0001729149-20-000047.txt : 20201104 0001729149-20-000047.hdr.sgml : 20201104 20201104172616 ACCESSION NUMBER: 0001729149-20-000047 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 72 CONFORMED PERIOD OF REPORT: 20200930 FILED AS OF DATE: 20201104 DATE AS OF CHANGE: 20201104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIEMED HEALTHCARE, INC. CENTRAL INDEX KEY: 0001729149 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 000000000 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-38973 FILM NUMBER: 201287756 BUSINESS ADDRESS: STREET 1: 625 E. KALISTE SALOOM RD. CITY: LAFAYETTE STATE: LA ZIP: 70508 BUSINESS PHONE: 337.504.3802 MAIL ADDRESS: STREET 1: 625 E. KALISTE SALOOM RD. CITY: LAFAYETTE STATE: LA ZIP: 70508 10-Q 1 vmd-20200930.htm 10-Q vmd-20200930
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 classTrading Symbol(s)Name of exchange on which registered
Common Shares, no par valueVMDThe 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
Emerging growth company
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 October 31, 2020, there were 39,145,182 common shares of the registrant outstanding.




VIEMED HEALTHCARE, INC.
TABLE OF CONTENTS
September 30, 2020 and 2019
Page



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)
NoteAt
September 30, 2020
At
December 31, 2019
(Unaudited)(Audited)
ASSETS
Current assets
Cash and cash equivalents$32,396 $13,355 
Accounts receivable, net of allowance for doubtful accounts of $8,788 and $7,782 at September 30, 2020 and December 31, 2019, respectively
211,489 11,534 
Inventory, net of inventory reserve of $805 and $0 at September 30, 2020 and December 31, 2019, respectively
22,762 1,360 
Prepaid expenses and other assets23,333 1,562 
Total current assets$49,980 $27,811 
Long-term assets
Property and equipment, net356,317 54,772 
Equity method investment79 13 
Deferred tax asset107,593  
Total long-term assets$63,989 $54,785 
TOTAL ASSETS$113,969 $82,596 
LIABILITIES
Current liabilities
Trade payables$7,553 $4,700 
Deferred revenue3,612 3,315 
Income taxes payable368 86 
Accrued liabilities412,793 8,968 
Current portion of lease liabilities54,207 7,093 
Current portion of long-term debt51,815 1,750 
Total current liabilities$30,348 $25,912 
Long-term liabilities
Accrued liabilities71,210 2,317 
Long-term lease liabilities5952 3,039 
Long-term debt56,261 7,629 
Total long-term liabilities$8,423 $12,985 
TOTAL LIABILITIES$38,771 $38,897 
Commitments and Contingencies  
SHAREHOLDERS' EQUITY
Common stock - No par value: unlimited authorized; 39,145,182 and 37,952,660 issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
79,085 3,366 
Additional paid-in capital6,019 6,377 
Accumulated other comprehensive loss(478)(157)
Retained earnings60,572 34,113 
TOTAL SHAREHOLDERS' EQUITY$75,198 $43,699 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$113,969 $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 September 30,Nine Months Ended September 30,
Note2020201920202019
Revenue2$33,447 $20,368 $100,107 $58,808 
Cost of revenue13,994 6,318 39,174 17,045 
Gross profit$19,453 $14,050 $60,933 $41,763 
Operating Expenses
Selling, general and administrative13,550 10,231 40,555 31,207 
Research and development243 208 688 645 
Stock-based compensation71,234 1,064 3,581 2,978 
Depreciation202 193 612 460 
Loss (gain) on disposal of property and equipment203 167 (2,424)308 
     Other (income) expense9(19)1 (3,593)(1)
Income from operations$4,040 $2,186 $21,514 $6,166 
Non-operating expenses
Unrealized gain on warrant conversion liability6 (800) (363)
(Gain) loss from equity method investment(21)26 (36)77 
Interest expense, net of interest income5116 56 409 102 
Net income before taxes3,945 2,904 21,141 6,350 
Provision (benefit) for income taxes101,141 51 (5,318)213 
Net income$2,804 $2,853 $26,459 $6,137 
Other Comprehensive Income
Change in unrealized gain (loss) on derivative instruments, net of tax24 (88)(321)(236)
Other Comprehensive Loss$24 $(88)$(321)$(236)
Comprehensive Income$2,828 $2,765 $26,138 $5,901 
Net income per share
Basic11$0.07 $0.08 $0.69 $0.17 
Diluted11$0.07 $0.07 $0.66 $0.15 
Weighted average number of common shares outstanding:
Basic 1139,107,640 37,812,921 38,603,267 37,775,775 
Diluted1141,155,668 40,051,422 40,377,608 39,768,877 




