VIEMED HEALTHCARE, INC. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Income and Comprehensive Income F-4 Consolidated Statements of Changes in Shareholders' Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to the Financial Statements F-7 Page F-1 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Viemed Healthcare, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Viemed Healthcare, Inc. (the Company) as of December 31, 2021 and 2020, 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, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Basis for Opinion 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 audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the 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 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 We have served as the Company’s auditor since 2019. New Orleans, Louisiana March 7, 2022 Page F-2 VIEMED HEALTHCARE, INC. CONSOLIDATED BALANCE SHEETS (Expressed in thousands of U.S. Dollars, except outstanding shares) Note At December 31, 2021 At December 31, 2020 ASSETS Current assets Cash and cash equivalents 2 $ 28,408 $ 30,981 Accounts receivable, net of allowance for doubtful accounts of $ 7,031 and $ 9,013 at December 31, 2021 and December 31, 2020, respectively 2 12,823 12,373 Inventory, net of inventory reserve of $ 1,418 and $ 1,353 at December 31, 2021 and December 31, 2020, respectively 2 2,457 2,310 Income tax receivable 1,893 — Prepaid expenses and other assets 2 1,729 1,511 Total current assets $ 47,310 $ 47,175 Long-term assets Property and equipment, net 3 62,846 55,056 Equity investments 2 2,157 733 Deferred tax asset 10 4,787 8,733 Other long-term assets 8 862 863 Total long-term assets $ 70,652 $ 65,385 TOTAL ASSETS $ 117,962 $ 112,560 LIABILITIES Current liabilities Trade payables $ 3,239 $ 2,096 Deferred revenue 3,753 3,409 Income taxes payable — 340 Accrued liabilities 4 8,875 12,595 Current portion of lease liabilities 5 464 2,741 Current portion of long-term debt 5 1,480 1,836 Total current liabilities $ 17,811 $ 23,017 Long-term liabilities Accrued liabilities 7 757 1,292 Long-term lease liabilities 5 268 762 Long-term debt 5 4,306 5,796 Total long-term liabilities $ 5,331 $ 7,850 TOTAL LIABILITIES $ 23,142 $ 30,867 Commitments and Contingencies — — SHAREHOLDERS' EQUITY Common stock - No par value: unlimited authorized; 39,640,388 and 39,185,182 issued and outstanding as of December 31, 2021 and December 31, 2020, respectively 7 14,014 9,181 Additional paid-in capital 7,749 7,320 Accumulated other comprehensive loss ( 278 ) ( 451 ) Retained earnings 73,335 65,643 TOTAL SHAREHOLDERS' EQUITY $ 94,820 $ 81,693 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 117,962 $ 112,560 See accompanying notes to the consolidated financial statements Page F-3 VIEMED HEALTHCARE, INC. CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Expressed in thousands of U.S. Dollars, except share and per share amounts) Year Ended December 31, Note 2021 2020 Revenue 2 $ 117,062 $ 131,309 Cost of revenue 43,652 51,198 Gross profit $ 73,410 $ 80,111 Operating expenses Selling, general and administrative 54,893 52,829 Research and development 2,110 1,083 Stock-based compensation 7 5,150 4,882 Depreciation 851 816 Loss (gain) on disposal of property and equipment 448 ( 2,328 ) Other expense (income) 9 ( 1,622 ) ( 3,952 ) Income from operations $ 11,580 $ 26,781 Non-operating income and expenses Income from equity method investments ( 1,241 ) ( 91 ) Interest expense, net of interest income 5 318 509 Net income before taxes 12,503 26,363 Provision (benefit) for income taxes 10 3,377 ( 5,167 ) Net income $ 9,126 $ 31,530 Other comprehensive income (loss) Change in unrealized gain/loss on derivative instruments, net of tax 173 ( 294 ) Other comprehensive income (loss) $ 173 $ ( 294 ) Comprehensive income $ 9,299 $ 31,236 Net income per share Basic 11 $ 0.23 $ 0.81 Diluted 11 $ 0.22 $ 0.78 Weighted average number of common shares outstanding: Basic 11 39,491,117 38,743,516 Diluted 11 40,680,947 40,525,737 See accompanying notes to the consolidated financial statements Page F-4 VIEMED HEALTHCARE, INC. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Expressed in thousands of U.S. Dollars, except share and per share amounts) Common Stock Additional paid-in capital Accumulated other comprehensive loss Total Shareholders' equity Shares Amount Retained earnings Shareholders' equity, December 31, 2019 37,952,660 $ 3,366 $ 6,377 $ ( 157 ) $ 34,113 $ 43,699 Stock-based compensation - options — — 3,810 — — 3,810 Stock-based compensation - restricted stock — — 1,072 — — 1,072 Exercise of options 643,297 1,876 — — — 1,876 Shares issued for vesting of restricted stock units 589,225 3,939 ( 3,939 ) — — — 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 Stock-based compensation - options — — 4,197 — — 4,197 Stock-based compensation - restricted stock — — 953 — — 953 Exercise of options 27,597 112 — — — 112 Shares issued for vesting of restricted stock units 608,929 4,721 ( 4,721 ) — — — Shares redeemed to pay income tax ( 181,320 ) — — — ( 1,434 ) ( 1,434 ) Change in accumulated other comprehensive loss, net of tax — — — 173 — 173 Net income — — — — 9,126 9,126 Shareholders' equity, December 31, 2021 39,640,388 $ 14,014 $ 7,749 $ ( 278 ) $ 73,335 $ 94,820 See accompanying notes to the consolidated financial statements Page F-5 VIEMED HEALTHCARE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of U.S. Dollars) Year Ended December 31, Note 2021 2020 Cash flows from operating activities Net income $ 9,126 $ 31,530 Adjustments for: Depreciation 11,312 9,582 Change in allowance for doubtful accounts 2 6,895 9,116 Change in inventory reserve 65 1,353 Share-based compensation 7 5,150 4,882 Distributions of earnings received from equity method investments 416 — Income from equity method investments ( 1,241 ) ( 91 ) Loss (gain) on disposal of property and equipment 448 ( 2,328 ) Deferred income tax expense (benefit) 3,884 ( 8,733 ) Net change in working capital Increase in accounts receivable ( 7,345 ) ( 9,955 ) Increase in inventory ( 212 ) ( 2,303 ) Increase in prepaid expenses and other assets ( 226 ) ( 812 ) Increase in trade payables 133 213 Increase in deferred revenue 344 94 (Decrease) increase in accrued liabilities ( 4,022 ) 2,308 Change in income tax payable/receivable ( 2,233 ) 254 Net cash provided by operating activities $ 22,494 $ 35,110 Cash flows from investing activities Purchase of property and equipment ( 19,743 ) ( 13,044 ) Investment in equity investments ( 599 ) ( 629 ) Proceeds from sale of property and equipment 596 5,258 Net cash used in investing activities $ ( 19,746 ) $ ( 8,415 ) Cash flows from financing activities Proceeds from exercise of options 112 1,876 Principal payments on notes payable 5 ( 152 ) ( 142 ) Principal payments on term note 5 ( 1,683 ) ( 1,605 ) Shares redeemed to pay income tax ( 1,434 ) — Repayments of lease liabilities ( 2,164 ) ( 9,198 ) Net cash used in financing activities $ ( 5,321 ) $ ( 9,069 ) Net (decrease) increase in cash and cash equivalents ( 2,573 ) 17,626 Cash and cash equivalents at beginning of year 30,981 13,355 Cash and cash equivalents at end of period $ 28,408 $ 30,981 Supplemental disclosures of cash flow information Cash paid during the period for interest $ 351 $ 559 Cash paid during the period for income taxes, net of refunds received $ 1,768 $ 3,311 Supplemental disclosures of non-cash transactions Net non-cash changes to finance leases balances $ 48 $ 3,002 Net non-cash changes to operating lease balances $ 712 $ 57 See accompanying notes to the consolidated financial statements Page F-6 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Notes to Consolidated Financial Statements 1. Nature of Business and Operations 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 47 states in the United States. The Company was incorporated under the Business Corporations Act (British Columbia) on December 14, 2016. The Company's registered and records office is located at Suite 2800, Park Place, 666 Burrard Street, Vancouver, British Columbia V6C 2Z7 and its corporate office is located at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508. 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"). As of June 30, 2021, the Company determined that it no longer qualifies as a “smaller reporting company,” but the Company is 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. 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 the U.S. on the Nasdaq Capital Market under the symbol "VMD" and in Canada on the TSX under the symbol "VMD.TO". 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in accordance with U.S. GAAP and pursuant to the rules and regulations of the SEC. 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. Reporting Currency All values are in U.S. dollars ($ or "USD") unless specifically indicated otherwise. Canadian dollars are indicated as CAD$. Functional Currency Management has exercised judgment in selecting the functional currency of each of the entities that it consolidates based on the primary economic environment in which the entity operates and in reference to the various indicators including the currency that primarily influences or determines the selling prices of goods and services and the cost of those services, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices. The Company's functional currency was determined to be the U.S. dollar, which was determined using management’s assumption that the primary economic environment 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. Page F-7 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. 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. 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, 2021, 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 Cash and cash equivalents consist of cash and temporary investments with an original maturity of three months or less that are readily convertible to known amounts of cash that are subject to insignificant risk or change. At December 31, 2021 and 2020, our cash was held primarily in checking and money market accounts. Cash and cash equivalents consist of the following at December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Cash $ 11,952 $ 5,319 Money market accounts 16,456 25,662 Total cash and cash equivalents $ 28,408 $ 30,981 Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are regularly reviewed for collectability and an allowance is recorded to cover the estimated bad debts and billing modifications. The accounts receivable are presented on the Consolidated Balance Sheets net of the allowance for doubtful accounts. It is possible that the estimates of the allowance for doubtful accounts could change, which could have a material impact on our operations and cash flows. The Company writes off receivables when the likelihood for collection is remote, and when the Company believes collection efforts have been fully exhausted and it does not intend to devote additional resources in attempting to collect. The write-offs are charged against the allowance for doubtful accounts. 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. The estimates and write-offs for the allowance for doubtful accounts for each reporting period were as follows: December 31, 2021 December 31, 2020 Balance, beginning of year $ 9,013 $ 7,782 Change in allowance for doubtful accounts 6,895 9,116 Amounts written off ( 8,877 ) ( 7,885 ) Balance, end of period $ 7,031 $ 9,013 Page F-8 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 As of December 31, 2021 and 2020, no one customer represented more than 10% of outstanding accounts receivable. The Company does have receivables at December 31, 2021 from Medicare and Medicaid, representing 35 % and 9 %, respectively, and 44 % combined, of total outstanding receivables (December 31, 2020 - 46 %). 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. 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, 2021 and 2020 were as follows: Year Ended December 31, 2021 2020 Medicare revenues 55 % 58 % Medicaid revenues 9 % 9 % Total Medicare and Medicaid revenues 64 % 67 % Inventory Inventory represents non-serialized supplies that consist of equipment parts, consumables, and associated product supplies and is expensed at the time of sale or use. The Company values inventory at the lower of cost or net realizable value. Obsolete and unserviceable inventories are valued at estimated net realizable value. Inventory is presented net of a reserve balance of $ 1,418,000 and $ 1,353,000 at December 31, 2021 and 2020, respectively, that relates to COVID-19 response supplies. Property and Equipment 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. Management has estimated the useful lives of equipment leased to customers. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. The estimated useful lives of the property and equipment are as follows: 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 Buildings 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 Equity investments on the Consolidated Balance Sheets are comprised of an investment accounted for under the equity method and an equity investment without a readily determinable fair value which is accounted for under the measurement alternative described in ASC 321-10-35-2. Page F-9 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 The following table details the Company’s equity investments: December 31, 2021 December 31, 2020 Equity method investments $ 959 $ 134 Other equity investments 1,198 599 Balance, end of period $ 2,157 $ 733 Our equity method investments include a 49 % equity interest in Solvet Services, LLC. Investments accounted for under the equity method are investments in unconsolidated entities over whose operating and financial policies the Company has the ability to exercise significant influence but not control. Equity method investments are initially measured at cost in the Consolidated Balance Sheets with a n y 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 on the gain (loss) from equity method investments within non-operating expenses in the 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, 2021 that would impair the carrying value of equity method investments. Other equity investments include a 5 % equity interest in VeruStat, Inc. Other equity investments are investments without a readily determinable fair value which do not qualify for the practical expedient in ASC 820. For these investments, the Company has elected the measurement alternative which measures the investment at cost, less any impairment. ASU 2019-04 clarifies that if an entity identifies observable price changes in orderly transactions for the identical or a similar investment of the same issuer, it must measure its equity investment at fair value in accordance with ASC 820 as of the date that the observable transaction occurred. The Company was not aware of any impairment or observable price change adjustments that needed to be made as of December 31, 2021 on its investments in equity securities without a readily determinable fair value. 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. As a result of the “backward tracing” prohibition in ASC 740, certain previously measured unrealized gains or losses have resulted in the existence of "dangling" amounts within other comprehensive income. The Company has elected the individual security approach to the release of these effects. Under the individual security approach, dangling amounts are tracked on a security-by-security basis and cleared out of the other comprehensive income balance upon sale of each individual security. During the periods presented, none of the individual securities associated with a dangling balance were sold. 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 reimbursement rates paid 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 a 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. patient). 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. Page F-10 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 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: Year Ended December 31, 2021 2020 Revenue from rentals under Topic 842 Ventilator rentals, non-invasive and invasive $ 83,849 $ 78,286 Other durable medical equipment rentals 13,843 9,888 Revenue from sales and services under Topic 606 Equipment and supply sales 8,765 7,357 COVID-19 response sales and services 8,558 34,379 Service revenues 2,047 1,399 Total revenues $ 117,062 $ 131,309 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, 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. 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. 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 recognizes revenue based on contractual payment rates as determined by the payors at the point in time where 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. 