Co-Diagnostics, Inc. 10-Q

Item 1. Financial Statements CO – DIAGNOSTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) June 30, 2021 December 31, 2020 Assets Current assets Cash and cash equivalents $ 70,274,078 $ 42,976,713 Marketable investment securities 2,109,675 4,335,446 Accounts receivable, net 12,755,952 12,136,833 Inventory 4,120,704 7,995,189 Prepaid expenses 1,039,506 369,028 Deferred tax asset 20,443 547,224 Total current assets 90,320,358 68,360,433 Property and equipment, net 1,192,901 949,639 Investment in joint venture 1,276,202 1,927,125 Total assets $ 92,789,461 $ 71,237,197 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 427,144 $ 598,318 Accrued expenses, current 4,001,445 2,849,503 Accrued expenses (related party), current 90,000 120,000 Income taxes payable 47,180 637,560 Deferred revenue 163,134 305,307 Total current liabilities 4,728,903 4,510,688 Long-term liabilities Accrued expenses, noncurrent 794,615 - Accrued expenses (related party), noncurrent - 30,000 Total long-term liabilities 794,615 30,000 Total liabilities 5,523,518 4,540,688 Commitments and contingencies (Note 9) - - Stockholders’ equity Convertible preferred stock, $ 0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020 - - Common stock, $ 0.001 par value; 100,000,000 shares authorized; 28,889,890 and 28,558,033 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 28,890 28,558 Additional paid-in capital 52,042,150 49,157,236 Accumulated earnings 35,194,903 17,510,715 Total stockholders’ equity 87,265,943 66,696,509 Total liabilities and stockholders’ equity $ 92,789,461 $ 71,237,197 See accompanying notes to unaudited condensed consolidated financial statements 3 CO – DIAGNOSTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) 2021 2020 2021 2020 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenue $ 27,358,140 $ 24,040,274 $ 47,382,909 $ 25,588,802 Cost of revenue 2,504,355 5,975,305 5,776,920 6,457,045 Gross profit 24,853,785 18,064,969 41,605,989 19,131,757 Operating expenses Sales and marketing 5,853,313 390,191 7,050,859 658,674 General and administrative 2,468,433 2,191,034 5,404,122 3,650,518 Research and development 4,669,160 750,249 6,886,223 1,150,271 Depreciation and amortization 71,714 25,218 138,719 45,966 Total operating expenses 13,062,620 3,356,692 19,479,923 5,505,429 Income from operations 11,791,165 14,708,277 22,126,066 13,626,328 Other income (expense) Interest income 10,529 38,173 25,186 45,748 Gain (loss) on equity method investment in joint venture 128,595 258,559 ( 336,348 ) 267,740 Total other income (expense) 139,124 296,732 ( 311,162 ) 313,488 Income before income taxes 11,930,289 15,005,009 21,814,904 13,939,816 Income tax provision 2,145,076 - 4,130,716 - Net income $ 9,785,213 $ 15,005,009 $ 17,684,188 $ 13,939,816 Earnings per common share: Basic $ 0.34 $ 0.54 $ 0.61 $ 0.50 Diluted $ 0.33 $ 0.51 $ 0.59 $ 0.48 Weighted average shares outstanding: Basic 28,794,047 27,582,229 28,921,140 27,605,137 Diluted 29,741,265 29,152,222 29,833,955 29,094,475 See accompanying notes to unaudited condensed consolidated financial statements 4 CO – DIAGNOSTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 2021 2020 Six Months Ended June 30, 2021 2020 Cash flows from operating activities Net income $ 17,684,188 $ 13,939,816 Adjustments to reconcile net income to cash used in operating activities: Depreciation and amortization 138,719 45,966 Stock-based compensation expense 2,440,347 1,124,242 Loss (gain) from equity method investment 336,348 ( 267,740 ) Deferred income taxes 526,781 - Bad debt expense 147,775 524,389 Changes in assets and liabilities: Accounts receivable ( 766,894 ) ( 5,742,883 ) Prepaid expenses ( 670,478 ) ( 2,527,983 ) Inventory 3,874,485 ( 10,030,838 ) Deferred revenue ( 142,173 ) 1,044,225 Income taxes payable ( 590,380 ) - Accounts payable and accrued expenses 1,715,383 1,542,347 Net cash provided by (used in) operating activities 24,694,101 ( 348,459 ) Cash flows from investing activities Purchases of property and equipment ( 381,981 ) ( 205,290 ) Proceeds from maturities of marketable investment securities 2,225,771 - Investment in joint venture 314,575 ( 714,500 ) Net cash provided by (used in) investing activities 2,158,365 ( 919,790 ) Cash flows from financing activities Proceeds from sale of common stock - 19,470,005 Proceeds from exercise of options and warrants 444,899 913,465 Payment of offering costs - ( 1,457,922 ) Net cash provided by financing activities 444,899 18,925,548 Net increase in cash and cash equivalents 27,297,365 17,657,299 Cash and cash equivalents at beginning of period 42,976,713 893,138 Cash and cash equivalents at end of period $ 70,274,078 $ 18,550,437 Supplemental disclosure of cash flow information Interest paid $ - $ - Income taxes paid $ 3,423,700 $ - Supplemental disclosure of non-cash investing and financing transactions Inventory moved to property, plant and equipment $ - $ 117,220 See accompanying notes to unaudited condensed consolidated financial statements 5 CO – DIAGNOSTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Shares Amount Shares Amount Capital (Deficit) Equity Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Earnings Total Stockholders’ Shares Amount Shares Amount Capital (Deficit) Equity Balance as of December 31, 2020 - $ - 28,558,033 $ 28,558 $ 