EX-99.6 7 tm2125757d1_ex99-6.htm EXHIBIT 99.6

Exhibit 99.6

Quipt Home Medical Corp.

(Formerly, Protech Home Medical Corp.)

Condensed Consolidated Interim Financial Statements

2021 Third Quarter

For the Three and Nine Months Ended

June 30, 2021 and 2020

(UNAUDITED)

(Expressed in US dollars)

TABLE OF CONTENTS

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 5-26

Quipt Home Medical Corp. (formerly, Protech Home Medical Corp.)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)

(Expressed in thousands of US Dollars, except per share amounts)

	Notes		As at June 30, 2021			As at September 30, 2020			As at October 1, 2019 (Restated)
ASSETS
Current Assets
Cash			$	30,594		$	29,227		$	9,708
Accounts receivable, net		4		11,702			9,089			9,357
Inventory		5		10,914			6,415			3,578
Receivable from warrant exercise		12		6,840			-			-
Prepaid and other current assets				1,640			552			604
Total current assets				61,690			45,283			23,247
Long-term assets
Property, equipment, and right of use assets, net		6		20,171			16,667			14,723
Goodwill		7		11,436			3,895			1,420
Intangible assets, net		7		12,713			5,579			2,198
Deferred financing costs		11		451			556			-
Deposits				81			85			71
Total long-term assets				44,852			26,782			18,412
TOTAL ASSETS			$	106,542		$	72,065		$	41,659

LIABILITIES
Current Liabilities
Accounts payable			$	10,394		$	7,434		$	6,134
Accrued liabilities				2,614			3,488			1,750
Current portion of equipment loans		11		7,003			4,311			6,176
Current portion of leases		11		2,594			2,037			421
Government grant		8		4,885			2,599			-
Deferred revenue		9		2,420			1,804			1,438
Purchase price payable		3		2,420			857			-
Derivative warrant liability		10		-			1,855			-
Total current liabilities				32,330			24,385			15,919
Long-term Liabilities
Debentures		11		13,792			12,930			10,547
Equipment loans		11		648			439			1,130
Lease liabilities		11		3,399			3,230			1,040
Government grant		8		-			2,286			-
SBA Loan		11		122			-			-
Long-term purchase price payable		3		133			560			-
TOTAL LIABILITIES				50,424			43,830			28,636

SHAREHOLDERS' EQUITY
Capital stock		12		202,065			171,405			151,963
Contributed surplus				17,762			16,519			16,177
Shares to be issued		3		657			-			-
Accumulated deficit				(164,366	)		(159,689	)		(155,117	)
TOTAL SHAREHOLDERS' EQUITY				56,118			28,235			13,023
TOTAL LIABILITIES AND EQUITY			$	106,542		$	72,065		$	41,659

The accompanying notes are an integral part of these condensed consolidated interim financial statements

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Quipt Home Medical Corp. (formerly, Protech Home Medical Corp.)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

(Expressed in thousands of US Dollars, except per share amounts)

	Notes		Three Months Ended June 30, 2021			Three Months Ended June 30, 2020			Nine Months Ended June 30, 2021			Nine Months Ended June 30, 2020
Revenue
Rentals of medical equipment			$	13,751		$	10,906		$	39,942		$	30,730
Sales of medical equipment and supplies				12,487			7,666			33,291			22,251
Total revenues				26,238			18,572			73,233			52,981
Inventory sold				7,747			5,217			19,938			14,578
Operating expenses		14		13,184			9,431			37,447			29,325
Depreciation		6		4,313			3,499			11,282			10,100
Amortization of intangible assets		7		455			149			1,107			494
Stock-based compensation		12		1,597			52			1,624			153
Acquisition-related costs		3		92			-			164			-
Gain on sale of property and equipment				(37	)		(10	)		(65	)		(78	)
Other expense (income)		8		-			(467	)		-			(613	)
Operating income (loss) from continuing operations				(1,113	)		701			1,736			(978	)
Financing expenses
Interest expense on convertible debenture				190			216			655			666
Interest expense on leases		11		150			184			404			409
Interest expense on loans		11		86			69			268			312
Amortization of financing costs		11		35			-			105			-
Other interest expense, net				18			-			48			-
(Gain) loss on foreign currency transactions				36			44			170			(552	)
Transaction costs on issuance of financial liabilities		12		-			210			-			210
Change in fair value of warrants		10		(4,127	)		-			2,110			-
Change in fair value of debentures		11		(3,295	)		2,470			4,594			1,106
Income (loss) before taxes from continuing operations				5,794			(2,492	)		(6,618	)		(3,129	)
Provision for (recovery of) income taxes				(535	)		36			(1,941	)		69
Net income (loss) from continuing operations				6,329			(2,528	)		(4,677	)		(3,198	)
Discontinued operations:
Income (loss) from discontinued operations		17		-			-			-			(869	)
Net income (loss)			$	6,329		$	(2,528	)	$	(4,677	)	$	(4,067	)

Net income (loss) per share (Note 15)
Basic earnings per share			$	0.20		$	(0.12	)	$	(0.16	)	$	(0.19	)
Diluted earnings per share			$	0.19		$	(0.12	)	$	(0.16	)	$	(0.19	)
Weighted average number of common shares outstanding:
Basic				30,893			21,065			29,500			20,959
Diluted				33,754			21,065			29,500			20,959

The accompanying notes are an integral part of these condensed consolidated interim financial statements

Page | 2

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY (UNAUDITED)

(Expressed in thousands of US Dollars, except per share amounts)

	Notes		Number of Shares (000’s)		Capital stock			Contributed surplus			Shares to be Issued			Accumulated Deficit			Total shareholders' equity
Balance September 30, 2019				20,897	$	151,963		$	16,177		$	-		$	(155,117	)	$	13,023
Net loss				-		-			-			-			(4,067	)		(4,067	)
Stock-based compensation		12		15		26			127			-			-			153
Proceeds from shares issued in bought deal, net of transaction costs of $2,645		12		6,920		19,189			-			-			-			19,189
Compensation options issued with bought deal		12		-		(462	)		462			-			-			-
Stock options exercised		12		129		428			(221	)		-			-			207
Balance June 30, 2020				27,961	$	171,144		$	16,545		$	-		$	(159,184	)	$	28,505

Balance September 30, 2020				28,069	$	171,405		$	16,519		$	-		$	(159,689	)	$	28,235
Net loss				-		-			-			-			(4,677	)		(4,677	)
Stock to be issued from acquisition		3		-		-			-			3,033			-			3,033
Issuance of stock for acquisitions		3		629		2,376			-			(2,376	)		-			-
Conversion of debentures		11		663		4,714			-			-			-			4,714
Stock-based compensation		12		-		-			1,624			-			-			1,624
Stock options exercised		12		92		239			(65	)		-			-			174
Compensation options exercised		12		368		1,717			(316	)		-			-			1,401
Exercise of warrants, including transfer of derivative warrant liability of $4,140		10,12		3,390		21,614			-			-			-			21,614
Balance June 30, 2021				33,211	$	202,065		$	17,762		$	657		$	(164,366	)	$	56,118

The accompanying notes are an integral part of these condensed consolidated interim financial statements

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Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS (UNAUDITED)

(Expressed in thousands of US Dollars, except per share amounts)

	Notes		Nine months ended June 30, 2021			Nine months ended June 30, 2020
Operating activities
Loss from continuing operations			$	(4,677	)	$	(3,198	)
Loss from discontinued operations				-			(869	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		6,7		12,389			10,594
Amortization of financing costs		11		105			-
Accretion of purchase price payable		3		19			-
Interest expense on leases and loans		11		672			721
Loss (gain) on foreign currency transactions				170			(552	)
Loss on fair value of warrants		11		2,110			-
Loss on fair value of convertible debentures		11		4,594			1,106
Gain on disposal of property and equipment				(65	)		(78	)
Transaction cost related to issuance of financial liability				-			210
Stock-based compensation		12		1,624			153
Bad debt expense		4		5,970			5,224
Change in inventory reserve				144			150
Government grant				-			(476	)
Deferred income taxes				(2,142	)		-
Change in working capital:
Net increase in accounts receivable				(6,499	)		(3,802	)
Net increase in inventory				(2,452	)		(1,197	)
Net increase in prepaid and other current assets				(1,077	)		(106	)
Net decrease in deferred revenue				317			-
Net increase in accounts payables and accrued liabilities				719			1,822
Net cash flow provided by operating activities				11,921			9,702
Investing activities
Purchase of property and equipment		6		(2,254	)		(67	)
Cash proceeds from sale of property and equipment				638			221
Cash paid for acquisitions		3		(10,963	)		(3,272	)
Net cash flow used in investing activities				(12,579	)		(3,118	)
Financing activities
Repayments of long-term debt		11		(10,386	)		(10,256	)
Payments of purchase price payable		3		(783	)		-
Proceeds from government grant				-			6,096
Proceeds from exercise of warrants		12		10,633			1,628
Proceeds from issuance of common shares				-			19,189
Proceeds from exercise of options		12		1,575			207
Net cash flow provided by financing activities				1,039			16,864

Net increase in cash				381			23,448

Effect of exchange rate changes on cash held in foreign currencies				986			(372	)

Cash, beginning of period				29,227			9,708
Cash, end of period			$	30,594		$	32,784

The accompanying notes are an integral part of these condensed consolidated interim financial statements

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Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Nature of operations

Reporting entity

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 and BiPAP units; ii) traditional and non-traditional durable medical respiratory equipment and services; and iii) non-invasive ventilation equipment, supplies and services. The Company has embarked on an acquisition strategy for additional revenue and profit growth.

