Co-Diagnostics, Inc. 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 001-38148 CO-DIAGNOSTICS, INC. (Exact Name of Registrant as Specified in Its Charter) Utah 46-2609396 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 2401 S. Foothill Drive , Suite D , Salt Lake City , Utah 84109 (Address of principal executive offices and zip code) (801) 438-1036 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock CODX The Nasdaq Capital Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ As of August 6, 2024, there were 31,911,002 shares of common stock, par value $ 0.001 per share, outstanding. CO-DIAGNOSTICS, INC. AND SUBSIDIARIES TABLE OF CONTENTS PART I FINANCIAL INFORMATION: Item 1. Financial Statements (unaudited): 3 Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Condensed Consolidated Statements of Stockholders’ Equity 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk 22 Item 4. Controls and Procedures 22 PART II OTHER INFORMATION: Item 1. Legal Proceedings 23 Item 1A. Risk Factors 23 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23 Item 3. Defaults Upon Senior Securities 23 Item 4. Mine Safety Disclosures 23 Item 5. Other Information 23 Item 6. Exhibits 24 Signatures 25 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements CO – DIAGNOSTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 13,858,866 $ 14,916,878 Marketable investment securities 31,020,811 43,631,510 Accounts receivable, net 551,504 303,926 Inventory, net 1,463,960 1,664,725 Income taxes receivable - 26,955 Prepaid expenses and other current assets 1,324,098 1,597,114 Total current assets 48,219,239 62,141,108 Property and equipment, net 3,054,487 3,035,729 Operating lease right-of-use asset 2,547,485 2,966,774 Intangible assets, net 26,252,333 26,403,667 Investment in joint venture 627,924 773,382 Total assets $ 80,701,468 $ 95,320,660 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 1,863,499 $ 1,482,109 Accrued expenses 1,504,750 2,172,959 Operating lease liability, current 878,174 838,387 Contingent consideration liabilities, current 838,032 891,666 Deferred revenue 220,930 362,449 Total current liabilities 5,305,385 5,747,570 Long-term liabilities Income taxes payable 699,113 659,186 Operating lease liability 1,703,717 2,152,180 Contingent consideration liabilities 595,599 748,109 Total long-term liabilities 2,998,429 3,559,475 Total liabilities 8,303,814 9,307,045 Commitments and contingencies (Note 10) - - Stockholders’ equity Convertible preferred stock, $ 0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively - - Common stock, $ 0.001 par value; 100,000,000 shares authorized; 36,759,680 shares issued and 31,911,002 shares outstanding as of June 30, 2024 and 36,108,346 shares issued and 31,259,668 shares outstanding as of December 31, 2023 36,760 36,108 Treasury stock, at cost; 4,848,678 shares held as of June 30, 2024 and December 31, 2023, respectively ( 15,575,795 ) ( 15,575,795 ) Additional paid-in capital 99,878,676 96,808,436 Accumulated other comprehensive income 371,208 146,700 Accumulated earnings (deficit) ( 12,313,195 ) 4,598,166 Total stockholders’ equity 72,397,654 86,013,615 Total liabilities and stockholders’ equity $ 80,701,468 $ 95,320,660 See accompanying notes to unaudited condensed consolidated financial statements 3 CO – DIAGNOSTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) 2024 2023 2024 2023 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Product revenue $ 161,102 $ 197,806 $ 413,847 $ 799,763 Grant revenue 2,495,738 - 2,710,847 - Total revenue 2,656,840 197,806 3,124,694 799,763 Cost of revenue 212,148 459,095 446,653 961,336 Gross profit 2,444,692 ( 261,289 ) 2,678,041 ( 161,573 ) Operating expenses Sales and marketing 1,041,243 1,732,966 2,604,925 3,439,297 General and administrative 3,132,385 3,713,895 6,051,188 6,727,860 Research and development 5,612,691 5,981,043 11,292,369 10,995,103 Depreciation and amortization 338,335 305,246 668,908 621,256 Total operating expenses 10,124,654 11,733,150 20,617,390 21,783,516 Loss from operations ( 7,679,962 ) ( 11,994,439 ) ( 17,939,349 ) ( 21,945,089 ) Other income, net Interest income 342,188 191,892 704,921 394,264 Realized gain on investments 74,165 411,190 302,235 829,272 Gain on disposition of assets 3,500 - 3,500 - Gain (loss) on remeasurement of acquisition contingencies ( 244,116 ) 359,405 206,144 1,397,077 Gain (loss) on equity method investment in joint venture ( 74,503 ) ( 125,193 ) ( 145,458 ) 152,129 Total other income, net 101,234 837,294 1,071,342 2,772,742 Loss before income taxes ( 7,578,728 ) ( 11,157,145 ) ( 16,868,007 ) ( 19,172,347 ) Income tax provision (benefit) 20,590 ( 2,238,320 ) 43,354 ( 4,498,131 ) Net loss $ ( 7,599,318 ) $ ( 8,918,825 ) $ ( 16,911,361 ) $ ( 14,674,216 ) Other comprehensive loss Change in net unrealized gains on marketable securities, net of tax 144,653 107,366 224,508 285,987 Total other comprehensive income $ 144,653 $ 107,366 $ 224,508 $ 285,987 Comprehensive loss $ ( 7,454,665 ) $ ( 8,811,459 ) $ ( 16,686,853 ) $ ( 14,388,229 ) Loss per common share: Basic and Diluted $ ( 0.25 ) $ ( 0.31 ) $ ( 0.56 ) $ ( 0.50 ) Weighted average shares outstanding: Basic and Diluted 30,124,696 29,088,159 29,983,785 29,284,175 See accompanying notes to unaudited condensed consolidated financial statements 4 CO – DIAGNOSTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) 2024 2023 Six Months Ended June 30, 2024 2023 Cash flows from operating activities Net loss $ ( 16,911,361 ) $ ( 14,674,216 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 668,908 621,256 Stock-based compensation expense 3,070,892 4,338,542 Change in fair value of acquisition contingencies ( 206,144 ) ( 1,397,077 ) Non-cash lease expense 10,613 26,012 Realized gain on investments ( 302,235 ) ( 829,272 ) (Gain) loss from equity method investment 145,458 ( 152,129 ) Gain on disposition of assets ( 3,500 ) - Deferred income taxes - ( 4,430,168 ) Provision for credit losses ( 40,944 ) 491,161 Inventory obsolescence expense 84,430 440,704 Changes in assets and liabilities: Accounts receivable ( 206,634 ) 1,865,169 Prepaid expenses and other assets 299,970 247,659 Inventory 116,335 179,374 Deferred revenue ( 141,519 ) 257,999 Income taxes payable 39,927 22,691 Accounts payable, accrued expenses and other liabilities ( 318,728 ) 1,454,227 Net cash used in operating activities ( 13,694,532 ) ( 11,538,068 ) Cash flows from investing activities Purchases of property and equipment ( 500,922 ) ( 664,137 ) Proceeds from maturities of marketable investment securities 26,836,743 69,393,987 Purchases of marketable securities ( 13,699,301 ) ( 65,296,809 ) Net cash provided by investing activities 12,636,520 3,433,041 Cash flows from financing activities Repurchases of common stock - ( 1,037,930 ) Net cash used in financing activities - ( 1,037,930 ) Net decrease in cash and cash equivalents ( 1,058,012 ) ( 9,142,957 ) Cash and cash equivalents at beginning of period 14,916,878 22,973,803 Cash and cash equivalents at end of period $ 13,858,866 $ 13,830,846 Supplemental disclosure of cash flow information Income taxes paid $ 800 $ 49,197 Supplemental disclosure of non-cash investing and financing transactions Inventory moved to property, plant and equipment $ - $ 673 Right-of-use assets obtained in exchange for new operating lease liabilities $ - $ 3,063,782 See accompanying notes to unaudited condensed consolidated financial statements 5 CO – DIAGNOSTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) Shares Amount Shares Amount Stock Capital Income (Deficit) Equity Convertible Preferred Stock Common Stock Treasury Additional Paid-in Accumulated Other Comprehensive Accumulated Earnings Total Stockholders’ Shares Amount Shares Amount Stock Capital Income (Deficit) Equity Balance as of December 31, 2023 - - 36,108,346 36,108 ( 15,575,795 ) 96,808,436 146,700 4,598,166 86,013,615 Stock-based compensation - - 18,750 19 - 1,571,215 - - 1,571,234 Other comprehensive income, net of tax - - - - - - 79,855 - 79,855 Net loss - - - - - - - ( 9,312,043 ) ( 9,312,043 ) Balance as of March 31, 2024 - - 36,127,096 36,127 ( 15,575,795 ) 98,379,651 226,555 ( 4,713,877 ) 78,352,661 Stock-based compensation - - 632,584 633 - 1,499,025 - - 1,499,658 Other comprehensive income, net of tax - - - - - - 144,653 - 144,653 Net loss - - - - - - - ( 7,599,318 ) ( 7,599,318 ) Balance as of June 30, 2024 - $ - 36,759,680 $ 36,760 $ ( 15,575,795 ) $ 99,878,676 $ 371,208 $ ( 12,313,195 ) $ 72,397,654 Convertible Preferred Stock Common Stock Treasury Additional Paid-in Accumulated Other Comprehensive Accumulated Earnings Total Stockholders’ Shares Amount Shares Amount Stock Capital Income (Deficit) Equity Balance as of December 31, 2022 - $ - 34,754,265 $ 34,754 $ ( 14,211,866 ) $ 88,472,935 $ 293,140 $ 39,931,031 $ 114,519,994 Stock-based compensation - - 68,750 69 - 2,168,673 - - 2,168,742 Repurchases of common stock - - - - ( 482,196 ) - - - ( 482,196 ) Other comprehensive income, net of tax - - - - - - 178,621 - 178,621 Net loss - - - - - - - ( 5,755,391 ) ( 5,755,391 ) Balance as of March 31, 2023 - - 34,823,015 34,823 ( 14,694,062 ) 90,641,608 471,761 34,175,640 110,629,770 Balance - - 34,823,015 34,823 ( 14,694,062 ) 90,641,608 471,761 34,175,640 110,629,770 Stock-based compensation - - 525,335 525 - 2,169,276 - - 2,169,801 Repurchases of common stock - - - - ( 555,734 ) - - - ( 555,734 ) Other comprehensive income, net of tax - - - - - - 107,366 - 107,366 Net loss - - - - - - - ( 8,918,825 ) ( 8,918,825 ) Balance as of June 30, 2023 - $ - 35,348,350 $ 35,348 $ ( 15,249,796 ) $ 92,810,884 $ 579,127 $ 25,256,815 $ 103,432,378 Balance - $ - 35,348,350 $ 35,348 $ ( 15,249,796 ) $ 92,810,884 $ 579,127 $ 25,256,815 $ 103,432,378 See accompanying notes to unaudited condensed consolidated financial statements 6 CO – DIAGNOSTICS, INC. AND SUBSIDIARIES 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 “CODX”), is a molecular diagnostics company that develops, manufactures and markets state-of-the-art diagnostics technologies. The Company’s technologies are utilized for tests that are designed using the detection and/or analysis of nucleic acid molecules (DNA or RNA). The Company also uses its proprietary technology to design specific tests for its Co-Dx™ platform and to locate genetic markers for use in applications other than infectious disease. In connection with the sale of our tests we may sell diagnostic equipment from other manufacturers as self-contained lab systems. 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 (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information as they are prescribed for smaller reporting companies. As permitted under those rules and regulations, certain notes or other financial information normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to make the financial statements not misleading have been included. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. These statements should be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 14, 2024. The Company’s significant accounting policies are set forth in Note 2 to the consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, 2023. 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 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 Reclassifications Certain prior year amounts have been reclassified to conform with the current year’s presentation. These reclassifications have no impact on the previously reported results. 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, 2024 total accounts receivable was $ 710,898 with an allowance for uncollectable accounts of $ 159,394 resulting in a net amount of $ 551,504 . At December 31, 2023 total accounts receivable was $ 504,264 with an allowance for uncollectable accounts of $ 200,338 resulting in a net amount of $ 303,926 . 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, 2024, the Company had $ 1,463,960 in inventory, of which $ 620,825 was finished goods and $ 843,135 was raw materials. At December 31, 2023, the Company had $ 1,664,725 in inventory, of which $ 700,467 was finished goods and $ 964,258 was raw materials. The Company establishes reserves to reduce low-moving, obsolete, or unusable inventories to their estimated useful or scrap values. The Company recognized $ 24,333 and $ 287,006 related to the change in inventory reserves during the three and six months ended June 30, 2024, respectively, compared to $ 198,978 and $ 242,695 during the three and six months ended June 30, 2023 respectively. Revenue Recognition The Company generates revenue from customers from product and license sales. The Company recognizes revenue from customers 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. 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. Grant Revenue The Company may submit applications to receive grant funding from governmental and non-governmental entities. The Company accounts for grants by analogizing to the contribution accounting model under ASC 958-605, Not-for-Profit Entities (“ASC 958”). Revenues from grants, contracts, and awards provided by governmental and non-governmental agencies are recorded based upon the terms of the specific agreements. The Company recognizes grant funding without conditions or continuing performance obligations as revenue in the consolidated statements of operations and comprehensive income (loss). The Company recognizes grant funding with conditions or continuing performance obligations as deferred revenue in the consolidated balance sheets if the conditions or performance obligations have not yet been met. The Company recognized grant funding revenue of $ 2,495,738 and $ 2,710,847 during the three and six months ended June 30, 2024, respectively, compared to $ 0 during the three and six months ended June 30, 2023, respectively. At June 30, 2024, the Company has also recorded $ 127,710 of deferred revenue related to grant funding for which the cash was received, but the underlying conditions or performance obligations have not yet been met. Cash received from federal grants, contracts, and awards can be subject to audit by the grantor and, if the examination results in a disallowance of any expenditure, repayment could be required. 8 Income Taxes The Company accounts for income taxes in accordance with the liability method of accounting for income taxes. Under this method, d eferred income tax assets and deferred income tax liabilities represent the tax effect of temporary differences between financial reporting and tax reporting measured at enacted tax rates in effect for the year in which the differences are expected to reverse. 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. The Company has uncertain income tax positions in the condensed consolidated financial statements, and adverse determinations by these taxing authorities could have a material adverse effect on the condensed consolidated financial positions, result of operations, or cash flows. Concentrations Risk and Significant Customers The Company had certain customers which were each responsible for generating 10 % or more of the total revenue for the three and six months ended June 30, 2024. Two customers accounted for approximately 37 % of product revenue, and two granting agencies accounted for approximately 94 % of the grant revenue recognized during the three months ended June 30, 2024. One customer accounted for approximately 29 % of product revenue, and two granting agencies accounted for approximately 94 % of grant revenue recognized during the six months ended June 30, 2024. Three customers accounted for approximately 44 % of product revenue and two customers accounted for approximately 33 % of product revenue recognized for the three and six months ended June 30, 2023, respectively. Four customers accounted for more than 10 % of accounts receivable at June 30, 2024 and three customers accounted for more than 10 % of accounts receivable at December 31, 2023. These customers together accounted for approximately 89 % and 97 % of accounts receivable at June 30, 2024 and December 31, 2023, respectively. 9 Recently Issued Accounting Standards 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. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires an entity to disclose annually additional information related to the company’s income tax rate reconciliation and income taxes paid during the period. The guidance should be applied prospectively with the option to apply the standard retrospectively. The standard becomes effective for the Company for full year 2025 reporting. The Company is currently evaluating the impact of this new standard on its consolidated financial statements. Note 3 – Cash, Cash Equivalents, and Financial Instruments The following table shows the Company’s cash, cash equivalents, and marketable investment securities by significant investment category: Schedule of Cash, Cash Equivalents and Marketable Investment Securities June 30, 2024 Adjusted Cost Total Unrealized Gains / (Losses) Fair Value Cash and Cash Equivalents Marketable Investment Securities Cash $ 13,858,866 $ - $ 13,858,866 $ 13,858,866 $ - Level 2: U.S. treasury securities 30,649,603 371,208 31,020,811 - 31,020,811 Subtotal 30,649,603 371,208 31,020,811 - 31,020,811 Total $ 44,508,469 $ 371,208 $ 44,879,677 $ 13,858,866 $ 31,020,811 December 31, 2023 Adjusted Cost Total Unrealized Gains / (Losses) Fair Value Cash and Cash Equivalents Marketable Investment Securities Cash $ 4,317,449 $ - $ 4,317,449 $ 4,317,449 $ - Level 1: Money market funds 10,599,429 - 10,599,429 10,599,429 - Subtotal 10,599,429 - 10,599,429 10,599,429 - Level 2: U.S. treasury securities 43,484,810 146,700 43,631,510 - 43,631,510 Subtotal 43,484,810 146,700 43,631,510 - 43,631,510 Total $ 58,401,688 $ 146,700 $ 58,548,388 $ 14,916,878 $ 43,631,510 Marketable investment securities held as of June 30, 2024 mature over the next 12 months. 10 Note 4 – Fair Value Measurements The Company measures and records certain financial assets and liabilities 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 following three levels of inputs are used to measure the fair value of financial assets and liabilities: 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. The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023, by level within the fair value hierarchy: Schedule of Fair Value Assets and Liabilities (Level 1) (Level 2) (Level 3) Total June 30, 2024 (Level 1) (Level 2) (Level 3) Total Assets: Cash equivalents $ 225,852 $ - $ - $ 225,852 Marketable securities (U.S. treasury bills and notes) - 31,020,811 - 31,020,811 Total assets measured at fair value $ 225,852 $ 31,020,811 $ - $ 31,246,663 Liabilities: Contingent consideration - common stock $ - $ - $ 1,239,657 $ 1,239,657 Contingent consideration - warrants - - 193,974 193,974 Total liabilities measured at fair value $ - $ - $ 1,433,631 $ 1,433,631 (Level 1) (Level 2) (Level 3) Total December 31, 2023 (Level 1) (Level 2) (Level 3) Total Assets: Cash equivalents $ 13,806,864 $ - $ - $ 13,806,864 Marketable securities (U.S. treasury bills and notes) - 43,631,510 - 43,631,510 Total assets measured at fair value $ 13,806,864 $ 43,631,510 $ - $ 57,438,374 Liabilities: Contingent consideration - common stock $ - $ - $ 1,318,995 $ 1,318,995 Contingent consideration - warrants - - 320,780 320,780 Total liabilities measured at fair value $ - $ - $ 1,639,775 $ 1,639,775 11 The Company’s financial instruments that are measured at fair value on a recurring basis consist of U.S. treasury bills and notes as of June 30, 2024 and December 31, 2023. The fair value of contingent consideration is calculated using a discounted probability weighted valuation model. Discount rates used in such calculations are a significant assumption that are not observed in the market, and therefore, the resulting fair value represents a Level 3 measurement. The changes for Level 3 items measured at fair value on a recurring basis are as follows: Schedule of Changes in the Fair Value Measurement Fair value as of December 31, 2023 $ 1,639,775 Change in fair value of contingent consideration issued for business acquisitions ( 206,144 ) Fair value as of June 30, 2024 $ 1,433,631 The fair value of the contingent consideration is based on the fair value of the contingent consideration-common stock and contingent consideration-warrants. The fair value of the contingent consideration-common stock is equal to the probability-adjusted value of the Company’s common stock as of the valuation date. The fair value of the contingent consideration-warrants is equal to the probability adjusted value of a call option with terms consistent with the terms of the warrants as of the valuation date. Prior to the probability adjustments, the warrants were valued based on the following inputs: Schedule of Contingent Consideration Common Stock and Warrants June 30, 2024 December 31, 2023 Stock price $ 1.25 $ 1.33 Strike price $ 9.13 $ 9.13 Volatility 149.6 % 187.5 % Risk-free rate 4.6 % 4.0 % Expected term (years) 2.5 3.0 Fair Value of Other Financial Instruments The carrying amounts of certain financial instruments, including cash held in banks, accounts receivable, notes receivable, accounts payable, accrued liabilities, and other liabilities approximate fair value due to their short-term maturities and are excluded from the fair value tables above. Note 5 – Intangible Assets, Net Intangible assets, net consisted of the following: Schedule of Intangible Assets, Net June 30, 2024 Weighted-Average Gross Net Useful Life (1) Carrying Accumulated Carrying (in Years) Amount Amortization Amount In-process research and development Indefinite $ 26,101,000 $ - $ 26,101,000 Non-competition agreements 2.7 1,094,000 ( 942,667 ) 151,333 Total intangible assets $ 27,195,000 $ ( 942,667 ) $ 26,252,333 December 31, 2023 Weighted-Average Gross Net Useful Life (1) Carrying Accumulated Carrying (in Years) Amount Amortization Amount In-process research and development Indefinite $ 26,101,000 $ - $ 26,101,000 Non-competition agreements 2.7 1,094,000 ( 791,333 ) 302,667 Total intangible assets $ 27,195,000 $ ( 791,333 ) $ 26,403,667 (1) Based on weighted-average useful life established as of the acquisition date. 12 The expected future annual amortization expense of the Company’s intangible assets held as of June 30, 2024 is as follows: Schedule of Future Amortization Expense Year Ending December 31, Amortization Expense 2024 (remainder) 151,333 Note 6 – Revenue The following table sets forth revenue by geographic area: Summary of Revenue by Geographic Area 2024 2023 2024 2023 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 United States Product revenue $ 137,411 $ 137,230 $ 223,706 $ 530,384 Grant revenue 2,495,738 - 2,710,847 - Total United States 2,633,149 137,230 2,934,553 530,384 Rest of World Product revenue 23,691 60,576 190,141 269,379 Grant revenue - - - - Total Rest of World 23,691 60,576 190,141 269,379 Total $ 2,656,840 $ 197,806 $ 3,124,694 $ 799,763 Revenue geographic area $ 2,656,840 $ 197,806 $ 3,124,694 $ 799,763 Percentage of revenue by area: United States 99 % 69 % 94 % 66 % Rest of World 1 % 31 % 6 % 34 % Changes in the Company’s deferred revenue balance for the six months ended June 30, 2024 were as follows: Schedule of Deferred Revenue Balance as of December 31, 2023 $ 362,449 Revenue recognized included in deferred revenue balance at the beginning of the period ( 215,119 ) Increase due to prepayments from customers 73,600 Balance as of June 30, 2024 $ 220,930 Note 7 – Loss Per Share The following table reconciles the numerator and the denominator used to calculate basic and diluted loss per share for three and six months ended June 30, 2024 and 2023, respectively: Schedule of Basis and Diluted Earnings Per Share 2024 2023 2024 2023 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Numerator Net loss, as reported $ ( 7,599,318 ) $ ( 8,918,825 ) $ ( 16,911,361 ) $ ( 14,674,216 ) Denominator Weighted average shares, basic 30,124,696 29,088,159 29,983,785 29,284,175 Dilutive effect of stock options, warrants and RSUs - - - - Shares used to compute diluted earnings per share 30,124,696 29,088,159 29,983,785 29,284,175 Basic loss per share $ ( 0.25 ) $ ( 0.31 ) $ ( 0.56 ) $ ( 0.50 ) Diluted loss per share $ ( 0.25 ) $ ( 0.31 ) $ ( 0.56 ) $ ( 0.50 ) 13 The computation of diluted loss per share for the three and six months ended June 30, 2024 and 2023, respectively, also excludes approximately 1.4 million shares of common stock and approximately 465,000 warrants to purchase shares of common stock that are contingent upon the achievement of certain milestones. As a result of incurring a net loss for the three and six months ended June 30, 2024 and 2023, respectively, no potentially dilutive securities are included in the calculation of diluted loss per share because such effect would be anti-dilutive. The Company had potentially dilutive securities as of June 30, 2024, consisting of: (i) 1,758,323 restricted stock units and (ii) 532,112 options and warrants. The Company had potentially dilutive securities as of June 30, 2023, consisting of: (i) 2,890,985 restricted stock units and (ii) 512,112 options and warrants. Note 8 – Stock-Based Compensation Stock Incentive Plans The Company’s board of directors adopted, and shareholders approved, the Co-Diagnostics, Inc. Amended and Restated 2015 Long Term Incentive Plan (the “Incentive Plan”) providing for the issuance of stock-based incentive awards to employees, officers, consultants, directors and independent contractors. On August 31, 2022, the shareholders approved an increase in the number of awards available for issuance under the Incentive Plan to an aggregate of 12,000,000 shares of common stock. The number of awards available for issuance under the Incentive Plan was 2,987,694 at June 30, 2024. Stock Options The following table summarizes option activity during the six months ended June 30, 2024: 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, 2023 1,040,572 $ 2.19 $ 1.37 4.89 Granted - - - Expired - - - Forfeited/Cancelled - - - Exercised - - - Outstanding at June 30, 2024 1,040,572 $ 2.19 $ 1.37 4.38 Exercisable at June 30, 2024 1,040,572 $ 2.19 $ 1.37 4.38 The aggregate intrinsic value of outstanding options at June 30, 2024 was approximately $ 0.2 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. As of June 30, 2024, there were no unvested options and no unrecognized stock-based compensation expense related to options. 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, 2024: Schedule of Outstanding Restricted Stock Units and Related Party Number of RSUs Weighted Average Grant Date Fair Value Unvested at December 31, 2023 2,925,497 $ 3.99 Granted 1,555,000 1.11 Vested ( 651,334 ) 4.77 Forfeited/Cancelled ( 184,757 ) 3.78 Unvested at June 30, 2024 3,644,406 $ 2.63 14 As of June 30, 2024, there was approximately $ 7.5 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 1.7 years. Warrants The Company has issued warrants related to financings, acquisitions 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, 2024: 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, 2023 485,000 $ 8.81 $ 1.29 3.0 Granted - - - Expired - - - Forfeited/Cancelled - - - Exercised - - - Outstanding at June 30, 2024 485,000 $ 8.81 $ 1.03 2.5 The aggregate intrinsic value of outstanding warrants at June 30, 2024 was $ 0 . The total number of warrants exercisable at June 30, 2024 is 20,000 . The ability to exercise the remaining 465,000 warrants issued in connection with acquisitions in prior years is contingent upon the achievement of certain development and revenue milestones on or before January 1, 2027. There was no unrecognized stock-based compensation expense related to warrants. Stock-Based Compensation Expense The Company recognized stock-based compensation expense as follows: Schedule of Recognized Stock-based Compensation Expense 2024 2023 2024 2023 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Cost of revenue $ 6,054 $ 12,057 $ 14,195 $ 24,065 Sales and marketing 292,983 572,789 663,363 1,101,906 General and administrative 1,046,148 1,261,511 2,132,644 2,453,726 Research and development 154,473 323,444 260,690 758,847 Total stock-based compensation expense $ 1,499,658 $ 2,169,801 $ 3,070,892 $ 4,338,544 Note 9 – Income Taxes For the three months ended June 30, 2024, the Company recognized expense from income taxes of $ 20,590 , representing an effective tax rate of ( 0.3 %). For the six months ended June 30, 2024, the Company recognized expense from income taxes of $ 43,354 , representing an effective tax rate of ( 0.3 %). The Company’s effective tax rate will generally differ from the U.S. Federal statutory rate of 21.0 %, primarily due to the full valuation allowance as well as state taxes, permanent items, and discrete items. For the three and six months ended June 30, 2023, the Company recognized a benefit from income taxes of $ 2,238,320 and $ 4,498,131 , respectively. 15 Note 10 – Commitments and Contingencies Lease Obligations The Company leases administrative, R&D, sales and marketing and manufacturing facilities under non-cancellable operating leases and leases cancellable with one month notice. The Company expenses the cancelable leases in the period incurred in accordance with the practical expedient elected. The components of lease expense are summarized as follows: Schedule of Lease Expense 2024 2023 2024 2023 Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Operating lease costs $ 252,646 $ 62,847 $ 503,841 $ 150,454 Short-term lease costs 12,250 48,301 37,789 156,979 Total lease costs $ 264,896 $ 111,148 $ 541,630 $ 307,433 As of June 30, 2024, the maturities of the Company’s lease liabilities are as follows: Schedule of Maturities on Company Lease Liabilities Year Ending December 31, 2024 (remainder) $ 502,196 2025 1,018,383 2026 714,630 2027 300,591 2028 308,462 Thereafter - Total lease payments 2,844,262 Less: imputed interest 262,371 Present value of operating lease liabilities 2,581,891 Less: current portion 878,174 Long-term portion $ 1,703,717 Other information related to operating leases was as follows: Schedule of Other Information Related to Operating Lease Six Months Ended June 30, 2024 Cash paid for operating leases included in operating cash flows $ 521,018 Remaining lease term of operating leases 3.2 years Discount rate of operating leases 6.3 % 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. 16 The Company is a defendant in two class action claims and four derivative actions 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 is also a party to three civil actions, one in the US and the other in the United Kingdom. Each of the civil actions is based on breach of contract claims against the Company. 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 11 – Share Repurchase Program In March 2022, the Company’s Board of Directors authorized a share repurchase program that would allow the Company to repurchase up to $ 30.0 million of CODX common stock. The repurchase program does not obligate the Company to acquire any particular number of common shares, and the repurchase program may be suspended or discontinued at any time at the Company’s discretion. The timing and amount of any share repurchases under the share repurchase program will be determined by Co-Diagnostics’ management at its discretion based on ongoing assessments of the capital needs of the business, the market price of the Company’s common stock, corporate and regulatory requirements, and general market conditions. For accounting purposes, common stock repurchased under the stock repurchase program is recorded based upon the transaction date of the applicable trade. Such repurchased shares are held in treasury and are presented using the cost method. These shares are not retired and are considered issued but not outstanding. No shares were repurchased during the three or six months ended June 30, 2024. Note 12 – Related Party Transactions In 2023, the Company entered into a services agreement with CoSara Diagnostics Pvt Ltd (“CoSara”), our joint venture for manufacturing in India, under which CoSara provides certain research and development consulting and support services. The Company recognized $ 74,040 and $ 179,965 of expense related to this agreement during the three and six months ended June 30, 2024, respectively. 17 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking statements” that involve risks and uncertainties. All statements other than statements of historical fact contained in this Quarterly Report and the documents incorporated by reference herein, including statements regarding future events, our future financial performance, business strategy, and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors and the documents incorporated by reference herein, which may affect our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a highly regulated, very competitive, and rapidly changing environment. New risks emerge from time to time, and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under the heading “Risk Factors” in other documents we file with the SEC, including our Annual Report on form 10-K for the year ended December 31, 2023. The following discussion should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 14, 2024, and the audited financial statements and notes included therein. As used in this Quarterly Report, the terms “we”, “us”, “our”, and “Co-Diagnostics” means Co-Diagnostics, Inc., a Utah corporation and its consolidated subsidiaries (the “Company”), unless otherwise indicated. Executive Overview The following management’s discussion and analysis of financial condition and results of operations describes the principal factors affecting the results of our operations, financial condition, and changes in financial condition. This discussion should be read in conjunction with the accompanying unaudited financial statements and notes thereto included elsewhere in this report. The information contained in this discussion is subject to a number of risks and uncertainties. We urge you to review carefully the section of this report entitled “ Cautionary Note Regarding Forward-Looking Statements. ” Business Overview Co-Diagnostics, 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, liquid biopsy for cancer screening, and agricultural applications. Our 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 (“Co-Primers®”) 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. Using our proprietary test design system and proprietary reagents, we have designed and obtained regulatory approval 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. These initial diagnostic tests are cleared for use in clinical labs only and not for point-of-care or at-home use. We are currently developing a unique, groundbreaking portable diagnostic device and test system designed for point-of-care and at-home use. The system is comprised of our PCR instrument that we refer to as the Co-Dx™ PCR Pro™ instrument, our proprietary diagnostic test cup system and a mobile application to be installed on the user’s mobile device. We refer to the system as the “Co-Dx™ PCR platform that is being designed to bring affordable, reliable polymerase chain reaction (“PCR”) testing to patients in point-of-care and at-home settings. The Co-Dx PCR platform is subject to U.S. Food and Drug Administration (“FDA”) review and is not available for sale at the time of this filing. In June 2024, we completed our first U.S. Food and Drug Administration (FDA) application for 510(k) clearance for the Co-Dx™ PCR Pro™ instrument, and the Co-Dx PCR COVID-19 Test for over-the-counter (OTC) use. We have received acknowledgement from the FDA that the 510(k) application was received and is under review. Additionally, in December 2023, we submitted the Co-Dx PCR platform for review by the U.S. Food and Drug Administration (FDA) for Emergency Use Authorization (EUA). There is no guarantee that our Co-Dx PCR 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. 18 Technology We 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. For various reasons, including owning our own platform, we believe we will be able 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. For example, we were the first US-based company to receive a CE-marking for a COVID-19 test in early 2020, as we worked to help slow the spread of the pandemic through our global network of distributors covering clinical labs in more than 50 countries. Our Logix Smart® COVID-19 test was designed, developed, submitted for regulatory approval and ready to be used as an in vitro diagnostic or IVD in countries that accept a CE Mark as approval for use of the test in a period of just over 30 days. This is a real-world example of how the CODX technology can be used in an evolving epidemic or pandemic to get diagnostic tools in the hands of medical professionals in a timely manner. It can be similarly used to design a test for mutated strains of the virus should they not be detectable using currently available tests. In 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. Our 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. 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 represents 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. Our 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. 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. Using 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, 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. 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”). In 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, have designed and licensed tests that identify genetic traits in plant and animal genomes. 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 managing mosquito populations on the specific areas known to be breeding the mosquitos that carry deadly viruses. RESULTS OF OPERATIONS The Three Months Ended June 30, 2024 Compared to the Three Months ended June 30, 2023 Revenues For the three months ended June 30, 2024, we generated revenues of $2,656,840, compared to revenues of $197,806 for the three months ended June 30, 2023. Grant revenue accounted for $2,495,738 of revenue for the three months ended June 30, 2024, compared to $0 for the three months ended June 30, 2023. The increase in grant revenue was primarily due to the achievement of certain milestones under various grants the Company was awarded. 19 Cost of Revenues We recorded cost of revenues of $212,148 for the three months ended June 30, 2024, compared to $459,095 for the three months ended June 30, 2023. The decrease in cost of revenues of $246,947 is primarily due to lower inventory obsolescence reserves recorded in the current quarter. Expenses We incurred total operating expenses of $10,124,654 for the three months ended June 30, 2024, compared to total operating expenses of $11,733,150 for the three months ended June 30, 2023. The decrease in operating expenses was primarily due to decreased stock-based compensation expense, bad debt expense, and expense related to clinical trials for the Co-Dx PCR platform. These decreases were partially offset by increased legal expenses. Our sales and marketing expenses for the three months ended June 30, 2024 were $1,041,243, compared to $1,732,966 for the three months ended June 30, 2023. The decrease was primarily a result of decreased stock-based compensation expense, tradeshow and travel expenses, and website development expenses. General and administrative expenses were $3,132,385 for the three months ended June 30, 2024, compared to $3,713,895 for the three months ended June 30, 2023. The decrease in general and administrative expenses was primarily due to decreases in stock-based compensation expense, bad debt expense, and insurance expense, partially offset by increased legal and professional services expenses. Our research and development expenses were $5,612,691 for the three months ended June 30, 2024, compared to $5,981,043 for the three months ended June 30, 2023. The decrease was primarily a result of decreased expenses related to clinical trials for the Co-Dx PCR platform and stock-based compensation expense, partially offset by increases in personnel related expenses. Other Income For the three months ended June 30, 2024 we had total other income of $101,234, compared to total other income of $837,294 for the three months ended June 30, 2023. The decrease in other income is primarily due to a change in the fair value of contingent consideration liabilities and decreased realized gains from investments in marketable securities, partially offset by increased interest income. Net Loss We realized a net loss for the three months ended June 30, 2024 of $7,599,318, compared to a net loss for the three months ended June 30, 2023 of $8,918,825. The smaller net loss was primarily the result of an increase in grant revenue, combined with a decrease in operating expenses, as well as changes in the fair value of acquisition contingencies and income related to investments in marketable securities. Additionally, we recorded income tax expense of $20,590 for the three months ended June 30, 2024, compared to an income tax benefit of $2,238,320 for the three months ended June 30, 2023. The primary reason for the change in the provision for income taxes is a result of the Company now being in a full valuation allowance. The Six Months Ended June 30, 2024 Compared to the Six Months ended June 30, 2023 Revenues For the six months ended June 30, 2024, we generated revenues of $3,124,694, compared to revenues of $799,763 for the six months ended June 30, 2023. Grant revenue accounted for $2,710,847 of revenue for the six months ended June 30, 2024, compared to $0 for the six months ended June 30, 2023. The decrease in product revenue of $385,916 was primarily due to lower sales of our Logix Smart COVID-19 throughout the world. The increase in grant revenue was primarily due to the achievement of certain milestones under various grants the Company was awarded. 20 Cost of Revenues We recorded cost of revenues of $446,653 for the six months ended June 30, 2024, compared to $961,336 for the six months ended June 30, 2023. The decrease in cost of revenues of $514,683 is primarily due to lower inventory obsolescence reserves being recorded in the current year. Expenses We incurred total operating expenses of $20,617,390 for the six months ended June 30, 2024, compared to total operating expenses of $21,783,516 for the six months ended June 30, 2023. The decrease in operating expenses was primarily due to decreased stock-based compensation expense, bad debt expense and expense related to clinical trials for the Co-Dx PCR platform. These decreases were partially offset by increased personnel related expenses and legal expenses. Our sales and marketing expenses for the six months ended June 30, 2024 were $2,604,925, compared to $3,439,297 for the six months ended June 30, 2023. The decrease was primarily a result of decreased stock-based compensation expense, tradeshow and travel expenses, and website development expenses. General and administrative expenses were $6,051,188 for the six months ended June 30, 2024, compared to $6,727,860 for the six months ended June 30, 2023. The decrease in general and administrative expenses was primarily due to decreases in stock-based compensation expense, bad debt expense, and insurance expense, partially offset by increased legal and professional services expenses. Our research and development expenses were $11,292,369 for the six months ended June 30, 2024, compared to $10,995,103 for the six months ended June 30, 2023. The primary increase in expenses was a result of increased personnel related expenses, partially offset by decreased expenses related to clinical trials for the Co-Dx PCR platform and stock-based compensation expense. Other Income For the six months ended June 30, 2024 we had total other income of $1,071,342, compared to total other income of $2,772,742 for the six months ended June 30, 2023. The decrease in other income is primarily due to a change in the fair value of contingent consideration liabilities, an increased loss related to the Company’s joint venture investment, and decreased realized gains from investments in marketable securities, partially offset by increased interest income. Net Loss We realized a net loss for the six months ended June 30, 2024 of $16,911,361, compared to a net loss for the six months ended June 30, 2023 of $14,674,216. The larger net loss was primarily the result of changes in the fair value of acquisition contingencies and income taxes, partially offset by an increase in grant revenue combined with a decrease in operating expenses. We recorded income tax expense of $43,354 for the six months ended June 30, 2024, compared to an income tax benefit of $4,498,131 for the six months ended June 30, 2023. The primary reason for the change in the provision for income taxes is a result of the Company now recording a full valuation allowance. Liquidity and Capital Resources At June 30, 2024, we had cash and cash equivalents of $13,858,866. Additionally, we had $31,020,811 of marketable investment securities that could readily be converted into cash if needed. Additionally, our total current assets of June 30, 2024, were $48,219,239 compared to total current liabilities of $5,305,385. Net cash used in operating activities during the six months ended June 30, 2024 was $13,694,532, compared to $11,538,068 for the six months ended June 30, 2023. The increase in cash used in operating activities was primarily due to increased operating expenses and the impact of non-cash items. Net cash provided by investing activities during the six months ended June 30, 2024 was $12,636,520, primarily from maturities of marketable investment securities, compared to $3,433,041 during the six months ended June 30, 2023. Net cash used in financing activities was $0 for the six months ended June 30, 2024, compared to $1,037,930 for the same period in the prior year. This is due to the repurchase of outstanding common shares during the prior period, compared to no such repurchases in the current period. 21 Since commencing sales of our Logix Smart COVID-19 test in March 2020, we have used our cash generated from those sales to fund the purchase of inventories and the development of our Co-Dx PCR platform, and to pay our operating expenses. We have increased our work force most significantly in research and development in order to continue development of the Co-Dx PCR platform and additional tests that will enable continued use of our distributor network to sell additional products throughout the world. We believe that our existing capital resources and the cash generated from future sales will be sufficient to meet our projected operating requirements for the next 12 months. However, our available capital resources may be consumed more rapidly than currently expected and we may need or want to raise additional financing for strategic opportunities. It is anticipated that the Company will continue to generate operating losses and use cash in operations in the near term. If needed, we expect additional investment capital to come from additional issuances of our common stock or other equity-based securities with existing and new investors similar to those that have provided funding in the past. On March 16, 2023, the Company entered into an Equity Distribution Agreement with Piper Sandler & Co. (“Piper”), pursuant to which we may sell from time to time, shares of our common stock, having an aggregate offering price of up to $50.0 million through Piper, as agent. No shares have been sold under the distribution agreement as of June 30, 2024. We may not be able to secure financing in a timely manner or on favorable terms, if at all. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not required under Regulation S-K for “smaller reporting companies.” Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain “disclosure controls and procedures,” as defined in Rules 13a-15I and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2024. Based on the evaluation of our disclosure controls and procedures as of June 30, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during the three months ended June 30, 2024, that have materially affected or, are reasonably likely to materially affect, our internal control over financial reporting. 22 PART II – OTHER INFORMATION Item 1. Legal Proceedings There have been no material developments to the legal proceedings previously disclosed under Part I. Item 3 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Item 1A. Risk Factors. Not required under Regulation S-K for “smaller reporting companies.” Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Dividends We have never declared or paid any cash dividends on our capital stock. The payment of dividends on our common stock in the future will depend on our earnings, capital requirements, operating and financial condition and such other factors as our board of directors may consider appropriate. We currently expect to use all available funds to finance the future development and expansion of our business and do not anticipate paying dividends on our common stock in the foreseeable future. Pursuant to Section 16-10a-640 of the Utah Revised Business Corporation Act, no distribution may be made if, after giving it effect: (a) the corporation would not be able to pay its debts as they become due in the usual course of business; or (b) the corporation’s total assets would be less than the sum of its total liabilities plus, unless the articles of incorporation permit otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures Not applicable. Item 5. Other Information None. 23 Item 6. Exhibits Exhibit Index (a) Exhibits Exhibit Number Description 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File * Filed herewith. # Management Contract or Compensatory Plan or Arrangement 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CO-DIAGNOSTICS, INC. Date: August 8, 2024 By: /s/ Dwight H. Egan Name: Dwight H. Egan Title: Chief Executive Officer and Principal Executive Officer Date: August 8, 2024 By: /s/ Brian Brown Name: Brian Brown Title: Chief Financial Officer and Principal Financial and Accounting Officer 25