Amended Quarterly Report (10-q/a)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the Quarterly Period Ended November 30, 2013

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the Transition Period From ____ To______

Commission file number: 001-33090

NOVATION HOLDINGS, INC.

( Exact Name of Registrant as Specified in its Charter)


Florida	46-1420443
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)


1800 NW Corporate Boulevard, Suite 201, Boca Raton, FL	33431
(Address of principal executive offices)	(Zip Code)

(321)-452-9091

(Registrant ’ s Telephone Number, Including Area Code )

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


Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ]	Smaller reporting company [X]
(Do not check if a smaller reporting company)

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [ X]

As of February 21, 2014, there were 1,949,782,041 shares of Common Stock ($0.001 par value) outstanding.

TABLE OF CONTENTS


		Page Number

PART I.	FINANCIAL INFORMATION

ITEM 1.	Condensed Consolidated Financial Statements (unaudited)	1

	Condensed Consolidated Balance Sheets as of November 30, 2013 (unaudited) and August 31, 2013	2

	Condensed Consolidated Statements of Comprehensive Loss for the three months ended November 30, 2013 and November 30, 2012 (unaudited)	3
-	Condensed Consolidated Statements of Cash Flows for the three months ended November 30, 2013 and November 30, 2012 (unaudited)	4
	Notes to the Unaudited Condensed Consolidated Financial Statements.	5

ITEM 2.	Management ’ s Discussion and Analysis of Financial Condition and Results of Operations	18

ITEM 3.	Quantitative and Qualitative Disclosure about Market Risk	21

ITEM 4.	Controls and Procedures	21

PART II.	OTHER INFORMATION	22

ITEM 1.	Legal Proceedings	22

ITEM 1A.	Risk Factors	23

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

ITEM 3.	Defaults Upon Senior Securities	23

ITEM 4.	(Removed and Reserved)	23
ITEM 5.	Other Information	23

ITEM 6.	Exhibits	23

	SIGNATURES	23

This amended report on Form 10-Q/A has been filed to adjust the financial statements as originally reported to conform to the revised financial statements contained in our recently filed report on Form 10-K/A.

PART 1 – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

The accompanying condensed consolidated balance sheets of Novation Holdings, Inc. and subsidiaries (the "Company ” ) at November 30, 2013 (with comparative figures as at August 31, 2013); and the condensed consolidated statements of comprehensive loss for the three months ended November 30, 2013 and November 30, 2012, and the condensed consolidated statements of cash flows for the three months ended November 30, 2013 and November 30, 2012 have been prepared by the Company ’ s management in conformity with accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments considered necessary for a fair presentation of the consolidated results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

Consolidated operating results for the three months ended November 30, 2013 are not necessarily indicative of the results that can be expected for the year ending August 31, 2014.


Novation Holdings, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
			November 30, 2013	August 31, 2013
			(Unaudited)
ASSETS
CURRENT ASSETS
	Cash		$ 29,463	$ 4
	Accounts receivable		266,110	161,110
	Prepaid expenses		10,436	6,845
	Deferred loan costs, net of accumulated amortization of $43,379 and $39,148		2,622	6,853
		Total current assets	308,631	174,812

Property, plant and equipment (net of accumulated
	depreciation of $751 and $645 respectively)		1,369	1,475
Loan receivable			564,104	646,376
Investment – cost method			20,000	52,000
Intangibles, net			150,000	165,000
Goodwill			20,000	20,000
Advances to related parties			57,950	42,350
		Total assets	$ 1,122,054	$ 1,102,013
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
	Accounts payable and accrued expenses		$ 156,621	$ 177,528
	Accrued interest		63,400	47,878
	Due to related party		30,712	30,712
	Due to third party		798	5,694
	Notes payable - net of debt discount of $20,148 and $48,324		111,046	111,205
	Derivative liability		1,587,627	632,794
		Total current liabilities	1,950,204	1,005,811
LONG-TERM LIABILITIES
	Acquisition note payable		-	489,689
	Convertible note payable - net of discount of $532,644 and $5,357		320,264	202,020
		Total liabilities	2,270,468	1,697,520
STOCKHOLDERS' DEFICIT
	Preferred stock, $0.001 par value; 5,000,000 shares authorized
		1,000,000 issued and outstanding at
		November 30, 2013 and August 31, 2013, respectively	1,000	1,000
	Common stock, $0.001 par value; 2,500,000,000 shares authorized,
		1,523,009,438 and 509,999,997 shares issued and outstanding at
		November 30, 2013 and August 31, 2013, respectively	1,523,009	510,000
	Additional paid in capital		9,234,071	9,833,605
	Accumulated other comprehensive income (loss)		(8,000)	24,000
	Deficit accumulated during the development stage		(11,898,494)	(10,964,112)
		Total stockholders' deficit	(1,148,414)	(595,507)
		Total liabilities and stockholders' deficit	$ 1,122,054	$ 1,102,013

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


Novation Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
		For the Three Months Ended
		November 30, 2013	November 30, 2012

REVENUES		$ 135,807	$ -

COST OF GOODS SOLD		9,008	-

NET REVENUES		$ 126,799	$ -

GENERAL AND ADMINISTRATIVE EXPENSES
	Payroll and payroll taxes	30,000	30,000
	Professional fees	72,833	69,749
	General and administrative	29,146	19,653
	Amortization	15,000	-
	Rent	3,090	-
	Total operating expenses	150,069	119,402

	Loss from operations	(23,270)	(119,402)

OTHER INCOME (EXPENSE)
	Interest, net	(151,904)	(106,060)
	Derivative expense	(811,777)	(57,844)
	Change in fair value of derivatives	52,571	9,432
	Total other expense	(911,110)	(154,472)

	Net loss	$ (934,380)	$ (273,874)

Net loss per share (basic and diluted)		$ (0.00)	$ (0.01)

Weighted average number of shares outstanding during the period-basic and diluted		882,235,803	31,985,904
	Net loss	$ (934,380)	$ (273,874)

OTHER COMPREHENSIVE INCOME, NET OF TAX
	Unrealized loss on investment	(32,000)	-
	Comprehensive loss	(966,380)	(273,874)

