What changed in this filing

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Item 1. Financial Statements

2020-11-04 compared with 2020-08-04 · 228 added, 190 removed, 498 unchanged (46% of the section changed)

4 unchanged sentences

Dollars, except outstanding shares)

June 30, 2020 At

September 30, 2020 At

December 31, 2019

2 unchanged sentences

Cash and cash equivalents $ 32,396 $ 13,355

Accounts receivable, net of allowance for doubtful accounts of $ 9,345 and $ 7,782 at June 30, 2020 and December 31, 2019, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 8,788 and $ 7,782 at September 30, 2020 and December 31, 2019, respectively

2 11,489 11,534

Inventory, net 2 6,580 1,360

Inventory, net of inventory reserve of $ 805 and $ 0 at September 30, 2020 and December 31, 2019, respectively

2 2,762 1,360

Prepaid expenses and other assets 2 3,333 1,562

1 unchanged sentence

Long-term assets

Property and equipment 3 55,087 54,772

Property and equipment, net 3 56,317 54,772

Equity method investment 79 13

20 unchanged sentences

unlimited authorized;

39,082,932 and 37,952,660 issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

39,145,182 and 37,952,660 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

7 9,085 3,366

9 unchanged sentences

Dollars, except share and per share amounts)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

Note 2020 2019 2020 2019

7 unchanged sentences

Depreciation 202 193 612 460

(Gain) loss on disposal of property and equipment ( 1,458 ) 85 ( 2,627 ) 141

Loss (gain) on disposal of property and equipment 203 167 ( 2,424 ) 308

Other (income) expense 9 ( 19 ) 1 ( 3,593 ) ( 1 )

1 unchanged sentence

Non-operating expenses

Unrealized loss on warrant conversion liability 6 — 268 — 437

Unrealized gain on warrant conversion liability 6 — ( 800 ) — ( 363 )

(Gain) loss from equity method investment ( 21 ) 26 ( 36 ) 77

1 unchanged sentence

Net income before taxes 3,945 2,904 21,141 6,350

(Benefit) provision for income taxes 10 ( 6,646 ) 24 ( 6,459 ) 162

Provision (benefit) for income taxes 10 1,141 51 ( 5,318 ) 213

Net income $ 2,804 $ 2,853 $ 26,459 $ 6,137

Other Comprehensive Income

Change in unrealized loss on derivative instruments, net of tax ( 33 ) ( 148 ) ( 345 ) ( 148 )

Change in unrealized gain (loss) on derivative instruments, net of tax 24 ( 88 ) ( 321 ) ( 236 )

Other Comprehensive Loss $ 24 $ ( 88 ) $ ( 321 ) $ ( 236 )

29 unchanged sentences

Shareholders' equity, June 30, 2019 37,697,535 $ 2,350 $ 5,063 $ ( 148 ) $ 28,872 $ 36,137

Stock-based compensation - options — — 745 — — 745

Stock-based compensation - restricted stock — — 319 — — 319

Exercise of warrants 124,890 245 — — — 245

Exercise of options 35,025 114 — — — 114

Shares issued for vesting of restricted stock units 95,210 657 ( 657 ) — — —

Change in accumulated other comprehensive loss — — — ( 88 ) — ( 88 )

Net Income — — — — 2,853 2,853

Shareholders' equity, September 30, 2019 37,952,660 $ 3,366 $ 5,470 $ ( 236 ) $ 31,725 $ 40,325

See accompanying notes to the condensed consolidated financial statements

VIEMED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Expressed in thousands of U.S.

Dollars, except share and per share amounts)

Common Stock Additional paid-in capital Accumulated other comprehensive loss Total Shareholders'

14 unchanged sentences

Shareholders' equity, June 30, 2020 39,082,932 $ 8,414 $ 5,448 $ ( 502 ) $ 57,768 $ 71,128

Stock-based compensation - options — — 945 — — 945

Stock-based compensation - restricted stock — — 289 — — 289

Exercise of options 2,400 8 — — — 8

Shares issued for vesting of restricted stock units 59,850 663 ( 663 ) — — —

Change in accumulated other comprehensive income — — — 24 — 24

Net Income — — — — 2,804 2,804

Shareholders' equity, September 30, 2020 39,145,182 $ 9,085 $ 6,019 $ ( 478 ) $ 60,572 $ 75,198

See accompanying notes to the condensed consolidated financial statements

2 unchanged sentences

(Expressed in thousands of U.S.

Six Months Ended June 30,

Nine Months Ended September 30,

Note 2020 2019

5 unchanged sentences

Share-based compensation 7 3,581 2,978

Unrealized loss on warrant conversion liability 6 — 437

(Gain) loss on equity investment ( 15 ) 51

Unrealized gain on warrant conversion liability 6 — ( 363 )

(Gain) loss on equity method investment ( 36 ) 77

(Gain) loss on disposal of property and equipment ( 2,424 ) 308

2 unchanged sentences

Increase in accounts receivable ( 6,986 ) ( 9,827 )

Increase in inventory ( 5,220 ) ( 825 )

(Increase) decrease in inventory ( 1,402 ) 1,621

Increase in prepaid expenses and other current assets ( 1,771 ) ( 1,321 )

Increase in trade payables 2,044 1,934

(Decrease) increase in deferred revenue ( 36 ) 690

Increase (decrease) in accrued liabilities 3,765 ( 181 )

Increase (decrease) in trade payables 2,739 ( 1,813 )

Increase in deferred revenue 297 770

Increase in accrued liabilities 2,397 1,909

Increase (decrease) in income tax payable 282 ( 124 )

8 unchanged sentences

Proceeds from exercise of warrants — 261

(Principal payments) proceeds on notes payable 5 ( 67 ) 4,837

Principal payments on term note 5 ( 795 ) —

(Principal payments) net proceeds on notes payable 5 ( 104 ) 4,837

(Principal payments) net proceeds on term note 5 ( 1,199 ) 4,966

Shares repurchased and canceled under the Normal Course Issuer Bid — ( 1,522 )

Repayments of lease liabilities, net of proceeds ( 5,926 ) ( 4,551 )

Net cash used in financing activities $ ( 5,016 ) $ ( 1,198 )

Net increase (decrease) in cash and cash equivalents 16,352 ( 2,722 )

Repayments of lease liabilities ( 7,708 ) ( 7,916 )

Net cash (used in) provided by financing activities $ ( 7,231 ) $ 762

Net increase in cash and cash equivalents 19,041 2,217

Cash and cash equivalents at beginning of year 13,355 10,413

11 unchanged sentences

Dollars, except per share amounts)

June 30, 2020 and 2019

September 30, 2020 and 2019

Nature of Business and Operations

2 unchanged sentences

The Company’s service offerings are focused on effective in-home treatment with clinical practitioners providing therapy and counseling to patients in their homes using cutting edge technology.

The Company currently serves patients in over 35 states in the United States.

The Company currently serves patients in 36 states in the United States.

The Company was incorporated under the Business Corporations Act (British Columbia) on December 14, 2016.

17 unchanged sentences

The nature of our business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Reporting currency

All values are in U.S.

dollars ($ or "USD") unless specifically indicated otherwise.

Canadian dollars are indicated as CAD$.

Functional currency

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 those services, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices.

The Company's functional currency was determined to be the U.S.

dollar, which was determined using management’s assumption that the primary economic environment which it will derive its revenue and expenses incurred to generate those revenues is the United States.

Basis of consolidation

1 unchanged sentence

All intercompany transactions have been eliminated.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

Use of estimates

3 unchanged sentences

Actual results could differ from these estimates.

As of June 30, 2020, the COVID-19 pandemic is ongoing and the impacts of the pandemic on our business, financial condition and results of operations continue to evolve as of the date of this report.

As a result, the impacts remain uncertain and difficult to predict and will depend on, among other factors, the duration and severity of the pandemic, as well as any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home, and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts .

As of September 30, 2020, the COVID-19 pandemic is ongoing and the impacts of the pandemic on our business, financial condition and results of operations continue to evolve as of the date of this report.

As a result, the impacts remain uncertain and

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

difficult to predict and will depend on, among other factors, the duration and severity of the pandemic, as well as any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home, and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts .

As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

5 unchanged sentences

The write-offs are charged against the allowance for doubtful accounts.

For the six months ended June 30, 2020, our assessment considered business and market disruptions caused by the COVID-19 pandemic and estimates of expected emerging credit and collectability trends.

For the nine months ended September 30, 2020, our assessment considered business and market disruptions caused by the COVID-19 pandemic and estimates of expected emerging credit and collectability trends.

The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

The estimates and write-offs for the allowance for doubtful accounts for each reporting period were as follows:

June 30, 2020 June 30, 2019

September 30, 2020 September 30, 2019

Balance, beginning of year $ 7,782 $ 4,266

Provision for bad debts 5,578 3,859

Change in allowance for doubtful accounts 7,031 6,937

Amounts written off ( 6,025 ) ( 3,539 )

Balance, end of period $ 8,788 $ 7,664

As of June 30, 2020 and 2019, no one customer represented more than 10% of outstanding accounts receivable.

The Company does have receivables at June 30, 2020 from Medicare and Medicaid, representing 70 % and 6 %, respectively, and 76 % combined, of total outstanding receivables (December 31, 2019 - 58 %).

As of September 30, 2020 and 2019, no one customer represented more than 10% of outstanding accounts receivable.

The Company does have receivables at September 30, 2020 from Medicare and Medicaid, representing 59 % and 6 %, respectively, and 65 % combined, of total outstanding receivables (December 31, 2019 - 58 %).

As these receivables are both from government programs, there is little credit risk associated with these balances;

however, these receivables are subject to billing modifications and other adjustments and estimates of the amounts of such adjustments are included in the allowance for doubtful accounts.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

Revenues from Medicare and Medicaid as percentages of the Company's traditional revenue streams, excluding COVID-19 response sales, for the three and six month periods ended June 30, 2020, were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Revenues from Medicare and Medicaid as percentages of the Company's traditional revenue streams, excluding COVID-19 response sales and services, for the three and nine month periods ended September 30, 2020, were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

2 unchanged sentences

Total Medicare and Medicaid 66 % 64 % 69 % 66 %

Inventory represents non-serialized respiratory supplies that consist of equipment parts, consumables, and associated product supplies and is expensed at the time of sale or use.

The Company values inventory at the lower of cost or net realizable value.

Obsolete and unserviceable inventories are valued at estimated net realizable value .

Inventory is presented net of a reserve balance of $ 805,000 and $ 0 at September 30, 2020 and December 31, 2019, respectively, that relates to COVID-19 response supplies.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

Property and equipment

16 unchanged sentences

Prepaid expenses and other assets

Prepaid expenses and other current assets consists primarily of refundable deposits made for ventilators that have not been received by the Company, along with prepaid insurance, and prepaid rent.

Prepaid expenses and other current assets consists primarily of prepaid expenses such as insurance, rent, and supplier deposits for rental equipment.

Comprehensive income

7 unchanged sentences

Contractual adjustments result from the differences between the rates charged for services and reimbursement rates paid by government-sponsored healthcare programs and insurance companies for such services.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

The Company's contracts with customers often include multiple products and services, and the Company evaluates these arrangements to determine the unit of accounting for revenue recognition purposes based on whether the product or service is distinct from other products or services in the arrangement and should be accounted for as a separate performance obligation.

3 unchanged sentences

These services are paid based on a Medicare determined price that is publicly available on the website for the Centers for Medicare & Medicaid Services (“CMS”).

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

For commercial payors, DME companies must negotiate in-network pricing separately, though in general, the Company’s payors tend to benchmark their contract rates and coverage policies closely to those of Medicare.

6 unchanged sentences

The revenues from each major source are summarized in the following table:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

5 unchanged sentences

1,890 1,349 3,962 3,202

COVID-19 response sales (1)

COVID-19 response sales and services

8,553 — 29,306 —

2 unchanged sentences

Total Revenues $ 33,447 $ 20,368 $ 100,107 $ 58,808

(1) See Management's Discussion and Analysis for further discussion.

Revenue Accounting under Topic 842

9 unchanged sentences

Such adjustments are typically identified and recorded at the point of cash application or claim denial.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

Revenue Accounting under Topic 606

3 unchanged sentences

The Company also provides sleep study services to customers and recognizes revenue when the results of the sleep study are complete as that is when the performance obligation is met.

The transaction price on both equipment sales and sleep studies is the amount that the Company expects to receive in exchange for the goods and services provided.

The transaction price on both equipment sales and sleep studies is the

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

amount that the Company expects to receive in exchange for the goods and services provided.

Due to the nature of the DME business, gross charges are retail charges and generally do not reflect what the Company is ultimately paid.

14 unchanged sentences

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 as of June 30, 2020.

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 as of September 30, 2020.

Stock-based compensation

7 unchanged sentences

The Company utilizes an interest rate swap contract to reduce exposure to fluctuations in variable interest rates for future interest payments on the Term Note (as defined below).

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

For determining the fair value of the interest rate swap contract, the Company uses significant other observable market data or assumptions (Level 2 inputs) that market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk.

4 unchanged sentences

To the extent that interest rate swaps are determined to be ineffective, the Company would recognize the changes in the estimated fair value of swaps in Interest and other non-operating expenses, net in its Condensed Consolidated Statements of Income.

Net Income per Share Attributable to Common Stockholders

The Company uses the two-class method to compute net income per common share attributable to common stockholders because the Company issued securities, other than common stock, that contractually entitled the holders to participate in dividends and earnings prior to the initial listing.

The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period.

Net income attributable to common stockholders is computed by subtracting from net income the portion of the current period's earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed.

No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

See Note 11 for earnings per share computations.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

Recently adopted accounting pronouncements

6 unchanged sentences

The Company is an “emerging growth company” as defined by the JOBS Act.

The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards.

The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards.

In other words, an emerging growth company can selectively delay the adoption of all accounting standards until those standards would otherwise apply to private companies.

6 unchanged sentences

The Company anticipates adopting this ASU on January 1, 2023 given its smaller reporting company status and is still evaluating the impact of adoption on the consolidated financial statements in future periods.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses.

