What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-11-10 · 118 added, 163 removed, 103 unchanged (73% of the section changed)

67 unchanged sentences

Co-Diagnostics,

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.

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, ground-breaking 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 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.

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.

Inc., a Utah corporation (the “Company” 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 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 device and proprietary test cups (the “Co-Dx PCR Home platform”) that have been designed

to bring affordable, reliable polymerase chain reaction (“PCR”) to patients in point-of-care and even at-home settings.

platform is subject to U.S.

Food and Drug Administration (“FDA”) review and is not available for sale at the time of this

There is no guarantee that our Co-Dx PCR Home platform will receive the necessary regulatory approvals for commercialization,

or that, if regulatory approval is received, we will be able to successfully commercialize this platform.

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

complex procedures in both the development and administration of tests.

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

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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

to accomplish this faster and more economically than some competitors, allowing for significant margins while still positioning ourselves

as a low-cost provider of molecular diagnostics and screening services.

addition, continued development has demonstrated the unique properties of our CoPrimer 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 PCR test design to engineer and optimize PCR tests and to automate algorithms that

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

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.

Brent Satterfield, our founder, developed the intellectual

property we use in our business, 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.

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

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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.

tests to verify whether we succeeded in designing what we intended.

Verification involves 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.

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.

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,

and/or 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

any type of genetic trait, which creates a number of significant applications.

In the United States, we obtained Emergency Use Authorization (“EUA”) for

our Logix Smart ™ COVID-19 detection test from the Food and Drug Administration, or

FDA, and we sell 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 describes

any type of genetic trait, which creates several significant applications.

We, in conjunction with our customers, are active in designing

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

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

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 31,

2021, we completed the acquisitions of IdMO and ACI, 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 frequent screening to reduce the spread of the COVID-19 virus and other contagions 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 prior to commercialization.

OF OPERATIONS

Three Months Ended September 30, 2022 Compared to the Three Months ended September 30, 2021

the three months ended September 30, 2022, we generated revenues of $5,094,456, compared to revenues of $30,101,353 for the three months

ended September 30, 2021.

The decrease in revenue of $25,006,897 was primarily due to lower sales of our Logix Smart™ COVID-19

test developed in response to the current COVID-19 pandemic.

recorded cost of revenues of $767,936 for the three months ended September 30, 2022, compared to $3,311,255 for the three months ended

September 30, 2021.

The decrease in revenues combined with a larger percentage of fixed product production costs resulted in a lower

cost of revenues and gross margin percentage.

incurred total operating expenses of $10,862,135 for the three months ended September 30, 2022, compared to total operating expenses

of $13,159,977 for the three months ended September 30, 2021.

The decrease in operating expenses was due to a decrease in business activities

experienced as a result of our decrease in revenue, variable compensation, third party sales commissions reflected in sales and marketing,

and a lower investment in third-party research and development.

These decreases were partially offset by increased stock-compensation

sales and marketing expenses for the three months ended September 30, 2022 were $1,889,907, compared to $4,253,091 for the three months

ended September 30, 2021.

The decrease was primarily a result of decreased variable compensation, such as bonuses and commissions, and

decreased third-party sales commissions, partially offset by increased stock-based compensation expense.

and administrative expenses increased from $2,919,498 for the three months ended September 30, 2021 to $3,622,273 for the three months

ended September 30, 2022.

The increase in general and administrative expenses was primarily due to increased insurance expense and professional,

legal, and advisory fees, as well as increased stock-based compensation expense, partially offset by decreased variable compensation

research and development expenses decreased from $5,893,350 for the three months ended September 30, 2021 to $5,037,461 for the

three months ended September 30, 2022.

The primary decrease in expenses was a result of decreased expenditures to third parties

related our point-of-care device development, partially offset by increases in personnel expenses related to our acquisitions of

IdMo and ACI on December 31, 2021, the primary focus of which relates to the point-of-care device development, as well as

increased stock-based compensation expense.

Income (Expense)

the three months ended September 30, 2022 we had total other income of $3,059,915, compared to total other expense of $53,561 for the

three months ended September 30, 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 a net loss for the three months ended September 30, 2022 of $1,361,062, compared with net income for the three months ended

September 30, 2021 of $11,475,966.