The Company changed its name from Protech Home Medical Corp. to Quipt Home Medical Corp. on May 13, 2021.

The Company’s shares are traded on the TSX Venture Exchange under the symbol QIPT. The stock is also traded on the OTCQX Best Market in the United States under the symbol PTQQF. Effective May 13, 2021, the Company consolidated its issued and outstanding common shares based on one post-consolidation common share for every four pre-consolidation common shares. Unless otherwise stated, the share, options and warrants along with corresponding exercise prices and per-share amounts have been restated retrospectively to reflect this share consolidation.

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.

Change in presentation currency

Effective October 1, 2020, the Company changed its presentation currency to United States (“US”) dollars from Canadian dollars. Since the Company operates in the United States and its functional currency is US dollars, the Company believes that the change in presentation currency will provide stakeholders with a better reflection of the Company's business activities and enhance the comparability of the Company's financial information. The change in presentation currency represents a voluntary change in accounting policy, which is accounted for retrospectively. The consolidated financial statements for all periods presented have been translated into the new presentation currency in accordance with International Accounting Standard (“IAS”) 21 - The Effects of Changes in Foreign Exchange Rates.

The consolidated statements of operations and comprehensive income (loss) and the consolidated statements of cash flows have been translated into the presentation currency using the average exchange rates prevailing during each reporting period. In the consolidated statements of financial position, all assets and liabilities have been translated using the period-end exchange rates, and all resulting exchange differences have been recognized as a foreign currency gain (loss) in the condensed consolidated interim statements of income (loss) and comprehensive income (loss). Asset and liability amount previously reported in Canadian dollars have been translated into US dollars as at October 1, 2019 and September 30, 2020, using the period-end exchange rates of 1.3242 C$/US$ and 1.3339 C$/US$, respectively. The statements of income (loss) and comprehensive income (loss) and statement of cash flows have been translated at an exchange rate of 1.3516 C$/US$ for the nine months ended June 30, 2020.

In prior reporting periods, the translation of the Company’s US entities, which had a US dollar functional currency, into the Company’s presentation currency of the Canadian dollar, gave rise to a translation adjustment which was recorded as a cumulative translation adjustment (“CTA”), a separate component of shareholders’ equity. With the retrospective application of the change in presentation currency from the Canadian dollar to the US dollar, the CTA was eliminated.

COVID-19 pandemic

On March 11, 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus ‎‎(“COVID-19”) a global pandemic. In response to the outbreak, governmental authorities in the United States and internationally have introduced various ‎recommendations and measures to try to limit the pandemic, including travel restrictions, border closures, ‎non-essential business closures, quarantines, self-isolations, shelters-in-place, and social distancing. The ‎COVID-19 outbreak and the response of governmental authorities to try to limit it are having a significant ‎impact on the private sector and individuals, including unprecedented business, employment, and economic ‎disruptions.‎

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Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Although the Company has taken steps to mitigate the impact of COVID-19, the continued presence and ‎spread of COVID-19 nationally and globally could have a material adverse impact on the Company’s ‎business, operations, and financial results and position, including through employee attrition, ‎disruptions to the Company’s supply chains and sales channels, restrictions of operations at our retail stores, changes in the number of Americans with health insurance resulting in a change in demand for the Company’s products, as well as a deterioration of general economic ‎conditions including a possible national or global recession. Due to the speed with which the COVID-19 ‎situation is developing and the uncertainty of its magnitude, outcome, and duration, it is not possible to ‎estimate its impact on the Company’s business, operations, financial results and position or prospects at this ‎time.‎

The Company continues to monitor the situation and work with its stakeholders (including customers, ‎employees, and suppliers) in order to assess further possible implications to its business, supply chain, and ‎customers, and, where practicable, mitigate adverse consequences and responsibly address this global ‎pandemic.‎

The actual and threatened spread of COVID-19 globally could adversely affect global economies and ‎financial markets, resulting in a prolonged economic downturn and a decline in the value of the Company’s share price. ‎The extent to which COVID-19 (or any other disease, epidemic, or pandemic) impacts business activity or financial ‎results, and the duration of any such negative impact, will depend on future developments, which are highly ‎uncertain and cannot be predicted, including new information which may emerge concerning COVID-19 and the ‎actions required to contain or treat its impact, among others.‎

See Note 8 for relief payments the Company received related to the U.S. Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

Summary of significant accounting policies

Unreserved 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 years ended September 30, 2020 and 2019.

Except as noted, 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 years ended September 30, 2020 and 2019.

The unaudited condensed consolidated interim financial statements were approved and authorized for issuance by the Board of Directors on August 23, 2021.

These unaudited condensed consolidated interim financial statements, which are presented in US dollars, have been prepared under the historical cost convention, as modified by the measurement at fair values of certain financial assets and financial liabilities.

Critical accounting estimates

The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments, and assumptions concerning the future. The Company’s management reviews these estimates, judgments, and assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted prospectively in the period in which the estimates are revised.

Estimates where management has made subjective judgments and where there is significant risk of material adjustments to assets and liabilities in future accounting periods include fair value measurements for financial instruments and share-based transactions, useful lives and impairment of non-financial assets (property and equipment and intangible assets), provision for expected credit losses, fair value measurements for assets and liabilities acquired in business acquisition, and calculation of deferred taxes.

The following are the key estimate and assumption uncertainties that have a significant risk of resulting in a material adjustment within the next financial year:

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Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Revenue recognition

Revenues are billed to and collections are received from both third-party insurers and patients. Because of continuing changes in the health care industry and third-party reimbursement, the consideration receivable from these insurance companies is variable as these billings can be challenged by the payer. Therefore, the amount billed by the Company is reduced by an estimate of the amount that the Company believes is an allowable charge to be ultimately allowed by the insurance contract. The above estimate involves significant judgment including an analysis of past collections and historical modification rates. Management regularly reviews the actual claims approved by the insurance companies, adjusting as required.

Rental of medical equipment

The Company rents medical 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 IFRS 16 - “Leases”, the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term, resulting in deferred revenue for the portion of the monthly rent that is after the consolidated statement of financial position date. The term begins on the date products are delivered to patients, and revenues are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare, private commercial payors, and Medicaid. Certain customer co-payments are included in revenue when payment is considered probable.

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

Sales of medical equipment and supplies

The Company sells equipment, 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 payors are generally charged at the time that the product is sold.

The transaction price on equipment sales is the amount that the Company expects to receive in exchange for the goods and services provided. Due to the nature of the industry, gross charges are retail charges and generally do not reflect what the Company is ultimately paid. As such, the transaction price is constrained for the difference between the gross charge and what is estimated to be collected from payors and from patients. The transaction price therefore is predominantly based on contractual payment rates as determined by the payors. The Company does not generally contract with uninsured customers but does offer point-of-sale payments at retail outlets. 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 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 secondary insurance providers and/or 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.

Returns and refunds are not accepted on equipment sales. 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 June 30, 2021, relating to sale of medical equipment and supplies.

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Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Valuation of accounts receivable

The measurement of expected credit losses considers information about past events and current conditions. Forward looking macro-economic factors are incorporated into the risk parameters, such as unemployment rates, inflation, and interest rates. Significant judgments are made in order to incorporate forward-looking information into the estimation of allowances and may result in changes to the provision from period to period which may significantly affect our results of operations.

