Zomedica (ZOM) - 2025 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The company presents its unaudited Q1 2025 financial statements, detailing a significant net loss increase due to impairment charges Consolidated Balance Sheet Highlights (USD in Thousands): | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Total Assets | $142,993 | $207,360 | | Total Liabilities | $10,549 | $11,696 | | Total Shareholders' Equity | $132,444 | $195,664 | Consolidated Statements of Operations and Comprehensive Loss Highlights (USD in Thousands, except Per Share Data): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net Revenue | $6,500 | $6,262 | | Gross Profit | $4,407 | $4,117 | | Loss from Operations | $(64,548) | $(10,386) | | Net Loss | $(63,809) | $(9,160) | | Loss per Share - Basic and Diluted | $(0.07) | $(0.01) | Consolidated Statements of Cash Flows Highlights (USD in Thousands): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Used in Operating Activities | $(6,648) | $(7,590) | | Net Cash Provided by Investing Activities | $8,406 | $5,625 | | Increase (Decrease) in Cash and Cash Equivalents | $1,758 | $(1,965) | | Cash and Cash Equivalents, End of Period | $8,837 | $10,939 | - The company recognized a significant impairment expense of $55,833 thousand for the three months ended March 31, 2025, primarily due to goodwill ($45,556 thousand), intangible assets ($8,297 thousand), and property and equipment ($1,981 thousand)[7][75][76][77][157][158] - This was triggered by a substantial decline in market capitalization following the delisting of common shares from NYSE American[7][75][76][77][157][158] Consolidated Balance Sheets Consolidated Balance Sheet (USD in Thousands): | Asset/Liability/Equity | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $8,837 | $7,021 | | Available-for-sale securities | $54,770 | $64,332 | | Total current assets | $73,224 | $81,773 | | Property and equipment, net | $22,238 | $24,589 | | Goodwill | $— | $45,556 | | Intangible assets, net | $42,769 | $52,538 | | Total assets | $142,993 | $207,360 | | Total current liabilities | $7,405 | $9,331 | | Total liabilities | $10,549 | $11,696 | | Total shareholders' equity | $132,444 | $195,664 | - Total assets decreased by $64,367 thousand (31%) from December 31, 2024, to March 31, 2025, primarily due to the full impairment of goodwill and a reduction in available-for-sale securities[6][75] Consolidated Statements of Operations and Comprehensive Loss Consolidated Statements of Operations (USD in Thousands, except Per Share Data): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net revenue | $6,500 | $6,262 | +$238 (4%) | | Cost of revenue | $2,093 | $2,145 | -$52 (-2%) | | Gross profit | $4,407 | $4,117 | +$290 (7%) | | General and administrative | $6,262 | $8,625 | -$2,363 (-27%) | | Research and development | $1,853 | $1,771 | +$82 (5%) | | Selling and marketing | $5,007 | $4,107 | +$900 (22%) | | Impairment expense | $55,833 | $— | +$55,833 | | Loss from operations | $(64,548) | $(10,386) | -520% | | Net loss | $(63,809) | $(9,160) | -597% | | Loss per share - basic and diluted | $(0.07) | $(0.01) | -600% | - Net loss significantly increased by 597% year-over-year, primarily driven by a $55.8 million impairment expense recognized in Q1 2025[7][159] Consolidated Statements of Shareholders' Equity Consolidated Statements of Shareholders' Equity (USD in Thousands): | Metric | Balance at Dec 31, 2024 | Stock-based Compensation | Net Loss | Other Comprehensive Income | Balance at Mar 31, 2025 | | :-------------------------- | :---------------------- | :----------------------- | :------- | :------------------------- | :---------------------- | | Common Stock Amount | $380,973 | — | — | — | $380,973 | | Additional Paid-In Capital | $32,518 | $545 | — | — | $33,063 | | Accumulated Deficit | $(217,915) | — | $(63,809) | — | $(281,724) | | Accumulated Comprehensive Income (Loss) | $88 | — | — | $44 | $132 | | Total Shareholders' Equity | $195,664 | $545 | $(63,809) | $44 | $132,444 | - Total shareholders' equity decreased by $63,220 thousand from December 31, 2024, to March 31, 2025, primarily due to the net loss incurred during the period[9] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (USD in Thousands): | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(6,648) | $(7,590) | | Net cash provided by investing activities | $8,406 | $5,625 | | Net cash provided by financing activities | $— | $— | | Increase (decrease) in cash and cash equivalents | $1,758 | $(1,965) | | Cash and cash equivalents, end of period | $8,837 | $10,939 | - Net cash used in operating activities decreased by $942 thousand (12%) year-over-year, while net cash provided by investing activities increased by $2,781 thousand (49%), primarily due to decreased capital expenditures[11][160][161] Notes to the Condensed Consolidated Financial Statements Note 1. Nature of Operations - Zomedica Corp is a veterinary health company focused on creating products for companion animals, addressing unmet needs of clinical veterinarians[12] Note 2. Basis of Preparation - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP and SEC rules for interim reports, including all normal recurring adjustments[14] Note 3. Significant Accounting Policies - The company's functional currency for Canada, U.S., and Switzerland subsidiaries is U.S. dollars, while its Japanese subsidiary uses Japanese Yen, with translation gains/losses recorded in other comprehensive income/loss[17] - Zomedica adopted ASU No. 2023-07 (Segment Reporting) in Q4 2024, which did not materially impact consolidated financial statements[18][19] - The company is evaluating ASU 2024-03 (Disaggregation of Income Statement Expenses) and ASU 2023-09 (Income Tax Disclosures) for future impact[20][21][22] - The company's reportable segments are Diagnostics (TRUFORMA®, VetGuardian®, TRUVIEW®) and Therapeutic Devices (Assisi®, PulseVet®, VETIGEL®)[23][102] Disaggregated Revenue by Segment (USD in Thousands): | Category | Diagnostics (2025) | Diagnostics (2024) | Therapeutic Devices (2025) | Therapeutic Devices (2024) | Consolidated (2025) | Consolidated (2024) | | :---------- | :----------------- | :----------------- | :------------------------- | :------------------------- | :------------------ | :------------------ | | Capital | $1,800 | $156 | $450 | $1,774 | $1,956 | $2,224 | | Consumables | $4,094 | $403 | $294 | $3,716 | $4,497 | $4,010 | | Other | $47 | $— | $— | $28 | $47 | $28 | | Total revenue | $5,941 | $559 | $744 | $5,518 | $6,500 | $6,262 | Note 4. Critical Accounting Judgments and Key Sources of Estimation Uncertainty - Critical accounting judgments include impairment testing for goodwill and long-lived assets, valuation and payback of TRUFORMA® property and equipment, and revenue recognition for variable consideration in the Therapeutic Device segment[54][58][60][127] - Goodwill impairment testing involves qualitative and quantitative analyses, using discounted cash flow and market-based methods with significant assumptions on financial projections, growth rates, and discount rates[55][56][57] - For TRUFORMA® capital, the company estimates anticipated future revenue over a ten-year life to determine if the payback period is less than the asset's life, relying on third-party data for expected consumable volume, growth rates, and placements[58][138][139] Note 5. Investment Securities Investment Securities Fair Value (USD in Thousands): | Type | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------- | :---------------- | | Commercial paper | $4,442 | $10,387 | | Corporate notes / bonds | $42,642 | $45,826 | | U.S. treasuries | $6,705 | $6,649 | | U.S. govt. agencies | $1,947 | $1,470 | | Money market funds | $4,466 | $2,766 | | Total investment securities | $60,202 | $67,098 | Contractual Maturities of Investment Securities (USD in Thousands) as of March 31, 2025: | Maturity | Acquisition Cost | Estimated Fair Value | | :------------------------ | :--------------- | :------------------- | | 90 days or less | $4,466 | $4,466 | | 91-365 days | $54,329 | $54,770 | | 366+ days | $965 | $966 | | Total | $59,760 | $60,202 | Note 6. Fair Value Measurements - The company measures cash and cash equivalents and investments at fair value on a recurring basis, classifying inputs into a three-tier hierarchy (Level 1, 2, 3)[63][65][69] Fair Value Hierarchy of Investments (USD in Thousands) as of March 31, 2025: | Type | Level 1 | Level 2 | Level 3 | Estimated Fair Value | | :-------------------- | :------ | :------ | :------ | :------------------- | | Commercial paper | $— | $4,442 | $— | $4,442 | | Corporate notes / bonds | $— | $42,642 | $— | $42,642 | | U.S. treasuries | $6,705 | $— | $— | $6,705 | | U.S. govt. agencies | $1,947 | $— | $— | $1,947 | | Money market funds | $4,466 | $— | $— | $4,466 | | Total | $13,118 | $47,084 | $— | $60,202 | Note 7. Inventory Inventory, Net (USD in Thousands): | Category | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Raw materials | $4,629 | $4,301 | | Finished goods | $398 | $539 | | Purchased inventory | $352 | $244 | | Total inventory | $5,379 | $5,084 | | Less: reserves | $(21) | $(26) | | Inventory, net | $5,358 | $5,058 | Note 8. Prepaid Expenses and Deposits Prepaid Expenses and Deposits (USD in Thousands): | Category | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Deposits | $330 | $508 | | Prepaid marketing | $340 | $368 | | Prepaid insurance | $366 | $438 | | Other | $1,284 | $1,170 | | Total prepaid expenses and deposits | $2,320 | $2,484 | Note 9. Accrued Expenses and Other Current Liabilities Accrued Expenses and Other Current Liabilities (USD in Thousands): | Category | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Accrued employee compensation and benefits | $2,438 | $4,557 | | Accrued taxes | $860 | $1,003 | | Accrued professional services | $478 | $535 | | Other | $202 | $336 | | Total accrued expenses and other current liabilities | $3,978 | $6,431 | Note 10. Property and Equipment Property and Equipment, Net (USD in Thousands): | Category | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Machinery and equipment | $15,392 | $15,947 | | Construction in progress | $6,595 | $7,889 | | Total property and equipment | $25,820 | $28,005 | | Less: accumulated depreciation | $(3,582) | $(3,416) | | Property and equipment, net | $22,238 | $24,589 | - The company recognized a $2 million impairment charge on property and equipment within the Diagnostics segment for the three months ended March 31, 2025, due to certain assets not being fully recoverable[74] Note 11. Goodwill and Intangible Assets Goodwill Carrying Amount by Segment (USD in Thousands): | Segment | December 31, 2024 | Impairment | March 31, 2025 | | :---------- | :---------------- | :--------- | :------------- | | Diagnostics | $— | $— | $— | | Therapeutic Devices | $45,556 | $(45,556) | $— | | Total | $45,556 | $(45,556) | $— | - A $45.6 million noncash goodwill impairment charge was recognized for the three months ended March 31, 2025, fully impairing goodwill in the PulseVet and Assisi reporting units[75] - This was triggered by a significant reduction in the company's market capitalization following delisting from NYSE American[75] - An $8.3 million non-cash impairment charge was also recognized for amortizable intangible assets within the Diagnostics segment, primarily related to technology assets ($7.1 million) and customer relationships ($0.8 million), due to the same triggering event[76] Intangible Assets, Net (USD in Thousands): | Category | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Computer software | $3,132 | $3,454 | | Customer relationships | $26,087 | $26,850 | | Licenses | $9,542 | $9,542 | | Technology | $17,990 | $25,050 | | Tradenames | $2,787 | $2,850 | | Trademarks | $16 | $16 | | Website | $1,433 | $1,364 | | Intangibles under construction | $63 | $— | | Total intangibles | $61,050 | $69,126 | | Less: accumulated amortization | $(18,281) | $(16,588) | | Intangibles, net | $42,769 | $52,538 | Estimated Future Amortization of Intangible Assets (USD in Thousands): | Year | Amount | | :--- | :----- | | 2025 | $4,192 | | 2026 | $5,177 | | 2027 | $4,997 | | 2028 | $4,753 | | 2029 | $4,639 | | Thereafter | $18,385 | | Total | $42,143 | Note 12. Stock-Based Compensation - The company issued 6,975,000 stock options in Q1 2025 (vs 795,000 in Q1 2024), vesting over four years with a 10-year expiration period[81] Stock Options Continuity: | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Balance at period start | 89,051,943 | 93,349,943 | | Stock options granted | 6,975,000 | 795,000 | | Stock options forfeited | 351,250 | 1,092,500 | | Vested stock options expired | 3,845,557 | 435,000 | | Balance at period end | 91,830,136 | 92,617,443 | | Vested at period end | 55,036,523 | 44,713,274 | - Stock-based compensation expense decreased to $545 thousand in Q1 2025 from $1,101 thousand in Q1 2024[83] - Unrecognized compensation cost for nonvested awards was $2,184 thousand as of March 31, 2025, to be recognized over 2.5 years[83] - The company adopted the 2024 Stock Appreciation Rights (SAR) Plan, with awards settled solely in cash[84] - As of March 31, 2025, the SAR liability was $192 thousand, with $73 thousand compensation expense recognized in Q1 2025[88] Note 13. Income Taxes - The company has an overall domestic net deferred tax liability position and maintains a valuation allowance of $24,587 thousand against US federal and state net operating loss carryforwards due to uncertainty of realization[89] Note 14. Commitments and Contingencies - As of March 31, 2025, the company is not aware of any pending or threatened material litigation claims[90] - The company has a Development and License Agreement with Brisby Inc, requiring milestone payments totaling $1,937 thousand upon future development milestones and first commercial sales of Smart Pet Pad and Intelligent Pet Bed[92][93](index=93&type=chunk] - Zomedica holds a 19.50% equity stake in Brisby Inc[94] - A License and Supply Agreement with Cresilon, Inc grants Zomedica exclusive rights to market and sell VETIGEL® Hemostatic Gel in the U.S. and Japan, with various milestone payments and royalties based on net sales[95][96][97][98][102] Note 15. Segment Information - The Chief Operating Decision Maker (CODM) evaluates financial performance and makes strategic decisions for two reportable segments: Diagnostics (TRUFORMA®, VetGuardian®, TRUVIEW®) and Therapeutic Devices (Assisi®, PulseVet®, VETIGEL®)[99][102] Segment Performance (USD in Thousands): | Metric | Diagnostics (2025) | Diagnostics (2024) | Therapeutic Devices (2025) | Therapeutic Devices (2024) | Consolidated (2025) | Consolidated (2024) | | :---------------- | :----------------- | :----------------- | :------------------------- | :------------------------- | :------------------ | :------------------ | | Net revenue | $559 | $744 | $5,941 | $5,518 | $6,500 | $6,262 | | Cost of revenue | $557 | $583 | $1,536 | $1,562 | $2,093 | $2,145 | | Gross profit | $2 | $161 | $4,405 | $3,956 | $4,407 | $4,117 | - For Q1 2025, U.S. revenue was $5,053 thousand and foreign revenue was $1,447 thousand[101] - In Q1 2024, U.S. revenue was $5,162 thousand and foreign revenue was $1,100 thousand[101] Note 16. Loss Per Share Loss Per Share (USD in Thousands, except Per Share Data): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss for the period | $(63,809) | $(9,160) | | Weighted-average shares - basic | 979,949,668 | 979,949,668 | | Loss per share - basic and diluted | $(0.07) | $(0.01) | - Stock options and warrants were excluded from diluted loss per share computation as their effect would be anti-dilutive[103] Note 17. Subsequent Events - No events or transactions requiring disclosure or adjustment to the condensed consolidated financial statements were identified subsequent to March 31, 2025[104] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, analyzing the drivers of a significant net loss and outlining the company's future outlook - The company's revenue sources include consumables and capital sales for Assisi®, PulseVet®, TRUFORMA®, TRUVIEW®, and VetGuardian® products in the U.S. and internationally[109] - Operating expenses consist of general and administrative (salaries, public company costs), research and development (new assay development, product enhancements), and selling and marketing (personnel, promotional activities)[112][113][114][115] - Critical accounting policies include impairment testing for goodwill, intangible assets, and property and equipment, as well as revenue recognition for variable consideration in the Therapeutic Device segment[127][128][138][142] CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS - This section contains forward-looking statements subject to risks and uncertainties, including macroeconomic conditions, geopolitical tensions, product development, acquisition integration, supply chain disruptions, and intellectual property protection[106][107] Components of Revenue and Costs and Expenses - Revenue sources include consumables and capital sales from Assisi®, PulseVet®, TRUFORMA®, TRUVIEW®, and VetGuardian® products, both domestically and internationally[109] - Cost of revenue primarily consists of raw materials, overhead, labor, and shipping for product assembly, including provisions for inventory obsolescence[110] - Operating expenses are categorized into general and administrative (salaries, public company costs), research and development (new assay development, product enhancements), and selling and marketing (personnel, promotional activities)[112][113][114][115] - Stock-based compensation includes equity-classified stock options (fair value using Black-Scholes, graded vesting) and liability-classified Stock Appreciation Rights (SARs) (cash-settled, remeasured at each reporting date)[118][119][122] Critical Accounting Policies and Significant Judgments and Estimates - Goodwill impairment testing involves qualitative and quantitative analyses, using discounted cash flow and market-based methods with assumptions on