| Summary of Significant Accounting Policies | Note
2 – Summary of Significant Accounting Policies Use
of Estimates The
preparation of condensed 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 condensed
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.
This applies in particular to going concern assessment, useful lives of non-current assets, impairment of non-current assets, allowance
for doubtful receivables, allowance for slow moving and obsolete inventory, valuation of share-based compensation and warrants, and valuation
allowance for deferred tax assets. 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 unaudited condensed consolidated financial statements include the accounts of the Company and entities it controls including
its wholly owned subsidiaries, NHL, Acenzia Inc. (“Acenzia”), Novomerica Health Group, Inc. (“NHG”), Novo Healthnet
Rehab Limited, Novo Assessments Inc., PRO-DIP, LLC (“PRO-DIP”), a 91 50.1 80 70 All
intercompany transactions have been eliminated. An
entity is controlled when the Company has the ability to direct the relevant activities of the entity, has exposure or rights to variable
returns from its involvement with the entity, and is able to use its power over the entity to affect its returns from the entity. Income
or loss and each component of other comprehensive income are attributed to the shareholders of the Company and to the noncontrolling
interests. Total comprehensive loss is attributed to the shareholders of the Company and to the noncontrolling interests even if this
results in the non-controlling interests having a deficit balance on consolidation. Noncontrolling
Interest The
Company follows FASB ASC Topic 810, Consolidation, The
net income (loss) attributed to the NCI is separately designated in the accompanying condensed consolidated statements of operations
and comprehensive loss. Cash
Equivalents For
the purpose of the condensed consolidated statements 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, 2023 and August 31, 2022, the allowance for uncollectible accounts receivable was $ 1,095,710 992,329 Inventory Inventories
are valued at the lower of cost (determined by the first in, first out method) and net realizable value. Management compares the cost
of inventories with the net realizable value and allowance is made for writing down their inventories to net realizable value, if lower.
Inventory is segregated into three areas: raw materials, work-in-process and finished goods. The Company periodically assessed its inventory
for slow moving and/or obsolete items and any change in the allowance is recorded in cost of revenues in the accompanying condensed consolidated
statements of operations and comprehensive loss. If any are identified an appropriate allowance for those items is made and/or the items
are deemed to be impaired. As of May 31, 2023 and August 31, 2022, the Company’s allowance for slow moving or obsolete inventory
was $ 990,501 1,027,670 Other
Receivables Other
receivables are recorded at cost and presented as current or long-term based on the terms of the agreements. Management reviews the collectability
of other receivables and writes off the portion that is deemed to be uncollectible. During the nine months ended May 31, 2023 and year
ended August 31, 2022, the Company wrote off $ nil 299,672 225,924 73,748 Property
and Equipment Property
and equipment are stated at cost less depreciation and impairment. 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: Schedule
of Estimated Useful lives of Assets
Building 30
Leasehold
improvements 5
Clinical
equipment 5
Computer
equipment 3
Office
equipment 5
Furniture
and fixtures 5 Leases The
Company applies the provisions of ASC Topic 842, Leases Long-Lived
Assets The
Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment Intangible
Assets The
Company’s intangible assets are being amortized over their estimated useful lives as follows: Schedule
of Intangible Assets Amortized Estimated Useful Lives
Land
use rights 50
Intellectual
property 7
Customer
relationships 5
Brand
names 7 The
intangible assets with finite useful lives are reviewed for impairment 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. Based on its reviews at May 31, 2023,
the Company believes there was no impairment of its intangible assets. Right-of-use
Assets The
Company’s right-of-use assets consist of leased assets recognized in accordance with ASC 842, Leases, which 12 months Goodwill Goodwill
represents the excess of purchase price over the underlying net assets of businesses acquired. Under U.S. GAAP, goodwill is not amortized
but is subject to annual impairment tests. The Company recorded goodwill related to its acquisition of APKA Health, Inc. (“APKA”)
during the fiscal year ended August 31, 2017, Executive Fitness Leaders (“EFL”) during the fiscal year ended August 31, 2018,
Action Plus Physiotherapy Rockland (“Rockland”) during the fiscal year ended August 31, 2019, Acenzia during the fiscal year
ended August 31, 2021, and 1285 Canada during the fiscal year ended August 31, 2022. As of August 31, 2022, the Company performed the
required impairment reviews and determined that an impairment charge of $ 1,357,043 Summary
of changes in goodwill by acquired businesses is as follows: Schedule of Changes in Goodwill
APKA EFL Rockland Acenzia 1285 Canada Total
Balance, August 31, 2021 $ 197,925 $ 129,839 $ 229,593 $ 8,931,491 $ - $ 9,488,848
Goodwill acquired with purchase of business - - - - 602 602
Impairment of goodwill - - - (1,357,043 ) - (1,357,043 )
Foreign currency translation adjustment (7,247 ) (4,751 ) (8,405 ) (286,141 ) (19 ) (306,563 )
Balance, August 31, 2022 $ 190,678 $ 125,088 $ 221,188 $ 7,288,307 $ 583 $ 7,825,844
Beginning balance $ 190,678 $ 125,088 $ 221,188 $ 7,288,307 $ 583 $ 7,825,844
Foreign currency translation adjustment (6,895 ) (4,526 ) (8,000 ) (263,607 ) (21 ) (283,049 )
Balance, May 31, 2023 $ 183,783 $ 120,562 $ 213,188 $ 7,024,700 $ 562 $ 7,542,795
Ending balance $ 183,783 $ 120,562 $ 213,188 $ 7,024,700 $ 562 $ 7,542,795 Fair
Value of Financial Instruments For
certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, other receivables, accounts
payable, accrued expenses, current portion of finance and operating lease liability, current portion of government loans and notes payable,
debentures, convertible notes payable, and due to related parties, the carrying amounts approximate their fair values due to their short-term
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 For
certain financial instruments, the carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents,
accounts receivable, other receivables, and current liabilities, including accounts payable, accrued expenses, current portion of government
loans and notes payable, convertible notes payable, due to related parties, debentures, operating lease liability and finance lease liability,
each qualify as a financial instrument, 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 carrying value of notes
payable approximates their fair values due to current market rate on such debt. As
of May 31, 2023 and August 31, 2022, respectively, the Company did not identify any financial assets and liabilities required to be presented
on the condensed consolidated balance sheet at fair value, except for cash and cash equivalents which are carried at fair value using
Level 1 inputs. Derivative
Financial Instruments Fair
value accounting requires bifurcation of embedded derivative instruments such as conversion features in convertible debt or equity instruments
and measurement of their fair value for accounting purposes. In assessing the convertible debt instruments, management determines if
the convertible debt host instrument is conventional convertible debt and further if there is a beneficial conversion feature requiring
measurement. If the instrument is not considered conventional convertible debt under ASC 470, the Company will continue its evaluation
process of these instruments as derivative financial instruments under ASC 815. The Company applies the guidance in ASC 815-40-35-12
to determine the order in which each convertible instrument would be evaluated for derivative classification. Once
determined, derivative liabilities are adjusted to reflect fair value at each reporting period end, with any increase or decrease in
the fair value being recorded in results of operations as an adjustment to the fair value of derivatives. Revenue
Recognition The
Company’s revenue recognition reflects the updated accounting policies as per the requirements of FASB Accounting Standards Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers Revenue
from providing healthcare and healthcare related services and product sales are recognized under Topic 606
● 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 the Company’s revenue category, are summarized below:
● Healthcare
and healthcare related services – gross service revenue is recorded in the accounting records at the time the services are
provided (point-in-time) on an accrual basis at the provider’s established rates. 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.
● Product
sales – revenue is recorded at the point of time of delivery In
arrangements where another party is involved in providing specified services to a customer, the Company evaluates whether it is the principal
or agent. In this evaluation, the Company considers if the Company obtains control of the specified goods or services before they are
transferred to the customer, as well as other indicators such as the party primarily responsible for fulfillment, inventory risk, and
discretion in establishing price. For product sales where the Company is not the principal, the Company recognizes revenue on a net basis.
For the periods presented, revenue for arrangements where the Company is the agent was not material. Payments
received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Unearned revenue
is included with accrued expenses in the accompanying condensed consolidated balance sheets. Sales
returns and allowances were insignificant for the nine months ended May 31, 2023 and 2022. The Company does not provide unconditional
right of return, price protection or any other concessions to its customers. 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 12,266,165 10,624,849 6,548,571 911,392 Due
to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as
basic loss per share for all periods presented. 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 and the functional currency of the parent company is the United States
dollar. Translation losses of $ 738,022 431,605 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 condensed consolidated statements of cash flows will not necessarily agree
with changes in the corresponding balances on the condensed consolidated balance sheets. Segment
Reporting ASC
Topic 280, Segment Reporting two Reclassifications Certain
prior period amounts were reclassified to conform to the manner of presentation in the current period. These reclassifications had no
effect on the net loss or stockholders’ equity. Recent
Accounting Pronouncements Management
does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying
condensed consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under
the circumstances. |
