Business Combinations

6 Months Ended

Jun. 30, 2024

Business Combinations

Business Combinations

7. Business Combinations

All of the Company’s acquisitions of businesses have been accounted for under ASC 805.  Accordingly, the assets of the acquired companies reflect the fair values and have been included in the Company’s Condensed Financial Statements from their respective dates of acquisition.

The results of operations of Revo Squared LLC, Assisi Animal Health, LLC, Structured Monitoring Products, Inc, and Qorvo Biotechnologies, LLC have been included in the Company’s Condensed Financial Statements since the dates of acquisition on June 14, 2022, July 15, 2022, September 4, 2023, and October 4, 2023 respectively.

2022 Acquisitions

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Asset Purchase Agreement with Revo Squared LLC

On June 14, 2022, Zomedica Corp. and its wholly owned subsidiary Zomedica Inc. entered into an Asset Purchase Agreement with Revo Squared LLC (“Revo Squared”) and its majority member pursuant to which Zomedica Inc. agreed to acquire substantially all of the assets of Revo Squared. Revo Squared, based in Marietta, Georgia, was in the business of developing, manufacturing, marketing, distributing, and selling diagnostic imaging products and services for use in animal health, including its SuperView™, Sonoview^® Color ultrasound, Sonoview Mini/Mini Plus ultrasound, and Microview^® product offerings.

On July 1, 2022, the parties consummated the acquisition.  At the closing, Zomedica Inc. paid Revo Squared a base purchase price of $6,011 in cash, which was subject to adjustments based on the amount of Revo Squared’s working capital at the closing.  On this date, $500 of the purchase price was deposited into a third-party escrow account for a period of fifteen months to support Revo Squared’s indemnification obligation under the Purchase Agreement.  No indemnification claims were made during this period resulting in the $500 being released from the escrow to the seller.  The Company also issued to Revo Squared a ten-year warrant to purchase an aggregate of 10,000,000 of the Company’s common shares at a per share exercise price equal to $0.2201.  The warrants may be exercised on a cash or cashless basis, at the election of the warrant holder.

In addition, Zomedica Inc. has agreed to pay Revo Squared aggregate earn-out payments ranging from $0 to $4,000 based on the achievement of milestones related to future net sales from Revo Squared Products. One-time earn-out payments of $2,000 each will be payable upon net sales from Revo Squared Products exceeding $5,000 and $10,000 during any calendar year ending on or prior to December 31, 2027.  The fair value of the earnout liability was adjusted from $2,000 to $374 at June 30, 2024.  Fair value of the earnout was determined using Level 3 inputs.

As a result of total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $6,528 was recorded in connection with this acquisition, which will be deductible for US tax purposes.  The goodwill largely results from our ability to market and sell their respective products and services through our established customer base.

The Company finalized the allocation of the purchase price for Revo Squared as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities.

The final allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:

	Initial		Measurement
	Allocation of		Period		Updated
	Consideration		Adjustments		Allocation
Trade receivables, net	$	8	$	—	$	8
Prepaid expenses and deposits		10		—		10
Intangible Assets (estimated useful life)
Trade name (5 years)		200		—		200
Developed technology (10 years)		2,300		—		2,300
Customer relationships (16 years)		1,200		—		1,200
Total assets acquired		3,718		—		3,718
Earnout liabilities		2,458		(458)		2,000
Total liabilities assumed		2,458		(458)		2,000
Net assets acquired, excluding goodwill		1,260		458		1,718
Goodwill		6,528		(458)		6,070
Net assets acquired	$	7,788	$	—	$	7,788

Purchase price consideration was made up of the following:

Cash	$	6,011
Fair value of warrants		1,777
Total	$	7,788

Asset Purchase Agreement with Assisi Animal Health LLC

On July 15, 2022, Zomedica Corp. and its wholly owned subsidiary Zomedica Inc. entered into an Asset Purchase Agreement with Assisi Animal Health LLC (“Assisi”), its wholly owned subsidiary, AAH Holdings LLC, and certain of Assisi’s members (collectively the “Seller”) pursuant to which Zomedica Inc. agreed to acquire substantially all of the assets related to the Assisi® product lines.  The Sellers were in the business of developing, manufacturing, marketing, distributing and selling animal health products which use targeted Pulsed Electromagnetic Field (PEMF) therapy to decrease pain and inflammation, accelerate healing, and reduce anxiety that include the Assisi Loop^®, Assisi Loop Lounge^®, Assisi DentaLoop^® and Calmer Canine™ product lines.

Zomedica Inc. paid Assisi a purchase price of $18,293 in cash, which was subject to adjustments based on, among other things, the value of Assisi’s inventory and prepaid expenses at the closing of the acquisition.  A portion of the purchase price ($1,400) was deposited into a third-party escrow account.  The balance of the escrow account was released to seller on the 18-month anniversary of the Closing Date as there were no indemnification claims.  The Company also issued to Assisi a ten-year warrant to purchase an aggregate of 22,000,000 of the Company’s common shares at a per share exercise price equal to $0.252.  The warrants may be exercised on a cash or cashless basis, at the election of the warrant holder.

As a result of total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $14,329 was recorded in connection with this acquisition, which will be deductible for US tax purposes.  The goodwill largely results from our ability to market and sell their respective products and services through our established customer base.

The Company finalized the allocation of the purchase price for Assisi as of the acquisition date based on its understanding of the fair value of the acquired assets and assumed liabilities.

The final allocation of the purchase price to the assets acquired and liabilities assumed, based on their estimated fair values at the acquisition date, is as follows:

	Initial		Measurement
	Allocation of		Period		Updated
	Consideration		Adjustments		Allocation
Inventory, net	$	220	$	—	$	220
Prepaid expenses and deposits		271		—		271
Other receivables		406		(206)		200
Right of use asset		—		260		260
Intangible Assets (estimated useful life)
E-commerce technology (2 years)		200		—		200
Trade name (5 years)		300		—		300
Developed technology (10 years)		4,500		—		4,500
Customer relationships (19 years)		2,800		—		2,800
Total assets acquired		8,697		54		8,751
Current portion of lease obligations		—		49		49
Non current portion of lease obligations		—		211		211
Other non current liabilities		45		—		45
Total liabilities assumed		45		260		305
Net assets acquired, excluding goodwill		8,652		(206)		8,446
Goodwill		14,329		206		14,535
Net assets acquired	$	22,981	$	—	$	22,981

Purchase price consideration was made up of the following:

Cash	$	18,293
Fair value of warrants		4,688
Total	$	22,981

2023 Acquisitions

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Stock Purchase Agreement with Structured Monitoring Products, Inc.

On September 4, 2023, Zomedica Inc., a wholly owned subsidiary of Zomedica Corp. (the “Company”), entered into a Stock Purchase Agreement with Structured Monitoring Products, Inc. pursuant to which Zomedica Inc. acquired 100% of the capital stock of Structured Monitoring Products, Inc., a Florida corporation (“SMP”).  SMP is the maker of VetGuardian^®, a zero-touch vital signs remote monitoring system that improves the quality of care for pets during recovery from surgery and for those staying in clinic overnight.  The system provides real-time remote monitoring of the pet’s vital signs with the ability to alert staff if the vital signs fall outside preset ranges (the “Acquisition”).  The Acquisition was consummated on September 5, 2023.

In connection with the Acquisition, the Company converted $2,750 in convertible debt and accrued interest of $171 owed by SMP to the Company into equity totaling 28.7% outstanding equity of SMP, which has an implied value of $5,095 based upon the SMP’s enterprise value of $18,000.  Zomedica paid a purchase price of $12,952 for the balance of 71.3% equity of SMP.  The cash purchase price was funded through a $250 deposit previously paid to SMP and $12,702 of cash on hand.  At closing, Zomedica deposited $1,295 in escrow. $215 was released at 90 days as there were no adjustments to the working capital, cash, indebtedness, and transaction expenses.  The remaining balance will be released 18 months following the date of closing less the amount of any pending or prior indemnification claims.

As a result of total consideration exceeding the preliminary fair value of the net assets acquired, goodwill in the amount of $9,796 was recorded in connection with the Acquisition, none of which will be deductible for U.S tax purposes.  The goodwill is mainly attributable to skills and technical talent of SMP’s work force and the synergies expected to be achieved from integrating SMP into the Company’s existing business.

The previously held equity interests were remeasured to its fair value as of the acquisition date.  The Company computed the fair value based upon the SMP’s enterprise value of $18,000 and the fair value of previously held 28.7% equity interests were determined to be $5,095.  The Company recognized an amount of $2,174 as a gain on the fair valuation of Company’s previously held equity interest in SMP and was included in other income (loss) in our 2023 Form 10-K as part of our consolidated statements of operations and comprehensive loss for the period ended December 31, 2023.

The following table summarizes the fair value amounts of identifiable assets acquired and liabilities assumed at the acquisition date:

	Initial
	Allocation of
	Consideration
Cash and cash equivalents	$	42
Trade receivables, net(1)		11
Inventory, net		316
Other receivables		1
Intangible assets (estimated useful life)
Developed technology (10 years)		9,400
Non-competition agreement (3 years)		200
Total assets acquired		9,970
Accounts payable		6
Deferred tax liabilities		1,713
Total liabilities assumed		1,719
Net assets acquired, excluding goodwill		8,251
Goodwill		9,796
Net assets acquired	$	18,047

(1) The “trade receivables, net” comprise gross contractual amounts due of $11, of which no amounts were expected to be uncollectable at the date of acquisition.

The Company evaluated the disclosure requirements under ASC 805 and determined SMP was not considered a material business combination for purposes of disclosing the earnings of SMP since the date of acquisition and supplemental pro forma information.

Purchase price consideration was made up of the following:

Cash	$	12,702
Fair value of previously held interest		5,095
Prepaid deposits		250
Net assets acquired	$	18,047
Cash	$	12,702
Less: cash acquired		(42)
Investment in acquisitions, net of cash acquired	$	12,660

The determination of the final purchase price allocation to specific assets, primarily intangibles, is incomplete and may change in future periods.

LLC Membership Interest Purchase Agreement for the Acquisition of Qorvo Biotechnologies, LLC

On October 4, 2023, Zomedica Inc., a wholly owned subsidiary of Zomedica Corp. (the “Company”), entered into an LLC Membership Interest Purchase Agreement with Qorvo US, Inc. (“Qorvo”) pursuant to which Zomedica Inc. acquired 100% of the membership interests of Qorvo Biotechnologies, LLC, a Delaware limited liability company (“QBT”) from Qorvo. QBT develops the TRUFORMA^® Platform that utilizes innovative Bulk Acoustic Wave sensor technology to provide a non-optical and fluorescence free system for the detection of disease at the point of care (the “Acquisition”).  The Acquisition was consummated on October 4, 2023.

Zomedica paid Qorvo a purchase price of $7,646, which comprised of cash of $11,300 and settlement of pre-existing relationship of $3,654.  The cash purchase price was funded through the cash on hand.

The following table summarizes the fair value amounts of identifiable assets acquired and liabilities assumed at the acquisition date:

	Initial		Measurement
	Allocation of		Period		Updated
	Consideration		Adjustments		Allocation
Inventory, net	$	1,674	$	(201)	$	1,473
Other receivables		52		—		52
Property and equipment, net		6,495		201		6,696
Right-of-use asset		1,202		—		1,202
Other assets		19		—		19
Total assets acquired		9,442		—		9,442
Accounts payable and accrued liabilities		594		—		594
Current portion of lease obligations		249		—		249
Lease obligations		953		—		953
Total liabilities assumed		1,796		—		1,796
Net assets acquired, excluding goodwill		7,646		—		7,646
Net assets acquired	$	7,646	$	—	$	7,646

The Company incurred $499 in acquisition costs that were expensed in the period incurred and are included in general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss.

The Company evaluated the disclosure requirements under ASC 805 and determined QBT was not considered a material business combination for purposes of disclosing the earnings of QBT since the date of acquisition and supplemental pro forma information.

Purchase price consideration was made up of the following:

Cash	$	11,300
Settlement of pre-existing relationship(1)		(3,654)
Total	$	7,646

(1) The Company had entered into a Development and Manufacturing License Agreement with QBT on January 17, 2023 and the Company had an intangible asset and liability balance of $6,945 and $3,654, respectively as of the acquisition date related to this agreement. The effect of the pre-existing liability (i.e., $3,654) is included in the consideration transferred.

The determination of the final purchase price allocation to specific assets, primarily fixed assets, is incomplete and may change in future periods in the event that the intended uses of the assets change as we continue to deploy and integrate operations.