Co-Diagnostics, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023 Table of Contents Report of Independent Registered Public Accounting Firms (PCAOB ID No. 270 ) 36 Consolidated Balance Sheets 37 Consolidated Statements of Operations 38 Consolidated Statement of Changes in Stockholders’ Equity 39 Consolidated Statements of Cash Flows 40 Notes to Consolidated Financial Statements 41 35 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders Co-Diagnostics, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Co-Diagnostics, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2024 and 2023, and the consolidated results of its operations and its cash flows for the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Going Concern The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses from operations and negative operating cash flows and needs to obtain additional financing to finance its operations. These issues raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Impairment of Intangible Assets In December 2021 the Company acquired in-process research and development indefinite-lived intangible assets totaling $26,101,000. The Company assesses these assets for impairment at least annually or whenever events or changes in circumstances occur that may indicate impairment. The Company’s analysis for the year ended December 31, 2024, required significant judgment to assess qualitative factors in determining whether it is more likely than not that the indefinite-lived intangible assets are impaired. As a result of their analysis, the Company determined there was no impairment as of year-end. Auditing the Company’s annual impairment assessment was complex and highly judgmental due to the significant judgment required in determining whether it is more likely than not the in-process research and development indefinite-lived intangible assets are impaired. This required a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence to evaluate management’s assessment in evaluating these indefinite-lived intangible assets for impairment. These procedures included among others: (1) evaluating management’s process for evaluating impairment, (2) evaluating the factors assessed by management (3) evaluating other relevant factors in making our own determination, and (4) evaluating and discussing considerations and conclusions made by management. /s/ Tanner LLC We have served as the Company’s auditor since 2023 Salt Lake City, Utah March 27, 2025 36 CO-DIAGNOSTICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 2,936,544 $ 14,916,878 Marketable investment securities 26,811,098 43,631,510 Accounts receivable, net 132,570 303,926 Inventory, net 1,072,724 1,664,725 Income taxes receivable - 26,955 Prepaid expenses and other current assets 1,338,762 1,597,114 Total current assets 32,291,698 62,141,108 Property and equipment, net 2,761,280 3,035,729 Operating lease right-of-use asset 2,114,876 2,966,774 Intangible assets, net 26,101,000 26,403,667 Investment in joint venture 731,065 773,382 Total assets $ 63,999,919 $ 95,320,660 Liabilities and stockholders’ equity Current liabilities Accounts payable $ 3,294,254 $ 1,482,109 Accrued expenses 2,562,169 2,172,959 Operating lease liability, current 915,619 838,387 Contingent consideration liabilities, current 502,819 891,666 Deferred revenue 40,857 362,449 Total current liabilities 7,315,718 5,747,570 Long-term liabilities Income taxes payable 713,643 659,186 Operating lease liability 1,236,560 2,152,180 Contingent consideration liabilities 422,080 748,109 Total long-term liabilities 2,372,283 3,559,475 Total liabilities 9,688,001 9,307,045 Commitments and contingencies (Note 12) - - Stockholders’ equity Convertible preferred stock, $ 0.001 par value; 5,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively - - Common stock, $ 0.001 par value; 100,000,000 shares authorized; 37,902,222 shares issued and 33,053,544 shares outstanding as of December 31, 2024 and 36,108,346 shares issued and 31,259,668 shares outstanding as of December 31, 2023 37,902 36,108 Treasury stock, at cost; 4,848,678 shares held as of December 31, 2024 and December 31, 2023, respectively ( 15,575,795 ) ( 15,575,795 ) Additional paid-in capital 102,472,210 96,808,436 Accumulated other comprehensive income 418,443 146,700 Accumulated earnings (deficit) ( 33,040,842 ) 4,598,166 Total stockholders’ equity 54,311,918 86,013,615 Total liabilities and stockholders’ equity $ 63,999,919 $ 95,320,660 See accompanying notes to consolidated financial statements. 37 CO-DIAGNOSTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2024 2023 Years Ended December 31, 2024 2023 Product revenue $ 770,048 $ 991,473 Grant revenue 3,145,112 5,820,565 Total revenue 3,915,160 6,812,038 Cost of revenue 999,124 4,184,949 Gross profit 2,916,036 2,627,089 Operating expenses Sales and marketing 4,483,339 6,860,815 General and administrative 16,157,152 14,279,441 Research and development 20,979,589 22,962,593 Depreciation and amortization 1,377,266 1,230,474 Total operating expenses 42,997,346 45,333,323 Loss from operations ( 40,081,310 ) ( 42,706,234 ) Other income, net Interest income, net 1,091,825 1,161,913 Realized gain on investments 870,745 2,243,059 Gain (loss) on disposition of assets 8,291 ( 2,578 ) Gain on remeasurement of acquisition contingencies 714,876 1,092,581 Gain (loss) on equity method investment in joint venture ( 186,067 ) 100,703 Total other income, net 2,499,670 4,595,678 Loss before income taxes ( 37,581,640 ) ( 38,110,556 ) Income tax provision (benefit) 57,368 ( 2,777,691 ) Net loss $ ( 37,639,008 ) $ ( 35,332,865 ) Other comprehensive loss Change in net unrealized gains on marketable securities, net of tax 271,743 ( 146,440 ) Total other comprehensive income (loss) $ 271,743 $ ( 146,440 ) Comprehensive loss $ ( 37,367,265 ) $ ( 35,479,305 ) Loss per common share: Basic and Diluted $ ( 1.24 ) $ ( 1.20 ) Weighted average shares outstanding: Basic and Diluted 30,335,350 29,346,599 See accompanying notes to consolidated financial statements. 