AKUMIN INC (2018) ?· Akumin Inc. Condensed Interim Consolidated Balance Sheets (Unaudited) (expressed…

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<p>Akumin Inc. </p> <p>Condensed Interim Consolidated Financial Statements (Unaudited) September 30, 2018 (expressed in US dollars unless otherwise stated) </p> <p>Akumin Inc. Table of Contents </p> <p>CONTENTS</p> <p>Page</p> <p>Condensed Interim Consolidated Financial Statements (Unaudited) </p> <p>Condensed Interim Consolidated Balance Sheets 1 </p> <p>Condensed Interim Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss) 2 </p> <p>Condensed Interim Consolidated Statements of Changes in Equity 3 </p> <p>Condensed Interim Consolidated Statements of Cash Flows 4 </p> <p>Notes to Condensed Interim Consolidated Financial Statements 5 - 28 </p> <p>Akumin Inc. Condensed Interim Consolidated Balance Sheets </p> <p>(Unaudited) </p> <p>(expressed in US dollars unless otherwise stated) </p> <p>(1)</p> <p>Approved by the Board of Directors </p> <p> (signed) Riadh Zine Director (signed) Tom Davies Director </p> <p>The accompanying notes are an integral part of these condensed interim consolidated financial statements.</p> <p>September 30, 2018 </p> <p>$</p> <p>December 31,2017 </p> <p>$</p> <p>Assets</p> <p>Current assetsCash 20,370,228 12,145,481Accounts receivable (note 5) 26,094,634 12,968,010Prepaid expenses 469,048 381,144</p> <p>46,933,910 25,494,635</p> <p>Security deposits and other assets 810,044 209,335</p> <p>Property and equipment (note 6) 51,200,237 42,002,927</p> <p>Goodwill 118,663,175 100,777,451</p> <p>Intangible assets 3,175,019 2,264,041</p> <p>220,782,385 170,748,389</p> <p>Liabilities</p> <p>Current liabilitiesAccounts payable and accrued liabilities 14,123,277 14,578,538Finance leases (note 7) 493,764 528,895Senior loans payable (notes 8 and 9) 1,612,615 3,016,958</p> <p>16,229,656 18,124,391</p> <p>Finance leases (note 7) 1,725,774 2,062,103</p> <p>Senior loans payable (notes 8 and 9) 98,129,774 70,156,708</p> <p>Subordinated note payable (note 10) 1,491,716 -</p> <p>Subordinated note - Earn-out (note 10) 166,121 -</p> <p>117,743,041 90,343,202</p> <p>Shareholders Equity</p> <p>Common shares (note 11) 120,926,620 83,771,904Warrants (note 11) 1,742,910 1,310,661Contributed surplus 6,670,349 2,205,784</p> <p>Deficit (28,849,284) (13,223,745)</p> <p>Equity attributable to shareholders of Akumin Inc. 100,490,595 74,064,604</p> <p>Non-controlling interests 2,548,749 6,340,583</p> <p>103,039,344 80,405,187</p> <p>220,782,385 170,748,389</p> <p>Commitments and contingencies (note 12) </p> <p>Subsequent events (note 17)</p> <p>Akumin Inc. Condensed Interim Consolidated Statements of Net Income (Loss) and </p> <p>Comprehensive Income (Loss) </p> <p>(Unaudited) </p> <p>(expressed in US dollars unless otherwise stated) </p> <p>(2)</p> <p>The accompanying notes are an integral part of these condensed interim consolidated financial statements.</p> <p>Three-month period ended September 30, </p> <p>2018 $</p> <p>Three-monthperiod ended </p> <p>September 30, 2017 </p> <p>$</p> <p>Nine-month period ended September 30, </p> <p>2018 $</p> <p>Nine-month period ended September 30, </p> <p>2017 $</p> <p>RevenueService fees - net of allowances and </p> <p>discounts 38,316,457 23,488,721 107,243,804 54,139,063Other revenue 814,139 618,363 2,086,732 1,441,950</p> <p>39,130,596 24,107,084 109,330,536 55,581,013</p> <p>ExpensesEmployee compensation 14,733,517 9,529,177 38,387,117 21,439,479Reading fees 5,142,654 3,994,614 14,795,857 8,744,433Rent and utilities 4,292,354 3,018,759 11,461,327 7,688,979Third party services and professional fees 3,003,890 2,339,452 8,706,414 4,569,338Administrative 1,778,987 1,391,350 6,360,998 2,942,472Medical supplies and other expenses 1,383,446 1,095,726 4,104,805 3,037,536Depreciation and amortization 2,576,851 1,623,417 6,848,850 3,564,185Stock-based compensation 1,423,998 1,980,713 4,464,565 2,442,140Interest expense 1,482,079 1,291,371 4,200,877 3,102,402Impairment of property and equipment - 130,086 638,336 130,086Settlement costs (recoveries) (99,100) 21,000 29,494 29,500Provisions - (30,000) - 700,000Acquisition related costs 255,954 3,412,557 919,602 3,542,117Public offering costs - 498,857 813,545 498,857Financial instruments revaluation, </p> <p>unrealized foreign exchange loss and other (gains) losses 2,425,933 3,242,555 2,318,994 3,324,490</p> <p>38,400,563 33,539,634 104,050,781 65,756,014</p> <p>Income (loss) before income taxes 730,033 (9,432,550) 5,279,755 (10,175,001)</p> <p>Income tax provision 23,648 1,639 327,038 11,497 </p> <p>Net income (loss) and comprehensive income (loss) for the period 706,385 (9,434,189) 4,952,717 (10,186,498)</p> <p>Non-controlling interests 511,389 555,217 2,162,027 555,217 </p> <p>Net income (loss) attributable to common shareholders 194,996 (9,989,406) 2,790,690 (10,741,715)</p> <p>Net income (loss) per shareBasic and diluted (note 16) 0.00 (0.29) 0.05 (0.35)</p> <p>Akumin Inc. Condensed Interim Consolidated Statements of Changes in Equity </p> <p>(Unaudited) </p> <p>(expressed in US dollars unless otherwise stated) </p> <p>(3)</p> <p>The accompanying notes are an integral part of these condensed interim consolidated financial statements.</p> <p>Common shares </p> <p>$Warrants </p> <p>$</p> <p>Contributed surplus </p> <p>$Deficit </p> <p>$</p> <p>Non-controlling </p> <p>interests $</p> <p>Total equity </p> <p>$</p> <p>Balance - September 30, 2016 11,004,683 475,180 713,560 (4,719,751) - 7,473,672</p> <p>Net loss and comprehensive loss - - - (341,666) - (341,666)Stock-based compensation expense - - 230,713 - - 230,713</p> <p>Balance - December 31, 2016 11,004,683 475,180 944,273 (5,061,417) - 7,362,719</p> <p>Acquisition of non-controlling interests 7,718,242 7,718,242Net loss and comprehensive loss - - - (10,741,715) 555,217 (10,186,498)Issuance of common shares - net of issuance costs 25,099,570 - 1,750,000 - - 26,849,570RSUs and warrants exercised 4,472,936 (292,936) (3,500,000) 680,000Issuance of warrants - 33,229,285 - - - 33,229,285Stock-based compensation expense - - 2,442,140 - - 2,442,140Payment to non-controlling interests (1,678,054) (1,678,054)</p> <p>Balance - September 30, 2017 40,577,189 33,411,529 1,636,413 (15,803,132) 6,595,405 66,417,404</p> <p>Balance - December 31, 2017 83,771,904 1,310,661 2,205,784 (13,223,745) 6,340,583 80,405,187</p> <p>Acquisition of non-controlling interests - - - (18,416,229) (3,074,268) (21,490,497)Net income and comprehensive income - - - 2,790,690 2,162,027 4,952,717Issuance of common shares - net of issuance costs</p> <p>Acquisition consideration 3,709,588 - - - - 3,709,588Public offering 32,444,362 - - - - 32,444,362</p> <p>Warrants exercised 1,000,766 (302,130) - - - 698,636Issuance of warrants - 734,379 - - - 734,379Stock-based compensation expense - - 4,464,565 - - 4,464,565Payment to non-controlling interests - - - - (2,879,593) (2,879,593)</p> <p>Balance - September 30, 2018 120,926,620 1,742,910 6,670,349 (28,849,284) 2,548,749 103,039,344</p> <p>Akumin Inc. Condensed Interim Consolidated Statements of Cash Flows </p> <p>(Unaudited) </p> <p>(expressed in US dollars unless otherwise stated) </p> <p>(4)</p> <p>The accompanying notes are an integral part of these condensed interim consolidated financial statements.</p> <p>Nine-monthperiod ended </p> <p>September 30, 2018 </p> <p>$</p> <p>Nine-monthperiod ended </p> <p>September 30, 2017 </p> <p>$</p> <p>Cash flows provided by (used in)</p> <p>Operating activitiesNet income (loss) for the period 4,952,717 (10,186,498)Add</p> <p>Depreciation and amortization 6,848,850 3,564,185Stock-based compensation 4,464,565 2,442,140Impairment of property and equipment 638,336 130,086Interest expense accretion of debt 475,500 720,005Financial instruments revaluation, unrealized foreign exchange loss </p> <p>and other (gains) losses 2,318,994 3,324,490Changes in non-cash working capital</p> <p>Accounts receivable (11,807,476) 1,611,130Prepaid expenses and security deposits and other assets (500,821) 52,099Accounts payable and accrued liabilities (4,545,786) 2,077,584</p> <p>2,844,879 3,735,221</p> <p>Investing activitiesProperty and equipment and intangible assets (5,891,514) (3,454,443)Business acquisitions - net of cash acquired (note 4) (23,315,703) (76,146,906)Acquisition of non-controlling interests (note 11) (17,780,909) -</p> <p>(46,988,126) (79,601,349)</p> <p>Financing activitiesLoans proceeds 100,000,000 46,759,883Loans repayments (76,029,409) (326,651)Issuance costs - loans (2,211,914) (3,033,591)Finance leases - net (388,467) (86,846)Capital stock - special warrants - 32,929,579Capital stock - common shares 35,698,637 11,176,600Equity issuance costs (1,821,260) (3,347,322)Payment to non-controlling interests (2,879,593) (1,678,054)</p> <p>52,367,994 82,393,598</p> <p>Increase in cash during the period 8,224,747 6,527,470</p> <p>Cash - Beginning of period 12,145,481 4,628,616</p> <p>Cash - End of period 20,370,228 11,156,086</p> <p>Supplemental informationInterest paid 3,727,548 2,387,317Income taxes paid 424,653 21,497</p> <p>Akumin Inc. Notes to Condensed Interim Consolidated Financial Statements </p> <p>(Unaudited) September 30, 2018 </p> <p>(expressed in US dollars unless otherwise stated) </p> <p>(5)</p> <p>1 Presentation of consolidated financial statements and nature of operations </p> <p>The operations of Akumin Inc. (Akumin or the Company) and its Subsidiaries (defined below) primarily consist </p> <p>of operating 90 outpatient diagnostic imaging centres located in Florida, Delaware, Pennsylvania, Texas, </p> <p>Illinois and Kansas. Thirteen of the current 40 Florida imaging centres were acquired from Tri-State Imaging </p> <p>Group, LP (TSIG) on October 1, 2014. The 26 Delaware and Pennsylvania imaging centres were acquired from </p> <p>Siemens Financial Services, Inc. (Siemens), in its capacity as the secured party with respect to the acquired </p> <p>assets (the NE Acquisition), following a foreclosure auction of certain assets of TSIG on April 21, 2016. On </p> <p>April 1, 2017, the Company acquired seven imaging centres in Florida: six from Altamonte Springs Diagnostic </p> <p>Imaging Inc. and one from Hatz, LLC and its affiliates. On August 9, 2017, the Company acquired a 100% equity </p> <p>interest in Preferred Medical Imaging, LLC (PMI, the Texas Acquisition), a Texas LLC, from certain selling </p> <p>security holders. PMI, through its subsidiaries, operates 24 diagnostic imaging centres in the Dallas-Fort </p> <p>Worth, Texas area, Chicago, Illinois and Wichita, Kansas. In connection with that acquisition, the Company also </p> <p>acquired a 100% equity interest in: (a) certain general partners of limited partnerships in which PMI has a </p> <p>direct or indirect ownership interest; (b) SyncMed, LLC (SyncMed), a Texas LLC, which provides maintenance </p> <p>services to PMI and its subsidiaries; and (c) Lonestar RCM, LLC (Lonestar), a Texas LLC that provides revenue </p> <p>and billing services to PMI and its subsidiaries in a manner similar to the services provided by Rev Flo (defined </p> <p>below) to Akumin and the Subsidiaries. On May 11, 2018, the Company acquired certain assets of four imaging </p> <p>centres in Florida and commenced operations at those centres through its wholly owned subsidiary, Akumin </p> <p>FL, LLC (Akumin FL). On August 15, 2018, the Company acquired 11 outpatient diagnostic imaging centres in </p> <p>the Tampa Bay Area through one of its wholly owned subsidiaries. The Company also owns Rev Flo, Inc. (Rev </p> <p>Flo), a New York company providing medical billing services in the United States. Rev Flo and Lonestar were </p> <p>amalgamated on September 30, 2017. </p> <p>The services offered by the Company (through the Subsidiaries) include magnetic resonance imaging (MRI), </p> <p>computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, </p> <p>ultrasound, digital radiography (X-ray), fluoroscopy and other related procedures. </p> <p>The Company has a diverse mix of payers, including private, managed care capitated and government payers. </p> <p>The registered and head office of Akumin is located at 151 Bloor Street West, Suite 603, Toronto, Ontario, M5S </p> <p>1S4. All operating activities are conducted through its wholly owned US subsidiary, Akumin Holdings Corp. and </p> <p>the wholly owned subsidiaries of Akumin Holdings Corp., namely, Akumin Corp., Tri-State Imaging FL </p> <p>Holdings, LLC (FL Holdings), Rev Flo, PMI, SyncMed and Akumin FL (collectively, the Subsidiaries), all of </p> <p>which are located in the United States. </p> <p>2 Basis of preparation </p> <p>These condensed interim consolidated financial statements for the three and nine months ended September 30, </p> <p>2018 have been prepared in accordance with International Accounting Standard (IAS) 34 - Interim Financial </p> <p>Reporting. The disclosures contained in these condensed interim consolidated financial statements do not </p> <p>include all of the requirements of International Financial Reporting Standards (IFRS) for annual financial </p> <p>statements. The condensed interim consolidated financial statements should be read in conjunction with the </p> <p>audited consolidated financial statements for the fifteen months ended December 31, 2017 and for the year </p> <p>Akumin Inc. Notes to Condensed Interim Consolidated Financial Statements </p> <p>(Unaudited) September 30, 2018 </p> <p>(expressed in US dollars unless otherwise stated) </p> <p>(6)</p> <p>ended September 30, 2016, which have been prepared in accordance with IFRS, as issued by the International </p> <p>Accounting Standards Board (IASB). The condensed interim consolidated financial statements are based on </p> <p>accounting policies as described in the December 31, 2017 consolidated financial statements, except for changes </p> <p>to the accounting policies described in note 3. </p> <p>Certain comparative information has been reclassified to conform with the presentation adopted in the current </p> <p>fiscal period.</p> <p>The condensed interim consolidated financial statements include all of the accounts of the Company and the </p> <p>Subsidiaries. All intercompany transactions and balances have been eliminated on consolidation. </p> <p>On November 13, 2018, the Board of Directors (the Board) authorized the condensed interim consolidated </p> <p>financial statements for issuance. </p> <p>3 Summary of significant accounting policies </p> <p>These condensed interim consolidated financial statements have been prepared using the significant accounting </p> <p>policies consistent with those applied in the Companys December 31, 2017 consolidated financial statements, </p> <p>except as described below relating to the adoption of IFRS 15, Revenue from Contracts with Customers </p> <p>(IFRS 15), IFRS 9, Financial Instruments (IFRS 9) and International Financial Reporting Interpretations </p> <p>Committee (IFRIC) 22. </p> <p>The Company adopted IFRS 15 as at January 1, 2018, with full retrospective application. Other new standards </p> <p>were also adopted as at January 1, 2018, including IFRS 9 and IFRIC 22, Foreign Currency Transactions and </p> <p>Advance Consideration, but they do not have a material effect on the Companys condensed interim </p> <p>consolidated financial statements. </p> <p>Adoption of IFRS 15</p> <p>Service fee revenue, net of contractual allowances and discounts, consists of net patient fees received from </p> <p>various payers and patients based mainly on established contractual billing rates, less allowances for </p> <p>contractual adjustments and discounts and allowances. This service fee revenue is primarily comprised of fees </p> <p>for the use of the Company...</p>

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