What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-03-03 compared with 2020-03-04 · 414 added, 673 removed, 497 unchanged (69% of the section changed)

9 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Viemed Healthcare, Inc.

(the Company) as of December 31, 2019, the related consolidated statements of income and comprehensive income, changes in shareholders’ equity and cash flows for the year then ended, 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 financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for the year then ended in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Viemed Healthcare, Inc.

(the Company) as of December 31, 2020 and 2019, the related consolidated statements of income and comprehensive income, changes in shareholders' equity and cash flows for the years then ended, 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 financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with U.S.

generally accepted accounting principles.

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These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

Our responsibility is to express an opinion on the Company’s 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 audit in accordance with the standards of 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 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 audit 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.

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 audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the 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 financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

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March 3, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of Viemed Healthcare, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Viemed Healthcare, Inc.

and its subsidiaries (the Company) as of December 31, 2018, and the related consolidated statements of income and comprehensive income, changes in shareholders’ equity, and cash flows for the year ended December 31, 2018, 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 December 31, 2018, and the results of its consolidated operations and its consolidated cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

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 audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.

Chartered Professional Accountant

Licensed Public Accountants

We have served as the Company’s auditor since 2015.

Toronto, Ontario

May 1, 2019, except for note 3, which is as of March 3, 2020.

VIEMED HEALTHCARE, INC.

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Dollars, except outstanding shares)

December 31, 2019

December 31, 2020 At

December 31, 2019

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Accounts receivable, net of allowance for doubtful accounts of $ 9,013 and $ 7,782 at December 31, 2020 and December 31, 2019, respectively

Inventory, net

2 12,373 11,534

Inventory, net of inventory reserve of $ 1,353 and $ 0 at December 31, 2020 and December 31, 2019, respectively

2 2,310 1,360

Prepaid expenses and other assets 2 1,511 1,562

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Long-term assets

Property and equipment

Property and equipment, net 3 55,056 54,772

Equity investments 733 13

Deferred tax asset 10 8,733 —

Other long-term assets 8 863 —

Total long-term assets $ 65,385 $ 54,785

TOTAL ASSETS $ 112,560 $ 82,596

Current liabilities

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Current portion of long-term debt 5 1,836 1,750

Warrant conversion liability

Total current liabilities $ 23,017 $ 25,912

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TOTAL LIABILITIES $ 30,867 $ 38,897

Commitments and Contingencies (Note 9)

Commitments and Contingencies — —

SHAREHOLDERS' EQUITY

2 unchanged sentences

39,185,182 and 37,952,660 issued and outstanding as of December 31, 2020 and December 31, 2019, respectively

7 9,181 3,366

Additional paid-in capital 7,320 6,377

9 unchanged sentences

Year Ended December 31,

Note 2020 2019

Revenue 2 $ 131,309 $ 80,256

Cost of revenue 51,198 24,250

Gross profit $ 80,111 $ 56,006

Operating expenses

2 unchanged sentences

Stock-based compensation 7 4,882 3,886

Loss on disposal of property and equipment

Other expense

Depreciation 816 671

(Gain) loss on disposal of property and equipment ( 2,328 ) 360

Other (income) expense 9 ( 3,952 ) 3

Income from operations $ 26,781 $ 8,857

Non-operating expenses

Unrealized (gain) loss on warrant conversion liability

Unrealized gain on warrant conversion liability 6 — ( 363 )

(Gain) loss from equity investments ( 91 ) 110

Interest expense, net of interest income 5 509 314

Net income before taxes 26,363 8,796

Provision for income taxes

(Benefit) provision for income taxes 10 ( 5,167 ) 271

Net income $ 31,530 $ 8,525

Other comprehensive income

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Net income per share

Basic 11 $ 0.81 $ 0.23

Diluted 11 $ 0.78 $ 0.21

Weighted average number of common shares outstanding:

Basic 11 38,743,516 37,716,864

Diluted 11 40,525,737 39,747,509

See accompanying notes to the consolidated financial statements

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(Expressed in thousands of U.S.

Dollars, except share amounts)

Additional paid-in capital

Accumulated other comprehensive loss

Total Shareholders'

Dollars, except share and per share amounts)

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

Shares Amount Retained

Shareholders' equity, December 31, 2018 37,500,815 $ 71 $ 5,390 $ — $ 27,110 $ 32,571

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Exercise of warrants 133,170 260 — — — 260

Exercise of options 42,168 136 — — — 136

Shares issued for vesting of restricted stock units 641,607 2,899 ( 2,899 ) — — —

Shares repurchased and canceled under the Normal Course Issuer Bid ( 365,100 ) — — — ( 1,522 ) ( 1,522 )

Change in accumulated other comprehensive loss — — — ( 157 ) — ( 157 )

Net income — — — — 8,525 8,525

Shareholders' equity, December 31, 2019 37,952,660 $ 3,366 $ 6,377 $ ( 157 ) $ 34,113 $ 43,699

1 unchanged sentence

Stock-based compensation - restricted stock — — 1,072 — — 1,072

Exercise of warrants

Exercise of options 643,297 1,876 — — — 1,876

Shares issued for vesting of restricted stock units 589,225 3,939 ( 3,939 ) — — —

Shares repurchased and canceled under the Normal Course Issuer Bid

Change in unrealized loss on derivative instruments

Change in accumulated other comprehensive loss, net of tax — — — ( 294 ) — ( 294 )

Net income — — — — 31,530 31,530

Shareholders' equity, December 31, 2020 39,185,182 $ 9,181 $ 7,320 $ ( 451 ) $ 65,643 $ 81,693

4 unchanged sentences

Year Ended December 31,

Note 2020 2019

Cash flows from operating activities

Net income $ 31,530 $ 8,525

Adjustments for:

Depreciation 9,582 6,400

Change in allowance for doubtful accounts 2 9,116 9,811

Change in inventory reserve 1,353 —

Share-based compensation 7 4,882 3,886

Unrealized (gain) loss on warrant conversion liability

Loss on disposal of property and equipment

Unrealized gain on warrant conversion liability 6 — ( 363 )

(Gain) loss on equity investments ( 91 ) 110

(Gain) loss on disposal of property and equipment ( 2,328 ) 360

Deferred income taxes (benefit) ( 8,733 ) —

Net change in working capital

1 unchanged sentence

Increase in inventory ( 2,303 ) ( 306 )

Increase in prepaid expenses and other assets ( 812 ) ( 733 )

Increase in trade payables 213 783

1 unchanged sentence

Increase in accrued liabilities 2,308 2,461

(Decrease) Increase in income tax payable

Increase in prepaid expenses and other current assets

Increase (decrease) in income tax payable 254 ( 66 )

Net cash provided by operating activities $ 35,110 $ 19,087

1 unchanged sentence

Purchase of property and equipment ( 13,044 ) ( 13,385 )

Investment in equity investments ( 629 ) —

Proceeds from sale of property and equipment 5,258 574

3 unchanged sentences

Proceeds from exercise of warrants — 260

Proceeds from commercial long-term note for building

Proceeds from term note

Principal payments on notes payable

Principal payments on term note

(Principal payments) net proceeds on notes payable 5 ( 142 ) 4,446

(Principal payments) net proceeds on term note 5 ( 1,605 ) 4,933

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

9 unchanged sentences

Property and equipment financed through finance leases $ 3,002 $ 12,011

Property and equipment financed through operating leases under FASB ASC 842

Property and equipment financed through leases under FASB ASC 842 $ 57 $ 615

See accompanying notes to the consolidated financial statements

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Nature of Business and Operations

On December 21, 2017, Viemed Healthcare, Inc.

(the "Company") consumated Asset and Share Purchase Agreements as well as an Arrangement Agreement (the "Arrangement") with Protech Home Medical Corp.

("PHM") (formerly Patient Home Monitoring Corp.) and was spun-out as a separate public company that owns a 100% interest in Home Sleep Delivered, L.L.C.

("HSD") and Sleep Management, L.L.C.

dba Viemed ("Viemed") through the U.S.

holding company Viemed Inc.

Effective as of the spin-out date, the consolidated financial statements include all of the above referenced entities.

The spin-out transaction was treated as a common control transaction and all assets and liabilities of the spun out business were transferred at the prior carrying values.

The Company, through its subsidiaries, provides in-home durable medical equipment ("DME") and health care solutions to patients in 31 states in the United States.

Viemed offers customers requiring respiratory services and related equipment an appropriate selection of home medical products including non-invasive ventilators, positive airway pressure (“PAP”) machines and oxygen units, as well as the services of experienced respiratory therapists.

