UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2021.

OR

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

For the transition period from________ to_________.

Commission File Number:  001-38298

Zomedica Corp.

(Exact name of registrant as specified in its charter)

Alberta, Canada	N/A
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

100 Phoenix Drive, Suite 125 Ann Arbor, Michigan	48108
(Address of principal executive offices)	(Zip code)

(734) 369-2555

 (Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

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

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, without par value	ZOM	NYSE American

As of November 12, 2021, 979,894,668 shares of the registrant’s common shares, without par value, were issued and outstanding.

Zomedica Corp.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED

SEPTEMBER 30, 2021

TABLE OF CONTENTS

		Page
	PART I
	FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 4.	Controls and Procedures	34
	PART II
	OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 6.	Exhibits	37

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

Zomedica Corp.

Condensed consolidated balance sheets

As of September 30, 2021, and December 31, 2020

(Unaudited) (Stated in United States dollars)

	September 30,			December 31,
	2021			2020
Assets
Current assets
Cash and cash equivalents	$	271,411,043		$	61,991,703
Inventory		1,423,923			-
Prepaid expenses and deposits		1,633,846			1,727,814
Trade receivables		6,938			-
Other receivables		258,359			146,207
Total current assets		274,734,109			63,865,724
Prepaid expenses and deposits		168,020			13,924
Property and equipment, net		706,266			583,007
Right-of-use asset		1,419,790			1,318,716
Intangible assets, net		473,966			362,663
Total assets	$	277,502,151		$	66,144,034
Liabilities, mezzanine and shareholders' equity
Current liabilities
Accounts payable and accrued liabilities	$	4,464,874		$	1,248,628
Current portion of debt obligations		-			527,360
Current portion of lease obligations		407,278			252,788
Total current liabilities		4,872,152			2,028,776
Lease obligations		1,069,687			1,087,998
Total liabilities		5,941,839			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		-			11,961,397
at September 30, 2021 and December 31, 2020, respectively
Shareholders' equity
Unlimited common shares, no par value;
979,738,168 and 642,036,228 issued and outstanding		380,928,831			104,783,612
at September 30, 2021 and December 31, 2020, respectively
Common shares subscribed		-			459,600
Additional paid-in capital		6,732,887			14,792,276
Accumulated deficit		(116,101,406	)		(68,969,625	)
Total shareholders' equity		271,560,312			51,065,863
Total liabilities, mezzanine equity and shareholders' equity	$	277,502,151		$	66,144,034

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

3

Zomedica Corp.

Condensed consolidated statements of loss and comprehensive loss

For the three and nine months ended September 30, 2021, and 2020

(Unaudited) (Stated in United States dollars)

	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Net revenue	$	22,514		$	-		$	52,331		$	-
Cost of revenue		17,899			-			59,433			-
Gross profit		4,615			-			(7,102	)		-
Expenses
Research and development		288,453			2,702,103			1,008,083			7,205,674
Selling, general and administrative		6,124,382			2,298,330			14,593,952			5,430,812
Loss from operations		(6,408,220	)		(5,000,433	)		(15,609,137	)		(12,636,486	)
Interest income		(94,302	)		(21,238	)		(261,556	)		(21,566	)
Interest expense		-			-			6,054			732
Loss on disposal of assets		26,760			-			269,707			128,931
Gain on extinguishment of debt		-			-			(533,414	)		-
Other gains		(600	)		(1,963	)		(2,481	)		(7,463	)
Foreign exchange loss		5,609			2,743			5,731			1,462
Loss before income taxes		(6,345,687	)		(4,979,975	)		(15,093,178	)		(12,738,582	)
Income tax expense		-			-			-			-
Net loss and comprehensive loss	$	(6,345,687	)	$	(4,979,975	)	$	(15,093,178	)	$	(12,738,582	)
Weighted average number of common shares - basic and diluted		978,494,076			550,541,878			948,664,410			291,314,002
Loss per share - basic and diluted (Note 16)	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.04	)

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

4

Zomedica Corp.

Condensed consolidated statements of shareholders’ equity

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars) 

	Series 1 preferred shares				Common shares					Common stock			Additional paid-			Accumulated
For the nine months ending September 30, 2021	Shares		Amount		Shares		Amount			subscribed			in capital			deficit			Total
Balance at December 31, 2020		-		-		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		-		-		-		(14,280,914	)		-			-			-			(14,280,914	)
Stock-based compensation		-		-		-		-			-			4,502,597			-			4,502,597
Stock issued from warrant exercises		-		-		200,951,905		44,082,183			(459,600	)		(11,511,046	)		-			32,111,537
Stock issued from stock option exercises		-		-		7,017,776		2,818,950			-			(1,050,940	)		-			1,768,010
Preferred share exchange		-		-		24,719,101		44,000,000			-			-			(32,038,603	)		11,961,397
Net loss		-		-		-		-			-			-			(15,093,178	)		(15,093,178	)
Balance at September 30, 2021		-		-		979,738,168	$	380,928,831		$	-		$	6,732,887		$	(116,101,406	)	$	271,560,312
	Series 1 preferred shares				Common shares					Common stock			Additional paid-			Accumulated
For the three months ending September 30, 2021	Shares		Amount		Shares		Amount			subscribed			in capital			deficit			Total
Balance at June 30, 2021		-		-		977,950,993	$	380,222,091		$	-		$	5,601,641		$	(109,755,719	)	$	276,068,013
Stock-based compensation		-		-		-		-			-			1,437,778			-			1,437,778
Stock issued from stock option exercises		-		-		1,787,175		706,740			-			(306,532	)		-			400,208
Net loss		-		-		-		-			-			-			(6,345,687	)		(6,345,687	)
Balance at September 30, 2021		-		-		979,738,168	$	380,928,831		$	-		$	6,732,887		$	(116,101,406	)	$	271,560,312
	Series 1 preferred shares				Common shares					Common stock			Additional paid-in			Accumulated
For the nine months ending September 30, 2020					Shares		Amount			subscribed			capital			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, warrants and pre-funded warrants issuance for financing						337,830,001		32,275,266			-			24,221,017			-			56,496,283
Stock issuance costs						-		(2,979,594	)		-			(2,128,021	)		-			(5,107,615	)
Placement agent warrants						-		(154,767	)		-			154,767			-			-
Stock-based compensation						-		-			-			478,835			-			478,835
Stock issued from exercise of warrants and prefunded warrants						118,183,039		20,250,412			-			(8,095,003	)		-			12,155,409
Net loss						-		-			-			-			(12,738,582	)		(12,738,582	)
Balance at September 30, 2020		12	$	11,961,397		564,051,438	$	87,958,137		$	-		$	18,256,678		$	(64,796,423	)	$	53,379,789
		Series 1  preferred shares			Common shares					Common stock			Additional paid-in			Accumulated
For the three months ending September 30, 2020					Shares		Amount			subscribed			capital			deficit			Total
Balance at June 30, 2020		12	$	11,961,397		361,039,946	$	67,328,922		$	1,465,500		$	8,639,590		$	(59,816,448	)		29,578,961
Stock, warrants and pre-funded warrants issuance for financing						162,500,000		16,290,941			(1,465,500	)		13,706,559			-			28,532,000
Stock issuance costs						-		(1,224,218	)		-			(1,043,997	)		-			(2,268,215	)
Placement agent warrants						-		-			-			-			-			-
Stock-based compensation						-		-			-			187,969			-			187,969
Stock issued from exercise of warrants and prefunded warrants						40,511,492		5,562,492			-			(3,233,443	)		-			2,329,049
Net loss						-		-			-			-			(4,979,975	)		(4,979,975	)
Balance at September 30, 2020		12	$	11,961,397		564,051,438	$	87,958,137		$	-		$	18,256,678		$	(64,796,423	)	$	53,379,789

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

5

Zomedica Corp.

