Full Press Release Details
Quipt Home Medical Corp.
Condensed Consolidated Interim Financial Statements
For the three and nine months ended
June 30, 2024 and 2023
(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 5-15 |
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, | |||||||
| Notes | 2024 | 2023 | ||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 14,403 | $ | 17,209 | ||||
| Accounts receivable, net | 4 | 31,411 | 25,978 | |||||
| Inventory | 5 | 22,601 | 18,414 | |||||
| Prepaid and other current assets | 5,827 | 3,832 | ||||||
| Total current assets | 74,242 | 65,433 | ||||||
| Long-term assets | ||||||||
| Property, equipment, and right of use assets, net | 6 | 52,071 | 53,405 | |||||
| Goodwill | 7 | 52,303 | 52,825 | |||||
| Intangible assets, net | 7 | 69,470 | 74,040 | |||||
| Other assets | 1,698 | 1,705 | ||||||
| Total long-term assets | 175,542 | 181,975 | ||||||
| TOTAL ASSETS | $ | 249,784 | $ | 247,408 | ||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 32,629 | $ | 24,736 | ||||
| Accrued liabilities | 3,902 | 7,282 | ||||||
| Current portion of equipment loans | 9 | 13,335 | 14,114 | |||||
| Current portion of lease liabilities | 9 | 5,899 | 5,122 | |||||
| Current portion of senior credit facility | 9 | 6,195 | 3,352 | |||||
| Deferred revenue | 8 | 4,216 | 4,511 | |||||
| Purchase price payable | 3 | 644 | 1,457 | |||||
| Total current liabilities | 66,820 | 60,574 | ||||||
| Long-term Liabilities | ||||||||
| Equipment loans | 9 | 96 | 233 | |||||
| Lease liabilities | 9 | 13,544 | 14,028 | |||||
| Senior credit facility | 9 | 58,948 | 61,114 | |||||
| Derivative liability - interest rate swap | 9 | 170 | - | |||||
| Deferred income taxes | 405 | 344 | ||||||
| TOTAL LIABILITIES | 139,983 | 136,293 | ||||||
| SHAREHOLDERS' EQUITY | ||||||||
| Capital stock | 10 | 250,241 | 247,530 | |||||
| Contributed surplus | 27,191 | 27,393 | ||||||
| Accumulated deficit | (167,461) | (163,808) | ||||||
| Accumulated other comprehensive loss | 9 | (170) | - | |||||
| TOTAL SHAREHOLDERS' EQUITY | 109,801 | 111,115 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 249,784 | $ | 247,408 |
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, | |||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Revenue | ||||||||||||
| Rentals of medical equipment | $ | 26,739 | $ | 25,707 | $ | 81,506 | $ | 68,648 | ||||
| Sales of medical equipment and supplies | 37,228 | 34,577 | 111,779 | 90,571 | ||||||||
| Total revenue | 63,967 | 60,284 | 193,285 | 159,219 | ||||||||
| Cost of inventory sold | 16,694 | 16,630 | 51,260 | 41,613 | ||||||||
| Operating expenses | 30,593 | 27,385 | 91,096 | 74,533 | ||||||||
| Bad debt expense | 3,208 | 2,425 | 8,702 | 7,190 | ||||||||
| Depreciation | 10,943 | 10,208 | 32,208 | 24,328 | ||||||||
| Amortization of intangible assets | 1,519 | 1,490 | 4,570 | 3,746 | ||||||||
| Stock-based compensation | 483 | 2,034 | 2,154 | 3,911 | ||||||||
| Acquisition-related costs | 188 | (25) | 393 | 1,132 | ||||||||
| Loss (gain) on disposal of property and equipment | (51) | (33) | (51) | (88) | ||||||||
| Operating income | 390 | 170 | 2,953 | 2,854 | ||||||||
| Financing expenses | ||||||||||||
| Interest expense, net | 1,892 | 1,969 | 5,735 | 4,704 | ||||||||
