10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number: 001-38973

Viemed Healthcare, Inc.

(Exact name of registrant as specified in its charter)

British Columbia, Canada		N/A
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
	625 E. Kaliste Saloom Rd. Lafayette, LA 70508
(Address of principal executive offices, including zip code)
	(337) 504-3802
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Shares, no par value	VMD	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-Accelerated filer ☐ Smaller reporting company x Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x

As of April 29, 2020, there were 38,486,772 common shares of the registrant outstanding.

VIEMED HEALTHCARE, INC.

TABLE OF CONTENTS

March 31, 2020 and 2019

		Page
PART I - FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income and Comprehensive Income	4
	Condensed Consolidated Statements of Changes in Shareholders' Equity	5
	Consolidated Consolidated Statements of Cash Flows	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		22
	Forward-Looking Statements	22
	General Matters	23
	Overview	23
	Trends Affecting Our Business	24
	Results of Operations	26
	Non-GAAP Financial Measures	28
	Liquidity and Capital Resources	29
	Accounting and Disclosure Matters	32
Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
Item 4. Controls and Procedures		35
PART II - OTHER INFORMATION		37
Item 1. Legal Proceedings		37
Item 1A. Risk Factors		37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		38
Item 3. Defaults Upon Senior Securities		39
Item 4. Mine Safety Disclosures		39
Item 5. Other Information		39
Item 6. Exhibits		40

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

VIEMED HEALTHCARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. Dollars, except outstanding shares)
	Note	At March 31, 2020			At December 31, 2019
		(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents		$	8,409		$	13,355
Accounts receivable, net of allowance for doubtful accounts of $10,196 and $7,782 at March 31, 2020 and December 31, 2019, respectively	2	15,443			11,534
Inventory, net	2	1,785			1,360
Prepaid expenses and other assets	2	4,514			1,562
Total current assets		$	30,151		$	27,811
Long-term assets
Property and equipment	3	56,632			54,772
Equity method investment		18			13
Total long-term assets		$	56,650		$	54,785
TOTAL ASSETS		$	86,801		$	82,596
LIABILITIES
Current liabilities
Trade payables		$	6,380		$	4,700
Deferred revenue		3,394			3,315
Income taxes payable		281			86
Accrued liabilities	4	6,886			8,968
Current portion of lease liabilities	5	7,433			7,093
Current portion of long-term debt	5	1,772			1,750
Total current liabilities		$	26,146		$	25,912
Long-term liabilities
Accrued liabilities	7	2,350			2,317
Long-term lease liabilities	5	2,330			3,039
Long-term debt	5	7,179			7,629
Total long-term liabilities		$	11,859		$	12,985
TOTAL LIABILITIES		$	38,005		$	38,897
Commitments and Contingencies		—			—
SHAREHOLDERS' EQUITY
Common stock - No par value: unlimited authorized; 38,486,772 and 37,952,660 issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	7	6,657			3,366
Additional paid-in capital		4,252			6,377
Accumulated other comprehensive loss		(469		)	(157		)
Retained earnings		38,356			34,113
TOTAL SHAREHOLDERS' EQUITY		$	48,796		$	43,699
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	86,801		$	82,596

See accompanying notes to the condensed consolidated financial statements

Page 3

VIEMED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Expressed in thousands of U.S. Dollars, except share and per share amounts)

(Unaudited)

		Three Months Ended March 31,
	Note	2020			2019
Revenue	2	$	23,806		$	18,115
Cost of revenue		8,253			5,041
Gross profit		$	15,553		$	13,074
Operating Expenses
Selling, general and administrative		10,577			9,460
Research and development		174			234
Stock-based compensation	7	1,151			880
Depreciation		205			129
(Gain) loss on disposal of property and equipment		(1,169		)	56
Income from operations		$	4,615		$	2,315
Non-operating expenses
Unrealized loss on warrant conversion liability	6	—			169
Loss from equity method investment		27			24
Interest expense, net of interest income	5	158			26
Net income before taxes		4,430			2,096
Provision for income taxes	9	187			138
Net income		$	4,243		$	1,958
Other Comprehensive Income
Change in unrealized loss on derivative instruments, net of tax		(312		)	—
Other Comprehensive Loss		$	(312	)	$	—
Comprehensive Income		$	3,931		$	1,958
Net income per share
Basic	11	$	0.11		$	0.05
Diluted	11	$	0.11		$	0.05
Weighted average number of common shares outstanding:
Basic	11	38,030,854			37,827,058
Diluted	11	39,677,983			39,449,123

See accompanying notes to the condensed consolidated financial statements

Page 4

VIEMED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Expressed in thousands of U.S. Dollars, except share and per share amounts)

(Unaudited)

	Common Stock				Additional paid-in capital			Accumulated other comprehensive loss						Total Shareholders' equity
	Shares		Amount								Retained earnings
Shareholders' equity, December 31, 2018	37,500,815		$	71	$	5,390		$	—		$	27,110		$	32,571
Stock-based compensation - options	—		—		578			—			—			578
Stock-based compensation - restricted stock	—		—		302			—			—			302
Options exercised	2,418		4		—			—			—			4
Shares issued for vesting of restricted stock units	539,965		2,202		(2,202		)	—			—			—
Shares repurchased and canceled under the Normal Course Issuer Bid	(365,100	)	—		—			—			(1,522		)	(1,522		)
Net Income	—		—		—			—			1,958			1,958
Shareholders' equity, March 31, 2019	37,678,098		$	2,277	$	4,068		$	—		$	27,546		$	33,891
	Common Stock				Additional paid-in capital			Accumulated other comprehensive loss						Total Shareholders' equity
	Shares		Amount								Retained earnings
Shareholders' equity, December 31, 2019	37,952,660		$	3,366	$	6,377		$	(157	)	$	34,113		$	43,699
Stock-based compensation - options	—		—		891			—			—			891
Stock-based compensation - restricted stock	—		—		260			—			—			260
Exercise of options	4,737		15		—			—			—			15
Shares issued for vesting of restricted stock units	529,375		3,276		(3,276		)	—			—			—
Change in accumulated other comprehensive loss	—		—		—			(312		)	—			(312		)
Net Income	—		—		—			—			4,243			4,243
Shareholders' equity, March 31, 2020	38,486,772		$	6,657	$	4,252		$	(469	)	$	38,356		$	48,796

See accompanying notes to the condensed consolidated financial statements

Page 5

VIEMED HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. Dollars)

(Unaudited)

		Three Months Ended March 31,
	Note	2020			2019
Cash flows from operating activities
Net income		$	4,243		$	1,958
Adjustments for:
Depreciation		2,130			1,400
Change in allowance for doubtful accounts	2	2,846			2,125
Share-based compensation	7	1,151			880
Unrealized loss on warrant conversion liability	6	—			169
Loss on equity investment		27			24
(Gain) loss on disposal of property and equipment		(1,169		)	56
Net change in working capital
Increase in accounts receivable		(6,755		)	(4,952		)
Increase in inventory		(425		)	(728		)
Increase in prepaid expenses and other current assets		(2,952		)	(129		)
Increase in trade payables		3,598			504
Increase in deferred revenue		79			203
Decrease in accrued liabilities		(2,361		)	(856		)
Increase (decrease) in income tax payable		195			(4		)
Net cash provided by operating activities		$	607		$	650
Cash flows from investing activities
Purchase of property and equipment		(4,220		)	(116		)
Investment in equity method investment		(32		)	—
Proceeds from sale of property and equipment		2,541			24
Net cash used in investing activities		$	(1,711	)	$	(92	)
Cash flows from financing activities
Proceeds from exercise of options		15			4
Principal payments on notes payable		(33		)	—
Principal payments on term note		(395		)	—
Shares repurchased and canceled under the Normal Course Issuer Bid		—			(1,522		)
Repayments of lease liabilities, net of proceeds		(3,429		)	(2,043		)
Net cash used in financing activities		$	(3,842	)	$	(3,561	)
Net decrease in cash and cash equivalents		(4,946		)	(3,003		)
Cash and cash equivalents at beginning of year		13,355			10,413
Cash and cash equivalents at end of period		$	8,409		$	7,410
Supplemental disclosures of cash flow information
Cash paid during the period for interest		$	165		$	26
Cash paid during the period for income taxes, net of refunds received		$	(8	)	$	143
Supplemental disclosures of non-cash transactions
Property and equipment financed through finance leases		$	3,002		$	4,505
Property and equipment financed through leases under FASB ASC 842		$	31		$	1,267

See accompanying notes to the condensed consolidated financial statements

Page 6

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

1.    Nature of Business and Operations

On December 21, 2017, Viemed Healthcare, Inc. (the "Company") consumated Asset and Share Purchase Agreements as well as an Arrangement Agreement ("the Arrangement") with Protech Home Medical Corp. ("PHM") (formerly Patient Home Monitoring Corp.) and was spun-out as a separate public company that owns a 100% interest in Home Sleep Delivered, L.L.C. ("HSD") and Sleep Management, L.L.C. dba Viemed ("Viemed") through the U.S. holding company Viemed Inc.

The Company, through its subsidiaries, Viemed and HSD, provides in-home durable medical equipment ("DME") and health care solutions to patients in over 30 states in the United States. Viemed offers customers requiring respiratory services and related equipment an appropriate selection of home medical products including non-invasive ventilators, positive airway pressure (“PAP”) machines and oxygen units, as well as the services of experienced respiratory therapists. HSD provides in-home sleep apnea testing, allowing a patient to determine the existence of sleep apnea at home at a fraction of the cost of the traditional sleep lab environment. The Company was incorporated under the Business Corporations Act (British Columbia) on December 14, 2016. The Company's registered and records office is located at Suite 2800, Park Place, 666 Burrard Street, Vancouver, British Columbia V6C 2Z7 and its corporate office is located at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508.

The Company qualifies as a "foreign private issuer," as defined in Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), for the purposes of the informational requirements of the Exchange Act. Although, as a foreign private issuer, the Company would not be required to do so, the Company will file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Securities and Exchange Commission (the "SEC"), instead of filing the reporting forms available to foreign private issuers.

The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"), and as such, has elected to comply with certain reduced U.S. public company reporting requirements.

The Company’s shares are traded in Canada on the Toronto Stock Exchange under the symbol VMD.TO and in the U.S. on the Nasdaq Capital Market under the symbol VMD.

2. Summary of Significant Accounting Policies

Principles of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements are unaudited, but reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income and Comprehensive Income, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows for the interim periods presented. Our fiscal year ends on December 31. The condensed consolidated balance sheet as of December 31, 2019 was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto and the report of our independent registered public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The nature of our business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Reporting currency

All values are in U.S. dollars ($ or "USD") unless specifically indicated otherwise. Canadian dollars are indicated as CAD$.

Page 7

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

Functional currency

Management has exercised judgment in selecting the functional currency of each of the entities that it combines based on the primary economic environment in which the entity operates and in reference to the various indicators including the currency that primarily influences or determines the selling prices of goods and services and the cost of those services, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices. The Company's functional currency was determined to be the U.S. dollar, which was determined using management’s assumption that the primary economic environment which it will derive its revenue and expenses incurred to generate those revenues is the United States.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable. Significant areas requiring the use of management estimates relate to revenue recognition, accounts receivable and the related allowance for doubtful accounts, income tax provisions, and fair value of financial instruments. Actual results could differ from these estimates.

As of March 31, 2020, the COVID-19 pandemic is ongoing and the impacts of the pandemic on our business, financial condition and results of operations continue to evolve as of the date of this report. As a result, the impacts remain uncertain and difficult to predict and will depend on, among other factors, the duration and severity of the pandemic, as well as any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home, and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

Accounts receivable

Accounts receivable are regularly reviewed for collectability and an allowance is recorded to cover the estimated bad debts and billing modifications. The accounts receivable are presented on the Condensed Consolidated Balance Sheets net of the allowance for doubtful accounts. It is possible that the estimates of the allowance for doubtful accounts could change, which could have a material impact on our operations and cash flows.

The Company writes off receivables when the likelihood for collection is remote, and when the Company believes collection efforts have been fully exhausted and it does not intend to devote additional resources in attempting to collect. The write-offs are charged against the allowance for doubtful accounts.

For the three months ended March 31, 2020, our assessment considered business and market disruptions caused by the COVID-19 pandemic and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

The estimates and write-offs for the allowance for doubtful accounts for each reporting period were as follows:

	March 31, 2020			March 31, 2019
Balance, beginning of year	$	7,782		$	4,266
Provision for bad debts	2,846			2,125
Amounts written off	(432		)	(502		)
Balance, end of period	$	10,196		$	5,889

Page 8

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

As of March 31, 2020 and 2019, no one customer represented more than 10% of outstanding accounts receivable. The Company does have receivables at March 31, 2020 from Medicare and Medicaid, representing 49% and 8%, respectively, and 57% combined, of total outstanding receivables (December 31, 2019 - 58%). As these receivables are both from government programs, there is little credit risk associated with these balances; however, these receivables are subject to billing modifications and other adjustments and estimates of the amounts of such adjustments are included in the allowance for doubtful accounts.

Revenues from Medicare and Medicaid accounted for 64% and 9%, respectively and 73% combined, of the Company's total revenues for the three months ended March 31, 2020. Revenues from Medicare and Medicaid accounted for 68% and 9%, respectively, and 77% combined, of the Company's total revenues for the three months ended March 31, 2019.

Property and equipment

Property and equipment is presented on the Condensed Consolidated Balance Sheets at historic cost less accumulated depreciation. Major renewals and improvements that extend the useful life of assets are capitalized to the respective property accounts, while maintenance and repairs, which do not extend the useful life of the respective assets, are expensed as incurred. Management has estimated the useful lives of equipment leased to customers. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Property and equipment are amortized on a straight-line basis over their estimated useful lives.

The estimated useful lives of the property and equipment are as follows:

Description	Estimated Useful Lives
Medical Equipment	1 - 10 Years
Computer Equipment	5 Years
Office Furniture & Fixtures	5 - 10 Years
Leasehold Improvements	Shorter of Useful Life or Lease
Vehicles	5 Years
Building	15 - 39 Years
Land	Indefinite Life

Depreciation of medical equipment commences at the date of service, which represents the date that the asset has been deployed to a patient’s address and is put in use and continues through the useful life of the asset. 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.

Prepaid expenses and other assets

Prepaid expenses and other current assets consists primarily of refundable deposits made for ventilators that have not been received by the Company, along with prepaid insurance, and prepaid rent.

Comprehensive income

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on derivative instruments. Accumulated other comprehensive loss is presented in the accompanying balance sheets as a component of shareholders' equity.

Revenue recognition

Revenue from a customer consists of any combination of the sale and rental of DME and/or patient medical services. Revenues are billed to and collections received from Medicare, Medicaid, third-party insurers, co-insurance and patient-pay. Revenue is recognized net of contractual adjustments and bad debt based on contractual arrangements with third-party payors, an evaluation of expected collections resulting from the analysis of current and past due accounts, past collection experience in relation to amounts billed and other relevant information. Contractual adjustments result from the differences between the rates charged for services and reimbursements by government-sponsored healthcare programs and insurance companies for such services.

Page 9

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

The Company's contracts with customers often include multiple products and services, and the Company evaluates these arrangements to determine the unit of accounting for revenue recognition purposes based on whether the product or service is distinct from other products or services in the arrangement and should be accounted for as a separate performance obligation. A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the Company's ability to transfer the goods or services is separately identifiable from other promises in the contractual arrangement with the customer (e.g. patient). Revenue is then allocated to each separately identifiable good or service based on the standalone price of the items underlying the performance obligations. Most of the Company’s products fall in the Medicare Fee-for-Service (“FFS”) program which is a payment model where services are unbundled and paid for separately. These services are paid based on a Medicare determined price that is publicly available on the website for the Centers for Medicare & Medicaid Services (“CMS”). For commercial payors, DME companies must negotiate in-network pricing separately, though in general, the Company’s payors tend to benchmark their contract rates and coverage policies closely to those of Medicare.

The Company considers performance obligations for sales and rentals to be met when the customer receives the equipment, and revenue for rentals is recognized over time, over the respective rental period. For revenue associated with DME rentals, the Company recognizes revenue in accordance with FASB ASC 842, “Leases,” (Topic 842). For any DME sales and services, the Company recognizes revenue under FASB ASU 2014-09, “Revenue from Contracts with Customers,” (Topic 606) and related amendments.

The Company recognizes equipment rental revenue over the non-cancelable lease term, which is one month, less estimated adjustments, in accordance with Topic 842. The Company has separate contracts with each patient that are not subject to a master lease agreement with any third-party payor. The Company would first consider the lease classification issue (sales-type lease or operating lease) and then appropriately recognize or defer rental revenue over the lease term.

The revenues from each major source are summarized in the following table:

	Three Months Ended March 31,
	2020		2019
Revenue from rentals under Topic 842
Ventilator rentals, non-invasive and invasive	$	18,792	$	16,204
Other durable medical equipment rentals	2,131		797
Revenue from sales and services under Topic 606
Equipment and supply sales	1,533		778
COVID-19 response sales(1)	1,040		—
Service revenues	310		336
Total Revenues	$	23,806	$	18,115

⁽¹⁾ See Management's Discussion and Analysis for further discussion.

Revenue Accounting under Topic 842

The Company leases DME such as non-invasive and invasive ventilators, PAP machines, percussion vests, oxygen concentrator units and other small respiratory equipment to customers for a fixed monthly amount on a month-to-month basis. The customer generally has the right to cancel the lease at any time during the rental period. The Company considers these rentals to be operating leases.

Under FASB Accounting Standards Codification Topic 842, the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term which varies based on the type of equipment rental. The lease term begins on the date 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 considered probable of payment, which is generally when paid.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

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VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

Revenue Accounting under Topic 606

The Company sells DME, replacement parts and supplies to customers and recognizes revenue based on contractual payment rates as determined by the payors at the point in time where control of the good or service is transferred through delivery to the customer. The customer and, if applicable, the payors are generally charged at the time that the product is sold. For sales of equipment previously placed in service, proceeds associated with these sales are recorded to gain (loss) on disposal of property and equipment.

The Company also provides sleep study services to customers and recognizes revenue when the results of the sleep study are complete as that is when the performance obligation is met. The transaction price on both equipment sales and sleep studies is the amount that the Company expects to receive in exchange for the goods and services provided. Due to the nature of the DME business, gross charges are retail charges and generally do not reflect what the Company is ultimately paid. As such, the transaction price is constrained for the difference between the gross charge and what is estimated to be collected from payors and from patients. The transaction price therefore is predominantly based on contractual payment rates as determined by the payors. The Company does not generally contract with uninsured customers. The payment terms and conditions of customer contracts vary by customer type and the products and services offered.

The Company determines its estimates of contractual allowances and discounts based upon contractual agreements, its policies and historical experience. While the rates are fixed for the product or service with the customer and the payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, and are due from the patient. The Company includes in the transaction price only the amount that the Company expects to be entitled, which is substantially all of the payor billings at contractual rates. The transaction price is initially constrained by the amount of customer co-payments, which are included in the transaction price when considered probable of payment and included in revenue if the product or service has already been provided to the customer.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Returns and refunds are not accepted on either equipment sales or sleep study services. The Company does not offer warranties to customers in excess of the manufacturer’s warranty. Any taxes due upon sale of the products or services are not recognized as revenue. The Company does not have any partially or unfilled performance obligations related to contracts with customers and as such, the Company has no contract liabilities as of March 31, 2020.

Stock-based compensation

The Company accounts for its stock-based compensation in accordance with ASC 718, "Compensation—Stock Compensation", which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Stock–based compensation cost for stock options are determined at the grant date using the Black-Scholes option pricing model. Stock-based compensation costs for restricted stock units are determined at the grant date based on the closing stock price. The expense of such stock-based compensation awards is recognized using the graded vesting attribution method over the vesting period and the offsetting credit is recorded as an increase in additional paid-in capital. Forfeitures are recorded as incurred. Any excess tax benefit or deficiency is recognized as a component of income taxes and within operating cash flows upon vesting of the share-based award.

Interest rate swaps

The Company utilizes an interest rate swap contract to reduce exposure to fluctuations in variable interest rates for future interest payments on the Term Note (as defined below). 

For determining the fair value of the interest rate swap contract, the Company uses significant other observable market data or assumptions (Level 2 inputs) that market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. These fair value estimates reflect an income approach based on the terms of the interest rate swap contract and inputs corroborated by observable market data including interest rate curves. The Company includes unrealized gains in Prepaid expenses and other assets, as a component of Long-term Assets, and unrealized losses in Accrued Liabilities, as a component of Long-term Liabilities on the Condensed Consolidated Balance Sheets.

Page 11

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

The Company recognizes any differences between the variable interest rate payments and the fixed interest rate settlements from its swap counterparty as an adjustment to interest expense over the life of the swap. If determined to be an effective cash flow hedge, the Company will record the changes in the estimated fair value of the swaps to Accumulated other comprehensive income or loss on the Condensed Consolidated Balance Sheets. To the extent that interest rate swaps are determined to be ineffective, the Company would recognize the changes in the estimated fair value of swaps in Interest and other non-operating expenses, net in its Condensed Consolidated Statements of Income.

Net Income per Share Attributable to Common Stockholders

The Company uses the two-class method to compute net income per common share attributable to common stockholders because the Company issued securities, other than common stock, that contractually entitled the holders to participate in dividends and earnings prior to the initial listing. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of the current period's earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

See Note 11 for earnings per share computations.

Recently adopted accounting pronouncements

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements on fair value measurements. The Company adopted this standard on January 1, 2020 and the adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

Recently issued accounting pronouncements

The Company is an “emerging growth company” as defined by the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of all accounting standards until those standards would otherwise apply to private companies. The Company has elected to utilize this exemption and, as a result, our condensed consolidated financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. To date, however, the Company has not delayed the adoption of any accounting standards except as noted below. Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU will be effective for interim and annual periods beginning January 1, 2020 for issuers and annual periods beginning January 1, 2023 for non-issuers. The Company anticipates adopting this ASU on January 1, 2023 given its smaller reporting company status and is still evaluating the impact of adoption on the consolidated financial statements in future periods.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. Among other things, the ASU expands the scope of the practical expedient that allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326 to also include certain disclosures required by Topic 320. Entities that elect to apply the practical expedient must disclose the total amount of accrued interest that they exclude from their disclosures of amortized cost. The amendments have the same effective dates as ASU 2016-13 (Topic ASC 326) for entities that have not yet adopted that standard. For entities that early adopted ASU 2016-13 (Topic ASC 326), the amendments are effective for fiscal years beginning after December 15, 2019 and interim periods therein. Entities that early adopted ASU 2016-13 (Topic ASC 326) may early adopt the amendments.

Page 12

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The new guidance also improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. The ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect of the new guidance.

3.     Property and Equipment

The Company’s fixed assets consist of its medical equipment held for rental, furniture and equipment, real property and related improvements, and vehicles and other various small equipment. In May 2019, the Company purchased a 77,000 square foot commercial building located in Lafayette, Louisiana to utilize as its new corporate headquarters. The Building Term Note used to finance this purchase is further discussed in Note 5.

The following table details the Company’s fixed assets:

	March 31, 2020			December 31, 2019
Medical equipment	$	59,169		$	56,202
Furniture and equipment	2,442			2,350
Land	2,138			2,138
Buildings	6,458			6,351
Leasehold improvements	301			301
Vehicles	1,029			1,110
Less: Accumulated depreciation	(14,905		)	(13,680		)
Property and equipment, net of accumulated depreciation	$	56,632		$	54,772

Depreciation in the amount of $1,925,000 and $1,166,000 is included in cost of revenue for the three months ended March 31, 2020 and 2019, respectively. Included in medical equipment above is equipment acquired under capital lease obligations whose cost and accumulated depreciation at March 31, 2020 total $14,374,000 and $1,153,000, respectively. At December 31, 2019, cost and accumulated depreciation on equipment acquired under capital lease obligations was $15,680,000 and $1,337,000, respectively. Medical equipment purchases with a cost of $899,000 and $2,817,000 was included in accounts payable at March 31, 2020 and December 31, 2019, respectively.

4. Current Liabilities

The Company’s short-term accrued liabilities are included within current liabilities and consist of the following:

	March 31, 2020		December 31, 2019
Accrued trade payables	$	775	$	1,023
Accrued commissions payable	391		371
Accrued bonuses payable	1,509		2,292
Accrued vacation and payroll	1,148		1,502
Current portion of phantom share liability	2,711		3,129
Accrued other liabilities	352		651
Total accrued liabilities	$	6,886	$	8,968

Page 13

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

5.     Debt and lease liabilities

Senior Credit Facility

On February 20, 2018, the Company entered into a two year Commercial Business Loan Agreement for Term Loans and Lines of Credit with Hancock Whitney Bank. Any amounts advanced will be secured by substantially all of the Company's assets and carried an interest rate of one month ICE LIBOR plus 3.00%, with a 4.00% interest rate floor. Advances of the line of credit initially were subject to a borrowing base as determined in accordance with the loan agreement, which was based on the value of the Company's accounts receivable balance.