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


Novation Holdings, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
			For the Three Months Ended
			November 30, 2013	November 30, 2012
OPERATING ACTIVITIES
	Net loss		$ (934,380)	$ (273,874)
	Adjustments to reconcile net loss to net
		cash used by operations:
		Depreciation expense	106	106
		Change in fair value of derivatives	(52,571)	48,412
		Amortization of intangibles	15,000	-
		Amortization of deferred loan costs	4,231	4,926
		Amortization of debt discount and non-cash derivative expense	942,134	100,453
	Changes in certain operating assets and liabilities:
		Interest accrued on notes payable	15,522	5,606
		Increase in accounts receivable	(105,000)	-
		Increase in other current assets	(3,591)	-
		Loans receivable	82,273	(7,000)
		Increase in accounts payable	(31,367)	8,483
Net cash used by operating activities			(67,643)	(112,888)
FINANCING ACTIVITIES
	Proceeds from notes payable		81,500	120,000
	Related party advances		15,601	(8,500)
Net cash provided by financing activities			97,101	111,500
Net increase (decrease) in cash			29,458	(1,388)
Cash, beginning of period			4	1,245
Cash, end of period			$ 29,462	$ (143)
Supplemental cash flow information:
	Cash paid for interest		$ -	$ -
	Cash paid for income taxes		$ -	$ -
	Significant non-cash activities
		Notes payable and accrued interest converted to common stock	$ 112,398	$ 53,070
		Accrued interest converted to notes payable	$ -	$ -
		Debt discount on notes payable from derivative liability	$ 21,357	$ 162,500
		Reclassification of derivative liabilities to paid-in-capital	$ -	$ 68,530

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

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 1. ORGANIZATION

Novation Holdings, Inc., formerly Allezoe Medical Holdings, Inc., and formerly Stanford Management, Ltd. (the “ Company ” ), was incorporated under the laws of the State of Delaware on September 24, 2008. Effective October 25, 2012, the Company amended its Articles of Incorporation to change its name to Novation Holdings, Inc., increased its authorized capital to 500 million shares of common stock, par value $0.001, and 10 million shares of preferred stock, par value $0.001, and changed its place of incorporation from Delaware to Florida. The corporate trading symbol also was changed from ALZM to NOHO.

The Company was originally organized for the purpose of acquiring and developing mineral properties. On February 18, 2011, all of the mineral properties and related development and exploration activities were disposed of as part of a series of transactions resulting in the Company moving into the medical technology industry.

On February 18, 2011, the Company acquired all of the outstanding shares of Organ Transport Systems, Inc. ( “ OTS ” ), a Nevada corporation, and simultaneously disposed of the assets relating to its former activities in mining exploration, along with all related liabilities. Consequently, OTS was considered to be the surviving entity, with the Company intending to include only the financial results of OTS in its financial statements. Effective March 19, 2012 the Company agreed to rescind the acquisition of Organ Transport Systems, Inc. The net effect of the rescission transaction has been to remove OTS as a subsidiary of the Company.

As a result of the rescission of the OTS transaction, on July 11, 2012, the Company amended its prior SEC periodic filings to remove the financial results for OTS by filing an amended Form 10-K/A for the year ended August 31, 2011, and amended Forms 10-Q/A for the quarters ended November 30, 2011 and February 29, 2012.

Effective October 25, 2012, the Company completed a 1 for 15 reverse split of its common stock as part of its recapitalization, name change and change of corporate domicile. The reverse stock split has been given retroactive recognition in the Form 10-K/A for the fiscal year ended August 31, 2013 and in this Form 10-Q. All shares and per share information have been retroactively adjusted to reflect the stock split.

Nature of Operations

On December 1, 2012, we acquired the operating assets of an Internet Service Provider (ISP) based in Utah and plan to continue the existing, profitable operations as well as to acquire similar ISPs located across the US. To date, the Company has identified 5 possible acquisition targets. Burgoyne Internet Services, Inc. is operated as a wholly-owned subsidiary of the Company and its results of operations are consolidated with the Company.

Burgoyne provides Internet access, emails, and related services to customers throughout the United States, primarily in areas where high speed cable and other high speed Internet access services are not readily available. Its web site is at www.burgoyne.com . As a result of this initial ISP acquisition, the Company plans to undertake acquisitions of other regional ISP companies in a national roll-up strategy. The Company has already identified 5 other regional ISP companies for sale and believes that, with the added infrastructure provided by the Company; the existing operating success can grow and add to the bottom line for the Company. As part of the transaction, the Company also executed a Transition Services Agreement with ISP Holdings, LLC. under which ISP Holdings will continue to provide administrative services in managing the ISP business of Burgoyne for a nominal fee of the greater of 2 percent of revenues or $200 per month.

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations (Continued)

On January 1, 2013, the Company acquired a portion of an existing administrative and financial consulting business and formed Novation Consulting Services, Inc., as a wholly-owned subsidiary. Novation Consulting Services, Inc. provides administrative, financial, legal and similar consulting services to the Company as well as to other, unrelated companies.

In May, 2013, the Company acquired 1,000,000 shares of Series A Preferred Stock in Crown City Pictures, Inc. (OTC Pink: CCPI), a non-reporting shell company, which the Company intends to use for future acquisitions of operating subsidiaries. The operating results of CCPI are not consolidated with the Company, because CCPI had no significant activity and because the investment in CCPI was written off as impaired for the fiscal year ended August 31, 2013.

In November, 2013, the Company subscribed for 1,000,000 shares of a convertible preferred stock of Focus Gold Corp. (OTC Pink FGLD) with voting power equal to 55 percent of all voting power of all classes of stock. The first payment on the total subscription amount of $65,000 was made in December, 2013 and the balance will be paid by March 1, 2014. As a result of the acquisition, the Company will acquire a controlling interest in FGLD, and the financial results of FGLD thereafter will be consolidated with that of the Company, with an adjustment for the minority interest.

Basis of Presentation of Interim Period Financial Statements

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles ( ‘ GAAP ’ ) for interim financial statements, instructions to Form 10-Q, and Regulation S-X.

In management ’ s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make the Company ’ s financial statements not misleading have been included. The results of operations for the periods ended November 30, 2013 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. A significant estimate as of November 30, 2013 and August 31, 2013 included a 100% valuation allowance for deferred tax assets arising from net operating losses incurred since inception and the calculation of the derivative liability.

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ materially from estimates.

Cash and Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company had no cash equivalents at November 30, 2013 and August 31, 2013, respectively. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. There were no balances that exceeded the federally insured limit at November 30, 2013 and August 31, 2013, respectively.

Loss per Share

In accordance with Financial Accounting Standards Board “ FASB ” Accounting Standards Codification “ ASC ” Topic 260, “ Earnings per Share, ” basic earnings (loss) per share ( “ EPS ” ) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. The computation of basic and diluted loss per share for the period from September 24, 1998 (inception) to November 30, 2013, is equivalent since the Company has had continuing losses. The Company also has no common stock equivalents. The calculation of earnings per share has been done by applying the 1 for 15 reverse split of common stock, effective November 7, 2012, retroactively to September 24, 1998, the date of inception.

Accounting for Stock-Based Compensation

The Company adopted the provisions of FASB ASC 718-20, Stock Compensation – Awards Classified as Equity, which require companies to expense the estimated fair value of employee stock options and similar awards based on the fair value of the award on the date of grant. The cost is recognized over the period during which an employee is required to provide service in exchange for the award, usually the vesting period. At the Annual Meeting of Shareholders held on October 24, 2012, the shareholders approved the adoption of the Novation Holdings, Inc. 2012 Stock Incentive Plan, and the setting aside of 4,500,000 shares of post-reverse split common stock for grants under the Plan. There have been no grants of any stock or other equity under the Plan, or otherwise, as of November 30, 2013.

Non-Employee Stock Based Compensation

Share-based payment awards issued to non-employees for services rendered are recorded with ASC 505 “ Equity ” at either fair value of the services rendered of the fair value of the share-based payments, whichever is more readily determinable.

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded and deducted from deferred tax assets when the deferred tax assets are not expected to be realized based on currently available evidence. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Management has analyzed its various federal and state filing positions and believes that its income tax filing positions and deductions are well documented and supported. Additionally, management believes that no accruals for tax liabilities are necessary. Therefore, no reserves for uncertain income tax positions have been recorded.

Concentrations of Credit Risk

The Company maintains its cash in a bank deposit account in a bank which participates in the Federal Deposit Insurance Corporation (FDIC) Program. As of November 30, 2013 and August 31, 2013, the Company had no balances in excess of federally insured limits.

Fair Value of Financial Instruments

All financial instruments, including derivatives, are to be recognized on the balance sheet initially at fair value. Subsequent measurement of all financial assets and liabilities except those held-for-trading and available for sale are measured at amortized cost determined using the effective interest rate method. Held-for-trading financial assets are measured at fair value with changes in fair value recognized in earnings. Available-for-sale financial assets are measured at fair value with changes in fair value recognized in comprehensive income and reclassified to earnings when derecognized or impaired.

The carrying amounts of the Company ’ s other short-term financial instruments, including accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these instruments. The Company does not utilize financial derivatives or other contracts to manage commodity price risks. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

The fair value of the Company's financial assets and liabilities reflects the Company's estimate of amounts that it would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from sources independent from the Company) and to minimize the use of unobservable inputs (the Company's assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.

Level 2 – inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

Level 3 – unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

Derivatives

The Company evaluates embedded conversion features within convertible debt under ASC 815 “ Derivatives and Hedging ” to determine whether the embedded conversion feature should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. The Company uses a Binomial pricing model to estimate the fair value of convertible debt conversion features at the end of each applicable reporting period. Changes in the fair value of these derivatives during each reporting period are included in the consolidated statement of operation. Inputs into the Binomial pricing model require estimates, including such items as estimated volatility of the Company ’ s stock, risk-free interest rate and the estimated life of the financial instruments being fair valued.

If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “ Debt with Conversion and Other Options ” for consideration of any beneficial conversion features.

Going Concern

As reflected in the accompanying condensed consolidated financial statements, the Company has a net loss of $934,380 and net cash used in operations of $67,643 for the three months ended November 30, 2013; and negative working capital of $1,641,573 and an accumulated deficit of $11,898,494 at November 30, 2013.

The accompanying condensed consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company is and has suffered recurring losses and has no established source of revenue. Its ability to continue as a going concern is dependent upon achieving profitable operations and generating positive cash flows.

There can be no assurances that the Company will be able to achieve profitable operations or obtain additional funding. These factors create substantial doubt about the Company ’ s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty.

Management intends to raise financing through private or public equity financing or other means and interests that it deems necessary to provide the Company with the ability to continue in existence.

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent Accounting Pronouncements

There are no recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows.

NOTE 3. INCOME TAXES

The Company accounts for income taxes in accordance with accounting standards for Accounting for Income Taxes which require the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and tax credit carry-forwards. Additionally, the standards require the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

The following is a schedule of deferred tax assets as of November 30, 2013, and August 31, 2013:


	November 30, 2013	August 31, 2013
Net operating loss	$ 11,898,494	$ 10,964,112
Future tax benefit at 34%	4,045,488	3,719,638
Less: Valuation allowance	(4,045,488)	(3,719,638
Net deferred tax asset	$ --	$ --

The valuation allowance changed by approximately $325,850 during the three months ended November 30, 2013.

Under Sections 382 and 269 (the ‘ shell corporation ’ rule) of the Internal Revenue Code, following an “ ownership change, ” special limitations ( “ Section 382 Limitations ” ) apply to the use by a corporation of its net operating loss, or NOL, carry-forwards arising before the ownership change and various other carry-forwards of tax attributes (referred to collectively as the ‘ Applicable Tax Attributes ’ ). The Company had NOL carry-forwards due to historical losses of Stanford of approximately $368,374 at November 30, 2013.

The Company has adopted the provisions of FASB ASC 740-10-25. As a result of its implementation, the Company performed a comprehensive review of its uncertain tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10-25. In this regard, an uncertain tax position represents the Company ’ s expected treatment of a tax position taken in a prepared and filed tax return, or expected to be taken in a tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company does not expect any reasonably possible material changes to the estimated amount of liability associated with uncertain tax positions through November 30, 2013. The Company ’ s continuing policy is to recognize accrued interest and penalties related to income tax matters in income tax expense.

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)


NOTE 4.	CAPITAL STOCK

The Company is authorized to issue 2,500,000,000 shares of common stock, par value $0.001 per share and 5 million shares of preferred stock, par value $0.001.

During the quarter ended November 30, 2013, the Company issued Company stock as follows:

In September, 2013 we issued a total of 169,702,236 common shares converting $39,313 in principal amounts of loans and accrued interest.

In October, 2013 we issued a total of 323,992,919 common shares converting $35,337 in principal amounts of loans and accrued interest.

In November, 2013 we issued a total of 519,314,286 common shares converting $37,740 in principal amounts of loans and accrued interest.

As a result of the issue of these shares, we now have a total of 152,009,438 common shares and 1,000,000 preferred shares issued and outstanding as of November 30, 2013

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 5. NOTES PAYABLE

*The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15 "Derivatives and Hedging" and determined that certain outstanding instruments should be classified as liabilities once the conversion option became effective (typically after three or six months) due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

The following is a summary of notes payable at November 30, 2013 and August 31, 2013:


Description	November 30, 2013	August 31, 2013
Asher Enterprises, Inc.*
On April 23, 2012, the Company issued its promissory note in the amount of $27,500 to an unrelated third party for additional working capital. The note is due on January 8, 2014 and carries interest at 8 percent per annum, payable at maturity. The note is convertible into common stock of the Company after six months, at the election of the Holder, at 51 percent of the average of the three lowest closing bid prices of the common stock for the ten trading days prior to the date of the election to convert. The note was fully converted at November 30, 2013.	-	27,500
Asher Enterprises, Inc.*
On August 15, 2013, the Company issued its promissory note in the amount of $42,500 to an unrelated third party for additional working capital. The note is due on May 17, 2014 and carries interest at 8 percent per annum, payable at maturity. The note is convertible into common stock of the Company after six months, at the election of the Holder, at 35 percent of the average of the three lowest closing bid prices of the common stock for the thirty trading days prior to the date of the election to convert. The note was fully outstanding as of November 30, 2013.	42,500	-
Common Stock LLC
On May 2, 2012, the Company issued its promissory note in the amount of $20,000 to an unrelated third party for additional working capital. The note is due on February 8, 2013 and carries interest at 6 percent per annum, payable at maturity. The note was convertible into common stock of the Company after six months, at the election of the Holder, at 60 percent of the average of the three lowest closing bid prices of the common stock for the ten trading days prior to the date of the election to convert. The carrying amount of the debt discount was $0 and $4,603, respectively. The note was fully converted as of November 30, 2013	-	59

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 5. NOTES PAYABLE (continued)


Description	November 30, 2013	August 31, 2013
JMJ Financial *
On October 3, 2012, the Company issued its promissory note in the amount of $56,000 to an unrelated third party for additional working capital. The note is due on October 3, 2013 and has an initial charge of 5 percent interest. The note is convertible into common stock of the Company after three months, at the election of the Holder, at $0.006 or 70 percent of the lowest closing trading price of the common stock for the twenty-five trading days prior to the date of the election to convert. The Note was issued with an original issue discount of $6,000, which is fully amortized at November 30, 2013. The carrying amount of the debt discount was $0 and $2,057, respectively. $49,629 had been converted into common stock as of November 30, 2013.	6,620	53,646
WHC Capital, LLC *
On June 21, 2013, the Company issued its promissory note in the amount of $30,000 to an unrelated third party for additional working capital. The note is due on May 1, 2014 and carries interest at 10 percent per annum, payable at maturity. The note was immediately convertible into common stock of the Company, at the election of the Holder, at 50 percent of the average of the three lowest intra-day trading prices of the common stock for the ten trading days prior to the date of the election to convert. The carrying amount of the debt discount was $1,966 and $16,663, respectively. $28,034 had been converted to common stock as of November 30, 2013.	-	-
WHC Capital, LLC *
On July 11, 2013, the Company issued its promissory note in the amount of $25,000 to an unrelated third party for additional working capital. The note is due on July 11, 2014 and carries interest at 5 percent per annum, payable at maturity. The note was immediately convertible into common stock of the Company, at the election of the Holder, at 50 percent of the average of the three lowest intra-day trading prices of the common stock for the ten trading days prior to the date of the election to convert. The carrying amount of the debt discount was $18,182 and $25,000, respectively. The note was fully outstanding as of November 30, 2013.	6,818	-
Indian River Financial Services, LLC*
On March 23, 2013, the Company issued its promissory note in the amount of $19,525 to an unrelated third party for additional working capital. The note is due on March 31, 2015. The note is convertible into common stock of the Company after six months, at the election of the Holder, at $0.0013. The note was fully outstanding as of November 30, 2013.	19,525	19,525

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 5. NOTES PAYABLE (continued)


Description	November 30, 2013	August 31, 2013
Indian River Financial Services, LLC*
On July 10, 2013, the Company issued its promissory note in the amount of $25,000 to an unrelated third party for additional working capital. The note is due on July 31, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company after six months, at the election of the Holder, at $0.0004. The note was fully outstanding as of November 30, 2013.	25,000	25,000
Indian River Financial Services, LLC*
On September 1, 2013, the Company issued its promissory note in the amount of $23,950to an unrelated third party to consolidate liabilities owed to the third party. The note is due on September 30, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company after six months, at the election of the Holder, at 50% of the average closing stock price of the Company ’ s common stock for the ten trading days prior to conversion. The note was fully outstanding as of November 30, 2013.	23,950	-
Indian River Financial Services, LLC*
On June 1, 2013, the Company issued its promissory note in the amount of $7,000 to an unrelated third party to convert accounts payable. The note is due on June 30, 2015. The note was acquired from the original holder by assignment when the note balance was paid by the current holder. The note is convertible into common stock of the Company after six months, at the election of the Holder, at $0.00075. The note was fully outstanding as of November 30, 2013.	7,000	7,000
Dana L. Hipple
On January 15, 2013, the Company issued its promissory note in the amount of $25,108 to an unrelated third party as part of an acquisition of notes receivable. The note is due on December 31, 2014 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company after three months, at the election of the Holder, at $0.0007. The note was fully outstanding as of November 30, 2013.	25,108	25,108
Dana L. Hipple
On June 25, 2013, the Company issued its promissory note in the amount of $30,000 to an unrelated third party as part of an acquisition of notes receivable. The note is due on June 3, 2014 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company after three months, at the election of the Holder, at $0.0004. The note was fully outstanding as of November 30, 2013.	30,000	30,000

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 5. NOTES PAYABLE (continued)


Description	November 30, 2013	August 31, 2013
Dana L. Hipple
On October 17, 2013, the Company issued its promissory note in the amount of $39,000 to an unrelated third party for additional working capital. The note is due on December 31, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company immediately at 50% of the average closing stock price of the Company ’ s common stock for the ten trading days prior to conversion. The carrying amount of the debt discount was $34,844 and $0, respectively. The note was fully outstanding as of November 30, 2013.	4,157	-
CFOs to Go
On December 31, 2012, the Company issued its promissory note in the amount of $495,689 as part of an acquisition of notes receivable from an unrelated third party. The note is due on December 31, 2015. $6,000 has been paid against this note. This note was transferred to a convertible note with JSJ Investments on October 15, 2013.	-	489,689
JSJ Investments
On October 15, 2013, JSJ Investments acquired the CFOs to Go acquisition note and the note was restated. The note is due on December 31, 2014 and carries interest at12 percent per annum.. The note is immediately convertible into common stock of the Company, at the election of the Holder, at 50 percent of the average of the three lowest trading prices of the common stock for the ten trading days prior to the date of the election to convert. The carrying amount of the debt discount was $437,735 and $0, respectively. $4,179 had been converted to common stock as of November 30, 2013.	47,774	-
ISP Holdings, Inc.
On December 6, 2012, the Company issued its promissory note in the amount of $280,000 to an unrelated third party for additional working capital. The note is due on May 31, 2014. The note is convertible into common stock of the Company after three months, at the election of the Holder, at $0.03. The Note was issued at a discount of $15,000, of which $12,857 unamortized portion remains at May 31, 2013. The carrying value of the debt discount was $57,922 and $133,907 respectively. $27,077 had been converted into common stock as of November 30, 2013.	192,858	125,387
Total notes payable	431,310	802,914
Current portion	111,046	111,205
Notes payable-Long-term portion	$ 320,264	$ 691,709

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 6. DERIVATIVE LIABILITIES

The Company has various convertible instruments outstanding more fully described in Note 5. Because the number of shares to be issued upon settlement cannot be determined under these instruments, the Company cannot determine whether it will have sufficient authorized shares at a given date to settle any other of its share-settleable instruments.

As a result, under ASC 815-15 “ Derivatives and Hedging ” , all other share-settleable instruments must be classified as liabilities.

Embedded Derivative Liabilities in Convertible Notes

During the three months ended November 30, 2013, the Company recognized new derivative liabilities of $1,367,966 as a result of convertible debt issuances having embedded conversion options. The fair value of these derivative liabilities was less than the principal balance of the related notes payable by $52,571, and was recorded as a gain on derivatives for the three months ended November 30, 2013.

As a result of conversion of notes payable described in Note 5, the Company reclassified $360,562 of derivative liabilities to equity and the change in fair value of derivatives was $52,571.

The following table summarizes the derivative liabilities included in the consolidated balance sheet:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Derivative Liabilities:
Balance at August 31, 2013	$	632,794
ASC 815-15 additions		1,367,966
Change in fair value		(52,571)
ASC 815-15 deletions from conversion		(360,562)
Balance at November 30, 2013	$	1,587,627

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 6. DERIVATIVE LIABILITIES (continued)

The following table summarizes the derivative gain or loss recorded as a result of the derivative liabilities above:


	Included in Other Income (Expense) on Consolidated Statement of Operations
Gain/(Loss) on Derivative Liability:
Change in fair value of derivatives	$	52,571
Derivative expense		(811,777)
Balance for the three months ended November 30, 2013	$	(759,206)

The fair values of derivative instruments were estimated using the Binomial pricing model based on the following weighted-average assumptions:


	Convertible Debt Instruments
Risk-free rate		0.17% - 0.18%
Expected volatility		300% - 600%
Expected life		9 months – 12 months

NOTE 7. SEGMENT REPORTING

Our operating businesses are organized based on the nature of markets and customers. Segment accounting policies are the same as described in Note 1.

Effects of transactions between related companies are eliminated and consist primarily of inter-company transactions and transfers of cash or cash equivalents from corporate to support each business segment ’ s overall operations when each segment has working capital requirements.

A description of our operating segments as of November 30, 2013 can be found below.

Operating revenues and expenses of each of the Company ’ s segments are as follows:

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 7. SEGMENT REPORTING (continued)



			Novation Holdings, Inc.	Novation Consulting	Burgoyne	Consolidated
Income
	Consulting		-	120,000	-	120,000
	Sales		-	-	16,627	16,627
	Returns		-	-	(820)	(820)
		Total income	-	120,000	15,807	135,807
Cost of Sales			-	-	9,008	9,008

Gross profit			-	120,000	6,799	126,799

Expense
	Operating expense		104,267	35,927	9,875	150,069
			104,267	84,073	(3,076)	(23,270)

Net loss from operations			(104,267)	84,073	(3,076)	(23,270)

Accounts receivable			-	266,110	-	266,110
Accounts payable			61,863	57,799	36,959	156,621

NOTE 8. SUBSEQUENT EVENTS

In December, 2013, the Company acquired a controlling interest in Focus Gold Corp., which has formed two operating subsidiaries and commenced business in its new office location near Buffalo, New York. The two subsidiaries have hired employees and commenced business operations, and have already generated revenues.

Common Stock Transactions :

In December, 2013, the Company issued a total of 426,782,600 common shares on conversion of principal amount of loans.

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 9. RESTATEMENT

Company management subsequently discovered certain errors in our condensed consolidated financial statements included in our Form 10-Q as previously filed for the quarter ended November 30, 2013. The restatement primarily comprises the right amortization of intangibles and the recording of a derivative liability on a convertible note payable.


