Full Press Release Details
Quipt Home Medical Corp.
Condensed Consolidated Interim Financial Statements
For the three and nine months ended
June 30, 2023 and 2022
(Expressed in US Dollars)
| Condensed Consolidated Interim Statements of Financial Position | Page 1 | |
| Condensed Consolidated Interim Statements of Income (Loss) and Comprehensive Income (Loss) | Page 2 | |
| Condensed Consolidated Interim Statements of Changes in Shareholders' Equity | Page 3 | |
| Condensed Consolidated Interim Statements of Cash Flows | Page 4 | |
| Notes to the Condensed Consolidated Interim Financial Statements | Pages 5-16 |
Quipt Home Medical Corp.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Expressed in thousands of US Dollars, except per share amounts)
| As at | As at | |||||
| June 30, | September 30, | |||||
| 2023 | 2022 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 20,445 | $ | 8,516 | ||
| Accounts receivable, net | 23,817 | 16,383 | ||||
| Inventory | 19,449 | 15,585 | ||||
| Prepaid and other current assets | 3,188 | 1,052 | ||||
| Total current assets | 66,899 | 41,536 | ||||
| Long-term assets | ||||||
| Property, equipment, and right of use assets, net | 51,401 | 33,497 | ||||
| Goodwill | 50,850 | 28,208 | ||||
| Intangible assets, net | 72,961 | 28,887 | ||||
| Other assets | 274 | 86 | ||||
| Total long-term assets | 175,486 | 90,678 | ||||
| TOTAL ASSETS | $ | 242,385 | $ | 132,214 | ||
| LIABILITIES | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | 24,373 | $ | 13,841 | ||
| Accrued liabilities | 5,329 | 3,451 | ||||
| Current portion of equipment loans | 13,198 | 5,473 | ||||
| Current portion of lease liabilities | 4,704 | 3,304 | ||||
| Current portion of senior credit facility | 3,353 | 6,857 | ||||
| Deferred revenue | 4,451 | 3,036 | ||||
| Purchase price payable | 359 | 5,778 | ||||
| Total current liabilities | 55,767 | 41,740 | ||||
| Long-term Liabilities | ||||||
| Equipment loans | 106 | 234 | ||||
| Lease liabilities | 13,562 | 7,195 | ||||
| Senior credit facility | 61,966 | 3,378 | ||||
| SBA Loan | - | 120 | ||||
| TOTAL LIABILITIES | 131,401 | 52,667 | ||||
| SHAREHOLDERS' EQUITY | ||||||
| Capital stock | 247,444 | 214,254 | ||||
| Contributed surplus | 26,024 | 26,317 | ||||
| Accumulated deficit | (162,484) | (161,024) | ||||
| TOTAL SHAREHOLDERS' EQUITY | 110,984 | 79,547 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 242,385 | $ | 132,214 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Quipt Home Medical Corp.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(Expressed in thousands of US Dollars, except per share amounts)
| Three Months | Three Months | Nine Months | Nine Months | |||||||||||
| Ended June 30, | Ended June 30, | Ended June 30, | Ended June 30, | |||||||||||
| Notes | 2023 | 2022 | 2023 | 2022 | ||||||||||
| Revenue | ||||||||||||||
| Rentals of medical equipment | $ | 25,707 | $ | 18,106 | $ | 68,648 | $ | 50,953 | ||||||
| Sales of medical equipment and supplies | 34,577 | 18,586 | 90,571 | 48,817 | ||||||||||
| Total revenues | 60,284 | 36,692 | 159,219 | 99,770 | ||||||||||
| Cost of inventory sold | 16,630 | 8,906 | 41,613 | 23,919 | ||||||||||
| Operating expenses | 13 | 27,385 | 16,926 | 74,533 | 46,597 | |||||||||
| Bad debt expense | 2,425 | 3,404 | 7,190 | 8,983 | ||||||||||
| Depreciation | 10,208 | 4,602 | 24,328 | 14,159 | ||||||||||
| Amortization of intangible assets | 7 | 1,490 | 761 | 3,746 | 1,676 | |||||||||
| Stock-based compensation | 11 | 2,034 | 1,325 | 3,911 | 4,596 | |||||||||
| Acquisition-related costs | 3 | (25) | 156 | 1,132 | 223 | |||||||||
| Gain on disposal of property and equipment | (33) | (7) | (88) | (10) | ||||||||||
| Other income from government grant | - | - | - | (4,254) | ||||||||||
| Operating income | 170 | 619 | 2,854 | 3,881 | ||||||||||
| Financing expenses | ||||||||||||||
| Interest expense, net | 1,969 | 522 | 4,704 | 1,507 | ||||||||||
| Loss (gain) on foreign currency transactions | (442) | (44) | (430) | 82 | ||||||||||
| Loss on extinguishment of debt | - | - | 30 | - | ||||||||||
| Change in fair value of debentures | - | (177) | - | (1,235) | ||||||||||
| Income (loss) before taxes | (1,357) | 318 | (1,450) | 3,527 | ||||||||||
| Provision (benefit) for income taxes | 14 | (323) | 155 | 10 | 458 | |||||||||
| Net income (loss) | $ | (1,034) | $ | 163 | $ | (1,460) | $ | 3,069 | ||||||
| Net income (loss) per share | 15 | |||||||||||||
| Basic earnings (loss) per share | $ | (0.03) | $ | 0.00 | $ | (0.04) | $ | 0.09 | ||||||
| Diluted earnings (loss) per share | $ | (0.03) | $ | 0.00 | $ | (0.04) | $ | 0.08 | ||||||
| Weighted average number of common shares outstanding (in thousands): | ||||||||||||||
| Basic | 40,584 | 33,559 | 37,434 | 33,449 | ||||||||||
| Diluted | 40,584 | 37,863 | 37,434 | 38,109 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Quipt Home Medical Corp.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS'
(Expressed in thousands of US Dollars, except per share amounts)
| Number of | Total | ||||||||||||||||||
| shares | Capital | Contributed | Shares to | Accumulated | shareholders' | ||||||||||||||
| Notes | (000's) | stock | surplus | be Issued | Deficit | equity | |||||||||||||
| Balance September 30, 2021 | 33,350 | $ | 202,827 | $ | 21,001 | $ | 657 | $ | (165,863) | $ | 58,622 | ||||||||
| Net income | - | - | - | - | 3,069 | 3,069 | |||||||||||||
| Conversion of debentures | 10 | 160 | 884 | - | - | - | 884 | ||||||||||||
| Stock options exercised | 11 | 22 | 204 | (25) | - | - | 179 | ||||||||||||
| Compensation options exercised | 11 | 115 | 528 | (153) | - | - | 375 | ||||||||||||
| Stock-based compensation | 11 | - | - | 4,596 | - | - | 4,596 | ||||||||||||
| Balance June 30, 2022 | 33,647 | $ | 204,443 | $ | 25,419 | $ | 657 | $ | (162,794) | $ | 67,725 | ||||||||
| Balance September 30, 2022 | 35,605 | $ | 214,254 | $ | 26,317 | $ | - | $ | (161,024) | $ | 79,547 | ||||||||
| Net loss | - | - | - | - | (1,460) | (1,460) | |||||||||||||
| Acquisition of Great Elm | 3 | 432 | 2,060 | - | - | - | 2,060 | ||||||||||||
| Issuance of shares, net of issuance costs | 11 | 5,409 | 27,866 | - | - | - | 27,866 | ||||||||||||
| Settlement of restricted stock units | 11 | 526 | 2,791 | (4,129) | - | - | (1,338) | ||||||||||||
| Stock options exercised | 11 | 101 | 473 | (75) | - | - | 398 | ||||||||||||
| Change in cumulative translation adjustment | - | - | - | - | - | - | |||||||||||||
| Stock-based compensation | 11 | - | - | 3,911 | - | - | 3,911 | ||||||||||||
| Balance June 30, 2023 | 42,073 | $ | 247,444 | $ | 26,024 | $ | - | $ | (162,484) | $ | 110,984 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Quipt Home Medical Corp.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)
(Expressed in thousands of US Dollars, except per share amounts)
| Nine months | Nine months | |||||||
| ended June 30, | ended June 30, | |||||||
| Notes | 2023 | 2022 | ||||||
| Operating activities | ||||||||
| Net income (loss) | $ | (1,460) | $ | 3,069 | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 7 | 28,074 | 15,835 | |||||
| Amortization of financing costs and accretion of purchase price payable | 3, 10 | 447 | 168 | |||||
| Interest expense, net of amortization and accretion | 10 | 4,257 | 1,339 | |||||
| Cash paid for interest | (3,808) | (1,520) | ||||||
| Loss on foreign currency transactions | (430) | 82 | ||||||
| Gain on fair value of convertible debentures | 10 | - | (1,235) | |||||
| Gain on disposal of property and equipment | (88) | (10) | ||||||
| Loss on extinguishment of debt | 30 | - | ||||||
| Stock-based compensation | 11 | 3,911 | 4,596 | |||||
| Other income from government grant | - | (4,254) | ||||||
| Adjustments to purchase price payable | (95) | - | ||||||
| Provision for income taxes | 10 | 458 | ||||||
| Cash paid for income taxes | (515) | (468) | ||||||
| Change in working capital (net of acquisitions): | ||||||||
| Net (increase) decrease in accounts receivable | (1,902) | 497 | ||||||
| Net increase in inventory | (2,469) | (1,081) | ||||||
| Net (increase) decrease in prepaid and other current assets | (1,578) | 801 | ||||||
| Net increase (decrease) in deferred revenue | 393 | (117) | ||||||
| Net increase in accounts payables and accrued liabilities | 2,535 | 1,273 | ||||||
