Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended |
31-May-14 | |
Document and Entity Information: | ' |
Entity Registrant Name | 'Novation Holdings Inc |
Document Type | '10-Q |
Document Period End Date | 31-May-14 |
Amendment Flag | 'false |
Entity Central Index Key | '0001080602 |
Current Fiscal Year End Date | '--08-31 |
Entity Common Stock, Shares Outstanding | 6,056,244,893 |
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 | 'Q3 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | 31-May-14 | Aug. 31, 2013 | |
Current Assets | ' | ' | |
Cash | $100,459 | $4 | |
Prepaid expenses | 4,851 | 6,845 | |
Accounts receivable | 271,000 | 161,110 | |
Deposit in subscription | 57,100 | 0 | |
Deferred loan costs | 2,055 | [1] | 6,853 |
Total Current Assets | 435,465 | 174,812 | |
Property, plant, and equipment | 1,157 | [2] | 1,475 |
Loans receivable, net | 522,977 | 646,376 | |
Investments - cost method | 24,000 | 52,000 | |
Intangibles, net | 120,000 | 165,000 | |
Goodwill | 20,000 | 20,000 | |
Advances to related parties | 94,525 | 42,350 | |
Total Noncurrent Assets | 782,659 | 927,201 | |
Total Assets | 1,218,124 | 1,102,013 | |
Current Liabilities | ' | ' | |
Accounts payable and accrued liabilities | 128,578 | 177,528 | |
Bank overdraft | 346 | 0 | |
Notes payable-current | 132,239 | [3] | 47,878 |
Advances from related parties | 30,712 | 30,712 | |
Advances from third parties | 30,575 | 5,694 | |
Accrued interest | 94,428 | 111,205 | |
Derivative liability | 3,129,569 | 632,794 | |
Total Current Liabilities | 3,546,447 | 1,005,811 | |
Non-current Liabilities | ' | ' | |
Notes Payable | 468,372 | [4] | 691,709 |
Total Liabilities | 4,014,819 | 1,697,520 | |
Stockholder's Equity (Deficit) | ' | ' | |
Common Stock | 6,056,245 | [5] | 510,000 |
Preferred Stock | 1,000 | [6] | 1,000 |
Additional paid in capital | 5,868,181 | 9,833,606 | |
Accumulated Deficit | -14,722,121 | -10,940,112 | |
Total Stockholders' Equity (Deficit) | -2,796,695 | -595,507 | |
Total Liabilities and Stockholders' Equity (Deficit) | $1,218,124 | $1,102,013 | |
[1] | Net of accumulated amortization of $46,445 and $39,148 | ||
[2] | Net of accumulated depreciation of $963 and $645 | ||
[3] | Net of debt discount of $71,067 and $48,324 | ||
[4] | Net of debt discount of $230,018 and $210,562 | ||
[5] | $0.001 par value, 10,000,000,000 shares authorized, 6,056,244,893 and 509,999,997 shares issued and outstanding | ||
[6] | $0.001 par value, 5,000,000 shares authorized, 1,000,000 shares issued and outstanding |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
31-May-14 | 31-May-13 | 31-May-14 | 31-May-13 | |
Net Income (Loss) | ' | ' | ' | ' |
Revenues | $147,216 | $77,201 | $449,241 | $147,744 |
Cost of Goods Sold | 14,971 | 15,271 | 40,992 | 46,168 |
Gross Profit | 132,245 | 61,930 | 408,249 | 101,576 |
General & Administrative | ' | ' | ' | ' |
Payroll and payroll taxes | 30,000 | 30,000 | 90,000 | 90,000 |
Professional fees | 111,670 | 98,460 | 289,605 | 317,112 |
General and administrative | 34,724 | 15,759 | 87,730 | 78,843 |
Amortization expense | 15,445 | 0 | 45,445 | 0 |
Rent | 3,090 | 3,190 | 9,271 | 14,919 |
Impairment loss | 6,360 | 0 | 6,360 | 0 |
Total Expenses | 201,290 | 147,409 | 528,411 | 500,874 |
Loss from operations | -69,044 | -85,479 | -120,162 | -399,298 |
Other income (expense) | ' | ' | ' | ' |
Interest, net | -204,689 | -42,819 | -569,263 | -212,153 |
Derivative expense | -246,373 | 0 | -1,837,036 | 0 |
Sale subsidiary | 0 | 0 | 0 | 418,877 |
Gain on extinguishment of debt | 0 | 172,000 | 0 | 0 |
Change in fair value of derivatives | -1,835,317 | -69,217 | -1,227,547 | -135,764 |
Non-controlling interest | 0 | 0 | 0 | 0 |
Income (loss) before income taxes | -2,355,423 | -25,515 | -3,754,009 | -328,338 |
Income taxes, net | 0 | 0 | 0 | 0 |
Net income (loss) | -2,355,423 | -25,515 | -3,754,009 | -328,338 |
Unrealized loss from investment | -224,000 | 0 | -28,000 | 0 |
Comprehensive loss | ($2,579,423) | ($25,515) | ($3,782,009) | ($328,338) |
Earnings Per Share: | ' | ' | ' | ' |
Net loss per common share (basic and diluted) | $0 | $0 | $0 | $0 |
Weighted average number of common shares outstanding | ' | ' | ' | ' |
Weighted average number of shares outstanding during the period - basic and diluted | 4,148,993,419 | 69,517,749 | 4,148,993,419 | 69,517,749 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | 9 Months Ended | |
