Exhibit 99.1

Protech Home Medical Corp.

Consolidated Financial Statements

For the fiscal years ended

September 30, 2019 and 2018

(Expressed in Canadian dollars)

TABLE OF CONTENTS

Independent Auditor’s Report

To the Shareholders of Protech Home Medical Corp.:

Opinion

We have audited the consolidated financial statements of Protech Home Medical Corp. and its subsidiaries (the “Company”), which comprise the consolidated statements of financial position as at September 30, 2019 and 2018, and the consolidated statements of (loss) income and other comprehensive (loss) income, changes in shareholders’ equity and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at September 30, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other Information

Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

The engagement partner on the audit resulting in this independent auditor's report is Murad Mansoor Ali Bhimani.

Toronto, Ontario	Chartered Professional Accountants
January 20, 2020	Licensed Public Accountants

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements of Protech Home Medical Corp. and its subsidiaries (the “Company”) were prepared by management in accordance with International Financial Reporting Standards. Management acknowledges responsibility for the preparation and presentation of the consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company’s circumstances. The significant accounting policies of the Company are summarized in Note 2 to the consolidated financial statements.

The Board of Directors is responsible for reviewing and approving the consolidated financial statements and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the consolidated financial statements for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company’s affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

APPROVED ON BEHALF OF THE BOARD:

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

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

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

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

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Protech Home Medical Corp. was incorporated under the Business Corporations Act (Alberta) on March 5, 1993. On December 30, 2013, the Company was continued into British Columbia, Canada. The address of the registered office is 5626 Larch St. Suite 202, Vancouver, BC V6M 4E1 (Canada). The head office is located at 1019 Town Drive, Wilder, Kentucky, United States. Protech Home Medical Corp. and its subsidiaries ("PHM" or the “Company”) main revenue source is in providing in-home monitoring equipment, supplies, and services to patients in the United States. The Company has also embarked on an acquisition strategy for additional revenue and profit growth.

The Company changed its name from Patient Home Monitoring Corp. to Protech Home Medical Corp. on April 4, 2018.

The Company’s shares are traded on the TSX Venture Exchange under the symbol PHM. The stock is also traded over the counter in the United States under the symbol PHMZF. Effective December 31, 2018, the Company consolidated its issued and outstanding common shares based on one post-consolidation common share for every five pre-consolidation common shares. Unless otherwise stated, all share, options, warrants and per-share amounts have been restated retrospectively to reflect this share consolidation.

On December 21, 2017, the Company executed Asset and Share Purchase Agreements as well as an Arrangement Agreement (the “Arrangement”) with Viemed Healthcare, Inc. (“Viemed”), then a wholly owned subsidiary of the Company, which was spun-off as a separate public Company which would own a 100% interest in Home Sleep Delivered, L.L.C. and Sleep Management, L.L.C.

On July 29, 2019, the Company sold all the assets of one of its subsidiaries, Patient Home Monitoring, Inc. (“PHM Inc.”).

The consolidated financial statements and the notes reflect the Viemed and PHM Inc. entities as discontinued operations. (see Note 19).

Basis of accounting

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

The consolidated financial statements were authorized for issue by the Board of Directors on January 20, 2020.

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

This is the first set of Company’s annual financial statements in which IFRS 9 Financial instruments and IFRS 15 Revenue from contracts with customers have been applied. Changes to significant accounting policies are described in Note 3.

Basis of measurement

These consolidated financial statements have been prepared on a going concern basis that assumes that the Company will continue its operations for the foreseeable future and be able to realize its assets and discharge its liabilities and commitments in the normal course of operation. If this assumption was not appropriate, adjustments to these consolidated financial statements may be necessary.

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated. The Company’s consolidated entities, their functional currencies and ownership percentages are as follows:

Critical Accounting Estimates and Judgments

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

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

PROTECH HOME MEDICAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

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

Revenues are billed to and collections are received from third-party insurers, co-insurance companies and patients. Because of continuing changes in the health care industry and third-party reimbursement, the consideration receivable from these insurance companies is variable as these billings can be challenged by the payer and therefore the amount billed by the Company is the best estimate of the amount that the Company believes is an allowable charge as determined by the payer (i.e. the insurance companies). The above estimate involves significant judgement including an analysis of past collections, historical modification rates and appeals results. Management regularly reviews the actual claims approved by the insurance companies, making adjustments as required.

The application of new ECL model represents a significant change from the incurred loss model under IAS 39, lifetime credit losses are expected to be recognized earlier.