38 CO-DIAGNOSTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY 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, 2022 - $ - 34,754,265 $ 34,754 $ ( 14,211,866 ) $ 88,472,935 $ 293,140 $ 39,931,031 $ 114,519,994 Stock-based compensation expense - - 1,354,081 1,354 - 8,335,501 - - 8,336,855 Repurchases of common stock - - - - ( 1,363,929 ) - - - ( 1,363,929 ) Other comprehensive loss, net of tax - - - - - - ( 146,440 ) - ( 146,440 ) Net loss - - - - - - - ( 35,332,865 ) ( 35,332,865 ) 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 Balance - $ - 36,108,346 $ 36,108 $ ( 15,575,795 ) $ 96,808,436 $ 146,700 $ 4,598,166 $ 86,013,615 Issuance of common stock related to at-the-market offering, net of offering costs - - 314,707 315 - 230,349 - - 230,664 Stock-based compensation expense - - 1,479,169 1,479 - 5,433,425 - - 5,434,904 Repurchases of common stock - - - - - - - - - Other comprehensive loss, net of tax - - - - - - 271,743 - 271,743 Net loss - - - - - - - ( 37,639,008 ) ( 37,639,008 ) Balance as of December 31, 2024 - $ - 37,902,222 $ 37,902 $ ( 15,575,795 ) $ 102,472,210 $ 418,443 $ ( 33,040,842 ) $ 54,311,918 Balance - $ - 37,902,222 $ 37,902 $ ( 15,575,795 ) $ 102,472,210 $ 418,443 $ ( 33,040,842 ) $ 54,311,918 See accompanying notes to consolidated financial statements. 39 CO-DIAGNOSTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS 2024 2023 Years Ended December 31, 2024 2023 Cash flows from operating activities Net loss $ ( 37,639,008 ) $ ( 35,332,865 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 1,377,266 1,230,474 Stock-based compensation expense 5,434,904 8,336,855 Change in fair value of acquisition contingencies ( 714,876 ) ( 1,092,581 ) Non-cash lease expense 13,510 47,992 Realized gain on investments ( 870,745 ) ( 2,243,059 ) (Gain) loss from equity method investment 186,067 ( 100,703 ) (Gain) loss on disposition of assets ( 8,291 ) 2,578 Deferred income taxes - ( 2,417,987 ) Provision for (recoveries of) credit losses ( 15,035 ) 612,809 Inventory obsolescence expense 326,512 3,233,281 Changes in assets and liabilities: Accounts receivable 186,391 2,536,988 Prepaid expenses and other assets 412,056 1,082,536 Inventory 265,489 413,140 Deferred revenue ( 321,592 ) 362,449 Income taxes payable 54,457 ( 522,098 ) Accounts payable, accrued expenses and other liabilities 2,157,850 1,768,326 Net cash used in operating activities ( 29,155,045 ) ( 22,081,865 ) Cash flows from investing activities Purchases of property and equipment ( 748,352 ) ( 1,365,306 ) Proceeds from maturities of marketable investment securities 58,765,487 127,251,619 Purchases of marketable securities ( 40,802,588 ) ( 110,497,444 ) Investment in joint venture ( 143,750 ) - Net cash provided by investing activities 17,070,797 15,388,869 Cash flows from financing activities Repurchases of common stock - ( 1,363,929 ) Issuance of common stock related to at-the-market offering, net of offering costs 103,914 - Net cash provided by (used in) financing activities 103,914 ( 1,363,929 ) Net decrease in cash and cash equivalents ( 11,980,334 ) ( 8,056,925 ) Cash and cash equivalents at beginning of period 14,916,878 22,973,803 Cash and cash equivalents at end of period $ 2,936,544 $ 14,916,878 Supplemental disclosure of cash flow information Income taxes paid $ - $ 55,975 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 $ - $ 3,203,146 Receivable from issuance of common stock, collected in 2025 $ 126,750 $ - See accompanying notes to consolidated financial statements. 40 CO-DIAGNOSTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2024 AND 2023 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™ PCR 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. 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 inventories, receivables and other long-lived assets, legal and regulatory contingencies, income taxes, share based arrangements, and others. These estimates and assumptions are based on management’s best estimates and judgments. Actual amounts and results could differ from those estimates. Basis of Presentation The accompanying audited consolidated financial statements of Co-Diagnostics, Inc. and its wholly owned subsidiaries have been prepared to reflect the financial position, results of operations and cash flows of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany balances and transactions have been eliminated. Liquidity and Going Concern In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, (“ASC 205-40”) the Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date on which this Annual Report on Form 10-K is filed. Based on the Company’s cash, cash equivalents, and short-term investments as of December 31, 2024, the Company’s current and forecasted level of operations, and its forecasted cash flows, the Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, and to generate profitable operations in the future. Management plans to provide for the Company’s capital requirements through equity financing, including through selling shares under the Company’s ATM Agreement, seeking additional grant funding, and through operational efficiencies. Our ability to obtain additional financing in equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry. Accordingly, there can be no assurance that the Company will be able to raise a sufficient amount of additional capital to fund operations with terms acceptable to the Company, or at all. Because certain elements of management’s plans to mitigate the conditions that raised substantial doubt about the Company’s ability to continue as a going concern are outside of the Company’s control, including the ability to raise capital through equity or other financings, those elements cannot be considered probable according to ASC 205-40, and therefore cannot be considered in the evaluation of mitigating factors. As a result, management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for 12 months from the date these consolidated financial statements are issued. The consolidated financial statements as of December 31, 2024 have been prepared under the assumption that the Company will continue as a going concern for the next 12 months after these financial statements are issued, and that contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company’s ability to continue as a going concern is dependent upon its uncertain ability to obtain additional capital, reduce expenditures, and execute on its business plans. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Note 2 – Summary of Significant Accounting Policies Operating Segments The Company operates as one operating segment. Operating segments are defined as components of an entity for which separate financial information is regularly evaluated by the chief operating decision maker (“CODM”), which is the Company’s Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company’s CODM evaluates financial information and resources and assesses the performance of these resources on a consolidated basis. There is no expense or asset information that is supplemental to information disclosed within the consolidated financial statements, that is regularly provided to the CODM. The allocation of resources and assessment of performance of the operating segment is based on consolidated net loss and functional expenses as reported on our consolidated statements of operations and comprehensive loss. Because the Company operates as one operating segment, financial segment information, including expense and asset information, can be found in the consolidated financial statements. All material long-lived assets are based in the United States. 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. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, money market funds and highly liquid investments with an original maturity date of 90 days or less from the date of purchase. The fair value of cash equivalents approximated their carrying value as of December 31, 2024 and December 31, 2023. The Company has its cash and cash equivalents with a large creditworthy financial institution and the balance exceeded federally insured limits. The Company has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit risk on cash and cash equivalents. 41 Marketable Investment Securities The Company’s marketable investment securities are comprised of investments in certificates of deposit and U.S. Treasury bills and notes. The Company designates investments in debt securities as available-for-sale. Available-for-sale debt securities with original maturities of three months or less from the date of purchase are classified within cash and cash equivalents. Available-for-sale debt securities with original maturities longer than three months are available to fund current operations and are classified as marketable investment securities, within current assets on the consolidated balance sheets. The Company may sell these securities at any time for use in its current operations or for other purposes, even prior to maturity. Available-for-sale debt securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Realized gains and losses on the sale of marketable securities are determined using the average cost method on a first-in, first-out basis and recorded in total other income (expense), net in the consolidated statements of operations and comprehensive loss. The available-for-sale debt securities are subject to a periodic impairment review. For investments in an unrealized loss position, the Company writes down the amortized cost basis of the investment if it is more likely than not that the Company will be required or will intend to sell the investment before recovery of its amortized cost basis. For investments not likely to be sold before recovery of the amortized cost basis, the Company determines whether a credit loss exists by considering information about the collectability of the instrument, current market conditions, and reasonable and supportable forecasts of economic conditions. The Company recognizes an allowance for credit losses up to the amount of the unrealized loss when appropriate. Allowances for credit losses and write-downs are recognized in total other income (expense), net, and unrealized losses not related to credit losses are recognized in accumulated other comprehensive income (loss). There are no allowances for credit losses recorded for the periods presented. 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 credit losses 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 December 31, 2024 total accounts receivable was $ 242,625 with an allowance for uncollectable accounts of $ 110,055 resulting in a net amount of $ 132,570 . 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 . At December 31, 2022 total accounts receivable was $ 6,552,249 with an allowance for uncollectable accounts of $ 3,098,526 resulting in a net amount of $ 3,453,723 . Equity-Method Investments Our equity-method investments are initially recorded at cost and are included in other long-term assets in the accompanying consolidated balance sheet. We adjust the carrying value of our investment based on our share of the earnings or losses in the periods which they are reported by the investee until the carrying amount is zero. The earnings or losses are included in other income in the accompanying consolidated statements of operations. Inventory Inventory is stated at the lower of cost or net-realizable value. Inventory cost is determined on a first-in first-out basis that approximates average cost in accordance with ASC 330-10-30-12. At December 31, 2024, the Company had $ 1,072,724 in inventory, of which $ 567,281 was finished goods and $ 505,443 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 $ 54,987 and $ 2,760,011 related to the change in inventory reserves during the years ended December 31, 2024 and 2023, respectively. 42 Intangible Assets Indefinite-lived intangible assets are not amortized, but rather tested for impairment at least annually on December 31, or more often if and when circumstances indicate that the carrying value may not be recoverable. Finite-lived intangible assets are amortized over their useful lives. Long-lived Assets Long-lived assets, such as property and equipment, are stated at cost less accumulated depreciation and amortization. Depreciation is provided using the straight-line method over the estimated useful lives of the property, generally from three to five years. Repairs and maintenance costs are expensed as incurred except when such repairs significantly add to the useful life or productive capacity of the asset, in which case the repairs are capitalized. For in-process research and development projects acquired in business combinations, the in-process research and development project is capitalized and evaluated for impairment until the development process has been completed. Once the development process has been completed the asset will be amortized over its remaining estimated useful life. The Company reviews its long-lived assets, including property and equipment, indefinite-lived and finite-lived intangible assets, and ROU assets, for impairment whenever an event or change in facts and circumstances indicates that their carrying amounts may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount to the estimated undiscounted future cash flows expected to be generated. If the carrying amount exceeds the undiscounted cash flows, the assets are determined to be impaired and an impairment charge is recognized as the amount by which the carrying amount exceeds fair value. Revenue Recognition The Company generates revenue from product sales and license sales. The Company recognizes revenue when all of the following criteria are satisfied: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when, or as the Company satisfies each performance obligation. Based on the criteria above, the Company typically recognizes revenue upon delivery. 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 $ 3.1 million and $ 5.8 million during the years ended December 31, 2024 and 2023, respectively. At December 31, 2024 and 2023, respectively, the Company has also recorded $ 0.1 million and $ 0.3 million 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. Deferred Revenue Deferred revenue primarily consists of payments received from customers prior to the Company fulfilling its performance obligation of providing the product. When this occurs, the Company records a contract liability as deferred revenue. Deferred revenue is recognized as revenue as the related performance obligations are satisfied. 43 Research and Development Research and development costs are expensed when incurred. The Company recorded $ 20,979,589 and $ 22,962,593 of research and development costs for the years ended December 31, 2024 and 2023, respectively. Stock-based Compensation The Company has granted stock-based awards, including restricted stock, stock options, stock warrants and restricted stock units (“RSUs”), to its employees, certain consultants and members of its board of directors. The Company records stock-based compensation based on the grant date fair value of the awards and recognizes the fair value of those awards as expense using the straight-line method over the requisite service period of the award. The Company estimates the grant date fair value of stock options using the Black-Scholes option-pricing model. When an award is forfeited prior to the vesting date, the Company recognizes an adjustment for the previously recognized expense in the period of the forfeiture. Income Taxes The Company accounts for income taxes in accordance with the liability method of accounting for income taxes. Under this method, deferred income tax assets and deferred income tax liabilities represent the tax effect of temporary differences between financial reporting and tax reporting measured at enacted tax rates in effect for the year in which the differences are expected to reverse. The Company recognizes only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority. Valuation allowances are provided when it is more-likely-than-not that some or all of the deferred income tax assets may not be realized. In assessing the need for a valuation allowance, the Company has considered its historical levels of income, expectations of future taxable income and ongoing tax planning strategies. Developing the provision for income taxes, including the effective tax rate and analysis of potential tax exposure items, if any, requires significant judgment and expertise in federal and state income tax laws, regulations and strategies, including the determination of deferred income tax assets and liabilities and any estimated valuation allowances deemed necessary to value deferred income tax assets. Judgments and tax strategies are subject to audit by various taxing authorities. The Company has uncertain income tax positions in the consolidated financial statements, and adverse determinations by these taxing authorities could have a material adverse effect on the consolidated financial positions, result of operations, or cash flows. Net Loss per Share Basic net loss per common share is computed by dividing net loss applicable to common shareholders by the weighted average number of shares outstanding during each period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period increased by common shares that could be issued upon conversion or exercise of other outstanding securities to the extent those additional common shares would be dilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net loss per share by application of the treasury stock method. During periods when the Company is in a net loss position, basic net loss per share is the same as diluted net loss per share as the effects of potentially dilutive securities are anti-dilutive. Comprehensive Loss Comprehensive loss is comprised of net loss and unrealized gains and losses on marketable securities, net of income taxes. 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 years ended December 31, 2024 and 2023, respectively. One customer accounted for approximately 31 % of product revenue for the year ended December 31, 2024 and two customers accounted for approximately 27 % of product revenue for the year ended December 31, 2023. Two granting agencies accounted for approximately 95 % of grant revenue for the year ended December 31, 2024, and one granting agency accounted for 100 % of grant revenue for the year ended December 31, 2023. 44 Two customers accounted for more than 10 % of accounts receivable at December 31, 2024, and three customers accounted for more than 10 % of accounts receivable at December 31, 2023. These customers together accounted for approximately 94 % and 97 % of accounts receivable at December 31, 2024 and 2023, respectively. 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 November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The standard is effective for full year 2024 reporting, and for interim reporting beginning in 2025. The adoption of this ASU did not change the way the Company evaluates its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures. 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 does not expect a material impact on its consolidated financial statements related to ASU 2023-09. In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires an entity to disclose on an annual and interim basis, disaggregated information about specific income statement expense categories. The guidance should be applied prospectively with the option to apply the standard retrospectively. The standard becomes effective for the Company for full year 2027 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 December 31, 2024 Adjusted Cost Total Unrealized Gains / (Losses) Fair Value Cash and Cash Equivalents Marketable Investment Securities Cash $ 2,936,544 $ - $ 2,936,544 $ 2,936,544 $ - Level 2: U.S. treasury securities 26,392,655 418,443 26,811,098 - 26,811,098 Subtotal 26,392,655 418,443 26,811,098 - 26,811,098 Total $ 29,329,199 $ 418,443 $ 29,747,642 $ 2,936,544 $ 26,811,098 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 December 31, 2024 mature over the next 12 months. 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. 45 The following table summarizes the assets and liabilities measured at fair value on a recurring basis as of December 31, 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 December 31, 2024 (Level 1) (Level 2) (Level 3) Total Assets: Cash equivalents $ 441,000 $ - $ - $ 441,000 Marketable securities (U.S. treasury bills and notes) - 26,811,098 - 26,811,098 Total assets measured at fair value $ 441,000 $ 26,811,098 $ - $ 27,252,098 Liabilities: Contingent consideration - common stock $ - $ - $ 743,794 $ 743,794 Contingent consideration - warrants - - 181,105 181,105 Total liabilities measured at fair value $ - $ - $ 924,899 $ 924,899 (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 The Company’s financial instruments that are measured at fair value on a recurring basis consist of certificates of deposit and U.S. treasury bills and notes as of December 31, 2024 and 2023, respectively. In connection with previous acquisitions, the Company recorded a liability for contingent consideration in the form of shares of common stock and warrants to purchase common stock, both to be issued when certain milestones are achieved. 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 ( 714,876 ) Fair value as of December 31, 2024 $ 924,899 46 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 December 31, 2024 December 31, 2023 Stock price $ 0.75 $ 1.33 Strike price $ 9.13 $ 9.13 Volatility 246.4 % 187.5 % Risk-free rate 4.3 % 4.0 % Expected term (years) 2.0 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 – Property and Equipment Property and equipment, net consisted of the following: Schedule of Property and Equipment Estimated December 31, Useful Lives in years 2024 2023 Lab equipment 3 - 5 $ 4,920,781 $ 4,545,908 Leasehold improvements 0 - 5 947,674 548,648 Office equipment, furniture and other 2 - 5 173,668 173,668 Less accumulated depreciation and amortization ( 3,280,843 ) ( 2,232,495 ) Fixed assets, net $ 2,761,280 $ 3,035,729 Note 6 – Intangible Assets Intangible assets, net consisted of the following: Schedule of Intangible Assets, Net December 31, 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 ( 1,094,000 ) - Total intangible assets $ 27,195,000 $ ( 1,094,000 ) $ 26,101,000 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. 47 Note 7 - Accrued Expenses Accrued expenses consisted of the following: Schedule of Accrued Expenses December 31, 2024 December 31, 2023 Payroll liabilities $ 820,621 $ 1,643,186 Legal fees 1,666,914 503,890 Other accrued liabilities 74,634 25,883 Total accrued expenses $ 2,562,169 $ 2,172,959 Note 8 – Revenue The following table sets forth revenue by geographic area: Summary of Revenue by Geographic Area 2024 2023 Years Ended December 31, 2024 2023 United States Product revenue $ 378,212 $ 659,618 Grant revenue 3,145,112 5,820,565 Total United States 3,523,324 6,480,183 Rest of World Product revenue 391,836 331,855 Grant revenue - - Total Rest of World 391,836 331,855 Total $ 3,915,160 $ 6,812,038 Revenue geographic area $ 3,915,160 $ 6,812,038 Percentage of revenue by area: United States 90 % 95 % Rest of World 10 % 5 % Deferred Revenue Changes in the Company’s deferred revenue balance for the year ended December 31, 2024 were as follows: Schedule of Deferred Revenue Balance as of December 31, 2022 $ - Increase due to prepayments from customers 32,570 Increase due to grant funding awarded 329,879 Balance as of December 31, 2023 $ 362,449 Revenue recognized included in deferred revenue balance at the beginning of the period ( 301,972 ) Decrease due to reclassification of previously deferred amounts ( 19,620 ) Balance as of December 31, 2024 $ 40,857 Note 9 – Loss per Share The following table reconciles the numerator and the denominator used to calculate basic and diluted loss per share for years ended December 31, 2024 and 2023: Schedule of Basis and Diluted Earnings Per Share 2024 2023 Years Ended December 31, 2024 2023 Numerator Net loss, as reported $ ( 37,639,008 ) $ ( 35,332,865 ) Denominator Weighted average shares, basic 30,335,350 29,346,599 Dilutive effect of stock options, warrants and RSUs - - Shares used to compute diluted loss per share 30,335,350 29,346,599 Basic loss per share $ ( 1.24 ) $ ( 1.20 ) Diluted loss per share $ ( 1.24 ) $ ( 1.20 ) 48 The computation of diluted loss per share for the years ended December 31, 2024 and December 31, 2023 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 years ended December 31, 2024 and 2023, respectively, no potentially dilutive securities are included in the calculation of diluted earnings per share because such effect would be anti-dilutive. The Company had potentially dilutive securities as of December 31, 2024, consisting of: (i) 1,475,646 restricted stock units and (ii) 532,112 options and warrants, and potentially dilutive securities as of December 31, 2023, consisting of: (i) 2,618,362 restricted stock units and (ii) 512,112 options. Note 10 – 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. The number of awards available for issuance under the Incentive Plan was 3,061,949 at December 31, 2024. Stock Options The following table summarizes option activity during the years ended December 31, 2024 and 2023: 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, 2022 1,040,572 $ 2.19 $ 1.37 5.88 Granted - - - Expired - - - Forfeited/Cancelled - - - Exercised - - Outstanding at December 31, 2023 1,040,572 $ 2.19 $ 1.37 4.89 Granted - - - Expired - - - Forfeited/Cancelled - - - Exercised - - - Outstanding at December 31, 2024 1,040,572 $ 2.19 $ 1.37 3.88 Exercisable at December 31, 2024 1,040,572 $ 2.19 $ 1.37 3.88 49 There were no options exercised during the years ended December 31, 2024 and 2023, respectively. The aggregate intrinsic value of outstanding options at December 31, 2024 and 2023 was approximately $ 0 and $ 0.2 million, respectively. As of December 31, 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 years ended December 31, 2024 and 2023: Schedule of Outstanding Restricted Stock Units and Related Party Number of RSUs Weighted Average Grant Date Fair Value Unvested at December 31, 2022 2,426,725 $ 6.95 Granted 1,948,750 1.92 Vested ( 1,354,081 ) 6.17 Forfeited/Cancelled ( 95,897 ) 6.16 Unvested at December 31, 2023 2,925,497 $ 3.99 Granted 1,555,000 1.11 Vested ( 1,479,169 ) 4.30 Forfeited/Cancelled ( 259,012 ) 4.04 Unvested at December 31, 2024 2,742,316 $ 2.50 As of December 31, 2024, there was $ 4.8 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 1.5 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. 50 The following table summarizes warrant activity during the years ended December 31, 2024 and 2023: 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, 2022 485,000 $ 8.81 $ 2.43 4.0 Granted - - - Expired - - - Forfeited/Cancelled - - - Exercised - - - Outstanding at December 31, 2023 485,000 $ 8.81 $ 1.29 3.0 Granted - - - Expired - - - Forfeited/Cancelled - - - Exercised - - - Outstanding at December 31, 2024 485,000 $ 8.81 $ 1.00 2.0 There were no warrants exercised during the years ended December 31, 2024 and 2023, respectively. The aggregate intrinsic value of outstanding warrants at December 31, 2024 was approximately $ 0 . The total number of warrants exercisable at December 31, 2024 is 20,000 . The ability to exercise the approximately 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 Years Ended December 31, 2024 2023 Cost of sales $ 20,831 $ 46,586 Sales and marketing 1,068,175 2,153,974 General and administrative 3,985,281 4,933,822 Research and development 360,617 1,202,473 Total stock-based compensation expense $ 5,434,904 $ 8,336,855 Note 11 – Income Taxes The components of the provision (benefit) for income taxes consist of the following for the years ended December 31, 2024 and 2023: Schedule of Components of Provision (Benefit) for Income Taxes 2024 2023 Years Ended December 31, 2024 2023 Current: Federal $ 40,031 $ 84,435 State 17,337 ( 540,240 ) Total current $ 57,368 $ ( 455,805 ) Deferred: Federal ( 7,610,511 ) ( 7,228,611 ) State ( 394,244 ) ( 2,068,509 ) Change in valuation allowance 8,004,755 6,975,234 Total deferred - ( 2,321,886 ) Total income tax provision (benefit) $ 57,368 $ ( 2,777,691 ) 51 A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows: Schedule of Benefit from Income Taxes and Effective Income Tax Rates 2024 2023 Years Ended December 31, 2024 2023 Federal income tax expense at statutory rate 21.0 % 21.0 % State income tax expense, net of federal tax benefit 0.4 % 1.6 % Permanent differences: - Stock based compensation - 2.0 % - 3.5 % - Contingent consideration remeasurement 0.4 % 0.6 % - Other permanent differences - 0.2 % - 0.2 % Research and development credits 1.8 % 4.6 % Change in tax rate 0.0 % 0.0 % Change in uncertain tax positions - 0.3 % 1.2 % Change in valuation allowance - 21.3 % - 18.3 % Other - 0.0 % 0.3 % Effective income tax rate - 0.2 % 7.3 % Net deferred tax liabilities consist of the following components as of December 31, 2024 and 2023: Schedule of Deferred Tax Assets and Liabilities 2024 2023 December 31, 2024 2023 Deferred tax assets: Accrued liabilities $ 44,364 $ 58,158 Reserves and allowances 643,206 734,631 Deferred compensation 638,454 620,551 Section 174 costs 9,372,153 7,337,629 Lease liability 491,744 742,131 UNICAP 20,846 43,943 Net operating loss carryforwards 8,552,938 4,040,601 Research and development credits 2,314,332 1,688,255 Other 196 - Total gross deferred tax assets 22,078,233 15,265,899 Less valuation allowance ( 14,884,382 ) ( 6,938,829 ) Total deferred tax assets 7,193,851 8,327,070 Deferred tax liabilities: Property and equipment, net ( 418,148 ) ( 672,416 ) Intangibles, net ( 5,963,713 ) ( 6,552,255 ) Prepaids ( 233,162 ) ( 329,768 ) Right of use asset ( 483,220 ) ( 736,226 ) Other comprehensive income ( 95,608 ) ( 36,405 ) Total deferred tax liabilities ( 7,193,851 ) ( 8,327,070 ) Net deferred tax liability $ - $ - Valuation allowances are established when necessary to reduce deferred tax assets, including temporary differences and net operating loss carryforwards, to the amount expected to be realized in the future. FASB guidance indicates that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. The Company had cumulative losses from continuing operations for the three-year period ended December 31, 2024. The Company considered this negative evidence along with all other available positive and negative evidence and concluded that, at December 31, 2024, it is more likely than not that the Company’s U.S. deferred tax assets will not be realized. As of December 31, 2024, a valuation allowance has been recorded on the Company’s deferred tax assets to recognize only the portion of the deferred tax asset that is more likely than not to be recognized. The Company’s total valuation allowance was $ 14.9 million at December 31, 2024 and $ 6.9 million at December 31, 2023. At December 31, 2024, the Company had federal net operating loss carryforwards of $ 37.6 million and federal research and development credit carryforwards of $ 2.0 million. The net operating losses have an indefinite carryforward period. If not utilized, the credits will begin to expire in 2043. At December 31, 2024, the Company had state net operating loss carryforwards of $ 14.9 million and $ 0.9 million of state research and development credit carryforwards. Of the total state net operating losses, approximately $ 10.8 million are attributable to Utah. All of the Utah net operating losses are carried forward indefinitely. The remaining state net operating loss carryforwards are attributable to various other states and begin to expire in 2044. If unused, the state research credit carryforward will expire in 2036. 52 ASC Topic 740-10-05 requires that the impact of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Our unrecognized tax benefit balances included $ 1,200,035 at December 31, 2024 and $ 1,078,431 at December 31, 2023 of tax positions that, if recognized, would reduce the annual effective tax rate offset by deferred tax assets recorded for uncertain tax positions. During the next 12 months, the Company anticipates that approximately $ 508,000 of previously unrecognized tax benefits, inclusive of interest and penalties, will be recognized due to the expiration of the applicable statutes of limitations. Interest and penalties associated with uncertain tax positions are recorded as a component of income tax expense. A reconciliation of the beginning and ending amount of unrecognized benefits is as follows: Schedule of Unrecognized Tax Benefits December 31, 2024 2023 Unrecognized tax benefits at the beginning of the year $ 1,078,431 $ 1,469,577 Gross increases - current year tax positions 137,527 273,569 Gross increases - prior year tax positions 51,225 66,127 Gross decreases - prior year tax positions ( 67,148 ) ( 730,842 ) Unrecognized tax benefits at end of year $ 1,200,035 $ 1,078,431 Interest and penalties in year-end balance $ 128,783 $ 100,162 The Company is subject to taxation in the United States and other state jurisdictions. The tax years from December 31, 2021 through December 31, 2024 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which the Company is subject. The Company is not currently under examination by any taxing authority. Note 12 – 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. During the year December 31, 2023, the Company amended two operating leases to extend the lease term and entered into two new operating leases. As a result, the Company recognized additional operating lease liabilities and corresponding operating right-of-use assets of $ 3,203,146 . For the years ended December 31, 2024 and 2023, respectively, components of lease expense are summarized as follows: Schedule of Lease Expense 2024 2023 Years Ended December 31, 2024 2023 Operating lease costs $ 1,019,500 $ 813,743 Short-term lease costs 54,289 198,261 Total lease costs $ 1,073,789 $ 1,012,004 As of December 31, 2024, the maturities of the Company’s lease liabilities are as follows: Schedule of Maturities of Lease Liabilities Years Ending December 31, 2025 $ 1,018,383 2026 714,630 2027 300,591 2028 308,462 Total lease payments 2,342,066 Less: imputed interest 189,887 Present value of operating lease liabilities 2,152,179 Less: current portion 915,619 Long-term portion $ 1,236,560 53 Other information related to operating leases was as follows: Schedule of Other Information Related to Operating Leases Year Ended December 31, 2024 Cash paid for operating leases included in operating cash flows $ 1,050,279 Remaining lease term of operating leases 2.8 Discount rate of operating leases 6.2 % 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. 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, two 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 13 – 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. There were no shares repurchased under this program during the year ended December 31, 2024. Note 14 – At-the-Market Agreement We have entered into an Equity Distribution Agreement (the “ATM Agreement”) with Piper Sandler & Co. (“Piper Sandler”), pursuant to which we may offer and sell shares of our common stock having an aggregate offering price of up to $ 17,111,650 from time to time through Piper Sandler acting as our agent, under our prospectus supplement dated October 18, 2024. As of December 31, 2024, we have sold 314,707 shares of common stock under the ATM Agreement resulting in net proceeds to the Company of $ 0.2 million, of which $ 0.1 million was recorded in other current assets as of December 31, 2024 and subsequently collected in January 2025. As of December 31, 2024, the Company has up to $ 16.9 million remaining in aggregate gross proceeds that can be issued through the ATM Agreement. Note 15 – Related Party Transactions The Company employs two employees who are related to current or former executive officers. Seth Egan, the Company’s Chief Commercialization Officer, and Winston Egan, the Company’s Director of Customer Experience, are each sons of Dwight Egan, the Company’s President and Chief Executive Officer and Chairman of the Board. During the year ended December 31, 2024, total compensation paid to Seth Egan, including salaries, bonuses, and the grant date fair value of equity awards which vest over three years , was $ 0.4 million, and total compensation paid to Winston Egan, including consulting fees, salaries, and bonuses, was $ 0.1 million. Prior to the acquisition of Advanced Conceptions by the Company in December 2021, the Company’s President, Richard Abbott was serving as President of Advanced Conception. At the time of the acquisition, Mr. Abbott was an indirect shareholder of Advanced Conceptions, Inc. through his fifty percent (50%) ownership interest in Whiteknob LLC. Whiteknob LLC owned 71.61% of Advanced Conceptions at the time of the acquisition. The terms of the acquisition agreement between the Company and Advanced Conceptions include the opportunity for Whiteknob LLC to earn an additional 507,386 common shares and an additional 166,503 common stock purchase warrants of Co-Diagnostics upon the achievement of certain milestones. Should those milestone events be achieved Mr. Abbott would have a fifty percent (50%) interest in the common shares and common stock purchase warrants. In August 2023, the Company entered into a services agreement with CoSara, the Company’s equity method investment, under which CoSara provides certain research and development consulting and support services. During the years ended December 31, 2024 and 2023, respectively, the Company recognized $ 0.6 million and $ 0.2 million of expense related to this agreement. Note 16 – Subsequent Events On January 10, 2025, the Company received a notice from the Listing Qualifications Department of The NASDAQ Stock Market (the “Staff”) stating that the bid price of our common stock for the previous 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing on The NASDAQ Capital Market under NASDAQ Listing Rule 5550(a)(2). The Company has a period of 180 calendar days, or until July 9, 2025 (the “Compliance Date”) to regain compliance with Listing Rule 5550(a)(2). To regain compliance, the bid price of the Company’s common stock must close at $1 or more for a minimum of ten consecutive business days before the Compliance Date. If the Company does not regain compliance with Rule 5550(a)(2) by July 9, 2025, the Company may be eligible for additional time. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to provide written notice of its intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary. If the Company meets these requirements, the Staff will inform the Company that it has been granted an additional 180 calendar days. However, if it appears to the Staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, the Staff will provide notice that its securities will be subject to delisting. We intend to actively monitor our bid price and will consider available options to resolve the deficiency and regain compliance with the Nasdaq Listing Rules. 54 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.