| Net cash flow provided by operating activities | 27,312 | 19,433 | ||||||
| Investing activities | ||||||||
| Purchase of property and equipment | 6 | (4,959) | (6,020) | |||||
| Cash proceeds from sale of property and equipment | 84 | 283 | ||||||
| Cash paid for acquisitions, net of cash acquired | (71,869) | (28,687) | ||||||
| Net cash flow used in investing activities | (76,744) | (34,424) | ||||||
| Financing activities | ||||||||
| Repayments of loans | 10 | (12,651) | (9,214) | |||||
| Repayments of leases | 10 | (3,200) | (2,857) | |||||
| Issuance of debt under senior credit facility | 10 | 64,000 | - | |||||
| Repayments of senior credit facility | 10 | (8,788) | - | |||||
| Proceeds from borrowings on the revolving credit facility | 10 | - | 12,000 | |||||
| Issuance costs related to senior credit facility | 10 | (467) | - | |||||
| Payments of purchase price payable | 3 | (4,889) | (1,468) | |||||
| Settlement of restricted stock units | 11 | (1,338) | - | |||||
| Issuance of shares, net of issuance costs | 27,866 | - | ||||||
| Proceeds from exercise of compensation options | 11 | - | 375 | |||||
| Proceeds from exercise of options | 11 | 398 | 179 | |||||
| Net cash flow provided by (used in) financing activities | 60,931 | (985) | ||||||
| Net increase (decrease) in cash | 11,499 | (15,976) | ||||||
| Effect of exchange rate changes on cash held in foreign currencies | 430 | (98) | ||||||
| Cash, beginning of period | 8,516 | 34,612 | ||||||
| Cash, end of period | $ | 20,445 | $ | 18,538 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) JUNE 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
Quipt Home Medical Corp. ("Quipt" or the "Company") was incorporated under the Business Corporations Act (Alberta) on March 5, 1993. On December 30, 2013, the Company was continued into British Columbia, Canada. The address of the registered office is 666 Burrard St, Vancouver, British Columbia, V6C 2Z7. The head office is located at 1019 Town Drive, Wilder, Kentucky, United States. The Company is a participating Medicare provider that provides i) nebulizers, oxygen concentrators, and CPAP (continuous positive airway pressure) and BiPAP (bi level positive air pressure) units; ii) traditional and non-traditional durable medical equipment and services; and iii) non-invasive ventilation equipment, supplies and services.
Basis of measurement
These consolidated financial statements have been prepared on a going concern basis that assumes that the Company will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of operations.
Statement of compliance
These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, "Interim Financial Reporting", using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. These condensed consolidated interim financial statements do not include all the disclosures required in annual consolidated financial statements and should be read in conjunction with the Company's audited consolidated financial statements for the year ended September 30, 2022.
The Company has followed the same basis of presentation, accounting policies and method of computation for these condensed consolidated interim financial statements as disclosed in the annual audited consolidated financial statements for the year ended September 30, 2022.
The unaudited consolidated financial statements were approved and authorized for issuance by the Board of Directors on August 14, 2023.
Acquisition of Great Elm Healthcare, LLC
On January 3, 2023, the Company, through one of its indirect wholly-owned subsidiaries, acquired Great Elm Healthcare, LLC ("Great Elm"). The purchase price was $73,929,000, which is comprised of approximately $72,689,000 in cash to the sellers and 431,996 Quipt common shares at a closing price per share of $4.77 for $2,060,000, less $820,000 of cash acquired. The net cash was obtained from the delayed draw term loan and revolving credit facility of the senior credit facility described in Note 10. The Company expensed $1,084,000 of professional fees in conjunction with the acquisition for the nine months ended June 30, 2023.
