CDI(CODX) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial information for the company, including statements and detailed notes Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 2024, covering balance sheets, operations, cash flows, equity, and detailed notes Condensed Consolidated Balance Sheets This section presents the company's financial position at March 31, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets | Metric | March 31, 2024 ($) | December 31, 2023 ($) | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $23,099,251 | $14,916,878 | | Marketable investment securities | $26,864,435 | $43,631,510 | | Total current assets | $53,698,833 | $62,141,108 | | Total assets | $86,671,133 | $95,320,660 | | Total current liabilities | $5,269,652 | $5,747,570 | | Total liabilities | $8,318,472 | $9,307,045 | | Total stockholders' equity | $78,352,661 | $86,013,615 | - Cash and cash equivalents increased by approximately $8.18 million from December 31, 2023, to March 31, 2024, while marketable investment securities decreased by approximately $16.77 million[9] - Total assets decreased by approximately $8.65 million, and total stockholders' equity decreased by approximately $7.66 million from December 31, 2023, to March 31, 2024[9] Condensed Consolidated Statements of Operations This section details the company's financial performance for the three months ended March 31, 2024, and 2023 Condensed Consolidated Statements of Operations | Metric (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :------------------------------------ | :------------ | :------------ | | Product revenue | $252,745 | $601,957 | | Grant revenue | $215,109 | $- | | Total revenue | $467,854 | $601,957 | | Cost of revenue | $234,505 | $502,241 | | Gross profit | $233,349 | $99,716 | | Total operating expenses | $10,492,736 | $10,050,366 | | Loss from operations | $(10,259,387) | $(9,950,650) | | Total other income, net | $970,108 | $1,935,448 | | Net loss | $(9,312,043) | $(5,755,391) | | Basic and Diluted Loss per common share | $(0.31) | $(0.20) | - Total revenue decreased by $134,103, primarily due to lower product revenue, partially offset by new grant revenue of $215,109 in Q1 2024[10][80] - Net loss increased significantly to $(9.31) million in Q1 2024 from $(5.76) million in Q1 2023, driven by higher operating expenses and changes in other income and income tax provision[10][87] Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Cash Flow Activity (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :------------------------------------------------ | :------------ | :------------ | | Net cash used in operating activities | $(8,490,334) | $(5,917,517) | | Net cash provided by (used in) investing activities | $16,672,707 | $(10,214,710) | | Net cash used in financing activities | $- | $(482,196) | | Net increase (decrease) in cash and cash equivalents | $8,182,373 | $(16,614,423) | | Cash and cash equivalents at end of period | $23,099,251 | $6,359,380 | - Cash provided by investing activities significantly increased in Q1 2024 to $16.67 million, primarily from maturities of marketable investment securities, compared to cash used in investing activities of $(10.21) million in Q1 2023[12][90] - Net cash used in operating activities increased to $(8.49) million in Q1 2024 from $(5.92) million in Q1 2023, mainly due to decreased revenues and increased operating expenses[12][89] Condensed Consolidated Statements of Stockholders' Equity This section presents changes in the company's equity for the three months ended March 31, 2024, and 2023 Condensed Consolidated Statements of Stockholders' Equity | Stockholders' Equity Component | December 31, 2023 ($) | March 31, 2024 ($) | | :----------------------------- | :---------------- | :------------- | | Common Stock (Amount ($)) | $36,108 | $36,127 | | Additional Paid-in Capital | $96,808,436 | $98,379,651 | | Accumulated Other Comprehensive Income | $146,700 | $226,555 | | Accumulated Earnings (Deficit) | $4,598,166 | $(4,713,877) | | Total Stockholders' Equity | $86,013,615 | $78,352,661 | - Total stockholders' equity decreased by approximately $7.66 million from December 31, 2023, to March 31, 2024, primarily due to the net loss incurred during the period[13] - Stock-based compensation contributed $1.57 million to additional paid-in capital during the three months ended March 31, 2024[13] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the accounting policies and specific financial statement items Note 1 – Overview and Basis of Presentation This note describes the company's business and the basis for preparing the financial statements - Co-Diagnostics, Inc. (CODX) is a molecular diagnostics company developing, manufacturing, and marketing state-of-the-art diagnostics technologies for nucleic acid detection and analysis[14] - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for smaller reporting companies, with certain information condensed or omitted[15] Note 2 – Summary of Significant Accounting Policies This note outlines the key accounting policies used in preparing the condensed consolidated financial statements - The Company recognizes revenue from product and license sales when performance obligations are satisfied, and grant revenue is recognized when conditions or performance obligations are met[21][23] - Accounts receivable, net, increased to $434,868 at March 31, 2024, from $303,926 at December 31, 2023, with an allowance for uncollectable accounts of $185,680[19] - Inventory, net, decreased to $1.55 million at March 31, 2024, from $1.66 million at December 31, 2023. The Company recognized $311,339 in inventory obsolescence expense in Q1 2024[20] - The Company has significant customer concentration risk, with one customer accounting for 26% of product revenue and one granting agency for all grant revenue in Q1 2024[28] Note 3 – Cash, Cash Equivalents, and Financial Instruments This note details the company's cash, cash equivalents, and financial instrument holdings and fair values Cash, Cash Equivalents, and Financial Instruments Fair Value | Category | March 31, 2024 (Fair Value) | December 31, 2023 (Fair Value) | | :---------------------- | :-------------------------- | :----------------------------- | | Cash | $23,099,251 | $4,317,449 | | Money market funds | $- | $10,599,429 | | U.S. treasury securities | $26,864,435 | $43,631,510 | | Total | $49,963,686 | $58,548,388 | - Cash and cash equivalents increased significantly, while marketable investment securities (U.S. treasury securities) decreased, indicating a shift in liquidity management[33] Note 4 – Fair Value Measurements This note provides information on assets and liabilities measured at fair value, categorized by valuation inputs Fair Value Measurements of Assets and Liabilities | Item | March 31, 2024 ($) | December 31, 2023 ($) | | :------------------------------------ | :------------- | :---------------- | | Total assets measured at fair value | $30,868,515 | $57,438,374 | | Total liabilities measured at fair value | $1,189,515 | $1,639,775 | - Contingent consideration liabilities, measured at Level 3 fair value, decreased from $1.64 million at December 31, 2023, to $1.19 million at March 31, 2024, reflecting a change in fair value of $(450,260)[37][39] Note 5 – Intangible Assets, Net This note details the company's intangible assets, including in-process research and development and non-competition agreements Intangible Assets, Net Carrying Amount | Intangible Asset | March 31, 2024 (Net Carrying Amount ($)) | December 31, 2023 (Net Carrying Amount ($)) | | :----------------------------- | :----------------------------------- | :-------------------------------------- | | In-process research and development | $26,101,000 | $26,101,000 | | Non-competition agreements | $227,000 | $302,667 | | Total intangible assets | $26,328,000 | $26,403,667 | - The net carrying amount of intangible assets slightly decreased due to amortization of non-competition agreements, while in-process research and development remained constant[41] Note 6 – Revenue This note provides a breakdown of revenue by type and geographic area for the periods presented Revenue by Geographic Area | Geographic Area | Three Months Ended March 31, 2024 ($) | Three Months Ended March 31, 2023 ($) | | :---------------- | :-------------------------------- | :-------------------------------- | | United States | $301,404 | $393,154 | | Rest of World | $166,450 | $208,803 | | Total | $467,854 | $601,957 | - Total revenue decreased by $134,103 year-over-year, with product revenue declining in both the United States and Rest of World segments, partially offset by $215,109 in grant revenue in the United States[43][80] Note 7 – Loss Per Share This note explains the calculation of basic and diluted loss per common share for the periods presented Net Loss and Loss Per Share | Metric (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :------------------------------------ | :------------ | :------------ | | Net loss | $(9,312,043) | $(5,755,391) | | Weighted average shares, basic and diluted | 29,842,874 | 29,483,540 | | Basic and Diluted loss per share | $(0.31) | $(0.20) | - Diluted loss per share increased to $(0.31) in Q1 2024 from $(0.20) in Q1 2023, reflecting the higher net loss[44] - Potentially dilutive securities (restricted stock units, options, and warrants) were excluded from diluted EPS calculation due to the net loss making their effect anti-dilutive[46] Note 8 – Stock-Based Compensation This note details the stock-based compensation expense recognized and unrecognized for equity awards Stock-Based Compensation Expense | Stock-Based Compensation Expense (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :-------------------------------------------------------------- | :---------- | :---------- | | Cost of revenue | $8,141 | $12,008 | | Sales and marketing | $370,381 | $529,117 | | General and administrative | $1,086,495 | $1,192,214 | | Research and development | $106,217 | $435,403 | | Total stock-based compensation expense | $1,571,234 | $2,168,742 | - Total stock-based compensation expense decreased by approximately $0.60 million in Q1 2024 compared to Q1 2023[55] - As of March 31, 2024, there was approximately $7.60 million of unrecognized stock-based compensation expense related to outstanding RSUs, expected to be recognized over a weighted-average period of 1.5 years[51] Note 9 – Income Taxes This note outlines the company's income tax provision or benefit and related deferred tax assets and liabilities Income Tax Provision (Benefit) | Income Tax (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :---------------------------------------- | :-------- | :------------ | | Income tax provision (benefit) | $22,764 | $(2,259,811) | | Effective tax rate | -0.2% | N/A | - The Company recognized an income tax expense of $22,764 in Q1 2024, a significant change from an income tax benefit of $(2.26) million in Q1 2023, primarily due to the Company now being in a full valuation allowance[56][87] Note 10 – Commitments and Contingencies This note describes the company's lease liabilities, legal proceedings, and other significant commitments Lease Liabilities Maturity Schedule | Lease Liabilities Maturity (Year Ending December 31,) | Amount ($) | | :---------------------------------------------------- | :---------- | | 2024 (remainder) | $752,656 | | 2025 | $1,018,383 | | 2026 | $714,630 | | 2027 | $300,591 | | 2028 | $308,463 | | Total lease payments | $3,094,723 | | Present value of operating lease liabilities | $2,791,076 | - The Company is a defendant in multiple class action and derivative lawsuits, as well as civil actions for breach of contract. While the Company believes these lawsuits are without merit, an unfavorable outcome could have a material adverse effect on operations[62] Note 11 – Share Repurchase Program This note provides information on the company's authorized share repurchase program and activity - The Board of Directors authorized a share repurchase program of up to $30.00 million in March 2022. No shares were repurchased during the three months ended March 31, 2024[63][64] Note 12 – Related Party Transactions This note details transactions with related parties, including equity method investments - The Company recognized $0.10 million of expense during Q1 2024 related to a services agreement with CoSara, an equity method investment, for research and development consulting[65] Note 13 – Subsequent Events This note discloses significant events that occurred after the balance sheet date - In April 2024, the Company received an additional $2.00 million in grant funding after meeting a milestone, part of a total $9.00 million grant awarded in October 2023[66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's discussion and analysis of financial condition and results of operations for Q1 2024 Executive Overview This section provides an overview of the principal factors affecting the company's operations and financial condition - The discussion describes principal factors affecting operations, financial condition, and changes in financial condition, and should be read with accompanying unaudited financial statements[71] Business Overview This section describes the company's core business, products, and proprietary technology - Co-Diagnostics, Inc. develops, manufactures, and sells reagents for diagnostic tests detecting nucleic acid molecules, including infectious diseases, cancer screening, and agricultural applications[72] - The Company is developing the Co-Dx™ PCR platform for point-of-care and at-home use, which was submitted for FDA Emergency Use Authorization (EUA) in December 2023[73] - CODX's proprietary Co-Primers® technology and test design system aim to provide dependable, low-cost molecular testing by eliminating primer-dimer issues in PCR amplification[72][76] RESULTS OF OPERATIONS This section analyzes the company's financial performance, including revenues, costs, expenses, and net loss Revenues This section details the company's product and grant revenue for the three months ended March 31, 2024, and 2023 Revenue by Type | Revenue Type (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :------------------------------------------ | :---------- | :---------- | | Product revenue | $252,745 | $601,957 | | Grant revenue | $215,109 | $- | | Total revenue | $467,854 | $601,957 | - Total revenue decreased by $134,103, primarily due to lower sales of the Logix Smart COVID-19 test, partially offset by $215,109 in grant revenue in Q1 2024[80] Cost of Revenues This section analyzes the cost of revenues and its impact on gross profit for the periods presented Cost of Revenues | Cost of Revenues (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :---------------------------------------------- | :---------- | :---------- | | Cost of revenues | $234,505 | $502,241 | - Cost of revenues decreased to $234,505 in Q1 2024 from $502,241 in Q1 2023, with gross margins comparable after adjusting for grant revenue[81] Expenses This section details the company's operating expenses, including sales, marketing, general, administrative, and R&D Operating Expenses | Operating Expense (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :----------------------------------------------- | :------------ | :------------ | | Sales and marketing | $1,563,682 | $1,706,331 | | General and administrative | $2,918,803 | $3,013,965 | | Research and development | $5,679,678 | $5,014,060 | | Total operating expenses | $10,492,736 | $10,050,366 | - Total operating expenses increased by $442,370, primarily due to increased personnel expenses and investment in research and development, partially offset by decreased stock compensation expense[82] - Research and development expenses increased to $5.68 million in Q1 2024, mainly due to personnel and development costs for the Co-Dx PCR platform[85] Other Income This section outlines other income sources, including interest income, realized gains, and acquisition contingency adjustments Other Income, Net | Other Income (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :------------------------------------------ | :---------- | :---------- | | Interest income | $362,733 | $202,372 | | Realized gain on investments | $228,070 | $418,082 | | Gain on remeasurement of acquisition contingencies | $450,260 | $1,037,672 | | Total other income, net | $970,108 | $1,935,448 | - Total other income decreased to $970,108 in Q1 2024 from $1.94 million in Q1 2023, mainly due to lower gains on remeasurement of acquisition contingencies and realized gains on investments[10][86] Net Loss This section analyzes the company's net loss and the factors contributing to its change year-over-year Net Loss | Net Loss (Three Months Ended March 31,) | 2024 ($) | 2023 ($) | | :-------------------------------------- | :------------ | :------------ | | Net loss | $(9,312,043) | $(5,755,391) | - The net loss increased to $(9.31) million in Q1 2024 from $(5.76) million in Q1 2023, primarily due to increased operating expenses, changes in acquisition contingencies, and a shift from income tax benefit to expense[87] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term financial obligations Liquidity and Capital Resources Summary | Metric | March 31, 2024 ($) | December 31, 2023 ($) | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $23,099,251 | $14,916,878 | | Marketable investment securities | $26,864,435 | $43,631,510 | | Total current assets | $53,698,833 | $62,141,108 | | Total current liabilities | $5,269,652 | $5,747,570 | - The Company's cash and cash equivalents increased to $23.10 million at March 31, 2024, and it held $26.86 million in marketable investment securities, providing strong liquidity[88] - Management believes existing capital resources and future sales will be sufficient for the next 12 months, but anticipates continued operating losses and potential need for additional financing[93] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements for the company - The Company has no off-balance sheet arrangements[94] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies under Regulation S-K - The Company is a 'smaller reporting company' and is not required to provide quantitative and qualitative disclosures about market risk under Regulation S-K[95] Item 4. Controls and Procedures This section details the company's disclosure controls and procedures and reports on internal control changes Evaluation of Disclosure Controls and Procedures This section covers evaluation of disclosure controls and procedures - As of March 31, 2024, the Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective[95] Changes in Internal Control over Financial Reporting This section covers changes in internal control over financial reporting - There have been no changes in internal control over financial reporting during the three months ended March 31, 2024, that have materially affected or are reasonably likely to materially affect, internal control over financial reporting[96] PART II. OTHER INFORMATION This section presents other information not covered in the financial statements, including legal, equity, and exhibit details Item 1. Legal Proceedings This section reports no material developments in legal proceedings previously disclosed in the Annual Report on Form 10-K - No material developments have occurred in the legal proceedings previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023[99] Item 1A. Risk Factors This section is not required for smaller reporting companies under Regulation S-K - The Company is a 'smaller reporting company' and is not required to provide risk factors under Regulation S-K[100] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered equity sales or use of proceeds and reiterates the company's dividend policy Unregistered Sales of Equity Securities and Use of Proceeds This section covers unregistered sales of equity securities and use of proceeds - There were no unregistered sales of equity securities or use of proceeds during the period[100] Dividends This section outlines the company's dividend policy and historical dividend payments - The Company has never declared or paid cash dividends and does not anticipate paying dividends in the foreseeable future, intending to use all available funds for business development and expansion[101] Item 3. Defaults Upon Senior Securities This section reports no defaults upon senior securities - There were no defaults upon senior securities during the period[102] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the Company[103] Item 5. Other Information This section reports no other information - There is no other information to report in this section[104] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications and XBRL documents, and officer signatures Exhibit Index This section covers exhibit index - The exhibit index includes certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[107] Signatures This section includes the official signatures of the company's principal executive and financial officers - The report is signed by Dwight H. Egan, Chief Executive Officer, and Brian Brown, Chief Financial Officer, on May 9, 2024[111]