Nova Leap Health : Interim Financial Statements – 2024 Q1

Nova Leap Health Corp.

Unaudited Condensed Interim Consolidated Financial Statements

For the three months ended March 31, 2024 and 2023

(United States dollars)

Nova Leap Health Corp.

Unaudited Condensed Interim Consolidated Statements of Financial Position

(United States dollars)
As at	March 31, 2024	December 31, 2023
	$	$
ASSETS
Current assets
Cash and cash equivalents	1,116,762	894,765
Accounts receivable	1,567,760	1,652,116
Prepaid expenses	341,582	294,248
Total current assets	3,026,104	2,841,129
Non-current assets
Property and equipment	1,118,520	1,188,383
Intangible assets	469,966	542,711
Goodwill	14,568,242	14,622,219
Deferred income tax asset	1,623,979	1,701,285
Total non-current assets	17,780,707	18,054,598
TOTAL ASSETS	20,806,811	20,895,727
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities	1,242,344	1,240,953
Client deposits payable	56,673	59,584
Promissory notes (note 4)	119,758	117,509
Lease liability	282,660	276,124
Government loans	-	90,730
Total current liabilities	1,701,435	1,784,900
Non-current liabilities	846,515
Lease liability	914,056
Total non-current liabilities	846,515	914,056
TOTAL LIABILITIES	2,547,950	2,698,956
SHAREHOLDERS' EQUITY
Share capital (note 5)	18,959,250	18,959,250
Contributed surplus	2,288,037	2,263,219
Accumulated other comprehensive loss	(1,214,036)	(778,235)
Deficit	(1,774,390)	(2,247,463)
TOTAL SHAREHOLDERS' EQUITY	18,258,861	18,196,771
TOTAL LIABILITIES AND SHARHOLDERS' EQUITY	20,806,811	20,895,727

The accompanying notes form an integral part of these unaudited condensed interim consolidated financial statements.

Subsequent event (note 11)
Approved on behalf of the Board of Directors
"Michael O'Keefe"	"Chris Dobbin"
(signed)	Director (signed)	Director

(1)

Nova Leap Health Corp.

Unaudited Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(United States dollars)
For the	Three months ended March 31
	2024	2023
	$	$
Revenues
Service revenues	6,429,721	6,396,076
Operating expenses
Cost of service	3,986,740	4,144,120
	2,442,981	2,251,956
Corporate and administrative expenses
Head office and operations management	1,590,798	1,632,475
General & administrative	490,381	533,456
Amortization and depreciation	150,275	234,027
Stock-based compensation	24,818	34,862
	2,256,272	2,434,820
Income (loss) from operating activities	186,709	(182,864)
Other expenses
Foreign exchange gain (loss)	371,867	(11,747)
Forgiveness of government loans	29,544	-
Finance expense	(21,289)	(69,455)
Acquisition related and other legal expenses	(316)	(106,491)
Other expenses	(6,206)	(2,181)
	373,600	(189,874)
Income (loss) before income taxes	560,309	(372,738)
Income taxes
Deferred income tax (expense) recovery	(77,361)	84,552
Current income tax expense	(9,875)	(8,690)
	(87,236)	75,862
Net Income (loss)	473,073	(296,876)
Items that will be reclassified subsequently to profit or loss
Foreign exchange (loss) gain on translation to presentation	(435,801)	14,134
Total comprehensive income (loss)	37,272	(282,742)
Net income (loss) per share - basic and diluted (note 6)	$0.005	$(0.003)

The accompanying notes form an integral part of these unaudited condensed interim consolidated financial statements.

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Nova Leap Health Corp.

Unaudited Condensed Interim Consolidated Statements of Changes in Shareholders' Equity

(United States dollars)
				Accumulated
				other		Total
			Contributed	comprehensive		shareholders'
	Common	Share capital	surplus	loss	Deficit	equity
	shares	$	$	$	$	$
Balance at January 1, 2024	86,209,252	18,959,250	2,263,219	(778,235)	(2,247,463)	18,196,771
Stock-based compensation	-	-	24,818	-	-	24,818
Net income for the period	-	-	-	-	473,073	473,073
Other comprehensive loss for the period	-	-	-	(435,801)	-	(435,801)
Balance at March 31, 2024	86,209,252	18,959,250	2,288,037	(1,214,036)	(1,774,390)	18,258,861
Balance at January 1, 2023	86,209,252	18,959,250	2,130,911	(1,215,458)	(1,192,782)	18,681,921
Stock-based compensation	-	-	34,862	-	-	34,862
Net loss for the period	-	-	-	-	(296,876)	(296,876)
Other comprehensive income for the period	-	-	-	14,134	-	14,134
Balance at March 31, 2023	86,209,252	18,959,250	2,165,773	(1,201,324)	(1,489,658)	18,434,041

The accompanying notes form an integral part of these unaudited condensed interim consolidated financial statements.

