What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-07 compared with 2021-03-03 · 116 added, 252 removed, 248 unchanged (60% of the section changed)

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We 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 SEC.

As of June 30, 2021, we determined that we no longer qualify as a “smaller reporting company,” but we are not required to comply with the larger company disclosure obligations (subject to certain exemptions and relief from various reporting requirements that are applicable to emerging growth companies) until our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022.

As a result, this Annual Report on Form 10-K is only required to comply with the smaller company disclosure obligations.

We are an "emerging growth company," as defined in the JOBS Act, and as such, we have elected to comply with certain reduced U.S.

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Our respiratory care programs are designed specifically for payors to have the ability to treat patients in the home for less total cost and with a superior quality of care.

Our services include respiratory disease management (through the rental of various DME devices), in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies.

We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 80.8% of our traditional revenue, excluding COVID-19 response sales and services, and 86.0% of our revenue for the year ended December 31, 2020 and 2019, respectively.

Our services include respiratory disease management (through the rental of various DME devices), neuromuscular care, in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies.

We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 77.3% and 80.8% of our traditional revenue, excluding COVID-19 response sales and services for the years ended December 31, 2021 and 2020, respectively.

We combine the benefits of home ventilation support with licensed RTs to drive improved patient outcomes and reduce costly hospital readmissions.

We expect to use an organic growth model whereby expansion is accomplished through existing service areas as well as in new regions through a cost efficient launch that reduces location expenses.

We expect to use a growth model whereby expansion is accomplished through existing service areas as well as in new regions through a cost efficient launch that reduces location expenses.

Our licensed RTs currently serve patients in 47 states.

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We expect to continue to be a solution to the rising health costs in the United States by offering more cost effective, home based solutions while increasing the quality of life for patients fighting serious respiratory diseases.

As a result of this trend, we continue to experience significant organic growth.

For the year ended December 31, 2021, we generated revenues of $117.1 million and had net income of $9.1 million, compared to revenues of $131.3 million and net income of $31.5 million for the year ended December 31, 2020.

Our primary sources of capital to date have been from operating income and the leverage of our manufacturer credit lines and to a lesser extent access to bank term loans.

Excluding COVID-19 response sales and services, net revenue increased $11.6 million (or 11.9%) from the comparable period in 2020.

Our primary sources of capital to date have been from operating cash flows.

In addition, our line of credit availability of $10.0 million remains undrawn.

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On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic.

Various policies and initiatives have been implemented to reduce the transmission of COVID-19, including travel bans and restrictions, the postponement of non-essential medical surgeries, the limiting of access to medical facilities in certain areas, the promotion of social distancing and the adoption of remote working policies.

Various policies and initiatives have been implemented to reduce the transmission of COVID-19, including travel bans and restrictions, the postponement of non-essential medical surgeries, limiting access to medical facilities, and adoption of social distancing and remote working policies.

Local, state and national governments continue to emphasize the importance of essential medical personnel and we remain open to meet the needs of our communities.

Employee and patient safety is our first priority, and as a result, we put preparedness plans in place for our employees, especially our clinical personnel, and modified our clinical protocols to limit unnecessary patient encounters in order to ensure the safety of our employees as well as the safety of our patients.

These measures do not appear to be negatively impacting our patient attrition rate at this time, but we cannot assure you that future governmental policies and initiatives will not significantly disrupt our operations or adversely affect our ability to provide services to our patients in the future.

In addition, our current ability to assess potential patients in hospitals varies by hospital and city, but overall our business of setting up new patients in the home is continuing although at lower levels than in recent periods.

Many state governments have begun a phased reopening of their economies while adhering to new guidelines and enhanced safety measures, including social distancing and face mask protocols.

However, certain states have paused or reversed plans to reopen their economies as new cases of COVID-19 have been on the rise in recent weeks and months and such measures could negatively affect our operations or our ability to provide services to our patients.

While governmental and other restrictions have not had a material impact on our consolidated operating results for the year ended December 31, 2020, it is possible that more significant disruptions could occur if the COVID-19 pandemic continues for a prolonged period of time and we cannot assure you that demand for our products and services will continue or that we will be able to maintain operations, including sufficient personnel, supply chains and distribution channels to continue to satisfy demand for our products and services.

The COVID-19 pandemic has resulted in a significant economic downturn in the United States and globally and has also led to significant disruptions and volatility in capital and financial markets.

In addition, our ability to assess potential patients in hospitals varies by hospital and city, but overall our business of setting up new patients in the home is continuing although at lower levels than in recent periods.

While governmental and other restrictions have not had a material impact on our consolidated operating results for the year ended December 31, 2021, it is possible that more significant disruptions could occur if the COVID-19 pandemic continues for a prolonged period of time and we cannot assure you that demand for our products and services will continue or that we will be able to maintain operations necessary to satisfy such demand, including sufficient personnel, supply chains and distributions channels.

The COVID-19 pandemic has led to significant disruptions and volatility in capital and financial markets.

Broad economic factors resulting from the current COVID-19 pandemic, including high unemployment and underemployment levels and reduced consumer spending and confidence, could also affect our service mix, revenue mix, payor mix and patient base, as well as our ability to collect outstanding receivables.

