Novo Integrated Sciences, Inc. (NVOS) is a pioneering force in the healthcare industry, embracing a comprehensive, patient-centric approach to wellness and medical solutions. The company's multidisciplinary ecosystem integrates cutting-edge technology, advanced therapeutics, and personalized diagnostics to transform the delivery of non-catastrophic healthcare.
Company Background
Founded in 2000 and headquartered in Bellevue, Washington, Novo Integrated Sciences has steadily expanded its footprint over the past two decades. The company's origins trace back to 2000 when it was incorporated as Turbine Truck Engines, Inc. in Delaware. In February 2008, the company was re-domiciled to the state of Nevada, and on July 12, 2017, it underwent a name change to Novo Integrated Sciences, Inc. to reflect its evolving focus on innovative healthcare solutions.
A significant milestone in the company's history occurred on April 25, 2017, when Novo Integrated entered into a Share Exchange Agreement to acquire Novo Healthnet Limited (NHL), a Canadian company, in exchange for the issuance of Novo Integrated common stock. This transaction was accounted for as a reverse acquisition, with NHL being treated as the continuing entity. The historical financial statements presented are the financial statements of NHL. In May 2017, the Share Exchange Agreement closed, and NHL became a wholly owned subsidiary of Novo Integrated.
Business Model
Novo Integrated Sciences' business model is centered around three primary pillars: Service Networks, Technology, and Products. The company owns Canadian and U.S. subsidiaries which provide essential and differentiated solutions to the delivery of multidisciplinary primary care and related wellness products. These solutions are achieved through the integration of medical technology, interconnectivity, advanced therapeutics, diagnostic solutions, unique personalized product offerings, and rehabilitative science.
Service Networks
The company's Service Networks deliver multidisciplinary primary care services through an affiliate network of clinics, small and micro-footprint facilities, franchise relationships, and corporate-owned clinics.
Technology
The Technology pillar focuses on developing and deploying sophisticated interconnected platforms that extend the reach of healthcare services beyond traditional clinic locations, including the patient's home.
Products
The Products pillar encompasses the development and distribution of effective, personalized health and wellness solutions, emphasizing a science-first approach to preventative and maintenance care.
Financials
As of May 31, 2024, Novo Integrated Sciences reported total assets of $35.33 million, a decrease from $35.56 million as of August 31, 2023. The company's current ratio stood at 0.37, and its quick ratio was 0.30, indicating a relatively illiquid position. Novo Integrated Sciences' net loss for the nine-month period ended May 31, 2024, was $21.17 million, compared to a net loss of $10.05 million in the same period of the prior year.
The company's revenue for the nine months ended May 31, 2024, was $10.21 million, representing a 10% increase from the $9.27 million reported in the same period of the previous year. This growth was primarily driven by higher product sales, which offset a decrease in revenue during the third quarter. Acenzia, a wholly owned subsidiary, contributed $2.57 million in revenue, while Terragenx, another subsidiary, added $120.37 thousand in revenue during the nine-month period.
Novo Integrated Sciences' operating costs for the nine months ended May 31, 2024, increased by 22% to $11.54 million, compared to $9.48 million in the same period of the prior year. This increase was mainly due to higher fair value of stock options issued, common stock issuance for services, and cashless warrant exercises. Interest expense also rose by 91% to $460.50 thousand, and amortization of debt discount increased by 16% to $5.10 million during the nine-month period.
For the most recent quarter ended May 31, 2024, Novo Integrated Sciences reported revenue of $3,151,851 and a net loss of $13,741,903. The decrease in revenue was principally due to a decrease in product sales. However, revenue from the healthcare services segment increased by 8.1% compared to the same quarter in the previous year. The significant increase in net loss was mainly attributed to the recognition of a $6.72 million loss in the fair value of the derivative liability, loss from operations of $1.09 million, amortization of the debt discount of $2.75 million, and foreign currency exchange loss of $1.46 million arising as a result of intercompany balance reconciliation.
The company's operating cash flow (OCF) for the most recent quarter was negative $657,970, while free cash flow (FCF) stood at negative $659,975.
Liquidity
The company's liquidity position remains a concern, as it used $6.01 million in cash for operating activities during the nine months ended May 31, 2024, compared to $2.01 million in the same period of the previous year. As of the most recent quarter, Novo Integrated Sciences had a cash balance of $1,540,000. The company's debt-to-equity ratio was 0.32, current ratio was 0.37, and quick ratio was 0.30, further highlighting the liquidity challenges.
In September 2023, Novo Integrated Sciences entered into two separate securities purchase agreements with Mast Hill Fund, L.P. and FirstFire Global Opportunities Fund, L.P., issuing promissory notes totaling $3.78 million. The company subsequently paid off the remaining balances of these notes in April 2024 using proceeds from a $6.21 million securities purchase agreement with Streeterville Capital, LLC.
Additionally, in April 2024, the company entered into a securities purchase agreement with Streeterville Capital, LLC, issuing a $6.21 million secured convertible promissory note. The proceeds from this transaction were used to repay the outstanding balances of the Mast Hill and FirstFire notes.
Recent Developments
Novo Integrated Sciences has also been involved in several other notable events and transactions. In November 2023, the company entered into a Purchase and Sale Agreement to acquire the Ophir Collection, a collection of 43 gemstones, 42 of which are certified by the Gemological Institute of America. The company is expected to use the proceeds from a Standby Letter of Credit monetization program to fund this acquisition.
Furthermore, in June 2024, Novo Integrated Sciences and RC Consulting Consortium Group LLC amended the prepayment terms and conditions of a previously disclosed $70 million promissory note, allowing the company to prepay up to 50% of the outstanding note in restricted shares under certain conditions.
The company's stock price has faced challenges, with Nasdaq notifying Novo Integrated Sciences in February 2024 that it was not in compliance with the minimum bid price requirement. The company has until August 2024 to regain compliance with this requirement.
Business Segments
Novo Integrated Sciences operates in two reportable segments: healthcare services and product sales.
Healthcare Services Segment
The healthcare services segment provides a wide array of multidisciplinary primary health care services and related products beyond the traditional medical doctor level of care. The company's clinicians and practitioners, who are not licensed medical doctors, offer services such as physiotherapy, chiropractic care, occupational therapy, massage therapy, acupuncture, chiropody, and more. These specialized healthcare services are delivered through Novo's 16 corporate-owned clinics, a network of affiliate clinics, and eldercare-related facilities in Canada.
For the nine months ended May 31, 2024, the healthcare services segment generated revenue of $6.33 million, representing 62% of the company's total revenue during that period. Gross profit from healthcare services was $2.15 million, with a gross margin of 34%. The company has continued to expand its patient care model by leveraging various medical technology platforms to extend oversight of patient diagnosis, care, and monitoring beyond traditional brick-and-mortar facilities.
Product Sales Segment
The product sales segment focuses on the development and distribution of effective, personalized health and wellness products. This allows the company to offer customized preventative care solutions and promote healthier populations. Recent acquisitions of Acenzia, PRO-DIP, and Terragenx have supported the growth of Novo's product portfolio.
For the nine months ended May 31, 2024, the product sales segment generated revenue of $3.80 million, accounting for 37% of the company's total revenue. Gross profit from product sales was $1.94 million, with a gross margin of 51%. Novo's science-first approach to product innovation has emphasized the creation and distribution of over-the-counter preventative and maintenance care solutions.
The company continues to leverage its growing patient base across its corporate clinics, affiliate network, micro-clinics, and interconnected technology platforms to drive demand for its expanding line of health and wellness products. Novo's strategic vision is to provide an essential and differentiated solution to health and wellness globally through the integration of medical technology, advanced therapeutics, and personalized diagnostic offerings.
During the quarter ended May 31, 2024, revenues from healthcare services and product sales were 53% and 45%, respectively, of the company's total revenues for the quarter.
Risks and Challenges
In terms of risks, Novo Integrated Sciences faces several challenges, including its ongoing liquidity concerns, the highly competitive nature of the healthcare industry, and the regulatory environment surrounding the healthcare and medical technology sectors. The company's ability to successfully execute its growth strategy and maintain its technological edge will be crucial to its long-term success.
Conclusion
Despite the challenges, Novo Integrated Sciences remains committed to its vision of transforming the delivery of non-catastrophic healthcare through its innovative, patient-centric approach. The company's focus on integrating medical technology, advanced therapeutics, and personalized diagnostics positions it for potential long-term growth, should it navigate the current headwinds effectively.
Over the years, Novo Integrated has faced various challenges. In 2021, the company had to navigate the COVID-19 pandemic, which impacted operations and required adjustments to service delivery. This experience further highlighted the importance of the company's focus on innovative healthcare solutions and adaptable service delivery models.