(3)

Nova Leap Health Corp.

Unaudited Condensed Interim Consolidated Statements of Cash Flows

(United States dollars)

For the	Three months ended March 31
	2024	2023
	$	$
Cash provided by (used in)
Operating activities
Net income (loss) for the period	473,073	(296,876)
Adjustments for items not affecting cash:
Government tax credit receivable	-	207,189
Amortization and depreciation	150,275	234,027
Deferred income tax expense (recovery)	77,361	(84,552)
Stock-based compensation	24,818	34,862
Finance expense	19,455	73,013
Unrealized foreign exchange (gain) loss	(376,636)	12,054
Forgiveness of government loans	(29,544)	-
Gain on the sale of assets	-	(4,861)
Net change in non-cash operating working capital (note 7)	35,502	119,471
Cash provided by operating activities	374,304	294,327
Investing activities
Purchase of property and equipment	-	(27,990)
Proceeds on the sale of assets	-	4,861
Cash used in investing activities	-	(23,129)
Financing activities
Repayment of demand loans and transaction costs (note 3)	-	(392,634)
Repayment of government loans	(59,333)	-
Interest payments on demand loans (note 3)	-	(25,893)
Repayment of promissory notes and interest (note 4)	-	(127,500)
Repayment of lease liability and interest	(88,370)	(104,141)
Cash used in financing activities	(147,703)	(650,168)
Effect of foreign exchange rate change on cash and cash equivalents	(4,604)	689
Increase (decrease) in cash and cash equivalents for the period	221,997	(378,281)
Cash and cash equivalents - beginning of period	894,765	1,272,646
Cash and cash equivalents - end of period	1,116,762	894,365

The accompanying notes form an integral part of these unaudited condensed interim consolidated financial statements.

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Nova Leap Health Corp.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

(United States dollars)

For the three months ended March 31, 2024 and 2023

1. Nature of operations
   Nova Leap Health Corp. (the "Corporation") is the parent company and was incorporated under the Canada Business Corporations Act on November 16, 2015. The principal activities of the Corporation and its subsidiaries (the "Group") is to provide home and home health care services to clients. The Group is currently providing services in the United States in ten states as well as in Nova Scotia, Canada. The Corporation's shares are listed on the TSX Venture Exchange and are traded under the symbol NLH and the over-the-counter market (OTCBB) in the United States under the symbol NVLPF.
   These Unaudited Condensed Interim Consolidated Financial Statements include the accounts of the Corporation and its United States ("US") and Canadian subsidiaries and are presented in United States dollars ("USD") which is the functional currency of the majority of the Group's business operations. The registered head office of the Corporation is located at 7071 Bayers Road, Suite 3006, Halifax, NS Canada B3L 2C2.
   The Unaudited Condensed Interim Consolidated Financial Statements were approved by the Board of Directors on May 9, 2024.
2. Material accounting policies

Statement of compliance

These Unaudited Condensed Interim Consolidated Financial Statements are prepared in accordance with IAS 34, Interim Financial Reporting as issued by the International Accounting Standards Board (''IASB''). These Unaudited Condensed Interim Consolidated Financial Statements were prepared using the same accounting policies and methods of computation and are subject to the same use of estimates and judgments as the Corporation's Audited Consolidated Financial Statements for the year ended December 31, 2023. These Unaudited Condensed Interim Consolidated Financial Statements do not include all disclosures required by IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS Accounting Standards") for annual consolidated financial statements and accordingly should be read in conjunction with the Corporation's Audited Consolidated Financial Statements for the year ended December 31, 2023, prepared in accordance with IFRS Accounting Standards.

3. Demand loans

The changes in the demand loans for the period are as follows:

	March 31, 2024	December 31, 2023
	$	$
At amortized cost:
Balance, beginning of period	-	1,378,244
Debt issue and guarantee insurance costs	-	(6,515)
Effective interest	-	47,452
Interest payment	-	(55,817)
Principal repayment in cash	-	(1,369,521)
Foreign exchange loss	-	6,157
Balance, end of period	-	-
Fair value	-	-

At December 31, 2023, all demand loans were fully repaid.

The Corporation also has access to a $1,107,011 (CAD$1,500,000) revolving operating facility for working capital purposes from a Schedule 1 Canadian bank. The interest rate is the CAD prime rate plus 1.5%. The CAD prime rate at March 31, 2024 was 7.20% (December 31, 2023 - 7.20%). Interest is calculated monthly in arrears, and payable on the last day of each month. The facility is repayable on demand. There was no outstanding balance on this facility as at March 31, 2024 or December 31, 2023.

All the demand loans were secured through a registered General Security Agreement and a Corporate Guarantee for the principal amount of the loan from Nova Leap's US and Canadian subsidiaries.

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Nova Leap Health Corp.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

(United States dollars)

For the three months ended March 31, 2024 and 2023

4. Promissory notes
The changes in the promissory notes for the period are as follows:
	March 31, 2024	December 31, 2023
	$	$
Balance, beginning of period	117,509	1,008,035
Effective interest	2,249	49,763
Repayments	-	(682,500)
Forgiveness of notes on litigation settlement	-	(257,789)
Balance, end of period	119,758	117,509
Current portion	119,758	117,509
Non-current portion	-	-
Balance, end of period	119,758	117,509
Fair value	123,107	119,940

The promissory notes were all initially recorded at fair value using a market interest rate of 7.75% and subsequently measured at amortized cost using the effective interest rate method.

The promissory notes are subject to a Guaranty Agreement from the Corporation and are subordinated to the demand loans (note 3).

5. Share capital

1. Authorized:

Unlimited number of common shares, without nominal or par value.

b. Issued and outstanding:
	March 31, 2024	December 31, 2023
	Number of	Value	Number of	Value
	Shares	$	Shares	$
Balance, beginning and end of period	86,209,252	18,959,250	86,209,252	18,959,250

6. Earnings per share

Basic earnings per share is calculated based on the weighted average number of shares outstanding during the period. Diluted earnings per share assumes that stock options and DSUs have been exercised on the later of the beginning of the period and the date granted. For the period ended March 31, 2024, 6,375,000 stock options and DSUs were excluded from the computation of diluted income per share because their effect would have been anti-dilutive. For the period ended March 31, 2023 all stock options and DSUs were excluded from the computation of diluted income per share because their effect would have been anti-dilutive.

The following table summarizes the basic and diluted weighted average number of shares:

	Three months ended March 31
	2024	2023
Weighted average number of shared used in basic
earnings per share	86,209,252	86,209,252
Shares deemed to be issued for no consideration in
respect of share-based payments	1,133,493	-
Weighted average number of shares used in
basic and diluted earnings per share	87,342,745	86,209,252

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Nova Leap Health Corp.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

(United States dollars)

For the three months ended March 31, 2024 and 2023

7. Supplemental cash flow information

The change in the non-cash operating working capital is as follows:
	Three months ended March 31
	2024	2023
	$	$
Change in non-cash operating working capital:
Accounts receivable	84,356	122,600
Prepaid expenses	(47,334)	(47,913)
Accounts payable and accrued liabilities	1,391	43,863
Client deposits payable	(2,911)	921
	35,502	119,471
Supplemental information:
Interest paid	17,206	48,938
Income taxes paid	-	690

8. Related party transactions

Transactions with related parties are in the normal course of operations and are measured at the exchange amount, which is the amount agreed to by the parties. Related parties include members of the Board of Directors, as well as the Chief Executive Officer and the Chief Financial Officer.

Corporate and administrative expenses include the following related party remuneration expenses:

	Three months ended March 31
	2024	2023
	$	$
Management compensation	118,807	105,400
Directors' compensation	35,587	35,503
Stock-based compensation	22,151	26,682
	176,545	167,585

As at March 31, 2024, there was $16,790 included in accounts payable and accrued liabilities for amounts owed to officers of the Corporation for compensation and expense reimbursements (December 31, 2023 - $53,337) and $ 22,140 for amounts due to directors for directors fees (December 31, 2023 - $11,341).

9. Financial instruments

The Group's risk management is coordinated at its Head Office, in close cooperation with the Board of Directors, and focuses on actively securing the Group's short to medium-term cash flows by maximizing cash flow from operations.

The Group is exposed to various risks in relation to financial instruments. The main types of risks are credit risk, liquidity risk and market risk. The Group is exposed to the same risks in the current year as it was exposed to in the prior year. The most significant financial risks to which the Group is exposed are described below.

Credit risk

Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to this risk for various financial instruments, for example by granting receivables to customers and placing deposits.

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Nova Leap Health Corp.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

(United States dollars)

For the three months ended March 31, 2024 and 2023

9. Financial instruments (continued)

The Group's maximum exposure to credit risk is limited to the carrying amount of financial assets recognized at the end of the reporting period, as summarized below:

Classes of financial assets - carrying amounts	March 31, 2024	December 31, 2023
	$	$
Cash and cash equivalents	1,116,762	894,765
Accounts receivable	1,567,760	1,652,116
	2,684,522	2,546,881

Credit risk management

The credit risk is managed on a group basis based on the Group's credit risk management policies and procedures. The credit risk in respect of cash balances held with banks are managed by only using major reputable financial institutions.

The Group does not specifically assess the credit quality of clients based on a credit rating but through an informal process while onboarding for service. Invoice terms are generally payable within thirty days. The ongoing credit risk is managed through regular review of the aging analysis.

At certain locations, clients are required to pay an upfront deposit, mitigating the credit risk. As at March 31, 2024, the Group had $56,673 collected for client deposits (December 31, 2023 - $59,584), representing approximately 3.6% of outstanding accounts receivable, billed and accrued (December 31, 2023 - 3.6%).

Liquidity risk

Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecasting cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below.

Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a quarterly lookout period are identified monthly. Net cash requirements are compared to available cash balances and available borrowing facilities in order to determine headroom or shortfalls. This analysis shows that available borrowing facilities and available cash are expected to be sufficient for the next twelve months.

The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and accounts receivable. The Group's existing cash resources and accounts receivable, in addition to the current unused balance of the revolving operating facility and cash flow projections are expected to be sufficient to meet current contractual cash outflow requirements. Cash flows from accounts and other receivables are all contractually due within 30 days.

The Group's financial liabilities have contractual maturities (including interest payments where applicable) as summarized below:

As at March 31, 2024	< 1 year	1-2 years	3-5 years	> 5 years
	$	$	$	$
Account payable and accrued liabilities	1,242,344	-	-	-
Client deposits	56,673	-	-	-
Promissory notes, principal and interest	126,000	-	-	-
Lease liability, principal and interest	339,577	308,616	420,723	213,678
Total	1,764,594	308,616	420,723	213,678

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Nova Leap Health Corp.

Notes to the Unaudited Condensed Interim Consolidated Financial Statements

(United States dollars)

For the three months ended March 31, 2024 and 2023

9. Financial instruments (continued)
As at December 31, 2023	< 1 year	1-2 years	3-5 years	> 5 years
	$	$	$	$
Account payable and accrued liabilities	1,240,953	-	-	-
Client deposits	59,584	-	-	-
Promissory notes, principal and interest	126,000	-	-	-
Lease liability, principal and interest	335,938	305,579	480,096	238,228
Government loans	60,487	-	-	-
Total	1,822,962	305,579	480,096	238,228

Market risk

The Group is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk, which result from both its operating and financing activities.

Foreign currency sensitivity

The Group's operations are carried out in USD which is the functional currency of the majority of the Group's business operations. Exposure to currency exchange rates arise from Canadian assets, liabilities, home care operations and head office costs.

The Group's exposure to the Canadian dollar currency risk was as follows:
	March 31, 2024	December 31, 2023
	CAD$	CAD$
Cash and cash equivalents	306,893	288,643
Accounts receivable	333,013	232,445
Accounts payable & accrued liabilities	(503,776)	(455,173)
Lease liability	(899,919)	(933,413)
Government loans	-	(120,000)
	(763,789)	(987,498)

A change of 5.0% in the Canadian dollar exchange rate at March 31, 2024 would affect net income and comprehensive income and deficit by approximately $27,000 (March 31, 2023 - $44,000).

Interest rate sensitivity

As at March 31, 2024, the Group is not exposed to changes in market interest rates through bank borrowings at variable interest rates. An increase or decrease of 1% in interest rates would have no affect net income and comprehensive income and deficit (March 31, 2023- $8,000).

Fair value

All financial assets and liabilities are short-term. The carrying values of short-term financial assets and liabilities are a reasonable approximation of fair value. The fair value of the demand loans and promissory notes are disclosed in notes 3 and 4.

10. Segment reporting

Management identifies the Group's reportable segments as Canadian operations and US operations. All businesses provide home care services to clients. These operating segments are monitored by the Group's Chief Executive Officer and strategic decisions are made based on segment operating results. Group Head Office provides management oversight and expertise including merger and acquisitions services.

Segment information for the reporting period is as follows:

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