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Staffing, equipment and supplies shortages may also impact our ability to assess potential patients in hospitals and set up and treat patients in the home.

We believe we presently have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times, such as limiting discretionary spending across the organization.

The CARES Act, which was signed into law on March 27, 2020, provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments.

The legislation provides for $100 billion in relief funds to hospitals and other healthcare providers on the front lines of the coronavirus response to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19.

As a result, we received a payment from the Provider Relief Fund of $3.5 million in April 2020.

The legislation provides for relief funds to hospitals and other healthcare providers on the front lines of the coronavirus response to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19.

As a result, we received a general distribution payment from the Provider Relief Fund of $3.5 million in April 2020 and a targeted distribution payment of $1.5 million in November 2021.

Payments from the Provider Relief Fund are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to the COVID-19 pandemic.

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The CARES Act also provides for a temporary suspension of the 2% payment sequestration adjustment currently applied to all Medicare fee-for-service claims.

The suspension is effective for claims with dates of service from May 1, 2020 through December 31, 2020.

The Consolidated Appropriations Act, 2021, signed into law on December 27, 2020, extends the suspension through March 31, 2021.

However, CMS and Medicare Administrative Contractors may issue guidance that affects the implementation of this provision.

In December 2021, President Biden signed into law legislation that extended the suspension on the 2 percent payment sequestration through March 31, 2022.

The payment sequestration adjustment was fixed at 1 percent from April 1, 2022 to June 30, 2022 and it returns to 2 percent on July 1, 2022.

As part of the CARES Act legislation, certain Payroll Protection Program ("PPP") loans were authorized for small businesses to pay their employees, subject to potential debt forgiveness.

We evaluated the PPP extensively and after evaluation, decided not to submit a PPP loan application.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

We are continuing to monitor any effects or requirements that may result from the CARES Act as many of the provisions in the CARES Act are temporary and may require us to modify our operations and compliance procedures.

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To the extent these provisions will expire as stated in the CARES Act, we will be required to unwind any changes.

While the overall impact of COVID-19 on our consolidated results of operations for the year ended December 31, 2020 has resulted in an overall increase in revenues related to additional product sales and services during the period, the overall impact that COVID-19 will continue to have on our consolidated results of operations in future periods remains 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.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2021 and 2020

While the impact of COVID-19 on our consolidated results of operations for the year ended December 31, 2021 has resulted in an increase in revenues related to additional product sales and services during the period, the overall impact that COVID-19 will continue to have on our consolidated results of operations in future periods remains 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.

We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, liquidity and capital resources.

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In 2019, CMS announced the inclusion of non-invasive ventilator products on the list of products subject to the competitive bidding program in Round 2021 which covers the period of January 1, 2021 through December 31, 2023.

Rental revenue from ventilator products represents a significant portion of our revenue (approximately 81% of total traditional revenue, excluding COVID-19 response sales and services, in 2020).

On March 9, 2020, CMS announced that due to the COVID-19 pandemic, the United States President’s exercise of the Defense Production Act, public concern regarding access to ventilators, and the non-invasive ventilators product category being new to the competitive bidding program, non-invasive ventilators were removed as a product category from Round 2021.

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If changes are made to the competitive program in the future, it could affect our reimbursement and review.

The below table highlights summary financial and operational metrics for the last eight quarters.

The below table highlights summary financial and operational metrics for the trailing eight quarters.

(Tabular amounts expressed in thousands of U.S.

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Net Income 4,087 1,789 1,566 1,684 5,071 2,804 19,412 4,243

Cash (As of) 30,981 32,396 29,707 8,409 13,355 12,630 7,691 7,410

Cash and Cash Equivalents (As of) 28,408 26,867 31,151 31,097 30,981 32,396 29,707 8,409

Total Assets (As of) 117,962 115,486 111,014 113,001 112,560 113,969 112,178 86,801

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(2) Vent Patients represents the number of active ventilator patients on recurring billing service at the end of each calendar quarter.

Critical Accounting Principles and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The preparation of these financial statements requires us to make estimates and judgments that affected the reported amounts of assets and liabilities, and related disclosure of contingent assets and liabilities, revenues and expenses at the date of the financial statements.

Generally, we base our estimates on historical experience and on various other assumptions in accordance with U.S.

GAAP that we believe to be reasonable under the circumstances.

Actual results may differ from these estimates and such differences could be material to our financial position and results of operations.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included in Part II, Item 8 of this report, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult, subjective and complex judgments.

Reporting Currency

All values are in U.S.

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

Canadian dollars are indicated as CAD$.

Functional Currency

Management has exercised judgment in selecting the functional currency of each of the entities that it combines based on the primary economic environment in which the entity operates and in reference to the various indicators including the currency that primarily influences or determines the selling prices of goods and services and the cost of those services, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices.

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

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

Revenue Recognition

Revenue from a customer consists of any combination of the sale and rental of DME and/or patient medical services.

Revenues are billed to and collections received from Medicare, Medicaid, third-party insurers, co-insurance and patient-pay.

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.

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 their relative standalone selling 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 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 FASB ASU 2016-02 “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, "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 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.