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) JUNE 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
The pro forma revenues and net income for Great Elm for the nine months ended June 30, 2023 as if the acquisition had occurred on October 1, 2022 was approximately $50,000,000 and $2,500,000, respectively, of which approximately $33,000,000 and $2,400,000 were recognized in the period from January 3, 2023 to June 30, 2023.
The fair value of the acquired assets and liabilities is provisional pending final valuations of the assets and liabilities and is as follows:
| Accounts receivable | $ | 5,531 | |
| Inventory | 1,398 | ||
| Prepaid and other current assets | 584 | ||
| Property, equipment, and right of use assets | 13,261 | ||
| Goodwill | 23,186 | ||
| Intangible assets | 47,820 | ||
| Other assets | 161 | ||
| Accounts payable | (6,085) | ||
| Accrued liabilities | (3,845) | ||
| Deferred revenue | (1,022) | ||
| Equipment loans | (4,259) | ||
| Lease liabilities | (2,801) | ||
| Net assets acquired | $ | 73,929 | |
| Cash paid at closing | $ | 72,689 | |
| Cash acquired | (820) | ||
| Equity issued at closing | 2,060 | ||
| Consideration paid or payable | $ | 73,929 |
The goodwill is attributable to expected synergies from the combining operations. All of the goodwill is deductible for income tax purposes.
Purchase Price Payable
The purchase price payable included on the statements of financial position consists of amounts related to prior period acquisitions. Below is the movement in purchase price payable for the nine months ended June 30, 2023 and 2022, respectively:
| Amount | |||
| Balance September 30, 2021 (current $2,383, long-term $133) | $ | 2,516 | |
| Addition from acquisitions | 5,762 | ||
| Accretion of interest | 63 | ||
| Payments | (1,468) | ||
| Balance June 30, 2022 (current $6,873, long-term $0) | $ | 6,873 | |
| Balance September 30, 2022 (current $5,778, long-term $0) | $ | 5,778 | |
| Adjustments on prior acquisitions | (639) | ||
| Accretion of interest | 109 | ||
| Payments | (4,889) | ||
| Balance June 30, 2023 (current $359, long-term $0) | $ | 359 |
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) JUNE 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
Of the adjustments on prior acquisitions for the nine months ended June 30, 2023, $544,000 was adjusted through goodwill and $95,000 was included in "Acquisition-related costs" on the condensed consolidated interim statements of income (loss).
Accounts receivable represent amounts due from insurance companies and patients. As of June 30, 2023, the Company has approximately 12% of the Company's receivables due from Medicare:
| As at | As at | |||||
| June 30, 2023 | September 30, 2022 | |||||
| Gross receivable | $ | 32,550 | $ | 27,122 | ||
| Reserve for expected credit losses | (8,733) | (10,739) | ||||
| Total | $ | 23,817 | $ | 16,383 |
Inventory was comprised of the following as at June 30, 2023 and September 30, 2022:
| As at June 30, | As at September 30, | |||||
| 2023 | 2022 | |||||
| Serialized | $ | 7,590 | $ | 5,814 | ||
| Non-serialized | 12,073 | 9,854 | ||||
| Reserve for slow-moving | (214) | (83) | ||||
| Total Inventory | $ | 19,449 | $ | 15,585 |
The expense for slow-moving inventory is included within cost of inventory sold in the condensed consolidated statement of income (loss) and comprehensive income (loss).
The property and equipment and right of use assets was comprised of the following:
| As at | As at | |||||
| Cost | June 30, 2023 | September 31, 2022 | ||||
| Property and equipment, net | $ | 32,776 | $ | 22,750 | ||
| Right of use assets, net | 18,625 | 10,747 | ||||
| Total | $ | 51,401 | $ | 33,497 |
Rental equipment transferred from inventory during the nine months ended June 30, 2023 and 2022 was $20,187,000 and $12,029,000 respectively. For the nine months ended June 30, 2023 and 2022, the Company obtained equipment loans (Note 10) of $15,839,000 and $6,183,000, respectively, with the balance of $4,348,000 and $5,846,000 paid in cash, respectively.