15 unchanged sentences

The following table details the Company’s fixed assets:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Medical equipment $ 62,490 $ 56,202

5 unchanged sentences

Accumulated depreciation ( 18,261 ) ( 13,680 )

Property and equipment, net of accumulated depreciation $ 55,087 $ 54,772

Depreciation in the amount of $ 1,985,000 and $ 1,306,000 is included in cost of revenue for the three months ended June 30, 2020 and 2019, respectively, and in the amount of $ 3,910,000 and $ 2,472,000 for the six months ended June 30, 2020 and 2019, respectively.

Included in medical equipment above is equipment acquired under capital lease obligations whose cost and accumulated depreciation at June 30, 2020 total $ 9,093,000 and $ 2,282,000 , respectively.

At December 31, 2019, cost and accumulated depreciation on equipment acquired under capital lease obligations was $ 15,680,000 and $ 1,337,000 , respectively.

Medical equipment purchases with a cost of $ 1,448,000 and $ 2,817,000 were included in accounts payable at June 30, 2020 and December 31, 2019, respectively.

Property and equipment, net of accumulated depreciation and amortization $ 56,317 $ 54,772

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

Depreciation in the amount of $ 2,224,000 and $ 1,465,000 is included in cost of revenue for the three months ended September 30, 2020 and 2019, respectively, and in the amount of $ 6,133,000 and $ 3,937,000 for the nine months ended September 30, 2020 and 2019, respectively.

Included in medical equipment above is equipment acquired under finance lease obligations whose cost and accumulated depreciation at September 30, 2020 total $ 8,087,000 and $ 801,000 , respectively.

At December 31, 2019, cost and accumulated depreciation on equipment acquired under finance lease obligations was $ 15,680,000 and $ 1,337,000 , respectively.

Medical equipment purchases with a cost of $ 2,931,000 and $ 2,817,000 were included in accounts payable at September 30, 2020 and December 31, 2019, respectively.

Current Liabilities

The Company’s short-term accrued liabilities are included within current liabilities and consist of the following:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Accrued trade payables $ 1,682 $ 1,023

5 unchanged sentences

Total accrued liabilities $ 12,793 $ 8,968

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

Debt and lease liabilities

4 unchanged sentences

Any amounts advanced on this line will be subject to an interest rate equal to the WSJ prime rate plus a margin of 0.50 %, with a 3.50 % interest rate floor and will be secured by substantially all of the Company's assets.

There were no borrowings against this line of credit at June 30, 2020 or December 31, 2019.

There were no borrowings against this line of credit at September 30, 2020 or December 31, 2019.

Commercial Term Notes

11 unchanged sentences

The Term Note bears interest at the rate of 4.60 % per annum.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

The Company incurred immaterial financing costs related to the above term notes.

1 unchanged sentence

The Company has recognized these term notes, which have terms greater than twelve months, as follows:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Notes payable $ 8,076 $ 9,379

2 unchanged sentences

Under the terms of the Commercial Business Loan Agreement, the Company is subject to the following financial covenants:

Financial Covenant Required Ratio Ratio

Financial Covenant Required Ratio Ratio at September 30, 2020

Total Debt to Adjusted EBITDA (Quarterly) not more than 1.50:1.00 0.35

1 unchanged sentence

Loan-to-Value Ratio (Quarterly) not more than 0.85 0.71

The Company was in compliance with all covenants in effect at June 30, 2020.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

The Company was in compliance with all covenants under the Commercial Business Term Loan Agreement in effect at September 30, 2020.

The Company has recognized finance lease liabilities for medical equipment and operating leases for land and buildings that have terms greater than twelve months, as follows:

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Lease liabilities $ 5,159 $ 10,132

3 unchanged sentences

The Company has various finance leases for equipment with an implied interest rate at fixed rates up to 9.64 %, secured by equipment, due between 2020 and 2022.

The Company's weighted average interest rate was 2.75 % and 0.47 % for all finance lease liabilities outstanding as of June 30, 2020 and 2019, respectively.

At June 30, 2020 and 2019, the weighted average lease term was approximately 0.90 years and 0.76 years, respectively.

Interest expense related to these finance lease obligations for the three and six months ended June 30, 2020 amounted to $ 42,000 and $ 94,000 , respectively.

Interest expense related to these finance lease obligations for the three and six months ended June 30, 2019 amounted to $ 20,000 and $ 46,000 , respectively.

The Company's weighted average interest rate was 3.17 % and 1.83 % for all finance lease liabilities outstanding as of September 30, 2020 and 2019, respectively.

At September 30, 2020 and 2019, the weighted average lease term was approximately 0.73 years and 1.01 years, respectively.

Interest expense related to these finance lease obligations for the three and nine months ended September 30, 2020 amounted to $ 34,000 and $ 128,000 , respectively.

Interest expense related to these finance lease obligations for the three and nine months ended September 30, 2019 amounted to $ 56,000 and $ 102,000 , respectively.

Operating lease liabilities

2 unchanged sentences

These lease liabilities are recorded at present value based on a discount rate of 5.50 %, which was based on the Company's incremental borrowing rate at the time of assessment.

At June 30, 2020, the weighted average lease term was approximately 3.52 years.

Operating rental expenses were $ 201,000 and $ 385,000 for the three and six months ended June 30, 2020, respectively, and $ 89,000 and $ 178,000 for the three and six months ended June 30, 2019.

At September 30, 2020, the weighted average lease term was approximately 3.41 years.

Operating rental expenses were $ 191,000 and $ 575,000 for the three and nine months ended September 30, 2020, respectively, and $ 100,000 and $ 278,000 for the three and nine months ended September 30, 2019.

The related assets for operating lease liabilities have been included with property and equipment on the Condensed Consolidated Balance Sheets.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

Included within these operating lease liabilities are real property leases for real estate from a related party.

Rental payments under these related party lease agreements are $ 20,000 per month, plus taxes, utilities and maintenance.

Total rental payments for the use of these properties were $ 61,000 and $ 121,000 for the three and six months ended June 30, 2020, respectively, and $ 61,000 and $ 121,000 for the three and six months ended June 30, 2019, respectively.

Total rental payments for the use of these properties were $ 58,000 and $ 180,000 for the three and nine months ended September 30, 2020, respectively, and $ 61,000 and $ 182,000 for the three and nine months ended September 30, 2019, respectively.

The expense for these related party rents has been included within general and administrative expenses.

10 unchanged sentences

The degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

The Company’s cash and cash equivalents are measured using Level 1 inputs and include cash on hand, deposits in banks, and money market funds.

6 unchanged sentences

The warrant derivative financial liability was valued using Level 3 inputs from the fair value hierarchy.

There were no warrants issued or outstanding during the three and six month periods ended June 30, 2020.

A summary of the change in fair value of warrant conversion liability is as follows for the period ended June 30, 2019:

There were no warrants issued or outstanding during the three and nine month periods ended September 30, 2020.

A summary of the change in fair value of warrant conversion liability is as follows for the period ended September 30, 2019:

Warrant Conversion Liability

1 unchanged sentence

Warrants issued —

Unrealized loss on warrant conversion liability 437

Balance June 30, 2019 $ 800

Unrealized gain on warrant conversion liability ( 363 )

Balance September 30, 2019 $ —

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

Derivative instruments and hedging activities

2 unchanged sentences

This swap contract converts the variable interest rate to a fixed interest rate on borrowings under the Building Term Note.

As of June 30, 2020, the notional amount of the interest rate swap was $ 4.7 million and will be amortized over the term of the swap.

The fair value was $ 0.5 million (determined based on Level 2 inputs) and is included in Accrued liabilities, as a component of Long-term liabilities as of June 30, 2020.

In the first six months of 2020, losses recognized as a result of ineffectiveness were immaterial.

As of September 30, 2020, the notional amount of the interest rate swap was $ 4.7 million and will be amortized over the term of the swap.

The fair value was $ 0.5 million (determined based on Level 2 inputs) and is included in Accrued liabilities, as a component of Long-term liabilities as of September 30, 2020.

In the first nine months of 2020, losses recognized as a result of ineffectiveness were immaterial.

Shareholders' Equity

3 unchanged sentences

The Company has only one class of stock outstanding, common shares.

The authorized stock consists of an unlimited number of common shares with no stated par value, of which 39,082,932 and 37,952,660 shares were issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.

The authorized stock consists of an unlimited number of common shares with no stated par value, of which 39,145,182 and 37,952,660 shares were issued and outstanding as of September 30, 2020 and December 31, 2019, respectively.

Stock-based compensation

1 unchanged sentence

The Former Plan is a “fixed” stock plan, whereby the maximum number of the Company's shares reserved for issuance, combined with any equity securities granted under all other compensation arrangements adopted by the Company, may not exceed 7,582,000 shares (equal to 20 % of the issued and outstanding shares of the Company as of the date of the adoption of the Plan).

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

As of June 30, 2020, the Company had outstanding issuances of options of 3,040,000 and restricted stock units of 701,000 under the Former Plan.

As of September 30, 2020, the Company had outstanding issuances of options of 3,068,000 and restricted stock units of 679,000 under the Former Plan.

Effective June 11, 2020 (the "Effective Date"), the Company’s shareholders approved the Company's 2020 Long Term Incentive Plan (the "Omnibus Plan"), and the Former Plan was frozen.

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The maximum amount of the foregoing common shares that may be awarded under the Omnibus Plan as “incentive stock options” is 2,600,000 Common Shares.

The following table summarizes stock-based compensation for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes stock-based compensation for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

2 unchanged sentences

Total $ 1,234 $ 1,064 $ 3,581 $ 2,978

At June 30, 2020, there was approximately $ 4,078,000 of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized over a weighted-average period of 2.26 years.

As of June 30, 2020, there was approximately $ 628,000 of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 0.65 years.

The following table summarizes stock option activity for the six months ended June 30, 2020:

At September 30, 2020, there was approximately $ 3,671,000 of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized over a weighted-average period of 2.16 years.

As of September 30, 2020, there was approximately $ 938,000 of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 0.47 years.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

The following table summarizes stock option activity for the nine months ended September 30, 2020:

Number of options

(000's) Weighted average exercise price (CAD$) Weighted average remaining contractual life Aggregate Intrinsic Value (1)

(000's) Weighted average exercise price (1)

Weighted average remaining contractual life Aggregate Intrinsic Value (2)

Balance December 31, 2019 2,683 $ 3.36 6.7 years $ 7,790

2 unchanged sentences

Expired / Forfeited ( 65 ) 4.81

Balance June 30, 2020 3,040 $ 5.39 8.2 years $ 16,999

Balance September 30, 2020 3,068 $ 4.29 8.1 years $ 13,867

(1) For presentation purposes, stock options issued with a CAD exercise price have been translated to USD based on the prevailing exchange rate on the date of grant.

(2) The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

The aggregate intrinsic value of options outstanding was $ 16,999,000 and options exercisable were $ 6,926,000 at June 30, 2020.

For the six months ended June 30, 2020, 600,897 shares of common stock were issued pursuant to the exercise of stock options.

At June 30, 2020, the Company had 1,043,000 exercisable stock options outstanding with a weighted average exercise price of CAD $ 3.96 and a weighted average remaining contractual life of 6.8 years.

At December 31, 2019, the Company had 1,037,000 exercisable stock options outstanding with a weighted average exercise price of CAD $ 3.83 and a weighted average remaining contractual life of 3.5 years.

The aggregate intrinsic value of options outstanding was $ 13,867,000 and options exercisable were $ 5,767,000 at September 30, 2020.

For the nine months ended September 30, 2020, 603,297 shares of common stock were issued pursuant to the exercise of stock options.

At September 30, 2020, the Company had 1,008,000 exercisable stock options outstanding with a weighted average exercise price of $ 2.94 and a weighted average remaining contractual life of 6.8 years.

At December 31, 2019, the Company had 1,037,000 exercisable stock options outstanding with a weighted average exercise price of $ 2.95 and a weighted average remaining contractual life of 3.5 years.

The fair value of the stock options has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and credited to additional paid-in capital over the vesting period, using the Black-Scholes option pricing model calculated using the following assumptions for issuances during the nine months ended September 30, 2020:

Exercise price $ 5.70 - $ 10.44

Risk-free interest rate 0.39 % - 1.63 %

Expected volatility 65.73 % - 85.38 %

Expected term 5.63 - 10 years

Expected dividend yield Nil

Fair value on date of grant $ 4.10 - $ 7.23

VIEMED HEALTHCARE, INC.

2 unchanged sentences

Dollars, except per share amounts)

June 30, 2020 and 2019

Exercise price ($CAD) $ 7.44 ($CAD)

Risk-free interest rate 1.63 %

Expected volatility 65.73 %

Expected life of options 10 years

Expected dividend yield Nil

Fair value on date of grant ($USD) $ 4.10 ($USD)

September 30, 2020 and 2019

Restricted stock units

Under the Plan, the Company also grants restricted stock units to directors, officers, and employees.

The Company also grants restricted stock units to directors, officers, and employees.

The Company accounts for restricted stock units using fair value.

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The Company accounts for forfeitures on restricted stock units under ASU 2016-09 and recognizes forfeitures in the period in which they occur.

The following table summarizes restricted stock unit activity for the six months ended June 30, 2020:

Number of Restricted Stock Units (000's) Weighted average grant price (CAD$) Weighted average remaining contractual life Aggregate Intrinsic Value (1)

The following table summarizes restricted stock unit activity for the nine months ended September 30, 2020:

Number of Restricted Stock Units (000's) Weighted average grant price (1)

Weighted average remaining contractual life Aggregate Intrinsic Value (2)

Balance December 31, 2019 1,139 $ 2.16 0.55 years $ 7,129

2 unchanged sentences

Expired / Forfeited ( 5 ) 5.70

Balance June 30, 2020 701 $ 3.64 0.65 years $ 6,699

Balance September 30, 2020 679 $ 2.97 0.47 years $ 5,878

(1) All future equity grants will be awarded in USD, therefore, restricted stock units issued with a CAD grant price have been translated to USD based on the prevailing exchange rate on the date of grant for presentation purposes.

(2) The aggregate intrinsic value of time-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

During the three months ended June 30, 2020, the Company did no t issue any restricted stock units.

During the six months ended June 30, 2020, the Company issued 92,088 restricted stock units, with a vesting term of one to three years and a fair value of $ 5.66 ($USD) per share.

During the three months ended September 30, 2020, the Company issued 42,147 restricted stock units with a fair value of $ 10.44 per share.

During the nine months ended September 30, 2020, the Company issued 134,235 restricted stock units, with a vesting term of one to three years and a fair value between $ 5.70 and $ 10.44 per share.

Phantom share units

The Company has a phantom share unit plan, which it uses for grants to directors, officers, and employees.

Phantom share units granted under the plan are non-assignable and are settled in cash at vesting.

Phantom share units granted under the plan are non-assignable and are settled in cash at vesting based on the fair value of the Company's common stock on the vesting date.

Phantom share units vest annually over a three -year period.

The following table summarizes phantom share unit activity for the six months ended June 30, 2020:

The following table summarizes phantom share unit activity for the nine months ended September 30, 2020:

Number of Phantom Share Units (000's)

2 unchanged sentences

Expired / Forfeited ( 76 )

Balance June 30, 2020 1,042

Balance September 30, 2020 1,019

VIEMED HEALTHCARE, INC.

2 unchanged sentences

Dollars, except per share amounts)

June 30, 2020 and 2019

September 30, 2020 and 2019

The cash-settled phantom share units are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with accrued liability and related expense being recognized over the requisite service period.

The change in fair value of the phantom share units has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and recorded as a liability included in accrued liabilities and long-term accrued liabilities, using a valuation method with the following inputs:

Six Months Ended

June 30, 2020

Share price $ 13.01 (CAD$)

Nine Months Ended

September 30, 2020

Share price (Nasdaq closing price on September 30, 2020)

Remaining life of phantom share units 0.61 - 2.61 Years

Calculated fair value of phantom share units $ 5,159

The total liability associated with phantom share units at June 30, 2020 is $ 4,699,000 , with $ 4,171,000 of this amount included in current accrued liabilities and the remaining portion of $ 528,000 included in long-term accrued liabilities.

Accrued liability and related expense is determined at each reporting period based on the stock price at period end.

Purchase Commitments

As of June 30, 2020, the Company had non-cancellable purchase order commitments in the amount of $ 5.0 million for respiratory equipment.

An outstanding deposit in the amount of $ 863,000 related to such purchase order commitments is included within other current assets.

On July 29, 2020, the Company filed a legal complaint formally requesting a refund of this remaining deposit as the Company believes the supplier is unable to deliver the contracted equipment.

The Company is unable to predict what action, if any, might result related to this claim and a loss is not considered probable at June 30, 2020.

The total liability associated with phantom share units at September 30, 2020 is $ 5,159,000 , with $ 4,427,000 of this amount included in current accrued liabilities and the remaining portion of $ 732,000 included in long-term accrued liabilities.

Expense associated with the phantom stock units is recorded in "Selling, general, and administrative" within the unaudited Condensed Consolidated Statements of Income and Comprehensive Income.

The following table summarizes expense associated with the phantom stock units for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Selling, general, and administrative $ 459 $ 1,054 $ 4,070 $ 5,654

The Company paid cash settlements of $ 4,201,000 and $ 3,386,000 during the nine months ended September 30, 2020 and 2019, respectively, pertaining to vestings of cash-settled phantom stock units.

Commitments and Contingencies

We accrue estimates for resolution of any legal and other contingencies when losses are probable and reasonably estimable in accordance with ASC 450, Contingencies (“ASC 450”).

No less than quarterly, we review the status of each significant matter underlying a legal proceeding or claim and assess our potential financial exposure.

We accrue a liability for an estimated loss if the potential loss from any legal proceeding or claim is considered probable and the amount can be reasonably estimated.

Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable, and accruals are based only on the information available to our management at the time the judgment is made, which may prove to be incomplete or inaccurate or unanticipated events and circumstances may occur that might cause us to change those estimates and assumptions.

Furthermore, the outcome of legal proceedings is inherently uncertain, and we may incur substantial defense costs and expenses defending any of these matters.

In March 2020, we (through our subsidiary Sleep Management LLC) entered into a purchase order (the “Purchase Order”) with

Vyaire Medical, Inc.

d/b/a CareFusion Respiratory Technologies (“Vyaire”) for respiratory equipment and paid $ 1.4 million (the “Deposit”) towards the delivery of such respiratory equipment.

As of September 30, 2020, outstanding supplier deposits in the amount of $ 0.9 million related to such Deposit are included within other prepaid and other current assets.

Vyaire has been unable to deliver the vast majority of the respiratory equipment referenced in the Purchase Order.

On July 29, 2020, we (through our subsidiary Sleep Management LLC) filed a lawsuit against Vyaire in the United States District Court for the Western District of Louisiana (the “Court”) seeking a declaratory judgment that the Company is not required to pay any further funds to Vyaire and demanding Vyaire refund all amounts currently held by Vyaire as a result of the Deposit.

On September 23, 2020, Vyaire filed its Defense and Counterclaim (“Counterclaim”) with the Court alleging breach of contract and seeking damages of $ 4.7 million, purportedly for the improper cancellation of the Purchase Order.

On October 16, 2020, we filed an answer and affirmative defenses with the Court in response to the Counterclaim and intend to pursue further legal action.

We continue to believe that we have valid legal and equitable grounds to recover our outstanding Deposit as a result of Vyaire’s failure to deliver the vast majority of the respiratory equipment referenced in the Purchase Order.

We have not concluded that a loss

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

related to the Counterclaim is probable, nor have we accrued a liability related to this claim.

Although a loss may be reasonably possible (as defined in ASC 450), we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the Counterclaim given that the dispute is in the early stages of the legal process.

"CARES" Act Funds Received

The CARES Act created a Provider Relief Fund to support health care-related expenses or lost revenue attributable to the COVID-19 pandemic.

The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") created a Provider Relief Fund to support health care-related expenses or lost revenue attributable to the COVID-19 pandemic.

The Company received $ 3.5 million of the Provider Relief Funds in April 2020 and has recognized this amount within other income on its Condensed Consolidated Statements of Income.

4 unchanged sentences

In accordance with the terms of acceptance for the grant, the Company has utilized these funds to prevent, prepare for, and respond to the COVID-19 pandemic.

At June 30, 2020 and 2019, the Company had no amounts recorded for uncertain tax positions and does not expect any material changes in uncertain tax benefits during the next 12 months.

At September 30, 2020 and 2019, the Company had no amounts recorded for uncertain tax positions and does not expect any material changes in uncertain tax benefits during the next 12 months.

The Company recognizes interest and penalties related to income tax matters in income tax expense.

The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") which was signed into law on March 27, 2020 includes various income and payroll tax provisions.

As of June 30, 2020, the CARES Act has not had a material impact on our condensed consolidated financial statements, however, the Company is still analyzing these provisions of the CARES Act.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

June 30, 2020 and 2019

The CARES Act which was signed into law on March 27, 2020 includes various income and payroll tax provisions.

As of September 30, 2020, the CARES Act has not had a material impact on our condensed consolidated financial statements, however, the Company is still analyzing these provisions of the CARES Act.

The Company is subject to U.S.

1 unchanged sentence

The Company is generally not subject to examination by taxing authorities for years prior to 2016.

Our annual estimated effective tax rate for 2020 is ( 32.81 )%.

Our annual estimated effective tax benefit rate for 2020 is ( 19.20 )%.

Our effective tax rate is based on forecasted annual results which may fluctuate significantly through the rest of the year, in particular due to the uncertainty in our annual forecasts resulting from the unpredictable impact of the COVID-19 pandemic on our operating results.

Included in the annual estimated effective tax rate of ( 32.81 )% is a discrete item described below accounting for ( 44.61 )% of the rate.

Included in the annual estimated effective tax rate of ( 19.20 )% are discrete permanent differences that make up ( 3.0 )% of the rate and a discrete benefit described below accounting for ( 31.50 )%.

The Company recognizes deferred tax assets to the extent that the Company believes that these assets are more likely than not to be realized.

1 unchanged sentence

Pursuant to ASC 740, any change in judgment relating to the beginning of the year valuation allowance balance should be recognized discretely in continuing operations in the interim period in which the change occurs.

At June 30, 2020, the Company determined that it was more likely than not that the deferred tax asset would be realized, and made an adjustment to the deferred tax asset valuation allowance, which reduced the provision for income taxes.

The Company has recorded a provisional income tax benefit of $ 6.5 million in its Condensed Consolidated Statements of Income and Comprehensive Income for the six months ended June 30, 2020.

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S.

Dollars, except per share amounts)

September 30, 2020 and 2019

Earnings Per Share

Income per common share is calculated using earnings for the year divided by the weighted average number of shares outstanding during the year .

Diluted income per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares by assuming the proceeds received from the exercise of stock options, restricted stock units, and warrants are used to purchase common shares at the prevailing market rate.

Using the treasury stock method, diluted income per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares by assuming the proceeds received from the exercise of stock options, restricted stock units, and warrants are used to purchase common shares at the prevailing market rate.

The following reflects the earnings and share data used in the basic and diluted earnings per share computations:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

11 unchanged sentences

Conversion of Accounts Payable into Short-term Capital Lease

Subsequent to June 30, 2020, the Company entered into a capital lease agreement with a third party and, as a result, $ 2.8 million of accounts payable was converted to a short-term lease payable.

Subsequent to September 30, 2020, the Company entered into a capital lease agreement with a third party and, as a result, $ 2.5 million of accounts payable was converted to a short-term lease payable.

VIEMED HEALTHCARE, INC.

1 unchanged sentence

(Tabular amounts expressed in thousands of US Dollars, except per share amounts)

June 30, 2020 and 2019

September 30, 2020 and 2019

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements