Item 1A. Risk Factors. 13
Item 1B. Unresolved Staff Comments. 25
Item 1C. Cybersecurity 26
Item 2. Properties. 27
Item 3. Legal Proceedings. 27
Item 4. Mine Safety Disclosures. 28
PART II
Item 6. [Reserved.] 30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 34
Item 8. Financial Statements and Supplementary Data. 35
Item 9A. Controls and Procedures. 55
Item 9B. Other Information. 56
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. 56
PART III
Item 10. Directors, Executive Officers and Corporate Governance. 56
Item 11. Executive Compensation. 61
Item 14. Principal Accountant Fees and Services. 65
PART IV
Item 15. Exhibits and Financial Statement Schedules. 66
PART
I
Forward-Looking
Statements
This
Annual Report on Form 10-K contains “forward-looking statements” that involve risks and uncertainties. All statements other
than statements of historical fact contained in this Annual Report and the documents incorporated by reference herein, including statements
regarding future events, our future financial performance, business strategy, and plans and objectives of management for future operations,
are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,”
“believes,” “can,” “continue,” “could,” “estimates,” “expects,”
“intends,” “may,” “plans,” “potential,” “predicts,” “should,”
or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements
unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions
and involve known and unknown risks, uncertainties and other factors which may affect our or our industry’s actual results, levels
of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a highly regulated,
very competitive, and rapidly changing environment. New risks emerge from time to time, and it is not possible for us to predict all
risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors,
may cause our actual results to differ materially from those contained in any forward-looking statements.
We
have based these forward-looking statements largely on our current expectations and projections about future events and financial trends
that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations,
and financial needs. These forward-looking statements are subject to certain risks and uncertainties that could cause our actual results
to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this Annual Report, and in particular, the risks discussed under “Item 1,
Business,” “Item 1A, Risk Factors,” and “Item 7, Management’s Discussion and Analysis of Financial Condition
and Results of Operations,” and those discussed in other documents we file with the Securities and Exchange Commission (the
“SEC”). In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in
this Annual Report may not occur as described and actual results could differ materially and adversely from those anticipated or implied
in the forward-looking statement.
Important
factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation:
● our ability to obtain regulatory approval to market and sell our products;
● the results of clinical evaluations of our product candidates;
● market acceptance of any products that may be approved for commercialization;
● our ability to protect our intellectual property rights;
● the impact of any infringement actions or other litigation brought against us;
● competition from other providers and products;
● changes in government regulation;
Should
one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated, expected, intended or planned.
Given
these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements. Forward-looking statements
contained in this Annual Report speak only as of the date of this Annual Report. We undertake no obligation to update any forward-looking
statements as a result of new information, events or circumstances or other factors arising or coming to our attention after the date
hereof.
As
used in this Annual Report, the terms “we”, “us”, “our”, “Company”, “CODX”
and “Co-Diagnostics” means Co-Diagnostics, Inc., a Utah corporation and its consolidated subsidiaries (the “Company”),
unless otherwise indicated.
ITEM
1: 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. Our diagnostics systems enable dependable, low-cost, molecular testing for organisms and
genetic diseases by automating or simplifying historically complex procedures in both the development and administration of tests. CODX’s
technical advance involves a novel, proprietary approach to PCR test design of primer and probe structure (“Co-Primers®”)
that dramatically reduces one of the key vexing issues of PCR amplification: the exponential growth of primer-dimer amplification (false
positives) which adversely interferes with identification of the target DNA/RNA. Using our proprietary test design system and reagents,
we have designed and obtained regulatory approval 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. These initial diagnostic tests are cleared
for use in clinical labs only and not for point-of-care or at-home use.
We
are currently developing a unique, groundbreaking portable diagnostic device and test system designed for point-of-care and at-home use.
The system is comprised of our PCR instrument that we refer to as the Co-DxTM PCR ProTM instrument, our patent-pending diagnostic
test cup system and a mobile application to be installed on the user’s mobile device. We refer to the system as the “Co-DxTM
PCR platform which has been designed to bring affordable, reliable polymerase chain reaction (“PCR”) testing to patients
in point-of-care and at-home settings. The Co-Dx PCR platform is subject to U.S. Food and Drug Administration (“FDA”) review
and is not available for sale at the time of this filing. In June 2024, we completed our first U.S. Food and Drug Administration (FDA)
application for 510(k) clearance for the Co-DxTM PCR ProTM instrument, the Co-Dx PCR COVID-19 Test, and the Co-Dx PCR mobile
app for over-the-counter (OTC) use. Following productive engagement with the FDA related to the regulatory submission, the Company withdrew
its 510(k) application. The decision to withdraw the submission was based on discussions with the FDA regarding the ability to detect
a potential deterioration of one component of the test, related to shelf-life stability. Following dialogue with the FDA and exploring
the various courses of action available, we determined that the best long-term solution would be to submit a version of the test that
has been enhanced to address the matter raised in the 510(k) review process. The Company plans to submit the next iteration of the Co-Dx
PCR COVID-19 test for 510(k) OTC clearance, following the collection of clinical evaluation data to support the new test’s performance.
A new submission also allows the Company to incorporate more recent Co-Dx PCR platform developments into the COVID-19 test, which Co-Dx
believes will also help create greater operational and manufacturing efficiencies, such as consolidating manufacturing processes to utilize
the next generation of test kits and instruments across all tests on the at-home and point-of-care Co-Dx PCR platform. There is no guarantee
that our Co-Dx PCR platform will receive the necessary regulatory approvals for commercialization, or that, if regulatory approval is
received, we will be able to successfully commercialize this platform.
Technology
We
believe our proprietary and patented 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 platform, we believe
we will be able to accomplish this faster and more economically than some competitors, allowing for significant margins while still positioning
ourselves as a low-cost provider of molecular diagnostics and screening services. For example, we were the first US-based company to
receive a CE-marking for a COVID-19 test in early 2020, as we worked to help slow the spread of the pandemic through our global network
of distributors covering clinical labs in more than 50 countries. Our Logix Smart® COVID-19 test was designed, developed, submitted
for regulatory approval and ready to be used as an in vitro diagnostic or IVD in countries that accept CE marking for regulatory clearance
in a period of just over 30 days. This is a real-world example of how CODX technology can be used in an evolving epidemic or pandemic
to get diagnostic tools in the hands of medical professionals in a timely manner. It can be similarly used to design a test for mutated
strains of SARS-CoV-2 or other viruses should they not be detectable using currently available tests.
In
addition, continued development has demonstrated the unique properties of our Co-Primers 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 PCR test design to engineer and optimize PCR tests and to automate algorithms that
rapidly screen millions of possible options to pinpoint the optimum design. The intellectual property we use in our business consists
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.
Our
proprietary test design process involves identifying the optimal locations on the target genes for amplification and pairing 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. Verification involves 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 reagents, we have designed and obtained regulatory approval in the European Community and 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, we obtained Emergency Use Authorization (“EUA”) for our Logix
Smart® COVID-19 detection test from the FDA, and we sell that test to qualified labs.
In addition, our COVID-19 detection test and certain of our other suite of COVID-19 products have been cleared for sale in countries
such as the United Kingdom, Australia, India, and Mexico by the regulatory bodies in those countries and have been registered for sale
in many more countries. In connection with the sale of our tests we may sell diagnostic equipment from other manufacturers, including
an OEM’s PCR instrument which we refer to here as the “Co-Dx Box”.
In addition to testing for infectious disease, Co-Primers technology lends
itself to identifying any section of a DNA or RNA strand that describes any type of genetic trait, which creates several significant applications.
We, in conjunction with our customers, have designed and licensed tests that identify genetic traits in plant and animal genomes. We also
have commercialized three multiplexed tests to test mosquitos for the presence of diseases they carry, which enables municipalities to
concentrate their efforts in managing mosquito populations in specific areas where mosquitos carrying deadly viruses are known to breed.
Co-Dx
PCR Platform
We
believe the benefits of affordable, high-quality diagnostics should be available to everyone. High-quality point-of-care polymerase chain
reaction (“PCR”) testing plays a crucial role in healthcare. It enables rapid diagnosis of infectious diseases, such as COVID-19
or tuberculosis, facilitating timely treatment and containment measures. By delivering results on-site, it eliminates the need for sample
transportation, reducing the risk that the sample is transported incorrectly or lost, reducing turnaround time to results, and
allowing for immediate decision-making. Gold-standard PCR testing at the point of care ensures reliable detection of pathogens, minimizing
incorrect results. In short, high-quality PCR testing at home and at the point of care enhances patient care, public health response,
and helps control the spread of infectious diseases. That is why we are developing the Co-Dx PCR platform utilizing our Co-PrimersTM
real-time PCR technology for at-home and point-of-care testing. Because we believe that testing for COVID-19 and other infectious diseases
will continue to be a consideration for public health worldwide, we initiated the Co-Dx PCR platform to facilitate frequent, affordable,
reliable PCR testing to patients in point-of-care and at-home settings, including schools, businesses, and the hospitality industry.
We believe this may be accomplished through the development of a testing platform comprised of a compact, relatively low-cost testing
device, the Co-Dx PCR Pro instrument, together with patent-pending diagnostic test cups that work with the instrument and an intuitive
mobile application, that is easy to use by professionals and non-professionals, all of which can provide PCR test results in around 30
minutes. As user test results are analyzed and anonymized in the cloud, we believe this data may be useful for governmental health agencies
and the World Health Organization to determine where outbreaks of infectious diseases may be occurring and to enable them to act more
quickly and efficiently to slow-down or perhaps even prevent further spread.
The
6 1⁄2” x 4 1/2” x 6”, 2 lbs. Co-Dx PCR Pro instrument operates via a smartphone app with simple-to-follow instructions
that includes videos to walk users through every step, from sample swab collection to the straightforward instrument operation. Results
are processed in the cloud and delivered back to the user’s smartphone or tablet in about 30 minutes using software designed from
the ground-up for this specific use. The PCR tests themselves (contained in the simple but unique, innovative test collection cups) are
powered by patented Co-Dx Co-Primers PCR technology.
The
initial diagnostic test designed for use 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 RNA/DNA extraction (standard in laboratory-based PCR
testing). The final result is believed to be approximately equivalent to those processed by a high-complexity clinical laboratory. Our
COVID-19 PCR platform test has the advantages of increased speed over clinical laboratories, with results in around 30 minutes compared
to hours or even days, and ease of handling thanks to lyophilization (or freeze-drying) of our testing reagents to allow for storage
at room temperatures. In December 2023, we submitted our proprietary Co-Dx PCR COVID-19 test cups, together with the Co-Dx PCR Pro instrument
and mobile application, all designed for use in point-of-care and at-home settings, for review by the U.S. Food and Drug Administration
(FDA) for Emergency Use Authorization (EUA). In June 2024, we completed our first FDA application for 510(k) clearance for the Co-Dx
PCR Pro instrument, the Co-Dx PCR COVID-19 Test, and the Co-Dx PCR mobile app for over-the-counter (OTC) use. Following productive engagement
with the FDA related to the regulatory submission the Company withdrew its 510(k) application. The decision to withdraw the submission
was based on discussions with the FDA regarding the ability to detect a potential deterioration of one component of the test, related
to shelf-life stability. Following dialogue with the FDA and exploring the various courses of action available, we determined that the
best long-term solution would be to submit a version of the test that has been enhanced to address the matter raised in the 510(k) review
process. The Company plans to submit the next iteration of the Co-Dx PCR COVID-19 test for 510(k) OTC clearance, following the collection
of clinical evaluation data to support the new test’s performance. A new submission will also allow the Company to incorporate
more recent Co-Dx PCR platform developments into the COVID-19 test, which Co-Dx believes will also help create greater operational and
manufacturing efficiencies, such as consolidating manufacturing processes to utilize the next generation of test kits and instruments
across all tests on the at-home and point-of-care Co-Dx PCR platform.
We
expect to develop further diagnostic tests for use with the PCR Pro instrument, including a multiplex test for influenza A and B, RSV
and COVID-19. To that effect, in July 2023 we were awarded $1.2 million in funding from the National Institutes of Health (NIH) as part
of the Rapid Acceleration of Diagnostics (RADx®) Tech program for development of our upper respiratory panel diagnostic test for
use on the Company’s Co-Dx PCR platform. We are utilizing the funds from the RADx Tech award to complete development of our flu
A/B, COVID-19, and RSV multiplex test, preparatory for that test to begin clinical trials on the Co-Dx PCR Pro instrument. The NIH launched
the RADx initiative on April 29, 2020, with the goal of speeding innovation in the development, commercialization, and implementation
of technologies for COVID-19 testing, leveraging the existing NIH Point-of-Care Technology Research Network. The RADx Tech program is
managed by the National Institute of Biomedical Imaging and Bioengineering (NIBIB), to support the accelerated development of tests and
provide regulatory guidance during the COVID-19 pandemic and beyond.