The following is the activity in goodwill and intangible assets for the nine months ended June 30, 2023 and 2022:
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) JUNE 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
| Sub-total | |||||||||||||||
| intangibles | |||||||||||||||
| Customer | Other | with finite | |||||||||||||
| Cost | Goodwill | relationships | Intangibles | lives | Total | ||||||||||
| Balance September 30, 2021 | $ | 12,456 | $ | 20,690 | $ | 8,109 | $ | 28,799 | $ | 41,255 | |||||
| Acquisitions | 22,120 | - | 5,300 | 5,300 | 27,420 | ||||||||||
| Disposals | - | - | (2) | (2) | (2) | ||||||||||
| Balance June 30, 2022 | $ | 34,576 | $ | 20,690 | $ | 13,407 | $ | 34,097 | $ | 68,673 | |||||
| Balance September 30, 2022 | $ | 28,208 | 34,898 | 10,499 | $ | 45,397 | $ | 73,605 | |||||||
| Acquisitions | 23,186 | 42,000 | 5,820 | 47,820 | 71,006 | ||||||||||
| Adjustments to prior year acquisitions | (544) | - | - | - | (544) | ||||||||||
| Balance June 30, 2023 | $ | 50,850 | $ | 76,898 | $ | 16,319 | $ | 93,217 | $ | 144,067 |
| Sub-total | |||||||||||||||
| intangibles | |||||||||||||||
| Customer | Other | with finite | |||||||||||||
| Accumulation amortization | Goodwill | relationships | Intangibles | lives | Total | ||||||||||
| Balance September 30, 2021 | $ | - | $ | 8,267 | $ | 5,658 | $ | 13,925 | $ | 13,925 | |||||
| Amortization | - | - | 1,676 | 1,676 | 1,676 | ||||||||||
| Disposals | - | - | (2) | (2) | (2) | ||||||||||
| Balance June 30, 2022 | $ | - | $ | 8,267 | $ | 7,332 | $ | 15,599 | $ | 15,599 | |||||
| Balance September 30, 2022 | $ | - | $ | 10,345 | $ | 6,165 | $ | 16,510 | $ | 16,510 | |||||
| Amortization | - | 2,985 | 761 | 3,746 | 3,746 | ||||||||||
| Balance June 30, 2023 | $ | - | $ | 13,330 | $ | 6,926 | $ | 20,256 | $ | 20,256 |
| Sub-total | |||||||||||||||
| intangibles | |||||||||||||||
| Customer | Other | with finite | |||||||||||||
| Net carrying amount | Goodwill | relationships | Intangibles | lives | Total | ||||||||||
| Balance September 30, 2021 | $ | 12,456 | $ | 12,423 | $ | 2,451 | $ | 14,874 | $ | 27,330 | |||||
| Balance June 30, 2022 | $ | 34,576 | $ | 12,423 | $ | 6,075 | $ | 18,498 | $ | 53,074 | |||||
| Balance September 30, 2022 | $ | 28,208 | $ | 24,553 | $ | 4,334 | $ | 28,887 | $ | 57,095 | |||||
| Balance June 30, 2023 | $ | 50,850 | $ | 63,568 | $ | 9,393 | $ | 72,961 | $ | 123,811 |
During the year ended September 30, 2020, the Company received payments related to the US CARES Act.
Payroll Protection Plan ("PPP')
During April 2020, the Company received $4,254,000 related to the PPP, which was to assist companies in maintaining their workforce. The loans and accrued interest were forgivable if the borrower uses the loan proceeds for eligible purposes. On March 23, 2022, the loan was forgiven, and "other income from government grant" was recorded in the condensed consolidated interim financial statements for the nine months ended June 30, 2022. No balance remained on the balance sheet as of June 30, 2023 and September 30, 2022.
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) JUNE 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
Activity for deferred revenue for the nine months ended June 30, 2023 and 2022 is as follows:
| For the nine | For the nine | |||||
| months ended | months ended | |||||
| June 30, 2023 | June 30, 2022 | |||||
| Beginning Balance | $ | 3,036 | $ | 2,452 | ||
| Acquisitions | 1,022 | 424 | ||||
| Net change | 393 | (118) | ||||
| Ending Balance | $ | 4,451 | $ | 2,758 |
Senior Credit Facility
In September 2022, the Company entered into a five-year, $110,000,000 senior credit facility ("Facility") with a group of US banks. The facility consists of a.) a delayed draw term loan facility of $85,000,000, of which $64,000,000 was drawn on January 3, 2023, to partially fund the acquisition of Great Elm, b.) a term loan of $5,000,000 that was drawn at closing, and c.) a $20,000,000 revolving credit facility. The Facility amended the $20,000,000 revolving credit facility that was entered into in September 2020. The Facility is secured by substantially all assets of the Company and is subject to certain financial covenants.