49,157,236 $ 17,510,715 $ 66,696,509 Public offering, net of offering costs of $1,457,922 Public offering, net of offering costs of $1,457,922, shares Common stock issued for warrant exercises Common stock issued for warrant exercises, shares Common stock issued for option exercises - - 65,891 66 148,914 - 148,980 Common stock issued for option and warrant exercises Common stock issued for option and warrant exercises, shares Stock-based compensation - - 41,790 42 1,512,970 - 1,513,012 Conversion of preferred stock to common Conversion of preferred stock to common, shares Net income - - - - - 7,898,975 7,898,975 Balance as of March 31, 2021 - $ - 28,665,714 $ 28,666 $ 50,819,120 $ 25,409,690 $ 76,257,476 Common stock issued for option exercises - - 118,334 118 295,799 - 295,917 Stock-based compensation - - 105,842 106 927,231 - 927,337 Net income - - - - - $ 9,785,213 9,785,213 Balance as of June 30, 2021 - $ - 28,889,890 $ 28,890 $ 52,042,150 $ 35,194,903 $ 87,265,943 Balance as of December 31, 2019 25,600 $ 26 17,342,922 $ 17,343 $ 26,687,701 $ ( 24,967,814 ) $ 1,737,256 Public offering, net of offering costs of $ 1,457,922 - - 7,242,954 7,243 18,004,840 - 18,012,083 Common stock issued for warrant exercises - - 719,492 720 49,280 - 50,000 Stock-based compensation expense - - 12,363 12 432,811 - 432,823 Conversion of preferred stock to common ( 25,600 ) ( 26 ) 2,133,333 2,133 ( 2,107 ) - - Net loss - - - - - ( 1,065,193 ) ( 1,065,193 ) Balance as of March 31, 2020 - $ - 27,451,064 $ 27,451 $ 45,172,525 $ ( 26,033,007 ) $ 19,166,969 Common stock issued for option and warrant exercises - - 530,289 530 862,935 - 863,465 Stock-based compensation expense - - 9,689 10 691,409 - 691,419 Net income - - - - - 15,005,009 15,005,009 Net income (loss) - - - - - 15,005,009 15,005,009 Balance as of June 30, 2020 - $ - 27,991,042 $ 27,991 $ 46,726,869 $ ( 11,027,998 ) $ 35,726,862 See accompanying notes to unaudited condensed consolidated financial statements 6 CO – DIAGNOSTICS, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 – Overview and Basis of Presentation Description of Business Co-Diagnostics, 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. Unaudited Condensed Consolidated Financial Statements The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q as they are prescribed for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the three months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. These statements should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed on March 25, 2021. Certain 2020 financial statement amounts have been reclassified to conform to 2021 presentations. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Such estimates include receivables and other long-lived assets, legal and regulatory contingencies, income taxes, share based arrangements, and others. These estimates and assumptions are based on management’s best estimates and judgments. Actual amounts and results could differ from those estimates. Note 2 – Summary of Significant Accounting Policies Cash and Cash Equivalents Cash 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 June 30, 2021 and December 31, 2020. 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. Marketable Investment Securities The 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 re-evaluates 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 sheets. Any unrealized gains or losses are immaterial. 7 Accounts Receivable Trade 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. Recoveries of trade receivables previously written off are recorded when collected. At June 30, 2021, total accounts receivable was $ 13,686,152 with an allowance for uncollectable accounts of $ 930,200 resulting in a net amount of $ 12,755,952 . 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 . Equity-Method Investments Our 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. Inventory Inventory 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 June 30, 2021, the Company had $ 4,120,704 in inventory, of which $ 659,737 was finished goods and $ 3,460,967 was raw materials. 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. The Company establishes reserves to reduce slow-moving, obsolete, or unusable inventories to their estimated useful or scrap values. Property and Equipment Property 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. The 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. Revenue Recognition The Company generates revenue from product sales and license sales. The Company recognizes revenue when all of the following criteria are satisfied: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as the Company satisfies each performance obligation. 8 The Company constrains revenue by giving consideration to factors that could otherwise lead to a probable reversal of revenue. The Company records any payments received from customers prior to the Company fulfilling its performance obligation(s) as deferred revenue. Deferred Revenue Deferred revenue primarily consists of payments received from customers prior to the Company fulfilling its performance obligation of providing the product. 