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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
10-Q
☒ |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended May 31, 2022
☐ |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the transition period from ______, 20___, to _____, 20___.
Commission
File Number 001-40089
Novo
Integrated Sciences, Inc.
(Exact
Name of Registrant as Specified in its Charter)
Nevada |
|
59-3691650 |
(State
or Other Jurisdiction of
Incorporation or Organization) |
|
(I.R.S.
Employer
Identification
Number) |
11120
NE 2nd Street, Suite 100
Bellevue,
Washington |
|
98004 |
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
(206)
617-9797
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
name, former address and former fiscal year, if changed since last report)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each Exchange on which Registered |
Common
Stock |
|
NVOS |
|
The
Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated
filer |
☒ |
Smaller
reporting company |
☒ |
Emerging
growth company |
☐ |
|
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There
were 31,021,645 shares
of the Registrant’s $0.001 par value common stock outstanding as of July 13, 2022.
Novo
Integrated Sciences, Inc.
Contents
Item
1. Financial Statements.
NOVO
INTEGRATED SCIENCES, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
As
of May 31, 2022 (unaudited) and August 31, 2021
| |
| | |
| |
| |
May
31, | | |
August
31, | |
| |
2022 | | |
2021 | |
| |
| (unaudited) | | |
| | |
ASSETS | |
| | | |
| | |
Current
Assets: | |
| | | |
| | |
Cash
and cash equivalents | |
$ | 12,677,446 | | |
$ | 8,293,162 | |
Accounts
receivable, net | |
| 5,166,239 | | |
| 1,468,429 | |
Inventory,
net | |
| 645,063 | | |
| 339,385 | |
Other
receivables, current portion | |
| 1,209,137 | | |
| 814,157 | |
Prepaid
expenses and other current assets | |
| 380,800 | | |
| 218,376 | |
Total
current assets | |
| 20,078,685 | | |
| 11,133,509 | |
| |
| | | |
| | |
Property
and equipment, net | |
| 5,931,683 | | |
| 6,070,291 | |
Intangible
assets, net | |
| 32,192,858 | | |
| 32,029,499 | |
Right-of-use
assets, net | |
| 2,222,970 | | |
| 2,543,396 | |
Other
receivables, net of current portion | |
| - | | |
| 692,738 | |
Goodwill | |
| 11,366,618 | | |
| 9,488,848 | |
TOTAL
ASSETS | |
$ | 71,792,814 | | |
$ | 61,958,281 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current
Liabilities: | |
| | | |
| | |
Accounts
payable | |
$ | 1,621,719 | | |
$ | 1,449,784 | |
Accrued
expenses | |
| 1,243,792 | | |
| 1,129,309 | |
Accrued
interest (including amounts to related parties) | |
| 961,823 | | |
| 366,280 | |
Government
loans and notes payable, current portion | |
| 5,260,056 | | |
| 4,485,649 | |
Convertible
notes payable, net of discount of $0 | |
| 1,875,000 | | |
| - | |
Contingent
liability | |
| 750,860 | | |
| - | |
Due
to related parties | |
| 456,528 | | |
| 478,920 | |
Finance
lease liability, current portion | |
| 15,982 | | |
| 23,184 | |
Operating
lease liability, current portion | |
| 544,690 | | |
| 530,797 | |
Total
current liabilities | |
| 12,730,450 | | |
| 8,463,923 | |
| |
| | | |
| | |
Debentures,
related parties | |
| 981,337 | | |
| 982,205 | |
Notes
payable, net of current portion | |
| 158,645 | | |
| 5,133,604 | |
Convertible
notes payable, net of discount of $5,170,205 | |
| 10,252,017 | | |
| - | |
Finance
lease liability, net of current portion | |
| 8,563 | | |
| 16,217 | |
Operating
lease liability, net of current portion | |
| 1,734,790 | | |
| 2,057,805 | |
Deferred
tax liability | |
| 1,499,045 | | |
| 1,500,372 | |
TOTAL
LIABILITIES | |
| 27,364,847 | | |
| 18,154,126 | |
| |
| | | |
| | |
Commitments
and contingencies | |
| - | | |
| - | |
| |
| | | |
| | |
STOCKHOLDERS’
EQUITY | |
| | | |
| | |
Novo
Integrated Sciences, Inc. | |
| | | |
| | |
Convertible
preferred stock; $0.001 par value; 1,000,000 shares authorized; 0 and 0 shares issued and outstanding at May 31, 2022 and August
31, 2021, respectively | |
| | | |
| | |
Common
stock; $0.001
par value; 499,000,000
shares authorized; 30,659,073
and 26,610,144
shares issued and outstanding at May 31, 2022 and August 31, 2021, respectively | |
| 30,659 | | |
| 26,610 | |
Additional
paid-in capital | |
| 64,620,878 | | |
| 54,579,396 | |
Common
stock to be issued (4,308,591 and 3,622,199 shares at May 31, 2022 and August 31, 2021) | |
| 10,096,332 | | |
| 9,236,607 | |
Other
comprehensive income | |
| 1,015,993 | | |
| 991,077 | |
Accumulated
deficit | |
| (31,391,082 | ) | |
| (20,969,274 | ) |
Total
Novo Integrated Sciences, Inc. stockholders’ equity | |
| 44,372,780 | | |
| 43,864,416 | |
Noncontrolling
interest | |
| 55,187 | | |
| (60,261 | ) |
Total
stockholders’ equity | |
| 44,427,967 | | |
| 43,804,155 | |
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 71,792,814 | | |
$ | 61,958,281 | |
The
accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
NOVO
INTEGRATED SCIENCES, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For
the Three and Nine Months Ended May 31, 2022 and 2021 (unaudited)
| |
May
31, | | |
May
31, | | |
May
31, | | |
May
31, | |
| |
Three
Months Ended | | |
Nine
Months Ended | |
| |
May
31, | | |
May
31, | | |
May
31, | | |
May
31, | |
| |
2022 | | |
2021 | | |
2022 | | |
2021 | |
| |
(unaudited) | | |
(unaudited) | | |
(unaudited) | | |
(unaudited) | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 13,851,883 | | |
$ | 2,380,974 | | |
$ | 19,883,033 | | |
$ | 6,612,374 | |
| |
| | | |
| | | |
| | | |
| | |
Cost
of revenues | |
| 11,443,001 | | |
| 1,100,516 | | |
| 14,991,331 | | |
| 3,769,020 | |
| |
| | | |
| | | |
| | | |
| | |
Gross
profit | |
| 2,408,882 | | |
| 1,280,458 | | |
| 4,891,702 | | |
| 2,843,354 | |
| |
| | | |
| | | |
| | | |
| | |
Operating
expenses: | |
| | | |
| | | |
| | | |
| | |
Selling
expenses | |
| 9,802 | | |
| 2,381 | | |
| 36,340 | | |
| 4,226 | |
General
and administrative expenses | |
| 3,601,826 | | |
| 1,680,049 | | |
| 9,542,443 | | |
| 5,324,768 | |
Total
operating expenses | |
| 3,611,628 | | |
| 1,682,430 | | |
| 9,578,783 | | |
| 5,328,994 | |
| |
| | | |
| | | |
| | | |
| | |
Loss
from operations | |
| (1,202,746 | ) | |
| (401,972 | ) | |
| (4,687,081 | ) | |
| (2,485,640 | ) |
| |
| | | |
| | | |
| | | |
| | |
Non
operating income (expense) | |
| | | |
| | | |
| | | |
| | |
Interest
income | |
| 8,355 | | |
| 8,402 | | |
| 25,233 | | |
| 25,265 | |
Interest
expense | |
| (513,398 | ) | |
| (21,701 | ) | |
| (1,808,310 | ) | |
| (68,590 | ) |
Amortization
of debt discount | |
| (2,133,890 | ) | |
| - | | |
| (3,654,752 | ) | |
| - | |
Foreign
currency transaction gains (losses) | |
| 97,654 | | |
| - | | |
| (303,714 | ) | |
| - | |
Total
other income (expense) | |
| (2,541,279 | ) | |
| (13,299 | ) | |
| (5,741,543 | ) | |
| (43,325 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Income
tax expense | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net
loss | |
$ | (3,744,025 | ) | |
$ | (415,271 | ) | |
$ | (10,428,624 | ) | |
$ | (2,528,965 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
income (loss) attributed to noncontrolling interest | |
| 66,029 | | |
| (4,084 | ) | |
| (6,816 | ) | |
| (6,438 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
loss attributed to Novo Integrated Sciences, Inc. | |
$ | (3,810,054 | ) | |
$ | (411,187 | ) | |
$ | (10,421,808 | ) | |
$ | (2,522,527 | ) |
| |
| | | |
| | | |
| | | |
| | |
Comprehensive
loss: | |
| | | |
| | | |
| | | |
| | |
Net
loss | |
| (3,744,025 | ) | |
| (415,271 | ) | |
| (10,428,624 | ) | |
| (2,528,965 | ) |
Foreign
currency translation gain | |
| 13,711 | | |
| 123,521 | | |
| 24,916 | | |
| 176,349 | |
Comprehensive
loss: | |
$ | (3,730,314 | ) | |
$ | (291,750 | ) | |
$ | (10,403,708 | ) | |
$ | (2,352,616 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted
average common shares outstanding - basic and diluted | |
| 29,817,999 | | |
| 25,298,866 | | |
| 28,498,414 | | |
| 24,192,998 | |
| |
| | | |
| | | |
| | | |
| | |
Net
loss per common share - basic and diluted | |
$ | (0.13 | ) | |
$ | (0.02 | ) | |
$ | (0.37 | ) | |
$ | (0.10 | ) |
The
accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
NOVO
INTEGRATED SCIENCES, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For
the Three and Nine Months Ended May 31, 2022 and 2021 (unaudited)
| |
Shares | | |
Amount | | |
Capital | | |
Be
Issued | | |
Income | | |
Deficit | | |
Equity | | |
Interest | | |
Equity | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
Total | | |
| | |
| |
| |
| | |
| | |
Additional | | |
Common | | |
Other | | |
| | |
Novo | | |
| | |
| |
| |
Common
Stock | | |
Paid-in | | |
Stock
To | | |
Comprehensive | | |
Accumulated | | |
Stockholders’ | | |
Noncontrolling | | |
Total | |
| |
Shares | | |
Amount | | |
Capital | | |
Be
Issued | | |
Income | | |
Deficit | | |
Equity | | |
Interest | | |
Equity | |
Balance, August
31, 2021 | |
| 26,610,144 | | |
$ | 26,610 | | |
$ | 54,579,396 | | |
$ | 9,236,607 | | |
$ | 991,077 | | |
$ | (20,969,274 | ) | |
$ | 43,864,416 | | |
$ | (60,261 | ) | |
$ | 43,804,155 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock for services | |
| 35,000 | | |
| 35 | | |
| 64,715 | | |
| - | | |
| - | | |
| - | | |
| 64,750 | | |
| - | | |
| 64,750 | |
Common stock issued as collateral
and held in escrow | |
| 2,000,000 | | |
| 2,000 | | |
| (2,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Common stock to be issued for
purchase of Terragenx | |
| - | | |
| - | | |
| - | | |
| 983,925 | | |
| - | | |
| - | | |
| 983,925 | | |
| 97,311 | | |
| 1,081,236 | |
Common stock to be issued for
purchase of Mullin assets | |
| - | | |
| - | | |
| - | | |
| 188,925 | | |
| - | | |
| - | | |
| 188,925 | | |
| - | | |
| 188,925 | |
Value of warrants issued with
convertible notes | |
| - | | |
| - | | |
| 295,824 | | |
| - | | |
| - | | |
| - | | |
| 295,824 | | |
| - | | |
| 295,824 | |
Fair value of stock options | |
| - | | |
| - | | |
| 154,135 | | |
| - | | |
| - | | |
| - | | |
| 154,135 | | |
| - | | |
| 154,135 | |
Foreign currency translation
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (103,533 | ) | |
| - | | |
| (103,533 | ) | |
| (855 | ) | |
| (104,388 | ) |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,806,587 | ) | |
| (1,806,587 | ) | |
| (9,808 | ) | |
| (1,816,395 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, November 30, 2021 | |
| 28,645,144 | | |
| 28,645 | | |
| 55,092,070 | | |
| 10,409,457 | | |
| 887,544 | | |
| (22,775,861 | ) | |
| 43,641,855 | | |
| 26,387 | | |
| 43,668,242 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock for services | |
| 240,000 | | |
| 240 | | |
| 297,760 | | |
| - | | |
| - | | |
| - | | |
| 298,000 | | |
| - | | |
| 298,000 | |
Value of warrants issued with
convertible notes | |
| - | | |
| - | | |
| 5,257,466 | | |
| - | | |
| - | | |
| - | | |
| 5,257,466 | | |
| - | | |
| 5,257,466 | |
Fair value of stock options | |
| - | | |
| - | | |
| 44,427 | | |
| - | | |
| - | | |
| - | | |
| 44,427 | | |
| - | | |
| 44,427 | |
Foreign currency translation
gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| 114,738 | | |
| - | | |
| 114,738 | | |
| 355 | | |
| 115,093 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,805,167 | ) | |
| (4,805,167 | ) | |
| (63,037 | ) | |
| (4,868,204 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, February 28, 2022 | |
| 28,885,144 | | |
| 28,885 | | |
| 60,691,723 | | |
| 10,409,457 | | |
| 1,002,282 | | |
| (27,581,028 | ) | |
| 44,551,319 | | |
| (36,295 | ) | |
| 44,515,024 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock for services | |
| 125,000 | | |
| 125 | | |
| 313,875 | | |
| - | | |
| - | | |
| - | | |
| 314,000 | | |
| - | | |
| 314,000 | |
Common stock for conversion
of convertible notes | |
| 623,929 | | |
| 624 | | |
| 1,247,225 | | |
| - | | |
| - | | |
| - | | |
| 1,247,849 | | |
| - | | |
| 1,247,849 | |
Common stock for acquisition | |
| 800,000 | | |
| 800 | | |
| 1,703,200 | | |
| - | | |
| - | | |
| - | | |
| 1,704,000 | | |
| - | | |
| 1,704,000 | |
Common stock to be issued for
acquisitions | |
| - | | |
| - | | |
| - | | |
| 260,625 | | |
| - | | |
| - | | |
| 260,625 | | |
| 25,402 | | |
| 286,027 | |
Issuance of common stock to
be issued | |
| 225,000 | | |
| 225 | | |
| 573,525 | | |
| (573,750 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Fair value of stock options | |
| - | | |
| - | | |
| 91,330 | | |
| - | | |
| - | | |
| - | | |
| 91,330 | | |
| - | | |
| 91,330 | |
Foreign currency translation
gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| 13,711 | | |
| - | | |
| 13,711 | | |
| 51 | | |
| 13,762 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,810,054 | ) | |
| (3,810,054 | ) | |
| 66,029 | | |
| (3,744,025 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
May 31, 2022 | |
| 30,659,073 | | |
$ | 30,659 | | |
$ | 64,620,878 | | |
$ | 10,096,332 | | |
$ | 1,015,993 | | |
$ | (31,391,082 | ) | |
$ | 44,372,780 | | |
$ | 55,187 | | |
$ | 44,427,967 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, August 31, 2020 | |
| 23,466,236 | | |
$ | 23,466 | | |
$ | 44,905,454 | | |
$ | - | | |
$ | 1,199,696 | | |
$ | (16,507,127 | ) | |
$ | 29,621,489 | | |
$ | (49,859 | ) | |
$ | 29,571,630 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock issued for cash | |
| 21,905 | | |
| 22 | | |
| 91,978 | | |
| - | | |
| - | | |
| - | | |
| 92,000 | | |
| - | | |
| 92,000 | |
Common stock issued for services | |
| 65,000 | | |
| 65 | | |
| 247,935 | | |
| - | | |
| - | | |
| - | | |
| 248,000 | | |
| - | | |
| 248,000 | |
Foreign currency translation
gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,596 | | |
| - | | |
| 10,596 | | |
| (225 | ) | |
| 10,371 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (771,470 | ) | |
| (771,470 | ) | |
| (1,633 | ) | |
| (773,103 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, November 30, 2020 | |
| 23,553,141 | | |
| 23,553 | | |
| 45,245,367 | | |
| - | | |
| 1,210,292 | | |
| (17,278,597 | ) | |
| 29,200,615 | | |
| (51,717 | ) | |
| 29,148,898 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Exercise of stock options | |
| 7,500 | | |
| 8 | | |
| 11,992 | | |
| - | | |
| - | | |
| - | | |
| 12,000 | | |
| - | | |
| 12,000 | |
Common stock issued for intellectual
property | |
| 240,000 | | |
| 240 | | |
| 875,760 | | |
| - | | |
| - | | |
| - | | |
| 876,000 | | |
| - | | |
| 876,000 | |
Common stock to be issued for
services rendered | |
| - | | |
| - | | |
| - | | |
| 375,000 | | |
| - | | |
| - | | |
| 375,000 | | |
| - | | |
| 375,000 | |
Rounding due to stock split | |
| 957 | | |
| 1 | | |
| (1 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Fair value of vested stock
options | |
| - | | |
| - | | |
| 22,215 | | |
| - | | |
| - | | |
| - | | |
| 22,215 | | |
| - | | |
| 22,215 | |
Foreign currency translation
gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| 42,232 | | |
| - | | |
| 42,232 | | |
| (965 | ) | |
| 41,267 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,339,870 | ) | |
| (1,339,870 | ) | |
| (721 | ) | |
| (1,340,591 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, February 28, 2021 | |
| 23,801,598 | | |
| 23,802 | | |
| 46,155,333 | | |
| 375,000 | | |
| 1,252,524 | | |
| (18,618,467 | ) | |
| 29,188,192 | | |
| (53,403 | ) | |
| 29,134,789 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common stock for services | |
| 100,000 | | |
| 100 | | |
| 374,900 | | |
| (375,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Common stock issued for acquisition | |
| 189,796 | | |
| 190 | | |
| 430,647 | | |
| - | | |
| - | | |
| - | | |
| 430,837 | | |
| - | | |
| 430,837 | |
Common stock issued for services
rendered | |
| 9,913 | | |
| 9 | | |
| 37,163 | | |
| - | | |
| - | | |
| - | | |
| 37,172 | | |
| - | | |
| 37,172 | |
Common stock issued for cash,
net of offering costs | |
| 2,388,050 | | |
| 2,388 | | |
| 7,233,192 | | |
| - | | |
| - | | |
| - | | |
| 7,235,580 | | |
| - | | |
| 7,235,580 | |
Fair value of vested stock
options | |
| - | | |
| - | | |
| 66,640 | | |
| - | | |
| - | | |
| - | | |
| 66,640 | | |
| - | | |
| 66,640 | |
Foreign currency translation
gain | |
| - | | |
| - | | |
| - | | |
| - | | |
| 123,521 | | |
| - | | |
| 123,521 | | |
| (3,143 | ) | |
| 120,378 | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (411,187 | ) | |
| (411,187 | ) | |
| (4,084 | ) | |
| (415,271 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
May 31, 2021 | |
| 26,489,357 | | |
$ | 26,489 | | |
$ | 54,297,875 | | |
$ | - | | |
$ | 1,376,045 | | |
$ | (19,029,654 | ) | |
$ | 36,670,755 | | |
$ | (60,630 | ) | |
$ | 36,610,125 | |
The
accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
NOVO
INTEGRATED SCIENCES, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the Nine Months Ended May 31, 2022 and 2021 (unaudited)
| |
May 31, | | |
May 31, | |
| |
Nine
Months Ended | |
| |
May 31, | | |
May 31, | |
| |
2022 | | |
2021 | |
| |
(unaudited) | | |
(unaudited) | |
| |
| | |
| |
CASH FLOWS FROM OPERATING
ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (10,428,624 | ) | |
$ | (2,528,965 | ) |
Adjustments to reconcile
net loss to net cash used in operating
activities: | |
| | | |
| | |
Depreciation and amortization | |
| 2,349,434 | | |
| 1,118,925 | |
Fair value of vested stock
options | |
| 289,892 | | |
| 88,855 | |
Common stock issued for
services | |
| 676,750 | | |
| 660,172 | |
Operating lease expense | |
| 418,188 | | |
| 467,864 | |
Amortization of debt discount | |
| 3,654,752 | | |
| - | |
Foreign currency transaction
losses | |
| 303,714 | | |
| - | |
Changes in operating assets
and liabilities: | |
| | | |
| | |
Accounts receivable | |
| (3,650,069 | ) | |
| 543,213 | |
Inventory | |
| (263,539 | ) | |
| - | |
Prepaid expenses and other
current assets | |
| (150,632 | ) | |
| (143,590 | ) |
Accounts payable | |
| 117,056 | | |
| (97,659 | ) |
Accrued expenses | |
| (68,871 | ) | |
| 64,513 | |
Accrued interest | |
| 598,904 | | |
| 7,455 | |
Operating
lease liability | |
| (406,862 | ) | |
| (460,063 | ) |
Net cash used in operating
activities | |
| (6,559,907 | ) | |
| (279,280 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING
ACTIVITIES: | |
| | | |
| | |
Purchase of property and
equipment | |
| (190,973 | ) | |
| (201,369 | ) |
Cash acquired from (paid
for) acquisition | |
| 57,489 | | |
| (10,000 | ) |
Payment on other receivable | |
| 296,138 | | |
| - | |
Amounts
loaned for other receivables | |
| - | | |
| (470,040 | ) |
Net cash provided by
(used in) investing activities | |
| 162,654 | | |
| (681,409 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING
ACTIVITIES: | |
| | | |
| | |
Repayments to related parties | |
| (21,932 | ) | |
| (177,534 | ) |
Repayments of finance leases | |
| (14,797 | ) | |
| - | |
Repayments of notes payable | |
| (4,430,794 | ) | |
| - | |
Proceeds from the sale
of common stock, net of offering costs | |
| - | | |
| 7,327,580 | |
Proceeds from exercise
of stock options | |
| - | | |
| 12,000 | |
Proceeds
from issuance of convertible notes, net | |
| 15,270,000 | | |
| - | |
Net cash provided by
financing activities | |
| 10,802,477 | | |
| 7,162,046 | |
| |
| | | |
| | |
Effect of exchange rate
changes on cash and cash equivalents | |
| (20,940 | ) | |
| 97,970 | |
| |
| | | |
| | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | |
| 4,384,284 | | |
| 6,299,327 | |
| |
| | | |
| | |
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |
| 8,293,162 | | |
| 2,067,718 | |
| |
| | | |
| | |
CASH
AND CASH EQUIVALENTS, END OF PERIOD | |
$ | 12,677,446 | | |
$ | 8,367,045 | |
| |
| | | |
| | |
CASH PAID FOR: | |
| | | |
| | |
Interest | |
$ | 1,294,912 | | |
$ | 33,183 | |
Income
taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES: | |
| | | |
| | |
Common
stock to be issued for intangible assets | |
$ | 188,925 | | |
$ | 876,000 | |
Common
stock to be issued for acquisitions | |
$ | 1,244,550 | | |
$ | - | |
Common
stock issued for acquisition | |
$ | 1,704,000 | | |
$ | 430,837 | |
Conversion
of convertible notes payable and accrued interest to common stock | |
$ | 1,247,849 | | |
$ | - | |
The
accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
NOVO
INTEGRATED SCIENCES, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2022 and 2021 (unaudited)
Note
1 - Organization and Basis of Presentation
Organization
and Line of Business
Novo
Integrated Sciences, Inc. (“Novo Integrated” or the “Company”) was incorporated in Delaware on November 27, 2000,
under the name Turbine Truck Engines, Inc. On February 20, 2008, the Company was re-domiciled to the State of Nevada. Effective July
12, 2017, the Company’s name was changed to Novo Integrated Sciences, Inc. When used herein, the terms the “Company,”
“we,” “us” and “our” refer to Novo Integrated and its consolidated subsidiaries.
The
Company owns Canadian and U.S. subsidiaries which provide, or intend to provide, essential and differentiated solutions to the delivery
of multidisciplinary primary care and related wellness products through the integration of medical technology, interconnectivity, advanced
therapeutics, diagnostic solutions, unique personalized product offerings, and rehabilitative science.
We
believe that “decentralizing” healthcare, through the integration of medical technology and interconnectivity, is an essential
solution to the rapidly evolving fundamental transformation of how non-catastrophic healthcare is delivered now and how it will be delivered
in the future. Specific to non-critical care, ongoing advancements in both medical technology and inter-connectivity are allowing for
a shift of the patient/practitioner relationship to the patient’s home and away from on-site visits to primary medical centers
with mass-services. This acceleration of “ease-of-access” in the patient/practitioner interaction for non-critical care diagnosis
and subsequent treatment minimizes the degradation of non-critical health conditions to critical conditions as well as allowing for more
cost-effective and efficient healthcare distribution.
The
Company’s decentralized healthcare business model is centered on three primary pillars to best support the transformation of non-catastrophic
healthcare delivery to patients and consumers:
|
● |
First
Pillar – Service Networks: Deliver multidisciplinary primary care services through (i) an affiliate network of clinic facilities,
(ii) small and micro footprint sized clinic facilities primarily located within the footprint of box-store commercial enterprises,
(iii) clinic facilities operated through a franchise relationship with the Company, and (iv) corporate operated clinic facilities. |
|
|
|
|
● |
Second
Pillar – Technology: Develop, deploy, and integrate sophisticated interconnected technology, interfacing the patient to the
healthcare practitioner thus expanding the reach and availability of the Company’s services, beyond the traditional clinic
location, to geographic areas not readily providing advanced, peripheral based healthcare services, including the patient’s
home. |
|
|
|
|
● |
Third
Pillar – Products: Develop and distribute effective, personalized health and wellness product solutions allowing for the customization
of patient preventative care remedies and ultimately a healthier population. The Company’s science-first approach to product
innovation further emphasizes our mandate to create and provide over-the-counter preventative and maintenance care solutions. |
Innovation
through science, combined with the integration of sophisticated, secure technology, assures Novo Integrated of continued cutting edge
advancement in patient first platforms.
On
April 25, 2017 (the “Effective Date”), we entered into a Share Exchange Agreement (the “Share Exchange Agreement”)
by and between (i) Novo Integrated; (ii) Novo Healthnet Limited, a wholly owned subsidiary of the Company (“NHL”), (iii)
ALMC-ASAP Holdings Inc. (“ALMC”); (iv) Michael Gaynor Family Trust (the “MGFT”); (v) 1218814 Ontario Inc. (“1218814”)
and (vi) Michael Gaynor Physiotherapy Professional Corp. (“MGPP,” and together with ALMC, MGFT and 1218814, the “NHL
Shareholders”). Pursuant to the terms of the Share Exchange Agreement, Novo Integrated agreed to acquire, from the NHL Shareholders,
all of the shares of both common and preferred stock of NHL held by the NHL Shareholders in exchange for the issuance, by Novo Integrated
to the NHL Shareholders, of Novo Integrated common stock such that following the closing of the Share Exchange Agreement, the NHL Shareholders
would own 16,779,741 restricted shares of Novo Integrated common stock, representing 85% of the issued and outstanding Novo Integrated
common stock, calculated including all granted and issued options or warrants to acquire Novo Integrated common stock as of the Effective
Date, but to exclude shares of Novo Integrated common stock that are subject to a then-current Regulation S offering that was undertaken
by Novo Integrated (the “Exchange”).
On
May 9, 2017, the Exchange closed and, as a result, NHL became a wholly owned subsidiary of Novo Integrated. The Exchange was accounted
for as a reverse acquisition under the purchase method of accounting since NHL obtained control of Novo Integrated Sciences, Inc. Accordingly,
the Exchange was recorded as a recapitalization of NHL, with NHL being treated as the continuing entity. The historical financial statements
presented are the financial statements of NHL. The Share Exchange Agreement was treated as a recapitalization and not as a business combination;
therefore, no pro forma information is disclosed. At the closing date of the Exchange, the net assets of the legal acquirer, Novo Integrated
Sciences, Inc., were $6,904.
Reverse
Stock Split
On
February 1, 2021, the Company effected a 1-for-10 reverse stock split of our common stock. As a result of the reverse stock split, every
10 shares of issued and outstanding common stock were exchanged for one share of common stock, with any fractional shares being rounded
up to the next higher whole share. Unless otherwise noted, the share and per share information in this report have been retroactively
adjusted to give effect to the 1-for-10 reverse stock split.
Impact
of COVID-19
In
December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. On March 17, 2020, as a result of COVID-19
pandemic having been reported throughout both Canada and the United States, certain national, provincial, state and local governmental
authorities issued proclamations and/or directives aimed at minimizing the spread of COVID-19. Accordingly, on March 17, 2020, the Company
closed all corporate clinics for all in-clinic non-essential services to protect the health and safety of its employees, partners, and
patients. Commencing in May 2020, the Company was able to begin providing some services, and was fully operational again in June 2020.
As of May 31, 2022, all corporate clinics were open and operational, with staffing shortages in some facilities due to ongoing COVID-19
residual impact, while following all mandated guidelines and protocols from Health Canada, the Ontario Ministry of Health, and the respective
disciplines’ regulatory Colleges to ensure a safe treatment environment for our staff and clients, and our eldercare operations
are fully operational. In addition, Acenzia Inc. (“Acenzia”), Terragenx Inc. (“Terragenx”), PRO-DIP, LLC (“PRO-DIP”),
and Clinical Consultants International LLC (“CCI”), each of which is a wholly owned subsidiary of Novo Integrated, are open
and fully operational, with staffing shortages due to ongoing COVID-19 residual impact, while following all local, state, provincial,
and national guidelines and protocols related to minimizing the spread of the COVID-19 pandemic.
Canadian
federal and provincial COVID-19 governmental proclamations and directives, including interprovincial travel restrictions, have presented
unprecedented challenges to launching our Harvest Gold Farms and Kainai Cooperative joint ventures during the period ended May 31, 2022.
The Company intends to commence pilot projects for each joint venture in the period ended August 31, 2022. These joint ventures relate
to the development, management, and arrangement of medicinal farming projects involving industrial hemp for medicinal Cannabidiol (CBD)
applications.
While
all of the Company’s business units are operational at the time of this filing, any future impact of the COVID-19 pandemic on the
Company’s operations remains unknown and will depend on future developments, which are highly uncertain and cannot be predicted
with confidence, including, but not limited to, (i) the duration of the COVID-19 outbreak and additional variants that may be identified,
(ii) new information which may emerge concerning the severity of the COVID-19 pandemic, and (iii) any additional preventative and protective
actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced
patient traffic, and reduced operations.
For
more on the financial impact of COVID-19 on the Company, see “—Liquidity and Capital Resources—Financial Impact of
COVID-19” of this quarterly report on Form 10-Q.
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements were prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”) and in conformity with accounting principles generally accepted in
the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which
in the opinion of management, are necessary to fairly state the Company’s financial position, the results of its operations, and
cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared
in accordance with U.S. GAAP were omitted pursuant to such rules and regulations.
The
financial information contained in this report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year
ended August 31, 2021, that the Company filed on December 14, 2021. The results of operations for the nine months ended May 31, 2022
are not necessarily indicative of the results for the fiscal year ending August 31, 2022. The Company’s Canadian subsidiaries’
functional currency is the Canadian Dollar (“CAD”); however, the accompanying unaudited condensed consolidated financial
statements were translated and presented in United States Dollars (“$” or “USD”).
Foreign
Currency Translation
The
accounts of the Company’s Canadian subsidiaries are maintained in CAD. The accounts of these subsidiaries are translated into USD
in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”)
Topic 830, Foreign Currency Transaction, with the CAD as the functional currency. According to ASC Topic 830, all assets and liabilities
are translated at the exchange rate on the balance sheet date, stockholders’ equity is translated at historical rates and statement
of operations items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported
under other comprehensive income in accordance with ASC Topic 220, Comprehensive Income. Gains and losses resulting from the translations
of foreign currency transactions and balances are reflected in the condensed consolidated statement of operations and comprehensive loss.
The following table details the exchange rates used for the respective periods:
Schedule of Foreign Currency Translation, Exchange Rate Used
| |
May
31, 2022 | | |
May
31, 2021 | | |
August
31, 2021 | |
| |
| | |
| | |
| |
Period end: CAD to USD exchange
rate | |
$ | 0.7910 | | |
$ | 0.8284 | | |
$ | 0.7917 | |
Average period: CAD to USD exchange rate | |
$ | 0.7897 | | |
$ | |