The Company estimates that a certain portion of receivables from customers may not be collected and maintains an allowance for doubtful accounts. The Company evaluates the net realizable value of accounts receivable as of the date of the consolidated balance sheets. Specifically, the Company considers historical realization data, including current and historical cash collections, accounts receivable aging trends, other operating trends, and relevant business conditions. Because of continuing changes in the health care industry and third-party reimbursement, it is possible that the estimates could change, which could have a material impact on the operations and cash flows. If circumstances related to certain customers change or actual results differ from expectations, our estimate of the recoverability of receivables could fluctuate from that provided for in our consolidated financial statements. A change in estimate could impact bad debt expense and accounts receivable.

Valuation of inventories

Inventory is recorded at the lower of cost or market. Inventory is expensed through cost of inventory sold when shipped to customers or transferred to property and equipment when rented to customers. The Company estimates that a certain portion of inventory purchased may be excess, obsolete, or non-saleable. The Company maintains a provision for obsolescence for these items. Valuation of the inventory was assessed at year-end, and all inventory items which more than two years are old and not supported by recent sales were provided for 40% in accordance with Company’s policy.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation. Major renewals and improvements are charged to the property accounts, while maintenance, and repairs which do not extend the useful life of the respective assets, are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets.

The estimated useful lives of the assets are as follows:

	Description	Estimated Useful Life
	Rental equipment	1-5 years
	Computer equipment	3-5 years
	Office furniture and fixtures	5-10 years
	Leasehold improvements	Life of lease (1-7 years)
	Right-of-use vehicles	5 years
	Right of use real estate leases	Life of lease (1-6 years)

Depreciation of rental equipment commences once it has been deployed to a patient’s address and put in use. Property and equipment and other non-current assets with definite useful lives are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Intangible assets

The Company has recorded various intangible assets consisting primarily of non-compete agreements, trademarks, customer contracts and customer relationships. Non-compete agreements are the value associated with the non-compete agreements entered by the sellers of purchased companies. Trademarks are the purchase price allocation for the value associated with the trade name of the acquired company. Customer contracts are comprised of the purchase price allocation of the present value of expected future customer billings based on the statistical life of a customer. Customer relationships are the value given in the purchase price allocation to the long-term associations with referral sources such as doctors, medical centers, etc. Finite life intangible assets are amortized on a straight-line basis over the estimated useful lives of the related assets as follows:

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Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Description	Estimated Useful Life
Non-compete agreements	5 Years
Trademarks	10 Years
Customer contracts	2 Years
Customer relationships	10 Years

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Statements of Net Loss and Comprehensive Loss when the asset is derecognized.

The Company reviews the estimates for useful lives on an annual basis, or more frequently if events during the year indicate that a change may be required, with consideration given to technological obsolescence and other relevant business factors. A change in management’s estimate could impact depreciation/amortization expense and the carrying value of property and equipment and intangible assets.

Functional currency

The consolidated financial statements of the Company are presented in US dollars, which is the Company’s functional currency. Determined using management’s judgment that the primary economic environment in which it will derive its revenue and expenses incurred to generate those revenues is the United States. 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 production, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices.

Business combinations

In accordance with IFRS 3 – Business Combination (“IFRS 3”), a transaction is recorded as a business combination if the significant assets, liabilities, or activities in addition to property and related mortgage debt assumed constitute a business. A business is defined as an integrated set of activities and assets, capable of being conducted and managed for the purpose of providing a return, lower costs, or other economic benefits. Where there are no such integrated activities, the transaction is treated as an asset acquisition. The estimation of the fair value of the assets and liabilities acquired in an acquisition is subject to judgement concerning estimating market values and predicting future events. These values are uncertain and can materially impact the carrying value of the acquired assets and the amount allocated to goodwill.

Lease liabilities

Estimate of lease term

When the Company recognizes a lease, it assesses the lease term based on the conditions of the lease and determines whether it will extend the lease at the end of the lease contract or exercise an early termination option. As it is not reasonably certain that the extension or early termination options will be exercised, the Company determined that the term of its leases are the lesser of original lease term or the life of the leased asset. This significant estimate could affect future results if the Company extends the lease or exercises an early termination option.

Incremental borrowing rate

When the Company recognizes a lease, the future lease payments are discounted using the Company’s incremental borrowing rate. This significant estimate impacts the carrying amount of the lease liabilities and the interest expense recorded on the consolidated statement of loss and comprehensive loss.

Recognition and initial measurement

The Company recognizes financial assets when it becomes party to the contractual provisions of the instrument. Financial assets are measured initially at their fair value plus, in the case of financial assets not subsequently measured at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Transaction costs attributable to the acquisition of financial assets subsequently measured at fair value through profit or loss are expensed in the consolidated statement of income (loss) and comprehensive income (loss) when incurred.

Page | 9

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Financial instruments

Fair value measurement

Financial instruments carried at fair value on the consolidated statements of financial position are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 – Where financial instruments are traded in active financial markets; fair value is determined by reference to the appropriate quoted market price at the reporting date. Active markets are those in which transactions occur in significant frequency and volume to provide pricing information on an ongoing basis;

Level 2 – If there is no active market, fair value is established using valuation techniques, including discounted cash flow models. The inputs to these models are taken from observable market data where possible, including recent arm’s length market transaction and comparisons to the current fair value of similar instruments, but where this is not feasible, inputs such as liquidity risk, credit risk and volatility are used; and

Level 3 – In this level, fair value determinations are made with inputs other than observable market data.

Cash and cash equivalents are classified as Level 1. The warrant derivative financial liability has been valued using level 3 inputs from the fair value hierarchy. The convertible debentures have been valued using Level 1 inputs.

Financial instrument risk exposure

The Company’s activities expose it to a variety of financial risks: market risk (including credit risk, liquidity risk and interest rate risk), credit risk, and liquidity risk. These risks arise from the normal course of operations and all transactions are undertaken to support the Company’s ability to continue as a going concern. Risk management is carried out by management under policies promulgated by the Board of Directors. The Company’s overall risk management program seeks to minimize potential adverse effects on the Company’s financial performance.

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Financial instruments that potentially subject the Company to credit risk are primarily cash and accounts receivable. Each subsidiary places its cash with one major financial institution. At times, the cash in the financial institution is temporarily more than the amount insured by the Federal Deposit Insurance Corporation. Substantially all accounts receivable is due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, or directly from patients. Receivables generally are collected within industry norms for third-party payors. The Company continuously monitors collections from its clients and maintains an allowance for bad debts based upon any specific payor collection issues that are identified and historical experience. The expected loss rates are based on the historical loss rates and are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables, such as the unemployment rate of the states in which it conducts business. Trade receivables are written off where there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, among others, a failure to make contractual payments after multiple collection efforts, including third party collection agencies.

As of June 30, 2021, the Company has approximately 8% of the Company’s receivables are due from Medicare. As this is a federal health insurance program in the United States, there is nominal credit risk associated with these balances.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company’s approach in managing liquidity is to ensure, to the extent possible, that it will have sufficient liquidity to meet its liabilities when due by continuously monitoring actual and budgeted cash flows and monitoring financial market conditions for signs of weakness.

As of June 30, 2021, the Company faces no material liquidity risk and can meet all its current financial obligations as they become due and payable. The Company has $32,330,000 of liabilities that are due within one year but has $61,690,000 of current assets to meet those obligations.

Interest rate risk

Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate risk is limited to potential decreases on the interest rate offered on cash and cash equivalents held with Chartered Canadian and registered US financial institutions. The Company considers this risk to be immaterial. The interest on the debenture and equipment loans is not subject to cash flow interest rate risk as these instruments bear interest at fixed rates.

Page | 10

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Acquisition of businesses and purchase accounting

Acquisition of Sleepwell, LLC

Effective October 23, 2020, the Company, through PHM Logistics Corporation, entered into a purchase agreement to acquire the shares of Sleepwell, Inc. (Sleepwell), Georgia company in the same industry as the Company. The purchase price was $9,976,000 of which $6,623,000 was paid in cash at closing, $2,376,000 (629,000 shares at a fair value of $3.78 per share) was paid through the issuance of stock in January 2021, a holdback paid in March 2021 discounted at 3.46% for a fair value of $320,000, and $657,000 (246,000 shares at a fair value of $2.67) to be paid in stock in August 2022. The fair value of the stock has been discounted by 15% and 25%, respectively, using the Black-Scholes pricing model for put options, to reflect the inability to sell the stock for a period and for the time between the date of the acquisition and the dates the stock is to be issued. The Company has determined that the transaction is an acquisition of a business under IFRS 3 – Business Combinations, and it has been accounted for by applying the acquisition method. The Company expensed $102,000 of professional fees in conjunction with the acquisition.

