UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021.2022.
OR
☐TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________ to_________.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
| | 48108 |
(Address of principal executive offices) | | (Zip code) |
(734) (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 [X]☒ 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 [X]☒ 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. [X]☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]☐ No [X]☒
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 May 12, 2021, 974,350,08410, 2022, 979,899,668 shares of the registrant’s common shares, without par value, were issued and outstanding.
Zomedica Corp.ZOMEDICA CORP.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 20212022
TABLE OF CONTENTS
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Item 6. | 31 |
2
PART I — FINANCIAL INFORMATION
Zomedica Corp.
Condensed consolidatedConsolidated balance sheets
As of March 31, 2021, and December 31, 2020(Unaudited) (United States dollars in thousands)
(Unaudited) (Stated in United States dollars)
| | | | | | |
| | As of | ||||
|
| March 31, |
| December 31, | ||
|
| 2022 |
| 2021 | ||
Assets |
| |
|
| |
|
| | | | | | |
Current assets |
| |
|
| |
|
Cash and cash equivalents | | $ | 192,337 | | $ | 194,952 |
Inventory, net | |
| 3,606 | |
| 2,848 |
Prepaid expenses and deposits | |
| 1,696 | |
| 1,842 |
Trade receivables, net | |
| 341 | |
| 315 |
Other receivables | |
| 470 | |
| 450 |
Total current assets | |
| 198,450 | |
| 200,407 |
| | | | | | |
Prepaid expenses and deposits | |
| 410 | |
| 394 |
Property and equipment, net | |
| 1,373 | |
| 1,130 |
Assets in process | | | 547 | | | 420 |
Right-of-use asset | |
| 1,218 | |
| 1,320 |
Goodwill | |
| 43,288 | |
| 43,288 |
Intangible assets, net | |
| 32,439 | |
| 33,176 |
Other assets | |
| 265 | |
| 265 |
Total assets | | $ | 277,990 | | | 280,400 |
| | | | | | |
Liabilities and shareholders’ equity | |
|
| |
| |
| | | | | | |
Current liabilities | |
|
| |
| |
Accounts payable and accrued liabilities | | $ | 3,109 | | $ | 3,225 |
Accrued income taxes | |
| 217 | |
| 240 |
Current portion of lease obligations | |
| 422 | |
| 415 |
Customer contract liabilities | |
| 148 | |
| 198 |
Other current liabilities | |
| 222 | |
| 262 |
Total current liabilities | |
| 4,118 | |
| 4,340 |
| | | | | | |
Lease obligations | |
| 855 | |
| 964 |
Deferred tax liabilities | |
| 3,430 | |
| 3,709 |
Customer contract liabilities | |
| 155 | |
| 140 |
Other liabilities | |
| 391 | |
| 361 |
Total liabilities | |
| 8,949 | |
| 9,514 |
| | | | | | |
Commitments and contingencies (Note 13) | |
|
| |
|
|
| | | | | | |
Shareholders’ equity | |
|
| |
|
|
Unlimited common shares, 0 par value; 979,899,668 issued and outstanding at March 31, 2022 and December 31, 2021 | | | 380,962 | | $ | 380,962 |
Additional paid-in capital | |
| 11,354 | |
| 9,313 |
Accumulated deficit | |
| (123,328) | | �� | (119,391) |
Accumulated comprehensive income | |
| 53 | |
| 2 |
Total shareholders' equity | |
| 269,041 | |
| 270,886 |
| | | | | | |
Total liabilities and shareholders’ equity | | $ | 277,990 | | | 280,400 |
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 276,601,860 | $ | 61,991,703 | ||||
Inventory | 309,658 | - | ||||||
Prepaid expenses and deposits | 1,393,616 | 1,727,814 | ||||||
Trade receivables | 8,535 | - | ||||||
Other receivables | 235,905 | 146,207 | ||||||
Total current assets | 278,549,574 | 63,865,724 | ||||||
Prepaid expenses and deposits | 39,101 | 13,924 | ||||||
Property and equipment, net | 293,516 | 583,007 | ||||||
Right-of-use asset | 1,263,061 | 1,318,716 | ||||||
Intangible assets, net | 323,471 | 362,663 | ||||||
Total assets | $ | 280,468,723 | $ | 66,144,034 | ||||
Liabilities, mezzanine and shareholders' equity | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | 1,128,233 | $ | 1,248,628 | ||||
Current portion of debt obligations | 527,360 | 527,360 | ||||||
Current portion of lease obligations | 306,770 | 252,788 | ||||||
Total current liabilities | 1,962,363 | 2,028,776 | ||||||
Lease obligations | 978,470 | 1,087,998 | ||||||
Total liabilities | 2,940,833 | 3,116,774 | ||||||
Commitments and contingencies (Note 13) | ||||||||
Mezzanine equity: | ||||||||
Series 1 preferred shares, no par value; 20 shares authorized 0 and 12 Series 1 preferred shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | - | 11,961,397 | ||||||
Shareholders' equity | ||||||||
Unlimited common shares, no par value; 972,092,308 and 642,036,228 issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 377,970,846 | 104,783,612 | ||||||
Common shares subscribed | - | 459,600 | ||||||
Additional paid-in capital | 4,602,089 | 14,792,276 | ||||||
Accumulated deficit | (105,045,045 | ) | (68,969,625 | ) | ||||
Total shareholders' equity | 277,527,890 | 51,065,863 | ||||||
Total liabilities, mezzanine equity and shareholders' equity | $ | 280,468,723 | $ | 66,144,034 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Zomedica Corp.
Condensed consolidatedConsolidated statements of loss and comprehensive loss
For the three months ended March 31, 2021 and 2020
(Unaudited) (Stated(United States dollars in United States dollars)thousands, except per share data)
| | | | | | | |
|
| For the Three Months Ended March 31, | | ||||
|
| 2022 |
| 2021 | | ||
| | | | | | | |
Net revenue | | $ | 3,751 | | $ | 14 | |
Cost of revenue | |
| 990 | |
| 6 | |
Gross profit | |
| 2,761 | |
| 8 | |
| | | | | | | |
Expenses | |
| | |
| | |
Research and development | |
| 351 | |
| 412 | |
Selling, general and administrative | |
| 6,724 | |
| 3,468 | |
Loss from operations | |
| (4,314) | |
| (3,872) | |
Interest income | |
| (107) | |
| (55) | |
Loss on disposal of assets | | | — | | | 219 | |
Other expense | |
| 1 | |
| — | |
Foreign exchange loss | |
| 7 | |
| 1 | |
Loss before income taxes | |
| (4,215) | |
| (4,037) | |
Income tax benefit | |
| (278) | |
| — | |
Net loss | |
| (3,937) | |
| (4,037) | |
Change in foreign currency translation | |
| 51 | |
| — | |
Net loss and comprehensive loss | | $ | (3,886) | | $ | (4,037) | |
| | | | | | | |
Weighted average number of common shares - basic and diluted | |
| 979,899,668 | |
| 890,245,654 | |
| | | | | | | |
Loss per share - basic and diluted (Note 15) | |
| (0.004) | | $ | (0.04) | |
March 31, | March 31, | |||||||
2021 | 2020 | |||||||
Net revenue | $ | 14,124 | $ | - | ||||
Cost of revenue | 5,658 | - | ||||||
Gross profit | 8,466 | - | ||||||
Expenses | ||||||||
Research and development | 413,128 | 630,066 | ||||||
Selling, general and administrative | 3,467,670 | 1,703,443 | ||||||
Loss from operations | (3,872,332 | ) | (2,333,509 | ) | ||||
Interest income | (55,147 | ) | - | |||||
Interest expense | - | 651 | ||||||
Loss on disposal of assets | 218,986 | 128,931 | ||||||
Other income | - | (5,500 | ) | |||||
Foreign exchange loss (gain) | 646 | (6,973 | ) | |||||
Loss before income taxes | (4,036,817 | ) | (2,450,618 | ) | ||||
Income tax expense | - | - | ||||||
Net loss and comprehensive loss | $ | (4,036,817 | ) | $ | (2,450,618 | ) | ||
Weighted average number of common shares - basic and diluted | 890,245,654 | 118,340,596 | ||||||
Loss per share - basic and diluted (Note 18) | $ | (0.04 | ) | $ | (0.02 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Zomedica Corp.
Condensed consolidatedConsolidated statements of shareholders’ equity
For the three months ended March 31, 2021 and 2020(Unaudited) (United States dollars in thousands)
| | | | | | | | | | | | | | | | | | | | |
|
| For the three months ended March 31, 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 |
| — |
| | — |
| | — |
| | 2,041 |
| | — |
| | — |
| | 2,041 |
Net loss |
| — |
| | — |
| | — |
| | — |
| | (3,937) |
| | — |
| | (3,937) |
Other comprehensive income |
| — |
| | — |
| | — |
| | — |
| | — |
| | 51 |
| | 51 |
Balance at March 31, 2022 |
| 979,899,668 | | $ | 380,962 | | $ | — | | $ | 11,354 | | $ | (123,328) |
| $ | 53 | | $ | 269,041 |
| | | | | | | | | | | | | | | | | | | | |
|
| For the three months ended March 31, 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 | | $ | 104,783 | | $ | 460 |
| $ | 14,792 | | $ | (68,970) | | $ | — | | $ | 51,065 |
Stock issuance for financing |
| 105,013,158 |
| | 199,525 |
| | — |
| | — |
| | — |
| | — |
| | 199,525 |
Stock issuance costs |
| — |
| | (14,281) |
| | — |
| | — |
| | — |
| | — |
| | (14,281) |
Stock-based compensation |
| — |
| | — |
| | — |
| | 1,283 |
| | — |
| | — |
| | 1,283 |
Stock issuance from warrant exercises |
| 200,323,821 |
| | 43,944 |
| | (460) |
| | (11,473) |
| | — |
| | — |
| | 32,011 |
Stock redemption |
| 24,719,101 |
| | 44,000 |
| | — |
| | — |
| | (32,039) |
| | — |
| | 11,961 |
Net loss |
| — |
| | — |
| | — |
| | — |
| | (4,037) |
| | — |
| | (4,037) |
Balance at March 31, 2021 |
| 972,092,308 | | $ | 377,971 | | $ | — | | $ | 4,602 | | $ | (105,046) |
| $ | — | | $ | 277,527 |
(Unaudited) (Stated in United States dollars)
Series 1 preferred stock | Common stock | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Common stock subscribed | Additional paid-in capital | Accumulated deficit | Total | |||||||||||||||||||||||||
Balance at December 31, 2019 | 12 | $ | 11,961,397 | 108,038,398 | $ | 38,566,820 | $ | - | $ | 3,625,083 | $ | (52,057,841 | ) | $ | 2,095,459 | |||||||||||||||||
Stock and warrant issuance for financing | - | - | 20,833,334 | 1,705,655 | - | 794,345 | - | 2,500,000 | ||||||||||||||||||||||||
Stock issuance costs | - | - | - | (238,217 | ) | - | (110,003 | ) | - | (348,220 | ) | |||||||||||||||||||||
Placement agent warrants | - | - | - | (35,816 | ) | - | 35,816 | - | - | |||||||||||||||||||||||
Stock-based compensation | - | - | - | - | - | 155,022 | - | 155,022 | ||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (2,450,618 | ) | (2,450,618 | ) | ||||||||||||||||||||||
Balance at March 31, 2020 | 12 | 11,961,397 | 128,871,732 | 39,998,442 | - | 4,500,263 | (54,508,459 | ) | 1,951,643 | |||||||||||||||||||||||
Balance at December 31, 2020 | 12 | 11,961,397 | 642,036,228 | 104,783,612 | 459,600 | 14,792,276 | (68,969,625 | ) | 51,065,863 | |||||||||||||||||||||||
Stock issuance for financing | - | - | 105,013,158 | 199,525,000 | - | - | - | 199,525,000 | ||||||||||||||||||||||||
Stock issuance costs | - | - | - | (14,281,368 | ) | - | - | - | (14,281,368 | ) | ||||||||||||||||||||||
Stock-based compensation | - | - | - | - | - | 1,282,741 | - | 1,282,741 | ||||||||||||||||||||||||
Stock issuance from warrant exercises | - | 200,323,821 | 43,943,602 | (459,600 | ) | (11,472,928 | ) | - | 32,011,074 | |||||||||||||||||||||||
Stock redemption | (12 | ) | (11,961,397 | ) | 24,719,101 | 44,000,000 | - | (32,038,603 | ) | 11,961,397 | ||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (4,036,817 | ) | (4,036,817 | ) | ||||||||||||||||||||||
Balance at March 31, 2021 | - | $ | - | 972,092,308 | $ | 377,970,846 | $ | - | $ | 4,602,089 | $ | (105,045,045 | ) | $ | 277,527,890 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Zomedica Corp.
