Item 3. Legal Proceedings
ITEM
3. LEGAL PROCEEDINGS
In
the ordinary course of business, we are at times subject to various legal proceedings and disputes, including the proceedings specifically
discussed below. We assess our liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information
available. Where it is probable that we will incur a loss and the amount of the loss can be reasonably estimated, we record a liability
in our consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on
a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, we do not accrue legal reserves. While the outcome
of legal proceedings is inherently uncertain, based on information currently available and available insurance coverage, our management
believes that it has established appropriate legal reserves. Any incremental liabilities arising from pending legal proceedings are not
expected to have a material adverse effect on our consolidated financial position, consolidated results of operations, or consolidated
cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to our consolidated
financial position, consolidated results of operations, or consolidated cash flows.
Class
Actions and Shareholder Derivative Suits
Gelt
Securities Class Action (District of Utah)
On
June 15, 2020, Gelt Trading Co. (“Gelt”) filed a lawsuit in the United States District Court for the District of Utah (“District
of Utah”), against the Company and certain of our directors and officers, on behalf of itself and a putative class, seeking to
recover damages for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Gelt Litigation”).
The complaint alleges that Co-Diagnostics and the individual defendants overstated the accuracy of the Company’s Logix Smart COVID-19
test in statements on April 30, 2020 and May 1, 2020, and that plaintiff suffered losses when the Company’s stock price dropped
after public reports questioned the accuracy of the Logix Smart test on May 14, 2020. On July 15, 2020, plaintiff filed an amended complaint.
On March 10, 2021, the court appointed Gelt as Lead Plaintiff, and on April 7, 2021, Lead Plaintiff filed a second amended complaint
(“SAC”), which asserts the same Sections 10(b) and 20(a) claims against the same defendants on largely the same theory. On
May 5, 2021, the defendants moved to dismiss the SAC. On March 9, 2022, the court entered a Decision & Order denying the motion to
dismiss, but narrowing the challenged statements to only those made in the May 1, 2020 press release, and on April 13, 2022, the defendants
filed an answer to the SAC. On October 17, 2022, Gelt filed a motion to certify the putative class, and on August 18, 2023, the court
partially granted that motion, certifying a class of all those who purchased Co-Diagnostics securities between May 1, 2020 and May 14,
2020, dates inclusive, and who were damaged thereby. Fact and expert discovery are now closed, and the parties’ cross-motions for
summary judgment and to exclude certain expert testimony are now fully briefed. The court held oral argument on those motions on February
21, 2025. On March 4, 2025 a judgment was issued granting the Company’s motion for summary judgment and denying Lead Plaintiff’s
motion for partial summary judgment.
Shareholder
Derivative Lawsuits (District of Utah & Utah State Court)
On
September 17, 2020, a shareholder derivative lawsuit was filed in the District of Utah by Luis Aguilera, allegedly on behalf of Co-Diagnostics,
Inc., that substantially piggybacks on the Gelt Litigation referenced above. The lawsuit asserts that the defendants failed to prevent
the alleged securities law violations largely asserted in the Gelt Litigation. On December 2, 2020, a second shareholder derivative lawsuit
was filed in the District of Utah by Melvyn Klein asserting essentially the same claims, allegedly on behalf of Co-Diagnostics, as the
Aguilera shareholder derivative action. And on April 29, 2021, the District of Utah consolidated the two shareholder derivative cases,
with the Aguilera case serving as the lead case under the caption In re Co-Diagnostics, Inc. Derivative Litigation . On May 3,
2022, plaintiffs filed an amended complaint asserting claims for breach of fiduciary duty, unjust enrichment, and contribution under
Sections 10(b) and 21D of the Securities Exchange Act of 1934. Defendants answered the amended complaint on June 24, 2022. On January
25, 2024, the consolidated Aguilera derivative action was voluntarily dismissed without prejudice.
On
November 24, 2020, an additional shareholder derivative lawsuit was filed in the District of Utah by Matthew Wallace, allegedly on behalf
of Co-Diagnostics, Inc., that also piggybacks on the Gelt Litigation referenced above. It named the same defendants and asserted essentially
the same claims, allegedly on behalf of Co-Diagnostics, as in the other District of Utah shareholder derivative actions referenced above.
On January 25, 2021, another shareholder derivative lawsuit was filed in the District of Utah by Jason Reagan, asserting essentially
the same claims as in the Wallace lawsuit. On March 18, 2021, the court consolidated the two lawsuits, with the Wallace lawsuit serving
as the lead case. On April 30, 2021, plaintiffs filed an amended complaint asserting claims for breach of fiduciary duty against defendants
and claims for insider trading. On January 26, 2024, the court ordered the parties’ proposed revised case schedule, setting fact
and expert discovery deadlines throughout 2024 and early 2025; dispositive motions are due June 1, 2025, but no trial date has yet been
set.
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On
March 29, 2021, an additional shareholder derivative lawsuit was filed in the Third District Court in and for Salt Lake County, State
of Utah (“Utah State Court”) by Hua Ding, allegedly on behalf of Co-Diagnostics, Inc., that also piggybacks on the Gelt Litigation
referenced above. It names the same defendants and asserts essentially the same claims as in In re Co-Diagnostics, Inc. Derivative
Litigation pending in the District of Utah referenced above. On December 12, 2022, a second shareholder derivative lawsuit was filed
in Utah State Court by Kathryn Matuch asserting essentially the same claims, allegedly on behalf of Co-Diagnostics, as the Ding shareholder
derivative action.
The
defendants believe the claims asserted in all of the shareholder derivative lawsuits referenced above are without merit and intend to
defend vigorously against them, but there can be no assurances as to the outcome.
Stadium
Capital Securities Class Action (Southern District of New York)
On
August 16, 2022, Stadium Capital LLC (“Stadium”) filed a lawsuit in the United States District Court for the Southern District
of New York, against Co-Diagnostics, Inc., and certain of our officers, on behalf of itself and a putative class, seeking to recover
damages for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that Co-Diagnostics
and the individual defendants overstated the demand for the Company’s Logix Smart COVID-19 test in statements on May 12, 2022 and
June 15, 2022, and that plaintiff suffered losses when the Company’s stock price dropped after the Company disclosed its financial
results for the quarter ended June 30, 2022 in a press release on August 11, 2022. On September 19, 2022, a second plaintiff, Drew Lee,
filed a similar complaint in the same court against the same defendants alleging essentially the same claims. On August 9, 2023, the
court consolidated these two securities class actions into the Stadium action and appointed Stadium as lead plaintiff. On September 21,
2023, Stadium filed a consolidated amended complaint, and on October 20, 2023, defendants moved to dismiss. On February 5, 2024, the
Court granted in part and denied in part the defendants’ motion to dismiss, and on April 19, 2024, the Court dismissed an additional
claim. Fact discovery on the remaining claims closed on November 15, 2024, and expert discovery is currently underway. Dispositive motions
are due March 21, 2025, and no trial date has yet been set. The defendants believe the claims are without merit and intend to defend
vigorously against them, but there can be no assurances as to the outcome.
Commercial
Litigation
Co-Diagnostics,
Inc. v. Hukui Technology, Inc., et al. (Third Judicial District Court, Salt Lake County, State of Utah, Civil No. 210902131, filed on
April 21, 2021).
The
Company filed a complaint against Defendants Hukui Technology, Inc., Hukui Tech, Inc., and Hukui Bio Co., Ltd (collectively, “Hukui”)
seeking a declaratory judgment that the Company is not obligated to any of them in any amount. On August 24, 2021, Hukui filed their
Answer and Counterclaim seeking damages on a number of theories, including breach of contract for letter agreements, breach of oral agreement,
promissory estoppel, unjust enrichment, and interference with economic relations. Hukui requested a money judgment against the Company
in an amount to be determined at trial. On September 20, 2021, Hukui filed their Unopposed Motion for Leave to Amend Answer to the Complaint,
Affirmative Defenses, and Counterclaims and, on October 14, 2021, Hukui filed their Amended Answer and Counterclaims seeking damages
on declaratory judgment, as well as breach of contract for letters of authorization, breach of oral agreement, promissory estoppel, unjust
enrichment, and interference with economic relations. In 2022 the parties exchanged their initial disclosures, exchanged written discovery
requests, and conducted a number of depositions on each side that were concluded in January 2023. On June 1, 2023 the Company filed a
Motion for Summary Judgment asking the court for summary judgment on its sole claim for declaratory relief and for summary judgment with
respect to all Hukui counterclaims. On November 7, 2023, the Court issued its decision and granted the Company summary judgment on its
sole claim for declaratory relief and on all Hukui counterclaims. On December 22, 2023, Hukui filed a notice of appeal of the final judgment
in its entirety with the Utah Supreme Court. The Utah Supreme Court subsequently issued an order transferring the case to the Utah Court
of Appeals. Hukui has filed its brief in support of its efforts to overturn the Court’s order granting the Company’s motion
for summary judgment. The Company has filed its reply brief in response to Hukui’s appellant brief. The Utah Court of Appeals has
not ruled on Hukui’s appeal. The Company believes the claims are without merit and intends to defend vigorously against them, but
there can be no assurances as to the outcome.
Co-Diagnostics,
Inc. v. Pantheon International Advisors Ltd. (Third Judicial District Court, Salt Lake County, State of Utah, Civil No. 210902609, filed
on May 14, 2021).
The
Company filed a complaint against Pantheon International Advisors (“Pantheon”) asking the court to declare that the Company
has no ongoing contractual business relationship with Pantheon, no monies owing, nor does Pantheon have any interest, right, title or
claim to any stock issued by the Company or ownership of any kind in the Company. Pantheon was served with a 30-Day Summons on September
9, 2021 to which it failed to respond, and a default judgement against Pantheon International Advisors was entered by the Court on November
28, 2021. The time to appeal from the judgment or seek to vacate the judgment has passed.
After
learning that the Company had initiated suit in Utah, and after learning of Company’s intent to serve it with process of that suit,
on May 24, 2021, Pantheon filed a claim against the Company in the Royal Courts of Justice Group, Queens Bench Division, Claim No. QB-21-002245,
stating that the Company owes Pantheon $2,860,809.79 for alleged breach of contract for failing to make payments purportedly due under
a contract allegedly entered into on October 18, 2018. The Company has filed its response to Pantheon’s claim. The Company is being
represented locally in the UK by Freshfields Bruckhaus Deringer LLP in that matter. The Company intends to vigorously defend against
the UK claims and will seek to the full extent possible to enforce its rights under the Declaratory Judgment already obtained in Utah
but there can be no assurances as to the outcome.
ITEM
4. MINE SAFETY DISCLOSURES
Not
applicable.
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PART
II