Novo Integrated Sciences, Inc. - Annual Report: 2017 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

For the fiscal year ended August 31, 2017

For the transition period from ______, 20 ____, to ______, 20_____.

Commission File Number 333-109118

Novo Integrated Sciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

(206) 617-9797

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: $0.001 par value common stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes [  ] No [X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, February 28, 2017, was $3,903,769.

There were 202,221,364 shares of the registrant’s $0.001 par value common stock outstanding as of December 6, 2017.

Novo Integrated Sciences, Inc.

Contents

NOVO INTEGRATED SCIENCES, INC.

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates and projections about Novo Integrated Sciences, Inc.’s industry, management beliefs, and assumptions made by management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such forward-looking statements.

PART I

ITEM 1. BUSINESS

Business Overview

Novo Integrated Sciences, Inc. 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. When used herein, the terms the “Company,” “we,” “us” and “our” refer to Novo Integrated Sciences, Inc. and its consolidated subsidiaries.

We provide specialized physiotherapy, chiropractic care, occupational therapy, eldercare, laser therapeutics, massage therapy, acupuncture, chiropodist, neurological functions, kinesiology and dental services to our clients. Our multi-disciplinary primary healthcare services and protocols are directed at assessment, treatment, management, rehabilitation and prevention through our 14 corporate owned clinics, 150 affiliate clinics, retirement homes, long-term care facilities and institutional locations throughout Canada. Directly and indirectly through our contractual relationships, we provide our specialized services to over 300,000 patients annually. No employee of the Company or any of its subsidiaries practices primary care medicine and the Company’s services do not require a medical or nursing license.

Our strict adherence to public regulatory standards, as well as self-imposed standards of excellence, have allowed us to navigate with ease through the industry’s licensing and regulatory framework. Compliant treatment, data and administrative protocols are managed through a team of highly-trained, certified healthcare and administrative professionals. Novo Healthnet Limited, our wholly owned subsidiary (“NHL”), and its direct and indirect subsidiaries are regulated under the Financial Services Commission of Ontario (“FSCO”). In 2013, NHL received its accreditation from the Commission on Accreditation of Rehabilitation Facilities (“CARF”). Currently, NHL is undergoing the CARF re-accreditation process.

Recent Developments

Share Exchange Agreement

On April 25, 2017 (the “Effective Date”), the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) by and between (i) the Company; (ii) NHL, (iii) ALMC-ASAP Holdings Inc. (“ALMC”); (iv) Michael Gaynor Family Trust (the “MGFT”); (v) 1218814 Ontario Inc. (“1218814”) and (vi) Michael Gaynor Physiotherapy Professional Corp. (“MGPP,” and together with ALMC, MGFT and 1218814, the “NHL Shareholders”). Pursuant to the terms of the Share Exchange Agreement, the Company agreed to acquire from the NHL Shareholders all of the shares of both common and preferred stock of NHL, held by the NHL Shareholders, in exchange for the issuance by the Company to the NHL Shareholders of shares of the Company’s common stock, such that following the closing of the Share Exchange Agreement, the NHL Shareholders would own 167,797,406 restricted shares of Company common stock, representing 85% of the issued and outstanding Company common stock, calculated including all granted and issued options or warrants to acquire the Company common stock as of the Effective Date, but to exclude shares of Company common stock that are subject to a then-current Regulation S offering that was undertaking by the Company (the “Exchange”).

On May 9, 2017, the Exchange closed and, as a result, NHL became a wholly owned subsidiary of Novo Integrated Sciences, Inc.

Increase in Size of Board of Directors; Officer and Director Changes

In connection with the Exchange closing, our Board of Directors increased the size of the Board, such that the size of the Board is currently comprised of three members.

On May 9, 2017, in connection with the Exchange, (i) Enzo Cirillo resigned his positions as the Company’s Chairman of the Board, a member of the Board of Directors and Interim Chief Executive Officer, (ii) Christopher David resigned his position as the Company’s Secretary and Treasurer, and (iii) Judith Norstrud resigned her position as the Company’s Principal Financial Officer and Principal Accounting Officer. Mr. David retained his responsibilities as the Company’s President and as a member of the Company’s Board of Directors.

Also on May 9, 2017, the Board appointed Dr. Pierre Dalcourt, D.C. and Mr. Michael Gaynor as directors, and Ms. Klara Radulyne, CPA as the Company’s Principal Financial Officer, effective immediately. Mr. Gaynor is the trustee of MGFT. As a result of the Exchange, MGFT acquired 16,779,740 shares of the Company’s common stock, which represented approximately 8.5% of the Company’s outstanding common stock as of the date of the closing of the Exchange. As of the closing date of the Exchange, the value of MGFT’s stock ownership was $14,094,982, based on the closing price of the Company’s common stock of $0.84 on May 9, 2017. Dr. Dalcourt is the President and 50% owner of 1218814. Amanda Dalcourt, NHL’s Chief Executive Officer and Dr. Dalcourt’s spouse, also is a 50% owner of 1218814. As a result of the Exchange, 1218814 acquired 31,881,507 shares of the Company’s common stock, which represented approximately 16.2% of the Company’s outstanding common stock as of the date of the closing of the Exchange. As of the closing date of the Exchange, the value of 1218814’s stock ownership was $26,780,466, based on the closing price of the Company’s common stock of $0.84 on May 9, 2017. The value of each of Dr. Dalcourt’s and Ms. Dalcourt’s ownership interests in 1218814’s Company common stock as of May 9, 2017, based on the closing price of the Company’s common stock on May 9, 2017, was $13,390,233.

