Novo Integrated Sciences Reports Fiscal Year 2024 Second Quarter Financial Results

Rhea-AI Summary

Novo Integrated Sciences, Inc. (NVOS) reported its financial results for the second fiscal quarter ended February 29, 2024, emphasizing operational efficiencies and future cost savings. Revenues increased by 24% to $3,170,592, driven by product sales. The company's net loss decreased by 41% to $2,746,128. Novo continues to focus on commercializing proprietary products and expanding healthcare services.

Positive

• Revenues increased by 24% to $3,170,592, driven by product sales.
• Net loss decreased by 41% to $2,746,128.
• Cash and cash equivalents were $651,747, total assets were $34,949,271, total liabilities were $13,058,987, and stockholders’ equity was $21,890,284.
• Acenzia’s and Terragenx’s revenue for the three months ended February 29, 2024 were $884,396 and $103,399, respectively.
• Operating costs increased by 4% to $2,863,854, primarily due to higher fair value of stock options issued.
• Total principal and interest of $449,535 owed on the $445,000 Mast Hill Fund, LP promissory note was converted to 457,128 shares of the Company’s common stock and paid in full.

Negative

• None.

Insights

Financial Analyst

Naturally, investors are inclined to fixate on revenue growth and net loss reduction as key indicators of a company's performance. In the case of Novo Integrated Sciences, the reported 24% increase in revenue suggests robust sales activity, potentially leading to greater market share. This uptick, when dissected, appears primarily driven by product sales, which could imply successful product development or enhanced market penetration strategies. Furthermore, the conversion of debt to equity, as seen with the Mast Hill Fund promissory note, may alleviate short-term liquidity pressures, yet dilutes current stockholders' equity.

However, the 41% decrease in net loss requires a more nuanced examination. A shrinking net loss, while ostensibly positive, needs to be contextualized against the backdrop of operational efficiencies and cost-saving measures. The critical question for shareholders is whether this decrease is due to sustainable operational improvements or one-time gains. Long-term viability hinges on the former.

Market Research Analyst

Investors should consider the competitive landscape and the company's ability to sustain its growth trajectory. Novo's emphasis on a holistic healthcare ecosystem and its patient-first approach can be compelling differentiators in the healthcare services industry. Yet, the modest 3.4% increase in healthcare services revenue—despite the overall rise in total revenue—might signal slower growth in this core area, which warrants scrutiny.

Furthermore, the strategic move to work with financial partners on non-traditional financing might position Novo for accelerated growth, but also raises questions about potential financing terms and future financial flexibility. Stakeholders should weigh the potential for increased financial leverage against the opportunity for expansion.

Legal Expert

From a legal standpoint, the conversion of debt to equity, as seen with Novo's promissory note, often raises questions on corporate governance and investor rights. Existing investors might be concerned about the dilution of their shares, impacting their voting power and share value. The terms of such conversions, including the pricing of converted shares, should be meticulously reviewed for fairness and compliance with market regulations. This action also has implications for the company's capital structure, potentially affecting future borrowing capacity and strategic financial decisions.

BELLEVUE, Wash.--(BUSINESS WIRE)-- Novo Integrated Sciences, Inc. (NASDAQ:NVOS) (the “Company” or “Novo”), pioneering a holistic approach to patient-first health and wellness through a multidisciplinary healthcare ecosystem of multiple patient and consumer touchpoints for services and product innovation, today reported its financial results for the second fiscal quarter ended February 29, 2024.

Robert Mattacchione, Novo’s CEO and Board Chairman, stated, “The Company’s fiscal year 2024 second quarter period emphasized maximizing operational efficiencies pointed towards future cost savings and margin improvement. The Company continues to work with certain prospective financial partners to close previously announced non-traditional financing opportunities to raise foundational capital with repayment terms necessary to support and accelerate the further growth of Novo’s three-pillar business model. The Company remains committed to the commercialization of its proprietary product offerings and the expansion and delivery of its essential services and solutions for how non-catastrophic healthcare is delivered both now and in the future.”