31-May-14 | 31-May-13 | |
Statement of Cash Flows | ' | ' |
Net Income (loss) | ($3,754,009) | ($328,338) |
Depreciation | 318 | 318 |
Change in derivatives | 3,064,584 | 0 |
Amortization | 50,243 | 18,078 |
Amortization of debt discount | 485,509 | 128,176 |
Increase Decrease in impairment loss | 6,360 | 0 |
Increase Decrease in accrued interest payable | 46,550 | 14,865 |
Increase Decrease in other current assets | 3,024 | -46,174 |
Increase Decrease in accounts receivable | -109,890 | -62,787 |
Increase Decrease in prepaid expenses | 0 | -1,678 |
Increase Decrease in loans receivable | 123,399 | 0 |
Increase Decrease in accounts payable and accrued expenses | 20,079 | 176,789 |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | -63,834 | -100,751 |
Investment in deposit subscription | -42,100 | 0 |
NET CASH PROVIDED BY INVESTING ACTIVITIES | -42,100 | 0 |
Proceeds from notes payable | 223,192 | 147,500 |
Proceeds from bank overdraft | 346 | 0 |
Related party advances | -17,149 | -42,250 |
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 206,389 | 105,250 |
Increase (Decrease) in cash and cash equivalents | 100,455 | 4,499 |
Cash and Cash Equivalents, at Carrying Value, Beginning Balance | 4 | 1,245 |
Cash and Cash Equivalents, at Carrying Value, Ending Balance | 100,459 | 5,744 |
Interest | 0 | 0 |
Income taxes, net | 0 | 0 |
Non-cash activites | $436,998 | $748,900 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (PARENTHETICAL) (USD $) | 31-May-14 | Aug. 31, 2013 |
Stockholders' Equity: | ' | ' |
Common stock, par value | $0.00 | $0.00 |
Common shares authorized | 10,000,000,000 | 2,500,000,000 |
Common shares issued | 6,056,244,893 | 509,999,997 |
Common shares outstanding | 6,056,244,893 | 509,999,997 |
Preferred shares authorized | 5,000,000 | 5,000,000 |
Preferred shares issued | 5,000,000 | 5,000,000 |
Preferred shares outstanding | 1,000,000 | 1,000,000 |
Organization_Consolidation_and
Organization, Consolidation and Presentation of Financial Statements | 9 Months Ended |
31-May-14 | |
Organization, Consolidation and Presentation of Financial Statements: | ' |
Nature of Operations | ' |
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 at the same time. | |
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 was 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 | |
On December 1, 2012, we acquired the operating assets of an Internet Service Provider (ISP) based in Utah and have continued the existing, profitable operations. We also plan to acquire similar ISPs located across the US. To date, the Company has identified three 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 three 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 for a fixed monthly fee. | |
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 company paid $57,100 as of May 31, 2014 out of the total subscription amount of $65,000 and the balance of $7,900 has been paid after May 31, 2014. | |
Use of Estimates, Policy | ' |
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 May 31, 2014 and August 31, 2013 included a 100% valuation allowance for deferred tax assets arising from net operating losses incurred since inception and also calculations of derivative liability. | |
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. | |
New Accounting Pronouncements, Policy | ' |
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. | |
Going Concern Note | ' |
As reflected in the accompanying consolidated financial statements, the Company has a net loss of $3,754,009 and net cash used in operations of $63,834 for the nine months ended May 31, 2014; and negative working capital of $3,110,982 and an accumulated deficit of $14,718,121 at May 31, 2014. | |
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_Policies
Accounting Policies | 9 Months Ended |
31-May-14 | |
Accounting Policies: | ' |
Basis of Accounting, Policy | ' |
The accompanying unaudited consolidated financial statements of the Company at May 31, 2014 and May 31, 2013 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 period ended May 31, 2014 presented are not necessarily indicative of the results to be expected for the full year ended August 31, 2014. | |
Concentration Risk, Credit Risk, Policy | ' |