On March 19, 2019, the Company entered into an amendment to the loan agreement increasing the available line of credit from $5.0 million to $10.0 million and extending the expiration date to March 19, 2021. In addition, the borrowing base restriction was removed from the loan agreement.

On September 19, 2019, in conjunction with the Term Note described below, the Company entered into a third amendment to the loan agreement, which, among other things, replaced the financial covenants in the loan agreement with the following:

Financial Covenant	Required Ratio	Ratio
Total Debt to Adjusted EBITDA (Quarterly)	not more than 1.50:1.00	0.83
Fixed Charge Coverage Ratio (Quarterly)	not less than 1.35:1.00	3.12
Loan-to-Value Ratio (Quarterly)	not more than 0.85	0.72

On May 1, 2020, the Company entered into a fourth amendment to the loan agreement extending the expiration date to May 1, 2023 and modifying the interest rate on amounts advanced to be equal to the WSJ prime rate plus a margin of 0.50%, with a 3.50% interest rate floor.

The Company was in compliance with all covenants in effect at March 31, 2020. There were no borrowings against this line of credit at March 31, 2020 and December 31, 2019.

Commercial Term Notes

On May 30, 2019, the Company entered into a second amendment to the loan agreement providing for a term note (the “Building Term Note”) in favor of Hancock Whitney Bank in the principal amount of $4,845,000. The proceeds of the Building Term Note were used to purchase a building to utilize as a new corporate headquarters for the Company. Beginning July 1, 2019, the Company began making monthly payments towards the outstanding balance. The Building Term Note matures on May 30, 2026 and is secured by substantially all of the assets of the borrower, including the real property acquired with the proceeds of the Building Term Note. The Building Term Note bears interest at a variable rate equal to the one month ICE LIBOR index plus a margin of 2.45% per annum. The Company is required to maintain a loan to value ratio of 85% with respect to the appraised value of the real property. In connection with the Building Term Note, the Company entered into an interest rate swap transaction (the "Interest Rate Swap Transaction") with Hancock Whitney Bank effectively fixing the interest rate for the Building Term Note at 4.68%.

The Company incurred immaterial financing costs related to the real property acquired with the proceeds of the Building Term Note. These deferred financing costs are amortized over the term of the loan using the effective interest method.

On September 19, 2019, the Company entered into a third amendment to the loan agreement providing for a term note (the “Term Note") in favor of Hancock Whitney Bank in the principal amount of $5,000,000. The proceeds of the Term Note will be used for general corporate purposes. Beginning October 19, 2019, the Company started making monthly principal payments of $139,000 towards the outstanding balance. The Term Note matures on September 19, 2022 and is secured by substantially all of the assets of the borrower. The Term Note bears interest at the rate of 4.60% per annum.

Page 14

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

The Company has recognized these term notes, which have terms greater than twelve months, as follows:

	March 31, 2020			December 31, 2019
Notes payable	$	8,951		$	9,379
Less:
Current portion of notes payable	(1,772		)	(1,750		)
Net long-term notes payable	$	7,179		$	7,629

Leases

The Company has recognized finance lease liabilities for medical equipment and operating leases for land and buildings that have terms greater than twelve months, as follows:

	March 31, 2020			December 31, 2019
Lease liabilities	$	9,763		$	10,132
Less:
Current portion of lease liabilities	(7,433		)	(7,093		)
Net long-term lease liabilities	$	2,330		$	3,039

Finance lease liabilities

The Company has various finance leases for equipment with an implied interest rate at fixed rates up to 9.64%, secured by equipment, due between 2020 and 2022. The Company's weighted average interest rate was 2.22% and 0.86% for all finance lease liabilities outstanding as of March 31, 2020 and 2019, respectively. At March 31, 2020 and 2019, the weighted average lease term was approximately 0.99 years and 0.83 years, respectively. Interest expense related to these finance lease obligations for the three months ended March 31, 2020 and March 31, 2019 amounted to $52,000 and $26,000, respectively.

Operating lease liabilities

The Company has recognized operating lease liabilities that relate primarily to the lease of land and buildings. These leases contain renewal options that we have not included as part of the Company's assessment of the lease term as it is not reasonably certain that we will exercise these options. These lease liabilities are recorded at present value based on a discount rate of 5.50%, which was based on the Company's incremental borrowing rate at the time of assessment. At March 31, 2020, the weighted average lease term was approximately 3.66 years. Operating rental expenses were $184,000 for the three months ended March 31, 2020, and $90,000 for the three months ended March 31, 2019.

Included within these operating lease liabilities are real property leases for real estate from a related party. Rental payments under these related party lease agreements are $20,000 per month, plus taxes, utilities and maintenance. Total rental payments for the use of these properties were $61,000 for the three months ended March 31, 2020, and $61,000 for the three months ended March 31, 2019. The expense for these related party rents has been included within general and administrative expenses.

Page 15

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

6.     Fair value measurement

Under ASC Topic 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). ASC Topic 820 establishes a hierarchy for inputs to valuation techniques used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that reflect assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. There are three levels to the hierarchy based on the reliability of inputs, as follows:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets and liabilities in markets that are not active.

Level 3 - Unobservable inputs for the asset or liability. The degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

The Company’s cash and cash equivalents are measured using Level 1 inputs and include cash on hand, deposits in banks, certificates of deposit and money market funds. Due to their short-term nature, the carrying amounts reported in the consolidated balance sheets approximate the fair value of cash and cash equivalents.

The fair value of debt is classified as Level 2 for the periods presented and approximates its carrying value.

Warrants

Pursuant to the Arrangement, PHM common share purchase warrant holders each received one tenth (1/10) of one warrant to purchase one common share of the Company. The warrants conversion feature is denominated in Canadian dollars which is different from the functional currency of the Company, which is U.S. dollars. The conversion feature is treated as a derivative financial liability and the fair value movement during the period is recognized in the Condensed Consolidated Statement of Income and Comprehensive Income. The change in the value of warrants has been recorded as an unrealized (gain) loss on derivative financial liability in the Condensed Consolidated Statements of Income and Comprehensive Income. All unexercised warrants expired during the year ended December 31, 2019.

The warrant derivative financial liability was valued using Level 3 inputs from the fair value hierarchy.

There were no warrants issued during the three month period ended March 31, 2020. There were no warrants exercised and no warrants that expired during the three months ended March 31, 2020. A summary of the change in fair value of warrant conversion liability is as follows for the period ended March 31, 2019:

Warrant Conversion Liability
Balance December 31, 2018	$	363
Warrants issued	—
Unrealized loss on warrant conversion liability	169
Balance March 31, 2019	$	532

Page 16

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

Derivative instruments and hedging activities

We currently have one interest rate swap contract in place, which became effective on May 31, 2019 and has been designated as a cash flow hedge. This swap contract matures on May 30, 2026. This swap contract converts the variable interest rate to a fixed interest rate on borrowings under the Building Term Note. As of March 31, 2020, the notional amount of the interest rate swap was $4.7 million and will be amortized over the term of the swap. The fair value was $0.5 million (determined based on Level 2 inputs) and is included in Accrued liabilities, as a component of Long-term liabilities as of March 31, 2020.

In the first three months of 2020, losses recognized as a result of ineffectiveness were immaterial.

7. Shareholders' Equity

Authorized share capital

The Company’s authorized share capital consists of an unlimited number of common shares.

Issued and outstanding share capital

The Company has only one class of stock outstanding, common shares. The authorized stock consists of an unlimited number of common shares with no stated par value, of which 38,486,772 and 37,952,660 shares were issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.

Stock-based compensation

The purpose of the Company's RSU and Option Plans (collectively, the "Plan") is to provide incentive to employees, directors, officers, management companies, and consultants who provide services to the Company or any of its subsidiaries. The Plan is a “fixed” stock plan, whereby the maximum number of the Company's shares reserved for issuance, combined with any equity securities granted under all other compensation arrangements adopted by the Company, may not exceed 7,582,000 shares (equal to 20% of the issued and outstanding shares of the Company as of the date of the adoption of the Plan). As of March 31, 2020, the Company had outstanding issuances of options of 3,638,000 and restricted stock units of 701,088 under the Plan.

The following table summarizes stock-based compensation for the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020		2019
Stock-based compensation - options	$	891	$	578
Stock-based compensation - restricted stock units	260		302
Total	$	1,151	$	880

At March 31, 2020, there was approximately $5,012,000 of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized over a weighted-average period of 2.49 years. As of March 31, 2020, there was approximately $920,000 of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 0.90 years.

Page 17

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

Options

The following table summarizes stock option activity for the three months ended March 31, 2020:

	Number of options  (000's)		Weighted average exercise price (CAD$)		Weighted average remaining contractual life	Aggregate Intrinsic Value(1)
Balance December 31, 2019	2,683		$	4.36	6.7 years	$	7,790
Issued	964		7.44
Exercised	(5	)	4.16
Expired / Forfeited	(4	)	6.79
Balance March 31, 2020	3,638		$	5.17	7.4 years	$	3,684

⁽¹⁾ The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

The aggregate intrinsic value of options outstanding was $3,684,000 and options exercisable were $3,018,000 at March 31, 2020. For the three months ended March 31, 2020, 4,737 shares of common stock were issued pursuant to the exercise of stock options.

At March 31, 2020, the Company had 1,641,000 exercisable stock options outstanding with a weighted average exercise price of CAD $4.00 and a weighted average remaining contractual life of 5.2 years. At December 31, 2019, the Company had 1,037,000exercisable stock options outstanding with a weighted average exercise price of CAD $3.83 and a weighted average remaining contractual life of 3.5 years.

The fair value of the stock options has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and credited to additional paid-in capital over the vesting period, using the Black-Scholes option pricing model calculated using the following assumptions for issuances during the three months ended March 31, 2020:

Exercise price ($CAD)	$7.44 ($CAD)
Risk-free interest rate	1.63	%
Expected volatility	65.73	%
Expected life of options	10 Years
Expected dividend yield	Nil
Fair value on date of grant ($USD)	$4.10 ($USD)

Restricted stock units

The Company has a restricted stock unit plan ("RSU Plan"), which it uses for grants to directors, officers, and employees. The Company accounts for restricted stock units using fair value. The fair value of the restricted stock units has been charged to the consolidated statements of income and comprehensive income and credited to additional paid-in capital over the vesting period, based on the stock price on the date of grant. Restricted stock units vest generally over a one or three-year period. The Company accounts for forfeitures on restricted stock units under ASU 2016-09 and recognizes forfeitures in the period in which they occur.

The following table summarizes restricted stock unit activity for the three months ended March 31, 2020:

	Number of Restricted Stock Units (000's)		Weighted average grant price (CAD$)		Weighted average remaining contractual life	Aggregate Intrinsic Value(1)
Balance December 31, 2019	1,139		$	2.74	0.55 years	$	7,129
Issued	92		7.44
Vested	(530	)	2.54
Expired / Forfeited	—		—
Balance March 31, 2020	701		$	3.64	0.90 years	$	3,269

⁽¹⁾ The aggregate intrinsic value of time-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

Page 18

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

During the three months ended March 31, 2020, the Company issued 92,088 restricted stock units, with a vesting term of one to three years and a fair value of $5.66 ($USD) per share.

Phantom share units

The Company has a phantom share unit plan, which it uses for grants to directors, officers, and employees. Phantom share units granted under the plan are non-assignable and are settled in cash at vesting. Phantom share units vest annually over a three-year period.

The following table summarizes phantom share unit activity for the three months ended March 31, 2020:

	Number of Phantom Share Units (000's)
Balance December 31, 2019	1,350
Issued	—
Vested	—
Expired / Forfeited	(22	)
Balance March 31, 2020	1,328

The change in fair value of the phantom share units has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and recorded as a liability included in accrued liabilities and long-term accrued liabilities, using a valuation method with the following inputs:

	Three Months Ended
	March 31, 2020
Share price	$ 6.61 (CAD$)
Remaining life of phantom share units	0.11 - 2.11 Years
Calculated fair value of phantom share units	$	4,593

The total liability associated with phantom share units at March 31, 2020 is $4,593,000, with $1,882,000 of this balance included in long-term accrued liabilities and the remaining portion of $2,711,000 in current accrued liabilities. Accrued liability and related expense is determined at each reporting period based on the stock price at period end.

8.     Commitments

Purchase Commitments

As of March 31, 2020, the Company has non-cancellable purchase order commitments in the amount of $5.5 million for respiratory equipment.

9. Income Taxes

At March 31, 2020 and 2019, the Company had no amounts recorded for uncertain tax positions and does not expect any material changes in uncertain tax benefits during the next 12 months. The Company recognizes interest and penalties related to income tax matters in income tax expense.

The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") which was signed into law on March 27, 2020 includes various income and payroll tax provisions. As of March 31, 2020, the CARES Act has not had a material impact on our condensed consolidated financial statements, however, the Company is still analyzing these provisions of the CARES Act.

Page 19

VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

The Company is subject to U.S. federal income tax as well as income tax in various states. The Company is generally not subject to examination by taxing authorities for years prior to 2016. Our annual estimated effective tax rate for 2020 is 4.20%. Our effective tax rate is based on forecasted annual results which may fluctuate significantly through the rest of the year, in particular due to the uncertainty in our annual forecasts resulting from the unpredictable impact of the COVID-19 pandemic on our operating results. The primary component of the annual effective tax rate relates to the Company's current state income taxes, as the Company continues to generate taxable losses for U.S. federal income tax purposes.

10.     Financial Risk Factors

Risk management

In the normal course of business, the Company is exposed to a number of risks that can affect its operating performance. ASC 820—Fair Value Measurements and Disclosures creates a single definition of fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement is to estimate the price at which an orderly transaction to sell an asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Assets and liabilities adjusted to fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

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 in excess of the amount insured by the Federal Deposit Insurance Corporation. Substantially all accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, directly from patients or for rebates due from manufacturers. Receivables generally are collected within industry norms for third-party payors and from manufacturers. The Company continuously monitors collections from its clients and maintains an allowance for bad debts based upon lifetime expected credit losses.

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 March 31, 2020, the Company faced no material liquidity risk and is able to meet all of its current financial obligations as they become due and payable. The Company had $26,146,000 and $25,912,000 of current liabilities that are due within one year as of March 31, 2020 and December 31, 2019, respectively. The Company had $30,151,000 and $27,811,000 of current assets as of March 31, 2020 and December 31, 2019, respectively, in addition to positive cash flow from operations. The Company utilizes short term leases with a major supplier that could be extended over a longer term if there was a need for additional liquidity. Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank which was fully available as of March 31, 2020, subject to compliance with certain covenants.

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 registered US financial institutions. The Company considers this risk to be immaterial. The interest on finance leases and the Term Note are not subject to cash flow interest rate risk as these instruments bear interest at fixed rates. In connection with the Building Term Note, the Company entered into an Interest Rate Swap Transaction with Hancock Whitney Bank for a fixed rate of 4.68%, thereby transforming the variable interest rate exposure into a fixed rate obligation.

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VIEMED HEALTHCARE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular dollar amounts expressed in thousands of U.S. Dollars, except per share amounts)

(Unaudited)

March 31, 2020 and 2019

11.     Earnings Per Share

Income per common share is calculated using earnings for the year divided by the weighted average number of shares outstanding during the year. Diluted income per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares by assuming the proceeds received from the exercise of stock options, restricted stock units, and warrants are used to purchase common shares at the prevailing market rate.

The following reflects the earnings and share data used in the basic and diluted earnings per share computations:

	Three Months Ended March 31,
	2020		2019
Numerator - basic and diluted:
Net income attributable to shareholders	$	4,243	$	1,958
Denominator:
Basic weighted-average number of common shares	38,030,854		37,827,058
Diluted weighted-average number of shares	39,677,983		39,449,123
Basic earnings per share	$	0.11	$	0.05
Diluted earnings per share	$	0.11	$	0.05
Denominator calculation from basic to diluted:
Basic weighted-average number of common shares	38,030,854		37,827,058
Stock options and other dilutive securities	1,647,129		1,622,065
Diluted weighted-average number of shares	39,677,983		39,449,123

12. Subsequent Events

"CARES" Act Funds Received

The CARES Act created a Provider Relief Fund to support health care-related expenses or lost revenue attributable to the COVID-19 pandemic.  The Company received $3.5 million of the Provider Relief Funds in April 2020. The Department of Health and Human Services has stated that Provider Relief Fund payments are not loans and will not need to be repaid. However, as a condition to the receipt of funds, the Company and any other providers must agree to a detailed set of terms and conditions. CMS has indicated that the terms and conditions may be subject to ongoing changes and reporting. To the extent that reporting requirements and terms and conditions are modified, it may affect the Company’s ability to comply and may require the return of funds. In accordance with the terms of acceptance for the grant, we expect to utilize these funds to prevent, prepare for, and respond to the COVID-19 pandemic.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified entirely by, our condensed consolidated financial statements (including Notes to the Condensed Consolidated Financial Statements) and the other consolidated financial information under Item 1 of this Quarterly Report on Form 10-Q. Some of the information in this discussion and analysis includes forward-looking statements that involve risk and uncertainties. Actual results and timing of events could differ from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus ("COVID-19") a pandemic. Based on the duration and severity of the impacts of the COVID-19 pandemic, including but not limited to any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home, and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts, we are uncertain of the ultimate impact COVID-19 could have on our business, financial condition and results of operations. The impact of COVID-19 on our financial results are discussed in more detail below.

Forward-Looking Statements

Certain statements and information in this Quarterly Report on Form 10-Q may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 or "forward-looking information" as such term is defined in applicable Canadian securities legislation (collectively, "forward-looking statements"). Any statements other than statements of historical information, including those that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking and may involve estimates, assumptions and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. These forward-looking statements are made as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by applicable law.

Forward-looking statements relate to future events or future performance and reflect the expectations or beliefs of management regarding future events, and include, but are not limited to, statements with respect to: operating results; profitability; financial condition and resources; anticipated needs for working capital; liquidity; capital resources; capital expenditures; milestones; licensing milestones; information with respect to future growth and growth strategies; anticipated trends in our industry; our future financing plans; timelines; currency fluctuations; government regulation; unanticipated expenses; commercial disputes or claims; limitations on insurance coverage; and availability of cash flow to fund capital requirements.

Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “potential”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes”, “projects”, or the negatives thereof or variations of such words and phrases or statements that certain actions, events or results “will”, “should”, “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology.

Forward-looking statements are based on the reasonable assumptions, estimates, analysis and opinions of management made in light of its experience and its perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made, but which may prove to be incorrect. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable. We cannot assure you, however, that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

By their nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, including those identified under “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and the other documents we file with the SEC, including under “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019, and with the securities regulatory authorities in certain provinces of Canada, which contribute to the possibility that the predicted outcomes may not occur or may be delayed. The risks, uncertainties and other factors, many of which are beyond our control, that could influence actual results include, but are not limited to: the general business, market and economic conditions in the regions in which the we operate; the impact of the COVID-19 pandemic and of the actions taken by governmental authorities, individuals and companies in response to the pandemic on our business, financial condition and results of operations, including on the our patient base and revenues, employees, and equipment and supplies; we may be subject to significant capital requirements and operating risks; our ability to implement business strategies and pursue business opportunities; volatility in the market price of our common shares; our novel business model; the risk that the clinical application of treatments that demonstrate positive results in a study may not be positively replicated or that such test results may not be predictive of actual treatment results or may not result in the adoption of such treatments by providers; the state of the capital markets; the availability of funds and resources to pursue operations; decline of reimbursement rates; dependence on few payors; possible new drug discoveries; dependence on key suppliers; granting of permits and licenses in a highly regulated business; competition; low profit market segments; disruptions in or attacks (including cyber-attacks) on our information technology, internet, network access or other voice or data communications systems or services; the evolution of various types of fraud or other criminal behavior to which we are exposed; the failure of third parties to comply with their obligations; difficulty integrating newly acquired businesses; the impact of new and changes to, or application of, current laws and regulations; the overall difficult litigation and regulatory environment; increased competition; changes in foreign currency rates; increased funding costs and market volatility due to market illiquidity and competition for funding; critical accounting estimates and changes to accounting standards, policies, and methods used by us; the impact of the previously disclosed restatement and correction of our previously issued financial statements; the previously disclosed identified material weakness in our internal control over financial reporting and our ability to remediate that material weakness; the initiation of legal or regulatory proceedings with respect to the restatement and corrections; the adverse effects on our business, results of operations, financial condition and stock price, as a result of the restatement and correction process; our status as an emerging growth company and a foreign private issuer; and the occurrence of natural and unnatural catastrophic events or health epidemics or concerns, such as the recent COVID-19 pandemic, and claims resulting from such events or concerns, as well as other general economic, market and business conditions; and other factors beyond our control.

General Matters

In this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms the "Company," "we," "us" and "our" refer to Viemed Healthcare, Inc. and its wholly-owned subsidiaries, Viemed Inc., Home Sleep Delivered, L.L.C. ("HSD"), and Sleep Management, L.L.C. dba Viemed ("Viemed").

We were incorporated on December 14, 2016 pursuant to the Business Corporations Act (British Columbia), and qualify as a "foreign private issuer," as defined in Rule 12b-2 of the Exchange Act, for the purposes of the informational requirements of the Exchange Act. Although, as a foreign private issuer, we would not be required to do so, we will file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the SEC, instead of filing the reporting forms available to foreign private issuers.

We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"), and as such, we have elected to comply with certain reduced U.S. public company reporting requirements.

Unless otherwise noted herein, all references to "$" or "USD" are to the currency of the United States and references to "CAD$" or "Canadian dollars" are to the currency of Canada.

Overview

We provide an array of home medical equipment, services and supplies, specializing in post-acute respiratory care services in the United States. Our primary objective is to focus on the organic growth of the business and thereby solidify our position as one of the United States’ largest providers of in home therapy for patients suffering from respiratory diseases. Our respiratory care programs are designed specifically for payors to have the ability to treat patients in the home for less total cost and with a superior quality of care. Our services include respiratory disease management (through the rental of various durable medical equipment ("DME") devices), in-home sleep testing and sleep apnea treatment, oxygen therapy, and the sale of associated supplies.

We derive the majority of our revenue through the rental of non-invasive and invasive ventilators which represented 78.9% and 89.5% of our revenue for the three months ended March 31, 2020 and 2019, respectively. We combine the benefits of home ventilation support with licensed Respiratory Therapists ("RTs") to drive improved patient outcomes and reduce costly hospital readmissions.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

We expect to use an organic growth model whereby expansion is accomplished through existing service areas as well as in new regions through a cost efficient launch that reduces location expenses. Our licensed RTs currently serve patients in over 30 states. We expect to continue to employ more RTs in order to assure our high service model is accomplished in the home. As of March 31, 2020, we employed more than 255 licensed RTs, representing more than 54% of our company-wide employee count. By focusing overhead costs on personnel that service the patient rather than physical location costs, we anticipate efficiently scaling our business in regions that are currently not being effectively serviced.

The continued trend of servicing patients in the home rather than in hospitals is aligned with our business objective and we anticipate that this trend will continue to offer growth opportunities for us. We expect to continue to be a solution to the rising health costs in the United States by offering more cost effective, home based solutions while increasing the quality of life for patients fighting serious respiratory diseases.

Trends Affecting our Business

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Various policies and initiatives have been implemented to reduce the transmission of COVID-19, including travel bans and restrictions, the postponement of non-essential medical surgeries, the limiting of access to medical facilities in certain areas, the promotion of social distancing and the adoption of remote working policies. Local, state and national governments continue to emphasize the importance of essential medical personnel and we remain open to meet the needs of our communities. Employee and patient safety is our first priority, and as a result, we put preparedness plans in place for our employees, especially our clinical personnel, and modified our clinical protocols to limit unnecessary patient encounters in order to ensure the safety of our employees as well as the safety of our patients. These measures do not appear to be negatively impacting our patient attrition rate at this time. In addition, our current ability to assess potential patients in hospitals varies by hospital and city, but overall our business of setting up new patients in the home is continuing. As a result, to date there has been minimal disruption to our normal operations, though it is possible that more significant disruptions could occur if the COVID-19 pandemic continues for a prolonged period of time.

The COVID-19 pandemic has resulted in a significant economic downturn in the United States and globally and has also led to significant disruptions and volatility in capital and financial markets. Broad economic factors resulting from the current COVID-19 pandemic, including high unemployment and underemployment levels and reduced consumer spending and confidence, could also affect our service mix, revenue mix, payor mix and patient base, as well as our ability to collect outstanding receivables. Business closures and layoffs in the geographic areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our financial results and require an increased level of working capital. In addition, we may experience supply chain disruptions, including delays and price increases in equipment and supplies. Staffing, equipment and supplies shortages may also impact our ability to assess potential patients in hospitals and set up and treat patients in the home.

We believe we presently have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times, such as limiting discretionary spending across the organization. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which was signed into law on March 27, 2020, provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic, including tax relief and government loans, grants and investments. The legislation provides for $100 billion in relief funds to hospitals and other healthcare providers on the front lines of the coronavirus response to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19. As a result, we received a payment from the Provider Relief Fund for $3.5 million in April 2020. Payments from the Provider Relief Fund are intended to compensate healthcare providers for lost revenues and incremental expenses incurred in response to the COVID-19 pandemic and are not required to be repaid provided the recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using Provider Relief Fund funds to reimburse expenses or losses that other sources are obligated to reimburse. In accordance with the terms of acceptance for the grant, we expect to utilize these funds to prevent, prepare for, and respond to the COVID-19 pandemic.

The CARES Act also provides for a temporary suspension of the 2% payment sequestration adjustment currently applied to all Medicare fee-for-service claims. The suspension is effective for claims with dates of service from May 1, 2020 through December 31, 2020.  However, CMS and Medicare Administrative Contractors may issue guidance that affects the implementation of this provision.

As part of the CARES Act legislation, certain Payroll Protection Program ("PPP") loans were authorized for small businesses to pay their employees, subject to potential debt forgiveness. Our company evaluated the PPP extensively and after evaluation, decided not to submit a PPP loan application.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

We are continuing to monitor any effects or requirements that may result from the CARES Act as many of the provisions in the CARES Act are temporary and may require us to modify our operations and compliance procedures.  CMS and other federal agencies have and are likely to issue rules and regulations to implement the CARES Act.  The impact of these rules and regulations are unknown and may affect us.  To the extent these provisions will expire as stated in the CARES Act, we will be required to unwind any changes.

While the overall impact of COVID-19 on our consolidated results of operations for the three months ended March 31, 2020 has resulted in an overall increase in revenues related to additional product sales during the period, the overall impact that COVID-19 will have on our consolidated results of operations throughout 2020 remains uncertain and difficult to predict and will depend on, among other factors, the duration and severity of the pandemic, as well as any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, liquidity and capital resources. If COVID-19 continues to spread or if the response to contain the COVID-19 pandemic is unsuccessful, we could experience a material adverse effect on our business, financial condition, and results of operations. For additional information, see Part II. Item 1A “Risk Factors.”

In 2019, CMS announced the inclusion of noninvasive ventilator products on the list of products subject to the competitive bidding program for Round 2021 which covers the period of January 1, 2021 through December 31, 2023. Rental revenue from ventilator products represents a significant portion of our revenues (approximately 86% of total revenue in 2019). At the end of 2019, approximately 19% of ventilator product-related revenue was set to be subject to the competitive bidding process under Medicare. On March 9, 2020, CMS announced that due to the COVID-19 pandemic, the President's exercise of the Defense Production Act, public concern regarding access to ventilators, and the non-invasive ventilators product category being new to the competitive bidding program, non-invasive ventilators were removed as a product category from Round 2021 and this removal from the competitive bidding process is expected to last three years. As a result of this announcement, we retain the ability to continue to furnish non-invasive ventilators for all of our Medicare accredited areas, however, we are uncertain if vents will be included in future competitive bidding programs.

The below table highlights summary financial and operational metrics for the last eight quarters.

(Tabular amounts expressed in thousands of U.S. Dollars, except vent patients)
For the quarter ended	March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
Financial Information:
Revenue	$	23,806		$	21,448		$	20,368		$	20,325		$	18,115		$	18,363		$	16,930		$	15,208
Gross Profit	15,553			14,243			14,050			14,639			13,074			13,519			12,829			11,023
Gross Profit %	65		%	66		%	69		%	72		%	72		%	74		%	76		%	72		%
Net Income	4,243			2,388			2,853			1,326			1,958			2,968			2,219			2,098
Cash (As of)	8,409			13,355			12,630			7,691			7,410			10,413			10,174			8,551
Total Assets (As of)	86,801			82,596			79,981			71,014			58,718			53,653			49,240			44,256
Adjusted EBITDA(1)	7,869			5,569			4,883			4,116			4,466			4,896			4,155			3,846
Operational Information:
Vent Patients(2)	7,965			7,759			7,421			7,130			6,393			5,905			5,444			5,078

⁽¹⁾ Refer to "Non-GAAP Financial Measures" section below for definition of Adjusted EBITDA.

⁽²⁾ Vent Patients represents the number of active ventilator patients on recurring billing service at the end of each calendar quarter.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

Results of Operations

Comparison of the Three Months Ended March 31, 2020 and 2019:

The following table summarizes our results of operations for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020			% of Total Revenue		2019		% of Total Revenue		$ Change			% Change
Revenue	$	23,806		100.0	%	$	18,115	100.0	%	$	5,691		31.4	%
Cost of revenue	8,253			34.7	%	5,041		27.8	%	3,212			63.7	%
Gross profit	15,553			65.3	%	13,074		72.2	%	2,479			19.0	%
Selling, general and administrative	10,577			44.4	%	9,460		52.2	%	1,117			11.8	%
Research and development	174			0.7	%	234		1.3	%	(60		)	(25.6	)%
Stock-based compensation	1,151			4.8	%	880		4.9	%	271			30.8	%
Depreciation	205			0.9	%	129		0.7	%	76			58.9	%
Loss (gain) on disposal of property and equipment	(1,169		)	(4.9	)%	56		0.3	%	(1,225		)	(2,187.5	)%
Income from operations	4,615			19.4	%	2,315		12.8	%	2,300			99.4	%
Non-operating expenses
Unrealized (gain) loss on warrant conversion liability	—			—	%	169		0.9	%	(169		)	(100.0	)%
Loss from equity investment	27			0.1	%	24		0.1	%	3			12.5	%
Interest expense, net	158			0.7	%	26		0.1	%	132			507.7	%
Net income before taxes	4,430			18.6	%	2,096		11.6	%	2,334			111.4	%
Provision for income taxes	187			0.8	%	138		0.8	%	49			35.5	%
Net income	$	4,243		17.8	%	$	1,958	10.8	%	$	2,285		116.7	%

Revenue

The following table summarizes our revenue for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		% of Total Revenue		2019		% of Total Revenue		$ Change			% Change
Net revenue from rentals under Topic 842
Ventilator rentals, non-invasive and invasive	$	18,792	78.9	%	$	16,204	89.4	%	$	2,588		16.0	%
Other durable medical equipment rentals	2,131		9.0	%	797		4.4	%	1,334			167.4	%
Net revenue from sales and services under Topic 606
Equipment and supply sales	1,533		6.4	%	778		4.3	%	755			97.0	%
COVID-19 response sales	1,040		4.4	%	—		—	%	1,040			100.0	%
Service revenues	310		1.3	%	336		1.9	%	(26		)	(7.7	)%
Total net revenue	$	23,806	100.0	%	$	18,115	100.0	%	$	5,691		31.4	%

For the three months ended March 31, 2020, revenue totaled $23.8 million, an increase of $5.7 million (or 31.4%) from the comparable period in 2019. The revenue growth was primarily driven by a $2.6 million (or 16.0%) increase in ventilator rental revenue. Our active ventilator patient base grew from 6,393 as of March 31, 2019 to 7,965 as of March 31, 2020, an increase of 25%. Rental revenue from other DME grew $1.3 million (or 167.4%) quarter over quarter. This growth was largely attributable to our percussion vests and to a lesser extent our many other respiratory-related products (PAPs, oxygen concentrators, nebulizers). As we continue to expand geographically into new states and further expand our presence in our existing territories, we expect continued growth in our active ventilator patient base and ventilator rental revenue, as well as in our other respiratory products.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

In response to the COVID-19 pandemic, we have been working in close cooperation with state agencies and hospital systems to source urgently needed medical equipment such as ventilators, ventilator supplies and other respiratory equipment. During the three months ended March 31, 2020, we had $1.0 million of COVID-19 response related sales consisting primarily of ventilators and associated supplies. We expect further COVID-19 related sales during the remainder of 2020, but the quantity and impact of such sales remains uncertain and dependent on the length and intensity of the COVID-19 pandemic and the availability of such equipment and supplies from other suppliers. Additionally, non-COVID-19 related equipment sales grew $0.8 million (or 97.0%) year over year primarily as a result of higher supply orders for our PAP patients.

Cost of revenue and gross profit

For the three months ended March 31, 2020, cost of revenue totaled $8.3 million, an increase of $3.2 million (or 63.7%) from the comparable period in 2019. For the three months ended March 31, 2020 and 2019, gross profit percentage decreased from approximately 72.2% to approximately 65.3%. The decreased margins were primarily the result of the above mentioned COVID-19 response sales which contributed a weighted average gross profit percentage of 45.9%. Excluding the COVID-19 response sales, gross profit percentage for the three months ended March 31, 2020 was 66.2%. We expect our gross profit percentage for our normal operations (non-COVID-19 related) to remain relatively consistent with the current quarter through the end of 2020.

Selling, general & administrative expense

For the three months ended March 31, 2020, selling, general and administrative expenses totaled $10.6 million, an increase of $1.1 million (or 11.8%) from the comparable prior period. Selling, general, and administrative expenses as a percentage of revenue decreased to 44.4% for the three months ended March 31, 2020 compared to 52.2% for the three months ended March 31, 2019. Excluding the impact of the COVID-19 response sales, selling, general, and administrative expenses as a percentage of revenue was 46.4% for the three months ended March 31, 2020. The increase in overall selling, general and administrative expense as compared to the prior year period can be attributed to additional expenses to accommodate both the overall growth of the Company and an increase in associated public company expenses resulting from our August 2019 NASDAQ listing, partially offset by a decrease in employee costs, driven by the impact of our phantom stock plan. Our phantom stock plan is measured at fair value as of the reporting period and is driven primarily by our stock price. During the three months ended March 31, 2020, our stock price decreased 19%, versus an increase of 26% during the three months ended March 31, 2019, driving lower comparable expenses related to these awards in the current period. As we continue to grow into new markets and increase our employee count, we expect selling, general, and administrative expenses will trend accordingly. We expect that selling, general and administrative expenses as a percentage of revenue will remain relatively consistent with the current quarter through the end of 2020.

Loss (gain) on disposal of property and equipment

For the three months ended March 31, 2020, we recorded a gain on disposal of property and equipment of $1.2 million, compared to a loss of $0.1 million during the comparable period in 2019. As a result of our efforts for the COVID-19 response as described above, certain of our previously placed in service property and equipment was sold. As a result, during the three months ended March 31, 2020, we recorded sales proceeds on used equipment of $2.5 million which resulted in a net gain on disposal for related equipment of $1.6 million. We expect disposals of equipment to generally remain consistent with historical trends, with the exception of additional gains that could be realized from any additional COVID-19 response related sales, but the impact of such sales remains uncertain and dependent on the length and intensity of the COVID-19 pandemic and the availability of such equipment and supplies from other suppliers.

Stock-based compensation

For the three months ended March 31, 2020, stock-based compensation totaled $1.2 million, an increase of $0.3 million (or 30.8%) from the comparable period in 2019. This increase is attributable to the expense of additional stock-based awards during 2020. We expect that as we continue to increase our employee count and utilize stock-based awards as an aspect of employee compensation, stock-based compensation expense will increase accordingly. Stock-based compensation as a percentage of revenue has historically remained under 5%.

Interest expense, net

For the three months ended March 31, 2020, net interest expense totaled $158,000, an increase of $132,000 (or 507.7%) from the comparable period in 2019. We expect net interest expense to remain materially consistent through the end of 2020.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

Provision for income taxes

For the three months ended March 31, 2020, the provision for income taxes was $187,000, compared to $138,000 during the 2019 period. The current period provision is related to state income tax liabilities. We expect to continue to benefit from the federal tax environment in the United States. Recent tax changes allow for accelerated deductions for capital expenditures and lower corporate tax rates. As we continue to incur substantial capital expenditures to acquire medical equipment to accommodate our rapid patient base growth, combined with the deferred tax assets, we expect most near-term tax payments will continue to result from state tax liabilities.

Net income

For the three months ended March 31, 2020, net income was $4.2 million, an increase of $2.3 million (or 116.7%) from the comparable period in 2019. Net income as a percentage of revenue increased from 10.8% for the three months ended March 31, 2019 to 17.8% for the three months ended March 31, 2020, primarily driven by increased revenue, increased gains on disposal of equipment and reduced selling, general and administrative expenses, as described above.

Non-GAAP Financial Measures

Our management regularly monitors certain financial measures to track the progress of our business against internal goals and targets. We believe that one of the most important measures for our company is Adjusted EBITDA. Adjusted EBITDA is a non-GAAP financial measure. We believe Adjusted EBITDA provides helpful information with respect to our operating performance as viewed by management, including a view of our business that is not dependent on the impact of our capitalization structure and items that are not part of our day-to-day operations. Management uses Adjusted EBITDA (i) to compare our operating performance on a consistent basis, (ii) to calculate incentive compensation for our employees, (iii) for planning purposes including the preparation of our internal annual operating budget, and (iv) to evaluate the performance and effectiveness of our operational strategies. Accordingly, we believe that Adjusted EBITDA provides useful information in understanding and evaluating our operating performance in the same manner as management.

In calculating Adjusted EBITDA, certain items (mostly non-cash) are excluded from net income including interest, taxes and depreciation of property and equipment. Set forth below are descriptions of the financial items that have been excluded from net income to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure as compared to net income.

– Depreciation may be useful for investors to consider because it generally represents the wear and tear on the property and equipment used in our operations. However, we do not believe these charges necessarily reflect the current and ongoing cash charges related to our operating costs.

– The amount of interest expense we incur or interest income we generate may be useful for investors to consider and may result in current cash inflows or outflows. However, we do not consider the amount of interest expense or interest income to be a representative component of the day-to-day operating performance of our business.

– Unrealized loss on warrant conversion liability may be useful for investors to consider as it represents changes in the fair value of warrants and exchangeable shares of subsidiaries, driven predominantly by changes in our share price and exchange rates. These changes are non-cash, as is the settlement of the underlying derivative liability, which occurs upon the conversion of the derivative instrument into common shares of the Company.

– Stock-based compensation may be useful for investors to consider because it is an estimate of the non-cash component of compensation received by the Company’s directors, officers, employees and consultants. However, stock-based compensation is being excluded from our operating expenses because the decisions which gave rise to these expenses were not made to increase revenue in a particular period, but were made for the Company’s long-term benefit over multiple periods. While strategic decisions, such as those to issue stock-based awards are made to further our long-term strategic objectives and do impact our earnings under GAAP, these items affect multiple periods and management is not able to change or affect these items within any period.

– Income tax expense may be useful for investors to consider because it generally represents the taxes which may be payable for the period and the change in deferred income taxes and may reduce or increase the amount of funds otherwise available for use. However, we do not consider the amount of income tax expense to be a representative component of the day-to-day operating performance of our business.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

The following table is a reconciliation of Net income, the most directly comparable GAAP measure, to Adjusted EBITDA, on a historical basis for the periods indicated:

For the quarter ended	March 31, 2020		December 31, 2019		September 30, 2019			June 30, 2019		March 31, 2019		December 31, 2018			September 30, 2018		June 30, 2018
Net Income	$	4,243	$	2,388	$	2,853		$	1,326	$	1,958	$	2,968		$	2,219	$	2,098
Add back:
Depreciation	2,130		2,003		1,659			1,444		1,295		1,177			972		893
Interest expense	158		212		56			20		26		30			37		67
Unrealized (gain) loss on warrant conversion liability	—		—		(800		)	268		169		(210		)	220		123
Stock-based compensation	1,151		908		1,064			1,034		880		804			672		665
Income tax expense	187		58		51			24		138		127			35		—
Adjusted EBITDA	$	7,869	$	5,569	$	4,883		$	4,116	$	4,466	$	4,896		$	4,155	$	3,846

Use of Non-GAAP Financial Measures

Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. It is not a measurement of our financial performance under GAAP and should not be considered as an alternative to revenue or net income, as applicable, or any other performance measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other businesses. Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our operating results as reported under GAAP. Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of ongoing operations; and other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Liquidity and Capital Resources

Cash and cash equivalents at March 31, 2020 was $8.4 million, compared to $13.4 million at December 31, 2019. Based on our current plan of operations, including potential acquisitions, we believe this amount, when combined with expected cash flows from operations and amounts available under our line of credit will be sufficient to fund our growth strategy and to meet our anticipated operating expenses, capital expenditures, and debt service obligations for at least the next 12 months. The Company utilizes short term leases with a major supplier that could be extended over a longer term if there was a need for additional liquidity. Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank which was fully undrawn as of March 31, 2020.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Three Months Ended March 31,
	2020			2019
Net Cash provided by (used in):
Operating activities	$	607		$	650
Investing activities	(1,711		)	(92		)
Financing activities	(3,842		)	(3,561		)
Net decrease in cash and cash equivalents	$	(4,946	)	$	(3,003	)

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

Net Cash Provided by Operating Activities

Net cash provided by operating activities during the three months endedMarch 31, 2020 was $0.6 million, resulting from net income of $4.2 million and non-cash net income adjustments of $5.0 million, which was partially offset by an increase in net operating assets of $10.1 million. The non-cash net income adjustments primarily consisted of $2.8 million in change of allowance for doubtful accounts, $2.1 million of depreciation and $1.2 million of stock-based compensation. The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $6.8 million, which was partially offset by a decrease in inventory of $0.4 million. The changes in operating liabilities primarily consisted of a decrease in accounts payable of $3.6 million and increases in accrued liabilities of $2.4 million. The increase in our operating assets was primarily driven by accounts receivable related to COVID-19 response sales occurring at the end of the quarter. Additionally, prepaid expenses and other current assets increased as a result of deposits related to ventilator supplies.

Net cash provided by operating activities during the three months endedMarch 31, 2019 was $0.7 million, resulting from net income of $2.0 million, non-cash net income adjustments of $4.7 million, a decrease in net operating liabilities of $0.2 million, and an increase in net operating assets of $5.8 million. The non-cash net income adjustments primarily consisted of $2.1 million of bad debt expense, $1.4 million of depreciation and $0.9 million of stock-based compensation. The uses of cash related to changes in operating assets primarily consisted of an increase in accounts receivable of $5.0 million as a result of increased revenue growth and an increase in inventory of $0.7 million. The changes in operating liabilities primarily consisted of increases in accounts payable of $0.5 million and deferred revenue of $0.2 million, partially offset by a decrease in accrued liabilities of $0.9 million.

Net Cash Used in Investing Activities

Net cash used in investing activities during the three months endedMarch 31, 2020 was $1.7 million, consisting of $4.2 million of purchases of property and equipment, partially offset by $2.5 million of COVID-19 response sales proceeds from the disposal of property and equipment. Purchases of property and equipment were primarily related to medical equipment rented to our patients. Combining cash purchases of property and equipment of $4.2 million and equipment financed through finance leases of $3.0 million, our total capital expenditures for the three months endedMarch 31, 2020 were $7.2 million. This represents a $2.6 million, or 56.3%, increase year over year, driven by our company growth.

Net cash used in investing activities during the three months endedMarch 31, 2019 was $92,000, consisting of $116,000 of purchases of property and equipment, partially offset by $24,000 of proceeds from the disposal of property and equipment. Purchases of property and equipment were primarily related to the medical equipment rented to patients. Combining cash purchases of property and equipment of $116,000 and equipment financed through finance leases of $4.5 million, our total capital expenditures for the three months endedMarch 31, 2019 was $4.6 million.

Net Cash Used in Financing Activities

Net cash used in financing activities during the three months endedMarch 31, 2020 was $3.8 million, consisting of $0.4 million in proceeds from the new term note, partially offset by $3.4 million in repayments of finance lease liabilities.

Net cash used in financing activities during the three months endedMarch 31, 2019 was $3.6 million, consisting of $2.0 million in repayments of finance lease liabilities and $1.5 million of shares repurchased and canceled under our normal course issuer bid.

Credit Agreement

On February 20, 2018, we entered into a two year commercial business loan agreement with Hancock Whitney Bank. Any amounts advanced will be secured by substantially all our assets and carried an interest rate of one month ICE LIBOR plus 3.00%, with a 4.00% interest rate floor. Advances of the line of credit initially were subject to a borrowing base as determined in accordance with the loan agreement, which was based on the value of our accounts receivable balance.

On March 19, 2019, we entered into an amendment to the loan agreement increasing the available line of credit from $5.0 million to $10.0 million and extending the expiration date to March 19, 2021. In addition, the borrowing base restriction was removed from the loan agreement.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

On September 19, 2019, in conjunction with the Term Note described below, the Company entered into a third amendment to the loan agreement, which, among other things, replaced the financial covenants in the loan agreement with the following:

Financial Covenant	Required Ratio	Ratio
Total Debt to Adjusted EBITDA (Quarterly)	not more than 1.50:1.00	0.83
Fixed Charge Coverage Ratio (Quarterly)	not less than 1.35:1.00	3.12
Loan-to-Value Ratio (Quarterly)	not more than 0.85	0.72

On May 1, 2020, the Company entered into a fourth amendment to the loan agreement extending the expiration date to May 1, 2023 and modifying the interest rate on amounts advanced to be equal to the WSJ prime rate plus a margin of 0.50%, with a 3.50% interest rate floor.

The Company was in compliance with all covenants in effect at March 31, 2020. There were no borrowings against this line of credit at March 31, 2020 and December 31, 2019.

While we currently have no immediate plans to draw on this line of credit, the line of credit allows flexibility in funding our future operations subject to compliance with the covenants described above.

Commercial Term Notes

On May 30, 2019, the Company entered into an amendment to the loan agreement providing for a term note (the “Building Term Note”) in favor of Hancock Whitney Bank in the principal amount of $4.8 million. The proceeds of the Building Term Note were used to purchase a building to utilize as a new corporate headquarters for the Company. Beginning July 1, 2019, the Company makes monthly payments towards the outstanding balance. The Building Term Note matures on May 30, 2026 and is secured by substantially all of the assets of the borrower, including the real property acquired with the proceeds of the Building Term Note. The Building Term Note bears interest at a variable rate equal to the one month ICE LIBOR index plus a margin of 2.45% per annum. The Company is required to maintain a loan to value ratio of 85% with respect to the appraised value of the real property. In connection with the Building Term Note, the Company entered into an interest rate swap transaction (the "Interest Rate Swap Transaction") with Hancock Whitney Bank effectively fixing the interest rate for the Building Term Note at 4.68%.

On September 19, 2019, the Company entered into a third amendment to the loan agreement providing for a term note (the “Term Note") in favor of Hancock Whitney Bank in the principal amount of $5.0 million. The proceeds of the Term Note will be used for general corporate purposes. Beginning October 19, 2019, the Company makes monthly payments towards the outstanding balance. The Term Note matures on September 19, 2022 and is secured by substantially all of the assets of the borrower. The Term Note bears interest at the rate of 4.60% per annum.

Sources of funds

Our cash provided by operating activities in the three months endedMarch 31, 2020 was $0.6 million compared to $0.7 million in the three months endedMarch 31, 2019. As of March 31, 2020, we had cash and cash equivalents of $8.4 million.

Use of funds

Our principal uses of cash are funding our new rental assets and other capital purchases, operations, and other working capital requirements. Over the past two years, our revenue has increased significantly from year-to-year and, as a result, our cash provided by operating activities has increased over time and now is a significant source of capital to the business, which we expect to continue in the future.

We may need to raise additional funds to support our investing operations, and such funding may not be available to us on acceptable terms, or at all. If we are unable to raise additional funds when needed, our operations and ability to execute our business strategy could be adversely affected. We may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness would have rights that are senior to holders of our equity securities and could contain covenants that restrict our operations. Any additional equity financing may be dilutive to our stockholders.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

Leases

Leases under which we assume substantially all the risks and rewards of ownership are classified as capital leases. Upon initial recognition, the leased asset is measured at an amount equal to the lesser of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to the asset. The associated lease liability is drawn down over the life of the lease by allocating a portion of each lease payment to the liability with the remainder being recognized as finance charges. Leases that do not transfer the risks and rewards of ownership to the Company are treated as operating leases and are expensed as incurred.

Retirement Plan

The Company maintains a 401(k) retirement plan for employees to which eligible employees can contribute a percentage of their pre-tax compensation. Matching employer contributions to the 401(k) plan totaled $179,000 and $168,000 for the three months ended March 31, 2020 and 2019, respectively.

Off balance sheet arrangements

The Company has no material undisclosed off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its results of operations or financial condition.

Accounting and Disclosure Matters

Segment Information

We have determined that we predominantly operate in a single operating segment, which is the sleep and respiratory disorders sector of the DME industry. While we do provide some services and products outside of this operating segment, these operations, both in terms of revenue and profit, are not material to our operations and therefore have not been separately reported as a segment. 

Critical Accounting Principles and Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those estimates related to allowance for doubtful accounts, inventory adjustments, impaired assets, income taxes, deferred tax valuation allowances and stock-based compensation costs.

