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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended December 31, 2012

For the transition period from                     to                    

Commission File Number 000-24541

CORGENIX MEDICAL CORPORATION

(Exact name of registrant as specified in its Charter)

11575 Main Street, Number 400, Broomfield, CO 80020

(Address of principal executive offices, including zip code)

(303) 457-4345

(Registrant’s telephone number, including area code)

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

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

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

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

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

The number of shares of Common Stock outstanding was 49,828,303 as of February 5, 2013.

CORGENIX MEDICAL CORPORATION

December 31, 2012

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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)

See accompanying notes to consolidated financial statements.

*Less than $0.00 or $ (0.01) per share

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CORGENIX MEDICAL CORPORATION

AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

For the six months ended December 31, 2012

(Unaudited)

See accompanying notes to consolidated financial statements.

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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)                                 Company Overview

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

Our revenues are generated from the following:

·                  Sales of Manufactured Products—We manufacture and sell 52 diagnostic products on a worldwide basis to hospitals, clinical testing laboratories, universities, biotechnology and pharmaceutical companies and research institutions.

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

·                  Outside of North America, prior to October 1, 2010, we sold our products through Corgenix UK (formerly REAADS Bio Medical Products, UK Limited), our own wholly owned subsidiary (“Corgenix UK”). Corgenix UK also managed the remainder of our international business, selling our products through independent distributors worldwide. On October 1, 2010 we transferred our international business to the ELITech Group (“ELITech”) which now serves as our international master distributor, selling our products through its wholly owned subsidiaries in addition to numerous independent distributors.

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

·                  Sales of OM Products—We purchase some products from other healthcare manufacturers which we then resell. These products include other IVD products, instruments, instrument systems and various reagents and supplies, and are primarily used to support the sale of our own manufactured products.

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

·                  Contract R&D Agreements—We provide contract product development services to strategic partners and alliances. Our most significant Contract R &D customers include ELITech, Tulane University (“Tulane”) and the National Institutes of Health (“NIH”).

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

·                  We are not dependent upon only one or a few major customers.

Most of our products are used in clinical laboratories for the diagnosis and/or the monitoring of three important sectors 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).

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

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

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

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

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

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

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

(b)                                 Basis of Presentation

Financial Statement Preparation

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

In the opinion of management, the accompanying unaudited consolidated financial statements for the periods presented reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2012 filed with the SEC on September 27, 2012.

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

2.                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 1 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012. There have been no significant changes to these policies and no recent accounting pronouncements or changes in accounting pronouncements during the  three or six months ended December 31, 2012 that are of significance or potential significance to the Company.

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3.                                      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 December 31, 2012 or June 30, 2012. Components of inventories as of December 31, 2012 and June 30, 2012 are as follows:

4.                                      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. Under the treasury stock method, the diluted earnings per share denominator includes the net of new shares potentially created by unexercised in-the-money warrants and options. This method assumes that the proceeds that we receive from an in-the-money option exercise would be used to repurchase common shares in the market.

*Less than $0.01 or (0.01) per share

Options, warrants and shares of convertible preferred stock, totaling 27,470,913 shares as of December 31, 2011, were not considered in the calculation of weighted average common shares-diluted above, as their effect would be to lower the net loss per share and thus be anti-dilutive.

5.                                      LIQUIDITY

At December 31, 2012, our working capital increased by $636,920 to $4,281,558 from $3,644,638 at June 30, 2012, and concurrently, our current ratio (current assets divided by current liabilities) increased from 4.16 to 1 at June 30, 2012 to 5.86 to 1 at December 31, 2012. This increase in working capital is primarily attributable to the net income for the period in addition to the cash provided by the issuance of common stock.

At December 31, 2012, trade receivables were $1,552,680 versus $1,396,938 at June 30, 2012. Accounts payable, accrued payroll and other accrued expenses decreased by a combined $264,694 to $740,612 from $1,005,306 at June 30, 2012. At December 31, 2012, inventories decreased $5,827 to $2,112,842 versus $2,118,669 at June 30, 2012.