The Company maintains its cash in bank deposit accounts in a bank which participates in the Federal Deposit Insurance Corporation (FDIC) Program. As of May 31, 2014 and August 31, 2013, the Company had no balances in excess of federally insured limits. | |
Cash and Cash Equivalents, Policy | ' |
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 May 31, 2014 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 May 31, 2014 and August 31, 2013, respectively. | |
Derivatives, Policy | ' |
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. | |
Revenue Recognition, Policy | ' |
The Company recognizes revenue in accordance with FASB ASC 605 on revenue recognition for consulting and ISP services. Revenue from consulting and ISP services will be recognized only when persuasive evidence of a sale or arrangement with a customer exists, price if fixed and determinable, services have been performed, and collectability of the resulting receivable reasonably assured. | |
Cash received in advance of meeting the revenue recognition criteria described above is recorded as deferred revenue. | |
Compensation Related Costs, Policy | ' |
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 May 31, 2014. | |
Non-Employee Stock Based Compensation | |
Share-based payment awards issued to non-employees for services rendered are recorded in accordance with ASC 505, “Equity” at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. | |
Income Tax, Policy | ' |
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. | |
Earnings Per Share, Policy | ' |
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 ending May 31, 2014, is equivalent since the Company has had continuing losses. The Company also has no common stock equivalents. |
Debt
Debt | 9 Months Ended | |||||||
31-May-14 | ||||||||
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 nine 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 May 31, 2014 and August 31, 2013: | ||||||||
Description | 31-May-14 | 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 nine 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 May 31, 2014. | - | 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 nine 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 carrying amount of the debt discount was $894 and $0, respectively. $38,570 has been converted as of May 31, 2014. | 3,036 | - | ||||||
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 nine 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 May 31, 2014. | - | 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. The note was fully converted as of May 31, 2014. | - | 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 $0 and $16,663, respectively. This note has been fully converted to common stock as of May 31, 2014. | - | - | ||||||
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 $0 and $25,000, respectively. This note has been fully converted as of May 31, 2014. | - | - | ||||||
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 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company after nine months, at the election of the Holder, at $0.0013. This note was transferred to a convertible note with Tide Pool as of May 31, 2014. | - | 19,525 | ||||||
Tide Pool* | ||||||||
On January 14, 2014, Indian River Financial Services LLC transferred its promissory note in the amount of $19,525 to an unrelated third party. The note is due on January 15, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at the lesser of $0.0001 or 50% of the lowest trading price for the ten days prior to the date of conversion. This note has been fully converted as of May 31, 2014. | - | - | ||||||
JSJ Investments | ||||||||
On July 10, 2013, the Company issued its promissory note in the amount of $35,150 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 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. $30,150 of the note has been converted as of May 31, 2014. | 5,000 | 25,000 | ||||||
Indian River Financial Services, LLC* | ||||||||
On September 1, 2013, the Company issued its promissory note in the amount of $23,950 to 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 nine 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 carrying amount of the debt discount was $23,950 and $0, respectively. This note was transferred to a convertible note with LG Capital Funding, LLC as of May 31, 2014. | - | - | ||||||
LG Capital Funding, LLC* | ||||||||
On March 27, 2014, Indian River Financial Services LLC transferred its promissory note in the amount of $23,950 plus interest 1,087 totaling $25,037 to an unrelated third party. The note is due on March 27, 2015 and carries interest at 10 percent per annum. The note is convertible, after 180 days, into common stock of the Company at the election of the Holder, at 50% of the lowest closing bid price for the fifteen days prior to the date of conversion. This note is fully outstanding as of May 31, 2014. | 25,037 | - | ||||||
Indian River Financial Services, LLC* | ||||||||
On December 1, 2013, the Company issued its promissory note in the amount of $50,000 to an unrelated third party to consolidate liabilities owed to the third party. The note is due on November 30, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company 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 carrying amount of the debt discount was $17,411 and $0, respectively. $20,000 in principal has been paid on this note as of May 31, 2014. | 12,589 | - | ||||||
Moss Krusick & Associates, 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 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company after nine months, at the election of the Holder, at $0.00075. The note was transferred to Indian River Financial Services, LLC as of May 31, 2014. | - | 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 transferred to Tangiers as of May 31, 2014. | - | 25,108 | ||||||
Tangiers Investment Group, LLC | ||||||||
On January 31, 2014, Dana L. Hipple transferred its promissory note in the amount of $25,108 plus accrued interest of $2,084 to an unrelated third party. The note is due on January 31, 2015 and carries interest at 10 percent per annum. The note is convertible into common stock of the Company after three months, at the election of the Holder, at the lesser of $0.0001 or 50% of the lowest trading price for the ten days prior to the date of conversion. . The carrying amount of the debt discount was $10,677 and $0, respectively. This note has been fully converted as of May 31, 2014. | - | - | ||||||
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 May 31, 2014. | 30,000 | 30,000 | ||||||
Dana L. Hipple | ||||||||
On February 20, 2014, the Company issued its promissory note in the amount of $34,667 to an unrelated third party for additional working capital. The note is due on May 31, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at 50% of the average closing stock price for the last ten days prior to the date of conversion. The carrying amount of the debt discount was $25,072 and $0, respectively. The note was fully outstanding as of May 31, 2014. | 9,595 | - | ||||||
Indian River Financial Services, LLC* | ||||||||
On January 27, 2014, 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 January 31, 2014 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at 50% of the average closing stock price for the last ten days prior to the date of conversion. The carrying amount of the debt discount was $17,635 and $0, respectively. The note was transferred to Tide Pool Ventures Corporation as of May 31, 2014. | - | - | ||||||
Tide Pool Ventures Corporation | ||||||||
On March 18, 2014, Indian River Financial Services LLC transferred its promissory note in the amount of $19,525 plus interest 1,375 and outstanding debt of $5,475 totaling $26,375 to an unrelated third party. The note is due on March 18, 2015 and carries interest at 10 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at 35% of the average lowest three trading prices for the five days prior to the date of conversion. The carrying amount of the debt discount was $3,524 and $0, respectively. $16,204 of this note has been converted as of May 31, 2014. | 6,647 | - | ||||||
Indian River Financial Services, LLC* | ||||||||
On December 20, 2013, Moss Krusick & Associates, LLC transferred its promissory note in the amount of $7,000 to an unrelated third party.. The note is due on June 30, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at 50% of the average closing stock price for the last ten days prior to the date of conversion. The carrying amount of the debt discount was $3,876 and $0, respectively. The note was fully outstanding as of May 31, 2014. | 3,124 | - | ||||||
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 $14,592 and $0, respectively. The note was fully outstanding as of May 31, 2014. | 24,408 | - | ||||||
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 and carries interest at 8 percent per annum. $6,000 has been paid against this note. This note was transferred to a convertible note with JSJ on October 15, 2013. | - | 489,689 | ||||||
JSJ Investments | ||||||||
On October 15, 2013, the Company transferred the CFOs to Go acquisition note to an unrelated third party. The note is due on December 31, 2014 and carries interest at 8 percent per annum. 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 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 $198,015 and $0, respectively. $44,265 had been converted to common stock as of May 31, 2014. | 247,408 | |||||||
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 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 $0.03. The Note was issued at a discount of $15,000, of which $0 unamortized portion remains at May 31, 2014. $96,035 had been converted into common stock as of May 31, 2014. | 183,966 | 125,387 | ||||||
Indian River Financial Services, LLC* | ||||||||
On March 21, 2014, the Company issued its promissory note in the amount of $15,000 to an unrelated third party for additional working capital. The note is due on March 21, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at 50% of the average closing stock price for the last ten days prior to the date of conversion. The carrying amount of the debt discount was $12,056 and $0, respectively. The note was fully outstanding as of May 31, 2014. | 2,944 | - | ||||||
Indian River Financial Services, LLC* | ||||||||
On March 27, 2014, the Company issued its promissory note in the amount of $15,000 to an unrelated third party for additional working capital. The note is due on March 27, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at 50% of the average closing stock price for the last ten days prior to the date of conversion. The carrying amount of the debt discount was $12,297 and $0, respectively. The note was fully outstanding as of May 31, 2014. | 2,703 | - | ||||||
Indian River Financial Services, LLC* | ||||||||
On April 11, 2014, the Company issued its promissory note in the amount of $15,000 to an unrelated third party for additional working capital. The note is due on April 30, 2015 and carries interest at 8 percent per annum. The note is convertible into common stock of the Company at the election of the Holder, at 50% of the average closing stock price for the last ten days prior to the date of conversion. The carrying amount of the debt discount was $13,346 and $0, respectively. The note was fully outstanding as of May 31, 2014. | 1,654 | - | ||||||
LG Capital Funding, LLC* | ||||||||
On March 27, 2014, 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 March 27, 2015 and carries interest at 10 percent per annum. The note is convertible, after 180 days, into common stock of the Company at the election of the Holder, at 50% of the lowest closing bid price for the fifteen days prior to the date of conversion. This note is fully outstanding as of May 31, 2014. | 42,500 | - | ||||||
Total notes payable | 600,611 | 802,914 | ||||||
Current portion | 132,239 | 111,205 | ||||||
Notes payable-Long-term portion | $ 468,372 | $ 691,709 | ||||||
Equity
Equity | 9 Months Ended |
31-May-14 | |
Equity: | ' |
Stockholders' Equity Note Disclosure | ' |
The Company is authorized to issue 10,000,000,000 shares of common stock, par value $0.001 per share and 5 million shares of preferred stock, par value $0.001. | |
. | |
During the nine months ended May 31, 2014, 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. | |
In December, 2013 we issued a total of 621,782,600 common shares converting $42,993 in principal amounts of loans and accrued interest. | |
In January, 2014 we issued a total of 904,923,480 common shares converting $47,780 in principal amounts of loans and accrued interest. | |
In February, 2014 we issued a total of 616,328,000 common shares converting $37,566 in principal amounts of loans and accrued interest. | |
In March, 2014 we issued a total of 1,726,408,500 common shares converting $108,495 in principal amounts of loans and accrued interest. | |
In April, 2014 we issued a total of 663,792,875common shares converting $36,985 in principal amounts of loans and accrued interest. | |
As a result of the issue of these shares, we had a total of 6,056,244,893 common shares and 1,000,000 preferred shares issued and outstanding as of May 31, 2014 | |
Income_Taxes
Income Taxes | 9 Months Ended | ||||
31-May-14 | |||||
Income Taxes: | ' | ||||
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 May 31, 2014, and August 31, 2013: | |||||
31-May-14 | 31-Aug-13 | ||||
Net operating loss | $ 14,718,121 | $ 9,997,509 | |||
Future tax benefit at 34% | 5,004,161 | 3,399,153 | |||
Less: Valuation allowance | (5,004,161) | -3,399,153 | |||
Net deferred tax asset | $ -- | $ -- | |||
The valuation allowance changed by approximately $1,605,008 during the nine months ended May 31, 2014. | |||||
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 May 31, 2014. | |||||
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 May 31, 2014. The Company’s continuing policy is to recognize accrued interest and penalties related to income tax matters in income tax expense. |
Segment_Reporting
Segment Reporting | 9 Months Ended | |||||||
31-May-14 | ||||||||
Segment Reporting: | ' | |||||||
Schedule of Segment Reporting Information, by Segment | ' | |||||||
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 May 31, 2014 can be found below. | ||||||||
Operating revenues and expenses of each of the Company’s segments are as follows: | ||||||||
Novation Holdings, Inc. | Novation Consulting | Burgoyne | Consolidated | |||||
Income | ||||||||
Consulting | - | 375,000 | - | 375,000 | ||||
Sales | - | - | 78,633 | 78,633 | ||||
Returns | - | - | (4,392) | (4,392) | ||||
Total income | - | 375,000 | 74,241 | 449,241 | ||||
Cost of Sales | - | - | 40,992 | 40,992 | ||||
Gross profit | - | 375,000 | 33,249 | 408,249 | ||||
Expense | ||||||||
Operating expense | 528,411 | 104,282 | 29,275 | 661,968 | ||||
(528,411) | 186,533 | 3,974 | (253,719) | |||||
Net income (loss) from operations | (528,411) | 186,533 | 3,974 | (253,719) | ||||
Accounts receivable | - | 295,000 | - | 295,000 | ||||
Accounts payable | 72,473 | - | 46,750 | 119,223 |
Derivative_Instruments_and_Hed
Derivative Instruments and Hedging Activities | 9 Months Ended | |||
31-May-14 | ||||
Derivative Instruments and Hedging Activities: | ' | |||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value | ' | |||
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 nine months ended May 31, 2014, the Company recognized new derivative liabilities of $2,668,582 as a result of convertible debt issuances having embedded conversion options. The fair value of these derivative liabilities was more than the principal balance of the related notes payable by $3,064,584, and was recorded as a loss on derivatives for the nine months ended May 31, 2014. | ||||
As a result of conversion of notes payable described in Note 5, the Company reclassified $1,399,354 of derivative liabilities to equity and the change in fair value of derivatives was $1,227,547. | ||||
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 | 2,668,582 | |||
Change in fair value | 1,227,547 | |||
ASC 815-15 deletions | -1,399,354 | |||
Balance at May 31, 2014 | $ | 3,129,569 | ||
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 | $ | -1,227,547 | ||
Derivative expense | (1,837,037) | |||
Balance for the nine months ended May 31, 2014 | $ | (3,064,584) | ||
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 | 0.16% - 0.18% | |||
Expected volatility | 167% - 836% | |||
Expected life | 2 months – 13 months | |||
Fair_Value_Measures_and_Disclo
Fair Value Measures and Disclosures | 9 Months Ended |
31-May-14 | |
Fair Value Measures and Disclosures: | ' |
Fair Value Disclosures | ' |
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 | 9 Months Ended |
31-May-14 | |
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 in turn controls (55% each) two operating subsidiaries, which have commenced business in an office location near Buffalo, New York. The two subsidiaries have hired employees and commenced business operations, and have already generated revenues. The acquisition has not closed as the preferred shares have not been issued as of May 31, 2014. | |
Common Stock Transactions: | |
In June 2014, the Company issued a total of 400,000,000 common shares on conversion of principal amount of loans. On July 1, 2014, the Comp-any issued an additional 287,298,510 common shares on conversion of principal amount of loans. | |
As a result of the issue of these shares, the Company had a total of 6,743,543,403 common shares issued and outstanding as of July 7, 2014. |