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. Research and Development Research and development costs are expensed when incurred. For the three and six months ended June 30, 2021, the Company expensed $ 4,669,160 and $ 6,886,223 of research and development costs, respectively. For the three and six months ended June 30, 2020, the Company expensed $ 750,249 and $ 1,150,271 , respectively. Stock-based Compensation The 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. Income Taxes The Company accounts for income taxes in accordance with the liability method of accounting for income taxes. Under this method, deferred 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. The Company 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. Valuation 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. Developing 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 tax assets. 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. Concentrations Risk and Significant Customers The Company had certain customers which are each responsible for generating 10% or more of the total revenue for the three months ended June 30, 2021. Two customers together accounted for approximately 67 % of total revenue for the three months ended June 30, 2021. Two customers each accounted for more than 10% of accounts receivable at June 30, 2021. These two customers together accounted for approximately 48 % of accounts receivable at June 30, 2021. 9 Net Income (Loss) per Share Basic 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. Diluted 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. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption. As 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 standards which allows the Company to defer adoption of certain accounting standards until those standards would otherwise apply to private companies. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires recognition of leased assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual periods and interim periods with those periods beginning after December 15, 2021, for public EGC companies like us. 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. In 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. The standard 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. Note 3 – Fair Value Measurements The 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. The Company’s financial instruments that are measured at fair value on a recurring basis consist of money market funds. The following three levels of inputs are used to measure the fair value of financial instruments: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. 10 The 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 June 30, 2021 and December 31, 2020, by level within the fair value hierarchy: Summary of Assets Measured at Fair Value on Recurring Basis June 30, 2021 (Level 1) (Level 2) (Level 3) Total Marketable investment securities: Certificates of deposit $ - $ 2,109,675 $ - $ 2,109,675 December 31, 2020 (Level 1) (Level 2) (Level 3) Total Marketable investment securities: Certificates of deposit $ - $ 4,335,446 $ - $ 4,335,446 Note 4 – Revenue The following table sets forth revenue by geographic area: Summary of Revenue by Geographic Area Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 United States $ 5,365,323 $ 13,383,761 $ 17,859,273 $ 13,997,786 Rest of World 21,992,817 10,656,513 29,523,636 11,591,016 Total $ 27,358,140 $ 24,040,274 $ 47,382,909 $ 25,588,802 Percentage of revenue by area: United States 20 % 56 % 38 % 55 % Rest of World 80 % 44 % 62 % 45 % Deferred Revenue Changes in the Company’s deferred revenue balance for the six months ended June 30, 2021 were as follows: Schedule of Deferred Revenue Balance as of December 31, 2020 $ 305,307 Revenue recognized included in deferred revenue balance at the beginning of the period ( 194,060 ) Increase due to prepayments from customers 51,887 Balance as of June 30, 2021 $ 163,134 The Company expects to perform its performance obligation and recognize the deferred revenue as revenue during the year ended December 31, 2021. 11 Note 5 – Earnings Per Share The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share for three and six months ended June 30, 2021 and 2020: Schedule of Basic and Diluted Earnings Per Share 2021 2020 2021 2020 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Numerator Net income (loss), as reported $ 9,785,213 $ 15,005,009 $ 17,684,188 $ 13,939,816 Denominator Weighted average shares, basic 28,794,047 27,582,229 28,728,828 27,605,137 Dilutive effect of stock options, warrants and RSUs 947,218 1,569,993 1,105,127 1,489,338 Shares used to compute diluted earnings per share 29,741,265 29,152,222 29,833,955 29,094,475 Basic earnings per share $ 0.34 $ 0.54 $ 0.62 $ 0.50 Diluted earnings per share $ 0.33 $ 0.51 $ 0.59 $ 0.48 For the three and six months ended June 30, 2021, potentially dilutive securities of 931,341 and 146,133 were excluded from the calculation because their effect would have been anti-dilutive. No securities were excluded from the calculation for the three and six months ended June 30, 2020. Note 6 – Stock-Based Compensation Stock Incentive Plans The 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 2,798,683 at June 30, 2021. Stock Options The following table summarizes option activity during the six months ended June 30, 2021: Schedule of Option Activity Number of Options Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Life (Years) Outstanding at December 31, 2020 1,300,588 $ 2.44 $ 1.24 Granted - - - Expired - - - Forfeited/Cancelled - - - Exercised ( 184,225 ) 2.41 1.14 Outstanding at June 30, 2021 1,116,363 $ 2.12 $ 1.31 7.44 Exercisable at June 30, 2021 828,036 $ 2.20 $ 1.19 7.17 The total intrinsic value of options exercised during the six months ended June 30, 2021 was approximately $ 1.3 million. The aggregate intrinsic value of outstanding options at June 30, 2021 was approximately $ 6.9 million. Stock-based 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. 