Change in Fiscal Year End

On May 9, 2017, our Board of Directors determined, in connection with the closing of the Exchange, to change our fiscal year end from December 31 to August 31, but did not memorialize such determination in writing. On July 17, 2017, the Board ratified and memorialized in writing its May 9, 2017 determination regarding the change in fiscal year end.

Change in the Company’s Independent Registered Public Accounting Firm

On May 31, 2017, our Board of Directors approved the engagement of AJ Robbins CPA, LLC, and the dismissal of Warren Averett, LLC, as our independent registered public accounting firm.

Business Strategy

Our mission is to build a Canada and U.S. based multi-disciplinary primary healthcare service provider that provides certain high-quality specialized healthcare services and products through the integration of technology and medical science. Key elements of our business strategy include:

Back on Track Physiotherapy and Health Centres

On September 30, 2013, NHL closed a Purchase and Sale of Assets Agreement with Michael Gaynor Physiotherapy Professional Corporation, operating as Back on Track Physiotherapy and Health Centres (“Back on Track”), for all tangible and intangible assets of Back on Track, including four operational physiotherapy clinics located in Ottawa, Ontario, Canada. Since 1994, Back on Track Physiotherapy and Health Centres have been providing in-clinic physiotherapy and multi-disciplinary primary healthcare services including chiropractic services, kinesiology, massage therapy, chiropody/foot care and occupational therapy services. As of November 28, 2017, we operate eight Back on Track Physiotherapy and Health centres in the Ottawa area and eastern Ontario regions.

Novo Peak Health Inc.

On September 16, 2013, Novo Peak Health Inc. (“Novo Peak Health”) was incorporated under the laws of Ontario, Canada, as a wholly owned subsidiary of NHL for the purpose of providing multi-disciplinary primary healthcare services to long-term care and retirement facilities in Ontario, Canada. On September 30, 2013, NHL acquired the assets of Peak Health LTC Inc., an Ontario, Canada corporation formed in 2006, including existing contracts with 20 long-care homes and a community physiotherapy clinic license with the Ministry of Health and Long-Term Care. This acquisition provided the initial foundation for Novo Peak Health’s operational and growth strategy focused on providing rehabilitation, physiotherapy, occupational therapy and assistive devices program (“ADP”) multi-disciplinary primary healthcare services to eldercare patients located at various long-term care homes, retirement homes and community clients across Ontario. Novo Peak Health provides its eldercare patients an integrated approach to rehabilitative strategies and continued education for the residents, their caregivers and the patients’ family members through its two major divisions: physiotherapy (“PT”) and occupational therapy (“OT”).

Novo Peak Health’s proprietary Electronic Rehabilitation Record and Management Reporting (“ERRMR”) software solution provides Novo Peak Health the ability to provide each eldercare facility, of both the PT and OT divisions, with reports that identify cost and optimization possibilities, a wide variety of patient outcome measurements, overall contract effectiveness and much more.

Both PT and OT have similar philosophies, offering an overlap and synchronicity between the divisions. This allows for opportunities where contracts for multi-disciplinary primary healthcare services with one particular division can create contractual opportunities for the other division. The PT division has been in existence since the beginning of Novo Peak Health, and the OT division was formed in April 2017 due to an increase in demand for OT healthcare services at many eldercare facilities.

The Novo Peak Health PT division consists of the following five sectors:

The Novo Peak Health OT Division consists of two sectors:

Our occupational therapists have specialized training in mobility providing assistive device assessments when required. This service is funded primarily by the MOHLTC.

Novo Dental

On March 31, 2015, NHL completed the formation of a 50/50 joint venture with the Sophie Freeman Dental Hygiene Professional Corporation operated under the name Novo Dental. This joint venture was formed for the purpose of providing dental assessments and treatments, as well as preventative dental care and education, for elderly located in long-term care homes and retirement facilities. As required, Novo Dental processes referrals to dentists, oral maxillofacial surgeons and denturists.

Combining the experience and contacts developed by NHL over many years of providing multi-disciplinary primary healthcare services to the aging population along with the over 24-years Sophie Freeman had as a registered dental hygienist, our joint venture is well positioned to best understand the advanced dental services, assessments and education needs of the elderly, including those individuals that are either physically or medically compromised.