We state these accounting policies in the notes to the consolidated financial statements and at relevant sections in the Management's Discussion and Analysis of Financial Condition and Results of Operations. The estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

Revenue recognition

Revenue Accounting under Topic 842

We lease DME such as non-invasive and invasive ventilators, PAP machines, percussion vests, oxygen concentrator units and other small respiratory equipment to customers for a fixed monthly amount on a month-to-month basis. The customer generally has the right to cancel the lease at any time during the rental period. The Company considers these rentals to be operating leases.

Under FASB Accounting Standards Codification Topic 842, “Leases”, we recognize rental revenue on operating leases on a straight-line basis over the contractual lease term which varies based on the type of equipment rental. The lease term begins on the date 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 considered probable of payment, which is generally when paid.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Revenue Accounting under Topic 606

We sell DME, replacement parts and supplies to customers and recognize revenue based on contractual payment rates as determined by the payors at the point in time when control of the good or service is transferred through delivery to the customer. The customer and, if applicable, the payors are generally charged at the time that the product is sold.

We also provide sleep study services to customers and recognize revenue when the results of the sleep study are complete as that is when the performance obligation is met. The transaction price on both equipment sales and sleep studies is the amount that we expect to receive in exchange for the goods and services provided. Due to the nature of the DME business, gross charges are retail charges and generally do not reflect what we are 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. We do not generally contract with uninsured customers. The payment terms and conditions of customer contracts vary by customer type and the products and services offered.

We determine our estimates of contractual allowances and discounts based upon contractual agreements, our policies and historical experience. While the rates are fixed for the product or service with the customer and the payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, and are due from the patient. We include in the transaction price only the amount that we expect to be entitled, which is substantially all of the payor billings at contractual rates. The transaction price is initially constrained by the amount of customer co-payments, which are included in the transaction price when considered probable of payment and included in revenue if the product or service has already been provided to the customer.

Due to the nature of the industry and the reimbursement environment in which we operate, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Returns and refunds are not accepted on either equipment sales or sleep study services. We do 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. We do not have any partially or unfilled performance obligations related to contracts with customers and as such, we have no contract liabilities as of March 31, 2020.

Allowance for doubtful accounts

We estimate that a certain portion of receivables from customers may not be collected and maintain an allowance for doubtful accounts. We evaluate the net realizable value of accounts receivable as of the date of consolidated balance sheets. Specifically, we consider 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. Our allowance for doubtful accounts was $10.2 million and $5.9 million as of March 31, 2020 and 2019, respectively, and based on our analysis, we believe the reserve is adequate for any exposure to credit losses.

Stock-based compensation

We account for our stock-based compensation in accordance with ASC 718—Compensation—Stock Compensation, which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Stock–based compensation cost for stock options are determined at the grant date using the Black-Scholes option pricing model. Stock-based compensation cost for restricted stock units are determined at the grant date based on the closing stock price. The expense of such stock-based compensation awards is recognized using the graded vesting attribution method over the vesting period.

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VIEMED HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

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

March 31, 2020 and 2019

Interest rate swaps

We utilize an interest rate swap contract to reduce our exposure to fluctuations in variable interest rates for future interest payments on Term Note. 

For determining the fair value of our interest rate swap contract, we use significant other observable market data or assumptions (Level 2 inputs) that we believe market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. Our fair value estimates reflect an income approach based on the terms of the interest rate swap contract and inputs corroborated by observable market data including interest rate curves. We include unrealized gains in Other Assets, as a component of Long-term Assets, and unrealized losses in Accrued Liabilities, as a component of Long-term Liabilities on the Condensed Consolidated Balance Sheets.

We recognize any differences between the variable interest rate payments and the fixed interest rate settlements from our swap counterparty as an adjustment to interest expense over the life of the swap. If determined to be effective cash flow hedges, we record the changes in the estimated fair value of the swaps to Accumulated other comprehensive income or loss on our Condensed Consolidated Balance Sheets. To the extent our interest rate swaps are determined to be ineffective, we recognize the changes in the estimated fair value of our swaps in Interest and other non-operating expenses, net on our Condensed Consolidated Statements of Income.

Income taxes

We are subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the provision for income taxes. Our income tax provisions reflect management’s interpretation of country and state tax laws. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business and may remain uncertain for several years after their occurrence. We recognize assets and liabilities for taxation when it is probable that we will receive refunds or pay taxes to the relevant tax authority. Where the final determination of tax assets and liabilities is different from the amounts that were initially recorded, such differences will impact the current and deferred income taxes provision in the period in which such a determination is made. Changes in tax law or changes in the way tax law is interpreted may also impact our effective tax rate as well as our business and operations.

Deferred income tax assets and liabilities are recognized for the future income tax consequences attributable to temporary differences between the financial statement carrying value of assets and liabilities and their respective income tax bases. Deferred income tax assets or liabilities are measured using enacted or substantively enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be settled. The calculation of current and deferred income taxes requires management to make estimates and assumptions and to exercise a certain amount of judgment concerning the carrying value of assets and liabilities. The current and deferred income tax assets and liabilities are also impacted by expectations about future operating results and the timing of reversal of temporary differences as well as possible audits of tax filings by regulatory agencies. Changes or differences in these estimates or assumptions may result in changes to the current and deferred tax assets and liabilities on the consolidated statements of financial position and a charge to or recovery of income tax expense.

Recently Issued Accounting Pronouncements

See Note 2 – Summary of significant account policies of the Notes to Condensed Consolidated Financial Statements for a description of recently issued accounting pronouncements, including the expected dates of adoption and estimated effects on our results of operations, financial positions and cash flows.

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VIEMED HEALTHCARE, INC.

March 31, 2020 and 2019

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company's management, including its Chief Executive Officer and Chief Financial Officer, completed an evaluation of the effectiveness of the Company's disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded:

i. that the Company's disclosure controls and procedures are designed to ensure (a) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and (b) that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure; and

ii. that the Company's disclosure controls and procedures are effective.

Notwithstanding the foregoing, there can be no assurance that the Company's disclosures controls and procedures will detect or uncover all failures of persons within the Company and its consolidated subsidiaries to disclose material information otherwise required to be set forth in the Company's periodic reports. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.

Changes in Internal Control Over Financial Reporting

We disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, the conclusion of the Chief Executive Officer and Chief Financial Officer that the Company’s disclosure controls and procedures were not effective at the reasonable assurance level as of the end of fiscal year 2019, as a result of a material weakness relating to the accounting for revenue related to the leasing of its medical equipment. This control deficiency resulted in adjustments to revenue, income before income taxes and net income for the year ended December 31, 2018, the 2018 quarterly periods and the quarterly periods ended March 31, 2019, June 30, 2019 and September 30, 2019. The Company concluded that the adjustments for the quarterly periods ended June 30, 2019 and September 30, 2019 resulted in a material misstatement of the interim consolidated financial statements for these periods. Accordingly, the Company’s management developed a remediation plan for implementing internal controls to monitor its recognition of revenue related to the leasing of its medical equipment and has taken the following steps to remediate the identified material weakness:

i. Implemented a systematic process for the proper calculation of associated revenue and visibility for enhanced management oversight.

ii. Implemented compensating controls and procedures to ensure the proper calculation of revenue related to the leasing of medical equipment over time.

During the current year, the Company's management tested the controls related to the material weakness described above for a sufficient period of time, and has concluded, through testing, that by the end of the first quarter of 2020, these controls were operating effectively. Therefore, the Company's management has concluded that the material weakness previously identified in the Company’s internal control over financial reporting has been remediated at March 31, 2020.

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VIEMED HEALTHCARE, INC.

March 31, 2020 and 2019

Despite the previously identified and now remediated material weakness, the Company believes that the consolidated financial statements included in this Quarterly Report on Form 10-Q and the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2019 fairly present, in all material respects, the Company's financial condition, results of operations and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.

In the ordinary course of business, we review our system of internal control over financial reporting and make changes to our systems and processes to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems and automating manual processes.  Except as noted above, there has been no change in our internal control over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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VIEMED HEALTHCARE, INC.

March 31, 2020 and 2019

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to various ongoing or threatened legal actions and proceedings, including those that arise in the ordinary course of business, which may include employment matters and breach of contract disputes. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time. In the opinion of management, the outcome of such routine ongoing litigation is not expected to have a material adverse effect on our results of operations or financial condition.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 4, 2020, which could materially affect our business, financial condition or future results. Except as set forth below, there have been no material changes in our risk factors from those disclosed in that Annual Report. 

The COVID-19 pandemic could adversely affect our business, financial condition and results of operations.

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Various policies and initiatives have been implemented to reduce the transmission of COVID-19, including travel bans and restrictions, the postponement of non-essential medical surgeries, the limiting of access to medical facilities in certain areas, the promotion of social distancing and the adoption of remote working policies. Local, state and national governments continue to emphasize the importance of essential medical personnel and we remain open to meet the needs of our communities. Employee and patient safety is our first priority, and as a result, we put preparedness plans in place for our employees, especially our clinical personnel, and modified our clinical protocols to limit unnecessary patient encounters in order to ensure the safety of our employees as well as the safety of our patients. These measures do not appear to be negatively impacting our patient attrition rate at this time. In addition, our current ability to assess potential patients in hospitals varies by hospital and city, but overall our business of setting up new patients in the home is continuing. As a result, to date, there has been minimal disruption to our normal operations, though it is possible that more significant disruptions could occur if the COVID-19 pandemic continues for a prolonged period of time.

The COVID-19 pandemic has resulted in a significant economic downturn in the United States and globally and has also led to significant disruptions and volatility in capital and financial markets. Broad economic factors resulting from the current COVID-19 pandemic, including high unemployment and underemployment levels and reduced consumer spending and confidence, could also affect our service mix, revenue mix, payor mix and patient base, as well as our ability to collect outstanding receivables. Business closures and layoffs in the geographic areas in which we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payors to pay for services rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our financial results and require an increased level of working capital. In addition, we may experience supply chain disruptions, including delays and price increases in equipment and supplies. Staffing, equipment and supplies shortages may also impact our ability to assess potential patients in hospitals and set up and treat patients in the home.

We believe we presently have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during these uncertain times, such as limiting discretionary spending across the organization. In addition, we have received, and may continue to receive, payments, grants or other relief under the CARES Act and other stimulus efforts. While the overall impact of COVID-19 on our consolidated results of operations for the three months ended March 31, 2020 has resulted in an overall increase in revenues related to additional product sales during the period, the overall impact that COVID-19 will have on our consolidated results of operations throughout 2020 remains uncertain, and difficult to predict and will depend on, among other factors, the duration and severity of the pandemic, as well as any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, liquidity and capital resources. If COVID-19 continues to spread or if the response to contain the COVID-19 pandemic is unsuccessful, we could experience a material adverse effect on our business, financial condition, and results of operations.

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Further, the COVID-19 pandemic, and the volatile economic conditions stemming from the pandemic, could also precipitate or aggravate the other risk factors that we identify in our Annual Report on Form 10-K for the year ended December 31, 2019, which could materially adversely affect our business, financial condition and results of operations. In addition, COVID-19 may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks to our operations.

Our products are currently subject to the competitive bidding process under Medicare, which may negatively affect our business and financial condition.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 required the Secretary of Health and Human Services to establish and implement programs under which competitive acquisition areas are established throughout the United States for purposes of awarding contracts for the furnishing of competitively priced items of DME.

CMS, the agency responsible for administering the Medicare program, conducts a competition for each competitive acquisition area under which providers submit bids to supply certain covered items of DME. Under the competitive bidding program, durable medical equipment suppliers compete to become Medicare contract suppliers by submitting bids to furnish certain items in competitive bidding areas. As part of the competitive bidding process, single payment amounts ("SPAs") replace the current Medicare durable medical equipment fee schedule payment amounts for selected items in certain areas of the country. The SPAs are determined by using bids submitted by DME suppliers.

Successful bidders must meet certain program quality standards in order to be awarded a contract and only successful bidders can supply the covered items to Medicare beneficiaries in the acquisition area. There are, however, regulations in place that allow non-contracted providers to continue to provide products and services to their existing customers at the new competitive bidding payment amounts. The contracts are expected to be re-bid every three years. CMS is required to award contracts to multiple entities submitting bids in each area for an item or service, but has the authority to limit the number of contractors in a competitive acquisition area to the number it determines to be necessary to meet projected demand.

In 2019, CMS announced the inclusion of non-invasive ventilator products on the list of products subject to the competitive bidding program in Round 2021 which covers the period of January 1 2021 through December 31, 2023. Rental revenue from ventilator products represents a significant portion of our revenues (approximately 86% of total revenue in 2019). At the end of 2019, approximately 19% of ventilator product-related revenue is subject to the competitive bidding process under Medicare. On March 9, 2020, CMS announced that due to the COVID-19 pandemic, the President’s exercise of the Defense Production Act, public concern regarding access to ventilators, and the non-invasive ventilators product category being new to the competitive bidding program, non-invasive ventilators were removed as a product category from Round 2021. As a result of this announcement, we retain the ability to continue to furnish non-invasive ventilators for all of our Medicare accredited areas. However, we cannot assure you that non-invasive ventilator products will not be included on the list of products subject to the competitive bidding program in the future.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

Not applicable.

Share Repurchases

The Company did not repurchase any equity securities during the quarter ended March 31, 2020.

Dividends

We have not declared or paid any cash or stock dividends on our common shares since our inception and do not anticipate declaring or paying any cash or stock dividends in the foreseeable future. Our subsidiaries are restricted from making distributions or dividend payments to us by the Loan Agreement, subject to certain exceptions.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On May 1, 2020, Viemed, Inc., Sleep Management, L.L.C. and Home Sleep Delivered, L.L.C. (collectively, the “Borrowers”), subsidiaries of the Company, entered into that certain Fourth Amendment (the “Fourth Amendment”) to Commercial Business Loan Agreement for Term Loans and Lines of Credit dated as of May 1, 2020 (as amended from time to time, the “Loan Agreement”) with Hancock Whitney Bank (the “Lender”). Pursuant to the Fourth Amendment, the Loan Agreement was amended to, among other things, (i) extend the expiration date to May 1, 2023 and (ii) modify the interest rate on amounts advanced to be equal to the WSJ prime rate plus a margin of 0.50%, with a 3.50% interest rate floor. The foregoing description of the Fourth Amendment is qualified in its entirety by reference to the Fourth Amendment and the Commercial Term Note (the “Term Note”) made by the Borrowers in favor of the Lender in the principal amount of $10,000,000, copies of which are attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and incorporated by reference herein.

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Item 6. Exhibits

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index below.

Exhibit Number	Exhibit Title
#2.1	Share Purchase Agreement dated as of January 11, 2017 between PHM Logistics Corporation and Viemed, Inc. Incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
#2.2	Asset Purchase Agreement dated as of January 11, 2017 between Patient Home Monitoring Corp. and Viemed Healthcare, Inc. Incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
#2.3	Arrangement Agreement dated as of January 11, 2017 between Patient Home Monitoring Corp. and Viemed Healthcare, Inc. Incorporated by reference to Exhibit 2.3 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
#2.4	Arrangement Agreement Amendment dated as of October 31, 2017 between Patient Home Monitoring Corp. and Viemed Healthcare, Inc. Incorporated by reference to Exhibit 2.4 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
3.1	Notice of Articles of Business Corporation Act of Viemed Healthcare, Inc. Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
3.2	Business Corporation Act Articles of Viemed Healthcare, Inc. Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
4.1	Amended and Restated Warrant Indenture dated effective January 9, 2018 between Viemed Healthcare, Inc. and Computershare Trust Company of Canada (amending and restating a warrant indenture dated as of August 27, 2014) and the Form of Warrant included as Schedule A therein. Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
4.2	Amended and Restated Warrant Indenture dated effective January 9, 2018 between Viemed Healthcare, Inc. and Computershare Trust Company of Canada (amending and restating a warrant indenture dated as of May 4, 2015) and the Form of Warrant included as Schedule A therein. Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form 10 filed on July 10, 2019.
*10.1	Fourth Amendment to Commercial Business Loan Agreement for Term Loans and Lines of Credit dated May 1, 2020 among Viemed, Inc., Sleep Management, LLC, Home Sleep Delivered, LLC and Hancock Whitney Bank.
*10.2	Commercial Term Note made by Viemed, Inc., Sleep Management, LLC, Home Sleep Delivered, LLC to Hancock Whitney Bank, dated as of May 1, 2020.
*31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
**32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

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*101.INS	XBRL Instance Document.
*101.SCH	XBRL Taxonomy Extension Schema Document.
*101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
*101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
*101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
*101.DEF	XBRL Taxonomy Extension Definition Document.
* Filed herewithin.
** Furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K.
# Schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company will furnish supplementally a copy of any omitted schedule or similar attachment to the Securities and Exchange Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange of Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VIEMED HEALTHCARE, INC.
(Registrant)
By:	/s/ Casey Hoyt
	Casey Hoyt
	Chief Executive Officer
By:	/s/ Trae Fitzgerald
	Trae Fitzgerald
	Chief Financial Officer

Date: May 4, 2020

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EX-10.1

FOURTH AMENDMENT TO COMMERCIAL BUSINESS LOAN AGREEMENT FOR TERM LOANS AND LINES OF CREDIT THIS FOURTH AMENDMENT TO COMMERICAL BUSINESS LOAN AGREEMENT FOR TERM LOANS AND LINES OF CREDIT (this “Fourth Amendment”) is dated May 1, 2020, by and among VIEMED, INC., a Delaware corporation (“Viemed”), SLEEP MANAGEMENT, L.L.C. (“Sleep Management”), a Louisiana limited liability company, and HOME SLEEP DELIVERED, L.L.C. (“Home Sleep”), a Louisiana limited liability company (collectively, the “Borrower”), and HANCOCK WHITNEY BANK, a Mississippi state chartered bank, formally known as Whitney Bank (the “Lender”). The Borrower, Guarantor, if any, and any other person who may be liable now or in the future for any portion of any Loans are referred to as “Obligor”, which term means individually, collectively, and interchangeably any, each and/or all of them. R E C I T A L S: A. Borrower and Lender are parties to that certain Commercial Business Loan Agreement for Term Loans and Lines of Credit dated February 21, 2018, pursuant to which the Lender established in favor of Borrower, among other things, a revolving line of credit in the maximum aggregate principal amount of $5,000,000.00 (collectively, with all past, present and future amendments and/or restatements, the “Agreement”). B. Borrower has now applied to Lender to renew an existing $10,000,000.00 revolving line of credit. C. Lender, subject to the terms and conditions of this Fourth Amendment, has agreed to Borrower’s requests. NOW, THEREFORE, in consideration of the mutual covenants hereunder set forth, Borrower and Lender do hereby covenant and agree to amend the Agreement as follows: 1. Revisions to Article A – The Loan or Loans. A. The first subsection of Section A of the Agreement, entitled “A LINE OF CREDIT LOAN,” is hereby deleted in its entirety and replaced as follows: A LINE OF CREDIT LOAN (the “Line of Credit,” which term shall include all renewals, extensions or modifications thereof) to Borrower in the maximum principal amount of Ten Million and no/100 ($10,000,000.00) dollars, bearing interest at a variable rate equal to the Wall Street Journal Prime Rate less a margin of .50%, floating daily, per annum from date of advance until paid, payable in monthly installments of interest only, payable in arrears, commencing on June 1, 2020, and continuing on the same day of each month thereafter, with a final payment of all principal and outstanding interest due and payable on May 1, 2023. The Line of Credit shall be represented by Bank’s standard form of commercial note containing 4th Amendment Hancock Whitney Bank 1

additional terms and conditions (the “Revolving Note”). The term “Wall Street Journal Prime Rate” shall have the meaning set forth in the Revolving Note, and, notwithstanding any other provision of this Agreement, at no time shall the interest rate on the Revolving Note be less than three and one-half percent (3.50%) per annum. 2. Expenses. Borrower will pay all of the costs, expenses and fees incurred in connection with the Agreement, as documented pursuant to the original Agreement, as modified by this Fourth Amendment and any future amendments, including attorneys’ fees and appraisal fees. 3. Confirmation of Loan Documents and Security. Each Obligor understands and agrees that all other terms, conditions, and provisions of the Agreement and/or the Loan Documents shall remain in full force and effect. All of the liens, privileges, mortgages, security interests, priorities, and equities existing and to exist under and in accordance with the terms of the Agreement, as amended, the Revolving Note, and the Loan Documents are hereby extended and carried forward as security for the Agreement, the Revolving Note, the Loans, and all other indebtedness, obligations, and liabilities of the Borrower to Lender. 4. Representations; Resolutions. As of the date hereof, and after giving effect to this Fourth Amendment, each Obligor confirms, reaffirms, and restates the representations and warranties set forth in the Agreement and the Loan Documents. Each Obligor further confirms and reaffirms each and every resolution, certificate, consent, and/or other authorization provided to Lender, and further represents that each such resolution, certificate, consent, and/or other authorization (i) remains in full force and effect, (ii) stands of record on the books of such Obligor, and (iii) may be relied upon by Lender, including without limitation the Authorizations given by Borrower and Guarantor on or about February 21, 2018, as well as any before or after. 5. No Right of Setoff; Release of Claims. Borrower acknowledges that as of the date of this Fourth Amendment, Borrower has no right to setoff any amount against the amounts owed by Borrower to Lender. In consideration of this Fourth Amendment, each Obligor further releases Lender from any and all claims arising on or prior to the date of this Fourth Amendment, known or unknown, in connection with the Agreement, the Loans, the Revolving Note, and/or the Loan Documents. 6. No Course of Dealing. This Fourth Amendment shall not establish a course of dealing or be construed as evidence of any willingness on Lender’s part to grant other or future amendments, should any be requested, and Lender is under no obligation to grant or approve such other or future amendments. 7. AMENDMENT. THE AGREEMENT AND THIS FOURTH AMENDMENT ARE CREDIT OR LOAN AGREEMENTS AS DESCRIBED IN LOUISIANA REVISED STATUTES 6:1121, ET SEQ. THERE ARE NO ORAL AGREEMENTS BETWEEN LENDER AND ANY OBLIGOR. THE AGREEMENT, AS AMENDED BY THIS FOURTH AMENDMENT, THE REVOLVING NOTE, AND THE LOAN 4th Amendment Hancock Whitney Bank 2

DOCUMENTS SET FORTH THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR WRITTEN AND ORAL UNDERSTANDINGS BETWEEN THE PARTIES WITH RESPECT TO THE MATTERS HEREIN SET FORTH. THE AGREEMENT, AS AMENDED BY THIS FOURTH AMENDMENT, MAY NOT BE MODIFIED OR AMENDED EXCEPT BY A WRITING SIGNED AND DELIVERED BY BORROWER AND LENDER. 8. Miscellaneous provisions. a. This Fourth Amendment shall be governed by and construed in accordance with the laws of the State of Louisiana. This Fourth Amendment may be executed in any number of counterparts, all of which counterparts, when taken together, shall constitute one and the same instrument. b. Except as expressly amended herein, the Agreement and all of the terms, conditions, and provisions set forth therein shall continue in full force and effect. The Agreement, as amended by this Fourth Amendment, is hereby ratified and confirmed by the parties hereto. c. No novation or satisfaction of any indebtedness, obligations, and/or liabilities owed by any Obligor to Lender is intended by this Fourth Amendment. d. Unless specifically defined in this Fourth Amendment, capitalized terms used herein shall have the meanings set forth in the Agreement. 9. USA Patriot Act. Lender is subject to the USA Patriot Act (Title III of Pub. L. 107- 56 (signed into law October 26, 2001)) (the “Act”) and Lender hereby notifies Borrower that pursuant to the requirements of the Act, Lender is required to obtain, verify, and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Lender to identify Borrower in accordance with the Act. Borrower shall, promptly following each request by Lender, provide all documentation and other information requested by Lender in order for Lender to comply with its ongoing obligations under the applicable “know your customer” and anti-money laundering rules and regulations, including the Act. 4th Amendment Hancock Whitney Bank 3

Executed by the parties as of the date set forth above. Lender: Hancock Whitney Bank, a Mississippi state chartered bank By: /s/ Grant Guillotte Grant Guillotte Senior Vice President Borrower: Viemed, Inc. By: /s/ Casey Hoyt Casey Hoyt Chief Executive Officer Sleep Management, L.L.C. By: /s/ Casey Hoyt Casey Hoyt Member & Manager Home Sleep Delivered, L.L.C. By: /s/ Casey Hoyt Casey Hoyt Member & General Manager 4th Amendment Hancock Whitney Bank 4

EX-10.2

COMMERCIAL NOTE Lafayette, Louisiana $10,000,000.00 May 1, 2020 For value received, the undersigned maker(s) (hereinafter referred to as "Borrower", which term means individually, collectively, and interchangeably any, each and/or all of them), jointly, severally, and solidarily, promises to pay to the order of HANCOCK WHITNEY BANK ("Bank"), a Mississippi state chartered bank, with an office located at 1301 Camellia Blvd., Suite 100, Lafayette, LA 70508, the sum of TEN MILLION AND NO/100s DOLLARS ($10,000,000.00), together with interest thereon, in accordance with the terms set forth in this Commercial Note ("Note"). REPAYMENT: Single principal, periodic interest. Principal shall be due and payable in a single payment due on May 1, 2023 (the “Maturity Date”). Accrued interest shall be due and payable in consecutive payments beginning June 1, 2020, and on the same day in each month thereafter until the Maturity Date, on which date any unpaid accrued interest shall be due and payable in full. Unless sooner declared due and payable in accordance with the provisions of this Note, on the Maturity Date, all outstanding principal, interest, fees, costs and expenses owing by Borrower to Bank shall be due and payable in full without notice or demand. Provided no other agreement between the Borrower and Bank expressly imposes a prepayment penalty, Borrower may prepay without penalty any principal on this Note in whole or in part and any prepayments made on this Note shall be applied to the principal payment(s) due on this Note in the inverse order of their maturity. INTEREST: Wall Street Journal Prime Rate The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the Prime Rate for the U.S. as published in the “Money Rates” section of the Wall Street Journal (the “Index”). In the event the Prime Rate is published as a range of rates, the highest rate in the quoted range shall be the Index. Interest on the unpaid balance of this Note shall accrue at a variable rate equal to the Index less a margin of .50%, floating daily. The rate of interest on this Note will change when and as the Index changes. Interest rate changes on this Note will not occur more often than once each day. The Index is not necessarily the lowest rate charged by Bank for any particular class of borrowers or credit extensions. Borrower understands that Bank may make loans based on other rates as well. If the Index becomes unavailable during the term of this Note, Bank may designate a substitute index by notice to Borrower. Borrower may obtain the current Index from Bank upon Borrower’s request. Bank’s determination of the Index shall be conclusive absent demonstrable error. Floor Rate. Notwithstanding the foregoing, at no time shall the interest rate on this Note as calculated pursuant to the previous paragraph be less than three and one-half percent (3.50%) per annum, regardless of any changes to the Index that might otherwise lead to a lower rate. Default Rate. After maturity, whether that maturity results from acceleration or otherwise, interest shall, to the extent permitted by applicable law, accrue at the Default Rate. Additionally, upon the occurrence of any Event of Default hereunder other than a delinquent payment (and from and after the date of such occurrence), interest shall, to the extent permitted by applicable law, accrue at the Default Rate. The Default Rate shall be the maximum rate authorized by applicable law, and if applicable law establishes no maximum rate, then eighteen percent (18.0%) per annum. All interest shall be computed on the basis of the actual number of days elapsed over a year composed of 360 days. Interest shall accrue from the first date that funds are advanced to Borrower until all sums due hereunder are paid in full. Notwithstanding the foregoing, under no circumstances will the effective rate of interest on this Note exceed the maximum rate permissible under applicable law. To the extent federal law permits to contract for, charge or receive a greater amount of interest, Bank reserves the right to rely on federal law for the purpose of determining the maximum rate. It is the intention of Borrower and Bank to conform strictly to any applicable usury laws. The aggregate of all consideration which constitutes interest under applicable law that is contracted for, charged or received under this Note shall under no circumstances exceed the maximum amount of interest allowed by applicable law, and any excess shall be credited to the principal balance on this Note or, if this Note shall have been paid in full, refunded to Borrower. All payments to be made by the Borrower to Bank under or pursuant to this Note shall be in immediately available United States currency, without setoff or counterclaim, and in the event that any payments submitted hereunder are in funds not available until collected, said payments shall continue to bear interest until collected. LATE PAYMENT AND NSF CHARGES: In the event any installment payment of principal and/or interest is more than ten (10) days past due, Borrower promises to pay, in addition to the amount otherwise due hereunder, a delinquency charge of 5.00% of the unpaid portion of the regularly schedule payment, but not more than $1,000.00. In the event that any payment under this Note by check or preauthorized charge is later dishonored or returned to Bank unpaid due to insufficient funds, Borrower agrees to pay Bank an additional NSF check charge equal to $25.00. LINE OF CREDIT: This Note evidences a line of credit under the terms of which the Borrower may borrow, repay and reborrow hereunder, and advances hereunder shall be subject to that certain Loan Agreement dated February 21, 2018, between Bank and Borrower, the terms and conditions of which, as the same may be amended from time to time, are incorporated herein by reference and are a part of the terms and conditions of this Note. Advances may be made by Bank upon the written, telephonic or facsimile request of Borrower, and Bank is authorized to rely conclusively upon such requests when received from a person purporting to be Borrower or Borrower’s authorized officer or representative. Borrower covenants and agrees to furnish to Bank written confirmation of any non-written request for an advance within five (5) days of the resulting loan or advance, but any such loan or advance shall be deemed to be made under and entitled to the benefits of this Note irrespective of any failure by Borrower to furnish such written confirmation. The unpaid principal balance of this Note at any time shall be the total amounts loaned or advanced hereunder by Bank, less the amount of payments or prepayments of principal made hereon by or for the account of Borrower. It is contemplated that by reason of prepayments there may be times when no indebtedness is owing hereunder; but notwithstanding such occurrences, this Note and any agreements and instruments securing the same shall remain valid and shall be in full force and effect as to loans or advances made pursuant to and under the terms of this Note subsequent to each occurrence. In the event that the unpaid principal amount {N2549732.2} Initial ___CH_____ 70423.6LA (May 2018)

hereof at any time, for any reason, exceeds the maximum amount hereinabove specified, Borrower promises and agrees to pay the excess principal amount promptly upon demand; such excess principal amount shall in all respects be deemed to be included among the loans or advances made pursuant to the other terms of this Note, shall bear interest at the rate or rates stated herein, and shall be fully secured by all collateral. BALANCE OWING: The amount from time to time outstanding under this Note and each payment on this Note shall be evidenced by entries in Bank’s internal records, which shall be conclusive evidence absent manifest error of (a) the amount of principal and interest owing on this Note from time to time; (b) the amount of each advance made to Borrower under this Note; and (c) the amount of each principal and/or interest payment received by Bank on this Note. The failure of Bank to make an accurate entry of advances and payments shall not limit or otherwise affect the obligation of Borrower to repay funds actually advanced by Bank hereunder. Any loan or advance shall be conclusively presumed to have been made under the terms of this Note to or for the benefit of Borrower when made in accordance with such requests and directions, or when made pursuant to the terms of any written agreement executed in connection herewith between Borrower and Bank, or when said advances are deposited to the credit of the account of Borrower with Bank regardless of the fact that persons other than those authorized hereunder may have authority to draw against such account, or when applied as a payment of principal and/or interest to another obligation of Borrower to Bank. OBLIGORS: Any or each party to this Note (including each maker and endorser) and any or each surety and guarantor of this Note bound under separate instrument or agreement are hereinafter referred to jointly and severally as “Obligor.” SECURITY AND SET-OFF: In order to secure the repayment of the indebtedness evidenced by this Note, including, without limitation, future advances, interest, attorneys’ fees, expenses of collection and costs, as well as the payment and performance of any and all other liabilities or obligations of any Borrower to Bank, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter arising, and including, but not limited to, all agreements with respect to any swap, forward, future, or derivative transaction or option or similar agreement involving, or settled by reference to, one or more interest rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value (collectively, the “Obligations”), Borrower hereby pledges to Bank, and grants to Bank a continuing lien and security interest in and a right of set-off and compensation against, all property of Borrower, including any such property Borrower holds jointly with someone else, that is now or hereafter on deposit with, in the possession of, under the control of or held by Bank or any financial institution affiliate of the Bank, including, without limitation, all cash, deposit accounts, funds on deposit, stocks, bonds, treasury obligations and other securities, investment property, financial assets, securities accounts, notes, documents, instruments, certificates of deposit, items, chattel paper, and other property (except IRA, pension, other tax-deferred retirement accounts and any accounts or property held in a trust or fiduciary capacity for which setoff would be prohibited by law), together with all property added to or substituted for any of the foregoing, and all interest, dividends, income, fruits, accessions and proceeds of any of the foregoing. The terms "chattel paper," "deposit accounts," "documents," "items," "instruments," "investment property," “securities accounts,” “financial assets” and "proceeds" shall have the meaning provided in the Louisiana Uniform Commercial Code. Each Obligor releases Bank from any obligation with respect to the collateral including any obligation to collect any proceeds of or preserve any of Obligor’s rights, including, without limitation, rights against prior parties, in any collateral in which Bank possesses a security interest. Any responsibility of Bank with respect to any collateral in which Bank possesses a security interest, whether arising contractually or as a matter of law, is hereby expressly waived. EVALUATIONS: Borrower represents and warrants that the indebtedness evidenced by this Note was contracted for by Borrower at Borrower’s request based upon Borrower’s own independent determination of need. Borrower and each other Obligor understand and agree that any appraisals or evaluations made by or for the Bank of the financial condition of any person or the value of any property were made solely for the Bank’s benefit and Bank in no way has represented or warranted the financial condition of any person or the value of any property in making or obtaining said appraisals or evaluations or in extending credit to Borrower or any other Obligor. Borrower and each other Obligor understand and agree that they have no right to rely on Bank’s appraisals or evaluations in assuming this debt and executing this instrument and that their obligation to pay the debt represented by this Note is independent of any such appraisals or evaluations. RENEWAL: If an earlier note of Borrower to Bank is renewed at the time of execution hereof, then this Note constitutes an extension, but not a novation, of the amount of the unpaid and continuing indebtedness, and all rights held by Bank under the earlier note shall continue in full force and effect. FINANCIAL INFORMATION: Borrower shall, and shall cause each other Obligor to, promptly provide to Bank true and correct current financial statements and such other information regarding the financial condition, business and properties of each Obligor as Bank may request from time to time, all in form, substance and detail satisfactory to the Bank. The financial statements shall include, among other things, detailed information regarding (i) any entities, such as corporations, partnerships, or limited liability companies of which the Obligor is the majority owner and (ii) any entities of which the Obligor is not the majority owner, but for which Obligor is directly or contingently liable on debts or obligations of any kind incurred by those entities. All financial statements or records submitted to Bank via electronic means, including, without limitation by facsimile, open internet communications or other telephonic or electronic methods, including, without limitation, documents in Tagged Image Format Files (“TIFF”) or Portable Document Format (“PDF”) shall be treated as originals, fully binding and with full legal force and effect and the parties waive any rights they may have to object to such treatment. The Bank may rely on all such records in good faith as complete and accurate records produced or maintained by or on behalf of the party submitting such records. DEFAULT: If any of the following events shall occur (each such event being referred to herein as an “Event of Default”): (a) the non-payment of any principal or interest on this Note or any other Obligation on the date when due; (b) the death, dissolution, liquidation or insolvency of any Obligor; (c) the filing by or against any Obligor of a proceeding under the U.S. Bankruptcy Code; (d) the application for appointment of a receiver for, the making of a general assignment for the benefit of creditors of, or the filing of any proceeding seeking any other relief afforded debtors or affecting rights of creditors generally under the laws of any jurisdiction by or against any Obligor; (e) the default by any Obligor in the payment or performance of (i) any obligation under this Note or under any deed of trust, mortgage, security agreement or any other document securing payment of this Note, or (ii) any obligation under any other note or under any other agreement of any Obligor with or in favor of Bank; (f) any judgment, garnishment, seizure, tax lien or levy against any assets of any Obligor; (g) any material adverse change in the financial condition of any Obligor, or any material discrepancy between the financial statements submitted by any Obligor and the actual financial condition of any Obligor; (h) any statement, warranty, or representation made by any Obligor to Bank proves to be untrue in any material respect; (i) any default by any Obligor in the payment or performance of any material liabilities, indebtedness or obligations to any other creditor; (j) any merger, consolidation or change in any Obligor’s type or form of organizational structure without the prior written consent of Bank; or (k) any discontinuance or termination of any guaranty of all or any portion of this Note by any Obligor or any attempt by any Obligor to do so; then, at the option of Bank, the full amount of this Note and all other obligations and liabilities, direct or contingent, of any Obligor to Bank shall be immediately due and payable without notice or demand. REMEDIES: Bank shall have the remedies of a secured party under the Louisiana Uniform Commercial Code. In addition to any and all other remedies which may be available to it, all of which shall be cumulative and may be pursued singly, successively or together against any Obligor and/or any security given at any time to secure the payment hereof, all at the sole discretion of Bank. Failure on the part of Bank to exercise any right described herein or in such other documents shall not constitute a waiver of such {N2549732.2}2 Initial __CH______ 70423.6 LA (May 2018)

right or preclude Bank’s subsequent exercise thereof. If any notice of sale or other intended disposition of the collateral is required by law to be given, Borrower hereby agrees that a notice sent in compliance with applicable law or if applicable law does not define the required notice period then at least ten (10) days prior to such action shall constitute reasonable notice to Borrower. If the proceeds of any collateral securing this Note disposed of by Bank are insufficient to pay this Note in full, Obligor shall remain fully obligated for any deficiency. For purposes of executory process, Obligor hereby acknowledges the debt created by this Note, confesses judgment in favor of Bank for the full amount of the debt evidenced by this Note, and consents to enforcement by executory process. To the extent permitted by law, Obligor hereby expressly waives (a) the benefit of appraisement provided for in Art. 2723 of the Louisiana Code of Civil Procedure and (b) all other rights to notices, demands, appraisements and delays provided by the Louisiana Code of Civil Procedure or any other applicable laws. FEES AND EXPENSES: Obligor agrees to pay on demand all charges, fees, costs and/or taxes levied or assessed against Bank in connection with this Note or any collateral securing this Note, together with all reasonable attorneys and paralegals’ fees and expenses, and all other costs and expenses incurred by Bank in connection with the preparation, enforcement (including, without limitation, in bankruptcy, probate or administration proceeding or otherwise), workout, restructuring or collection of this Note, whether or not suit is filed, including such fees incurred in bankruptcy proceedings, at state and/or federal trial and appellate court levels, together with all other costs and expenses that may be incurred by Bank in connection with the enforcement of this Note or the preservation or enforcement of any of Bank’s rights or interests with respect to any collateral securing this Note. WAIVER: The Borrower waive(s), on behalf of itself and each Obligor, presentment, demand, protest, notice of dishonor, notice of demand or intent to demand, notice of acceleration or intent to accelerate, and all other notices, and agree(s) that no extension or indulgence to the undersigned (or any of them) or release, substitution or nonenforcement of any security, or release or substitution of any of the undersigned, any guarantor or any other party, whether with or without notice, shall affect the obligations of any of the undersigned. The undersigned waive(s) all defenses or right to discharge available under applicable law and waive(s) all other suretyship defenses or right to discharge and waives any right to receive notice of interest rate changes. Each Obligor also agrees Bank may, one or more times, in its sole discretion, without releasing or affecting any of its rights and without notice to or the consent of such Obligor, take any one or more of the following actions: (a) release, renew, extend or modify the obligations of Borrower or any other Obligor; (b) release, exchange, modify, or surrender in whole or in part Bank’s rights with respect to any collateral for this Note; (c) with the consent of Borrower, modify or alter the term, interest rate or due date of any payment of this Note; (d) grant any postponements, compromises, indulgences, waivers, surrenders or discharges or modify the terms of its agreements with Borrower or any other Obligor; (e) change its manner of doing business with Borrower or any other Obligor or person; or (f) impute payments or proceeds of any collateral furnished by any Obligor, in whole or in part to any costs, interest, or principal due on this Note, or to any other obligation of any Obligor to Bank, or in the event of a third party claim thereto retain the payments or proceeds as collateral for this Note without applying same toward payment of this Note, and each Obligor hereby expressly waives any claims or defenses arising from any such actions. COMMERCIAL USE: Borrower warrants and represents to Bank and all other holders of this Note that all loans evidenced by this Note are and will be for business, commercial, or other similar purpose and not primarily for personal, family, or household purposes. SALE/ASSIGNMENT: The Borrower acknowledge(s) that the Bank has the right to sell, assign, transfer, negotiate, or grant participations in all or any part of this Note and any related obligations, including, without limit, this Note, without notice to the undersigned and that the Bank may disclose any documents and information which the Bank now has or later acquires relating to the undersigned or to any collateral or to any Obligor or this Note in connection with such sale, assignment, transfer, negotiation, or grant. The Borrower agree(s) that the Bank may provide information relating to this Note or relating to the undersigned to the Bank's parent, affiliates, subsidiaries and service providers. GOVERNING LAW, JURISDICTION AND VENUE: THIS NOTE IS MADE AND DELIVERED IN THE STATE OF LOUISIANA AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS THEREOF WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. BORROWER AND EACH OTHER OBLIGOR PARTY TO THIS NOTE HEREBY IRREVOCABLY SUBMITS AND CONSENTS TO THE EXCLUSIVE PERSONAL JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT IN LOUISIANA LOCATED IN THE SAME JUDICIAL DISTRICT AS THE OFFICE OF BANK SPECIFIED IN THE FIRST PARAGRAPH OF THIS NOTE AND AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE SHALL BE LITIGATED ONLY IN ONE OF THE FOREGOING DESCRIBED COURTS. BORROWER AND EACH OTHER OBLIGOR PARTY TO THIS NOTE, FOR THEMSELVES, AND THEIR RESPECTIVE HEIRS, SUCCESSORS AND ITS ASSIGNS, AND FOR ANY PERSON CLAIMING UNDER OR THROUGH ANY OF THEM, HEREBY KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS TO HAVE THE JURISDICTION AND VENUE OF ANY LITIGATION ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS NOTE IN ANY OTHER COURT, AND HEREBY KNOWINGLY AND VOLUNTARILY WAIVES ANY AND ALL RIGHTS TO REMOVE THIS ACTION TO, OR TO TRANSFER, DISMISS, OR CHANGE VENUE TO, ANY OTHER COURT. BORROWER AND EACH OTHER OBLIGOR PARTY TO THIS NOTE FURTHER ACKNOWLEDGES AND AGREES THAT NEITHER BANK NOR ANY PERSON ACTING ON BEHALF OF BANK HAS IN ANY WAY AGREED WITH OR REPRESENTED TO BORROWER OR SUCH OBLIGOR THAT THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN WAIVED OR WILL NOT BE FULLY ENFORCED BY BANK. WAIVER OF JURY TRIAL. BORROWER KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS BORROWER MAY HAVE TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BASED ON, ARISING OUT OF, OR IN ANY WAY RELATED TO: THIS NOTE; THE OBLIGATIONS; ANY NOTES, LOAN AGREEMENTS, OR ANY OTHER LOAN DOCUMENT OR AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH ANY OF THE OBLIGATIONS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THIS JURY WAIVER ALSO APPLIES TO ANY CLAIM, COUNTERCLAIM, CAUSE OF ACTION OR DEMAND ARISING FROM OR RELATED TO (I) ANY COURSE OF CONDUCT, COURSE OF DEALING, OR RELATIONSHIP OF BORROWER, ANY OBLIGOR, OR ANY OTHER PERSON WITH BANK OR ANY EMPLOYEE, OFFICER, DIRECTOR OR ASSIGNEE OF BANK IN CONNECTION WITH THE OBLIGATIONS; OR (II) ANY STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PERSON BY OR ON BEHALF OF BANK TO BORROWER, ANY OBLIGOR, OR ANY OTHER PERSON IN CONNECTION WITH THE OBLIGATIONS, REGARDLESS OF WHETHER SUCH CAUSE OF ACTION ARISES BY CONTRACT, TORT OR OTHERWISE. BORROWER HEREBY ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL INDUCEMENT TO THE BANK IN EXTENDING CREDIT TO THE BORROWER, THAT THE BANK WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND THAT BORROWER HAS BEEN REPRESENTED BY AN ATTORNEY {N2549732.2}3 Initial __CH______ 70423.6 LA (May 2018)

OR HAS HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER. BORROWER FURTHER CERTIFIES THAT NO PERSON HAS REPRESENTED TO IT, EXPRESSLY OR OTHERWISE, THAT BANK OR ANY OTHER PERSON WOULD NOT, IN THE EVENT OF A LEGAL PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER. MISCELLANEOUS: The provisions of this Note may not be waived or modified except in writing, signed by Bank. Failure of Bank to exercise rights, remedies or options Bank may have upon the happening of one or more of the events giving rise to such rights, remedies or options shall not constitute a waiver of the right to exercise the same or any other right, remedy or option at any subsequent time in respect to the same or any other event. The acceptance by Bank of any payment hereunder that is less than payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the rights, remedies or options granted herein to Bank at that time or at any subsequent time or nullify any prior exercise of any such right, remedy or option without the express written acknowledgment of the Bank. If any provision of this Note shall be held to be legally invalid or unenforceable by any court of competent jurisdiction, all remaining provisions of this Note shall remain in full force and effect. The term Bank as used herein shall include transferees, successors, and assigns of Bank, and all rights of Bank hereunder shall inure to the benefit of its transferees, successors, and assigns. All obligations of Obligor shall bind Obligor’s heirs, legal representatives, successors, and assigns. The descriptive headings of the several sections of this Note are inserted for convenience only and shall not in any way affect the meaning or construction hereof. Bank may, at its option and in its sole discretion, maintain and rely upon a photocopy, electronic copy or other reproduction of this Note, and Borrower and each other Obligor, for themselves and their respective heirs, successors, and assigns, and any person claiming by or through any of them, hereby waive any and all objections to, and claims or defenses based upon, the failure of Bank to produce the original hereof for any purpose whatsoever. This Note embodies the final, entire agreement of Borrower and Bank with respect to the subject matter hereof. No course of dealing, course of performance, usage of trade or evidence of any prior, contemporaneous or subsequent oral agreements or discussions or other extrinsic evidence of any nature shall be used to contradict, vary, supplement or modify any term of this note. There are no oral agreements between the parties. THIS NOTE AND ALL OTHER LOAN DOCUMENTS EMBODY THE FINAL, ENTIRE AGREEMENT OF BORROWER AND BANK AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY ANY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR A SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF BORROWER AND BANK. THERE ARE NO ORAL AGREEMENTS BETWEEN THE BORROWER AND BANK. BORROWER: INTERNAL USE ONLY Viemed, Inc. By: /s/ Casey Hoyt Name: Casey Hoyt Title: Chief Executive Officer Sleep Management, L.L.C. By: /s/ Casey Hoyt Name: Casey Hoyt Title: General Manager Home Sleep Delivered, L.L.C. By: /s/ Casey Hoyt Name: Casey Hoyt Title: General Manager {N2549732.2}4 Initial __CH______ 70423.6 LA (May 2018)

EX-31.1

Certification of Principal Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Casey Hoyt, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Viemed Healthcare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2020

/s/ Casey Hoyt

Casey Hoyt

Chief Executive Officer

EX-31.2

Certification of Principal Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Trae Fitzgerald, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Viemed Healthcare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 4, 2020

/s/ Trae Fitzgerald

Trae Fitzgerald

Chief Financial Officer

EX-32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Casey Hoyt, the Chief Executive Officer of Viemed Healthcare, Inc (the “Company”), hereby certify, that, to my knowledge:

1.The Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 4, 2020

/s/ Casey Hoyt

Casey Hoyt

Chief Executive Officer

EX-32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Trae Fitzgerald, the Chief Financial Officer of Viemed Healthcare, Inc (the “Company”), hereby certify, that, to my knowledge:

1.The Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 4, 2020

/s/ Trae Fitzgerald

Trae Fitzgerald

Chief Financial Officer

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities
Net Income	$ 4,243	$ 1,958
Adjustments for:
Depreciation	2,130	1,400
Change in allowance for doubtful accounts	2,846	2,125
Share-based compensation	1,151	880
Unrealized loss on warrant conversion liability	0	169
Loss from equity method investment	27	24
(Gain) loss on disposal of property and equipment	(1,169)	56
Net change in working capital
Increase in accounts receivable	(6,755)	(4,952)
Increase in inventory	(425)	(728)
Increase in prepaid expenses and other current assets	(2,952)	(129)
Increase in trade payables	3,598	504
Increase in deferred revenue	79	203
Decrease in accrued liabilities	(2,361)	(856)
Increase (decrease) in income tax payable	195	(4)
Net cash provided by operating activities	607	650
Cash flows from investing activities
Purchase of property and equipment	(4,220)	(116)
Investment in equity method investment	(32)	0
Proceeds from sale of property and equipment	2,541	24
Net cash used in investing activities	(1,711)	(92)
Cash flows from financing activities
Proceeds from exercise of options	15	4
Principal payments on notes payable	(33)	0
Principal payments on term note	(395)	0
Shares repurchased and canceled under the Normal Course Issuer Bid	0	(1,522)
Repayments of lease liabilities, net of proceeds	(3,429)	(2,043)
Net cash used in financing activities	(3,842)	(3,561)
Net decrease in cash and cash equivalents	(4,946)	(3,003)
Cash and cash equivalents at beginning of year	13,355	10,413
Cash and cash equivalents at end of period	8,409	7,410
Supplemental disclosures of cash flow information
Cash paid during the period for interest	165	26
Cash paid during the period for income taxes, net of refunds received	(8)	143
Supplemental disclosures of non-cash transactions
Property and equipment financed through finance leases	3,002	4,505
Property and equipment financed through leases under FASB ASC 842	$ 31	$ 1,267

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets
Cash and cash equivalents	$ 8,409	$ 13,355
Accounts receivable, net of allowance for doubtful accounts of $10,196 and $7,782 at March 31, 2020 and December 31, 2019, respectively	15,443	11,534
Inventory, net	1,785	1,360
Prepaid expenses and other assets	4,514	1,562
Total current assets	30,151	27,811
Long-term assets
Property and equipment	56,632	54,772
Equity method investment	18	13
Total long-term assets	56,650	54,785
TOTAL ASSETS	86,801	82,596
Current liabilities
Trade payables	6,380	4,700
Deferred revenue	3,394	3,315
Income taxes payable	281	86
Accrued liabilities	6,886	8,968
Current portion of lease liabilities	7,433	7,093
Current portion of long-term debt	1,772	1,750
Total current liabilities	26,146	25,912
Long-term liabilities
Accrued liabilities	2,350	2,317
Long-term lease liabilities	2,330	3,039
Long-term debt	7,179	7,629
Total long-term liabilities	11,859	12,985
TOTAL LIABILITIES	38,005	38,897
Commitments and Contingencies	0	0
SHAREHOLDERS' EQUITY
Common stock - No par value: unlimited authorized; 38,486,772 and 37,952,660 issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	6,657	3,366
Additional paid-in capital	4,252	6,377
Accumulated other comprehensive loss	(469)	(157)
Retained earnings	38,356	34,113
TOTAL SHAREHOLDERS' EQUITY	48,796	43,699
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 86,801	$ 82,596

XML

Income Taxes (Details)	3 Months Ended
	Mar. 31, 2020
Income Tax Disclosure [Abstract]
Effective tax rate	4.20%

XML

Summary of Significant Accounting Policies (Property and Equipment) (Details)	3 Months Ended
	Mar. 31, 2020
Medical equipment | Minimum
Property, Plant and Equipment [Line Items]
Useful life	1 year
Medical equipment | Maximum
Property, Plant and Equipment [Line Items]
Useful life	10 years
Computer Equipment
Property, Plant and Equipment [Line Items]
Useful life	5 years
Office Furniture & Fixtures | Minimum
Property, Plant and Equipment [Line Items]
Useful life	5 years
Office Furniture & Fixtures | Maximum
Property, Plant and Equipment [Line Items]
Useful life	10 years
Vehicles
Property, Plant and Equipment [Line Items]
Useful life	5 years
Building | Minimum
Property, Plant and Equipment [Line Items]
Useful life	15 years
Building | Maximum
Property, Plant and Equipment [Line Items]
Useful life	39 years

XML

Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued trade payables	$ 775	$ 1,023
Accrued commissions payable	391	371
Accrued bonuses payable	1,509	2,292
Accrued vacation and payroll	1,148	1,502
Current portion of phantom share liability	2,711	3,129
Accrued other liabilities	352	651
Total accrued liabilities	$ 6,886	$ 8,968

XML

Debt and lease liabilities (Lease Liabilities) (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt And Leases [Abstract]
Lease liabilities	$ 9,763	$ 10,132
Current portion of lease liabilities	(7,433)	(7,093)
Net long-term lease liabilities	$ 2,330	$ 3,039

XML

Earnings Per Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Income per common share is calculated using earnings for the year divided by the weighted average number of shares outstanding during the year. Diluted income per share amounts are calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common shares were exercised or converted to common shares by assuming the proceeds received from the exercise of stock options, restricted stock units, and warrants are used to purchase common shares at the prevailing market rate.

The following reflects the earnings and share data used in the basic and diluted earnings per share computations:

	Three Months Ended March 31,
	2020		2019
Numerator - basic and diluted:
Net income attributable to shareholders	$	4,243	$	1,958
Denominator:
Basic weighted-average number of common shares	38,030,854		37,827,058
Diluted weighted-average number of shares	39,677,983		39,449,123
Basic earnings per share	$	0.11	$	0.05
Diluted earnings per share	$	0.11	$	0.05
Denominator calculation from basic to diluted:
Basic weighted-average number of common shares	38,030,854		37,827,058
Stock options and other dilutive securities	1,647,129		1,622,065
Diluted weighted-average number of shares	39,677,983		39,449,123

XML

Shareholders' Equity

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Shareholders' Equity

Shareholders' Equity

Authorized share capital

The Company’s authorized share capital consists of an unlimited number of common shares.

Issued and outstanding share capital

The Company has only one class of stock outstanding, common shares. The authorized stock consists of an unlimited number of common shares with no stated par value, of which 38,486,772 and 37,952,660 shares were issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.

Stock-based compensation

The purpose of the Company's RSU and Option Plans (collectively, the "Plan") is to provide incentive to employees, directors, officers, management companies, and consultants who provide services to the Company or any of its subsidiaries. The Plan is a “fixed” stock plan, whereby the maximum number of the Company's shares reserved for issuance, combined with any equity securities granted under all other compensation arrangements adopted by the Company, may not exceed 7,582,000 shares (equal to 20% of the issued and outstanding shares of the Company as of the date of the adoption of the Plan). As of March 31, 2020, the Company had outstanding issuances of options of 3,638,000 and restricted stock units of 701,088 under the Plan.

The following table summarizes stock-based compensation for the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020		2019
Stock-based compensation - options	$	891	$	578
Stock-based compensation - restricted stock units	260		302
Total	$	1,151	$	880

At March 31, 2020, there was approximately $5,012,000 of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized over a weighted-average period of 2.49 years. As of March 31, 2020, there was approximately $920,000 of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 0.90 years.

Options

The following table summarizes stock option activity for the three months ended March 31, 2020:

	Number of options  (000's)		Weighted average exercise price (CAD$)		Weighted average remaining contractual life	Aggregate Intrinsic Value(1)
Balance December 31, 2019	2,683		$	4.36	6.7 years	$	7,790
Issued	964		7.44
Exercised	(5	)	4.16
Expired / Forfeited	(4	)	6.79
Balance March 31, 2020	3,638		$	5.17	7.4 years	$	3,684

⁽¹⁾ The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

The aggregate intrinsic value of options outstanding was $3,684,000 and options exercisable were $3,018,000 at March 31, 2020. For the three months ended March 31, 2020, 4,737 shares of common stock were issued pursuant to the exercise of stock options.

At March 31, 2020, the Company had 1,641,000 exercisable stock options outstanding with a weighted average exercise price of CAD $4.00 and a weighted average remaining contractual life of 5.2 years. At December 31, 2019, the Company had 1,037,000exercisable stock options outstanding with a weighted average exercise price of CAD $3.83 and a weighted average remaining contractual life of 3.5 years.

The fair value of the stock options has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and credited to additional paid-in capital over the vesting period, using the Black-Scholes option pricing model calculated using the following assumptions for issuances during the three months ended March 31, 2020:

Exercise price ($CAD)	$7.44 ($CAD)
Risk-free interest rate	1.63	%
Expected volatility	65.73	%
Expected life of options	10 Years
Expected dividend yield	Nil
Fair value on date of grant ($USD)	$4.10 ($USD)

Restricted stock units

The Company has a restricted stock unit plan ("RSU Plan"), which it uses for grants to directors, officers, and employees. The Company accounts for restricted stock units using fair value. The fair value of the restricted stock units has been charged to the consolidated statements of income and comprehensive income and credited to additional paid-in capital over the vesting period, based on the stock price on the date of grant. Restricted stock units vest generally over a one or three-year period. The Company accounts for forfeitures on restricted stock units under ASU 2016-09 and recognizes forfeitures in the period in which they occur.

The following table summarizes restricted stock unit activity for the three months ended March 31, 2020:

	Number of Restricted Stock Units (000's)		Weighted average grant price (CAD$)		Weighted average remaining contractual life	Aggregate Intrinsic Value(1)
Balance December 31, 2019	1,139		$	2.74	0.55 years	$	7,129
Issued	92		7.44
Vested	(530	)	2.54
Expired / Forfeited	—		—
Balance March 31, 2020	701		$	3.64	0.90 years	$	3,269

⁽¹⁾ The aggregate intrinsic value of time-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

During the three months ended March 31, 2020, the Company issued 92,088 restricted stock units, with a vesting term of one to three years and a fair value of $5.66 ($USD) per share.

Phantom share units

The Company has a phantom share unit plan, which it uses for grants to directors, officers, and employees. Phantom share units granted under the plan are non-assignable and are settled in cash at vesting. Phantom share units vest annually over a three-year period.

The following table summarizes phantom share unit activity for the three months ended March 31, 2020:

	Number of Phantom Share Units (000's)
Balance December 31, 2019	1,350
Issued	—
Vested	—
Expired / Forfeited	(22	)
Balance March 31, 2020	1,328

The change in fair value of the phantom share units has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and recorded as a liability included in accrued liabilities and long-term accrued liabilities, using a valuation method with the following inputs:

	Three Months Ended
	March 31, 2020
Share price	$ 6.61 (CAD$)
Remaining life of phantom share units	0.11 - 2.11 Years
Calculated fair value of phantom share units	$	4,593

The total liability associated with phantom share units at March 31, 2020 is $4,593,000, with $1,882,000 of this balance included in long-term accrued liabilities and the remaining portion of $2,711,000 in current accrued liabilities. Accrued liability and related expense is determined at each reporting period based on the stock price at period end.

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Summary of Significant Accounting Policies (Accounts Receivable, Narrative) (Details) - Customer Concentration	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Medicare and Medicaid | Accounts Receivable
Concentration Risk [Line Items]
Concentration risk, percentage	57.00%		58.00%
Medicare and Medicaid | Revenue
Concentration Risk [Line Items]
Concentration risk, percentage	73.00%	77.00%
Medicare | Accounts Receivable
Concentration Risk [Line Items]
Concentration risk, percentage	49.00%
Medicare | Revenue
Concentration Risk [Line Items]
Concentration risk, percentage	64.00%	68.00%
Medicaid | Accounts Receivable
Concentration Risk [Line Items]
Concentration risk, percentage	8.00%
Medicaid | Revenue
Concentration Risk [Line Items]
Concentration risk, percentage	9.00%	9.00%

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Shareholders' Equity (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation Expense

The following table summarizes stock-based compensation for the three months ended March 31, 2020 and 2019 (in thousands):

	Three Months Ended March 31,
	2020		2019
Stock-based compensation - options	$	891	$	578
Stock-based compensation - restricted stock units	260		302
Total	$	1,151	$	880

Schedule of Option Activity

The following table summarizes stock option activity for the three months ended March 31, 2020:

	Number of options  (000's)		Weighted average exercise price (CAD$)		Weighted average remaining contractual life	Aggregate Intrinsic Value(1)
Balance December 31, 2019	2,683		$	4.36	6.7 years	$	7,790
Issued	964		7.44
Exercised	(5	)	4.16
Expired / Forfeited	(4	)	6.79
Balance March 31, 2020	3,638		$	5.17	7.4 years	$	3,684

⁽¹⁾ The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

Schedule of Stock Options, Valuation Assumptions

The fair value of the stock options has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and credited to additional paid-in capital over the vesting period, using the Black-Scholes option pricing model calculated using the following assumptions for issuances during the three months ended March 31, 2020:

Exercise price ($CAD)	$7.44 ($CAD)
Risk-free interest rate	1.63	%
Expected volatility	65.73	%
Expected life of options	10 Years
Expected dividend yield	Nil
Fair value on date of grant ($USD)	$4.10 ($USD)

Schedule of Restricted Stock Units

The following table summarizes restricted stock unit activity for the three months ended March 31, 2020:

	Number of Restricted Stock Units (000's)		Weighted average grant price (CAD$)		Weighted average remaining contractual life	Aggregate Intrinsic Value(1)
Balance December 31, 2019	1,139		$	2.74	0.55 years	$	7,129
Issued	92		7.44
Vested	(530	)	2.54
Expired / Forfeited	—		—
Balance March 31, 2020	701		$	3.64	0.90 years	$	3,269

⁽¹⁾ The aggregate intrinsic value of time-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period

Schedule of Phantom Share Units

The following table summarizes phantom share unit activity for the three months ended March 31, 2020:

	Number of Phantom Share Units (000's)
Balance December 31, 2019	1,350
Issued	—
Vested	—
Expired / Forfeited	(22	)
Balance March 31, 2020	1,328

The change in fair value of the phantom share units has been charged to the Condensed Consolidated Statements of Income and Comprehensive Income and recorded as a liability included in accrued liabilities and long-term accrued liabilities, using a valuation method with the following inputs:

	Three Months Ended
	March 31, 2020
Share price	$ 6.61 (CAD$)
Remaining life of phantom share units	0.11 - 2.11 Years
Calculated fair value of phantom share units	$	4,593

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

The estimated useful lives of the property and equipment are as follows:

Description	Estimated Useful Lives
Medical Equipment	1 - 10 Years
Computer Equipment	5 Years
Office Furniture & Fixtures	5 - 10 Years
Leasehold Improvements	Shorter of Useful Life or Lease
Vehicles	5 Years
Building	15 - 39 Years
Land	Indefinite Life

The following table details the Company’s fixed assets:

	March 31, 2020			December 31, 2019
Medical equipment	$	59,169		$	56,202
Furniture and equipment	2,442			2,350
Land	2,138			2,138
Buildings	6,458			6,351
Leasehold improvements	301			301
Vehicles	1,029			1,110
Less: Accumulated depreciation	(14,905		)	(13,680		)
Property and equipment, net of accumulated depreciation	$	56,632		$	54,772

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Debt and lease liabilities (Operating Lease Liabilities) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Lessee, Lease, Description [Line Items]
Discount rate	5.50%
Weighted average lease term	3 years 7 months 29 days
Operating rental expenses	$ 184	$ 90
Monthly Rental Payments | Related Party
Lessee, Lease, Description [Line Items]
Rental payments	20
Total rental payments	$ 61	$ 61

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Shareholders' Equity (Stock-based Compensation) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Maximum shares in Plan (in shares)	7,582,000
Percent of issued and outstanding shares	20.00%
Options outstanding (in shares)	3,638,000		2,683,000
Stock-based compensation, expense	$ 1,151	$ 880
Unrecognized pre-tax stock option expense	$ 5,012
Weighted-average period of recognition	2 years 5 months 28 days
Options
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation, expense	$ 891	578
Restricted Stock Units
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
RSUs outstanding (in shares)	701,088		1,139,000
Stock-based compensation, expense	$ 260	$ 302
Weighted-average period of recognition	10 months 25 days
Unrecognized pre-tax compensation expense, restricted stock units	$ 920

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Shareholders' Equity (Restricted Stock Units) (Details) - Restricted Stock Units $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($) $ / shares shares	Mar. 31, 2020 USD ($) $ / shares shares	Mar. 31, 2019	Dec. 31, 2019 USD ($)
Number of Restricted Stock Units (000's)
Beginning balance (in shares)	1,139,000	1,139,000
Issued (in shares)	92,088	92,088
Vested (in shares)	(530,000)	(530,000)
Expired / Forfeited (in shares)	0	0
Ending balance (in shares)	701,088	701,088
Weighted average grant price (CAD$)
Beginning balance (CAD per share) | $ / shares		$ 2.74
Issued (CAD per share) | (per share)	$ 5.66	7.44
Vested (CAD per share) | $ / shares		2.54
Expired / Forfeited (CAD per share) | $ / shares		0.00
Ending balance (CAD per share) | $ / shares		$ 3.64
Weighted average remaining contractual life
Weighted average remaining contractual life	10 months 25 days	10 months 25 days	6 months 18 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value | $	$ 3,269	$ 3,269		$ 7,129
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year	1 year
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years	3 years

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Fair value measurement (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of Warrants

There were no warrants exercised and no warrants that expired during the three months ended March 31, 2020. A summary of the change in fair value of warrant conversion liability is as follows for the period ended March 31, 2019:

Warrant Conversion Liability
Balance December 31, 2018	$	363
Warrants issued	—
Unrealized loss on warrant conversion liability	169
Balance March 31, 2019	$	532

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Accounts Receivable, Allowance for Doubtful Accounts

The estimates and write-offs for the allowance for doubtful accounts for each reporting period were as follows:

	March 31, 2020			March 31, 2019
Balance, beginning of year	$	7,782		$	4,266
Provision for bad debts	2,846			2,125
Amounts written off	(432		)	(502		)
Balance, end of period	$	10,196		$	5,889

Schedule of Estimated Useful Lives

The estimated useful lives of the property and equipment are as follows:

Description	Estimated Useful Lives
Medical Equipment	1 - 10 Years
Computer Equipment	5 Years
Office Furniture & Fixtures	5 - 10 Years
Leasehold Improvements	Shorter of Useful Life or Lease
Vehicles	5 Years
Building	15 - 39 Years
Land	Indefinite Life

The following table details the Company’s fixed assets:

	March 31, 2020			December 31, 2019
Medical equipment	$	59,169		$	56,202
Furniture and equipment	2,442			2,350
Land	2,138			2,138
Buildings	6,458			6,351
Leasehold improvements	301			301
Vehicles	1,029			1,110
Less: Accumulated depreciation	(14,905		)	(13,680		)
Property and equipment, net of accumulated depreciation	$	56,632		$	54,772

Schedule of Revenue by Source

The revenues from each major source are summarized in the following table:

	Three Months Ended March 31,
	2020		2019
Revenue from rentals under Topic 842
Ventilator rentals, non-invasive and invasive	$	18,792	$	16,204
Other durable medical equipment rentals	2,131		797
Revenue from sales and services under Topic 606
Equipment and supply sales	1,533		778
COVID-19 response sales(1)	1,040		—
Service revenues	310		336
Total Revenues	$	23,806	$	18,115

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Summary of Significant Accounting Policies (Accounts Receivable, Allowance for Doubtful Accounts) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Allowance for Doubtful Accounts
Balance, beginning of year	$ 7,782	$ 4,266
Provision for bad debts	2,846	2,125
Amounts written off	(432)	(502)
Balance, end of period	$ 10,196	$ 5,889

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Shareholders' Equity (Phantom Share Units) (Details) shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020 USD ($) shares	Dec. 31, 2019 USD ($) shares	Mar. 31, 2020 $ / shares	Dec. 31, 2019 $ / shares
Fair Value Assumptions
Current accrued liabilities | $	$ 2,711	$ 3,129
Phantom Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Number of Phantom Share Units (000's)
Beginning balance (in shares) | shares	1,350
Issued (in shares) | shares	0
Vested (in shares) | shares	0
Expired / Forfeited (in shares) | shares	(22)
Ending balance (in shares) | shares	1,328	1,350
Fair Value Assumptions
Share price (USD per share) | $ / shares			$ 6.61	$ 8.13
Calculated fair value of phantom share units | $	$ 4,593
Total liability | $	4,593
Long-term accrued liabilities | $	1,882
Current accrued liabilities | $	$ 2,711
Phantom Share Units | Minimum
Fair Value Assumptions
Remaining life of phantom share units	1 month 9 days	4 months 9 days
Phantom Share Units | Maximum
Fair Value Assumptions
Remaining life of phantom share units	2 years 1 month 9 days	2 years 4 months 20 days

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Fair value measurement (Narrative) (Details)	3 Months Ended
	Mar. 31, 2020 USD ($) swap shares	Mar. 31, 2019 USD ($)	Dec. 21, 2017 shares
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Number of shares called by each warrant (in shares) | shares			0.10
Exercise of warrants (in shares) | shares	0
Expired warrants (in shares) | shares	0
Interest Rate
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Number of interest rate swaps | swap	1
Notional amount | $	$ 4,700,000.0
Fair value | $	500,000
Warrant
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Warrants issued | $	$ 0	$ 0

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Shareholders' Equity (Options, Stock Option Activity) (Details) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($) $ / shares shares	Mar. 31, 2019	Dec. 31, 2019 USD ($)
Number of options (000's)
Beginning balance (in shares) | shares	2,683
Issued (in shares) | shares	964
Exercised (in shares) | shares	(5)
Expired / Forfeited (in shares) | shares	(4)
Ending balance (in shares) | shares	3,638
Weighted average exercise price (CAD$)
Beginning balance (CAD per share) | $ / shares	$ 4.36
Issued (CAD per share) | $ / shares	7.44
Exercised (CAD per share) | $ / shares	4.16
Expired / Forfeited (CAD per share) | $ / shares	6.79
Ending balance (CAD per share) | $ / shares	$ 5.17
Weighted average remaining contractual life
Weighted average remaining contractual life	7 years 5 months	6 years 7 months 25 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value | $	$ 3,684		$ 7,790

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Subsequent Events (Details) $ in Millions	1 Months Ended
	Apr. 30, 2020 USD ($)
Subsequent Event
Subsequent Event [Line Items]
Government grant received	$ 3.5

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Nature of Business and Operations

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business and Operations

Nature of Business and Operations

On December 21, 2017, Viemed Healthcare, Inc. (the "Company") consumated Asset and Share Purchase Agreements as well as an Arrangement Agreement ("the Arrangement") with Protech Home Medical Corp. ("PHM") (formerly Patient Home Monitoring Corp.) and was spun-out as a separate public company that owns a 100% interest in Home Sleep Delivered, L.L.C. ("HSD") and Sleep Management, L.L.C. dba Viemed ("Viemed") through the U.S. holding company Viemed Inc.

The Company, through its subsidiaries, Viemed and HSD, provides in-home durable medical equipment ("DME") and health care solutions to patients in over 30 states in the United States. Viemed offers customers requiring respiratory services and related equipment an appropriate selection of home medical products including non-invasive ventilators, positive airway pressure (“PAP”) machines and oxygen units, as well as the services of experienced respiratory therapists. HSD provides in-home sleep apnea testing, allowing a patient to determine the existence of sleep apnea at home at a fraction of the cost of the traditional sleep lab environment. The Company was incorporated under the Business Corporations Act (British Columbia) on December 14, 2016. The Company's registered and records office is located at Suite 2800, Park Place, 666 Burrard Street, Vancouver, British Columbia V6C 2Z7 and its corporate office is located at 625 E. Kaliste Saloom Road, Lafayette, Louisiana 70508.

The Company qualifies as a "foreign private issuer," as defined in Rule 12b-2 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), for the purposes of the informational requirements of the Exchange Act. Although, as a foreign private issuer, the Company would not be required to do so, the Company will file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the Securities and Exchange Commission (the "SEC"), instead of filing the reporting forms available to foreign private issuers.

The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act (the "JOBS Act"), and as such, has elected to comply with certain reduced U.S. public company reporting requirements.

The Company’s shares are traded in Canada on the Toronto Stock Exchange under the symbol VMD.TO and in the U.S. on the Nasdaq Capital Market under the symbol VMD.

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 10,196	$ 7,782
Issued (in shares)	38,486,772	37,952,660
Outstanding (in shares)	38,486,772	37,952,660

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Commitments (Details) $ in Millions	Mar. 31, 2020 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Purchase obligation	$ 5.5

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Debt and lease liabilities (Finance Lease Liabilities) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Debt And Leases [Abstract]
Interest rate	9.64%
Weighted average interest rate	2.22%	0.86%
Weighted average lease term	11 months 25 days	9 months 29 days
Interest expense	$ 52	$ 26

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Summary of Significant Accounting Policies (Revenue Recognition) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation of Revenue [Line Items]
Recognition period	1 month
Revenue	$ 23,806	$ 18,115
Ventilator rentals, non-invasive and invasive
Disaggregation of Revenue [Line Items]
Revenue from rentals under Topic 842	18,792	16,204
Other durable medical equipment rentals
Disaggregation of Revenue [Line Items]
Revenue from rentals under Topic 842	2,131	797
Equipment and supply sales
Disaggregation of Revenue [Line Items]
Revenue from sales and services under Topic 606	1,533	778
COVID-19 response sales
Disaggregation of Revenue [Line Items]
Revenue from sales and services under Topic 606	1,040	0
Service revenues
Disaggregation of Revenue [Line Items]
Revenue from sales and services under Topic 606	$ 310	$ 336

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Debt and lease liabilities (Senior Credit Facility) (Details)	May 01, 2020	Feb. 20, 2018 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Sep. 19, 2019	Mar. 19, 2019 USD ($)
Notes Payable | Term Note
Line of Credit Facility [Line Items]
Total Debt to Adjusted EBITDA (Quarterly)			0.83		1.50
Fixed Charge Coverage Ratio (Quarterly)			3.12		1.35
Loan-to-Value Ratio (Quarterly)			0.72		0.85
Notes Payable | Fourth Amendment Loan | Subsequent Event
Line of Credit Facility [Line Items]
Floor rate	3.50%
Prime Rate | Notes Payable | Fourth Amendment Loan | Subsequent Event
Line of Credit Facility [Line Items]
Basis spread on variable rate	0.50%
Line of Credit
Line of Credit Facility [Line Items]
Debt term		2 years
Floor rate		4.00%
Maximum borrowing capacity		$ 5,000,000	$ 10,000,000.0			$ 10,000,000
Borrowings against facility			$ 0	$ 0
Line of Credit | ICE LIBOR
Line of Credit Facility [Line Items]
Basis spread on variable rate		3.00%

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Financial Risk Factors

3 Months Ended

Mar. 31, 2020

Risks and Uncertainties [Abstract]

Financial Risk Factors

Financial Risk Factors

Risk management

In the normal course of business, the Company is exposed to a number of risks that can affect its operating performance. ASC 820—Fair Value Measurements and Disclosures creates a single definition of fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and states that a fair value measurement is to estimate the price at which an orderly transaction to sell an asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Assets and liabilities adjusted to fair value in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

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 in excess of the amount insured by the Federal Deposit Insurance Corporation. Substantially all accounts receivable are due under fee-for-service contracts from third party payors, such as insurance companies and government-sponsored healthcare programs, directly from patients or for rebates due from manufacturers. Receivables generally are collected within industry norms for third-party payors and from manufacturers. The Company continuously monitors collections from its clients and maintains an allowance for bad debts based upon lifetime expected credit losses.

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 March 31, 2020, the Company faced no material liquidity risk and is able to meet all of its current financial obligations as they become due and payable. The Company had $26,146,000 and $25,912,000 of current liabilities that are due within one year as of March 31, 2020 and December 31, 2019, respectively. The Company had $30,151,000 and $27,811,000 of current assets as of March 31, 2020 and December 31, 2019, respectively, in addition to positive cash flow from operations. The Company utilizes short term leases with a major supplier that could be extended over a longer term if there was a need for additional liquidity. Additionally, the Company maintains a $10.0 million line of credit with Hancock Whitney Bank which was fully available as of March 31, 2020, subject to compliance with certain covenants.

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 registered US financial institutions. The Company considers this risk to be immaterial. The interest on finance leases and the Term Note are not subject to cash flow interest rate risk as these instruments bear interest at fixed rates. In connection with the Building Term Note, the Company entered into an Interest Rate Swap Transaction with Hancock Whitney Bank for a fixed rate of 4.68%, thereby transforming the variable interest rate exposure into a fixed rate obligation.

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Fair value measurement

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair value measurement

Fair value measurement

Under ASC Topic 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). ASC Topic 820 establishes a hierarchy for inputs to valuation techniques used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that reflect assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. There are three levels to the hierarchy based on the reliability of inputs, as follows:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets and liabilities in markets that are not active.

Level 3 - Unobservable inputs for the asset or liability. The degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

The Company’s cash and cash equivalents are measured using Level 1 inputs and include cash on hand, deposits in banks, certificates of deposit and money market funds. Due to their short-term nature, the carrying amounts reported in the consolidated balance sheets approximate the fair value of cash and cash equivalents.

The fair value of debt is classified as Level 2 for the periods presented and approximates its carrying value.

Warrants

Pursuant to the Arrangement, PHM common share purchase warrant holders each received one tenth (1/10) of one warrant to purchase one common share of the Company. The warrants conversion feature is denominated in Canadian dollars which is different from the functional currency of the Company, which is U.S. dollars. The conversion feature is treated as a derivative financial liability and the fair value movement during the period is recognized in the Condensed Consolidated Statement of Income and Comprehensive Income. The change in the value of warrants has been recorded as an unrealized (gain) loss on derivative financial liability in the Condensed Consolidated Statements of Income and Comprehensive Income. All unexercised warrants expired during the year ended December 31, 2019.

The warrant derivative financial liability was valued using Level 3 inputs from the fair value hierarchy.

There were no warrants issued during the three month period ended March 31, 2020. There were no warrants exercised and no warrants that expired during the three months ended March 31, 2020. A summary of the change in fair value of warrant conversion liability is as follows for the period ended March 31, 2019:

Warrant Conversion Liability
Balance December 31, 2018	$	363
Warrants issued	—
Unrealized loss on warrant conversion liability	169
Balance March 31, 2019	$	532

Derivative instruments and hedging activities

We currently have one interest rate swap contract in place, which became effective on May 31, 2019 and has been designated as a cash flow hedge. This swap contract matures on May 30, 2026. This swap contract converts the variable interest rate to a fixed interest rate on borrowings under the Building Term Note. As of March 31, 2020, the notional amount of the interest rate swap was $4.7 million and will be amortized over the term of the swap. The fair value was $0.5 million (determined based on Level 2 inputs) and is included in Accrued liabilities, as a component of Long-term liabilities as of March 31, 2020.

In the first three months of 2020, losses recognized as a result of ineffectiveness were immaterial.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Schedule of Earnings Per Share

The following reflects the earnings and share data used in the basic and diluted earnings per share computations:

	Three Months Ended March 31,
	2020		2019
Numerator - basic and diluted:
Net income attributable to shareholders	$	4,243	$	1,958
Denominator:
Basic weighted-average number of common shares	38,030,854		37,827,058
Diluted weighted-average number of shares	39,677,983		39,449,123
Basic earnings per share	$	0.11	$	0.05
Diluted earnings per share	$	0.11	$	0.05
Denominator calculation from basic to diluted:
Basic weighted-average number of common shares	38,030,854		37,827,058
Stock options and other dilutive securities	1,647,129		1,622,065
Diluted weighted-average number of shares	39,677,983		39,449,123

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Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Schedule of Current Liabilities

The Company’s short-term accrued liabilities are included within current liabilities and consist of the following:

	March 31, 2020		December 31, 2019
Accrued trade payables	$	775	$	1,023
Accrued commissions payable	391		371
Accrued bonuses payable	1,509		2,292
Accrued vacation and payroll	1,148		1,502
Current portion of phantom share liability	2,711		3,129
Accrued other liabilities	352		651
Total accrued liabilities	$	6,886	$	8,968

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Shareholders' Equity (Issued and Outstanding Share Capital) (Details) - shares	Mar. 31, 2020	Dec. 31, 2019
Share-based Payment Arrangement [Abstract]
Shares outstanding (in shares)	38,486,772	37,952,660

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Shareholders' Equity (Options, Fair Value Assumptions) (Details) - Options	3 Months Ended	12 Months Ended
	Mar. 31, 2020 $ / shares	Dec. 31, 2019 $ / shares	Mar. 31, 2020 $ / shares	Dec. 31, 2019 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.63%
Risk-free interest rate, minimum		1.59%
Risk-free interest rate, maximum		1.96%
Expected volatility	65.73%
Expected volatility, minimum		73.00%
Expected volatility, maximum		81.00%
Expected life of options	10 years
Expected dividend yield	0.00%
Fair value on date of grant (in dollars per share)	$ 4.10
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price (CAD per share)				$ 5.49
Fair value on date of grant (in dollars per share)		$ 3.40
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price (CAD per share)			$ 7.44	$ 9.62
Fair value on date of grant (in dollars per share)		$ 5.52

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional paid-in capital	Accumulated other comprehensive loss	Retained earnings
Shareholders' equity, beginning balance (in shares) at Dec. 31, 2018		37,500,815
Shareholders' equity, beginning balance at Dec. 31, 2018	$ 32,571	$ 71	$ 5,390	$ 0	$ 27,110
Increase (Decrease) in Stockholders' Equity
Stock-based compensation - options	578		578
Stock-based compensation - restricted stock	302		302
Exercise of options (in shares)		2,418
Exercise of options	4	$ 4
Shares issued for vesting of restricted stock units (in shares)		539,965
Shares issued for vesting of restricted stock units	0	$ 2,202	(2,202)
Shares repurchased and canceled under the Normal Course Issuer Bid (in shares)		(365,100)
Shares repurchased and canceled under the Normal Course Issuer Bid	(1,522)				(1,522)
Change in accumulated other comprehensive loss	0
Net Income	1,958				1,958
Shareholders' equity, ending balance (in shares) at Mar. 31, 2019		37,678,098
Shareholders' equity, ending balance at Mar. 31, 2019	$ 33,891	$ 2,277	4,068	0	27,546
Shareholders' equity, beginning balance (in shares) at Dec. 31, 2019	37,952,660	37,952,660
Shareholders' equity, beginning balance at Dec. 31, 2019	$ 43,699	$ 3,366	6,377	(157)	34,113
Increase (Decrease) in Stockholders' Equity
Stock-based compensation - options	891		891
Stock-based compensation - restricted stock	$ 260		260
Exercise of options (in shares)	5,000	4,737
Exercise of options	$ 15	$ 15
Shares issued for vesting of restricted stock units (in shares)		529,375
Shares issued for vesting of restricted stock units	0	$ 3,276	(3,276)
Change in accumulated other comprehensive loss	(312)			(312)
Net Income	$ 4,243				4,243
Shareholders' equity, ending balance (in shares) at Mar. 31, 2020	38,486,772	38,486,772
Shareholders' equity, ending balance at Mar. 31, 2020	$ 48,796	$ 6,657	$ 4,252	$ (469)	$ 38,356

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Cover - shares	3 Months Ended
	Mar. 31, 2020	Apr. 29, 2020
Cover [Abstract]
Entity Registrant Name	VIEMED HEALTHCARE, INC.
Entity Central Index Key	0001729149
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding		38,486,772

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Financial Risk Factors (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019	May 30, 2019	Mar. 19, 2019	Feb. 20, 2018
Debt Instrument [Line Items]
Current liabilities	$ 26,146,000	$ 25,912,000
Current assets	30,151,000	$ 27,811,000
Line of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity	$ 10,000,000.0			$ 10,000,000	$ 5,000,000
Notes Payable | Interest Rate | Building Term Note
Debt Instrument [Line Items]
Fixed interest rate	4.68%		4.68%

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Property and Equipment

3 Months Ended

Mar. 31, 2020

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment

The Company’s fixed assets consist of its medical equipment held for rental, furniture and equipment, real property and related improvements, and vehicles and other various small equipment. In May 2019, the Company purchased a 77,000 square foot commercial building located in Lafayette, Louisiana to utilize as its new corporate headquarters. The Building Term Note used to finance this purchase is further discussed in Note 5.

The following table details the Company’s fixed assets:

	March 31, 2020			December 31, 2019
Medical equipment	$	59,169		$	56,202
Furniture and equipment	2,442			2,350
Land	2,138			2,138
Buildings	6,458			6,351
Leasehold improvements	301			301
Vehicles	1,029			1,110
Less: Accumulated depreciation	(14,905		)	(13,680		)
Property and equipment, net of accumulated depreciation	$	56,632		$	54,772

Depreciation in the amount of $1,925,000 and $1,166,000 is included in cost of revenue for the three months ended March 31, 2020 and 2019, respectively. Included in medical equipment above is equipment acquired under capital lease obligations whose cost and accumulated depreciation at March 31, 2020 total $14,374,000 and $1,153,000, respectively. At December 31, 2019, cost and accumulated depreciation on equipment acquired under capital lease obligations was $15,680,000 and $1,337,000, respectively. Medical equipment purchases with a cost of $899,000 and $2,817,000 was included in accounts payable at March 31, 2020 and December 31, 2019, respectively.

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Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

"CARES" Act Funds Received

The CARES Act created a Provider Relief Fund to support health care-related expenses or lost revenue attributable to the COVID-19 pandemic.  The Company received $3.5 million of the Provider Relief Funds in April 2020. The Department of Health and Human Services has stated that Provider Relief Fund payments are not loans and will not need to be repaid. However, as a condition to the receipt of funds, the Company and any other providers must agree to a detailed set of terms and conditions. CMS has indicated that the terms and conditions may be subject to ongoing changes and reporting. To the extent that reporting requirements and terms and conditions are modified, it may affect the Company’s ability to comply and may require the return of funds. In accordance with the terms of acceptance for the grant, we expect to utilize these funds to prevent, prepare for, and respond to the COVID-19 pandemic.

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Commitments

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments

Commitments

Purchase Commitments

As of March 31, 2020, the Company has non-cancellable purchase order commitments in the amount of $5.5 million for respiratory equipment.

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Current Liabilities

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Current Liabilities

Current Liabilities

The Company’s short-term accrued liabilities are included within current liabilities and consist of the following:

	March 31, 2020		December 31, 2019
Accrued trade payables	$	775	$	1,023
Accrued commissions payable	391		371
Accrued bonuses payable	1,509		2,292
Accrued vacation and payroll	1,148		1,502
Current portion of phantom share liability	2,711		3,129
Accrued other liabilities	352		651
Total accrued liabilities	$	6,886	$	8,968

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Property and Equipment (Schedule of Fixed Assets) (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Less: Accumulated depreciation	$ (14,905)	$ (13,680)
Property and equipment, net of accumulated depreciation	56,632	54,772
Medical equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	59,169	56,202
Furniture and equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,442	2,350
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,138	2,138
Building
Property, Plant and Equipment [Line Items]
Property and equipment, gross	6,458	6,351
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	301	301
Vehicles
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 1,029	$ 1,110

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Debt and lease liabilities (Schedule of Notes Payable) (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Current portion of notes payable	$ (1,772)	$ (1,750)
Net long-term notes payable	7,179	7,629
Notes Payable
Debt Instrument [Line Items]
Notes payable	8,951	9,379
Current portion of notes payable	(1,772)	(1,750)
Net long-term notes payable	$ 7,179	$ 7,629

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Principles of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements are unaudited, but reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income and Comprehensive Income, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows for the interim periods presented. Our fiscal year ends on December 31. The condensed consolidated balance sheet as of December 31, 2019 was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto and the report of our independent registered public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The nature of our business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Reporting currency

All values are in U.S. dollars ($ or "USD") unless specifically indicated otherwise. Canadian dollars are indicated as CAD$.

Functional currency

Management has exercised judgment in selecting the functional currency of each of the entities that it combines based on the primary economic environment in which the entity operates and in reference to the various indicators including the currency that primarily influences or determines the selling prices of goods and services and the cost of those services, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices. The Company's functional currency was determined to be the U.S. dollar, which was determined using management’s assumption that the primary economic environment which it will derive its revenue and expenses incurred to generate those revenues is the United States.

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable. Significant areas requiring the use of management estimates relate to revenue recognition, accounts receivable and the related allowance for doubtful accounts, income tax provisions, and fair value of financial instruments. Actual results could differ from these estimates.

As of March 31, 2020, the COVID-19 pandemic is ongoing and the impacts of the pandemic on our business, financial condition and results of operations continue to evolve as of the date of this report. As a result, the impacts remain uncertain and difficult to predict and will depend on, among other factors, the duration and severity of the pandemic, as well as any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home, and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

Accounts receivable

Accounts receivable are regularly reviewed for collectability and an allowance is recorded to cover the estimated bad debts and billing modifications. The accounts receivable are presented on the Condensed Consolidated Balance Sheets net of the allowance for doubtful accounts. It is possible that the estimates of the allowance for doubtful accounts could change, which could have a material impact on our operations and cash flows.

The Company writes off receivables when the likelihood for collection is remote, and when the Company believes collection efforts have been fully exhausted and it does not intend to devote additional resources in attempting to collect. The write-offs are charged against the allowance for doubtful accounts.

For the three months ended March 31, 2020, our assessment considered business and market disruptions caused by the COVID-19 pandemic and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

The estimates and write-offs for the allowance for doubtful accounts for each reporting period were as follows:

	March 31, 2020			March 31, 2019
Balance, beginning of year	$	7,782		$	4,266
Provision for bad debts	2,846			2,125
Amounts written off	(432		)	(502		)
Balance, end of period	$	10,196		$	5,889

As of March 31, 2020 and 2019, no one customer represented more than 10% of outstanding accounts receivable. The Company does have receivables at March 31, 2020 from Medicare and Medicaid, representing 49% and 8%, respectively, and 57% combined, of total outstanding receivables (December 31, 2019 - 58%). As these receivables are both from government programs, there is little credit risk associated with these balances; however, these receivables are subject to billing modifications and other adjustments and estimates of the amounts of such adjustments are included in the allowance for doubtful accounts.

Revenues from Medicare and Medicaid accounted for 64% and 9%, respectively and 73% combined, of the Company's total revenues for the three months ended March 31, 2020. Revenues from Medicare and Medicaid accounted for 68% and 9%, respectively, and 77% combined, of the Company's total revenues for the three months ended March 31, 2019.

Property and equipment

Property and equipment is presented on the Condensed Consolidated Balance Sheets at historic cost less accumulated depreciation. Major renewals and improvements that extend the useful life of assets are capitalized to the respective property accounts, while maintenance and repairs, which do not extend the useful life of the respective assets, are expensed as incurred. Management has estimated the useful lives of equipment leased to customers. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Property and equipment are amortized on a straight-line basis over their estimated useful lives.

The estimated useful lives of the property and equipment are as follows:

Description	Estimated Useful Lives
Medical Equipment	1 - 10 Years
Computer Equipment	5 Years
Office Furniture & Fixtures	5 - 10 Years
Leasehold Improvements	Shorter of Useful Life or Lease
Vehicles	5 Years
Building	15 - 39 Years
Land	Indefinite Life

Depreciation of medical equipment commences at the date of service, which represents the date that the asset has been deployed to a patient’s address and is put in use and continues through the useful life of the asset. 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.

Prepaid expenses and other assets

Prepaid expenses and other current assets consists primarily of refundable deposits made for ventilators that have not been received by the Company, along with prepaid insurance, and prepaid rent.

Comprehensive income

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on derivative instruments. Accumulated other comprehensive loss is presented in the accompanying balance sheets as a component of shareholders' equity.

Revenue recognition

Revenue from a customer consists of any combination of the sale and rental of DME and/or patient medical services. Revenues are billed to and collections received from Medicare, Medicaid, third-party insurers, co-insurance and patient-pay. Revenue is recognized net of contractual adjustments and bad debt based on contractual arrangements with third-party payors, an evaluation of expected collections resulting from the analysis of current and past due accounts, past collection experience in relation to amounts billed and other relevant information. Contractual adjustments result from the differences between the rates charged for services and reimbursements by government-sponsored healthcare programs and insurance companies for such services.

The Company's contracts with customers often include multiple products and services, and the Company evaluates these arrangements to determine the unit of accounting for revenue recognition purposes based on whether the product or service is distinct from other products or services in the arrangement and should be accounted for as a separate performance obligation. A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the Company's ability to transfer the goods or services is separately identifiable from other promises in the contractual arrangement with the customer (e.g. patient). Revenue is then allocated to each separately identifiable good or service based on the standalone price of the items underlying the performance obligations. Most of the Company’s products fall in the Medicare Fee-for-Service (“FFS”) program which is a payment model where services are unbundled and paid for separately. These services are paid based on a Medicare determined price that is publicly available on the website for the Centers for Medicare & Medicaid Services (“CMS”). For commercial payors, DME companies must negotiate in-network pricing separately, though in general, the Company’s payors tend to benchmark their contract rates and coverage policies closely to those of Medicare.

The Company considers performance obligations for sales and rentals to be met when the customer receives the equipment, and revenue for rentals is recognized over time, over the respective rental period. For revenue associated with DME rentals, the Company recognizes revenue in accordance with FASB ASC 842, “Leases,” (Topic 842). For any DME sales and services, the Company recognizes revenue under FASB ASU 2014-09, “Revenue from Contracts with Customers,” (Topic 606) and related amendments.

The Company recognizes equipment rental revenue over the non-cancelable lease term, which is one month, less estimated adjustments, in accordance with Topic 842. The Company has separate contracts with each patient that are not subject to a master lease agreement with any third-party payor. The Company would first consider the lease classification issue (sales-type lease or operating lease) and then appropriately recognize or defer rental revenue over the lease term.

The revenues from each major source are summarized in the following table:

	Three Months Ended March 31,
	2020		2019
Revenue from rentals under Topic 842
Ventilator rentals, non-invasive and invasive	$	18,792	$	16,204
Other durable medical equipment rentals	2,131		797
Revenue from sales and services under Topic 606
Equipment and supply sales	1,533		778
COVID-19 response sales(1)	1,040		—
Service revenues	310		336
Total Revenues	$	23,806	$	18,115

⁽¹⁾ See Management's Discussion and Analysis for further discussion.

Revenue Accounting under Topic 842

The Company leases DME such as non-invasive and invasive ventilators, PAP machines, percussion vests, oxygen concentrator units and other small respiratory equipment to customers for a fixed monthly amount on a month-to-month basis. The customer generally has the right to cancel the lease at any time during the rental period. The Company considers these rentals to be operating leases.

Under FASB Accounting Standards Codification Topic 842, the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term which varies based on the type of equipment rental. The lease term begins on the date 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 considered probable of payment, which is generally when paid.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Revenue Accounting under Topic 606

The Company sells DME, replacement parts and supplies to customers and recognizes revenue based on contractual payment rates as determined by the payors at the point in time where control of the good or service is transferred through delivery to the customer. The customer and, if applicable, the payors are generally charged at the time that the product is sold. For sales of equipment previously placed in service, proceeds associated with these sales are recorded to gain (loss) on disposal of property and equipment.

The Company also provides sleep study services to customers and recognizes revenue when the results of the sleep study are complete as that is when the performance obligation is met. The transaction price on both equipment sales and sleep studies is the amount that the Company expects to receive in exchange for the goods and services provided. Due to the nature of the DME business, gross charges are retail charges and generally do not reflect what the Company is ultimately paid. As such, the transaction price is constrained for the difference between the gross charge and what is estimated to be collected from payors and from patients. The transaction price therefore is predominantly based on contractual payment rates as determined by the payors. The Company does not generally contract with uninsured customers. The payment terms and conditions of customer contracts vary by customer type and the products and services offered.

The Company determines its estimates of contractual allowances and discounts based upon contractual agreements, its policies and historical experience. While the rates are fixed for the product or service with the customer and the payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, and are due from the patient. The Company includes in the transaction price only the amount that the Company expects to be entitled, which is substantially all of the payor billings at contractual rates. The transaction price is initially constrained by the amount of customer co-payments, which are included in the transaction price when considered probable of payment and included in revenue if the product or service has already been provided to the customer.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Returns and refunds are not accepted on either equipment sales or sleep study services. The Company does not offer warranties to customers in excess of the manufacturer’s warranty. Any taxes due upon sale of the products or services are not recognized as revenue. The Company does not have any partially or unfilled performance obligations related to contracts with customers and as such, the Company has no contract liabilities as of March 31, 2020.

Stock-based compensation

The Company accounts for its stock-based compensation in accordance with ASC 718, "Compensation—Stock Compensation", which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Stock–based compensation cost for stock options are determined at the grant date using the Black-Scholes option pricing model. Stock-based compensation costs for restricted stock units are determined at the grant date based on the closing stock price. The expense of such stock-based compensation awards is recognized using the graded vesting attribution method over the vesting period and the offsetting credit is recorded as an increase in additional paid-in capital. Forfeitures are recorded as incurred. Any excess tax benefit or deficiency is recognized as a component of income taxes and within operating cash flows upon vesting of the share-based award.

Interest rate swaps

The Company utilizes an interest rate swap contract to reduce exposure to fluctuations in variable interest rates for future interest payments on the Term Note (as defined below). 

For determining the fair value of the interest rate swap contract, the Company uses significant other observable market data or assumptions (Level 2 inputs) that market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. These fair value estimates reflect an income approach based on the terms of the interest rate swap contract and inputs corroborated by observable market data including interest rate curves. The Company includes unrealized gains in Prepaid expenses and other assets, as a component of Long-term Assets, and unrealized losses in Accrued Liabilities, as a component of Long-term Liabilities on the Condensed Consolidated Balance Sheets.

The Company recognizes any differences between the variable interest rate payments and the fixed interest rate settlements from its swap counterparty as an adjustment to interest expense over the life of the swap. If determined to be an effective cash flow hedge, the Company will record the changes in the estimated fair value of the swaps to Accumulated other comprehensive income or loss on the Condensed Consolidated Balance Sheets. To the extent that interest rate swaps are determined to be ineffective, the Company would recognize the changes in the estimated fair value of swaps in Interest and other non-operating expenses, net in its Condensed Consolidated Statements of Income.

Net Income per Share Attributable to Common Stockholders

The Company uses the two-class method to compute net income per common share attributable to common stockholders because the Company issued securities, other than common stock, that contractually entitled the holders to participate in dividends and earnings prior to the initial listing. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of the current period's earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

See Note 11 for earnings per share computations.

Recently adopted accounting pronouncements

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements on fair value measurements. The Company adopted this standard on January 1, 2020 and the adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

Recently issued accounting pronouncements

The Company is an “emerging growth company” as defined by the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of all accounting standards until those standards would otherwise apply to private companies. The Company has elected to utilize this exemption and, as a result, our condensed consolidated financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. To date, however, the Company has not delayed the adoption of any accounting standards except as noted below. Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU will be effective for interim and annual periods beginning January 1, 2020 for issuers and annual periods beginning January 1, 2023 for non-issuers. The Company anticipates adopting this ASU on January 1, 2023 given its smaller reporting company status and is still evaluating the impact of adoption on the consolidated financial statements in future periods.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. Among other things, the ASU expands the scope of the practical expedient that allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326 to also include certain disclosures required by Topic 320. Entities that elect to apply the practical expedient must disclose the total amount of accrued interest that they exclude from their disclosures of amortized cost. The amendments have the same effective dates as ASU 2016-13 (Topic ASC 326) for entities that have not yet adopted that standard. For entities that early adopted ASU 2016-13 (Topic ASC 326), the amendments are effective for fiscal years beginning after December 15, 2019 and interim periods therein. Entities that early adopted ASU 2016-13 (Topic ASC 326) may early adopt the amendments.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The new guidance also improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. The ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect of the new guidance.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenue	$ 23,806	$ 18,115
Cost of revenue	8,253	5,041
Gross profit	15,553	13,074
Operating Expenses
Selling, general and administrative	10,577	9,460
Research and development	174	234
Stock-based compensation	1,151	880
Depreciation	205	129
(Gain) loss on disposal of property and equipment	(1,169)	56
Income from operations	4,615	2,315
Non-operating expenses
Unrealized loss on warrant conversion liability	0	169
Loss from equity method investment	27	24
Interest expense, net of interest income	158	26
Net income before taxes	4,430	2,096
Provision for income taxes	187	138
Net income	4,243	1,958
Other Comprehensive Income
Change in unrealized loss on derivative instruments, net of tax	(312)	0
Other Comprehensive Loss	(312)	0
Comprehensive Income	$ 3,931	$ 1,958
Net income per share
Basic (in dollars per share)	$ 0.11	$ 0.05
Diluted (in dollars per share)	$ 0.11	$ 0.05
Weighted average number of common shares outstanding:
Basic (in shares)	38,030,854	37,827,058
Diluted (in shares)	39,677,983	39,449,123

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share [Abstract]
Net income attributable to shareholders	$ 4,243	$ 1,958
Denominator:
Basic weighted-average number of common shares (in shares)	38,030,854	37,827,058
Diluted weighted-average number of shares (in shares)	39,677,983	39,449,123
Basic earnings per share (in dollars per share)	$ 0.11	$ 0.05
Diluted earnings per share (in dollars per share)	$ 0.11	$ 0.05
Denominator calculation from basic to diluted:
Basic weighted-average number of common shares (in shares)	38,030,854	37,827,058
Stock options and other dilutive securities (in shares)	1,647,129	1,622,065
Diluted weighted-average number of shares (in shares)	39,677,983	39,449,123

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Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

At March 31, 2020 and 2019, the Company had no amounts recorded for uncertain tax positions and does not expect any material changes in uncertain tax benefits during the next 12 months. The Company recognizes interest and penalties related to income tax matters in income tax expense.

The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") which was signed into law on March 27, 2020 includes various income and payroll tax provisions. As of March 31, 2020, the CARES Act has not had a material impact on our condensed consolidated financial statements, however, the Company is still analyzing these provisions of the CARES Act.

The Company is subject to U.S. federal income tax as well as income tax in various states. The Company is generally not subject to examination by taxing authorities for years prior to 2016. Our annual estimated effective tax rate for 2020 is 4.20%. Our effective tax rate is based on forecasted annual results which may fluctuate significantly through the rest of the year, in particular due to the uncertainty in our annual forecasts resulting from the unpredictable impact of the COVID-19 pandemic on our operating results. The primary component of the annual effective tax rate relates to the Company's current state income taxes, as the Company continues to generate taxable losses for U.S. federal income tax purposes.

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Debt and lease liabilities

3 Months Ended

Mar. 31, 2020

Debt And Leases [Abstract]

Debt and lease liabilities

Debt and lease liabilities

Senior Credit Facility

On February 20, 2018, the Company entered into a two year Commercial Business Loan Agreement for Term Loans and Lines of Credit with Hancock Whitney Bank. Any amounts advanced will be secured by substantially all of the Company's assets and carried an interest rate of one month ICE LIBOR plus 3.00%, with a 4.00% interest rate floor. Advances of the line of credit initially were subject to a borrowing base as determined in accordance with the loan agreement, which was based on the value of the Company's accounts receivable balance.

On March 19, 2019, the Company entered into an amendment to the loan agreement increasing the available line of credit from $5.0 million to $10.0 million and extending the expiration date to March 19, 2021. In addition, the borrowing base restriction was removed from the loan agreement.

On September 19, 2019, in conjunction with the Term Note described below, the Company entered into a third amendment to the loan agreement, which, among other things, replaced the financial covenants in the loan agreement with the following:

Financial Covenant	Required Ratio	Ratio
Total Debt to Adjusted EBITDA (Quarterly)	not more than 1.50:1.00	0.83
Fixed Charge Coverage Ratio (Quarterly)	not less than 1.35:1.00	3.12
Loan-to-Value Ratio (Quarterly)	not more than 0.85	0.72

On May 1, 2020, the Company entered into a fourth amendment to the loan agreement extending the expiration date to May 1, 2023 and modifying the interest rate on amounts advanced to be equal to the WSJ prime rate plus a margin of 0.50%, with a 3.50% interest rate floor.

The Company was in compliance with all covenants in effect at March 31, 2020. There were no borrowings against this line of credit at March 31, 2020 and December 31, 2019.

Commercial Term Notes

On May 30, 2019, the Company entered into a second amendment to the loan agreement providing for a term note (the “Building Term Note”) in favor of Hancock Whitney Bank in the principal amount of $4,845,000. The proceeds of the Building Term Note were used to purchase a building to utilize as a new corporate headquarters for the Company. Beginning July 1, 2019, the Company began making monthly payments towards the outstanding balance. The Building Term Note matures on May 30, 2026 and is secured by substantially all of the assets of the borrower, including the real property acquired with the proceeds of the Building Term Note. The Building Term Note bears interest at a variable rate equal to the one month ICE LIBOR index plus a margin of 2.45% per annum. The Company is required to maintain a loan to value ratio of 85% with respect to the appraised value of the real property. In connection with the Building Term Note, the Company entered into an interest rate swap transaction (the "Interest Rate Swap Transaction") with Hancock Whitney Bank effectively fixing the interest rate for the Building Term Note at 4.68%.

The Company incurred immaterial financing costs related to the real property acquired with the proceeds of the Building Term Note. These deferred financing costs are amortized over the term of the loan using the effective interest method.

On September 19, 2019, the Company entered into a third amendment to the loan agreement providing for a term note (the “Term Note") in favor of Hancock Whitney Bank in the principal amount of $5,000,000. The proceeds of the Term Note will be used for general corporate purposes. Beginning October 19, 2019, the Company started making monthly principal payments of $139,000 towards the outstanding balance. The Term Note matures on September 19, 2022 and is secured by substantially all of the assets of the borrower. The Term Note bears interest at the rate of 4.60% per annum.

The Company has recognized these term notes, which have terms greater than twelve months, as follows:

	March 31, 2020			December 31, 2019
Notes payable	$	8,951		$	9,379
Less:
Current portion of notes payable	(1,772		)	(1,750		)
Net long-term notes payable	$	7,179		$	7,629

Leases

The Company has recognized finance lease liabilities for medical equipment and operating leases for land and buildings that have terms greater than twelve months, as follows:

	March 31, 2020			December 31, 2019
Lease liabilities	$	9,763		$	10,132
Less:
Current portion of lease liabilities	(7,433		)	(7,093		)
Net long-term lease liabilities	$	2,330		$	3,039

Finance lease liabilities

The Company has various finance leases for equipment with an implied interest rate at fixed rates up to 9.64%, secured by equipment, due between 2020 and 2022. The Company's weighted average interest rate was 2.22% and 0.86% for all finance lease liabilities outstanding as of March 31, 2020 and 2019, respectively. At March 31, 2020 and 2019, the weighted average lease term was approximately 0.99 years and 0.83 years, respectively. Interest expense related to these finance lease obligations for the three months ended March 31, 2020 and March 31, 2019 amounted to $52,000 and $26,000, respectively.

Operating lease liabilities

The Company has recognized operating lease liabilities that relate primarily to the lease of land and buildings. These leases contain renewal options that we have not included as part of the Company's assessment of the lease term as it is not reasonably certain that we will exercise these options. These lease liabilities are recorded at present value based on a discount rate of 5.50%, which was based on the Company's incremental borrowing rate at the time of assessment. At March 31, 2020, the weighted average lease term was approximately 3.66 years. Operating rental expenses were $184,000 for the three months ended March 31, 2020, and $90,000 for the three months ended March 31, 2019.

Included within these operating lease liabilities are real property leases for real estate from a related party. Rental payments under these related party lease agreements are $20,000 per month, plus taxes, utilities and maintenance. Total rental payments for the use of these properties were $61,000 for the three months ended March 31, 2020, and $61,000 for the three months ended March 31, 2019. The expense for these related party rents has been included within general and administrative expenses.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Principles of Presentation

Principles of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The accompanying condensed consolidated financial statements are unaudited, but reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Income and Comprehensive Income, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Cash Flows for the interim periods presented. Our fiscal year ends on December 31. The condensed consolidated balance sheet as of December 31, 2019 was derived from audited consolidated financial statements but does not include all disclosures required by GAAP. These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto and the report of our independent registered public accounting firm included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. The nature of our business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Functional Currency

Functional currency

Management has exercised judgment in selecting the functional currency of each of the entities that it combines based on the primary economic environment in which the entity operates and in reference to the various indicators including the currency that primarily influences or determines the selling prices of goods and services and the cost of those services, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices. The Company's functional currency was determined to be the U.S. dollar, which was determined using management’s assumption that the primary economic environment which it will derive its revenue and expenses incurred to generate those revenues is the United States.

Basis of consolidation

Basis of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

Use of estimates

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements and other factors that management believes to be reasonable. Significant areas requiring the use of management estimates relate to revenue recognition, accounts receivable and the related allowance for doubtful accounts, income tax provisions, and fair value of financial instruments. Actual results could differ from these estimates.

As of March 31, 2020, the COVID-19 pandemic is ongoing and the impacts of the pandemic on our business, financial condition and results of operations continue to evolve as of the date of this report. As a result, the impacts remain uncertain and difficult to predict and will depend on, among other factors, the duration and severity of the pandemic, as well as any negative economic conditions arising from the pandemic, our ability to assess potential patients in hospitals and set up and treat patients in the home, and the impacts of government actions and administrative regulations on the healthcare industry and broader economy, including through existing and any future stimulus efforts. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.

Accounts receivable

Accounts receivable

Accounts receivable are regularly reviewed for collectability and an allowance is recorded to cover the estimated bad debts and billing modifications. The accounts receivable are presented on the Condensed Consolidated Balance Sheets net of the allowance for doubtful accounts. It is possible that the estimates of the allowance for doubtful accounts could change, which could have a material impact on our operations and cash flows.

The Company writes off receivables when the likelihood for collection is remote, and when the Company believes collection efforts have been fully exhausted and it does not intend to devote additional resources in attempting to collect. The write-offs are charged against the allowance for doubtful accounts.

For the three months ended March 31, 2020, our assessment considered business and market disruptions caused by the COVID-19 pandemic and estimates of expected emerging credit and collectability trends. The continued volatility in market conditions and evolving shifts in credit trends are difficult to predict causing variability and volatility that may have a material impact on our allowance for credit losses in future periods.

Property and equipment

Depreciation of medical equipment commences at the date of service, which represents the date that the asset has been deployed to a patient’s address and is put in use and continues through the useful life of the asset. 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.

Property and equipment

Property and equipment is presented on the Condensed Consolidated Balance Sheets at historic cost less accumulated depreciation. Major renewals and improvements that extend the useful life of assets are capitalized to the respective property accounts, while maintenance and repairs, which do not extend the useful life of the respective assets, are expensed as incurred. Management has estimated the useful lives of equipment leased to customers. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Property and equipment are amortized on a straight-line basis over their estimated useful lives.

Prepaid expenses and other assets

Prepaid expenses and other assets

Prepaid expenses and other current assets consists primarily of refundable deposits made for ventilators that have not been received by the Company, along with prepaid insurance, and prepaid rent.

Comprehensive income

Comprehensive income

Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on derivative instruments. Accumulated other comprehensive loss is presented in the accompanying balance sheets as a component of shareholders' equity.

Revenue recognition

Revenue recognition

Revenue from a customer consists of any combination of the sale and rental of DME and/or patient medical services. Revenues are billed to and collections received from Medicare, Medicaid, third-party insurers, co-insurance and patient-pay. Revenue is recognized net of contractual adjustments and bad debt based on contractual arrangements with third-party payors, an evaluation of expected collections resulting from the analysis of current and past due accounts, past collection experience in relation to amounts billed and other relevant information. Contractual adjustments result from the differences between the rates charged for services and reimbursements by government-sponsored healthcare programs and insurance companies for such services.

The Company's contracts with customers often include multiple products and services, and the Company evaluates these arrangements to determine the unit of accounting for revenue recognition purposes based on whether the product or service is distinct from other products or services in the arrangement and should be accounted for as a separate performance obligation. A product or service is distinct if the customer can benefit from it on its own or together with other readily available resources and the Company's ability to transfer the goods or services is separately identifiable from other promises in the contractual arrangement with the customer (e.g. patient). Revenue is then allocated to each separately identifiable good or service based on the standalone price of the items underlying the performance obligations. Most of the Company’s products fall in the Medicare Fee-for-Service (“FFS”) program which is a payment model where services are unbundled and paid for separately. These services are paid based on a Medicare determined price that is publicly available on the website for the Centers for Medicare & Medicaid Services (“CMS”). For commercial payors, DME companies must negotiate in-network pricing separately, though in general, the Company’s payors tend to benchmark their contract rates and coverage policies closely to those of Medicare.

The Company considers performance obligations for sales and rentals to be met when the customer receives the equipment, and revenue for rentals is recognized over time, over the respective rental period. For revenue associated with DME rentals, the Company recognizes revenue in accordance with FASB ASC 842, “Leases,” (Topic 842). For any DME sales and services, the Company recognizes revenue under FASB ASU 2014-09, “Revenue from Contracts with Customers,” (Topic 606) and related amendments.

The Company recognizes equipment rental revenue over the non-cancelable lease term, which is one month, less estimated adjustments, in accordance with Topic 842. The Company has separate contracts with each patient that are not subject to a master lease agreement with any third-party payor. The Company would first consider the lease classification issue (sales-type lease or operating lease) and then appropriately recognize or defer rental revenue over the lease term.

Revenue Accounting under Topic 842

Revenue Accounting under Topic 842

The Company leases DME such as non-invasive and invasive ventilators, PAP machines, percussion vests, oxygen concentrator units and other small respiratory equipment to customers for a fixed monthly amount on a month-to-month basis. The customer generally has the right to cancel the lease at any time during the rental period. The Company considers these rentals to be operating leases.

Under FASB Accounting Standards Codification Topic 842, the Company recognizes rental revenue on operating leases on a straight-line basis over the contractual lease term which varies based on the type of equipment rental. The lease term begins on the date 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 considered probable of payment, which is generally when paid.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Revenue Accounting under Topic 606

Revenue Accounting under Topic 606

The Company sells DME, replacement parts and supplies to customers and recognizes revenue based on contractual payment rates as determined by the payors at the point in time where control of the good or service is transferred through delivery to the customer. The customer and, if applicable, the payors are generally charged at the time that the product is sold. For sales of equipment previously placed in service, proceeds associated with these sales are recorded to gain (loss) on disposal of property and equipment.

The Company also provides sleep study services to customers and recognizes revenue when the results of the sleep study are complete as that is when the performance obligation is met. The transaction price on both equipment sales and sleep studies is the amount that the Company expects to receive in exchange for the goods and services provided. Due to the nature of the DME business, gross charges are retail charges and generally do not reflect what the Company is ultimately paid. As such, the transaction price is constrained for the difference between the gross charge and what is estimated to be collected from payors and from patients. The transaction price therefore is predominantly based on contractual payment rates as determined by the payors. The Company does not generally contract with uninsured customers. The payment terms and conditions of customer contracts vary by customer type and the products and services offered.

The Company determines its estimates of contractual allowances and discounts based upon contractual agreements, its policies and historical experience. While the rates are fixed for the product or service with the customer and the payors, such amounts typically include co-payments, co-insurance and deductibles, which vary in amounts, and are due from the patient. The Company includes in the transaction price only the amount that the Company expects to be entitled, which is substantially all of the payor billings at contractual rates. The transaction price is initially constrained by the amount of customer co-payments, which are included in the transaction price when considered probable of payment and included in revenue if the product or service has already been provided to the customer.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenue and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application or claim denial.

Returns and refunds are not accepted on either equipment sales or sleep study services. The Company does not offer warranties to customers in excess of the manufacturer’s warranty. Any taxes due upon sale of the products or services are not recognized as revenue. The Company does not have any partially or unfilled performance obligations related to contracts with customers and as such, the Company has no contract liabilities as of March 31, 2020.

Stock-based compensation

Stock-based compensation

The Company accounts for its stock-based compensation in accordance with ASC 718, "Compensation—Stock Compensation", which establishes accounting for share-based awards exchanged for employee services and requires companies to expense the estimated fair value of these awards over the requisite employee service period. Stock–based compensation cost for stock options are determined at the grant date using the Black-Scholes option pricing model. Stock-based compensation costs for restricted stock units are determined at the grant date based on the closing stock price. The expense of such stock-based compensation awards is recognized using the graded vesting attribution method over the vesting period and the offsetting credit is recorded as an increase in additional paid-in capital. Forfeitures are recorded as incurred. Any excess tax benefit or deficiency is recognized as a component of income taxes and within operating cash flows upon vesting of the share-based award.

Interest rate swaps

Interest rate swaps

The Company utilizes an interest rate swap contract to reduce exposure to fluctuations in variable interest rates for future interest payments on the Term Note (as defined below). 

For determining the fair value of the interest rate swap contract, the Company uses significant other observable market data or assumptions (Level 2 inputs) that market participants would use in pricing similar assets or liabilities, including assumptions about counterparty risk. These fair value estimates reflect an income approach based on the terms of the interest rate swap contract and inputs corroborated by observable market data including interest rate curves. The Company includes unrealized gains in Prepaid expenses and other assets, as a component of Long-term Assets, and unrealized losses in Accrued Liabilities, as a component of Long-term Liabilities on the Condensed Consolidated Balance Sheets.

The Company recognizes any differences between the variable interest rate payments and the fixed interest rate settlements from its swap counterparty as an adjustment to interest expense over the life of the swap. If determined to be an effective cash flow hedge, the Company will record the changes in the estimated fair value of the swaps to Accumulated other comprehensive income or loss on the Condensed Consolidated Balance Sheets. To the extent that interest rate swaps are determined to be ineffective, the Company would recognize the changes in the estimated fair value of swaps in Interest and other non-operating expenses, net in its Condensed Consolidated Statements of Income.

Net Income per Share Attributable to Common Stockholders

Net Income per Share Attributable to Common Stockholders

The Company uses the two-class method to compute net income per common share attributable to common stockholders because the Company issued securities, other than common stock, that contractually entitled the holders to participate in dividends and earnings prior to the initial listing. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of the current period's earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

Recently adopted accounting pronouncements and Recently issued accounting pronouncements

Recently adopted accounting pronouncements

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance modifies the disclosure requirements on fair value measurements. The Company adopted this standard on January 1, 2020 and the adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

Recently issued accounting pronouncements

The Company is an “emerging growth company” as defined by the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of all accounting standards until those standards would otherwise apply to private companies. The Company has elected to utilize this exemption and, as a result, our condensed consolidated financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. To date, however, the Company has not delayed the adoption of any accounting standards except as noted below. Section 107 of the JOBS Act provides that the Company can elect to opt out of the extended transition period at any time, which election is irrevocable.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU will be effective for interim and annual periods beginning January 1, 2020 for issuers and annual periods beginning January 1, 2023 for non-issuers. The Company anticipates adopting this ASU on January 1, 2023 given its smaller reporting company status and is still evaluating the impact of adoption on the consolidated financial statements in future periods.

In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. Among other things, the ASU expands the scope of the practical expedient that allows entities to exclude the accrued interest component of amortized cost from various disclosures required by ASC 326 to also include certain disclosures required by Topic 320. Entities that elect to apply the practical expedient must disclose the total amount of accrued interest that they exclude from their disclosures of amortized cost. The amendments have the same effective dates as ASU 2016-13 (Topic ASC 326) for entities that have not yet adopted that standard. For entities that early adopted ASU 2016-13 (Topic ASC 326), the amendments are effective for fiscal years beginning after December 15, 2019 and interim periods therein. Entities that early adopted ASU 2016-13 (Topic ASC 326) may early adopt the amendments.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The new guidance also improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. The ASU is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the effect of the new guidance.

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Property and Equipment (Narrative) (Details) ft² in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)	May 31, 2019 ft²
Property, Plant and Equipment [Line Items]
Depreciation	$ 1,925	$ 1,166
Accumulated depreciation	14,905		$ 13,680
Building
Property, Plant and Equipment [Line Items]
Property and equipment, gross	6,458		6,351
Capital lease
Property, Plant and Equipment [Line Items]
Property and equipment, gross	14,374		15,680
Accumulated depreciation	1,153		1,337
Medical equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	59,169		56,202
Accounts payable	$ 899		$ 2,817
Lafayette, Louisiana | Building
Property, Plant and Equipment [Line Items]
Area of commercial building (in square feet) | ft²				77

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Debt and lease liabilities (Commercial Term Notes Narrative) (Details) - Notes Payable - USD ($)	Oct. 19, 2019	May 30, 2019	Mar. 31, 2020	Sep. 19, 2019
Building Term Note
Debt Instrument [Line Items]
Principal amount		$ 4,845,000
Required loan to value ratio		85.00%
Building Term Note | Interest Rate
Debt Instrument [Line Items]
Fixed interest rate		4.68%	4.68%
Building Term Note | ICE LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate		2.45%
Term Note
Debt Instrument [Line Items]
Principal amount				$ 5,000,000
Monthly principal payments	$ 139,000
Stated interest rate				4.60%

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Nature of Business and Operations (Details) - state	Mar. 31, 2020	Dec. 21, 2017
Noncontrolling Interest [Line Items]
Number of states in which entity provides DME and health care solutions	30
Home Sleep Delivered, L.L.C. and Sleep Management, L.L.C | Protech Home Medical Corp
Noncontrolling Interest [Line Items]
Ownership percentage		100.00%

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Debt and lease liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Debt And Leases [Abstract]

Schedule of Covenants

On September 19, 2019, in conjunction with the Term Note described below, the Company entered into a third amendment to the loan agreement, which, among other things, replaced the financial covenants in the loan agreement with the following:

Financial Covenant	Required Ratio	Ratio
Total Debt to Adjusted EBITDA (Quarterly)	not more than 1.50:1.00	0.83
Fixed Charge Coverage Ratio (Quarterly)	not less than 1.35:1.00	3.12
Loan-to-Value Ratio (Quarterly)	not more than 0.85	0.72

Schedule of Notes Payable

The Company has recognized these term notes, which have terms greater than twelve months, as follows:

	March 31, 2020			December 31, 2019
Notes payable	$	8,951		$	9,379
Less:
Current portion of notes payable	(1,772		)	(1,750		)
Net long-term notes payable	$	7,179		$	7,629

Schedule of Lease Liabilities

The Company has recognized finance lease liabilities for medical equipment and operating leases for land and buildings that have terms greater than twelve months, as follows:

	March 31, 2020			December 31, 2019
Lease liabilities	$	9,763		$	10,132
Less:
Current portion of lease liabilities	(7,433		)	(7,093		)
Net long-term lease liabilities	$	2,330		$	3,039

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Fair value measurement (Warrant Conversion Liability) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Warrant Conversion Liability
Unrealized loss on warrant conversion liability	$ 0	$ 169,000
Warrant
Warrant Conversion Liability
Beginning balance		363,000
Warrants issued	$ 0	0
Unrealized loss on warrant conversion liability		169,000
Ending balance		$ 532,000

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Shareholders' Equity (Options, Narrative) (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($) shares	Mar. 31, 2019	Mar. 31, 2020 $ / shares	Dec. 31, 2019 USD ($) shares	Dec. 31, 2019 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate intrinsic value, outstanding | $	$ 3,684			$ 7,790
Aggregate intrinsic value, exercisable | $	$ 3,018
Common stock issued pursuant to stock options (in shares)	5,000
Exercisable (in shares)	1,641,000			1,037,000
Weighted average exercise price (CAD per share) | $ / shares			$ 4.00		$ 3.83
Weighted average remaining contractual term	5 years 2 months 12 days	3 years 5 months 15 days
Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued pursuant to stock options (in shares)	4,737