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For the six months ended December 31, 2012, cash provided by operating activities amounted to $10,207, versus cash provided by operating activities of $143,587 for the six months ended December 31, 2011. The decrease in the cash provided by operations for the current six month period resulted primarily from the increases in accounts receivable and decreases in accounts payable and accrued liabilities, which more than offset the increase in the net income realized for the current period.

Net cash used by investing activities, the purchase of laboratory equipment, leasehold improvements and computer equipment, was $43,477 for the six months ended December 31, 2012, compared to net cash used by investing activities for the six months ended December 31, 2011 totaling $23,300.

Net cash provided by financing activities amounted to $16,756 for the six months ended December 31, 2012 compared to net cash used by financing activities for the six months ended December 31, 2011 totaling $403,662. This increase versus the comparable prior year was primarily due to the significantly lower borrowings for the current period.

We have incurred operating losses and negative cash flow from operations for most of our history. Losses incurred since our inception, net of accreted dividends on redeemable common and redeemable preferred stock, have aggregated $13,956,526 and there can be no assurance that we will be able to generate positive cash flows to fund our operations in the future or to pursue our strategic objectives. Historically, we have financed our operations primarily through long-term debt, factoring of accounts receivables, and the sales of common stock, redeemable common stock, and preferred stock. We have also financed operations through sales of diagnostic products and agreements with strategic partners. We have developed and are continuing to modify an operating plan intended to eventually achieve sustainable profitability, positive cash flow from operations, and an adequate level of financial liquidity. Key components of this plan include consistent revenue growth and the cash to be derived from such growth, as well as the expansion of our strategic alliances with other biotechnology and diagnostic companies, securing diagnostic-related government contracts and grants, improving operating efficiencies to reduce our cost of sales as a percentage of sales, thereby improving gross margins, and lowering our overall operating expenses. If our sales were to decline, 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 further improve our liquidity and operating results, we entered into the ELITech collaboration and investment.

In summary, the cash provided by operating and financing activities was more than offset by the net cash used in investing  activities, resulting in a net decrease in cash of $16,514 for the current six month period.

We believe that our current working capital, in conjunction with our current revised profitable forecasts indicating profitability for the current fiscal year, should provide adequate resources to continue operations for longer than 12 months.

6.                                  FAIR VALUE MEASUREMENT

The fair value of our financial instruments reflect the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company uses a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

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

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

Level 3—unobservable inputs.

The Company’s financial instruments are valued using quoted prices in active markets or based upon other observable inputs. The following table sets forth the fair value of the Company’s financial assets that were measured on a recurring basis as of December 31, 2012:

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7.                                      SEGMENT INFORMATION

The Company’s 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, in prior years, its diagnostic medical products were sold wholesale through distributors, via its wholly owned subsidiary, Corgenix UK. However, commencing October 1, 2010, the Company began the process of winding down with the intent of eventually closing its international subsidiary, Corgenix UK, and its international product sales began to be executed solely through ELITech-UK, a wholly owned subsidiary of the ELITech Group, its master distributor. Consequently, it is no longer meaningful to organize its business around the two geographic segments of business: North American and International operations. For the quarters ended December 31, 2012 and December 31, 2011, the Company generated international sales to ELITech-UK amounting to $423,637 and $223,267, respectively. For the six months ended December 31, 2012 and December 31, 2011, the Company generated international sales to ELITech-UK amounting to $675,257 and $454,351, respectively, with the amount receivable from ELITech-UK at December 31, 2012 and December 31, 2011 amounting to $332,544 and $189,368, respectively.