The pro forma revenues and net income for Sleepwell for the nine months ended June 30, 2021 was approximately $8,200,000 and $1,900,000, respectively, of which approximately $7,600,000 and $1,800,000 were recognized in the period from October 23, 2020 through June 30, 2021.

The primary areas of the preliminary purchase price allocations that are not yet finalized relate to: intangible assets acquired, deferred tax liabilities, working capital adjustments, and purchase price. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at the acquisition date during the measurement period. Measurement period adjustments that the Company determines to be material will be applied retrospectively to the period of acquisition in the Company’s consolidated financial statements and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could be affected. The fair value of the acquired assets is provisional pending final valuations of the assets and is as follows:

Cash	$	378
Accounts receivable		780
Inventory		769
Prepaid expenses and other current assets		2
Property and equipment		960
Right of use real estate ($390 net of unfavorable lease)		313
Goodwill		4,067
Intangible asset – Non-compete		220
Intangible asset – Brand		520
Intangible asset – Customer relationships		4,670
Accounts payable		(640	)
Accrued liabilities		(166	)
Deferred revenue		(100	)
Lease liabilities		(390	)
Deferred tax liability		(1,407	)
Net assets acquired	$	9,976

Cash paid at closing	$	6,623
Stock issued in January 2021		2,376
Cash to be paid after closing		320
Stock to be issued after closing, included in shares to be issued		657
Consideration paid or payable	$	9,976

Page | 11

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

The goodwill is attributable to expected synergies from the combining operations. None of the goodwill is deductible for tax purposes. Subsequent to the acquisition date, the deferred tax liability on the purchase price allocation of $1,407,000 was offset by the deferred tax asset from tax loss carry forwards and recorded as recovery of income taxes.

Acquisition of Mayhugh Drugs, Inc.

Effective February 1, 2021, the Company, through PHM Logistics Corporation, entered into a purchase agreement to acquire the shares of Mayhugh Drugs, Inc, dba Mayhugh Medical Equipment (Mayhugh). Mayhugh is a Florida based company in the same industry as the Company. The purchase price was $1,972,000, of which $1,047,000 was paid in cash at closing, holdbacks due on the six- and twelve-month anniversary of the acquisition discounted at 2.39% for a fair value of $662,000, and an earnout valued at $250,000. The earnout could be as high as $750,000 ($250,000 for each of the first three twelve-month periods following the acquisition), and the fair value was based on a Monte Carlo simulation. The Company has determined that the transaction is an acquisition of a business under IFRS 3, and it has been accounted for by applying the acquisition method. The Company expensed $33,000 of professional fees in conjunction with the acquisition.

The pro forma revenues and net income for Mayhugh for the nine months ended June 30, 2021 was approximately $4,800,000 and $1,100,000, respectively, of which approximately $2,700,000 and $1,100,000 were recognized in the period from February 1, 2021 to June 30, 2021.

The primary areas of the preliminary purchase price allocations that are not yet finalized relate to working capital adjustments and purchase price. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at the acquisition date during the measurement period. Measurement period adjustments that the Company determines to be material will be applied retrospectively to the period of acquisition in the Company’s consolidated financial statements and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could be affected. The fair value of the acquired assets is provisional pending final valuations of the assets and is as follows:

Cash	$	180
Accounts receivable, net of expected credit loss of $1,142		474
Inventory		487
Prepaid expenses and other current assets		7
Property and equipment		1,357
Right of use real estate		61
Goodwill		1,376
Intangible asset – Non-compete		40
Intangible asset – Brand		290
Intangible asset – Customer relationships		2,500
Accounts payable		(880	)
Accrued liabilities		(14	)
Deferred revenue		(84	)
Equipment loans		(2,846	)
U.S. Small Business Association (“SBA”) loan		(119	)
Lease liabilities		(134	)
Deferred tax liability		(736	)
Net assets acquired	$	1,959

Cash paid at closing	$	1,047
Cash to be paid after closing, included in purchase price payable		912
Consideration paid or payable	$	1,959

The goodwill is attributable to expected synergies from the combining operations. None of the goodwill is deductible for income tax purposes. Subsequent to the acquisition date, the deferred tax liability on the purchase price allocation of $736,000 was offset by the deferred tax asset from tax loss carry forwards and recorded as recovery of income taxes.

Page | 12

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Acquisition of Med Supply Center, Inc.

On June 21, 2021, the Company, through PHM Logistics Corporation, entered into a purchase agreement to acquire the shares of Med Supply Center, Inc. (“Med Supply”). Med Supply is a Mississippi based company in the same industry as the Company. The purchase price was $1,603,000, of which $1,279,000 was paid in cash at closing, $10,000 to be paid within two months of the acquisition, and holdbacks payable on the six- and twelve-month anniversaries of the acquisition discounted at 2.39% for a fair value of $314,000. The Company has determined that the transaction is an acquisition of a business under IFRS 3, and it has been accounted for by applying the acquisition method. The Company expensed $9,000 of professional fees in conjunction with the acquisition.

The pro forma revenues and net income for Med Supply for the nine months ended June 30, 2021 was approximately $1,800,000 and $200,000, respectively, of which approximately $250,000 and $90,000 were recognized in the period from June 21, 2021 to June 30, 2021.

Cash	$	48
Accounts receivable		379
Inventory		543
Property and equipment		191
Right of use real estate		88
Goodwill (provisional)		747
Accounts payable		(175	)
Accrued liabilities		(40	)
Deferred revenue		(53	)
Lease liabilities		(125	)
Net assets acquired	$	1,603

Cash paid at closing	$	1,279
Cash to be paid after closing, included in purchase price payable		324
Consideration paid or payable	$	1,603

Acquisition of Semo Drug-Care Plus of Mo. Inc

On June 23, 2021, the Company, through PHM Logistics Corporation, entered into a purchase agreement to acquire the shares of Semo Drug-Care Plus of Mo. Inc, dba Care Plus Home Oxygen Therapy (“Care Plus”). Care Plus is a Missouri based company in the same industry as the Company. The purchase price was $1,627,000, of which $1,440,000 was paid in cash at closing, $10,000 to be paid within two months of the acquisition, and holdbacks payable on the six- and twelve-month anniversaries of the acquisition discounted at 2.39% for a fair value of $177,000. The Company has determined that the transaction is an acquisition of a business under IFRS 3, and it has been accounted for by applying the acquisition method. The Company expensed $10,000 of professional fees in conjunction with the acquisition.

The pro forma revenues and net income for Care Plus Oxygen for the nine months ended June 30, 2021 was approximately $1,700,000 and $400,000, respectively, of which approximately $250,000 and $90,000 were recognized in the period from June 23, 2021 to June 30, 2021.

Page | 13

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Cash	$	47
Accounts receivable		292
Inventory		359
Property and equipment		380
Goodwill (provisional)		716
Accounts payable		(65	)
Accrued liabilities		(51	)
Deferred revenue		(51	)
Net assets acquired	$	1,627
Cash paid at closing	$	1,440
Cash to be paid after closing, included in purchase price payable		187
Consideration paid or payable	$	1,627

Acquisition of Oxygen Plus, Inc.

On June 29, 2021, the Company, through PHM Logistics Corporation, entered into a purchase agreement to acquire the shares of Oxygen Plus, Inc. Oxygen Plus is a California based company in the same industry as the Company. The purchase price was $731,000, of which $574,000 was paid in cash at closing and a holdback due on the six- and twelve-month anniversaries of the acquisition discounted at 2.39% for a fair value of $157,000. The Company has determined that the transaction is an acquisition of a business under IFRS 3, and it has been accounted for by applying the acquisition method. The Company expensed $10,000 of professional fees in conjunction with the acquisition.

The pro forma revenues and net income (loss) for Oxygen Plus for the nine months ended June 30, 2021 was approximately $800,000 and $100,000, respectively, of which approximately $70,000 and $(20,000) were recognized in the period from June 29, 2021 to June 30, 2021.