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 StockAdditional paid-in capitalAccumulated other comprehensive lossTotal Shareholders'
equity
SharesAmountRetained
earnings
Shareholders' equity, December 31, 201837,500,815$71 $5,390 $ $27,110 $32,571 
Stock-based compensation - options— — 578 — — 578 
Stock-based compensation - restricted stock— — 302 — — 302 
Exercise of options2,418 4 — — — 4 
Shares issued for vesting of restricted stock units539,965 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, 201937,678,098 $2,277 $4,068 $ $27,546 $33,891 
Stock-based compensation - options— — 705 — — 705 
Share-based compensation - restricted stock— — 329 — — 329 
Exercise of warrants8,280 16 — — — 16 
Exercise of options4,725 18 — — — 18 
Shares issued for vesting of restricted stock units6,432 39 (39)— —  
Change in accumulated other comprehensive loss— — — (148)— (148)
Net Income— — — — 1,326 1,326 
Shareholders' equity, June 30, 201937,697,535 $2,350 $5,063 $(148)$28,872 $36,137 
Stock-based compensation - options— — 745— — 745 
Stock-based compensation - restricted stock— — 319— — 319 
Exercise of warrants124,890 245— — — 245 
Exercise of options35,025 114— — — 114 
Shares issued for vesting of restricted stock units95,210 657(657)— —  
Change in accumulated other comprehensive loss— — — (88)— (88)
Net Income— — — — 2,853 2,853 
Shareholders' equity, September 30, 201937,952,660 $3,366 $5,470 $(236)$31,725 $40,325 
See accompanying notes to the condensed consolidated financial statements
Page 5


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 StockAdditional paid-in capitalAccumulated other comprehensive lossTotal Shareholders'
equity
SharesAmountRetained
earnings
Shareholders' equity, December 31, 201937,952,660 $3,366 $6,377 $(157)$34,113 $43,699 
Stock-based compensation - options— — 891 — — 891 
Stock-based compensation - restricted stock— — 260 — — 260 
Exercise of options4,737 15 — — — 15 
Shares issued for vesting of restricted stock units529,375 3,276 (3,276)— —  
Change in accumulated other comprehensive loss— — — (312)— (312)
Net Income— — — — 4,243 4,243 
Shareholders' equity, March 31, 202038,486,772 $6,657 $4,252 $(469)$38,356 $48,796 
Stock-based compensation - options— — 933 — — 933 
Stock-based compensation - restricted stock— — 263 — — 263 
Exercise of options596,160 1,757 — — — 1,757 
Change in accumulated other comprehensive loss— — — (33)— (33)
Net Income— — — — 19,412 19,412 
Shareholders' equity, June 30, 202039,082,932 $8,414 $5,448 $(502)$57,768 $71,128 
Stock-based compensation - options— — 945 — — 945 
Stock-based compensation - restricted stock— — 289 — — 289 
Exercise of options2,400 8 — — — 8 
Shares issued for vesting of restricted stock units59,850 663 (663)— —  
Change in accumulated other comprehensive income— — — 24 — 24 
Net Income— — — — 2,804 2,804 
Shareholders' equity, September 30, 202039,145,182 $9,085 $6,019 $(478)$60,572 $75,198 











