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Item 8. Financial Statements and Supplementary Data

2021-03-25 compared with 2020-03-30 · 497 added, 536 removed, 153 unchanged (87% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATE.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

FINANCIAL STATEMENTS

45 unchanged sentences

BALANCE SHEETS

December 31, 2019

December 31, 2018

Current assets

Cash and cash equivalents

Marketable investment securities

Accounts receivable, net

Prepaid expenses

Deferred tax asset

Total current assets

1 unchanged sentence

Investment in joint venture

Total other long-term assets

LIABILITIES AND STOCKHOLER’S EQUITY (DEFICIT) :

Liabilities and stockholders’

Current liabilities

2 unchanged sentences

Accrued expenses (related party)

Current notes payable net of $0 and $91,427 discount, respectively

Deferred income current

Deferred revenue

Total current liabilities

Long-term Liabilities

Accrued liabilities (related-party)

Total long-term liabilities

Accrued expenses-long-term (related party)

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 11)

Stockholders’

EQUITY (DEFICIT):

Preferred stock, $.001 par value, 5,000,000 shares authorized;

25,600 and no shares issued and outstanding, respectively

Common stock, $.001 100,000,000 shares authorized;

17,342,922 and 12,923,383 shares issued and outstanding, respectively

Convertible preferred stock, $0.001 par value;

5,000,000 shares authorized;

0 and 25,600 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively

Common stock, $0.001 par value;

100,000,000 shares authorized;

28,558,033 and 17,342,922 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively

Additional paid-in capital

Accumulated deficit

(24,967,814 )

Accumulated earnings (deficit)

(24,967,814 )

Total stockholders’

equity (deficit)

Total liabilities and stockholders’

equity (deficit)

accompanying notes to consolidated financial statements.

2 unchanged sentences

STATEMENTS OF OPERATIONS

the years ended

and marketing

Administrative

and development

and amortization

Years Ended December 31,

Cost of revenue

Operating expenses

operating loss

on disposition of assets

loss from investment in joint venture

other expense

before income taxes

for income taxes

loss per share –

basic and diluted

average shares –

basic and diluted

Sales and marketing

General and administrative

Research and development

Depreciation and amortization

Total operating expenses

Income (loss) from operations

Other income (expense)

Interest income

Interest expense

Gain (loss) on disposition of assets

Gain (loss) on equity method investment in joint venture

Total other income (expense)

Income (loss) before income taxes

Income tax provision

Net income (loss)

$ (6,195,557 )

Earnings (loss) per common share:

Weighted average shares outstanding:

accompanying notes to consolidated financial statements.

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EQUITY (DEFICIT)

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Preferred Stock

Stockholders’

as of December 31, 2017

$ (12,422,444 )

issued for the exercise of warrants

as of December 31, 2018

Convertible Preferred Stock

Additional Paid-in

Accumulated Earnings

Total Stockholders’

Balance as of December 31, 2018

$ (18,694,167 )

$ (1,058,811 )

Offering, net of offering costs of $592,764

of preferred stock

-based compensation

of Preferred Stock to Common

exercise price reset

as of December 31, 2019

Public offering, net of offering costs of $592,764

Issuance of preferred stock

Conversion of preferred stock to common

Warrant exercise price reset

Stock-based compensation

Balance as of December 31, 2019

$ (24,967,814 )

Public offering, net of offering costs of $1,457,922

Common stock issued for warrant exercises

Common stock issued for option exercises

Stock-based compensation expense

Conversion of preferred stock to common

Balance as of December 31, 2020

accompanying notes to consolidated financial statements.

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STATEMENTS OF CASH FLOWS

THE YEARS ENDED DECEMBER 31, 2019 AND 2018

Years Ended December 31,

Cash flows from operating activities

$ (6,195,557 )

Net income (loss)

$ (6,195,557 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net income (loss) to cash used in operating activities:

Depreciation and amortization

Stock based compensation

Stock-based compensation expense

Accretion of notes payable discount

Gain on disposition of assets

Allowance for doubtful accounts

Loss on equity method investment

Loss (gain) on disposition of assets

Loss (gain) from equity method investment

Bad debt expense

Deferred income taxes

Changes in assets and liabilities:

Increase (decrease) deferred income

Decrease (increase) in prepaid and other assets

Increase in accounts receivable

Increase in inventory

Increase (decrease) in accounts payable and accrued expenses

Net cash used in operating activities

Accounts and other receivable

(12,960,255 )

Prepaid and other assets

Deferred revenue

Accounts payable and accrued expenses

Net cash provided by (used in) operating activities

Cash flows from investing activities

Purchase of property and equipment

Purchases of property and equipment

Purchases of marketable investment securities

Proceeds from maturities of marketable investment securities

Investment in joint venture

Net cash used by investing activities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from sale of common stock

Proceed from sale of preferred stock

Proceeds from debt financing

Offering costs

Proceeds from sale of preferred stock

Proceeds from exercise of options and warrants

Payment of offering costs

Net cash provided by financing activities

Net increase (decrease) in cash

Cash and cash equivalents beginning of period

Cash and cash equivalents end of period

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information

1 unchanged sentence

Income taxes paid

Schedule of non-cash (investing) and financing activities:

Supplemental disclosure of non-cash investing and financing transactions

Inventory moved to property, plant and equipment

Warrants issued for services

6 unchanged sentences

ENDED DECEMBER 31, 2020 AND 2019

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview and Basis of Presentation

Co-Diagnostics,

(“Company,”

“CDI,”

“we”), a Utah corporation headquartered in Salt Lake City, Utah, is

a molecular diagnostics company formed in April, 2013 that develops, manufactures and markets a new diagnostics technology.

accompanying consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiary.

All intercompany

account balances and transactions have been eliminated in consolidation.

entered into a joint venture agreement with a company in India for the purpose of setting up a manufacturing location in India

of our products and for distribution of our products in India.

We invested $322,000 and $339,000 in 2019 and 2018, respectively

for our 50% interest in the joint venture.

We determined that we had a variable interest in the joint venture company, which is

considered a variable interest entity, but that we were not the primary beneficiary as the power to direct the significant activities

of the joint venture company are shared.

Therefore, we used the equity method of accounting to record our investment in the joint

Our equity method investees are recorded in other long-term assets in the accompanying consolidated balance sheet.

share of earnings or losses from equity method investees is included in other losses in the accompanying consolidated statements

of operations.

Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying

amounts of such investments may not be recoverable.

The difference between the carrying value of the equity method investment

and its estimated fair value is recognized as an impairment charge when the loss in value is deemed other than temporary.

from the joint venture shall be divided as follows:

Up to $1,000,000

$1,000,000-$2,000,000

$2,000,000-$3,000,000

Above $3,000,000

joint venture partner will be reimbursed for some expenses, such as approximately $96,000 per year for office space.

venture needs additional funding, it will be achieved through loans obtained by the joint venture, or if loans are not available

on commercially reasonable terms, from capital contributions.

There is no term to the joint venture agreement but it can be dissolved

by mutual agreement or by one party upon a material breach by the other party.

of Presentation

accompanying audited consolidated financial statements of Co-Diagnostics, Inc.

have been prepared to reflect the financial position,

results of operations and cash flows of the Company and have been prepared in accordance with accounting principles generally

accepted in the United States of America (“GAAP”).

Account Policies

and Cash Equivalents

Company considers all cash on hand and in banks, and highly liquid investments to be cash equivalents.

At December 31, 2019, the

Company had $389,147 in bank balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

At December 31,

2018, the Company had $700,237 in bank balances in excess of amounts insured by the Federal Deposit Insurance Corporation.

in cash and cash equivalents at December 31, 2019 was $253,991 in short-term federally insured certificates of deposits.

has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit

risk on cash and cash equivalents.

is stated at the lower of cost or market.

Inventory cost is determined on a first-in first-out basis that approximates average

cost in accordance with ASC 330-10-30-12.

Provisions are made to reduce slow-moving, obsolete, or unusable inventories to their

estimated useful or scrap values.

The Company establishes reserves for this purpose.

accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of

all outstanding amounts on a monthly basis.

Management determines the allowance for doubtful accounts by identifying troubled

accounts and by using historical experience applied to an aging of accounts.

Trade receivables are written off when deemed uncollectible.

Recoveries of trade receivables previously written off are recorded when collected.

At December 31, 2019 and 2018 total net accounts

receivable was $131,382 and $13,420 which included an allowance for uncollectable accounts of $11,000 and $0, respectively.

and Equipment

and equipment are stated at cost.

Depreciation is provided using the straight-line method over the estimated useful lives of the

property, generally from three to five years.

Repairs and maintenance costs are expensed as incurred except when such repairs

significantly add to the useful life or productive capacity of the asset, in which case the repairs are capitalized.

Equity-Method

equity method investments are initially recorded at costs and are included in other long-term assets in the accompanying consolidated

balance sheet.

We adjust the carrying value of our investment based on our share of the earnings or losses in the periods which

they are reported by the investee until the carrying amount is zero.

The earnings or losses are included in other losses in the

accompanying consolidated statements of operations.

(Loss) per Share

earnings or loss per common share is computed by dividing net income or loss applicable to common shareholders by the weighted

average number of shares outstanding during each period.

As the Company experienced net losses during the years ending December

31, 2019 and 2018, no common stock equivalents have been included in the diluted earnings per common share calculations as the

effect of such common stock equivalents would be anti-dilutive.

As of December 31, 2019, and 2018, there were 3,005,352 and 1,656,242

potentially dilutive shares, respectively.

Company accounts for stock-based compensation under the provisions of FASB ASC Topic 718, Compensation-Stock Compensation (“ASC

718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees

and directors based on estimated fair values on the grant date.

The Company estimates the fair value of stock-based awards on

the date of grant using the Black-Scholes-Merton option-pricing model (the “Black-Scholes Model”).

The value of the

portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the

straight-line method.

Company estimates forfeitures at the time of grant and revises its estimate in subsequent periods if actual forfeitures differ

from those estimates.

Company accounts for stock-based compensation awards to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments

to Non-Employees (“ASC 505-50”).

Under ASC 505-50, the Company determines the fair value of the warrants or stock-based

compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments

issued, whichever is more reliably measurable.

issuances of stock options or other equity instruments to employees and non-employees as the consideration for goods or services

received by the Company are accounted for based on the fair value of the equity instruments issued or the fair market value of

the services provided.

Any stock options issued to non-employees are recorded in expense and additional paid-in capital in shareholders’

equity over the applicable service periods using variable accounting through the vesting dates based on the fair value of the

options at the end of each reporting period.

account for income taxes in accordance with the asset and liability method of accounting for income taxes prescribed by ASC Topic

Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences

attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in

the years in which those temporary differences are expected to be recovered or settled.

taxes are provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences

and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.

tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion

or all of the deferred tax assets will not be realized.

Deferred tax assets and liabilities are adjusted for the effects of changes

in tax laws and rates on the date of enactment.

and Development

and development costs are expensed when incurred.

The Company expensed $1,371,433 and $1,361,154 of research and development costs

for the years ended December 31, 2019 and 2018, respectively.

Inc., a Utah corporation (the “Company”

or “CDI”), is developing robust and innovative molecular tools

for detection of infectious diseases, liquid biopsy for cancer screening, and agricultural applications.

The Company develops,

manufactures and sells reagents used for diagnostic tests that function via the detection and/or analysis of nucleic acid molecules

(DNA or RNA).

In connection with the sale of these tests, the Company may sell diagnostic equipment and supplies from other manufacturers.

preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates

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differ from those estimates.

Value Measurements

carrying amounts of our accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their

immediate or short-term maturities.

The aggregate carrying amount of the notes payable approximates fair value as the individual

notes bear interest at market interest rates and there has not been a significant change in our operations and risk profile.

and Intangibles

represent initial legal costs incurred to apply for United States and international patents on the diagnostic testing technology,

and are amortized on a straight-line basis over their useful life of approximately 20 years.

Because much of our future success

and value depends on our proprietary technology, our patent and intellectual property strategy is of critical importance.

of our initial U.S.

patents related to our technology have been granted by the U.S.

Patent and Trademark Office, or PTO, including

the patent for our CoPrimer technology, which we consider our most important patent.

One of our patents has been issued in Great

Britain, but is still pending in the United States.

As of March 15, 2020, we had two additional patents pending in the U.S.

foreign counterpart applications.

While we are unsure whether we can develop the technology in order to obtain the full benefits

of the issued patents, the patents themselves hold value and could be sold to companies with more resources to complete the development.

On-going legal expenses incurred for patent follow-up have been expensed from April 2013 forward.

review our long-lived assets, including patents, whenever events or changes in circumstances indicate that the carrying amount

of an asset may not be recoverable.

Recoverability of assets held and used is measured by a comparison of the carrying amount

of an asset to future un-discounted net cash flows expected to be generated by the asset.

If such assets are considered to be

impaired, then the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the

estimated fair value of the assets.

Fair value is determined by using cash flow analyses and other market valuations.

review at December 31, 2019, it was determined that no adjustment was required.

Leased Equipment

leased equipment is capitalized and depreciated using the straight-line method over the estimated useful life of the equipment,

generally from three to five years.