Condensed consolidated statements of cash flows

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

	Nine months ended September 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(15,093,178	)	$	(12,738,582	)
Adjustments for
Depreciation		175,168			232,475
Amortization - intangible assets		136,200			177,873
Loss on disposal of property and equipment		247,753			69,834
Loss on other assets		5,323			59,097
Gain on extinguishment of debt		(533,414	)		-
Stock-based compensation		4,502,597			478,835
Non-cash portion of rent expense		35,838			16,051
Change in non-cash operating working capital
Purchased inventory		(1,875,423	)		-
Prepaid expenses and deposits		(61,004	)		(1,003,091	)
Trade receivable		(6,938	)		-
Other receivables		(122,972	)		(61,651	)
Accounts payable and accrued liabilities		3,216,246			(787,124	)
Net cash used in operating activities		(9,373,804	)		(13,556,283	)
Cash flows from investing activities:
Cash from sale of property and equipment		225			5,400
Investment in intangibles		(245,560	)		-
Investment in property and equipment		(96,964	)		(613	)
Cash from lease cancellation or modification		-			1,002,113
Net cash (used in) provided by investing activities		(342,299	)		1,006,900
Cash flows from financing activities:
Proceeds from issuance of common shares, warrants and pre-funded warrants		199,525,000			56,496,283
Cash received from warrant exercises		32,111,537			12,155,409
Cash received from stock option exercises		1,768,010			-
Cash received from shares to be issued		-			-
Cash paid on stock issuance costs		(14,269,104	)		(5,107,615	)
Cash received for government loan		-			527,360
Net cash provided by financing activities		219,135,443			64,071,437
Increase in cash and cash equivalents		209,419,340			51,522,054
Cash and cash equivalents, beginning of period		61,991,703			510,586
Cash and cash equivalents, end of period	$	271,411,043		$	52,032,640
Noncash investing and financing activities
Transfer of inventory into property and equipment	$	451,500		$	-
Deferred financing fees charged to stock issuance costs	$	11,810		$	-
Account receivable recorded in intercompany account	$	(990	)	$	-
Net equity effect of preferred share exchange	$	(11,961,397	)	$	-
Supplemental cash flow information:
Interest paid	$	-		$	651
Interest received	$	228,881		$	14,347

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

6

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

1. Nature of operations

The Company is a veterinary health company creating point-of-care diagnostics products for dogs and cats, that focuses on the needs of the veterinarians themselves.

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.

2. Basis of preparation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for the presentation of interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited financial statements do not include all the information and footnotes necessary for a comprehensive presentation of the financial position, results of operations and cash flows for the periods presented. In the opinion of management, the unaudited financial statements include all the normal recurring adjustments that are necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. Operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021. These unaudited financial statements should be read in combination with the other Notes in this section; “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing in Item 2; and the Consolidated Financial Statements, including the Notes to the Consolidated Financial Statements, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The Consolidated Balance Sheet as of December 31, 2020, was derived from audited financial statements.

7

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

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. The Company utilizes specific identification 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.

Revenue recognition

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

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

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

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.

8

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

3. Significant accounting policies (continued)

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 prior year amounts have been reclassified 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 and six months ended September 30, 2020. These changes in classification do not affect previously reported cash flows from operating activities in the consolidated statements of cash flows.

4. Prepaid expenses, deposits, and deferred financing costs

	September 30,		December 31,
	2021		2020
Deposits (i)	$	1,256,094	$	1,469,043
Prepaid marketing		64,300		26,330
Prepaid insurance		380,254		184,154
Other (ii)		101,218		62,211
Total	$	1,801,866	$	1,741,738

(i)	Deposits include payments made to vendors in advance and are primarily associated with inventory, warranties, and research activity. As of September 30, 2021, and December 31, 2020, the Company classified $168,020 and $13,924 as a non-current asset, with the remainder classified as a current asset in the consolidated balance sheets.
(ii)	Other is comprised of deferred financing costs, subscription payments, utilities, travel costs, and software licensing. As of September 30, 2021, and December 31, 2020, the Company classified all amounts as a current asset in the consolidated balance sheets.

9

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

5. Property and equipment

	September 30,		December 31,
	2021		2020
Computer equipment	$	901,379	$	364,165
Furniture and equipment		110,244		121,281
Laboratory equipment		225,330		234,087
Leasehold improvements		275,149		571,460
		1,512,102		1,290,993
Accumulated depreciation and amortization		805,836		707,986
Net property and equipment	$	706,266	$	583,007

Depreciation expense for the three months ended September 30, 2021 and 2020 was $60,445 and $78,200, respectively and for the nine months ended September 30, 2021 and 2020 was $175,168 and $232,475, respectively.

.

6. Intangible assets

	September 30,		December 31,
	2021		2020
Computer software		28,097	$	22,882
Trademarks		16,236		16,236
Website		755,968		513,680
		800,301		552,798
Accumulated amortization		326,335		190,135
Net intangibles	$	473,966	$	362,663

Amortization expense for the three months ended September 30, 2021 and 2020 was $46,732 and $45,399, respectively and for the nine months ended September 30, 2021 and 2020 was $136,200 and $135,425, respectively.

10

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

7. Leases

On February 1, 2020, the Company cancelled its existing lease with Wickfield Phoenix LLC. and entered 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 during the three months ended March 31, 2020 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 for the first two months and escalating to $30,911 over the lease period. The carrying value of the right of use asset was $1,258,263 upon modification. The Company recorded a gain on right-of-use asset of $731 during the three months ended March 31, 2021 in the consolidated statements of comprehensive loss.

On February 1, 2021, the Company recorded a right-of-use asset and a corresponding lease liability in the amount of $1,281,609 using the Company’s incremental borrowing rate of 3.95%.

On September 15, 2021, the Company entered into an additional lease with Wickfield Phoenix LLC for warehousing space. The new lease period is for 41 months, commencing on September 15, 2021, and ending on January 31, 2025, with a monthly rent payment of recorded a right-of-use asset and a corresponding lease liability in the amount of $4,580 for the first month and escalating to $10,009 over the lease period. The Company recorded a right-of-use asset and corresponding lease liability for $365,840 using the Company’s incremental borrowing rate of 3.95%.

