# Co-Diagnostics, Inc.: Form 10-K for the period ended Dec 31, 2021 - Company: [Co-Diagnostics, Inc.](/companies/codx.md) (CIK 1692415) - Form: 10-K - Filed: 2022-03-24 - Accepted by EDGAR: Mar 24, 2022, 16:08 ET - Period: 2021-12-31 - Accession: 0001493152-22-007662 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1692415/000149315222007662/form10-k.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1692415/000149315222007662/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2021-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2021-01-01 to 2021-12-31 | $97.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 12 months, 2021-01-01 to 2021-12-31 | $11.6m | us-gaap:CostOfRevenue | | Gross profit | 12 months, 2021-01-01 to 2021-12-31 | $86.3m | us-gaap:GrossProfit | | Research and development | 12 months, 2021-01-01 to 2021-12-31 | $15.0m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 12 months, 2021-01-01 to 2021-12-31 | $46.1m | us-gaap:OperatingIncomeLoss | | Income tax | 12 months, 2021-01-01 to 2021-12-31 | $9.0m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2021-01-01 to 2021-12-31 | $36.7m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2021-01-01 to 2021-12-31 | $1.23 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2021-01-01 to 2021-12-31 | $1.27 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2021-01-01 to 2021-12-31 | 29,903,686 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2021-01-01 to 2021-12-31 | $41.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2021-01-01 to 2021-12-31 | $669.5k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Cash and equivalents | at 2021-12-31 | $88.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2021-12-31 | $115.1m | us-gaap:AssetsCurrent | | Total assets | at 2021-12-31 | $160.0m | us-gaap:Assets | | Current liabilities | at 2021-12-31 | $12.6m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2021-12-31 | $25.6m | us-gaap:Liabilities | | Shareholders' equity | at 2021-12-31 | $134.5m | us-gaap:StockholdersEquity | ## Business As filed, 37,194 characters. ### Overview Co-Diagnostics, Inc., a Utah corporation (the “Company” or “CODX”), develops, manufactures and sells reagents used for diagnostic tests that function via the detection and/or analysis of nucleic acid molecules (DNA or RNA), including robust and innovative molecular tools for detection of infectious diseases, liquid biopsy for cancer screening, and agricultural applications. 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”). We have also developed a unique, groundbreaking portable PCR device (the “CODX YourTest PCR™ Device”) that has been designed to bring affordable, reliable gold-standard polymerase chain reaction (“PCR”) to patients in point-of-care and even at-home settings. Our diagnostics systems enable dependable, low-cost, molecular testing for organisms and genetic diseases by automating historically complex procedures in both the development and administration of tests. CODX’s technical advance involves a novel, patented approach to PCR test design of primer and probe structure (“CoPrimers™”) that eliminates one of the key vexing issues of PCR amplification, the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely interferes with identification of the target DNA/RNA. We believe our proprietary molecular diagnostics technology is paving the way for innovation in disease detection and life sciences research through our enhanced detection of genetic material. For various reasons, including owning our own our platform, we believe we will be able to accomplish this faster and more economically, allowing for significant margins while still positioning the Company to be a low-cost provider of molecular diagnostics and screening services. In addition, continued development has demonstrated the unique properties of our CoPrimer technology that we believe makes it ideally suited for a variety of applications where specificity is key to optimal results, including multiplexing several targets, enhanced Single Nucleotide Polymorphism (“SNP”) detection and enrichment for next generation sequencing. Our scientists use the complex mathematics of DNA/RNA test design to engineer and optimize DNA/RNA tests and to automate algorithms that rapidly screen millions of possible options to pinpoint the optimum design. Dr. Brent Satterfield, our founder, developed the Company’s intellectual property consisting of the predictive mathematical algorithms and patented molecular structure used in the testing process, which together represent a major advance in PCR testing systems. CODX technologies are now protected by more than 20 granted or pending US and foreign patents, as well as certain trade secrets and copyrights. Ownership of our proprietary platform permits us the advantage of avoiding payment of patent royalties required by other PCR test systems, which may allow the sale of diagnostic PCR tests at a lower price than competitors, while enabling us to maintain profit margins. 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. Our proprietary test design process involves identifying the optimal locations on the target genes for amplification and pair the locations with the optimized primer and probe structure to achieve outputs that meet the design input requirements identified from market research. This is done by following planned and documented processes, procedures and testing. In other words, we use the data resulting from our tests to verify whether we succeeded in designing what we intended at the outset. Verification is a series of testing that concludes that the product is ready to proceed to validation in an evaluation either in our laboratory or in an independent laboratory setting using initial production tests to confirm that the product as designed meets the user needs. Using our proprietary test design system and proprietary reagents, we have designed and obtained regulatory approval in the European Community and/or in India to sell PCR diagnostic tests for the detection of COVID-19, influenza, tuberculosis, hepatitis B and C, human papillomavirus, malaria, chikungunya, dengue, and the zika virus. In the United States, CODX has obtained Emergency Use Authorization (“EUA”) for its Logix Smart™ COVID-19 detection test from the Food and Drug Administration, or FDA, and sells that test to qualified labs. In addition, our COVID-19 detection test and certain of our other suite of COVID-19 products have been approved for sale in countries such as the United Kingdom, Australia and Mexico by the regulatory bodies in those countries and have been registered for sale in many more countries. In addition to testing for infectious disease, the technology lends itself to identifying any section of a DNA or RNA strand that describe any type of genetic trait, which creates a number of significant applications. We, in conjunction with our customers, are