The expense for the depreciation on this equipment is included in cost of sales.

typically retains ownership of this equipment.

of Presentation

accompanying audited consolidated financial statements of Co-Diagnostics, Inc.

and its wholly owned subsidiary have been prepared

to reflect the financial position, results of operations and cash flows of the Company and have been prepared in accordance with

accounting principles generally accepted in the United States of America (“GAAP”).

All intercompany balances and transactions

have been eliminated.

Summary of Significant Accounting Policies

and Cash Equivalents

and cash equivalents consist of cash on hand, money market funds and highly liquid investments with an original maturity date

of 90 days or less from the date of purchase.

The fair value of cash equivalents approximated their carrying value as of December

31, 2020 and December 31, 2019.

The Company has its cash and cash equivalents with a large

creditworthy financial institution and the balance exceeded federally insured limits.

The Company has not experienced any losses

in such accounts, and management believes the Company is not exposed to any significant credit risk on cash and cash equivalents.

Investment Securities

Company’s marketable investment securities are comprised of investments in certificates of deposit.

The Company determines

the appropriate classification of its marketable investment securities at the time of purchase and reevaluates such designation

at each balance sheet date.

The Company has classified and accounted for its marketable investment securities as available-for-sale

securities as the Company may sell these securities at any time for use in its current operations or for other purposes, even

prior to maturity.

As a result, the Company classifies its marketable investment securities,

including securities with stated maturities beyond twelve months, within current assets in the condensed consolidated balance

Any unrealized gains or losses are immaterial.

accounts receivable are recorded at the invoiced amount (net of allowance) and do not bear interest.

The Company maintains an

allowance for doubtful accounts for amounts the Company does not expect to collect.

In establishing the required allowance, management

considers historical losses, current market condition, customers’

financial condition, the age of receivables, and current

payment patterns.

Account balances are written off against the allowance once the receivable is deemed uncollectible.

of trade receivables previously written off are recorded when collected.

At December 31, 2020 total accounts receivable was $12,928,633

with an allowance for uncollectable accounts of $791,800 resulting in a net amount of $12,136,833.

At December 31, 2019 total

accounts receivable was $142,382 with an allowance for uncollectable accounts of $11,000 resulting in a net amount of $131,382.

Equity-Method

equity method investments are initially recorded at cost and are included in other long-term assets in the accompanying condensed

consolidated balance sheet.

We adjust the carrying value of our investment based on our share of the earnings or losses in the

periods which they are reported by the investee until the carrying amount is zero.

The earnings or losses are included in other

income (expense) in the accompanying condensed consolidated statements of operations.

is stated at the lower of cost or net-realizable value.

Inventory cost is determined on a first-in first-out basis that approximates

average cost in accordance with ASC 330-10-30-12.

At December 31, 2020, the Company had $7,995,189 in inventory, of which $598,881

was finished goods and $7,396,308 was raw materials.

At December 31, 2019, the $197,168 of inventory was finished goods.

establishes reserves to reduce low-moving, obsolete, or unusable inventories to their estimated useful or scrap values.

and Equipment

and equipment are stated at cost less accumulated depreciation and amortization.

Depreciation is provided using the straight-line

method over the estimated useful lives of the property, generally from three to five years.

Repairs and maintenance costs are

expensed as incurred except when such repairs significantly add to the useful life or productive capacity of the asset, in which

case the repairs are capitalized.

Company reviews its long-lived assets, including property and equipment, for impairment whenever an event or change in facts and

circumstances indicates that their carrying amounts may not be recoverable.

Recoverability of these assets is measured by comparing

the carrying amount to the estimated undiscounted future cash flows expected to be generated.

If the carrying amount exceeds the

undiscounted cash flows, the assets are determined to be impaired and an impairment charge is recognized as the amount by which

the carrying amount exceeds fair value.

Company generates revenue from product sales and license sales.

9 unchanged sentences

and (v) recognition of revenue when, or as the Company satisfies each performance obligation.

the criteria above, the Company typically recognizes revenue upon delivery.

Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue.

Company records any payments received from customers prior to the Company fulfilling its performance obligation(s) as deferred

Related-Party

are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control,

are controlled by, or are under common control with the Company.

Related parties also include principal stockholders of the Company,

its management, members of the immediate families of principal stockholders of the Company and its management and other parties

with which the Company may deal where one party controls or can significantly influence the management or operating policies of

the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

The Company discloses all material related-party transactions.

All transactions shall be recorded at fair value of the goods or

services exchanged.

Property purchased from a related party is recorded at the cost to the related party and any payment to or

on behalf of the related party in excess of the cost is reflected as compensation or distribution to related parties depending

on the transaction.

revenue primarily consists of payments received from customers prior to the Company fulfilling its performance obligation of providing

When this occurs, the Company records a contract liability as deferred revenue.

Deferred revenue is recognized as

revenue as the related performance obligations are satisfied.

and Development

and development costs are expensed when incurred.

The Company expensed $3,185,290 and $1,371,433 of research and development costs

for the years ended December 31, 2020 and 2019, respectively.

Company has granted stock-based awards, including restricted stock, stock options, stock warrants and restricted stock units (“RSUs”),

to its employees, certain consultants and members of its board of directors.

The Company records stock-based compensation based

on the grant date fair value of the awards and recognizes the fair value of those awards as expense using the straight-line method

over the requisite service period of the award.

The Company estimates the grant date fair value of stock options using the Black-Scholes

option-pricing model.

When an award is forfeited prior to the vesting date, the Company

recognizes an adjustment for the previously recognized expense in the period of the forfeiture.

Company accounts for income taxes in accordance with the liability method of accounting for income taxes.

Under this method, d eferred

income tax assets and deferred income tax liabilities represent the tax effect of temporary differences between financial reporting

and tax reporting measured at enacted tax rates in effect for the year in which the differences are expected to reverse.

recognizes only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon

an audit by the taxing authority.

allowances are provided when it is more-likely-than-not that some or all of the deferred income tax assets may not be realized.

In assessing the need for a valuation allowance, the Company has considered its historical levels of income, expectations of future

taxable income and ongoing tax planning strategies.

the provision for income taxes, including the effective tax rate and analysis of potential tax exposure items, if any, requires

significant judgment and expertise in federal and state income tax laws, regulations and strategies, including the determination

of deferred income tax assets and liabilities and any estimated valuation allowances deemed necessary to value deferred income

Judgments and tax strategies are subject to audit by various taxing authorities.

While the Company believes it has

no significant uncertain income tax positions in the consolidated financial statements, adverse determinations by these taxing

authorities could have a material adverse effect on the consolidated financial positions, result of operations, or cash flows.

