Full Press Release Details
BUSINESS ACQUISITION REPORT
ITEM 1 - IDENTITY OF COMPANY
and Address of Company
Quipt Home Medical Corp. (the "Company"
or "Quipt" or "QHM")
Wilder, Kentucky 41076
Hardik Mehta, Chief Financial Officer
Telephone: (859) 202-3085
ITEM 2 - DETAILS OF ACQUISITION
of Business Acquired
The Company acquired (the "Acquisition"),
indirectly through its subsidiary, QHM Holdings Inc ., Great Elm Healthcare, LLC ("Great Elm"), a division of Great
Elm Group, Inc. (NASDAQ:GEG), in accordance with a membership interest purchase agreement by and among Great Elm, the sellers named
therein (collectively, the "Sellers"), Great Elm DME Holdings, Inc., as the Sellers' representative, QHM
Holdings Inc . and the Company dated January 3, 2023 (the "Purchase Agreement").
Great Elm is a limited liability company organized
under the laws of the State of Delaware and a participating Medicare provider that provides (i) nebulizers, oxygen concentrators,
and continuous positive airway pressure (CPAP) and bilevel positive airway pressure (BiPAP) units; (ii) traditional and non-traditional
durable medical respiratory equipment and services; (iii) non-invasive ventilation equipment, supplies and services; (iv) power
mobility services; and (v) sleep testing.
Great Elm is a respiratory disease-focused durable
medical equipment business with 21 locations in eight states in the Midwest, Southwest and Pacific Northwest. The Acquisition adds seven
new states to Quipt's current geographic coverage, including Arizona, Alaska, Iowa, Kansas, Nebraska, Oregon, and Washington.
The Acquisition adds approximately 8,500 referring physicians bringing Quipt's referring network base to over 32,500 physicians,
while increasing Quipt's active patient count by approximately 70,000, bringing total patient count to approximately 270,000 active
patients for the post-transaction Company.
This combination of two leading clinical respiratory
providers is expected to materially enhance Quipt's already robust patient-centric ecosystem, permitting enterprise-wide
collaboration with key market touchpoints such as hospitals, sleep centers, referring physicians , rehab centers, and long-term care
For further information
about the Acquisition, please refer to the Purchase Agreement, a copy of which has been filed under the Company's profile on the
System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
The aggregate consideration for the sale of all
of the equity interests in Great Elm was $ 80 million (subject to customary adjustments of Great Elm's working capital, existing
debt and expenses), comprised of $73 million in cash, $5 million in assumed debt, and approximately $2 million by the issuance of 431,996
common shares in the capital of Quipt at a deemed price per share equal to $4.63.
In connection with the Acquisition, Quipt drew
down a total of $73 million from its previously disclosed $110 million senior secured credit facility with CIT Bank, N.A.
otherwise requires, all references in this Business Acquisition Report to "$" or "US$" refer to United
on Financial Position
of the Acquisition, Great Elm became a wholly owned subsidiary of the Company.
The effect of the Acquisition on the Company's
financial performance and financial position is presented in the financial statements (including the unaudited pro forma condensed consolidated
financial statements and the accompanying notes thereto) included as Schedules included hereto which form part of this Business Acquisition
Report. The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only and do not purport
to project the future results of operations or financial position of the Company.
No valuation opinions
were obtained within the last 12-months by the Company as required by securities legislation or as required by a Canadian exchange
or a market to support the consideration paid by the Company in connection with the Acquisition.
No informed person, associate or affiliate of
the Corporation, as those terms are defined under applicable securities legislation, was a party to the Acquisition.
ITEM 3 - FINANCIAL STATEMENTS AND OTHER INFORMATION
Pursuant to Part 8 of National Instrument
51-102 - Continuous Disclosure Obligations ("NI 51-102"), the following financial statements are incorporated
by reference in or attached as schedules to this Business Acquisition Report and form part of this Business Acquisition Report:
| Schedule A | The audited consolidated financial statements of Great Elm for the year ended June 30, 2022 and 2021, together with the notes thereto and the independent auditor's report thereon. |
| Schedule B | The unaudited condensed consolidated interim financial statements of Great Elm for the three month periods ended September 30, 2022 and 2021, together with the notes thereto. |
| Schedule C | The unaudited pro forma condensed consolidated financial statements of the Company that give effect to the Acquisition, which are comprised of: (i) the pro forma condensed consolidated statement of financial position as at September 30, 2022; (ii) the pro forma condensed consolidated statement of income (loss) and comprehensive income (loss) for the year ended September 30, 2022, in each case, together with the notes thereto and other information required by Part 8 of NI 51-102. |
| By Reference | The audited consolidated financial statements of the Company for the year ended September 30, 2022, together with the notes thereto and the independent auditor's report thereon. |
Caution Regarding Unaudited Pro Forma Financial
This Business Acquisition Report contains the
unaudited pro forma condensed consolidated financial statements of the Company. Such unaudited pro forma condensed consolidated financial
statements have been prepared using certain of the Company's and Great Elm's respective historical condensed consolidated
financial statements as more particularly described in the notes to such unaudited pro forma condensed consolidated financial statements.
In preparing such unaudited pro forma condensed consolidated financial statements, the Company has not independently verified the financial
statements of Great Elm that were used to prepare the unaudited pro forma condensed consolidated financial statements. The historical
audited condensed consolidated financial information has been adjusted in the unaudited pro forma condensed consolidated financial statements
to give effect to events that are: (i) directly attributable to the pro forma events, for which there are firm commitments and for
which the complete financial effects are objectively determinable; and (ii) with respect to the unaudited pro forma condensed consolidated
statement of comprehensive loss, expected to have a continuing impact on the combined company's results. As such, the impact from
merger-related expenses is not included in the unaudited pro forma condensed consolidated financial statement of income (loss) and comprehensive
income (loss). The unaudited pro forma condensed consolidated financial statements do not reflect any cost savings from operational efficiencies
or synergies that could result from the Acquisition or for liabilities that may result from integration planning. The unaudited pro forma
condensed consolidated financial statements are presented for illustrative purposes only and do not necessarily reflect what the combined
company's financial condition and results of operations would have been had the Acquisition occurred on the dates indicated in Note
2, Basis of Presentation in Schedule C .
The unaudited pro forma condensed consolidated
financial statements also may not be useful in predicting the future financial condition and results of the operations. The actual financial
position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The
pro forma adjustments are based on preliminary estimates of the fair value of the consideration paid and the fair value of the assets
acquired and liabilities assumed, currently available information and certain assumptions that the Company believes are reasonable in
the circumstances, as described in the notes to the unaudited pro forma condensed consolidated financial statements.
As a result of these factors, the actual adjustments
will differ from the pro forma adjustments, and the differences may be material.
Forward-Looking Information
Certain statements contained in this Business
Acquisition Report constitute "forward-looking information" as such term is defined in applicable Canadian securities
legislation (collectively, "forward-looking information"). The words "may", "would", "could",
"should", "potential", "will", "seek", "intend", "plan",
"anticipate", "believe", "estimate", "expect", "outlook", and similar expressions as
they relate to the Company, including: post integration financial results; anticipated pro forma cost savings and synergies
and the timing of capturing them; the Acquisition expecting to be financially accretive to overall growth and cash flow; anticipated cross-selling
opportunities; the acquisition increasing resupply revenue and margins and the timing of such; Great Elm's footprint expected to create
additional opportunities to expand Quipt's access for accretive tuck-in acquisitions; the Acquisition enhancing Quipt's patient-centric
ecosystem; the Acquisition providing the Company with significant additional inorganic and organic growth opportunities; the Company being
able to expand its senior credit facilities when opportunities arise; and the impact the Acquisition will have on the Company's
ability to complete further acquisitions; are intended to identify forward-looking information.
other than statements of historical fact may be forward- looking information. Such statements reflect the Company's
current views and intentions with respect to future events, and current information available to the Company, and are
subject to certain risks, uncertainties and assumptions, including: the Acquisition achieving results at least as good
as historical performances; the financial information regarding the Acquisition being verified when included in the Company's
consolidated financial statements prepared in accordance with generally accepted accounting principles in Canada as set