Novo Dental provides the following preventive dental hygiene care and assessment services:

Novo Healthnet Rehab Limited

Novo Healthnet Rehab Limited, a 100% owned Canadian subsidiary of NHL, holds all rental and lease agreements for the Novo affiliates and produces no revenue.

About Our Affiliate Clinics

In order to strengthen our position within the Canadian Preferred Provider Network (“PPN”), we have built a contracted affiliate relationship with over 150 clinics across Canada. The PPN is a network comprised of three major insurance companies and their subsidiaries, totaling 16 insurance companies. PPN member insurance companies in need of specific primary healthcare solutions for their patients send referrals to specific clinics registered through the PPN. We, as one of five major providers to the PPN, receive referrals through the PPN. This subset of business is a continuous source of referrals, from the insurance company payer to the approved group of clinics meeting the insurance companies’ pre-determined set of criteria for what they believe to be an appropriate clinical setting. Affiliate clinics pay us a mix of a flat fee and a percentage based fee upon receipt of a payment for a service referred through the PPN.

The services provided by our affiliate clinics are consistent with the multi-disciplinary primary healthcare services provided by clinics owned by us. While each affiliate clinic may provide additional unique healthcare solutions, in order to strengthen its position in its respective immediate local market, all affiliate clinics must meet certain criteria established by the PPN, so these criteria are consistent among all of our owned and affiliated clinics. Most of our affiliate clinics are located in Ontario. Approximately, 15% of our affiliate clinics are located outside of Ontario, including in Newfoundland, Nova Scotia, New Brunswick and Alberta.

Contracts

Certain contracts held with client homes and client companies follow standard formats, templates and include generally accepted terms of reference. Certain of the main clauses of the NHL contracts for services and other work product contain language intended to (1) clarify which entity is the health information custodian of the medical files (usually held by the client home or company), (2) define release of liability, (3) ensure privacy and confidentiality of proprietary information or private health information, (4) define provisions of worker’s compensation clearance or benefits for employees and/or contractors, (5) detail provisions of value-added items, services or programs, (6) terms and conditions of the contract (often for a set number of years with an option to a renewal option), (7) provide for termination conditions, and (8) invoicing and billing procedures.

Competition

In Canada, the specialized multi-disciplinary primary healthcare service sector in which we operate is highly competitive. With a finite number of patients and clients, companies providing multi-disciplinary primary healthcare services similar to those that we provide are vying for the same contracts, customers and referrals.

Our business strategy includes pursuing selective acquisitions of additional multi-disciplinary primary healthcare providers and clinics in markets that we currently populate as well as new geographic markets. In pursuit of certain acquisitions, we face competition from other for-profit multi-disciplinary primary healthcare providers and clinics that are neither affiliated with nor owned by NHL. We face competition from existing multi-disciplinary primary healthcare providers that offer patients a different path of diagnosis, assessment, treatment, management and rehabilitation healthcare services. We utilize both employee and independent contractor clinicians for delivery of our multi-disciplinary primary healthcare services and are always seeking to attract clinics and clinicians that are qualified to maintain our Company’s reputation for high-quality care and patient satisfaction.

Our ability to effectively compete for patients is impacted by commercial and managed care payor programs that influence patient choice by offering health insurance plans that restrict patient choice of provider. Patients in the markets where we provide our multi-disciplinary primary healthcare services may travel to out-of-market providers to seek medical treatment for a variety of reasons including, but not limited to, the need for services we do not offer or as a result of either a PPN referral or the referral of another clinician. Patients who seek multi-disciplinary primary healthcare services from an out-of-market provider may subsequently shift their preferences to that clinician for future healthcare services.

Employees

As of August 31, 2017, we employed 61 full-time employees. We believe that we maintain a satisfactory working relationship with our employees and have not experienced any labor disputes.

Corporate History

Novo Integrated Sciences, Inc. 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.

Since inception and through May 9, 2017, the Company’s activities and business operations were limited to raising capital, organizational matters and the implementation of its business plan related to research, development, testing and commercialization of various alternative energy technologies.

On September 5, 2013, NHL was incorporated under the laws of Ontario province, Canada. On September 16, 2013, Novo Peak Health Inc., Novo Assessments Inc. and Novo Healthnet Rehab Limited were formed as Ontario, Canada corporate entities, each wholly owned by NHL. On November 18, 2014, Novo Healthnet Kemptville Centre, Inc., a Back on Track Physiotherapy and Health Centre clinic operated by NHL, was formed with NHL owning an 80% interest. On March 31, 2015, NHL completed the formation of a 50/50 joint venture with the Sophie Freeman Dental Hygiene Professional Corporation operated under the name Novo Dental. On April 1, 2017, NHL purchased assets of Apka Health to expand our community occupational therapy services.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Companies’ corporate headquarters are located at 11120 NE 2^nd Street, Suite 200, Bellevue, WA 98004.