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. The transaction price therefore is predominantly based on contractual Page F-11 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 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. 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. 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, 2021 or 2020. 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 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. 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 presents a positive ending period fair value of the interest rate swap contract in other long-term assets, as a component of long-term assets, and a negative ending period fair value of the interest rate swap contract 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 in its Consolidated Statements of Income. Page F-12 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Income Taxes 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. 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. 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 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 years ended December 31, 2021 and 2020. 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 stock-based awards outstanding during the period using the treasury stock method. Dilutive stock-based awards include outstanding common stock options and time-based RSUs. See Note 11 for earnings per share computations. Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions for performing intraperiod tax allocations, recognizing deferred taxes for investments, and calculating income taxes in interim periods. The guidance also simplifies the accounting for franchise taxes, transactions that result in a step-up in the tax basis of goodwill, and the effect of enacted changes in tax laws or rates in interim periods. The Company adopted ASU 2019-12 in the first quarter of 2021 and the adoption had no material impact to the Company’s consolidated financial statements. Page F-13 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 On January 1, 2021, we adopted Accounting Standards Update (ASU) No. 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (ASU 2020-01), which clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. The adoption of this new standard did not have a material impact on our 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, 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 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. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets. The standard replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. Further, the FASB issued ASU 2019-04 and ASU 2019-05 to provide additional guidance on the credit losses standard. The standard will be effective for fiscal years beginning after December 15, 2022 , including interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Specifically, the guidance permits an entity, when certain criteria are met, to consider amendments to contracts made to comply with reference rate reform to meet the definition of a modification under GAAP. It further allows hedge accounting to be maintained and a one-time transfer or sale of qualifying held-to-maturity securities. The expedients and exceptions provided by the amendments are permitted to be adopted any time through December 31, 2022 and do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for certain optional expedients elected for certain hedging relationships existing as of December 31, 2022. The Company has a commercial term note that references LIBOR and is evaluating how this standard may be applied to specific contract modifications through December 31, 2022. In November 2021, the FASB issued ASU No. 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance (ASU 2021-10), which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity's financial statements. This guidance will be effective for us in the year ended December 31, 2022, with early adoption permitted. We are currently evaluating the impact of the new guidance on our consolidated financial statements. Page F-14 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 3. 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. The following table details the Company’s fixed assets: December 31, 2021 December 31, 2020 Medical equipment $ 76,864 $ 63,307 Furniture and equipment 2,521 2,722 Land 2,566 2,138 Buildings 7,682 5,966 Leasehold improvements 296 290 Vehicles 972 922 Less: Accumulated depreciation ( 28,055 ) ( 20,289 ) Property and equipment, net of accumulated depreciation and amortization $ 62,846 $ 55,056 Depreciation in the amount of $ 10,461,000 and $ 8,765,000 is included in cost of revenue for the years ended December 31, 2021 and 2020, respectively. Included in medical equipment above is equipment acquired under finance lease obligations whose cost and accumulated depreciation at December 31, 2021 total $ 47,000 and $ 5,000 , respectively. At December 31, 2020, cost and accumulated depreciation on equipment acquired under finance lease obligations was $ 6,900,000 and $ 885,000 , respectively. Medical equipment purchases with a cost of $ 1,010,000 and $ 0 were included in accounts payable at December 31, 2021 and 2020, respectively. 4. Current Liabilities The Company’s short-term accrued liabilities are included within current liabilities and consist of the following: December 31, 2021 December 31, 2020 Accrued trade payables $ 2,011 $ 1,252 Accrued commissions payable 452 278 Accrued bonuses payable 3,405 5,190 Accrued vacation and payroll 1,226 844 Current portion of phantom share liability 1,118 4,485 Accrued other liabilities 663 546 Total accrued liabilities $ 8,875 $ 12,595 5. Debt and Lease Liabilities Senior Credit Facility 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, 2021 or 2020. Page F-15 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Commercial Term Notes 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 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 ("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, 2021 December 31, 2020 Notes payable $ 5,786 $ 7,632 Less: Current portion of notes payable ( 1,480 ) ( 1,836 ) Net long-term notes payable $ 4,306 $ 5,796 Future minimum principal and interest obligations for the term notes required over the next five years as of December 31, 2021, as follows: Principal Payments Interest Payments (1) 2022 $ 1,480 $ 234 2023 167 201 2024 177 194 2025 186 184 2026 3,776 89 Thereafter — — Total $ 5,786 $ 902 (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, 2021 Total Debt to Adjusted EBITDA (Quarterly) not more than 1.50:1.00 0.22 Fixed Charge Coverage Ratio (Quarterly) not less than 1.35:1.00 4.95 Loan-to-Value Ratio (Quarterly) not more than 0.85 0.68 The Company was in compliance with all covenants under the Commercial Business Term Loan Agreement in effect at December 31, 2021. Page F-16 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Leases 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, 2021 December 31, 2020 Lease liabilities $ 732 $ 3,503 Less: Current portion of lease liabilities ( 464 ) ( 2,741 ) Net long-term lease liabilities $ 268 $ 762 Included in lease liabilities at December 31, 2021 are finance lease liabilities for medical equipment in the amount of $ 42,000 due between 2022 and 2024. 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 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, 2021, the weighted average lease term was approximately 2.24 years. Future minimum principal and interest payments for operating lease liabilities required over the next five years as of December 31, 2021, as follows: Principal Payments Interest Payments 2022 $ 448 $ 26 2023 95 11 2024 74 6 2025 73 2 2026 — — Thereafter — — Total $ 690 $ 45 Operating rental expenses for the years ended December 31, 2021 and 2020 amounted to $ 650,000 and $ 759,000 , respectively. The related assets for operating lease liabilities have been included with property and equipment on the Consolidated Balance Sheets. Included within these operating lease liabilities are real property leases for real estate from a related party. On August 1, 2015, the Company entered a ten-year triple net lease agreement for office and warehouse space with a company owned by the Company’s CEO, Casey Hoyt, and President, Michael Moore. Rental payments under these related party lease agreements were $ 20,000 per month, plus taxes, utilities and maintenance. Total rental payments for the use of these properties were $ 201,000 and $ 237,000 for the years ended December 31, 2021 and 2020, respectively. The expense for these related party rents has been included within selling, general and administrative expenses. On October 1, 2021, the Company acquired the properties for $ 2.8 million following approval by the Board of Directors. The acquisition of these previously leased properties was funded by cash on hand and resulted in no incremental debt. At December 31, 2021, these properties are recorded in property and equipment, net of related depreciation. Page F-17 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 6. Fair Value Measurement Under ASC Topic 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). ASC Topic 820 establishes a hierarchy for inputs to valuation techniques used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. There are three levels to the hierarchy based on the reliability of inputs, as follows: Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets and liabilities in markets that are not active. Level 3 - Unobservable inputs for the asset or liability. The degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. Assets and Liabilities Measured at Fair Value on a Recurring Basis The Company measures certain assets and liabilities at fair value on a recurring basis. There were no transfers between fair value measurement levels during any presented period. The following tables summarize the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and December 31, 2020: At December 31, 2021 (In thousands) Level 1 Level 2 Level 3 Total Recurring Fair Value Measurements: Money market mutual funds $ 16,456 $ — $ — $ 16,456 Interest rate swap — ( 200 ) — ( 200 ) Total $ 16,456 $ ( 200 ) $ — $ 16,256 At December 31, 2020 (In thousands) Level 1 Level 2 Level 3 Total Recurring Fair Value Measurements: Money market mutual funds $ 25,662 $ — $ — $ 25,662 Interest rate swap — ( 433 ) — ( 433 ) Total $ 25,662 $ ( 433 ) $ — $ 25,229 Derivative Instruments and Hedging Activities The Company recognizes its interest rate swaps as either assets or liabilities in the accompanying Consolidated Balance Sheets at fair value. The valuation of these derivative instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. As of December 31, 2021, the Company holds one interest rate swap contract which matures on May 30, 2026 and has a notional amount of $ 4.5 million. This contract is designated as a cash flow hedge. During 2021, ineffective portions of the hedge were immaterial. 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, 2021. Page F-18 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We measure certain assets and liabilities at fair value on a nonrecurring basis. These assets and liabilities include equity method investments and other equity investments. 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. The Company's other equity investments are holdings in a privately-held company without a readily determinable market value. The Company remeasures equity securities without readily determinable fair value at fair value when an orderly transaction is identified for an identical or similar investment of the same issuer in accordance with Topic 820. ASU 2019-04 states that the measurement alternative is a nonrecurring fair value measurement. Accordingly, other equity investments without readily determinable fair value are classified within Level 3 in the fair value hierarchy because the Company estimates the value using a combination of observable and unobservable inputs, including valuation ascribed to the issuing company in subsequent financing rounds, volatility in the results of operations of the issuers and rights and obligations of the holdings we own. The Company had no material adjustments of assets and liabilities measured at fair value on a nonrecurring basis during any of the periods presented. There were no transfers between fair value measurement levels during any presented period. 7. Shareholders' Equity Authorized Share Capital The Company’s authorized share capital consists of an unlimited number of common shares, with no stated par value. Issued and Outstanding Share Capital The Company has only one class of stock outstanding, common shares. The authorized stock consists of an unlimited number of common shares with no stated par value, of which 39,640,388 and 39,185,182 shares were issued and outstanding as of December 31, 2021 and 2020, respectively. During the year ended December 31, 2021, the Company repurchased and cancelled 181,320 common shares at a cost of $ 1.4 million due to tax withholding for RSUs vesting. Stock-Based Compensation 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). 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 7,758,211 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, 2021, the Company had outstanding issuances of options of 3,822,000 and RSUs of 206,000 under the Omnibus Plan. The following table summarizes stock-based compensation for the years ended December 31, 2021 and 2020: Year Ended December 31, 2021 2020 Stock-based compensation - options $ 4,197 $ 3,810 Stock-based compensation - restricted stock units 953 1,072 Total $ 5,150 $ 4,882 At December 31, 2021, there was approximately $ 2,594,000 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 1.88 years. As of December 31, 2021, there was approximately $ 591,000 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 0.68 years. Page F-19 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Options The following table summarizes stock option activity for the years ended December 31, 2021 and 2020: Number of options (000's) Weighted average exercise price (1) Weighted average remaining contractual life Aggregate intrinsic value (2) Balance December 31, 2019 2,683 $ 3.36 6.7 years $ 7,790 Issued 1,089 6.18 Exercised ( 643 ) 3.15 Expired / Forfeited ( 72 ) 4.58 Balance December 31, 2020 3,057 $ 4.37 7.9 years $ 10,362 Issued 879 8.44 Exercised ( 28 ) 3.87 Expired / Forfeited ( 86 ) 8.32 Balance December 31, 2021 3,822 $ 5.22 7.4 years $ 3,722 (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 $ 3,722,000 and options exercisable were $ 3,303,000 at December 31, 2021. During the fiscal years ended December 31, 2021 and 2020, 27,597 and 643,297 shares of common stock were issued pursuant to the exercise of stock options, respectively. At December 31, 2021, the Company had 1,906,000 exercisable stock options outstanding with a weighted average exercise price of $ 3.70 and a weighted average remaining contractual life of 6.6 years. 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. 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, 2021 and 2020: 2021 2020 Exercise price $ 5.80 - $ 9.70 $ 5.70 - $ 10.44 Risk-free interest rate 0.60 % - 1.54 % 0.39 % - 1.63 % Expected volatility 60 % - 68 % 66 % - 85 % Expected term 5.65 - 5.76 5.63 - 10 years Expected dividend yield Nil Nil Fair value on date of grant $ 3.35 - $ 5.57 $ 4.10 - $ 7.23 Page F-20 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Restricted Stock Units The Company accounts for Restricted Stock Units ("RSU") 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 following table summarizes restricted stock unit activity for the years ended December 31, 2021 and 2020: Number of RSUs (000's) Weighted average grant price (1) Weighted average remaining contractual life Aggregate intrinsic value (2) Balance December 31, 2019 1,139 $ 2.16 0.55 years $ 7,129 Issued 144 7.29 Vested ( 589 ) 2.33 Expired / Forfeited ( 10 ) 5.70 Balance December 31, 2020 684 $ 3.04 0.22 years $ 5,308 Issued 145 7.34 Vested ( 609 ) 2.76 Expired / Forfeited ( 14 ) 6.91 Balance December 31, 2021 206 $ 6.61 0.68 years $ 1,074 (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, 2021, the Company issued 144,700 RSUs, with a vesting term of one to three years and a fair value between $ 6.38 and $ 8.57 per share. 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. 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 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. Page F-21 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 The following table summarizes phantom share unit activity for the years ended December 31, 2021 and 2020: Number of phantom share units (000's) Value of share equivalents (1) Balance December 31, 2019 1,350 $ 8,370 Issued 346 2,439 Vested ( 601 ) ( 4,201 ) Expired / Forfeited ( 110 ) ( 862 ) Balance December 31, 2020 985 7,644 Issued 394 3,771 Vested ( 656 ) ( 6,282 ) Expired / Forfeited ( 150 ) ( 783 ) Balance December 31, 2021 573 2,991 (1) The value of outstanding share equivalents at the beginning of the period is based on the market price of the Company’s stock at that time; the value of issued share equivalents is based on the market price of the Company’s stock at issuance; the value of vested share equivalents is based on the cash paid at the time of vesting; and the values of expired/forfeited share equivalents and outstanding share equivalents at the end of the period are based on the market price of the Company's stock at the end of the period. The market price of the Company's stock was $ 5.22 and $ 7.76 on December 31, 2021 and December 31, 2020, respectively. The change in fair value of the phantom share units has been charged to the Consolidated Statements of Income and Comprehensive Income and recorded as a liability included in accrued liabilities and long-term accrued liabilities. The total liability associated with phantom share units at December 31, 2021 is $ 1,676,000 , with $ 1,118,000 of this amount included in current accrued liabilities and the remaining portion of $ 558,000 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, 2021 and 2020: Year Ended December 31, 2021 2020 Selling, general and administrative $ 2,614 $ 4,255 The Company paid cash settlements of $ 6,282,000 and $ 4,201,000 during the years ended December 31, 2021 and 2020, respectively, pertaining to vestings of cash-settled phantom share units. 8. 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. Page F-22 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Legal Proceedings As previously disclosed, the Company (through its subsidiary Sleep Management LLC) submitted a purchase order (the “Purchase Order”) in March 2020 to Vyaire Medical, Inc. d/b/a CareFusion Respiratory Technologies (“Vyaire”) for respiratory equipment. The Company ultimately prepaid $ 1.4 million towards the delivery of such respiratory equipment. Vyaire was unable or unwilling to deliver the vast majority of the respiratory equipment referenced in the Purchase Order, and also refused to refund the prepayment amount (less the amounts paid for equipment actually received). On July 29, 2020, the Company (through its subsidiary Sleep Management LLC) filed a lawsuit against Vyaire in the United States District Court for the Western District of Louisiana (the “Court”). This lawsuit was dismissed on December 8, 2020 in connection with the commencement of the lawsuit filed by the Company (through its subsidiary Sleep Management) on November 5, 2020, 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. The Company filed its Answer to the Reconventional Demand on February 12, 2021 and the parties are currently engaged in discovery. We continue to believe that we have valid legal and equitable grounds to recover our outstanding prepayment as a result of Vyaire’s failure to deliver the vast majority of the respiratory equipment referenced in the Purchase Order. We have determined that a loss related to the Reconventional Demand is not probable, and thus have not accrued a liability related to this claim. Although a loss may be reasonably possible, we do not have sufficient information to determine the amount or range of reasonably possible loss with respect to the Reconventional Demand given that the dispute is in the early stages of the legal process. At December 31, 2021, outstanding funds in the amount of $ 0.9 million related to undelivered respiratory equipment are included within other long-term assets. Governmental and Regulatory Matters From time to time we are involved in various external governmental investigations, audits and reviews. Reviews, audits and investigations of this sort can lead to government actions, which can result in the assessment of recoupment of reimbursement, civil or criminal fines or penalties, or other sanctions, including restrictions or changes in the way we conduct business, loss of licensure or exclusion from participation in government healthcare programs. In May of 2021, a final report and recommendation (“Report”) was issued by the OIG regarding an audit by OIG of claims relating to 100 of the Company’s non-invasive ventilation at home (“NIVH”) patients. The OIG asserted that most of the sampled Medicare claims submitted for the monthly rental of non-invasive ventilators did not comply with Medicare requirements. The Company firmly believes that the Report ignores each patient’s diagnosis and supporting documentation of that diagnosis from treating and prescribing physicians and applies clinical guidelines that are contrary to CMS’s accepted standard of care. In late June of 2021, the Company received initial request letters from DME Medicare Administrative Contractors ("MACs") referencing the Report and requesting repayment of purported overpayments. The Company responded to each initial request by submitting a rebuttal and by filing a redetermination appeal as prescribed by the initial request letters and by statute. In September 2021, the MACs informed the Company of unfavorable decisions with respect to the redetermination appeals. In November 2021, the Company filed Reconsideration Appeals and intends to continue to defend itself vigorously through the remaining appeals processes which include, in successive order, Reconsideration decision, Administrative Law Judge appeals, Medicare Appeals Council review, and ultimately through Federal Court, if necess ary. The timing of additional appeals beyond reconsideration are subject to workload constraints of the reviewing body. Based on initial discussions with CMS, a review of the current facts and circumstances as we understand them, and the nature of the requests, we have determined that a loss is not probable but may be reasonably possible. Accordingly, no related accrual has been recorded. The extrapolated value of the 39 associated claims within the 4-year reopening period limited by statute is approximately $ 9 million. Man agement estimates that a possible loss, if any, will not exceed this amount. It is possible that the ultimate resolution of this matter, if unfavorable, could materially and adversely affect the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows. 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 $ 0.8 million and $ 0.8 million for the years ended December 31, 2021 and 2020, respectively. Page F-23 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 9. Other Income CARES Act Funds Received 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. 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. 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. 10. Income Taxes 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. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in its consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company is required to make certain estimates and judgments about the application of tax law, the expected resolution of uncertain tax positions and other matters. In the event that uncertain tax positions are resolved for amounts different than the Company’s estimates, or the related statutes of limitations expire without the assessment of additional income taxes, the Company will be required to adjust the amounts of related assets and liabilities in the period in which such events occur. Such adjustment may have a material impact on the Company’s income tax provision and results of operations. At December 31, 2021 and 2020, the Company had no amounts recorded for uncertain tax positions and does not expect any material changes in uncertain tax benefits during the next 12 months. The Company recognizes interest and penalties related to income tax matters in income tax expense. The 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 2018. The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before the provision for income taxes. The sources and tax effects of the differences are as follows: Year Ended December 31, 2021 December 31, 2020 Net income before income taxes $ 12,503 $ 26,363 Statutory income tax rate 21.0 % 21.0 % Computed provision for income taxes 2,626 5,536 State income tax expense 799 839 Permanent differences 694 ( 41 ) Prior Year True Ups ( 436 ) ( 469 ) Changes in valuation allowance for deferred tax assets ( 306 ) ( 11,032 ) Provision for (recovery of) income taxes $ 3,377 $ ( 5,167 ) Page F-24 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 The significant components of the provision for income taxes for the years ended December 31, 2021 and 2020 are as follows: Year Ended December 31, 2021 December 31, 2020 Current taxes: Federal $ ( 428 ) $ 2,547 State ( 79 ) 1,019 Total current taxes ( 507 ) 3,566 Deferred taxes: Federal $ 3,181 $ ( 6,699 ) State 703 ( 2,034 ) Total deferred taxes 3,884 ( 8,733 ) Provision for (recovery of) income taxes $ 3,377 $ ( 5,167 ) Deferred Income Taxes 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. Page F-25 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 The significant components of the Company’s deferred tax assets and liabilities are as follows: Year Ended December 31, 2021 December 31, 2020 Deferred tax assets: Net operating losses - US $ 508 $ — State fixed asset and net operating losses 514 783 Goodwill 10,639 11,894 Allowance for doubtful accounts 1,828 2,334 Accrued compensation and other 970 1,438 Accrued phantom stock 434 1,384 Stock-based compensation 2,745 2,205 Lease liability 179 348 Charitable contributions 41 — Other 52 112 UNICAP 381 363 Total deferred tax assets $ 18,291 $ 20,861 Deferred tax liabilities: Right-of-use asset $ ( 179 ) $ ( 348 ) Property and equipment ( 13,316 ) ( 11,465 ) Total deferred liabilities $ ( 13,495 ) $ ( 11,813 ) Valuation allowance: Net deferred tax asset before valuation allowance $ 4,796 $ 9,048 Less: valuation allowance ( 9 ) ( 315 ) Net deferred tax asset $ 4,787 $ 8,733 Page F-26 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 11. Earnings Per Share Income per common share is calculated using earnings for the year divided by the weighted average number of shares outstanding during the year . 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: Year Ended December 31, 2021 2020 Numerator - basic and diluted: Net income attributable to shareholders $ 9,126 $ 31,530 Denominator: Basic weighted average number of common shares 39,491,117 38,743,516 Diluted weighted average number of shares 40,680,947 40,525,737 Basic earnings per share $ 0.23 $ 0.81 Diluted earnings per share $ 0.22 $ 0.78 Denominator calculation from basic to diluted: Basic weighted average number of common shares 39,491,117 38,743,516 Stock options and other dilutive securities 1,189,830 1,782,221 Diluted weighted average number of shares 40,680,947 40,525,737 12. Subsequent Events Repurchase and Cancellation of Vested Shares In connection with the RSUs vested in January 2022, the Company repurchased 21,955 shares at fair value and used cash on hand to satisfy statutory tax withholding obligations. These shares were subsequently cancelled by the Company. Page F-27 VIEMED HEALTHCARE, INC. (Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts) December 31, 2021 and 2020 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.