12 In January 2021, the Company modified the exercise price of 100,000 of the options from $ 16.49 to $ 9.30 . Due to the modification, the Company will recognize incremental stock-based compensation cost of $ 65,000 . Of this amount, the Company has recognized approximately $ 45,000 and the remaining will be recognized over the remaining service period. As of June 30, 2021, there were 288,327 of unvested options and $ 186,144 of unrecognized stock-based compensation expense. The unrecognized stock-based compensation expense is expected to be recognized over 0.9 years. Restricted Stock Units The 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 six months ended June 30, 2021: Schedule of Outstanding Restricted Stock Units and Related Activity Number of RSUs Weighted Average Grant Date Fair Value Unvested at December 31, 2020 522,500 $ 10.49 Granted 480,000 9.90 Vested ( 192,084 ) 10.39 Forfeited/Cancelled - - Unvested at June 30, 2021 810,416 $ 10.18 As of June 30, 2021, there was approximately $ 7.8 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 2.7 years. Warrants The Company has issued warrants related to past financings and as compensation to third parties for services provided. The 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 warrant if granted for services. The following table summarizes warrant activity during the six months ended June 30, 2021: Schedule of Warrant Activity Number of Warrants Weighted Average Exercise Price Weighted Average Fair Value Weighted Average Remaining Contractual Life (Years) Outstanding at December 31, 2020 70,000 $ 1.83 $ 5.21 Granted - - - Forfeited/Cancelled - - - Exercised - - - Outstanding at June 30, 2021 70,000 $ 1.83 $ 5.21 2.8 The aggregate intrinsic value of outstanding warrants at June 30, 2021 was approximately $ 450,000 . All outstanding warrants are exercisable at June 30, 2021 and there was no unrecognized stock-based compensation expense related to warrants. 13 Stock Issued for Services The 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 5,548 shares of restricted stock for services during the six months ended June 30, 2021 and there was no unrecognized stock-based compensation expense related to restricted stock issued. Stock-Based Compensation Expense The Company recognized stock-based compensation expense related to the types of awards discussed above as follows: Schedule of Recognized Stock-based Compensation Expense Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Options $ 76,114 $ 301,568 $ 152,786 $ 703,198 Restricted stock units 839,224 - 2,235,661 - Warrants - 303,802 - 303,802 Stock 12,000 86,049 51,900 117,242 Total stock-based compensation expense $ 927,338 $ 691,419 $ 2,440,347 $ 1,124,242 Note 7 – Income Taxes For the three months ended June 30, 2021, the Company recognized an expense from income taxes of $ 2,145,076 , representing an effective tax rate of 18.0 %. For the six months ended June 30, 2021, the Company recognized an expense from income taxes of $ 4,130,716 , representing an effective tax rate of 18.9 %. The Company’s effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0 % due to state taxes, permanent items, and discrete items. For the three and six months ended June 30, 2020, no benefit from income taxes was recorded due to the Company being in a full valuation allowance position, resulting in an effective tax rate of 0.0 %. Note 8 – Related Party Transactions The 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, a former 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. Satterfield. The amendment provides in part that all accrued royalties under the License cease as of January 1, 2017, and the Company began in January 2017 to pay to Dr. Satterfield $ 700,000 of accrued royalties at the rate of $ 10,000 per month. At June 30, 2021, the aggregate balance of this related party liability was $ 90,000 . Note 9 – Commitments and Contingencies Lease Obligations The 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 three and six months ended June 30, 2021 the Company expensed $ 86,588 and $ 173,175 for rent, respectively. For the three and six months ended June 30, 2020, the Company expensed $ 86,969 and $ 138,786 for rent, respectively. The Company’s future minimum lease payments were as follows as of June 30, 2021: Schedule of Future Minimum Lease Payments Year Ending December 31, 2021 (remainder) $ 142,950 2022 293,595 2023 303,059 2024 50,774 Total lease payments $ 790,378 Litigation Liabilities 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. In July and September 2020, securities class action complaints were filed 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. Note 10 – Subsequent Events The Company evaluated subsequent events pursuant to ASC Topic 855 and has determined that there are no events that need to be reported. 14