Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended |
Nov. 30, 2013 | |
Document and Entity Information: | ' |
Entity Registrant Name | 'Novation Holdings Inc |
Document Type | '10-Q |
Document Period End Date | 30-Nov-13 |
Amendment Flag | 'false |
Entity Central Index Key | '0001080602 |
Current Fiscal Year End Date | '--08-31 |
Entity Common Stock, Shares Outstanding | 1,523,009,438 |
Entity Filer Category | 'Smaller Reporting Company |
Entity Current Reporting Status | 'Yes |
Entity Voluntary Filers | 'Yes |
Entity Well-known Seasoned Issuer | 'Yes |
Document Fiscal Year Focus | '2014 |
Document Fiscal Period Focus | 'Q1 |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | 3 Months Ended | ||
Nov. 30, 2013 | Aug. 31, 2013 | ||
Current Assets | ' | ' | |
Cash | $29,463 | $4 | |
Prepaid expenses | 10,436 | 6,845 | |
Accounts receivable | -105,000 | ' | |
Deferred loan costs | 2,622 | [1] | 6,853 |
Total Current Assets | 308,631 | 174,812 | |
Property, plant, and equipment | 1,369 | [2] | 1,475 |
Loans receivable, net | 564,104 | 646,377 | |
Acquisitions | 20,000 | 52,000 | |
ISP Contracts & Support | 180,000 | 180,000 | |
Goodwill | 20,000 | 20,000 | |
Advances to related parties | 57,950 | 42,349 | |
Total Noncurrent Assets | 843,423 | 942,201 | |
Total Assets | 1,152,054 | 1,117,013 | |
Current Liabilities | ' | ' | |
Accounts payable and accrued liabilities | 156,621 | 177,528 | |
Notes payable-current | 108,246 | [3] | 47,878 |
Advances from related parties | 30,712 | 30,712 | |
Advances from third parties | 798 | 5,694 | |
Accrued interest | 63,400 | 108,405 | |
Derivative liability | 1,271,430 | 377,435 | |
Total Current Liabilities | 1,631,207 | 747,652 | |
Non-current Liabilities | ' | ' | |
Notes Payable | 248,966 | [4] | 620,411 |
Total Liabilities | 1,880,173 | 1,368,063 | |
Stockholder's Equity (Deficit) | ' | ' | |
Common Stock | 1,523,009 | [5] | 510,000 |
Preferred Stock | 1,000 | [6] | 1,000 |
Additional paid in capital | 9,234,071 | 9,833,606 | |
Deficit accumulated during the development stage | -11,486,199 | -10,595,655 | |
Total Stockholders' Equity (Deficit) | -728,119 | -251,049 | |
Total Liabilities and Stockholders' Equity (Deficit) | $1,152,054 | $1,117,013 | |
[1] | Net of accumulated amortization of $43,379 and $39,148 | ||
[2] | Net of accumulated depreciation of $751 and $645 | ||
[3] | Net of debt discount of $20,148 and $48,324 | ||
[4] | Net of debt discount of $603,942 and $210,562 | ||
[5] | $0.001 par value, 2,500,000,000 shares authorized, 1,523,009,438 and 30,094,500 shares issued and outstanding | ||
[6] | $0.001 par value, 5,000,000 shares authorized, 1,000,000 shares issued and outstanding |
CONSOLIDATED_BALANCE_SHEETS_PA
CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) (USD $) | Nov. 30, 2013 | Aug. 31, 2013 |
Stockholders' Equity: | ' | ' |
Common stock, par value | $0.00 | $0.00 |
Common shares authorized | 2,500,000,000 | 2,500,000,000 |
Common shares issued | 1,523,009,438 | 509,999,997 |
Common shares outstanding | 1,523,009,438 | 509,999,997 |
Preferred stock, par value | $0.00 | $0.00 |
Preferred shares authorized | 5,000,000 | 5,000,000 |
Preferred shares issued | 1,000,000 | 1,000,000 |
Preferred shares outstanding | 1,000,000 | 1,000,000 |
CONSOLIDATED_STATEMENT_OF_OPER
CONSOLIDATED STATEMENT OF OPERATIONS (USD $) | 3 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | |
Net Income (Loss) | ' | ' |
Revenues | $135,807 | $0 |
Cost of Goods Sold | 9,008 | 0 |
Gross Profit | 126,799 | 0 |
General & Administrative | ' | ' |
Payroll and payroll taxes | 30,000 | 30,000 |
Professional fees | 72,833 | 69,749 |
General and administrative | 163,882 | 19,653 |
Bad debt expense | 0 | 0 |
Rent | 3,090 | 0 |
Total Expenses | 269,805 | 119,402 |
Loss from operations | -143,005 | -119,402 |
Other income (expense) | ' | ' |
Interest, net | 0 | 0 |
Derivative expense | -809,561 | -57,844 |
Change in fair value of derivatives | 111,192 | 9,432 |
Unrealized loss from investment | -32,000 | 0 |
Income (loss) before income taxes | -890,543 | -273,874 |
Income taxes, net | 0 | 0 |
Net income (loss) | ($890,543) | ($273,874) |
Earnings Per Share: | ' | ' |
Net loss per common share (basic and diluted) | $0 | ($0.01) |
Weighted average number of common shares outstanding | ' | ' |
Weighted average number of shares outstanding during the period - basic and diluted | 882,235,803 | 31,985,904 |
STATEMENT_OF_CASH_FLOWS
STATEMENT OF CASH FLOWS (USD $) | 3 Months Ended | |
Nov. 30, 2013 | Nov. 30, 2012 | |
Statement of Cash Flows | ' | ' |
Net Income (loss) | ($890,543) | ($273,874) |
Depreciation | 106 | 106 |
Debt cancellation | 698,369 | 48,412 |
Unrealized gain on investment | 32,000 | 0 |
Amortization | 4,231 | 4,926 |
Amortization of debt discount | 130,357 | 100,453 |
Accrued interest payable | 15,522 | 5,606 |
Increase in prepaid expenses | -3,591 | 0 |
Accounts receivable | -105,000 | 0 |
Loans receivable | 82,273 | -7,000 |
Accounts payable and accrued expenses | -31,367 | 8,483 |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | -67,643 | -112,888 |
Proceeds from notes payable | 81,500 | 120,000 |
Related party advances | 15,602 | -8,500 |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 97,102 | 111,500 |
Increase (Decrease) in cash and cash equivalents | 29,459 | -1,388 |
Cash and Cash Equivalents, at Carrying Value, Beginning Balance | 4 | 1,245 |
Cash and Cash Equivalents, at Carrying Value, Ending Balance | 29,463 | -143 |
Interest | 0 | 0 |
Income taxes, net | 0 | 0 |
Conversion of notes payable to stock | $133,756 | $284,100 |
Organization_Consolidation_and
Organization, Consolidation and Presentation of Financial Statements | 3 Months Ended |
Nov. 30, 2013 | |
Organization, Consolidation and Presentation of Financial Statements: | ' |
Organization, Consolidation and Presentation of Financial Statements Disclosure | ' |
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 for the fiscal year ended August 31, 2012 and in this Form 10-Q. All shares and per share information have been retroactively adjusted to reflect the stock split. | |
Nature of Operations | ' |
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. | |
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 tear 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 January 31, 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 Accounting | ' |
Basis of Presentation of Interim Period Financial Statements | |
The accompanying unaudited condensed consolidated financial statements of the Company at November 30, 2013 and November 30, 2012 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. The Condensed Consolidated Financial Statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States ("GAAP") and do not contain certain information included in the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 2013. Therefore, the Interim Condensed Consolidated Financial Statements should be read in conjunction with that Annual Report on Form 10-K. | |
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 and November 30, 2012 presented are not necessarily indicative of the results to be expected for the year ended August 31, 2014. | |
Use of Estimates, Policy | ' |
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. | |
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. | |
Going Concern Note | ' |
Going Concern | |
As reflected in the accompanying consolidated financial statements, the Company has a net loss of $890,543 and net cash used in operations of $67,643 for the three months ended November 30, 2013; and negative working capital of $1,322,576 and an accumulated deficit of $11,486,199 at November 30, 2013. | |
The accompanying 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 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. | |
Accounting_Changes_and_Error_C
Accounting Changes and Error Corrections | 3 Months Ended |
Nov. 30, 2013 | |
Accounting Changes and Error Corrections: | ' |
New Accounting Pronouncements and Changes in Accounting Principles | ' |
Recent Accounting Pronouncements | |
In September 2011, the FASB issued an amendment to Topic 350, Intangibles—Goodwill and Other, which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to test goodwill for impairment under the two-step process as described under paragraphs 350-20-35-4 and 350-20-35-9 under Topic 350. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and early adoption is permitted. | |
The Company continually assesses any new accounting pronouncements to determine their applicability to the Company. Where it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change. |
Risks_and_Uncertainties
Risks and Uncertainties | 3 Months Ended |
Nov. 30, 2013 | |
Risks and Uncertainties: | ' |
Concentration Risk Disclosure | ' |
Risks and Uncertainties | |
The Company operates in an industry that is subject to rapid technological change. The Company's operations will be subject to significant risk and uncertainties including financial, operational, technological, regulatory and other risks associated with , including the potential risk of business failure. | |
Schedules of Concentration of Risk, by Risk Factor | ' |
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. |
Cash_and_Cash_Equivalents
Cash and Cash Equivalents | 3 Months Ended |
Nov. 30, 2013 | |
Cash and Cash Equivalents: | ' |
Cash and Cash Equivalents Disclosure | ' |
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. |
Debt
Debt | 3 Months Ended | ||||||
Nov. 30, 2013 | |||||||
Debt: | ' | ||||||
Schedule of Short-term Debt | ' | ||||||
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 | 30-Nov-13 | 31-Aug-13 | |||||
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 September 6, 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 | |||||
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. 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, of which $547 unamortized portion remains at August 31, 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. | 3,820 | 50,846 | |||||
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 | |||||
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. 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 $23,950.46 to an unrelated third party to consolidate liabilities owed to the third party. The note is due on September 30, 2015. 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. 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. 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 | |||||
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. 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. 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 $129,220. $27,077 had been converted into common stock as of November 30, 2013. | 121,560 | 54,089 | |||||
Total notes payable | 357,212 | 728,816 | |||||
Current portion | 108,246 | 108,405 | |||||
Notes payable-Long-term portion | $ 248,966 | $ 620,411 | |||||
Equity
Equity | 3 Months Ended |
Nov. 30, 2013 | |
Equity: | ' |
Stockholders' Equity Note Disclosure | ' |
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 |
Compensation_Related_Costs_Sha
Compensation Related Costs, Share Based Payments | 3 Months Ended |
Nov. 30, 2013 | |
Compensation Related Costs, Share Based Payments: | ' |
Disclosure of Compensation Related Costs, Share-based Payments | ' |
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 at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. |
Income_Taxes
Income Taxes | 3 Months Ended | ||||
Nov. 30, 2013 | |||||
Income Taxes: | ' | ||||
Income Tax Disclosure | ' | ||||
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. | |||||
Summary of Operating Loss Carryforwards | ' | ||||
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 (unaudited), and August 31, 2013: | |||||
30-Nov-13 | 31-Aug-13 | ||||
Net operating loss | $ 11,486,199 | $ 9,997,509 | |||
Future tax benefit at 34% | 3,905,308 | 3,399,153 | |||
Less: Valuation allowance | (3,905,308) | -3,399,153 | |||
Net deferred tax asset | $ -- | $ -- | |||
The valuation allowance changed by approximately $506,155 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. | |||||
Earnings_Per_Share
Earnings Per Share | 3 Months Ended |
Nov. 30, 2013 | |
Earnings Per Share: {1} | ' |
Earnings Per Share | ' |
Earnings 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. |
Derivative_Instruments_and_Hed
Derivative Instruments and Hedging Activities | 3 Months Ended | |||
Nov. 30, 2013 | ||||
Derivative Instruments and Hedging Activities: | ' | |||
Derivative Instruments and Hedging Activities Disclosure | ' | |||
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 feature. | ||||
Derivative Instruments, Gain (Loss) | ' | |||
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 $1,365,749 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 $111,192, 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 $111,192. | ||||
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 | $ | 377,435 | ||
ASC 815-15 additions | 1,365,749 | |||
Change in fair value | -111,192 | |||
ASC 815-15 deletions | -360,562 | |||
Balance at November 30, 2013 (unaudited) | $ | 1,271,430 | ||
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 | $ | 111,192 | ||
Derivative expense | (809,561) | |||
Balance for the three months ended November 30, 2013 | $ | (698,369) | ||
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 | 0.21% - 0.30% | |||
Expected volatility | 100% - 300% | |||
Expected life | 9 months – 12 months |
Fair_Value_Measures_and_Disclo
Fair Value Measures and Disclosures | 3 Months Ended |
Nov. 30, 2013 | |
Fair Value Measures and Disclosures: | ' |
Fair Value Disclosures | ' |
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). | |
Fair Value of Measurements | |
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: | |
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. |
Subsequent_Events
Subsequent Events | 3 Months Ended |
Nov. 30, 2013 | |
Subsequent Events: | ' |
Subsequent Events | ' |
During the period up to the date of this Report, the Company has 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. | |
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 January 21, 2014. |