Condensed consolidated statements of cash flows
For(Unaudited) (United States dollars in thousands)
| | | | | | |
|
| For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: |
| |
|
| |
|
Net loss | | $ | (3,937) | | $ | (4,037) |
Adjustments for | |
|
| |
|
|
Depreciation | |
| 82 | |
| 59 |
Amortization - intangible assets | |
| 737 | |
| 44 |
Loss on sale of property and equipment | |
| 0 | |
| 243 |
(Gain) loss on right-of-use assets | |
| 0 | |
| (24) |
Stock-based compensation | |
| 2,041 | |
| 1,283 |
Non cash portion of rent expense | |
| 0 | |
| 24 |
Change in non-cash operating working capital | |
|
| |
|
|
Purchased inventory | |
| (1,005) | |
| (309) |
Prepaid expenses and deposits | |
| 128 | |
| 309 |
Trade receivables | |
| (27) | |
| (8) |
Other receivables | |
| (25) | |
| (102) |
Accounts payable and accrued liabilities | |
| (118) | |
| (120) |
Accrued income tax | |
| (23) | |
| 0 |
Deferred tax liabilities | |
| (279) | |
| 0 |
Other current liabilities | |
| (40) | |
| 0 |
Customer contract liabilities | |
| (35) | |
| 0 |
Other liabilities | |
| 30 | |
| 0 |
Net cash used in operating activities | |
| (2,471) | |
| (2,638) |
| | | | | | |
Cash flows from investing activities: | |
|
| |
|
|
Investment in property and equipment | |
| (83) | |
| (15) |
Investment in intangibles | |
| 0 | |
| (3) |
Investment in assets in process | | | (123) | | | 0 |
Net cash used in investing activities | |
| (206) | |
| (18) |
| | | | | | |
Cash flows from financing activities: | |
|
| |
|
|
Cash proceeds from issuance of common shares and warrants | |
| 0 | |
| 199,525 |
Cash received from warrant exercises | |
| 0 | |
| 32,011 |
Cash paid for shares and warrant issuance costs | |
| 0 | |
| (14,270) |
Net cash provided by financing activities | |
| 0 | |
| 217,266 |
| | | | | | |
(Decrease) increase in cash and cash equivalents | |
| (2,677) | |
| 214,610 |
Effect of exchange rate changes on cash | | | 62 | | | 0 |
Cash and cash equivalents, beginning of year | |
| 194,952 | |
| 61,992 |
| | | | | | |
Cash and cash equivalents, end of year | | $ | 192,337 | | $ | 276,602 |
| | | | | | |
Noncash investing and financing activities | |
|
| |
|
|
Transfer of inventory into property and equipment | | $ | 246 | | $ | 0 |
| | | | | | |
Supplemental cash flow information: | |
|
| |
|
|
Interest received | | $ | (90) | | $ | (24) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Zomedica Corp.
Notes to the three months ended March 31, 2021 and 2020condensed consolidated financial statements
(Unaudited) (Stated(United Stated dollars in United States dollars)thousands, except for per share data)
March 31 | March 31, | |||||||
2021 | 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (4,036,817 | ) | $ | (2,450,618 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
Depreciation | 59,326 | 76,416 | ||||||
Amortization - intangible assets | 44,321 | 45,036 | ||||||
Amortization - right-of-use asset | - | 42,448 | ||||||
Loss on sale of property and equipment | 243,061 | 69,834 | ||||||
(Gain) loss on right-of-use assets | (24,075 | ) | 59,097 | |||||
Stock-based compensation | 1,282,741 | 155,022 | ||||||
Non cash portion of rent expense | 24,185 | 4,012 | ||||||
Change in non-cash operating working capital | ||||||||
Purchased Inventory | (309,658 | ) | - | |||||
Prepaid expenses and deposits | 309,021 | 409,028 | ||||||
Trade receivable | (8,535 | ) | - | |||||
Other receivable | (101,508 | ) | (74,845 | ) | ||||
Accounts payable and accrued liabilities | (120,395 | ) | (508,557 | ) | ||||
Net cash used in operating activities | (2,638,333 | ) | (2,173,127 | ) | ||||
Cash flows from investing activities: | ||||||||
Cash received from sale of property and equipment | 75 | 5,400 | ||||||
Investment in intangibles | (3,185 | ) | - | |||||
Investment in property and equipment | (14,916 | ) | - | |||||
Cash from lease cancellation | - | 1,002,113 | ||||||
Net cash (used in) provided by investing activities | (18,026 | ) | 1,007,513 | |||||
Cash flows from financing activities: | ||||||||
Cash proceeds from issuance of common shares and warrants | 199,525,000 | 2,500,000 | ||||||
Cash received from warrant exercises | 32,011,074 | - | ||||||
Cash paid for shares and warrant issuance costs | (14,269,558 | ) | (348,220 | ) | ||||
Net cash provided by financing activities | 217,266,516 | 2,151,780 | ||||||
Increase in cash and cash equivalents | 214,610,157 | 986,166 | ||||||
Cash and cash equivalents, beginning of year | 61,991,703 | 510,586 | ||||||
Cash and cash equivalents, end of year | $ | 276,601,860 | $ | 1,496,752 | ||||
Supplemental cash flow information: | ||||||||
Interest paid | $ | - | $ | 651 | ||||
Interest (received) | $ | (24,313 | ) | $ | - |
|
|
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 has 2 reportable segments, consisting ofDiagnostics, which comprises the parent company and its U.S subsidiary and includes the TRUFORMA® products, and Therapeutics, which comprises PulseVet operations and its 2 international subsidiaries, HMT High Medical Technologies (Japan) Co. Ltd. ("HMT") and NeoPulse, GmbH ("NeoPulse"), and includes the ProPulse products and services.
The impact of the novel strain of coronavirus (“COVID-19”)
The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, has resulted in the World Health Organization declaring this virus a global pandemic in March 2020. Governments around the world have enacted emergency measures to combat the spread of the virus. These measures include the implementation of travel bans, self-imposed quarantine periods and social distancing. The closure of businesses has caused material disruption to businesses resulting in an economic slowdown. Governments and central banks have responded with significant monetary and fiscal interventions designed to stabilize the financial markets.
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 months ended March 31, 20212022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021.2022. 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
7
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
year ended December 31, 2020.2021. The Consolidated Balance Sheet as of December 31, 20202021 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 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. Cost is based onThe Company utilizes the firstspecific identification and First in, firstFirst out method.(“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 recognizerecognizes 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 diagnostic 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
8
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
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 for $36 and $34, as of March 31, 2022 and December 31, 2021, respectively, which is recorded net in trade receivables.
For the period ending March 31, 2022, the Diagnostics segment reported $57 in revenue from consumables. The Therapeutics segment reported $1,590 in revenue from instruments, $1,952 from trodes, $73 from extended warranties and services, and $79 from other revenues.
For the period ending March 31, 2021, the Diagnostics segment report $14 in revenue from consumables.
Cost of revenue
Cost of goods sold 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 goods sold.
|
|
Comparative figures
Certain priorAssets in process are separately stated in the current period balance sheet for $547. The consolidated balance sheets for the year amountsended 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. Adjustments have been made to the consolidated balance sheets and consolidated statements of loss and comprehensive loss for three months ended March 31, 2020. These changes in classification do not affect previously reported cash flows from operating activities in the consolidated statements of cash flows.
4. Business Combinations
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Deposits (i) | $ | 1,148,755 | $ | 1,455,119 | ||||
Prepaid marketing | 15,444 | 26,330 | ||||||
Prepaid insurance | 109,440 | 184,154 | ||||||
Other (ii) | 159,078 | 62,211 | ||||||
Total | $ | 1,432,717 | $ | 1,727,814 |
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
9
|
|
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
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.
The Company’s 2021 consolidated operating results included revenues of $4,008 and net income of $454 since the date of acquisition.
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 | |
| 0 | |
| 365 |
Trade receivables | |
| 269 | |
| 0 | |
| 269 |
Other receivables | |
| 0 | |
| 150 | |
| 150 |
Property and equipment | |
| 125 | |
| 0 | |
| 125 |
Intangible Assets (estimated useful life) | |
| — | |
| — | |
| — |
Developed technology (15 years) | |
| 8,650 | |
| 0 | |
| 8,650 |
Trade name (19 years) | |
| 2,350 | |
| 0 | |
| 2,350 |
Customer relationships (11 years) | |
| 22,650 | |
| 0 | |
| 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 | |
| 0 | |
| 44 |
Deferred revenue | |
| 61 | |
| 0 | |
| 61 |
Liability for contracts with customers | |
| 332 | |
| 0 | |
| 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 | | $ | 0 | | $ | 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.
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Computer equipment | $ | 387,055 | $ | 364,165 | ||||
Furniture and equipment | 110,244 | 121,281 | ||||||
Laboratory equipment | 220,372 | 234,087 | ||||||
Leasehold improvements | 272,194 | 571,460 | ||||||
989,865 | 1,290,993 | |||||||
Accumulated depreciation and amortization | 696,349 | 707,986 | ||||||
Net property and equipment | $ | 293,516 | $ | 583,007 |
10
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
5. Inventory
The detail of inventory is a follows:
| | | | | | | | | |
|
| Diagnostics |
| Therapeutics |
| Consolidated | |||
| | | | | | | | | |
Raw Materials | | $ | 0 | | $ | 888 | | $ | 888 |
Finished Goods | |
| 0 | |
| 106 | |
| 106 |
Purchased Inventory | |
| 2,640 | |
| 0 | |
| 2,640 |
Total | |
| 2,640 | |
| 994 | |
| 3,634 |
| |
| | | | | | | |
Reserves | |
| (6) | |
| (22) | |
| (28) |
Inventory, Net | | $ | 2,634 | | $ | 972 | | $ | 3,606 |
6. Prepaid expenses, deposits and deferred financing costs
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2022 | | 2021 | ||
Deposits | | $ | 1,582 | | $ | 1,340 |
Prepaid rent | | | 9 | | | |
Prepaid marketing | |
| 71 | |
| 83 |
Prepaid insurance | |
| 296 | |
| 599 |
Other | |
| 148 | |
| 214 |
Total | | $ | 2,106 | | $ | 2,236 |
7. Property and equipment
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2022 | | 2021 | ||
| | | | | | |
Machinery and office equipment | | $ | 1,697 | | $ | 1,392 |
Furniture and equipment | |
| 110 | |
| 110 |
Laboratory equipment | |
| 230 | |
| 225 |
Leasehold improvements | |
| 287 | |
| 287 |
| |
| 2,324 | |
| 2,014 |
| | | | | | |
Accumulated depreciation and amortization | |
| 951 | |
| 884 |
Net property and equipment | | $ | 1,373 | | $ | 1,130 |
Depreciation expense for the three months ended March 31, 2022 and March 31, 2021 was $59,326.$82 and $59, respectively.
11
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
8. Intangible assets |
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Computer software | $ | 28,011 | $ | 22,882 | ||||
Trademarks | 16,236 | 16,236 | ||||||
Website | 513,680 | 513,680 | ||||||
557,927 | 552,798 | |||||||
Accumulated amortization | 234,456 | 190,135 | ||||||
Net intangibles | $ | 323,471 | $ | 362,663 |
| | | | | | |
|
| March 31, |
| December 31, | ||
| | 2022 | | 2021 | ||
| | | | | | |
Computer software | | $ | 28 | | $ | 28 |
Trademarks | |
| 16 | |
| 16 |
Website | |
| 546 | |
| 546 |
Tradename | |
| 2,350 | |
| 2,350 |
Customer relationships | |
| 22,650 | |
| 22,650 |
Technology | |
| 8,650 | |
| 8,650 |
| |
| 34,240 | |
| 34,240 |
| | | | | | |
Accumulated amortization | |
| 1,801 | |
| 1,064 |
Net intangibles | | $ | 32,439 | | $ | 33,176 |
The estimated future amortization of intangible assets is as follows:
| | | |
2022 Remainder |
| $ | 2,210 |
2023 | |
| 2,773 |
2024 | |
| 2,768 |
2025 | |
| 2,761 |
2026 and beyond | |
| 21,927 |
Total | | $ | 32,439 |
Amortization expense for the three months ended March 31, 2022 and March 31, 2021 was $44,321.$737 and $44, respectively.
|
|
9. Leases |
On February 1, 2020 the Company cancelled its existing lease with Wickfield Phoenix LLC. and entered into a new lease. The new lease period was for 60 months, commencing on February 1, 2020 and ending on January 31, 2025 with a monthly rent payment of $32,452 escalating to $36,525 over the lease period. Upon cancellation of the previous existing lease, the Company received a refund of prepaid rent in the amount of $1,002,113. The carrying value of the right of use asset was $1,061,210 upon cancellation. The Company recorded a loss on right-of-use asset of $59,097 in the consolidated statements of comprehensive loss.
On February 1, 2020, the Company recorded a right-of-use asset and a corresponding lease liability in the amount of $1,553,611 using the Company’s incremental borrowing rate of 12%.
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 $12,039$12 for the first two months and escalating to $30,911$31 over the lease period. The carrying value of the right of use asset was $1,297,666$1,258 upon modification. Themodification 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 $24,075$24 in the consolidated statements of comprehensive loss.
On February 1,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 a corresponding lease liability in the amount of $1,306,082for $366 using the Company’sCompany's incremental borrowing rate of 3.95%.
During the three months ended March 31, 2021,2022, the Company recognized $80,714$152 in rent expense with $18,626$16 recorded in research and development expenses and $62,088$136 recorded in general and administrative expense in the consolidated statements of comprehensive loss.
12
|
|
Right-of-use asset | Premise lease | |||
Cost | ||||
Aggregate lease commitments | $ | 1,387,655 | ||
Less: impact of present value | (81,573 | ) | ||
Balance at March 31, 2021 | 1,306,082 | |||
Reduction in right-of-use asset | ||||
Straight line amortization | 46,256 | |||
Interest | (3,235 | ) | ||
Balance at March 31, 2021 | 43,021 | |||
Net book value as at: | ||||
March 31, 2021 | $ | 1,263,061 | ||
Lease liabilities | Premise lease | |||
Additions | $ | 1,306,082 | ||
Payments | (24,077 | ) | ||
Interest | 3,235 | |||
Total lease liabilities at March 31, 2021 | 1,285,240 | |||
Current portion of lease liabilities | 306,770 | |||
Long term portion of lease liabilities | 978,470 | |||
Total lease liabilities at March 31, 2021 | $ | 1,285,240 |
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
During the three months ended March 31, 2021, the Company recognized $81 in rent expense with $19 recorded in research and development expenses and $62 recorded in general and administrative expense in the consolidated statements of comprehensive loss.
| | | | | | |
| | March 31, | | December 31, | ||
|
| 2022 |
| 2021 | ||
Right-of-use asset |
|
|
| |
|
|
Cost |
| |
| | |
|
Aggregate lease commitments | | $ | 1,779 | | $ | 1,779 |
Less: impact of present value | |
| (155) | |
| (155) |
Balance | |
| 1,624 | |
| 1,624 |
| | | | | | |
Reduction in right-of-use asset | |
|
| |
|
|
Straight line amortization | |
| 461 | |
| 346 |
Interest | |
| (55) | |
| (42) |
Balance | |
| 406 | |
| 304 |
| | | | | | |
Net book value as at: | | | | | | |
Balance | | $ | 1,218 | | $ | 1,320 |
| | | | | | |
Lease liabilities | | | | | | |
| | | | | | |
Additions | | $ | 1,647 | | $ | 1,647 |
Payments | |
| (425) | |
| (310) |
Interest | |
| 55 | |
| 42 |
Total lease liabilities | | $ | 1,277 | | $ | 1,379 |
| | | | | | |
Current portion of lease liabilities | |
| 422 | |
| 415 |
Long term portion of lease liabilities | |
| 855 | |
| 964 |
Total lease liabilities | | $ | 1,277 | | $ | 1,379 |
Total remaining undiscounted lease liabilities related to the above lease are as follows:
2021 - remainder balance | $ | 254,591 | |||||
2022 | 348,790 | ||||||
| | | | ||||
|
| | | ||||
2022 Remainder | | $ | 347 | ||||
2023 | 359,254 | | | 359 | |||
2024 | 370,031 | |
| 490 | |||
2025 | 30,911 | |
| 41 | |||
Total | $ | 1,363,577 | | $ | 1,237 |
|
|
On October 18, 2017, the Company entered into a loan arrangement with a shareholder of the Company, pursuant to which such shareholder has agreed to provide a loan facility to the Company, whereby the Company may borrow up to $5,000,000, with the proceeds to be used for working capital and general corporate purposes. The term of the loan facility is five (5) years, with principal and interest payments being due only at the time of maturity. Under the loan agreement, the Company may borrow in one or more advances, provided however that a minimum amount of $250,000 must be borrowed at any one time and not more than two advances may occur per month. Interest shall accrue at a rate of fourteen percent (14%) per annum, payable upon maturity. As of March 31, 2021, no amounts have been borrowed.
The Coronavirus Aid, Relief, and Economic Security Act, or (“CARES”) Act, was signed into law on March 27, 2020, and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (the “Program”). The Program provides for 100% federally guaranteed loans to small businesses to allow employers to keep workers employed and maintain payroll during the pandemic and economic downturn. Under the Program, qualified companies are eligible for a loan in an amount equal to the lesser of $10 million or 2.5x the business’s average monthly payroll. Collateral or guarantor support is not required for the loan.
Under the Program, the borrower is eligible for loan forgiveness up to the amount the borrower spends on certain eligible costs during the 8-week period beginning on the date the proceeds were received on the loan. Eligible costs under the Program include payroll costs, interest on mortgage obligations incurred before the covered period, rent on leasing agreements and utility services. The amount of loan forgiveness is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees. Under the Program, proceeds that are not forgiven convert to a loan bearing interest at a fixed rate of 1% payable in 18 equal monthly installments commencing after the forgiveness period. The Program was subsequently amended to allow the borrower to use an extended forgiveness period of 24 weeks beginning on the date the proceeds were received on the loan and to extend the repayment period to 54 months commencing after the 24 week forgiveness period.
In April of 2020, the Company received $527,360 under the program. The receipt is currently reported as a current liability and accounted for as a loan. The company filed for forgiveness, pending approval from the Small Business Administration.
The Company is authorized to issue up to 20 shares of its Series 1 Preferred Shares, all without par value, and each having a stated value of $1,000,000. The Series 1 Preferred Shares do not have voting rights except to the extent required by applicable law and are not convertible into the Company’s common shares. Holders of the Series 1 Preferred Shares will not be entitled to dividends but, in lieu thereof, will receive Net Sales Returns (“Net Sales Returns” is defined as annual payments equal to 9 percent of net sales) until such time as the holders have received total Net Sales Returns equal to 9 times the aggregate stated value of the outstanding Series 1 Preferred Shares. The Company will have the right to redeem the outstanding Series 1 Preferred Shares at any time at a redemption price equal to 9 times the aggregate stated value of the Series 1 Preferred Shares outstanding less the aggregate amount of the Net Sales Returns paid (the “Redemption Amount”).
Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series 1 Preferred Shares will be entitled to a liquidation preference equal to the stated value of the Series 1 Preferred Shares less the Net Sales Returns paid on the Series 1 Preferred Shares.
In the event of a fundamental transaction (defined to include an amalgamation, merger or other business combination transaction involving our company in which the shareholders do not have the right to cast more than 50% of the votes that may be cast for the election of directors, or a sale, lease or other disposition of the properties and/or assets of our company as an entirety or substantially as an entirety to a third party), the holders of the Series 1 Preferred Shares will be entitled to receive consideration for their Series 1 Preferred Shares equal to a multiple of the stated value of the Series 1 Preferred Shares ranging from 5.0 to 9.0 depending on the timing of the fundamental transaction, subject to a cap equal to the redemption amount.
|
|
Issued and outstanding preferred stock:
Number of | ||||||||
preferred | Preferred | |||||||
stock | stock amount | |||||||
Balance at December 31, 2019 | 12 | $ | 11,961,397 | |||||
Balance at December 31, 2020 | 12 | 11,961,397 | ||||||
Stock redemption | (12 | ) | (11,961,397 | ) | ||||
Balance at March 31, 2021 | - | $ | - |
The Company exchanged the issued and outstanding shares of its Series 1 Preferred Shares on March 7, 2021 for 24,719,101 of common shares valued at $44,000,000. The difference between the carrying value of the preferred shares and the fair value of the common shares exchanged was charged to accumulated deficit.
The Company is authorized to issue an unlimited number of common shares, without par value.
Issued and outstanding common shares:
Number of common stock | Common stock amount | |||||||
Balance at December 31, 2019 | 108,038,398 | $ | 38,566,820 | |||||
Stock issued from financing (i) | 20,833,334 | 1,431,622 | ||||||
Balance at March 31, 2020 | 128,871,732 | $ | 39,998,442 | |||||
Balance at December 31, 2020 | 642,036,228 | $ | 104,783,612 | |||||
Stock issued from financing (ii) | 105,013,158 | 185,243,632 | ||||||
Stock issued from exercises of warrants (iii) | 200,323,821 | 43,943,602 | ||||||
Stock issued from preferred share redemption (Note 10) | 24,719,101 | 44,000,000 | ||||||
Balance at March 31, 2021 | 972,092,308 | $ | 377,970,846 |
|
|
The Company raised $2,500,000 in gross proceeds as part of the RDO. The Company recorded $1,705,655 as the value of common shares under common shares and $794,345 as the value of Series A Warrants under additional paid-in-capital in the consolidated statements of shareholders’ equity.
The direct cash costs related to the issuance of the common shares and warrants issued in February 2020 were $348,220. These direct costs were recorded as an offset against the statement of shareholders’ equity with $238,217 being recorded under common shares and $110,003 being recorded under additional paid-in-capital. The Company also recorded the value of the Series A Placement Agent Warrants in the amount of $52,496 as an offset against the statement of shareholders’ equity with $35,816 being recorded under common shares and $16,680 being recorded under additional paid-in-capital.
The Company raised $199,525,000 in gross proceeds as part of the offering. The Company recorded $199,525,000 as the value of common shares under common shares.
The direct cash costs related to the issuance of the common shares and warrants issued in February 2021 were $14,281,368. These direct costs were recorded as an offset against the statement of shareholders’ equity with the entirety recorded under common shares.
Warrant series | Warrants exercised | Amount | ||||||
Series A | 21,677,084 | $ | 4,293,229 | |||||
Series B | 3,037,167 | 455,576 | ||||||
Series C | 37,566,195 | 5,646,929 | ||||||
Series D | 138,043,375 | 22,074,940 | ||||||
Subtotal | 200,323,821 | 32,470,674 | ||||||
Common stock subscribed | - | (459,600 | ) | |||||
Total | 200,323,821 | $ | 32,011,074 |
|
|
10. Stock-based compensation |
During the three months ended March 31, 2021,2022, the Company issued 14,425,000 stock options to purchase an aggregate of 1,400,00014,425,000 common shares. The options vest over a period of four years and have an expiration period of ten years. During the three months ended March 31, 2021, no options were exercised. During the three months ended March 31, 2020, the Company issued 1,400,000 stock options to purchase an aggregate of 5,056,0001,400,000 common shares. The options vest over a period of four years and have an expiration period of five10 years.
13
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
The continuity of stock options are as follows:
Number of Options | Weighted Avg Exercise Price | |||||||||||||
Balance at December 31, 2020 | 39,604,515 | $ | 0.36 | |||||||||||
| | | | | | | ||||||||
| | Number of | | Weighted Avg | | |||||||||
| | Options | | Exercise Price | | |||||||||
Balance at December 31, 2021 |
| 50,717,724 |
| $ | 0.45 |
| ||||||||
Stock options granted |
| 14,425,000 | | $ | 0.35 | | ||||||||
Stock options exercised |
| — | | $ | — | | ||||||||
Stock options forfeited | (3,965,265 | ) | $ | 1.52 |
| 700,000 | | $ | 0.55 | | ||||
Stock options forfeited | (18,750 | ) | $ | 0.19 | ||||||||||
Stock options granted | 800,000 | $ | 1.87 | |||||||||||
Stock options granted | 200,000 | $ | 2.06 | |||||||||||
Stock options granted | 200,000 | $ | 1.88 | |||||||||||
Stock options granted | 200,000 | $ | 2.49 | |||||||||||
Balance at March 31, 2021 | 37,020,500 | $ | 0.30 | |||||||||||
Vested at March 31, 2021 | 11,916,500 | $ | 0.29 | |||||||||||
Vested stock options expired |
| 6,810,000 | | $ | 0.22 | | ||||||||
Balance at March 31, 2022 |
| 57,632,724 | | $ | 0.45 | | ||||||||
Vested at March 31, 2022 |
| 13,621,349 | | $ | 0.34 | |
As at March 31, 2021,2022, 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 | Number of options issued and outstanding | Number of vested options outstanding | Number of unvested options outstanding | Weighted Avg Remaining Life outstanding (years) | | Exercise price | | and outstanding | | outstanding | | outstanding | | (years) | |||||||||||||||
August 19, 2019 | 0.26 | 500,000 | 500,000 | - | 0.39 | |||||||||||||||||||||||||
August 19, 2019 | 0.35 | 100,000 | 100,000 | - | 0.39 | |||||||||||||||||||||||||
August 19, 2019 | 0.45 | 100,000 | 100,000 | - | 0.39 | |||||||||||||||||||||||||
August 19, 2019 | 0.55 | 100,000 | 100,000 | - | 0.39 | |||||||||||||||||||||||||
August 19, 2019 | 0.65 | 100,000 | 100,000 | - | 0.39 | |||||||||||||||||||||||||
August 19, 2019 | 0.75 | 100,000 | 100,000 | - | 0.39 | |||||||||||||||||||||||||
September 16, 2019 | 0.43 | 500,000 | 500,000 | - | 0.46 | |||||||||||||||||||||||||
| | | | | | | | | | | ||||||||||||||||||||
March 14, 2020 | 0.19 | 3,705,500 | 1,852,750 | 1,852,750 | 3.96 |
| 0.19 |
| 1,933,557 |
| 1,599,682 |
| 333,875 |
| 2.96 | |||||||||||||||
June 16, 2020 | 0.19 | 2,000,000 | 2,000,000 | - | 4.21 | |||||||||||||||||||||||||
July 9, 2020 | 0.18 | 175,000 | 43,750 | 131,250 | 4.28 |
| 0.18 |
| 175,000 |
| 87,500 |
| 87,500 |
| 3.28 | |||||||||||||||
August 25, 2020 | 0.13 | 40,000 | 10,000 | 30,000 | 4.41 |
| 0.13 |
| 20,000 |
| — |
| 20,000 |
| 3.41 | |||||||||||||||
September 29, 2020 | 0.11 | 300,000 | 75,000 | 225,000 | 4.50 | |||||||||||||||||||||||||
October 1, 2020 | 0.11 | 300,000 | 75,000 | 225,000 | 4.51 |
| 0.11 |
| 266,667 |
| 116,667 |
| 150,000 |
| 3.51 | |||||||||||||||
October 20, 2020 | 0.09 | 40,000 | 10,000 | 30,000 | 4.56 |
| 0.09 |
| 20,000 |
| 10,000 |
| 10,000 |
| 3.56 | |||||||||||||||
December 31, 2020 | 0.23 | 27,560,000 | 6,000,000 | 21,560,000 | 9.76 |
| 0.23 |
| 17,942,500 |
| 10,307,500 |
| 7,635,000 |
| 8.76 | |||||||||||||||
February 26, 2021 | 1.87 | 800,000 | 200,000 | 600,000 | 9.92 |
| 1.87 |
| 600,000 |
| 300,000 |
| 300,000 |
| 8.91 | |||||||||||||||
March 1, 2021 | 2.06 | 200,000 | 50,000 | 150,000 | 9.92 |
| 2.06 |
| 200,000 |
| 100,000 |
| 100,000 |
| 8.92 | |||||||||||||||
March 8, 2021 | 1.88 | 200,000 | 50,000 | 150,000 | 9.94 |
| 1.88 |
| 200,000 |
| 100,000 |
| 100,000 |
| 8.94 | |||||||||||||||
March 15, 2021 | 2.49 | 200,000 | 50,000 | 150,000 | 9.96 |
| 2.49 |
| 200,000 |
| 100,000 |
| 100,000 |
| 8.96 | |||||||||||||||
Balance at March 31, 2021 | 37,020,500 | 11,916,500 | 25,104,000 | |||||||||||||||||||||||||||
May 12, 2021 |
| 0.78 |
| 3,600,000 |
| 850,000 |
| 2,750,000 |
| 9.12 | ||||||||||||||||||||
May 14, 2021 |
| 0.75 |
| 3,200,000 |
| 50,000 |
| 3,150,000 |
| 9.12 | ||||||||||||||||||||
August 11, 2021 |
| 0.57 |
| 1,100,000 |
| — |
| 1,100,000 |
| 9.37 | ||||||||||||||||||||
August 18, 2021 |
| 0.50 |
| 200,000 |
| — |
| 200,000 |
| 9.39 | ||||||||||||||||||||
August 23, 2021 |
| 0.50 |
| 100,000 |
| — |
| 100,000 |
| 9.40 | ||||||||||||||||||||
September 13, 2021 |
| 0.57 |
| 1,000,000 |
| — |
| 1,000,000 |
| 9.46 | ||||||||||||||||||||
October 1, 2021 |
| 0.58 |
| 12,650,000 |
| — |
| 12,650,000 |
| 9.51 | ||||||||||||||||||||
January 3, 2022 | | 0.36 | | 100,000 | | — | | 100,000 | | 9.76 | ||||||||||||||||||||
January 4, 2022 | | 0.35 | | 200,000 | | — | | 200,000 | | 9.77 | ||||||||||||||||||||
January 14, 2022 | | 0.35 | | 200,000 | | — | | 200,000 | | 9.79 | ||||||||||||||||||||
January 16, 2022 | | 0.35 | | 325,000 | | — | | 325,000 | | 9.80 | ||||||||||||||||||||
January 18, 2022 | | 0.35 | | 100,000 | | — | | 100,000 | | 9.81 | ||||||||||||||||||||
February 14, 2022 | | 0.30 | | 400,000 | | — | | 400,000 | | 9.88 | ||||||||||||||||||||
February 21, 2022 | | 0.37 | | 200,000 | | — | | 200,000 | | 9.90 | ||||||||||||||||||||
February 25, 2022 | | 0.35 | | 12,500,000 | | — | | 12,500,000 | | 9.91 | ||||||||||||||||||||
March 30, 2022 | | 0.35 | | 200,000 | | — | | 200,000 | | 10.00 | ||||||||||||||||||||
Balance at March 31, 2022 |
| |
| 57,632,724 |
| 13,621,349 |
| 44,011,375 |
|
|
|
|
The Company calculates volatility of stock-based compensation using the historical price of the Company’s stock. An increase/decrease in the volatility would have resulted in an increase/decrease in the fair value of the options.
14
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
The fair value of options granted during the three months ended March 31, 20212022 and March 31, 20202021 was estimated using the Black-Scholes option pricing model to determine the fair value of options granted using the following assumptions:
| | | | | | | | | | |
|
| February 26, |
| March 1, |
| March 8, |
| |||
| | 2021 | | 2021 | | 2021 |
| |||
Volatility |
| | 117 | % | | 117 | % | | 117 | % |
Risk-free interest rate |
| | 0.95 | % | | 0.92 | % | | 1.07 | % |
Expected life (in years) |
| | 10 |
| | 10 |
| | 10 | |
Dividend yield |
| | 0 | % | | 0 | % | | 0 | % |
Common share price | | $ | 1.87 | | $ | 2.06 | | $ | 1.88 | |
Strike price | | $ | 1.87 | | $ | 2.06 | | $ | 1.88 | |
Forfeiture rate | |
| 0 | % | | 0 | % | | 0 | % |
| | | | | | | | | | |
|
| May 12, |
| August 11, |
| August 23, |
| |||
| | 2021 | | 2021 | | 2021 |
| |||
Volatility |
| | 118 | % | | 116 | % | | 116 | % |
Risk-free interest rate |
| | 1.11 | % | | 0.96 | % | | 0.92 | % |
Expected life (in years) |
| | 6.21-6.22 |
| | 6.18-6.25 |
| | 6.25 | |
Dividend yield |
| | 0 | % | | 0 | % | | 0 | % |
Common share price | | $ | 0.78 | | $ | 0.56 | | $ | 0.50 | |
Strike price | | $ | 0.78 | | $ | 0.57 | | $ | 0.50 | |
Forfeiture rate | |
| 0 | % | | 0 | % | | 0 | % |
| | | | | | | |
|
| September 27, |
| October 1, |
| ||
| | 2021 | | 2021 | | ||
Volatility |
| | 116 | % | | 116 | % |
Risk-free interest rate |
| | 1.14 | % | | 1.10 | % |
Expected life (in years) |
| | 6.25 |
| | 6.25 |
|
Dividend yield |
| | 0 | % | | 0 | % |
Common share price | | $ | 0.54 | | $ | 0.57 | |
Strike price | | $ | 0.54 | | $ | 0.58 | |
Forfeiture rate | |
| 0 | % | | 0 | % |
March 14, 2020 | February 26, 2021 | |||||||
Volatility | 87 | % | 117 | % | ||||
Risk-free interest rate | 0.49 | % | 0.95 | % | ||||
Expected life (in years) | 5 | 10 | ||||||
Dividend yield | 0 | % | 0 | % | ||||
Common share price | $ | 0.18 | $ | 1.87 | ||||
Strike price | $ | 0.19 | $ | 1.87 | ||||
Forfeiture rate | 0 | 0 |
15
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
March 1, 2021 | March 8, 2021 | |||||||
Volatility | 117 | % | 117 | % | ||||
Risk-free interest rate | 0.92 | % | 1.07 | % | ||||
Expected life (in years) | 10 | 10 | ||||||
Dividend yield | 0 | % | 0 | % | ||||
Common share price | $ | 2.06 | $ | 1.88 | ||||
Strike price | $ | 2.06 | $ | 1.88 | ||||
Forfeiture rate | 0 | 0 |
| | | | | | | | | | |
|
| January 3, |
| January 4, |
| January 14, | | |||
| | 2022 | | 2022 | | 2022 | | |||
Volatility |
| | 114 | % | | 114 | % | | 114 | % |
Risk-free interest rate |
| | 1.50 | % | | 1.47 | % | | 1.64 | % |
Expected life (in years) |
| | 6.25 |
| | 6.25 |
| | 6.25 |
|
Dividend yield |
| | 0 | % | | 0 | % | | 0 | % |
Common share price | | $ | 0.36 | | $ | 0.35 | | $ | 0.35 | |
Strike price | | $ | 0.36 | | $ | 0.35 | | $ | 0.35 | |
Forfeiture rate | |
| 0 | % | | 0 | % | | 0 | % |
| | | | | | | | | | |
| | January 16, |
| January 18, |
| February 14, |
| |||
| | 2022 | | 2022 | | 2022 | | |||
Volatility | | | 114 | % | | 114 | % | | 113 | % |
Risk-free interest rate | | | 1.73 | % | | 1.74 | % | | 1.94 | % |
Expected life (in years) | | | 6.25 |
| | 6.25 |
| | 6.25 |
|
Dividend yield | | | 0 | % | | 0 | % | | 0 | % |
Common share price | | $ | 0.35 | | $ | 0.35 | | $ | 0.29 | |
Strike price | | $ | 0.35 | | $ | 0.35 | | $ | 0.30 | |
Forfeiture rate | |
| 0 | % | | 0 | % | | 0 | % |
| | | | | | | | | | |
| | | | | | | | | | |
Volatility |
| February 21, |
| February 25, 2021 |
| March 30, |
| |||
Risk-free interest rate |
| 2022 | | 2022 | | 2022 | | |||
Expected life (in years) |
| | 113 | % | | 113 | % | | 114 | % |
Dividend yield |
| | 1.89 | % | | 1.91 | % | | 2.43 | % |
Common share price | | | 6.25 |
| | 6.25 |
| | 6.25 |
|
Strike price | | | 0 | % | | 0 | % | | 0 | % |
Forfeiture rate | | $ | 0.37 | | $ | 0.35 | | $ | 0.35 | |
| | $ | 0.37 | | $ | 0.35 | | $ | 0.35 | |
| |
| 0 | % | | 0 | % | | 0 | % |
March 15, 2021 | |||||
Volatility | 117 | % | |||
Risk-free interest rate | 1.06 | % | |||
Expected life (in years) | 10 | ||||
Dividend yield | 0 | % | |||
Common share price | $ | 2.49 | |||
Strike price | $ | 2.49 | |||
Forfeiture rate | 0 |
The Company recorded $1,282,741$2,041 and $155,022$1,283 of stock-based compensation for the three months ended March 31, 20212022 and 2020,2021, respectively. For the three months ended March 31, 20212022 and 20202021 there were no0 stock options exercised.
|
|
11. Warrants |
The Company values warrants issued in equity placements using the Black Scholes model to allocate the fair value of the proceeds from equity financings using a relative fair value approach. Like other stock-based compensation, management uses judgment to determine the inputs to the Black-Scholes option pricing model including the expected life, and underlying share price volatility. Changes in these assumptions will impact the calculation of fair value and the value attributed to the warrants. The Company calculates volatility of warrants based on the historical price of the Company’s stock. An increase/decrease in the volatility would have resulted in an increase/decrease in the fair value of the options.
In connection with the February 14, 2020 registered direct offering, the Company issued 20,833,334 five and one half-year Series A warrants to purchase one share20,833,334 shares of common stock at an exercise price of $.20.$0.20. The Company also issued 1,041,667 warrants to purchase a share1,041,667 shares of common stock at an exercise price of $0.15 per share to the placement agents.
16
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
In connection with the April 9, 2020 CMPO, the Company issued 16,666,667 five-year Series B Warrants to purchase one16,666,667 common shareshares at an exercise price of $0.15. The Company also issued 1,666,667 Placement Agent Warrants to purchase one1,666,667 common shareshares at an exercise price of $0.15 per share.
In connection with the May 29, 2020 public offering, the Company issued 133,333,333 two-year Series C Warrants to purchase one133,333,333 common shareshares at an exercise price of $0.15. The Company also issued 12,170,000 Series C Pre-Funded Warrants to purchase common shares at an exercise price of $0.0001 on a cashless exercise basis. As of December 31, 2020, all of the Series C Pre-Funded Warrants have been exercised.
In connection with the July 7, 2020 public offering, the Company issued 187,500,000 two-year Series D Warrants to purchase one187,500,000 common shareshares at an exercise price of $0.16. The Company also issued 25,000,000 Series D Pre-Funded Warrants to purchase common shares at an exercise price of $0.0001 on a cashless exercise basis. As of December 31, 2020, all of the Series D Pre-Funded Warrants have been exercised.
As at March 31, 2021,2022, details of the outstanding warrants were as follows:
| | | | | | | ||||||||||||
|
| |
| |
| Weighted | ||||||||||||
| | | | | | Average | ||||||||||||
| | Exercise | | Warrants | | Remaining | ||||||||||||
Original Issue date | Exercise Price | Warrants Outstanding | Weighted Average Remaining Life | | Price | | Outstanding | | Life | |||||||||
February 14, 2020 | 0.20 | - | - | |||||||||||||||
February 14, 2020 | 0.15 | 197,917 | 3.87 | | 0.15 | | 197,917 | | 2.87 | |||||||||
April 9, 2020 | 0.15 | 366,585 | 4.03 | | 0.15 | | 363,501 | | 3.02 | |||||||||
May 29, 2020 | 0.15 | 276,500 | 1.16 |
| 0.15 |
| 120,000 |
| 0.16 | |||||||||
July 7, 2020 | 0.16 | 856,000 | 1.27 |
| 0.16 |
| 231,000 |
| 0.27 | |||||||||
Balance at March 31, 2021 | 1,697,002 | |||||||||||||||||
Balance at March 31, 2022 |
|
|
| 912,418 |
|
|
|
|
12. Income taxes
The Company is an overall net deferred tax liability position as of March 31, 2022. Management has assessed that the future taxable income resulting from the deferred tax liability position will result in utilization of the Company’s US federal and state net operating loss carryforwards in future tax periods. The Company is in a net deferred tax asset position in Canada and a full valuation allowance against the Canada deferred tax assets remains necessary as a result of the historical losses and the uncertainty of realizing any future tax benefits related to the Canadian deferred tax assets. 13. Commitments and contingencies |
On May 10, 2018, the Company entered into a Development, Commercialization and Exclusive Distribution Agreement. As part of the agreement, the Company is required to make the following future milestone payments:
● |
● |
As atof March 31, 2021,2022, none of the future development milestones related to the above agreement have been met. The Company has assessed the probability of meeting the above milestones and has determined that an accrual is not necessary atas of March 31, 2022 and 2021.
17
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
From time to time, the Company may be exposed to claims and legal actions in the normal course of business. As at March 31, 2021, and continuing as of May 12, 2021, theThe Company is not aware of any pending or threatened material litigation claims against the Company, other than as described below.Company.
14. Segment information
On November 1, 2019, Heska Corporation (“Heska”) filed a complaint for damages and injunctive relief (the “Complaint”) inThe Company’s operations are comprised of 2 reportable segments. Although the United States District Court for the Middle District of North Carolina, Case 1:19-cv-01108-LCB-JLW, against Qorvo US, Inc. (“Qorvo US”), Qorvo Biotechnologies, LLC (“Qorvo Biotech” and, together with Qorvo US, “Qorvo”) and the Company (collectively with Qorvo, the “Defendants”) which was amended on November 22, 2019. The amended Complaint alleges, among other things, that the Defendants improperly obtained Heska’s trade secrets and confidential information and/or conspiredreportable segments provide similar products, each one is managed separately to use improper means to misappropriate Heska’s trade secrets related to an instrument and related consumable products for performing immunoassay analysis of biomarkers and other substances. The amended Complaint seeks compensatory and exemplary damages, as well as preliminary and permanent injunctive relief to prevent the Defendants from commercializing our TRUFORMA® diagnostic instrument. On January 21, 2020, the Defendants filed a motion seeking dismissal of the Complaint. On February 11, 2020, Heska filed its response to the Defendants’ motion to dismiss to which the Defendants responded on February 25, 2020. Heska subsequently moved to strike a portion of the Defendants’ response. On September 30, 2020, the court denied the Defendants’ motion to dismiss and granted Heska’s motion to strike. On October 14, 2020 the Defendants filed their answer to the amended Complaint. On May 10, 2021, the Defendants filed an updated answer and counterclaims to Heska’s amended complaint alleging unfair and deceptive trade practices claims against Heska. Discovery is ongoing. The Company believes that the allegations in the amended Complaint have no merit and will not have a material adverse effect on our business, results of operations or financial condition.
Under the terms of the Development and Supply Agreement, dated November 26, 2018, by and between Qorvo Biotech and the Company (as amended, the “Qorvo Agreement”), Qorvo Biotech agreed to indemnify the Company and certain related parties against claims alleging infringement or misappropriation of third-party intellectual property rights, subject to certain limitations and exceptions. Qorvo Biotech has notified the Company that Qorvo Biotech has assumed the defense of the amended Complaint and will indemnify the Company for losses arising from the amended Complaint in accordancebetter align with the terms of the Qorvo Agreement. Qorvo Biotech has further advised us that it intends to mount a vigorous defense to the claims in the amended Complaint,Company’s customers and that it believes the allegations contained in the amended Complaint are without merit.distribution or development partners.
|
|
The Company follows ASC topic 820, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The provisions of ASC topic 820 apply to other accounting pronouncements that require or permit fair value measurements. ASC topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date; and establishes a three level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refers broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. To increase consistency and comparability in fair value measurements and related disclosures, the fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of the hierarchy are defined as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly for substantially the full term of the financial instrument.
Level 3 inputs are unobservable inputs for asset or liabilities.
The categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The carrying values of cash, trade and other receivable, accounts payable and accrued liabilities and shareholder loans payable approximates their fair values because of the short-term nature of these instruments.
Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates, relative to interest rates on cash and cash equivalents, due to the short-term nature of these balances.
The Company has balances in Canadian dollars that give rise to exposure to foreign exchange (“FX”) risk relating to the impact of translating certain non-U.S. dollar balance sheet accounts as these statements are presented in U.S. dollars. A strengthening U.S. dollar will lead to a FX loss while a weakening U.S. dollar will lead to a FX gain. For each Canadian dollar balance of $1.0 million, a +/- 10% movement in the Canadian currency held by the Company versus the U.S. dollar would affect the Company’s loss and other comprehensive loss by $0.1 million.
|
|
Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the Company closely monitors its forecasted cash requirements with expected cash drawdown.
The following are the contractual maturities of the undiscounted cash flows of financial liabilities as at March 31, 2021 and December 31, 2020:
March 31, 2021 | ||||||||||||||||||||||||
Less than | 3 to 6 | 6 to 9 | 9 months | Greater than | ||||||||||||||||||||
3 months | months | months | 1 year | 1 year | Total | |||||||||||||||||||
Third parties | ||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 1,128,233 | $ | - | $ | - | $ | - | $ | - | $ | 1,128,233 | ||||||||||||
Debt obligations | 527,360 | - | - | - | - | 527,360 | ||||||||||||||||||
Lease obligations | 75,413 | 75,980 | 76,551 | 78,826 | 978,470 | 1,285,240 | ||||||||||||||||||
$ | 1,731,006 | $ | 75,980 | $ | 76,551 | $ | 78,826 | $ | 978,470 | $ | 2,940,833 |
December 31, 2020 | ||||||||||||||||||||||||
Less than | 3 to 6 | 6 to 9 | 9 months | Greater than | ||||||||||||||||||||
3 months | months | months | 1 year | 1 year | Total | |||||||||||||||||||
Third parties | ||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 1,248,628 | $ | - | $ | - | $ | - | $ | - | $ | 1,248,628 | ||||||||||||
Debt obligations | 527,360 | - | - | - | - | 527,360 | ||||||||||||||||||
Lease obligations | 59,662 | 62,463 | 64,356 | 66,307 | 1,087,998 | 1,340,786 | ||||||||||||||||||
$ | 1,835,650 | $ | 62,463 | $ | 64,356 | $ | 66,307 | $ | 1,087,998 | $ | 3,116,774 |
The Company's operations comprise a single reportable segment engaged in the research, development targeting health and wellness solutions for the companion animal. As the operations comprise a single reportable segment, amounts disclosed in the financial statements for loss for the period, depreciation and total assets also represent segmented amounts. In addition, all of the Company'sCompany’s long-lived assets are in the United States of America (“US”).
| | | | | | | | | |
|
| Diagnostics |
| Therapeutics |
| Consolidated | |||
| | | | | | | | | |
Net Revenue | | $ | 57 | | $ | 3,694 | | $ | 3,751 |
Operating (loss) income | |
| (5,287) | |
| 974 | |
| (4,314) |
Net interest income | |
| 107 | |
| - | |
| 107 |
(Loss) income before income taxes | | $ | (5,177) | | $ | 962 | | $ | (4,215) |
| | | | | | | | | |
Total assets | | $ | 195,915 | | $ | 82,075 | | $ | 277,990 |
Depreciation and amortization | |
| 110 | | $ | 709 | | $ | 819 |
Capital expenditures | | $ | 206 | | $ | - | | $ | 206 |
| | | | | | |
|
| | March 31, |
| | December 31, |
| | | 2022 | | | 2021 |
| | | | | | |
Canada | | $ | 163,913 | | $ | 170,601 |
US | |
| 114,077 | |
| 109,799 |
Total assets | | $ | 277,990 | | $ | 280,400 |
| | | | | | |
Total US property and equipment | | $ | 1,920 | | $ | 1,550 |
Total US right-of-use asset | | $ | 1,218 | | $ | 1,320 |
18
March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Canada | $ | 250,972,315 | $ | 53,160,701 | ||||
US | 29,496,408 | 12,983,333 | ||||||
Total assets | $ | 280,468,723 | $ | 66,144,034 | ||||
Total US property and equipment | $ | 293,516 | $ | 583,007 | ||||
Total US right-of-use asset | 1,263,062 | 1,318,716 | ||||||
$ | 1,556,578 | $ | 1,901,723 |
Zomedica Corp.
Notes to the condensed consolidated financial statements
(Unaudited) (United Stated dollars in thousands, except for per share data)
15. Loss per share
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Numerator | |
| | |
| |
Net loss for the period | | $ | (3,937) | | $ | (4,037) |
Charge to retained earnings for preferred share exchange | |
| - | |
| (32,039) |
Loss attributable to common shareholders | | | (3,937) | | | (36,076) |
| | | | | | |
Denominator | |
| | | | |
Weighted average shares - basic | |
| 979,899,668 | |
| 890,245,654 |
Stock options | |
| — | |
| — |
Warrants | |
| — | |
| — |
Denominator for diluted loss per share | |
| 979,899,668 | |
| 890,245,654 |
| | | | | | |
Loss per share - basic and diluted | | $ | (0.004) | | $ | (0.04) |
|
|
For the three months ended March 31, 2021 | For the three months ended March 31, 2020 | |||||||
Numerator | ||||||||
Net loss for the period | $ | (4,036,817 | ) | $ | (2,450,618 | ) | ||
Charge to retained earnings for preferred share exchange | (32,038,603 | ) | - | |||||
Loss attributable to common shareholders | (36,075,420 | ) | (2,450,618 | ) | ||||
Denominator | ||||||||
Weighted average shares - basic | 890,245,654 | 118,340,596 | ||||||
Stock options | - | - | ||||||
Warrants | - | - | ||||||
Denominator for diluted loss per share | 890,245,654 | 118,340,596 | ||||||
Loss per share - basic and diluted | $ | (0.04 | ) | $ | (0.02 | ) |
For the above-mentioned periods, the Company had 57,632,724 stock options and 912,418 warrants outstanding which could potentially dilute basic earnings per share in the future but were excluded from the computation of diluted loss per share in the periods presented, as their effect would have been anti-dilutive.
16. Related party transaction
On March 1, 2022 we entered into a Consulting Agreement with Johnny Powers, a member of our Board. Pursuant to the Powers Agreement, Dr. Powers provides strategic consulting services to the Company. Dr. Powers is entitled to $10 per month as compensation and reimbursement for authorized expenses. The Powers Agreement expires November 30, 2022.
17. Subsequent events
On April 1, 2022, the Company entered into an agreement with ULF Northfield Business Center LLC to lease 61,500 square feet of office and warehouse space. The lease period is for 61 months beginning on April 30, 2022, with a monthly rent payment of $9 for the first twelve months and escalating to $11 per month over the lease period.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
��
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes and the other financial information included elsewhere in this Report. This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and forward-looking information under applicable Canadian securities legislation (collectively, “forward-looking statements”) that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, and those set forth in our most recent Annual Report on Form 10-K particularly those under “Risk Factors” discussed below and in our most recent Annual Report on Form 10-K10-K.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and pursuant to applicable Canadian securities legislation that are based on management’s beliefs and assumptions and on information currently available to management. Some of the statements under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report contain forward-looking statements. In some cases, you can identify forward-looking statements through our use of words such as “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.
There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
our ability to successfully |
our ability to |
our ability to |
the ability of our contract partners and contractors to appropriately conduct our product development, validation studies, verification studies, and beta testing, and certain other development activities; |
the ability of our contract manufacturing organizations to manufacture and supply our products; |
our |
the expected impact of the novel coronavirus pandemic on our |
our ability to develop and commercialize products that can compete effectively; |
the size and growth of the veterinary diagnostics and medical device markets; |
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our ability to obtain and maintain intellectual property protection for our planned and future products candidates; |
regulatory developments in the United States; |
the loss of key personnel; |
the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; |
the impact of the novel coronavirus pandemic on our operations, including the development, manufacturing and selling of our TRUFORMA® platform and related assays and our PulseVet platform; |
● | our ability to maintain the listing of our common shares on the NYSE American exchange; and |
our status as a “passive foreign investment company” for U.S. federal income tax purposes. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. Please see “Risk Factors” below and in our most recent Annual Report on Form 10-K for additional risks which could adversely impact our business and financial performance.
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Report or the date of the document incorporated by reference into this Report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.
All amounts are in thousands of dollars, except earnings per share, unless otherwise stated.
Overview
We are a veterinary health company creating products for companion animals by focusing on the unmet needs of clinical veterinarians. We expectOur mission is to enrich the lives of the animals we love and the people that ourcare for them by providing products and technologies that improve patient care and enhance practice health. Our product portfolio will includeincludes innovative diagnostics and therapeutic medical devices that emphasize patient health and enhancing practice health. Witheconomics.
We currently have two discrete platforms - our TRUFORMA® platform, comprising point-of-care diagnostic products for disease states in dogs and cats, and our PulseVet® platform, which provides for treatment of musculoskeletal issues in horses and small animals.
Dogs and cats commonly suffer from adrenal disorders and thyroid disease, including hypothyroidism and hyperthyroidism. We believe that diagnostic tests are vital for identifying these disorders in sick patients as well as for screening apparently healthy patients. In certain cases, multiple assays must be performed to reach a team that includesdefinitive diagnosis of a specific disease or condition. Clinical veterinarians often do not have access to the equipment and assays to perform this testing at the point-of- care. As a result, certain tests must be sent to a reference lab, resulting in delay in diagnosis and treatment, and depriving clinical veterinary professionals,veterinarians of potential testing revenue.
Through our goal is to provide veterinarians the opportunity to increase productivity and grow revenue while better serving the animals in their care.
Our strategic focus isTRUFORMA® platform, we are focused on the commercialization of our TRUFORMA® diagnostic biosensor platform and the final development and commercialization of the first fivediagnostic instruments and related assays for the detection of adrenal and thyroid disorders in cats and dogs. The TRUFORMA® platform uses Bulk Acoustic Wave (BAW) technology to provide a non-optical and fluorescence free detection system for use at the point-of-care. We believepoint-of-care that BAWprovide reference lab accuracy, thereby enabling practitioners to diagnose and treat diseases sooner.
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Through our PulseVet platform, we are the world leader in electro-hydraulic shockwave technology will enable precisefor the treatment of a wide variety of conditions in horses and repeatable test results at the point-of-care during a typical veterinary appointment.
small animals. Our technology is indicated for conditions including osteoarthritis, tendon and ligament healing, bone healing, chronic pain relief and wound healing.
As TRUFORMA®’s market presence grew, we intended to transition from a distributor-based sales model to a direct sales organization. However, due to anticipated changes at our current distributor that we believe have impacted its ability to market our products effectively, we will be accelerating that transition and the building of a direct sales organization.
Zomedica currently employs nine direct field commercialization personnel, supported by two regional managers, a Vice President of Sales, and a Chief Commercial Officer.
Following the commercial launch of TRUFORMA®, we expect to continue the development of another point-of-care diagnostic platform, which is based on miniaturized laser-based Raman spectroscopy technology and is designed to detect pathogens in companion animals. We believe this platform will enable the identification of biological and biochemical signatures in complex biological samples and has the potential to achieve reference lab sensitivity/specificity to screen for a wide range of pathogens in companion animal feces, urine, respiratory, and dermatological samples in minutes without the need for extensive sample prep or the use of reagents. The diagnostic platform requires a small fecal sample preparation. Additionally, the platform has automated analysis and does not require specialized staff training. We believe that this diagnostic platform does not require pre-market regulatory approval for use with companion animals in the United States.
We have performed initial development work on a circulating tumor cell (CTC) “liquid biopsy” product for use in a reference lab setting as a canine cancer diagnostic. This product is intended for use to detect canine cancers faster, more affordably and less invasively compared to existing methods, which can be expensive and cost-prohibitive for pet owners. We have worked on the developmentresult of an assay that targets hard-to-diagnose canine cancers, such as hemangiosarcoma and osteosarcoma.
Consistent withinternal strategic view, we have focused our focus on the development of point-of-care diagnostic products, we intend to seek one or more partners for the further development and commercialization of the liquid biopsy product.
Through the year ended December 31, 2020, we were a development-stage company with no commercialized products, and we did not generate any revenue from product sales. We have incurred significant net losses since our inception. We incurred net losses of approximately $4.0 million and approximately $2.5 million for the three months ended March 31, 2021 and March 31, 2020 and approximately $16.9 million and $19.8 million for the years ended December 31, 2020 and December 31, 2019 respectively. These losses have resulted principally from costs incurred in connection with investigating and developing our product candidates, research and development activities, and general and administrative costs associated with our operations. As of March 31, 2021, we had an accumulated deficit of approximately $105.0 million and cash and cash equivalents of approximately $276.6 million.
For the foreseeable future, we expect to continue to incur losses, which will increase from historical levels as we continue the commercialization of our TRUFORMA® platform, expand our product development activities, and expand our sales and marketing activities.
For further informationefforts on the regulatory, business and product pipeline, please see the “Business” section of this Annual Report on Form 10-K. For further information on the risk factors, please see the “Risk Factors” section of this Annual Report on Form 10-K.
Revenue
We launched our TRUFORMA® platform and our first three assays duringPulseVet technology. We believe this narrowed focus will enable us to capitalize on our core strengths and to accelerate the first quartercommercialization of 2021. these existing platforms.
Reportable Segments
Our reportable segments are:
● | Diagnostics, which consists of our parent company and its U.S subsidiary and includes the TRUFORMA® products, and |
● | Therapeutics, which consists of PulseVet operations and its two international subsidiaries, HMT High Medical Technologies (Japan) Co. Ltd. ("HMT") and NeoPulse, GmbH ("NeoPulse"), and includes the ProPulse products and services. |
Revenue
Our revenue consisted of instruments, cartridges, extended warranty services and miscellaneous activities sold in the U.S associated with our TRUFORMA® platform, as well as instruments, trodes and warranty services sold in the U.S.
U.S and internationally associated with our PulseVet products.
Cost of Revenue
Cost of revenue consistsconsisted primarily of costs related to the costscost of manufacturingraw materials used in the assembly of PulseVet instruments and cartridgestrodes, the cost of TRUFORMA® instruments purchased, and consumables and the related warranty purchases.warranties purchased. We expense all inventory obsolescence provisions related to normal manufacturing changes as cost of revenue.
Operating Expenses
The majority of our operating expenses to date have been for the selling, general and administrative activities related to general business activities, capital market activities, and stock-based compensation, developing a commercial team and research and development activities related to our lead product candidates.
development.
Research and Development Expense
All costs of research and development are expensed in the period in which they are incurred. Research and development costs primarily consist of salaries and related expenses for personnel, fees paid to consultants, outside service providers, professional services, travel costs and materials used in clinical trials and research and development.
Selling, General and Administrative Expense
Selling, general and administrative expense consists primarily of personnel costs, including salaries, related benefits and stock-based compensation for employees, consultants and directors. General and administrativeThese expenses also include costs associated with sales and marketing activity, professional fees, and corporate administrative and overhead costs, including rent and other facilities costs, professional fees, amortization, and depreciation.
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Income Taxes
As of December 31, 2020,2021, we had net operating loss carryforwards for U.S. federal and state income tax purposes of approximately $19.6 million$28,178 and non-capital loss carryforwards for Canada of approximately $27.8 million,$37,280, which will begin to expire in fiscal year 2035. We have evaluated the factors bearing upon the realizability of our deferred tax assets, which are comprised principally of net operating loss carryforwards and non-capital loss carryforwards. We concluded that, due to the limitations under Section 382, our U.S. federal and state net operating loss carryfowards for the periods prior to February 11, 2021 have been limited to zero. We therefore have derecognized $20,976 of our U.S deferred tax assets, resulting in a remaining carryforward balance of $7,202.
In Canada, due to the uncertainty of realizing any tax benefits as of December 31, 2020, a valuation allowance was necessary2021, and March 31, 2022 we continue to fully offsetvalue our Canadian deferred tax assets. There has been no significant change in the first three months ended March 31, 2021.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and revenue, costs and expenses and related disclosures during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those described below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
JOBS Act
The Jumpstart Our Business Startups Act, or the JOBS Act, contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” We have irrevocably elected not to avail ourselves of the JOBS Act provision that an emerging growth company may delay adopting new or revised accounting standards until such times as those standards apply to private companies.
In addition, as an “emerging growth company” we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, and (ii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). These exemptions will apply until December 31, 2022 or until we no longer meet the requirements of being an “emerging growth company,” whichever is earlier.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the year. Actual results could differ from those estimates.
Areas where significant judgment is involved in making estimates are the determination of fair value of stock-based compensation, the useful lives of property and equipment, allocation of proceeds from financings to shares and warrants, and fair value of warrants and placement agent warrants.
Research and Development Costs
Research and development expenses comprise costs incurred in performing research and development activities, including salaries and benefits, safety and efficacy studies, contract manufacturing costs, contract research costs, patent procurement costs, materials and supplies and occupancy costs. Research and development activities include internal and external activities associated with research and development studies of current product candidates and advancing product candidates towards commercialization.
Research and development costs related to continued research and development programs are expensed as incurred in accordance with ASC topic 730.
Translation of Foreign Currencies
The functional currency, as determined by management, for our subsidiaries in the United States, Switzerland, and Canada is the U.S. dollars,dollar, which is also our reporting currency. Transactions denominated in currencies other than U.S. dollars andcurrency
The functional currency, as determined by management, for our Japanese subsidiary is the monetary value of assets and liabilitiesJapanese Yen. Japanese Yen are translated at the period end exchange rates. Revenuefor financial reporting purposes with translation gains and expenses are measured at rateslosses recorded as a component of exchange prevailing on the transaction dates. All of the exchange gainsother comprehensive income or losses resulting from these other transactions are recognized in the consolidated statements of operations and comprehensive loss.
Stock-Based Compensation
We measure the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted if the fair value of the goods or services received by us cannot be reliably estimated.
granted.
We calculate stock-based compensation using the fair value method, under which the fair value of the options at the grant date is calculated using the Black-Scholes Option Pricing Model, and subsequently expensed over the vesting period of the option using the graded vesting method. The provisions of our stock-based compensation plans do not require us to settle any options by transferring cash or other assets, and therefore we classify the awards as equity. Stock-based compensation expense recognized during the period is based on the value of stock-based payment awards that are ultimately expected to vest. We estimate forfeitures at the time of grant and revise these estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on an average of the term of the options. The risk-free rate assumed in valuing the options is based on the U.S.Canadian treasury yield curve in effect at the time of grant for the expected term of the option. The expected dividend yield percentage at the date of grant is zero as we are not expected to pay dividends in the foreseeable future.
Loss Per Share
Basic loss per share, or EPS, is computed by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding. Diluted EPS reflects the potential dilution that could occur from common shares issuable through the exercise or conversion of stock options, restricted stock awards, warrants and convertible securities. In certain circumstances, the conversion of options, warrants and convertible securities are excluded from diluted EPS if the effect of such inclusion would be anti-dilutive.
The dilutive effect of stock options is determined using the treasury stock method. Stock options and warrants to purchase our common shares issued during the period were not included in the computation of diluted EPS, as the effect would be anti-dilutive.
Comprehensive Loss
We follow ASC topic 220. This statement establishes standards for reporting and display of comprehensive (loss) income and its components. Comprehensive loss is net loss plus certain items that are recorded directly to shareholders'shareholders’ equity. We currently have no other comprehensive loss items.
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Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and revenue, costs and expenses and related disclosures during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those described below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 3 of the notes to our consolidated financial statements appearing elsewhere in this document, management has identified the following as “Critical Accounting Policies and Estimates”: Intangible Assets and Business Combinations, Inventory Reserves, and Revenue Recognition and Liabilities due to Customers. We believe that the estimates and assumptions involved in these accounting policies may have the greatest potential impact on our financial statements.
Intangible Assets and Business Combinations
Assets acquired and liabilities assumed as part of a business combination are recognized at their acquisition date fair values. In determining these fair values, we utilized various forms of the income, cost and market approaches depending on the asset or liability being valued.
We used a discounted cash flow model to measure the trade names, customer relationship, and technology assets. The estimation of fair value required significant judgment related to future net cash flows based on assumptions related to revenue and EBITDA growth rates, discount rates, and attrition factors. Inputs were generally determined by taking into account competitive trends, market comparisons, independent appraisals, and historical data, among other factors, and were supplemented by current and anticipated market conditions.
Variances in future cash flows, anticipated growth rates and revenue could significantly impact the value assigned to intangible assets. Any variance could cause impairment charges upon testing.
We will evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change indicating the carrying value may not be recoverable. When testing goodwill for impairment, we may first assess qualitative factors to determine if it is more likely than not the carrying value of a reporting unit exceeds its estimated fair value. During a qualitative analysis, we consider the impact of changes, if any, to the following factors: macroeconomic, industry and market factors; cost factors; changes in overall financial performance; and any other relevant events and uncertainties impacting a reporting unit. If our qualitative assessment indicates a goodwill impairment is more likely than not, we perform additional quantitative analyses. We may also elect to skip the qualitative testing and proceed directly to the quantitative testing. For reporting units where a quantitative analysis is performed, we will perform a test measuring the fair values of the reporting units and comparing them to their aggregate carrying values, including goodwill. If the fair value is less than the carrying value of the reporting unit, an impairment is recognized for the difference, up to the carrying amount of goodwill.
We will estimate the fair values of our reporting units using a discounted cash flow method or a weighted combination of discounted cash flows and a market-based method. The discounted cash flow method includes assumptions about a wide variety of internal and external factors. Significant assumptions used in the discounted cash flow method include financial projections of free cash flow, including revenue trends, medical costs trends, operating productivity, income taxes and capital levels; long-term growth rates for determining terminal value beyond the discretely forecasted periods; and discount rates. Financial projections and long-term growth rates used for our reporting units will be consistent with, and use inputs from, our internal long-term business plan and strategies. Discount rates will be determined for each reporting unit and include consideration of the implied risk inherent in their forecasts. Our most significant estimate in the discount rate determinations involves our adjustments to the peer company weighted average costs of capital reflecting
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reporting unit-specific factors. We will not make any adjustments to decrease a discount rate below the calculated peer company weighted average cost of capital for any reporting unit. Company-specific adjustments to discount rates are subjective and thus are difficult to measure with certainty. The passage of time and the availability of additional information regarding areas of uncertainty with respect to the reporting units’ operations could cause these assumptions to change in the future. Additionally, as part of our quantitative impairment testing, we will perform various sensitivity analyses on certain key assumptions, such as discount rates, cash flow projections and peer company multiples to analyze the potential for a material impact. The market-based method requires determination of an appropriate peer group whose securities are traded on an active market. The peer group is used to derive market multiples to estimate fair value.
Inventory Reserves
Our Diagnostics segment purchases instruments and places them in inventory. Instruments are removed from inventory and recorded as fixed assets when they are placed with our customers under the agreement that they will repeatedly purchase assays (tests) which are utilized in the instrument. Each instrument placed in the portfolio represents an asset that we own. An estimate is made of the anticipated future revenue over the life of the instrument, based on the sale of assays, which is typically ten years. If the payback period of the initial investment in the asset is less than the ten-year life of the asset, we conclude that the inventory has been properly recorded, and no write-down is necessary. We rely on third-party data that considers various data points and assumptions, including, but not limited to, the expected volume of assays which will be sold, anticipated growth rates and placements of instruments. Realization of the anticipated revenue is dependent on the current assumptions and forecasted models.
The customer is obligated to purchase assays during the placement period. However, since the customer is not obligated to purchase the instrument, and can return it at any time, we are exposed to a risk of loss to the extent the customer returns the instrument and discontinues assay purchases.
On March 31, 2022, the carrying value of our Diagnostic inventory was $2,634. A significant assumption included in the realization model is a placement rate of two instruments per month, per account manager.
The effect of a 10% reduction in the estimated annual placements of instrument would increase the payback period on March 31, 2022, by 0.12 years.
Changes to placement rates are not expected to decrease, nor do we expect that any decrease would be permanent.
Revenue Recognition and Liabilities Due to Customers
The nature of our Therapeutics business segment 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. When revenue is recognized, a simultaneous adjustment for returns is estimated, reducing revenue. Estimated return credits are presented as a reduction to gross sales with the corresponding reserve presented as customer contract liabilities.
Variable consideration related to unused shock credits is calculated 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. Estimates of variable consideration are based upon historical experience and known trends. These estimated credits are non-refundable 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.
The number of trodes returned by year is tracked against the number of trodes sold in that same year, creating a current experience rate. It is assumed that the ultimate return rate for the trodes is 98%. For annual calculations, it is assumed that the expected returns in the current year for each layer increase to the experience rate of the year immediately preceding it. Once the 98% is reached the layer is removed from the calculation. The annual incremental change in expected returns is multiplied by an average return credit amount, generating the current liability due to customers.
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The average return credit is calculated by dividing the actual shock credits issued by the actual number of trodes returned. A variance in the assumed return rate compared to the actual rate would impact the estimate and potentially understate net sales (overestimated rate) or overstate net sales (underestimated rate) in any given year and create a corresponding misstatement of the liability due to customers.
On March 31, 2022, the estimated value of our Therapeutics customer contract liability was $303. If the expected return rate was increased by 2%, the effect on current year reduction in sales and increase in customer liability would have been $21.
Results of Consolidated Operations
Revenue
Revenue for the three months ended March 31, 2022, was $3,751 compared to $14 for the three months ended March 31, 2021, was $14,124 andan increase of $3,737. Revenue in the current period primarily resulted from the saleinclusion of our TRUFORMA® productsPulseVet platform, which had revenues of $3,694, consisting of instruments, trodes and associated warranties.warranty services sold worldwide. Revenues from sales of cartridges from our TRUFORMA® platform were $57 for the three months ended March 31, 2022, compared to $14 for the three months ended March 31, 2021, an increase of $43, or 307%. We commenced commercialization oflaunched our TRUFORMA® onplatform in March 15, 2021 and accordingly had only limited sales activity in the first quarter of 2021. WeIn general, we expect that revenue willto increase in subsequent periods as we increase our sales and marketing activities and have full periods duringof the PulseVet platform which we obtain salesacquired on October 1, 2021, and record related revenue.as additional assays are added to our TRUFORMA® platform.
Cost of Revenue
Cost of revenue for the three months ended March 31, 2022, was $990 compared to $6 for the three months ended March 31, 2021, was $5,658. As noted above, commercializationan increase of TRUFORMA® commenced on March 15, 2021.$984. Cost of revenue primarily resulted from costs associated with sales of our PulseVet platform which totaled $944, as well as $46 from costs associated with sales of our TRUFORMA® platform. We expectanticipate that costcosts of revenue will increase in 2022 as we sell additionalincrease revenue as described above.
Gross Profit
Gross profit for the three months ended March 31, 2022, was $2,761 compared to $8 for the three months ended March 31, 2021, an increase of $2,753. Gross profit margin for the quarter ended March 31, 2022, was approximately 74%, compared to 60% for the quarter ended March 31, 2021, an increase of 14%. The increase in gross profit resulted primarily from the inclusion of our PulseVet platform in the first quarter of 2022. In general, we believe gross margins will remain relatively unchanged due to a variety of factors, including the ability to effectively stimulate demand for certain of our products; potential increases in the cost of components and outside manufacturing services; our ability to manage warranty costs effectively; shifts in the mix of products and services, or in subsequent periods.the geographic, currency or channel mix; and fluctuations in exchange rates.
Research and Development
Research and development expense for the three months ended March 31, 20212022 was approximately $0.4 million$351 compared to approximately $0.6 million$413 for the three months ended March 31, 2020,2021, a decrease of approximately $0.2 million,$62, or 34%15%. The decrease was athe result of an overalla reduction in research and development activity as we curtailed our drug development activities, and a reduction in development costs related to TRUFORMA®associated with TRUFORMA® as we completed development of the instrument and three of the first five assays and began commercialization.commercialization in March of 2021.
Selling, General and Administrative
Selling, general and administrative expense for the three months ended March 31, 20212022 was approximately $3.5 million,$6,722, compared to approximately $1.7 million$3,468 for the three months ended March 31, 2020,2021, an increase of approximately $1.8 million,$3,254, or 105%91%. The increase primarily was due to an increase in share-based compensation expense which was approximately $1.3 million$2,041 for the three months ended March 31, 20212022 compared to approximately $0.2 million$1,283 for the comparable period in 20202021 as a result of stock option grants made during the first quarter of 2021. Other significant increases include professional fees incurred2022, as well as an increase in connection withcompensation expense of $1,373 due to additions to our sales force and management team and from the exchange
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acquisition of PulseVet and feesamortization and depreciation of $693 associated with SEC filings for $.7 million.intangibles acquired as part of our acquisition of PulseVet.
Net Loss
Our net loss for the three months ended March 31, 20212022 was approximately $4.0 million. We also incurred a direct charge to retained earnings as a result of the exchange of the Series 1 preferred shares of approximately $32.0 million as a result of the exchange of the Series 1 preferred shares, resulting in a net loss of $0.04 per share,$3,937 compared to a net loss of approximately $2.5 million, or $0.02 per share,$4,037, for the three months ended March 31, 2020, an increase2021, a decrease of approximately $1.5 million, or 60%.$100. The net loss in each period was attributed to the matters described above. We expect to continue to record net losses in future periods until such time as we have sufficient revenue from product sales to offset our operating expenses.
Cash Flows
Three months ended March 31, 20212022 compared to three months ended March 31, 2020
2021
The following table shows a summary of our cash flows for the periods set forth below:
| | | | | | | | | | | | |
|
| Three months ended | | Three months ended | | | | | | | ||
|
| March 31, 2022 |
| March 31, 2021 |
| Change | | |||||
Cash used in operating activities | | $ | (2,470) | | $ | (2,638) | | $ | 168 |
| (6.4) | % |
Cash used in investing activities |
| | (206) |
| | (18) | | $ | (188) |
| 1,043.7 | % |
Cash provided by financing activities |
| | — |
| | 217,267 | | $ | (217,267) |
| (100.0) | % |
Increase in cash and cash equivalents |
| | (2,676) |
| | 214,610 | | $ | (217,286) |
| (101.2) | % |
Effect of exchange rate changes on cash |
| | 62 |
| | — | | $ | 62 |
| NA | |
Cash and cash equivalents, beginning of period |
| | 194,952 |
| | 61,992 | | $ | 132,961 |
| 214.5 | % |
Cash and cash equivalents, end of period | | $ | 192,337 | | $ | 276,602 | | $ | (84,265) |
| (30.5) | % |
Three months ended | Three months ended | |||||||||||||||
March 31, 2021 | March 31, 2020 | Change | ||||||||||||||
$ | $ | $ | % | |||||||||||||
Cash flows used in operating activities | (2,638,333 | ) | (2,173,127 | ) | (465,206 | ) | 21.4 | % | ||||||||
Cash flows (used in) from investing activities | (18,026 | ) | 1,007,513 | (1,025,539 | ) | -101.8 | % | |||||||||
Cash flows from financing activities | 217,266,516 | 2,151,780 | 215,114,736 | 9997.1 | % | |||||||||||
Increase in cash | 214,610,157 | 986,166 | 213,623,991 | 21662.1 | % | |||||||||||
Cash and cash equivalents, beginning of period | 61,991,703 | 510,586 | 61,481,117 | 12041.3 | % | |||||||||||
Cash and cash equivalents , end of period | 276,601,860 | 1,496,752 | 275,105,108 | 18380.1 | % |
Operating Activities
Net cash used in operating activities for the three months ended March 31, 20212022, was approximately $2.6 million,$2,471, compared to approximately $2.2 million$2,638 for the three months ended March 31, 2020, an increase2021, a decrease in cash used of approximately $0.4 million,$168, or 21%6.4%. The increasedecrease in cash used in operations primarily resulted from the increasedecrease in our operating loss, as wellloss. Cash used in operations during the three months ended March 31, 2022 included inventory purchases of approximately $0.3 million related to our preparation for commercialization of our TRUFORMA® product, as well as changes$2,003, and increases in working capital items of $388, offset in part by an increase in non-cash expenses including stock-based compensation of approximately $1.3 million, loss on fixed asset dispositions of approximately $0.2 million$2,041, and positive changesan increase in in other non-cash items.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 20212022 was $18,026,$206, compared to cash fromused in investing activities of approximately $1.0 million$18 for the three months ended March 31, 2020, a decrease2021, an increase of approximately $1.0 million,$188, or 102%1,043.7%. The decreaseincrease primarily resulted from cash received from the repurchaseimprovement of our previously prepaid lease for approximately $1.0 million duringecommerce platform in the first quarter of 2020.2022.
Financing Activities
Net cash from financing activities for the three months ended March 31, 20212022, was approximately $217.3 million,zero, compared to approximately $2.2 million$217,267 for the three months ended March 31, 2020, an increase2021, a decrease of $215.1 million,$217,267, or 9,997%100%. Cash from financing activities in the first quarter of 2021 primarily resulted from approximately $199.5 million of proceeds from the February 2021 public offering of our common shares, partially offset by stock issuance costs of approximately $14.3 million.
costs.
Liquidity and Capital Resources
We have incurred losses and negative cash flows from operations since our inception in May 2015. As of March 31, 2021,2022, we had an accumulated deficit of approximately $105.0 million.$123,328. We have funded our working capital requirements primarily through the sale of our equity and equity-related securities and the exercise of stock options and warrants.
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AtAs of March 31, 2021,2022, the Company had cash and cash equivalents of approximately $276.6 million, inventory of approximately $0.3 million, prepaid expenses$192,337 and deposits of approximately $1.4 million, accounts receivable of $8,535 and tax credits receivable of approximately $0.2 million. At March 31, 2021, current assets amounted to approximately $278.5 million and current liabilities were approximately $2.0 million, resulting in working capital (defined as current assets minus current liabilities) of approximately $276.5 million.$194,332.
Short Term Cash Requirements
On March 7, 2021,We believe that our existing cash is sufficient to fund our expected short-term needs. We currently have cash fixed obligations in association with our building leases and quarterly inventory orders. We also have payment obligations associated with our on-going clinical studies and expect that we exchanged the 12 issued and outstanding shares ofhave sufficient cash to cover these requirements. We do not expect that PulseVet’s operations will require significant increases in our Series 1 Preferred Shares for 24,719,101 common shares valued at $44.0 million.short-term cash needs.
Subsequent to March 31, 2021, warrants and stock options to purchase 625,000 and 1,632,776 common shares, respectively were exercised, resulting in additional cash proceeds of approximately $0.7 million.
In December 2018, we entered into an at-the-market equity offering sales agreement with Cantor Fitzgerald & Co. under which we may sell pursuant to the universal shelf registration statement common shares in the United States only, from time to time, for up to $50.0 million and which was amended on March 25, 2019 to $10.0 million in aggregate sales proceeds in "at the market" transactions. No sales of common shares were made under the sales agreement, and the program was inactive at March 31, 2021.
On October 17, 2017 we entered into a five-year $5,000,000 unsecured working capital facility with Equidebt LLC, one of our shareholders (the “Equidebt Facility”). Amounts borrowed under the Equidebt Facility bear interest at a rate of 14% per annum payable at maturity. All amounts borrowed under the Equidebt Facility become due and payable on October 17, 2022. We can make two borrowings per month under the Equidebt Facility, each of which must be for a minimum of $250,000. No amounts were outstanding under the Equidebt Facility at March 31, 2021.
Long Term Cash Requirements
We believe that our existing cash resources will be sufficient to fund our expected workingoperational requirements through at least December 2024. We regularly evaluate our business plans and strategy. These evaluations often result in changes to our business plans and strategy, some of which may be material and significantly change our cash requirements. Ongoing business development activity may also require us to use some of our liquidity for an acquisition, and use of additional capital needs through December 2023.to fund newly acquired operations. If we raise additional funds by issuing equity securities, our existing security holders will likely experience dilution,dilution; and the incurring of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that could restrict operations. In the event that we are unable to obtain sufficient capital to meet our working capital requirements, we may be required to change or curtail current or planned operations in order to conserve cash until such time, if ever, that sufficient proceeds from operations are generated. In such an event, we may not be able to take advantage of business opportunities and may have to terminate or delay safety and efficacy studies, curtail our product development programs, or sell or assign rights to our product candidates, products and technologies.
Our future capital requirements depend on many factors, including, but not limited to:
● | the costs and timing of our development and commercialization activities; |
● | the cost of manufacturing our existing and future products; |
● | the cost of marketing and selling our existing and future products including marketing, sales, service, customer support and distribution costs; |
● | the expenses needed to attract and retain skilled personnel; |
● | the costs associated with being a public company; |
● | the costs associated with additional business development or mergers and acquisitions activity, including acquisition-related costs, earn-outs or other contingent payments and costs of developing and commercializing any technologies to which we obtain rights; |
● | third-party costs associated with the development and commercialization of our existing and future products and the ability of our development partners to satisfy our requirements on a timely basis; |
● | the scope and terms of our business plans from time to time, and our ability to realize upon our business plans; and |
● | the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs and the outcome of any such litigation. |
Off Balance Sheet Arrangements
Since inception, we have not engaged in the use of any off-balance sheet arrangements, such as structured finance entities, special purpose entities or variable interest entities.
Outstanding Share Data
The only class of outstanding voting equity securities of the Company are the common shares. As of May 10, 2021,2022:
there are 979,899,668 common shares issued and outstanding; |
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● | there are stock options outstanding under our Stock Option Plan to acquire an aggregate of 58,507,724 common shares |
● | there are common share purchase warrants outstanding to acquire an aggregate of 197,917 common shares at an exercise price of $0.15 per share issued in February 2020. |
● | there are common share purchase warrants outstanding to acquire an aggregate of 363,501 common shares at an exercise price of $0.15 per share issued in April 2020. |
● | there are common share purchase warrants outstanding to acquire an aggregate of 120,000 common shares at an exercise price of $0.15 per share issued in May 2020. |
● | there are common share purchase warrants outstanding to acquire an aggregate of 231,000 common shares at an exercise price of $0.16 per share issued in July 2020. |
● | All of the currently outstanding warrants also have a “cashless exercise” feature which is applicable in certain circumstances. The cashless exercise feature could result in the potential issuance of common shares based upon the “in-the-money” value of the applicable warrants at the time of exercise of the applicable warrants. The number of the common shares that may be issued is not determinable. However, the number of common shares that are issuable is based upon a formula contained in the applicable warrants, which determines the number of common shares issuable by dividing the “in-the-money” value (based upon the then current market price, as provided in the applicable warrants) by the then current market price and multiplying this result by the number of common shares that are issuable under the applicable warrants pursuant to cash exercise. |
Recently Adopted Accounting Pronouncements
From time to time, the Financial Accounting Standards Board ("FASB") or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification ("ASC") are communicated through issuance of an Accounting Standards Update ("ASU"). Unless otherwise discussed, we believe that recently issued guidance, whether adopted or to be adopted in the future, is not expected to have a “cashless exercise” feature which is applicable in certain circumstances. The cashless exercise feature could result inmaterial impact on our Consolidated Financial Statements upon adoption.
To understand the potential issuanceimpact of common shares based uponrecently issued guidance, whether adopted or to be adopted, please review the “in-the-money” value of the applicable warrants at the time of exercise of the applicable warrants. The number of the common shares that may be issued is not determinable. However, the number of common shares that are issuable is based upon a formula contained in the applicable warrants, which determines the number of common shares issuable by dividing the “in-the-money” value (based upon the then current market price, asinformation provided in Note 3 - Significant Accounting Policies to the applicable warrants) by the then current market price, and multiplying this result by the number of common shares that are issuable under the applicable warrants pursuant to cash exercise.
consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a result of our international operations, we are exposed to foreign currency risks that arise from our normal business operations, including in connection with our transactions that are denominated in foreign currencies. In addition, we translate sales and financial results denominated in foreign currencies into U.S. dollars for purposes of our consolidated financial statements. As a result, appreciation of the U.S. dollar against these foreign currencies generally will have a negative impact on our reported revenue and operating income while depreciation of the U.S. dollar against these foreign currencies will generally have a positive effect on reported revenue and operating income.
Not applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Evaluation of Our Disclosure Controls
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed,
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summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, our chief executive officer and our chief financial officer, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of March 31, 2021,2022, our disclosure controls and procedures were effective.
Changes in Internal Controls
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the period covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II —– OTHER INFORMATION
On November 1, 2019, Heska Corporation (“Heska”) filed a complaint for damages and injunctive relief (the “Complaint”) in the United States District Court for the Middle District of North Carolina, Case 1:19-cv-01108-LCB-JLW, against Qorvo US, Inc. (“Qorvo US”), Qorvo Biotechnologies, LLC (“Qorvo Biotech” and, together with Qorvo US, “Qorvo”) and us (collectively with Qorvo, the “Defendants”) which was amended on November 22, 2019. The amended Complaint alleges, among other things, that the Defendants improperly obtained Heska’s trade secrets and confidential information and/or conspired to use improper means to misappropriate Heska’s trade secrets related to an instrument and related consumable products for performing immunoassay analysis of biomarkers and other substances. The amended Complaint seeks compensatory and exemplary damages, as well as preliminary and permanent injunctive relief to prevent the Defendants from commercializing our TRUFORMATM diagnostic instrument. On January 21, 2020, the Defendants filed a motion seeking dismissal of the Complaint. On February 11, 2020, Heska filed its response to the Defendants’ motion to dismiss to which the Defendants responded on February 25, 2020. Heska subsequently moved to strike a portion of the Defendants’ response. On September 30, 2020, the court denied the Defendants’ motion to dismiss and granted Heska’s motion to strike. On October 14, 2020 the Defendants filed their answer to the amended Complaint. On May 10, 2021, the Defendants filed an updated answer and counterclaims to Heska’s amended complaint alleging unfair and deceptive trade practices claims against Heska. Discovery is ongoing. We believe that the allegations in the amended Complaint have no merit and will not have a material adverse effect on our business, results of operations or financial condition.
Under the terms of the Development and Supply Agreement, dated November 26, 2018, by and between Qorvo Biotech and the Company (as amended, the “Qorvo Agreement”), Qorvo Biotech agreed to indemnify us and certain related parties against claims alleging infringement or misappropriation of third-party intellectual property rights, subject to certain limitations and exceptions. Qorvo Biotech has notified us that Qorvo Biotech has assumed the defense of the amended Complaint and will indemnify us for losses arising from the amended Complaint in accordance with the terms of the Qorvo Agreement. Qorvo Biotech has further advised us that it intends to mount a vigorous defense to the claims in the amended Complaint, and that it believes the allegations contained in the amended Complaint are without merit.
There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.
If we are unable to establish an effective direct sales capability, our ability to market and sell our existing and future products and our ability to generate product revenue will be materially and adversely affected.
As a result30
We have used third parties to assist in the sales and distribution of our products. If these third parties are not successful in selling our products or do not adequately perform their obligations, our ability to market and sell our existing and future products and our ability to generate product revenue could be materially and adversely affected.
We have used third parties to assist in the sales and distribution of our TRUFORMA® instrument and related assays. We cannot assure you that these third parties will be successful in selling our products or that they will satisfy their obligations to us. If our sales and distribution partners are not successful in selling our products, or do not adequately perform their obligations, our ability to sell our existing and future products and our ability to generate product revenue could be materially and adversely affected.
The exhibits listed on the accompanying index to exhibits immediately preceding the exhibits are filed as part of, or hereby incorporated by reference into, this Quarterly Report.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EXHIBIT INDEX
Exhibit
* Filed herewith. ** This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.
31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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