Financial Highlights for the three-month period ended February 29, 2024:

• Cash and cash equivalents were $651,747, total assets were $34,949,271, total liabilities were $13,058,987, and stockholders’ equity was $21,890,284.
• Revenues were $3,170,592, representing an increase of $614,083, or 24%, from $2,556,509 for the three months ended February 28, 2023. The increase in revenue is principally due to an increase in product sales. Acenzia’s and Terragenx’s revenue for the three months ended February 29, 2024 were $884,396 and $103,399, respectively. Revenue from our healthcare services increased by 3.4% when comparing the revenue for the three months ended February 29, 2024 to the three months ended February 28, 2023.
• Operating costs were $2,863,854, representing an increase of $106,141, or 4%, from $2,757,713 for the three months ended February 28, 2023. The increase in operating costs was principally due to higher fair value of stock options issued during the three months.
• Net loss attributed to the Company for the three months ended February 29, 2024 was $2,746,128, representing a decrease of $1,875,227, or 41%, from $4,621,355 for the three months ended February 28, 2023. The decrease in net loss was principally due to the increase in gross profit and lower amount of other expenses.
• On December 21, 2023, the total principal and interest of $449,535 owed on the $445,000 Mast Hill Fund, LP promissory note, dated June 20, 2023, was converted to 457,128 shares of the Company’s common stock and paid in full.

About Novo Integrated Sciences, Inc.

Novo Integrated Sciences, Inc. is pioneering a holistic approach to patient-first health and wellness through a multidisciplinary healthcare ecosystem of services and product innovation. Novo offers an essential and differentiated solution to deliver, or intend to deliver, these services and products through the integration of medical technology, advanced therapeutics, 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 both now and 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 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 Sciences of continued cutting-edge advancement in patient-first platforms.

For more information concerning Novo Integrated Sciences, please visit www.novointegrated.com.

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Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this press release are forward-looking statements. In some cases, forward-looking statements can be identified by words such as "believe," “intend,” "expect," "anticipate," "plan," "potential," "continue" or similar expressions. Such forward-looking statements include risks and uncertainties, and there are important factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors, risks and uncertainties are discussed in Novo’s filings with the Securities and Exchange Commission. Investors should not place any undue reliance on forward-looking statements since they involve known and unknown, uncertainties and other factors which are, in some cases, beyond Novo’s control which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects Novo’s current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to operations, results of operations, growth strategy and liquidity. Novo assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. The contents of any website referenced in this press release are not incorporated by reference herein.

NOVO INTEGRATED SCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS As of February 29, 2024 (unaudited) and August 31, 2023
		February 29,				August 31,
		2024				2023
ASSETS
Current Assets:
Cash and cash equivalents		$	651,747			$	416,323
Accounts receivable, net			2,153,914				1,467,028
Inventory, net			947,351				1,106,983
Other receivables			1,048,596				1,051,584
Prepaid expenses and other current assets			217,619				346,171
Total current assets			5,019,227				4,388,089
Property and equipment, net			5,246,241				5,390,038
Intangible assets, net			15,205,967				16,218,539
Right-of-use assets, net			1,916,900				1,983,898
Goodwill			7,560,936				7,582,483
TOTAL ASSETS		$	34,949,271			$	35,563,047
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable		$	2,173,667			$	3,513,842
Accrued expenses			1,328,828				1,233,549
Accrued interest (including amounts to related parties)			477,480				382,666
Government loans and notes payable, current portion			93,488				277,405
Convertible notes payable, net of discount of $2,004,245			1,773,533				558,668
Derivative liability			2,312,921				–
Contingent liability			27,756				61,767
Debentures, related parties			914,219				916,824
Due to related parties			434,039				533,001
Finance lease liability			5,788				11,744
Operating lease liability, current portion			417,342				415,392
Total current liabilities			9,959,061				7,904,858
Government loans and notes payable, net of current portion			64,016				65,038
Operating lease liability, net of current portion			1,639,391				1,693,577
Deferred tax liability			1,396,519				1,400,499
TOTAL LIABILITIES			13,058,987				11,063,972
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 February 29, 2024 and August 31, 2023, respectively			–				–
Common stock; $0.001 par value; 499,000,000 shares authorized; 17,748,320 and 15,759,325 shares issued and outstanding at February 29, 2024 and August 31, 2023, respectively			17,749				15,760
Additional paid-in capital			96,082,626				90,973,316
Common stock to be issued (17,375 and 91,138 shares at February 29, 2024 and August 31, 2023)			44,443				1,217,293
Other comprehensive gain (loss)			503,381				(357,383	)
Accumulated deficit			(74,459,512	)			(67,033,041	)
Total Novo Integrated Sciences, Inc. stockholders’ equity			22,188,687				24,815,945
Noncontrolling interest			(298,403	)			(316,870	)
Total stockholders’ equity			21,890,284				24,499,075
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	34,949,271			$	35,563,047