We
are also developing diagnostics tests for TB and HPV for use with our Co-Dx PCR platform. We have been awarded two grants totaling $6.8
million for the TB test and one grant totaling $987,000 for the HPV test by the Bill & Melinda Gates Foundation to support the development
and manufacture of these tests for our Co-Dx PCR platform. In 2014, all United Nations Member States and the World Health Organization
(WHO) committed to ending the global TB epidemic by 2030, before the COVID-19 pandemic slowed, stalled or reversed progress of global
TB targets. The WHO reported a worldwide gap of roughly 2.7 million unidentified cases between the reported number of newly diagnosed
TB cases in 2023 and the estimated number of incident cases, highlighting the need for a dramatic increase of affordable, high-quality,
point-of-care TB diagnostics to enable rapid treatment decisions to be made for a disease that has a mortality rate of about 50% if left
untreated. The National Cancer Institute estimates that high-risk HPVs cause roughly 5% of all cancers worldwide, including cervical
cancer, the fourth most common cancer in women and which led to an estimated 350,000 cervical cancer deaths in 2022 according to the
WHO. About 94% of these deaths are in low- and middle-income countries, and all of which the WHO believes can be dramatically reduced
by access to diagnostics, vaccinations, and cancer screenings.
Infectious
Disease Product Offering
Using
our proprietary test design system and reagents, we and CoSara Diagnostics Pvt Ltd (“CoSara”), our consolidated joint venture
for development and manufacturing in India, design and sell PCR diagnostic tests for detection of diseases and pathogens such as COVID-19,
influenza, 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 tests received CE marking in 2018, and a triplex test
for Zika, dengue and chikungunya received CE marking 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 CE marking for our Logix Smart COVID-19 test followed by an EUA by the FDA in April 2020. Also, 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.
As
explained above, our Logix Smart COVID-19 test was designed, developed, submitted for regulatory clearance and ready to be used as an
in vitro diagnostic or IVD in countries that accept CE marking for regulatory clearance in a period of just over 30 days. This
is a real-world example of how CODX technology can be used in an evolving epidemic or pandemic to get diagnostic tools in the hands of
medical professionals in a timely manner. It can be similarly used to design a test for mutated strains of SARS-CoV-2 or other viruses
should they not be detectable using currently available tests.
Caribbean
and Central and South America
We
began selling PCR diagnostic tests to entities located in South and Central America and the Caribbean in 2018. In some of those countries,
there are limited regulatory hurdles, which allowed us to begin offering our tests immediately with CE markings. 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, and our triplex
test for Zika, chikungunya, and dengue. Sales of those tests have not been material, but with the granting of CE marking and EUA for
our Logix Smart COVID-19, we experienced an increase in sales in this region.
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 CoSara Diagnostics Pvt. Ltd. as a joint venture. 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 it is being used for testing and manufacturing of
our products for the Indian market.
The
CDSCO has given us the approval for manufacture and sale of the 15 tests referred to above, and the Company’s joint venture
manufactures and sells 14 of those tests under the SaraGene brand. The Company manages a reagent rental program in India with
thermocyclers purchased from a third-party manufacturer and which we refer to here as our Co-Dx Box. The placement of thermocyclers
in India has facilitated the sale of the SaraGene PCR tests in India. The WHO 2024 Global Tuberculosis Report indicates that India
was the country with the highest number of cases of tuberculosis in the world in 2023, with 26% of an estimated global incidence of
approximately 10.8 million cases.
On
March 19, 2020, we announced that CoSara received authorization to manufacture and sell 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 limited the revenue in India more than we 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 (including viral load tests for both hepatitis B and C), human papillomavirus (HPV), a test for high-risk HPV, two COVID-19 assays,
chikungunya, dengue, a dengue/chikungunya duplex test, an influenza A/influenza B/COVID-19 (“ABC”) multiplex test, and in
2024 CDSCO cleared the manufacture and sell SARAPLEXTM Influenza Multiplex (IFM) Test Kit to clinical laboratories as an in vitro
diagnostic for the detection and differentiation of Influenza A and Influenza B.
Europe
Molecular
diagnostics, such as our tests, are governed in Europe by the framework for IVDs, which encompasses diagnostic products such as reagents,
instruments and systems intended for use in diagnosis of disease. The regulatory system for some IVDs historically allowed for a self-certification
procedure, placing heavy responsibility on manufacturers. Non self-certified products were subject to the same standards as self-certified
products but were also subject to audit and review by a notified body prior to receiving approval to receiving CE marking. A CE-marking
is a manufacturer’s declaration that a product meets the requirements of the applicable European Commission (EC) 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 bear a CE marking, as an indication that the product is compliant with EU legislation and
sold in the European Union. We have received CE marking 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. In May 2022, the EC published the In Vitro Diagnostic Regulation (IVDR), a new regulation that significantly revised the
requirements for CE marking of IVDs. To avoid potential shortages of essential healthcare products, the EC extended the transition deadlines
in 2024. Co-Dx is actively pursuing CE-IVD compliance under IVDR through the Annex IX route to conformity. For manufacturers actively
pursuing IVDR compliance, European regulators have allowed a grace period until 2028 for Class B devices to harmonize their devices and
Quality Management Systems (QMS) with the new regulation.
Co-Diagnostics
PCR tests are manufactured under an ISO 13485:2016 certified quality management system, relating to the design and manufacture of our
medical device products. The ISO certification indicates that we meet the standards required to pursue CE-marking for certain of our
products, subject to the requirements in the updated directive mentioned above.
United
States
Section
801(e) of the Federal Food, Drug, and Cosmetic Act, as amended (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 for any of our Logix Smart PCR tests. 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, and grants Co-Diagnostics permission
to export all of our IVD products. We have received EUA clearance for our Logix Smart COVID-19 test, which allows sales to qualified
labs in the United States and facilitates the registration for sale in other countries as well. Under the FDA’s existing policy,
the FDA continues to review a prioritized subset of COVID-19 tests for EUAs, and emphasizes that traditional device premarket review
pathways remain open to all developers. We intend to pursue all appropriate FDA review pathways for products under development, including
traditional premarket review pathways.
Under
our EUA, we are actively selling our Logix Smart COVID-19 test to overseas customers and to CLIA certified laboratories in the United
States. The CLIA labs are able to use our test, or to further validate our COVID-19 tests (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. 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 worldwide distribution network that
has allowed us to export products throughout the world. We anticipate that our network of distributors that we have built over
the past five years will serve us well in sales and distribution of other diagnostic tests and our forthcoming PCR diagnostic platform.
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, in June 2019 we introduced our first Vector Smart® PCR tests to be used exclusively for mosquito-borne
pathogens in mosquito populations. Municipalities in the US and many other countries in the world are concerned about the diseases carried
by mosquitos, which infect the human population. To prevent outbreaks of potentially harmful viruses such as Zika or West Nile from infecting
the public, many municipalities conduct mitigation operations to eliminate the mosquito populations carrying the diseases. Because it
is too expensive and potentially harmful to the environment to treat all mosquito breeding areas, municipalities may identify and focus
their efforts on particular areas with 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. 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 encephalitis 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 encephalitis 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. Our products also allow municipalities to obtain test results in-house in a
matter of hours, instead of the days or weeks they might otherwise have to wait for a central lab to process the mosquito tests.
We
have sold our Vector SmartTM 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:
Intellectual
Property
Much
of our future success and value depends on our proprietary technology, and therefore, our patent and intellectual property strategy is
of critical importance. Currently, our flagship Co-Primers technology is covered by two U.S. patents titled “Cooperative primers,
probes, and applications thereof” as well as by granted and pending foreign counterparts. We have another three U.S. patents directed
to our earlier work in primer and assay designs. For more recent works, we have filed international and U.S. patent applications directed
to “Methods and Compositions for Next Generation Sequencing (NGS) Library Preparation,” “Allele-Specific Design of
Cooperative Primers for Improved Nucleic Acid Variant Genotyping,” “Methods and Compositions Related to Cooperative Primers
and Reverse Transcription,” and “Systems, Methods, and Apparatus for Automated Self-Contained Biological Analysis”
which is the basis of our at-home and point-of-care PCR platform. We intend to continue building our patent portfolio as development
continues and resources are available.
We
also protect some of our technology and know-how as trade secrets and, where appropriate, we use and register trademarks to protect and
strengthen our products and proprietary brands. All trademarks, trade/product names, graphics and logos of Co-Diagnostics contained herein
are trademarks of Co-Diagnostics or its subsidiary, as applicable, in the U.S. and/or other countries. Solely for convenience, we may
refer to trademarks in this Annual Report on Form 10-K without the TM or ® symbols, but such references are not intended to
indicate, in any way, that we will not assert, to the fullest extent permitted by law, our rights to our trademarks.
