# Co-Diagnostics, Inc.: Form 10-K for the period ended Dec 31, 2019

- Company: [Co-Diagnostics, Inc.](/companies/codx.md) (CIK 1692415)
- Form: 10-K
- Filed: 2020-03-30
- Accepted by EDGAR: Mar 30, 2020, 17:30 ET
- Period: 2019-12-31
- Accession: 0001493152-20-005305
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1692415/000149315220005305/form10-k.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1692415/000149315220005305/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2019-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 12 months, 2019-01-01 to 2019-12-31 | $215.0k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 12 months, 2019-01-01 to 2019-12-31 | $112.4k | us-gaap:CostOfRevenue |
| Gross profit | 12 months, 2019-01-01 to 2019-12-31 | $102.5k | us-gaap:GrossProfit |
| Research and development | 12 months, 2019-01-01 to 2019-12-31 | $1.4m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 12 months, 2019-01-01 to 2019-12-31 | −$5.9m | us-gaap:OperatingIncomeLoss |
| Net income | 12 months, 2019-01-01 to 2019-12-31 | −$6.2m | us-gaap:NetIncomeLoss |
| Operating cash flow | 12 months, 2019-01-01 to 2019-12-31 | −$5.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 12 months, 2019-01-01 to 2019-12-31 | $113.2k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2019-12-31 | $893.1k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2019-12-31 | $1.6m | us-gaap:AssetsCurrent |
| Total assets | at 2019-12-31 | $2.2m | us-gaap:Assets |
| Current liabilities | at 2019-12-31 | $328.1k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2019-12-31 | $478.1k | us-gaap:Liabilities |
| Shareholders' equity | at 2019-12-31 | $1.7m | us-gaap:StockholdersEquity |

## Business

As filed, 28,492 characters.

### Overview

Co-Diagnostics, Inc., a Utah corporation (“Company,” or “CDI,”) is developing robust and innovative molecular tools for detection of infectious diseases, liquid biopsy for cancer screening, and agricultural applications. We have developed and we manufacture and sell reagents used for diagnostic tests that function via the detection and/or analysis of nucleic acid molecules (DNA or RNA). In connection with the sale of our tests we may sell diagnostic equipment from other manufacturers as self-contained lab systems (which we refer to as the “MDx device”).

Our diagnostics systems enable very rapid, low-cost, molecular testing for organisms and genetic diseases by automating historically complex procedures in both the development and administration of tests. CDI’s newest technical advance involves a novel approach to Polymerase Chain Reaction (“PCR”) test design (“Co-Primers”) that eliminates one of the key vexing issues of PCR amplification, the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely interferes with identification of the target DNA.

Our proprietary molecular diagnostics technology is paving the way for innovation in disease detection and life sciences research through our enhanced detection of genetic material. Because we own our platform, we are able to accomplish this faster and more economically, allowing for wider margins while still positioning Co-Diagnostics to be a low-cost provider of molecular diagnostics and screening services.

In addition, continued development has demonstrated the unique properties of our Co-Primer technology that make them ideally suited to a variety of applications where specificity is key to optimal results, including multiplexing several targets, enhanced Single Nucleotide Polymorphism (“SNP”) detection and enrichment for next gen sequencing.

Our scientists use the complex mathematics of DNA test design, to “engineer” a DNA test and to automate algorithms that rapidly screen millions of possible options to pinpoint the optimum design. Dr. Satterfield, our Chief Technology Officer, developed the Company’s intellectual property consisting of the predictive mathematical algorithms and proprietary reagents used in the testing process, which together represent a major advance in PCR testing systems. CDI technologies are now protected by seven granted or pending US and foreign patents, as well as certain trade secrets and copyrights. Ownership of our proprietary platform permits us the advantage of avoiding payment of patent royalties required by other PCR test systems, which enables the sale of diagnostic tests at a lower price than competitors, while generating a profit margin.

We may either sell or lease the MDX Device to labs and diagnostic centers, through sale or lease agreements, and sell the reagents that comprise our proprietary tests to those laboratories and testing facilities.

We designed our tests by identifying the optimal locations on the target gene for amplification and paired the location with the optimized primer and probe structure to achieve outputs that meet the design input requirements identified from market research. This is done by following planned and documented processes, procedures and testing. In other words, the data resulting from our tests verify that we succeeded in designing what we intended at the outset. Verification is a series of testing that concludes that the product is ready to proceed to validation in a clinical evaluation setting using initial production tests to confirm that the product as designed meets the user needs.

CDI’s diagnostics systems enable very rapid, low-cost, sophisticated molecular testing for organisms and genetic diseases by greatly automating historically complex procedures in both the development and administration of tests. CDI’s newest technical advance involves a novel approach to PCR test design (cooperative primers) that eliminates one of the key vexing issues of PCR amplification, the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely interferes with identification of the target DNA.

Using its proprietary test design system and proprietary reagents, CDI has designed and obtained regulatory approval in the European Community and in India to sell PCR diagnostic tests for COVID-19, tuberculosis, hepatitis B and C, human papilloma virus, Malaria, chikungunya, dengue, and the Zika virus.

In addition to testing for infectious disease, the technology lends itself to identifying any section of a DNA strand that describe any type of genetic trait, which creates a number of significant applications. We are active in designing and licensing tests that identify genetic traits in plant and animal genomes. We also have a number of tests developed to test mosquitos for the identification of diseases carried by the mosquitos to enable municipalities to concentrate their efforts in spraying mosquito populations on the specific areas known to be breeding the mosquitos that carry deadly viruses.

### Recent Developments

On January 23, 2020, we announced the completion of the principle design work for a PCR screening test for new coronavirus, COVID-19, intended to address potential need for detection of the virus. An outbreak of respiratory illness caused by the pneumonia-like COVID-19 has spread rapidly over past few months, after first being discovered in the Chinese city of Wuhan on December 31, 2019. China confirmed human-to-human transmission of the virus and the United States announced the first infection in this country, detected in a traveler returning from Wuhan. Our COVID-19 test features the Company’s patented CoPrimer™ technology, and was designed using our proprietary software system, following the guidelines published by the World Health Organization and Centers for Disease Control.

On February 20, 2020, we announced that our Logix Smart™ COVID-19 Test technical file had been submitted for registration with the European Community, and that it was expected to be available late February as an in vitro diagnostic (“IVD”) for markets that accept a CE marking as valid regulatory approval. Subsequently, on February 24, 2020, we announced that our test obtained regulatory clearance to be sold as an in vitro diagnostic for the diagnosis of SARS-CoV-2 (COVID-19) in markets that accept CE-marking as valid regulatory approval, and became available for purchase from the Company’s Utah-based ISO-13485:2016 certified facility. The Declaration of Conformity for the Logix Smart COVID-19 test confirms that it meets the Essential Requirements of the European Community’s In-Vitro Diagnostic Medical Device Directive (IVDD 98/79/EC), permitting export and sales of the product as an IVD to commence immediately in the European Community. We shipped samples of the Research Use Only version of our test to distributors in various countries, which allowed future customers to confirm the quality and sensitivity of the product, and for us to accelerate the sales efforts of the COVID-19 test. We commenced sales of the COVID-19 tests in February and March and have sold the tests in numerous countries around the world as well as sales to labs in the United States.

### Infectious Disease Product Offering

Using its proprietary test design system and proprietary reagents, CDI designs and sells PCR diagnostic tests for diseases and pathogens such as COVID-19, tuberculosis, hepatitis B and C, Malaria, dengue, human papilloma virus, chikungunya, and Zika virus, all of which tests have been designed and verified in CDI’s laboratory. Our tuberculosis test and Zika test received a CE Mark in 2018, and a triplex test for Zika, Dengue and Chikungunya received a CE Mark in 2019, qualifying our test to be sold throughout the European community and in most countries in central and South America. In December, 2019, our Indian joint venture received a license to manufacture and sell Tuberculosis, Hepatitis B, Hepatitis C, Human Papilloma virus 16/18 and Malaria tests in India from the Central Drugs Standard Control Organization (“CDSCO”). In February 2020, we received a CE Mark for our Logix Smart COVID-19 test.

As explained above, the development of our Logix Smart COVID-19 test was designed, developed, submitted for regulatory approved and ready to be used both as a Research Use Only (“RUO”) and as an IVD in countries that accept a CE Mark as approval for use of the test in a period of just over thirty days. This is a real world example of how in an evolving epidemic that the CDI technology can be used to get diagnostics tools in the hands of medical professionals without delay. It can be similarly used to design a test for mutations of the virus should they occur.

### Caribbean and Central and South America

Our initial sales were to entities within the Caribbean Public Health Agency Members States (Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, BES Islands, British Virgin Islands, Cayman Islands, Curacao, Dominica, Grenada, Haiti, Guyana, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, St Maarten, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos Islands).

In some of these countries, there are no regulatory hurdles and we can start offering our tests immediately. We have applied for registration of our tests in those countries that require registration and our distributors in those countries have provided us with in country assistance in completing such registrations.

We first offered our Zika test in this region because of the demand for such test, followed quickly by tests for tuberculosis, our triplex test for Zika, chikungunya, and dengue, hepatitis B and C, and dengue. Products are manufactured for sale upon receipt of purchase orders from labs and hospitals.

### India

The Company has entered into an agreement to manufacture diagnostics tests for seven infectious diseases with a pharmaceutical manufacturing company in India and formed an Indian joint venture which is CoSara Diagnostics, Pvt. The agreement provides for the construction of a manufacturing plant and the manufacture of the tests named above and the joint sales and marketing of those tests in India. We have completed licensing of the plant in Rinoli, India, that will be used for testing and manufacturing for the Indian market.

Since the tests will be conducted in India on Indian citizens, no FDA approval or inspection will be required. As mentioned above, the CDSCO has given us the approval for manufacture and sale of the five tests referred above and the Company has begun to take orders for our tests. The Company has commenced a reagent rental program in India with our Mx Device. We have placed five of our Mx Devices with labs in India and have purchased an additional fifteen Mx Devices in the first quarter of 2020. Each of the reagent rental placements requires the purchase of a minimum of 250 tests per month. We have submitted to the CDSCO our technical file requesting approval for the manufacture and sale of our COVID-19 test in India and have received authorization to begin manufacture and sale of COVID-19 tests on a RUO basis. We intend to submit technical files to the CDSCO requesting approval tests for HIV and Dengue as well as a blood bank panel before the end of the second quarter of 2020 and expect them to be approved for sale in 2020.

India is the country with the highest burden of tuberculosis. World Health Organization (WHO) tuberculosis statistics for India for 2015 give an estimated incidence figure of 2.2 million cases of tuberculosis for India out of a global incidence of 9.6 million. The tuberculosis incidence for India is the number of new cases of active tuberculosis disease in India during a certain time period (usually a year).

### Europe

Molecular diagnostics, such as our tests, are governed in Europe by the framework for in vitro diagnostics (IVDs), which encompasses diagnostic products such as reagents, instruments and systems intended for use in diagnosis of disease. The regulatory system for IVDs is built largely on a self-certification procedure, placing heavy responsibility on manufacturers. Non self-certified products are subject to the same standards as self-certified products but are subject to audit and review by a notified body prior to receiving approval to be CE-marked. A CE-marking is a manufacturer’s declaration that a product meets the requirements of the applicable European Commission directive. Examples of current obligations include having in place a qualitative manufacturing process, user instructions that are clear and fit for purpose, ensuring that the ‘physical’ features of devices and diagnostics do not pose any danger. If a product fulfils these and other related control requirements, it may be CE-marked as an indication that the product is compliant with EU legislation and sold in the European Union. We have received CE Marks for four of our tests including COVID-19, tuberculosis, Zika, and our zika, dengue, chikungunya triplex tests.

We have received ISO 13485 and ISO 9001 certifications relating to the design and manufacture of our medical device products. The ISO certification indicates that we meet the standards required to self-certify certain of our products and affix a CE-marking for sales of our products in countries accepting the CE marking (not in the United States) with only minimal further governmental approvals in each country.

### United States

The U.S. Food and Drug Administration (FDA) has granted permission for us to export many of our products. The FDA’s permission to export was granted under Section 801(e) of the Federal Food, Drug, and Cosmetic Act, as amended (the “FDC Act”). Section 801(e) of the FDA Act covers certain medical devices that have not yet received an approved Premarket Approval in the United States by the FDA, such as our products. We have not commenced any Premarket Approval steps with the FDA. Section 801(e) applies to medical devices that are acceptable to the importing country and that are manufactured under the FDA’s Good Manufacturing Practices. We have applied to the FDA for Emergency Use Authorization for our COVID-19 test, which would allow sales in the US to qualified labs.

We do not anticipate offering our tests in the United States in the near future. We believe, however, our tests may be able to qualify as Laboratory Developed Tests (LDT’s), diagnostic tests that are developed and manufactured by CLIA certified laboratories. These tests are developed by the lab for use only in that laboratory. CLIA laboratories develop the performance characteristics, perform the analytical validation for their LDT’s and obtain licenses to offer them as diagnostic services. The FDA has publicly announced its intention to regulate certain LDTs in a phased-in approach, but draft guidance that was published a couple of years ago was withdrawn at the end of the Obama administration and replaced by an informal non-enforceable discussion paper reflecting some of the feedback that it received on LDT regulation.

### Market Opportunity

The molecular diagnostics market is a fast-growing portion of the in vitro (test tube based, controlled environment) diagnostics market. Using estimates of the incidence of disease by the Centers for Disease Control, the World Health Organization and other international health agencies and sources, the Company estimates that the global annual demand for diagnostic tests are:

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

There are several advantages of molecular tests, such as the ones we market and sell, over other forms of diagnostic testing, which include higher sensitivities, the ability to perform multiplex tests and the ability to test for drug resistance or individual genes.

**Mosquito Vector Control Services.**

In response to market demand, we introduced our first diagnostics tests to be used exclusively to test mosquito DNA in June 2019. Municipalities in the US and many other countries in the world are concerned about the diseases carried by mosquitos and which infect the human population. To prevent outbreaks of potentially harmful viruses, such as Zika or West Nile, from infecting the public the municipalities conduct spraying operations to eliminate the mosquito populations carrying the diseases. Because it is too expensive to spray all mosquito breeding areas, the problem is to identify which particular area has mosquitos that are carrying the harmful viruses. To know where the host mosquitos with the harmful viruses are located, traps are set, mosquitos collected and then tested to find the areas that most needed spraying. There are over three thousand mosquito abatement districts throughout the United States and almost all of them conduct testing to help make the spraying more effective.

Our first test is a triplex test that tests for West Nile, Western Equine and St. Louis encephalitis. We began shipping the tests in June 2019. We have since added a second test that tests mosquitos for Zika, chikungunya and dengue in a triplex test. Finally, in November, we completed a test for West Nile, Eastern Equine and St. Louis encephalitis, specifically for use in the eastern United States. As a result, mosquito abatement districts can test for three target viruses in one test for the same cost as one test would cost ($10-$15) using other market available PCR tests. Additionally, the districts are more effective because they can get test results in a matter of hours using our product instead of weeks when they have to wait for a central lab to process the mosquito tests.

We have sold our Vector Smart test products and/or related lab equipment to seven different testing districts and are marketing our products through trade shows, electronic and regular mail solicitations and have hired additional sales personal in the eastern US to more economically and efficiently market to the east coast areas.

### Competitive Advantages of Co-Diagnostics

### We believe that we have the following competitive advantages:

- ***Affordability:*** Lower-cost test kits and low-cost MDx-device.
- ***Flexibility:*** CDI’s 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 accurate than competitors’ and can detect more strains of viruses.

7

- ***Exclusivity:*** CDI owns all patents and all intellectual property used in preparation of its 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. A critical component will be accurate, more affordable DNA-based diagnostics, which CDI plans to offer.
- ***Low-cost Provider:*** We plan to keep the Company’s overhead low. Its platform technology obviates the need to pay patent royalties typically required of its competitors, which use patented test platforms to design their tests.
- ***Worldwide Footprint:*** With a dynamic technology that encompasses markets worldwide, the Company anticipates that it can identify the best target markets, not only in high burden developing countries (HBDC’s) but also in developed nations.
- ***Growth Industry Category:*** We believe that DNA testing is the fastest-growing segment of in-vitro diagnostic testing.
- ***Combination Product Offering:*** CDI’s ultra-sensitive tests can be a well-designed match for a new generation of handheld and other small point-of-care 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 initial development efforts have demonstrated that our Co-Primer designed tests will be 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.

### Liquid Biopsy for Cancer Screening

The development of the liquid biopsy test will spur low cost testing in many developing countries. We believe that our liquid biopsy cancer screening shall be ready for testing in 2020 if we have sufficient development resources to dedicate to the project. Medical applications of our SNP detection technology can determine the presence of cancer cells or cell-free genetic material in a liquid or tissue biopsy, and to determine the distinct type of cancer involved. A real-life example of this includes being able to identify specific mutation(s) in genes linked to breast cancer in order to determine a patient’s prognosis, initiate the most effective and affordable treatment and to determine whether chemotherapy is necessary. After diagnosis the relative cost of our technology allows for frequent testing to measure the effectiveness of the treatment.

Our technology has for all practical purposes essentially eliminated, primer-dimers, which opens up some very unique applications for liquid biopsy for cancer detection. Our ability to multiplex the reaction in testing for several DNA targets allows technicians to detect multiple cancers as free-circulating DNA fragments or whole cells in a blood sample at the same time

### Agricultural Applications

SNP detection is also used in the agricultural industry to identify variations in crop genomes to achieve improved seed viability and other desired characteristics, including drought resistance, disease resistance, pest resistance and higher yield.

In mid-2017, the Company was first approached by a large agribusiness to evaluate our ability to multiplex certain target genomes. The results of the development project have been to successfully demonstrate our ability to not only multiplex the target genomes, but targeted SNP’s as well. The project was undertaken in conjunction with the manufacturer of our CoPrimer tests. The results of the project encouraged the parent of our manufacturer to seek a world-wide licensing arrangement for our CoPrimers in the agricultural industry, which was completed in October 2018. Pursuant to the exclusive license for the agrigenomics industry, the licensee will pay us a royalty for all CoPrimers sold to the licensee’s customers. In January 2019, the licensee formally introduced the product at a large agricultural conference and has branded the product to sell as BHQCoPrimers.

### Additional Licensing and Assay Development

In addition, the unique properties of our CoPrimer technology make them ideally suited to a variety of applications where sensitivity is key to optimal results, including multiplexing several targets, enhanced SNP detection and enrichment for next gen sequencing. Our licensee for our agricultural testing requested an expansion of our license agreement to include test design services for their customers and potential customers, both in the infectious disease arena as well as for agricultural customers. The license was amended in July 2019 and we will derive a license fee from our licensee for its design services. If any of its customers desire to commercialize the tests designed, they will need to seek a commercial license directly from us. Because of these unique characteristics of CoPrimers, research companies and institutions have requested that we design diagnostics to locate and identify uncommon gene sequences and SNPs and create tests for the target sequences in a multiplexed reaction. This application of our technology is in its beginning stages, but we believe that the results from our initial research indicate a significant step forward in defining the capabilities of our technology, which we believe can be translated to revenue producing licensing arrangements.

### Organizational History and Corporate Information

We were incorporated as Co-Diagnostics, Inc., in Utah on April 18, 2013. Our principal executive office is located 2401 S. Foothill Drive, Salt Lake City, Utah 84109. Our telephone number is (801) 438-1036. Our web address is http://codiagnostics.com.

### Implications of Being an Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year following the fifth anniversary of July 12, 2017, the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”); (ii) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under applicable SEC rules. We expect that we will remain an emerging growth company for the foreseeable future, but cannot retain our emerging growth company status indefinitely. We refer to the Jumpstart Our Business Startups Act of 2012 herein as the “JOBS Act”. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

- being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
- not being required to comply with the requirement of auditor attestation of our internal controls over financial reporting;
- not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
- reduced disclosure obligations regarding executive compensation; and
- not being required to hold a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

For as long as we continue to be an emerging growth company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of that classification. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

An emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the dates on which adoption of such standards is required for other public reporting companies.

We are also a “smaller reporting company” as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage of certain of the scaled disclosure available for smaller reporting companies.

## Properties

As filed, 415 characters.

Our executive offices are located at 2401 S. Foothill Drive, Salt Lake City, Utah 84109. We occupy the space at the executive offices under a lease, which expired January 31, 2020. We currently occupy the space on a month to month basis as we negotiate a longer-term lease. The lease covers approximately 10,273 square feet of lab and office space leased at a rate of $14,831 per month. We have no other properties.

## Legal proceedings

As filed, 715 characters.

From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. There is one lawsuit pending in the State of Florida alleging liable, which we believe is groundless and has no relevance to our products or services and which will be vigorously defended. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company. We have received inquiries relative to the sudden rise in the price of our stock from FINRA and NASDAQ, to which we have responded.

## Management's discussion and analysis

As filed, 29,851 characters.

The following management’s discussion and analysis of financial condition and results of operations describes the principal factors affecting the results of our operations, financial condition, and changes in financial condition. This discussion should be read in conjunction with the accompanying audited financial statements, and notes thereto, included elsewhere in this report. The information contained in this discussion is subject to a number of risks and uncertainties. We urge you to review carefully the sections of this report entitled “*Risk Factors”* in other filings with the SEC and “*Forward-Looking Statements”* in this Annual Report for a more complete discussion of the risks and uncertainties associated with an investment in our securities.

### Overview

### Business Overview

Co-Diagnostics, Inc., a Utah corporation (“Company,” or “CDI,”) is developing robust and innovative molecular tools for detection of infectious diseases, liquid biopsy for cancer screening, and agricultural applications. We have developed and we manufacture and sell reagents used for diagnostic tests that function via the detection and/or analysis of nucleic acid molecules (DNA or RNA). In connection with the sale of our tests we may sell diagnostic equipment from other manufacturers as self-contained lab systems (which we refer to as the “MDx device”).

Our diagnostics systems enable very rapid, low-cost, molecular testing for organisms and genetic diseases by automating historically complex procedures in both the development and administration of tests. CDI’s newest technical advance involves a novel approach to Polymerase Chain Reaction (“PCR”) test design (“Co-Primers”) that eliminates one of the key vexing issues of PCR amplification, the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely interferes with identification of the target DNA.

Our proprietary molecular diagnostics technology is paving the way for innovation in disease detection and life sciences research through our enhanced detection of genetic material. Because we own our platform, we are able to accomplish this faster and more economically, allowing for wider margins while still positioning Co-Diagnostics to be a low-cost provider of molecular diagnostics and screening services.

In addition, continued development has demonstrated the unique properties of our Co-Primer technology that make them ideally suited to a variety of applications where specificity is key to optimal results, including multiplexing several targets, enhanced Single Nucleotide Polymorphism (“SNP”) detection and enrichment for next gen sequencing.

Our scientists use the complex mathematics of DNA test design, to “engineer” a DNA test and to automate algorithms that rapidly screen millions of possible options to pinpoint the optimum design. Dr. Satterfield, our Chief Technology Officer, developed the Company’s intellectual property consisting of the predictive mathematical algorithms and proprietary reagents used in the testing process, which together represent a major advance in PCR testing systems. CDI technologies are now protected by seven granted or pending US and foreign patents, as well as certain trade secrets and copyrights. Ownership of our proprietary platform permits us the advantage of avoiding payment of patent royalties required by other PCR test systems, which enables the sale of diagnostic tests at a lower price than competitors, while generating a profit margin.

We may either sell or lease the MDX Device to labs and diagnostic centers, through sale or lease agreements, and sell the reagents that comprise our proprietary tests to those laboratories and testing facilities.

We designed our tests by identifying the optimal locations on the target gene for amplification and paired the location with the optimized primer and probe structure to achieve outputs that meet the design input requirements identified from market research. This is done by following planned and documented processes, procedures and testing. In other words, the data resulting from our tests verify that we succeeded in designing what we intended at the outset. Verification is a series of testing that concludes that the product is ready to proceed to validation in a clinical evaluation setting using initial production tests to confirm that the product as designed meets the user needs.

CDI’s diagnostics systems enable very rapid, low-cost, sophisticated molecular testing for organisms and genetic diseases by greatly automating historically complex procedures in both the development and administration of tests. CDI’s newest technical advance involves a novel approach to PCR test design (cooperative primers) that eliminates one of the key vexing issues of PCR amplification, the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely interferes with identification of the target DNA.

Using its proprietary test design system and proprietary reagents, CDI has designed and obtained regulatory approval to sell PCR diagnostic tests for COVID-19, tuberculosis, hepatitis B and C, human papilloma virus, Malaria, chikungunya, dengue, and the Zika virus.

In addition to testing for infectious disease, the technology lends itself to identifying any section of a DNA strand that describe any type of genetic trait, which creates a number of significant applications. We are active in designing and licensing tests that identify genetic traits in plant and animal genomes. We also have a number of tests developed to test mosquitos for the identification of diseases carried by the mosquitos to enable municipalities to concentrate their efforts in spraying mosquito populations on the specific areas known to be breeding the mosquitos that carry deadly viruses.

### Recent Developments

On January 23, 2020, we announced the completion of the principle design work for a PCR screening test for new coronavirus, COVID-19, intended to address potential need for detection of the virus. An outbreak of respiratory illness caused by the pneumonia-like COVID-19 has spread rapidly over past few months, after first being discovered in the Chinese city of Wuhan on December 31, 2019. China confirmed human-to-human transmission of the virus and the United States announced the first infection in this country, detected in a traveler returning from Wuhan. Our COVID-19 test features the Company’s patented CoPrimer™ technology, and was designed using our proprietary software system, following the guidelines published by the World Health Organization and Centers for Disease Control.

On February 20, 2020, we announced that our Logix Smart™ COVID-19 Test technical file had been submitted for registration with the European Community, and that it was expected to be available late February as an in vitro diagnostic (“IVD”) for markets that accept a CE marking as valid regulatory approval. Subsequently, on February 24, 2020, we announced that our test obtained regulatory clearance to be sold as an in vitro diagnostic for the diagnosis of SARS-CoV-2 (COVID-19) in markets that accept CE-marking as valid regulatory approval, and became available for purchase from the Company’s Utah-based ISO-13485:2016 certified facility. The Declaration of Conformity for the Logix Smart COVID-19 test confirms that it meets the Essential Requirements of the European Community’s In-Vitro Diagnostic Medical Device Directive (IVDD 98/79/EC), permitting export and sales of the product as an IVD to commence immediately in the European Community. We shipped samples of the Research Use Only version of our test to distributors in Italy and Germany, which allows future customers to confirm the quality and sensitivity of the product prior to the IVD being available, and for us to accelerate the sales efforts of its diagnostic. Many other global markets also accept a CE marking as valid regulatory approval following routine local product registration, which allows sales of our COVID-19 IVD into these areas.

### Agreement with Synbiotics

The Company has entered into a joint venture agreement to manufacture diagnostics tests for seven infectious diseases with Synbiotics Limited, a pharmaceutical manufacturing company in India. The Company and Synbiotics shall be equal partners in the joint venture. The agreement provides for the manufacture of the tests named above and the joint sales and marketing of those tests in India. The Company will license its technology to the joint venture on a royalty-free basis. The profits from the partnership shall be divided as follows:

| Profit Level | CDI Share | Synbiotics Share |
| --- | ---: | ---: |
| Up to $1,000,000 | 50% | 50% |
| $1,000,000-$2,000,000 | 60% | 40% |
| $2,000,000-$3,000,000 | 70% | 30% |
| Above $3,000,000 | 80% | 20% |

12

Synbiotics will be reimbursed by the joint venture for some expenses, such as approximately $96,000 in rent for the manufacturing plant and office space. If the joint venture needs additional funding, it will be achieved through loans obtained by the joint venture, or if loans are not available on commercially reasonable terms, from capital contributions. There is no term to the joint venture agreement but it can be dissolved by mutual agreement or by one party upon a material breach by the other party.

In December 2019, we announced that CoSara Diagnostics Pvt Ltd (“CoSara,” or the “JV”), our joint venture for manufacturing, obtained regulatory clearance for five tests to be manufactured and sold as *in vitro* diagnostics (“IVDs”) from their facility in Ranoli India.

The tests for Mycobacterium tuberculosis, malaria, hepatitis B, hepatitis C and human papillomavirus (HPV) met the requirements of the Central Drug Standard Control Organization (“CDSCO”) Medical Device Rules (MDR) 2017, File no. 29/Misc./3/2017-DC (292), to be manufactured and sold as IVDs. CDSCO approval was granted following the completion of the CoSara manufacturing facility and a comprehensive inspection of the location, presentation of the technology, quality system, procedures, product validation data and performance evaluation by an independent NABL & CAP accredited laboratory. The licenses and regulatory clearance allow CoSara for the first time to manufacture and sell the tests for the detection of the respective pathogens and microorganisms.

CoSara distributors have begun taking pre-orders for the five IVDs. The JV has the exclusive manufacturing rights in India for the complete menu of our infectious disease molecular diagnostics kits, designed by us using our patented CoPrimer™ technology platform. Additional tests such as our COVID-19 test have been submitted to the CDSCO for approval and others such as consist a drug-resistant tuberculosis, HIV and more, including a multiplexed panel specifically for blood-bank screening will be submitted in 2020. Since the tests will be conducted in India on Indian citizens, no FDA approval or inspection will be required.

India is the country with the highest burden of tuberculosis. According to the World Health Organization (WHO) tuberculosis statistics for India for 2015 give an estimated incidence figure of 2.2 million cases of tuberculosis for India out of a global incidence of 9.6 million. The tuberculosis incidence for India is the number of new cases of active tuberculosis disease in India during a certain time period (usually a year).

### Intellectual Property Protection

Because much of our future success and value depends on our proprietary technology, our patent and intellectual property strategy is of critical importance. Four of our initial U.S. patents related to our technology have been granted by the U.S. Patent and Trademark Office, or PTO, including the patent for our CoPrimer technology, which we consider our most important patent. One of our patents has been issued in Great Britain, but is still pending in the United States. As of March 15, 2020, we had three additional patents pending in the U.S. and foreign counterpart applications. Two of our issued patents expire in 2034, one in 2036 and one in 2038.

We have identified additional applications of the technology, which represent potential patents that further define specific applications of the processes that are covered by the original patents. We intend to continue building our intellectual property portfolio as development continues and resources are available.

We have copyrighted our development software that can be used by any lab or developer to develop diagnostic tests based on our technology. We have allowed one customer access to our development software and intend to sell customized reagents through that customer to labs serviced by that customer throughout the world. To date we have not sold any products through that customer.

### Major Customers

We had no major customers in 2019, but one customer in the first quarter of 2020 comprised approximately 20% of our sales to date and payment was received in advance of shipment of the tests.

### Competition

The molecular diagnostics industry is extremely competitive. There are many firms that provide some or all of the products we provide and provide many diagnostic tests that we have yet to develop. Many of these competitors are larger than us and have significantly greater financial resources. Because we are not established, many of our competitors have a competitive advantage in the diagnostic testing industry because they also have other lines of business in the pharmaceutical industry from which they derive revenues and for which they are well known and respected in the medical profession. We will need to overcome the disadvantage of being a start up with no history of success and no respect of the medical and testing professionals. In the diagnostic testing industry, we compete with such companies as Roche, BioMerieux, Siemans, Qiagen, and Cephied and with such pharmaceutical companies as Abbott Laboratories, Becton, Dickinson and Johnson and Johnson.

Many of these competitors already have an established customer base with industry standard technology, which we must overcome to be successful.

### Employees

We currently employ 23 full-time personnel at our executive offices and lab facilities in Salt Lake City, Utah, and two employees outside of Utah. We have engaged independent contractors in the US and India to promote the use of our products and develop outlets for products and employ the services of an independent sales representatives in our mosquito vector sales efforts.

### Government Regulation

We will be regulated by the U.S. Federal Drug Administration and our products must be approved by the FDA before we will be allowed to sell our tests in the United States. Because our lab is ISO certified we are allowed to apply for CE-Marking, which will allow us to sell in most countries in Europe, South America and Asia. We currently have CE Marks issued for our COVID-19 test, tuberculosis test, our zika virus test, and a triplex test that tests for zika, dengue, and chikungunya simultaneously. Our joint venture in India is regulated by the CDSCO and has approved the manufacture and sale of five diagnostic tests and has approved the manufacture and sale of COVID-19 tests on as a Research Use Only test pending approval for full manufacture and sale.

### Properties

Our executive offices are located at 2401 S. Foothill Drive, Salt Lake City, Utah 84109. We occupy the space at the executive offices under a month to month lease. The lease covers approximately 10,273 square feet of lab and office space leased at a rate of $14,831 per month. We have no other properties.

### Legal Proceedings

From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. There is one lawsuit pending in the State of Florida alleging liable, which we believe is groundless and has no relevance to our products or services and which will be vigorously defended. To the best of our knowledge, no governmental authority is contemplating any proceeding to which we are a party or to which any of our properties or businesses are subject, which would reasonably be likely to have a material adverse effect on the Company. We have received inquiries relative to the sudden rise in the price of our stock from FINRA and NASDAQ, to which we have responded.

### RESULTS OF OPERATIONS

### Results of Operations for the Years Ended December 31, 2019 and 2018

| Table derived from audited financial statements | For the years ended December 31, 2019 | December 31, 2018 |
| --- | ---: | ---: |
| Net sales | $214,974 | $39,911 |
| Cost of sales | 112,431 | 9,391 |
| Gross profit | 102,543 | 30,520 |
| Operating expenses: |  |  |
| Selling and marketing | 1,061,676 | 1,165,631 |
| Administrative and general | 3,497,273 | 3,570,786 |
| Research and development | 1,371,433 | 1,361,154 |
| Depreciation and amortization | 65,902 | 50,765 |
| Total operating expenses | 5,996,284 | 6,148,336 |
| Total operating loss | (5,893,741) | (6,117,816) |
| Other expense: |  |  |
| Interest expense | (28,196) | (134,947) |
| Loss on extinguishment of debt | (78,241) | —) |
| Net gain (loss) from investment in joint venture | (232,881) | (38,764) |
| Net gain (loss) on disposition of assets | 850 | — |
| Interest income | 36,652 | 19,804 |
| Total other expense | (301,816) | (153,907) |
| Loss before income taxes | (6,195,557) | (6,271,723) |
| Provision for income taxes | — | — |
| Net loss | $(6,195,557) | $(6,271,723) |

14

### Revenues

Sales of products in the twelve months ended December 31, 2019 were $214,974, which consisted of sales of testing equipment of $128,124, sales from the license of our technology in the agriculture industry of $50,000 and $36,850 which represented the initial sales of our diagnostic tests, primarily of our mosquito vector products. For the twelve months ending December 31, 2018, we realized revenue from the sale of diagnostic equipment of $10,123 and had licensing revenue of $29,088 and test revenue of $700.

### Cost of Revenues and Gross Profit

We recorded costs of sales for the twelve months ended December 31, 2019 of $112,431 compared to costs of sales of $9,391 for the twelve months ended December 31, 2018. The increase in costs of sales of $103,040 was due to the increase in sales. Most of the increased related to the cost of equipment sold, which was $93,171 as equipment has the highest cost of sales. Costs of sales of tests increased $9,869 as a result of increased sales. There were no costs associated with the license revenue.

### Operating Expenses

We incurred total operating expenses of $5,996,284 for the year ended December 31, 2019 compared to total operating expenses of $6,148,336 for the year ended December 31, 2018. The decrease of $152,052 was due to a decrease in general and administrative expense of $73,513 and a decrease in sales and marketing costs of $103,955, partially offset by an increase of $15,137 in depreciation and amortization expense and an increase of $10,279 in our research and development expenses.

Our general and administrative expenses decreased $73,513 from $3,570,786 for the year ended December 31, 2018 to $3,497,273 for the year ended December 31, 2019. The decrease was primarily the result of a decrease of $975,417 in consulting fees and a decrease of $46,249 in attorney fees. These decreases were partially offset by an increase of $529,602 in other professional services, an increase in salaries and related benefits of $116,419 and an increase of $121,443 in option and warrant expense reflecting the issuance of options to our employees and others. In addition, insurance costs increased $77,757 and travel expenses increased $64,873.

Our sales and marketing expenses for the year ended December 31, 2019 were $1,061,676 compared to sales and marketing expenses of $1,165,631 for the year ended December 31, 2018. The decrease of $103,955 was due primarily to incurring a marketing expense of $497,208 related to acquisition of a distributor network in 2018 that was not repeated in 2019. Other sales and marketing costs generally increased. We experience an increase of $192,786 in salaries and related benefits, an increase of $118,026 in travel and convention related expenses and an increase of $90,573 in consulting expenses, all of which were incurred as we increased our sales efforts.

Our research and development expenses increased by $10,279 from $1,361,154 for the year ended December 31, 2018 to $1,371,433 for the year ended December 31, 2019. The increase was primarily due to an increase of $163,319 in salaries and related benefits as we increased research and development activities. The increase was partially offset by a decrease of $76,795 in consulting fees for research services, a decrease of $72,528 in other professional services and a decrease of $22,528 in other lab services.

### Interest and Other Expense

Interest and other expense items increased for the year ended December 31, 2019 by $147,909. The increase in expenses related primarily to an increased loss of $194,117 related to our India joint venture and a loss on extinguishment of debt of $78,241, which occurred when a loan was converted to preferred stock. The increase in loss was partially offset by a decrease in interest expense of $106,751and an increase in interest income of $16,848.

### Net Loss

We had net loss of $6,271,723 for the year ended December 31, 2018 compared to a net loss of $6,195,557 for the year ended December 31, 2019. The decrease in net loss for the year ended December 31, 2019 compared to the year ended December 31, 2018 was $76,166. Our total operating expenses decreased by $152,052 and our total other expenses increased by $147,909 as explained in more detail above.

### LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.

To date we have financed our operations through sales of common stock and the issuance of debt.

At December 31, 2019, we had cash and cash equivalents of $893,138, total current assets of $1,584,254, total current liabilities of $328,070 and total stockholders’ equity of $1,737,256. At December 31, 2018, we had cash and cash equivalents of $950,237, total current assets of $1,051,913, total current liabilities of $2,351,983 and total stockholders’ deficit of $1,058,811.

We experienced negative cash flow used in operations during the twelve months ended December 31, 2019 of $5,525,091 compared to negative cash flow used in operations for the twelve months ended December 31, 2018 of $4,080,036. In addition, we used $592,764 of our cash in financing transactions and used $322,000 in contributions to our joint venture in India. The negative cash flow in 2019 was met by cash reserves received from the completion of a registered direct offering in February 2019 pursuant to our S-3 shelf registration filed in 2018 and declared effective in September 2018. We received net proceeds of $5,000,000 from that offering. In addition, in January 2019 we sold preferred stock from which we received net proceeds of approximately $1,000,000 and converted $2,000,000 of our debt to the preferred stock. The amount of our operating deficit could decrease or increase significantly depending on strategic and other operating decisions, thereby affecting our need for additional capital. We expect our operating losses will continue until we are able to generate revenue and our operations become profitable. We will continue to rely on proceeds received from our public offerings of stock. We expect additional investment capital to come from (i) additional issuances of our common stock with existing and new investors and (ii) the private placement of other securities with investors similar to those that have provided funding in the past.

Our monthly cash operating expenses, including our technology research and development expenses and interest expense, were approximately $460,000 per month during the year ended December 31, 2019. We completed the registered direct offering described above in January 2019 to fund operations through 2019. The foregoing estimates, expectations and forward-looking statements are subject to change as we make strategic operating decisions from time to time and as our expenses fluctuate from period to period.

On February 28, 2020, the Company entered into securities purchase agreements with certain institutional investors for the sale by the Company of 470,000 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $ 9.00 per share in a registered direct offering. The aggregate gross proceeds for the sale of the Common Shares were approximately $4.00 million. The closing of the offering occurred on or about February 28, 2020. In the same manner as February 10, 2020 offering, the Common Shares sold in the offering were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, that was originally filed on August 14, 2018 and declared effective by the Securities and Exchange Commission (“SEC”) on September 7, 2018, and the base prospectus contained therein (File No. 333-226835).

On February 10, 2020, the Company entered into securities purchase agreements with certain institutional investors for the sale by the Company of 3,324,676 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $ 3.08 per share in a registered direct offering. The aggregate gross proceeds for the sale of the Common Shares were approximately $10.2 million. The closing of the offering occurred on or about February 13, 2020. In the same manner as January 23, 2020 offering, the Common Shares sold in the offering were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, that was originally filed on August 14, 2018 and declared effective by the Securities and Exchange Commission (“SEC”) on September 7, 2018, and the base prospectus contained therein (File No. 333-226835).

On January 23, 2020, the Company entered into securities purchase agreements with certain institutional investors for the sale by the Company of 3,448,278 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $1.45 per share in a registered direct offering. The aggregate gross proceeds for the sale of the Common Shares were approximately $5,000,000. The closing of the offering occurred on or about January 28, 2020. The Common Shares sold in the offering were offered and sold by the Company pursuant to an effective shelf registration statement on Form S-3, that was originally filed on August 14, 2018 and declared effective by the Securities and Exchange Commission (“SEC”) on September 7, 2018, and the base prospectus contained therein (File No. 333-226835).

On March 6, 2020, one of our warrant holders exercised its warrants for 25,000 shares of our common stock at $2.00 per share and paid us $50,000. In February and March, 2020 an additional 15 warrant holders exercised an aggregate of 759,445 warrants to purchase 694,492 shares of our common stock on a cashless basis.

On January 30, 2019, we entered into a securities purchase agreement with investors, whereby the investors purchased from the Company 30,000 shares of Series A Convertible Preferred Stock of the Company for a purchase price of $3,000,000. The purchase price was paid by the investors with $1.0 million in cash and the conversion of a $2.0 million note owed by the Company to one of the investors. The investors may not convert the Series A Preferred Stock to the extent that such conversion would result in beneficial ownership by the investors and their affiliates of more than 4.99% of the issued and outstanding Common Stock of the Company.

On February 4, 2019, we completed the sale of 3,925,716 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $1.40 per share in a registered direct offering. The aggregate gross proceeds for the sale of the Common Shares was $5,496,002 and we received net proceeds after offering costs of $4,996,322.

The amount of our operating deficit could decrease or increase significantly depending on strategic and other operating decisions, thereby affecting our need for additional capital. We expect our operating loses will continue until we are able to generate revenue. Revenue commenced in 2019 and has increased substantially in 2020 and our need for additional investment will depend on the amount of revenue generated. At our current level of operating expenditures, we have sufficient cash to fund operations for the next twelve months. Absent a significant acquisition or capital expansion, we do not expect to raise additional capital.

Our long-term liquidity is dependent upon execution of our business model and the commencement of revenue generating activities and working capital as described above, and upon capital needed for continued commercialization and development of our diagnostic testing technology. Commercialization and future development of diagnostic tests utilizing our PCR technology are expected to require additional capital estimated to be approximately $1,350,000 annually for the foreseeable future. This estimate will increase or decrease depending on specific opportunities and available funding.

### Off-Balance Sheet Arrangements

As of December 31, 2019, we had no off-balance sheet arrangements.

## Controls and procedures

As filed, 4,468 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain a set of disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this annual report on Form 10-K, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to assess the effectiveness of our disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2019, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of material weaknesses in our internal control over financial reporting and discussed below, our disclosure controls and procedures were not effective as of December 31, 2019.

### Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019. In making its evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013).

Based on this evaluation, management determined that our internal control over financial reporting was not effective as of December 31, 2019 due to the material weakness described below.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness identified during management’s assessment was the lack of sufficient technical expertise on certain accounting and tax requirements for new and unusual transactions. These control deficiencies could result in a material misstatement of accounts or disclosures that would result in a material misstatement to the Company’s interim or annual financial statements that would not be prevented or detected. Accordingly, management has determined that these control deficiencies constitute a material weakness.

The Company hired an independent consulting company to provide recommendations for improving our internal control given the size of the Company’s accounting staff. To the extent possible with the current accounting staff, some of the internal control recommendations have been implemented. However, the material weakness had not been fully remediated as December 31, 2019. The Company plans to further increase the involvement of consultants with the required expertise and or increase the accounting staff to remediate the material weakness.

Notwithstanding the material weaknesses, management has concluded that the Consolidated Financial Statements included in this Annual Report on Form 10-K present fairly, in all material respects, the Company’s financial position, results of operations and cash flows of the Company for the periods presented in conformity with U.S. GAAP.

This Annual Report does not include an attestation report by our independent registered public accounting firm regarding internal control over financial reporting since we are an emerging growth company. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit emerging growth companies to provide only management’s report in the 10-K.

Filed Mar 30, 2020.
Source: SEC EDGAR, the filing index for accession 0001493152-20-005305. Last ingested by Listed: Nov 4, 2026, 18:23 ET. No prices; not investment advice.