Annual Report for Fiscal Year Ending 09-30, 2025 (Form 10-K)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the audited consolidated financial statements and the accompanying notes. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described in Part I, Item 1A. "Risk Factors" and elsewhere in this Annual Report on Form 10-K.

The audited consolidated financial statements as of and for the years ended September 30, 2025 and 2024 (the "consolidated financial statements") of the Company were prepared in accordance with accounting principles generally accepted in the US ("GAAP").

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

Overview

Quipt business objective

The growth in the number of elderly patients in the US healthcare market is creating pressure to provide more efficient delivery systems. Healthcare providers, such as hospitals, physicians, and pharmacies, are seeking partners that can offer a range of products and services that improve outcomes, reduce hospital readmissions, and help control costs. Quipt fills this need by delivering a growing number of specialized products and services to achieve these goals. Quipt seeks to provide an ever-expanding line of products and services over larger geographic regions within the US using several growth strategies. With over 175 offices, Quipt employs approximately 1,600 employees in the US.

Recent transactions

On July 1, 2025, we completed the acquisition of Mediserve, a Tennessee-based full-service durable medical equipment provider. On September 1, 2025, we completed the acquisition of a 60% ownership interest in Hart, a Michigan-based provider of durable medical equipment, point-of-service products, and related services.

Future outlook

Our priority continues to be the generation of operating profit, positive cash flow, and growth in Adjusted EBITDA, a non-GAAP financial measure which is defined below, in fiscal year 2026 and beyond. As we continue to expand in our existing markets, we plan to leverage our business platforms to enter new markets and expand our product offerings. Our continued business integration and rationalization, and our prior acquisitions, have given us a focus and path toward revenue growth and profitability. We will continue to improve operational efficiencies and call center management as they are key execution points to maintaining our Adjusted EBITDA while growing revenues by cross selling products to existing and acquired patients.

Selected Annual Information ($ amounts in thousands, except per share amounts)

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Operating Results

The fiscal year ended September 30, 2025 presented us with a range of challenges that we absorbed in the period, which negatively impacted our financial performance and prevented us from achieving our target annualized organic growth.

The Medicare 75/25 blended rate ("Medicare 75/25"), which had been providing rate relief for certain geographies, was discontinued as of January 1, 2024‎. Medicare 75/25 was introduced in 2020.This rate adjustment, named after its 75%/25% allocation model, aimed to protect access to medical equipment products and services in non-rural, non-competitive bid areas by temporarily increasing Medicare reimbursement rates for providers serving those areas. This legislative action was designed to ensure that medical equipment suppliers could continue providing essential products and services. This blended rate was implemented to counter the decline in reimbursement rates experienced in the years prior to 2020. The discontinuance is still under legislative review, and Medicare 75/25 could return, but the cessation on January 1, 2024 had a negative impact ‎on our revenue and operating results in the fiscal year ended September 30, 2025.

Beginning during the fiscal year ended September 30, 2024 and continuing into the fiscal year end September 30, 2025, we also experienced the withdrawal of Medicare Advantage members due to a capitated agreement moving to other providers in the industry. Further, in November 2024, a disposable supply contract which the Company was a party to was not renewed.

The Company uses Change Healthcare, a subsidiary of UnitedHealth Group, to submit patient claims to certain non-Medicare payors for payment. UnitedHealth Group announced that on February 21, 2024, Change Healthcare's information technology systems were impacted by a cybersecurity incident ‎ (the "Change Healthcare Incident")‎. This incident significantly impacted the healthcare industry and hindered the ability to process and bill claims during the three months ended March 31, 2024 and June 30, 2024, creating a reduction in our cash flow, including collections of claims not directly impacted by the‎ Change Healthcare Incident that were slowed by the diversion of normal collection efforts to address the Change Healthcare Incident. The ultimate resolution of the Change Healthcare Incident also had a negative impact on our revenue and operating results during the fiscal year ended September 30, 2025.

The cumulative impact of these events on total revenue is estimated to be approximately $1,500,000 and $8,500,000 for the three and twelve months ended September 30, 2025, respectively.

Comparison of Results of Operations for the Years and Three Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations for the years and three months ended September 30, 2025 and 2024 (amounts in thousands, except per share amounts):

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Revenue

For the year ended September 30, 2025, revenue totaled $245,359,000, a decrease of $556,000, or 0.2%, from the year ended September 30, 2024. This decrease is primarily due to a reduction of approximately $8,500,000 from the challenges discussed in Operating Results above, and was mostly offset by $7,300,000 contributed by the acquisitions during the year ended September 30, 2025.