ITEM 3. LEGAL PROCEEDINGS

Except as set forth herein, as of the date of this Annual Report on Form 10-K, there are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or which our property is the subject. In addition, none of our officers, directors, affiliates or 5% stockholders (or any associates thereof) is a party adverse to us, or has a material interest adverse to us, in any material proceeding.

The Company is currently involved in litigation in Taiwan, wherein the Company engaged Formosan Brothers, a Taiwan-based law firm, to file a criminal complaint with the Taipei, Taiwan District Prosecutors Office (the “Prosecutor”) seeking criminal charges against the principal partners of ETS, Mr. Chen, Chong-Ping (“Alan Chen”) and Huang, Ren-Ju (“Mr. Huang”) for fraud in connection with their actions related to the Company’s business initiative to commercialize the HPBS technology in Asia.

On December 25, 2015, the Company received a written ruling from the Taiwan District Prosecutor’s Office that it had declined to prosecute Alan Chen and Mr. Huang for criminal fraud.

On January 4, 2016, the Company filed an appeal to the Taiwan High Prosecution Office. On February 1, 2016, the Company’s appeal was granted and the case was returned to the Taiwan District Court Prosecutor with instructions to conduct a new investigation of the facts and evidence. The Company intends to continue to pursue this matter until a final resolution is obtained.

On June 12, 2017, Mr. Chen was indicted and charged with criminal fraud and the Company was informed that Mr. Huang will not be indicted.

On the recommendation of both the Company’s Taiwan attorneys and the judge overseeing the criminal fraud case against Mr. Chen, the Company filed an ancillary civil action against Mr. Chen allowing the judge overseeing the criminal fraud case to initiate a mediation proceeding between the Company and Mr. Chen for a potential financial settlement. Mr. Chen did not appear for an August 1, 2017 mediation hearing but did appear for the subsequent criminal hearing. The defendant pleaded not guilty and the judge notified both parties the case will proceed to trial.

In late August 2017, the Company filed a Confiscation Application with the Taiwan Taipei District Court requesting the prosecutor’s office search for and confiscate any assets the prosecutor can locate in the name of Alan Chen as security for the compensation to the Company pending the criminal trial’s outcome. As of the date of this filing, the Company is awaiting the results of this Confiscation Application.

On November 23, 2017, Mr. Chen and the Company’s legal team appeared for a hearing to determine accepted facts and any additional evidence. The parties are waiting for the next court date to be scheduled.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the OTCQB tier of the OTC Markets Group under the symbol, “NVOS.” The OTC Market is a computer network that provides information on current “bids” and “asks,” as well as volume information.

The following table sets forth the range of high and low closing bid quotations for our common stock for each of the periods indicated as reported by the OTC Markets. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

On December 6, 2017, the closing bid price of our common stock as reported on the OTCQB was $0.46 and there were approximately 542 shareholders of record.

DIVIDENDS

We have not paid any cash dividends on our common or preferred stock and do not anticipate paying any such cash dividends in the foreseeable future. Earnings, if any, will be retained to finance future growth. We may issue shares of our common stock and preferred stock in private or public offerings to obtain financing, capital or to acquire other businesses that can improve our performance and growth. Issuance and or sales of substantial amounts of common stock could adversely affect prevailing market prices in our common stock.

Common Stock

During the year ended August 31, 2017, there was no modification of any instruments defining the rights of holders of the Company’s common stock and no limitation or qualification of the rights evidenced by the Company’s common stock as a result of the issuance of any other class of securities or the modification thereof.

On September 2, 2016, the Company sold 27,777 shares of common stock to 2367416 Ontario, Inc., a Canadian corporation owned by Mr. Cirillo, who at the time was our Interim Chief Executive Officer, Chairman of the Board and more than 10% stockholder (“2367416 Ontario”), for an aggregate purchase price of $15,000 (which represents a per share purchase price of $0.54). This sale occurred prior to the closing of the Exchange. Effective May 9, 2017, Mr. Cirillo resigned as an officer and director of the Company.

On October 17, 2016, the Company sold 35,714 shares of common stock to 2367416 Ontario for an aggregate purchase price of $15,000 (which represents a per share purchase price of $0.42).

On December 9, 2016, the Company sold 76,923 shares of common stock to 2367416 Ontario for an aggregate purchase price of $20,000 (which represents a per share purchase price of $0.26).

On December 21, 2016, the Company sold 115,385 shares of common stock to 2367416 Ontario for an aggregate purchase price of $30,000 (which represents a per share purchase price of $0.26).

On March 8, 2017, the Company sold 33,333 shares of common stock to 2367416 Ontario for an aggregate purchase price of $15,000 (which represents a per share purchase price of $0.45).

On May 19, 2017, the Company sold 8,368,500 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 $2,510,550.

On June 20, 2017, the Company sold 2,140,839 restricted shares of common stock to an aggregate of 12 accredited investors. The shares were sold at a price of $0.30 per share, for an aggregate purchase price of $642,250.