The decrease in net income was primarily the result of a decrease in revenues, partially offset by

a decrease of operating expenses, as well as changes in the fair value of acquisition contingencies.

Additionally, we recorded an income

tax benefit of $2,114,638 for the three months ended September 30, 2022, compared to income tax expense of $2,100,594 for the three months

ended September 30, 2021.

Nine Months Ended September 30, 2022 Compared to the Nine Months ended September 30, 2021

the nine months ended September 30, 2022, we generated revenues of $32,816,726, compared to revenues of $77,484,262 for the nine months

ended September 30, 2021.

The decrease in revenue of $44,667,536 was primarily due to lower sales of our Logix Smart™ COVID-19

test developed in response to the current COVID-19 pandemic.

recorded cost of revenues of $4,965,319 for the nine months ended September 30, 2022, compared to $9,088,175 for the nine months ended

September 30, 2021.

The decrease in revenues combined with a larger percentage of fixed product production costs resulted in a lower

cost of revenues and gross margin percentage.

incurred total operating expenses of $28,709,900 for the nine months ended September 30, 2022, compared to total operating expenses of

$32,639,900 for the nine months ended September 30, 2021.

The decrease in operating expenses was due to a decrease in business activities

experienced as a result of our decrease in revenue, variable compensation, and third party sales commissions reflected in sales and marketing,

partially offset by increased stock-based compensation expense.

sales and marketing expenses for the nine months ended September 30, 2022 were $6,014,280, compared to $11,303,950 for the nine months

ended September 30, 2021.

The decrease was primarily a result of decreased variable compensation, such as bonuses and commissions, and

decreased third-party sales commissions, partially offset by increased stock-based compensation expense.

and administrative expenses increased from $8,323,620 for the nine months ended September 30, 2021 to $9,012,888 for the nine months

ended September 30, 2022.

The increase in general and administrative expenses was primarily due to increased insurance expense and professional,

legal, and advisory fees, as well as increased stock-based compensation expense, partially offset by decreased variable compensation

research and development expenses decreased slightly from $12,779,573 for the nine months ended September 30, 2021 to $12,698,632

for the nine months ended September 30, 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, the primary focus of which relates to the point-of-care device

development, partially offset by a decrease in third-party research and development investment, as well as

increased stock-based compensation expense.

Three Months Ended March 31, 2023 Compared to the Three Months ended March 31, 2022

the three months ended March 31, 2023, we generated revenues of $601,957, compared to revenues of $22,699,044 for the three months ended

March 31, 2022.

The decrease in revenue of $22,097,087 was primarily due to lower sales of our Logix Smart COVID-19 test developed in

response to the COVID-19 pandemic.

recorded cost of revenues of $502,241 for the three months ended March 31, 2023, compared to $3,281,951 for the three months ended March

The decrease in revenues combined with a larger percentage of fixed product production costs, as well as costs related to expired

inventory, resulted in a lower cost of revenues and lower gross margin percentage.

incurred total operating expenses of $10,050,366 for the three months ended March 31, 2023, compared to total operating expenses of $9,592,934

for the three months ended March 31, 2022.

The increase in operating expenses was primarily due to increased personnel expenses, including

stock-compensation expense, and additional investment in research and development.

These increases were partially offset by decreased

expenses experienced in conjunction with our decrease in revenues, such as third party sales commissions reflected in sales and marketing

and variable compensation.

sales and marketing expenses for the three months ended March 31, 2023 were $1,706,331, compared to $2,652,148 for the three months ended

March 31, 2022.

The decrease was primarily a result of decreased variable compensation, such as bonuses and commissions, and decreased

third-party sales commissions, partially offset by increased stock-based compensation expense.

and administrative expenses increased slightly from $2,922,195 for the three months ended March 31, 2022 to $3,013,965 for the three

months ended March 31, 2023.

The increase in general and administrative expenses was primarily due to increased insurance expense and

professional, legal, and advisory fees, as well as increased stock-based compensation expense, partially offset by decreased variable

compensation expense.

research and development expenses increased from $3,771,327 for the three months ended March 31, 2022 to $5,014,060 for the three months

ended March 31, 2023.

The primary increase in expenses was a result of increases in personnel related expenses, increases in materials

and supplies expenses related to Co-Dx PCR Home platform development, and increased stock-based compensation expense.