| Loss (gain) on foreign currency transactions | 128 | (442) | 145 | (430) | ||||||||
| Loss on extinguishment of debt | - | - | - | 30 | ||||||||
| Share of loss in equity method investment | 71 | - | 243 | - | ||||||||
| Loss before income taxes | (1,701) | (1,357) | (3,170) | (1,450) | ||||||||
| Provision (benefit) for income taxes | - | (323) | 483 | 10 | ||||||||
| Net loss | $ | (1,701) | $ | (1,034) | $ | (3,653) | $ | (1,460) | ||||
| Other comprehensive income (loss) | ||||||||||||
| Change in fair value of derivative liability - interest rate swap | 105 | - | (170) | - | ||||||||
| Comprehensive loss | $ | (1,596) | $ | (1,034) | $ | (3,823) | $ | (1,460) | ||||
| Net loss per share | ||||||||||||
| Basic loss per share | $ | (0.04) | $ | (0.03) | $ | (0.09) | $ | (0.04) | ||||
| Diluted loss per share | $ | (0.04) | $ | (0.03) | $ | (0.09) | $ | (0.04) | ||||
| Weighted average number of common shares outstanding: | ||||||||||||
| Basic | 42,623 | 40,584 | 42,303 | 37,434 | ||||||||
| Diluted | 42,623 | 40,584 | 42,303 | 37,434 |
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 | Accumulated | Total | |||||||||||||||||
| Shares | Capital | Contributed | Accumulated | Other Comprehensive | shareholders' | ||||||||||||||
| Notes | (000's) | stock | surplus | Deficit | Loss | equity | |||||||||||||
| Balance September 30, 2022 | 35,605 | $ | 214,254 | $ | 26,317 | $ | (161,024) | $ | - | $ | 79,547 | ||||||||
| Net loss | - | - | - | (1,460) | - | (1,460) | |||||||||||||
| Acquisition of Great Elm | 432 | 2,060 | - | - | - | 2,060 | |||||||||||||
| Issuance of shares, net of issuance costs | 10 | 5,409 | 27,866 | - | - | - | 27,866 | ||||||||||||
| Settlement of restricted stock units | 10 | 526 | 2,791 | (4,129) | - | - | (1,338) | ||||||||||||
| Exercise of options | 10 | 101 | 473 | (75) | - | - | 398 | ||||||||||||
| Stock-based compensation | 10 | - | - | 3,911 | - | - | 3,911 | ||||||||||||
| Balance June 30, 2023 | 42,073 | $ | 247,444 | $ | 26,024 | $ | (162,484) | $ | - | $ | 110,984 | ||||||||
| Balance September 30, 2023 | 42,102 | $ | 247,530 | $ | 27,393 | $ | (163,808) | $ | - | $ | 111,115 | ||||||||
| Net loss | - | - | - | (3,653) | - | (3,653) | |||||||||||||
| Change in fair value of derivative liability - interest rate swap | 9 | - | - | - | - | (170) | (170) | ||||||||||||
| Settlement of restricted stock units | 469 | 1,591 | (1,804) | - | - | (213) | |||||||||||||
| Exercise of options | 10 | 519 | 1,120 | (552) | - | - | 568 | ||||||||||||
| Stock-based compensation | 10 | - | - | 2,154 | - | - | 2,154 | ||||||||||||
| Balance June 30, 2024 | 43,090 | $ | 250,241 | $ | 27,191 | $ | (167,461) | $ | (170) | $ | 109,801 |
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 | 2024 | 2023 | ||||||
| Operating activities | ||||||||
| Net loss | $ | (3,653) | (1,460) | |||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 36,778 | 28,074 | ||||||
| Amortization of financing costs and accretion of purchase price payable | 3, 9 | 417 | 447 | |||||
| Interest expense, net of amortization and accretion | 5,318 | 4,257 | ||||||
| Cash paid for interest | (5,546) | (3,808) | ||||||
| Loss (gain) on foreign currency transactions | 145 | (430) | ||||||
| Share of loss in equity method investment | 243 | - | ||||||
| Loss on extinguishment of debt | - | 30 | ||||||
| Gain on disposal of property and equipment | (51) | (88) | ||||||
| Stock-based compensation | 10 | 2,154 | 3,911 | |||||
| Adjustment to purchase price payable | (29) | (95) | ||||||
| Provision for income taxes | 483 | 10 | ||||||
| Cash paid for income taxes | (1,140) | (515) | ||||||
| Change in working capital: | ||||||||
| Net increase in accounts receivable | (5,433) | (1,902) | ||||||
| Net increase in inventory | (4,186) | (2,469) | ||||||
| Net increase in prepaid and other current assets | (2,022) | (1,578) | ||||||
| Net increase (decrease) in deferred revenue | (295) | 393 | ||||||
| Net increase in accounts payables and accrued liabilities | 5,459 | 2,535 | ||||||
| Net cash flow provided by operating activities | 28,642 | 27,312 | ||||||
| Investing activities | ||||||||
| Purchase of property and equipment | 6 | (6,852) | (4,959) | |||||
| Cash proceeds from sale of property and equipment | 112 | 84 | ||||||
| Cash paid for equity method investment | 3 | (210) | - | |||||
| Cash paid for acquisitions | - | (71,869) | ||||||
| Net cash flow provided by (used in) investing activities | (6,950) | (76,744) | ||||||
| Financing activities | ||||||||
| Repayments of loans | 9 | (20,327) | (12,651) | |||||
| Repayments of leases | 9 | (4,377) | (3,200) | |||||
| Repayments of senior credit facility | (2,588) | (8,788) | ||||||
| Issuance costs related to credit facility | (10) | (467) | ||||||
| Issuance of debt under senior credit facility | 2,888 | 64,000 | ||||||
| Issuance of shares, net of issuance costs | - | 27,866 | ||||||
| Settlement of restricted stock units | (213) | (1,338) | ||||||
| Proceeds from exercise of options | 568 | 398 | ||||||
| Payments of purchase price payable | 3 | (294) | (4,889) | |||||
| Net cash flow provided by (used in) financing activities | (24,353) | 60,931 | ||||||
| Effect of exchange rate changes on cash held in foreign currencies | (145) | 430 | ||||||
| Net increase (decrease) in cash | (2,806) | 11,929 | ||||||
| Cash, beginning of period | 17,209 | 8,516 | ||||||
| Cash, end of period | $ | 14,403 | $ | 20,445 |
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, 2024 and 2023
(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 continued into British Columbia, Canada. The address of the registered office is 1133 Melville St Suite 2700, Vancouver, British Columbia, V6E 4E5. 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, 2023.
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, 2023.
The unaudited consolidated financial statements were approved and authorized for issuance by the Board of Directors on August 14, 2024.
Investment in DMEScripts, LLC
In July 2023, the Company, through QHM Investments I, LLC, acquired an 8.3% stake in DMEScripts, LLC for $1,500,000. DMEScripts, LLC is an independent e-prescribe company in the US that automates the medical equipment ordering process. This technology is dedicated to improving the patient, prescriber, and provider experience by eliminating inefficiencies and reducing paperwork. During the nine months ended June 30, 2024, additional investments of $210,000 were made, which increased the Company's ownership to 8.6%.