For the three months ended September 30, 2025, revenue totaled $68,313,000, an increase of $6,981,000, or 11.4%, from the three months ended September 30, 2024. This increase is primarily due to $7,300,000 contributed by the acquisitions during the three months ended September 30, 2025, which was partially offset by the challenges discussed in the Operating Results above.

Inventory sold

For the year ended September 30, 2025, inventory sold totaled $68,182,000, a 1.1% decrease as compared to $68,925,000 for the year ended September 30, 2024. The decrease was due to the decrease in revenue.

For the three months ended September 30, 2025, inventory sold totaled $20,406,000, a 15.5% increase from $17,664,000 for the three months ended September 30, 2024. The increase in dollars was due to the growth in revenues. As a percentage of revenue, inventory sold increased to 29.9% for the three months ended September 30, 2025 as compared to 28.8% for the three months ended September 30, 2024, due to the acquisitions' inventory sold being higher as a percentage of revenue. Additionally, estimated vendor rebates were lower due to the lack of growth in purchases required to achieve the same tier that was achieved for the year ended September 30, 2024.

Operating expenses

For the year ended September 30, 2025, operating expenses were $125,457,000, an increase of $2,915,000 from $122,542,000 for the year ended September 30, 2024. The acquisitions during the year ended September 30, 2025 contributed approximately $3,500,000 to the increase in operating expenses. This was offset by decreases in the remaining portion of the Company from reduced headcount and incentive compensation, and controls on discretionary spending such as marketing and travel.

For the three months ended September 30, 2025, operating expenses were $34,125,000, an increase of $2,679,000 from $31,446,000 for the three months ended September 30, 2024. The acquisitions during the three months ended September 30, 2025, contributed approximately $3,500,000 to the increase in operations. This was offset by decreases in the remaining portion of the Company from reduced headcount and incentive compensation, and controls on discretionary spending such as marketing and travel.

Right-of-use operating lease amortization and interest

Right-of-use operating lease amortization and interest increased by $460,000 to $6,434,000 for the year ended September 30, 2025 from $5,974,000 for the year ended September 30, 2024. The increase was due to new locations and, to a lesser extent, the impact of the acquisitions during the year ended September 30, 2025.

Right-of-use operating lease amortization and interest increased by $319,000 to $1,681,000 for the three months ended September 30, 2025 from $1,362,000 for the three months ended September 30, 2024. The increase was due to new locations and, to a lesser extent, the impact of the acquisitions during the three months ended September 30, 2025.

Depreciation expense

Depreciation expense increased by $939,000 to $39,429,000 for the year ended September 30, 2025 from $38,490,000 for the year ended September 30, 2024. This increase was primarily due to approximately $800,000 from the acquisitions during the year ended September 30, 2025.

Depreciation expense increased by $353,000 to $10,369,000 for the three months ended September 30, 2025 from $10,016,000 for the year ended September 30, 2024. The increase was primarily due to approximately $800,000 from the acquisitions during the three months ended September 30, 2025 offset by decreases in rental equipment depreciation due to the timing of additions.

Stock-based compensation

Stock-based compensation increased by $1,551,000 to approximately $4,035,000 for the year ended September 30, 2025 from $2,484,000 for the year ended September 30,2024 due to grants of restricted stock units and stock options during the year ended September 30, 2025.

Stock-based compensation increased by $1,079,000 to approximately $1,409,000 for the three months ended September 30, 2025 from $330,000 for the three months ended September 30, 2024 due to grants of restricted stock units and stock options during the year ended September 30, 2025.

Acquisition-related costs

Acquisition related costs increased by $416,000 to $817,000 for the year ended September 30, 2025 from $401,000 for the year ended September 30, 2024. This increase is due to acquisitions during the year ended September 30, 2025.

Acquisition related costs increased by $589,000 to $596,000 for the three months ended September 30, 2025 from $7,000 for the three months ended September 30, 2024, due to acquisitions during the year ended September 30 2025.

Gain on disposals of property and equipment

Gain on disposals of property and equipment increased to $1,225,000 for the year ended September 30, 2025 from $107,000 for the year ended September 30, 2024, as a result of proceeds received from the return of recalled ventilators to the manufacturer.

Gain on disposals of property and equipment increased to $329,000 for the three months ended September 30, 2025 from $55,000 for the three months ended September 30, 2024, as a result of proceeds received from the return of recalled ventilators to the manufacturer.

Interest expense, net of interest income

Interest expense, net of interest income, decreased by $104,000 to $6,277,000 for the year ended September 30, 2025 from $6,381,000 for the year ended September 30, 2024 as a result of lower average balances and lower interest rates on the Facility and equipment loans

Interest expense, net of interest income, increased $110,000 to $1,634,000 in the three months ended September 30, 2025 from $1,524,000 for the three months ended September 30, 2024, primarily due to the one month of interest on the borrowing under the Facility used to fund the acquisition of Hart.

Share of loss in equity method investment

Share of loss in equity method investment was a loss of $79,000 and $324,000 for the three months and year ended September 30, 2025, respectively. Share of loss in equity method investment was a loss of $67,000 and $309,000 for the three months and year ended September 30, 2024. This represents the Company's pro rata percentage of the net loss of DMEScripts, LLC, which was acquired in the year ended September 30, 2023.

Provision (benefit) for income taxes

The provision for income taxes of $241,000 for the year ended September 30, 2025 increased from $109,000 for the year ended September 30, 2024.

The provision for income taxes was $141,000 for the three months ended September 30, 2025, as compared to a benefit for income taxes of $374,000 for the three months ended September 30, 2024. The benefit in the three months ended September 30, 2024 primarily relates to the filing of the tax returns for the year ended September 30, 2023 being more favorable than originally estimated.

Net income attributed to noncontrolling interest

The net income attributable to noncontrolling interest was $121,000 for both the three months and year ended September 30, 2025. This is related to the Company acquiring a 60% ownership interest in Hart during the three months ended September 30, 2025.

Non-GAAP measures

Throughout this MD&A, references are made to a measure which is believed to be meaningful in the assessment of the Company's performance. This metric is a non-standard measure under GAAP and may not be identical to similar measures reported by other companies. Readers are cautioned that the disclosure of these items is meant to add to, and not replace, the discussion of financial results as determined in accordance with GAAP. The primary purpose of this non-GAAP measure is to provide supplemental information that may prove useful to investors who wish to consider the impact of certain non-cash or unusual items on the Company's operating performance. Management uses both GAAP and non-GAAP measures when planning, monitoring, and evaluating the Company's performance.

Adjusted EBITDA

This MD&A refers to "Adjusted EBITDA," which is a non-GAAP ‎financial measure that does not have standardized meaning prescribed by GAAP. The ‎Company's ‎presentation of this financial measure may not be comparable to similarly titled measures used by ‎other ‎companies. This financial measure is intended to provide additional information to investors concerning ‎the ‎Company's performance.‎

Adjusted EBITDA is defined as net income (loss), adjusted for net interest expense, depreciation, amortization, right-of-use operating lease amortization and interest, provision (benefit) for income taxes, certain professional fees, stock-based compensation, acquisition-related costs, gain on disposals of property and equipment, gain (loss) on foreign currency transactions, change in fair value of derivative liability - interest rate swap, and share of loss in equity method investment. Adjusted EBITDA is a non-GAAP measure that the Company uses as an indicator of financial health and excludes ‎several items which may be useful in the consideration of the financial condition of the Company.

Set forth below are descriptions of the material financial items that have been excluded from net income (loss) to calculate Adjusted EBITDA and the material limitations associated with using this non-GAAP financial measure.

The following table is a reconciliation of net loss to Adjusted EBITDA for the indicated periods‎ (amounts in thousands of $):

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Use of Proceeds

The following table provides information about the Company's recent debt and equity financings and the actual use of proceeds from those financings compared to the intended use of proceeds from the offerings.

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Financial Position

The following table is the Company's summarized financial position as of September 30, 2025 and 2024 (in thousands):

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Liquidity and Capital Resources

The Company's primary source of liquidity is cash on hand and its line of credit availability. As of September 30, 2025, the Company had cash on hand of $12,916,000 and revolving credit availability under the Facility of $9,050,000. The Company's approach in managing liquidity is to ensure, to the extent possible, that it will have enough liquidity to meet its liabilities when due. The Company will do so by continuously monitoring actual and expected cash flows and monitoring financial market conditions for signs of weakness. The Company faces minimal liquidity risk in its current financial obligations as they become due and payable.