On August 24, 2017, the Company sold 779,202 restricted shares of common stock to an aggregate of three accredited investors. The shares were sold at a price of $0.30 per share, for an aggregate purchase price of $233,760.

All of the above shares were sold 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.

ITEM 6. SELECTED FINANCIAL DATA

Not required.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THIS FILING CONTAINS FORWARD-LOOKING STATEMENTS. THE WORDS “ANTICIPATED,” “BELIEVE,” “EXPECT,” “PLAN,” “INTEND,” “SEEK,” “ESTIMATE,” “PROJECT,” “WILL,” “COULD,” “MAY,” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS, INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES, AND FUTURE NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES IN FOREIGN, POLITICAL, SOCIAL, AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY’S CONTROL. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FILING ARE QUALIFIED BY THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS OR DEVELOPMENTS.

The following discussion and analysis of our financial condition and plan of operations should be read in conjunction with our financial statements and related notes appearing elsewhere herein. This discussion and analysis contains forward-looking statements including information about possible or assumed results of our financial conditions, operations, plans, objectives and performance that involve risk, uncertainties and assumptions. The actual results may differ materially from those anticipated in such forward-looking statements. For example, when we indicate that we expect to increase our product sales and potentially establish additional license relationships, these are forward-looking statements. The words expect, anticipate, estimate or similar expressions are also used to indicate forward-looking statements.

Business Overview

Novo Integrated Sciences, Inc. 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. When used herein, the terms the “Company,” “we,” “us” and “our” refer to Novo Integrated Sciences, Inc. and its consolidated subsidiaries.

We provide specialized physiotherapy, chiropractic care, occupational therapy, eldercare, laser therapeutics, massage therapy, acupuncture, chiropodist, neurological functions, kinesiology and dental services to our clients. Our multi-disciplinary primary healthcare services and protocols are directed at assessment, treatment, management, rehabilitation and prevention through our 14 corporate owned clinics, 150 affiliate clinics, retirement homes, long-term care facilities and institutional locations throughout Canada. Directly and indirectly through our contractual relationships, we provide our specialized services to over 300,000 patients annually. No employee of the Company or any of its subsidiaries practices primary care medicine and the Company’s services do not require a medical or nursing license.

Our strict adherence to public regulatory standards, as well as self-imposed standards of excellence, have allowed us to navigate with ease through the industry’s licensing and regulatory framework. Compliant treatment, data and administrative protocols are managed through a team of highly-trained, certified healthcare and administrative professionals. Novo Healthnet Limited, our wholly owned subsidiary (“NHL”), and its direct and indirect subsidiaries are regulated under the Financial Services Commission of Ontario (“FSCO”). In 2013, NHL received its accreditation from the Commission on Accreditation of Rehabilitation Facilities (“CARF”). Currently, NHL is undergoing the CARF re-accreditation process.

Recent Developments

Share Exchange Agreement

On April 25, 2017 (the “Effective Date”), the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) by and between (i) the Company; (ii) NHL, (iii) ALMC-ASAP Holdings Inc. (“ALMC”); (iv) Michael Gaynor Family Trust (the “MGFT”); (v) 1218814 Ontario Inc. (“1218814”) and (vi) Michael Gaynor Physiotherapy Professional Corp. (“MGPP,” and together with ALMC, MGFT and 1218814, the “NHL Shareholders”). Pursuant to the terms of the Share Exchange Agreement, the Company agreed to acquire from the NHL Shareholders all of the shares of both common and preferred stock of NHL, held by the NHL Shareholders, in exchange for the issuance by the Company to the NHL Shareholders of shares of the Company’s common stock, such that following the closing of the Share Exchange Agreement, the NHL Shareholders would own 167,797,406 restricted shares of Company common stock, representing 85% of the issued and outstanding Company common stock, calculated including all granted and issued options or warrants to acquire the Company common stock as of the Effective Date, but to exclude shares of Company common stock that are subject to a then-current Regulation S offering that was undertaking by the Company (the “Exchange”).

On May 9, 2017, the Exchange closed and, as a result, NHL became a wholly owned subsidiary of Novo Integrated Sciences, Inc.

Increase in Size of Board of Directors; Officer and Director Changes

In connection with the Exchange closing, our Board of Directors increased the size of the Board, such that the size of the Board is currently comprised of three members.

On May 9, 2017, in connection with the Exchange, (i) Enzo Cirillo resigned his positions as the Company’s Chairman of the Board, a member of the Board of Directors and Interim Chief Executive Officer, (ii) Christopher David resigned his position as the Company’s Secretary and Treasurer, and (iii) Judith Norstrud resigned her position as the Company’s Principal Financial Officer and Principal Accounting Officer. Mr. David retained his responsibilities as the Company’s President and as a member of the Company’s Board of Directors.