HSD provides in-home sleep apnea testing, allowing a patient to determine the existence of sleep apnea at home at a fraction of the cost of the traditional sleep lab environment.

Viemed Healthcare, Inc.

(the "Company"), through its subsidiaries, is a provider of in-home DME and post-acute respiratory healthcare services in the United States.

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 39 states in the United States.

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

1 unchanged sentence

Kaliste Saloom Road, Lafayette, Louisiana 70508.

The Company qualifies as a "foreign private issuer," as defined in Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), for the purposes of the informational requirements of the Exchange Act.

Although, as a foreign private issuer, the Company would not be required to do so, the Company will file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the SEC, instead of filing the reporting forms available to foreign private issuers.

The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"), and as such, has elected to comply with certain reduced U.S.

As of June 30, 2020, the Company determined that it no longer qualifies as a "foreign private issuer," as defined in Rule 3b-4 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), for the purposes of the informational requirements of the Exchange Act.

As a result, effective January 1, 2021, the Company became subject to the proxy solicitation rules under Section 14 of the Exchange Act and Regulation FD, and the Company's officers, directors, and principal shareholders became subject to the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

The Company will continue to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Securities and Exchange Commission (the "SEC").

The Company is an "emerging growth company," as defined in the JOBS Act, and as such, has elected to comply with certain reduced U.S.

public company reporting requirements.

The Company’s common shares are traded in Canada on the Toronto Stock Exchange (the "TSX") under the symbol VMD.TO, and as of August 9, 2019, in the U.S.

The Company’s common shares are traded in Canada on the TSX under the symbol VMD.TO and in the U.S.

on the Nasdaq Capital Market under the symbol VMD.

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In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows have been made.

We have classified $3.6 million of rental equipment purchased but not provided to patients as property and equipment as of December 31, 2019 .

As of December 31, 2018 , this rental equipment purchased but not provided to patients was $1.8 million and classified as inventory.

These reclassifications had no effect on the reported results of operations.

Reporting Currency

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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.

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

Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany transactions have been eliminated.

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

Basis of Consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany transactions have been eliminated.

Reclassification of Balances

Certain reclassifications have been made to current-year revenue presentation as part of the adoption of FASB Accounting Standards Codification Topic 842, “Leases,” ("Topic 842") as further discussed below within Recently Adopted Accounting Pronouncements.

These reclassifications include the reporting of bad debt expense net within the revenue line item on the Consolidated Statement of Income and Comprehensive Income for the year ended December 31, 2019 .

Bad debt expense is reported within selling, general and administrative expense for the year ended December 31, 2018 , consistent with FASB Accounting Standards Codification “Leases” Topic 840, which was superseded by Topic 842.

These reclassifications have no effect on the reported net income for the years ended December 31, 2019 and 2018 .

Use of Estimates

2 unchanged sentences

Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable.

Significant areas requiring the use of management estimates relate to revenue recognition, accounts receivable, income tax provisions, and fair value of financial instruments.

Significant areas requiring the use of management estimates relate to revenue recognition, accounts receivable and the related allowance for doubtful accounts, income tax provisions, and fair value of financial instruments.

Actual results could differ from these estimates.

As of December 31, 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 events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

Cash and Cash Equivalents

2 unchanged sentences

Cash and cash equivalents consist of the following at December 31, 2020 and 2019:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Cash $ 5,319 $ 3,974

Money market accounts 25,662 9,381

6 unchanged sentences

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

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

For the year ended December 31, 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 doubtful accounts in future periods.

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

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

3 unchanged sentences

As of December 31, 2020 and 2019, no one customer represented more than 10% of outstanding accounts receivable.

The Company has receivables at December 31, 2019 from Medicare and Medicaid, representing 45% and 13% , respectively, and 58% combined, of total outstanding receivables ( December 31, 2018 - 60% ).

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

Revenues from Medicare and Medicaid accounted for 64% and 70% , of the total revenues for the year ended December 31, 2019 and 2018 , respectively.

Inventory consists primarily of respiratory supplies, non-serialized.

We have classified $3.6 million of rental equipment purchased but not provided to patients as property and equipment as of December 31, 2019 .

As of December 31, 2018 , this rental equipment purchased but not provided to patients was $1.8 million and classified as inventory.

Non-serialized inventory represents spare equipment parts, consumables, and associated product supplies.

Non-serialized inventory is expensed at the time of sale or use.

The Company does have receivables at December 31, 2020 from Medicare and Medicaid, representing 35 % and 11 %, respectively, and 46 % 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.

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

Dollars, except per share amounts)

December 31, 2020 and 2019

Revenues from Medicare and Medicaid as percentages of the Company's traditional revenue streams, excluding COVID-19 response sales and services, for the years ended December 31, 2020 and 2019 were as follows:

Year Ended December 31,

Medicare revenues 63 % 56 %

Medicaid revenues 10 % 8 %

Total Medicare and Medicaid revenues 73 % 64 %

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.

The inventory value is determined using the first-in first-out method.

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

Inventory is presented net of a reserve balance of $ 1,353,000 and $ 0 at December 31, 2020 and 2019, respectively, that relates to COVID-19 response supplies.

Property and Equipment

Property and equipment is presented on the consolidated balances sheets at historic cost less accumulated depreciation.

Property and equipment is presented on the Consolidated Balance Sheets at historic cost less accumulated depreciation.

Major renewals and improvements that extend the useful life of assets are capitalized to the respective property accounts, while maintenance and repairs, which do not extend the useful life of the respective assets, are expensed as incurred.

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Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets.

Property, leasehold improvements, and equipment are amortized on a straight-line basis over their estimated useful lives.

Property and equipment are amortized on a straight-line basis over their estimated useful lives.

The estimated useful lives of the property and equipment are as follows:

Estimated Useful Lives

Medical Equipment

Computer Equipment

Office Furniture & Fixtures

Leasehold Improvements

Shorter of Useful Life or Lease

15 - 39 Years

Indefinite Life

Depreciation of medical equipment commences at the date of service, which represents the date that the asset has been deployed to a patient’s address and is put in use and continues through the useful life of the asset.

Property and equipment and other non-current assets with definite useful lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Comprehensive Income

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Our comprehensive income represents net income adjusted for unrealized gains and losses on derivative instruments.

Accumulated other comprehensive loss is presented in the accompanying balance sheets as a component of shareholders' equity.

Description Estimated Useful Lives

Medical Equipment 1 - 10 Years

Computer Equipment 5 Years

Office Furniture & Fixtures 5 - 10 Years

Leasehold Improvements Shorter of Useful Life or Lease

Vehicles 5 Years

Building 15 - 39 Years

Land Indefinite Life

Depreciation of medical equipment commences at the date of service, which represents the date that the asset has been delivered to a patient and is put in use and continues through the useful life of the asset.

Property and equipment with definite useful lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Prepaid Expenses and Other Assets

Prepaid expenses and other current assets consists primarily of prepaid expenses such as insurance and rent.

Equity Investments

Investments in unconsolidated entities, over whose operating and financial policies the Company has the ability to exercise significant influence but not control, are accounted for using the equity method of accounting.

Equity method investments are initially measured at cost in the Consolidated Balance Sheets with any subsequent adjustments made to the carrying amount of the investment for the Company’s proportionate share of income or loss.

The Company has recognized its share of income or loss within non-operating expenses in Consolidated Statements of Income.

Equity method investments are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of the investments may exceed the fair value.

No events or changes have occurred as of December 31, 2020 that would affect the carrying value of equity method investments.

The Company measures equity securities without a readily determinable fair value at cost minus impairment, if any, plus or minus any changes resulting from observable price changes in orderly transactions, as defined, for identical or similar investments of the same issuer.

The Company was not aware of any impairment or observable price change adjustments that needed to be made as of December 31, 2020 on its investments in equity securities without a readily determinable fair value.

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

Comprehensive Income

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Our comprehensive income represents net income adjusted for unrealized gains and losses on derivative instruments, net of tax.

Accumulated other comprehensive loss is presented on the accompanying Consolidated Balance Sheets as a component of shareholders' equity.

Revenue Recognition

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Revenue is recognized net of contractual adjustments and bad debt based on contractual arrangements with third-party payors, an evaluation of expected collections resulting from the analysis of current and past due accounts, past collection experience in relation to amounts billed and other relevant information.

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

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 separate performance obligation.

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.

A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the Company's ability to transfer the goods or services is separately identifiable from other promises in the contractual arrangement with the customer (e.g.

Revenue is then allocated to each separately identifiable good or service based on standalone price of the items underlying the performance obligations.

Most of the Company’s products fall in the Medicare Fee-for-Service (“FFS”) program which is a payment model where services are unbundled and paid for separately.