Cash Flows

The following is a summary of the Company's cash flows for the following periods (in thousands):

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Operating Activities

Net cash flow provided by operating activities was $37,692,000 for the year ended September 30, 2025, an increase of $2,311,000 from $35,381,000 for the year ended September 30, 2024. For the year ended September 30, 2025, the change in working capital improved $6,572,000 to a use of cash of ($1,082,000) for the year ended September 30, 2025 as compared to a use of cash of ($7,654,000) for the year ended September 30, 2024, due primarily to the negative impact of the Change Healthcare Incident during the year ended September 30, 2024. This was partially offset by an increase in the net loss by $3,938,000 and the variance in the gain on disposals of property and equipment of $1,118,000.

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Investing Activities

Net cash flow used in investing activities was $32,945,000 for the year ended September 30, 2025, an increase of $22,632,000 from $10,313,000 for the year ended September 30, 2024, primarily due to the two acquisitions made during the year ended September 30, 2025 of $21,684,000.

Financing Activities

Net cash flow used in financing activities was $7,758,000 for the year ended September 30, 2025, a decrease of $18,389,000 from $26,147,000 for the year ended September 30, 2024. This was primarily due to the $17,400,000 borrowing on the delayed-draw term loan portion of the Facility to fund the acquisition of Hart in September 2025.

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Capital management

The Company considers its capital to be shareholders' equity, excluding noncontrolling interest, which totaled $100,498,000 as of September 30, 2025, and the Facility with a principal amount of $87,583,000 as of September 30, 2025.

The Company raises capital, as necessary, to meet its needs such as funding its working capital requirements and take advantage of perceived opportunities and, therefore, does not have a numeric target for its capital structure. Funds are primarily raised through credit facilities and other long-term debt arrangements, and the issuance of common shares. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the size of the Company, is reasonable.

The Company had the following equity instruments outstanding as of September 30, 2025 and September 30, 2024 (in thousands):

Financing

Historically and currently, the Company has financed its operations from cash flow from operations, borrowings on the Facility, equipment loans, leases, and through the issuance of equity.

Senior Credit Facility

The Company has a $110,000,000 senior credit facility with a group of US banks that matures in September 2027. The Facility consists of a delayed-draw term loan facility of $85,000,000, of which $83,600,000 has been drawn; a term loan of $5,000,000, which was drawn at closing; and a $20,000,000 revolving credit facility. The Facility is secured by substantially all assets of the Company and is subject to certain financial covenants, with which the Company was in compliance as of September 30, 2025.

A summary of the outstanding balances related to the Facility as of September 30, 2025 is as follows (in thousands):

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The delayed-draw term loan and the term loan are bearing interest at a weighted average 6.7% as of September 30, 2025. The rate is based on a secured overnight financing rate ("SOFR"), with a floor of 0.5%, plus a spread of 2.1% to 2.85% (2.4% as of September 30, 2025) based on the Company's leverage ratio and will reprice within three months. The revolving credit facility is bearing interest at 7.0% as of September 30, 2025 and will reprice within three months. The Facility also has fees for unused availability of 0.75% for the delayed-draw term loan and 0.25% for the revolving credit facility. The fair value of the Facility was determined considering market conditions, credit worthiness and the current terms of debt, which is considered Level 2 on the fair value hierarchy. Due to the near-term repricing of the interest rates, the fair value of the Facility approximates the principal value as of September 30, 2025 and 2024.

To manage the risks of the cash flows related to interest expense, the Company entered into several interest rate swaps on $54,000,000 of the principal amount of the Facility. The swaps carry a fixed SOFR of 3.4% to 4.4%, resulting in a weighted combined rate of 6.6%.

The swaps are settled quarterly and mature on September 30, 2026 and at the Facility's maturity. Any difference between the Facility's SOFR rate and the swap's rate is recorded as interest expense. For the year ended September 30, 2025 and 2024, a reduction of $228,000 and $311,000 to interest expense was recorded in the consolidated statements of income (loss), respectively.