active in designing and licensing tests that identify genetic traits in plant and animal genomes. We also have three multiplexed tests developed to test mosquitos for the identification of diseases carried by the mosquitos to enable municipalities to concentrate their efforts in managing mosquito populations on the specific areas known to be breeding the mosquitos that carry deadly viruses. On January 23, 2020, we announced the completion of the principal design work for a PCR test for the new coronavirus, later named COVID-19, intended to address the potential need for detection of the virus. This 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 (WHO) and Centers for Disease Control (CDC). On February 24, 2020, we announced that this test had obtained regulatory clearance to be sold as an IVD for the diagnosis of 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 first US-based company to obtain such a marking for a COVID-19 test. We commenced sales of the COVID-19 tests in February and March of 2020 to international customers and to date have since sold over 30,000,000 of this and other COVID tests in numerous countries around the world through an expanding distributor network. On April 6, 2020, we announced that we had received an Emergency Use Authorization from the FDA allowing us to commence sales of our Logix Smart™ COVID-19 test to laboratories certified by the Center for Medicare and Medicaid Services under the Clinical Laboratories Improvements Act (“CLIA”) to accept human samples for diagnostics testing throughout the United States and have sold our Logix Smart™ COVID-19 test to such CLIA labs since that time. Because we believe that testing for COVID-19 is going to be a consideration for public health worldwide even after the current pandemic has subsided, we have initiated the Eikon platform to facilitate frequent testing in homes, schools, businesses, and the hospitality industry. We believe this may be accomplished through the development of a low-cost testing device, easy to use by non-professionals, that can provide PCR test results in around 30 minutes. The initial project built on this platform, an at-home and point-of-care COVID-19 PCR test, was ultimately facilitated by our development of a saliva or nasal swab-based PCR test that does not require the RNA/DNA extraction. While the final result is believed to be approximately equivalent to those processed by a high-complexity clinical laboratory, it has the advantages of increased speed and ease of handling thanks to lyophilization (or freeze-drying) of our testing reagents to allow for stability at room temperatures. On February 15, 2021, we engaged the services of a group of professionals at Idaho Molecular, Inc and Advanced Conceptions, Inc (the “Entities,”) with the expertise to develop the hardware for such a device using our CoPrimers™ as the reagent chemistry. On December 22, 2021, we announced that we would be acquiring the Entities along with all existing and future assets and intellectual property related to the platform and device. It is expected that the device and test will be available to homes, schools, offices, and the travel industry among other locations at a cost that will allow screening frequently to prevent spread of the COVID-19 virus in the future. The device would also be available to test for other pathogens detectable through saliva or other samples as we develop those tests and offer them to the marketplace. All such tests will be subject to regulatory approval. ### Infectious Disease Product Offering Using our proprietary test design system and proprietary reagents, we and CoSara Diagnostics Pvt Ltd (“CoSara”), our joint venture for manufacturing in India, design and sell PCR diagnostic tests for detection of diseases and pathogens such as COVID-19, tuberculosis, hepatitis B and C, malaria, dengue, human papillomavirus, chikungunya, and Zika virus, all of which tests have been designed and verified in our laboratories. 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 the tests to be sold throughout the European community and in most countries in central and South America. In December, 2019, CoSara received a license to manufacture and sell tuberculosis, hepatitis B, hepatitis C, human papillomavirus 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 followed by an Emergency Use Authorization by the FDA a few weeks later, and in April 2020, our COVID-19 test was approved for manufacture and sale in India by the CDSCO and in Mexico by the INDRE, Mexico’s equivalent to the United States Center for Disease Control. In August 2020, we received approval from the Australian Department of Health Therapeutic Goods Division to sell our COVID-19 test in Australia. Other regulatory approvals and registrations followed those listed here. As explained above, our Logix Smart™ COVID-19 test was designed, developed, submitted for regulatory approval and ready to be used as an IVD in countries that accept a CE Mark as approval for use of the test in a period of just over 30 days. This is a real-world example of how the CODX technology can be used in an evolving epidemic to get diagnostic tools in the hands of medical professionals without delay. It can be similarly used to design a test for mutated strains of the virus should they not be detectable using currently available tests. ### Caribbean and Central and South America Our initial sales were to entities located in South and Central America. In some of those countries, there are limited regulatory hurdles so we started offering our tests immediately. We have applied for and received registrations for our tests in many of 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 a test, followed by tests for tuberculosis, our triplex test for Zika, chikungunya, and dengue. Sales of those tests have not been material, but with the granting of a CE mark for our Logix Smart™ COVID-19, we began significant sales in this region. Products are manufactured for sale upon receipt of purchase orders from distributors, labs and hospitals. ### India In January 2017, the Company 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 organized as CoSara Diagnostics, Pvt Ltd (“CoSara”). The agreement provided 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 received a license for the plant in Ranoli, India to manufacture approved tests and is being used for testing and manufacturing of our products for the Indian market. As mentioned above, the CDSCO has given us the approval for manufacture and sale of the nine tests referred above and the Company has begun manufacture and sale of those tests. The Company has commenced a reagent rental program in India with thermocyclers purchased from third-party vendors and which we refer to as our MDx Device. Each of the reagent rental placements requires the purchase of a minimum number of tests per month. The placement of thermocyclers in India