8.                                      REDEEMABLE COMMON STOCK

(a)                             Redeemable Common Stock and Warrants

As previously reported, on July 1, 2002, as part of the Medical & Biological Laboratories Co., Ltd. (“MBL”) Stock Purchase Agreement (the “MBL Agreement”), MBL purchased shares of the Company’s common stock for $500,000, which were subject to MBL’s option to require the Company to repurchase at the same price in the event that a previously existing distribution agreement with RhiGene, Inc. were terminated. For no additional consideration, MBL was also issued warrants to purchase an additional 880,282 shares of Common Stock (the “Purchased Shares”) at a price of $.568 per share, which is equal to an aggregate amount of $500,000. These warrants were originally due to expire on July 3, 2009

On August 27, 2010, the Company entered into a Third MBL Amendment to the Common Stock Purchase Agreement and Warrant dated August 1, 2010 (the “Third MBL Amendment”) among the Company and MBL, wherein the remaining 220,070 Purchased Shares were exchanged for a two-year promissory note in the principal amount of $125,000, payable with interest at the prime rate plus two percent (the “Third MBL Note”) with payments having commenced on September 1, 2010. The Third MBL Amendment also extended the warrants to August 1, 2012. As a result of the warrant extension, an additional discount was created, which was accreted through dividends and was included as deferred financing costs on the Company’s balance sheet.

As of September 30, 2012, all 880,282 shares were returned to us pursuant to the three notes payable. As a result, no shares are still held as collateral for the note payable, and the warrants have now expired.

9.                                      STOCKHOLDERS’ EQUITY

(a)                                 Common Stock

On September 16, 2011, Wescor invested an additional $500,000 pursuant to the Third Tranche under the Common Stock Purchase Agreement and was issued 3,333,333 shares of our common stock valued at $0.15 per share. For no additional consideration we issued a warrant to Wescor to purchase 1,666,667 shares at $0.15 per share. As a condition to the closing of the Third Tranche, the Executive Committee established under the Joint Product Development Agreement has determined the feasibility of creating not less than two (2) new Corgenix assays as further described in the Joint Product Development Agreement.

On July 28, 2011, we entered into a First Amended Joint Product Development Agreement (the “2011 Development Agreement”) with ELITech and Wescor. Each party is responsible for its own costs, expenses and liabilities incurred under the Agreement; however, ELITech and Wescor will be responsible for expenses related to the development of new Corgenix Assays and systems. Pursuant to this agreement, each month we will notify Wescor of the amount of their stock purchase commitment, which is equal to sixty-six and 7/10 percent (66.7%) of the amount of each monthly R & D invoice at a per share price of $0.15. Wescor must purchase such shares within thirty (30) days of each notification. For the quarters ended December 31, 2012 and December 31, 2011, we generated $150,368 and $208,298, respectively in R & D revenue from Wescor, and issued 1,139,651 and 872,731 shares, respectively under this arrangement. For the six months ended December 31, 2012 and December 31, 2011, we generated $355,761 and $384,857, respectively in R & D revenue from Wescor, and issued 2,034,712 and 1,099,384 shares, respectively under this arrangement. Also, pursuant to the 2011 Development Agreement, as of December 31, 2012 and December 31, 2011 there was $150,368 and $208,298, respectively, in accounts receivable for ELITech/Wescor-funded research and development and $39,276 and $37,106 due from Wescor with respect to stock purchase commitments owing from Wescor for 261,843 and 247,473 shares, respectively, to be issued subsequent to December 31, 2012 and December 31, 2011, respectively. The $39,276 and $37,106 stock purchase commitments were not recorded as of December 31, 2012 or December 31, 2011.

As a result of these transactions, ELITech, including warrants, beneficially owned 45.0% of the Company’s outstanding shares as of  December 31, 2012, and is considered a related party.

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(b)                                 Employee Stock Purchase Plan

Effective January 1, 1999, the Company adopted an Employee Stock Purchase Plan to provide eligible employees an opportunity to purchase shares of its common stock through payroll deductions, up to 10% of eligible compensation. On April 26, 2008, Shareholders approved the Company’s Second Amended and Restated Employee Stock Purchase Plan. These plans are registered under 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. On January 17, 2012, at our Annual Meeting of shareholders, the shareholders voted to approve The Third Amended & Restated Employee Stock Purchase Plan, effective January 1, 2012. The maximum number of shares that may be sold under the Third Amended & Restated Employee Stock Purchase Plan is 500,000 shares, which shares have been registered with the SEC. For the three and six months ended December 31, 2012, shares issued under the plans amounted to 84,282 and 187,361, respectively. For the three and six months ended December 31, 2011, shares issued under the plans amounted to 84,244 and 174,402, respectively.

(c)                                  Incentive Stock Option Plan

Stock Options as of December 31, 2012

Our Amended and Restated Employee Stock Purchase Plans and the 2007 and 2011 Incentive Compensation Plans (the “Plans”) provide for two separate components. The Stock Option Grant Program, administered by the Compensation Committee (the “Committee”) appointed by our Board of Directors, provides for the grant of incentive and non-statutory stock options to purchase common stock to employees, directors or other independent advisors designated by the Committee. The Restricted Stock Program administered by the Committee, provides for the issuance of Restricted Stock Awards to employees, directors or other independent advisors designated by the Committee. The following table summarizes stock options outstanding as of December 31, 2012, and changes during the six months then ended:

The total intrinsic value as of December 31, 2012 measures the difference between the market price as of December 31, 2012 and the exercise price. No options were exercised during the six months ended December 31, 2012 or December 31, 2011. Consequently, no cash was received, nor did we realize any tax deductions related to exercise of stock options during the period.

As of December 31, 2012, estimated unrecognized compensation cost from unvested stock options amounted to $76,914, which is expected to be recognized over a weighted average period of 69.4 months.

The weighted average per share fair value of stock options granted during the six months ending December 31, 2012 was $0.11. The weighted average per share fair value of stock options granted during the six months ending December 31, 2011 was $0.075. 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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10.                               REVOLVING LINE OF CREDIT

On July 14, 2011, the Company entered into a Revolving Credit and Security Agreement (the “Loan Agreement”) with LSQ Funding Group, L.C., a Florida limited liability company (“LSQ”), which provided the Company with a $1,500,000 revolving line of credit (the “Line”).

Pursuant to the terms of the Loan Agreement, LSQ is providing the Line to us under which LSQ agrees to make loans to us in the maximum principal amount outstanding at any time of $1,500,000. The maximum amount of the loans under the Line shall also be governed by a borrowing base equal to 85% of Eligible Accounts Receivable plus 50% of Eligible Inventory, with certain limits and exclusions more fully set forth in the Loan Agreement.

Interest accrues on the average outstanding principal amount of the loans under the Line at a rate equal to 0.043% per day (15.7% APR).

Loans under the Line may be repaid and such repaid amounts re-borrowed until the maturity date. Unless terminated by us or accelerated by LSQ in accordance with the terms of the Loan Agreement, the Line will terminate and all loans there under must be repaid on July 14, 2013.

In addition, pursuant to the terms of the Loan Agreement, we granted to LSQ a security interest in all of our personal property to secure the repayment of the loans under the Line and all other of our obligations to LSQ, whether under the Loan Agreement or otherwise.

We have used the money we received under the Loan Agreement and the Line to pay off prior our outstanding debt obligations to Summit Financial Resources, L.P. (“Summit”), which totaled $732,487 as of July 14, 2011, the date of payment. Such payment resulted in our indebtedness and obligations owing to Summit being terminated and satisfied in full. Currently, we have made a concerted effort to minimize our use of the Line, and consequently for the quarters ended December 31, 2012 and December 31, 2011, LSQ funded a total of $1,850,415 and $1,068,288, respectively under the Line, of which $227,281 was owed us as of December 31, 2012 as opposed to $6,202 which was  outstanding as of  December 31, 2011. For the six months ended December 31, 2012 and 2011, LSQ funded a total of $3,750,924   and   $3,267,930, respectively.  Fees paid to LSQ for interest and other services for the quarters ended December 31, 2012 and 2011 totaled $415 and $18,287, respectively, and for the six months ended December 31, 2012 and 2011, totaled $924 and $53,386, respectively.

11.                               NOTES PAYABLE

Notes payable consist of the following at December 31, 2012 and June 30, 2012:

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12.                               CONCENTRATION OF CREDIT RISK

The Company’s customers are principally located in the U.S. However, the ELITech Group, a French diagnostic company, via its wholly owned subsidiaries, ELITech-UK (our master international distributor) and Wescor (located in Logan, Utah), combined are considered to be a related party beneficially owning 45.0% of the Company’s outstanding shares, and  is now the Company’s largest customer. The Company performs periodic credit evaluations of its customers’ financial condition but generally does not require collateral for receivables. The ELITech group (ELITech-UK and Wescor) represented approximately 23.2% and 20.9% of total revenues in the quarters ended December 31, 2012 and December 31, 2011, respectively, approximately 19.5% and 19.3% of total revenues for the six months ended December 31, 2012 and December 31, 2011, respectively, and 30.5% and 28.4% of total accounts receivable at December 31, 2012 and December 31, 2011, respectively. The company’s international sales to ELITech-UK for the quarters ended December 31, 2012 and December 31, 2011 amounted to $423,637 and $223,267 respectively, and for the six months ended December 31, 2012 and 2011 amounted to $675,257 and $454,351, respectively.

13.                               COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

On July 12, 2010, the Company announced that under the terms and conditions of the distribution agreement (“Master Distribution Agreement”) with ELITech UK entered into on July 12, 2010, and as a condition precedent to the closing of the Second Tranche of the Common Stock Purchase Agreement with ELITech and Wescor, also entered into on July 12, 2010, ELITech UK became the exclusive distributor of its Products (as that term is defined therein) outside of North America. Accordingly, the Company along with Corgenix UK assigned and/or transferred the economic benefit to ELITech UK, and ELITech UK assumed all of the obligations of the Company or Corgenix UK under all distribution agreements executed by us or Corgenix UK, as the case may be, related to any distributor whose territory is outside of North America. Thus, as a condition to the closing of the Second Tranche investment with the ELITech group, it has effectively transferred its product distribution activity outside of North America from its subsidiary, Corgenix UK, to ELITech UK.

Pursuant to this plan, beginning October 1, 2010, the Company began winding down the business activities heretofore carried out by Corgenix UK and permanently closing the business on or about May 31, 2011. In order to accomplish this wind down and closing of Corgenix UK, the Company transferred one of Corgenix UK’s seven employees to ELITech UK, terminated the employment of all but two of the remaining Corgenix UK employees at December 31, 2011, retained one employee and one consultant until November 30, 2010, and retained the last remaining employee until December 31, 2011.

In connection with this reduction in workforce, the Company incurred cash charges of approximately $131,751 for one-time costs associated with the severance of these employees, which has been accounted for on a straight-line basis over the period from notification through each employee’s termination date. In addition to the above one-time charges amounting to $131,751, the Company has sold, where possible, the fixed assets, and transferred the facility lease of Corgenix UK. In that regard, the Company incurred an additional $90,237 in costs related to the loss on sale or abandonment of fixed assets, and $264,074 of charges relating to facility leases and other fixed obligations. During the three months ended December 31, 2011, Corgenix-UK was completely liquidated and all of the costs associated with exit or disposal activities have been incurred and accounted for.

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 Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations, beliefs, intentions or strategies regarding the future.  All statements other than historical fact contained in this 10-Q, including, without limitation, statements regarding future capital guidance, acquisition strategies, strategic partnership expectations, technological developments, the 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.

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(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, 2009, and 2011 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 1997, 2009, and 2011, there can be no assurance that, in the future, we will sustain revenue growth, current revenue levels, or achieve or maintain profitability. Our results of operations may fluctuate significantly from period-to-period as the result of several factors, including: (i) whether and when new products are successfully developed and introduced, (ii) market acceptance of current or new products, (iii) seasonal customer demand, (iv) whether and when we receive research and development payments from strategic partners, (v) changes in reimbursement policies for the products that we sell, (vi) competitive pressures on average selling prices for the products that we sell, and (vii) changes in the mix of products that we sell.

(c)           Results of Operations

Three months ended December 31, 2012 compared to three months ended December 31, 2011

Total revenues. The following two tables provide the reader with further insight as to the changes in the various components of our total revenues for the comparable quarters ended December 31, 2012 and December 31, 2011.

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Cost of revenues.  Total cost of revenues, as a percentage of sales, were 56.9% for the quarter ended December 31, 2012 versus 54.6% for the prior fiscal year. The primary reasons  for the increase for the quarter were the product sales mix, which was much more heavily weighted towards lower margin sales such as contract manufacturing, OEM sales and international product sales, in addition to the increased revenue generated from contract R & D and grants, which carry a much higher cost of revenues than do our core products. The following table shows, for the quarters ended December 31, 2012 and December 31, 2011, the composition of the cost of revenues, between the cost of sales related to our core business and that the cost of revenues related to our contract research and development and grant revenues, and their relative percentage of related revenues.

Quarter Ended December 31, 2012

Quarter Ended December 31, 2011

Selling and marketing expenses.  For the quarter ended December 31, 2012, selling and marketing expenses decreased $13,271 or 3.0% to $435,128 from $448,399 for the quarter ended December 31, 2011. The $13,271 decrease versus the prior year resulted primarily from decreases of $31,813 in labor-related expenses, $16,334 trade show and travel related expenses, and $6,695 in advertising expense, partially offset by a net increase of $41,571 in other selling and marketing expenses.

Research and development expenses. Gross research and development expenses, prior to the reclassification of a portion of said expenses to cost of sales, decreased $29,221 or 9.6% to $275,406 for the quarter ended December 31, 2012, from $304,627 for the quarter ended December 31, 2011. The $29,221 decrease versus the prior year resulted primarily from decreases of $11,991 laboratory supplies and $3,783 in travel-related expenses, plus a net decrease of $13,447 in other research and development expenses.

General and administrative expenses. For the quarter ended December 31, 2012, general and administrative expenses increased $8,510 or 1.8% to $479,177 from $470,667 for the quarter ended December 31, 2011. This increase was primarily a result of a $48,796 increase in labor-related expense, partially offset by a net decrease of $40,286 for the period.

Interest expense. Interest expense decreased $23,391, or 81.0% to $5,495 for the quarter ended December 31, 2012, from $28,886 for the quarter ended December 31, 2011. This substantial decrease in interest expense was due primarily to the considerably lower borrowings for the current period.

Six months ended December 31, 2012 compared to six months ended December 31, 2011

Total revenues. The following two tables provide the reader with further insight as to the changes in the various components of our total revenues for the comparable six month periods ended December 31, 2012 and December 31, 2011.

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Table of Contents

Cost of revenues.  Total cost of revenues, as a percentage of sales, were 57.1% for the six months ended December 31, 2012 versus 53.2% for the prior fiscal year. The primary reasons for the increase for the six month period were the product sales mix, which was much more heavily weighted towards lower margin sales such as contract manufacturing, OEM sales and international product sales, in addition to the increased revenue generated from contract R & D and grants, which carry a much higher cost of revenues than do our core products. The following table shows, for the six months ended December 31, 2012 and December 31, 2011, the composition of the cost of revenues, between the cost of sales related to our core business and that the cost of revenues related to our contract research and development and grant revenues, and their relative percentage of related revenues.

Six Months Ended December 31, 2012

Six Months Ended December 31, 2011