As of September 30, 2025, the fair value of the interest rate swap liability, which was determined using Level 2 inputs of market conditions on future expected interest rates, credit worthiness, and the current terms of debt, was $670,000, as compared to $1,122,000 as of September 30, 2024 and is recorded in derivative liability - interest rate swap in the condensed consolidated statements of financial position. The Company has recorded the changes in fair value of derivative liability - interest rate swaps on the consolidated statements of income (loss).

Interest expense on the Facility, including the impact of the interest rate swap agreements, was $5,095,000 and $5,346,000 for the years ended September 30, 2025 and 2024, respectively.

The Company has incurred financing costs to obtain and maintain the Facility, which is reflected as a reduction of the outstanding balance and will be amortized as interest expense using the effective interest method over the life of the Facility. During the years ended September 30, 2025 and 2024, $563,000 and $513,000 of amortization of deferred financing costs was recorded, respectively.

Equipment Loans

The Company is offered financing arrangements from the Company's suppliers and the supplier's designated financial institution, in which payments for certain invoices or products can be financed and paid over an extended period. The financial institution pays the supplier when the original invoice becomes due, and the Company pays the third-party financial institution over a period of time. In most cases, the supplier accepts a discounted amount from the financial institution and the Company repays the financial institution the face amount of the invoice with no stated interest, in twelve

equal monthly installments. The Company uses its incremental borrowing rate of 6.6% to 8.0% to impute interest on these arrangements. The discount of the carrying amount from the face value of the loans is $252,000 as of September 30, 2025. The Company has also assumed equipment loans in conjunction with several of its acquisitions.

The balance of the loans as of September 30, 2025 is $12,215,000, with substantially all of the balance due within the next year.

Lease Liabilities

The Company enters into leases for real estate and vehicles. Real estate leases are operating leases and are valued at the net present value of the future lease payments at the incremental borrowing rate. Vehicle leases are finance leases and recorded at the rate implicit in the lease - a weighted average of 8.7% as of September 30, 2025 - based on the current value and the estimated residual value of the vehicle, if any. Future payments on these liabilities are as follows (in thousands):

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Quarterly operating results

Results of operations for the healthcare services market in which the Company operates show little seasonality from quarter to quarter. The increase in revenues from the past year is primarily due to the Company's acquisitions during the year ended September 30, 2025.

The following table provides selected historical information and other data, which should be read in conjunction with the consolidated financial statements of the Company (amounts in thousands except per share amounts).

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Related party transactions

The Company (through indirect wholly owned subsidiaries) has six leases for office, warehouse, and retail space with a rental company affiliated with the Company's Chief Executive Officer, the majority of which were entered into in 2015,

prior to such subsidiaries being acquired by the Company and prior to the Chief Executive Officer joining the Company, and five of which were renewed effective October 1, 2022. The leases have a combined area of 74,520 square feet. Lease payments under these leases were approximately $65,000 and $63,000 per month for the twelve months ended September 30, 2025 and 2024, respectively, with increases on October 1 of each year equal to the greater of (i) the Consumer Price Index for All Urban Consumers (CPI-U), and (ii) 3%. One lease expires in June 2026 and the remaining five leases expire on September 30, 2029.

Off balance sheet arrangements

The Company has no material undisclosed off balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on its results of operations or financial condition, revenues or expenses results of operations, liquidity, capital expenditures or capital resources.

Critical accounting estimates

Preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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. Actual results could differ from those estimates.

Estimates where management has made subjective judgments and where there is significant risk of material adjustments to assets and liabilities in future accounting periods included in the list below.

Accounts receivable

The Company estimates that a certain portion of receivables from customers may not be collected and maintains a reserve for expected pricing concessions and insurance denials. The Company evaluates the net realizable value of accounts receivable as of the date of the consolidated balance sheets, considering current and historical cash collections, the age of the accounts receivable, and relevant business conditions. Significant judgments are made in order to incorporate forward-looking information into the estimation of reserves and may result in changes to revenue and accounts receivable period to period which may significantly affect the Company's results of operations.

Intangible assets

The Company has recorded various intangible assets consisting primarily of non-compete agreements, trademarks, customer contracts and customer relationships in connection with various business acquisitions. Non-compete agreements are recognized at the estimated fair value associated with the non-compete agreements entered by the sellers of acquired companies. Trademarks are recognized at the estimated fair value associated with the trade name of the acquired company. Customer contracts are recognized at the estimated fair value of the present value of expected future customer billings based on the statistical life of a customer. Customer relationships are recognized based on the estimated fair value given to the long-term associations with referral sources such as doctors, medical centers, etc.

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.

The Company periodically evaluates the recoverability of long-lived assets whenever events and changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. When indicators of impairment are present, the carrying values of the assets are evaluated in relation to the operating performance and future undiscounted cash flows of the underlying business. The net book value of the underlying asset is adjusted to fair value if the sum of the expected

discounted cash flows is less than book value. Fair values are based on estimates of market prices and assumptions concerning the amount and timing of estimated future cash flows and discount rates, reflecting varying degrees of perceived risk. The Company did not have any long-lived asset impairments in the years ended September 30, 2025 or 2024.

Goodwill impairment

The Company tests goodwill for impairment on an annual basis on July 1, or more frequently if an event occurs or circumstances change that would indicate that impairment may exist. The Company determines the fair value of our reporting unit using the income approach and market approach to valuation, as well as other generally accepted valuation methodologies. The income approach utilizes a discounted cash flow analysis using management's assumptions. The market approach compares the reporting unit to similar companies with the assumption that companies operating in the same industry will share similar characteristics and that company values will correlate to those characteristics. If the carrying amount of the reporting unit exceeds the reporting unit's fair value, an impairment loss is recognized equal to the difference between the carrying amount and the estimated fair value of the reporting unit. The Company concluded that there was no impairment of goodwill during the years ended September 30, 2025 or 2024.

The approach uses cash flow projections based upon a financial forecast approved by management, covering a five-year period. Cash flows for the years thereafter are extrapolated using the estimated terminal growth rate. The risk premiums expected by market participants related to uncertainties about the industry and assumptions relating to future cash flows may differ or change quickly, depending on economic conditions and other events.

Foreign currency transactions

Transactions in foreign currencies are initially recorded at the foreign currency spot rate or the rate realized in the transaction. Monetary items are translated at the foreign currency spot rate as of the reporting date and 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 US 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.

Revenue recognition

Revenues are billed to, and collections are received from customers. 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 payor. Therefore, the amount billed by the Company is reduced to an estimate of the amount that the Company believes will be ultimately allowed by the insurance contract, including co-pays and deductibles. This estimate involves significant judgment including an analysis of past collections and historical modification rates. Management regularly reviews the actual claims approved by the insurance companies, adjusting estimated revenue as necessary.

The Company does not offer warranties to customers in excess of the manufacturer's warranty. Any taxes due upon sale of the products or services are not recognized as revenue. The Company does not have any partially or unfilled performance obligations related to contracts with customers and as such, the Company has no contract liabilities during the years ended September 30, 2025 and 2024.

Rental of medical equipment

Revenue that is generated from equipment that the Company rents to patients is primarily recognized over the noncancelable rental period, typically one month, and commences on delivery of the equipment to the patients. Revenues are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including private insurers, prepaid health plans, Medicare, Medicaid and patients. Rental revenue, less estimated adjustments, is recognized as earned on a straight-line basis over the noncancellable lease term.

Sales of medical equipment and supplies

The Company sells equipment, consumable supplies, and replacement parts to customers and recognizes revenue on delivery, as at that point all performance obligations have been met.

Shipping and handling

The Company provides shipping and handling at no charge in sending product to customers. The Company does not consider this a separate performance obligation since these shipping and handling activities occur before the customer obtains control of the goods. The shipping and handling are considered activities to fulfill the entity's promise to transfer the goods and are expensed within operating expenses.

Share-based payments

The Company grants stock options and restricted stock units to employees, members of the Board of Directors, and consultants. The Company measures equity settled share-based payments based on their fair value at the grant date and recognizes compensation expense on a straight-line basis over the vesting period. Fair value is measured using the Black-Scholes Model. In estimating fair value, management is required to make certain assumptions and estimates, such as the expected life of units, volatility of the Company's future share price, risk-free interest rates, and future dividend yields, at the initial grant date. Changes in assumptions used to estimate fair value could result in materially different results. The Company has elected to recognize the effect of forfeitures in compensation cost when they occur. Previously recognized compensation cost for an award is reversed in the period that the award is forfeited. Further, the Company has elected to use the contractual term as the expected term. Compensation expense is recognized on a straight-line basis, by amortizing the grant date fair value over the vesting period for each separately vesting portion of the award.

Loss per share

The Company presents basic and diluted loss per share data for its ordinary shares. Basic loss per share is calculated by dividing the net loss by the weighted average number of Common Shares outstanding during the period. Contingently issuable shares (including shares held in escrow) are not considered outstanding common shares and consequently are not included in the loss per share calculations. The Company's potentially dilutive common share equivalents are stock options and restricted stock units. The years ended September 30, 2025 and 2024 were periods of net losses, therefore, the potentially dilutive common share equivalents are excluded in the determination of dilutive net loss per share because their effect is antidilutive. In order to determine diluted loss per share, it is assumed that any proceeds from the exercise of dilutive instruments would be used to repurchase common shares at the average market price during the period.

Leases

Leases are classified as operating or finance leases based on the terms of the lease agreement and certain characteristics of the identified assets.

The Company's operating leases are for real estate and range from 2 to 11 years. The Company's finance leases are for vehicles and range from 2 to 7 years.

The Company's leases include fixed payments, as well as in some cases, scheduled base rent increases over the term of the lease. Certain leases require variable payments of common area maintenance, operating expenses, and real estate taxes applicable to the property. Variable payments are excluded from the measurements of lease liabilities and are expensed as incurred. Any tenant improvement allowances received from the lessor are recorded as a reduction to rent expense over the term of the lease. Some of the Company's vehicle lease agreements contain residual value guarantees.

The Company determines if an arrangement is a lease at the inception of the contract. Lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term for those arrangements where there is an identified asset, and the contract conveys the right to control its use. The right-of-use asset is measured at the

initial amount of the lease liability. Right-of-use assets are included in property and equipment in the Company's consolidated balance sheets.

Operating lease expense is recognized on a straight-line basis over the term of the lease. Finance lease cost includes a.) depreciation, which is recognized on a straight-line basis over the expected life of the right-of-use asset and included in depreciation in the Company's consolidated statements of income (loss), and b.) interest expense, which is recognized following an effective interest rate method and is included in interest expense in the Company's consolidated statements of income (loss).

The Company's real estate operating leases do not provide an implicit rate that can be easily determined. Therefore, the Company applies its incremental borrowing rate to the lease based on the information available at the commencement date. This estimate impacts the carrying amount of the lease liabilities and the interest expense recorded on the consolidated statement of income (loss). Vehicle finance leases are recorded at the interest rate implicit in the lease based on the current value and the estimated residual value of the vehicle.

Certain leases include one or more options to renew or terminate the lease at the Company's discretion. When the Company recognizes a lease, it assesses the lease term based on the conditions of the lease and determines whether it is probable that it will choose to extend the lease at the end of the initial lease term. This estimate could affect future results if the Company extends the lease or exercises an early termination option.

The Company accounts for non-lease and lease components to which they relate as a single lease component. Additionally, the Company recognized lease payments under short-term leases with an initial term of twelve months or less, as well as low value assets, as an expense on a straight-line basis over the lease term without recognizing the lease liability and ROU asset.

Income taxes

Deferred taxes are determined based on the differences between the financial statements and the tax bases using rates as enacted in the laws. A valuation allowance is established if it is "more likely than not" that all or a portion of the deferred tax assets will not be realized.

Interest and penalties related to unrecognized tax benefits are recognized in the tax provision. Liabilities for uncertain tax positions are recognized when it is more likely than not that a tax position will not be sustained upon examination and settlement with various taxing authorities. Liabilities for uncertain tax positions are measured based upon the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. There have not been any material interest or penalties during any of the years presented.

Business combinations

The Company accounts for business combinations using the acquisition method when control is obtained by the Company. The Company measures the consideration transferred, the assets acquired, and the liabilities assumed in a business combination at their acquisition-date fair values. Acquisition-related costs are recognized as expenses in the periods in which the costs are incurred, and the services are received. The excess of the consideration transferred to obtain control, over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed, is recognized as goodwill as of the acquisition date.

Contingent consideration for a business combination is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Contingent consideration that is classified as a liability is measured at subsequent reporting dates at fair value with the corresponding gain or loss being recognized in profit or loss.

Contractual Commitments and Obligations

The following table summarizes the Company's contractual commitments and obligations as of September 30, 2025 (in thousands), which are primarily for debt, leasing of offices and other obligations. The leases have been entered into with terms between one and ten years, including optional extensions.

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