See accompanying notes to the condensed consolidated financial statements
Page 6


VIEMED HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. Dollars)
(Unaudited)
Nine Months Ended September 30,
Note20202019
Cash flows from operating activities
Net income$26,459 $6,137 
Adjustments for:
Depreciation6,745 4,398 
Change in allowance for doubtful accounts27,031 6,937 
Share-based compensation73,581 2,978 
Unrealized gain on warrant conversion liability6 (363)
(Gain) loss on equity method investment (36)77 
(Gain) loss on disposal of property and equipment(2,424)308 
Deferred income taxes (benefit)(7,593) 
Net change in working capital
Increase in accounts receivable(6,986)(9,827)
(Increase) decrease in inventory(1,402)1,621 
Increase in prepaid expenses and other current assets(1,771)(1,321)
Increase (decrease) in trade payables2,739 (1,813)
Increase in deferred revenue297 770 
Increase in accrued liabilities2,397 1,909 
Increase (decrease) in income tax payable282 (124)
Net cash provided by operating activities$29,319 $11,687 
Cash flows from investing activities
Purchase of property and equipment(8,204)(10,582)
Investment in equity method investment(30) 
Proceeds from sale of property and equipment5,187 350 
Net cash used in investing activities$(3,047)$(10,232)
Cash flows from financing activities
Proceeds from exercise of options1,780 136 
Proceeds from exercise of warrants 261 
(Principal payments) net proceeds on notes payable5(104)4,837 
(Principal payments) net proceeds on term note5(1,199)4,966 
Shares repurchased and canceled under the Normal Course Issuer Bid (1,522)
Repayments of lease liabilities(7,708)(7,916)
Net cash (used in) provided by financing activities$(7,231)$762 
Net increase in cash and cash equivalents19,041 2,217 
Cash and cash equivalents at beginning of year13,355 10,413 
Cash and cash equivalents at end of period$32,396 $12,630 
Supplemental disclosures of cash flow information
Cash paid during the period for interest$437 $91 
Cash paid during the period for income taxes, net of refunds received$1,975 $338 
Supplemental disclosures of non-cash transactions
Property and equipment financed through finance leases$3,002 $14,735 
Property and equipment financed through leases under FASB ASC 842$57 $2,052 

See accompanying notes to the condensed consolidated financial statements
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)
September 30, 2020 and 2019
1.    Nature of Business and Operations

Viemed Healthcare, Inc. (the "Company"), through its subsidiaries, is a provider of in-home durable medical equipment ("DME") and post-acute respiratory healthcare services in the United States. The Company’s service offerings are focused on effective in-home treatment with clinical practitioners providing therapy and counseling to patients in their homes using cutting edge technology. The Company currently serves patients in 36 states in the United States. 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.

As of June 30, 2020, the Company determined that it no longer qualifies as a "foreign private issuer," as defined in Rule 3b-4 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), for the purposes of the informational requirements of the Exchange Act. As a result, effective January 1, 2021, the Company will become subject to the proxy solicitation rules under Section 14 of the Exchange Act and Regulation FD, and the Company's officers, directors, and principal shareholders will become subject to the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. The Company will continue to 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").

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.

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 September 30, 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
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)
September 30, 2020 and 2019
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 nine months ended September 30, 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:
September 30, 2020September 30, 2019
Balance, beginning of year$7,782 $4,266 
Change in allowance for doubtful accounts7,031 6,937 
Amounts written off(6,025)(3,539)
Balance, end of period$8,788 $7,664 

As of September 30, 2020 and 2019, no one customer represented more than 10% of outstanding accounts receivable. The Company does have receivables at September 30, 2020 from Medicare and Medicaid, representing 59% and 6%, respectively, and 65% 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 as percentages of the Company's traditional revenue streams, excluding COVID-19 response sales and services, for the three and nine month periods ended September 30, 2020, were as follows:

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Medicare Revenues57 %57 %60 %59 %
Medicaid Revenues9 %7 %9 %7 %
Total Medicare and Medicaid66 %64 %69 %66 %

Inventory

Inventory represents non-serialized respiratory supplies that consist of equipment parts, consumables, and associated product supplies and is expensed at the time of sale or use. The Company values inventory at the lower of cost or net realizable value. Obsolete and unserviceable inventories are valued at estimated net realizable value. Inventory is presented net of a reserve balance of $805,000 and $0 at September 30, 2020 and December 31, 2019, respectively, that relates to COVID-19 response supplies.

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)
September 30, 2020 and 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:
DescriptionEstimated Useful Lives
Medical Equipment
1 - 10 Years
Computer Equipment5 Years
Office Furniture & Fixtures
5 - 10 Years
Leasehold ImprovementsShorter of Useful Life or Lease
Vehicles5 Years
Building
15 - 39 Years
LandIndefinite 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 prepaid expenses such as insurance, rent, and supplier deposits for rental equipment.
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 on the accompanying Condensed Consolidated 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 reimbursement rates paid 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”).
Page 10


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)
September 30, 2020 and 2019
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 September 30,Nine Months Ended September 30,
2020201920202019
Revenue from rentals under Topic 842
    Ventilator rentals, non-invasive and invasive$19,962 $17,213 $58,672 $50,990 
    Other durable medical equipment rentals2,649 1,449 7,184 3,464 
Revenue from sales and services under Topic 606
    Equipment and supply sales
1,890 1,349 3,962 3,202 
    COVID-19 response sales and services
8,553  29,306  
    Service revenues
393 357 983 1,152 
Total Revenues$33,447 $20,368 $100,107 $58,808 

Revenue Accounting under Topic 842

The Company leases DME such as non-invasive and invasive ventilators, positive airway pressure ("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
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)
September 30, 2020 and 2019
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 September 30, 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.

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)
September 30, 2020 and 2019
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, 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.

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.

The following table details the Company’s fixed assets:
September 30, 2020December 31, 2019
Medical equipment$62,490 $56,202 
Furniture and equipment2,606 2,350 
Land2,138 2,138 
Buildings6,132 6,351 
Leasehold improvements290 301 
Vehicles922 1,110 
Less: Accumulated depreciation(18,261)(13,680)
Property and equipment, net of accumulated depreciation and amortization$56,317 $54,772 
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)
September 30, 2020 and 2019

Depreciation in the amount of $2,224,000 and $1,465,000 is included in cost of revenue for the three months ended September 30, 2020 and 2019, respectively, and in the amount of $6,133,000 and $3,937,000 for the nine months ended September 30, 2020 and 2019, respectively. Included in medical equipment above is equipment acquired under finance lease obligations whose cost and accumulated depreciation at September 30, 2020 total $8,087,000 and $801,000, respectively. At December 31, 2019, cost and accumulated depreciation on equipment acquired under finance lease obligations was $15,680,000 and $1,337,000, respectively. Medical equipment purchases with a cost of $2,931,000 and $2,817,000 were included in accounts payable at September 30, 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:
September 30, 2020December 31, 2019
Accrued trade payables $1,682 $1,023 
Accrued commissions payable321 371 
Accrued bonuses payable4,483 2,292 
Accrued vacation and payroll1,577 1,502 
Current portion of phantom share liability 4,427 3,129 
Accrued other liabilities303 651 
Total accrued liabilities$12,793 $8,968 

5.     Debt and lease liabilities

Senior Credit Facility

On February 20, 2018, the Company entered a Commercial Business Loan Agreement that provides for Term Loans and Lines of Credit with Hancock Whitney Bank.

Line of Credit

The Company maintains a line of credit in the amount of $10.0 million that expires May 1, 2023 under the Commercial Business Loan Agreement. Any amounts advanced on this line will be subject to an interest rate equal to the WSJ prime rate plus a margin of 0.50%, with a 3.50% interest rate floor and will be secured by substantially all of the Company's assets. There were no borrowings against this line of credit at September 30, 2020 or December 31, 2019.

Commercial Term Notes

On May 30, 2019, the Company entered into a term note (the “Building Term Note”) under the Commercial Business Loan Agreement in the principal amount of $4,845,000. The proceeds of the Building Term Note were used to purchase the Company's corporate headquarters. 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%.

On September 19, 2019, the Company entered into an additional loan agreement providing for a term note (the “Term Note") under the Commercial Business Loan Agreement in the principal amount of $5,000,000. The proceeds of the Term Note were utilized 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)
September 30, 2020 and 2019
The Company incurred immaterial financing costs related to the above term notes. These deferred financing costs are amortized over the term of the loans using the effective interest method.

The Company has recognized these term notes, which have terms greater than twelve months, as follows:
September 30, 2020December 31, 2019
Notes payable$8,076 $9,379 
Less:
Current portion of notes payable(1,815)(1,750)
Net long-term notes payable$6,261 $7,629 

Under the terms of the Commercial Business Loan Agreement, the Company is subject to the following financial covenants:
Financial CovenantRequired RatioRatio at September 30, 2020
Total Debt to Adjusted EBITDA (Quarterly)not more than 1.50:1.000.35
Fixed Charge Coverage Ratio (Quarterly)not less than 1.35:1.002.75
Loan-to-Value Ratio (Quarterly)not more than 0.850.71

The Company was in compliance with all covenants under the Commercial Business Term Loan Agreement in effect at September 30, 2020.

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:
September 30, 2020December 31, 2019
Lease liabilities$5,159 $10,132 
Less:
Current portion of lease liabilities(4,207)(7,093)
Net long-term lease liabilities$952 $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 3.17% and 1.83% for all finance lease liabilities outstanding as of September 30, 2020 and 2019, respectively. At September 30, 2020 and 2019, the weighted average lease term was approximately 0.73 years and 1.01 years, respectively. Interest expense related to these finance lease obligations for the three and nine months ended September 30, 2020 amounted to $34,000 and $128,000, respectively. Interest expense related to these finance lease obligations for the three and nine months ended September 30, 2019 amounted to $56,000 and $102,000, 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 September 30, 2020, the weighted average lease term was approximately 3.41 years. Operating rental expenses were $191,000 and $575,000 for the three and nine months ended September 30, 2020, respectively, and $100,000 and $278,000 for the three and nine months ended September 30, 2019. The related assets for operating lease liabilities have been included with property and equipment on the Condensed Consolidated Balance Sheets.
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)
September 30, 2020 and 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 $58,000 and $180,000 for the three and nine months ended September 30, 2020, respectively, and $61,000 and $182,000 for the three and nine months ended September 30, 2019, respectively. The expense for these related party rents has been included within general and administrative expenses.

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, 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

During 2019, the Company had warrants to purchase one common share of the Company 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 or outstanding during the three and nine month periods ended September 30, 2020. A summary of the change in fair value of warrant conversion liability is as follows for the period ended September 30, 2019:
Warrant Conversion Liability
Balance December 31, 2018$363 
Warrants issued 
Unrealized gain on warrant conversion liability(363)
Balance September 30, 2019$ 

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)
September 30, 2020 and 2019
Derivative instruments and hedging activities

The Company has 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 September 30, 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 September 30, 2020.

In the first nine 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 39,145,182 and 37,952,660 shares were issued and outstanding as of September 30, 2020 and December 31, 2019, respectively.

Stock-based compensation

The purpose of the Company's RSU and Option Plans (collectively, the "Former 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 Former 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 September 30, 2020, the Company had outstanding issuances of options of 3,068,000 and restricted stock units of 679,000 under the Former Plan.

Effective June 11, 2020 (the "Effective Date"), the Company’s shareholders approved the Company's 2020 Long Term Incentive Plan (the "Omnibus Plan"), and the Former Plan was frozen. No future awards will be made under the Former Plan, and the common shares that were not settled or awarded under the ‎Former Plan as of the Effective Date are available for awards under the Omnibus Plan. The maximum number of common ‎shares that are available for awards under the Omnibus Plan ‎and under any other security based compensation arrangements adopted by the Company, including the ‎Former Plan, may not exceed 7,758,000 shares (equal to 20% of the issued and outstanding common shares of the Company on the ‎Effective Date). The maximum amount of the foregoing common shares that may be awarded under the Omnibus Plan as “incentive stock options” is 2,600,000 Common Shares.

The following table summarizes stock-based compensation for the three and nine months ended September 30, 2020 and 2019 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Stock-based compensation - options$945 $745 $2,769 $2,028 
Stock-based compensation - restricted stock units289 319 812 950 
Total$1,234 $1,064 $3,581 $2,978 

At September 30, 2020, there was approximately $3,671,000 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 2.16 years. As of September 30, 2020, there was approximately $938,000 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 0.47 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)
September 30, 2020 and 2019
Options

The following table summarizes stock option activity for the nine months ended September 30, 2020:
Number of options
(000's)
Weighted average exercise price(1)
Weighted average remaining contractual life
Aggregate Intrinsic Value(2)
Balance December 31, 20192,683 $3.36 6.7 years$7,790 
Issued1,053 6.10 
Exercised(603)3.20 
Expired / Forfeited(65)4.81 
Balance September 30, 20203,068 $4.29 8.1 years$13,867 
(1) For presentation purposes, stock options issued with a CAD exercise price have been translated to USD based on the prevailing exchange rate on the date of grant.
(2) 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 $13,867,000 and options exercisable were $5,767,000 at September 30, 2020. For the nine months ended September 30, 2020, 603,297 shares of common stock were issued pursuant to the exercise of stock options.

At September 30, 2020, the Company had 1,008,000 exercisable stock options outstanding with a weighted average exercise price of $2.94 and a weighted average remaining contractual life of 6.8 years. At December 31, 2019, the Company had 1,037,000 exercisable stock options outstanding with a weighted average exercise price of $2.95 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 nine months ended September 30, 2020:
Exercise price
$5.70 - $10.44
Risk-free interest rate
0.39% - 1.63%
Expected volatility
65.73% - 85.38%