Novation Holdings, Inc.
CONSOLIDATED BALANCE SHEETS
			November 30, 2013	Adjustments		Restated
			(Unaudited)			(Unaudited)
ASSETS
CURRENT ASSETS
	Cash		$ 29,463			$ 29,463
	Accounts receivable		266,110			266,110
	Due from ISP		10,436			10,436
	Deferred loan costs, net of accumulated amortization of $43,379 and $39,148		2,622			2,622
		Total current assets	308,631			308,631
OTHER ASSETS
Property, plant and equipment (net of accumulated
	depreciation of $751 and $645 respectively)		1,369			1,369
Loan receivable			564,104			564,104
Investment – cost method			20,000			20,000
Intangibles			180,000	(30,000)	(a)	150,000
Goodwill			20,000			20,000
Advances to related parties			57,950			57,950
		Total assets	$ 1,152,054			$ 1,122,054
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
	Accounts payable and accrued expenses		$ 156,621			$ 156,621
	Accrued interest		63,400			63,400
	Due to related party		30,712			30,712
	Due to third party		798			798
	Notes payable - net of debt discount of $20,148 and $48,324		108,246	2,800	(b)	111,046
	Derivative liability		1,271,430	316,197	(c)	1,587,627
		Total current liabilities	1,631,207			1,950,204
LONG-TERM LIABILITIES
	Convertible note payable - net of discount of $532,644 and $5,357		248,966	71,298	(d)	320,264
		Total liabilities	1,880,173			2,270,468
STOCKHOLDERS' DEFICIT
	Preferred stock, $0.001 par value; 5,000,000 shares authorized
		1,000,000 issued and outstanding at
		November 30, 2013 and August 31, 2013, respectively	1,000			1,000
	Common stock, $0.001 par value; 2,500,000,000 shares authorized,
		1,523,009,438 and 509,999,997 shares issued and outstanding at
		November 30, 2013 and August 31, 2013, respectively	1,523,009			1,523,009
	Additional paid in capital		9,234,071			9,234,071
	Accumulated other comprehensive income (loss)		-	(8,000)		(8,000)
	Deficit accumulated during the development stage		(11,486,199)	(412,295)		(11,898,494)
		Total stockholders' deficit	(728,119)			(1,148,414)
		Total liabilities and stockholders' deficit	$ 1,152,054			$ 1,122,054

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 9. RESTATEMENT (continued)


Novation Holdings, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
		For the Three Months Ended
		November 30, 2013	Adjustments			Restated

REVENUES		$ 135,807			$ 135,807

COST OF GOODS SOLD		9,008			9,008

NET REVENUES		$ 126,799			$ 126,799

GENERAL AND ADMINISTRATIVE EXPENSES
	Payroll and payroll taxes	30,000			30,000
	Professional fees	72,833			72,833
	General and administrative	163,882	15,000	(e)	44,146
			(134,735)	(h)
	Rent	3,090			3,090
	Total operating expenses	269,805			150,069

	Loss from operations	(143,006)			(23,270)

OTHER INCOME (EXPENSE)
	Interest, net	(17,169)	(134,735)	(h)	(151,904)
	Derivative expense	(809,561)	(2,216)	(f)	(811,777)
	Change in fair value of derivatives	111,192	(58,621)	(g)	52,571
	Total other income (expense)	(715,538)			(911,110)

	Net loss	$ (858,544)			$ (934,380)

Net loss per share (basic and diluted)		$ (0.00)			$ (0.00)

Weighted average number of shares outstanding during the period-basic and diluted		882,235,803			882,235,803

OTHER COMPREHENSIVE INCOME, NET OF TAX
	Unrealized loss on investment	(32,000)			(32,000)
	Comprehensive loss	(890,543)			(966,380)

NOVATION HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2013

(UNAUDITED)

NOTE 9. RESTATEMENT (continued)


Novation Holdings, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
			For the Three Months Ended
			November 30, 2013	Adjustments	Restated
OPERATING ACTIVITIES
	Net loss		$ (890,543)	(43,837)	$ (934,380)
	Adjustments to reconcile net loss to net
		cash used by operations:
		Depreciation expense	106	-	106
		Change in fair value of derivatives	698,369	60,837	759,206
		Amortization of intangibles	-	15,000	15,000
		Unrealized gain on investment	32,000	(32,000)	-
		Amortization of deferred loan costs	4,231	-	4,231
		Amortization of debt discount and non-cash derivative expense	130,357	-	130,357
	Changes in certain operating assets and liabilities:			-
		Interest accrued on notes payable	15,522	-	15,522
		Increase in accounts receivable	(105,000)	-	(105,000)
		Increase in other current assets	(3,591)	-	(3,591)
		Loans receivable	82,273	-	82,273
		Increase in accounts payable	(31,367)	-	(31,367)
Net cash used by operating activities			(67,643)		(67,643)
FINANCING ACTIVITIES
	Proceeds from notes payable		81,500	-	81,500
	Related party advances		15,601	-	15,601
Net cash provided by financing activities			97,101	-	97,101
Net increase in cash			29,458		29,458
Cash, beginning of period			4	-	4
Cash, end of period			$ 29,462		$ 29,462
Supplemental cash flow information:
	Cash paid for interest		$ -	-	$ -
	Cash paid for income taxes		$ -	-	$ -
	Significant non-cash activities
		Notes payable and accrued interest converted to common stock	$ 112,398	-	$ 112,398
		Accrued interest converted to notes payable	$ -	-	$ -
		Debt discount on notes payable from derivative liability	$ 21,357	-	$ 21,357
		Reclassification of derivative liabilities to paid-in-capital	$ -	-	$ -

(a) Accumulated Amortization of intangibles for $30,000

(b) Amortization of debt discount for $2,800

(d) Amortization of debt discount and change in liability for $71,298.

(e) Amortization of intangibles for $15,000

(f) Derivative expensed decreased based on updated calculations ($2,216).

(g) Change in fair value of derivatives decreased based on updated calculations ($58,621).

(h) Reclass of amortization of debt discounts – interest expense from general & administrative expense to interest, net.

ITEM 2. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

To the extent that the information presented in this Quarterly Report on Form 10-Q/A for the quarter ended November 30, 2013 discusses financial projections, information or expectations about our products, services, or markets, or otherwise makes statements about future events or statements regarding the intent, belief or current expectations of Allezoe Medical Holdings, Inc. and its subsidiary (collectively the ‘ Company ’ ), its directors or its officers with respect to, among other things, future events and financial trends affecting the Company, such statements are forward-looking. We are making these forward-looking statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Forward-looking statements are typically identified by the words ‘ believes, ’ ‘ expects, ’ ’ anticipates, ’ and similar expressions. In addition, any statements that refer to expectations or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and that matters referred to in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise these forward-looking statements because of new information, future events or otherwise, except as required by law.

OVERVIEW

We were incorporated under the laws of the State of Delaware on September 24, 1998 with authorized common stock of 25,000,000 shares at $0.001 par value. On March 9, 2007, at the Annual General Meeting of Stockholders a Resolution was approved increasing the authorized share capital to 500,000,000 common shares with a par value of $0.001 per share. In February, 2011, our Articles of Incorporation were amended to change the corporate name to Allezoe Medical Holdings, Inc. Effective October 25, 2012, our corporate name was changed to Novation Holdings, Inc., our place of incorporation was transferred from Delaware to Florida, and we completed a reverse split of our common shares in the ratio of 1 new shares for each 15 common shares previously issued. The amendment to our Articles also provided that we are authorized to issue up to 500 million common shares, par value $0.001, and 10 million preferred shares, par value $0.001. The rights and preferences of any preferred shares we issue may be set by resolution of our Board of Directors. The reverse stock split was given retroactive recognition in our Form 10-K filed on December 14, 2012. All shares and per share information were retroactively adjusted to reflect the stock split. On August 29, 2013, we amended our Articles of Incorporation to increase our authorized common stock to 2,500,000,000 shares.

The Business

Novation Holdings, Inc. (the “ Company ” or “ we ” ), formerly Allezoe Medical Holdings, Inc., is engaged in the business of acquiring and managing operating companies, initially in the medical device development and production market, and subsequently in other healthcare, technology and similar markets. We were organized originally under the laws of the State of Delaware as Stanford Management Ltd., on September 24, 1998, and, effective on October 25, 2012, transferred our place of incorporation from Delaware to Florida and changed our corporate name to Novation Holdings, Inc.

Burgoyne ISP

On December 6, 2012, we completed the acquisition of Burgoyne Internet Services, LLC ( “ Burgoyne ” ), a Utah limited liability company, with an effective closing date of December 1, 2012. Since the effect of the change of control of the limited liability company under Utah law was a legal dissolution of the old company, the acquisition has been treated as an asset acquisition by Burgoyne Internet Services, Inc., a newly formed Florida corporation and our wholly-owned subsidiary. In addition to the acquisition consideration of $200,000, the seller, ISP Holdings, LLC, a Utah limited liability company, also agreed to provide $50,000 in working capital at closing and an additional $50,000 in working capital if the median dollar value of Novation ’ s trading volume for its common stock for an consecutive 30 day period equals or exceeds $50,000 during the one year period after closing. The closing was completed on December 6, 2012 on the transfer of the initial $50,000 in working capital funds, although the acquisition transaction has been treated as closing effective on December 1, 2012 for accounting purposes.

Novation has issued its convertible promissory note to ISP Holdings, Inc. in the principal amount of $280,000, representing the $200,000 purchase price for Burgoyne, the initial $50,000 working capital. advance, a $15,000 original issue discount, and a $15,000 expense allowance to cover ISP Holding ’ s expenses related to the transaction. The promissory note has a term of 14 months, bears interest at 8 percent, and is convertible into common stock (subject to a maximum holding of 9.9 percent of the total common shares outstanding at any time) at $0.03 per share. The second working capital loan of $50,000, if made, will bear similar terms, except that there will be no original issue discount or expense allowance.

As part of the transaction, we also executed a Transition Services Agreement with ISP Holdings, LLC. under which ISP Holdings will continue to provide administrative services in managing the ISP business of Burgoyne for a period of 9 months from closing, for a nominal fee of the greater of 2 percent of revenues or $200 per month.

Novation Consulting Services, Inc., a Florida corporation, is a wholly-owned subsidiary, and was formed to acquire and operate the assets and business acquired by us in January 2013 from CFOs to Go, Inc. and Matriarch Management, Inc. Novation Consulting provides administrative, financial, regulatory and legal management services to the Company as well as to other small public and private companies for a monthly management fee.

Liquidity and Capital Resources

We have historically met our capital requirements through either private placement of equity or private borrowings. Our cash balance increased $29,458 from $4 at August 31, 2013 to $29,462 at November 30, 2013.

We received loan proceeds of $42,500 in September of 2013 from Asher Enterprises, LLC, an unrelated third party, due May 17, 2014 at 8 percent interest. The note is convertible into common stock at a price equal to 35 percent of the three lowest trading prices for our common stock for the thirty trading days prior to the notice of conversion. We accrued interest of $848 on this note as of November 30, 2013.

We received loan proceeds of $39,000 in October 2013 from Dana L. Hipple, an unrelated third party, due December 31, 2015 at 8 percent interest. The note is convertible into common stock at a price equal to 50 percent of the average closing price for our common stock for the ten trading days prior to the notice of conversion. We accrued interest of $368 on this note as of November 30, 2012.

In our opinion, available funds will satisfy our capital requirements for the next several months while we are in the process of negotiating additional funding to implement our business model. We expect to do so during the remainder of our fiscal year 2013. There can be no assurance that we will be successful in raising additional funds to meet our capital needs.

Recurring Fair Value Measurements

In accordance with accounting principles generally accepted in the United States of America, certain assets and liabilities are required to be recorded at fair value on a recurring basis.

Off-Balance Sheet Arrangements

None

Current Economic Environment

The U.S. economy is currently in a recession, which could be long-term. Consumer confidence continued to deteriorate and unemployment figures continued to increase in 2012. However, in recent months, certain economic indicators have shown modest improvements. The generally deteriorating economic situation, together with the limited availability of debt and equity capital, including bank financing, will likely have a disproportionate impact on all micro-cap companies. As a result, we may not be able to execute our business plan due to our inability to raise sufficient capital and/or be able to develop a customer base for our planned products.

Contractual obligations

We have entered into a consulting agreement dated July 1, 2011 with Michael Gelmon, our Chairman and Chief Executive Officer, under which Mr. Gelmon provides services as an officer and director for a monthly fee of $10,000. The consulting agreement is for an initial term of three years and extends annually unless terminated by either party at the end of the term, as extended.

A summary of notes payable by the Company at November 30, 2013 and August 31, 2012 is contained in Note 5 to the Financial Statements included in this Quarterly Report and which summary is incorporated here by reference.

We now maintain our corporate offices in space made available at no charge by our Chief Executive Officer, located in Boca Raton, Florida.

Results of Operations

For the three months ended November 30, 2013 and November 30, 2012, the Company had operating revenues of $ 135,807 and $0, respectively. Since inception, the Company has incurred cumulative net losses of $11,898,494. For the three months ended November 30, 2013, the Company had a net loss of $934,380. This loss was mainly attributed to $30,000 in consulting expenses, $72,833 for professional fees, amortization of $15,000, and derivative expense of $811,777. For the three months ended November 30, 2012, the Company had a net loss of $273,874. Our activities have been attributed primarily to consulting and business development.

For the quarters ended November 30, 2013 and November 30, 2012, we incurred operating expenses of $284,805 and $150,069, respectively.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market Information

There are no common shares subject to outstanding options, warrants or securities convertible into common equity of our Company at November 30, 2013, except certain convertible promissory notes as detailed in Note 5 to the financial statements included in this Report.

There are no shares that have been offered pursuant to an employee benefit plan or dividend reinvestment plan as of November 30, 201Q. Our shares are traded on the OTCQB under the symbol NOHO. Although the OTCQB does not

have any listing requirements per se, to be eligible for quotation on the OTCQB, we must remain current in our filings with the SEC, being at a minimum Forms 10-Q and 10-K. Securities already quoted on the OTCBB that become delinquent in their required filings will be removed following a 30 or 60 day grace period if they do not make their filing during that time.

In the future our common stock trading price might be volatile with wide fluctuations. Things that could cause wide fluctuations in our trading price of our stock could be due to one of the following or a combination of several of them:


●	variations in our operations results, either quarterly or annually;

●	trading patterns and share prices in other medical technology companies which our shareholders consider similar to ours; and

●	other events which we have no control over.

In addition, the stock market in general, and the market prices for thinly traded companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These wide fluctuations may adversely affect the trading price of our shares regardless of our future performance. In the past, following periods of volatility in the market price of a security, securities class action litigation has often been instituted against such company. Such litigation, if instituted, whether successful or not, could result in substantial costs and a diversion of management ’ s attention and resources, which would have a material adverse effect on our business, results of operations and financial conditions.

Trends

We are in the development stage and have not generated any revenue as of November 30, 2012. We are unaware of any known trends, events or uncertainties that have had, or are reasonably likely to have, a material impact on our business or income, either in the long term or short term, as more fully described under “ Risk Factors ” in our annual report on Form 10-K for the year ended August 31, 2013, as amended on January 21, 2014.

ITEM 4. CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure controls and procedures

It is management ’ s responsibility for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, we have evaluated the effectiveness of our disclosure controls and procedures as required by the Exchange Act Rule 13a-15(d) as of November 30, 2013 (the “ Evaluation Date ” ). Based on the evaluation by management, they have concluded these disclosure controls and procedures were not effective as of the Evaluation Date as a result of material weaknesses in internal control over financial reporting as more fully discussed below.

Under Rule 13a-15(e)/15d-15(e); Regulation S-K, Item 307, the SEC states that “ disclosure controls and procedures ” have the following characteristics:


●	designed to ensure disclosure of information that is required to be disclosed in the reports that we file or submit under the Exchange Act;

●

recorded, processed, summarized and reported with the time period required by the SEC ’ s rules and forms; and

●

accumulated and communicated to management to allow them to make timely decisions about the required disclosures.

As of November 30, 2013, our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ( “ COSO ” ) and SEC guidance on conducting such assessments.

Management concluded, during the three months ended November 30, 2013, internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules. Management realized there are deficiencies in the design or operation of our internal control that adversely affected our internal controls which management considers to be material weaknesses.

Material Weaknesses

Management assessed the effectiveness of our internal control over financial reporting as of the Evaluation Date and identified the following material weaknesses:

●

Due to a significant number and magnitude of out-of-period adjustments identified during the quarter-end closing process, management has concluded that the controls over the quarter-end financial reporting process were not operating effectively. A material weakness in the quarter-end financial reporting process could result in our not being able to meet our regulatory filing deadlines and, if not remedied, has the potential to cause a material misstatement or to miss a filing deadline in the future. Management override of existing controls is possible given the small size of the organization and lack of personnel.


●	There is no system in place to review and monitor internal control over financial reporting. This is due to our maintaining an insufficient complement of personnel to carry out ongoing monitoring responsibilities and ensure effective internal control over financial reporting.

(a)

Changes in control over financial reporting

There were no changes in our internal controls over financial reporting during the three months ended November 30, 2013 that have materially affected, or are reasonably likely to material affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are no legal proceedings to which we are a party or to which we are subject, nor, to the best of our knowledge, are any material legal proceedings contemplated.

ITEM 1A RISK FACTORS

The list of risk factors contained in our Annual Report on Form 10-K for the year ended August 31, 2013, under Part 1 ITEM 1A, Risk Factors, are incorporated by reference.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

In September, 2013 we issued a total of 169,702,236 common shares converting $39,313 in principal amounts of loans and accrued interest.

In October, 2013 we issued a total of 323,992,919 common shares converting $35,337 in principal amounts of loans and accrued interest.

In November, 2013 we issued a total of 519,314,286 common shares converting $37,740 in principal amounts of loans and accrued interest.

In December, 2013, the Company issued a total of 426,782,600 common shares on conversion of principal amount of loans.

As a result of the issue of these shares, the Company had a total of 1,949,782,041 common shares issued and outstanding as of February 21, 2014.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. (Removed and Reserved)

ITEM 5. OTHER INFORMATION

In January, 2014, we were notified by the Alberta Securities Commission in Calgary, Alberta, Canada, that we are considered to be an “ Alberta reporting company ” by virtue of an Alberta ordinance making any US company with its shares trading in the US over-the-counter markets automatically an Alberta reporting company if any officer, director or consultant with executive or fund-raising responsibilities is a resident of Alberta. Since Michael Gelmon, our CEO, is a Calgary resident, the Alberta Securities Commission deems the Company to be a reporting issuer, required to file periodic reports in Alberta, and according issued a trading “ cease and desist ” order. We are investigating the effect of this order on the Company with Canadian legal counsel, but do not expect the order to have any effect on trading activity in the US. As of February, 2014, we have initiated the process of meeting any filiung requirements in ALbeta and applying to have the Cease trade order removed.

ITEM 6. EXHIBITS


31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.
32.2	Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NOVATION HOLDINGS, INC. (Registrant)

/s/MICHAEL GELMON

Michael Gelmon

Chief Executive Officer

Dated: March 7, 2014