Also on May 9, 2017, the Board appointed Dr. Pierre Dalcourt, D.C. and Mr. Michael Gaynor as directors, and Ms. Klara Radulyne, CPA as the Company’s Principal Financial Officer, effective immediately. Mr. Gaynor is the trustee of MGFT. As a result of the Exchange, MGFT acquired 16,779,740 shares of the Company’s common stock, which represented approximately 8.5% of the Company’s outstanding common stock as of the date of the closing of the Exchange. As of the closing date of the Exchange, the value of MGFT’s stock ownership was $14,094,982, based on the closing price of the Company’s common stock of $0.84 on May 9, 2017. Dr. Dalcourt is the President and 50% owner of 1218814. Amanda Dalcourt, NHL’s Chief Executive Officer and Dr. Dalcourt’s spouse, also is a 50% owner of 1218814. As a result of the Exchange, 1218814 acquired 31,881,507 shares of the Company’s common stock, which represented approximately 16.2% of the Company’s outstanding common stock as of the date of the closing of the Exchange. As of the closing date of the Exchange, the value of 1218814’s stock ownership was $26,780,466, based on the closing price of the Company’s common stock of $0.84 on May 9, 2017. The value of each of Dr. Dalcourt’s and Ms. Dalcourt’s ownership interests in 1218814’s Company common stock as of May 9, 2017, based on the closing price of the Company’s common stock on May 9, 2017, was $13,390,233.

Change in Fiscal Year End

On May 9, 2017, our Board of Directors determined, in connection with the closing of the Exchange, to change our fiscal year end from December 31 to August 31, but did not memorialize such determination in writing. On July 17, 2017, the Board ratified and memorialized in writing its May 9, 2017 determination regarding the change in fiscal year end.

Change in the Company’s Independent Registered Public Accounting Firm

On May 31, 2017, our Board of Directors approved the engagement of AJ Robbins CPA, LLC, and the dismissal of Warren Averett, LLC, as our independent registered public accounting firm.

For the year ended August 31, 2017 compared to the year ended August 31, 2016

Revenues for the year ended August 31, 2017 were $7,963,045, representing an increase of $784,799, or 10.9%, from $7,178,246 for the same period in 2016. The increase in revenue is principally due to the Company’s entry into new occupational therapy service contracts in January 2017 and the acquisition of Apka Health, Inc. in April 2017.

Cost of revenues for the year ended August 31, 2017 were $4,985,715, representing an increase of $315,100, or 6.7%, from $4,670,615 for the same period in 2016. The increase in cost of revenues is principally due to the increase in revenues. Cost of revenues as a percentage of revenue was 63% for the year ended August 31, 2017 and 65% for same period in 2016. The decrease in cost of revenues as a percentage of revenue is principally due to slightly lower costs.

Operating costs for the year ended August 31, 2017 were $3,090,374, representing an increase of $704,697, or 29.5%, from $2,385,677 for the same period in 2016. The increase in operating costs is attributed to stock based compensation of $252,428 for the year ended August 31, 2017 (there was no stock based compensation for the same period in 2016) as well as an increase in both operating payroll expenses and professional fees.

Interest expense for the year ended August 31, 2017 was $554,657, representing an increase of $31,317, or 6.0%, from $523,340 for the same period in 2016. The increase in interest expense is due to an increase in the aggregate principal amount of interest bearing notes being outstanding during the year ended August 31, 2017 compared to the same period in 2016.

Net loss for the year ended August 31, 2017 was $745,264, representing an increase of $399,086, or 115.3%, from $346,178 for the same period in 2016. The increase in net loss is due to the reasons described above.

Liquidity and Capital Resources

As shown in the accompanying financial statements, for the year ended August 31, 2017 and 2016, the Company has had net losses of $745,264 and $346,178, respectively.

During the year ended August 31, 2017, the Company used cash in operating activities of $810,687 compared to generating cash from operations of $101,388 for the same period in 2016. The principal reason for the decrease is the additional net loss incurred during the year ended August 31, 2017 as compared to the same period in 2016 and the increase in accounts receivable for the year ended August 31, 2017 compared to a decrease in accounts receivable for the same period in 2016.

During the year ended August 31, 2017, the Company used cash in investing activities of $749,530 compared to $462,304 for the same period in 2016. The principal reason for the increase is the payment of deposit acquisitions and changes in other receivables.

During the year ended August 31, 2017, the Company generated cash of $3,107,539 from financing activities compared to $402,207 for the same period in 2016. The principal reason for the increase is the sale of common stock during the year ended August 31, 2017, as discussed below.

On March 8, 2017, the Company sold 33,333 restricted shares of common stock to 2367416 Ontario, Inc. The shares were sold at a price of $0.45 per share, for an aggregate purchase price of $15,000. This sale of 33,333 restricted shares occurred prior to the share exchange as described above. The $15,000 was provided to fund the Company’s ongoing operational and product development expenses. At the time of the sale, Enzo Cirillo was the Company’s Interim CEO, Chairman of the Board and a greater than 10% shareholder of the Company’s common stock, as well as the principal partner of 2367416 Ontario, Inc. Effective May 9, 2017, Mr. Cirillo resigned as an officer and director of the Company. Additionally, with the closing of the Share Exchange Agreement between the Company and Novo Healthnet Limited, Mr. Cirillo is no longer a greater than 10% shareholder of the Company’s common stock.

On May 19, 2017, the Company sold 8,368,500 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 $2,510,550. The $2,510,550 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 June 20, 2017, the Company sold 2,140,839 restricted shares of common stock to an aggregate of 12 accredited investors. The shares were sold at a price of $0.30 per share, for an aggregate purchase price of $642,250. The $642,250 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. 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 August 24, 2017, the Company sold 779,202 restricted shares of common stock to an aggregate of three accredited investors. The shares were sold at a price of $0.30 per share, for an aggregate purchase price of $233,760. The $233,760 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. 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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our financial statements.

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.

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).

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.

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.

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 7,860,000 options/warrants outstanding as of August 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

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 Canadian $. Translation gains of $1,240,844 and $1,277,449 at August 31, 2017 and 2016, respectively, are classified as an item of other comprehensive income in the stockholders’ equity section of the balance sheet.

New 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.

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.

Recent accounting pronouncements issued by the FASB, the AICPA and the Securities and Exchange Commission did not or are not believed by management to have a material effect on the Company’s financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

Consolidated Financial Statements

Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Novo Integrated Sciences, Inc.

We have audited the accompanying consolidated balance sheets of Novo Integrated Sciences, Inc and Subsidiaries (collectively “the Company”) as of August 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ deficit, and cash flows for the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Novo Integrated Sciences, Inc. as of August 31, 2017 and 2016, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

aj@ajrobbins.com

3773 Cherry Creek North Drive, Suite 575 East, Denver, Colorado 80209

(B)303-331-6190 (M)720-339-5566 (F)303-845-9078

NOVO INTEGRATED SCIENCES, INC. (formerly Turbine Truck Engines, Inc.)

CONSOLIDATED BALANCE SHEETS

As of August 31, 2017 and 2016 

The accompanying footnotes are an integral part of these consolidated financial statements.

NOVO INTEGRATED SCIENCES, INC. (formerly Turbine Truck Engines, Inc.)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Years Ended August 31, 2017 and 2016

The accompanying footnotes are an integral part of these consolidated financial statements.

NOVO INTEGRATED SCIENCES, INC. (formerly Turbine Truck Engines, Inc.)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

For the Years Ended August 31, 2017 and 2016

The accompanying footnotes are an integral part of these consolidated financial statements.

NOVO INTEGRATED SCIENCES, INC. (formerly Turbine Truck Engines, Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended August 31, 2017 and 2016

The accompanying footnotes are an integral part of these consolidated financial statements.

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

Note 1 - Organization and Basis of Presentation

Organization and Line of Business

Novo Integrated Sciences, Inc. 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. When used herein, the terms the “Company,” “we,” “us” and “our” refer to Novo Integrated Sciences, Inc. and its consolidated subsidiaries.

We provide specialized physiotherapy, chiropractic care, occupational therapy, eldercare, laser therapeutics, massage therapy, acupuncture, chiropodist, neurological functions, kinesiology and dental services to our clients. Our multi-disciplinary primary healthcare services and protocols are directed at assessment, treatment, management, rehabilitation and prevention through our 14 corporate owned clinics, 150 affiliate clinics, retirement homes, long-term care facilities and institutional locations throughout Canada. Directly and indirectly through our contractual relationships, we provide our specialized services to over 300,000 patients annually. No employee of the Company or any of its subsidiaries practices primary care medicine and the Company’s services do not require a medical or nursing license.

On April 25, 2017 (the “Effective Date”), the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”) by and between (i) the Company; (ii) NHL, (iii) ALMC-ASAP Holdings Inc. (“ALMC”); (iv) Michael Gaynor Family Trust (the “MGFT”); (v) 1218814 Ontario Inc. (“1218814”) and (vi) Michael Gaynor Physiotherapy Professional Corp. (“MGPP,” and together with ALMC, MGFT and 1218814, the “NHL Shareholders”). Pursuant to the terms of the Share Exchange Agreement, the Company agreed to acquire from the NHL Shareholders all of the shares of both common and preferred stock of NHL, held by the NHL Shareholders, in exchange for the issuance by the Company to the NHL Shareholders of shares of the Company’s common stock, such that following the closing of the Share Exchange Agreement, the NHL Shareholders would own 167,797,406 restricted shares of Company common stock, representing 85% of the issued and outstanding Company common stock, calculated including all granted and issued options or warrants to acquire the Company common stock as of the Effective Date, but to exclude shares of Company common stock that are subject to a then-current Regulation S offering that was undertaking by the Company (the “Exchange”).

