Quipt Home Medical Corp.

Consolidated Financial Statements

For the fiscal years ended

September 30, 2023 and 2022

(Expressed in US dollars)

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:

Page 5

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.

Page 7

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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.