Quipt Home Medical Corp.
Consolidated Financial Statements
For the fiscal years ended
September 30, 2023 and 2022
(Expressed in US dollars)
TABLE OF CONTENTS | |
Page 1 | |
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) | Page 2 |
Page 3 | |
Page 4 | |
Pages 5-32 |
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Quipt Home Medical Corp.
Wilder, KY
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Quipt Home Medical Corp. (the "Company") as of September 30, 2023 and 2022, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders' equity, and cash flows for each of the two years in the period ended September 30, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2023 and 2022, and the results of its consolidated operations and its consolidated cash flows for each of the two years in the period ended September 30, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO USA, P.C.
We have served as the Company's auditor since 2022.
Cincinnati, Ohio
PCAOB ID: 243
December 21, 2023
Quipt Home Medical Corp.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in thousands of US dollars, except per share amounts)
As of | As of | ||||||||
September 30, | September 30, | ||||||||
Notes | 2023 | 2022 | |||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash | $ | 17,209 | $ | 8,516 | |||||
Accounts receivable, net | 4 | 25,978 | 16,383 | ||||||
Inventory | 5 | 18,414 | 15,585 | ||||||
Prepaid and other current assets | 3,832 | 1,052 | |||||||
Total current assets | 65,433 | 41,536 | |||||||
Long-term assets | |||||||||
Property, equipment, and right of use assets, net | 6 | 53,405 | 33,497 | ||||||
Goodwill | 7 | 52,825 | 28,208 | ||||||
Intangible assets, net | 7 | 74,040 | 28,887 | ||||||
Other assets | 10 | 1,705 | 86 | ||||||
Total long-term assets | 181,975 | 90,678 | |||||||
TOTAL ASSETS | $ | 247,408 | $ | 132,214 | |||||
LIABILITIES | |||||||||
Current liabilities | |||||||||
Accounts payable | $ | 24,736 | $ | 13,841 | |||||
Accrued liabilities | 7,282 | 3,451 | |||||||
Current portion of equipment loans | 10 | 14,114 | 5,473 | ||||||
Current portion of lease liabilities | 10 | 5,122 | 3,304 | ||||||
Current portion of senior credit facility | 10 | 3,352 | 6,857 | ||||||
Deferred revenue | 9 | 4,511 | 3,036 | ||||||
Purchase price payable | 3 | 1,457 | 5,778 | ||||||
Total current liabilities | 60,574 | 41,740 | |||||||
Long-term liabilities | |||||||||
Equipment loans | 10 | 233 | 234 | ||||||
Lease liabilities | 10 | 14,028 | 7,195 | ||||||
Senior credit facility | 10 | 61,114 | 3,378 | ||||||
Deferred income taxes | 344 | - | |||||||
SBA Loan | 10 | - | 120 | ||||||
TOTAL LIABILITIES | 136,293 | 52,667 | |||||||
SHAREHOLDERS' EQUITY | |||||||||
Capital stock | 11 | 247,530 | 214,254 | ||||||
Contributed surplus | 27,393 | 26,317 | |||||||
Accumulated deficit | (163,808) | (161,024) | |||||||
TOTAL SHAREHOLDERS' EQUITY | 111,115 | 79,547 | |||||||
TOTAL LIABILITIES AND EQUITY | $ | 247,408 | $ | 132,214 |
The accompanying notes are an integral part of these consolidated financial statements
Page 1
Quipt Home Medical Corp.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(Expressed in thousands of US dollars, except per share amounts)
Year Ended | Year Ended | ||||||
September 30, | September 30, | ||||||
Notes | 2023 | 2022 | |||||
Revenue | |||||||
Rentals of medical equipment | $ | 96,237 | $ | 69,192 | |||
Sales of medical equipment and supplies | 125,505 | 70,670 | |||||
Total revenues | 221,742 | 139,862 | |||||
Cost of inventory sold | 57,897 | 33,213 | |||||
Operating expenses | 13 | 103,224 | 65,203 | ||||
Bad debt expense | 10,065 | 12,225 | |||||
Depreciation | 6 | 34,966 | 20,453 | ||||
Amortization of intangible assets | 7 | 5,197 | 2,587 | ||||
Stock-based compensation | 11 | 5,280 | 5,493 | ||||
Acquisition-related costs | 3 | 1,269 | 797 | ||||
Loss (gain) on disposals of property and equipment | (75) | 45 | |||||
Other income from government grant | 8 | - | (4,885) | ||||
Operating income | 3,919 | 4,731 | |||||
Financing expenses | |||||||
Interest expense, net | 6,607 | 2,079 | |||||
Loss on extinguishment of debt | 10 | 30 | 281 | ||||
(Gain) loss on foreign currency transactions | (108) | 144 | |||||
Share of loss in equity method investment | 3 | 89 | - | ||||
Change in fair value of debentures | 10 | - | (1,150) | ||||
Loss on settlement of shares to be issued | 3 | - | 442 | ||||
Income (loss) before taxes | (2,699) | 2,935 | |||||
Provision (benefit) for income taxes | 14 | 85 | (1,904) | ||||
Net income (loss) | $ | (2,784) | $ | 4,839 | |||
Net income (loss) per share (Note 15) | |||||||
Basic earnings per share | $ | (0.07) | $ | 0.14 | |||
Diluted earnings per share | $ | (0.07) | $ | 0.13 | |||
Weighted average number of common shares outstanding: | |||||||
Basic | 38,607 | 33,647 | |||||
Diluted | 38,607 | 36,302 |
The accompanying notes are an integral part of these consolidated financial statements
Page 2
Quipt Home Medical Corp.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(Expressed in thousands of US dollars, except per share amounts)
Number of | Total | ||||||||||||||||||
Shares | Capital | Contributed | Shares to | Accumulated | shareholders' | ||||||||||||||
Notes | (000's) | stock | surplus | be Issued | Deficit | equity | |||||||||||||
Balance September 30, 2021 | 33,350 | $ 202,827 | $ | 21,001 | $ | 657 | $ | (165,863) | $ | 58,622 | |||||||||
Net income | - | - | - | - | 4,839 | 4,839 | |||||||||||||
Cash in lieu of shares to be issued | 3 | - | - | - | (657) | (657) | |||||||||||||
Conversion of debentures | 10 | 2,107 | 10,683 | - | - | 10,683 | |||||||||||||
Stock-based compensation | 11 | - | - | 5,493 | - | 5,493 | |||||||||||||
Stock options exercised | 11 | 33 | 216 | (25) | - | 191 | |||||||||||||
Compensation options exercised | 11 | 115 | 528 | (152) | - | 376 | |||||||||||||
Balance September 30, 2022 | 35,605 | $ 214,254 | $ | 26,317 | $ | - | $ | (161,024) | $ | 79,547 | |||||||||
Net loss | - | - | - | - | (2,784) | (2,784) | |||||||||||||
Acquisition of Great Elm | 3 | 432 | 2,060 | - | - | - | 2,060 | ||||||||||||
Issuance of shares, net of issuance | |||||||||||||||||||
costs of $3,303 | 11 | 5,409 | 27,866 | - | - | - | 27,866 | ||||||||||||
Settlement of restricted stock units | 11 | 526 | 2,791 | (4,129) | - | - | (1,338) | ||||||||||||
Stock options exercised | 11 | 130 | 559 | (75) | - | - | 484 | ||||||||||||
Stock-based compensation | 11 | - | - | 5,280 | - | - | 5,280 | ||||||||||||
Balance September 30, 2023 | 42,102 | $ 247,530 | $ | 27,393 | $ | - | $ | (163,808) | $ | 111,115 |
The accompanying notes are an integral part of these consolidated financial statements
Page 3
Quipt Home Medical Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of US dollars, except per share amounts)
Year Ended September 30, | |||||||
Notes | 2023 | 2022 | |||||
Operating activities | |||||||
Net income (loss) | $ | (2,784) | $ | 4,839 | |||
Adjustments to reconcile net income (loss) to net cash provided by | |||||||
operating activities: | |||||||
Depreciation and amortization | 6 & 7 | 40,163 | 23,040 | ||||
Stock-based compensation | 11 | 5,280 | 5,493 | ||||
Loss (gain) on disposal of property and equipment | (75) | 45 | |||||
Other income from government grant | - | (4,885) | |||||
Loss on extinguishment of debt | 10 | 30 | 281 | ||||
Amortization of financing costs and accretion of purchase price payable | 3 & 10 | 591 | 251 | ||||
Interest expense, net of amortization and accretion | 10 | 6,016 | 1,828 | ||||
Cash paid for interest | (6,026) | (2,007) | |||||
Loss (gain) on foreign currency transactions | (108) | 144 | |||||
Share of loss in equity method investment | 89 | - | |||||
Loss (gain) loss on fair value of convertible debentures | 10 | - | (1,150) | ||||
Loss on settlement of shares to be issued | 3 | - | 442 | ||||
Provision (benefit) for income taxes | 85 | (1,904) | |||||
Cash paid for income taxes | (680) | (653) | |||||
Adjustments to purchase price payable | (96) | (178) | |||||
Change in working capital, net of acquisitions: | |||||||
Net increase in accounts receivable | (3,063) | (201) | |||||
Net increase in inventory | (60) | (2,419) | |||||
Net (increase) decrease in prepaid and other current assets | (2,239) | 450 | |||||
Net increase in deferred revenue | 9 | 240 | 31 | ||||
Net increase in accounts payables and accrued liabilities | 3,173 | 2,897 | |||||
Net cash flow provided by operating activities | 40,536 | 26,344 | |||||
Investing activities | |||||||
Purchase of property and equipment | 6 | (6,852) | (9,161) | ||||
Cash proceeds from sale of property and equipment | 65 | 193 | |||||
Cash paid for acquisitions, net of cash acquired | 3 | (76,038) | (33,525) | ||||
Net cash flow used in investing activities | (82,825) | (42,493) | |||||
Financing activities | |||||||
Repayments of loans | 10 | (20,447) | (11,900) | ||||
Repayments of leases | 10 | (4,377) | (3,822) | ||||
Issuance of debt under senior credit facility | 10 | 64,000 | - | ||||
Repayments of senior credit facility | 10 | (2,650) | - | ||||
Net (payments) borrowings on the revolving credit facility | 10 | (7,000) | 12,000 | ||||
Issuance costs relating to credit facility | 10 | (581) | (1,779) | ||||
Issuance of shares, net of issuance costs | 11 | 27,866 | - | ||||
Settlement of restricted stock units | 10 | (1,338) | - | ||||
Proceeds from exercise of stock options | 11 | 484 | 567 | ||||
Cash in lieu of shares to be issued | 3 | - | (1,100) | ||||
Payments of purchase price payable | 3 | (5,083) | (3,817) | ||||
Net cash flow (used in) provided by financing activities | 50,874 | (9,851) | |||||
Net increase (decrease) in cash | 8,585 | (26,000) | |||||
Effect of exchange rate changes on cash held in foreign currencies | 108 | (96) | |||||
Cash, beginning of year | 8,516 | 34,612 | |||||
Cash, end of year | $ | 17,209 | $ | 8,516 |
The accompanying notes are an integral part of these consolidated financial statements
Page 4
Quipt Home Medical Corp.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US dollars, except per share amounts)
1. Nature of operations Reporting entity
Quipt Home Medical Corp. ("Quipt" or the "Company") was incorporated under the Business Corporations Act (Alberta) on March 5, 1993. On December 30, 2013, the Company was redomiciled into British Columbia, Canada. The address of the registered office is 666 Burrard St, Vancouver, British Columbia, V6C 2Z7. The head office is located at 1019 Town Drive, Wilder, Kentucky, United States. The Company is a participating Medicare provider that provides i) nebulizers, oxygen concentrators, and CPAP and BiPAP units; ii) traditional and non-traditional durable medical respiratory equipment and services; and iii) non-invasive ventilation equipment, supplies and services.
The Company's shares are traded on the TSX Exchange in Canada and on NASDAQ in the United States, both under the symbol QIPT.
2. Basis of Presentation and summary of significant accounting policies Basis of accounting
These financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).
The consolidated financial statements were authorized for issue by the Board of Directors on December 21, 2023.
The consolidated financial statements, which are presented in US dollars, have been prepared under the historical cost convention, as modified by the measurement at fair values of certain financial assets and financial liabilities.
Basis of measurement
These consolidated financial statements have been prepared on a going concern basis that assumes that the Company will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of operation.
Functional currency
The consolidated financial statements of the Company are presented in US dollars, which is the Company's functional currency. Determined using management's judgment that the primary economic environment in which it will derive its revenue and expenses incurred to generate those revenues is the United States. Management has exercised judgment in selecting the functional currency of each of the entities that it consolidates based on the primary economic environment in which the entity operates and in reference to the various indicators including the currency that primarily influences or determines the selling prices of goods and services and the cost of production, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices.
Principles of consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated. The Company's consolidated entities, which all have a functional currency of USD and ownership of 100% are as follows:
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Quipt Home Medical Corp.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US dollars, except per share amounts)
100 W. Commercial Street, LLC | Medical West Healthcare Center, LLC |
Acadia Medical Supply, Inc. | Metro-Med, Inc. |
Access Respiratory Home Care, L.L.C. | Metro-Med, Inc. - Los Alamitos |
Alliance Home Care & Mobile Diagnostics, L.L.C. | Metro-Med, Inc. - Ventura |
At Home Health Equipment, LLC | NorCal Respiratory, Inc. |
Black Bear Medical, Inc. | Northwest Medical, LLC |
Black Bear Medical Group, Inc. | Oxygen Plus |
Black Bear Medical NH, Inc. | Patient-Aids, Inc. |
Care Medical Atlanta, LLC | Patient Home Monitoring, Inc |
Care Medical of Athens, Inc. | QHM Holdings, Inc. |
Care Medical of Augusta, LLC | QHM Investments I, LLC |
Care Medical of Gainesville, LLC | Quipt Home Medical, Inc. |
Care Medical Partners, LLC | Rejuvenight, LLC |
Care Medical Savannah, LLC | Resource Medical, Inc. |
Central Oxygen, Inc. | Resource Medical Group Charleston, LLC |
Coastal Med-Tech Corp. | Resource Medical Group, LLC |
Cooley Medical Equipment, Incorporated | Respicare, Inc. |
Focus Respiratory, LLC | Riverside Medical, Inc. |
Good Night Medical, LLC | RTA Homecare, LLC |
Good Night Medical of Ohio, LLC | Semo Drugs - Care Plus of Mo, Inc. |
Good Night Medical of Texas, Inc | Sleep Health Diagnostics, LLC |
Great Elm Healthcare, LLC | Sleepwell, LLC |
Health Technology Resources, LLC | Southeastern Biomedical Services, LLC |
Heartland Health Therapy, LLC | Southern Pharmaceutical Corporation |
Heckman Healthcare Service & Supplies Inc. | Thrift Home Care, Inc. |
Hometown Medical LLC | Tuscan, Inc. |
Legacy Oxygen and Home Care Equipment, LLC | United Respiratory Services, LLC |
Mayhugh Drugs, Inc. | West Home Healthcare, Inc. |
Med Supply Center, Inc. |
The Company's share of loss in investment is recorded on the equity method whereby the Company records "share of loss in equity method investment" on the consolidated statements of income (loss) and comprehensive income (loss) for its pro rata share ownership percentage of the investee's net income (loss).
Critical accounting estimates
The preparation of financial statements in accordance with IFRS requires management to make certain estimates, judgments, and assumptions concerning the future. The Company's management reviews these estimates, judgments, and assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted prospectively in the period in which the estimates are revised.
Estimates where management has made subjective judgments and where there is significant risk of material adjustments to assets and liabilities in future accounting periods include fair value measurements for financial instruments and share- based transactions, useful lives and impairment of non-financial assets (property and equipment and intangible assets), provision for expected credit losses, fair value measurements for assets and liabilities acquired in business acquisitions, and calculation of deferred taxes.
Page 6
Quipt Home Medical Corp.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US dollars, except per share amounts)
The following are the key estimate and assumption uncertainties that have a significant risk of resulting in a material adjustment within the next financial year:
a) Revenue recognition
Revenues are billed to, and collections are received from customers. Because of continuing changes in the health care industry and third-party reimbursement, the consideration receivable from these insurance companies is variable as these billings can be challenged by the payor. Therefore, the amount billed by the Company is reduced by an estimate of the amount that the Company believes is an amount to be ultimately allowed by the insurance contract, including co-pays and deductibles. This estimate involves significant judgment including an analysis of past collections and historical modification rates. Management regularly reviews the actual claims approved by the insurance companies, adjusting estimated revenue as necessary.
The Company does not offer warranties to customers in excess of the manufacturer's warranty. Any taxes due upon sale of the products or services are not recognized as revenue. The Company does not have any partially or unfilled performance obligations related to contracts with customers and as such, the Company has no contract liabilities during the years ended September 30, 2023 and 2022.
Rental of medical equipment
The Company rents medical equipment to customers for a fixed monthly amount on a month-to-month basis. The customer has the right to cancel the lease at any time during the rental period. The Company considers these rentals to be operating leases. Under IFRS 16 - Leases, the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term, resulting in deferred revenue for the portion of the monthly rent that is billed in advance for periods after the date of the consolidated statement of financial position. The term begins on the date products are delivered to patients.
Sales of medical equipment and supplies
The Company sells equipment, consumable supplies, and replacement parts to customers and recognizes revenue based at delivery, as all performance obligations have been met.
b) Valuation of accounts receivable
The measurement of expected credit losses considers information about past events and current conditions. Significant judgments are made in order to incorporate forward-looking information into the estimation of reserves and may result in changes to the provision from period to period which may significantly affect our results of operations.
The Company estimates that a certain portion of receivables from customers may not be collected and maintains a reserve for expected credit losses. The Company evaluates the net realizable value of accounts receivable as of the date of the consolidated balance sheets, considering current and historical cash collections, the age of the accounts receivable, and relevant business conditions. If circumstances related to certain customers change or actual results differ from expectations, the estimate of the recoverability of receivables could fluctuate from that provided for in our consolidated financial statements. A change in estimate could impact bad debt expense and accounts receivable.
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Quipt Home Medical Corp. published this content on 21 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 December 2023 20:27:04 UTC.