Co-Diagnostics, Inc 10-Q for FY2020 Q2

Co-Diagnostics, Inc. (CODX)

10-Q 2020-08-13 For: 2020-06-30

Added on April 08, 2026

About this 10-Q

Co-Diagnostics, Inc filed this 10-Q on August 13, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $24.04M; up 38942.9% from $61.57K a year earlier
Net income: $12.64M; compared with a net loss of $1.34M a year earlier
Diluted EPS: $0.43; compared with -$0.08 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[X]	Smaller reporting company	[X]
		Emerging growth company	[X]

PART I FINANCIAL INFORMATION:

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (unaudited)	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 (unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

PART II OTHER INFORMATION:

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	30

Item 5.	Other Information	30

Item 6.	Exhibits	30

	Signatures	31

	June 30, 2020			December 31, 2019
ASSETS:
Current Assets
Cash and cash equivalents	$	18,550,437		$	893,138
Accounts receivables, net		5,349,876			131,382
Inventory		10,110,786			197,168
Prepaid expenses		521,180			362,566
Total current assets		34,532,279			1,584,254
Other Assets
Property and equipment, net		473,376			196,832
Investment in joint venture		1,416,480			434,240
Total other assets		1,889,856			631,072

Total assets	$	36,422,135		$	2,215,326

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current Liabilities
Accounts payable	$	1,127,709		$	5,959
Accrued expenses		691,385			200,788
Accrued expenses (related party)		120,000			120,000
Deferred revenue		1,045,548			1,323
Total current liabilities		2,984,642			328,070
Long-term Liabilities, net of current portion
Accrued expenses-long-term (related party)		80,000			150,000
Total long-term liabilities, net of current portion		80,000			150,000
Total liabilities		3,064,642			478,070

STOCKHOLDERS’ EQUITY
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized, 0 and 25,600 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		—			26

Common stock, $0.001 par value, 100,000,000 shares authorized; 27,991,042 and 17,342,922 shares issued and outstanding, as of June 30, 2020 and December 31, 2019, respectively.		27,991			17,343
Additional paid-in capital		46,726,869			26,687,701
Accumulated deficit		(13,397,367	)		(24,967,814	)
Total stockholders’ equity		33,357,493			1,737,256

Total liabilities and stockholders’ equity	$	36,422,135		$	2,215,326

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2020		2019			2020		2019
Net revenue	$	24,040,274	$	61,574		$	25,588,802	$	64,974
Cost of revenue		8,344,674		38,809			8,826,414		39,261
Gross profit		15,695,600		22,765			16,762,388		25,713
Operating expenses:
Sales and marketing		390,191		252,076			658,674		508,179
Administrative and general		2,191,034		807,769			3,650,518		1,448,132
Research and development		750,249		312,590			1,150,271		659,896
Depreciation and amortization		25,218		16,094			45,966		29,762
Total operating expenses		3,356,692		1,388,529			5,505,429		2,645,969
Income (loss) from operations		12,338,908		(1,365,764	)		11,256,959		(2,620,256	)
Other expense:
Interest income		38,173		19,640			45,748		20,048
Interest expense		—		—			—		(106,427	)
Gain on disposition of assets		—		—			—		850
Gain (loss) on equity method investment in joint venture		258,559		1,728			267,740		(7,000	)
Total other expense		296,732		21,368			313,488		(92,529	)
Income (loss) before income taxes		12,635,640		(1,344,396	)		11,570,447		(2,712,785	)
Provision for income taxes		—		—			—		—
Net income (loss)	$	12,635,640	$	(1,344,396	)	$	11,570,447	$	(2,712,785	)

Basic income (loss) per common share	$	0.46	$	(0.08	)	$	0.42	$	(0.16	)

Diluted income (loss) per common share	$	0.43	$	(0.08	)	$	0.40	$	(0.16	)

Weighted average common shares outstanding basic		27,582,229		17,017,964			27,605,137		16,544,926

Weighted average common shares outstanding diluted		29,152,222		17,017,964			29,094,475		16,544,926

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net income (loss)	$	11,570,447		$	(2,712,785	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization		45,966			29,762
Stock based compensation		1,124,242			294,677
Accretion of notes payable discount		—			91,428
Gain on disposition of assets		—			(850	)
Loss (gain) of equity method investment		(267,740	)		7,000
Changes in assets and liabilities:
Increase in accounts and other receivables		(5,218,494	)		(42,065	)
Increase in prepaid and other assets		(158,614	)		(183,446	)
Decrease (increase) in inventory		(10,030,838	)		9,920
Increase in deferred revenue		1,044,225			—
Increase (decrease) in accounts payable and accrued expenses		1,542,347			(191,332	)

Net cash used in operating activities		(348,459	)		(2,697,691	)

Cash flows from investing activities:
Purchase of property and equipment		(205,290	)		(52,775	)
Investment in joint venture		(714,500	)		(247,000	)

Net cash used in investing activities		(919,790	)		(299,775	)

Cash flows from financing activities:
Proceeds from sale of common stock		19,470,005			5,496,002
Proceeds from sale of preferred stock		—			1,000,000
Proceeds from exercise of options and warrants		913,465			—
Payment of offering costs		(1,457,922	)		(592,764	)

Net cash provided by financing activities		18,925,548			5,903,238

Net increase in cash		17,657,299			2,905,772

Cash and cash equivalents beginning of period		893,138			950,237

Cash and cash equivalents end of period	$	18,550,437		$	3,856,009

Supplemental disclosure of cash flow information:
Interest paid	$	—		$	15,000
Income taxes paid	$	—		$	—

Supplemental disclosure of non-cash investing and financing transactions:
Inventory moved to property, plant and equipment	$	117,220		$	—

	Convertible Preferred Stock						Common Stock				Additional Paid-In-			Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Capital			Deficit			(Deficit)
Balance as of December 31, 2019		25,600		$	26			17,342,922	$	17,343	$	26,687,701		$	(24,967,814	)	$	1,737,256
Public offering, net of offering costs of $1,457,922		—			—			7,242,954		7,243		18,004,840			—			18,012,083
Issuance of Common Stock for warrant exercises		—			—			719,492		720		49,280			—			50,000
Stock-based compensation expense		—			—			12,363		12		432,811			—			432,823
Conversion of Preferred Stock to Common		(25,600	)		(26	)		2,133,333		2,133		(2,107	)		—			—
Net loss		—			—			—		—		—			(1,065,193	)		(1,065,193	)
Balance as of March 31, 2020		—		$	—			27,451,064	$	27,451	$	45,172,525		$	(26,033,007	)	$	19,166,969

Issuance of Common Stock for option and warrant exercises		—			—			530,289		530		862,935			—			863,465
Stock-based compensation expense		—			—			9,689		10		691,409			—			691,419

Net Income		—			—			—		—		—			12,635,640			12,635,640
Balance as of June 30, 2020		—		$	—			27,991,042	$	27,991	$	46,726,869		$	(13,397,367	)	$	33,357,493

Balance as of December 31, 2018		—		$	—			12,923,383	$	12,923	$	17,622,433			(18,694,167	)		(1,058,811	)
Public offering, net of offering costs of $592,764		—			—			3,925,716		3,926		4,899,312			—			4,903,238
Issuance of Preferred Stock		30,000			30			—		—		2,999,970			—			3,000,000
Stock-based compensation		—			—			—		—		87,794			—			87,794
Conversion of Preferred Stock to Common		(2,000	)		(2	)		166,667		167		(165	)		—			—
Net loss		—			—			—		—		—			(1,368,389	)		(1,368,389	)
Balance as of March 31, 2019		28,000		$	28			170,015,766	$	17,016	$	25,609,344		$	(20,062,556	)	$	5,563,832

Stock-based compensation		—			—			—		—		505,970			—			505,970
Issuance of common stock for services		—						100,000		100		80,300						80,400
Net loss		—			—			—		—		—			(1,344,396	)		(1,344,396	)
Balance as of June 30, 2019		28,000		$	28			17,115,766	$	17,116	$	26,195,614		$	(21,406,952)		$	4,805,806

	Six Months Ended June 30, 2020			Six Months Ended June 30, 2019
Risk free interest rate		1.05	%		1.56	%
Expected life (in years)		7.3			10
Expected volatility		62.82	%		63.65	%
Expected dividend yield		0	%		0	%
Stock price	$	8.14		$	1.07

	Options Outstanding			Weighted Average Exercise Price			Weighted Average Fair Value			Weighted Average Remaining Contractual Life (years)
Outstanding at January 1, 2019		1,172,707		$	2.23		$	1.09			8.72
Options granted		890,000			1.07			0.52			9.66
Expired		—			—			—			—
Forfeited options		(40,890	)		(3.85	)		(1.59	)		(8.04	)
Exercised		—			—			—			—
Outstanding at December 31, 2019		2,021,817		$	1.69		$	0.83			8.73

Options granted		150,000			8.14			4.70			7.30
Expired		—			—			—			—
Forfeited options		—			—			—			—
Exercised		(420,289)			(1.53)			(0.79)			(7.62)

Outstanding at June 30, 2020		1,751,528		$	2.28		$	1.21			8.50

	Warrants Outstanding			Weighted Average Exercise Price			Weighted Average Fair Value			Weighted Average Remaining Contractual Life (years)
Outstanding at January 1, 2019		483,535			4.92			1.99			3.29
Warrants issued		500,000			1.53			1.46			5.00
Expired		—			—			—			—
Forfeited warrants		—			—			—			—
Exercised		—			—			—			—
Outstanding at December 31, 2019		983,535		$	1.44		$	1.03			3.34

Warrants issued		20,000			16.49			15.19			5.00
Expired		—			—			—			—
Forfeited warrants		—			—			—			—
Exercised		(894,445	)		(1.37	)		(1.05	)		(2.80	)

Outstanding at June 30, 2020		109,090		$	2.06		$	1.17			3.62

Year	Amount
2020	$	198,148
2021		234,149
2022		35,998
Total	$	468,295

Year	Amount
Remainder of 2020	$	172,950
2021		345,900
2022		345,900
2023		345,900
2024		57,653
Total	$	1,268,303

	●	the results of clinical trials and the regulatory approval process;

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

	●	our ability to protect our intellectual property rights;

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

	●	competition from other providers and products;

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

	●	changes in government regulation; and

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

Tuberculosis			10,400,000
Multi-drug resistant Tuberculosis			580,000
Zika			324,000,000
Hepatitis B			240,000,000
Hepatitis C			130,000,000
HIV			36,700,000
Malaria			214,000,000
Sexually Transmitted Illnesses			357,000,000
Human papilloma virus			291,000,000
Dengue			390,000,000
Total Annual Tests			1,993,680,000

	●	*Affordability:* Lower-cost test kits and low-cost MDx Device.

	●	*Flexibility:* Our tests have been designed to run on many vendors’ DNA diagnostic testing machines. These tests are particularly well suited to the new generation of “lab-on-a-chip” and “point-of-care” (“LOC” and “POC”), highly portable analysis machinery for field, clinic and office applications.

	●	Speed: We believe our rapid assay design system software provides shorter time to product release. This has been demonstrated with the conception, design, product manufacture, clinical verification and submission for a CE Mark for our Logix Smart coronavirus disease (COVID-19) test being approximately 30 days.

	●	*Accuracy*: We believe our tests are more sensitive and specific than competitors’ and can detect more strains of viruses.

	●	Exclusivity: We own all patents and all intellectual property used in preparation of our tests.

	●	*Personalized Medicine:* We project that rising health care costs in developed and developing nations will increasingly require that health care systems be patient specific to eliminate waste, misdiagnoses, and ineffectiveness. We believe a critical component will be accurate, more affordable DNA/RNA-based diagnostics, which we plan to offer.

	●	Low-cost Provider: We plan to keep our overhead low. Our platform technology obviates the need to pay patent royalties typically required of our competitors which use patented test platforms to design their tests.

	●	Worldwide Footprint: With a dynamic technology that encompasses markets worldwide, we anticipate that we can identify the best target markets, not only in highly burden developing countries (HBDC’s) but also in developed nations.

	●	Growth Industry Category: We believe that DNA/RNA testing is the fastest-growing segment of in-vitro diagnostic testing.

	●	Combination Product Offering: Our ultra-sensitive tests can be a well-designed match for a new generation of handheld and other small point-of-care (POC) devices now entering the market. Used together, these affordable tests and devices may revolutionize the molecular diagnostics industry in cost, speed of test results and simplification.

	●	*Multi-plexing:* Our existing multiplexed tests demonstrate that our CoPrimer designed tests are able to test for multiple targets in the same sample without the distortion caused by false negatives and false positives that generally occur in multiplexed tests.

	●	On January 30, 2019, we entered into a securities purchase agreement with investors, whereby the investors purchased from the Company an aggregate of 30,000 shares of Series A Convertible Preferred Stock of the Company for an aggregate purchase price of $3,000,000. The purchase price was paid by the investors with $1 million in cash and the conversion of a $2 million promissory note issued by the Company to one of the investors. All of the preferred shares have been converted to common stock.

	●	On February 4, 2019, we completed the sale of an aggregate of 3,925,716 shares of common stock, at a purchase price of $1.40 per share in a registered direct offering pursuant the Shelf Registration Statement. The aggregate gross proceeds for the sale of the shares were $5,496,002 and we received net proceeds after offering costs of $4,996,322.

	●	In January 2020, we sold an aggregate of 3,448,278 shares of common stock to institutional investors for $1.45 per share for gross proceeds of approximately $5 million pursuant to a shelf-registration statement on Form S-3 (File No: 333-226835) declared effective by the SEC on September 7, 2018 (the “Shelf Registration Statement”).

	●	On February 10, 2020, the Company entered into securities purchase agreements with certain institutional investors pursuant to which such investors purchased an aggregate of 3,324,676 shares of common stock at a purchase price of $ 3.08 per share in a registered direct offering pursuant to the Shelf Registration Statement. The aggregate gross proceeds for the sale of the shares were approximately $10.2 million. The closing of the offering occurred on or about February 13, 2020.

	●	On February 28, 2020, the Company entered into securities purchase agreements with certain institutional investors pursuant to which such investors purchased an aggregate of 470,000 shares of common stock at a purchase price of $9.00 per share in a registered direct offering pursuant to the Shelf Registration Statement. The aggregate gross proceeds for the sale of the shares were approximately $4 million. The closing of the offering occurred on or about February 28, 2020.

	●	On March 6, 2020, we received $50,000 in gross proceeds from the exercise of a warrant for 25,000 shares of common stock for $2.00 per share. During the three months ending June 30, 2020, we received $863,465 from the exercise of warrants and stock options.

	●	Our ability to develop additional infectious disease diagnostic tests for which there is a commercial market.
	●	our ability to convince our potential customers of the advantages and economic value of our tests over competing technologies and diagnostic tests;
	●	the breadth of our test menu relative to competitors;
	●	changes to policies, procedures or currently accepted best practices in clinical diagnostic testing;
	●	the extent and success of our marketing and sales efforts; and
	●	our ability to manufacture in quantity our commercial diagnostic tests and meet demand in a timely fashion.

	●	sales of our common stock by our shareholders, executives, and directors;
	●	our ability to enter new markets;
	●	actual or un-anticipated fluctuations in our annual and quarterly financial results;
	●	our ability to obtain financings to continue and expand our commercial activities, expand our manufacturing operations, conduct research and development activities including, but not limited to, human clinical trials, and other business activities;
	●	our ability to secure resources and the necessary personnel to continue and expand our commercial activities, develop additional diagnostic tests, conduct clinical trials and gain approval for our diagnostic tests on our desired schedule;
	●	commencement, enrollment or results of our clinical trials of our diagnostic tests or any future clinical trials we may conduct;
	●	changes in the development status of our diagnostic tests;
	●	any delays or adverse developments or perceived adverse developments with respect to review by the FDA or other similar foreign regulatory authorities of our planned clinical trials;
	●	any delay in our submission for studies or test approvals or adverse regulatory decisions, including failure to receive regulatory approval for our diagnostic tests;
	●	our announcements or our competitors’ announcements regarding new tests, enhancements, significant contracts, acquisitions or strategic investments;
	●	failures to meet external expectations or management guidance;
	●	changes in our capital structure or dividend policy, including as a result of future issuances of securities and sales of large blocks of common stock by our shareholders;
	●	announcements and events surrounding financing efforts, including debt and equity securities;
	●	competition from existing technologies and diagnostic tests or new technologies and diagnostic tests that may emerge;
	●	announcements of acquisitions, partnerships, collaborations, joint ventures, new diagnostic tests, capital commitments, or other events by us or our competitors;
	●	changes in general economic, political and market conditions in any of the regions in which we conduct our business;
	●	changes in industry conditions or perceptions;
	●	changes in valuations of similar companies or groups of companies;
	●	analyst research reports, recommendations and changes in recommendations, price targets and withdrawals of coverage;
	●	departures and additions of key personnel;
	●	disputes and litigations related to intellectual properties, proprietary rights, and contractual obligations;
	●	changes in applicable laws, rules, regulations, or accounting practices and other dynamics;
	●	actions taken by our principal shareholders and release or expiry of lockup or other transfer restrictions; and
	●	other events or factors, many of which may be out of our control.

	●	authorize the issuance of “blank check” preferred stock that could be issued by our board of directors in response to a takeover attempt;

	●	provide that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office, except a vacancy occurring by reason of the removal of a director without cause shall be filled by vote of the shareholders; and

	●	limit who may call special meetings of shareholders.

	●	a limited availability of market quotations for our securities;

	●	reduced liquidity with respect to our securities;

	●	a determination that our shares of common stock are “penny stock” which will require brokers trading in our shares of common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares of common stock;

	●	a limited amount of news and analyst coverage for our company; and

	●	decreased ability to issue additional securities or obtain additional financing in the future.

●	On April 1, 2020, we issued a warrant to acquire up to 20,000 shares of our common stock at an exercise price of $1.40. the warrant was issued to a consultant pursuant to our agreement with the consultant. The warrant has a five-year life.

●	On June 30, 2020, we issued an aggregate of 9,689 shares of our common stock for services rendered pursuant to consulting agreements.

●	In June 2020, we issued 110,000 shares of stock pursuant to the exercise of warrants at an exercise price of $2.00 to three individuals and one limited liability company.

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		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File

	CO-DIAGNOSTICS, INC.

Date: August 13, 2020	By:	/s/ Dwight H. Egan
	Name:	Dwight H. Egan
	Title:	President and Chief Executive Officer (Principal Executive Officer)

Date: August 13, 2020	By:	/s/ Reed L. Benson
	Name:	Reed L. Benson
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

1.	I have reviewed this Quarterly Report on Form 10-Q of Co-Diagnostics, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepting accounting principles;

	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	(1)	The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.