Income (expense)

the nine months ended September 30, 2022 we had total other income of $7,055,666, compared to total other expense of $364,723 for the

nine months ended September 30, 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 nine months ended September 30, 2022 of $7,667,231, compared with net income for the nine months ended September

the three months ended March 31, 2023 we had total other income of $1,935,448, compared to total other income of $3,276,523 for the three

months ended March 31, 2022.

The primary components of other income include a change in the fair value of contingent consideration liabilities

recorded in conjunction with the acquisitions of IdMo and ACI and gains realized from investments in marketable securities.

Income (loss)

realized a net loss for the three months ended March 31, 2023 of $5,755,391, compared with net income for the three months ended March

31, 2022 of $11,714,595.

The decrease in net income was primarily the result of a decrease in revenues, partially offset by a decrease

of operating expenses, as well as changes in the fair value of acquisition contingencies.

The decrease in net income was primarily the result of a decrease in revenues, combined with an increase of

operating expenses, as well as changes in the fair value of acquisition contingencies.

Additionally, we recorded an income tax benefit

of $1,470,058 for the nine months ended September 30, 2022, compared to income tax expense of $6,231,310 for the nine months ended September

of $2,259,811 for the three months ended March 31, 2023, compared to income tax expense of $1,386,087 for the three months ended March

and Capital Resources

September 30, 2022, we had cash and cash equivalents of $81,507,983.

Additionally, we had $4,982,350 of marketable securities that could

readily be converted into cash if needed.

Additionally, our total current assets of September 30, 2022, were $101,915,715 compared to

total current liabilities of $6,012,209.

cash provided by operating activities during the nine months ended September 30, 2022 was $10,578,544, compared to $36,202,945 for the

nine months ended September 30, 2021.

The decrease in cash from operating activities was primarily due to decreased revenues, increases

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

used $4,861,292 of cash in investing activities during the nine months ended September 30, 2022, primarily from purchases of

marketable securities, offset by maturities of marketable investments and purchases of property and equipment, compared to cash

provided by investing activities of $3,028,192 during the nine months ended September 30, 2021.

cash used in financing activities was $12,816,503 for the nine months ended September 30, 2022, compared to net cash provided by financing

March 31, 2023, we had cash and cash equivalents of $6,359,380.

Additionally, we had $68,920,535 of marketable investment securities

that could readily be converted into cash if needed.

Additionally, our total current assets of March 31, 2023, were $85,922,919 compared

to total current liabilities of $3,610,069.

cash used in operating activities during the three months ended March 31, 2023 was $5,499,435, compared to cash provided by operating

activities of $7,805,838 for the three months ended March 31, 2022.

The decrease in cash from operating activities was primarily due

to decreased revenues and the impact of non-cash items.

used $10,632,792 of cash in investing activities during the three months ended March 31, 2023, primarily from purchases of marketable

securities, offset by maturities of marketable investments, compared to cash from investing activities of $858,666 during the three months

ended March 31, 2022.

cash used in financing activities was $482,196 for the three months ended March 31, 2023, compared to net cash provided by financing

activities of $150,001 for the same period in the prior year.

This decrease is due to the repurchase of outstanding common shares during

the current fiscal 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 develop the Co-Dx PCR home testing platform and 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 the repurchase of 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.

nine months ended September 30, 2022 we have repurchased 3,414,326 outstanding common shares under the repurchase program.

the first quarter.

commencing sales of our Logix Smart COVID-19 test in March 2020, we have used 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 develop the Co-Dx PCR Home platform and 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 the

repurchase of 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.

As of March 31, 2023 we have repurchased 4,190,670

outstanding common shares under the repurchase program for a total of $14.7 million.

Additionally,

in March 2023, we filed a shelf registration statement on Form S-3 (the “Shelf Registration Statement”) with the SEC registering

the sale, from time-to-time of up to $150 million of our securities.

In connection with the Shelf Registration Statement, we filed an

equity distribution agreement prospectus covering the offering, issuance and sale of up to a maximum of $50 million shares of our common

stock that may be issued and sold under an equity distribution agreement with Piper Sandler & Co.

We are under no obligation to sell

any securities under the Shelf Registration Statement or the equity distribution agreement with Piper Sandler & Co.

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

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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