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.

The customer generally has the right to cancel the lease at any time during the rental period.

The Company considers these rentals to be operating leases.

Under FASB Accounting Standards Codification Topic 842, “ Leases” , we recognize 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.

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

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required to record net revenue and accounts receivable at their net realizable values.

Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available.

Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded.

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

Revenue Accounting under Topic 606

The Company sells DME, replacement parts and supplies to customers and recognize revenue based on contractual payment rates as determined by the payors at the point in time when control of the good or service is transferred through delivery to the customer.

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 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.

The transaction price therefore is predominantly based on contractual payment rates as determined by the payors.

The Company does not generally contract with uninsured customers.

The payment terms and conditions of customer contracts vary by customer type and the products and services offered.

The Company determines its estimates of contractual allowances and discounts based upon contractual agreements, its policies and historical experience.

While the rates are fixed for the product or service with the customer and the payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, and are due from the patient.

The Company includes in the transaction price only the amount that the Company expects to be entitled, which is substantially all of the payor billings at contractual rates.

The transaction price is initially constrained by the amount of customer co-payments, which are included in the transaction price when considered probable of payment and included in revenue if the product or service has already been provided to the customer.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values.

Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available.

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

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, 2020.

Critical Accounting Estimates

We are required to disclose “critical accounting estimates” which are estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and that have had or are reasonably likely to have a material impact on our financial condition or results of operations of the registrant.

We follow financial accounting and reporting policies that are in accordance with accounting principles generally accepted in the United States.

The more significant of these policies are summarized in Note 2 to our consolidated financial statements included in Part II, Item 8 of this report.

Not all significant accounting policies require management to make difficult, subjective or complex judgments.

However, the policy noted below could be deemed to meet the SEC’s definition of a critical accounting estimate.

Allowance for Doubtful Accounts

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Specifically, we consider historical realization data, including current and historical cash collections, accounts receivable aging trends, other operating trends and relevant business conditions.

Because of continuing changes in the healthcare industry and third-party reimbursement, it is possible that the estimates could change, which could have a material impact on the operations and cash flows.

If circumstances related to certain customers change or actual results differ from expectations, our estimate of the recoverability of receivables could fluctuate from that provided for in our consolidated financial statements.

A change in estimate could impact bad debt expense and accounts receivable.

Our allowance for doubtful accounts was $9.0 million and $7.8 million as of December 31, 2020 and 2019, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 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 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.

Forfeitures are recorded as incurred.

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.

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 prepaid expenses and other 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.

Significant judgment is required in determining the provision for income taxes.

The Company’s income tax provisions reflect management’s interpretation of country and state tax laws.

There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business and may remain uncertain for several years after their occurrence.

The Company recognizes assets and liabilities for taxation when it is probable that the Company will receive refunds or pay taxes to the relevant tax authority.

Where the final determination of tax assets and liabilities is different from the amounts that were initially recorded, such differences will impact the current and deferred income taxes provision in the period in which such determination is made.

Changes in tax law or changes in the way tax law is interpreted may also impact the Company’s effective tax rate as well as its business and operations.

Income tax expense consists of current and deferred tax expense.

Current and deferred tax are recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income.

Current tax is recognized and measured at the amount expected to be recovered from or payable to the taxation authorities based on the income tax rates enacted at the end of the reporting period and includes any adjustment to taxes payable in respect of previous years.

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

Deferred income tax assets or liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be settled.

The calculation of current and deferred income taxes requires management to make estimates and assumptions and to exercise a certain amount of judgment concerning the carrying value of assets and liabilities.

The current and deferred income tax assets and liabilities are also impacted by expectations about future operating results and the timing of reversal of temporary differences as well as possible audits of tax filings by regulatory agencies.

Changes or differences in these estimates or assumptions may result in changes to the current and deferred tax assets and liabilities on the Consolidated Balance Sheets and a charge to or recovery of income tax expense.

Because of continuing changes in the healthcare industry

VIEMED HEALTHCARE, INC.

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December 31, 2021 and 2020

Deferred tax is recognized on any temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable earnings.

The effect of a change in the enacted tax rates is recognized in net earnings and comprehensive income or in equity depending on the item to which the adjustment relates.

Deferred tax assets are recognized to the extent future recovery is probable.

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.

See Note 10 to the audited financial statements for the fiscal years ended December 31, 2020 and 2019 included in this Annual Report on Form 10-K for details on income taxes recognized.

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 fiscal years ended December 31, 2020 and 2019.

Net Income per Share Attributable to Common Stockholders

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 to the audited financial statements for the fiscal years ended December 31, 2020 and 2019 included in this Annual Report on Form 10-K for earnings per share computations.

and third-party reimbursement, it is possible that the estimates could change, which could have a material impact on the operations and cash flows.

A change in estimate could impact bad debt expense and accounts receivable.

For the year ended December 31, 2021, 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.

Our allowance for doubtful accounts was $7.0 million and $9.0 million as of December 31, 2021 and 2020, respectively.

