What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-12 · 140 added, 186 removed, 87 unchanged (79% of the section changed)

39 unchanged sentences

factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation:

the results of clinical trials and the regulatory approval process;

ability to acquire in a timely manner the materials necessary to manufacture our products;

market acceptance of any products that may be approved for commercialization;

our ability to protect our intellectual property rights;

the impact of any infringement actions or other litigation brought against us;

competition from other providers and products;

our ability to develop and commercialize new and improved products and services;

changes in government regulation;

and other factors (including the risks contained in the section entitled “Risk Factors” in other documents we file with the SEC) relating to our industry, our operations and results of operations.

results of clinical trials and the regulatory approval process;

acceptance of any products that may be approved for commercialization;

ability to protect our intellectual property rights;

impact of any infringement actions or other litigation brought against us;

from other providers and products;

ability to develop and commercialize new and improved products and services;

in government regulation;

other factors (including the risks contained in the section entitled “Risk Factors” in other documents we file with the

SEC) relating to our industry, our operations and results of operations.

one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ

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We urge you to review carefully the section of this report entitled

“Cautionary Note Regarding Forward-Looking Statements” for a summary of the risks and uncertainties associated with an investment

in our securities.

“ Cautionary Note Regarding Forward-Looking Statements ” for a summary of the risks and uncertainties associated with

an investment in our securities.

Co-Diagnostics,

Inc., a Utah corporation (the “Company” or “Co-Dx”), is developing robust and innovative molecular tools for

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

We develop, manufacture and sell

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 our tests we may sell diagnostic equipment from other manufacturers as self-contained lab systems (which we refer to

as the “MDx Device”).

diagnostics systems enable very rapid, low-cost, molecular testing for organisms and genetic diseases by automating historically complex

Inc., a Utah corporation (the “Company”, “Co-Dx” or “CODX”), develops, manufactures and sells

reagents used for diagnostic tests that function via the detection and/or analysis of nucleic acid molecules (DNA or RNA), including

robust and innovative molecular tools for detection of infectious diseases, liquid biopsy for cancer screening, and agricultural applications.

In connection with the sale of our tests we may sell diagnostic equipment from other manufacturers as self-contained lab systems (which

we refer to as the “MDx Device”).

We are also developing a unique, groundbreaking portable PCR testing platform (the

“Co-Dx PCR home testing platform”) designed to bring affordable, reliable gold-standard polymerase chain reaction (“PCR”)

to patients in point-of-care and even at-home settings.

diagnostics systems enable dependable, low-cost, molecular testing for organisms and genetic diseases by automating historically complex

procedures in both the development and administration of tests.

Co-Dx’s technical advance involves a novel approach to Polymerase

Chain Reaction (“PCR”) test design of primer and probe structure (“CoPrimers”) that eliminates one of the key

vexing issues of PCR amplification, the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely

interferes with identification of the target DNA/RNA.

CODX’s technical advance involves a novel, patented approach to

PCR test design of primer and probe structure (“CoPrimers™”) that eliminates one of the key vexing issues of PCR amplification,

the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely interferes with identification of

the target DNA/RNA.

believe our proprietary molecular diagnostics technology is paving the way for innovation in disease detection and life sciences research

through our enhanced detection of genetic material.

Because we own our platform, we believe we will be able to accomplish this faster

and more economically, allowing for significant margins while still positioning the Company to be a low-cost provider of molecular diagnostics

and screening services.

addition, continued development has demonstrated the unique properties of our CoPrimer technology that make it ideally suited for a variety

of applications where specificity is key to optimal results, including multiplexing several targets, enhanced Single Nucleotide Polymorphism

(“SNP”) detection and enrichment for next gen sequencing.

scientists use the complex mathematics of DNA/RNA test design, to engineer and optimize a DNA/RNA test and to automate algorithms that

For various reasons, including owning our own platform, we believe we will be able

to accomplish this faster and more economically, allowing for significant margins while still positioning the Company to be a low-cost

provider of molecular diagnostics and screening services.

addition, continued development has demonstrated the unique properties of our CoPrimers™ technology that we believe makes it ideally

suited for a variety of applications where specificity is key to optimal results, including multiplexing several targets, enhanced Single

Nucleotide Polymorphism (“SNP”) detection and enrichment for next generation sequencing.

scientists use the complex mathematics of DNA/RNA test design to engineer and optimize DNA/RNA tests and to automate algorithms that

rapidly screen millions of possible options to pinpoint the optimum design.

