Quipt Home Medical (QIPT) - 2025 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION This section presents the unaudited condensed consolidated interim financial statements and related notes for Quipt Home Medical Corp Item 1. Financial Statements This section presents Quipt Home Medical Corp.'s unaudited condensed consolidated interim financial statements, including position, income, equity, and cash flows Condensed Consolidated Interim Statements of Financial Position This statement details the company's assets, liabilities, and shareholders' equity as of June 30, 2025, and September 30, 2024 | ASSETS | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :-------------------------------- | | Cash | $11,250 | $16,174 | | Accounts receivable, net | $27,009 | $29,116 | | Inventory | $23,996 | $20,853 | | Prepaid and other current assets | $6,431 | $6,911 | | Total current assets | $68,686 | $73,054 | | Property and equipment, net | $36,427 | $37,385 | | Right-of-use assets, net | $15,427 | $16,475 | | Goodwill | $50,733 | $50,733 | | Intangible assets, net | $63,405 | $67,953 | | Equity method investment | $1,066 | $1,311 | | Other assets | $348 | $337 | | Total long-term assets | $167,406 | $174,194 | | TOTAL ASSETS | $236,092 | $247,248 | | LIABILITIES | | | | Accounts payable and accrued liabilities | $36,814 | $35,363 | | Current portion of equipment loans | $10,525 | $12,804 | | Current portion of lease liabilities | $5,702 | $5,867 | | Current portion of senior credit facility | $3,303 | $3,248 | | Deferred revenue | $3,501 | $3,568 | | Total current liabilities | $59,845 | $60,850 | | Senior credit facility | $61,651 | $64,545 | | Lease liabilities | $11,159 | $13,283 | | Equipment loans | $13 | $55 | | Derivative liability - interest rate swaps | $680 | $1,122 | | Deferred income taxes | $208 | $202 | | TOTAL LIABILITIES | $133,556 | $140,057 | | SHAREHOLDERS' EQUITY | | | | Additional paid-in capital | $280,258 | $277,762 | | Accumulated deficit | $(177,722) | $(170,571) | | TOTAL SHAREHOLDERS' EQUITY | $102,536 | $107,191 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $236,092 | $247,248 | Condensed Consolidated Interim Statements of Income (Loss) This statement outlines the company's revenues, expenses, and net loss for the three and nine months ended June 30, 2025 and 2024 | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Nine Months Ended June 30, 2025 (in thousands) | Nine Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $58,289 | $60,759 | $177,046 | $184,583 | | Cost of inventory sold | $14,873 | $16,694 | $47,776 | $51,260 | | Operating expenses | $31,041 | $30,593 | $91,333 | $91,096 | | Depreciation | $9,758 | $9,573 | $29,061 | $28,474 | | Amortization of intangible assets | $1,481 | $1,519 | $4,548 | $4,570 | | Right-of-use operating lease amortization and interest | $1,585 | $1,660 | $4,753 | $4,612 | | Stock-based compensation | $2,120 | $483 | $2,625 | $2,154 | | Acquisition-related costs | $126 | $188 | $222 | $393 | | Gain on disposals of property and equipment | $(872) | $(51) | $(896) | $(51) | | Operating income (loss) | $(1,823) | $100 | $(2,376) | $2,075 | | Interest expense | $1,595 | $1,770 | $5,025 | $5,366 | | Interest income | $(101) | $(168) | $(383) | $(509) | | Change in fair value of derivative liability - interest rate swaps | $182 | $(105) | $(442) | $170 | | Loss (gain) on foreign currency transactions | $(610) | $128 | $231 | $145 | | Share of loss in equity method investment | $101 | $71 | $245 | $243 | | Loss before taxes | $(2,990) | $(1,596) | $(7,052) | $(3,340) | | Provision for income taxes | $35 | $0 | $99 | $483 | | Net loss | $(3,025) | $(1,596) | $(7,151) | $(3,823) | | Basic loss per share | $(0.07) | $(0.04) | $(0.17) | $(0.09) | | Diluted loss per share | $(0.07) | $(0.04) | $(0.17) | $(0.09) | Condensed Consolidated Interim Statements of Changes in Shareholders' Equity This statement tracks changes in shareholders' equity, including net loss, share repurchases, and stock-based compensation | Metric | Balance March 31, 2025 (in thousands) | Net Loss (in thousands) | Repurchase of Shares (in thousands) | Stock-based Compensation (in thousands) | Balance June 30, 2025 (in thousands) | | :---------------------- | :------------------------------------ | :---------------------- | :---------------------------------- | :-------------------------------------- | :----------------------------------- | | Additional Paid In Capital | $278,267 | — | $(129) | $2,120 | $280,258 | | Accumulated Deficit | $(174,697) | $(3,025) | — | — | $(177,722) | | Total Shareholders' Equity | $103,570 | $(3,025) | $(129) | $2,120 | $102,536 | | Metric | Balance September 30, 2024 (in thousands) | Net Loss (in thousands) | Repurchase of Shares (in thousands) | Settlement of Restricted Stock Units (in thousands) | Stock-based Compensation (in thousands) | Balance June 30, 2025 (in thousands) | | :---------------------- | :------------------------------------ | :---------------------- | :---------------------------------- | :------------------------------------------------ | :-------------------------------------- | :----------------------------------- | | Additional Paid In Capital | $277,762 | — | $(129) | — | $2,625 | $280,258 | | Accumulated Deficit | $(170,571) | $(7,151) | — | — | — | $(177,722) | | Total Shareholders' Equity | $107,191 | $(7,151) | $(129) | — | $2,625 | $102,536 | Condensed Consolidated Interim Statements of Cash Flows This statement summarizes cash flows from operating, investing, and financing activities for the nine months ended June 30, 2025 and 2024 | Cash Flow Activity | Nine months ended June 30, 2025 (in thousands) | Nine months ended June 30, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash flow provided by operating activities | $27,914 | $25,404 | | Net cash flow used in investing activities | $(9,611) | $(6,950) | | Net cash flow used in financing activities | $(22,997) | $(21,115) | | Effect of exchange rate changes on cash held in foreign currencies | $(230) | $(145) | | Net increase (decrease) in cash | $(4,924) | $(2,806) | | Cash, beginning of period | $16,174 | $17,209 | | Cash, end of period | $11,250 | $14,403 | Notes to Condensed Consolidated Interim Financial Statements These notes provide detailed context on operations, accounting policies, asset/liability breakdowns, debt, equity, and recent events 1. Nature of operations This note describes Quipt Home Medical Corp.'s business, accounting basis, and evaluation of new accounting standards - Quipt Home Medical Corp. was incorporated in 1997 and is headquartered in Wilder, KY. Its interim financial statements are unaudited and prepared under US GAAP[20][21][22] - The company is an 'emerging growth company' and has elected to use the extended transition period for new accounting standards, though it has not delayed adoption of most[24] - The company is currently evaluating the impact of recently issued ASUs on Income Tax Disclosures (ASU 2023-09), Segment Reporting (ASU 2023-07), Compensation-Stock Compensation (ASU 2024-01), and Financial Instruments – Credit Loss (ASC 326)[25][26][27][28] 2. Property and equipment and right-of-use assets This note details changes in property, equipment, and right-of-use assets, including rental equipment transfers and equipment loans | Asset Category | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :-------------------------------- | | Property and equipment, net | $36,427 | $37,385 | | Right-of-use assets, net | $15,427 | $16,475 | - Rental equipment transferred from inventory increased to $26,897,000 for the nine months ended June 30, 2025, from $24,467,000 for the same period in 2024[29] - Equipment loans obtained decreased to $16,192,000 for the nine months ended June 30, 2025, from $19,411,000 for the same period in 2024[29] 3. Goodwill and intangible assets This note covers goodwill impairment testing and the net value and estimated amortization of intangible assets - An interim quantitative impairment test for goodwill was performed due to decreased market capitalization and operational challenges, with no impairment identified[31] | Intangible Asset Category | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :-------------------------------- | | Intangible assets, net | $63,405 | $67,953 | | Period | Estimated Amortization (in thousands) | | :-------------------------------- | :------------------------------------ | | Three months ending September 30, 2025 | $1,468 | | Year ending September 30, 2026 | $5,776 | | Year ending September 30, 2027 | $5,723 | | Year ending September 30, 2028 | $5,594 | | Year ending September 30, 2029 | $5,587 | | Thereafter | $39,257 | | Intangible assets, net | $63,405 | 4. Accounts payable and accrued liabilities This note breaks down the components of accounts payable and accrued liabilities, showing changes over time | Category | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :-------------------------------- | | Accounts payable | $32,717 | $29,310 | | Accrued compensation | $2,505 | $4,576 | | Other | $1,592 | $1,477 | | Total | $36,814 | $35,363 | 5. Long-term debt This note details the company's senior credit facility, equipment loans, lease liabilities, and interest rate swap arrangements - The company has a $110 million senior credit facility, with $64 million drawn as of June 30, 2025, and was in compliance with financial covenants[34] | Debt Category | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :-------------------------------- | | Senior credit facility (net carrying value) | $64,954 | $67,793 | | Equipment loans (ending balance) | $10,538 | $12,859 | | Lease liabilities (total) | $16,861 | $19,150 | - Interest rate swaps on $59 million of the senior credit facility carry a fixed SOFR of 3.4% to 4.4%, resulting in a weighted combined rate of 6.8%[36] 6. Share capital This note outlines authorized and outstanding shares, share repurchase activity, and stock-based compensation plans - The company repurchased 62,800 shares for approximately $129,000 during the three and nine months ended June 30, 2025, under a program that terminated on April 30, 2025[47][142] - In March 2025, the company granted 425,000 stock options and 2,478,753 restricted share units under the 2024 Equity Incentive Plan[48] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Nine Months Ended June 30, 2025 (in thousands) | Nine Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Stock-based compensation expense | $2,120 | $483 | $2,625 | $2,154 | 7. Commitments and contingencies This note addresses legal proceedings, including a DOJ civil investigative demand and the conclusion of an SEC investigation - The company received a civil investigative demand (CID) from the DOJ concerning an investigation into potential false claims to government healthcare programs for CPAP equipment[53] - The SEC concluded its investigation in November 2024 and advised that it did not intend to recommend an enforcement action against the company[54] 8. Operating expenses This note details the breakdown and changes in operating expenses, highlighting factors like professional fees | Expense Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Nine Months Ended June 30, 2025 (in thousands) | Nine Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Payroll and employee benefits | $19,244 | $19,547 | $57,795 | $58,724 | | Facilities | $1,418 | $1,441 | $4,206 | $4,199 | | Billing | $3,116 | $2,734 | $9,132 | $8,138 | | Professional fees | $1,979 | $1,496 | $4,990 | $4,482 | | Outbound freight | $1,405 | $1,383 | $4,129 | $4,115 | | Vehicle fuel and maintenance | $1,257 | $1,233 | $3,445 | $3,515 | | Bank and credit card fees | $649 | $560 | $1,727 | $1,540 | | Technology | $564 | $409 | $1,431 | $1,157 | | Insurance | $334 | $384 | $1,107 | $1,160 | | All other | $1,075 | $1,406 | $3,371 | $4,066 | | Total operating expenses | $31,041 | $30,593 | $91,333 | $91,096 | 9. Income taxes This note explains the company's income tax accounting policies and the provision for income taxes - The company follows the asset and liability method for income taxes, recognizing deferred tax assets and liabilities and providing a valuation allowance for unrealized deferred tax assets[57] | Period | Provision for Income Taxes (in thousands) | | :-------------------------- | :---------------------------------------- | | Three months ended June 30, 2025 | $35 | | Three months ended June 30, 2024 | $0 | | Nine months ended June 30, 2025 | $99 | | Nine months ended June 30, 2024 | $483 | 10. Related party transactions This note describes operating lease agreements with a rental company affiliated with the company's CEO - The company has six operating leases with a rental company affiliated with its CEO, with combined monthly payments of approximately $65,000 for the nine months ended June 30, 2025[58] - Lease payments increase annually by the greater of CPI-U or 3%, with one lease expiring in June 2026 and the others in September 2029[58] 11. Subsequent event This note reports on the acquisition of Mediserve Medical Equipment and the evaluation of the 'One Big Beautiful Bill Act' - On July 1, 2025, the company acquired Mediserve Medical Equipment for approximately $2.6 million, comprising $2.45 million in cash and $150,000 in holdback consideration[59] - The preliminary allocation of the Mediserve purchase price includes $850,000 for accounts receivable, $150,000 for inventory, and $1,600,000 for property and equipment[61] - The company is evaluating the impact of the 'One Big Beautiful Bill Act' (OBBBA), signed into law on July 4, 2025, which includes provisions for interest deductibility, R&D expensing, and immediate capital expenditure deductions[62] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, and key factors impacting performance Loss of Foreign Private Issuer Status The company's change from foreign private issuer status to a domestic filer impacts reporting requirements and expenses - Quipt Home Medical Corp. ceased to be a foreign private issuer as of October 1, 2024, due to more than 50% of its voting securities being held by US residents[66] - This change requires the company to report on US domestic company forms (10-K, 10-Q, 8-K) and comply with US proxy rules, resulting in increased expenses and management time[66] - The primary changes in financial reporting due to this status change include a reduction in revenues with corresponding elimination of bad debt expense, and reclassification of right-of-use operating lease amortization and interest, and derivative liability fair value changes[69] Overview This overview describes the company's business, market position, and strategic priorities for future growth and profitability - The company provides specialized medical products and services in the US healthcare market, serving over 130 offices with more than 1,150 personnel[70][71] - Key priorities for fiscal year 2025 and beyond include driving organic revenue growth, achieving operational net profit, generating positive cash flow, and expanding Adjusted EBITDA[72] - Strategies involve expanding presence in existing and new markets, leveraging a scalable business platform, optimizing organizational structure, enhancing operational efficiencies, and centralizing back-office processes[72] Selected Quarterly and Interim Information This section provides key operational and financial metrics for the recent quarterly and interim periods | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Number of patients serviced | 151,000 | 153,000 | 271,000 | 270,000 | | Number of equipment set-ups or deliveries | 210,000 | 216,000 | 635,000 | 642,000 | | Respiratory resupply set-ups or deliveries | 119,000 | 120,000 | 354,000 | 359,000 | | Adjusted EBITDA (in thousands) | $13,683 | $14,195 | $41,022 | $44,432 | | Net cash flow provided by operating activities (in thousands) | $9,668 | $10,509 | $27,914 | $25,404 | | Total revenue (in thousands) | $58,289 | $60,759 | $177,046 | $184,583 | | Net loss (in thousands) | $(3,025) | $(1,596) | $(7,151) | $(3,823) | | Net loss per share - basic | $(0.07) | $(0.04) | $(0.17) | $(0.09) | | Net loss per share - diluted | $(0.07) | $(0.04) | $(0.17) | $(0.09) | | Total assets (in thousands) | N/A | N/A | $236,092 | $249,784 | | Total long-term liabilities (in thousands) | N/A | N/A | $73,711 | $76,051 | | Shareholders' equity (in thousands) | N/A | N/A | $102,536 | $109,801 | Operating results Operational challenges, including Medicare rate changes and a cybersecurity incident, impacted revenue and growth targets - The discontinuance of the Medicare 75/25 blended rate as of January 1, 2024, negatively impacted revenue and operating results[75] - Challenges included the withdrawal of Medicare Advantage members and the non-renewal of a disposable supply contract in November 2024[76] - The Change Healthcare cybersecurity incident significantly hindered claims processing and billing, impacting cash flow and collections[77] - The cumulative impact of these events reduced total revenue by an estimated $3 million for the three months and $7 million for the nine months ended June 30, 2025, compared to the prior year[78] Results of Operations This section analyzes revenue, cost of inventory, operating expenses, and other income/loss items for the reporting periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Nine Months Ended June 30, 2025 (in thousands) | Nine Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Revenue | $58,289 (down 4.1%) | $60,759 | $177,046 (down 4.1%) | $184,583 | | Cost of inventory sold | $14,873 (25.5% of revenue) | $16,694 (27.5% of revenue) | $47,776 (27.0% of revenue) | $51,260 (27.8% of revenue) | | Operating expenses | $31,041 (up 1.5%) | $30,593 | $91,333 (up 0.2%) | $91,096 | | Stock-based compensation | $2,120 (up 339%) | $483 | $2,625 (up 21.9%) | $2,154 | | Gain on disposals of property and equipment | $872 (up 1609%) | $51 | $896 (up 1657%) | $51 | | Interest expense, net | $1,494 (down 6.7%) | $1,602 | $4,642 (down 4.4%) | $4,857 | | Change in fair value of derivative liability - interest rate swaps | $182 (loss) | $(105) (gain) | $(442) (gain) | $170 (loss) | | Loss (gain) on foreign currency transactions | $(610) (gain) | $128 (loss) | $231 (loss) | $145 (loss) | | Net loss | $(3,025) (increased loss) | $(1,596) | $(7,151) (increased loss) | $(3,823) | Non-GAAP financial measure - Adjusted EBITDA Adjusted EBITDA, a non-GAAP measure, is reconciled to net loss and used to assess the company's operational performance - Adjusted EBITDA is a non-GAAP measure used to assess performance, excluding non-cash or unusual items, and is defined as net loss adjusted for various items including interest, depreciation, taxes, professional fees, stock-based compensation, and acquisition costs[102][103][104] | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Nine Months Ended June 30, 2025 (in thousands) | Nine Months Ended June 30, 2024 (in thousands) | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net loss | $(3,025) | $(1,596) | $(7,151) | $(3,823) | | Add back: Depreciation and amortization | $11,239 | $11,092 | $33,609 | $33,044 | | Add back: Interest expense, net | $1,494 | $1,602 | $4,642 | $4,857 | | Add back: Right-of-use operating lease amortization and interest | $1,585 | $1,660 | $4,753 | $4,612 | | Add back: Provision for income taxes | $35 | $0 | $99 | $483 | | Add back: Professional fees | $1,308 | $723 | $3,085 | $2,205 | | Add back: Stock-based compensation | $2,120 | $483 | $2,625 | $2,154 | | Add back: Acquisition-related costs | $126 | $188 | $222 | $393 | | Add back: Change in fair value of derivative liability - interest rate swaps | $182 | $(105) | $(442) | $170 | | Add back: Gain on disposals of property and equipment | $(872) | $(51) | $(896) | $(51) | | Add back: Loss (gain) on foreign currency transactions | $(610) | $128 | $231 | $145 | | Add back: Share of loss in equity method investment | $101 | $71 | $245 | $243 | | Adjusted EBITDA | $13,683 | $14,195 | $41,022 | $44,432 | Financial Position This section summarizes the company's balance sheet, detailing changes in assets, liabilities, and equity | Metric | June 30, 2025 (in thousands) | September 30, 2024 (in thousands) | | :------------------------------------------ | :----------------------------- | :-------------------------------- | | Cash | $11,250 | $16,174 | | Accounts receivable, inventory, and prepaid and other current assets | $57,436 | $56,880 | | Property and equipment, net | $36,427 | $37,385 | | Right-of-use assets, net | $15,427 | $16,475 | | Goodwill, intangible assets, and other non-current assets | $115,552 | $120,334 | | Total assets | $236,092 | $247,248 | | Accounts payable and other current liabilities | $59,845 | $60,850 | | Long-term debt and other long-term liabilities | $73,711 | $79,207 | | Total liabilities | $133,556 | $140,057 | | Shareholders' equity | $102,536 | $107,191 | | Total liabilities and shareholders' equity | $236,092 | $247,248 | Liquidity and Capital Resources This section discusses the company's cash position, credit facility availability, and ability to meet financial obligations - As of June 30, 2025, the company had $11.25 million in cash on hand and $14.3 million in revolving credit availability[107] - Management believes current liquidity sources are sufficient to fund operations and expected capital expenditures for the next twelve months[107] Cash Flows This section analyzes cash flows from operating, investing, and financing activities and their impact on overall cash | Cash Flow Activity | Nine months ended June 30, 2025 (in thousands) | Nine months ended June 30, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net cash flow provided by operating activities | $27,914 (up $2,510) | $25,404 | | Net cash flow used in investing activities | $(9,611) (up $2,661) | $(6,950) | | Net cash flow used in financing activities | $(22,997) (up $1,882) | $(21,115) | | Net increase (decrease) in cash | $(4,924) | $(2,806) | - Operating cash flow improved due to a $6.48 million improvement in working capital, partially offset by a $3.33 million increase in net loss[109] - Investing cash outflow increased due to a $3.89 million rise in cash portion of rental equipment transferred from inventory[110] Capital management This section defines the company's capital, its sources, and management's approach to funding operations and growth - The company's capital consists of shareholders' equity ($102.54 million) and its senior credit facility ($64.95 million principal amount) as of June 30, 2025[112] - Capital is primarily raised through credit facilities, long-term debt, and common share issuance to fund working capital and strategic opportunities[113] | Equity Instruments (in thousands of shares) | June 30, 2025 | September 30, 2024 | | :------------------------------------------ | :------------ | :----------------- | | Common shares | 43,444 | 43,091 | | Options | 3,778 | 3,402 | | Restricted share units | 2,583 | 519 | Contractual Commitments and Obligations This section details the company's total contractual obligations, including debt and lease liabilities, and their maturities | Obligation Type | Total (in thousands) | Less than 1 year (in thousands) | 1-3 Years (in thousands) | 3-5 Years (in thousands) | After 5 Years (in thousands) | | :-------------------------- | :------------------- | :------------------------------ | :----------------------- | :----------------------- | :--------------------------- | | Debt | $76,550 | $13,975 | $62,575 | $0 | $0 | | Operating leases | $16,188 | $5,449 | $7,103 | $2,924 | $712 | | Finance leases | $3,032 | $1,235 | $1,517 | $280 | $0 | | Other obligations | $32,717 | $32,717 | $0 | $0 | $0 | | Total contractual obligations | $128,487 | $53,376 | $71,195 | $3,204 | $712 | Critical Accounting Principles and Estimates This section explains management's use of estimates in financial reporting and confirms no material policy changes - Management makes estimates and assumptions for financial reporting under GAAP, which are reviewed continuously and adjusted prospectively[117] - There have been no material changes in the company's significant accounting policies compared to the Annual Report on Form 10-K for the year ended September 30, 2024[118] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to credit, currency, and interest rate risks and how they are managed - The company is exposed to credit risk, currency risk, and interest rate risk, managed under Board-approved policies[119] - Credit risk is low, with 17% of accounts receivable from Medicare and cash held with major financial institutions[120][122] - Currency risk from Canadian dollar cash balances resulted in a $231,000 foreign currency loss for the nine months ended June 30, 2025; the company does not currently use hedging programs[123][124] - Interest rate risk on the variable-rate credit facility is partially mitigated by interest rate swaps on $59 million of principal, leaving $7.01 million subject to rate changes (a 1% increase would add $70,120 to annual interest expense)[125] Item 4. Controls and Procedures Management assessed the effectiveness of disclosure controls and procedures, confirming their efficacy as of June 30, 2025 - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting[126] - There have been no material changes in the company's internal control over financial reporting during the three months ended June 30, 2025[128] PART II — OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings Information on legal proceedings is cross-referenced to the commitments and contingencies note in the financial statements - Details on legal proceedings are provided in Note 7, 'Commitments and Contingencies,' of the financial statements[130] Item 1A. Risk Factors This section updates risk factors, including political/economic conditions and activist shareholder actions, impacting the company - Political and economic conditions, including tariffs, trade disputes, and macroeconomic turmoil, could adversely affect the company's revenue, financial condition, and results of operations[132][133][136] - The company is subject to risks from proxy contests and activist shareholders, which can be costly, disrupt operations, divert management attention, and potentially impact business opportunities and share price volatility[137][144] - The company entered into cooperation and standstill agreements with certain activist shareholders (Kanen and Forager) to mitigate immediate proxy contest risks[137][138][139][141] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common share repurchases made under a program that terminated on April 30, 2025 | Period | Total Number Of Shares Purchased | Average Price Paid per Share (USD) | Total Number of Shares Purchased as Part of Publicly Announced Programs | | :---------------- | :------------------------------- | :--------------------------------- | :---------------------------------------------------------- | | April 1 - 30, 2025 | 62,800 | $2.06 | 62,800 | | May 1 - 31, 2025 | — | — | — | | June 1 - 30, 2025 | — | — | — | | Total | 62,800 | $2.06 | 62,800 | - The company's share repurchase program, authorizing purchases up to 3,626,845 common shares, terminated on April 30, 2025, with 62,800 shares repurchased for $129,000 during the three months ended June 30, 2025[142] Item 3. Defaults Upon Senior Securities This item is not applicable to the company for the current reporting period - This item is not applicable[145] Item 4. Mine Safety Disclosures This item is not applicable to the company for the current reporting period - This item is not applicable[145] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 trading plans during the three months ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[146] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents and certifications - Exhibits include organizational documents, a cooperation agreement, CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and Inline XBRL documents[150]