SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
_ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934
For the transition period from to
Commission File Number 000-24541
CORGENIX MEDICAL CORPORATION
(Name of Small Business Issuer in its Charter)
Nevada 93-1223466
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
12061 Tejon Street, Westminster, Colorado 80234
(Address of principal executive offices, including zip code)
(303) 457-4345
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
The number of shares of Common Stock outstanding was 17,320,164 as of November
15, 1999.
Transitional Small Business Disclosure Format. Yes _ No X_
<PAGE>
CORGENIX MEDICAL CORPORATION
September 30, 1999
TABLE OF CONTENTS
Page
Part I
Financial Information
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II
Other Information
Item 1. Legal Proceedings 15
Item 2. Changes in Securities and Use of Proceeds 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
<PAGE>
CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
September 30, 1999 June 30, 1999
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 107 15,963
Accounts receivable, less allowance for
doubtful accounts of $7,000 530,205 516,182
Note receivable
27,425 27,425
Inventories 512,465 518,215
Prepaid expenses 1,161 954
Total current assets 1,071,363 1,078,739
Equipment:
Machinery and laboratory equipment 302,949 302,949
Furniture, fixtures and office equipment 255,695 255,695
558,644 558,644
Accumulated depreciation and
amortization (413,234) (399,109)
Net equipment 145,410 159,535
Intangible assets:
Patents, net of accumulated
amortization of $664,912 and $646,987,
respectively 452,632 470,557
Goodwill, net of accumulated
amortization of $33,611 and $36,177,
respectively 25,045 25,411
477,677 495,968
Due from officer 12,000 12,000
Other assets 14,285 14,285
Total assets $ 1,720,735 1,760,527
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of notes payable $ 270,534 296,954
Accounts payable 769,098 795,262
Accrued payroll and related liabilities 109,629 114,061
Other liabilities 101,546 105,528
Current portion capital lease obligation 3,910 3,483
Employee stock purchase plan payable 2,976 2,984
Total current liabilities 1,257,693 1,318,272
Notes payable, excluding current portion 768,060 790,959
Capital lease obligation, excluding
current portion 6,423 7,703
Total liabilities 2,032,1776 2,116,934
Stockholders' equity (deficit):
Preferred stock, $0.001 par value.
Authorized 5,000,000 shares,
none issued or outstanding -- --
Common stock, $0.001 par value.
Authorized 20,000,000 shares; issued
and outstanding 16,867,163 in September
and 16,852,116 in June 16,867 16,852
Additional paid-in capital 3,863,373 3,859,806
Accumulated deficit (4,191,681) (4,233,065)
Total stockholders' equity (deficit) (311,441) (356,407)
Total liabilities and stockholders'
equity (deficit) $ 1,720,735 1,760,527
See accompanying notes to consolidated financial statements.
<PAGE>
CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
- -------------------------------------------------------------------------------
Three Months Ended
September 30, September 30,
1999 1998
--------------------------------------
(Unaudited) (Unaudited)
Net Sales $805,870 $548,848
Cost of Sales 304,666 282,677
--------------------------------
Gross profit 501,204 266,171
Operating expenses:
Selling and marketing 151,686 193,278
Research and development 99,165 97,715
General and 181,110 278,281
administrative
--------------------------------
Total Expense 431,961 569,274
Operating 69,243 (303,103)
profit (loss)
Interest expense, net 27,859 24,321
--------------------------------
Net income $ 41,384 $(327,424)
(loss)
Net income (loss) per $ 0.00 $ (0.03)
share basic and
diluted
Weighted average shares 16,866,345 12,156,591
outstanding basic and
diluted
See accompanying notes to consolidated financial statements.