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”).

Revenue is then allocated to each separately identifiable good or service based on the standalone price of the items underlying the performance obligations.

Most of the Company’s products fall in the Medicare FFS program which is a payment model where services are unbundled and paid for separately.

These services are paid based on a Medicare determined price that is publicly available on the website for CMS.

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.

The Company considers performance obligations for sales and rentals to be met when the customer receives the equipment, and revenue for rentals is recognized straight line, over the respective rental period.

For revenue associated with DME rentals, the Company recognizes revenue in accordance with the Financial Accounting Standards Board ("FASB") ASC 842 and 840, “Leases,” (Topic 842 and 840).

For any DME sales and services, the Company recognizes revenue under FASB Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers,” (Topic 606) and related amendments.

The Company recognizes equipment rental revenue over the non-cancelable lease term, which is one month , less estimated adjustments, in accordance with ASC 842 and 840, "Leases." The Company has separate contracts with each patient that are not subject to a master lease agreement with any third-party payor.

The Company considers the lease classification (sales-type lease or operating lease) and then appropriately recognizes rental revenue over the lease term.

The Company considers performance obligations for sales and rentals to be met when the customer receives the equipment, and revenue for rentals is recognized over time, over the respective rental period.

For revenue associated with DME rentals, the Company recognizes revenue in accordance with FASB ASC 842, “Leases,” (Topic 842).

For any DME sales and services, the Company recognizes revenue under FASB ASU 2014-09, “Revenue from Contracts with Customers,” (Topic 606) and related amendments.

The Company recognizes equipment rental revenue over the non-cancelable lease term, which is one month , less estimated adjustments, in accordance with Topic 842.

The Company has separate contracts with each patient that are not subject to a master lease agreement with any third-party payor.

The Company would first consider the lease classification issue (sales-type lease or operating lease) and then appropriately recognize or defer rental revenue over the lease term .

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

For the Year Ended

December 31, 2019

December 31, 2018 (1)

Net revenue from rentals under Topic 842 and 840 (2)

Year Ended December 31,

Revenue from rentals under Topic 842

Ventilator rentals, non-invasive and invasive $ 78,286 $ 69,067

Other durable medical equipment rentals 9,888 5,379

Net revenue from sales and services under Topic 606

Equipment sales

Revenue from sales and services under Topic 606

Equipment and supply sales

COVID-19 response sales and services

Service revenues

Total net revenue

(1) Net revenue from rentals and total net revenue have been updated to reflect the correction described in Note 3 to the Notes to Consolidated Financial Statements.

(2) Net revenue from rentals for the years ended December 31, 2019 and 2018 are presented under Topic 842 and 840, respectively.

Revenue Accounting under Topic 842 and 840

Total revenues $ 131,309 $ 80,256

Revenue Accounting under Topic 842

The Company leases DME such as non-invasive and invasive ventilators, PAP machines, percussion vests, oxygen concentrator units and other small respiratory equipment to customers for a fixed monthly amount on a month-to-month basis.

5 unchanged sentences

December 31, 2020 and 2019

Under FASB Accounting Standards Codification Topic 842, “Leases”, the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term which varies based on the type of equipment rental.

The lease term begins on the date products are delivered to patients, and revenues are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private commercial payors, and Medicaid.

Under FASB Accounting Standards Codification Topic 842, the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term which varies based on the type of equipment rental.

The lease term begins on the date equipment is delivered to patients, and revenues are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private commercial payors, and Medicaid.

Certain customer co-payments are included in revenue when considered probable of payment, which is generally when paid.

3 unchanged sentences

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

The Company classified bad debt expense within selling, general and administrative expense for the year ended December 31, 2018 , consistent with FASB Accounting Standards Codification “Leases” Topic 840, which was superseded by Topic 842.

After adoption of Topic 842, as previously discussed within Reclassification of Balances, the Company classified bad debt expense net within the revenue line item on the Consolidated Statement of Income and Comprehensive Income for the year ended December 31, 2019 .

These amounts are reclassified in the unaudited summarized quarterly financial information included in Note 13.

Revenue Accounting under Topic 606

1 unchanged sentence

The customer and, if applicable, the payors are generally charged at the time that the product is sold.

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.

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

For sales of equipment previously placed in service, proceeds associated with these sales are recorded to gain (loss) on disposal of property and equipment.

The Company also provides sleep study services to customers and recognizes revenue when the sleep study results are complete, satisfying the performance obligation.

In response to the COVID-19 pandemic, the Company began offering contact tracing services, which revenues are recognized in the period in which the service has been provided.

The transaction price on equipment sales, sleep studies, and contact tracing is the 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.

As such, the transaction price is constrained for the difference between the gross charge and what is estimated to be collected from payors and from patients.

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

Returns and refunds are not accepted on either equipment sales or sleep study services.

Returns and refunds are not accepted on equipment sales, sleep study services or contact tracing services.

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 as of December 31, 2019 .

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

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 December 31, 2020 or 2019.

Stock-Based Compensation

The Company accounts for its stock-based compensation in accordance with ASC 718 , "Compensation—Stock Compensation" , which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period.

Stock–based compensation cost for stock options are determined at the grant date using the Black-Scholes option pricing model.

Stock-based compensation costs for restricted stock units are determined at the grant date based on the closing stock price.

Stock–based compensation costs for stock options are determined at the grant date using the Black-Scholes option pricing model.

Stock-based compensation costs for RSUs are determined at the grant date based on the closing stock price.

The expense of such stock-based compensation awards is recognized using the graded vesting attribution method over the vesting period and the offsetting credit is recorded as an increase in additional paid-in capital.

1 unchanged sentence

Any excess tax benefit or deficiency is recognized as a component of income taxes and within operating cash flows upon vesting of the share-based award.

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2020 and 2019

For the Company’s phantom share units settled in cash, the Company computes the fair value of the phantom share units using the closing price of the Company's stock at the end of each period and records a liability based on the percentage of requisite service.

Interest Rate Swaps

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).

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.

These fair value estimates reflect an income approach based on the terms of the interest rate swap contract and inputs corroborated by observable market data including interest rate curves.

The Company includes unrealized gains in Other Long-term assets, as a component of long-term assets, and unrealized losses in accrued liabilities, as a component of long-term liabilities on the Consolidated Balance Sheets.

The Company recognizes any differences between the variable interest rate payments and the fixed interest rate settlements from its swap counterparty as an adjustment to interest expense over the life of the swap.

If determined to be an effective cash flow hedge, the Company will record the changes in the estimated fair value of the swaps to accumulated other comprehensive income or loss on the Consolidated Balance Sheets.

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 on its Consolidated Statements of Income.

The Company is subject to income taxes in numerous jurisdictions.

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At each reporting period end, deferred tax assets are evaluated for recoverability based on whether it is more likely than not that sufficient taxable earnings will be available to allow all or part of the asset to be recovered.

Impairment of Long-Lived Assets

The Company follows ASC Topic 360, which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the asset group’s carrying amounts may not be recoverable.

In performing the review for recoverability, if future undiscounted cash flows (excluding interest charges) from the use and ultimate disposition of the assets are less than their carrying values, an impairment loss represented by the difference between its fair value and carrying value, is recognized.

When properties are classified as held for sale they are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

There were no impairment charges recognized during the periods ended December 31, 2019 and 2018 .

See Note 10 for details on income taxes recognized.

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

Impairment of Long-Lived Assets

When properties are classified as held for sale they are recorded at the lower of the carrying amount or the expected sales price less costs to sell.

There were no impairment charges recognized during the fiscal years ended December 31, 2020 and 2019.

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 the dividends and earnings prior to the initial listing after the Arrangement.

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.

Basic net income per common share is computed based on the weighted average number of shares of common stock outstanding during the period.

Diluted net income per common share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential stock-based awards outstanding during the period using the treasury stock method.

Dilutive potential stock-based awards include outstanding common stock options and time-based RSUs.

See Note 11 for earnings per share computations.

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In August 2018, the FASB issued ASU No.

2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,” to provide clarity on how certain cash receipt and cash payment transactions are presented and classified within the statement of cash flows.

The ASU is effective for annual periods beginning December 31, 2018, and its adoption did not impact our consolidated financial statements.

In July 2018, the FASB issued ASU No.

2018-07 “Improvements to Non-employee Share-Based Payment Accounting,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees.

The ASU is effective for interim periods as of January 1, 2019, and its adoption did not have any material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, “Leases” (Topic 842) (“ASC 842”), which supersedes the existing guidance for lease accounting, “Leases” (Topic 840) (“ASC 840”).

ASC 842 requires lessees to recognize a lease liability and a right of use asset for all leases that extend beyond one year.