Cash	$	114
Accounts receivable		159
Inventory		33
Property and equipment		63
Goodwill (provisional)		636
Accounts payable		(94	)
Accrued liabilities		(12	)
Deferred revenue		(12	)
Equipment loans		(155	)
Net assets acquired	$	731
Cash paid at closing	$	574
Cash to be paid after closing, included in purchase price payable		157
Consideration paid or payable	$	731

Page | 14

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(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 acquisitions in addition to the five fiscal year 2021 acquisitions less payments made to date. Below is the movement in Purchase Price Payable for the nine months ended June 30, 2021:

	Nine months ended June 30, 2021
Balance, September 30, 2020 (current $857 plus long-term $560)	$	1,417
Addition from acquisitions		1,900
Accretion of interest		19
Payments on prior period acquisitions		(783	)
Balance, June 30, 2021 (current $2,420 plus long-term $133)	$	2,553

Accounts Receivable

Accounts receivable represents amounts due from insurance companies and patients:

	As at June 30, 2021			As at September 30, 2020
Gross receivable	$	15,921		$	14,125
Reserve for expected credit losses		(4,219	)		(5,036	)
	$	11,702		$	9,089

As at June 30, 2021	Gross Receivables		Allowance for expected credit losses			Net Receivables
0 – 90 days	$	10,692	$	(1,244	)	$	9,448
91 – 180 days		2,585		(980	)		1,605
Over 180 days		2,644		(1,995	)		649
Total	$	15,921	$	(4,219	)	$	11,702

Below is the movement in the reserve for expected credit losses:

Reserve for expected credit losses	Nine Months ended June 30, 2021			For the year ended September 30, 2020
Opening Balance	$	5,036		$	2,305
Bad debt expense		5,970			6,498
Amounts written off		(6,787	)		(3,767	)
Ending Balance	$	4,219		$	5,036

Inventory

	As at June 30, 2021			As at September 31, 2020
Serialized	$	3,281		$	2,132
Non-serialized		7,860			4,366
Reserve for shrink and slow-moving		(227	)		(83	)
Total Inventory	$	10,914		$	6,415

Page | 15

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

The reserve for slow-moving is included under cost of inventory sold in the condensed consolidated interim statement of (loss) and comprehensive (loss) income.

Property and equipment and right of use assets

Cost	Rental equipment			Computer equipment			Office furniture and fixtures			Leasehold improvements			Right of use assets – Vehicles			Right of use assets – Real estate			Total
Balance September 30, 2019	$	26,717		$	504		$	433		$	1,169		$	2,588		$	-		$	31,411
Additions – adoption of IFRS 16																	2,603			2,603
Transfers from inventory		5,827			-			-			-			-			-			5,827
Additions		-			7			-			60			601			1,020			1,688
Acquisitions		2,118			-			-			184			159			1,094			3,555
Disposals		(11,455	)		(265	)		(95	)		(70	)		(526	)		(93	)		(12,504	)
Balance June 30, 2020	$	23,207		$	246		$	338		$	1,343		$	2,822		$	4,624		$	32,580

Balance September 30, 2020	$	22,568		$	171		$	333		$	1,364		$	2,872		$	4,990		$	32,298
Transfers from inventory		9,415			-			-			-			-			-			9,415
Additions		-			10			-			66			704			1,570			2,350
Acquisitions		2,844			-			2			-			285			463			3,594
Disposals		(6,993	)		(28	)		(11	)		(7	)		(355	)		(1,043	)		(8,437	)
Balance June 30, 2021	$	27,834		$	153		$	324		$	1,423		$	3,506		$	5.980		$	39,220

Accumulated depreciation	Rental equipment			Computer equipment			Office furniture and fixtures			Leasehold improvements			Right of use assets – Vehicles			Right of use assets – Real estate			Total
Balance September 30, 2019	$	14,769		$	371		$	260		$	257		$	1,031		$	-		$	16,688
Depreciation		8,306			64			55			109			476			1,090			10,100
Disposals		(11,209	)		(266	)		(98	)		(75	)		(464	)		(12	)		(12,124	)
Balance June 30, 2020	$	11,866		$	169		$	217		$	291		$	1,043		$	1,078		$	14,664

Balance September 30, 2020	$	12,311		$	106		$	229		$	309		$	1,182		$	1,494		$	15,631
Depreciation		9,134			24			46			93			534			1,451			11,282
Disposals		(6,975	)		(28	)		(11	)		(7	)		(323	)		(520	)		(7,864	)
Balance June 30, 2021	$	14,470		$	102		$	264		$	395		$	1,393		$	2,425		$	(19,049	)

Net Book Value	Rental equipment		Computer equipment		Office furniture and fixtures		Leasehold improvements		Right of use assets – Vehicles		Right of use assets – Real estate		Total
Balance September 30, 2019	$	11,948	$	133	$	173	$	912	$	1,557	$	-	$	14,723
Balance June 30, 2020	$	11,341	$	77	$	121	$	1,052	$	1,779	$	3,546	$	17,916
Balance September 30, 2020	$	10,257	$	64	$	104	$	1,055	$	1,690	$	3,496	$	16,667
Balance June 30, 2021	$	13,364	$	51	$	60	$	1,028	$	3,555	$	2,113	$	20,171

Out of the $9,415,000 rental equipment transferred from inventory during the nine months ended June 30, 2021, the Company obtained equipment loans (Note 11) for $7,237,000 with the balance of $2,178,000 paid in cash. For the nine months ended June 30, 2020, the Company obtained equipment loans of $6,021,000.

Page | 16

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

7.	Goodwill and Intangible Assets

Cost	Goodwill		Non-compete agreements		Brand		Customer contracts		Customer relationships			Sub-total intangibles with finite lives			Total
Balance September 30, 2019	$	1,420	$	517	$	1,341	$	3,851	$	8,460		$	14,169		$15,589
Acquisitions		871		48		205		-		805			1,058		1,929
Disposals		-		-		-		-		(33	)		(33	)	(33)
Balance June 30, 2020	$	2,291	$	565	$	1,546	$	3,851	$	9,232		$	15,194		$17,485
Balance September 30, 2020	$	3,895	$	637	$	1,881	$	3,851	$	11,766		$	18,135		$22,030
Acquisitions		7,541		260		810		-		7,171			8,241		15,782
Disposals		-		-		-		-		(149	)		(149	)	(149)
Balance June 30, 2021	$	11,436	$	897	$	2,691	$	3,851	$	18,788		$	26,227		$37,663

Accumulation amortization	Goodwill		Non-compete agreements		Brand		Customer contracts		Customer relationships			Sub-total intangibles with finite lives			Total
Balance September 30, 2019	$	-	$	480	$	888	$	3,728	$	6,875		$	11,971		$	11,971
Amortization		-		32		71		103		288			494			494
Disposals		-		-		-		-		(33	)		(33	)		(33	)
Balance June 30, 2020	$	-	$	512	$	959	$	3,831	$	7,130		$	12,432		$	12,432
Balance September 30, 2020	$	-	$	522	$	989	$	3,845	$	7,200		$	12,556		$	12,556
Amortization		-		59		145		6		897			1,107			1,107
Disposals		-		-		-		-		(149	)		(149	)		(149	)
Balance June 30, 2021	$	-	$	581	$	1,134	$	3,851	$	7,948		$	13,514		$	13,514

Net carrying amount		Goodwill		Non-compete agreements		Brand		Customer contracts		Customer relationships		Sub-total intangibles with finite lives		Total
Balance September 30, 2019	$	1,420	$	37	$	453	$	123	$	1,585	$	2,198	$	3,618
Balance June 30, 2020	$	2,291	$	53	$	587	$	20	$	2,102	$	2,762	$	5,053
Balance September 30, 2020	$	3,895	$	115	$	892	$	6	$	4,566	$	5,579	$	9,474
Balance June 30, 2021	$	11,436	$	316	$	1,557	$	-	$	10,840	$	12,713	$	24,149

8.	Government Grant

During the year ended September 30, 2020, the Company received payments related to the two separate provisions of the US CARES Act.

Payroll Protection Plan (“PPP’)

On April 16, 2020, the Company received $4,254,000 related to the PPP, which was to assist companies in maintaining their workforce. The PPP provided for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses. The loans and accrued interest are forgivable if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent, and utilities for up to twenty-four weeks, and maintains certain payroll levels. The unforgiven portion of the PPP loan is payable, with 1% interest over nine equal installments of $472,000 from September 2021 through April 2022.

Since the Company expects to meet the PPP’s eligibility criteria for forgiveness and has concluded that the PPP loan represents, in substance, a grant that is expected to be forgiven, it has accounted for the proceeds under IAS 20, Accounting for Government Grants and Disclosure of Government Assistance. The cash inflow has been reported as a financing activity and a liability has been recorded on the statements of financial position. No reduction in the liability has been recorded.

Public health and Social Services Emergency Fund (“Relief Fund”)

During the year ended September 30, 2020, the Company received $1,797,000 from the Relief Fund, which was established to support healthcare providers to prevent, prepare for, and respond to coronavirus, including health care related expenses or lost revenues, subject to certain terms and conditions. If those terms and conditions are met, payments do not need to be repaid. No expenses related to the PPP can be used to meet the terms and conditions for the Relief Fund.

Since the Company believes it has met the Relief Fund’s terms and conditions, it has accounted for the proceeds under IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance. The cash inflow has been reported as a financing activity. The original proceeds were recognized as a liability, which was reduced based on certain related costs incurred. During the year ended September 30, 2020, the Company reduced the liability by $1,166,000, which was been included under other expense (income) in the statement of loss and comprehensive loss, of which $467,000 was recorded in the three and nine months ended June 30, 2020.

	Current		Long Term			Total
Balance September 30, 2020	$	2,599	$	2,286		$	4,885
Change in current and long-term portions		2,286		(2,286	)		-
Balance June 30, 2021	$	4,885	$	-		$	4,885

Page | 17

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

9.	Deferred Revenue

Activity for deferred revenue for the nine months ended June 30, 2021 and year ended September 2020 is as follows:

	For the nine months ended June 30, 2021		For the year ended September 30, 2020
Beginning balance	$	1,804	$	1,438
Acquisitions		247		330
Net addition		369		36
Ending balance	$	2,420	$	1,804

10.

Derivative warrant liability

On June 29, 2020, the Company completed a bought deal public offering, a concurrent brokered private placement, and a non-brokered private placement to the Company’s Chief Executive Officer and a director of the Company, for 27,678,826 units, respectively. Each unit consisted of one common share and one-half of one common share purchase warrant (each whole warrant, a “Warrant”), for a total of 13,839,413 Warrants. Each Warrant will be exercisable to acquire one common share for a period of 12 months following the closing at an exercise price of C$1.60 per share. During the nine months ended June 30, 2020, 13,559,300 Warrants for 3,389,825 common shares were exercised, and the remaining 280,113 Warrants for 70,028 common shares expired on June 29, 2021. The Warrants were recorded as a liability since they are denominated in Canadian Dollars and the Company’s functional currency is US Dollars. The liability was recorded at fair value $0.12 as of September 30, 2020, using the Black-Scholes pricing model. A revaluation was performed each period end, with the change in fair value recorded in the caption “Loss (gain) on fair value of warrants.” Upon exercise, the warrant liability is derecognized and transferred to equity.

	As at September 30, 2020
Share price		C$1.31
Risk-free interest rate		0.23	%
Expected volatility		60.8	%
Expected life of warrant		0.75 years
Expected dividend yield		0	%

Warrant activity for the year ended September 30, 2020 and the nine months ended June 30, 2021 is provided below:

	Amount
Balance September 30, 2019	$	-
Issued		1,627
Change in fair value		198
Change in foreign exchange rate		30
Balance September 30, 2020		1,855
Exercised at a weighted average Black-Scholes fair value of $0.31		(4,140	)
Change in fair value		2,110
Change in foreign exchange rate		175
Balance June 30, 2021	$	-

Page | 18

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

11.

Long-term Debt

Debentures

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 is convertible at the option of the holder into 192.31 common shares. As of September 30, 2020, C$4,000 of debentures had been converted into common shares, and during the nine months ended June 30, 2021, C$3,446,000 of debentures were converted into common shares, leaving C$11,550.000 (US$9,319,000) of face value of the debentures remaining. The fair value of the debentures on the dates of conversion totaled C$5,956,000, or $4,714,000. After three years, the Company can force conversion of the outstanding principal at a conversion price of C$5.20, if the daily volume weighted average price of the common shares exceeds C$6.48 per share for twenty consecutive trading days. The debenture agreement also allows for payment of cash in lieu of common shares upon exercise of conversion right by the holder, equivalent of the market price on the conversion date.

The debentures contain multiple embedded derivatives including conversion right, forced conversion option and payment in lieu of common shares. Since the Company is unable to measure the fair value of embedded derivatives reliably, it has 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 are valued at fair value using the current trading price of C$148 ($119) and C$115 ($86) as of June 30, 2021 and September 30, 2020, respectively, per unit. A gain of $3,295,000 and a loss $4,594,000 was recorded for the three and nine months ended June 30, 2021, respectively. A loss of $2,470,000 and $1,106,000 was recorded for the three and nine months ended June 30, 2020, respectively. Following is the movement in these debentures:

	Nine months ended June 30, 2021			Year ended September 30, 2020
Beginning Balance	$	12,930		$	10,547
Conversion to common shares		(4,714	)		-
Change in fair value		4,594			2,528
Change in foreign exchange rate		982			(145	)
Ending Balance	$	13,792		$	12,930

In conjunction with issuance of the debentures, the Company issued compensation options to the underwriters for 129,808 shares of the Company at an exercise price of C$5.20 for a period of two years from the closing of the transaction. The fair value of the options has been valued at $1.02 for a total of $133,000 using the Black-Scholes pricing model.

Compensation options activity for the nine months ended June 30, 2021 is provided below:

	Number (000s)			Weighted average exercise price
Balance, September 30, 2020		130			C$ 5.20
Exercised		(130	)		5.20
Balance, June 30, 2021		-			-

Equipment Loans

The Company is offered financing arrangements from the Company’s suppliers and the supplier’s designated financial institution, in 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 some 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 uses a 6% incremental borrowing rate to impute interest on these arrangements. In other cases, the supplier receives the full invoice price and Company pays a stated interest rate to the financial institution, ranging from 5.6% to 8.0%, with the terms of the financing ranging from 12 to 48 months. There are no covenants with the loans and the carrying value of the equipment that is pledged as security against the loans is $5,808,000.

Page | 19

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Following is the activity in equipment loans for the nine months ended June 30, 2021 and year ended September 30, 2020:

	Nine months ended June 30, 2021			Year ended September 30, 2020
Beginning Balance	$	4,750		$	7,306
Additions:
Acquisitions		3,001			646
Operations		7,237			7,080
Interest expense		268			489
Repayments		(7,605	)		(10,771	)
Ending Balance		7,651			4,750
Current portion, less than 1 year		7,003			4,311
Long-term portion, due between 1 and 5 years	$	648		$	439

Leases Liabilities

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 an 8% incremental borrowing rate. 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 1.7% to 10.4%.

Below is the movement in lease liabilities for the nine months ended June 30, 2021:

	Vehicles			Real estate			Total
Balance, September 30, 2020	$	1,627		$	3,640		$	5,267
Additions during the period:
Acquisitions		109			540			649
Operations		704			1,750			2,454
Interest		110			294			404
Repayments		(549	)		(2,232	)		(2,781	)
Balance, June 30, 2021	$	2,001		$	3,992		$	5,993

Future payments pursuant to lease liabilities are as follows:

	As at June 30, 2021			As at September 30, 2020
Less than 1 year	$	2,901		$	2,394
Between 1 and 5 years		3,761			3,497
More than five years		55			70
Gross lease payments		6,717			5,961
Less: finance charges		(724	)		(694	)
Net lease liabilities	$	5,993		$	5,267

SBA Loan

In conjunction with the acquisition of Mayhugh on February 1, 2021, the Company assumed an SBA Loan. The face amount of the loan is $150,000 and bears interest at stated interest rate of 3.75%. Due to the below-market interest rate, the Company valued the loan at the net present value of the payments using its incremental borrowing rate of 6%, resulting in a fair value on the acquisition date of $122,000. The loan is payable in 360 monthly installments of $731 beginning June 2021 and is secured by substantially all the assets of Mayhugh.

Following is the activity in the SBA Loan for the nine months ended June 30, 2021:

	Nine months ended June 30, 2021
Beginning Balance	$	-
Additions:
Acquisitions		119
Interest expense		4
Repayments		(1	)
Ending Balance	$	122

Page | 20

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Revolving Credit Facility

In September 2020, the Company entered a $20,000,000 asset-based revolving credit facility with a US bank. The facility matures in September 2024 and bears interest at floating rate of LIBOR plus 2.0% to 2.5%, with a LIBOR floor of 0.5% and has an unused fee of 0.3%. The Company has no borrowings from this facility as at June 30, 2021 and September 30, 2020. Interest expense for the facility for the nine months ended June 30, 2021 totaled $38,000 and primarily related to the unused fee. The facility is subject to a borrowing base based on a percentage of eligible accounts receivable and expected future revenues from existing customer rentals. Issuance costs are recorded in “deferred financing costs” on the consolidated statements of financial position and are 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, 2021, respectively.

12.

Share capital

The Company considers its capital to be shareholders’ equity, which is comprised of share capital, contributed surplus, shares to be issued, accumulated other comprehensive income (loss), and accumulated deficit, in the amount of $56,118,000 at June 30, 2021.

The Company raises capital, as necessary, to meet its needs and take advantage of perceived opportunities and, therefore, does not have a numeric target for its capital structure. Funds are primarily secured through equity, and long-term debt, including debentures, equipment loans and leases.

Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable. The Company invests all capital that is surplus to its immediate operational needs in short-term, liquid and highly rated financial instruments, such as cash, and short-term guarantee deposits, held with major Canadian and US financial institutions.

Authorized share capital

The Company’s authorized share capital consists of an unlimited number of common shares and an unlimited number of preferred shares issuable in series. The preferred shares issuable in series will have the rights, privileges, restrictions, and conditions assigned to the series upon the Board of Directors approving their issuance.

Issued share capital

The Company has only one class of common stock outstanding. Effective December 31, 2018, the Company consolidated its issued and outstanding common shares based on one post-consolidation common share for every five pre-consolidation common shares.

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a reduction of equity, net of any tax effects. Accumulated other comprehensive income represents items such as cumulative, foreign currency translation adjustments, the change in equity arising from unrealized gains and losses from financial instruments designated as available-for-sale, and changes in fair value of derivatives designated as cash flow hedges and is presented as a separate component of shareholders’ equity on the Consolidated Statements of Financial Position. The Company does not currently participate in hedging activities.

Bought deals and private placements

On June 29, 2020, the Company completed a bought deal public offering, a concurrent brokered private placement, and a non-brokered private placement to the Company’s Chief Executive Officer and a director of the Company, for a total of 27,678,826 pre-consolidation units, comprising 27,678,826 pre-consolidation shares, or 6,919,706 post-consolidation shares, and 27,678,826 warrants. Each unit issued was issued at a pre-consolidation price of C$1.15 for total gross proceeds of C$31,831,000 ($23,462,000) and consisted of one pre-consolidation common share and one-half of one common share purchase warrant (each whole warrant, a “Warrant”) for a total of 13,839,413 Warrants. The fair value of the Warrants was recorded as a liability and valued at June 29, 2020, at $0.12, for a total of $1,628,000, using the Black-Scholes pricing model, as described in Note 10. Upon exercise, the warrant liability was derecognized and transferred to equity.

Following the consolidation, for every four Warrants exercised in accordance with its terms, the holder will be entitled to acquire one common share for a period of 12 months following the closing at an exercise price of C$6.40 per share. During the nine months ended June 30, 2021, 13,559,300 Warrants for 3,389,825 common shares were exercised, for total proceeds of C$21,695,000, or $17,473,000. The Company did not receive all of the proceeds from the transfer agent until early July 2021, and accordingly, $6,840,000 is recorded as a “Receivable from warrant exercise” on the condensed consolidated interim statements of financial position.

Page | 21

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Warrant activity for the nine months ended June 30, 2021 is provided below:

	Number (000s)			Weighted average exercise price
Balance, September 30, 2020		3,460		C$	6.40
Exercised		(3,390	)		6.40
Expired		(70	)		6.40
Balance, June 30, 2021		-		C$	-

Issuance costs of $2,855,000 in cash were incurred. These costs were allocated ratably between common shares and warrant liability, with $2,645,000 recorded as a reduction of equity and $210,000 recorded as “Transaction costs on issuance of financial liabilities.” The Company issued compensation options to the underwriter for 367,826 shares at the issue price of C$4.60 for a period of two years from the closing of the offering. The fair value of the options has been valued at $1.24 for a total of $456,000.

Activity for the June 2020 compensation options for the nine months ended June 30, 2021 is as follows:

	Number (000s)			Weighted average exercise price
Balance, September 30, 2019		-		C$	-
Issued		368			4.60
Exercised		(15	)		4.60
Balance, September 30, 2020		353			4.60
Exercised		(238	)		4.60
Balance, June 30, 2021		115		C$	4.60

Shares to be issued

As discussed in Note 3, the Company acquired Sleepwell on October 23, 2020, with a portion of the purchase price in shares. $2,376,000 (629,000 shares at a fair value of $3.78 per share) was issued in January 2021, and $657,000 (246,000 shares at a fair value of $2.67) is expected to be issued in August 2022. The fair value of the stock has been discounted by 15% and 25%, respectively, using the Black-Scholes pricing model for put options, to reflect the inability to sell the stock for a period and for the time between the date of the acquisition and the dates the stock is to be issued.

Stock options and grants

The Company has a stock option plan, which it uses for grants to directors, officers, employees, and consultants. Options granted under the plan are non-assignable and may be granted for a term not exceeding ten years. Stock options having varying vesting periods and the options granted during the nine months ended June 30, 2021 vest annually over four years or quarterly over twelve quarters.

A summary of stock options is provided below:

	Number of options (000’s)			Weighted average exercise price
Balance, September 30, 2020		2,627		C$	1.99
Granted		1,396			8.40
Exercised		(92	)		2.39
Expired		(56	)		3.97
Forfeited		(15	)		8.12
Balance, June 30, 2021		3,860		C$	4.17

At June 30, 2020, the Company had 2,471,252 vested stock options with a weighted average exercise price of C$1.81.

Page | 22

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Restricted stock units

On May 20, 2021, there were 953,750 restricted stock units granted to officers and directors. Each unit represents the right to ‎receive one common share, and vests over a period of two years from the grant date at the rate of one-eighth every three months commencing August 20, 2021. The shares will be issued on the first business day of each calendar year in an amount equal to the units that vested in the previous calendar year or earlier upon a Change in Control, as defined. The fair value of the units on the date of grant are discounted to reflect the difference between the vesting dates and the issuance dates, resulting in compensation expense of C$7,479,000 to be expensed over the vesting period with an increase to contributed surplus

A summary of restricted stock units:

	Number of units (000’s)		Weighted average exercise price
Balance, September 30, 2020		-	C$	-
Granted		954		8.48
Balance, June 30, 2021		954	C$	8.48

The Company accounts for stock-based compensation using the fair value method as prescribed by IFRS 2. Under this method, the fair value of stock options and restricted stock units at the date of grant is expensed over the vesting period and the offsetting credit is recorded as an increase in contributed surplus. Awards with graded vesting are considered to be multiple awards for fair value measurement. An estimate of the number of awards that are expected to be forfeited is also made at the time of grant and revised periodically if actual forfeitures differ from those estimates.

For the nine months ended June 30, 2021 and 2020, the Company recorded stock-based compensation expense as follows:

		Three Months Ended June 30, 2021				Three Months Ended June 30, 2020				Nine Months Ended June 30, 2021				Nine Months Ended June 30, 2020
Stock-based compensation expense		$	1,597			$	52			$	1,624			$	153

The fair value of the stock options used the Black-Scholes option pricing model calculated using the following assumptions:

			Nine months ended
			June 30, 2021
Share price at grant date			C$6.16 – C$8.48
Risk-free interest rate			0.92 – 1.63%
Expected volatility			48.97 – 55.08%
Expected life of option			4 – 10 years
Expected dividend yield			Nil

13.

Commitments and contingencies

Commitments

The Company leases certain facilities with terms of less than a year that are classified as operating leases. Future payments pursuant to these leases are $25,000 as of June 30, 2021, which are all due in less than one year.

Contingencies

The Company has been in litigation with Lightwater Long Short Fund (“Lightwater”) during the year ended September 30, 2020 and the nine months ended June 30, 2021. The litigation is due to Lightwater claiming damages for matters related to subscription agreements in a prior private placement. Management and legal believe that this lawsuit is without merit and is unpredictable. It is uncertain currently to determine the outcome of this lawsuit or our potential liability, if any.

From time to time, the Company is involved in various legal proceedings arising from the ordinary course of business. None of the matters in which the Company is currently involved, either individually, or in the aggregate, is expected to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

Page | 23

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

14.

Operating expenses

	Three months ended June 30, 2021		Three months ended June 30, 2020		Nine months ended June 30, 2021		Nine months ended June 30, 2020
Payroll and employee benefits	$	7,257	$	5,635	$	20,693	$	17,194
Facilities		522		348		1,540		1,358
Bad debt expense		1,682		1,596		5,970		5,224
Billing		1,077		485		2,686		1,198
Professional fees		824		202		1,824		773
Marketing costs		234		86		577		391
Outbound freight		384		243		967		624
All other		1,204		836		3,190		2,563
Total Operating expenses	$	13,184	$	9,431	$	37,447	$	29,325

15.

Income (loss) per share

Income (loss) per common share is calculated using the weighted average number of common shares outstanding during the period. Diluted income (loss) per share amounts are calculated giving effect to the potential dilution that would occur from the incremental shares issued if in-the-money 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 warrants are used to purchase common shares at the prevailing market price. For periods with a net loss, the potential dilutive shares were excluded because their effect is anti-dilutive.

The following reflects the earnings and share data used in the basic and diluted income (loss) per share computations:

	Three months ended June 30, 2021		Three months ended June 30, 2020			Nine months ended June 30, 2021			Nine months ended June 30, 2020
Net income (loss) for continuing operations	$	6,329	$	(2,528	)	$	(4,677	)	$	(3,198	)
Net income (loss) for discontinued operations		-		-			-			(869	)
Basic weighted average number of shares		30,893		21,065			29,500			20,959
Diluted weighted average number of shares		33,754		21,065			29,500			20,959
Basic – continuing operations	$	0.20	$	(0.12	)	$	(0.16	)	$	(0.15	)
Diluted – continuing operations	$	0.19	$	(0.12	)	$	(0.16	)	$	(0.15	)
Basic – discontinuing operations	$	0.00	$	0.00		$	0.00		$	(0.04	)
Diluted – discontinuing operations	$	0.00	$	0.00		$	0.00		$	(0.04	)
Total - Basic	$	0.20	$	(0.12	)	$	(0.16	)	$	(0.19	)
Total - Diluted	$	0.19	$	(0.12	)	$	(0.16	)	$	(0.19	)

The effect of instruments exercisable or convertible to common shares for the three months ended June 30, 2020 were excluded from the calculation of diluted loss per share because their effect is anti-dilutive.

16.

Related party transactions

The Company has six market rate leases for office, warehouse, and retail space with a rental Company affiliated with the Company’s Chief Executive Officer, the majority of which were entered into in 2015. The leases have a combined area of 74,520 square feet. Lease payments under these leases are approximately $52,000 per month, plus taxes, utilities, and maintenance.

Expense for Board of Directors’ fees were $53,000 and $43,000 for the three months ended June 30, 2021 and 2020, respectively. Fees were $150,000 and $128,000 for the nine months ended June 30, 2021 and 2020, respectively. Stock-based compensation for the Board of Directors was $387,000 and $408,000 for the three and nine months ended June 30, 2021.

Key management personnel also participate in the Company’s share option program (see Note 12). The Company paid or accrued compensation to key management personnel the following:

Page | 24

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

	Three months ended June 30, 2021		Three months ended June 30, 2020		Nine months ended June 30, 2021		Nine months ended June 30, 2020
Salaries and Benefits	$	224	$	196	$	707	$	589
Stock-based compensation		746		-		746		-
Total	$	970	$	196	$	1,453	$	589

17.

Discontinued operations

On July 29, 2019, the Company sold the assets of Patient Home Monitoring, Inc. The consolidated financial statements and the notes reflect the Patient Home Monitoring, Inc. as discontinued operations. During the year ended September 30, 2020, there were ongoing litigation matters involving Patient Home Monitoring, Inc. that resulted in loss from discontinued operations, as reflected in the following table for the nine months ended June 30, 2020.

	Nine months ended June 30, 2021		Nine months ended June 30, 2020
Operating expenses	$	-	$	(869	)
Net (loss) income from discontinued operations	$	-	$	(869	)

For the periods ended June 30, 2020, Patient Home Monitoring, Inc. was classified as a discontinued operation. There were ongoing litigation matters involving Patient Home Monitoring, Inc. During the nine months ended June 30, 2020, the Company accrued $869,000 for defense and settlement costs. One of the matters was resolved in the second quarter of fiscal year 2020 and the other matter was resolved in the third quarter of fiscal year 2021. These matters are directly related to the operations of the disposed business, and as such, are reflected as discontinued operations.

18.

Subsequent event

On August 20, 2021, the Company, through one of its indirect wholly-owned subsidiaries, entered into a purchase agreement to acquire Medical West Healthcare Center, LLC (“Medical West”), a Missouri company. The purchase price was approximately $2,350,000, of which approximately $1,900,000 was paid in cash at closing, and approximately $450,000 of holdbacks are payable on the six- and twelve-month anniversaries of the acquisition, subject to normal post-closing adjustments, if any.

Pro forma nine-month revenues and net income of Medical West had the acquisition occurred on October 1, 2020 are approximately $4,300,000 and $100,000, respectively. The Company is in the process of gathering the information required to allocate the purchase price to the acquired tangible and intangible assets as of the acquisition date.

19.

Restatement

For comparative purposes, the consolidated statements of financial position as at September 30, 2020 and October 1, 2019 include adjustments to reflect the change in accounting policy resulting from the change in the presentation currency to the US dollar. The amounts previously reported in Canadian dollars as shown below have been translated into US dollars as at September 30, 2020 and October 1, 2019 exchange rate of 1.3339 US$:C$ and 1.3242 US$:C$, respectively.

Condensed consolidated interim financial statements as at September 30, 2020

	Previously Reported in C$		As Restated in US$
Current assets	$	60,402	$	45,283
Long-term assets		35,733		26,782
Total assets		96,135		72,065
Current liabilities		32,526		24,385
Long-term liabilities		25,938		19,445
Total liabilities		58,464		43,830
Shareholders’ equity		37,671		28,235
Total liabilities and shareholders’ equity		96,135		72,065

Page | 25

Quipt Home Medical Corp. (Formerly, Protech Home Medical Corp.)

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED) JUNE 30, 2021 AND 2020

(Tabular dollar amounts expressed in thousands of US Dollars, except per share amounts)

Condensed consolidated interim financial statements as at October 1, 2019

	Previously Reported in C$		As Restated in US$
Current assets	$	30,783	$	23,247
Long-term assets		24,382		18,412
Total assets		55,165		41,659
Current liabilities		21,081		15,919
Long-term liabilities		16,839		12,717
Total liabilities		37,920		28,636
Shareholder’s equity		17,245		13,023
Total liabilities and shareholders’ equity		55,165		41,659

The statements of income (loss) and comprehensive income (loss) and statement of cash flows have been adjusted for foreign exchange gain and translated at an exchange rate of 1.3516 C$/US$ for the nine months ended June 30, 2020.

Condensed consolidated interim statement of loss for the three months ended June 30, 2020

	Previously Reported in C$			As Restated in US$
Total revenue	$	25,735		$	18,572
Operating income (loss) from continuing operations		916			701
Income (loss) before taxes from continuing operations		(3,333	)		(2,492	)
Net income (loss) from continuing operations		(3,382	)		(2,528	)
Net income (loss)		(3,382	)		(2,528	)

Condensed consolidated interim statement of loss for the nine months ended June 30, 2020

	Previously Reported in C$			As Restated in US$
Total revenue	$	71,610		$	52,981
Operating income (loss) from continuing operations		(1,321	)		(978	)
Income (loss) before taxes from continuing operations		(4,975	)		(3,129	)
Net income (loss) from continuing operations		(5,068	)		(3,198	)
Net income (loss)		(6,226	)		(4,067	)

Condensed consolidated interim statement of cash flows for the nine months ended June 30, 2020

	Previously Reported in C$			As Restated in US$
Loss from continuing operations	$	(5,068	)	$	(3,198	)
Loss from discontinuing operations		(1,158	)		(869	)
Net cash flows provided by operating activities		13,131			9,702
Net cash flows used in investing activities		(4,214	)		(3,118	)
Net cash flow used in financing activities		22,899			16,864
Net increase in cash		31,816			23,448

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