Results of Operations

C omparison of the Years Ended December 31, 2020 and 2019:

Comparison of the Years Ended December 31, 2021 and 2020:

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:

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Depreciation 851 0.7 % 816 0.6 % 35 4.3 %

(Gain) loss on disposal of property and equipment (2,328) (1.8) % 360 0.4 % (2,688) NM

Other (income) expense (3,952) (3.0) % 3 — % (3,955) NM

Loss (gain) on disposal of property and equipment 448 0.4 % (2,328) (1.8) % 2,776 NM

Other expense (income) (1,622) (1.4) % (3,952) (3.0) % 2,330 (59.0) %

Income from operations 11,580 9.9 % 26,781 20.4 % (15,201) (56.8) %

Non-operating expenses

Unrealized (gain) on warrant conversion liability — — % (363) (0.5) % 363 NM

(Gain) loss from equity investment (91) (0.1) % 110 0.1 % (201) NM

Income from equity method investments (1,241) (1.1) % (91) (0.1) % (1,150) 1263.7 %

Interest expense, net 318 0.3 % 509 0.4 % (191) (37.5) %

Net income before taxes 12,503 10.7 % 26,363 20.1 % (13,860) (52.6) %

(Benefit) provision for income taxes (5,167) (3.9) % 271 0.3 % (5,438) NM

Provision (benefit) for income taxes 3,377 2.9 % (5,167) (3.9) % 8,544 NM

Net income $ 9,126 7.8 % $ 31,530 24.0 % $ (22,404) (71.1) %

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Total net revenue $ 117,062 100.0 % $ 131,309 100.0 % $ (14,247) (10.8) %

For the year ended December 31, 2020, revenue totaled $131.3 million, an increase of $51.1 million (or 63.6%) from the comparable period in 2019.

The revenue growth was significantly driven by COVID-19 response sales and services of $34.4 million as described in more detail below.

We expect further COVID-19 response revenue to continue into 2021, but the quantity and impact of such revenue remains uncertain and dependent on the length and intensity of the COVID-19 pandemic.

For the year ended December 31, 2021, revenue totaled $117.1 million, a decrease of $14.2 million (or 10.8%) from the comparable period in 2020.

Excluding COVID-19 response sales and services, net revenue increased $11.6 million (or 11.9%) from the comparable period in 2020.

Ventilator rental revenue increased $5.6 million (or 7.1%) due to our organic growth in active ventilator patient base sustained throughout the year.

In addition to the ventilator rental revenue growth, rental revenue from other DME grew $4.5 million (or 83.8%) which primarily consisted of product revenue from percussion vests, PAPs, and oxygen therapy.

Non-COVID-19 related equipment sales and services combined increased by $3.0 million (or 67.4%) year over year primarily as a result of increasing demand for respiratory supplies, specifically for PAP resupply patients, that are less impacted by the ongoing pandemic.

As we continue to expand geographically into new states and further expand our presence in our existing territories, we expect continued growth in our active ventilator patient base and ventilator rental revenue, as well as in our other growing respiratory offerings, although in the short term we anticipate growth to continue to occur at a slower rate than in recent periods as a result of the pandemic.

In addition to the ventilator rental revenue growth, rental revenue from other DME grew $4.0 million (or 40.0%) which primarily consisted of product revenue from PAPs, oxygen therapy, and percussion vests.

Non-COVID-19 related equipment sales and services combined increased by $1.4 million (or 19.1%) year over year primarily as a result of increasing demand for respiratory supplies, specifically for PAP resupply patients.

For the year ended December 31, 2021, net revenue for COVID-19 response sales and services totaled $8.6 million, compared to $34.4 million during the height of the pandemic during the year ended December 31, 2020.

Current period COVID-19 response sales and services consist primarily of contact and vaccination tracing services.

While we expect further COVID-19 response related revenue during 2022, the impact of such revenue remains uncertain and dependent on the length and intensity of the COVID-19 pandemic and the availability of equipment, supplies, and services from other suppliers.

As we continue to expand geographically and further penetrate existing territories, we expect growth in our active ventilator patient

base and ventilator rental revenue, as well as in our other growing respiratory offerings.

We expect growth to occur at an increased rate compared to recent periods which were impacted by COVID-19.

Cost of Revenue and Gross Profit

For the year ended December 31, 2020, cost of revenue totaled $51.2 million, an increase of $26.9 million (or 111.1%) from the comparable period in 2019.

For the years ended December 31, 2020 and 2019, gross profit percentage decreased from approximately 69.8% to approximately 61.0%.

The lower margins are primarily the result of the high volume of COVID-19 response sales and services.

Historically the majority of our revenue has come from equipment rentals.

For the year ended December 31, 2020, COVID-19 response sales and services accounted for 26.2% of total revenue, thus driving our company-wide gross profit percentage lower.

Excluding COVID-19 response sales and services, gross profit percentage for the year ended December 31, 2020 was 66.5%.

The reduction in gross profit percentage is partly a reflection of our current product mix, but is also due in part to direct labor cost for RTs.

While our active ventilator patient base growth was impacted by the pandemic in the short term, we have not experienced a corresponding change in the number of RTs employed.

We believe it is in the long term interest of our patients and the business to continue to employ these essential employees.

We expect our gross profit percentage for our normal operations to remain relatively consistent with (non-COVID-19 related) 2020 levels.

For the year ended December 31, 2021, cost of revenue totaled $43.7 million, a decrease of $7.5 million (or 14.7%) from the comparable period in 2020.

For the years ended December 31, 2021 and 2020, gross profit percentage increased from approximately 61.0% to approximately 62.7%.

The increase in overall gross profit percentage is due to declines in lower margin COVID-19 response sales and services as well as fluctuations in product and service mix.

We expect our gross profit percentage for our normal operations to remain relatively consistent with 2021 levels.

Selling, General and Administrative Expense

For the year ended December 31, 2021, selling, general and administrative expenses totaled $54.9 million, an increase of $2.1 million (or 3.9%) from the comparable period in 2020.

Selling, general and administrative expenses as a percentage of revenue decreased to 40.2% for the year ended December 31, 2020, compared to 51.6% for the year ended December 31, 2019.

Excluding the impact of the COVID-19 response sales and services, selling, general and administrative expenses as a percentage of revenue was 53.9% for the year ended December 31, 2020.

Excluding COVID-19 related revenues, selling, general and administrative

expenses as a percentage of revenue decreased to 50.6% for the year ended December 31, 2021 compared to 54.5% for the year ended December 31, 2020.

This decrease in selling, general and administrative expense as a percentage of revenue as compared to the prior period is primarily attributable to a decrease in employee related expenses associated with variable and incentive based compensation.

Phantom stock compensation expense decreased by $1.6 million due to the impact from remeasurement of our phantom stock plan.

As we continue to grow into new markets and increase our employee count, we expect selling, general and administrative expenses will grow proportionally as a percentage of revenue as we continue into 2022.

VIEMED HEALTHCARE, INC.

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December 31, 2021 and 2020

The increase in overall selling, general and administrative expense as compared to the prior year period is attributable to additional employee-related expenses to accommodate the overall growth of the Company as well as a full year of public company expenses relating to our NASDAQ listing in August 2019, partially offset by a decrease in travel, meals, and entertainment due to COVID-19 related restrictions.

Employee compensation increased $3.6 million (or 14.6%) as a result of higher incentive-based compensation and an overall increase in our employee headcount.

Our full time employee count increased from 418 on December 31, 2019 to 511 on December 31, 2020, an increase of 22.2%.

Partially offsetting these increases was a $1.8 million reduction in employee compensation expense related to the impact of our phantom stock plan.

Our phantom stock plan is measured at fair value as of the reporting period and is driven primarily by the number of eligible employees and our stock price.

For the year ended December 31, 2020 our stock price increased by 25.2% compared to an increase of 55.4% from the year ended December 31, 2019, resulting in lower comparable expenses related to these awards in the current period.

Additionally, professional fees increased $2.0 million (or 106.9%) from the comparable period in 2019, driven by higher legal and professional fees and public company expenses.

As we continue to respond to the COVID-19 pandemic, grow into new markets and increase our employee count, we expect selling, general and administrative expenses will trend upward accordingly.

We expect that selling, general and administrative expenses as a percentage of revenue will trend higher towards historical percentages as we continue into 2021.

Research and Development Costs

For the year ended December 31, 2021, research and development costs totaled $2.1 million, an increase of $1.0 million (or 94.8%) from the comparable period in 2020.

As we continue to invest in research and development related projects to support our technology initiatives, we expect that associated costs will increase in 2021 relative to 2020 costs.

(Gain) Loss on Disposal of Property and Equipment

For the year ended December 31, 2020, we recorded a gain on disposal of property and equipment of $2.3 million, compared to a loss of $0.4 million during the comparable period in 2019.

As a result of our COVID-19 response efforts, certain of our previously placed in service property and equipment was sold.

As a result, during the year ended December 31, 2020, we recorded sales proceeds on used equipment of $5.0 million which resulted in a net gain on disposal for related equipment of $3.5 million.

We expect disposals of equipment to generally remain consistent with historical trends, with the exception of additional gains that could be realized from any additional COVID-19 response sales, but the impact of such sales remains uncertain and dependent on the length and intensity of the COVID-19 pandemic and the availability of such equipment and supplies from other suppliers.

Other (Income) Expense

The increase of $4.0 million in other income was driven by current year state and federal government grants, the majority of which relate to the Provider Relief Funds of $3.5 million received in April 2020.

As we continue to invest in research and development related projects to support our technology initiatives, we expect that associated costs will slightly increase in 2022 relative to 2021 costs.

Loss (Gain) on Disposal of Property and Equipment

For the year ended December 31, 2021, we recorded a loss on disposal of property and equipment of $0.4 million, compared to a gain of $2.3 million during the comparable period in 2020.

For the year ended December 31, 2020, as a result of our COVID-19 response efforts, certain of our previously placed in service property and equipment was sold and gains resulting from these disposals were recognized.

We expect disposals of equipment to generally remain consistent with long term historical trends, excluding COVID-19 disposals.

Other Expense (Income)

The decrease of $2.3 million in other income was driven by reductions in current year state and federal government grants.

During the year ended December 31, 2020, the Company received and recognized a general distribution payment from the Provider Relief Fund of $3.5 million.

For the year ended December 31, 2021 the Company received and recognized a targeted distribution payment of $1.5 million.

Payments from the Provider Relief Fund are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to the COVID-19 pandemic as described in detail above.

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Interest Expense, Net

For the year ended December 31, 2020, net interest expense totaled $0.5 million, an increase of $0.2 million from the comparable period in 2019.

For the year ended December 31, 2021, net interest expense totaled $0.3 million, a decrease of $0.2 million from the comparable period in 2020.

We expect net interest expense to remain materially consistent with 2021 levels.

(Benefit) Provision for Income Taxes

For the year ended December 31, 2020, the provision for income taxes was a $5.2 million benefit, compared to a $0.3 million expense during the 2019 period.

The decrease in income tax expense was primarily due to a lower effective tax rate which was caused by the release of a valuation allowance and recognition of a deferred tax asset during the current period.

Excluding the impact of this current year discrete item, our estimated tax rate for the year was 9.6%.

Provision (Benefit) for Income Taxes

For the year ended December 31, 2021, the provision for income taxes was a $3.4 million expense, compared to a $5.2 million benefit during the 2020 period.

The increase in income tax expense was primarily due to the release of a valuation allowance during the prior period.

We expect tax expense to normalize at rates that approximate the federal and state statutory rates.

For the year ended December 31, 2021, net income was $9.1 million, a decrease of $22.4 million (or 71.1%) from the comparable period in 2020.

Net income as a percentage of net revenue decreased from 24.0% for the year ended December 31, 2020 to 7.8% for the year ended December 31, 2021, primarily driven by a decrease in COVID-19 response sales and the comparative benefit from income taxes in the prior period, as described above.

Non-GAAP Financial Measures

The Company uses Adjusted EBITDA, which is a financial measure that is not prepared in accordance with GAAP to analyze its financial results and believes that it is useful to investors, as a supplement to GAAP measures.

Management believes Adjusted EBITDA provides helpful information with respect to the Company's operating performance as viewed by management, including a view of the Company's business that is not dependent on the impact of the Company's capitalization structure and items that are not part of the Company's day-to-day operations.

Management uses Adjusted EBITDA (i) to compare the Company's operating performance on a consistent basis, (ii) to calculate incentive compensation for the Company's employees, (iii) for planning purposes including the preparation of the Company's internal annual operating budget, and (iv) to evaluate the performance and effectiveness of the Company's operational strategies.

Accordingly, management believes that Adjusted EBITDA provides useful information in understanding and evaluating the Company's operating performance in the same manner as management.

In calculating Adjusted EBITDA, certain items (mostly non-cash) are excluded from net income including interest, taxes, stock based compensation, and depreciation of property and equipment.

Set forth below are descriptions of the financial items that have

VIEMED HEALTHCARE, INC.

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December 31, 2021 and 2020

For the year ended December 31, 2020, net income was $31.5 million, an increase of $23.0 million (or 269.9%) from the comparable period in 2019.

Net income as a percentage of net revenue increased from 10.6% for the year ended December 31, 2019 to 24.0% for the year ended December 31, 2020, primarily driven by COVID-19 response sales, increased other income and the Company's income tax benefit, as described above.

Non-GAAP Financial Measures

Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets.

We believe that one of the most important measures for our company is Adjusted EBITDA.

Adjusted EBITDA is a non-GAAP financial measure.

We believe Adjusted EBITDA provides helpful information with respect to our operating performance as viewed by management, including a view of our business that is not dependent on the impact of our capitalization structure and items that are not part of our day-to-day operations.

Management uses Adjusted EBITDA (i) to compare our operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes including the preparation of our internal annual operating budget, and (iv) to evaluate the performance and effectiveness of our operational strategies.

Accordingly, we believe that Adjusted EBITDA provides useful information in understanding and evaluating our operating performance in the same manner as management.

In calculating Adjusted EBITDA, certain items (mostly non-cash) are excluded from net income including interest, taxes and depreciation of property and equipment.

Set forth below are descriptions of the financial items that have been excluded from net income to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income.

been excluded from net income to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income.

– Depreciation may be useful for investors to consider because it generally represents the wear and tear on the property and equipment used in our operations.

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However, we do not consider the amount of interest expense or interest income to be a representative component of the day-to-day operating performance of our business.

– Unrealized loss on warrant conversion liability may be useful for investors to consider as it represents changes in the fair value of warrants and exchangeable shares of subsidiaries, driven predominantly by changes in our share price and exchange rates.

These changes are non-cash, as is the settlement of the underlying derivative liability, which occurs upon the conversion of the derivative instrument into common shares of the Company.

– Stock-based compensation may be useful for investors to consider because it is an estimate of the non-cash component of compensation received by the Company’s directors, officers, employees and consultants.

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However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

The following table is a reconciliation of Net income, the most directly comparable GAAP measure, to Adjusted EBITDA, on a historical basis for the periods indicated:

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Interest expense 69 75 83 91 100 116 135 158

Unrealized (gain) loss on warrant conversion liability — — — — — (800) 268 169

Stock-based compensation 1,305 1,302 1,236 1,307 1,301 1,234 1,196 1,151

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Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

It is not a measurement of our financial performance under GAAP and should not be considered as an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses.

Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP.

It is not a measurement of our financial performance under GAAP and should not be considered as an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating activities as a measure of the Company's liquidity, and may not be comparable to other similarly titled measures of other businesses.

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our operating results as reported under GAAP.

Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations;

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Cash and cash equivalents at December 31, 2021 was $28.4 million, compared to $31.0 million at December 31, 2020.

Based on our current plan of operations, including potential acquisitions, we believe this amount, when combined with expected cash flows from operations and amounts available under our line of credit will be sufficient to fund our growth strategy and to meet our anticipated operating expenses, capital expenditures, and debt service obligations for at least the next 12 months from the date of this filing.

Based on our current plan of operations, we believe this amount, when combined with expected cash flows from operations and amounts available under our line of credit will be sufficient to fund our growth strategy and to meet our anticipated operating expenses, capital expenditures, and debt service obligations for at least the next 12 months from the date of this filing.

The Company utilizes short term leases with a major supplier that could be extended over a longer term if there was a need for additional liquidity.

Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank, which was fully undrawn as of December 31, 2021.

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2021 and 2020

The following table summarizes our cash flows for the periods indicated:

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Financing activities (5,321) (9,069)

Net increase in cash and cash equivalents $ 17,626 $ 2,942

VIEMED HEALTHCARE, INC.

(Tabular amounts expressed in thousands of U.S.

Dollars, except per share amounts)

December 31, 2020 and 2019

Net (decrease) increase in cash and cash equivalents $ (2,573) $ 17,626

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the year ended December 31, 2021 was $22.5 million, resulting from net income of $9.1 million, non-cash net income adjustments of $26.9 million and an increase in net operating liabilities of $5.8 million, which was partially offset by an increase in net operating assets of $7.8 million.

The non-cash net income adjustments primarily consisted of $6.9 million in change of allowance for doubtful accounts, $11.3 million of depreciation, $3.9 million in change in deferred tax asset, $5.2 million of stock-based compensation, and $1.2 million of income from equity investments.

The primary changes in operating assets were an increase in gross accounts receivable of $7.3 million, a net increase in income taxes receivable/(payable) of $2.2 million, and a decrease in accrued liabilities of $4.0 million.

Included in our operating cash flows for the period is the receipt of $1.5 million in Provider Relief Funds.

Net cash provided by operating activities during the year ended December 31, 2020 was $35.1 million, resulting from net income of $31.5 million, non-cash net income adjustments of $13.8 million and an increase in net operating liabilities of $2.9 million, which was partially offset by an increase in net operating assets of $13.1 million.

The non-cash net income adjustments primarily consisted of $9.1 million in change of allowance for doubtful accounts, $9.6 million of depreciation, $2.3 million of gains on disposal of property and equipment, $8.7 million in change in deferred tax asset, $4.9 million of stock-based compensation, $1.4 million in change in inventory reserve and $0.1 million of gain on equity investments.

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The changes in operating liabilities primarily consisted of an increase in accounts payable of $0.2 million, an increase in accrued liabilities of $2.3 million, an increase in deferred revenue of $0.1 million, and an increase in income tax payable of $0.3 million.

Net cash provided by operating activities during the year ended December 31, 2019 was $19.1 million, resulting from net income of $8.5 million, non-cash net income adjustments of $20.2 million, and an increase in net operating liabilities of $3.9 million, which was partially offset by an increase in net operating assets of $13.5 million.

The non-cash net income adjustments primarily consisted of $9.8 million in change of allowance for doubtful accounts, $6.4 million of depreciation and $3.9 million of stock-based compensation.

The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $12.5 million and an increase in inventory of $0.3 million.

Our increase in gross accounts receivable is driven by the impact of our current year billing conversion.

Net accounts receivable increased $2.7 million during the period.

The changes in operating liabilities primarily consisted of an increase in accounts payable of $0.8 million, an increase in accrued liabilities of $2.5 million, an increase in deferred revenue of $0.7 million, and a decrease in income tax payable of $0.1 million.

The increase in operating liabilities was primarily attributed to higher expense incurred as a result of phantom stock awards and increased deferred revenue.

The increase in our operating assets and liabilities were primarily driven by our increased business volume period-over-period and higher compensation and personnel-related costs.

Net Cash Used in Investing Activities

Net cash used in investing activities during the year ended December 31, 2021 was $19.7 million, consisting of $19.7 million of purchases of property and equipment and $0.6 million in equity investments, partially offset by $0.6 million of sales proceeds from the disposal of property and equipment.

Included in the purchase of property and equipment are patient capital expenditures of $16.4 million related to medical equipment.

Combining cash purchases of property and equipment of $19.7 million and equipment financed through finance leases of less than $0.1 million,our total capital expenditures for the year ended December 31, 2021 were $19.8 million.

This represents a $3.7 million, or 23.3%, increase year over year.

Net cash used in investing activities during the year ended December 31, 2020 was $8.4 million, consisting of $13.0 million of purchases of property and equipment and $0.6 million in equity investments, partially offset by $5.2 million of COVID-19 response sales proceeds from the disposal of property and equipment.

Purchases of property and equipment were primarily related to medical equipment rented to our patients.

Included in the purchase of property and equipment are patient capital expenditures of $15.6 million related to medical equipment.

Combining cash purchases of property and equipment of $13.0 million and equipment financed through finance leases of $3.0 million, our total capital expenditures for the year ended December 31, 2020 were $16.0 million.

This represents a $9.4 million, or 36.8%, decrease year over year.

Net cash used in investing activities during the year ended December 31, 2019 was $12.8 million, consisting of $13.4 million of purchases of property and equipment, partially offset by $0.6 million of proceeds from the disposal of property and equipment.

Purchases of property and equipment were primarily related to the purchase of our new corporate headquarters in addition to medical equipment rented to our patients.

Combining cash purchases of property and equipment of $13.4 million and equipment financed through finance leases of $12.0 million, our total capital expenditures for the year ended December 31, 2019 were $25.4 million.

This represents a $10.9 million, or 74.9%, increase year over year, which was driven by our revenue growth during the same periods combined with the purchase of our new corporate headquarters.

Net Cash Used in Financing Activities

Net cash used in financing activities during the year ended December 31, 2021 was $5.3 million, consisting of $1.7 million in principal payments on the Term Note (as defined below), $0.2 million in principal payments on the Building Term Note (as defined below), and $2.2 million in repayments of finance lease liabilities, partially offset by $0.1 million proceeds from the exercise of stock options.

Net cash used in financing activities during the year ended December 31, 2019 was $3.3 million, consisting of $4.4 million in proceeds from the Building Term Note to finance the purchase of our corporate headquarters, $4.9 million in proceeds from the Term Note, partially offset by $11.6 million in repayments of finance lease liabilities and $1.5 million of shares repurchased and canceled under our normal course issuer bid.

VIEMED HEALTHCARE, INC.

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December 31, 2021 and 2020

Net cash used in financing activities during the year ended December 31, 2020 was $9.1 million, consisting of $1.6 million in principal payments on the Term Note, $0.2 million in principal payments on the Building Term Note, and $9.2 million in repayments of finance lease liabilities, partially offset by $1.9 million proceeds from the exercise of stock options.

Line of Credit

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There were no borrowings against this line of credit at December 31, 2021 or December 31, 2020.

While we currently have no immediate plans to draw on this line of credit, the line of credit allows flexibility in funding our future operations subject to compliance with the covenants described below.

The line of credit allows flexibility in funding our future operations subject to compliance with the covenants described below.

Commercial Term Notes

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HHS Provider Relief Funds

The Company received $3.5 million of Provider Relief Funds from the HHS that was provided to eligible healthcare providers out of the $100 billion Public Health and Social Services Emergency Fund provided for in the CARES Act.

The funds are allocated to eligible healthcare providers for expenses and lost revenue attributable to the COVID-19 pandemic.

The Company received a general distribution payment from the Provider Relief Fund of $3.5 million in April 2020 and a targeted distribution payment of $1.5 million in November 2021.

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

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

There is no US GAAP guidance for for-profit health care entities that receive government grants that are not in the form of an income tax credit, revenue from a contract with a customer or a loan.

As such, for-profit entities must determine the appropriate accounting treatment by analogy to other guidance such as International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance , in IFRS.

Under IAS 20, we determined that upon receipt of funds, we fully complied with the conditions attached to the grant.

We recognized the distributions received from the Provider Relief Fund in the income statement in full during the period of receipt.

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 and to offset any lost patient care revenues attributable to the pandemic.

As of December 31, 2021, the Company had cash and cash equivalents of $28.4 million.

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Our principal uses of cash are funding our new rental assets and other capital purchases, operations, and other working capital requirements.

Over the past two years, our revenue has increased significantly from year-to-year and, as a result, our cash provided by operating activities has increased over time and is now a significant source of capital to the business, which we expect to continue in the future.

We may need to raise additional funds to support our investing operations, and such funding may not be available to us on acceptable terms, or at all.

The following table presents our material contractual obligations and commitments to make future payments as of December 31, 2021:

Within 12 Months Beyond 12 Months

Debt Obligations, including interest $1,714

Lease Obligations $490

Total $2,204 $5,261

We anticipate that our operating cash flows will satisfy our material cash requirements for the 12 months after December 31, 2021.

In addition to our operating cash flows, we may need to raise additional funds to support our contractual obligations and investing activities beyond such 12 month period, and such funding may not be available to us on acceptable terms, or at all.

If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected.

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Any additional equity financing may be dilutive to our stockholders.

For the year ended December 31, 2019, the Company re-purchased and canceled 365,100 common shares pursuant to our Normal Course Issuer Bid ("NCIB") at a cost of $1.5 million.

Leases under which we assume substantially all the risks and rewards of ownership are classified as capital leases.

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Recent Accounting Pronouncements

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 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.

See Note 2 – Summary of Significant Account Policies of the Notes to Consolidated Financial Statements for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial positions and cash flows.

Quantitative and Qualitative Disclosures About Market Risk

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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 7. Management’s Discussion and Analysis