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) June 30, 2024 and 2023
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
Purchase Price Payable
The purchase price payable included on the statements of financial position consists of amounts related to prior period business acquisitions. Below is the movement in purchase price payable for the nine months ended June 30, 2024 and 2023, respectively:
| Amount | |||
| Balance September 30, 2022 | $ | 5,778 | |
| Adjustments on prior acquisitions | (639) | ||
| Accretion of interest | 109 | ||
| Payments | (4,889) | ||
| Balance June 30, 2023 | $ | 359 | |
| Balance September 30, 2023 | $ | 1,457 | |
| Adjustments on prior acquisitions | (551) | ||
| Accretion of interest | 32 | ||
| Payments | (294) | ||
| Balance June 30, 2024 | $ | 644 |
Accounts receivable represent amounts due from insurance companies and patients. As of June 30, 2024, the Company has approximately 11% of the Company's receivables due from Medicare:
| As at | As at | |||||
| June 30, 2024 | September 30, 2023 | |||||
| Gross receivable | $ | 42,390 | $ | 35,374 | ||
| Reserve for expected credit losses | (10,979) | (9,396) | ||||
| Total | $ | 31,411 | $ | 25,978 |
Inventory was comprised of the following as at June 30, 2024 and September 30, 2023:
| As at June 30, | As at September 30, | |||||
| 2024 | 2023 | |||||
| Serialized | $ | 9,236 | $ | 6,733 | ||
| Non-serialized | 13,648 | 11,895 | ||||
| Reserve for slow-moving | (283) | (214) | ||||
| Total Inventory | $ | 22,601 | $ | 18,414 |
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:
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) June 30, 2024 and 2023
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
| As at | As at | |||||
| June 30, 2024 | September 31, 2023 | |||||
| Property and equipment, net | $ | 32,645 | $ | 33,648 | ||
| Right of use assets, net | 19,426 | 19,757 | ||||
| Total | $ | 52,071 | $ | 53,405 |
Rental equipment transferred from inventory during the nine months ended June 30, 2024 and 2023 was $24,467,000 and $20,187,000 respectively. For the nine months ended June 30, 2024 and 2023, the Company obtained equipment loans (Note 9) of $19,411,000 and $15,839,000, respectively, with the balance of $5,056,000 and $4,348,000 paid in cash, respectively.
The following is the activity in goodwill and intangible assets for the nine months ended June 30, 2024 and 2023:
| Sub-total | |||||||||||||||||||||
| intangibles | |||||||||||||||||||||
| Customer | Non-compete | Customer | with finite | ||||||||||||||||||
| Cost | Goodwill | relationships | Brand | Agreements | Contracts | lives | Total | ||||||||||||||
| Balance September 30, 2022 | $ | 28,208 | 34,898 | 5,461 | 1,187 | 3,851 | $ | 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 | $ | 11,281 | $ | 1,187 | $ | 3,851 | $ | 93,217 | $ | 144,067 | |||||||
| Balance September 30, 2023 | $ | 52,825 | $ | 79,088 | $ | 11,581 | $ | 710 | $ | 3,851 | $ | 95,230 | $ | 148,055 | |||||||
| Adjustments to prior year acquisitions | (522) | - | - | - | - | - | (522) | ||||||||||||||
| Balance June 30, 2024 | $ | 52,303 | $ | 79,088 | $ | 11,581 | $ | 710 | $ | 3,851 | $ | 95,230 | $ | 147,533 |
| Sub-total | |||||||||||||||||||||
| intangibles | |||||||||||||||||||||
| Customer | Non-compete | Customer | with finite | ||||||||||||||||||
| Accumulation amortization | Goodwill | relationships | Brand | Agreements | Contracts | lives | Total | ||||||||||||||
| Balance September 30, 2022 | $ | - | $ | 10,345 | $ | 1,589 | $ | 725 | $ | 3,851 | $ | 16,510 | $ | 16,510 | |||||||
| Amortization | - | 2,985 | 659 | 102 | - | 3,746 | 3,746 | ||||||||||||||
| Balance June 30, 2023 | $ | - | $ | 13,330 | $ | 2,248 | $ | 827 | $ | 3,851 | $ | 20,256 | $ | 20,256 | |||||||
| Balance September 30, 2023 | $ | - | $ | 14,487 | $ | 2,523 | $ | 329 | $ | 3,851 | $ | 21,190 | $ | 21,190 | |||||||
| Amortization | - | 3,634 | 829 | 107 | - | 4,570 | 4,570 | ||||||||||||||
| Balance June 30, 2024 | $ | - | $ | 18,121 | $ | 3,352 | $ | 436 | $ | 3,851 | $ | 25,760 | $ | 25,760 |
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) June 30, 2024 and 2023
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
| Sub-total | |||||||||||||||||||||
| intangibles | |||||||||||||||||||||
| Customer | Non-compete | Customer | with finite | ||||||||||||||||||
| Net carrying amount | Goodwill | relationships | Brand | Agreements | Contracts | lives | Total | ||||||||||||||
| Balance September 30, 2022 | $ | 28,208 | $ | 24,553 | $ | 3,872 | $ | 462 | $ | - | $ | 28,887 | $ | 57,095 | |||||||
| Balance June 30, 2023 | $ | 50,850 | $ | 63,568 | $ | 9,033 | $ | 360 | $ | - | $ | 72,961 | $ | 123,811 | |||||||
| Balance September 30, 2023 | $ | 52,825 | $ | 64,601 | $ | 9,058 | $ | 381 | $ | - | $ | 74,040 | $ | 126,865 | |||||||
| Balance June 30, 2024 | $ | 52,303 | $ | 60,967 | $ | 8,229 | $ | 274 | $ | - | $ | 69,470 | $ | 121,773 |
Activity for deferred revenue for the nine months ended June 30, 2024 and 2023 is as follows:
| For the nine | For the nine | |||||
| months ended | months ended | |||||
| June 30, 2024 | June 30, 2023 | |||||
| Beginning Balance | $ | 4,511 | $ | 3,036 | ||
| Acquisitions | - | 1,022 | ||||
| Net change | (295) | 393 | ||||
| Ending Balance | $ | 4,216 | $ | 4,451 |
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 is secured by substantially all assets of the Company and is subject to certain financial covenants.
A summary of the balances related to the Facility as of June 30, 2024 and September 30, 2023 is as follows:
| As of | As of | ||||||
| June 30, 2024 | September 30, 2023 | ||||||
| Delayed-draw term loan | $ | 59,200 | $ | 61,600 | |||
| Term loan | 4,563 | 4,750 | |||||
| Revolving credit facility | 2,888 | - | |||||
| Total principal | 66,651 | 66,350 | |||||
| Deferred financing costs | (1,508) | (1,884) | |||||
| Net carrying value | $ | 65,143 | $ | 64,466 | |||
| Current portion | 6,195 | 3,352 | |||||
| Long-term portion | 58,948 | 61,114 | |||||
| Net carrying value | $ | 65,143 | $ | 64,466 |
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 a
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) June 30, 2024 and 2023
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
balance of $2,888,000 as of June 30, 2024, and had average balances of $2,740,000 and $1,040,000 for the three and nine months ended June 30, 2024, respectively. It is classified as a current liability as it is expected to be repaid during the next twelve months.
The delayed-draw term loan and the term loan is bearing interest at 8.1% as of June 30, 2024. The rate is based on a secured overnight financing rate ("SOFR"), with a floor of 0.5%, plus a spread of 2.1% to 2.85% (2.65% as of June 30, 2024) based on the Company's leverage ratio and will reprice within three months. The revolving credit facility is bearing interest at 8.4% as of June 30,2024 and will reprice within three months. The Facility also has fees for unused availability.
To manage the risks of the cash flows related to interest expense, the Company entered into an interest rate swap, effective November 30, 2023, on $34,000,000 of the Facility. The swap carries a fixed SOFR of 4.4% (resulting in a combined 7.0% rate) and is settled quarterly until its September 2027 maturity date.
The Company entered into the arrangement with an intent to apply hedge accounting, in accordance with the criteria outlined in International Financial Reporting Standards (IFRS) 9, "Financial Instruments." The Company determined that the swap qualified as a cash flow hedge and is highly effective, and as such, the changes in fair value of the instrument are recorded in accumulated other comprehensive loss in the condensed consolidated interim statements of financial position. As of June 30, 2024, the fair value of the interest rate swap liability was $170,000. This liability is recorded in derivative liability - interest rate swap in the condensed consolidated statements of financial position.
For the three and nine months ended June 30, 2024, the change in fair value of the interest rate swap was a gain of $105,000 and loss of $170,000, respectively, recorded in other comprehensive income (loss) in the condensed consolidated interim statements of income (loss) and comprehensive income (loss). The fair value of the interest rate swap is determined based on the market conditions and the terms of the interest rate swap agreement using the discounted cash flow methodology. Any difference between the Facility's SOFR rate and the swap's rate is recorded as interest expense. For the three and nine months ended June 30, 2024, reductions of $84,000 and $201,000 to interest expense were recorded in the condensed consolidated interim statements of income (loss) and comprehensive income (loss).
Interest expense on the Facility, including the impact of the interest rate swap agreement, was $1,297,000 and $1,380,000 for the three months ended June 30, 2024 and 2023, respectively. Interest expense on the Facility was $3,997,000 and $3,000,000 for the nine months ended June 30, 2024 and 2023, respectively. The fair value of the Facility approximates the carrying value as of June 30, 2024 and September 30, 2023.
The Company has cumulatively incurred $2,370,000 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 months ended June 30, 2024 and 2023, $128,000 and $114,000 of amortization of deferred financing costs was recorded, respectively. During the nine months ended June 30, 2024 and 2023, $385,000 and $338,000 of amortization of deferred financing costs was recorded, 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 7.0% - 8.0% to impute interest on these
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) June 30, 2024 and 2023
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)
arrangements. There are no covenants with the loans and the carrying value of the equipment that is pledged as security against the loans is approximately $13,400,000 and $8,700,000 as of June 30, 2024 and September 30, 2023, respectively.
Following is the activity in equipment loans for the nine months ended June 30, 2024 and 2023:
| Nine months ended | Nine months ended | |||||
| June 30, 2024 | June 30, 2023 | |||||
| Beginning Balance | $ | 14,347 | $ | 5,707 | ||
| Additions: | ||||||
| Acquisitions | - | 4,259 | ||||
| Operations | 19,411 | 15,839 | ||||
| Repayments | (20,327) | (12,501) | ||||
| Ending Balance | 13,431 | 13,304 | ||||
| Current portion | 13,335 | 13,198 | ||||
| Long-term portion | $ | 96 | $ | 106 |
The Company enters into leases for real estate and vehicles. Real estate leases are valued at the net present value of the future lease payments at incremental borrowing rates ranging from 5.9% to 8.8%. Vehicle leases are recorded at rate implicit in the lease based on the current value and the estimated residual value of the vehicle, equating to rates ranging from 3.0% to 11.5%.
Following is the activity in lease liabilities for the nine months ended June 30, 2024 and 2023:
| Real | |||||||||
| Vehicles | estate | Total | |||||||
| Balance September 30, 2022 | $ | 1,993 | $ | 8,506 | $ | 10,499 | |||
| Additions: | |||||||||
| Acquisitions | 365 | 2,436 | 2,801 | ||||||
| Operations | 908 | 7,258 | 8,166 | ||||||
| Repayments | (586) | (2,614) | (3,200) | ||||||
| Balance June 30, 2023 | $ | 2,680 | $ | 15,586 | $ | 18,266 | |||
| Balance September 30, 2023 | $ | 2,914 | $ | 16,236 | $ | 19,150 | |||
| Additions: | |||||||||
| Operations | 1,760 | 3,049 | 4,809 | ||||||
| Non-cash adjustments | - | (139) | (139) | ||||||
| Repayments | (1,139) | (3,238) | (4,377) | ||||||
| Balance June 30, 2024 | $ | 3,535 | $ | 15,908 | $ | 19,443 |
Quipt Home Medical Corp.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS (UNAUDITED) June 30, 2024 and 2023
(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)