| Summary of Significant Accounting Policies | 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. Principles of Consolidation The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned subsidiaries, NHL, Novo Healthnet Rehab Limited, Novo Assessments
Inc., and an 80% interest in Novo Healthnet Kemptville Centre, Inc., a Back on Track Physiotherapy and Health Centre clinic operated
by NHL. All of the Company’s subsidiaries are incorporated under the laws of the Province of Ontario, Canada. All intercompany
transactions have been eliminated. Noncontrolling Interest The Company follows FASB ASC Topic 810, Consolidation, 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 February 28, 2019 and August 31, 2018, the allowance for uncollectible accounts receivable was $473,585 and $464,527, respectively. Property and Equipment Property 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 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 Long-Lived Assets The Company applies the provisions of
ASC Topic 360, Property, Plant, and Equipment Intangible Assets The Company’s intangible assets
consist of land use rights and a software license which will be amortized over 50 and 7 years, respectively.
Amortization will begin when the assets are fully placed in service. The Company will perform a test for impairment annually. The land
use rights and the software license intangible assets were acquired in January and February, 2019, respectively.
Therefore, the first annual impairment test will be performed as of August 31, 2019. Goodwill Goodwill represents the excess of purchase
price over the underlying net assets of businesses acquired. Under accounting requirements, goodwill is not amortized but is subject
to annual impairment tests. At February 28, 2019, the Company recorded goodwill of $379,800 and $220,284, respectively, related
to its acquisition of Apka Health, Inc. during the fiscal year ended August 31, 2017 and Executive Fitness Leaders during the fiscal
year ended August 31, 2018. As of August 31, 2018, the Company performed the required impairment review. Based on its review, the
Company believes there was no impairment of its goodwill. Acquisition Deposits The Company has signed letters of understanding
with two potential acquisition candidates which include refundable acquisition deposits totaling $1,104,985 and $1,112,404 at February
28, 2019 and August 31, 2018, respectively. 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 Financial Instruments
● 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 use 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 Derivatives and Hedging As of February 28, 2019 and August 31,
2018, respectively, the Company did not identify any assets and liabilities required to be presented on the balance sheet at fair
value. Revenue Recognition Accounting Standards Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers . Revenue Recognition Revenue from providing healthcare services
are recognized under Topic 606 in a manner that reasonably reflects the delivery of its services to customers in return for expected
consideration and includes the following elements:
● executed contracts with the Company’s customers that it believes are legally enforceable;
● identification of performance obligations in the respective contract;
● determination of the transaction price for each performance obligation in the respective contract;
● allocation the transaction price to each performance obligation; and
● recognition of revenue only when the Company satisfies each performance obligation. These five elements, as applied to healthcare
services, the Company’s sole revenue category, is summarized below:
● Healthcare services - gross service revenue is recorded in the accounting records at the time the service is provided on an accrual basis at the provider’s established rates, regardless of whether the provider expects to collect that amount. The Company reserves a provision for contractual adjustment and discounts that are deducted from gross service revenue. The Company reports revenues net of any sales, use and value added taxes. Income Taxes The Company accounts for income taxes
in accordance with ASC Topic 740, Income Taxes 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 Basic and Diluted Earnings Per Share Earnings per share is calculated in
accordance with ASC Topic 260, Earnings Per Share Foreign Currency Transactions and
Comprehensive Income U.S. 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 CAD. Translation gains of $1,165,795 and $1,139,815 at February 28, 2019 and
August 31, 2018, 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. Recent Accounting Pronouncements In October 2016, the FASB issued ASU
2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory In February 2016, the FASB issued ASU
2016-02, Leases (Topic 842) In May 2014, the FASB issued ASU No.
2014-09, Revenue from Contracts with Customers 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. |