* The condensed consolidated balance sheets’ common stock amounts have been retroactively adjusted to account for the Company’s 1:10 reverse stock split, effective November 7, 2023.

NOVO INTEGRATED SCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS For the Three and Six Months Ended February 29, 2024 and February 28, 2023 (unaudited)
		Three Months Ended								Six Months Ended
		February 29,				February 28,				February 29,				February 28,
		2024				2023				2024				2023
Revenues		$	3,170,592			$	2,556,509			$	7,061,810			$	5,975,789
Cost of revenues			1,846,506				1,585,606				3,793,706				3,265,353
Gross profit			1,324,086				970,903				3,268,104				2,710,436
Operating expenses:
Selling expenses			2,590				707				12,176				8,039
General and administrative expenses			2,861,264				2,757,006				8,113,333				6,731,167
Total operating expenses			2,863,854				2,757,713				8,125,509				6,739,206
Loss from operations			(1,539,768	)			(1,786,810	)			(4,857,405	)			(4,028,770	)
Non-operating income (expense)
Interest income			2,477				2,243				4,696				4,524
Interest expense			(138,684	)			(123,866	)			(282,058	)			(291,109	)
Other expense			(308,763	)			—				(960,937	)			—
Change in fair value of derivative liability			373,339				—				958,868				—
Amortization of debt discount			(1,114,573	)			(2,740,349	)			(2,190,501	)			(4,230,862	)
Foreign currency transaction (loss) gain			(19,588	)			3,620				(78,946	)			(35,681	)
Total other expense			(1,205,792	)			(2,858,352	)			(2,548,878	)			(4,553,128	)
Loss before income taxes			(2,745,560	)			(4,645,162	)			(7,406,283	)			(8,581,898	)
Income tax expense			—				—				—				—
Net loss		$	(2,745,560	)		$	(4,645,162	)		$	(7,406,283	)		$	(8,581,898	)
Net income (loss) attributed to noncontrolling interest			568				(23,807	)			20,188				(25,130	)
Net loss attributed to Novo Integrated Sciences, Inc.		$	(2,746,128	)		$	(4,621,355	)		$	(7,426,471	)		$	(8,556,768	)
Comprehensive loss:
Net loss			(2,745,560	)			(4,645,162	)			(7,406,283	)			(8,581,898	)
Foreign currency translation gain (loss)			750,067				(196,683	)			860,764				(617,665	)
Comprehensive loss:		$	(1,995,493	)		$	(4,841,845	)		$	(6,545,519	)		$	(9,199,563	)
Weighted average common shares outstanding - basic and diluted			17,642,829				7,933,492				17,184,569				5,646,937
Net loss per common share - basic and diluted		$	(0.16	)		$	(0.59	)		$	(0.43	)		$	(1.52	)

* The condensed consolidated statements of operations and comprehensive loss’s share and per share amounts have been retroactively adjusted to account for the Company’s 1:10 reverse stock split, effective November 7, 2023.

NOVO INTEGRATED SCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the Three and Six Months Ended February 29, 2024 and February 28, 2023 (unaudited)
										Additional				Common				Other								Novo
		Common Stock								Paid-in				Stock To				Comprehensive				Accumulated				Stockholders’				Noncontrolling				Total
		Shares				Amount				Capital				Be Issued				Income (Loss)				Deficit				Equity				Interest				Equity
Balance, August 31, 2023			15,759,325			$	15,760			$	90,973,316			$	1,217,293			$	(357,383	)		$	(67,033,041	)		$	24,815,945			$	(316,870	)		$	24,499,075
Cashless exercise of warrants			245,802				246				1,323,152				–				–				–				1,323,398				–				1,323,398
Exercise of warrants for cash			240,400				240				240,160				–				–				–				240,400				–				240,400
Share issuance for convertible debt settlement			519,845				520				577,002				–				–				–				577,522				–				577,522
Issuance of common stock to be issued			73,767				74				1,172,776				(1,172,850	)			–				–				–				–				–
Common stock issued for services			424,080				424				1,194,976				–				–				–				1,195,400				–				1,195,400
Reverse stock split share rounding			27,973				28				(28	)			–				–				–				–				–				–
Foreign currency translation loss			–				–				–				–				110,895				–				110,895				(1,919	)			108,976
Net loss			–				–				–				–				–				(4,680,343	)			(4,680,343	)			19,620				(4,660,723	)
Balance, November 30, 2023			17,291,192			$	17,292			$	95,481,354			$	44,443			$	(246,488	)		$	(71,713,384	)		$	23,583,217			$	(299,169	)		$	23,284,048
Share issuance for convertible debt settlement			457,128				457				453,616				–				–				–				454,073				–				454,073
Foreign currency translation gain			–				–				–				–				749,869				–				749,869				198				750,067
Fair value of stock options			–				–				147,656				–				–				–				147,656				–				147,656
Net loss			–				–				–				–				–				(2,746,128	)			(2,746,128	)			568				(2,745,560	)
Balance, February 29, 2024			17,748,320			$	17,749			$	96,082,626			$	44,443			$	503,381			$	(74,459,512	)		$	22,188,687			$	(298,403	)		$	21,890,284

										Additional				Common				Other								Novo
		Common Stock								Paid-in				Stock To				Comprehensive				Accumulated				Stockholders’				Noncontrolling				Total
		Shares				Amount				Capital				Be Issued				Income (Loss)				Deficit				Equity				Interest				Equity
Balance, August 31, 2022			3,118,063			$	3,118			$	66,084,887			$	9,474,807			$	560,836			$	(53,818,489	)		$	22,305,159			$	(257,588	)		$	22,047,571
Common stock issued for cash, net of offering costs			400,000				400				1,794,600				–				–				–				1,795,000				–				1,795,000
Issuance of common stock to be issued			3,623				4				92,362				(92,366	)			–				–				–				–				–
Cashless exercise of warrants			467,399				467				1,138,583				–				–				–				1,139,050				–				1,139,050
Fair value of stock options			–				–				60,887				–				–				–				60,887				–				60,887
Foreign currency translation loss			–				–				–				–				(417,008	)			–				(417,008	)			(3,974	)			(420,982	)
Net loss			–				–				–				–				–				(3,935,413	)			(3,935,413	)			(1,323	)			(3,936,736	)
Balance, November 30, 2022			3,989,085			$	3,989			$	69,171,319			$	9,382,441			$	143,828			$	(57,753,902	)		$	20,947,675			$	(262,885	)		$	20,684,790
Share issuance for convertible debt settlement			9,310,940				9,311				9,076,740				–				–				–				9,086,051				–				9,086,051
Cashless exercise of warrants			115,935				116				282,417				–				–				–				282,533				–				282,533
Exercise of warrants for cash			131,000				131				130,869				–				–				–				131,000				–				131,000
Issuance of common stock to be issued			320,202				320				8,164,828				(8,165,148	)			–				–				–				–				–
Shares issued with convertible notes			95,500				96				82,868				–				–				–				82,963				–				82,963
Value of warrants issued with convertible notes			–				–				86,327				–				–				–				86,327				–				86,327
Fair value of stock options			–				–				60,887				–				–				–				60,887				–				60,887
Extinguishment of derivative liability due to conversion			–				–				1,390,380				–				–				–				1,390,380				–				1,390,380
Foreign currency translation loss			–				–				–				–				(195,821	)			–				(195,821	)			(862	)			(196,683	)
Net loss			–				–				–				–				–				(4,621,355	)			(4,621,355	)			(23,807	)			(4,645,162	)
Balance, February 28, 2023			13,962,662			$	13,963			$	88,446,635			$	1,217,293			$	(51,993	)		$	(62,375,257	)		$	27,250,640			$	(287,554	)		$	26,963,086

* The condensed consolidated statements of stockholders’ equity share amounts have been retroactively adjusted to account for the Company’s 1:10 reverse stock split, effective November 7, 2023.

NOVO INTEGRATED SCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended February 29, 2024 and February 28, 2023 (unaudited)
		Six Months Ended
		February 29,				February 28,
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(7,406,283	)		$	(8,581,898	)
Adjustments for non-cash items:
Depreciation and amortization			1,140,613				1,138,797
Fair value of vested stock options			147,656				121,774
Change in fair value of derivative liability			(958,868	)			—
Cashless exercise of warrants			1,323,398				1,421,583
Common stock issued for services			1,195,400				—
Operating lease expense			308,867				419,256
Amortization of debt discount			2,190,501				4,230,862
Foreign currency transaction losses			78,946				35,681
Changes in operating assets and liabilities:
Accounts receivable			(691,424	)			57,936
Inventory			157,116				(78,898	)
Prepaid expenses and other current assets			127,885				6,143
Accounts payable			(1,333,031	)			299,881
Accrued expenses			98,987				148,918
Accrued interest			63,151				28,226
Operating lease liability			(308,867	)			(405,082	)
Net cash used in operating activities			(3,865,953	)			(1,156,821	)
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments to) proceeds from related parties			(64,837	)			6,138
Proceeds from notes payable			145				—
Repayments of notes payable			(184,475	)			—
Repayments of finance leases			(5,931	)			(4,299	)
Proceeds from issuance of convertible notes, net			3,314,153				445,235
Repayment of convertible notes			—				(2,977,778	)
Proceeds from the sale of common stock, net of offering costs			—				1,795,000
Proceeds from exercise of warrants			240,400				131,000
Net cash provided by (used in) financing activities			3,299,455				(604,704	)
Effect of exchange rate changes on cash and cash equivalents			801,922				192,576
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			235,424				(1,568,949	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			416,323				2,178,687
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	651,747			$	609,738
CASH PAID FOR:
Interest		$	158,367			$	275,990
Income taxes		$	—			$	—
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for convertible debt settlement		$	1,031,595			$	9,086,051
Debt discount recognized on derivative liability		$	—			$	1,390,380
Debt discount recognized on convertible note		$	—			$	297,055
Extinguishment of derivative liability due to conversion		$	—			$	1,390,380
Common stock issued with convertible notes		$	—			$	82,963
Warrants issued with convertible notes		$	—			$	86,327

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240415120487/en/

Chris David, COO-President

Novo Integrated Sciences, Inc.

chris.david@novointegrated.com

(888) 512-1195

Source: Novo Integrated Sciences, Inc.

FAQ

What were Novo Integrated Sciences, Inc.'s (NVOS) revenues for the three-month period ended February 29, 2024?

Novo Integrated Sciences, Inc.'s revenues for the three-month period ended February 29, 2024, were $3,170,592.

What was the net loss attributed to Novo Integrated Sciences, Inc. (NVOS) for the three months ended February 29, 2024?

The net loss attributed to Novo Integrated Sciences, Inc. for the three months ended February 29, 2024, was $2,746,128.

What were Novo Integrated Sciences, Inc.'s (NVOS) total assets and liabilities as of February 29, 2024?

Novo Integrated Sciences, Inc.'s total assets were $34,949,271, and total liabilities were $13,058,987 as of February 29, 2024.

What caused the increase in Novo Integrated Sciences, Inc.'s (NVOS) operating costs for the three months ended February 29, 2024?

The increase in operating costs for Novo Integrated Sciences, Inc. for the three months ended February 29, 2024, was primarily due to the higher fair value of stock options issued.

How did Novo Integrated Sciences, Inc. (NVOS) settle the total principal and interest owed on the Mast Hill Fund, LP promissory note?

Novo Integrated Sciences, Inc. settled the total principal and interest of $449,535 owed on the Mast Hill Fund, LP promissory note by converting it to 457,128 shares of the company’s common stock and paying it in full.