The Facility bears interest at variable rates ranging in length from one to three months and has fees for unused balances. The rate is based on a secured overnight financing rate plus a spread of 2.1% to 2.85% (2.6% as of June 30, 2023) based on the Company's leverage ratio. The Company is required to obtain interest rate protection agreements covering at least half of the outstanding principal amount by November 2023.
As of June 30, 2023, the outstanding balances under the Facility totaled $67,213,000, comprised of $62,400,000 on the delayed draw term loan and $4,813,000 on the term loan, both bearing interest at 8.0%. The delayed draw term loan is repayable in quarterly installments of $800,000, with the balance due at maturity. The term loan is repayable in quarterly installments of $62,500, with the balance due at maturity. The revolving credit facility has no balance as of June 30, 2023.
Interest expense on the Facility was $1,380,000 and $3,000,000 for the three and nine months ended June 30, 2023, respectively. The fair value of the facility approximates the carrying value as of June 30, 2023 and September 30, 2022.
The Company has cumulatively incurred $2,246,000 in financing costs to obtain the Facility, which is reflected as a reduction of the outstanding balance and will be amortized as interest expense using the effective interest method over the life of the Facility. During the three and nine months ended June 30, 2023, $114,000 and $338,000 of amortization of deferred financing costs was recorded, respectively.
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) JUNE 30, 2023 and 2022
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
The revolving credit facility that was replaced with the Facility incurred issuance costs that were being amortized on a straight-line over the four-year term of the facility for a total of $35,000 and $105,000 for the three and nine months ended June 30, 2022, respectively.
A summary of the balances related to the Facility as of June 30, 2023 and September 30, 2022 is as follows:
| As of | As of | ||||||
| June 30, 2023 | September 30, 2022 | ||||||
| Delayed draw term loan | $ | 62,400 | $ | - | |||
| Term loan | 4,813 | 5,000 | |||||
| Revolving credit facility | - | 7,000 | |||||
| Total principal | 67,213 | 12,000 | |||||
| Deferred financing costs | (1,894) | (1,765) | |||||
| Net carrying value | $ | 65,319 | $ | 10,235 | |||
| Current portion | 3,353 | 6,857 | |||||
| Long-term portion | 61,966 | 3,378 | |||||
| Net carrying value | $ | 65,319 | $ | 10,235 |
On March 7, 2019, the Company issued C$15,000,000 in 8.0% Convertible Unsecured Debentures due March 7, 2024, with interest payable semi-annually on June 30 and December 31. Each C$1,000 (US$807) debenture was convertible at the option of the holder into 192.31 common shares. Beginning March 9, 2022, the Company could force conversion of the outstanding principal at a conversion price of C$5.20 per share, if the daily volume weighted average price of the common shares exceeds C$6.48 per share for twenty consecutive trading days. The Company exercised this option during the year ended September 30, 2022. No debentures remain outstanding as of June 30, 2023 or September 30, 2022.
The debentures contained multiple embedded derivatives including conversion right, forced conversion option and payment in lieu of common shares. Since the Company was unable to measure the fair value of embedded derivatives reliably, it had chosen to designate the convertible debentures in their entirety (including conversion right, forced conversion option and payment in lieu of common shares) to be subsequently measured at fair value through profit or loss (FVTPL). The debentures were valued at fair value using the current trading price, and a gain of $177,000 and $1,235,000 was recorded for the three and nine months ended June 30, 2022, respectively.
The Company is offered financing arrangements from the Company's suppliers and the suppliers' designated financial institutions, under which payments for certain invoices or products can be financed and paid over an extended period. The financial institution pays the supplier when the original invoice becomes due, and the Company pays the third-party financial institution over a period of time. In most cases, the supplier accepts a discounted amount from the financial institution and the Company repays the financial institution the face amount of the invoice with no stated interest, in twelve equal monthly installments. The Company used an incremental borrowing rate of 6% - 7% to impute interest on these arrangements. There are no covenants with the loans and the carrying value of the equipment that is pledged as security against the loans is $23,375,000 and $14,949,000 as of June 30, 2023 and September 30, 2022, respectively.
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) JUNE 30, 2023 and 2022