Satterfield, our founder, developed the Company’s

intellectual property consisting of the predictive mathematical algorithms and proprietary reagents used in the testing process, which

together represent a major advance in PCR testing systems.

Co-Dx technologies are now protected by eight granted or pending US and foreign

patents, as well as certain trade secrets and copyrights.

Ownership of our proprietary platform permits us the advantage of avoiding

payment of patent royalties required by other PCR test systems, which enables the sale of diagnostic tests at a lower price than competitors,

while enabling us to maintain profit margins.

design our tests by identifying the optimal locations on the target gene for amplification and pair the location with the optimized primer

and probe structure to achieve outputs that meet the design input requirements identified from market research.

This is done by following

planned and documented processes, procedures and validation protocols.

In other words, the data resulting from our tests verify that

we succeeded in designing what we intended at the outset.

Verification is a series of testing that concludes that the product is ready

to proceed to validation in an evaluation either in our lab or in an independent laboratory setting using initial production tests to

confirm that the product as designed meets the user needs.

Brent Satterfield, our founder, developed the Company’s

intellectual property consisting of the predictive mathematical algorithms and patented molecular structure used in the testing process,

which together represent a major advance in PCR testing systems.

CODX technologies are now protected by more than 20 granted or pending

US and foreign patents, as well as certain trade secrets and copyrights.

Ownership of our proprietary platform permits us the advantage

of avoiding payment of patent royalties required by other PCR test systems, which may allow the sale of diagnostic PCR tests at a lower

price than competitors, while enabling us to maintain profit margins.

may either sell or lease the MDx Device to labs and diagnostic centers, through sale or lease agreements, and sell the reagents that

comprise our proprietary tests to those laboratories and testing facilities.

proprietary test design process involves identifying the optimal locations on the target genes for amplification and pair the locations

with the optimized primer and probe structure to achieve outputs that meet the design input requirements identified from market research.

This is done by following planned and documented processes, procedures and testing.

In other words, we use the data resulting from our

tests to verify whether we succeeded in designing what we intended at the outset.

Verification is a series of testing that concludes

that the product is ready to proceed to validation in an evaluation either in our laboratory or in an independent laboratory setting

using initial production tests to confirm that the product as designed meets the user needs.

our proprietary test design system and proprietary reagents, we have designed and obtained regulatory approval in the European Community

and in India to sell PCR diagnostic tests for the detection of COVID-19, influenza, tuberculosis, hepatitis B and C, human papillomavirus,

malaria, chikungunya, dengue, and the zika virus.

In the United States, CODX has obtained Emergency Use Authorization (“EUA”)

for its Logix Smart™ COVID-19 detection test from the Food and Drug Administration, or FDA, and sells that test to qualified labs.

In addition, our COVID-19 detection test and certain of our other suite of COVID-19 products have been approved for sale in countries

such as the United Kingdom, Australia and Mexico by the regulatory bodies in those countries and have been registered for sale in many

more countries.

addition to testing for infectious disease, the technology lends itself to identifying any section of a DNA or RNA strand that describe

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We also have three multiplexed tests developed to test

mosquitos for the identification of diseases carried by the mosquitos to enable municipalities to concentrate their efforts in spraying

mosquitos for the identification of diseases carried by the mosquitos to enable municipalities to concentrate their efforts in managing

mosquito populations on the specific areas known to be breeding the mosquitos that carry deadly viruses.

we believe that testing for the COVID-19 virus is going to be a consideration for public health worldwide even after the current pandemic

has subsided, we have initiated a project to facilitate frequent testing in schools, businesses, the hospitality industry, and at home.

We believe this may be accomplished through the development of a low cost, easy to use by non-professionals, testing device that can

provide PCR quality test results in less than an hour.

This project is possible due to the fact that in 2020 we were able to successfully

lyophilize our Logix Smart COVID-19 test reagents and additionally developed a saliva-based collection system that does not require the

RNA/DNA extraction.

While the final result is the same as if done through a lab-based IVD process, it has the advantages of increased

speed and ease of handling thanks to lyophilization.

We have engaged the services of a group of professionals who have the expertise

and track record to develop the hardware for such a device using our CoPrimers as the reagent chemistry.

The device will be available

to homes, offices, event facilities, and the travel industry at a cost that will allow screening frequently to prevent spread of the

COVID-19 virus and its variants in the future.

The device would also be available to test for other pathogens detectable through saliva

we believe that testing for COVID-19 is going to be a consideration for public health worldwide even after the current pandemic has subsided,

we have initiated the Co-Dx PCR home testing platform to facilitate frequent testing in homes, schools, businesses, and

the hospitality industry.

We believe this may be accomplished through the development of a low-cost testing device, easy to use by non-professionals,

that can provide PCR test results in around 30 minutes.

The initial project built on this platform, an at-home and point-of-care COVID-19

PCR test, was ultimately facilitated by our development of a saliva or nasal swab-based PCR test that does not require the RNA/DNA extraction.

While the final result is believed to be approximately equivalent to those processed by a high-complexity clinical laboratory, it has

the advantages of increased speed and ease of handling thanks to lyophilization (or freeze-drying) of our testing reagents to allow for

stability at room temperatures.

February 15, 2021, we engaged the services of a group of professionals at Idaho Molecular, Inc.

(IdMo) and Advanced Conceptions, Inc

(ACI) with the expertise to develop the hardware for such a device using our CoPrimers™ as the reagent chemistry.

On December 22,

2021, we announced that we would be acquiring IdMo and ACI, and on December 31, 2021, we completed the acquisitions, along with all existing

and future assets and intellectual property related to the platform and device.

It is expected that the device and test will be available

to homes, schools, offices, and the travel industry among other locations at a cost that will allow screening frequently to prevent spread

of the COVID-19 virus in the future.

The device would also be available to test for other pathogens detectable through saliva or other

samples as we develop those tests and offer them to the marketplace.

All such tests will be subject to regulatory approval.

OF OPERATIONS

Three Months Ended September 30, 2021 Compared to the Three Months ended September 30, 2020

the three months ended September 30, 2021, we generated revenues of $30,101,353, compared to revenues of $21,818,753 for the three months

ended September 30, 2020.

The increase in revenue of $8,282,600 was primarily due to sales of our LogixSmart COVID-19 test developed

in response to the current COVID-19 pandemic.

Of the total revenue in the three months ended September 30, 2021, $76,945 related to the

sale of third party manufactured equipment and consumables, which we sourced and sold to customers to facilitate the sales of our COVID-19

test compared to $1,457,160 of revenue from the sales of such equipment for the three months ended September 30, 2020.

recorded cost of revenues of $3,311,255 for the three months ended September 30, 2021, compared to $5,821,281 for the three months ended

September 30, 2020.

This decrease is due to a reduction of product production costs, reduction in sales of third-party equipment, which

have a higher cost of sales than tests, and the commission structure of certain sales of tests completed during the period.

cost of sales during the three months ended September 30, 2021, $50,563 was from equipment sold to our customers compared to $1,213,434

for equipment sold to customers for the three months ended September 30, 2020.

incurred total operating expenses of $13,159,977 for the three months ended September 30, 2021, compared to total operating expenses

of $3,959,270 for the three months ended September 30, 2020.

The increase in operating expenses was due to the increase in business activities

experienced as a result of our increase in revenue, increased third party sales commissions, reflected in sales and marketing, and increased

investment in research and development.

and administrative expenses increased $716,081, from $2,203,417 for the three months ended September 30, 2020 to $2,919,498 for the three

months ended September 30, 2021.

The increase in general and administrative expenses was primarily due to increased activity to support

the growth of our business.

The primary drivers of the increased expenses related to increases in compensation including stock-based

compensation, insurance expense, contributions to retirement plans and increased expenses for professional services.

These increases

were partially offset by a reduction of bad debt expense.

sales and marketing expenses for the three months ended September 30, 2021 were $4,253,091, compared to $798,474 for the three months

ended September 30, 2020.

The increase of $3,454,617 was primarily a result of increased third-party sales commissions, personnel related

expenses, including commissions paid to our sales team, and increased stock-based compensation due to the growth in revenue.

research and development expenses increased by $4,971,461, from $921,889 for the three months ended September 30, 2020 to $5,893,350

for the three months ended September 30, 2021.

The primary increase in expenses was research expenditures of greater than $4,300,000

for our point-of-care device in addition to increases in salaries and related benefits, including stock-based compensation, as we have

added additional employees to our research and development team to increase our product development activities.

Income (Expense)

the three months ended September 30, 2021 we had total other expense of $53,561, compared to total other income of $778,549 for the three

months ended September 30, 2020.

The decrease was due primarily to a loss from our India joint venture.

realized net income for the three months ended September 30, 2021 of $11,475,966, compared with net income for the three months ended

September 30, 2020 of $15,731,532.

The decrease in net income of $4,255,566 was primarily the result of an increase in operating expenses,

offset by an increase of product revenues and resulting margins from those sales.

Additionally, we recorded income tax expense of $2,100,594

for the three months ended September 30, 2021, compared to an income tax benefit of $2,914,781 for the three months ended September 30,

Nine Months Ended September 30, 2021 Compared to the Nine Months ended September 30, 2020

the nine months ended September 30, 2021, we generated revenues of $77,484,262 compared to revenues of $47,407,555 for the nine months

ended September 30, 2020.

The increase in revenue of $30,076,707 was primarily due to sales of our LogixSmart COVID-19 test developed

Three Months Ended March 31, 2022 Compared to the Three Months ended March 31, 2021

the three months ended March 31, 2022, we generated revenues of $22,699,044, compared to revenues of $20,024,769 for the three months

ended March 31, 2021.

The increase in revenue of $2,674,275 was primarily due to sales of our Logix Smart™ COVID-19 test developed

in response to the current COVID-19 pandemic.

Of the total revenue in the nine months ended September 30, 2021, $507,930 related to the

Of the total revenue in the three months ended March 31, 2022, $364,950 related to the

sale of third party manufactured equipment and consumables, which we sourced and sold to customers to facilitate the sales of our COVID-19

test, compared to $3,239,471 of revenue from the sales of such equipment for the nine months ended September 30, 2020.

recorded cost of revenues of $9,088,175 for the nine months ended September 30, 2021, compared to $12,278,326 for the nine months ended

September 30, 2020.

This decrease is due to a reduction of product production costs, reduction in sales of third-party equipment, which

have a higher cost of sales than tests, and the commission structure of certain sales of tests completed during the period.

cost of sales during the nine months ended September 30, 2021, $384,602 was from equipment sold to our customers compared to $2,864,829

for equipment sold to customers for the nine months ended September 30, 2020.

incurred total operating expenses of $32,639,900 for the nine months ended September 30, 2021, compared to total operating expenses of

$9,464,699 for the nine months ended September 30, 2020.

The increase in operating expenses was due to the increase in business activities

experienced as a result of our increase in revenue, increased third party sales commissions, reflected in sales and marketing, and increased

investment in research and development.

and administrative expenses increased $2,469,685, from $5,853,935 for the nine months ended September 30, 2020 to $8,323,620 for the

nine months ended September 30, 2021.

The primary drivers of the increased expenses related to increases in compensation including stock-based

compensation, insurance expense, contributions to retirement plans and increased expenses for professional services.

These increases

were partially offset by a reduction of bad debt expense.

sales and marketing expenses for the nine months ended September 30, 2021 were $11,303,950, compared to $1,457,148 for the nine months

ended September 30, 2020.

The increase of $9,846,802 was primarily a result of increased third-party sales commissions, personnel related

expenses, including commissions paid to our sales team, and increased stock-based compensation due to the growth in revenue.

research and development expenses increased by $10,707,413, from $2,072,160 for the nine months ended September 30, 2020 to $12,779,573

for the nine months ended September 30, 2021.

The primary increase in expenses was research expenditures of greater than $8,800,000 for

our point-of-care device in addition to increases in compensation and related benefits, including stock-based compensation, as we have

added additional employees to our research and development team to increase our product development activities.

Additionally, there has

been an increase in lab supplies expense to further help us in our research and product development activities.

test compared to $266,515 of revenue from the sales of such equipment for the three months ended March 31, 2021.

recorded cost of revenues of $3,281,951 for the three months ended March 31, 2022, compared to $3,272,565 for the three months ended

March 31, 2021.

The increase in revenues combined with a reduction of product production costs resulted in improved gross margin.

the total cost of sales during the three months ended March 31, 2022, $374,683 was from equipment sold to our customers compared to $202,636

for equipment sold to customers for the three months ended March 31, 2021.

incurred total operating expenses of $9,592,934 for the three months ended March 31, 2022, compared to total operating expenses of $6,417,303

for the three months ended March 31, 2021.

The increase in operating expenses was due to the increase in business activities experienced

as a result of our increase in revenue, increased third party sales commissions reflected in sales and marketing, and increased investment

in research and development.

sales and marketing expenses for the three months ended March 31, 2022 were $2,652,148, compared to $1,197,546 for the three months ended

March 31, 2021.

The increase was primarily a result of increased third-party sales commissions, advertising and promotional expenses,

including tradeshows and related travel, and increased stock-based compensation due to the growth in revenue.

and administrative expenses decreased from $2,935,689 for the three months ended March 31, 2021 to $2,922,195 for the three months ended

March 31, 2022.

The slight decrease in general and administrative expenses was primarily due to decreased stock-based compensation expense,

partially offset by increased activity to support the growth of our business, including increased insurance expense and professional

and advisory fees related to our recent acquisitions.

research and development expenses increased from $2,217,063 for the three months ended March 31, 2021 to $3,771,327 for the three months

ended March 31, 2022.

The primary increase in expenses was a result of increases in personnel expenses related to our acquisitions of

IdMo and ACI on December 31, 2021.

Income (Expense)

the nine months ended September 30, 2021 we had total other expense of $364,723, compared to total other income of $1,092,037 for the

nine months ended September 30, 2020.

The decrease in other income was due primarily due to recording a loss of $401,288 from our India

joint venture compared to income of $1,016,297 from our joint venture in the same period in 2020.

realized net income for the nine months ended September 30, 2021 of $29,160,154, compared to net income for the nine months ended September

the three months ended March 31, 2022 we had total other income of $3,276,523, compared to total other expense of $450,286 for the three

months ended March 31, 2021.

The increase was due primarily to a change in the fair value of contingent consideration liabilities recorded

in conjunction with the acquisitions of IdMo and ACI.

realized net income for the three months ended March 31, 2022 of $11,714,595, compared with net income for the three months ended March

31, 2021 of $7,898,975.

The decrease in net income of $511,194 was primarily the result of sales of our LogixSmart COVID-19 test and

resulting margins from those sales offset by increased operating expenses and income taxes.

We recorded income tax expense of $6,231,310

for the nine months ended September 30, 2021, compared to an income tax benefit of $2,914,781 for the nine months ended September 30,

The increase in net income was primarily the result of an increase in operating expenses, offset by an increase

of product revenues and resulting margins from those sales, as well as changes in the fair value of acquisition contingencies.

Additionally,

we recorded income tax expense of $1,386,087 for the three months ended March 31, 2022, compared to $1,985,640 for the three months ended

March 31, 2021.

and Capital Resources

September 30, 2021, we had cash and cash equivalents of $82,658,248 and marketable investment securities of $1,251,285 that could readily

be converted into cash if needed.

Additionally, our total current assets of September 30, 2021, were $102,287,152 compared to

total current liabilities of $4,119,897.

cash provided by operating activities during the nine months ended September 30, 2021 was $36,202,945, compared to $8,207,340 for the

nine months ended September 30, 2020.

The increase in cash from operating activities was primarily due to our increased revenue.

received $3,028,192 of cash from investing activities during the nine months ended September 30, 2021 from maturity of marketable investments

and repayment of advances from our India joint venture as compared to use of cash of $7,070,183 during the nine months ended September

cash provided by financing activities was $450,398 for the nine months ended September 30, 2021 realized from the exercise of options,

compared to $19,200,067 for the same period in the prior year.

The decrease is primarily due to net proceeds of $18,012,083 received

from a series of three registered direct offerings in January and February 2020 pursuant to our shelf registration in addition to receiving

$50,000 from the exercise of warrants and options for the nine months ended September 30, 2020.

commencing sales of our Logix Smart COVID-19 test in March 2020, we have used our cash generated from those sales to fund the increase

in our inventories and receivables and pay our operating expenses.

We have increased our work force primarily in the area of research

and development to complete development of additional tests to enable us to use our distributor network to sell other products throughout

the world and remain profitable in the future.

March 31, 2022, we had cash and cash equivalents of $97,421,739 that could readily be converted into cash if needed.

Additionally, our

total current assets of March 31, 2022, were $125,338,797 compared to total current liabilities of $13,020,695.

cash provided by operating activities during the three months ended March 31, 2022 was $7,805,838, compared to $12,269,955 for the three

months ended March 31, 2021.

The decrease in cash from operating activities was primarily due to increased operating expenses, increases

in inventory, and the effects of non-cash items.

received $858,666 of cash from investing activities during the three months ended March 31, 2022, primarily from maturities of marketable

investments offset by purchases of property and equipment, compared to cash from investing activities of $2,393,244 during the three

months ended March 31, 2021.

cash provided by financing activities was $150,001 for the three months ended March 31, 2022 realized from the exercise of options and

warrants, compared to $148,981 for the same period in the prior year.

commencing sales of our Logix Smart™ COVID-19 test in March 2020, we have used our cash generated from those sales to fund the

increase in our inventories and receivables and pay our operating expenses.

We have increased our work force primarily in the area of

research and development to complete development of additional tests to enable us to use our distributor network to sell other products

throughout the world and remain profitable in the future.

In March 2022 our board of directors authorized repurchasing up to $30.0 million

of the company’s outstanding common stock.

We have no obligation to repurchase any shares under the repurchase program and may

suspend or discontinue it at any time without prior notice.

We have not repurchased any of our outstanding common shares under the repurchase

believe that our existing capital resources and the cash generated from future sales will be sufficient to meet our projected operating

5 unchanged sentences

be able to secure such financing in a timely manner or on favorable terms, if at all.

October 30, 2020, we filed a Registration Statement on Form S-3 (File No:

333-249651) with the Securities and Exchange Commission (the

The SEC declared the Form S-3 effective on November 5, 2020.

Pursuant to a prospectus supplement to the Form S-3,

we may offer and sell up to $100 million of the following securities separately or together, in one or more series or classes and in

amounts, at prices and on terms described in one or more offerings:

common stock;

preferred stock;

warrants to purchase our securities,

each of which may be convertible into equity securities;

or units comprised of, or other combinations of, the foregoing securities through

underwriting syndicates managed or co-managed by one or more underwriters or dealers, through agents or directly to purchasers.

time our securities are offered, we will provide a prospectus supplement to the Form S-3 containing more specific information about the

particular offering.

We have not sold any securities pursuant to the Form S-3.

foregoing estimates, expectations and forward-looking statements are subject to change as we make strategic operating decisions from

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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-Q

Item 2. Management’s Discussion and Analysis