Income (Loss) per Share

net income or loss per common share is computed by dividing net income or loss applicable to common shareholders by the weighted

average number of shares outstanding during each period.

net income or loss per share is computed by dividing net income or loss attributable to common stockholders by the weighted-average

number of shares of common stock outstanding during the period increased by common shares that could be issued upon conversion

or exercise of other outstanding securities to the extent those additional common shares would be dilutive.

The dilutive effect

of potentially dilutive securities is reflected in diluted net income or loss per share by application of the treasury stock method.

During periods when the Company is in a net loss position, basic net loss per share is the same as diluted net loss per share

as the effects of potentially dilutive securities are anti-dilutive

Concentrations

Risk and Significant Customers

Company had certain customers which are each responsible for generating 10% or more of the total revenue for the year ended December

Two customers together accounted for approximately 38% of total revenue for the year ended December 31, 2020.

customers each accounted for more than 10% of accounts receivable at December 31, 2020.

These two customers together accounted

for approximately 48% of accounts receivable at December 31, 2020.

Issued Accounting Standards

3 unchanged sentences

standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

Company, an emerging growth company (“EGC”), has elected to take advantage of the benefits of the extended transition

an emerging growth company (“EGC”), the Company has elected to take advantage of the benefits of the extended transition

period provided for in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting

1 unchanged sentence

to private companies.

August 2016, the FASB issued ASU No.

2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and

Cash Payments, to clarify guidance on the presentation and classification of certain cash receipts and payments in the statement

of cash flows.

This update was issued with the intent of reducing diversity in practice with respect to eight types of cash flows.

This guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years,

for public EGC companies like us.

The update did not have a significant impact on the Company’s financial statements.

February 2016, the FASB issued ASU No.

3 unchanged sentences

interim periods with those periods beginning after December 15, 2021, for public EGC companies like us.

Management is currently

evaluating the impact that the updated standard will have on its consolidated financial statements and related disclosures.

May 2014, the FASB issued ASU No.

“Revenue from Contracts with Customers (Topic 606)”

which supersedes the

revenue recognition requirements in ASC Topic 605, “Revenue Recognition”, and requires entities to recognize revenue

in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to

which the entity expects to be entitled in exchange for those goods or services.

Additional revenue recognition updates were also

issued in 2016 and 2017, which further clarified certain aspects of the new revenue recognition guidance.

The new authoritative

guidance is effective for interim and annual periods beginning after December 15, 2018, for public EGC companies like us.

guidance permits two methods of adoption:

retrospectively to each prior reporting period presented (the full retrospective method),

or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application

(the modified retrospective method).

The Company adopted the modified retrospective method.

The update did not have a significant

impact on the Company’s financial statements.

March 2017, the FASB issued Accounting Standards Update (“ASU”) No.

2017-08, Receivables –

Nonrefundable Fees

and Other Costs (Subtopic 310-20).

The amendments in this update shorten the amortization period for certain callable debt securities

held at a premium.

Specifically, the amendments require the premium to be amortized to the earliest call date.

The amendments

do not require an accounting change for securities held at a discount;

the discount continues to be amortized to maturity.

public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal

years, beginning after December 15, 2019, for public EGC companies like us.

This update did not have a significant impact on the

Company’s financial statements.

NOTES PAYABLE

recorded value of our notes payable (net of $91,427 debt discount) for the years ending December 31, 2019 and 2018, were as follows:

Notes payable,

net of debt discount

Salna Promissory Note Payable

Total Long-term

Salna Promissory Note

August 3, 2018, we entered into a Note Purchase Agreement with an existing shareholder of the Company and prior investor in the

Company’s convertible debt securities.

Pursuant to the agreement, the Company issued to the shareholder a Promissory Note,

dated August 3, 2018, in the principal amount of $2,000,000 (the “Note”) in exchange for a loan to the Company of

equal principal amount.

January 30, 2019, we entered into a securities purchase agreement with two investors, whereby the investors purchased from the

Company 30,000 shares of Series A Convertible Preferred Stock of the Company for a purchase price of $3,000,000.

price was paid by the investors with $1.0 million in cash and the conversion of a $2.0 million note owed by the Company to the

Upon conversion we recognized $78,241 as interest expense for the unamortized debt discount.

For the year ended December

31, 2019 we recorded $106,409 in interest expense, of which $15,000 was for interest paid and $91,427 was for accretion of note

the year ended December 31, 2018, we recorded $71,000 in interest expense.

We incurred $153,845 in note origination costs which

are being accreted of the life of the note.

For the year ended December 31, 2018, we recorded $62,417 in interest expense for

the accretion of these note origination costs.

December 31, 2019 we had no outstanding notes payable.

The Company expects to

use the modified retrospective transition method with the option to recognize a cumulative-effect adjustment at the date of adoption.

The Company expects its balance sheet will be impacted as it records right-of-use assets and lease liabilities on its consolidated

balance sheet, but does not expect the adoption of this standard will have a material impact on its consolidated statements of

operations and cash flows.

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326) (“ASU 2016-13”), which

requires the measurement and recognition of expected credit losses for certain financial instruments, which includes the Company’s

accounts receivable.

ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result

in more timely recognition of credit losses.

The update is effective for annual periods and interim periods with those periods beginning

after December 15, 2021, for public EGC companies like us, but the Company may adopt it upon election on January 1, 2021.

requires a cumulative effect adjustment to the balance sheet as of the beginning of the first early reporting period in which the guidance

is effective.

The Company is evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements and when it

plans to adopt it.

December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) (“ASU 2019-12”), which removes certain exceptions

for investments, intra-period allocations and interim calculations and adds guidance to reduce complexity in accounting for income

ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,

early adoption is permitted.

The Company does not believe the adoption of this standard will have a material impact on its

consolidated financial statements and related disclosures.

Fair Value Measurements

Company measures and records certain financial assets at fair value on a recurring basis.

Fair value is based on the price that

would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants

at the measurement date.

Company’s financial instruments that are measured at fair value on a recurring basis consist of money market funds.

following three levels of inputs are used to measure the fair value of financial instruments:

Quoted market prices in active markets for identical assets or liabilities.

Observable market-based inputs or unobservable inputs that are corroborated by market data.

Unobservable inputs that are not corroborated by market data.

Company’s financial instruments that are measured at fair value on a recurring basis consist of certificates of deposit.

The following table summarizes the assets measured at fair value on a recurring basis as of December 31, 2020 by level within

the fair value hierarchy:

December 31, 2020

Marketable investment securities:

Certificates of deposit

Value of Other Financial Instruments

carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, accounts payable, accrued

liabilities, and other liabilities approximate fair value due to their short-term maturities and are excluded from the fair value

tables above.