financial projections, growth rates, and discount rates[128][129][130][131][132] - For Q1 2025, a quantitative impairment analysis resulted in a $45,555 thousand goodwill impairment charge for PulseVet and Assisi reporting units, an $8,297 thousand impairment for amortizable intangible assets, and $1,981 thousand for property and equipment, due to a significant decline in market capitalization[133][134][135] - Revenue recognition for the Therapeutic Device segment involves estimating variable consideration for discounts and applicator ('trode') returns using the expected value method, based on historical experience and known trends[142][143][144][145] Results of Consolidated Operations Consolidated Operations Summary (USD in Thousands): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Revenue | $6,500 | $6,262 | +$238 (4%) | | Cost of Revenue | $2,093 | $2,145 | -$52 (-2%) | | Gross Profit | $4,407 | $4,117 | +$290 (7%) | | Gross Profit Margin | 68% | 66% | +2 ppts | | General and Administrative | $6,262 | $8,625 | -$2,363 (-27%) | | Research and Development | $1,853 | $1,771 | +$82 (5%) | | Selling and Marketing | $5,007 | $4,107 | +$900 (22%) | | Impairment Expense | $55,833 | $0 | +$55,833 | | Net Loss | $(63,809) | $(9,160) | -597% | - Revenue increased by 4% due to growth in PulseVet® products, TRUFORMA® products (including new assays), and sales from VETIGEL®[147] - Gross profit margin improved to 68% from 66%, driven by manufacturing cost efficiencies from the Minnesota facility integration and fixed cost absorption from increased unit sales[150] - General and administrative expenses decreased by 27% due to non-recurring professional fees and lower stock-based compensation, while selling and marketing expenses increased by 22% due to higher salaries and commissions from increased headcount[152][156] Cash Flows Cash Flow Summary (USD in Thousands): | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Cash used in operating activities | $(6,648) | $(7,590) | +$942 (12%) | | Cash provided by investing activities | $8,406 | $5,625 | +$2,781 (49%) | | Increase (decrease) in cash and cash equivalents | $1,758 | $(1,965) | +$3,723 (189%) | | Cash and cash equivalents, end of period | $8,837 | $10,939 | $(2,102) (-19%) | - The decrease in cash used in operating activities was primarily due to lower operating expenses, excluding non-cash charges[160] - The increase in cash provided by investing activities resulted from decreased capital expenditures, as prior period included warehouse expansion spend[161] Liquidity, Capital Resources, and Financial Condition - As of March 31, 2025, Zomedica had an accumulated deficit of $281,724 thousand and working capital of $65,819 thousand[162][163] - The company believes existing cash is sufficient to fund short-term and long-term operational requirements, but future capital needs depend on development, manufacturing, marketing, M&A activities, and intellectual property costs[164][165][167][172] U.S. Taxes - As of March 31, 2025, the company had deferred tax assets of $17,464 thousand for U.S. federal net operating loss carryforwards and $6,419 thousand for Canadian non-capital loss carryforwards, which begin to expire in fiscal year 2035[168] Climate Change - Increased public awareness of climate change may lead to new regulations, higher energy costs, and potential impacts on operations, supply chain, and insurance, though the specific future impact remains uncertain[169][170][171] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls for Q1 2025 - The principal executive officer and principal financial and accounting officer concluded that disclosure controls and procedures were effective as of March 31, 2025[174] - There were no material changes to internal control over financial reporting during the three months ended March 31, 2025[175] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company reports no material legal proceedings as of the end of the first quarter - There are no pending or threatened material litigation claims against the company as of March 31, 2025[90][176] Item 1A. Risk Factors No material changes to risk factors from the 2024 Annual Report on Form 10-K are reported - No material changes in risk factors from those disclosed in the 2024 Form 10-K[176] Item 6. Exhibits This section lists all exhibits filed with the report, including certifications and XBRL data - Exhibits include a Separation Agreement, CEO and VP of Finance certifications (Sarbanes-Oxley Act), and Inline XBRL documents[180]