During the three and nine months ended September 30, 2021, the Company recognized $93,980 and $270,554 in rent expense, $3,882 of the expense was for common area maintenance charges, with $31,605 and $69,403 recorded in research and development expenses, respectively and $62,375 and $201,151 recorded in general and administrative expense, respectively in the consolidated statements of comprehensive loss.

During the three and nine months ended September 30, 2020, the Company recognized $103,375 and $279,997 in rent expense with $17,229 and $56,221 recorded in research and development expenses and $86,146 and $223,776 recorded in general and administrative expense, respectively in the consolidated statements of comprehensive loss.

11

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

7. Leases (continued)

	September 30, 2021			December 31, 2020
Right-of-use asset
Cost
Aggregate lease commitments	$	1,778,798		$	2,067,505
Less: impact of present value and lease modification		(154,695	)		(513,894	)
Balance		1,624,103			1,553,611
Reduction in right-of-use asset
Straight line amortization		232,214			379,043
Interest		(27,901	)		(144,148	)
Balance		204,313			234,895
Net book value	$	1,419,790		$	1,318,716
Lease liabilities
Additions	$	1,647,449		$	1,553,611
Payments		(198,385	)		(356,972	)
Interest		27,901			144,147
Total lease liabilities	$	1,476,965		$	1,340,786
Current portion of lease liabilities		407,278			252,788
Long term portion of lease liabilities		1,069,687			1,087,998
Total lease liabilities	$	1,476,965		$	1,340,786

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

2021 - remainder balance	$	112,342	$	400,133
2022		461,727		412,137
2023		475,579		424,501
2024		489,845		437,236
2025		40,920		36,526
Total	$	1,580,413	$	1,710,533

12

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

8. Loan arrangements

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 September 30, 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 was reported as a current liability and accounted for as a loan. The Company was granted forgiveness on June 13, 2021 and recorded a gain on the extinguishment of debt for $533,414, inclusive of $6,054 in accrued interest.

9. Preferred shares

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.

13

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

9. Preferred shares (continued)

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 exchanged		(12	)		(11,961,397	)
Balance at September 30, 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 of $32,038,603 was charged to accumulated deficit.

10. Common shares

(i)

On February 14, 2020, the Company completed a registered direct offering (“RDO”) of its common shares and a simultaneous private placement of its warrants (“Series A Warrants”) in a fixed combination of one common share and a Series A Warrant to purchase one common share, resulting in the sale of 20,833,334 common shares and Series A Warrants to purchase 20,833,334 common shares at a combined offering price of $0.12 per share and related Series A Warrant. Each Series A Warrant has an exercise price of $0.20 per share, is exercisable six months after issuance and has a term of 5.5 years. The Company also issued warrants to the placement agents to purchase 1,041,667 common shares at an exercise price of $0.15 per share (“Placement Agent Warrants”), which were exercisable immediately upon issuance and have a term of 5 years. In aggregate, the Company issued 20,833,334 common shares, 20,833,334 Series A Warrants, and an additional 1,041,667 Series A Placement Agent Warrants.

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.

14

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

10. Common shares (continued)

(ii)	On April 9, 2020, the Company completed a confidentially marketed public offering (“CMPO”) of its common shares and warrants (“Series B Warrants”) of 33,333,334 common shares and warrants to purchase up to 16,666,667 common shares. The securities were sold in a fixed combination of one common share and 0.5 of a Series B Warrant at a combined offering price of $0.12 per share and accompanying warrant. Each whole warrant is exercisable immediately for one common share after issuance, at an exercise price of $0.15 per share and has a term of 5 years. The Company also issued warrants to the placement agents to purchase 1,666,667 common shares at an exercise price of $0.15 per share (“Series B Placement Agent Warrants”), which were exercisable immediately upon issuance and have a term of 5 years. In aggregate, the Company issued 33,333,334 common shares,16,666,667 Series B Warrants in addition to 1,666,667 Series B Placement Agent Warrants.
	The Company raised $4,000,000 in gross proceeds in the CMPO. The Company recorded $2,942,248 as the value of common shares under common stock and $1,057,752 as the value of Series B 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 April were $582,977. These direct costs were recorded as an offset against the statement of shareholders’ equity with $428,283 being recorded under capital stock and $154,694 being recorded under additional paid-in-capital. The Company also recorded the value of the Series B Placement Agent Warrants in the amount of $161,714 as an offset against the statement of shareholders’ equity with $118,951 being recorded under capital stock and $42,763 being recorded under additional paid-in-capital.
(iii)	On May 29, 2020 the Company completed a public offering of its common shares or common share equivalents (“Series C pre-funded warrants”), and warrants (“Series C Warrants”) in a fixed combination of one common share or Series C pre-funded warrant, and a Series C Warrant to purchase one common share, resulting in the sale of 121,163,333 common shares, 12,170,000 pre-funded warrants, and Series C Warrants to purchase 133,333,333 common shares at a combined offering price of $0.15 per share for the common shares and related Series C Warrant, or a combined offering price of $0.1499 per pre-funded warrant and related Series C warrant. Each Series C pre-funded warrant has an exercise price of $0.0001 per share, is exercisable immediately after issuance, is exercisable only on a cashless exercise basis, and will not expire prior to exercise. Each Series C Warrant has an exercise price of $0.15 per share, is exercisable immediately after issuance and has a term of 2 years.
	The Company raised $19,998,783 in gross proceeds as part of the public offering. The Company recorded $11,336,422 as the value of common shares under common stock, $1,080,289 as the value of the pre-funded warrants and $7,582,072 as the value of Series C 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, Series C pre-funded warrants and Series C Warrants issued in May were $1,908,202. These direct costs were recorded as an offset against the statement of shareholders’ equity with $1,088,876 being recorded under capital stock and $819,327 being recorded under additional paid-in-capital.

15

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

10. Common shares (continued)

(iv)	On July 7, 2020 the Company completed a public offering of its common shares or common share equivalents (“Series D Pre-Funded Warrants”), and warrants (“Series D Warrants”) in a fixed combination of one common share or Series D Pre-Funded warrant, and a Series D Warrant to purchase one common share, resulting in the sale of 162,500,000 common shares, 25,000,000 Series D Pre-Funded Warrants, and Series D Warrants to purchase 187,500,000 common shares at a combined offering price of $0.16 per share for the common shares and related Series D Warrant, or a combined offering price of $0.1599 per Series D Pre-Funded warrant and related Series D Warrant. Each Series D Pre-Funded warrant has an exercise price of $0.0001 per share, is exercisable immediately after issuance, is exercisable only on a cashless exercise basis, and will not expire prior to exercise. Each Series D Warrant has an exercise price of $0.16 per share, is exercisable immediately after issuance, and has a term of 2 years.
	The Company raised $29,997,500 in gross proceeds as part of the public offering. The Company recorded $16,290,941 as the value of common shares under common stock, $2,329,983 as the value of the Series D Pre-Funded Warrants and $11,376,575 as the value of the Series D 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, Series D Pre-Funded Warrants and Series D Warrants issued in July 2020 were $2,268,215. These direct costs were recorded as an offset against the statement of shareholders’ equity with $1,224,218 being recorded under capital stock and $1,043,997 being recorded under additional paid-in-capital.
(v)	All Series C pre-funded warrants were exercised in June 2020. Upon exercise the value of the warrant exercise was based on the one-day VWAP of the Company stock the day before the exercise request date. The cashless exercise option resulted in the issuance of 12,162,492 shares.
(vi)	On February 8, 2021, the Company completed a sale of 91,315,790 common shares at an offering price of $1.90 per share. The Company also granted the underwriter a 30-day option to purchase up to 13,697,368 additional common shares at the public offering price.
	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 $14,2980,914. These direct costs were recorded as an offset against the statement of shareholders’ equity with the entirety recorded under common shares.

16

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

11. Stock-based compensation

During the three and nine months ended September 30, 2021, the Company issued stock options to purchase an aggregate of 2,900,000 and 12,100,000 common shares. The options vest over a period of four years and have an expiration period of ten years. During the three and nine months ended September 30, 2021, 1,787,175, and 7,017,776 options were exercised, and the Company received $400,208 and $1,768,011 in cash receipts and reclassified $306,532 and $1,050,940 of additional paid in capital to common stock due to the exercise of stock options.

During the three and nine months ended September 30, 2020, the Company issued stock options to purchase an aggregate of 515,000 and 7,571,000 common shares. The options vest over a period of four years and have an expiration period of five years. During the three and nine months ended September 30, 2020, no stock options were exercised.

The Company recorded $1,437,778 and $4,502,597 of stock-based compensation for the three and nine months ended September 30, 2021. The Company recorded $187,969 and $478,835 of stock-based compensation for the three and nine months ended September 30, 2020.

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
Stock options granted		12,100,000	$	0.86
Stock options exercised		7,017,776	$	0.25
Unvested stock options forfeited		1,670,000	$	0.64
Vested stock options exprired		4,034,015	$	1.52
Balance at September 30, 2021		38,982,724	$	0.40
Vested at September 30, 2021		9,152,474	$	0.28

17

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

11. Stock-based compensation (continued)

As of September 30, 2021, details of the issued and outstanding stock options were as follows:

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)
March 14, 2020		0.19		3,028,557		1,675,807		1,352,750		3.45
July 9, 2020		0.18		175,000		87,500		87,500		3.78
August 25, 2020		0.13		20,000		-		20,000		3.90
September 29, 2020		0.11		225,000		225,000		-		4.00
October 1, 2020		0.11		266,667		41,667		225,000		4.01
October 20, 2020		0.09		25,000		10,000		15,000		4.06
December 31, 2020		0.23		24,142,500		6,762,500		17,380,000		4.25
February 26, 2021		1.87		600,000		150,000		450,000		4.41
March 1, 2021		2.06		200,000		50,000		150,000		4.42
March 8, 2021		1.88		200,000		50,000		150,000		4.44
March 15, 2021		2.49		200,000		50,000		150,000		4.46
May 12, 2021		0.78		3,800,000		-		3,800,000		4.62
May 14, 2021		0.75		3,200,000		50,000		3,150,000		4.62
August 11, 2021		0.57		1,300,000		-		1,300,000		4.87
August 18, 2021		0.50		200,000		-		200,000		4.88
August 23, 2021		0.50		100,000		-		100,000		4.90
September 13,2021		0.57		800,000		-		800,000		4.96
September 27,2021		0.54		500,000		-		500,000		4.99
Balance at September 30, 2021				38,982,724		9,152,474		29,830,250

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.

The fair value of options granted during the three and nine months ended September 30, 2021 was estimated using the Black-Scholes option pricing model to determine the fair value of options granted using the following assumptions:

18

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

	February 26, 2021			March 1, 2021			March 8, 2021			March 15, 2021
Volatility		117	%		117	%		117	%		117	%
Risk-free interest rate		0.95	%		0.92	%		1.07	%		1.06	%
Expected life	10 years			10 years			10 years			10 years
Dividend yield		0	%		0	%		0	%		0	%
Common share price	$	1.87		$	2.06		$	1.88		$	2.49
Strike price	$	1.87		$	2.06		$	1.88		$	2.49
Forfeiture rate	zero			zero			zero			zero
	May 12, 2021			August 11, 2021			August 23,  2021			September 13, 2021
Volatility		118	%		116	%		116	%		116	%
Risk-free interest rate		1.11	%		0.96	%		0.92	%		0.96	%
Expected life	6.21 - 6.22 Years			6.18 - 6.25				6.25			6.25
Dividend yield		0	%		0	%		0	%		0	%
Common share price	$	0.78		$	0.56		$	0.50		$	0.57
Strike price	$	0.78		$	0.57		$	0.50		$	0.57
Forfeiture rate	zero			zero			zero			zero

	September 27, 2021
Volatility		116	%
Risk-free interest rate		1.14	%
Expected life		6.25
Dividend yield		0	%
Common share price	$	0.54
Strike price	$	0.54
Forfeiture rate	zero

12. Warrants

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 share of common stock at an exercise price of $.20. The Company also issued 1,041,667 warrants to purchase a share of common stock at an exercise price of $0.15 per share to the placement agents.

In connection with the April 9, 2020 CMPO, the Company issued 16,666,667 five-year Series B Warrants to purchase one common share at an exercise price of $0.15. The Company also issued 1,666,667 Placement Agent Warrants to purchase one common share 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 one common share 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 one common share 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.

19

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

(Unaudited) (Stated in United States dollars)

12. Warrants (continued)

As of September 30, 2021, details of the outstanding warrants were as follows:

Original Issue date	Exercise Price		Warrants Outstanding		Weighted Average Remaining Life
February 14, 2020		0.20		-		-
February 14, 2020		0.15		197,917		3.37
April 9, 2020		0.15		363,501		3.52
May 29, 2020		0.15		276,500		0.66
July 7, 2020		0.16		231,000		0.77
Balance at September 30, 2021				1,068,918

Cumulative warrant exercises as of the nine months ended September 30, 2021 were as follows:

Warrant series	Warrants exercised		Amount
Series A		21,677,084	$	4,293,229
Series B		17,969,833		2,695,475
Series C		133,056,833		19,958,525
Series D		187,269,000		29,963,040
Subtotal		359,972,750		56,910,269
Common stock subscribed		-		(459,600	)
Total		359,972,750	$	56,450,669

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:

● 1^st payment: $3,500,000 in cash payment upon the achievement of future development milestones

● 2^nd payment: $3,500,000 in equity, determined by dividing the amount due by the volume-weighted average price of the Company’s common stock on the NYSE American exchange over the 10 trading days prior to the achievement of the milestone event.

As of September 30, 2021, 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 as of September 30, 2021, and December 31, 2020.

From time to time, the Company may be exposed to claims and legal actions in the normal course of business. As of September 30, 2021, and continuing as of November 12, 2021, the Company is not aware of any pending or threatened material litigation claims against the Company.

20

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

Unaudited) (Stated in United States dollars)

13. Commitments and contingencies (continued)

On September 20, 2021, Heska Corporation (“Heska”), Qorvo US, Inc. (“Qorvo US”), Qorvo Biotechnologies, LLC (“Qorvo Biotech” and, together with Qorvo US, “Qorvo”) and our company (collectively with Qorvo, the “Defendants”) entered into a settlement agreement pursuant to which the litigation previously commenced by Heska against the Defendants in the United States District Court for the Middle District of North Carolina, Case 1:19-cv-01108-LCB-JLW, was dismissed with prejudice. Pursuant to the settlement agreement, the parties also provided mutual releases of any and all claims related to the subject matter of the litigation. We were not required to make any payment or agree to any covenants restricting the conduct of our business in connection with the settlement.

21

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

Unaudited) (Stated in United States dollars)

14. Financial instruments

(a) Fair values

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.

The following are the contractual maturities of the undiscounted cash flows of financial liabilities as of September 30, 2021 and December 31, 2020:

									September 30, 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	$	4,464,874	$	-	$	-	$	-	$	-	$	4,464,874
Lease obligations		112,343		114,589		115,713		115,713		1,018,607		1,476,965
	$	4,577,217	$	114,589	$	115,713	$	115,713	$	1,018,607	$	5,941,839
									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

15. Segment information

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 the Company’s long-lived assets are in the United States of America (“US”).

	September 30,		December 31,
	2021		2020
Canada	$	172,945,051	$	53,160,701
US		104,557,100		12,983,333
Total assest	$	277,502,151	$	66,144,034
Total US property and equipment	$	706,266	$	583,007
Total US right-of-use asset		1,419,790		1,318,716
	$	2,126,056	$	1,901,723

22

Zomedica Corp.

Notes to the condensed consolidated financial statements

For the three and nine months ended September 30, 2021 and 2020

Unaudited) (Stated in United States dollars)

16. Loss per share

	For the three months ended September 30						For the nine months ended September 30
	2021			2020			2021			2020
Numerator
Net loss for the period	$	(6,345,687	)	$	(4,979,975	)	$	(15,093,178	)	$	(12,738,582	)
Charge to retained earnings for preferred share exchange		-						(32,038,603	)		-
Loss attributable to common shareholders		(6,345,687	)		(4,979,975	)		(47,131,781	)		(12,738,582	)
Denominator
Weighted average shares - basic		978,494,076			550,541,878			948,664,410			291,314,002
Stock options		-			-			-			-
Warrants		-			-			-			-
Denominator for diluted loss per share		978,494,076			550,541,878			948,664,410			291,314,002
Loss per share - basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.05	)	$	(0.04	)

For the above‑mentioned periods, the Company had stock options and 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.

17. Subsequent Events

On October 1, 2021, Zomedica Inc., the wholly-owned subsidiary of Zomedica Corp. entered into a Stock Purchase Agreement with Branford PVT Mid-Hold, LLC pursuant to which Zomedica Inc. acquired 100% of the capital stock of Branford PVT Acquiror, Inc., a Delaware corporation “BPA”). BPA is a holding company whose direct and indirect wholly-owned subsidiaries include Georgia, United States-based Pulse Veterinary Technologies, LLC, which, together with its consolidated subsidiaries, is a leading provider of non-invasive shock wave therapy treatment devices to the veterinary industry. The purchase price for the Acquisition was $71.9 million in cash, which was subject to adjustments based on the amount of the Target’s cash and net working capital at the closing of the acquisition.

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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 financial statements and the related notes and the other financial information included elsewhere in this Report. This discussion contains forward-looking statements as well as 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-Kand in other reports we file under applicable securities laws.

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 commercialize our lead product, TRUFORMA^®;

· our ability to successfully integrate our recent acquisition of PulseVet (as defined below) and the timing and costs to achieve that integration;

· our ability to successfully market and sell TRUFORMA^®, and the PulseVet veterinary products and services and any other products we develop or acquire and the related cost and timing thereof;

· the ability of our contract partners and contractors to conduct our product development, validation studies, verification studies, and beta testing, and certain other development activities appropriately and on a timely basis;

· the ability of our contract manufacturing organizations to manufacture and supply our products to satisfy our requirements on a timely basis;

· our plans to develop and commercialize our planned and future products;

· our ability to obtain funding for our operations;

· our ability to develop and commercialize products that can compete effectively;

· the size and growth of the veterinary diagnostics and medical device markets;

· our ability to obtain and maintain intellectual property protection for our planned and future products candidates;

· regulatory developments in the United States and other important geographical markets;

· 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.

· 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.

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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 and in other reports we file under applicable securities laws 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.

Overview

We are a veterinary health company creating products for companion animals by focusing on the unmet needs of clinical veterinarians. We expect that our product portfolio will include innovative diagnostics and medical devices that emphasize patient health and practice health. With a team that includes clinical veterinary professionals, 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 has been on the commercialization of our TRUFORMA^® diagnostic biosensor platform and the final development and commercialization of the first three assays for the detection of adrenal and thyroid disorders in cats and dogs. We also have continued our efforts on the development of the final two assays and will begin commercialization as soon as they are available. 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 believe that BAW technology will enable precise and repeatable test results at the point-of-care during a typical veterinary appointment. 

We employ fifteen direct field commercialization personnel, supported by two regional directors, a Vice President of Sales, and a Chief Commercial Officer. 

We believe that market acceptance of TRUFORMA^® has been adversely impacted by delays in the development of our fT4 and ACTH assays by our development partner.  Pending commercial availability of those assays, we have focused on encouraging veterinarians to install the TRUFORMA^® instrument in order to test and utilize the TRUFORMA® platform. We expect this initiative to continue as we focus our efforts on growth of TRUFORMA^® in the market.

We are also continuing to recruit and hire level sales representatives, professional services veterinarians, and support staff in order both to further the execution of our instrument placement programs and to prepare for an acceleration of our sales efforts once the fT4 and ACTH assays are available for commercial release.

We are continuing to develop the fT4 and ACTH assays with our development partner. We are also continuing development work on three assays to diagnose gastro-intestinal conditions (cPL, Cobalamin and Folate) and are in discussions with our development partner regarding the development order and timing of additional assays. We also expect to commence the marketing of TRUFORMA^® in select markets outside the United States sometime during 2022.

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On October 1, 2021 we acquired Pulse Veterinary Technologies, LLC, (“PulseVet”) a leading provider of non-invasive shock wave therapy treatment devices to the veterinary industry (the “Acquisition”). The purchase price for the Acquisition was approximately $71.9 million in cash, subject to certain adjustments. The operations of PulseVet will be included in our consolidated financial statements commencing with the 4^thquarter of the fiscal year ended December 31,2021. PulseVet has its own sales representatives, professional services veterinarians and support staff and is capable of operating independently. Our management will assess the optimal manner of operation of the combined businesses going forward, which is expected to involve integration of PulseVet operations with existing operations.

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 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 development of an assay that targets hard-to-diagnose canine cancers, such as hemangiosarcoma and osteosarcoma.

Consistent with 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 $6.3 million and $15.1 million for the three and nine months ended September 30, 2021 and approximately $5.0 million and $12.7 million for the three and nine months ended September 30, 2020. 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 September 30, 2021, we had an accumulated deficit of approximately $116.1 million and cash and cash equivalents of approximately $271.4 million, prior to giving effect to the PulseVet acquisition.

For the foreseeable future, we expect to continue to incur losses, which will approximate historical levels as we continue the commercialization of our TRUFORMA^® platform, support the marketing and sales of PulseVet’s products and services and expand our product development and sales and marketing activities.

For further information on the regulatory, business and product pipeline, please see the “Business” section of our Annual Report on Form 10-K. For further information on the risk factorswe face, please see the “Risk Factors” section of our Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

Revenue

We launched our TRUFORMA^® platform and our first three assays during the first quarter of 2021. Through September 30, 2021, our revenue consisted of instruments, cartridges, and warranty services sold in the U.S.

Cost of Revenue

Cost of revenue through September 30, 2021 consisted primarily of the cost of purchasing instruments and cartridges and the related warranties purchased. We expense all inventory obsolescence provisions related to normal manufacturing changes as cost of revenue.

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Operating Expenses

The majority of our operating expenses through September 30, 2021 have been for the 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. 

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 testing and research and development.

Selling General and Administrative Expense

Selling, general and administrative expense consists of personnel costs, including salaries, related benefits and stock-based compensation for administrative employees, consultants, and directors. These expenses also include costs associated with sales and marketing activity, professional fees, and corporate administrative and overhead costs, including rent and other facilities costs, amortization, and depreciation.

Income Taxes

As of December 31, 2020, we had net operating loss carryforwards for U.S. federal and state income tax purposes of approximately $19.6 million and non-capital loss carryforwards for Canada of approximately $27.8 million, 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 uncertainty of realizing any tax benefits as of December 31, 2020, a valuation allowance was necessary to fully offset our deferred tax assets. There has been no significant change in the first nine months ended September 30, 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.

Because our public float was in excess of $700 million on June 30, 2021, we will no longer be an "emerging growth company" as of December 31, 2021.

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Use of Estimates

The preparation of our Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States and the rules and regulations of the U.S. Securities & Exchange Commission requires the use of estimates and assumptions. A listing of the Company’s significant accounting policies is detailed in Note 3 “Significant Accounting Policies.” A subsection of these accounting policies has been identified by management as “Critical Accounting Policies and Estimates.” Critical accounting policies and estimates are those which require management to make estimates using assumptions that were uncertain at the time the estimates were made and for which the use of different assumptions, which reasonably could have been used, could have a material impact on the financial condition or results of operations.  Management has identified Inventories as a “Critical Accounting Policies and Estimates”

Inventories are stated at the lower of cost or net realizable value determined by the specific identification method. Inventories are regularly reviewed and write-downs for excess and obsolete inventory are recorded based primarily on current inventory levels, expiration date and estimated sales forecasts. While estimated sales forecasts are subjective in nature, the projections allow management to reasonably predict the net realizable value of current inventory based on expected demand. A decrease in the estimated sales forecasts would indicate the need to write-down excess and obsolete inventory. Management continuously monitors the market activity and assesses inventory levels.

Research and Development

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, is U.S. dollars, which is also our reporting currency. Transactions denominated in currencies other than U.S. dollars and the monetary value of assets and liabilities are translated at the period end exchange rates. Revenue and expenses are measured at rates of exchange prevailing on the transaction dates. All of the exchange gains 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.

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. 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.

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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' equity. We currently have no other comprehensive loss items. 

Results of Operations

Revenue

Revenue for the three and nine months ended September 30, 2021 was $22,514 and $52,331, respectively and resulted from the sale of our TRUFORMA^® products and associated warranties. We commenced commercialization of TRUFORMA^® on March 15, 2021 and accordingly have had only limited sales activity in the first three quarters of 2021.

As noted in the “Overview” section above, we believe that market acceptance of TRUFORMA^® has been adversely impacted by unexpected delays in the development of our fT4 and ACTH assays by our development partner. We expect that market adoption of TRUFORMA^® will be challenging until our fT4 and ACTH assays are available for commercial release.

Our future revenue will include revenue associated with PulseVet operations.

Cost of Revenue

Cost of revenue for the three and nine months ended September 30, 2021 was $17,899 and $59,433, respectively. As noted above, commercialization of TRUFORMA^® commenced on March 15, 2021. We expect that cost of revenue will increase as we sell additional products in subsequent periods, inclusive of costs associated with PulseVet operations.

Research and Development

Research and development expense for the three and nine months ended September 30, 2021 was approximately $0.3 million and approximately $1.0 million, respectively, compared to approximately $2.7 million and $7.2 million for the three and nine months ended September 30, 2020, respectively, representing a decrease of approximately $2.4 million, or 89%, over the prior three-month period and a decrease of approximately $6.2 million, or 86%, for the prior nine-month period. The decrease in both periods was a result of an overall reduction in research and development costs related to TRUFORMA^® as we completed development of the instrument and three of the first five assays and began transitioning to commercialization activities.

Selling, General and Administrative

Selling, general and administrative expense for the three months ended September 30, 2021 was approximately $6.1 million, compared to approximately $2.3 million for the three months ended September 30, 2020, an increase of approximately $3.8 million, or 166%. The increase primarily was due to an increase in share-based compensation expense, which was approximately $1.5 million for the three months ended September 30, 2021, compared to approximately $0.2 million for the comparable period in 2020.  Other significant increases include professional fees of approximately $2.1 million relating to the PulseVet acquisition and increased fees associated with SEC compliance requirements, and salaries for administrative and sales personnel of approximately $0.4 million.

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Selling, general and administrative expense for the nine months ended September 30, 2021 was approximately $14.6 million, compared to approximately $5.4 million for the nine months ended September 30, 2020, an increase of approximately $9.2 million, or 169%. The increase primarily was due to an increase in share-based compensation expense, which was approximately $4.5 million for the nine months ended September 30, 2021, compared to approximately $0.5 million for the comparable period in 2020 as a result of stock option grants made during the first quarter of 2021. Other significant increases include professional fees of approximately $2.9 million, related primarily to the PulseVet acquisition and the exchange of our Series 1 preferred stock, increased fees associated with SEC compliance requirements, salaries of approximately $1.1 million, regulatory fees incurred for the annual shareholders meeting of approximately $0.8 million largely as a result of administrative costs related to increases in the shareholder base, marketing, travel and office expense of approximately $0.3 million, and contracted expenditures of approximately $0.1 million.

Net Loss

Our net loss for the three months ended September 30, 2021 was approximately $6.3 million, or $0.01 per share, compared to a net loss of approximately $5.0 million, or $0.01 per share, for the three months ended September 30, 2020, an increase in losses of approximately $1.3 million, or 27%. 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 to offset our operating expenses.

Our net loss for the nine months ended September 30, 2021 was approximately $15.1 million, or $0.05 per share, compared to a net loss of approximately $12.7 million, or $0.04 per share, for the nine months ended September 30, 2020, an increase in losses of approximately $2.4 million, or 18%.  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 to offset our operating expenses.

Cash Flows

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

The following table shows a summary of our cash flows for the periods set forth below:

	Nine months ended September 30
	2021			2020			Change
							$			%
Cash flows used in operating activities	$	(9,373,804	)	$	(13,556,283	)		4,182,479			-31	%
Cash flows (used) provided by investing activities		(342,299	)		1,006,900			(1,349,199	)		-134	%
Cash flow provided by financing activities		219,135,443			64,071,437			155,064,006			242	%
Increase in cash and cash equivalents		209,419,340			51,522,054			157,897,286			306	%
Cash and cash equivalents, beginning of period		61,991,703			510,586			61,481,117			12041	%
Cash and cash equivalents, end of period	$	271,411,043		$	52,032,640			219,378,403			422	%

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2021 was approximately $9.4 million, compared to approximately $15.6 million for the nine months ended September 30, 2020, a decrease of approximately $4.2 million, or 40%.  The reduction in net cash used in operating activities resulted primarily from a $4.5 million non-cash stock compensation expense in the 2021 period, approximately $0.5 million in gains recognized on extinguishment of debt, a loss on disposal of property of $0.2 million, and an increase in accounts payable in the 2021 period of approximately $3.2 million. These amounts were offset in part by an increase in inventory purchases of approximately $1.9 million. Other non-cash activity in the 2021 period included amortization and depreciation of approximately $0.3 million.

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Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2021 was approximately $0.3 million, compared to net cash provided of approximately $1.0 million for the nine months ended September 30, 2020, an increase in net cash used of approximately $1.3 million, or 134%. The increase in net cash used in investing activities resulted from the receipt of cash from the modification of our lease in the first half of 2020, compared to investments of intangible and other property and equipment in the current period.

Financing Activities 

Net cash from financing activities for the nine months ended September 30, 2021 was approximately $219.1 million, compared to approximately $64.1 million for the nine months ended September 30, 2020, an increase of approximately $155.1 million, or 242%. The increase resulted primarily from the sale of our equity securities in 2021 for total gross proceeds of approximately $199.5 million, cash received of approximately $32.1 million from warrant exercises, and cash received of approximately $1.4 million from stock option exercises, offset by stock issuance costs of approximately $14.3 million.

Liquidity and Capital Resources

We have incurred losses and negative cash flows from operations since our inception in May 2015. As of September 30, 2021, we had an accumulated deficit of approximately $116.1 million. 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.

As of September 30, 2021, we had cash and cash equivalents of approximately $271.4 million, inventory of approximately $1.4 million, prepaid expenses and deposits of approximately $1.6 million, accounts receivable of $6,938 and other receivables of approximately $.3 million. As of September 30, 2021, current assets amounted to approximately $274.8 million and current liabilities were approximately $4.9 million, resulting in working capital (defined as current assets minus current liabilities) of approximately $269.9 million.

Subsequent to September 30, 2021, warrants to purchase 156,500 common shares were exercised, resulting in additional cash proceeds of $23,475.

On October 1, 2021 we completed the acquisition of PulseVet, a leading provider of non-invasive shock wave therapy treatment devices to the veterinary industry (the “Acquisition”). The purchase price for the Acquisition was approximately $71.9 million in cash, subject to certain adjustments. The operations of PulseVet will be included in our consolidated financial statements commencing in the fourth quarter of 2021. On a pro forma basis after giving effect to the use of cash for the Acquisition, our cash and cash equivalents were approximately $202 million.

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 September 30, 2021.

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.

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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.

We believe that our existing cash resources will be sufficient to fund our expected working capital needs at least through December 2025.  If we raise additional funds by issuing equity securities, our existing security holders will likely experience 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 scope, progress, results and costs of researching and developing our current or future product candidates;

· the number and characteristics of the product candidates we pursue;

· the cost of manufacturing our current and future product candidates and any products we successfully commercialize;

· the cost of commercialization activities 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;

· our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

· the scope and terms of our business plans from time to time, and our ability to realize upon our business plans;

· the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing possible patent claims, including litigation costs and the outcome of any such litigation; and

· the costs associated with additional business development or mergers and acquisitions activity.

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.

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Outstanding Share Data

The only class of outstanding voting equity securities of the Company are the common shares. As of November 12, 2021,

· there are 979,894,668 common shares issued and outstanding.

· there are stock options outstanding under our Stock Option Plan to acquire an aggregate of 38,982,724 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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, 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 September 30, 2021, 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.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

On September 20, 2021, Heska Corporation (“Heska”), Qorvo US, Inc. (“Qorvo US”), Qorvo Biotechnologies, LLC (“Qorvo Biotech” and, together with Qorvo US, “Qorvo”) and our company (collectively with Qorvo, the “Defendants”) entered into a settlement agreement pursuant to which the litigation previously commenced by Heska against the Defendants in the United States District Court for the Middle District of North Carolina, Case 1:19-cv-01108-LCB-JLW, was dismissed with prejudice.  Pursuant to the settlement agreement, the parties also provided mutual releases of any and all claims related to the subject matter of the litigation.  We were not required to make any payment or agree to any covenants restricting the conduct of our business in connection with the settlement.

Item 1A. Risk Factors.

Risks Related to Our Recently Completed Acquisition of PulseVet

We have incurred and will continue to incur significant transaction and integration costs in connection with the acquisition of PulseVet. These expenses could materially and adversely affect our results of operations.

We have incurred significant costs associated with the negotiation and consummation of the PulseVet acquisition and expect to incur additional significant costs in connection with the integration of its operations. The substantial majority of these costs will be non-recurring expenses and will consist of transaction costs (e.g., legal, accounting), facilities and systems consolidation costs and employment-related costs. Additional unanticipated costs may be incurred in the integration of our businesses. These expenses could materially and adversely affect our results of operations.

The failure to integrate PulseVet successfully into our business could have a material adverse effect on our results of operations and financial condition.

In order to realize the expected benefits of the PulseVet acquisition, we must successfully integrate the operations or PulseVet with our existing operations. The integration of PulseVet will be a time-consuming and expensive process and could significantly disrupt our business. The anticipated benefits of the transaction, including the realization of revenue, tax benefits, financial benefits or returns and expense and other synergies, may not be fully realized, or may take longer to realize than expected, and the integration may be more expensive or require more senior management involvement than expected or be more disruptive to our existing operations than anticipated. In addition, the COVID-19 pandemic-related risks may result in unanticipated regulatory, planning and/or operational delays that may adversely impact the anticipated timeline and achievement of our ongoing integration goals. The integration process may result in the loss of key employees, the disruption of ongoing business or inconsistencies in standards, controls, procedures and policies. Our failure to successfully integrate the operations of PulseVet or to otherwise realize any of the anticipated benefits of the acquisition could have a material adverse effect on our results or operations.

The failure to realize the anticipated growth opportunities from our acquisition of PulseVet could have a material adverse effect on our results of operations and financial condition.

We may not realize the expected growth opportunities from our acquisition of PulseVet even if we are able to integrate PulseVet’s business successfully. We may incur unanticipated costs related to the operation of PulseVet and we may not achieve the growth potential for the PulseVet business that we expected at the time of acquisition or on our expected time schedule as a result of a number of factors, including our inability to successfully cross-market our or PulseVet’s products. Accordingly, the benefits from the proposed acquisition may be offset by costs incurred or delays in integrating the companies, which could cause our operational and growth assumptions to be inaccurate. Our failure to realize the anticipated growth opportunities from our acquisition of PulseVet could have a material adverse effect on our results of operations and financial condition.

The assumption of unknown liabilities in the PulseVet acquisition could have a material adverse effect on our financial condition and results of operations.

Because we acquired all of the membership interests of PulseVet, we obtained ownership of PulseVet subject to all of its liabilities, including contingent and unknown liabilities. Pursuant to the transaction documents for the acquisition, there are limitations and conditions to our ability to recoup unanticipated losses from PulseVet’s former owners. We may also learn additional information about PulseVet’s business that could adversely affect us, such as the existence of unknown liabilities, or matters that potentially affect our ability to comply with applicable laws.

If PulseVet’s liabilities are greater than expected, or if there are material additional obligations of which we are not aware, and if we have no recourse against the former owners of PulseVet for such matters, such liabilities could have a material adverse effect on our financial condition and results of operations.

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Risks Related to our Business

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 result of our experience with the initial commercialization of TRUFORMA^®, we have recently changed our sales strategy to focus on enhancing our internal capability to sell our existing and future products. As part of this strategic change, we are hiring additional sales personnel and sales support staff. We expect that expanding our internal sales capability will increase our compensation and other expenses. While members of our management team are experienced in the marketing, sale and distribution of animal diagnostic products, we as a company have not previously commercialized any products and there are significant risks involved in building and managing a sales organization, including our ability to hire, retain and motivate qualified individuals, generate sufficient sales leads, provide adequate training to sales and marketing personnel, and effectively oversee a geographically dispersed sales team. If we are unable to build an effective sales organization, our ability to sell our existing and future products and our ability to generate product revenue will be materially and adversely affected.

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 cannot assure you that our 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.

PulseVet will constitute a significant part of our business operations. Our failure to operate the PulseVet business successfully could have a material adverse effect on our financial condition and results of operations.

The acquisition of PulseVet was a material event for our company. We expect that the PulseVet business will constitute a significant part of our business operations in subsequent reporting periods. Our failure to operate the PulseVet business successfully could have a material adverse effect on our financial condition and results of operations.

Disruption in the global supply chain could increase our costs and delay, prevent or impair our ability to manufacture our products and satisfy customer demand, which could have a material adverse effect on our business, operating results and financial condition.

We rely on our developmental partners and third-party suppliers and manufacturers to develop and manufacture our products. Global supply chains have been significantly disrupted by the COVID-19 pandemic and other factors. For example, supply disruptions have led to a global shortage of semiconductor chips. In addition, shipping delays have increased and transportation costs have risen significantly. As a result, component costs have increased and the supply of materials has become less certain and more unpredictable. Any interruption or delay in the supply of parts and components for our products, or the inability to obtain those parts or components at acceptable prices and within a reasonable amount of time, could increase our costs and delay, prevent or impair our ability to manufacture our products and satisfy customer demand, which could have a material adverse effect on our business, operating results and financial condition.

If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop any of our existing or future product candidates, conduct our in-licensing and development efforts and commercialize any of our existing or future products.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management and scientific personnel. We are highly dependent upon our senior management, particularly Larry Heaton, our Chief Executive Officer, Ann Marie Cotter, our Chief Financial Officer, and members of the PulseVet leadership team, including Adrian Lock. The loss of services of any of these individuals could delay or prevent the achievement of our business objectives.

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International operations expose us to risks inherent in international activities.

Operating in international markets requires resources and management attention and subjects us to regulatory, economic and political risks that are different from those in the United States. We face risks in doing business internationally that could adversely affect our business, including:

· foreign exchange risk;

· import and export restrictions and changes in trade regulation, including uncertainty regarding renegotiation of international trade agreements and partnerships;

· sales and customer service challenges associated with operating in different countries;

· enhanced difficulties of integrating foreign acquisitions;

· difficulties in staffing and managing foreign operations and working with foreign partners;

· different pricing environments, longer sales cycles, longer accounts receivable payment cycles, and collections issues;

· compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including the US Foreign Corrupt Practices Act of 1977 and applicable laws of other jurisdictions, employment, ownership, trade, tax, privacy and data protection laws and regulations; 

· limitations on enforcement of intellectual property rights;

· more restrictive or otherwise unfavorable government regulations;

· increased financial accounting and reporting burdens and complexities;

· restrictions on the transfer of funds;

· withholding and other tax obligations on remittance and other payments made by our subsidiaries; and

· unstable regional, economic and political conditions.

Our inability to manage any of these risks successfully, or to comply with these laws and regulations, could have a material adverse effect on our business, operating results and financial condition.

If we are not able to manage growth successfully, this could adversely affect our business, financial condition, and results of operations.

Continued growth may place a significant strain on financial, operational, and managerial resources. We must continue to implement and enhance our managerial, operational and financial systems, expand our operations, and continue to recruit and train qualified personnel. There can be no assurance that our strategic and operational planning will allow us to adequately manage anticipated growth. In addition, the expense associated with increased manufacturing and sales/marketing may exceed our expectations. Any inability to successfully manage growth could have a material adverse effect on our business, operating results and financial condition.

Item 6. Exhibits.

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.

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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.

	Zomedica Corp.
Date: November 12, 2021	By:	/s/ Larry Heaton
	Name:	Larry Heaton
	Title:	Chief Executive Officer
Date: November 12, 2021	By:	/s/ Ann Marie Cotter
	Name:	Ann Marie Cotter
	Title:	Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
2.1	Stock Purchase Agreement, dated October 1, 2021, by and between Zomedica Inc. and Branford PVT Mid-Hold, LLC (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed with the Commission on October 1, 2021 (File No. 001-38298))
3.1	Articles of Amalgamation of Zomedica Corp. and all amendments thereto, as well as all Certificates issued in respect thereto (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on May 12, 2021 (File No. 001-38298))
3.2	Amended and Restated By-Law No. 1 (2nd Version) of Zomedica Corp. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on August 7, 2020 (File No. 001-38298))
10.1	Executive Employment Agreement, dated October 1, 2021, among Zomedica Inc., Zomedica Corp. and Larry Heaton (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Commission on October 4, 2021 (File No. 001-38298))
10.2*	Second Lease Agreement, effective September 15, 2021, by and between Zomedica Inc. and Wickfield Phoenix LLC.
10.3*	Executive Employment Agreement, dated September 6, 2019, by and between Pulse Veterinary Technologies, LLC and Adrian Lock
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
101.INS	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL (1)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (1)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (1)
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1)

(1) These interactive date files shall not be deemed filed for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under those sections.

* 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.

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