<PAGE>
CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------
Three Months Ended
September 30, September 30,
1999 1998
---------------------
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ 41,384 $ (327,424)
Adjustments to reconcile
net income (loss) to net
cash used by operating
activities
Depreciation and amortization 32,416 37,665
Changes in operating assets and liabilities:
Accounts receivable (14,023) 54,622
Inventories 5,750 (11,634)
Prepaid expenses and other assets (207) (12,817)
Accounts payable (26,164) 171,039
Accrued payroll and
related liabilities (4,432) 10,065
Other liabilities (3,982) (67,582)
Employee stock purchase plan payable (8) -
------------------------------
Net cash used by operating activities 30,734 (146,066)
Cash flows provided by (used
by) investing
activities - purchase of equipment - (17,371)
Cash flows from financing activities:
Payments on notes payable (49,319) (20,923)
Payments on leases payable (853) -
Cash receipts on stock subscription - 24,674
Cash receipts from Employee
stock purchase plan 3,582 -
---------------------------------
Net cash provided by (used by)
financing activities (46,590) 3,751
--------------------------------
Net ecrease in cash and cash
equivalents (15,856) (159,686)
Cash and cash equivalents at
beginning of period $ 15,963 $ 216,314
---------------------------------
Cash and cash equivalents at
end of period $ 107 $ 56,628
---------------------------------
Supplemental disclosure -
cash paid for interest $ 27,859 $ 25,476
See accompanying notes to consolidated financial statements.
<PAGE>
CORGENIX MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Corgenix Medical Corporation (Corgenix or the Company) develops, manufactures
and markets diagnostic products for the serologic diagnosis of certain vascular
diseases and autoimmune disorders using proprietary technology. The Company
markets its products to hospitals and free-standing laboratories worldwide
through a network of sales representatives, distributors, and private label
(OEM) agreements. The Company's offices and manufacturing facility are located
in Westminster, Colorado.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Corgenix, Inc. (U.S.) and Corgenix (UK) Ltd.
Corgenix (UK) was established as a United Kingdom company during 1996 to
market the Company's products in Europe.
The accompanying consolidated financial statements have been prepared, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
consolidated financial statements be read in connection with the financial
statements and notes thereto included in the Company's annual report on Form
10-KSB for the year ended June 30, 1999.
In the opinion of the Company, the accompanying consolidated financial
statements include all adjustments (consisting of normal recurring accruals and
adjustments) required to present fairly the Company's financial position at
September 30, 1999 and June 30, 1999 and the results of its operations for each
of the three month periods ended September 30, 1999 and 1998, and the cash flows
for each of the three month periods then ended.
The operating results for the three months ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
June 30, 2000.
2. INCOME (LOSS) PER SHARE
Basic and diluted income (loss) per share is presented based on the weighted
average number of common shares outstanding during the period.
3. INCOME TAXES
The Company recognized net income in the three months ended September 30, 1999
and a loss in the three months ended September 30, 1998. The Company has
historically incurred losses, and accordingly no tax benefit is recognized as it
is more likely than not that tax losses will result in a benefit to the Company.
<PAGE>
CORGENIX MEDICAL CORPORATION
Management's Discussion and Analysis Of
Financial Condition and Results of Operations
The following discussion should be read in conjunction with the financial
statements and accompanying notes included elsewhere herein.
General
Since the Company's inception, Corgenix has been primarily involved in the
research, development, manufacturing and marketing of diagnostic tests for sale
to clinical laboratories. Corgenix currently markets 23 products covering
autoimmune disorders, vascular diseases, bone and joint diseases and liver
disease. Corgenix's products are sold in the United States through the Company's
marketing and sales organization that includes direct sales representatives,
internationally through an extensive distributor network, and to several
significant OEM partners.
Corgenix manufactures products for inventory based upon expected sales
demand, shipping products to customers, usually within 24 hours of receipt of
orders. Accordingly, Corgenix does not operate with a backlog.
Except for the fiscal year ending June 30, 1997, the Company has
experienced revenue growth since its inception, primarily from sales of products
and contract revenues from strategic partners. Contract revenues consist of
licensing fees, milestone payments, and royalty payments from research and
development agreements with strategic partners.
Beginning in fiscal year 1996, Corgenix added third-party OEM licensed
products to its diagnostic product line. The Company currently markets products
through OEM licenses from third party manufacturers and expects to expand its
relationship with other companies in the future to gain access to additional
products.
Although Corgenix has experienced growth in revenues every year since 1990
except for 1997, there can be no assurance that, in the future, Corgenix will
sustain revenue growth or achieve consistent profitability. Corgenix's 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 Corgenix receives R&D
milestone payments and license fees from strategic partners, (v) changes in
reimbursement policies for the products that Corgenix sells, (vi) competitive
pressures on average selling prices for the products that Corgenix sells, and
(vii) changes in the mix of products that Corgenix sells.
Results of Operations
Three Months Ended September 30, 1999 and 1998
Net Sales. Net sales for the three months ended September 30, 1999 were
$806,000, a 46.8% increase from $549,000 in 1998. A component of net sales,
gross product sales, increased 45.5% to $803,000 in 1999 from $552,000 in 1998,
because of expansion of the Company's customer base in the United States,
enlargement of the international distribution network, and the worldwide market
launch of several new products.
Cost of sales. Cost of sales in dollars increased to $305,000 in 1999 from
$283,000 in 1998. As a percentage of sales, cost of sales decreased to 37.8% in
1999 from 51.5% in 1998 mainly reflective of increased manufacturing
efficiencies and product mix. The gross profit increased 88.3% to $501,000 in
1999 from $266,000 in 1998.
Selling and marketing. Selling and marketing expenses decreased 21.2% to
$152,000 in 1999 from $193,000 in 1998, primarily due to a restructuring of the
sales commission program in the U.S., and a reduction in advertising and
promotional expenditures from 1998 to 1999. As a percentage of sales, selling
and marketing expenses decreased to 18.9% in 1999 from 35.2% in 1998.
Research and development. Research and development expenses increased to
$99,000 in 1999 from $98,000 in 1998. No additional projects were added to the
ongoing development program during the first quarter
General and administrative. General and administrative expenses decreased
34.5% to $182,000 in 1999 from $278,000 in 1998, due in part to a reduction in
legal, accounting and related costs incurred when the Company became publicly
traded in 1998.
Net profit (loss). Net profit for the first quarter in 1999 was $41,000,
compared to a net loss of $327,000 in 1998.
Liquidity and Capital Resources
Since inception, Corgenix has financed its operations primarily through
private placements of common and preferred stock, raising net proceeds of
approximately $3.9 million from sales of these securities. Corgenix has also
received financing for operations from sales of diagnostic products and
agreements with strategic partners. Through September 30, 1999, Corgenix has
invested $145,000, (net of accumulated depreciation) in leasehold improvements,
laboratory and computer equipment and office furnishings and equipment to
support its development and administrative activities.
At September 30, 1999, the Company had cash of $107, a working capital
deficit of $186,330, and short and long-term notes and leases payable of
$1,048,927, with $274,444 due in the following twelve months and the remainder
due at varying dates through February 2006.
Management expects that cash flows from current operations will be
sufficient to fund such operations at current levels. The Company is
aggressively pursuing financing alternatives to provide funds for its current
operations and its growth plans, which financing alternatives may involve
accessing the public equity or debt markets. There can be no assurance that the
Company will be able to obtain sufficient capital from such financings to offset
its working capital deficits or to pursue its expansion plans
Year 2000 Effect
The Year 2000 will impact computer programs written using two digits
rather than four to define the applicable year. Any programs with time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operation, including a temporary inability to process
transactions, send invoices or engage in other ordinary activities. This problem
largely affects software programs written years ago, before the issue came to
prominence. Corgenix recently reviewed all of its software for exposure to Year
2000 issues, including network and workstation software, and does not believe
that such software poses significant risks associated with the Year 2000
problem. Corgenix primarily uses third-party software programs written and
updated by outside firms, each of whom has stated that its software is Year 2000
compliant. To assure that all software programs can successfully work in
conjunction with each other using the Company's computer hardware after the year
1999, Corgenix tested all of its software and hardware during the third quarter
of 1998 using a combination of past and future dates. Such testing revealed that
some of the Company's computer hardware could not correctly process dates after
December 31, 1999.
The Company has updated or replacd all such equipment.
The Company has received written assurance that all suppliers of materials
considered critical are Year 2000 compliant.
The Company has also begun the process of obtaining written assurances
from the Company's material customers regarding their Year 2000 compliance. In
addition, the Company has instituted a requirement that all new customers
placing standing orders of the Company's products must certify in writing that
they are Year 2000 compliant or provide written assurances as to the steps they
are taking to become Year 2000 compliant. The Company has received written
notification from customers representing greater than 90% of Company revenues
that such customers are Year 2000 compliant or that they are will become Year
2000 compliant before December 31, 1999.
Although the Company has taken significant steps to address the Year 2000
problem, there can be no assurance that the failure of the Company and/or its
material customers or suppliers to timely attain Year 2000 compliance will not
materially reduce the Company's revenues or income, or that these failures
and/or the impacts of broader compliance failures by telephone, mail, data
transfer or other utility or general service providers or government or private
entities will not have a material adverse effect on the Company.
Forward-Looking Statements and Risk Factors
This 10-QSB includes statements that are not purely historical and are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1934, as amended, including statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
statements other than historical fact contained in this 10-QSB, including,
without limitation, statements regarding future product developments,
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-QSB are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update such forward-looking statements. Although the Company
believes that the assumptions and expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct or that the Company will take any actions that may
presently be planned.
Certain factors that could cause actual results to differ materially from
those expected include the following:
Losses Incurred; Future Capital Needs; Uncertainty of Additional Funding
<PAGE>
The Company has incurred operating losses and negative cash flow from
operations for the last three fiscal years. Losses incurred by the Company since
its inception have aggregated over $4.1 million, and there can be no assurance
that the Company will be able to generate positive cash flows to fund its
operations in the near future. Assuming no significant uses of cash in
acquisition activities or other significant changes, the Company believes it
will have sufficient cash to satisfy its funding needs for at least the next
year. If the Company is not able to operate profitably and generate positive
cash flows, however, it may need to raise additional capital to fund its
continuing operations. If the Company needs additional financing to meet its
requirements, there can be no assurance that it will be able to obtain such
financing on terms satisfactory to it, if at all. Alternatively, any additional
equity financing may be dilutive to existing stockholders, and debt financing,
if available, may include restrictive covenants. If adequate funds are not
available, the Company might be required to limit its research and development
activities or its selling and marketing activities, either of which could have a
material adverse effect on the future of the Company's business.
Dependence on Collaborative Relationships and Third Parties for Product
Development and Commercialization
The Company has historically entered into licensing and research and
development agreements with collaborative partners, from which it derived a
significant percentage of its revenues in past years. Pursuant to these
agreements, the Company's collaborative partners have specific responsibilities
for the costs of development, promotion, regulatory approval and/or sale of the
Company's products. The Company will continue to rely on future collaborative
partners for the development of products and technologies. There can be no
assurance that the Company will be able to negotiate such collaborative
arrangements on acceptable terms, if at all, or that current or future
collaborative arrangements will be successful. To the extent that the Company is
not able to establish such arrangements, it could experience increased capital
requirements or be forced to undertake such activities at its own expense. The
amount and timing of resources that any of these partners devotes to these
activities will generally be based on progress by the Company in its product
development efforts. Usually, collaborative arrangements may be terminated by
the partner upon prior notice without cause and there can be no assurance that
any of these partners will perform its contractual obligations or that it will
not terminate its agreement. With respect to any products manufactured by third
parties, there can be no assurance that any third-party manufacturer will
perform acceptably or that failures by third parties will not delay clinical
trials or the submission of products for regulatory approval or impair the
Company's ability to deliver products on a timely basis.
No Assurance of Successful or Timely Development of Additional Products
The Company's business strategy includes the development of additional
diagnostic products. The Company's success in developing new products will
depend on its ability to achieve scientific and technological advances and to
translate these advances into commercially competitive products on a timely
basis. Development of new products requires significant research, development
and testing efforts. The Company will have limited resources to devote to the
development of products and, consequently, a delay in the development of one
product or the use of resources for product development efforts that prove
unsuccessful may delay or jeopardize the development of other products. Any
delay in the development, introduction and marketing of future products could
result in such products being marketed at a time when their cost and performance
characteristics would not enable them to compete effectively in their respective
markets. If the Company is unable, for technological or other reasons, to
complete the development and introduction of any new product or if any new
product is not approved or cleared for marketing or does not achieve a
significant level of market acceptance, the Company's results of operation could
be materially and adversely affected.
Competition in the Diagnostics Industry
Competition in the human medical diagnostics industry is, and is expected
to remain, significant. The Company's competitors range from development stage
diagnostics companies to major domestic and international pharmaceutical
companies. Many of these companies have financial, technical, marketing, sales,
manufacturing, distribution and other resources significantly greater than those
of the Company. In addition, many of these companies have name recognition,
established positions in the market and long standing relationships with
customers and distributors. Moreover, the diagnostics industry has recently
experienced a period of consolidation, during which many of the large domestic
and international pharmaceutical companies have been acquiring mid-sized
diagnostics companies, further increasing the concentration of resources. There
can be no assurance that technologies will not be introduced that could be
directly competitive with or superior to the Company's technologies.
<PAGE>
Governmental Regulation of Diagnostics Products
The testing, manufacture and sale of the Company's products is subject to
regulation by numerous governmental authorities, principally the FDA and certain
foreign regulatory agencies. Pursuant to the Federal Food, Drug, and Cosmetic
Act, and the regulations promulgated thereunder, the FDA regulates the
preclinical and clinical testing, manufacture, labeling, distribution and
promotion of medical devices. The Company will not be able to commence marketing
or commercial sales in the United States of new products under development until
it receives clearance from the FDA. The testing for, preparation of and
subsequent FDA regulatory review of required filings can be a lengthy, expensive
and uncertain process. Noncompliance with applicable requirements can result in,
among other consequences, fines, injunctions, civil penalties, recall or seizure
of products, repair, replacement or refund of the cost of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing clearances
or approvals, and criminal prosecution.
There can be no assurance that the Company will be able to obtain
necessary regulatory approvals or clearances for its products on a timely basis,
if at all, and delays in receipt of or failure to receive such approvals or
clearances, the loss of previously received approvals or clearances, limitations
on intended use imposed as a condition of such approvals or clearances or
failure to comply with existing or future regulatory requirements could have a
material adverse effect on the Company's business.
Dependence on Distribution Partners for Sales of Diagnostic Products in
International Markets
The Company has entered into distribution agreements with collaborative
partners in which Corgenix has granted distribution rights for certain Corgenix
products to these partners within specific international geographic areas.
Pursuant to these agreements, the Company's collaborative partners have certain
responsibilities for market development, promotion, and sales of the products.
If any of these partners fails to perform its contractual obligations or
terminates its agreement, this could have a material adverse effect on the
Company's business, financial condition and results of operation.
Governmental Regulation of Manufacturing and Other Activities
As a manufacturer of medical devices for marketing in the United States,
the Company is required to adhere to applicable regulations setting forth
detailed good manufacturing practice requirements, which include testing,
control and documentation requirements. The Company must also comply with
Medical Device Report ("MDR") requirements, which require that a manufacturer
report to the FDA any incident in which its product may have caused or
contributed to a death or serious injury, or in which its product malfunctioned
and, if the malfunction were to recur, it would be likely to cause or contribute
to a death or serious injury. The Company is also subject to routine inspection
by the FDA for compliance with QSR requirements, MDR requirements and other
applicable regulations. The FDA has recently implemented new QSR requirements,
including the addition of design controls that will likely increase the cost of
compliance. Labeling and promotional activities are subject to scrutiny by the
FDA and, in certain circumstances, by the Federal Trade Commission. The Company
may incur significant costs to comply with laws and regulations in the future,
which may have a material adverse effect upon the Company's business, financial
condition and results of operations.
Regulation Related to Foreign Markets
Distribution of diagnostic products outside the United States is subject
to extensive government regulation. These regulations, including the
requirements for approvals or clearance to market, the time required for
regulatory review and the sanctions imposed for violations, vary from country to
country. The Company may be required to incur significant costs in obtaining or
maintaining its foreign regulatory approvals. In addition, the export by the
Company of certain of its products that have not yet been cleared for domestic
commercial distribution may be subject to FDA export restrictions. Failure to
obtain necessary regulatory or the failure to comply with regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
Uncertain Availability of Third Party Reimbursement for Diagnostic
Products
In the United States, health care providers that purchase diagnostic
products, such as hospitals and physicians, generally rely on third party
payors, principally private health insurance plans, federal Medicare and state
Medicaid, to reimburse all or part of the cost of the procedure. Third party
payors are increasingly scrutinizing and challenging the prices charged for
medical products and services and they can affect the pricing or the relative
attractiveness of the Decreases in reimbursement amounts for tests performed
using the Company's diagnostic products, failure by physicians and other users
to obtain reimbursement from third party payors, or changes in government and
private third party payors' policies regarding reimbursement of tests utilizing
diagnostic products, may affect the Company's ability to sell its diagnostic
products profitably. Market acceptance of the Company's products in
international markets is also dependent, in part, upon the availability of
reimbursement within prevailing health care payment systems.
Uncertainty of Protection of Patents, Trade Secrets and Trademarks
The Company's success depends, in part, on its ability to obtain patents
and license patent rights, to maintain trade secret protection and to operate
without infringing on the proprietary rights of others. There can be no
assurance that the Company's issued patents will afford meaningful protection
against a competitor, or that patents issued to the Company will not be
infringed upon or designed around by others, or that others will not obtain
patents that the Company would need to license or design around. The Company
could incur substantial costs in defending itself or its licensees in litigation
brought by others or prosecuting infringement claims against third parties. If
the outcome of any such litigation is unfavorable to the Company, the Company's
business could be adversely affected.
Risks Regarding Potential Future Acquisitions
The Company's growth strategy includes as a material element the desire to
acquire complementary companies, products or technologies. There is no assurance
that the Company will be able to identify appropriate companies or technologies
to be acquired, to negotiate satisfactory terms for such an acquisition, or to
obtain sufficient capital to make such acquisitions. Moreover, because of
limited cash resources, the Company will be unable to acquire any significant
companies or technologies for cash and the Company's ability to effect
acquisitions in exchange for the Company's capital stock may depend upon the
market prices for the Common Stock. If the Company does complete one or more
acquisitions, a number of risks arise, such as short-term negative effects on
the Company's reported operating results, diversion of management's attention,
unanticipated problems or legal liabilities, and difficulties in the integration
of potentially dissimilar operations. The occurrence of some or all of these
risks could have a material adverse effect on the Company's business, financial
condition and results of operations.
Dependence on Suppliers
The components of the Company's products include chemical and packaging
supplies that are generally available from several suppliers, except certain
antibodies, which the Company purchases from single suppliers. The Company
mitigates the risk of a loss of supply by maintaining a sufficient supply of
such antibodies to ensure an uninterrupted supply for at least six months.
Although the Company believes that it can substitute a new supplier with respect
to any of these components in a timely manner, there can be no assurances that
the Company will be able to substitute a new supplier in a timely manner and
failure to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
Limited Manufacturing Experience with Certain Products
Although the Company has manufactured over ten million diagnostic tests
based on its proprietary applications of ELISA technology, certain of the
Company's diagnostic products in development or in consideration for future
development, incorporate technologies with which the Company has no
manufacturing experience. Assuming successful development and receipt of
required regulatory approvals, significant work may be required to scale up
production for each new product prior to such product's commercialization. There
can be no assurance that such work can be completed in a timely manner and that
such new products can be manufactured cost-effectively, to regulatory standards
or in sufficient volume.
Seasonality of Products; Quarterly Fluctuations in Results of Operations
The Company's revenue and operating results have historically been
minimally subject to quarterly fluctuations. There can be no assurance that such
seasonality in the Company's results of operations will not have a material
adverse effect on the Company's business.
Dependence on Key Personnel
Because of the specialized nature of the Company's business, the success
of the Company will be highly dependent upon its ability to attract and retain
qualified scientific and executive personnel. In particular, the Company
believes its success will depend to a significant extent on the efforts and
abilities of Dr. Luis R. Lopez and Douglass T. Simpson, who would be difficult
to replace. There can be no assurance that the Company will be successful in
attracting and retaining such skilled personnel, who are generally in high
demand by other companies. The loss of, inability to attract, or poor
performance by key scientific and executive personnel may have a material
adverse effect on the Company's business, financial condition and results of
operations.
Product Liability Exposure and Limited Insurance
The testing, manufacturing and marketing of medical diagnostic devices
entails an inherent risk of product liability claims. To date, the Company has
experienced no product liability claims, but any such claims arising in the
future could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's product liability insurance
coverage is currently limited to $2 million. Potential product liability claims
may exceed the amount of the Company's insurance coverage or may be excluded
from coverage under the terms of the Company's policy or limited by other claims
under the Company's umbrella insurance policy. Additionally, there can be no
assurance that the Company's existing insurance can be renewed by the Company at
a cost and level of coverage comparable to that presently in effect, if at all.
In the event that the Company is held liable for a claim against which it is not
insured or for damages exceeding the limits of its insurance coverage, such
claim could have a material adverse effect on the Company's business, financial
condition and results of operations.
Limited Public Market; Possible Volatility in Stock Prices; Penny Stock
Rules
There has, to date, been no active public market for the Company's Common
Stock, and there can be no assurance that an active public market will develop
or be sustained. Although the Company's Common Stock has been traded on the OTC
Bulletin Board(R) since February 1998, the trading has been sporadic with
insignificant volume.
Moreover, the over-the-counter markets for securities of very small
companies such as the Company historically have experienced extreme price and
volume fluctuations during certain periods. These broad market fluctuations and
other factors, such as new product developments and trends in the Company's
industry and the investment markets and economic conditions generally, as well
as quarterly variation in the Company's results of operations, may adversely
affect the market price of the Company's Common Stock. In addition, the
Company's Common Stock is subject to rules adopted by the Securities and
Exchange Commission regulating broker-dealer practices in connection with
transactions in "penny stocks." As a result, many brokers are unwilling to
engage in transactions in the Company's Common Stock because of the added
disclosure requirements.
<PAGE>
CORGENIX MEDICAL CORPORATION
Part II
Other Information
Item 1. Legal Proceedings
Corgenix is not a party to any material litigation or legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the period covered by this report.
Item 5. Other Information
On September 21, 1999, Alev Lewis resigned as a director of the Company.
Ms. Lewis has informed the Company that her resignation was not due to a
disagreement with the Company on any matter relating to the Company's
operations, policies or practices.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<PAGE>
Exhibit Description of Exhibit
Number
2.1 Agreement and Plan of Merger dated as of May 12, 1998 by and among Gray
Wolf Technologies, Inc., Gray Wolf Acquisition Corp. and REAADS Medical
Products, Inc. (filed as Exhibit 2.1 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
2.2 First Amendment to Agreement and Plan of Merger dated as of May 22,
1998 by and among Gray Wolf Technologies, Inc., Gray Wolf Acquisition
Corp. and REAADS Medical Products, Inc. (filed as Exhibit 2.2 to the
Company's Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
2.3 Second Amendment to Agreement and Plan of Merger dated as of June 17,
1998 by and among the Company and TransGlobal Financial Corporation
(filed as Exhibit 2.3 to the Company's Registration Statement on Form
10-SB filed June 29, 1998, and incorporated herein by reference).
3.1 Articles of Incorporation, as amended (filed as Exhibit 3.1 to the
Company's Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
3.2 Bylaws (filed as Exhibit 3.2 to the Company's Registration Statement on
Form 10-SB filed June 29, 1998, and incorporated herein by reference).
Certificate of Designations for Series A Preferred Stock
4.1 (filed as Exhibit 4.1 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.1 Manufacturing Agreement dated September 1, 1994 between
Chugai Pharmaceutical Co., Ltd. and REAADS Medical
Products, Inc. (filed as Exhibit 10.1 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998,
and incorporated herein by reference).
10.2 Amendment to the Manufacturing Agreement dated as of January 17, 1995
between Chugai Pharmaceutical Co., Ltd. and REAADS Medical Products,
Inc.(filed as Exhibit 10.2 to the Company's Registration Statement on
Form 10-SB filed June 29, 1998, and incorporated herein by reference).
10.3 Amendment Agreement dated November 17, 1997 between Chugai Diagnostic
Science, Co., Ltd. and REAADS Medical Products, Inc.(filed as Exhibit
10.3 to the Company's Registration Statement on Form 10-SB filed June
29, 1998, and incorporated herein by reference).
10.4 Distribution Agreement dated August 26, 1993 between Chugai
Pharmaceutical Co., Ltd. and REAADS Medical Products, Inc.(filed as
Exhibit 10.4 to the Company's Registration Statement on Form 10-SB
filed June 29, 1998, and incorporated herein by reference).
10.5 Amendment to the Distribution Agreement dated September
7, 1994 between Chugai Pharmaceutical Co., Ltd. and
REAADS Medical Products, Inc. (filed as Exhibit 10.5 to
the Company's Registration Statement on Form 10-SB filed
June 29, 1998, and incorporated herein by reference).
10.6 Distribution Agreement dated November 14, 1997 between Chugai
Diagnostics Science Co, Ltd. and REAADS Bio-Medical Products (UK) Ltd.
(filed as Exhibit 10.6 to the Company's Registration Statement on Form
10-SB filed June 29, 1998, and incorporated herein by reference).
10.7 Product Development and Manufacturing Agreement dated September 12,
1994 between REAADS Medical Products, Inc. and Helena Laboratories
Corporation (filed as Exhibit 10.7 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.8 Amendment to Product Development and Manufacturing Agreement effective
December 15, 1997 between REAADS Medical Products, Inc. and Helena
Laboratories Corporation (filed as Exhibit 10.8 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.9 Office Lease dated February 6, 1996 between Stream Associates, Inc. And
REAADS Medical Products, Inc. (filed as Exhibit 10.9 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.10 Guarantee dated November 1, 1997 between William George Fleming,
Douglass Simpson and Geoffrey Vernon Callen (filed as Exhibit 10.10 to
the Company's Registration Statement on Form 10-SB filed June 29, 1998,
and incorporated herein by reference).
10.11 Employment Agreement dated May 22, 1998 between Luis R. Lopez and the
Company (filed as Exhibit 10.11 to the Company's Registration Statement
on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.12 Employment Agreement dated May 22, 1998 between Douglass T. Simpson and
the Company (filed as Exhibit 10.12 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.13 Employment Agreement dated May 22, 1998 between Ann L. Steinbarger and
the Company (filed as Exhibit 10.13 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.14 Employment Agreement dated May 22, 1998 between Taryn G. Reynolds and
the Company (filed as Exhibit 10.14 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.15 Employment Agreement dated May 22, 1998 between Catherine (O'Sullivan)
Fink and the Company (filed as Exhibit 10.15 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.16 Consulting Contract dated May 22, 1998 between Wm. George Fleming, Bond
Bio-Tech, Ltd. and the Company (filed as Exhibit 10.16 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.17 Stock Purchase Agreement dated September 1, 1993 between Chugai
Pharmaceutical Co., Ltd. and REAADS Medical Products, Inc. (filed as
Exhibit 10.17 to the Company's Registration Statement on Form 10-SB
filed June 29, 1998, and incorporated herein by reference).
10.18 Lead Generation/Corporate Relations Agreement dated April 14, 1998
between the Company and Corporate Relations Group, Inc. (filed as
Exhibit 10.18 to the Company's Registration Statement on Form 10-SB
filed June 29, 1998, and incorporated herein by reference).
10.19 Note dated January 6, 1997 between REAADS Medical Products, Inc. and
Eagle Bank (filed as Exhibit 10.19 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.20 Deed of Guarantee Sterling and Currency dated May 14, 1997 by REAADS
Bio-Medical Products (UK) Limited (filed as Exhibit 10.20 to the
Company's Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.21 Option Agreement dated as of May 22, 1998 between TransGlobal Financial
Corporation and the Company (filed as Exhibit 10.21 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.22 Consulting Agreement dated May 22, 1998 between TransGlobal Financial
Corporation and the Company (filed as Exhibit 10.22 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.23 Distributor Agreement dated as of August 3, 1998 by and between
American Biogenetic Sciences, Inc. and the Company (filed as Exhibit
10.23 to the Company's Registration Statement on Form 10-SB/A-1 filed
September 24, 1998, and incorporated herein by reference) (certain
portions of Exhibit 10.23 have been omitted based upon a request for
confidential treatment; the omitted portions have been filed with the
Commission).
10.24 Form of Indemnification Agreement between the Company and its directors
and officers (filed as Exhibit 10.24 to the Company's Registration
Statement on Form 10-SB/A-1 filed September 24, 1998, and incorporated
herein by reference).
11.1* Statement Regarding Computation of Net Income per Share.
21.1 Subsidiaries of the Registrant (filed as Exhibit 21.1 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
27* Financial Data Schedule
- -------------------------------
* Filed herewith.
(b) Reports on Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORGENIX MEDICAL CORPORATION
November 15, 1999 By: /s/ Luis R. Lopez
Luis R. Lopez, M.D.
Chairman and Chief Executive Officer
Corgenix Medical Corporation
Computation of Net Income Per Share
Three Month Ended
September 30,
1999 1998
------------------
Net profit (loss) $ 40,604 $ (327,424)
Common shares of outstanding at
beginning of period 16,852,116 12,102,494
Effect of shares issued during
the period 14,229 54,097
Basic and diluted weighted average
common shares 16,866,345 12,156,591
Basic and diluted profit (loss)
per share $ 0.01 (0.03)
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