Property and Equipment

and equipment, net consisted of the following:

Lab equipment

Leasehold improvements

Office equipment, furniture and other

Less accumulated depreciation and amortization

Fixed assets, net

following table sets forth revenue by geographic area:

Years Ended December 31,

United States

Rest of World

Percentage of revenue by area:

United States

Rest of World

in the Company’s deferred revenue balance for the year ended December 31, 2020 were as follows:

Balance as of December 31, 2019

Revenue recognized that was included in deferred revenue balance at the beginning of the period

Increase due to prepayments from customers

Balance as of December 31, 2020

Company expects to perform its performance obligation and recognize the deferred revenue as revenue during the year ended December

Stockholders’

Stock and Preferred Stock

January 28, 2020, the Company completed the sale of 3,448,278 shares of the Company’s common stock, par value $0.001 per

share, at a purchase price of $1.45 per share in a registered direct offering.

The aggregate gross proceeds for the sale of the

shares were $5,000,003 and the Company received net proceeds of $4,517,102 after deducting offering costs of $482,901.

February 13, 2020, the Company completed the sale of 3,324,676 shares of the Company’s common stock, par value $0.001 per

share, at a purchase price of $3.08 per share in a registered direct offering.

The aggregate gross proceeds for the sale of the

shares were $10,240,002 and the Company received net proceeds of $9,612,561 after deducting offering costs of $627,441.

March 2, 2020, the Company completed the sale of 470,000 shares of the Company’s common stock, par value $0.001 per share,

at a purchase price of $9.00 per share in a registered direct offering.

The aggregate gross proceeds for the sale of the shares

were $4,230,000 and the Company received net proceeds of $3,882,420 after deducting offering costs of $347,580.

the year ended December 31, 2020, the Company issued an aggregate of 2,133,333 shares of common stock upon conversion of all of

the Company’s convertible preferred stock outstanding as of December 31, 2019.

the year ended December 31, 2020, the Company issued 856,660 shares of common stock upon the exercise of warrants and received

the year ended December 31, 2020, the Company issued 871,229 shares of common stock upon the exercise of options and received

the year ended December 31, 2020, the Company issued 83,935 shares of common stock for services provided by third parties primarily

related to investment relations services.

January 2019, we entered into a securities purchase agreement with investors, whereby the investors purchased from the Company

30,000 shares of Series A Convertible Preferred Stock of the Company for a purchase price of $3,000,000.

The Series A Convertible

Preferred Stock was convertible to common stock at a conversion price calculated by multiplying the number of preferred shares

being converted by $100 and dividing the result by $1.20.

the year ended December 31, 2019, 366,667 shares of our common stock were issued for the conversion of 4,400 shares of Series

A Preferred Stock.

February 2019, the Company completed the sale of 3,925,716 shares of the Company’s common stock, par value $0.001 per share,

at a purchase price of $1.40 per share in a registered direct offering.

The aggregate gross proceeds for the sale of the shares

were $5,496,002 and the Company received net proceeds of $4,903,238 after deducting offering costs of $592,764.

the year ended December 31, 2019, the Company issued an aggregate of 127,516 shares of common stock for services provided by third

parties primarily related to investment relations services.

Earnings per Share

following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share for years

ended December 31, 2020 and 2019:

Years Ended December 31,

Net income (loss), as reported

$ (6,195,557 )

Weighted average shares, basic

Dilutive effect of stock options, warrants and RSUs

Shares used to compute diluted earnings per share

Basic earnings per share

Diluted earnings per share

options were excluded from the computation of diluted earnings per share for the year ended December 31, 2020, because the effect

would have been anti-dilutive.

a result of incurring a net loss for the year ended December 31, 2019, no potentially dilutive securities are included in the

calculation of diluted earnings per share because such effect would be anti-dilutive.

The Company had potentially dilutive securities

as of December 31, 2019, consisting of:

(i) 2,021,817 options, (ii) 983,535 warrants and (iii) 2,133,333 for shares of convertible

preferred stock.

Stock-Based Compensation

Incentive Plans

the Co-Diagnostics, Inc.

2015 Long-term Incentive Plan (the “2015 Plan”), the board of directors may issue incentive

stock options, share equivalents such as restricted stock awards, stock bonus awards, performance shares and restricted stock

units to employees and directors and non-qualified stock options to consultants of the company.

Options generally expire ten years

after being granted.

Options granted vest in accordance with the vesting schedule determined by the board of directors, usually

ratably over a three-year vesting schedule upon anniversary date of the grant with the first 1/3 vesting on the grant date.

an employee terminate before the vesting period is completed, the unvested portion of each grant is forfeited.

The Company has

used the Black-Scholes valuation model to estimate fair value of our stock-based awards, which requires various judgmental assumptions

including estimated stock price volatility, forfeiture rates, and expected life.

Our computation of expected volatility is based

on market-based implied volatility.

The 2015 Plan reserves an aggregate of 6,000,000 shares.

The number of unissued stock options

authorized under the 2015 Plan at December 31, 2019 was 3,978,183.

On February 10, 2020 we issued an aggregate of 100,000 options

to the four independent members of our Board of Directors.

were 890,000 and 850,000 options granted in the years ended December 31, 2019 and 2018, respectively.

The Black-Scholes valuation

model requires various judgmental assumptions including the estimated volatility, risk-free interest rate and expected option

In determining the expected volatility our computation is based the stock prices of 3 comparable companies and is based

on a combination of historical and market-based implied volatility.

The risk-free interest rate was based on the yield curve of

a zero-coupon U.S.

Treasury bond on the date the option was granted with a maturity equal to the expected term of the option.

The fair values for the options granted were estimated at the date of grant using the Black Scholes option-pricing model with

the following weighted average assumptions:

December 31, 2019

December 31, 2018

Co-Diagnostics, Inc.

2015 Long Term Incentive Plan (the “Incentive Plan”) reserves an aggregate of 6,000,000 shares

of common stock issuable upon the grant of awards under the Incentive Plan.

The number of awards available for issuance under

the Incentive Plan was 3,278,683 at December 31, 2020.

following table summarizes option activity during the year ended December 31, 2020:

Exercise Price

Contractual Life

Outstanding at December 31, 2019

Forfeited/Cancelled

Outstanding at December 31, 2020

Exercisable at December 31, 2020

total intrinsic value of options exercised during the year ended December 31, 2020 was approximately $11.8 million.

The aggregate

intrinsic value of outstanding options at December 31, 2020 was approximately $7.1 million.

There were 296,667 of unvested options

as of December 31, 2020.

compensation cost is measured at the grant date based on the fair value of the award granted and recognized as expense over the

vesting period using the straight-line method.

The Company uses the Black-Scholes model to value options granted.

The following

weighted average assumptions were used in estimating the grant date fair value of options:

Years Ended December 31,

Risk-free interest rate

Expected life (in years)

Expected life (years)

Expected volatility

Expected dividend yield

weighted average fair value of options granted during the years ended December 31, 2019 and 2018 was $0.52 and $1.24, respectively.

Company recorded stock-based compensation expense of $589,683 and 468,240 for the years ended December 31, 2019 and 2018, respectively,

and all of it is included general and administrative expenses per the Consolidated Statements of Operations.

following table summarizes option activity during the years ended December 31, 2019 and December 31, 2018, respectively.

Average Exercise Price

Average Fair Value

Remaining Contractual

Outstanding at January 1, 2018

Options granted

Forfeited options

of December 31, 2020, there were 296,667 of unvested options and $270,147 of unrecognized stock-based compensation expense related

The unrecognized stock-based compensation expense is expected to be recognized over 1.5 years.

grant date fair value of RSUs granted is determined using the closing market price of the Company’s common stock on the

grant date with the associated compensation expense amortized over the vesting period of the awards.

The following table sets

forth the outstanding RSUs and related activity for the year ended December 31, 2020:

Number of RSUs

Weighted Average

Grant Date Fair Value

Outstanding at December 31, 2019

Options granted

Forfeited options

Forfeited/Cancelled

Outstanding at December 31, 2020

intrinsic value of the outstanding options at December 31, 2019 and 2018 was $102,366 and 245,690, respectively.

Company estimates the fair value of issued warrants on the date of issuance as determined using a Black-Scholes pricing model.

The Company amortizes the fair value of issued warrants using a vesting schedule based on the terms and conditions of each associated

underlying contract, as earned.

The Black-Scholes valuation model requires various judgmental assumptions including the estimated

volatility, risk-free interest rate and expected warrant term.

In determining the expected volatility our computation is based

the stock prices of 3 comparable companies and is based on a combination of historical and market-based implied volatility.

risk-free interest rate was based on the yield curve of a zero-coupon U.S.

Treasury bond on the date the warrant was issued with

a maturity equal to the expected term of the warrant.

were 500,000 and 50,000 warrants issued in the years December 31, 2019 and 2018, respectively.

The fair values for the warrants

issued were estimated at the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions:

December 31, 2019

December 31, 2018

of December 31, 2020, there was $5.2 million of unrecognized stock-based compensation expense related to outstanding RSUs which

is expected to be recognized over a weighted-average period of 2.8 years.

Company has issued warrants related to past financings and as compensation to third parties for services provided.

estimates the fair value of issued warrants on the date of issuance as determined using a Black-Scholes pricing model.

amortizes the fair value of issued warrants using a vesting schedule based on the terms and conditions of each warrant if granted

for services.

following table summarizes warrant activity during the year ended December 31, 2020:

Exercise Price

Contractual Life

Outstanding at December 31, 2019

Forfeited/Cancelled

Outstanding at December 31, 2020

intrinsic value of warrants exercised during the year ended December 31, 2020 was approximately $9.7 million.

The aggregate intrinsic

value of outstanding warrants at December 31, 2020 was approximately $523,000.

fair values for the warrants issued were estimated at the date of grant using the Black Scholes model with the following weighted

average assumptions:

Years Ended December 31,

Risk-free interest rate

Expected life (in years)

Expected life (years)

Expected volatility

Expected dividend yield

weighted average fair value of warrants issued during the years ended December 31, 2019 and 2018 was $1.46 and $1.22 per share,

respectively.

in stock-based compensation for the year ended December 31, 2019, the Company recognized $390,265 -based compensation expense

in general and administrative expenses for the year ended December 31, 2019 for the issuance of 500,000 warrants to two companies

for services rendered.

are 313,779 warrants outstanding that have a down round feature whereby the warrants exercise price could adjust if the Company

issues equity below the warrants exercise price.

The original exercise price of the warrants was $2.59.

During the year ended

December 31, 2019, the exercise price of these warrants was adjusted to $1.20 as a result of the issuance of equity below the

original exercise price.

The value of the effect of the warrant exercise price reset was $78,090 and was recorded to retained

earnings and additional paid-in capital.

the year ended December 31, 2018, the Company included $61,100 of stock-based compensation in sales and marketing expenses for

50,000 warrants issued to a company as part of the repurchasing of a market licensing agreement.

following table summarizes warrant activity during the years ended December 31, 2019 and 2018, respectively.

Average Exercise Price

Average Fair Value

Remaining Contractual

Outstanding at January 1, 2018

Warrants issued

Forfeited warrants

Outstanding at December 31, 2018

Warrants issued

Forfeited warrants

Outstanding at December 31, 2019

following table summarizes information about stock options and warrants outstanding at December 31, 2019.

twelve months ending December 31, 2019, we issued an aggregate of 127,516 shares of our common stock to a company valued at $108,463

to three companies for services rendered pursuant to professional services agreements.

The shares were issued pursuant to consulting

agreements and the services performed were comprised of financial services and media and shareholder relation services.

the year ended December 31, 2018, the Company issued 606,199 shares of our common stock as follows:

1) 272,727 shares for the

exercise of outstanding warrants for $30,000 in cash, 2) 84,112 shares valued at $202,090 to 4 companies for consulting services,

in our general and administrative department and, 3) 249,360 shares valued at $600,958 issued to 1 company as part of the repurchasing

of a market licensing agreement in our sales and marketing department.

unrecognized stock-based compensation was $459,560 at December 31, 2019 which the Company expects to recognize as follows:

LEASE OBLIGATIONS

offices are located at 2401 S Foothill Dr.

Suite D Salt Lake City Utah 84109-1479.

The space consists of approximately 10,273

square feet and is leased month to month a rate of $14,831 per month.

For the years ending December 31, 2019 and 2018, the Company

expensed $175,137 and $166,146, respectively for rent.

RELATED PARTY TRANSACTIONS

The Company acquired

the exclusive rights to the Co-Primer technology pursuant to a license agreement dated April 2014, between us and DNA Logix, Inc.,

which was assigned to Dr.

Satterfield prior to our acquisition of DNA Logix, Inc.

Pursuant to the license the Company was to pay

Satterfield minimum royalty payments of $30,000 per month until the Company receives an equity funding of at least $4,000,000,

at which time the payments increase to $60,000 per month for the remainder of the year.

The payment terms were orally modified

to maintain the monthly royalties at $30,000 per month through December 2016.

On March 1, 2017, the Company entered into an amendment

effective January 1, 2017, to its Exclusive License Agreement for its Cooperative Primers (“License”) technology with

Satterfield, a former member of our Board of Directors.

The amendment provides in part that all accrued royalties under

the License cease as of January 1, 2017, and we began in January to pay $700,000 of accrued royalties at the rate of $10,000 per

For the years ended December 31, 2019 and 2018, the Company paid $110,000 and $100,000, respectively for this license agreement.