On May 9, 2017, the Exchange closed and, as a result, NHL became a wholly owned subsidiary of Novo Integrated Sciences, Inc.

The Exchange was accounted for as a reverse acquisition under the purchase method of accounting since NHL obtained control of Novo Integrated Sciences, Inc. 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 closing date of the Exchange, the net assets of the legal acquirer, Novo Integrated Sciences, Inc., were $6,904.

On May 9, 2017, our Board of Directors determined, in connection with the closing of the Exchange, to change our fiscal year end from December 31 to August 31, but did not memorialize such determination in writing. On July 17, 2017, the Board ratified and memorialized in writing its May 9, 2017 determination regarding the change in fiscal year end.

Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s functional currency is the Canadian Dollar (“CAD”); however, the accompanying consolidated financial statements were translated and presented in United States Dollars (“$” or “USD”).

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

Foreign Currency Translation

The accounts of the Company are maintained in CAD. The accounts of the Company 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:

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 Peak Health Inc., Novo Healthnet Rehab Limited, Novo Assessments Inc., an 80% interest in Novo Healthnet Kemptville Centre, Inc., a Back on Track Physiotherapy and Health Centre clinic operated by NHL, and a fifty percent stake in a joint venture with the Sophie Freeman Dental Hygiene Professional Corporation operated as Novo Dental. 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 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 August 31, 2017 and 2016, the allowance for uncollectible accounts receivable was $507,636 and $508,161 respectively.

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

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:

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 discounted 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 August 31, 2017 and 2016, the Company believes there was no impairment of its long-lived assets.

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. The Company recorded goodwill of $399,400 related to its acquisition of Apka Health, Inc. during fiscal year ended August 31, 2017. As of August 31, 2017, the Company performed the required impairment review. Based on its review at August 31, 2017, 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 includes refundable acquisition deposits totaling $1,162,009.

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:

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

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 August 31, 2017 and 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.

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.

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 7,860,000 options/warrants outstanding as of August 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

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 Canadian dollar. Translation gains of $1,240,844 and $1,277,449 for the years ended August 31, 2017 and 2016, respectively, are classified as an item of other comprehensive income in the stockholders’ equity section of the balance sheet.

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

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 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 adoption of this ASU did not have an impact on the Company’s 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 adoption of this ASU did not have an impact on the Company’s financial statements.

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

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 to related parties

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 August 31, 2017 and 2016 consisted of the following:

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

Note 5 – Property and Equipment

Property and equipment at August 31, 2017 and 2016 consisted of the following:

Depreciation expense for the years ended August 31, 2017 and 2016 was $67,776 and $72,586, respectively.

Note 6 – Notes Payable

Notes payable at August 31, 2017 and 2016 consisted of the following:

Aggregate future maturities of notes payable as of August 31, 2017 are as follows:

Note 7 – Debentures, related parties

On September 30, 2013, the Company issued five debentures totaling $5,114,327 (CAD$6,402,512) at August 31, 2017 in connection with the acquisition of certain business assets. The holders of the debentures are current stockholders, officers and/or affiliates of the Company. The debentures are secured by all the assets of the Company, accrue interest at 8% per annum and were originally due on September 30, 2016. On December 2, 2017, the debenture holders agreed to extend the due date to September 30, 2019. On December 5, 2017, the debenture holders and the Company signed a binding Letter of Intent to convert no less than seventy-five percent (75%) of the debenture value plus any interest or fees owed to the Company’s common stock. The per share price to be used for the conversion of each debenture will be the average price of the five (5) trading days immediately preceding the date of conversion with a ten (10) percent premium added to the calculated per share price.

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

Note 8 – Stockholders’ Deficit

Convertible preferred stock

The Company has authorized 1,000,000 shares of $0.001 par value convertible preferred stock. As of August 31, 2017 and 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. As of August 31, 2017 and 2016 there were 201,837,254 and 167,797,406 common shares issued and outstanding, respectively.

During the year ended August 31, 2017 the Company issued:

Stock Options and Warrants

On September 8, 2015, the Company adopted the 2015 Incentive Compensation Plan (the “2015 Plan”), which authorizes the issuance of up to 5,000,000 shares of common stock to employees, officers, directors or independent consultants of the Company, provided that no person can be granted shares under the 2015 Plan for services related to raising capital or promotional activities. During 2017 and 2016, the Company did not grant any awards under the 2015 Plan. As of August 31, 2017, 4,987,500 shares were available under the 2015 Plan for future grants, awards, options or share issuances. However, because the shares issuable under the 2015 Plan or issuable upon conversion of awards granted under the Plan are no longer registered under the Securities Exchange Act of 1934, as amended, the Company does not intend to issue any additional grants under the 2015 Plan.

The following is a summary of stock option/warrant activity:

NOVO INTEGRATED SCIENCES, INC.

(formerly Turbine Truck Engines, Inc.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended August 31, 2017 and 2016

The exercise price for options/warrants outstanding at August 31, 2017: