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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022.

OR

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________.

Commission File Number: 001-38298

Zomedica Corp.

(Exact name of registrant as specified in its charter)

Alberta, Canada

N/A

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification Number)

100 Phoenix Drive, Suite 125
Ann Arbor, Michigan

48108

(Address of principal executive offices)

(Zip code)

(734) 369-2555

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, without par value

ZOM

NYSE American

As of August 15, 2022, 979,949,668 shares of the registrant’s common shares, without par value, were issued and outstanding.

ZOMEDICA CORP.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED

JUNE 30, 2022

TABLE OF CONTENTS

Page

PART I

FINANCIAL INFORMATION

Item 1.

Condensed Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 4.

Controls and Procedures

31

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 6.

Exhibits

33

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

Zomedica Corp.

Consolidated balance sheets

(Unaudited) (United States dollars in thousands)

As of

    

June 30, 

    

December 31, 

    

2022

    

2021

Assets

 

  

 

  

Current assets

 

  

 

  

Cash and cash equivalents

$

186,763

$

194,952

Inventory, net

 

4,819

 

2,848

Prepaid expenses and deposits

 

2,315

 

1,842

Trade receivables, net

 

414

 

315

Other receivables

 

315

 

450

Total current assets

 

194,626

 

200,407

Prepaid expenses and deposits

 

331

 

394

Property and equipment, net

 

1,710

 

1,130

Assets in process

523

420

Right-of-use asset

 

1,638

 

1,320

Goodwill

 

43,288

 

43,288

Intangible assets, net

 

32,097

 

33,176

Debt security (at fair value)

 

1,000

 

Other assets

 

265

 

265

Total assets

$

275,478

$

280,400

Liabilities and shareholders’ equity

 

  

 

Current liabilities

 

  

 

Accounts payable and accrued liabilities

$

3,491

$

3,225

Accrued income taxes

 

41

 

240

Current portion of lease obligations

 

523

 

415

Customer contract liabilities

 

153

 

198

Other current liabilities

 

266

 

262

Total current liabilities

 

4,474

 

4,340

Lease obligations

 

1,184

 

964

Deferred tax liabilities

 

3,048

 

3,709

Customer contract liabilities

 

161

 

140

Other liabilities

 

391

 

361

Total liabilities

$

9,258

$

9,514

Commitments and contingencies (Note 14)

 

  

 

  

Shareholders’ equity

 

  

 

  

Unlimited common shares, no par value; 979,899,668 issued and outstanding at June 30, 2022 and December 31, 2021

$

380,962

$

380,962

Additional paid-in capital

 

13,846

 

9,313

Accumulated deficit

 

(128,601)

 

(119,391)

Accumulated comprehensive income

 

13

 

2

Total shareholders' equity

 

266,220

 

270,886

Total liabilities and shareholders’ equity

$

275,478

$

280,400

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Zomedica Corp.

Consolidated statements of loss and comprehensive loss

(Unaudited) (United States dollars in thousands, except per share data)

    

For the Three Months Ended June 30, 

For the Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net revenue

$

4,246

$

16

$

7,997

$

30

Cost of revenue

 

1,210

 

36

 

2,199

 

42

Gross profit (loss)

 

3,036

 

(20)

 

5,798

 

(12)

Expenses

 

 

 

  

 

  

Research and development

 

319

 

271

 

670

 

684

Selling, general and administrative

 

8,597

 

5,038

 

15,321

 

8,505

Loss from operations

 

(5,880)

 

(5,329)

 

(10,193)

 

(9,201)

Interest income

 

(277)

 

(112)

 

(384)

 

(167)

Loss on disposal of assets

1

1

243

Other (income) loss

 

(1)

 

(505)

 

4

 

(529)

Foreign exchange loss (gain)

 

52

 

(1)

 

56

 

Loss before income taxes

 

(5,655)

 

(4,711)

 

(9,870)

 

(8,748)

Income tax benefit

 

(382)

 

 

(660)

 

Net loss

 

(5,273)

 

(4,711)

 

(9,210)

 

(8,748)

Change in foreign currency translation

 

(40)

 

 

11

 

Net loss and comprehensive loss

$

(5,313)

$

(4,711)

$

(9,199)

$

(8,748)

Weighted average number of common shares - basic and diluted

 

979,899,668

 

973,656,518

 

979,899,668

 

932,959,287

Loss per share - basic and diluted (Note 16)

$

(0.005)

$

(0.005)

$

(0.009)

$

(0.044)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Zomedica Corp.