December 31, 2019, and 2018 the Company had $270,000 and $380,000 respectively, in unpaid accrued expenses for technology royalty’s

payable to Dr.

January 2019, we entered into a securities purchase agreement with investors, whereby the investors purchased from the Company

30,000 shares of Series A Convertible Preferred Stock of the Company for a purchase price of $3,000,000.

Series A Convertible

Preferred Stock is convertible to common stock at a conversion price calculated by multiplying the number of preferred shares

being converted by $100 and dividing the result by $1.20.

the twelve months ending December 31, 2019, we issued 366,667 shares of our common stock to two individuals who converted 4,400

shares of our Series A Preferred Stock to common stock at a conversion price calculated by multiplying the number of preferred

shares being converted by $100 and dividing the result by $1.20.

February 2019, we completed the sale of 3,925,716 shares of the Company’s common stock, par value $0.001 per share, at a

purchase price of $1.40 per share in a registered direct offering.

The aggregate gross proceeds for the sale of the Common Shares

was $5,496,002 and we received net proceeds of $4,903,238 after offering costs of $592,764.

the twelve months ending December 31, 2019, we issued an aggregate of 127,516 shares of our common stock to a company valued at

$108,463 to three companies for services rendered pursuant to professional services agreements.

the year ended December 31, 2019, the Company issued warrants to purchase 500,000 shares of our common stock valued at $390,265

to 2 companies for services rendered.

the year ended December 31, 2018, the Company issued warrants to purchase 50,000 shares of our common stock with a weighted average

exercise price of $2.00 with an aggregate value of $61,100 to a company as part of the repurchasing of a market licensing agreement,

as stock-based compensation.

the year ended December 31, 2018, the Company issued 606,199 shares of common stock as follows:

(i) 272,727 shares for the exercise

of warrants, (ii) 249,360 shares for the repurchasing of a market licensing agreement, and (iii) 84,122 shares for services rendered.

December 28, 2018 the Company amended its Articles of Incorporation to authorized two classes of stock, Common Stock and Preferred

The total number of shares which the company is authorized to issue is 105,000,000 shares, 100,000,000 shares shall be

Commons Stock, par value $.001 and 5,000,000 shares shall be Preferred Stock, par value $.001.

deferred tax assets consist of the following components as of December 31, 2019 and 2018:

Deferred tax assets

NOL carry-forward

Sec 179 carry-forwards

Valuation allowance

outstanding warrants are exercisable at December 31, 2020 and there was no unrecognized stock-based compensation expense related

Issued for Services

Company has issued restricted stock to third parties for services provided.

The grant date fair value of the restricted stock

granted is determined using the closing market price of the Company’s common stock on the grant date with the associated

compensation expense amortized over the vesting period of the stock awards.

The Company has issued 83,935 of restricted stock

for services during the year ended December 31, 2020 and there was no unrecognized stock-based compensation expense related to

restricted stock issued.

Compensation Expense

Company recognized stock-based compensation expense related to the types of awards discussed above as follows:

Years Ended December 31,

Restricted stock units

Total stock-based compensation expense

components of the provision for income taxes consists of the following for the years ended December 31, 2020 and 2019:

Year Ended December 31,

Total current

Total deferred

Total income tax expense

income tax provision differs from the amount of income tax determined by applying the U.S.

federal income tax rate to pretax income

from continuing operations for the years ended December 31, 2019 and 2018 due to the following:

$ (1,610,800 )

federal income tax rate to income (loss)

before income taxes for the years ended December 31, 2020 and 2019 due to the following:

Year Ended December 31,

Federal income tax benefit at statutory rate

$ (1,610,800 )

Meals and entertainment

Other non-deductible expenses

State income tax benefit, net of federal tax benefit

Permanent differences

Change in valuation allowance

December 31, 2019, the Company had net operating loss carry-forwards of approximately $19,735,000 that may be offset against

future taxable income from the year 2020 through 2036.

No tax benefit has been reported in the December 31, 2019 and 2018, consolidated

financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Additionally, DNA

is a pass-through entity and therefore no provision or liability for federal income tax has been included in the consolidated

financial statements for that entity.

to change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting

purposes are subject to annual limitations.

Should a change in ownership occur, net operating loss carry-forwards may be limited

as to use in future years.

Company’s policy on the classification of interest and penalties related to income taxes is to recognize the interest and

penalties in the period incurred.

There were no penalties or interest incurred for the years ending December 31, 2019 and 2018,

related to income taxes.

deferred tax assets consist of the following components as of December 31, 2020 and 2019:

Deferred tax assets:

Accrued liabilities

Reserves and allowances

Deferred compensation

Research and development credits

Net operating loss carryforwards

SEC 179 carry-forwards

Total deferred tax assets

Deferred tax liabilities:

Property and equipment, net

Total deferred tax liabilities

Net deferred tax assets

Less valuation allowance

Net deferred tax assets

December 31, 2020, the Company had no federal or state net operating loss carryforwards.

At December 31, 2020, the Company had

$750,634 of federal research and development credit carryforward.

This credit has been offset by a liability for unrecognized

tax benefits of $375,317.

If not utilized, the credit will expire beginning in 2036.

At December 31, 2020, the Company had $120,198

of state research and development credit carryforward.

This credit has been offset by a liability for unrecognized tax benefits

If not utilized, the credit will expire beginning in 2032.

of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future

realization of deferred tax assets.

As of December 31, 2020, in part because in the current year we achieved three years of cumulative

pre-tax income, management determined that there is sufficient positive evidence to conclude that it is more likely than not that

its deferred taxes are realizable.

It therefore fully reduced its valuation allowance accordingly by $5,161,500.

Topic 740-10-05 requires that the impact of a tax position be recognized in the financial statements if that position is more

likely than not of being sustained on audit, based on the technical merits of the position.

At December 31, 2020, the Company

had a $447,831 liability for unrecognized tax benefits which is fully netted against deferred tax assets for related carryforward

The Company expects no material changes to the liability for unrecognized tax benefits in the next 12 months.

and penalties associated with uncertain tax positions are recorded as a component of income tax expense.

A reconciliation of the

beginning and ending amount of unrecognized benefits is as follows:

Unrecognized tax benefits at the beginning of the year

Gross increases - current year tax positions

Gross increases - prior year tax positions

Gross decreases - prior year tax positions

Unrecognized tax benefits at end of year

Interest and penalties in year-end balance

Company is subject to taxation in the United States and other state jurisdictions.

The tax years from December 31, 2016 through

December 31, 2020 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which

the Company is subject.

The Company is not currently under examination by any taxing authority.

Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020.

The income tax

provisions of the CARES Act include temporary changes to income-based tax laws, including the ability to utilize net operating

losses, interest expense deductions, alternative minimum tax credit refunds, charitable contributions, and depreciation of qualified

improvement property.

The income tax provisions of the CARES Act did not have a material impact on our consolidated financial

statements for the year ended December 31, 2020.

Related Party Transactions

Company acquired the exclusive rights to the CoPrimer technology pursuant to an exclusive license agreement, dated April 2014

(the “Exclusive License Agreement”), between the Company and DNA Logix, Inc., which was assigned to Dr.

Brent Satterfield,

an executive officer, prior to the Company’s acquisition of DNA Logix, Inc.

On March 1, 2017, the Company entered into an

amendment to its Exclusive License Agreement for its Cooperative Primers (“License”) technology with Dr.

The amendment provided in part that all accrued royalties under the License ceased as of January 1, 2017, and the Company agreed

to pay to Dr.

Satterfield $700,000 of accrued royalties at the rate of $10,000 per month starting in January 2017.

31, 2020, the aggregate balance of this related party liability was $150,000.

Commitments and Contingencies

Company’s offices are located at 2401 S.

Foothill Dr., Suite D, Salt Lake City, Utah 84109-1479.

In February 2020, the Company

entered into a 4-year lease agreement for its office space and in March 2020, the Company entered into an addendum with our landlord

for additional space.

The new aggregate space consists of approximately 13,687 square feet at a monthly rate of $28,825 and expires

in February 2024.

For the years ended December 31, 2020 and 2019, the Company expensed $311,963 and $175,137, respectively, for

The Company’s future minimum lease payments were as follows as of December 31, 2020:

Year Ending December 31,

Total lease payments

for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when

it is probable that a liability has been incurred and the amount can be reasonably estimated.

Legal costs incurred in connection

with loss contingencies are expensed as incurred.

different securities class action complaints were filed in July, September and December by certain stockholders of the Company

against the Company claiming that the Company promulgated false and misleading press releases to increase the price of our stock

to improperly benefit the officers and directors of the Company.

The plaintiffs demand compensatory damages sustained as a result

of the Company’s alleged wrongdoing in an amount to be proven at trial.

The Company believes these lawsuits are without

merit and intends to defend the cases vigorously.

The Company is unable to estimate a range of loss, if any, that could result

were there to be an adverse final decision in these cases.

As of the date of this report, the Company does not believe it is probable

that these cases will result in an unfavorable outcome;

however, if an unfavorable outcome were to occur in these cases, it is

possible that the impact could be material to the Company’s results of operations in the period(s) in which any such outcome

becomes probable and estimable.

Subsequent Events

January 23, 2020, we announced the completion of the principle design work for a PCR screening test for new coronavirus, COVID-19,

intended to address potential need for detection of the virus.

An outbreak of respiratory illness caused by the pneumonia-like

COVID-19 has spread rapidly over past few months, after first being discovered in the Chinese city of Wuhan on December 31, 2019.

China confirmed human-to-human transmission of the virus and the United States announced the first infection in this country,

detected in a traveler returning from Wuhan.

Our COVID-19 test features the Company’s patented CoPrimer™

and was designed using our proprietary software system, following the guidelines published by the World Health Organization and

Centers for Disease Control.

January 23, 2020, the Company entered into securities purchase agreements with certain institutional investors for the sale by

the Company of 3,448,278 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $1.45

per share in a registered direct offering.

The aggregate gross proceeds for the sale of the Common Shares were approximately $5,000,000.

The closing of the offering occurred on or about January 28, 2020.

The Common Shares sold in the offering were offered and sold

by the Company pursuant to an effective shelf registration statement on Form S-3, that was originally filed on August 14, 2018

and declared effective by the Securities and Exchange Commission (“SEC”) on September 7, 2018, and the base prospectus

contained therein (File No.

February 10, 2020, the Company entered into securities purchase agreements with certain institutional investors for the sale by

the Company of 3,324,676 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $ 3.08

per share in a registered direct offering.

The aggregate gross proceeds for the sale of the Common Shares were approximately $10.2

The closing of the offering occurred on or about February 13, 2020.

In the same manner as the January 23, 2020 offering,

the Common Shares sold in the offering were offered and sold by the Company pursuant to an effective shelf registration statement

on Form S-3, that was originally filed on August 14, 2018 and declared effective by the Securities and Exchange Commission (“SEC”)

on September 7, 2018, and the base prospectus contained therein (File No.

February 20, 2020, we announced that our Logix Smart™

COVID-19 Test technical file had been submitted for registration with

the European Community, and that it was expected to be available late February as an in vitro diagnostic (“IVD”) for

markets that accept a CE marking as valid regulatory approval.

Subsequently, on February 24, 2020, we announced that our test

obtained regulatory clearance to be sold as an in vitro diagnostic for the diagnosis of SARS-CoV-2 (COVID-19) in markets that

accept CE-marking as valid regulatory approval, and became available for purchase from the Company’s Utah-based ISO-13485:2016

certified facility.

The Declaration of Conformity for the Logix Smart COVID-19 test confirms that it meets the Essential Requirements

of the European Community’s In-Vitro Diagnostic Medical Device Directive (IVDD 98/79/EC), permitting export and sales of

the product as an IVD to commence immediately in the European Community.

We shipped samples of the Research Use Only version of

our test to distributors in Italy and Germany, which allows future customers to confirm the quality and sensitivity of the product

prior to the IVD being available, and for us to accelerate the sales efforts of its diagnostic.

Many other global markets also

accept a CE marking as valid regulatory approval following routine local product registration, which allows sales of our COVID-19

IVD into these areas.

February 28, 2020, the Company entered into securities purchase agreements with certain institutional investors for the sale by

the Company of 490,000 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $ 9.00 per

share in a registered direct offering.

The aggregate gross proceeds for the sale of the Common Shares were approximately $4.00

The closing of the offering occurred on or about February 28, 2020.

In the same manner as February 10, 2020 offering,

the Common Shares sold in the offering were offered and sold by the Company pursuant to an effective shelf registration statement

on Form S-3, that was originally filed on August 14, 2018 and declared effective by the Securities and Exchange Commission (“SEC”)

on September 7, 2018, and the base prospectus contained therein (File No.

March 6, 2020, one of our warrant holders exercised its warrants for 25,000 shares of our common stock at $2.00 per share and

paid us $50,000.

In February and March, 2020 an additional 15 warrant holders exercised an aggregate of 759,445 warrants to purchase

694,492 shares of our common stock on a cashless basis.

February and March the holder of 25,600 preferred stock converted all of his preferred shares to 2,133,333 shares of common stock.

Company evaluated subsequent events pursuant to ACS Topic 855 and determined that there are no additional events that need to

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data