This standard was adopted using the modified retrospective transition approach at the adoption date of January 1, 2019.

This approach does not require the restatement of previous periods.

The Company completed a qualitative and quantitative assessment of its leases from both a lessee and lessor perspective.

As part of this process, the Company elected to utilize certain practical expedients that provided transition relief.

Accordingly, the Company did not reassess expired or existing contracts, lease classifications or related initial direct costs as part of the assessment process for either lessee or lessor leases.

From a lessor perspective, the Company recognizes revenue on rentals in accordance with Topic 842 on a straight line basis over the term of the lease.

The adoption of this standard, from a lessee perspective, resulted in the recording of Right of Use (“ROU”) operating lease assets as a component of property and equipment, net and liabilities as a component of current and non-current liabilities of approximately $1.5 million on the Consolidated Balance Sheet as of January 1, 2019, with no impact to retained earnings.

In addition, the Company elected as an accounting policy, not to record leases with an initial term of less than 12 months.

(See Note 6 – “Debt and lease liabilities” for additional information and required disclosures.) Adoption of this standard had no change on finance leases previously subject to capital lease treatment under Topic 840.

In August 2017, the FASB issued ASU No.

2017-12, "Derivatives and Hedging", which changes both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results, in order to better align an entity’s risk management activities and financial reporting for hedging relationships.

The amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

The Company adopted this standard on June 1, 2019 and adoption of this standard did not have a material impact on the Company’s consolidated financial statement presentation or results.

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

The new guidance modifies the disclosure requirements on fair value measurements.

The Company adopted this standard on January 1, 2020 and the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements

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.

The Company has elected to utilize this exemption and, as a result, our consolidated financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies.

To date, however, the Company has not delayed the adoption of any accounting standards.

To date, however, the Company has not delayed the adoption of any accounting standards except as noted below.

Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable.

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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.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.

The new guidance modifies the disclosure requirements on fair value measurements.

The ASU is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.

While the Company continues to evaluate the effect of adopting this guidance, the Company expects the fair value disclosures related to financial instruments, derivative instruments and hedging activities and earnout liabilities will be subject to the new standard.

In November 2019, the FASB issued ASU 2019-11, "Codification Improvements to Topic 326, Financial Instruments – Credit Losses." Among other things, the ASU expands the scope of the practical expedient that allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326 to also include certain disclosures required by Topic 320.

Entities that elect to apply the practical expedient must disclose the total amount of accrued interest that they exclude from their disclosures of amortized cost.

The amendments have the same effective dates as ASU 2016-13 (Topic ASC 326) for entities that have not yet adopted that standard.

For entities that early adopted ASU 2016-13 (Topic ASC 326), the amendments are effective for fiscal years beginning after December 15, 2019 and interim periods therein.

Entities that early adopted ASU 2016-13 (Topic ASC 326) may early adopt the amendments.

In December 2019, the FASB issued ASU No.

2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

Simplifying the Accounting for Income Taxes." The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740.

The new guidance also improves consistent application of and simplifies U.S.

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The Company is currently evaluating the effect of the new guidance.

Correction of Prior Period Immaterial Errors

The Company has identified immaterial errors in the Company’s previously issued Consolidated Financial Statements related to revenue recognition.

The Company previously recorded full monthly rental revenue for its durable medical equipment in the month of billing instead of on a daily, pro-rata basis over the lease term, consistent with the straight-line methodology required by ASC 840 and ASC 842.

As a result, the Company has made certain corrections to defer revenue for rental days that extend outside of the reporting period, as well as the associated direct incremental cost of the lease.

In evaluating whether the previously issued Consolidated Financial Statements were materially misstated for the interim or annual periods prior to December 31, 2019 , the Company applied the guidance of ASC 250, Accounting Changes and Error Corrections, SEC Staff Accounting Bulletin (“SAB”) Topic 1.M, Assessing Materiality and SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and concluded that the effect of the errors on prior period annual financial statements was immaterial;

however, the cumulative effect of correcting all of the prior period misstatements in the current year would be material to the current year consolidated financial statements.

The guidance states that prior-year misstatements which, if corrected in the current year would materially misstate the current year’s financial statements, must be corrected by adjusting prior year financial statements, even though such correction previously was and continues to be immaterial to the prior-year financial statements.

Correcting prior-year financial statements for such immaterial misstatements does not require previously filed reports to be amended.

The cumulative effect of adjustments required to correct the misstatements in the financial statements for years prior to 2019 are reflected in the 2018 financial statements.

The cumulative effect of those adjustments on all periods prior to 2018 decreased retained earnings as of December 31, 2017 by $1.8 million .

The Consolidated Balance Sheet and Statements of Income, Changes in Shareholders' Equity, and Cash Flows have been adjusted to reflect the correction for the year ended December 31, 2018 .

The Company’s consolidated financial statements have been revised from the amounts previously reported to correct these errors as shown in the tables below.

We also revised our financial statements for each of the interim periods in the years ended December 31, 2019 and 2018 .

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

Consolidated Balance Sheet as of December 31, 2018 :

As Previously Reported

Prepaid expenses and other assets

Total current assets

Deferred revenue

Total current liabilities

Total liabilities

Retained earnings

Total shareholders' equity

Total liabilities and shareholders' equity

Consolidated Statement of Income for the year ended December 31, 2018 :

As Previously Reported

Selling, general, and administrative

Income from operations

Net income before taxes

Net income and comprehensive income

Net income per share:

Consolidated Statement of Cash Flows for the year ended December 31, 2018 :

As Previously Reported

Cash flows from operating activities:

Increase in deferred revenue

(Increase) other current assets

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

Property and Equipment

The Company’s fixed assets consist of its medical equipment held for rental, furniture and equipment, real property and related improvements, and vehicles and other various small equipment.

In May 2019, the Company purchased a 77,000 square foot commercial building located in Lafayette, Louisiana to utilize as its corporate headquarters.

The Building Term Note used to finance this purchase is further discussed in Note 6.

The following table details the Company’s fixed assets:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Medical equipment $ 63,307 $ 56,202

Furniture and equipment 2,722 2,350

Land 2,138 2,138

Buildings 5,966 6,351

Leasehold improvements 290 301

Vehicles 922 1,110

Accumulated depreciation ( 20,289 ) ( 13,680 )

Property and equipment, net of accumulated depreciation

Depreciation in the amount of $5,729,000 and $3,195,000 is included in the cost of revenue for the years ended December 31, 2019 and 2018 , respectively.

Property and equipment, net of accumulated depreciation and amortization $ 55,056 $ 54,772

Depreciation in the amount of $ 8,765,000 and $ 5,729,000 is included in cost of revenue for the years ended December 31, 2020 and 2019, respectively.

Included in medical equipment above is equipment acquired under finance lease obligations whose cost and accumulated depreciation at December 31, 2020 total $ 6,900,000 and $ 885,000 , respectively.

At December 31, 2018 , cost and accumulated depreciation on equipment acquired under capital lease obligations was $7,943,000 and $1,100,000 , respectively.

Medical equipment purchases with a cost of $2,817,000 and $4,785,000 was included in accounts payable at December 31, 2019 and 2018 , 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 $ 0 and $ 2,817,000 were included in accounts payable at December 31, 2020 and 2019, respectively.

Current Liabilities

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Accrued trade payables $ 1,252 $ 1,023

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Senior Credit Facility

On February 20, 2018, the Company entered into a two year commercial business loan agreement with Hancock Whitney Bank.

Any amounts advanced will be secured by substantially all assets and carry an interest rate of one month ICE libor plus 3.00% , with a 4.00% interest rate floor.

Advances on the line of credit initially were subject to a borrowing base as determined in accordance with the loan agreement, which was based on the value of the Company's accounts receivable balance.

On March 19, 2019, the Company entered into an amendment to the loan agreement increasing the available line of credit from $5.0 million to $10.0 million and extending the expiration date to March 19, 2021.

In addition, the borrowing base restriction was removed from the loan agreement.

On February 20, 2018, the Company entered a Commercial Business Loan Agreement that provides for Term Loans and Lines of Credit with Hancock Whitney Bank.

Line of Credit

The Company maintains a line of credit in the amount of $ 10.0 million that expires May 1, 2023 under the Commercial Business Loan Agreement.

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 December 31, 2020 or 2019.

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

On September 19, 2019, in conjunction with the Term Note described below, the Company entered into a third amendment to the loan agreement, which, among other things, replaced the financial covenants in the loan agreement with the following:

Financial Covenant

Required Ratio

Ratio as of December 31, 2019

Total Debt to Adjusted EBITDA (Quarterly)

not more than 1.50:1.00

Fixed Charge Coverage Ratio (Quarterly)

not less than 1.35:1.00

Loan-to-Value Ratio (Quarterly)

not more than 0.85

The Company was in compliance with all covenants in effect at December 31, 2019 .

There were no borrowings against this line of credit at December 31, 2019 and December 31, 2018 .

Commercial Term Notes

On May 30, 2019, the Company entered into a second amendment to the loan agreement providing for a term note (the “Building Term Note”) in favor of Hancock Whitney Bank in the principal amount of $4,845,000 .

The proceeds of the Building Term Note were used to purchase a building to utilize as a corporate headquarters.

On May 30, 2019, the Company entered into a term note (“Building Term Note”) under the Commercial Business Loan Agreement in the principal amount of $ 4.8 million.

The proceeds of the Building Term Note were used to purchase the Company's corporate headquarters.

Beginning July 1, 2019, the Company began making monthly payments towards the outstanding balance.

The Building Term Note matures on May 30, 2026 and is secured by substantially all of the assets of the borrowers, including the real property acquired with the proceeds of the Building Term Note.

The Building Term Note matures on May 30, 2026 and is secured by substantially all of the assets of the borrower, including the real property acquired with the proceeds of the Building Term Note.

The Building Term Note bears interest at a variable rate equal to the one month ICE LIBOR index plus a margin of 2.45 % per annum.

The Company is required to maintain a loan to value ratio of 85 % with respect to the appraised value of the real property.

In connection with the Building Term Note, the Company entered into an interest rate swap transaction (the "Interest Rate Swap Transaction") with Hancock Whitney Bank effectively fixing the interest rate for the Building Term Note at 4.68% .

The Company incurred immaterial financing costs related to the real property acquired with the proceeds of the Building Term Note.

These deferred financing costs are amortized over the term of the loan using the effective interest method.

On September 19, 2019, the Company entered into a third amendment to the loan agreement providing for a term note (the “Term Note") in favor of Hancock Whitney Bank in the principal amount of $5,000,000 .

The proceeds of the Term Note will be used for general corporate purposes.

Beginning October 19, 2019, the Company started making monthly principal payments of $139,000 towards the outstanding balance.

The Term Note matures on September 19, 2022 and is secured by substantially all of the assets of the borrowers.

In connection with the Building Term Note, the Company entered into an interest rate swap transaction ("Interest Rate Swap Transaction") with Hancock Whitney Bank effectively fixing the interest rate for the Building Term Note at 4.68 %.

On September 19, 2019, the Company entered into an additional loan agreement providing for a term note (“Term Note") under the Commercial Business Loan Agreement in the principal amount of $ 5.0 million.

The proceeds of the Term Note were utilized for general corporate purposes.

Beginning October 19, 2019, the Company began making monthly principal payments of $ 139,000 towards the outstanding balance.

The Term Note matures on September 19, 2022 and is secured by substantially all of the assets of the borrower.

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

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

These deferred financing costs are amortized over the term of the loans using the effective interest method.

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

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Notes payable $ 7,632 $ 9,379

1 unchanged sentence

Net long-term notes payable $ 5,796 $ 7,629

The table below represents the future minimum principal and interest obligations for the term notes as of December 31, 2019 :

Principal Payments

Interest Payments (1)

Future minimum principal and interest obligations for the term notes required over the next five years as of December 31, 2020, as follows:

Principal Payments Interest Payments (1)

2021 $ 1,836 $ 319

2022 1,479 234

Thereafter 3,787 89

Total $ 7,632 $ 1,222

(1) Interest payments under the term notes have effective interest rates of 4.68 % and 4.60 % per annum.

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

Financial Covenant Required Ratio Ratio at December 31, 2020

Total Debt to Adjusted EBITDA (Quarterly) not more than 1.50:1.00 0.27

Fixed Charge Coverage Ratio (Quarterly) not less than 1.35:1.00 3.12

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

The Company was in compliance with all covenants under the Commercial Business Term Loan Agreement in effect at December 31, 2020.

VIEMED HEALTHCARE, INC.

3 unchanged sentences

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:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Lease liabilities $ 3,503 $ 10,132

2 unchanged sentences

Finance Lease Liabilities

The Company has various finance leases for equipment with an implied interest rate at fixed rates of up to 10.98% , secured by equipment, due between 2020 and 2022.

The Company has various finance leases for equipment with an implied interest rate at fixed rates up to 9.61 %, secured by equipment, due between 2021 and 2022.

The Company's weighted average interest rate was 3.97 % and 2.48 % for all finance lease liabilities outstanding as of December 31, 2020 and 2019, respectively.

At December 31, 2019 and 2018 , the weighted average lease term was approximately 1.07 years and 0.88 years .

Minimum payments and interest for finance lease obligations required over the next five years as of December 31, 2019 , are as follows:

Principal Payments

Interest Payments

Interest expense related to these finance lease obligations for the year ended December 31, 2019 amounted to $147,000 .

Interest expense related to these finance lease obligations for the year ended December 31, 2018 amounted to $181,000 .

At December 31, 2020 and 2019, the weighted average lease term was approximately 0.59 years and 1.07 years, respectively.

Future minimum principal and interest payments for finance lease obligations required over the next five years as of December 31, 2020, as follows:

Principal Payments Interest Payments

2021 $ 2,147 $ 35

Total $ 2,158 $ 35

Interest expense related to these finance lease obligations for the years ended December 31, 2020 and 2019 amounted to $ 155,000 and $ 147,000 , respectively.

Operating Lease Liabilities

The Company has recognized operating lease liabilities that relate primarily to the lease of land and buildings.

These leases contain renewal options that we have not included as part of the Company's assessment of the lease term as it is not reasonably certain that the Company will exercise these options.

These leases contain renewal options that we have not included as part of the Company's assessment of the lease term as it is not reasonably certain that we will exercise these options.

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 December 31, 2020, the weighted average lease term was approximately 3.32 years.

Minimum payments and interest for operating lease liabilities required over the next five years as of December 31, 2019 , are as follows:

Principal Payments

Interest Payments

Future minimum principal and interest payments for operating lease liabilities required over the next five years as of December 31, 2020, as follows:

Principal Payments Interest Payments

2021 $ 594 $ 53

Thereafter — —

Total $ 1,345 $ 126

Operating rental expenses for the years ended December 31, 2020 and 2019 amounted to $ 759,000 and $ 408,000 , respectively.

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

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

Operating rental expenses were $408,000 for the year ended December 31, 2019 and $404,000 for the year ended December 31, 2018 .

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

1 unchanged sentence

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 $242,000 for the year ended December 31, 2019 and $235,000 for the year ended December 31, 2018 .

Total rental payments for the use of these properties were $ 237,000 and $ 242,000 for the years ended December 31, 2020 and 2019, respectively.

The expense for these related party rents has been included within selling, 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.

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

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.

Due to their short-term nature, the carrying amounts reported in the consolidated balance sheets approximate the fair value of cash and cash equivalents.

The fair value of debt is classified as Level 2 for the periods presented and approximates its carrying value.

Pursuant to the Arrangement with PHM effective December 21, 2017, PHM common share purchase warrant holders each received one tenth (1/10) of one warrant to purchase one common share of the Company.

The warrants conversion feature is denominated in Canadian dollars which is different from the functional currency of the Company, which is U.S.

During 2019, the Company had warrants to purchase one common share of the Company denominated in Canadian dollars which is different from the functional currency of the Company, which is U.S.

The conversion feature is treated as a derivative financial liability and the fair value movement during the period is recognized in the Consolidated Statement of Income and Comprehensive Income.

The change in the value of warrants has been recorded as an unrealized (gain) loss on derivative financial liability in the Consolidated Statements of Income and Comprehensive Income.

All unexercised warrants expired during the period ended December 31, 2019 .

All unexercised warrants expired during the year ended December 31, 2019.

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

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

There were no warrants issued or outstanding during the year ended December 31, 2020.

There were 133,000 warrants exercised at a weighted average price of $ 2.60 (CAD$) per common share and 44,000 warrants that expired during the year ended December 31, 2019.

No warrants were issued during the year ended December 31, 2018 .

A summary of the change in fair value of warrant conversion liability is as follows for the period ended December 31, 2019 and December 31, 2018 :

A summary of the change in fair value of warrant conversion liability is as follows for the period ended December 31, 2019:

Warrant Conversion Liability

1 unchanged sentence

Warrants issued —

Loss on warrant conversion liability

Balance December 31, 2018

Warrants issued

Unrealized gain on warrant conversion liability ( 363 )

Balance December 31, 2019 $ —

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2020 and 2019

Derivative Instruments and Hedging Activities

We currently have one interest rate swap contract in place, which became effective on May 31, 2019 and has been designated as a cash flow hedge.

The Company has one interest rate swap contract in place, which became effective on May 31, 2019 and has been designated as a cash flow hedge.

This swap contract matures on May 30, 2026.

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

As of December 31, 2019 , the notional amount of the interest rate swap was $4.8 million and will be amortized over the term of the swap.

The fair value was $0.2 million (determined based on Level 2 inputs) and is included in Accrued liabilities, as a component of Long-term liabilities as of December 31, 2019 .

As of December 31, 2020, the notional amount of the interest rate swap was $ 4,600,000 and will be amortized over the term of the swap.

The fair value was $ 433,000 (determined based on Level 2 inputs) and is included in accrued liabilities, as a component of long-term liabilities as of December 31, 2020.

During 2020, losses recognized as a result of ineffectiveness were immaterial.

4 unchanged sentences

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

As of December 31, 2019 and 2018 , 37,952,660 and 37,500,815 shares were issued and outstanding, respectively.

On November 26, 2018, the Company announced that the TSX had accepted the Company’s notice of intention to make a Normal Course Issuer Bid (the “NCIB”) for its common shares in compliance with the requirements of the TSX.

The authorized stock consists of an unlimited number of common shares with no stated par value, of which 39,185,182 and 37,952,660 shares were issued and outstanding as of December 31, 2020 and 2019, respectively.

On November 26, 2018, the Company announced that the TSX had accepted the Company’s notice of intention to make a NCIB for its common shares in compliance with the requirements of the TSX.

As of November 29, 2018, the Company was able to commence making purchases of up to a maximum of 1,875,575 common shares, which represented approximately 5 % of the Company’s issued and outstanding common shares at the time.

3 unchanged sentences

The Company’s retained earnings were reduced by the amount paid for the shares repurchased for cancellation.

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

All outstanding warrants expired unexercised on August 27, 2019.

The following table summarizes warrant activity during the years ended December 31, 2019 and 2018 :

Number of warrants (000's)

Weighted average exercise price (CAD$)

Balance December 31, 2017

The following table summarizes warrant activity during the year ended December 31, 2019:

Number of warrants (000's) Weighted average exercise price (CAD$)

Balance December 31, 2018 177 $ 2.60

Exercised ( 133 ) 2.60

Expired ( 44 ) 2.60

Balance December 31, 2019 — $ —

No warrants were issued, 133,000 warrants were exercised at a weighted price of $2.60 (CAD$) per share, and 44,000 warrants expired during the year ended December 31, 2019 .

Stock-Based Compensation

At the Company's annual and special meeting of shareholders held on July 17, 2018, shareholders of the Company passed a resolution approving the RSU and Option Plans (collectively, the “Plan”).

The purpose of the Plan is to provide incentives to employees, directors, officers, management companies, and consultants who provide services to the Company or any of its subsidiaries.

The 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 Arrangement).

As of December 31, 2019 , the Company had outstanding issuances of options of 2,683,000 and restricted stock units of 1,139,000 under the Plan.

The following table summarizes stock-based compensation for the years ended December 31, 2019 and 2018 :

For the Years Ended

December 31, 2019

December 31, 2018

Stock-based compensation - options

Stock-based compensation - restricted stock

At December 31, 2019 , there was approximately $1,947,000 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 2.05 years .

As of December 31, 2019 , there was approximately $657,000 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 0.55 years .

The purpose of the Company's RSU and Option Plans (collectively, the "Former Plan") is to provide incentive to employees, directors, officers, management companies, and consultants who provide services to the Company or any of its subsidiaries.

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 Former Plan).

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

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.

No future awards will be made under the Former Plan, and the common shares that were not settled or awarded under the Former Plan as of the Effective Date are available for awards under the Omnibus Plan.

The maximum number of common shares that are available for awards under the Omnibus Plan and under any other security based compensation arrangements adopted by the Company, including the Former Plan, may not exceed 7,758,000 shares (equal to 20 % of the issued and outstanding common shares of the Company on the Effective Date).

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.

As of December 31, 2020, the Company had outstanding issuances of options of 3,057,000 and RSUs of 684,000 under the Omnibus Plan.

The following table summarizes stock-based compensation for the years ended December 31, 2020 and 2019:

Year Ended December 31,

Stock-based compensation - options $ 3,810 $ 2,642

Stock-based compensation - restricted stock units 1,072 1,244

Total $ 4,882 $ 3,886

At December 31, 2020, there was approximately $ 2,872,000 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 2.03 years.

As of December 31, 2020, there was approximately $ 580,000 of total unrecognized pre-tax compensation expense related to outstanding time-based RSUs that is expected to be recognized over a weighted average period of 0.22 years.

The following table summarizes stock option activity for the years ended December 31, 2020 and 2019:

Number of options

Weighted average exercise price (CAD$)

Weighted average remaining contractual life

Aggregate Intrinsic Value (1)

Balance December 31, 2017

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

Weighted average remaining contractual life Aggregate intrinsic value (2)

Balance December 31, 2018 1,545 $ 2.67 5.8 years $ 1,605

Issued 1,269 4.34

Exercised ( 42 ) 3.38

Expired / Forfeited ( 89 ) 5.65

Balance December 31, 2018

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

Issued 1,089 6.18

Exercised ( 643 ) 3.15

Expired / Forfeited ( 72 ) 4.58

Balance December 31, 2019

Balance December 31, 2020 3,057 $ 4.37 7.9 years $ 10,362

(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 $ 10,362,000 and options exercisable were $ 4,534,000 at December 31, 2020.

There were 42,168 options exercised during the fiscal year ended December 31, 2019 .

There were no options exercised during the fiscal year ended December 31, 2018 .

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 .

At December 31, 2018 , the Company had 851,000 exercisable stock options outstanding with a weighted average exercise price of CAD $4.30 and a weighted average remaining contractual life of 3.2 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 proper vesting period, using the Black-Scholes option pricing model calculated using the following assumptions for issuances during the years ended December 31, 2019 and 2018 :

Exercise price ($CAD)

$5.49 - $9.62 ($CAD)

Risk-free interest rate

Expected volatility

Expected life of options

Expected dividend yield

Fair value on date of grant ($USD)

$3.40 - $5.52 ($USD)

During the fiscal years ended December 31, 2020 and 2019, 643,297 and 42,168 shares of common stock were issued pursuant to the exercise of stock options, respectively.

At December 31, 2020, the Company had 971,000 exercisable stock options outstanding with a weighted average exercise price of $ 3.09 and a weighted average remaining contractual life of 6.9 years.

At December 31, 2019, the Company had 1,037,000 exercisable stock options outstanding with a weighted average exercise price of $ 3.02 and a weighted average remaining contractual life of 3.5 years.

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

The fair value of the stock options has been charged to the Consolidated Statements of 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 years ended December 31, 2020 and 2019:

Exercise price $ 5.70 - $ 10.44

$ 4.13 - $ 7.30 (1)

Risk-free interest rate 0.39 % - 1.63 %

1.59 % - 1.96 %

Expected volatility 66 % - 85 %

Expected term 5.63 - 10 years

Expected dividend yield Nil Nil

Fair value on date of grant $ 4.10 - $ 7.23

$ 3.40 - $ 5.52

(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.

Restricted Stock Units

The Company has a restricted stock unit plan ("RSU Plan"), which it uses for grants to directors, officers, and employees.

The Company accounts for restricted stock units using fair value.

The fair value of the restricted stock units has been charged to the consolidated statements of income and comprehensive income and credited to additional paid-in capital over the proper vesting period, based on the stock price on the date of grant.

Restricted stock units vest generally over a one or three -year period.

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

The Company also grants RSUs to directors, officers, and employees.

The Company accounts for RSUs using fair value.

The fair value of the RSUs has been charged to the Consolidated Statements of Income and credited to additional paid-in capital over the vesting period, based on the stock price on the date of grant.

RSUs vest generally over a one or three -year period.

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

The following table summarizes restricted stock unit activity for the years ended December 31, 2020 and 2019:

Number of Restricted Stock Units (000's)

Weighted average grant price (CAD$)

Weighted average remaining contractual life

Aggregate Intrinsic Value (1)

Balance December 31, 2017

Number of RSUs (000's) Weighted average grant price (1)

Weighted average remaining contractual life Aggregate intrinsic value (2)

Balance December 31, 2018 1,715 $ 1.93 1.01 years $ 6,575

Issued 120 5.19

Vested ( 641 ) 2.13

Expired / Forfeited ( 55 ) 1.81

Balance December 31, 2018

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

Issued 144 7.29

Vested ( 589 ) 2.33

Expired / Forfeited ( 10 ) 5.70

Balance December 31, 2019

(1) 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.

The Company issued restricted stock units to employees totaling 120,444 and 1,774,347 during the fiscal years 2019 and 2018 , respectively, with a vesting term of one to three years and fair values ranging from $1.71 ($USD) to $6.14 ($USD) per share.

Balance December 31, 2020 684 $ 3.04 0.22 years $ 5,308

(1) All future equity grants will be awarded in USD, therefore, RSUs 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 RSUs outstanding was based on our closing stock price on the last trading day of the period.

During the year ended December 31, 2020, the Company issued 144,177 RSUs, with a vesting term of one to three years and a fair value between $ 5.70 and $ 10.44 per share.

During the year ended December 31, 2019, the Company issued 120,444 RSUs, with a vesting term of one to three years and a fair value between $ 4.13 and $ 6.27 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.

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2020 and 2019

The following table summarizes phantom share unit activity for the years ended December 31, 2020 and 2019:

1 unchanged sentence

Balance December 31, 2018 1,692

Vested ( 550 )

Expired / Forfeited ( 143 )

Balance December 31, 2019 1,350

Vested ( 601 )

Expired / Forfeited ( 110 )

Balance December 31, 2020 985

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 Consolidated Statements of Income and recorded as a liability included in accrued liabilities and long-term accrued liabilities, using a valuation method with the following inputs:

December 31, 2020 December 31, 2019

Share price (Nasdaq closing price at period end) $ 7.76 $ 6.20

Remaining life of phantom share units 0.36 - 2.36 Years

0.36 - 2.36 Years

Calculated fair value of phantom share units $ 5,344 $ 5,290

The total liability associated with phantom share units at December 31, 2020 is $ 5,344,000 , with $ 4,485,000 of this amount included in current accrued liabilities and the remaining portion of $ 859,000 included in long-term accrued liabilities.

The impact associated with the fair value remeasurement of phantom share units is recorded in selling, general and administrative expenses within the Consolidated Statements of Income.

The following table summarizes expenses associated with the phantom share units for the years ended December 31, 2020 and 2019:

Year Ended December 31,

Selling, general and administrative $ 4,255 $ 6,082

The Company paid cash settlements of $ 4,201,000 and $ 3,386,000 during the years ended December 31, 2020 and 2019, respectively, pertaining to vestings of cash-settled phantom share units.

Commitments and Contingencies

The Company accrues 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.

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

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:

December 31, 2019

December 31, 2018

$ 8.13 (CAD$)

$ 5.23 (CAD$)

Remaining life of phantom share units

0.36 - 2.36 Years

0.5 - 3 Years

Calculated fair value of phantom share units

The total liability associated with phantom share units at December 31, 2019 is $5,290,000 , with $2,161,000 of this balance included in long-term accrued liabilities and the remaining portion of $3,129,000 in current accrued liabilities.

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

Commitments and Contingencies

In March 2020, the Company (through its subsidiary Sleep Management) 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 December 31, 2020, outstanding supplier deposits in the amount of $ 0.9 million related to such Deposit are included within other long-term assets.

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

On July 29, 2020, the Company (through its subsidiary Sleep Management) filed a lawsuit against Vyaire in the United States District Court for the Western District of Louisiana (the “Federal Court”).

This lawsuit was dismissed on December 8, 2020 in connection with the commencement of the State Court lawsuit described below.

On November 5, 2020, the Company (through its subsidiary Sleep Management) filed a lawsuit against Vyaire in the 15th Judicial District Court for the Parish of Lafayette, Louisiana (the “State Court”) seeking damages for breach of contract and seeking a declaratory judgment that the Company is not required to pay any further funds to Vyaire.

On December 28, 2020, Vyaire filed its Answer, Affirmative Defenses, and Reconventional Demand (“Reconventional Demand”) with the State Court alleging breach of contract and seeking damages of $ 4.7 million, purportedly for the improper cancellation of the Purchase Order.

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 related to the Reconventional Demand 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.

Retirement Plan

The Company maintains a 401(k) retirement plan for employees to which eligible employees can contribute a percentage of their pre-tax compensation.

Matching employer contributions to the 401(k) plan totaled $615,000 and $440,000 for the years ended December 31, 2019 and 2018 , respectively.

Matching employer contributions to the 401(k) plan totaled $ 0.8 million and $ 0.6 million for the years ended December 31, 2020 and 2019.

CARES Act Funds Received

The CARES Act created a Provider Relief Fund to support healthcare-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 Consolidated Statements of Income.

The HHS has stated that Provider Relief Fund payments are not loans and will not need to be repaid.

However, as a condition to the receipt of funds, the Company and any other providers must agree to a detailed set of terms and conditions.

CMS has indicated that the terms and conditions may be subject to ongoing changes and reporting.

To the extent that reporting requirements and terms and conditions are modified, it may affect the Company’s ability to comply and may require the return of funds.

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.

Income taxes are computed in accordance with the provisions of ASC Topic 740, which requires, among other things, a liability approach to calculating deferred income taxes.

6 unchanged sentences

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

The Company is subject to U.S.

federal income tax as well as income tax in various states.

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

The Company's annual estimated effective tax rate for 2019 is 3.08% , as compared to the effective tax rate of 1.67% for the year ended December 31, 2018 .

The primary component of the annual effective tax rate relates to the Company's current state income taxes, as the Company continues to generate taxable losses for U.S.

federal income tax purposes.

VIEMED HEALTHCARE, INC.

2 unchanged sentences

December 31, 2020 and 2019

The following table reconciles income taxes calculated at combined U.S.

federal and state tax rates with income tax expense in the financial statements:

December 31, 2019

December 31, 2018 (1)

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

As of December 31, 2020, the CARES Act has not had a material impact on the Company's consolidated financial statements.

However, the Company is still analyzing these provisions of the CARES Act.

The Company is subject to U.S.

federal income tax as well as income tax in various states.

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

The Company's effective tax rate for 2020 is ( 19.60 )%, as compared to the effective tax rate of 3.08 % for the year ended December 31, 2019.

Included in the annual effective tax rate of ( 19.60 )% is a discrete benefit described below accounting for ( 29.19 )%.

The following table reconciles income taxes calculated at the combined U.S.

federal and statutory tax rate with income tax expense in the financial statements:

December 31, 2020 December 31, 2019

Net income before income taxes $ 26,363 $ 8,796

Statutory income tax rate 21.0 % 21.0 %

Computed provision for income taxes

Computed provision for (recovery of) income taxes 5,536 1,847

State income tax expense 839 632

3 unchanged sentences

Changes in valuation allowance for deferred tax assets ( 11,032 ) ( 1,550 )

Provision for income taxes

(1) Net income before income taxes has been updated to reflect the correction described in Note 3 to the Notes to the Consolidated Financial Statements.

Provision for (recovery of) income taxes $ ( 5,167 ) $ 271

The significant components of the provision for income taxes for the years ended December 31, 2020 and 2019 are as follows:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Current taxes:

Federal $ 2,547 $ —

State 1,019 271

Total current taxes 3,566 271

Deferred taxes:

Provision for income taxes

Federal $ ( 6,699 ) $ —

State ( 2,034 ) —

Total deferred taxes ( 8,733 ) —

Provision for (recovery of) income taxes $ ( 5,167 ) $ 271

Deferred Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

The Company computes deferred tax assets and liabilities in respect of taxes that are based on taxable profit.

Taxable profit is understood to be a net, rather than gross, taxable amount that gives effect to both revenues and expenses.

Taxable profit will often differ from accounting profit and management may need to exercise judgment to determine whether some taxes are income taxes (subject to deferred tax accounting) or operating expenses.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply when the differences are expected to be recovered or settled.

8 unchanged sentences

December 31, 2020 and 2019

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

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations.

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 released the valuation allowance placed on its deferred tax assets of $ 11.1 million.

This release of the valuation allowance was treated partially as a discrete item of $ 7.8 million and partially as part of the effective tax rate for the current year movement of the deferred prior to release in the amount of $ 3.3 million in the Company's June 30, 2020 effective tax rate computation.

The significant components of the Company’s deferred tax assets and liabilities are as follows:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

Deferred tax assets:

Net operating losses - US $ — $ 2,460

Non-capital losses - CAD

State fixed asset and net operating losses 783 —

11,894 13,149

Allowance for doubtful accounts 2,334 2,016

5 unchanged sentences

Charitable contributions — 12

481(a) adjustment

Total deferred tax assets $ 20,861 $ 22,481

2 unchanged sentences

Property and equipment ( 11,465 ) ( 10,949 )

Total deferred tax liabilities

Total deferred liabilities $ ( 11,813 ) $ ( 11,409 )

Valuation allowance:

4 unchanged sentences

The goodwill is amortized over 15 years for tax purposes.

The Company has US loss carryforwards that expire as noted in the table below.

The remaining deductible temporary differences may be carried forward indefinitely.

Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the group can utilize the benefits therefrom.

The Company has US loss carryforwards with the following expiry dates.

A portion of these net operating losses are subject to limitation on use:

December 31, 2019

Expiring in 2034

Expiring in 2037

No expiry date

VIEMED HEALTHCARE, INC.

4 unchanged sentences

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 and RSUs 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:

For the Years Ended

December 31, 2019

December 31, 2018 (1)

Year Ended December 31,

Numerator - basic and diluted:

8 unchanged sentences

Diluted weighted average number of shares 40,525,737 39,747,509

(1) Net income attributable to shareholders, basic earnings per share, and diluted earnings per share have been updated to reflect the correction described in Note 3 to the Notes to Consolidated Financial Statements.

Subsequent Events

Conversion of Accounts Payable into Short-term Capital Lease

Subsequent to December 31, 2019 , the Company entered into a capital lease agreement with a third party and, as a result, $1,816,000 of accounts payable was converted to a short-term lease payable.

Repurchase and Cancellation of Vested Shares

In connection with the RSUs vested in January 2021, the Company repurchased 181,320 shares at fair value and used cash on hand to satisfy statutory tax withholding obligations.

These shares were subsequently cancelled by the Company.

VIEMED HEALTHCARE, INC.

6 unchanged sentences

The results of historical periods are not necessarily indicative of the results of operations for any future period.

The following tables set forth our unaudited quarterly statements of income data for each of the eight quarters in the period ended December 31, 2019 (in thousands):

Year Ended December 31, 2019

Restated Sept.

Restated Jun.

Restated Mar.

Income from operations

Net income per share:

(1) These quarters have been updated to reflect the reclassification as described in Note 2 and the correction of errors as described in Note 3.

Year Ended December 31, 2018

Income from operations

Net income per share:

(2) These quarters have been updated to reflect the correction of immaterial errors as described in Note 3.

As described in Note 3 certain corrections have been made to the Company’s previously issued Consolidated Financial Statements.

The following tables present the effects of such adjustments on the Company’s unaudited summarized quarterly financial information.

The effects of these adjustments were material to the Company's previously issued June 30, 2019 and September 30, 2019 quarterly financial statements and, accordingly, such periods have been restated.

The tables below reflect the effect of the required adjustments on each of the quarterly periods for 2018 and the first three quarters of 2019.

Also included in the 2019 tables below are the effects of the changes in the presentation of bad debt expense as the result of the adoption of ASC 842, as fully explained in Note 2.

We have not included cash flow information in these tables as there is no change to total operating, investing, or financing cash flows as a result of the correction of these errors in any of the periods in the tables presented below.

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

For the three months ended March 31, 2019

For the three months ended March 31, 2018

Previously Reported

Bad Debt Presentation

Previously Reported

Cost of revenue

Operating Expenses

Selling, general and administrative

Research and development

Stock-based compensation

Loss on disposal of property and equipment

Other expense

Income from operations

Non-operating expenses

Unrealized loss on warrant conversion liability

Interest expense, net of interest income

Net income before taxes

Provision for income taxes

Net income per share:

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

For the three months ended June 30, 2019

For the three months ended June 30, 2018

Previously Reported

Bad Debt Presentation

Previously Reported

Cost of revenue

Operating Expenses

Selling, general and administrative

Research and development

Stock-based compensation

Loss on disposal of property and equipment

Other expense

Income from operations

Non-operating expenses

Unrealized loss on warrant conversion liability

Interest expense, net of interest income

Net income before taxes

Provision for income taxes

Net income per share:

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

For the three months ended September 30, 2019

For the three months ended September 30, 2018

Previously Reported

Bad Debt Presentation

Previously Reported

Cost of revenue

Operating Expenses

Selling, general and administrative

Research and development

Stock-based compensation

Loss on disposal of property and equipment

Other expense

Income from operations

Non-operating expenses

Unrealized (gain) loss on warrant conversion liability

Interest expense, net of interest income

Net income before taxes

Provision for income taxes

The following tables set forth our unaudited quarterly statements of income data for each of the eight quarters in the period ended December 31, 2020:

2020 2020 2020 2020

Consolidated Statements of Operations Data:

Revenue $ 31,202 $ 33,447 $ 42,854 $ 23,806

Gross profit 19,178 19,453 25,927 15,553

Operating income 5,267 4,040 12,859 4,615

Net income 5,071 2,804 19,412 4,243

Net income per share:

For the three months ended

December 31, 2018

Previously Reported

Cost of revenue

Operating Expenses

Selling, general and administrative

Research and development

Stock-based compensation

Loss (gain) on disposal of property and equipment

Other expense

Income from operations

Non-operating expenses

Unrealized (gain) loss on warrant conversion liability

Interest expense, net of interest income

Net income before taxes

Provision for income taxes

Basic $ 0.13 $ 0.07 $ 0.50 $ 0.11

Diluted $ 0.12 $ 0.07 $ 0.48 $ 0.11

Weighted average shares outstanding

Basic 39,161,215 39,107,640 38,665,765 38,030,854

Diluted 41,043,419 41,155,668 40,814,238 39,677,983

the amounts for each quarter are computed independently, and, due to the computation formula, the sum of the four quarters may not equal the year.

2019 2019 2019 2019

Consolidated Statements of Operations Data:

Revenue $ 21,448 $ 20,368 $ 20,325 $ 18,115

Gross profit $ 14,243 $ 14,050 $ 14,639 $ 13,074

Operating income 2,691 2,186 1,664 2,316

Net income 2,388 2,853 1,326 1,958

Net income per share:

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

March 31, 2018

June 30, 2018

Previously Reported

Current assets

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Total current assets

Long-term assets

Property and equipment

Total long-term assets

Current liabilities

Trade payables

Deferred revenue

Income taxes payable

Accrued liabilities

Current portion of lease liabilities

Current portion of long-term debt

Warrant conversion liability

Total current liabilities

Long-term liabilities

Accrued liabilities

Long-term lease liabilities

Long-term debt

Total long-term liabilities

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY

Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

TOTAL SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

September 30, 2018

December 31, 2018

Previously Reported

Current assets

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Total current assets

Long-term assets

Property and equipment

Total long-term assets

Current liabilities

Trade payables

Deferred revenue

Income taxes payable

Accrued liabilities

Current portion of lease liabilities

Current portion of long-term debt

Warrant conversion liability

Total current liabilities

Long-term liabilities

Accrued liabilities

Long-term lease liabilities

Long-term debt

Total long-term liabilities

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY

Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

TOTAL SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

March 31, 2019

June 30, 2019

Previously Reported

Current assets

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Total current assets

Long-term assets

Property and equipment

Total long-term assets

Current liabilities

Trade payables

Deferred revenue

Income taxes payable

Accrued liabilities

Current portion of lease liabilities

Current portion of long-term debt

Warrant conversion liability

Total current liabilities

Long-term liabilities

Accrued liabilities

Long-term lease liabilities

Long-term debt

Total long-term liabilities

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY

Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

TOTAL SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

VIEMED HEALTHCARE, INC.

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

Dollars, except per share amounts)

December 31, 2019 and 2018

September 30, 2019

Previously Reported

Current assets

Cash and cash equivalents

Accounts receivable

Prepaid expenses and other assets

Total current assets

Long-term assets

Property and equipment

Total long-term assets

Current liabilities

Trade payables

Deferred revenue

Income taxes payable

Accrued liabilities

Current portion of lease liabilities

Current portion of long-term debt

Warrant conversion liability

Total current liabilities

Long-term liabilities

Accrued liabilities

Long-term lease liabilities

Long-term debt

Total long-term liabilities

TOTAL LIABILITIES

SHAREHOLDERS’ EQUITY

Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

TOTAL SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

Basic $ 0.06 $ 0.08 $ 0.04 $ 0.05

Diluted $ 0.06 $ 0.07 $ 0.03 $ 0.05

Weighted average shares outstanding

Basic 37,952,660 37,812,921 37,686,763 37,827,058

Diluted 40,148,149 40,051,422 39,975,307 39,449,123

the amounts for each quarter are computed independently, and, due to the computation formula, the sum of the four quarters may not equal the year.

VIEMED HEALTHCARE, INC.

4 unchanged sentences

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-K

Item 8. Financial Statements and Supplementary Data