The measurement of expected credit losses considers information about past events and current conditions. Forward looking macro-economic factors are incorporated into the risk parameters as relevant such as unemployment rate, inflation and interest rates. Significant judgements are made in order to incorporate forward-looking information into the estimation of ECL allowances which were not required under IAS 39 and may result in changes to the provision from period to period which may significantly affect our results of operations.

The Company estimates that a certain portion of inventory purchased may be obsolete or non-saleable. The Company maintains a provision for obsolescence for these items. Valuation of the inventory was assessed at year-end, and all inventory items which more than two years are old and not supported by recent sales were provided for 50% in accordance with Company’s policy.

In accordance with the substance of the contractual arrangement, convertible debentures are compound financial instruments that are accounted for separately by their components: a financial liability and an equity instrument. The identification of convertible debenture components is based on interpretations of the substance of the contractual arrangement and therefore requires judgment from management. The separation of the components affects the initial recognition of the convertible debenture at issuance and the subsequent recognition of interest on the liability component. The determination of the fair value of the liability is also based on a number of assumptions, including contractual future cash flows, discount factors, and the presence of any derivative financial instruments.

Property plant and equipment and intangibles are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts. The assessment of the recoverable amount requires estimates and assumptions such as discount rates, exchange rates, future capital requirements and future operating performance.

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

The amounts used to estimate fair values of stock options and warrants issued are based on estimates of future volatility of the Company’s share price, expected lives of the options and warrants, expected dividends to be paid by the Company and other relevant assumptions. By their nature, these estimates are subject to measurement uncertainty and the effect of changes in such estimates on the consolidated financial statements of future periods could be significant.

Significant judgment is required in determining the provision for future income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Company recognizes liabilities and contingencies for anticipated tax audit issues based on the Company’s current understanding of the tax law. For matters where it is probable that an adjustment will be made, the Company records its best estimate of the tax liability including the related interest and penalties in the current tax provision. Management believes they have adequately provided for the probable outcome of these matters; however; the final outcome may result in a materially different outcome than the amount included in the tax liabilities.

In addition, the Company recognizes deferred tax assets relating to tax losses carried forward to the extent there are sufficient taxable temporary differences (deferred tax liabilities) relating to the same taxation authority and the same taxable entity against which the unused tax losses can be utilized. Utilization of the tax losses depends on the ability of the taxable entity to satisfy certain tests at the time the losses are recouped.

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

Critical Accounting Judgments

The following are the critical judgments, apart from those involving estimations, that have been made in the process of applying the Company's accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements.

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

Management has evaluated the recoverable amount for its cash generating unit and applied judgment in the discount rate and other underlying assumptions used in impairment analysis of goodwill. For details see Note 8.

PROTECH HOME MEDICAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

IFRS 8 requires operating segments to be determined based on the Company’s internal reporting to the Chief Operating Decision Maker (‘CODM’). The CODM has been determined to be the Company’s Chief Executive Officer as he is primarily responsible for the allocation of resources and the assessment of performance. The CODM uses operating profit, as reviewed at monthly business review meetings, as the key measure of the Company’s results as it reflects the Company’s underlying performance for the period under evaluation. Operating profit is defined as profit on operations before interest, taxes, stock- based compensation, amortization of intangibles, impairment expenses and depreciation. Company recognized its business segments during 2016 and had three reportable operating segments: Viemed (Sleep Management, LLC and Home Sleep Delivered, LLC), PHM and Corporate cost center under IFRS 8. After the spin-off transaction occurred described in Note 19, the Company no longer includes the Viemed segment in its continuing operations. Consequently, the Company now has only one reportable operating segment.

Management has exercised judgment in the determination of the fair value of the derivative instruments. Estimating fair value for the derivatives requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the instrument. This estimate also requires the judgment in the determination of the most appropriate inputs to the valuation model including the expected life of the option or warrant, volatility and dividend yield and making other assumptions about them.

For the purposes of impairment testing, assets are grouped at the lowest levels of integrated assets that generate identifiable cash inflows that are largely independent of the cash inflows of other assets or groups of assets, termed as a CGU. The allocation of assets into a CGU requires significant judgment and interpretations with respect to the integration between assets, the existence of active markets, similar exposure to market risks, shared infrastructures and the way in which management monitors the operations.

Reporting currency

All values are in Canadian dollars ($) unless specifically indicated otherwise. United States dollars are indicated as US$.

Functional currency

The consolidated financial statements of the Company are presented in Canadian dollars, which is the parent Company’s presentation currency but which differs from its functional currency, the US Dollar, which was determined using management’s assumption that the primary economic environment in which it will derive its revenue and expenses incurred to generate those revenues is the United States.

Management has exercised judgment in selecting the functional currency of each of the entities that it consolidates based on the primary economic environment in which the entity operates and in reference to the various indicators including the currency that primarily influences or determines the selling prices of goods and services and the cost of production, including labor, material and other costs and the currency whose competitive forces and regulations mainly determine selling prices.

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

New standards and interpretations adopted

The following new or amended accounting standards were adopted by the Company for the year ended September 30, 2019:

Effective October 1, 2018, the Company adopted IFRS 9, Financial Instruments. Adoption of this standard had no significant financial impact on the Company's consolidated financial statements and accordingly, the information presented for 2018 has not been restated. The Company has adopted the additional disclosures required under these standards.

IFRS 9, Financial Instruments replaced the multiple classification and measurement models in IAS 39, Financial Instruments: Recognition and Measurement, and set out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items.

IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost; fair value through other comprehensive income; and fair value through profit and loss. This classification of financial assets under IFRS 9 reflects the business model in which assets are managed and their contractual cash flow characteristics. IFRS 9 eliminated the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale.

IFRS 9 largely retained the requirements in IAS 39 for the classification and measurement of financial liabilities.

Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the financial instrument. As required by IFRS 9, at the date of initial application, the Company classified its financial assets and financial liabilities at fair value.

The following table outlines the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of the Company's financial assets and liabilities as at October 1, 2018:

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

New standards and interpretations adopted (continued)

The IASB replaced IAS 18, "Revenue" and IAS 11 Construction Contracts, in its entirety with IFRS 15, "Revenue from Contracts with Customers". The standard contains a single model which applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized as detailed below:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contracts

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. IFRS 15 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. The Company adopted the new standard on October 1, 2018 using the modified retrospective method, without restatement of the comparative figures.

Company’s revenue mainly consists of the sale and rental of medical equipment. All revenue recorded is supported by prescriptions received from patients’ physicians, except for any direct sales made to the customers at retail outlets which are supported by sales orders, confirming the existence of arrangement. In case of equipment sale, revenue is recognized when the performance obligation to deliver the equipment is satisfied. Performance obligation is considered satisfied when control of the equipment is transferred to its customers at the point of shipment or delivery. In case of rental revenue, revenue is recorded over the period of time over which rental services are provided and benefits are consumed.

Revenues are billed to and collections are received from third-party insurers, co-insurance companies and patients. The amount billed is the best estimate of the amount that the Company believes is the allowable charge as determined by the payer (i.e. the insurance companies). These billings can be challenged by the payer and therefore consideration is variable and involves significant judgement to determine any pricing adjustments. Company uses historical modification rates and appeals results to determine these pricing adjustments. The Company recognizes revenue, net of estimated returns, if any.

The Company's rental arrangements are on a month to month basis and therefore short term in nature and do not include multiple deliverables.

The Company reviewed its existing accounting policies and practices to identify potential differences that would result from applying the guidance. The new guidance requires the Company to estimate variable consideration and include in revenue amounts for which it is probable that a significant revenue reversal will not occur. The Company’s assessment of that impact determined that the adoption of the guidance did not have a material impact on the timing or measurement of the Company’s revenue recognition.

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Accounting standards issued but not yet effective

IFRS 16 supersedes IAS 17 Leases, IFRIC 4, Determining whether an arrangement contains a lease, SIC-15 operating leases-Incentives and SIC-27 Evaluating the substance of transactions involving the legal form of a lease. It eliminates the distinction between operating and finance leases from the perspective of the lessee. All contracts that meet the definition of a lease will be recorded in the statement of financial position with a “right of use” asset and a corresponding liability. The asset is subsequently accounted for as property plant and equipment. Or investment property and the liability is unwound using the interest rate inherent in the lease.

The date of initial application of IFRS 16 is January 1, 2019. The Company has elected to adopt IFRS 16 using the modified retrospective approach. Under this approach, the Company will not restate its comparative figures but will recognize the cumulative effect of adopting IFRS 16 as an adjustment to opening retained earnings at the beginning of 2019 fiscal year.

The Company leases certain facilities and medical equipment. The non-cancelable period for these leases is between one to four years.

On transition to IFRS 16, the Company will elect to apply the practical expedient to grandfather the assessment of which transactions are leases and apply IFRS 16 only to the contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 Leases will not be reassessed for whether a lease exists. The Company will elect to not recognize right of use assets and lease liabilities for leases that have a lease term of 12 months or less and for leases of low-value assets. The Company will also account for leases for which the lease term ends within 12 months of the end of the date of initial application as short term leases. Accordingly, there will be an increase to assets and liabilities, as the Company will be required to record a right of use asset and a corresponding lease liability on its statement of financial position. In addition, the Company expects a decrease to its rental costs, an increase to finance costs (due to accretion of the lease liability) and an increase to depreciation and amortization (due to amortization of right of use assets.

Foreign currency transactions

The functional currency of each of the Company’s wholly owned subsidiaries is measured using the currency of the primary economic environment in which the subsidiary operates. Each entity in the Company determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded by the Company’s entities in their respective functional currency at rates prevailing at the date of the transaction. The functional currency of the Company and its subsidiaries is the US dollar and the reporting currency is the Canadian dollar.

Monetary items are translated at the functional currency spot rate as of the reporting date. Exchange differences from monetary items are recognized in profit or loss. Non-monetary items that are not carried at fair value are translated using the exchange rates at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The assets and liabilities of foreign operations are translated into Canadian dollars at the rate of exchange prevailing at the reporting date and their statements of operations are translated at the average monthly rates of exchange. The exchange differences arising on the translation are recognized in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that foreign operation is recognized in the statement of (loss) income and comprehensive (loss) and income.

PROTECH HOME MEDICAL CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Business Combinations

Business combinations are accounted for using the acquisition method. For each business combination at the acquisition date, the Company recognizes at fair value all the identifiable assets acquired, the liabilities assumed, the non-controlling interest in the acquiree and the aggregate of the consideration transferred, including any contingent consideration to be transferred. When the fair value of the consideration transferred, and the amount recognized for non-controlling interest and the acquisition- date fair value of any existing equity interest in the acquiree exceeds the net amount of the identifiable assets acquired and the liabilities assumed measured at fair value (the “net identifiable assets”), the difference is treated as goodwill. After initial recognition, goodwill is measured at its initial cost from the acquisition date, less any accumulated impairment losses. Goodwill is reviewed at least annually for impairment or when there is an indication of potential impairment. If the fair value of the Company’s share of the net identifiable assets exceeds the sum calculated above, the difference (i.e. gain on a bargain purchase) is immediately recognized in profit or loss. If the business combination is achieved in stages, the acquisition date fair value of the previously held interest in the acquiree is re-measured to fair value as at the acquisition date through profit or loss.

Financial assets

Recognition and initial measurement

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

Classification and subsequent measurement

On initial recognition, financial assets are classified and subsequently measured at amortized cost, fair value through other comprehensive income (“FVOCI”) or fair value through profit or loss (“FVTPL”). The Company determines the classification of its financial assets, together with any embedded derivatives, based on the business model for managing the financial assets and their contractual cash flow characteristics.

Financial assets are classified as follows:

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Financial assets (continued)

Classification and subsequent measurement (continued)

The Company measures all equity investments at fair value. Changes in fair value are recorded in the consolidated statement of income (loss) and comprehensive income (loss). The entity does not hold any equity investments.

Business model assessment

The Company assesses the objective of its business model for holding a financial asset at a level of aggregation which best reflects the way the business is managed and information is provided to management. Information considered in this assessment includes stated policies and objectives.

Contractual cash flow assessment

The cash flows of financial assets are assessed as to whether they are solely payments of principal and interest on the basis of their contractual terms. For this purpose, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money, the credit risk associated with the principal amount outstanding, and other basic lending risks and costs. In performing this assessment, the Company considers factors that would alter the timing and amount of cash flows such as prepayment and extension features, terms that might limit the Company’s claim to cash flows, and any features that modify consideration for the time value of money.

Impairment

The Company recognizes a loss allowance for the expected credit losses associated with its financial assets, other than financial assets measured at fair value through profit or loss. Expected credit losses are measured to reflect a probability-weighted amount, the time value of money, and reasonable and supportable information regarding past events, current conditions and forecasts of future economic conditions.

The Company applies the simplified approach for trade receivables. Using the simplified approach, the Company records a loss allowance equal to the expected credit losses resulting from all possible default events over the assets’ contractual lifetime.

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Financial assets (continued)

Impairment (continued)

The Company assesses whether a financial asset is credit-impaired at the reporting date. Regular indicators that a financial instrument is credit-impaired include significant financial difficulties as evidenced through borrowing patterns or observed balances in other accounts and breaches of borrowing contracts such as default events or breaches of borrowing covenants. For financial assets assessed as credit-impaired at the reporting date, the Company continues to recognize a loss allowance equal to lifetime expected credit losses.

For financial assets measured at amortized cost, loss allowances for expected credit losses are presented in the statement of financial position as a deduction from the gross carrying amount of the financial asset.

Financial assets are written off when the Company has no reasonable expectations of recovering all or any portion thereof.

Derecognition of financial assets

The Company derecognizes a financial asset when its contractual rights to the cash flows from the financial asset expire.

Impairment of non-financial assets

Intangible assets are tested for impairment at each reporting period if impairment indicators exist and immediately prior to a transfer of costs to Property and Equipment (“P&E”). The Company has elected to allocate all its intangible assets to each of its cash generating units or subsidiaries listed under principals of consolidation (“CGUs”). As a result, the Company assesses its intangible assets for impairment at a CGU level. When the carrying amount of the CGU or group of CGUs exceeds their recoverable amount, the CGU or group of CGUs is considered impaired and written down to its recoverable amount. Recoverable amount is the higher of (i) the fair value less costs to sell and (ii) the value in use. Fair value less costs to sell is determined as the amount obtainable from the sale of an asset or CGU in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. Value in use is generally computed by reference to the present value of the future cash flows expected to be derived from the asset or CGU discounted using a pre-tax discount rate reflecting market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognized within earnings or loss. A previously recognized impairment loss may be reversed if the assumptions used to determine the recoverable amount have changed since the impairment loss recognition. For non-goodwill assets an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and depletion, if no impairment loss had been recognized.

Financial liabilities

Recognition and initial measurement

The Company recognizes a financial liability when it becomes party to the contractual provisions of the instrument. At initial recognition, the Company measures financial liabilities at their fair value plus transaction costs that are directly attributable to their issuance, with the exception of financial liabilities subsequently measured at fair value through profit or loss for which transaction costs are immediately recorded in the consolidated statement of income (loss) and comprehensive income (loss).

Where an instrument contains both a liability and equity component, these components are recognized separately based on the substance of the instrument, with the liability component measured initially at fair value and the equity component assigned the residual amount.

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Financial liabilities (continued)

Classification and subsequent measurement

Subsequent to initial recognition, all financial liabilities are measured at amortized cost using the effective interest rate method. Interest, gains and losses relating to a financial liability are recognized in consolidated statement of income (loss) and comprehensive income (loss).

Derecognition of financial liabilities

The Company derecognizes a financial liability only when its contractual obligations are discharged, cancelled or expire.

Discontinued operations and assets held for distribution

A non-current asset or a group of assets and liabilities is held for distribution when its carrying amount will be recovered principally through its divestiture and not by continuing utilization. To meet this definition, the asset must be available for immediate sale, and divestiture must be highly probably. These assets and liabilities are recognized as assets held for distribution and liabilities associated with assets held for distribution, without offset. An operation is qualified as discontinued when it represents a separate major line of business and the criteria for classification as an asset held for distribution has been made or the Company has sold the asset. Discontinued operations are presented on a single line of the statement of (loss) income and comprehensive (loss) income for the periods reported, comprising the earnings after tax of discontinued operations until divestiture and the gain or loss after tax on sale or fair value measurement, less costs to sell the assets and liabilities making up the discontinued operations are presented on one separate line of the statement of consolidated cash flows for the periods presented.

Property and equipment

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

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

Intangible assets

The Company has recorded various intangible assets consisting primarily of non-compete agreements, trademarks, customer contracts and customer relationships.

Non-compete agreements are the value associated with the non-compete agreements entered by the sellers of purchased companies.

PROTECH HOME MEDICAL CORP. 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

September 30, 2019 and 2018 

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

Intangible assets (continued)

Trademarks are the purchase price allocation for the value associated with the trade name of the acquired Company.

Customer contracts are comprised of the purchase price allocation of the present value of expected future customer billings based on the statistical life of a customer.

Customer relationships are the value given in the purchase price allocation to the long-term associations with referral sources such as doctors, medical centers, etc.

Finite life intangible assets are amortized on a straight-line basis over the estimated useful lives of the related assets as follows:

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

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

Accounts receivable represents amounts due from insurance companies and patients: