NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Note
1 - Organization and Basis of Presentation
Organization
and Line of Business
Novo
Integrated Sciences, Inc. (formerly Turbine Truck Engines, Inc.) (the “Company” or “NVOS”) 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. Novo Healthnet
Limited, an Ontario, Canada company (“NHL”), became a wholly owned subsidiary of the Company on May 9, 2017. NHL was
incorporated on September 5, 2013. Since inception, NHL has acquired and now owns a 100% interest in Novo Assessments, Inc., Novo
Healthnet Rehab Limited, Novo Peak Health, Inc. and an 80% interest in Novo Healthnet Kemptville Centre, Inc. (collectively with
the Company and NHL, the “Novo Family”), all of which are Ontario province, Canada corporations.
On
April 25, 2017, NVOS entered into a share exchange agreement with NHL and the NHL shareholders pursuant to which NVOS issued to
the NHL shareholders 167,797,406 restricted shares of NVOS common stock, representing 85% of the issued and outstanding NVOS common
stock, in exchange for all issued and outstanding shares of both common and preferred stock of NHL, calculated including all granted
and issued options or warrants to acquire NVOS common stock as of the effective date of the share exchange agreement, but to exclude
shares of NVOS common stock that are subject to a then-current Regulation S offering that was being undertaken by NVOS (the “Exchange”).
As a result of this transaction, NHL is a wholly owned Canadian subsidiary of NVOS.
The
Exchange was accounted for as a reverse acquisition under the purchase method of accounting since NHL obtained control of NVOS.
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 date of this transaction, the net
assets of the legal acquirer, NVOS, were $6,904. The combined entities are hereafter referred to as the “Company.”
Effective
with the closing of the Exchange, the Company has shifted its business operations and mission statement away from developing environmental
conservation innovations for the alternative energy sector and instead now focuses its resources and business operations on the
implementation and expansion of the Novo Family’s growth model of integrating healthcare, technology and medical science.
The
Novo Family provides specialized physiotherapy, chiropractic care, occupational therapy, eldercare, laser therapeutics, massage
therapy, acupuncture, chiropodist, neurological functions, kinesiology, certain dental assessments and long-term care services
to its clients. The Novo Family’s services include pain assessment, treatment, management and prevention, and are provided
in 14 corporate owned clinics, homes and institutional locations throughout Canada. In addition, NHL has contracted with over
300 healthcare providers throughout Canada to provide these services to their clients, consistent with NHL’s high-quality
standards. Directly and indirectly through its contractual relationships, NHL provides its specialized services to over 300,000
patients annually. No employee of the Novo Family practices medicine and the Novo Family’s services do not require a medical
or nursing license.
The
unaudited consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). 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 accounting principles generally accepted in the United States
of America (“US GAAP”) were omitted pursuant to such rules and regulations. The results of operations for the nine
months ended May 31, 2017 are not necessarily indicative of the results for the year ending August 31, 2017.
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Basis
of Presentation
The
accompanying consolidated financial statements were prepared in conformity with US GAAP. The Company’s Canadian subsidiaries’
functional currency is the Canadian Dollar (“CAD”); however, the accompanying 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 ASC Topic 830
Foreign Currency Transaction
, with the CAD as the functional currency. According
to 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 statement of operations and comprehensive income. The following table details the exchange rates used for the
respective periods:
|
|
|
May
31, 2017
|
|
|
May
31, 2016
|
|
|
August
31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end: CAD to USD exchange
rate
|
|
$
|
0.7405
|
|
|
$
|
0.7535
|
|
|
$
|
0.7620
|
|
|
Average period: CAD to USD exchange
rate
|
|
$
|
0.7509
|
|
|
$
|
0.7488
|
|
|
|
|
|
Going
Concern
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business. The Company has sustained net losses for the nine months ended
May 31, 2017 and for the years ended August 31, 2016 and 2015. The Company’s ability to continue as a going concern for
the next twelve months is dependent upon its ability to generate sufficient cash flows from operations to meet its obligations,
which it has not been able to accomplish to date, and its ability to obtain additional capital financing from investors. These
factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable
period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.
The
Company has raised equity capital to fund expenditures until the Company’s operations can generate sufficient cash flows
to sustain operations. No assurance can be made that these efforts of raising equity capital will be successful and sustain the
Company until it can generate positive cash flows from operations.
Note
2 – Summary of Significant Accounting Policies
Use
of Estimates
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company
regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience
and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent
from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s
estimates. To the extent there are material differences between the estimates and the actual results, future results of operations
will be affected.
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NHL, Novo
Peak Health Inc., Novo Healthnet Rehab Limited, Novo Assessments Inc., APKA Health, Inc. and its 80% owned subsidiary, Novo Healthnet
Kemptville Centre Inc. All of the Company’s subsidiaries are incorporated under the laws of the Province of Ontario, Canada.
Noncontrolling
Interest
The
Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 810,
Consolidation,
which governs the accounting for and reporting of non-controlling interests (“NCIs”)
in partially owned consolidated subsidiaries and the loss of control of subsidiaries. Certain provisions of this standard indicate,
among other things, that NCIs be treated as a separate component of equity, not as a liability, that increases and decreases in
the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions
or dilution gains or losses, and that losses of a partially owned consolidated subsidiary be allocated to the NCI even when such
allocation might result in a deficit balance.
The
net income (loss) attributed to the NCI is separately designated in the accompanying consolidated statements of operations and
other comprehensive income (loss).
Cash
Equivalents
For
the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquid
debt instruments with original maturities of three months or less.
Accounts
Receivable
Accounts
receivable are recorded, net of allowance for doubtful accounts and sales returns. Management reviews the composition of accounts
receivable and analyzes historical bad debts, customer concentration, customer credit worthiness, current economic trends and
changes in customer payment patterns to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful
accounts is made when collection of the full amount is no longer probable. Delinquent account balances are written-off after management
has determined that the likelihood of collection is not probable and known bad debts are written off against the allowance for
doubtful accounts when identified. As of May 31, 2017 and August 31, 2016, the allowance for uncollectible accounts receivable
was $519,921 and $508,161, respectively.
Furniture
and Equipment
Furniture
and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals
and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property
and equipment is provided using the double-declining balance method for substantially all assets with estimated lives as follows:
|
Leasehold improvements
|
|
5 years
|
|
Clinical equipment
|
|
5 years
|
|
Computer equipment
|
|
3 years
|
|
Office equipment
|
|
5 years
|
|
Furniture and fixtures
|
|
5 years
|
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Long-Lived
Assets
The
Company applies the provisions of ASC Topic 360,
Property, Plant, and Equipment
, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which
the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined
in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at May 31, 2017 and August
31, 2016, the Company believes there was no impairment of its long-lived assets.
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and equivalents, restricted cash, accounts receivable, advances
to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due
to their short maturities.
FASB
ASC Topic 820,
Fair Value Measurements and Disclosures
, requires disclosure of the fair value of financial instruments
held by the Company. FASB ASC Topic 825,
Financial Instruments
, defines fair value, and establishes a three-level valuation
hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying
amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments
and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined
as follows:
|
|
●
|
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
|
|
|
|
|
●
|
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices
for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly
or indirectly, for substantially the full term of the financial instrument.
|
|
|
|
|
|
|
●
|
Level
3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.
|
The
Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480,
Distinguishing
Liabilities from Equity
, and FASB ASC Topic 815,
Derivatives and Hedging
.
As
of May 31, 2017 and August 31, 2016, respectively, the Company did not identify any assets and liabilities required to be presented
on the balance sheet at fair value.
Revenue
Recognition
Revenue
related to healthcare services provided is recognized at the time services have been performed. Gross service revenue is recorded
in the accounting records on an accrual basis at the provider’s established rates, regardless of whether the health care
entity expects to collect that amount. The Company will reserve a provision for contractual adjustment and discounts and deduct
from gross service revenue. The Company believes that recognizing revenue at the time the services have been performed is appropriate
because the Company’s revenue policies meet the following four criteria in accordance with FASB ASC 605,
Revenue Recognition
:
(i) persuasive evidence that arrangement exists, (ii) services has occurred, (iii) the price is fixed and determinable and (iv)
collectability is reasonably assured. The Company reports revenues net of any sales, use and value added taxes.
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Income
Taxes
The
Company accounts for income taxes in accordance with ASC Topic 740,
Income Taxes
. ASC 740 requires a company to use the
asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not
be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Under
ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would
be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount
of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more
likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting
periods presented.
Stock-Based
Compensation
The
Company records stock-based compensation in accordance with FASB ASC Topic 718,
Compensation – Stock Compensation
.
FASB ASC Topic 718 requires companies to measure compensation cost for stock-based employee compensation at fair value at the
grant date and recognize the expense over the requisite service period. The Company recognizes in the statement of operations
the grant-date fair value of stock options and other equity-based compensation issued to employees and non-employees. There were
6,860,000 options/warrants outstanding as of May 31, 2017.
Basic
and Diluted Earnings Per Share
Earnings
per share is calculated in accordance with ASC Topic 260,
Earnings Per Share
. Basic earnings per share (“EPS”)
is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumption that all dilutive
securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants
are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby
were used to purchase common stock at the average market price during the period. There were 6,860,000 options/warrants outstanding
as of May 31, 2017. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted
loss per share is the same as basic loss for all periods presented.
Foreign
Currency Transactions and Comprehensive Income
US
GAAP generally requires recognized revenue, expenses, gains and losses be included in net income. Certain statements, however,
require entities to report specific changes in assets and liabilities, such as gain or loss on foreign currency translation, as
a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive
income. The functional currency of the Company’s Canadian subsidiaries is the Canadian $. Translation gains of $1,559,130
and $1,277,449 at May 31, 2017 and August 31, 2016, respectively, are classified as an item of other comprehensive income in the
stockholders’ equity section of the balance sheet.
Statement
of Cash Flows
Cash
flows from the Company’s operations are calculated based upon the local currencies using the average translation rates.
As a result, amounts related to assets and liabilities reported on the statements of cash flows will not necessarily agree with
changes in the corresponding balances on the balance sheets.
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Recent
Accounting Pronouncements
In
January 2017, the FASB issued an Accounting Standards Update (“ASU”) 2017-01,
Business Combinations (Topic 805)
Clarifying the Definition of a Business
. The amendments in this update clarify the definition of a business with the objective
of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals
of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill,
and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied
prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard
update.
In
November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash,
which requires restricted
cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash
flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet.
ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The
Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In
October 2016, the FASB issued ASU 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory
,
which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when
the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption
permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.
In
August 2016, the FASB issued ASU 2016-15
, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and
Cash Payments
. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are
classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for
interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of
evaluating the impact of this accounting standard update on its statements of cash flows.
In
March 2016, the FASB issued ASU 2016-09,
Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting
.
ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting
for income taxes, forfeitures, and statutory tax withholding requirements, and classification in the statement of cash flows.
ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 and interim periods within annual periods beginning
after December 15, 2016, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting
standard update on its financial statements.
In
February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires lessees to recognize lease assets
and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective
for fiscal years beginning after December 15, 2018 and interim periods in fiscal years beginning after December 15, 2018, with
early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial
statements.
In
August 2014, the FASB issued Accounting Standards Update No. 2014-15,
Disclosure of Uncertainties about an Entity’s Ability
to Continue as a Going Concern
, which provides guidance on determining when and how to disclose going-concern uncertainties
in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability
to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain
disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15
is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The
Company is currently evaluating the impact of the adoption of ASU 2014-15 on the Company’s financial statements and disclosures.
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09,
Revenue from
Contracts with Customers
. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing
revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.
ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in
the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and
cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from
costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December
15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods
therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of
the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements
and disclosures.
Management
does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying
financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note
3 – Related Party Transactions
Due
from related parties
Due
from related parties are amounts advanced to certain related parties that are non-interest bearing and the Company can demand
payment at any time.
Due
to related parties
Due
to related parties are amounts loaned to the Company by stockholders and officers of the Company that are non-interest bearing
and payable upon demand.
Note
4 – Other Receivables
Other
receivables at May 31, 2017 and August 31, 2016 consisted of the following:
|
|
|
May
31, 2017
|
|
|
August
31, 2016
|
|
|
Notes receivable dated November
15, 2014; accrues interest at 8% per annum; secured by assets; due November 15, 2016. This note receivable is currently in
default.
|
|
$
|
37,025
|
|
|
$
|
38,099
|
|
|
Notes receivable dated May 23, 2017;
accrues interest at 12% per annum; secured by certain assets; due May 23, 2018.
|
|
|
277,688
|
|
|
|
285,750
|
|
|
Notes receivable dated April 1, 2015;
accrues interest at 8% per annum; secured by certain assets; due April 1, 2017. This note receivable is currently in default.
|
|
|
740,500
|
|
|
|
-
|
|
|
Advance to corporation; non-interest
bearing; unsecured; payable upon demand
|
|
|
-
|
|
|
|
381,000
|
|
|
Advance to corporation; non-interest
bearing; unsecured; payable upon demand
|
|
|
29,620
|
|
|
|
30,481
|
|
|
Total other receivables
|
|
$
|
1,084,833
|
|
|
$
|
735,330
|
|
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Note
5 – Furniture and Equipment
Furniture
and equipment at May 31, 2017 and August 31, 2016 consisted of the following:
|
|
|
May
31, 2017
|
|
|
August
31, 2016
|
|
|
Leasehold Improvements
|
|
$
|
298,855
|
|
|
$
|
310,111
|
|
|
Clinical equipment
|
|
|
163,854
|
|
|
|
147,429
|
|
|
Computer equipment
|
|
|
18,071
|
|
|
|
8,575
|
|
|
Office equipment
|
|
|
22,544
|
|
|
|
22,780
|
|
|
Furniture and
fixtures
|
|
|
16,889
|
|
|
|
17,379
|
|
|
|
|
|
520,213
|
|
|
|
506,274
|
|
|
Accumulated depreciation
|
|
|
(228,485
|
)
|
|
|
(187,556
|
)
|
|
Total
|
|
$
|
291,728
|
|
|
$
|
318,718
|
|
Depreciation
expense for the nine months ended May 31, 2017 and 2016 was $46,870 and $54,662, respectively.
Note
6 – Notes Payable
Notes
payable at May 31, 2017 and August 31, 2016 consisted of the following:
|
|
|
May
31, 2017
|
|
|
August
31, 2016
|
|
|
Notes payable to five individuals;
accrues interest at 12% per annum; secured by assets of the Company; due May 29, 2016. These notes have been were fully repaid.
|
|
$
|
-
|
|
|
$
|
91,439
|
|
|
Notes payable to financial institution;
accrues interest at 7.2% per annum; monthly principal and interest payment of $4,465; unsecured; due October 2017.
|
|
|
16,532
|
|
|
|
47,636
|
|
|
Notes payable issued in connection with
purchase of assets; accrues interest at 0% per annum; due on March 21, 2019.
|
|
|
370,250
|
|
|
|
-
|
|
|
Notes payable
to financial institution; accrues interest at 6% per annum; monthly principal and interest payment of $608; unsecured; due
April 8, 2019.
|
|
|
19,456
|
|
|
|
20,022
|
|
|
|
|
|
406,238
|
|
|
|
159,097
|
|
|
Current portion
|
|
|
(34,241
|
)
|
|
|
(147,517
|
)
|
|
Long-term portion
|
|
$
|
371,997
|
|
|
$
|
11,580
|
|
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Aggregate
future maturities of notes payable as of May 31 are as follows:
|
Twelve months ending May 31:
|
|
|
|
|
2018
|
|
$
|
34,241
|
|
|
2019
|
|
|
371,997
|
|
|
|
|
$
|
406,238
|
|
Note
7 – Debentures, related parties
On
September 30, 2013, the Company issued five debentures totaling CAD 6,402,512 (US $4,741,060 at May 31, 2017) in connection with
the acquisition of certain businesses. The holders of the debentures are current stockholders of the Company. The debentures are
secured by all the assets of the Company, accrue interest at 8% per annum and are due on September 30, 2016. The debentures are
currently in default.
Note
8 – Stockholders’ Deficit
Convertible
preferred stock
The
Company has authorized 1,000,000 shares of $0.001 par value convertible preferred stock. At May 31, 2017 and August 31, 2016 there
were 0 and 0 convertible preferred shares issued and outstanding, respectively.
Common
stock
The
Company has authorized 499,000,000 shares of $0.001 par value common stock. At May 31, 2017 and August 31, 2016 there were 198,917,213
and 167,797,406 common shares issued and outstanding, respectively.
During
the nine months ended May 31, 2017 the Company issued:
|
|
●
|
22,751,307
shares of common stock in connection with the reverse merger transaction; and
|
|
|
|
|
|
|
●
|
8,368,500
shares of common stock for cash proceeds of $2,510,550.
|
Stock
options/warrants
The
following is a summary of stock option/warrant activity:
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
Options/
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
Warrants
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
|
Outstanding
|
|
|
Price
|
|
|
Life
|
|
|
Value
|
|
|
Outstanding, August 31, 2016
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Transfer from reverse merger
transactions
|
|
|
6,610,000
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
250,000
|
|
|
$
|
0.80
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, May 31, 2017
|
|
|
6,860,000
|
|
|
$
|
0.26
|
|
|
|
3.59
|
|
|
$
|
2,547,200
|
|
|
Exercisable, May 31, 2017
|
|
|
6,860,000
|
|
|
$
|
0.26
|
|
|
|
3.59
|
|
|
$
|
2,547,200
|
|
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
The
exercise price for options/warrants outstanding at May 31, 2017:
|
Outstanding
|
|
|
Exercisable
|
|
|
Number
of
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Options/
|
|
|
Exercise
|
|
|
Options/
|
|
|
Exercise
|
|
|
Warrants
|
|
|
Price
|
|
|
Warrants
|
|
|
Price
|
|
|
|
5,500,000
|
|
|
$
|
0.16
|
|
|
|
5,500,000
|
|
|
$
|
0.16
|
|
|
|
100,000
|
|
|
|
0.50
|
|
|
|
100,000
|
|
|
|
0.50
|
|
|
|
1,000,000
|
|
|
|
0.62
|
|
|
|
1,000,000
|
|
|
|
0.62
|
|
|
|
250,000
|
|
|
|
0.80
|
|
|
|
250,000
|
|
|
|
0.80
|
|
|
|
10,000
|
|
|
|
2.00
|
|
|
|
10,000
|
|
|
|
2.00
|
|
|
|
6,860,000
|
|
|
|
|
|
|
|
6,860,000
|
|
|
|
|
|
For
options granted during fiscal year 2017 where the exercise price equaled the stock price at the date of the grant, the weighted-average
fair value of such options was $0.79 and the weighted-average exercise price of such options/warrants was $0.80. No options were
granted during fiscal 2017 where the exercise price was less than the stock price at the date of grant or the exercise price was
greater than the stock price at the date of grant.
The
fair value of the stock options is being amortized to stock option expense over the vesting period. The Company recorded stock
option expense of $197,916 during the nine months ended August 31, 2017. At August 31, 2017, the unamortized stock option expense
was $0.
The
assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model for options granted
are as follows:
|
Risk-free interest rate
|
|
|
1.5
|
%
|
|
Expected life of the options
|
|
|
2.5
years
|
|
|
Expected volatility
|
|
|
323
|
%
|
|
Expected dividend yield
|
|
|
0
|
%
|
Note
9 – Acquisition of Assets
During
the nine months ended May 31, 2017, the Company acquired certain assets in exchange for a note payable of CAD 500,000 ($370,250
at May 31, 2017). The purchase of these assets was not considered significant to the Company; therefore, pro forma financial statements
are not presented.
Note
10 – Commitments and Contingencies
Litigation
The
Company is party to certain legal proceedings from time to time incidental to the conduct of its business. These proceedings could
result in fines, penalties, compensatory or treble damages or non-monetary relief. The nature of legal proceedings is such that
the Company cannot assure the outcome of any particular matter, and an unfavorable ruling or development could have a materially
adverse effect on our consolidated financial position, results of operations and cash flows in the period in which a ruling or
settlement occurs. However, based on information available to the Company’s management to date, the Company’s management
does not expect that the outcome of any matter pending against the Company is likely to have a materially adverse effect on the
Company’s consolidated financial position as of August 31, 2016, results of operations, cash flows or liquidity of the Company.
NOVO
INTEGRATED SCIENCES, INC.
(formerly
Turbine Truck Engines, Inc.)
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Nine Months Ended May 31, 2017 and 2016
(unaudited)
Leases
The
Company leases its office space and certain facilities under long-term operating leases expiring through fiscal year 2023. Rent
expense under these leases was $594,842 and $568,154 for the nine months ended May 31, 2017 and 2016, respectively.
Note
11 – Subsequent Events
On
June 20, 2017, the Company sold 2,140,839 restricted shares of common stock to an aggregate of 23 accredited investors. The shares
were sold at a price of $0.30 per share, for an aggregate purchase price of $642,250. The $875,000 was provided to fund the Company’s
ongoing operational and product development expenses. The shares were issued in reliance upon the exemptions provided by Regulation
S promulgated pursuant to the Securities Act of 1933, as amended (the “Securities Act”). The issuances involved offers
and sales of securities outside the United States. The offers and sales were made in offshore transactions and no directed selling
efforts were made by the issuer, a distributor, their affiliates or any persons acting on their behalf.
On
July 12, 2017, the Company entered into an Employment Agreement with Christopher David for the period of July 1, 2017 through
December 31, 2017. Pursuant to the terms of the Employment Agreement, Mr. David agreed to serve as the Company’s President.
In consideration thereof, the Company agreed to (i) pay Mr. David a monthly salary of $8,000, and (ii) grant Mr. David a 5-year
option to purchase 1,000,000 shares of the Company’s restricted common stock at an exercise price of $0.32 per share. The
Option will vest on July 12, 2018 and expire on July 12, 2022.