Major
Customers
The
Company had certain customers which were each responsible for generating 10% or more of the total revenue for the years ended December
31, 2024 and 2023, respectively. One customer accounted for approximately 31% of product revenue for the year ended December 31, 2024
and two customers accounted for approximately 27% of product revenue for the year ended December 31, 2023. Two granting agencies accounted
for approximately 95% of grant revenue for the year ended December 31, 2024, and one granting agency accounted for 100% of grant revenue
for the year ended December 31, 2023. These customers and granting agencies may not account for the same percentage of product revenue
or grant revenue 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. Many of our competitors have a competitive advantage
in the diagnostic testing industry because they also have other lines of business in the diagnostics, pharmaceutical, or biotech industries
from which they derive revenues and for which they are well known and respected in the medical profession. Many of these competitors already
have an established customer base with industry standard technology, which we must overcome to be successful. In the diagnostic testing
and POCT industries, we compete with such companies as BioMerieux, Siemens, Qiagen, Roche Diagnostics and Cepheid and with such pharmaceutical
companies as Abbott Laboratories, Becton Dickinson and Johnson and Johnson. 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 in certain regions,
particularly Asia and Latin America.
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. 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. The Company operates under an ISO 13485:2016 certified quality management system, relating
to the design and manufacture of our medical device products. Being ISO certified greatly facilitates our applications for regulatory
clearance, including CE marking, which allows us to sell any tests 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 required 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 clearance to sell our Logix Smart COVID-19 test in Australia.
Employees
As
of December 31, 2024, we had 132 full-time and part-time employees at our executive offices and lab facilities in Salt Lake City, Utah.
We have engaged independent contractors 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.
We
consider our people and the way we work to support each other and serve our customers to be critical to our success. The key human capital
measures and objectives that we focus on in managing our business are: maintaining a strong and collaborative company culture, increasing
our diversity, inclusion and belonging, offering fair and competitive compensation and benefits, investing in people and organizational
development, protecting and enriching employee health and wellness, and sustaining a culture of respectful and effective communications.
Organizational
History and Corporate Information
We
were incorporated as Co-Diagnostics, Inc., in Utah on April 18, 2013. Our principal executive office is located at 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.
ITEM
1A. RISK FACTORS
Risks
Related to Our Business and Industry
We
have limited commercial history upon which to base our prospects and are not certain that we will achieve profitability in the future.
We
have a limited operating history. We began operations in April 2013. Our accumulated retained earnings (deficit) were ($33.0 million)
and $4.6 million as of December 31, 2024 and 2023, respectively. We do not have any way of predicting when or if we will achieve profitability
in the future. Potential investors should be aware of the difficulties normally encountered by early commercial stage companies, many
of which are beyond our control, including substantial risks and expenses in the course of developing new diagnostic tests, obtaining
regulatory approval of clearance to commercialize such 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
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 expect 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
future success is dependent on our development of our Co-Dx PCR platform and securing regulatory approval for the platform including
the PCR Pro instrument and related diagnostic tests, demand for infectious disease diagnostics and upon our ability to develop and market
other commercially accepted diagnostic tests for our PCR platform.
Our
future success will depend, in part, on our development of our Co-Dx PCR platform and securing regulatory approval for the platform including
the PCR Pro instrument and related diagnostic tests, our ability to develop and sell sufficient quantities of other diagnostics tests,
and our ability to successfully and profitably market our Co-Dx PCR platform. Attracting new customers and distribution networks requires
substantial time and expense. Any failure to obtain regulatory approval for our product candidates and to increase sales of our diagnostic
tests in sufficient quantities to achieve profitability in a timely manner 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:
● the breadth of our test menu relative to competitors;
● the extent and success of our marketing and sales efforts; and
The
diagnostic market is highly competitive, and we may not be able to compete effectively against the larger, well-established companies
that dominate this market or emerging and small innovative companies that may seek to obtain or increase their share of the market.
The
markets for diagnostic products are intensely competitive, and many of our competitors are much larger and have substantially more financial
and human resources than we do. Many have long histories and strong reputations within the industry, and a relatively small number of
companies dominate these markets.
These
companies enjoy significant competitive advantages over us, including:
● products that are supported by long-term clinical data;
● greater financial and other resources for product research and development;
● established manufacturing operations and contract manufacturing relationships;
● significantly greater name recognition and widely recognized trademarks; and
● established relationships with healthcare providers and payers.
Our
products and any product candidates that we may introduce into the market may not enable us to overcome the competitive advantages of
these large and dominant companies. In addition, even if we successfully introduce additional product candidates into the market, emerging
and small innovative companies may seek to increase their market share and they may eventually possess competitive advantages, which
could adversely impact our business. Our competitors may also employ pricing strategies that could adversely affect the pricing of our
products.
We
depend on a limited number of third-party suppliers for key raw materials used in the manufacturing of our products, and the loss of
these third-party suppliers or their inability to supply us with adequate raw materials could harm our business.
We
rely on a limited number of third-party suppliers for the raw materials required for the production of our diagnostic products and product
candidates. Our dependence on a limited number of third-party suppliers involves several risks, including limited control over pricing,
availability, quality, and delivery schedules for raw materials. We have no supply agreements in place with any of our suppliers and
cannot be certain that our current suppliers will continue to provide us with the quantities of raw materials that we require or that
satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or single sourced raw materials could
materially harm our ability to manufacture our products until a new source of supply, if any, could be identified and qualified. We may
be unable to find a sufficient alternative supply channel within a reasonable time or on commercially reasonable terms. Any performance
failure on the part of our suppliers could delay the production of our products and product candidates and delay the development and
commercialization of our product candidates, including limiting supplies necessary for commercial sale, clinical trials and regulatory
approvals, which could have a material adverse effect on our business.
In
order to be successful, we must expand our available product lines by commercializing new product candidates, but we may not be able
to do so in a timely fashion and at expected costs, or at all.
Although
we are currently manufacturing diagnostic kits for commercialization, in order to be successful, we will need to expand our product lines
to include other diagnostic products. To succeed in our commercialization efforts, we must effectively continue product development and
testing, find new strategic partners, obtain regulatory clearances and approvals, and enhance our sales and marketing capabilities. Because
of these uncertainties, there is no assurance that we will succeed in bringing any of our current or future product candidates to market.
If we fail in bringing our product candidates to market, or experience delays in doing so, we will not generate revenues as planned and
will need to curtail operations or seek additional financing earlier than otherwise anticipated.
We
are dependent on our senior management team, scientific team, and external advisors, and the loss of any of them could harm our business,
including by adversely affecting our ability to effectuate our business strategy.
The
members of our current senior management team may not be able to successfully implement our strategy. In addition, we have not entered
into employment agreements with any of the members of our senior management team. There are no assurances that the services of any of
these individuals will be available to us for any specified period of time. The successful integration of our senior management team,
the loss of members of our senior management team, scientific team and key external advisors, or our inability to attract or retain other
qualified personnel or advisors could have a material adverse effect on our business, financial condition and results of operations.
We may not have a sufficient number of qualified personnel to effectuate our business strategy, which could have a material adverse effect
on our business, financial condition and results of operations.
If
we experience significant disruptions in our information technology systems, our business, results of operations and financial condition
could be adversely affected.
The
efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively
manage our sales and marketing, accounting and financial functions; manufacturing processes; inventory; scientific and product development
functions; and our research and development functions. As such, our information technology systems are vulnerable to damage or interruption
including from earthquakes, fires, floods and other natural disasters; terrorist attacks and attacks by computer viruses or hackers;
power losses; and computer systems, or Internet, telecommunications or data network failures. The failure of our information technology
systems to perform as we anticipate or our failure to effectively implement new systems could disrupt our entire operation and could
result in decreased sales, increased overhead costs, excess inventory and product shortages, all of which could have a material adverse
effect on our reputation, business, results of operations and financial condition.
Cybersecurity
risks and the failure to maintain the integrity of company, employee or customer data could expose us to data loss, litigation and liability,
and our reputation could be significantly harmed.
We
and third-party service providers collect and retain large volumes of data, including personally identifiable information regarding clinical
trial participants and others, for business purposes, including for regulatory, research and development and commercialization purposes,
and our collaborators’ various information technology systems enter, process, summarize and report such data. We also maintain
personally identifiable information about our employees. The integrity and protection of our company, employee and clinical data is critical
to our business. We are subject to significant data security and privacy laws and regulations. These regulations impose significant requirements
on how we maintain, use, and protect such information. Maintaining compliance with these evolving regulations and requirements could
be difficult and may increase our expenses. In addition, a penetrated or compromised data system or the intentional, inadvertent or negligent
release or disclosure of data could result in theft, loss or fraudulent or unlawful use of company, employee or clinical data which could
harm our reputation, disrupt our operations, or result in remedial and other costs, fines or lawsuits.
Risks
Related to Our Capital Resources and Impairments
We
will require additional financing and our failure to obtain additional funding would force us to delay, reduce or eliminate our product
development programs or commercialization efforts.
We
currently have limited committed sources of capital, and we have limited liquidity. Our cash, cash equivalents, and marketable investment
securities as of December 31, 2024 were $29.7 million. We have entered into an Equity Distribution Agreement (the “ATM Agreement”)
with Piper Sandler & Co. (“Piper Sandler”), pursuant to which we may offer and sell shares of our common stock having
an aggregate offering price of up to $17,111,650 from time to time through Piper Sandler acting as our agent, under our prospectus supplement
dated October 18, 2024. As of December 31, 2024, we have sold 314,707 shares of common stock under the ATM Agreement resulting in net
proceeds to the Company of $0.2 million. We will require substantial future capital in order to continue operating our business, conduct
the research and development and regulatory clearance and approval activities necessary to bring our products to market, and to establish
effective marketing and sales capabilities.
If
adequate funds to develop our product candidates and fund operations are not available on a timely basis, we may terminate or delay the
development of one or more of our product candidates, or delay activities necessary to commercialize our product candidates. Additional
funding may not be available to us on acceptable terms, or at all. Any additional equity financing, if available, may not be available
on favorable terms and will most likely be dilutive to our current stockholders, and debt financing, if available, may involve more restrictive
covenants. Our ability to access capital when needed is not assured and, if not achieved on a timely basis, will materially harm our
business, financial condition and results of operations or could cause us to cease operations.
Our
independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern
in its report on our audited financial statements. We may be unable to continue to operate without the threat of liquidation for the
foreseeable future.
Our
report from our independent registered public accounting firm for the year ended December 31, 2024 includes an explanatory paragraph
stating that our recurring losses from operations raises substantial doubt about our ability to continue as a going concern. If we are
unable to obtain sufficient additional funding, our business, prospects, financial condition and results of operations will be materially
and adversely affected, and we may be unable to continue as a going concern. If we are unable to continue as a going concern, we may
have to liquidate our assets and may receive less than the value at which those assets are carried on our consolidated financial statements,
and it is likely that investors will lose all or a part of their investment. Future reports from our independent registered public accounting
firm may also contain statements expressing doubt about our ability to continue as a going concern. If we seek additional financing to
fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other
financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all.
Raising
additional capital by issuing securities or through debt financings or licensing arrangements will likely cause dilution to existing
stockholders, restrict our operations or require us to relinquish proprietary rights.
To
the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will likely
be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Debt financing,
if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring
additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration and licensing
arrangements with third parties, we may have to relinquish valuable rights to our technologies or products or grant licenses on terms
that are not favorable to us. Any of these events could adversely affect our ability to achieve our product development and commercialization
goals and have a material adverse effect on our business, financial condition and results of operations.
Risks
Related to Regulatory Approval of Our Products and Other Government Regulations
We
received Emergency Use Authorization or EUA for our Logix Smart COVID-19 test in the US. For our existing EUA and any new EUA, the FDA
may revoke any EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization, which
would adversely impact our ability to market our COVID-19 test in the United States.
The
FDA has the authority to grant an EUA to allow unapproved medical products to be used in an emergency to diagnose, treat or prevent serious
or life-threatening diseases or conditions when there are no adequate, approved and available alternatives. During the COVID 19 pandemic
the FDA determined that circumstances exist to justify the authorization of emergency use of medical devices, including alternative products
used as medical devices, during the COVID-19 pandemic. On April 3, 2020, we received an EUA from the FDA for our Logix Smart Coronavirus
Disease 2019 (COVID-19) kit for use on individuals who are suspected of COVID-19 by their healthcare provider. We
cannot predict how long the EUA for our COVID-19 test will remain in place. The FDA may revoke an EUA where it is determined that
the underlying health emergency no longer exists or warrants such authorization. The FDA may take such a position at any time and without
notice and, therefore, we cannot predict how long our EUAs will remain in place. The FDA may also revoke an EUA when the circumstances
justifying its issuance no longer exist, such as when an alternative is authorized for marketing through the standard procedures, including
through a 510(k) clearance.
If
our existing EUAs are revoked prior to us having received regulatory approval to commercialize our COVID-19 test through a traditional
pathway, we may not be able to obtain required clearances or approvals in a timely manner, or at all, and one or more of our competitors
may obtain the necessary clearances or approvals for their products before we do. In addition, we would be required to cease our commercialization
efforts, which would substantially and negatively impact our business. As a result, any such revocation could adversely impact our business,
financial condition and results of operations.