has facilitated the sale of the SaraGene COVID-19 tests in India. The World Health Organization (“WHO”) 2019 Global Tuberculosis Report indicates that India is the country with the highest number of cases of tuberculosis in the world. WHO tuberculosis statistics for India for 2018 give an estimated incidence figure of 2.69 million cases of tuberculosis for India out of a global incidence of approximately 10.0 million. On March 19, 2020, we announced that CoSara received authorization to begin manufacture and sale of COVID-19 tests in India. Those tests in India are branded as SaraGene COVID-19 tests and are sold exclusively by CoSara. The Indian government places restrictions on the price that could be charged for COVID-19 tests which has limited the revenue in India more than we have experienced in other parts of the world. At the time of this report, CoSara has received CDSCO clearance for RT-PCR tests for Mycobacterium tuberculosis, malaria, hepatitis B, hepatitis C, human papillomavirus (HPV), two COVID-19 assays, chikungunya, dengue, a dengue/chikungunya duplex test, and an influenza A/influenza B/COVID-19 (“ABC”) multiplex test. ### 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 some IVDs allows for 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 also 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, and 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 six of our tests including for COVID-19, COVID-19 (2 gene test), ABC (a triplex test for Flu A, Flu B and COVID-19), a DS (Direct Saliva, extraction-free) COVID-19 test, tuberculosis, Zika, and our Zika, dengue, chikungunya triplex tests. We are ISO 13485:2016 certified, 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 and registrations in most countries. ### United States The U.S. Food and Drug Administration (FDA) has granted permission for us to export all of our IVD 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) of the FDA Act applies to medical devices that are acceptable to the importing country and that are manufactured under the FDA’s Good Manufacturing Practices. We have received EUA for our COVID-19 test, which allows sales to qualified labs in the United States. Under our EUA, we are actively selling our Logix Smart™ COVID-19 test to CLIA certified laboratories in the United States and the CLIA labs are able to use our test as it is or further validate our COVID-19 or other tests as Laboratory Developed Tests (LDTs), which refers to a diagnostic test that has been validated for use in the CLIA lab. LDTs may be used by the lab only in that laboratory. CLIA laboratories develop the performance characteristics, perform the analytical validation for their LDTs 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. We are currently marketing our Logix Smart™ COVID-19 test to CLIA laboratories throughout the US. ### Market Opportunity The market opportunity for our tests changed radically with the emergence of the COVID-19 pandemic. Because we were able to respond rapidly and produce a quality product, we have been able to build a distribution network that extends to more than 80 countries with over 50 active distributors, most of which have been the sales network that has allowed us to export products throughout the world. We believe that after the pandemic is brought under control, the network of distributors that we have built in these extra-ordinary times will serve us well in sales of other diagnostic tests. The molecular diagnostics market is a fast-growing portion of the in vitro (test tube-based, controlled environment) diagnostics market. There are several advantages of PCR tests, such as the ones we market and sell, over other forms of diagnostic testing. These advantages include higher specificity and sensitivity, the ability to perform multiplex tests and the ability to test for drug resistance or for individual genes. ### Mosquito Vector Control Services In response to market demand, we introduced our first diagnostics tests to be used exclusively to test for mosquito borne pathogens 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 mitigation operations to eliminate the mosquito populations carrying the diseases. Because it is too expensive and potentially harmful to the environment to spray all mosquito breeding areas, the solution 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 3,000 mosquito abatement districts throughout the United States and almost all of them conduct testing to help make the spraying more effective. Our first vector related test was a triplex test that tests for West Nile, western equine and St. Louis encephalitis. We began shipping the tests in June 2019. We added a second test that tests mosquitos for Zika, chikungunya and dengue in a triplex test. Finally, in November 2019, 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 as compared to performing three different tests using other market available tests, which saves our customers money. 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 might otherwise 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 testing districts in different sections of the country and are marketing our products through trade shows, electronic and regular mail solicitations. ### 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:*** CODX’s tests have been designed to run on many vendors’ DNA/RNA 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, clinical 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 technology allows us to build tests that are highly sensitive and specific, the two benchmarks for accuracy in PCR testing. - ***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, especially in at-home and POC settings, which we plan to offer. - ***Low-cost Provider:*** Our platform technology obviates the need to pay patent royalties typically required of our competitors, which use patented test platforms to design their tests. 8 - ***Worldwide Footprint:*** With a dynamic technology that encompasses markets worldwide, we anticipate that we can identify the best target markets, not only in high burden developing countries 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 sensitive tests can be a well-designed match for a new generation of handheld and other small POC devices now entering the market, including our own MDx and YourTest PCR™ devices. Used together, these affordable tests and devices may revolutionize the molecular diagnostics industry in cost, speed of test results and simplification. - ***Multiplexing:*** 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 often occur in multiplexed tests. ### Liquid Biopsy for Cancer Screening The enhanced specificity of our technology opens up some unique applications for liquid biopsy, demonstrating its ability to detect small quantities of mutations associated with cancer within an environment of large amounts of normal DNA, as we position the Company to take part in this historic and challenging development in human health care. ### 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 successfully demonstrated 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 agronomics industry, the licensee pays 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 under the name “BHQ CoPrimers™”. ### 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 generation 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 expect to 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. ### Intellectual Property Because much of our future success and value depends on our proprietary technology, our patent and intellectual property strategy is of critical importance. Five of our initial U.S. patents related to our technology have been granted by the U.S. Patent and Trademark Office (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 still pending in the United States, and another has been granted in South Korea. As of March 2022, we have an issued patent in Great Britain and India on “Rapid Oligo Probes.” We also have an issued patent in the U.S. on “Primers for Nucleic Acid Extension or Amplification Reactions.” We have another issued patent in the U.S. on “Detection of Primers for Nucleic Acid Extension or Amplification Reactions.” We have 3 patents issued in the US, as well as patents issued in Australia, Korea, and Mexico on “Cooperative Primers, Probes, and Applications Thereof.” We have applications pending in Australia, Canada, Europe, and the U.S. for “Methods and Compositions for Next Generation Sequencing (NGS) Library Preparation.” We have applications pending in the U.S. and internationally as a PCT application for “Allele-Specific Design of Cooperative Primers for Improved Nucleic Acid Variant Genotyping.” Lastly, we have a provisional application on file in the U.S. for “Methods and Compositions Related to Cooperative Primers and Reverse Transcription. 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 is used by us to develop diagnostic tests based on our technology. ### Major Customers We had certain customers which were each responsible for generating 10% or more of our total revenue for the year ended December 31, 2021. Two customers together accounted for approximately 48% of total revenue for the year ended December 31, 2021. These customers may not account for the same percentage of sales in future periods. If we were to sell nothing to those customers in the future, it would have a material adverse effect on our financial condition unless we were able to replace those customers with others. ### 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 are more recently 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 perceived as a start up with no significant respect from the medical and testing professionals, although this is changing as we continue to market our Logix Smart™ COVID-19 tests and other tests in the United States to well-known and successful laboratories. In the diagnostic testing industry, we compete with such companies as BioMerieux, Siemens, Qiagen, Cue Health, Lumira Dx and Cepheid 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. Competition is, and will likely continue to be, particularly intense in the market for COVID-19 diagnostic tests. Numerous companies in the United States and internationally have announced their intention to offer new products, services and technologies that could be used in substitution for our Logix Smart™ COVID-19 tests. Many of those competitors are significantly larger, and have substantially greater financial, engineering and other resources, than our company. Existing and potential competitors in the market for COVID-19 diagnostic tests include developers of serological, antigen and molecular tests. We also compete with companies from Asia in certain markets who are willing to sell their tests for much less than we sell our tests, which creates competitive price pressure on us. We expect competition to continue to increase as other established and emerging companies enter the market, as customer requirements evolve, and as new products, services and technologies are introduced. The entrance of new competitors is being encouraged by governmental authorities, who are offering funding to support development of testing solutions for COVID-19. Some of our existing or new competitors may have strong relationships with current and potential customers, including governmental authorities, and, as a result, may be able to respond more quickly to new or changing regulatory requirements, new or emerging technologies, and changes in customer requirements. ### Government Regulation In the United States, we are regulated by the FDA and our products must be approved, cleared, or authorized by the FDA before we are allowed to sell our tests in the United States as *in vitro* diagnostics. The FDA granted us an EUA to manufacture and sell our Logix Smart™ COVID-19 test to CLIA labs in the United States. Being ISO certified greatly facilitates our applications for CE-Marking, which allows us to sell any CE Marked test in most countries in Europe, South America and Asia, depending on the country and following that country’s registration process. We currently have CE Markings issued for our Logix Smart™ COVID-19 test, tuberculosis test, our Zika virus test, a triplex test that tests for Zika, dengue, and chikungunya simultaneously, a triplex “ABC” test that identifies and distinguishes between Flu A, Flu B and Covid-19, our SARS-CoV-2 2-gene multiplex test, and our DS (Direct Saliva, extraction-free) COVID-19 test. In addition, our Logix Smart™ COVID-19 has received the license to manufacture and sell in India from India’s CDSCO and the National Epidemiology Institute in Mexico evaluated our Logix Smart™ COVID-19 and ABC tests and approved them for sale in Mexico. We have also received approval to sell in Australia. We are in the process of registering for sale our Logix Smart™ COVID-19 and other tests in a number of major countries around the world. ### Employees As of December 31, 2021, we had 101 full-time and part-time employees at our executive offices and lab facilities in Salt Lake City, Utah. We have engaged independent contractors in India to promote the use of our products and develop outlets for products and employ the services of independent sales representatives on an “as needed” basis. ### 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 www.codiagnostics.com. The contents of our website are not incorporated by reference in this Annual Report. ### 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 received from other public companies. 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. ## Risk factors As filed, 15,702 characters. ### Risks Related to Our Business and Industry ***We have a limited commercial history upon which to base our prospects and are not certain that we will sustain profitability in the future.*** We began operations in April 2013, and we have a limited operating history. We were profitable for the years ended December 31, 2021 and 2020, respectively. Our accumulated retained earnings were $54.2 million and $17.5 million as of December 31, 2021 and 2020, respectively. We realized net income for the first time for the three months ended June 30, 2020. We were able to achieve net income during the prior two fiscal years because we were able to develop, market and profitably sell our LogixSmart COVID-19 and other COVID-19 tests, but we do not have any way to predict how long our market for that test will continue. Potential investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses in the course of developing new diagnostic tests, establishing or entering new markets, organizing operations and marketing procedures. The likelihood of our success must be considered in light of these risks, expenses, complications and delays, and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business plan will continue to prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the start-up nature of our business, we can be expected to continue to sustain substantial operating expenses and may not be able to continue generating sufficient revenues to cover expenditures. Any investment in our company is therefore highly speculative and could result in the loss of any investment. ***Our near-term success has been dependent on the market for our COVID-19 tests and future success is dependent on continued demand for COVID-19 diagnostics and upon our ability to develop and market other commercially accepted diagnostic tests.*** Our future success will depend, in part, on the continued market for COVID-19 tests, our ability to develop and sell sufficient quantities of other diagnostics tests, and our ability to successfully receive regulatory approval for and profitably market our “YourTest PCR™ Device.” Attracting new customers and distribution networks requires substantial time and expense. Any failure to continue sales of our tests in sufficient quantities to maintain profitability would adversely affect our operating results. Many factors could affect the market acceptance and commercial success of any of our diagnostic tests and devices, including: - 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. ### General Risk Factors ### The price of our common stock may fluctuate substantially. The market price of our common stock may be subject to wide fluctuation in response to various factors, some of which are beyond our control. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this report, are: - 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; 13 - 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. In addition, if the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. ***Future sales of our common stock in the public market may cause our stock price to decline and impair our ability to raise future capital through the sale of our equity securities.*** There are a substantial number of shares of our common stock held by shareholders who owned shares of our capital stock prior to our initial public offering that may be able to sell in the public market. Sales by such shareholders of a substantial number of shares could significantly reduce the market price of our common stock. Shares issued by us upon exercise of options granted under our equity plan will be eligible for sale in the public market. If any of these holders cause a large number of securities to be sold in the public market, the sales could reduce the trading price of our common stock. These sales also could impede our ability to raise capital in the future. ***Anti-takeover provisions in our charter documents and Utah law could discourage delay or prevent a change of control of our Company and may affect the trading price of our common stock.*** We are a Utah corporation and the anti-takeover provisions of the Utah Control Shares Acquisition Act may discourage, delay or prevent a change of control by limiting the voting rights of control shares acquired in a control share acquisition. In addition, our Articles of Incorporation and Bylaws may discourage, delay or prevent a change in our management or control over us that shareholders may consider favorable. Among other things, our Amended and Restated Articles of Incorporation and Bylaws: - 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. 14 These provisions could have the effect of delaying or preventing a change of control, whether or not it is desired by, or beneficial to, our shareholders. ***NASDAQ may delist our common stock from its exchange, which could limit investors’ ability to make transactions in our common stock and subject us to additional trading restrictions.*** Should we fail to satisfy the continued listing requirements of the NASDAQ Capital Market, such as the corporate governance requirements or the minimum closing bid price requirement, NASDAQ may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would take actions to restore our compliance with the NASDAQ Capital Market’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NASDAQ Capital Market’s minimum bid price requirement or prevent future non-compliance with the NASDAQ Capital Market’s listing requirements. If the NASDAQ Capital Market does not maintain the listing of our securities for trading on its exchange, we could face significant material adverse consequences, including: - 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. Therefore, it may be difficult for our shareholders to sell any shares if they desire or need to sell them. ### We do not currently intend to pay dividends on our common stock. We do not expect to pay cash dividends on our common stock. Any future dividend payments are within the absolute discretion of our board of directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, contractual restrictions, business opportunities, anticipated cash needs, provisions of applicable law and other factors that our board of directors may deem relevant. We may not generate sufficient cash from operations in the future to pay dividends on our common stock. ***We are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.*** We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Investors may find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.0 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (iii) the date on which we have issued more than $1.0 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 the rules of the Securities and Exchange Commission. ***We have elected to use the extended transition periods for complying with new or revised accounting standards.*** We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transaction period provided in Section 7(a)(2)(B). As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates. ### Our management is required to devote substantial time to compliance initiatives. As a public company, we incur significant legal, accounting and other expenses that we did not incur as a newly formed entity. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the Securities and Exchange Commission, and NASDAQ, have imposed various new requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time consuming and costly. We expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. ## Properties As filed, 416 characters. Our headquarters are located at 2401 S. Foothill Drive, Salt Lake City, Utah. Our current facility has approximately 14,000 square feet of laboratory and office space under a lease that expires in February 2024. Our recently acquired subsidiaries also lease additional laboratory and office space under month-to-month leases. We believe the facility we lease is sufficient to meet our needs for the immediate future. ## Legal proceedings As filed, 3,132 characters. In July 2020, we were served in an action filed in the United States District Court for the District of Utah claiming that the Company promulgated false and misleading press releases to increase the price of our stock to improperly benefit the officers and directors of the Company. The Plaintiff, Gelt Trading, Ltd., a Cayman Islands limited company, demands compensatory damages sustained as a result of our alleged wrongdoing in an amount to be proven at trial. We will vigorously defend this action as we do not believe it has any merit. In July 2020, we were served in an action filed in the United States District Court for the District of Utah claiming that the Company promulgated false and misleading press releases to increase the price of our stock to improperly benefit the officers and directors of the Company. The Plaintiff, Fernando Hernandez demands compensatory damages sustained as a result of our alleged wrongdoing in an amount to be proven at trial. We will vigorously defend this action as we do not believe it has any merit. In September 2020, we were served in an action filed in the United States District Court for the District of Utah claiming that the officers and the directors harmed the Company by promulgating false and misleading press releases to increase the price of our stock to improperly benefit the officers and directors of the Company. The Plaintiff, Luis Aguliera, on behalf of Co-Diagnostics, Inc. seeks damages from the individual defendants and attorneys’ fees. We will vigorously defend this as we do not believe it has any merit. In December 2020, we were served in an action filed in the United States District Court for the District of Utah claiming that the officers and the directors harmed the Company by promulgating false and misleading press releases to increase the price of our stock to improperly benefit the officers and directors of the Company. The Plaintiff, Melvyn Klein, on behalf of Co-Diagnostics, Inc. seeks damages from the individual defendants and attorneys’ fees. We will vigorously defend this as we do not believe it has any merit. In December 2020, we were served in an action filed in the United States District Court for the District of Utah claiming that the officers and the directors harmed the Company by promulgating false and misleading press releases to increase the price of our stock to improperly benefit the officers and directors of the Company. The Plaintiff, Mathew Wallace, on behalf of Co-Diagnostics, Inc. seeks damages from the individual defendants and attorneys’ fees. We will vigorously defend this as we do not believe it has any merit. From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business. Although we have received inquiries from FINRA, NASDAQ and the SEC, to which we have responded, 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. ## Management's discussion and analysis As filed, 17,948 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. In addition to historical information, this Annual Report contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption “Item 1A. Risk Factors” in this Annual Report on Form 10-K. ### Business Overview Co-Diagnostics, Inc., a Utah corporation (the “Company” or “CODX”), develops, manufactures and sells reagents used for diagnostic tests that function via the detection and/or analysis of nucleic acid molecules (DNA or RNA), including robust and innovative molecular tools for detection of infectious diseases, liquid biopsy for cancer screening, and agricultural applications. 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”). We have also developed a unique, groundbreaking portable PCR device (the “YourTest PCR™ Device”) that has been designed to bring affordable, reliable gold-standard polymerase chain reaction to patients in point-of-care and even at-home settings. Our diagnostics systems enable dependable, low-cost, molecular testing for organisms and genetic diseases by automating historically complex procedures in both the development and administration of tests. CODX’s technical advance involves a novel, patented approach to PCR test design of primer and probe structure (“CoPrimers™”) that eliminates one of the key vexing issues of PCR amplification, the exponential growth of primer-dimer pairs (false positives and false negatives) which adversely interferes with identification of the target DNA/RNA. We believe our proprietary molecular diagnostics technology is paving the way for innovation in disease detection and life sciences research through our enhanced detection of genetic material. For various reasons, including owning our own our platform, we believe we will be able to accomplish this faster and more economically, allowing for significant margins while still positioning the Company to be a low-cost provider of molecular diagnostics and screening services. In addition, continued development has demonstrated the unique properties of our CoPrimer technology that we believe makes it ideally suited for a variety of applications where specificity is key to optimal results, including multiplexing several targets, enhanced Single Nucleotide Polymorphism (“SNP”) detection and enrichment for next generation sequencing. Our scientists use the complex mathematics of DNA/RNA test design to engineer and optimize DNA/RNA tests and to automate algorithms that rapidly screen millions of possible options to pinpoint the optimum design. Dr. Brent Satterfield, our founder, developed the Company’s intellectual property consisting of the predictive mathematical algorithms and patented molecular structure used in the testing process, which together represent a major advance in PCR testing systems. CODX technologies are now protected by more than 20 granted or pending US and foreign patents, as well as certain trade secrets and copyrights. Ownership of our proprietary platform permits us the advantage of avoiding payment of patent royalties required by other PCR test systems, which may allow the sale of diagnostic PCR tests at a lower price than competitors, while enabling us to maintain profit margins. 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. Our proprietary test design process involves identifying the optimal locations on the target genes for amplification and pair the locations with the optimized primer and probe structure to achieve outputs that meet the design input requirements identified from market research. This is done by following planned and documented processes, procedures and testing. In other words, we use the data resulting from our tests to verify whether we succeeded in designing what we intended at the outset. Verification is a series of testing that concludes that the product is ready to proceed to validation in an evaluation either in our laboratory or in an independent laboratory setting using initial production tests to confirm that the product as designed meets the user needs. Using our proprietary test design system and proprietary reagents, we have designed and obtained regulatory approval in the European Community and/or in India to sell PCR diagnostic tests for the detection of COVID-19, influenza, tuberculosis, hepatitis B and C, human papillomavirus, malaria, chikungunya, dengue, and the zika virus. In the United States, CODX has obtained Emergency Use Authorization (“EUA”) for its Logix Smart™ COVID-19 detection test from the Food and Drug Administration, or FDA, and sells that test to qualified labs. In addition, our COVID-19 detection test and certain of our other suite of COVID-19 products have been approved for sale in countries such as the United Kingdom, Australia and Mexico by the regulatory bodies in those countries and have been registered for sale in many more countries. In addition to testing for infectious disease, the technology lends itself to identifying any section of a DNA or RNA strand that describe any type of genetic trait, which creates a number of significant applications. We, in conjunction with our customers, are active in designing and licensing tests that identify genetic traits in plant and animal genomes. We also have three multiplexed tests developed to test mosquitos for the identification of diseases carried by the mosquitos to enable municipalities to concentrate their efforts in managing mosquito populations on the specific areas known to be breeding the mosquitos that carry deadly viruses. ### RESULTS OF OPERATIONS ### Results of Operations for the Years Ended December 31, 2021 and 2020 The table below provides a comparison of our operating results for the year ended December 31, 2021 as compared to the year ended December 31, 2020. | | Years Ended December 31, 2021 | 2020 | Year Change Change% | | | --- | ---: | ---: | ---: | ---: | | Revenue | $97,885,603 | $74,552,758 | $23,332,845 | 31% | | Cost of revenue | 11,574,944 | 16,591,346 | (5,016,402) | -30% | | Gross profit | 86,310,659 | 57,961,412 | 28,349,247 | 49% | | Operating expenses | | | | | | Sales and marketing | 13,397,813 | 4,665,113 | 8,732,700 | 187% | | General and administrative | 11,550,615 | 8,278,734 | 3,271,881 | 40% | | Research and development | 14,961,916 | 3,185,290 | 11,776,626 | 370% | | Depreciation and amortization | 335,363 | 138,635 | 196,728 | 142% | | Total operating expenses | 40,245,707 | 16,267,772 | 23,977,935 | 147% | | Income from operations | 46,064,952 | 41,693,640 | 4,371,312 | 10% | | Other income (expense) | | | | | | Interest income | 45,631 | 97,215 | (51,584) | -53% | | Loss on disposition of assets | (44,355) | (175) | (44,180) | 25246% | | Gain (loss) on equity method investment in joint venture | (430,433) | 778,385 | (1,208,818) | -155% | | Total other income (expense) | (429,157) | 875,425 | (1,304,582) | -149% | | Income before income taxes | 45,635,795 | 42,569,065 | 3,066,730 | 7% | | Income tax provision | 8,977,231 | 90,536 | 8,886,695 | 9816% | | Net income | $36,658,564 | $42,478,529 | $(5,819,965) | -14% | ### Revenues For the year ended December 31, 2021, we generated $97.9 million of revenue compared to revenue of $74.5 million in the year ended December 31, 2020. The increase in revenue of $23.3 million was primarily due to sales of our LogixSmart COVID-19 test throughout the world, which was developed in response to the current COVID-19 pandemic. Of the total revenue in 2021 and 2020, respectively, $0.5 million and $3.7 million was from the sale of third party manufactured equipment and supplies that we sourced and sold to customers to facilitate usage of our test. ### Cost of Revenues and Gross Profit Cost of revenues decreased by $5.0 million from $16.6 million for the year ended December 31, 2020 to $11.6 million for the year ended December 31, 2021. The decrease in cost of revenues was due to a reduction of production costs and the reduction in sales of third-party equipment, which have a higher cost of sales than tests, and the commission structure of certain sales of tests sold during the year. Our gross margin was 88.2% for the year ended December 31, 2021 compared to 77.7% for the year ended December 31, 2020. The increase in gross margin was due to the reduction of production costs, as well as the mix of products we sold, with the majority of our 2021 revenue came from sales of our test reagents, which has a higher profit margin than sales of equipment. ### Operating Expenses We incurred total operating expenses of $40.2 million for the year ended December 31, 2021 compared to total operating expenses of $16.3 million for the year ended December 31, 2020. The increase in operating expenses was primarily due to the increase in business activities experienced as a result of our increase in revenue, increased third party sales commissions, reflected in sales and marketing, and increased investment in research and development. Sales and marketing expenses for the year ended December 31, 2021 were $13.4 million compared to $4.7 million for the year ended December 31, 2020. The increase of $8.7 million was primarily a result of increased expenses related to stock-based compensation, and personnel related expenses, including commissions paid to our sales team and distributors, due to the growth in revenue noted above. General and administrative expenses increased $3.3 million from $8.3 million for the year ended December 31, 2020 to $11.6 million for the year ended December 31, 2021. The increase in general and administrative expenses was primarily due to increased activity to support the growth of our business. The primary drivers of the increased expenses related to increases in stock-based compensation, employee related expenses and increased expenses for professional services. Our research and development expenses increased by $11.8 million from $3.2 million for the year ended December 31, 2020, to $15.0 million for the year ended December 31, 2021. The primary increase in expenses related to expenditures of over $9.2 million for our point-of-care device, as well as increases in salaries and related benefits, including stock-based compensation, as we have added additional employees to our research and development team to increase our product development activities. Additionally, there has been an increase in professional and lab services utilized to further help us in our research and product development activities. ### Other Income (Expense) Other expense was $0.4 million for the year ended December 31, 2021, compared to other income of $0.9 million for the year ended December 31, 2020. The decrease in other income of $1.3 million was primarily related to recording a loss of $0.4 million in 2021 from our India joint venture. For the year ended December 31, 2020 we recorded a gain of $0.8 million from our India joint venture. ### Net Income We realized net income for the year ended December 31, 2021 of $36.7 million compared to net income of $42.5 million for the year ended December 31, 2020. The decrease in net income of $5.8 million was primarily the result of sales of our LogixSmart COVID-19 test and resulting margins from those sales offset by increased operating expenses as discussed above. Additionally, we recorded income tax expense of $9.0 million during the year ended December 31, 2021, compared to $0.1 million for the year ended December 31, 2020. During 2020, we released our deferred tax asset valuation allowance and recorded a deferred tax asset since we utilized our net operating losses from prior years during the year ended December 31, 2020. ### LIQUIDITY AND CAPITAL RESOURCES At December 31, 2021, we had cash and cash equivalents of $88.6 million and marketable investment securities of $1.3 million that could readily be converted into cash if needed. Additionally, our total current assets at December 31, 2021, were $115.1 million compared to total current liabilities of $12.6 million. Net cash provided by operating activities during the year ended December 31, 2021 was $41.1 million, compared to $28.2 million for the year ended December 31, 2020. The increase in cash from operating activities was primarily due to our increased revenue and decrease in inventory, offset by increases in accounts receivable. We received $4.1 million of cash from investing activities during the year ended December 31, 2021 as compared to $5.8 million of cash used in investing activities during the year ended December 31, 2020. The increase in cash provided by investing activities is primarily due to net cash acquired from business acquisitions and proceeds received from maturities of marketable investment securities. Net cash provided by financing activities was $0.5 million for the year ended December 31, 2021, compared to $19.7 million for the year ended December 31, 2020. The decrease is primarily due to net proceeds of $18.0 million received from a series of three registered direct offerings in 2020 pursuant to our shelf registration in addition to receiving $1.7 million from the exercise of warrants and options for the year ended December 31, 2020. Since commencing sales of our Logix Smart™ COVID-19 test in March 2020, we have used our cash generated from those sales to fund the purchase of inventories and the development of our point-of-care device, and to pay our operating expenses. We have increased our work force most significantly in research and development in order to continue development of a new device and additional tests that will enable continued use of our distributor network to sell additional products throughout the world. We believe that our existing capital resources and the cash generated from future sales will be sufficient to meet our projected operating requirements for the next 12 months. However, our available capital resources may be consumed more rapidly than currently expected and we may need or want to raise additional financing for strategic opportunities. If needed, we expect additional investment capital to come from (i) additional issuances of our common stock with existing and new investors or (ii) the private placement of other securities with investors similar to those that have provided funding in the past. We may not be able to secure such financing in a timely manner or on favorable terms, if at all. On October 30, 2020, we filed a Registration Statement on Form S-3 (File No: 333-249651) with the Securities and Exchange Commission (the “SEC”). The SEC declared the Form S-3 effective on November 5, 2020. Pursuant to a prospectus supplement to the Form S-3, we may offer and sell up to $100 million of the following securities separately or together, in one or more series or classes and in amounts, at prices and on terms described in one or more offerings: common stock; preferred stock; warrants to purchase our securities, each of which may be convertible into equity securities; or units comprised of, or other combinations of, the foregoing securities through underwriting syndicates managed or co-managed by one or more underwriters or dealers, through agents or directly to purchasers. Each time our securities are offered, we will provide a prospectus supplement to the Form S-3 containing more specific information about the particular offering. To date, we have not filed a prospectus supplement to, or sold any securities under, this Form S-3. Below is a summary of the direct offerings done in 2020: - 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 $5.0 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 $4.0 million. The closing of the offering occurred on or about February 28, 2020. 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 revenue and expenses fluctuate from period to period. ### Off-Balance Sheet Arrangements As of December 31, 2021 and 2020, we had no off-balance sheet arrangements. ## Controls and procedures As filed, 4,881 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. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on the evaluation, management has concluded that our disclosure controls and procedures are effective as of December 31, 2021 to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. ### Changes in Internal Control Over Financial Reporting There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a- 15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ### 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, 2021. 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 effective as of December 31, 2021. 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. ### Inherent Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are intended to be designed to provide reasonable assurance of achieving their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected. Filed Mar 24, 2022. Source: SEC EDGAR, the filing index for accession 0001493152-22-007662. Last ingested by Listed: Nov 4, 2026, 18:23 ET. No prices; not investment advice.