Consolidated statements of shareholders’ equity

(Unaudited) (United States dollars in thousands)

    

For the six months ended June 30, 2022

Common

Additional

Accumulated

Common stock

stock

paid-in

Accumulated  

comprehensive  

 

Shares

    

Amount

    

subscribed

capital

    

deficit

    

income

    

Total

Balance at December 31, 2021

979,899,668

$

380,962

$

-

    

$

9,313

$

(119,391)

$

2

$

270,886

Stock-based compensation

 

-

 

-

 

-

 

4,533

 

-

 

-

 

4,533

Net loss

 

-

 

-

 

-

 

-

 

(9,210)

 

-

 

(9,210)

Other comprehensive income

 

-

 

-

 

-

 

-

 

-

 

11

 

11

Balance at June 30, 2022

 

979,899,668

$

380,962

$

-

$

13,846

$

(128,601)

 

$

13

$

266,220

    

For the three months ended June 30, 2022

Common

Additional

Accumulated

Common stock

stock

paid-in

Accumulated  

comprehensive  

 

Shares

    

Amount

    

subscribed

capital

    

deficit

    

income

    

Total

Balance at March 31, 2022

979,899,668

$

380,962

$

    

$

11,354

$

(123,328)

$

53

$

269,041

Stock-based compensation

 

 

 

 

2,492

 

 

 

2,492

Net loss

 

 

 

 

 

(5,273)

 

 

(5,273)

Other comprehensive income

 

 

 

 

 

 

(40)

 

(40)

Balance at June 30, 2022

 

979,899,668

$

380,962

$

$

13,846

$

(128,601)

 

$

13

$

266,220

    

For the six months ended June 30, 2021

Common

Additional

Accumulated

Common stock

stock

paid-in

Accumulated  

comprehensive  

 

Shares

    

Amount

    

subscribed

capital

    

deficit

    

income

    

Total

Balance at December 31, 2020

642,036,228

$

104,784

$

460

    

$

14,792

$

(68,969)

$

-

$

51,067

Stock issuance for financing

 

105,013,158

 

199,525

 

-

 

-

 

-

 

-

 

199,525

Stock issuance costs

 

 

(14,281)

 

-

 

-

 

-

 

-

 

(14,281)

Stock-based compensation

 

 

-

 

-

 

3,065

 

-

 

-

 

3,065

Stock issuance from warrant exercises

 

200,951,905

 

44,082

 

(460)

 

(11,511)

 

-

 

-

 

32,111

Stock issuance from exercise of stock options

 

5,230,601

 

2,112

 

-

 

(744)

 

-

 

-

 

1,368

Stock redemption

 

24,719,101

 

44,000

 

-

 

-

 

(32,039)

 

-

 

11,961

Net loss

 

 

-

 

-

 

-

 

(8,748)

 

-

 

(8,748)

Balance at June 30, 2021

 

977,950,993

$

380,222

$

-

$

5,602

$

(109,756)

 

$

-

$

276,068

    

For the three months ended June 30, 2021

Common

Additional

Accumulated

Common stock

stock

paid-in

Accumulated  

comprehensive  

 

Shares

    

Amount

    

subscribed

capital

    

deficit

    

income

    

Total

Balance at March 31, 2021

972,092,308

$

377,971

$

    

$

4,602

$

(105,045)

$

$

277,528

Stock issuance costs

 

 

0

 

 

 

 

 

0

Stock-based compensation

 

 

 

 

1,782

 

 

 

1,782

Stock issuance from warrant exercises

 

628,084

 

139

 

 

(38)

 

 

 

101

Stock issuance from exercise of stock options

 

5,230,601

 

2,112

 

 

(744)

 

 

 

1,368

Net loss

 

 

 

 

 

(4,711)

 

 

(4,711)

Balance at June 30, 2021

 

977,950,993

$

380,222

$

-

$

5,602

$

(109,756)

 

$

-

$

276,068

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Zomedica Corp.

Condensed consolidated statements of cash flows

(Unaudited) (United States dollars in thousands)

    

For the Six Months Ended June 30, 

    

2022

    

2021

Cash flows from operating activities:

 

  

 

  

Net loss

$

(9,210)

$

(8,748)

Adjustments for

 

  

 

  

Depreciation

 

161

 

115

Amortization - intangible assets

 

1,495

 

89

Loss on disposal of property and equipment

 

1

 

243

Loss on other assets

 

 

5

(Gain) loss on right-of-use assets

 

 

(533)

Stock-based compensation

 

4,533

 

3,065

Non cash portion of rent expense

 

9

 

35

Change in non-cash operating working capital

 

 

Purchased inventory

 

(2,572)

 

(794)

Prepaid expenses and deposits

 

(410)

 

437

Trade receivables

 

(96)

 

(4)

Other receivables

 

131

 

(133)

Accounts payable and accrued liabilities

 

292

 

1,847

Accrued income tax

 

(199)

 

Deferred tax liabilities

 

(661)

 

Other current liabilities

 

4

 

Customer contract liabilities

 

(25)

 

Other liabilities

 

30

 

Net cash used in operating activities

 

(6,517)

 

(4,376)

Cash flows from investing activities:

 

  

 

  

Investment in debt security (at fair value)

 

(1,000)

 

Investment in property and equipment

 

(151)

 

(43)

Investment in intangibles

 

 

(99)

Investment in assets in process

(492)

Net cash used in investing activities

 

(1,643)

 

(142)

Cash flows from financing activities:

 

  

 

  

Cash proceeds from issuance of common shares and warrants

 

 

199,525

Cash received from warrant exercises

 

 

32,112

Cash paid for shares and warrant issuance costs

 

 

(14,269)

Cash received from stock option exercises

 

 

1,368

Net cash provided by financing activities

 

 

218,736

(Decrease) increase in cash and cash equivalents

 

(8,160)

 

214,218

Effect of exchange rate changes on cash

(29)

Cash and cash equivalents, beginning of year

 

194,952

 

61,992

Cash and cash equivalents, end of year

$

186,763

$

276,210

Noncash investing and financing activities

 

  

 

  

Transfer of inventory into property and equipment

$

557

$

Supplemental cash flow information:

 

  

 

  

Interest received

$

(384)

$

(112)

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

1. Nature of operations

The Company is a veterinary health company creating point-of-care diagnostics and therapeutics products for dogs and cats, that focuses on the needs of the veterinarians themselves. The Company consists of the parent company, Zomedica Corp, its wholly-owned U.S subsidiary, Zomedica Inc., and Pulse Veterinary Technologies LLC, along with its international subsidiaries.

The impact of the novel strain of coronavirus (“COVID-19”)

There remains a significant amount of stress and uncertainty across national and global economies due to the pandemic of coronavirus disease 2019 (“COVID-19”) caused by severe acute respiratory syndrome coronavirus 2 (the “COVID-19 pandemic”). The continued presence of COVID-19 has resulted in changes in the macro-economic environment including disruptions in supply chain, labor disruptions, an inability to manufacture, an inability to sell to customers, declines in customer demand, and an impaired ability to access credit and capital markets, among other things.

The COVID-19 pandemic materially and adversely affected the development and commercialization of our TRUFORMA® platform and the initial five assays. In response to the pandemic, our development partner had reduced the number of employees working in its facilities for a period of time which has delayed the completion of the verification of the five initial TRUFORMA® assays and the manufacturing of commercial quantities of the TRUFORMA® platform and the related assays. Veterinary hospitals and clinics that had agreed to participate in the validation of our initial TRUFORMA® assays either shut down for a period of time or limited their operations to those involving only life-threatening conditions, which we have mitigated to a certain extent with our recent ability to successfully complete remote installations. Potential customers have at times restricted access to their facilities which has affected and may continue to affect our ability to perform on-site demonstrations and other marketing activities. The extent to which the COVID-19 pandemic may impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the spread and severity of COVID-19, and the effectiveness of governmental actions in response to the pandemic.

The emergence of new variants has not caused significant modification to business operations.  We continue to install remotely, if potential customers restrict access to their facilities.  We intend to continue development of new assays, both for equine indications of our current and planned assays, and for various additional disease states affecting canine, feline, and equine patients in the future.  

2. Basis of preparation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for the presentation of interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited financial statements do not include all the information and footnotes necessary for a comprehensive presentation of the financial position, results of operations and cash flows for the periods presented. In the opinion of management, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. These unaudited financial statements should be read in combination with the other Notes in this section; “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Item 2; and the Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. The Consolidated Balance Sheet as of December 31, 2021 was derived from audited financial statements.

3. Significant accounting policies

Estimates and assumptions

In preparing these financial statements, management was required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are based on our historical experience, the terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers and information available from other outside sources, as appropriate. These estimates and assumptions are subject to an inherent degree of uncertainty. We are not presently aware of any events or circumstances that would require us to update such estimates and assumptions or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur, and additional information is

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Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

obtained. As a result, actual results may differ significantly from our estimates, and any such differences may be material to our financial statements.

Inventories

Inventories are stated at the lower of cost or net realizable value. The Company utilizes the specific identification and First in, First out (“FIFO”) methods to track inventory costs. The Company records reserves, when necessary, to reduce the carrying value of inventory to its net realizable value. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Intangible assets

Expenditures related to the planning and operation of the Company’s website are expensed as incurred. Expenditures related to the website application and infrastructure development are capitalized and amortized over the website’s estimated useful life.

Costs related to acquired trademarks, tradename, customer relationships and developed technology have been capitalized and amortized over the estimated useful life.

Revenue recognition and liabilities due to customers

The Company enters into agreements which may contain multiple promises where customers purchase products, services or a combination thereof. Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires judgment. We determine the transaction price for a contract based on the total consideration we expect to receive in exchange for the transferred goods or services.

The Company allocates revenue to each performance obligation in proportion to the relative standalone selling prices and recognizes revenue when control of the related goods or services is transferred for each obligation. We utilize the observable standalone selling price when available, which represents the price charged for the performance obligation when sold separately.

The Company's contracts with customers are generally comprised of purchase orders for the sale of the point of care instrument, consumable products, and extended warranties, or some variation thereof. The instrument and consumables each represent a single performance obligation when sold separately, that is satisfied at a point in time upon transfer of control of the product to the customer which is typically upon receipt of the goods by the customer. The extended warranties are also a separate performance obligation, whereby revenue is recognized over time.

The nature of the Company’s business gives rise to variable consideration, including discounts and applicator (“trode”) returns. Credits are issued for unused shocks on returned trodes, which can be used toward the purchase of replacement trodes. Discounts and the estimated unused shock credits decrease the transaction price, which reduces revenue. Variable consideration related to unused shock credits is estimated using the expected value method, which estimates the amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are estimated based upon historical experience and known trends. These estimated credits are nonrefundable and may only be used towards the purchase of future trode refurbishments. This practice encourages refurbishment purchase prior to complete utilization of the previous trode, so the customer will always have a trode at hand with ample capacity to perform treatments.

At times the Company receives consideration prior to when the performance obligation is completed, giving rise to a contract liability.  

Sales are recorded net of sales tax. Sales tax is charged on sales to end users and remitted to the appropriate state authority.

Accounts receivable are recorded at net realizable value and have payment terms of 30 days.  The Company recorded an allowance for doubtful accounts of $36 and $34, as of June 30, 2022 and December 31, 2021, respectively, which is recorded net in trade receivables.

8

Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

The diagnostic segment reported $92 in revenue from consumables for the three months ended June 30, 2022, compared to $16 for the three months ended June 30, 2021, an increase of $76 or 475%. The therapeutics segment reported $4,154 in total revenue for the three months ended June 30, 2022, compared to $0 for the three months ended June 30, 2021. Therapeutics revenue for the three months ended June 30, 2002 was comprised of $2,308 in revenue from trodes, $1,543 in revenue from instruments, and $303 in other revenues which includes warranty and repair work.

The diagnostic segment reported $148 in revenue from consumables for the six months ended June 30, 2022, compared to $30 for the six months ended June 30, 2021, an increase of $118 or 393%. The therapeutics segment reported $7,849 in total revenue for the six months ended June 30, 2022, compared to $0 for the six months ended June 30, 2021. Therapeutics revenue for the six months ended June 30, 2002 was comprised of $4,226 in revenue from trodes, $3,102 in revenue from instruments, and $520 in other revenues which includes warranty and repair work.

Cost of revenue

Cost of revenue consists of materials, and shipping costs incurred internally to produce and receive the products. Shipping and handling costs incurred by the Company are included in cost of revenue.

Comparative figures  

Assets in process are separately stated in the current period balance sheet for $523.  The consolidated balance sheets for the year ended December 31, 2021 have been adjusted for $420 of assets in process that were included in intangible assets and property and equipment.  This amount has been reclassified to a separate line in the balance sheet to conform to the current year presentation. The change in presentation had no effect on the reported results of operations. These changes in classification do not affect previously reported cash flows from operating activities in the consolidated statements of cash flows.

4. Business Combinations

Acquisition of PulseVet

On October 1, 2021, Zomedica Inc., a wholly-owned subsidiary of Zomedica Corp. (the “Company”), entered into a Stock Purchase Agreement with Branford PVT Mid-Hold, LLC pursuant to which Zomedica Inc. acquired 100% of the capital stock of Branford PVT Acquiror, Inc., a Delaware corporation (“BPA”). BPA is a holding company whose direct and indirect wholly-owned subsidiaries include Pulse Veterinary Technologies, LLC (“PulseVet”), which, together with its consolidated subsidiaries, is a leading provider of non-invasive shock wave therapy treatment devices to the veterinary industry (the “Acquisition”). The purchase price for the Acquisition was $71,929 in cash.

As a result of total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $43,288 was recorded in connection with this acquisition, none of which will be deductible for U.S tax purposes. The goodwill largely results from our ability to market and sell the PulseVet Technology through our established customer base.

9

Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

The following table summarizes the preliminary acquisition date fair values of the assets acquired and liabilities assumed and subsequent initial period adjustments:

    

Initial

    

Measurement

    

allocation of

period

Updated

    

consideration

    

adjustments

    

allocation

Cash and cash equivalents

$

526

$

3

$

529

Inventory

 

840

 

31

 

871

Prepaid expenses and deposits

 

365

 

 

365

Trade receivables

 

269

 

 

269

Other receivables

 

 

150

 

150

Property and equipment

 

125

 

 

125

Intangible Assets (estimated useful life)

 

 

 

Developed technology (15 years)

 

8,650

 

 

8,650

Trade name (19 years)

 

2,350

 

 

2,350

Customer relationships (11 years)

 

22,650

 

 

22,650

Other Assets

 

69

 

265

 

334

Total assets acquired

 

35,844

 

449

 

36,293

Accounts payable and accrued liabilities

 

1,112

 

(543)

 

569

Income tax payable

 

44

 

 

44

Deferred revenue

 

61

 

 

61

Liability for contracts with customers

 

332

 

 

332

Deferred tax liabilities

 

7,138

 

(900)

 

6,238

Other non current liabilities

 

143

 

265

 

408

Total liabilities assumed

 

8,830

 

(1,178)

 

7,652

Net assets acquired, excluding goodwill

 

27,014

 

1,627

 

28,641

Goodwill

 

44,915

 

(1,627)

 

43,288

Net assets acquired

$

71,929

$

$

71,929

During the period subsequent to the acquisition of PulseVet, we made certain preliminary measurement period adjustments to the acquired assets and liabilities assumed. The determination of the final purchase price allocation to specific assets and liabilities assumed is incomplete. The purchase price allocation may change in future periods as the fair value estimates of the deferred tax assets and liabilities are adjusted.  

5. Inventory

Inventory details are as follows:

June 30, 2022

December 31, 2021

Diagnostics

    

Therapeutics

    

Consolidated

    

Diagnostics

    

Therapeutics

    

Consolidated

Raw Materials

$

$

1,300

$

1,300

$

$

890

$

890

Finished Goods

 

 

323

 

323

 

 

140

 

140

Purchased Inventory

 

3,234

 

 

3,234

 

1,848

 

 

1,848

Total

 

3,234

 

1,623

 

4,857

 

1,848

 

1,030

 

2,878

 

 

Reserves

 

(16)

 

(22)

 

(38)

 

(9)

 

(21)

 

(30)

Inventory, Net

$

3,218

$

1,601

$

4,819

$

1,839

$

1,009

$

2,848

6. Prepaid expenses, deposits and deferred financing costs

10

Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

    

June 30, 

    

December 31, 

2022

2021

Deposits

$

1,966

$

1,340

Prepaid marketing

 

144

 

83

Prepaid insurance

 

272

 

599

Other

 

264

 

214

Total

$

2,646

$

2,236

7. Property and equipment

    

June 30, 

    

December 31, 

2022

2021

Machinery and office equipment

$

2,098

$

1,392

Furniture and equipment

 

106

 

110

Laboratory equipment

 

230

 

225

Leasehold improvements

 

287

 

287

 

2,721

 

2,014

Accumulated depreciation and amortization

 

1,011

 

884

Net property and equipment

$

1,710

$

1,130

Depreciation expense for the three months ended June 30, 2022 and June 30, 2021 was $71 and $55, respectively and for the six months ended June 30, 2022 and June 30, 2021 was $161 and $115, respectively.

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Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

8. Intangible assets

    

June 30, 

    

December 31, 

2022

2021

Computer software

$

28

$

28

Trademarks

 

16

 

16

Website

 

962

 

546

Tradename

 

2,350

 

2,350

Customer relationships

 

22,650

 

22,650

Technology

 

8,650

 

8,650

 

34,656

 

34,240

Accumulated amortization

 

2,559

 

1,064

Net intangibles

$

32,097

$

33,176

The estimated future amortization of intangible assets is as follows:

2022 Remainder

    

$

1,542

2023

 

2,912

2024

 

2,906

2025

 

2,809

2026 and beyond

 

21,928

Total

$

32,097

Amortization expense for the three months ended June 30, 2022 and June 30, 2021 was $759 and $45, respectively and for the six months ended June 30, 2022 and 2021 was $1,495 and $89, respectively.

9. Debt security (at fair value)

On May 16, 2022, Zomedica Inc. purchased a $1.0 million convertible note from Structured Monitoring Products, Inc. (“SMP”), and in connection with the note has acquired the option to act as a sales agent for SMP's platform. The note, which provides for 8% interest and is due to be repaid in May of 2024, is convertible into equity securities of the Company upon the occurrence of certain events. Under the terms of the agreement, Zomedica Inc. will also have the option to acquire SMP’s VetGuardian product line for use in animal health. Exercise of both options is subject to certain conditions, including negotiation and execution of mutually acceptable agreements.

As of June 30, 2022, the fair value of our debt security investment was as follows:

June 30,

2022

Debt security (at fair value)

$

1,000,000

Interest receivable

 

9,863

 

1,009,863

Allowance for doubtful accounts

 

-

Debt security (at fair value), net

$

1,009,863

The investment in the convertible note was recorded at its fair value of $1,000,000 as of June 30, 2022 (with an amortized cost basis of $1,000,000). There were no unrealized gains or losses recorded and no other than temporary impairments recognized as of June 30, 2022.

12

Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

10. Leases

On February 1, 2021 the Company downsized its office space and modified its existing lease with Wickfield Phoenix LLC. The new lease period was for 48 months, commencing on February 1, 2021 and ending on January 31, 2025 with a monthly rent payment of $12 for the first two months and escalating to $31 over the lease period. The carrying value of the right of use asset was $1,258 upon modification using the Company's incremental borrowing rate of 3.95%. During the period ending March 31, 2021 the Company recorded a gain on right-of-use asset of $24 in the consolidated statements of comprehensive loss.

On September 15, 2021, the Company entered into an additional lease with Wickfield Phoenix LLC for warehousing space. The new lease period is for 41 months, commencing on September 15, 2021, and ending on January 31, 2025, with a monthly rent payment of $5 for the first month and escalating to $10 over the lease period. The Company recorded a right-of-use asset and corresponding lease liability for $366 using the Company's incremental borrowing rate of 3.95%.

On April 1, 2022, the Company entered into an agreement with ULF Northfield Business Center LLC to lease 12,400 square feet of office and warehouse space.  The lease period is for 61 months beginning on April 1, 2022, with a monthly rent payment of $9 for the first twelve months and escalating to $11 per month over the lease period. The Company recorded a right-of-use asset and corresponding lease liability for $546 using the Company's incremental borrowing rate of 3.95%.

During the three and six months ended June 30, 2022, the Company recognized $179 and $331 in rent expense inclusive of common area maintenance (CAM) charges, insurance, and tax with $18 and $34 recorded in research and development expenses and $161 and $297 recorded in general and administrative expense in the consolidated statements of comprehensive loss.

During the three and six months ended June 30, 2021, the Company recognized $85 and $176 in rent expense inclusive of common area maintenance (CAM) charges, insurance, and tax with $17 and $38 recorded in research and development expenses and $68 and $138 recorded in general and administrative expense in the consolidated statements of comprehensive loss.

June 30, 

December 31, 

    

2022

2021

Right-of-use asset

    

    

    

    

    

Cost

 

  

 

  

Aggregate lease commitments

$

2,385

$

1,779

Less: impact of present value

 

(215)

(155)

Balance

$

2,170

$

1,624

Reduction in right-of-use asset

 

  

  

Straight line amortization

 

605

346

Interest

 

(73)

(42)

Balance

$

532

$

304

Net book value as at:

Balance

$

1,638

$

1,320

Lease liabilities

Additions

$

2,193

$

1,647

Payments

 

(559)

(310)

Interest

 

73

42

Total lease liabilities

$

1,707

$

1,379

Current portion of lease liabilities

 

523

415

Long term portion of lease liabilities

 

1,184

964

Total lease liabilities

$

1,707

$

1,379

13

Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

Total remaining undiscounted lease liabilities related to the above lease are as follows:

    

2022 Remainder

$

287

2023

590

2024

 

609

2025

 

165

2026

129

2027

44

Total

$

1,824

11. Stock-based compensation

During the three and six months ended June 30, 2022, the Company issued 6,575,000 and 21,000,000 stock options to purchase an aggregate of 6,575,000 and 21,000,000 common shares. The options vest over a period of four years and have an expiration period of ten years.  During the three and six months ended June 30, 2021, the Company issued 7,800,000 and 9,200,000 stock options to purchase an aggregate of 7,800,000 and 9,200,000 common shares, respectively. The options vest over a period of four years and have an expiration period of 10 years.

The continuity of stock options are as follows:

Number of

Weighted Avg

Options

Exercise Price

Balance at December 31, 2021

    

50,717,724

    

$

0.45

    

Stock options granted

 

21,000,000

0.32

Stock options exercised

 

Stock options forfeited

 

1,250,000

0.67

Vested stock options expired

 

8,960,000

0.22

Balance at June 30, 2022

 

61,507,724

$

0.43

Vested at June 30, 2022

 

15,596,349

$

0.36

14

Table of Contents

Zomedica Corp.

Notes to the condensed consolidated financial statements

(Unaudited) (United Stated dollars in thousands, except for per share data)

As of June 30, 2022, details of the issued and outstanding stock options were as follows:

    

    

    

    

Number of 

    

Weighted avg 

Number of options

Number of 

unvested  

remaining life

 issued

vested options 

options

outstanding 

Grant date

Exercise price

 and outstanding

outstanding

outstanding

(years)

March 14, 2020

 

0.19

 

1,283,557

 

949,682

 

333,875

 

2.71

July 9, 2020

 

0.18

 

175,000

 

87,500

 

87,500

 

3.03

August 25, 2020

 

0.13

 

20,000

 

 

20,000

 

3.16

October 1, 2020

 

0.11

 

266,667

 

116,667

 

150,000

 

3.26

October 20, 2020

 

0.09

 

20,000

 

10,000

 

10,000

 

3.31

December 31, 2020

 

0.23

 

16,442,500

 

8,807,500

 

7,635,000

 

3.51

February 26, 2021

 

1.87

 

500,000

 

300,000

 

200,000

 

3.66

March 1, 2021

 

2.06

 

200,000

 

100,000

 

100,000

 

3.67

March 8, 2021

 

1.88

 

200,000

 

100,000

 

100,000

 

3.69

March 15, 2021

 

2.49

 

200,000

 

100,000

 

100,000

 

3.71

May 12, 2021

 

0.78

 

3,450,000

 

900,000

 

2,550,000

 

3.87

May 14, 2021

 

0.75

 

3,200,000

 

850,000

 

2,350,000

 

3.87

August 11, 2021

 

0.57

 

1,100,000

 

175,000

 

925,000

 

4.12

August 18, 2021

 

0.50

 

200,000

 

 

200,000

 

4.14

August 23, 2021

 

0.50

 

100,000

 

 

100,000

 

4.15

September 13, 2021

 

0.57

 

800,000

 

 

800,000

 

4.21

October 1, 2021

 

0.58

 

12,650,000

 

 

12,650,000

 

4.26

January 3, 2022

0.36

 

100,000

 

 

100,000

 

4.52

January 4, 2022

0.35