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Nova Leap Health Corp
Symbol NLH
Shares Issued 86,309,252
Close 2023-06-27 C$ 0.175
Market Cap C$ 15,104,119
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Nova Leap CEO Dobbin talks litigation settlement

2023-06-27 16:59 ET - News Release

Mr. Chris Dobbin reports

PRESIDENT & CEO LETTER TO SHAREHOLDERS

Dear Nova Leap Health Corp. shareholders

As Nova Leap Health is midway through its eighth year of operations, and in advance of tomorrow's annual general meeting, this is an appropriate time for me to provide some commentary as well as a corporate update.

Leadership, process improvement and expected impact

From Q2 2022 through to the end of Q1 2023, we made several leadership and structural changes to the company. I have commented on these changes in the past. These changes were strategic and reflect the resources and leadership qualities necessary to move the company through to its next phase of growth. The ensuing benefits of these changes often take time to show up in the financial results as new leaders evaluate specific opportunities and challenges at the agency level. I fully expect that these changes will lead to our intended long-term results and will begin to be reflected in future quarterly financial reporting.

During this quarter, I had the pleasure of traveling to meet with several of our leaders across the United States. These travels took me to visit our home care agency teams in Texas, Oklahoma, Arkansas, Ohio, Kentucky and western Massachusetts. These travels built upon previous visits to our offices throughout Massachusetts, Vermont, New Hampshire and Rhode Island several weeks earlier. I came away extremely impressed with the quality of leadership and talent that we have in place. Our leaders and teams instill a confidence in the exceptional service we provide to our clients, leading with safety in mind and continuing to move the business forward in a positive manner. These meetings also facilitated an increase in interagency co-operation and sharing of best practices, the implementation of new agency revenue sources and the removal of certain barriers, all of which I anticipate will lead to improved financial results over time.

Prudent fiscal management

In an environment of rapidly increasing interest rates and economic uncertainty, companies that learn to operate in a fiscally prudent manner with a view to continuous improvement generally are well positioned for growth. I believe Nova Leap is such a company.

I have referenced our favourable debt position in past commentary many times and believe it provides us with a great deal of financial flexibility as we continue to navigate the current economic and capital markets environment. With the full collection of the ERC receivable, referenced separately below, our bank debt at the end of 2023 is projected to be less than $300,000. This is a major accomplishment, particularly for a company that has borrowed several million dollars to support funding of its acquisition program.

Further, with the litigation settlement in place, also referenced separately herein, our cash flow profile has improved because of the settlement cash received, the reduction in continuing legal fees, and the entire elimination of both promissory notes and potential earnout payments.

The strength of our balance sheet positions Nova Leap well for future growth opportunities.

Government tax credit receivable

The government tax credit (ERC) receivable on our balance sheet at the end of Q1 in the amount of $452,306 has now been fully collected. The funds were used to repay the remaining balance of $430,000 in demand loans. As a result, the Q1 demand loans in the amount of $995,366 has been reduced by 43 per cent (not including regular monthly principal and interest payments). Both the ERC receivable collection and the demand loan repayment will be reflected in the Q2 financial statements.

Litigation settlement

The litigation initiated by Nova Leap and previously referenced as part of Q2 2022 results has been settled. The settlement consists of the following:

  1. Cash payments to Nova Leap in the amount of $95,000 received in Q2;
  2. Forgiveness of the remaining promissory notes related to this agency, plus accrued interest, in the amount to $258,000;
  3. No future earnout payments, if earnout thresholds have been reached.

As a result, the Q1 promissory notes in the amount of $897,706 has been reduced by 28.7 per cent (not including regularly scheduled payments) and significant future legal costs to pursue this litigation will be eliminated both improving future cash flow. The results of the settlement will be reflected in the Q2 financial statements.

Insider ownership

During the past six weeks, insiders have purchased just over three quarters of a million shares in the open market as part of their long-term investment strategy showing confidence in the company's future prospects. As a result, insider ownership has increased to 39.97 per cent.

Thank you for your continuing support.

Yours truly,

Chris Dobbin, CPA, ICDD

President and chief executive officer

We seek Safe Harbor.

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