Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended December 31, 2014

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

For the transition period from               to              

Commission File Number 000-24541

CORGENIX MEDICAL CORPORATION

(Exact name of registrant as specified in its Charter)

11575 Main Street, Number 400, Broomfield, CO 80020

(Address of principal executive offices, including zip code)

(303) 457-4345

(Registrant’s telephone number, including area code)

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

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

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

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

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

The number of shares of Common Stock outstanding was 54,965,493 as of February 10, 2015.

Table of Contents

CORGENIX MEDICAL CORPORATION

December 31, 2014

TABLE OF CONTENTS

2

Table of Contents

PART I

Item 1. Financial Statements

CORGENIX MEDICAL CORPORATION

Condensed Balance Sheets

(Unaudited)

See accompanying notes to condensed financial statements.

3

Table of Contents

CORGENIX MEDICAL CORPORATION

Condensed Statements of Operations

(Unaudited)

See accompanying notes to condensed financial statements.

*Less than $0.005per share

4

Table of Contents

CORGENIX MEDICAL CORPORATION

Condensed Statement of Stockholders’ Equity

For the six months ended December 31, 2014

(Unaudited)

See accompanying notes to condensed financial statements.

5

Table of Contents

CORGENIX MEDICAL CORPORATION

AND SUBSIDIARIES

Condensed Statements of Cash Flows

(Unaudited)

See accompanying notes to condensed financial statements.

6

Table of Contents

CORGENIX MEDICAL CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

1.                                      DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

(a)                                 Company Overview

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

Our revenues are generated from the following:

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

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

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

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

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

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

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

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

·                  For the current quarter, our four largest non-governmental customers, collectively, accounted for 49.3% of our total revenues.

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

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

·                  The aspirin effect on platelets; and

·                  Liver diseases (fibrosis and cirrhosis).

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

7

Table of Contents

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

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

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

·                  Immmunoturbidimetry (“IT”)—IT products are configured similar to ELISA Microplate products except that instead of coating microwell plates, this technology coats microbeads or microparticles. The assay configuration is more “automatable” than microplates, designed to be run on clinical chemistry analyzers in clinical testing laboratories by trained personnel.

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

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

(b)         Recent Developments

Merger Agreement and Special Shareholder Meeting

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

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

Consummation of the Merger is subject to various closing conditions, including the lack of certain litigation related to the Merger.

On December 18, 2014, the Company held the Special Meeting to adopt the Merger Agreement. Adoption of the Merger Agreement required the affirmative vote of the holders of at least a majority of the shares of the Company’s common stock outstanding at the close of business on October 14, 2014 and entitled to vote in accordance with Nevada law. According to the report of the inspector of elections, the Merger Agreement was approved by the Company’s shareholders at the Special Meeting.

The closing of the merger is expected to occur in the first quarter of calendar year 2015. See Note 10 “Commitments and Contingencies” to the condensed financial statements for further information on litigation related to the Merger.

8

Table of Contents

The Eli Lilly Agreement

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

NIH and Gates Foundation Ebola Grants

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

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

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

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

In December 2014, we were awarded two grants totaling $818,182 to advance the development of an Ebola rapid diagnostic test kit. The grants were awarded to Corgenix by the Bill & Melinda Gates Foundation and the Paul G. Allen Family Foundation. Corgenix has selected three subcontractors to assist on the project: Tulane University, Autoimmune Technologies, LLC and Zalgen Labs, LLC.

(c)                                  Basis of Presentation

Financial Statement Preparation

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

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

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosures of

9

Table of Contents

contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2.                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 1 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014. Other than the accounting policy for revenue recognition for the Lilly Agreement noted below, there have been no significant changes to these policies and no recent accounting pronouncements or changes in accounting pronouncements during the six months ended December 31, 2014 that are of significance or potential significance to the Company.

Research and Development and Grants

Supplementing the policy and methodology of revenue recognition for grants and research and development agreements described in Note 1 to the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014, revenues from the Lilly Agreement, a fixed price contract, is recognized in accordance with the milestone method of contract accounting. This contract is structured as a milestone agreement, and revenue is recognized when a specified milestone is achieved, due to the fact that for this agreement (1) the milestone event is substantive in nature and there is substantial uncertainty about the achievement of the milestone at the inception of the agreement, (2) the milestone payment is non-refundable, and (3) there are no continuing performance obligations associated with the milestone payment. Any milestone payments received prior to satisfying these revenue recognition criteria are deferred until the respective milestones are achieved.

3.                                      INVENTORIES

Inventories consist of raw materials, work in process, finished goods and laboratory instruments and parts held for sale, and are recorded at the lower of average cost or market, using the first-in, first-out method. If necessary, a provision is recorded to reduce excess and obsolete inventories to their estimated net realizable value. No such provision was recorded as of December 31, 2014 or June 30, 2014. Components of inventories as of December 31, 2014 and June 30, 2014 are as follows:

4.                                     EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding increased for potentially dilutive common shares outstanding during the period. The dilutive effect of stock options and their equivalents is calculated using the treasury stock method. Options and warrants to purchase common stock, totaling 290,000 and 11,270,000 shares, were not included in the calculation of weighted average diluted common shares below, for the quarters ended December 31, 2014 and December 30, 2013, respectively, as their effect would be anti-dilutive. For the same reasons, options and warrants to purchase common stock, totaling 15,834,394 and 11,270,000 were not considered in the calculation of weighted average diluted common shares for the six month periods ended December 31, 2014 and December 31, 2013.

10

Table of Contents

*                                         Less than $0.005per share

5.                             FAIR VALUE MEASUREMENT

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

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

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

Level 3—unobservable inputs.

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

As of December 31, 2014:

As of June 30, 2014:

6.                                      STOCKHOLDERS’ EQUITY

(a)                                 Common Stock

On July 28, 2011, we entered into a First Amended Joint Product Development Agreement (the “2011 Development Agreement”) with ELITech and Wescor. Each party was responsible for its own costs, expenses and liabilities incurred under the 2011 Development Agreement. However, ELITech and Wescor were responsible for expenses related to the development of new Corgenix Assays and systems. Pursuant to the 2011 Development Agreement, each month we notified Wescor of the amount of their stock

11

Table of Contents

purchase commitment, which was 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 was required to purchase such shares within thirty (30) days of each notification. For the quarter ended December 31, 2014 we generated no R & D revenue from Wescor and likewise, issued no shares under this agreement. For the quarter ended December 31, 2013, we generated $84,420 in R & D revenue from Wescor, and issued 540,197shares under this arrangement. For the six months ended December 31, 2014 we generated no R & D revenue from Wescor and issued 109,832 shares under this agreement. For the six months ended December 31, 2013, we generated $207,147 in R & D revenue from Wescor, and issued 823,348shares under this arrangement. The 109,832 shares issued in the current six month period were issued pursuant to R & D invoices billed to Wescor in May and June, 2014. Also, pursuant to the 2011 Development Agreement, as of December 31, 2014 and December 31, 2013 there was $0 and $56,407, respectively, in accounts receivable for ELITech/Wescor-funded research and development and $0 and $37,624 due from Wescor with respect to stock purchase commitments owing from Wescor for zero and 250,825 shares, respectively, to be issued subsequent to December 31, 2014 and December 31, 2013, respectively. The $37,624 stock purchase commitment as of December 31, 2013 was not recorded as of December 31, 2013. As of June 30, 2014, the 2011 Development Agreement had expired by its terms.

As a result of ELITech’s earlier investment and these transactions, ELITech, including warrants issued to them, beneficially owned 44.7% of the Company’s outstanding shares as of December 31, 2014, and, thus is considered a related party.

(b)                                 Employee Stock Purchase Plan

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

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

For the three months ended December 31, 2014, no shares were issued under the Fourth ESPPs. For the three months ended December 31, 2013, 12,133 shares were issued under the Third and Fourth ESPPs. For the six months ended December 31, 2014, 2,118 shares were issued under the Fourth ESPP. For the six months ended December 31, 2013, 26,403 shares were issued under the Third and Fourth ESPPs. For the three and  six month periods ended December 31, 2014, the benefits expense recognized for the 15% discount on shares purchased under the ESPP amounted to $0 and $678, respectively. For the three and  six month periods ended December 31, 2013, the benefits expense recognized for the 15% discount on shares purchased under the ESPPs amounted to $2,427 and $4,995, respectively.

(c)                              Incentive Stock Option Plan

Stock Options as of December 31, 2014

Our 2007 and 2011 Incentive Compensation Plans (the “Plans”) provide for two separate components. The Stock Option Grant Program, administered by the Compensation Committee (the “Committee”) appointed by our Board of Directors, provides for the grant of incentive and non-statutory stock options to purchase common stock to employees, directors or other independent advisors designated by the Committee. The Restricted Stock Program administered by the Committee, provides for the issuance of Restricted Stock Awards to employees, directors or other independent advisors designated by the Committee. The following table summarizes stock options outstanding as of December 31, 2014, and changes during the six months then ended:

12

Table of Contents

The aggregate intrinsic value of outstanding options as of December 31, 2014 measures the difference between the market price as of December 31, 2014 ($0.26) and the exercise price of the respective options. Options for 5,000 shares were exercised during the six months ended December 31, 2014.

As of December 31, 2014, the estimated unrecognized compensation cost of unvested stock options amounted to $95,051, which is expected to be recognized over a weighted average period of 68 months.

There were no stock options granted during the six months ending December 31, 2014. The weighted average per share fair value of stock options granted during the six months ending December 31, 2013 was $0.17. The fair value was estimated as of the grant date using the Black-Scholes option pricing model with the following assumptions:

(d)                                 Short-Term Incentive Compensation

For the calendar year ended December 31, 2014, the Company adopted a one year Senior Management Bonus Plan (‘the Plan”) to provide executive officers and certain members of senior management an opportunity to earn cash as a bonus upon the achievement by the Company of certain stipulated and targeted performance measures. In January 2015, the Compensation Committee of the Company’s Board of Directors determined that certain performance measures contained in the Plan had been achieved by December 31, 2014. As a result, the Company has accrued payouts under the Plan totaling $31,250 as of December 31, 2014.

7.                                      REVOLVING LINE OF CREDIT

Under the LSQ Revolving Credit and Security Agreement dated July 14, 2011 between the Company and LSQ (the “LSQ Agreement”), LSQ provided a line of credit (“Line”) to the Company under which LSQ agreed to make loans to the Company in the maximum principal amount outstanding at any time of $1,500,000. Interest accrued on the average outstanding principal amount of the loans under the Line at a rate equal to 0.043% per day (15.7% APR). Loans under the Line were permitted to be repaid and such repaid amounts re-borrowed until the maturity date. In addition, pursuant to the terms of the LSQ Agreement, we granted to LSQ a security interest in all of our personal property to secure the repayment of the loans under the Line and all other of our obligations to LSQ, whether under the LSQ Agreement or otherwise. The LSQ Agreement was terminated effective October 27, 2013. For the quarter ended December 31, 2013, LSQ funded a total of $922,569. Fees paid to LSQ for interest and other services for the quarter ended December 31, 2013 totaled $353. For the six months ended December 31, 2013, LSQ funded a total of $3,043,708, of which $375 was owed to us by LSQ as of December 31, 2013. Fees paid to LSQ for interest and other services for the six months ended December 31, 2013 totaled $793.

On August 28, 2013, the Company entered into a Business Loan Agreement (the “Loan Agreement”) effective August 15, 2013 between the Company and Bank of the West (the “Bank”). This Loan Agreement replaced the LSQ Agreement noted above.

Pursuant to the terms of the Loan Agreement, the Bank is providing a revolving line of credit (the “Revolver”) to the Company not to exceed $1,500,000. Interest accrues at a variable one month LIBOR (currently 0.18%) plus 4.00% per annum. Interest payments are due monthly. As of December 31, 2014, the annual interest rate was 4.15%.

Unless terminated by the Company or accelerated by the Bank in accordance with the terms of the Loan Agreement, The Revolver was originally scheduled to terminate and all loans there under were to be repaid on November 5, 2014. The Bank agreed to an extension of the Revolver until February 5, 2015, at which time the term of the Revolver expired.

The Loan Agreement contains certain representations, warranties, covenants and events of default typical in financings of this type, including, for example, limitations on assuming additional debt, making investments, or the sale of Company assets or other changes in the ownership of the Company. As of December 31, 2014, the Company was in compliance with the financial covenants of the Revolver.

13

Table of Contents

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

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

The Revolver was activated on October 30, 2013. During the six months ended December 31, 2014, the Company did not request any funding from the Bank under the Revolver. Consequently, there were no fees paid to the Bank for interest or other services for the same period.

8.                                      RELATED PARTY TRANSACTIONS

The ELITech Group, a French diagnostic company, via its wholly owned subsidiaries, ELITech-UK (our master international distributor) and Wescor (located in Logan, Utah) (the “ELITech Group”) combined, are considered to be a related party, beneficially owning 44.7% of the Company’s outstanding shares, and, as of December 31, 2014, was one of the Company’s four largest non-governmental customers.  For the three months ended December 31, 2014 and December 31, 2013, we generated $0 and $84,420, respectively, in R & D revenue from Wescor. In addition, the Company’s international product sales (including shipping) to ELITech-UK for the three month periods ended December 31, 2014 and December 31, 2013 amounted to $183,436 and $224,976, respectively. In total, for the three months ended December 31, 2014 and December 31, 2013 the ELITech Group (ELITech-UK and Wescor) represented approximately 5.1% and 8.3%, respectively, of total revenues. For the six months ended December 31, 2014 and December 31, 2013, we generated $0 and $207,147, respectively, in R & D revenue from Wescor. In addition, the Company’s international product sales (including shipping) to ELITech-UK for the six month periods ended December 31, 2014 and December 31, 2013 amounted to $358,253 and $366,832, respectively. In total, for the six months ended December 31, 2014 and December 31, 2013 the ELITech Group (ELITech-UK and Wescor) represented approximately 6.1% and 6.6%, respectively, of total revenues. As of December 31, 2014 and December 31, 2013, the accounts receivable from the ELITech Group amounted to $196,945 and $305,953, respectively, which represented approximately 8.9% and 15.5%, respectively, of total trade accounts receivable. The Joint Product Development Agreement with Wescor terminated on June 30, 2014.

9.                                      CONCENTRATION OF CREDIT RISK

The Company’s customers, with the exception of the ELITech Group, are principally located in the U.S. The Company performs periodic credit evaluations of its customers’ financial condition but generally does not require collateral for receivables. For the quarter ended December 31, 2014, our four largest non-governmental customers accounted for 49.3% of our total revenues and 63.1% of total trade receivables at period-end. For the quarter ended December 31, 2013, our four largest non-governmental customers accounted for 42.8% of our total revenues and 58.7% of total trade receivables at period-end. For the six months ended December 31, 2014 and December 31, 2013, our four largest non-governmental customers accounted for 42.5% and 48.1%, respectively, of our total revenues.

10.                               COMMITMENTS AND CONTINGENCIES

Litigation

Currently, we are aware of two purported class action complaints that have been filed in connection with the merger.  One complaint was filed in the Second Judicial District Court of the State of Nevada  on September 4, 2014, Rauenzhan v. Corgenix, et al., No. CV14-01907. One complaint was filed in the First Judicial Court of the State of Nevada on October 14, 2014—Bradford, et. al., No. 14TRT000681B. Counsel for the plaintiffs in the Rauenzhan and Bradford lawsuits have agreed to consolidate the actions in the Second Judicial District Court, and in November 2014, a consolidated Second Amended Class Action Complaint was filed. The consolidated complaint names as defendants us, each member of our board of directors, Buyer and Merger Sub.  The consolidated complaint generally alleges that the board of directors breached its fiduciary duties and that we, Buyer, and the Merger Sub aided and abetted those purported breaches, in connection with the proposed merger. The consolidated complaint challenges the Merger Consideration as inadequate, and makes a variety of other allegations, including the following:

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

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

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

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

14

Table of Contents

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

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

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

Certain plaintiffs and the defendants entered into a Memorandum of Understanding on November 19, 2014, which was previously disclosed.  On December 19, 2014, Plaintiff Rauenzhan and the defendants, through their respective counsel, executed a stipulation of settlement (the “Stipulation”) and related documents formalizing an agreement to settle all of the cases.  The Stipulation was filed with the District Court, which entered an order preliminarily approving the proposed settlement and scheduling a hearing on February 19, 2015 for consideration of final approval.

Pursuant to the Stipulation and the District Court’s preliminary approval order, the Company mailed copies of the Stipulation and a notice of proposed settlement to all record holders or beneficial owners of the Company’s common stock at any time during the period from and including March 11, 2014 through and including the effective date of the merger (the “Notice”). Any objections to the settlement had to be filed in writing with the court by no later than February 5, 2015 in accordance with the Notice.

On January 14, 2015, counsel for the plaintiffs in the Bradford action filed a motion to withdraw, asserting that counsel and Plaintiff Bradford reached a fundamental disagreement on what actions should be taken in the matter going forward. Plaintiff Bradford subsequently engaged new counsel, who filed an objection to the proposed settlement on her behalf, asserting that the proposed settlement is not fair. Two additional shareholders, one of whom was also named as a plaintiff in the original Bradford action and in the consolidated action, filed similar objections to the proposed settlement.

Item 2.

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

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere herein and in the Annual Report on Form 10-K for the year ended June 30, 2014.

(a)                                 Forward-Looking Statements

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

We have incurred operating losses and negative cash flow from operations for most of our history. There can be no assurance that we will be able to generate positive cash flows to fund our operations in the future or to pursue our strategic objectives. There can be no assurance that, in the future, we will sustain revenue growth, current revenue levels, or achieve or maintain profitability. Our results of operations may fluctuate significantly from period-to-period as the result of several factors, including: (i) whether and when new products are successfully developed and introduced, (ii) market acceptance of current or new products, (iii) seasonal customer demand, (iv) whether and when we receive research and development payments from strategic partners, (v) changes in reimbursement policies for the products that we sell, (vi) competitive pressures on average selling prices for the products that we sell, and

15

Table of Contents

(vii) changes in the mix of products that we sell. For more discussion about each risk factor , see Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2014.

(b)                                 General

Since our inception, we have been primarily involved in the research, development, manufacturing and marketing/distribution of diagnostic tests for sale to clinical laboratories. We currently market over 50 products covering aspirin effect on platelets, vascular diseases, infectious diseases and liver disease. Our products are sold in the United States, and other North American countries through our marketing and sales organization that includes direct sales representatives and contract sales representatives, and internationally through our Master Distributor (ELITech), and to several significant OEM partners.

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

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

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

(c)                                  Results of Operations

Three months ended December 31, 2014 compared to three months ended December 31, 2013

Total revenues. Total revenues for the current quarter increased $917,591 or 33.8% to $3,629,271 versus $2,711,679 in the prior year. This increase was primarily due to a 526.9% increase in our R & D and Grant revenue, mainly as a result of the Lilly Agreement and the NIH Ebola grant, an 11.2% increase in Coagulation sales, and a 13.1% increase in our contract manufacturing revenues, partially offset by decreases in sales of most of the other categories, the largest dollar decreases occurring in (i) the international segment of OEM sales, (ii) instrument-related sales, which are a part of the category below entitled Shipping and Other, and (iii) Aspirin Works sales. The second quarter weakness in Aspirin Works sales resulted primarily from a continued slow down in demand from a major customer. Instrument-related sales decreased as a result of the phaseout of this portion of the Company’s business.

Cost of revenues.  Total cost of revenues, as a percentage of total revenues, decreased to 39.8% for the quarter ended December 31, 2014 versus 51.4% for the quarter ended December 31, 2013. This decrease for the quarter was due to lower cost of

16

Table of Contents

goods sold for our manufactured goods in addition to substantially lower cost of revenues related to grants and contract research and development revenues, primarily as a result of the Lilly Agreement plus the effect of the June 30, 2014 expiration of the ELITech joint product development agreement. The reduction in the cost of goods sold for our core products was primarily attributable to the continuing effort to better manage the Company’s raw materials purchasing practices in addition to the continuing benefits being derived from the increased automation of the Company’s manufacturing processes.

Quarter ended December 31, 2014

Quarter ended December 31, 2013

Selling and marketing expenses.  For the quarter ended December 31, 2014, selling and marketing expenses decreased $49,079, or 11.4%, to $380,555 from $429,634 for the quarter ended December 31, 2013. The $49,079 decrease resulted primarily from decreases of $16,546 in trade show and travel and entertainment-related expenses, $17,644 in labor-related expenses, and $18,591 in outside services, partially offset by a net increase of $3,702 in other selling and marketing expenses.

Research and development expenses. Gross research and development expenses, prior to the reclassification of a portion of said expenses to cost of revenues, increased $218,504, or 74.1% to $513,202 from $294,698 for the quarter ended December 31, 2013, primarily as a result of the Lilly Agreement and the NIH Ebola grant. The $218,504 increase resulted primarily from increases of $76,870 in labor-related expenses, $15,948 in product testing expense, and $7,375 in outside services, plus a net increase of $118,311 in other research and development expenses.

General and administrative expenses. For the quarter ended December 31, 2014, general and administrative expenses increased $647,979, or 115.9%, to $1,206,927 from $558,948 for the quarter ended December 31, 2013. The substantial increase was primarily a result of an increase of $567,058 in merger transaction and litigation costs, a $33,233 increase in labor related expenses, and a net increase of $47,688 in other general and administrative expenses.

Six months ended December 31, 2014 compared to six months ended December 31, 2013

Total revenues. Total revenues for the six months ended December 31, 2014, increased $264,185 or 4.7% to $5,853,377 versus $5,589,192 in the prior year. This increase was primarily due to a 267.5% increase in our R & D and Grant revenue, mainly as a result of the Lilly Agreement and the NIH Ebola grant, an 8.1% increase in Coagulation sales, and a 5.8% increase in phospholipid sales, partially offset by decreases in sales of most of the other categories, the largest dollar decreases occurring in (i) contract manufacturing sales, (ii) the international segment of OEM sales, (iii) instrument-related sales, which are a part of the category below entitled Shipping and Other,  and (iv) Aspirin Works sales. The weakness in Aspirin Works sales and in our contract manufacturing sales resulted from a continued slow down in demand from a major customer, who is a major customer for our Aspirin Works assay in addition to being a major customer for our contract manufactured products.  Instrument-related sales decreased as a result of the phaseout of this portion of the Company’s business.

17

Table of Contents

Cost of revenues.  Total cost of revenues, as a percentage of total revenues, decreased to 44.2% for the six months ended December 31, 2014 versus 52.6% for the six months ended December 31, 2013. This decrease for the six month period was due to lower cost of goods sold for our manufactured goods in addition to substantially lower cost of revenues related to grants and contract research and development revenues, primarily as a result of the Lilly Agreement plus the effect of the June 30, 2014 expiration of the ELITech joint product development agreement. The reduction in the cost of goods sold for our core products was primarily attributable to the continuing effort to better manage the Company’s raw materials purchasing practices in addition to the continuing benefits being derived from the increased automation of the Company’s manufacturing processes.

Six months ended December 31, 2014

Six months ended December 31, 2013

Selling and marketing expenses.  For the six months ended December 31, 2014, selling and marketing expenses decreased $80,575 or 8.8%, to $832,743 from $913,318 for the six months ended December 31, 2013. The $80,575 decrease resulted primarily from decreases of $31,195 in labor-related expenses, $15,942 in outside services, and $39,109 in trade show and travel related expenses, partially offset by a net increase of $5,671 in other selling and marketing expenses.

Research and development Expenses. Gross research and development expenses, prior to the reclassification of a portion of said expenses to cost of revenues, increased $342,680 to $1,013,771from $671,091 for the six months ended December 31, 2013, primarily as a result of the Lilly Agreement and the NIH Ebola grant. The $342,680 increase resulted primarily from increases of $111,084 in labor-related expenses, $31,584 in lab supplies, $14,537 in product testing expense, and $10,718 in outside services, plus a net increase of $174,757 in other research and development expenses.

General and administrative expenses. For the six months ended December 31, 2014, general and administrative expenses increased $$1,249,992 or 113.7% to $2,349,450 from $1,099,458 for the six months ended December 31, 2013. The $1,249,992 increase resulted primarily from an increase of $1,228,246 in merger transaction and litigation related expenses and an increase or $49,689 in labor related expenses, partially offset by a net decrease of $27,943 in other general and administrative expenses.

18

Table of Contents

(d)                                 Adjusted EBITDA

The Company’s earnings (loss) before interest, taxes, depreciation, amortization, and non cash expense associated with stock based compensation (“Adjusted EBITDA”) increased $252,374, to $537,054 for the quarter ended December 31, 2014 compared with Adjusted EBITDA of $284,680 for the quarter ended December 31, 2013. The primary reason for the increase in Adjusted EBITDA for the current quarter was the larger net income earned in the current period. Adjusted EBITDA decreased $614,013, to a negative EBITDA of $141,883 for the six months ended December 31, 2014 compared with Adjusted EBITDA of $472,130 for the six months ended December 31, 2013. The primary reason for the decrease in Adjusted EBITDA for the current six month period was the net loss incurred in the current period versus net income earned in the prior year. Although Adjusted EBITDA is not a GAAP measure of performance or liquidity, the Company believes that it may be useful to an investor in evaluating the Company’s ability to meet future debt service, capital expenditures and working capital requirements. However, investors should not consider these measures in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company’s operating performance or liquidity that is calculated in accordance with GAAP. In addition, because Adjusted EBITDA is not calculated in accordance with GAAP, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of Adjusted EBITDA to net income (loss) as shown on the accompanying Statement of Operations can be made by eliminating depreciation and amortization expense, corporate stock based compensation expense, interest expense, and income tax expense, if any, from the net income (loss) and further eliminating any interest income from said net income (loss) as in the following table: