Attached files

file filename
EX-32 - CERTIFICATION - Novation Holdings Incexhibit32.htm
EX-31 - CERTIFICATION - Novation Holdings Incexhibit312.htm
EX-31 - CERTIFICATION - Novation Holdings Incexhibit311.htm
EXCEL - IDEA: XBRL DOCUMENT - Novation Holdings IncFinancial_Report.xls
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR7.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR1.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR9.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR5.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR2.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR8.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR4.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR6.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR3.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR12.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR13.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR15.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR11.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR14.htm
XML - IDEA: XBRL DOCUMENT - Novation Holdings IncR10.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549


FORM 10-K/A



x

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended:  August 31, 2012


¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                         to                      .

 

Commission File Number

001-33090

 

NOVATION HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)


ALLEZOE MEDICAL HOLDINGS, INC.

(Former Name, if changed since last filing)


Florida

 

46-1420443

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

 

1800 NW Corporate Boulevard, Suite 201, Boca Raton, FL 33431

(Address of Principal Executive Offices)

 

(321)-452-9091

(Registrants Telephone Number, Including Area Code)


Securities registered pursuant to Section 12(g) of the Act:   Common

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     

      ¨ YES        x NO

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    

       ¨ YES       x NO

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    

x YES        ¨ NO

 

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K    x





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of accelerated filer and large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.


Large accelerated filer

 

[  ]

  

Accelerated filer

 

[  ]

 

 

 

 

Non-accelerated filer

 

[  ]

  

Smaller reporting company

 

[X]

 

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

YES  [  ]  NO [X]

 

The Aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrants most recently completed second fiscal quarter, February 29, 2012 was $1,354,252.

 

There were 33,287,857 shares of the Registrants $.001 par value common stock outstanding as of November 7, 2012





Table of Contents

 

NOVATION HOLDINGS, INC.

FORM 10-K

 

 

 

 

 

 

 

Part I

 

1

 

 

 

 

Item 1.

 

Business

 

2

 

Item 1A.

 

Risk Factors

 

3

 

Item 1B.

 

Unresolved Staff Comments

 

9

 

Item 2.

 

Properties

 

10

 

Item 3.

 

Legal Proceedings

 

10

 

Item 4.

 

Removed and reserved

 

10

 

 

 

Part II

 

10

 

 

 

 

Item 5.

 

Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

 

10

 

Item 6.

 

Selected Financial Data

 

11

 

Item 7.

 

Managements Discussion and Analysis of Financial Condition and Results of Operations

 

11

 

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

16

 

Item 8.

 

Financial Statements and Supplementary Data

 

17

 

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

36

 

Item 9A.

 

Controls and Procedures

 

36

 

Item  9B.

 

Other information

 

37

 

 

 

Part III

 

37

 

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

 

37

 

Item 11.

 

Executive Compensation

 

39

 

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

40

 

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

 

40

 

Item 14.

 

Principal Accountant Fees and Services

 

40

 

Item 15.

 

Exhibits and Financial Statement Schedules

 

41

 

 

 

Signatures

 

41

 

 

 

Certifications

 

 

 















i






NOVATION HOLDINGS, INC.

 

FORWARD LOOKING STATEMENTS


This annual report on Form 10-K contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, expenses, earnings or losses from operations or investments, or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include risks that are described from time to time in our Securities and Exchange Commission, or the SEC, reports filed before this report.


The forward-looking statements included in this annual report represent our estimates as of the date of this annual report. We specifically disclaim any obligation to update these forward-looking statements in the future. Some of the statements in this annual report constitute forward-looking statements, which relate to future events or our future performance or financial condition. Such forward-looking statements contained in this annual report involve risks and uncertainties.

 

We use words such as anticipates, believes, expects, future, intends and similar expressions to identify forward-looking statements. Our actual results could differ materially from those projected in the forward-looking statements for any reason. We caution you that forward-looking statements of this type are subject to uncertainties and risks, many of which cannot be predicted or quantified.


The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Form 10-K, as well as the risk factors included in this Form 10-K under Item 1A.

PART I


EXPLANATORY NOTE


At the Annual Meeting of Shareholders held on October 25, 2012, our shareholders approved the following:


1.

A corporate name change from Allezoe Medical Holdings, Inc. to Novation Holdings, Inc.

2.

The transfer of our place of incorporation from Delaware to Florida.

3.

A 1:15 reverse split of our common stock.


These changes were effective on or before November 7, 2012.  Our trading symbol also has changed from ALZM to ALZMD on an interim basis, but will be changed on or before December 5, 2012 to a new trading symbol consistent with our new corporate name. These changes are applied retroactively in this Annual Report on Form 10-K although the actual effective date was after the end of the fiscal year on August 31, 2012, to more clearly reflect the current status of the company.  Accordingly, the number of shares of our common stock outstanding at August 31, 2012 has been adjusted from 451,417,495, the actual number of pre-reverse split common shares outstanding, to 30,094,500 common shares after giving effect to the 1:15 reverse split and adjusting any partial shares resulting from the reverse split upward to the next highest whole number of shares.  The reverse stock split has been given retroactive recognition in this Form 10-K.  All shares and per share information has been retroactively adjusted to reflect the stock split.


This amended Form 10-K/A is being filed solely to correct the reference on the cover page to indicate that the securities registered pursuant to Section 12(g) of the Act should state common and not None.  There are no other changes in this Form 10-K/A to the original Form 10-K as filed.


-1-


ITEM 1.

BUSINESS


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


We originally formed our Company 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 device 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 then considered to be the surviving entity, with the Company including only the financial results of OTS in our financial statements. In March, 2012, however, the Company determined that the development costs and time to development for the OTS technology were significantly greater than originally expected and that there were other unexpected issues and concerns relating to the acquisition. As a result, we determined to reverse the acquisition and the transaction was rescinded by agreement.


As a result of the rescission of the OTS transaction, on July 11, 2012, we amended our 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.


Current Business of the Company


We are in the business of medical technology development and marketing, operating through wholly-owned subsidiaries to which we provide management, administrative, financial and other support services.  We are also actively seeking other related acquisitions in the medical device field, as well as in other market segments where the development time and cost are less and the production of operating revenues can be accelerated

Our wholly-owned subsidiary, SureScreen Medical, Inc., has entered into a licensing agreement with AVM Corp. for the licensing of proprietary, patent pending technology that would enable healthcare providers to "see and treat" Human Papillomavirus (HPV), the most common sexually transmitted infection and a cause of cervical cancer. In addition to offering easy, affordable, and on-the-spot HPV diagnosis, the technology offers an important alternative to the HPV vaccine.

Currently HPV infects 233 million women worldwide; one woman dies every 2 hours from cervical cancer. Many experts advocate for HPV vaccination, but unexplained deaths in some patients has caused alarm. The Centers for Disease Control and Prevention (CDC) has examined 35 deaths that occurred among young people who received the vaccine. While no causation has been established, many patients and parents are avoiding the vaccine option. For this and other reasons, including the vaccine's cost and the inconvenience of it being administered over a number of visits, many patients don't actually complete the series. Last year only 32 percent of teenage girls nationwide received all three shots needed to prevent HPV infection.  While popular, HPV vaccines do not treat existing HPV infections or HPV-associated diseases. Nor does the vaccine completely protect from all strains of HPV. Merck's Gardisil® vaccine prevents 70% of virally-caused cervical cancer but may only have limited effect against the other strains. The technology, equipment, and procedures SureScreen has announced are comprehensive in that a light-based exam identifies cells damaged by all known strains of HPV -- with 98% accuracy, in a single visit, and at low cost.  For those who receive the vaccine, our new technology serves as a natural complement, screening for HPV-related damage that occurred in the window before the vaccine was administered. SureScreen will see the technology through regulatory approvals and clearances, to be followed by a broad market release. We have received notice that the pending patent application for the technology has been approved in Europe and we continue to pursue the patent application in the United States.

-2-






We are also negotiating the acquisition of a health and beauty products manufacturing and distribution company, and have entered into agreements to acquire Casita de los Niños, LLC, a language immersion program for children doing business as Immersion House, and Burgoyne Internet Services, LLC, a regional internet service provider (ISP). (See, Subsequent Events).

ITEM  1A .

RISK FACTORS

 

 You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities.  The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.


Risks Relating to Our Business

 

OUR MANAGEMENT HAS LIMITED EXPERIENCE IN MANAGING AND OPERATING A PUBLIC COMPANY. ANY FAILURE TO ADEQUATELY COMPLY WITH FEDERAL SECURITIES LAWS, RULES OR REGULATIONS COULD SUBJECT US TO FINES OR REGULATORY ACTIONS, WHICH MAY MATERIALLY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.


Our current management has limited experience managing and operating a public company and relies in many instances on the professional experience and advice of third parties including its attorneys and accountants. Failure to comply or adequately comply with any laws, rules, or regulations applicable to our business may result in fines or regulatory actions, which may materially adversely affect our business, results of operation, or financial condition and could result in delays in the development of an active and liquid trading market for our stock.


IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROL OVER FINANCIAL REPORTING, OUR ABILITY TO ACCURATELY AND TIMELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD MAY BE ADVERSELY AFFECTED AND INVESTOR CONFIDENCE AND THE MARKET PRICE OF OUR COMMON STOCK MAY BE ADVERSELY IMPACTED.

 

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404, the Securities and Exchange Commission adopted rules requiring public companies to include a report of management on the companys internal controls over financial reporting in their annual reports, including Form 10-K. Under current SEC rules, our management may conclude that our internal controls over our financial reporting are not effective.  Even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.


THE LACK OF EXPERIENCED ACCOUNTING STAFF MAY LEAD TO MATERIAL WEAKNESS IN THE PREPARATION OF OUR FINANCIALS.


A material weakness may occur in the preparation of our financials due to insufficient resources in our accounting and finance department, resulting in (i) an ineffective review, monitoring and analysis of schedules, reconciliations and financial statement disclosures, and (ii) the misapplication of U.S. GAAP and SEC reporting requirements. Due to the effect of the lack of resources, including a lack of resources that are appropriately qualified in the areas of U.S. GAAP and SEC reporting, this could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of the Companys financial information.


-3-





THE DEVELOPMENT OF OUR PRODUCTS MAY BE SLOWER THAN PROJECTED.


The development of our products and services and the implementation of such products in customer environments may take longer than expected. The sales cycle for contemplated products is long and the adoption rates are unknown, thus it may take longer for us to achieve meaningful revenue or meet our projections.  In addition, our products will or may require regulatory review and approvals prior to any sales or distribution, including approval of the U.S. Food & Drug Administration.  There can be no assurance that such approvals can be obtained, and the cost of doing so is considerable.


OUR PLANNED EXPANSION COULD BE DELAYED OR ADVERSELY AFFECTED BY, AMONG OTHER THINGS, DIFFICULTIES IN OBTAINING SUFFICIENT FINANCING, TECHNICAL DIFFICULTIES, OR HUMAN OR OTHER RESOURCE CONSTRAINTS. 


Our planned expansion could be delayed or adversely affected by, among other things, difficulties in obtaining sufficient financing, technical difficulties, or human or other resource constraints. Moreover, the costs involved in these projects may exceed those originally contemplated. Costs savings and other economic benefits expected from these projects may not materialize as a result of any such project delays, cost overruns or changes in market circumstances. Failure to obtain intended economic benefits from these projects could adversely affect our business, financial condition and operating performances.

 

WE ENCOUNTER SUBSTANTIAL COMPETITION IN OUR BUSINESS AND ANY FAILURE TO COMPETE EFFECTIVELY COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

 

As described in the products section, for every product we sell, we will encounter strong competitors. We anticipate that our competitors will continue to expand and seek to obtain additional market share with competitive price and performance characteristics. Aggressive expansion of our competitors or the entrance of new competitors into our markets could have a material adverse effect on our business, results of operations and financial condition.


OUR LIMITED OPERATING HISTORY MAY NOT SERVE AS AN ADEQUATE BASIS TO JUDGE OUR FUTURE PROSPECTS AND RESULTS OF OPERATIONS.


Our limited operating history may not provide a meaningful basis for evaluating our business. We cannot guarantee that we will obtain or maintain profitability or that we will not incur net losses in the future. We will continue to encounter risks and difficulties that companies at a similar stage of development frequently experience, including the potential failure to:


· obtain sufficient working capital to support our expansion;


· expand our product offerings and maintain the high quality of our products;


· manage our expanding operations and continue to fill customers orders on time;


· maintain adequate control of our expenses allowing us to realize anticipated income growth;


· implement our product development, sales, and acquisition strategies and adapt and modify them as needed; and


· successfully integrate any future acquisitions


If we are not successful in addressing any or all of the foregoing risks, our business may be materially and adversely affected.

-4-





WE NEED TO MANAGE GROWTH IN OPERATIONS TO MAXIMIZE OUR POTENTIAL GROWTH AND ACHIEVE OUR EXPECTED REVENUES AND OUR FAILURE TO MANAGE GROWTH WILL CAUSE A DISRUPTION OF OUR OPERATIONS RESULTING IN THE FAILURE TO GENERATE REVENUES AT LEVELS WE EXPECT.

 

In order to maximize potential growth in our current and potential markets, we believe that we must expand our producing operations. This expansion will place a significant strain on our management and our operational, accounting, and information systems. We expect that we will need to continue to improve our financial controls, operating procedures, and management information systems. We will also need to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately prevent us from generating the revenues we expect.


WE CANNOT ASSURE YOU THAT OUR GROWTH STRATEGY WILL BE SUCCESSFUL WHICH MAY RESULT IN A NEGATIVE IMPACT ON OUR GROWTH, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOW.

 

One of our strategies is to grow through increasing our product lines. However, there are many obstacles to expand our product lines. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products in any additional markets. Our inability to implement this sustainable growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.


IF WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.

 

If adequate additional financing is not available on reasonable terms, we may not be able to carry out our corporate strategy and we would be forced to modify our business plans accordingly. There is no assurance that additional financing will be available to us.

 

In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.


In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our securities can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If we need additional funding we will, most likely, seek such funding in the United States and the market fluctuations affect on our stock price could limit our ability to obtain equity financing.

 

If we cannot obtain additional funding, we may be required to: (i) limit our expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures. Such reductions could materially adversely affect our business and our ability to compete.

 

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are favorable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to the Units. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

-5-





NEED FOR ADDITIONAL EMPLOYEES.


The Companys future success also depends upon its continuing ability to attract and retain highly qualified personnel. Expansion of the Companys business and operation will require additional managers and employees with industry experience, and the success of the Company will be highly dependent on the Companys ability to attract and retain skilled management personnel and other employees. There can be no assurance that the Company will be able to attract or retain highly qualified personnel. Competition for skilled personnel in the construction industry is significant. This competition may make it more difficult and expensive to attract, hire and retain qualified managers and employees.



THE LOSS OF THE SERVICES OF OUR KEY EMPLOYEES COULD HARM OUR BUSINESS.


Our success depends to a significant degree on the services rendered to us by our key employees.  If we fail to attract, train and retain sufficient numbers of these qualified people, our prospects, business, financial condition and results of operations will be materially and adversely affected.  The loss of any key employees, including members of our senior management team, and our inability to attract highly skilled personnel with sufficient experience in our industry could harm our business.


WE ARE HIGHLY DEPENDENT ON TECHNOLOGY.


Our business and our results of operations are highly dependent on technology and our business faces many technology related risks.  Infringements of our intellectual property could adversely affect our ability to compete. Our patent applications may be rejected in whole or in part in the United States or in other jurisdictions around the world. We may have to defend ourselves against claims of intellectual property infringement, which could be very expensive for us and harm our business and financial condition. We may be a party to lawsuits in the course of our business. Litigation can be expensive, lengthy, and disruptive to normal business operations. Moreover, the results of complex legal proceedings are difficult to predict. An unfavorable resolution of a particular lawsuit could have a material adverse effect on our business, operating results, or financial condition.


OUR FUTURE SUCCESS IS DEPENDENT ON INTELLECTUAL PROPERTY OWNED BY US.


The Company may not be able to protect unauthorized use of intellectual property licensed to us and to take appropriate steps to enforce our rights.  Although management does not believe that our products or services infringe on the intellectual rights of others, there is no assurance that the Company may not be the target of infringement or other claims.  Such claims, even if not true, could result in significant legal and other costs associated and may be a distraction to management.  We plan to rely on a combination of copyright, trade secret, trademark laws and non-disclosure and other contractual provisions to protect our proprietary rights.  Because the policing of intellectual and intangible rights may be difficult and the ideas and other aspects underlying our business model may not in all cases be protectable under intellectual property laws, there can be no assurance that we can prevent competitors from marketing the same or similar products and services.


DIFFICULTIES IN ESTABLISHING A NEW PRODUCT


We are an early stage company, bringing to market an advanced and unproven technology. We may not be able to raise sufficient financing to effect our business plan and deliver products and services that are accepted by customers. If we cannot find adequate capital on reasonable terms, investors will face a significant risk of losing their investments in their entirety.


-6-






WE WILL INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH UNITED STATES CORPORATE GOVERNANCE AND ACCOUNTING REQUIREMENTS.


We will incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some activities more time consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.


Risks Relating To Our Industry


There is substantial competition in the medical technology industry.  Existing and new competitors may continue to improve their products and to introduce new products with competitive price and performance characteristics.   Our competitors have the advantage of established relationships within the industry and they may be more highly capitalized.  In addition, we cannot assure that additional competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.


The medical technology industry is a highly regulated industry and there is no guarantee that we will be able to meet the initial regulatory requirements to market our products, or, if obtained, to continue to meet those regulatory requirements.


Risks Related To Our Securities


OUR COMMON STOCK IS QUOTED ON THE OTC BULLETIN BOARD WHICH MAY HAVE AN UNFAVORABLE IMPACT ON OUR STOCK PRICE AND LIQUIDITY.


Our Common Stock is quoted on the OTC Bulletin Board.  The OTC Bulletin Board is a significantly more limited market than the New York Stock Exchange or NASDAQ system.  The quotation of our shares on the OTC Bulletin Board may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future.


THERE IS LIMITED LIQUIDITY ON THE OTCBB.


When fewer shares of a security are being traded on the OTCBB, volatility of prices may increase and price movement may outpace the ability to deliver accurate quote information.  Due to lower trading volumes in shares of our Common Stock, there may be a lower likelihood of ones orders for shares of our Common Stock being executed, and current prices may differ significantly from the price one was quoted at the time of ones order entry.


IN ORDER TO RAISE SUFFICIENT FUNDS TO EXPAND OUR OPERATIONS, WE MAY HAVE TO ISSUE ADDITIONAL SECURITIES AT PRICES WHICH MAY RESULT IN SUBSTANTIAL DILUTION TO OUR SHAREHOLDERS.


If we raise additional funds through the sale of equity or convertible debt, our current stockholders percentage ownership will be reduced. In addition, these transactions may dilute the value of our common shares outstanding. We may have to issue securities that may have rights, preferences and privileges senior to our common stock. We cannot provide assurance that we will be able to raise additional funds on terms acceptable to us, if at all. If future financing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would have a material adverse effect on our business plans, prospects, results of operations and financial condition.

-7-





OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY WHICH MAY RESULT IN A MAJOR COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE CORPORATE RESOURCES MAY BE EXPENDED FOR THE BENEFIT OF OFFICERS AND/OR DIRECTORS.


Our articles of incorporation and applicable Delaware law provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorneys fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on our behalf. We will also bear the expenses of such litigation for any of our directors, officers, employees, or agents, upon such persons written promise to repay us if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by us which we will be unable to recoup.


We have been advised that, in the opinion of the Securities and Exchange Commission (SEC), indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act of 1933, as amended (the Securities Act), and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with the securities being registered, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares, if such a market ever develops.    


CURRENTLY, THERE IS A LIMITED PUBLIC MARKET FOR OUR SECURITIES, AND THERE CAN BE NO ASSURANCES THAT ANY SIGNIFICANT PUBLIC MARKET WILL EVER DEVELOP OR THAT OUR COMMON STOCK WILL CONTINUE TO BE QUOTED FOR TRADING AND, EVEN IF QUOTED, IT IS LIKELY TO BE SUBJECT TO SIGNIFICANT PRICE FLUCTUATIONS.


We have a trading symbol for our common stock, ALZM, which permits our shares to be quoted on the OTCBB. However, our stock has been thinly traded since approval of our quotation on the over-the-counter bulletin board by FINRA using the new trading symbol in March 2011. Consequently, there can be no assurances as to whether:


·

any market for our shares will develop;


·

the prices at which our common stock will trade; or


·

the extent to which investor interest in us will lead to the development of an active, liquid trading market.  Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors.


In addition, our common stock is unlikely to be followed by any market analysts, and there may be few institutions acting as market makers for our common stock. Either of these factors could adversely affect the liquidity and trading price of our common stock. Until our common stock is fully distributed and an orderly market develops in our common stock, if ever, the price at which it trades is likely to fluctuate significantly. Prices for our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred to elsewhere in these risk factors, investor perception of us and general economic and market conditions.  No assurances can be given that an orderly or liquid market will ever develop for the shares of our common stock.

-8-






WE ARE NOT LIKELY TO PAY CASH DIVIDENDS IN THE FORESEEABLE FUTURE.

 

We currently intend to retain any future earnings for use in the operation and expansion of our business. Accordingly, we do not expect to pay any cash dividends in the foreseeable future, but will review this policy as circumstances dictate.


WE MAY NOT BE ABLE TO EFFECTIVELY CONTROL AND MANAGE OUR GROWTH.


If our business and markets grow and develop as we expect, it may be necessary for us to finance and manage expansion in an orderly fashion. In addition, we may face challenges in managing expanding product offerings. Such eventualities will increase demands on our existing management and facilities. Failure to manage this growth and expansion could interrupt or adversely affect our operations and cause production backlogs, longer product development time frames and administrative inefficiencies.


WE ARE SUBJECT TO THE PENNY STOCK RULES WHICH WILL MAKE OUR SECURITIES MORE DIFFICULT TO SELL.


We are now and may be subject in the future to the SECs penny stock rules if our securities sell below $5.00 per share. Penny stocks generally are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each penny stock held in the customers account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customers confirmation.


In addition, the penny stock rules require that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction. The penny stock rules are burdensome and may reduce purchases of any offerings and reduce the trading activity for our securities. As long as our securities are subject to the penny stock rules, the holders of such securities may find it more difficult to sell their securities.


OUR CONTROLLING SHAREHOLDER MAY TAKE ACTIONS THAT CONFLICT WITH YOUR INTERESTS.


Lin-Han Century Corp. owns approximately 21 percent of our common stock.  As a result, all of our officers and directors may be elected by Lin-Han Century Corp. which will be able to exercise control over all matters requiring shareholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions, and they will have significant control over our management and policies. The directors elected by this shareholder will be able to significantly influence decisions affecting our capital structure. This control may have the effect of delaying or preventing changes in control or changes in management, or limiting the ability of our other shareholders to approve transactions that they may deem to be in their best interest. For example, our controlling shareholders will be able to control the sale or other disposition of our operating businesses and subsidiaries to another entity.


ITEM 1B.

UNRESOLVED STAFF COMMENTS

 

None.

-9-


ITEM 2.

PROPERTIES


We maintain our corporate offices at 1800 NW Corporate Boulevard, Suite 201, Boca Raton, FL 33431 and also use a service office located at 1365 N. Courtenay Parkway, Suite A, Merritt Island, FL 32953 provided by a consultant to the Company. Our telephone number there is (321) 452-9091.  The corporate office space is currently being provided free of charge by our Chairman and CEO, Michael Gelmon. There are currently no proposed programs for the renovation, improvement or development of the facilities currently used.


We do not currently have policies regarding the acquisition or sale of real estate assets primarily for possible capital gain or primarily for income.  We do not presently hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities.


ITEM 3 .

LEGAL PROCEEDINGS


As of the date of this Report, neither we nor any of our officers or directors is involved in any litigation either as plaintiffs or defendants. As of this date, there is not any threatened or pending litigation against us or any of our officers or directors.


 ITEM 4.

REMOVED AND RESERVED


PART II

 

ITEM 5.

MARKET FOR REGISTRANTS COMMON EQUITY,  RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES


Our common stock has traded in the over-the-counter market on the OTC Bulletin Board system (OTCBB), previously under the symbol ALZM.OB and currently under the symbol ALZMD.OB.  During the year ended August 31, 2012 and to the date of this Report, we have not purchased or otherwise acquired any of our equity securities.  


The following table sets forth the range of high and low closing prices (prior to the reverse split) of the Common Stock as reported by the OTCBB for each fiscal quarter since trading commenced. 



Closing Prices

(Pre-Reverse split)


High

Low

FISCAL 2012



First Quarter (September 1, 2011 through November 30, 2011)

$       0.04

$   0.009

Second Quarter (December 1, 2011 through February 29, 2012)

$       0.04

$   0.006

Third Quarter (March 1, 2012 through May 31, 2012)

$     0.016

$   0.006

Fourth Quarter (June 1, 2012 through August 31, 2012)

$     0.012

$   0.003




FISCAL 2011



First Quarter (September 1, 2010 through November 30, 2010)

$            *

$          *

Second Quarter (December 1, 2010 through February 28, 2011)

$       0.40

$     0.36

Third Quarter (March 1, 2011 through May 31, 2011)

$       2.46

$     0.55

Fourth Quarter (June 1, 2011 through August 31, 2011)

$       0.66

$     0.40

 

* Prior to February 2011 and the change in the trading symbol, there was limited trading activity in the stock of the Company.

-10-





On August 31, 2011, the closing price of the Companys Common Stock as reported by the OTCBB was $0.57 (pre-reverse split) and there were approximately 65 shareholders of record.


Dividends

 

We have not paid any cash dividends on our common stock and do not anticipate paying any such cash dividend in the foreseeable future. Earnings, if any, will be retained to finance future growth. We may issue shares of our common stock in private or public offerings to obtain financing, capital or to acquire other businesses that can improve our performance and growth. Issuance and/or sales of substantial amounts of common stock could adversely affect prevailing market prices in our common stock.

 

Common Stock

 

As of November 29, 2012 there were approximately 41 record holders of our common stock with 33,287,857 common shares issued and outstanding.


ITEM 6.

SELECTED FINANCIAL DATA

 

Not required.


 ITEM 7.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion includes certain forward-looking statements within the meaning of the safe harbor protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include words such as believe, expect, should, intend, may, anticipate, likely, contingent, could, may, or other future-oriented statements, are forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our business plans, strategies and objectives, and, in particular, statements referring to our expectations regarding our ability to continue as a going concern, generate increased market awareness of, and demand for, our current products, realize profitability and positive cash flow, and timely obtain required financing. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from anticipated results. The forward-looking statements are based on our current expectations and what we believe are reasonable assumptions given our knowledge of the markets; however, our actual performance, results and achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Factors within and beyond our control that could cause or contribute to such differences include, among others, our critical capital raising efforts in an uncertain and volatile economical environment, our ability to maintain relationship with strategic companies, our cash preservation and cost containment efforts, our ability to retain key management personnel, our relative inexperience with advertising, our competition and the potential impact of technological advancements thereon, the impact of changing economic, political, and geo-political environments on our business, as well as those factors discussed elsewhere in this Form 10-K and in Item 1 - Our Business.


Readers are urged to carefully review and consider the various disclosures made by us in this report and those detailed from time to time in our reports and filings with the United States Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that are likely to affect our business.


-11-






OVERVIEW


We were incorporated under the laws of the State of Delaware on September 24, 1998 with authorized common stock of 25,000,000 shares at $0.001 par value. On March 9, 2007, at the Annual General Meeting of Stockholders a Resolution was approved increasing the authorized share capital to 500,000,000 common shares with a par value of $0.001 per share.  In February, 2011, our Articles of Incorporation were amended to change the corporate name to Allezoe Medical Holdings, Inc. Effective October 25, 2012, our corporate name was changed to Novation Holdings, Inc., our place of incorporation was transferred from Delaware to Florida, and we completed a reverse split of our common shares in the ratio of 1 new shares for each 15 common shares previously issued.  The amendment to our Articles also provided that we are authorized to issue up to 500 million common shares, par value $0.001, and 10 million preferred shares, par value $0.001.  The rights and preferences of any preferred shares we issue may be set by resolution of our Board of Directors.  At the date of this report, no preferred shares have been issued. The reverse stock split has been given retroactive recognition in this Form 10-K.  All shares and per share information has been retroactively adjusted to reflect the stock split.


We are engaged in the business of acquiring and managing operating companies, initially in the medical device development and production market, and subsequently in other healthcare, technology and similar markets. We formed our Company 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 device 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 then considered to be the surviving entity, with the Company including only the financial results of OTS in our financial statements. In March, 2012, however, the Company determined that the development costs and time to development for the OTS technology were significantly greater than originally expected and that there were other, unexpected issues and concerns relating to the acquisition. As a result, we determined to reverse the acquisition and the transaction was rescinded by agreement.


As a result of the rescission of the OTS transaction, on July 11, 2012, we amended our 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.


Liquidity and Capital Resources


We have historically met our capital requirements through either private placement of equity or private borrowings. Our cash balance decreased from $21,972 at August 31, 2011 to $1,245 at August 31, 2012. During 2012, our primary sources of cash were cash provided by borrowings under notes payable issuances. Our primary uses of cash were for operating activities.


2012 and 2011 Operating, Investing, and Financing Activities


Operating activities in 2012 and 2011 used $761,171 and $616,797 of cash flow, respectively. Cash flow from operating activities is related to both the level of our profitability and changes in working capital and other assets and liabilities. Operating cash outflows are largely attributable to recurring expenditures for labor and other activities. For the years ended August 31, 2012 and 2011, we reported net losses of $6,427,618 and $2,475,744, respectively.


Changes in the components of our working capital impact cash flow from operating activities. During 2012, our loan receivable balance increased $0. During 2012, accrued interest on notes payable increased $44,771, contributing favorably to our net cash flows from operating activities. Changes in accounts payable and accrued expenses, and other current and non-current liabilities also impact our cash flow from operating activities. During 2012, our accounts payable and accrued expenses increased $11,545 positively impacting our net cash provided by operating activities. During 2011, our accounts payable and accrued expenses decreased $124,223, contributing negatively to our net cash provided by operating activities.


12





Additionally, we received loan proceeds of $300,000 in March of 2011 from Crystal Falls Investments, LLC, an unrelated third party, and issued three identical convertible debentures for $100,000 each dated as of March 30, 2011 due September 30, 2011 at 9 percent interest. The notes are all convertible into common stock at a price equal to 80 percent of the five lowest volume weighted average prices for our common stock for the ten trading days prior to the notice of conversion.  On July 9, 2011, Crystal Falls Investments, LLC issued a notice of conversion of the principal amount of all three notes, with the accrued interest of $7,323 paid through the issue of a new convertible promissory note in that amount at July 9, 2011, due January 8, 2012, on the same terms as the converted notes.


We received loan proceeds of $260,000 in November of 2011 from Magna Group, LLC, an unrelated third party, due November 4, 2012 at 12 percent interest. The note is convertible into common stock at a price equal to 75 percent of the lowest trading price for our common stock for the three trading days prior to the notice of conversion.  


In November and December, 2011, Magna Group, LLC issued five notices of conversion totaling $260,000.


We received loan proceeds of $50,000 in November of 2011 from Hanover Holdings, LLC, an unrelated third party, due November 4, 2012 at 12 percent interest. The note is convertible into common stock at a price equal to 50 percent of the lowest trading price for our common stock for the ten trading days prior to the notice of conversion.  The note was fully converted as of August 31, 2012.


We received loan proceeds of $32,500 in November of 2011 from Asher Enterprises, LLC, an unrelated third party, due July 5, 2012 at 8 percent interest. The note is convertible into common stock at a price equal to 58 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. In April 2012, Asher issued two notices of conversion totaling $32,500.


We received loan proceeds of $50,000 in January of 2012 from Magna Group, LLC, an unrelated third party, due January 4, 2013 at 12 percent interest. The note is convertible into common stock at a price equal to 75 percent of the lowest trading price for our common stock for the three trading days prior to the notice of conversion. The note was fully converted as of August 31, 2012.


We received loan proceeds of $20,000 in January of 2012 from Common Stock, LLC, an unrelated third party, due October 31, 2012 at 6 percent interest. The note is convertible into common stock at a price equal to 60 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. In July and August 2012, two notices of conversion were issued totaling $6,000. We accrued interest of $1,777 on this note as of August 31, 2012.


We received loan proceeds of $195,000 in January of 2012 from Magna Group, LLC, an unrelated third party, due January 4, 2013 at 12 percent interest. The note is convertible into common stock at a price equal to 75 percent of the lowest trading price for our common stock for the three trading days prior to the notice of conversion. The note was fully converted as of August 31, 2012.


We received loan proceeds of $40,000 in January of 2012 from Asher Enterprises, LLC, an unrelated third party, due October 23, 2012 at 8 percent interest. The note is convertible into common stock at a price equal to 50 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. This note was fully converted into common stock as of August 31, 2012.


We received loan proceeds of $50,000 in January of 2012 from Panache Capital, LLC, an unrelated third party, due January 10, 2013 at 10 percent interest. The note is convertible into common stock at a price equal to 75 percent of the five lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. We accrued interest of $2,829 on this note as of August 31, 2012. In July and August 2012, two notices of conversion were issued totaling $40,320.


13





We received loan proceeds of $97,500 in January of 2012 from Panache Capital, LLC, an unrelated third party, due January 10, 2013 at 10 percent interest. The note is convertible into common stock at a price equal to 75 percent of the five lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. In January and February, 2012 Panache Capital, LLC issued two notices of conversion totaling $97,500.


We received loan proceeds of $40,000 in February of 2012 from Asher Enterprises, LLC, an unrelated third party, due November 23, 2012 at 8 percent interest. The note is convertible into common stock at a price equal to 50 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. As of August 31, 2012, Asher issued a notice of conversion totaling $25,000. We accrued interest of $1,157 on this note as of August 31, 2012.


We received loan proceeds of $322,785 in February of 2012 from ICG USA, LLC, an unrelated third party, due February 14, 2013 at 6 percent interest. The note is convertible into common stock at a price equal to 50 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. In February, March, April, and May 2012 ICG USA, LLC issued six notices of conversion totaling $322,785.


We received loan proceeds of $20,000 in March of 2012 from Common Stock, LLC, an unrelated third party, due December 19, 2012 at 6 percent interest. The note is convertible into common stock at a price equal to 60 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion.


We received loan proceeds of $35,000 in March 2012 from Asher Enterprises, LLC, an unrelated third party, due January 30, 2013 at 8 percent interest. The note is convertible into common stock at a price equal to 50 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion.


We received loan proceeds of $37,500 in April 2012 from Asher Enterprises, LLC, an unrelated third party, due December 14, 2012 at 8 percent interest. The note is convertible into common stock at a price equal to 50 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion.


We received loan proceeds of $20,000 in May of 2012 from Common Stock, LLC, an unrelated third party, due February 8, 2013 at 6 percent interest. The note is convertible into common stock at a price equal to 60 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion.


On June 8, 2012, we received a cash payment of $235,000 from OTS as part of the settlement of all issues with OTS effective May 31, 2012.


We received loan proceeds of $50,000 in July of 2012 from JMJ Financial, an unrelated third party, due July 30, 2013 at 5 percent interest. The note is convertible into common stock at a price equal to 70 percent of the lowest trading price for our common stock for the twenty five trading days prior to the notice of conversion.


In our opinion, available funds will satisfy our capital requirements for the next several months while we are in the process of negotiating additional funding to implement our FDA clearance process and bring the HPV technology to market. We expect to do so during the remainder of 2012. There can be no assurance that we will be successful in raising additional funds to meet our capital needs.


Financing activities provided $742,564 and $637,754 of cash during 2012 and 2011, respectively.


See ITEM 8. FINANCIAL STATEMENTS, Note 7 Notes Payable for additional information regarding our outstanding debt.


Year 2013 Cash Requirements and Potential Sources of Liquidity


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


-14-





Recurring Fair Value Measurements


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


Off-Balance Sheet Arrangements


None

Current Economic Environment


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


Contractual obligations


Currently, we have no employment agreements or other contractual undertakings with any of our officers, directors or employees.


A summary of notes payable at August 31, 2012 and 2011 may be found in Note 7 to our financial statements included later in this Report.


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


Results of Operations for the Years Ended August 31, 2012 and 2011.

 

For the years ended August 31, 2012 and 2011, the Company had no revenues.  Since inception, the Company has yet to earn revenues and has incurred cumulative net losses of $9,266,443.  For the years ended August 31, 2012 and 2011, the Company had net losses of $6,427,618 and $2,475,744, respectively.  Our activities have been attributed primarily to start up and business development.

 

For the years ended August 31, 2012 and 2011, we incurred operating expenses of $5,380,260 and $2,313,997, respectively.


Off-Balance Sheet Arrangements


We currently do not have any off-balance sheet arrangements.

 

Critical Accounting Policies


The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Actual results could differ from those estimates.  We believe that the following critical policies affect our more significant judgments and estimates used in preparation of our financial statements.


-15-






The Company has incurred deferred offering costs in connection with raising additional capital through the sale of its common stock. These costs are capitalized and charged against additional paid-in capital when common stock is issued. If there is no issuance of common stock, the costs incurred are charged to operations.


Recent Accounting Pronouncements:


In September 2011, the FASB issued an amendment to Topic 350, IntangiblesGoodwill 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 is currently evaluating whether early adoption is necessary.


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 Companys 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 Companys financials properly reflect the change.


ITEM  7A.

Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable.






















-16-


ITEM 8.

FINANCIAL STATEMENTS

 

Novation Holdings, Inc.

(A Development Stage Company)

Financial Statements

August 31, 2012 and 2011


CONTENTS

 

 

Page(s)

 

 

Reports of Independent Registered Certified Public Accounting Firm

18

 


Consolidated Balance Sheets - As of August 31, 2012 and 2011

19

 


Consolidated Statements of Operations -

20

     For the years ended August 31, 2012 and 2011


     and the period from September 24, 1998 (inception)


     through August 31, 2012


 


Consolidated Statement of  Stockholders Equity (Deficit)

21

     For the years ended August 31, 2012 and 2011


     and the period from September 24, 1998 (inception)


     through August 31, 2012


 


Consolidated Statements of Cash Flows -

22

     For the years ended August 31, 2012 and 2011


     and the period from September 24, 1998 (inception)


     through August 31, 2012


 


Notes to Financial Statements

23
















-17-






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders ofNovation Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Novation Holdings, Inc. and subsidiaries (a development stage company) as of August 31, 2012 and 2011 and the related consolidated statements of operations, stockholders equity, and cash flows for the years then ended and for the period from September 24, 1998, inception, to August 31, 2012. Novation Holdings, Inc.s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Novation Holdings, Inc. and subsidiaries as of August 31, 2012 and 2011, and the results of their operations and their cash flows for the years then ended and for the period from September 24, 1998, inception, to August 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the company is in the development stage, has had minimal operations to date, has an accumulated deficit, and negative working capital. These conditions raise substantial doubt about its ability to continue as a going concern. Managements plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Moss, Krusick & Associates, LLC



Winter Park, Florida

December 14, 2012


-18-

Novation Holdings, Inc.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS






August 31, 2012


August 31, 2011








ASSETS

CURRENT ASSETS





 Cash


 $                   1,245


 $           21,972


 Prepaid expenses

                      1,000


                1,000



 Total current assets

                      2,245


              22,972

 Property, plant and equipment (net of accumulated




 depreciation of $221 and $0 respectively)

                      1,899


                      -   

 Deferred loan costs, net of accumulated amortization of $15,689and $800

                      4,811


                4,700

 Loan receivable

48,000   


            257,653

 Advances to related parties

                    42,500


                5,000



 Total assets

 $                 99,455


 $         290,325

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES





 Accounts payable and accrued expenses

 $                 18,590


 $             7,045


 Notes payable - net of debt discount of $25,861 and $128,442

                  181,319


              64,578


 Accrued interest

                    13,438


                9,964


Derivative liability

30,815


-



 Total current liabilities

                  244,152


              81,587



 Total liabilities

244,152


              81,587

STOCKHOLDERS' EQUITY (DEFICIT)





Common stock, $0.001 par value; 500,000,000





shares authorized. 30,094,500 and 4,121,669 shares





issued and outstanding

30,094


              61,825


Additional paid in capital

               9,091,652


         2,985,738


Deficit accumulated during the development stage

              (9,266,443)


       (2,838,825)



Total stockholders' equity (deficit)

                 (144,697)


            208,738



Total liabilities and stockholders' equity

 $                 99,455


 $         290,325




See accompanying notes to consolidated financial statements.




-19-

Novation Holdings, Inc.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS



For the Year Ended

Cumulative from Inception to August 31, 2012



August 31, 2012

August 31, 2011


REVENUES

 $                         -   

 $                     -   

 $                             -   






GENERAL AND ADMINISTRATIVE EXPENSES





Payroll and payroll taxes

          4,012,477

           2,053,067

      6,065,544


Professional fees

            1,260,948

              189,565

      1,540,605


Travel and entertainment

           31,441

                  3,110

           34,551


Insurance

             25,000

                48,559

         73,559


Office expense

                 124

                     378

             1,333


Telephone and internet

              1,600

                  1,553

             7,953


General and administrative

           38,412

                13,507

         319,277


Dues and subscriptions

                   10

                       55

                  65


Repairs and maintenance

             10,248

                  4,203

           14,451







Loss from operations

           (5,380,260)

          (2,313,997)

    (8,057,338)






OTHER INCOME (EXPENSE)





Finance cost

                         -   

             (133,494)

       (133,494)


Gain on extinguishment of debt

              523,667

                        -   

         523,667


Interest, net

           (1,529,378)

               (28,253)

       (1,557,631)


Derivative expense

(169,878)

-

(169,878)


Change in fair market value of derivatives

130,452

-

130,452


Other, net

(2,221)

-

(2,221)







Net loss

 $        (6,427,618)

 $       (2,475,744)

 $           (9,266,443)






Net loss per share (basic and diluted)

 $                 (0.37)

 $                (0.69)







Weighted average number of shares outstanding during the period-basic and diluted

      17,161,733

         3,584,339





See accompanying notes to consolidated financial statements.



-20-


Novation Holdings, Inc.

(A Development Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

For the Periods from September 24, 1998 (Date of Inception), to August 31, 2012

(Adjusted retroactively to reflect 1:15 reverse split effective on November 7, 2012)





Deficit






Accumulated

Total




Additional

During the

Stockholders'


Common Stock

Paid In

Development

Equity


Shares

Par Value

Capital

Stage

(Deficit)







Balance - September 24, 1998 (inception)

                     -

 $             -   

 $                    -   

 $                     -   

 $                         -   

Common stock issued for cash, 1998-2009 (founders-$0.015/share)

  3,478,000

     3,478

                       51,972

                       -   

               55,450

Contributions-noncash expenses

                 -

              -

         138,000

                    -   

          138,000

Net loss for the period from September 24, 1998(inception) to August 31, 2009

              -   

           -   

                    -   

        (340,716)

      (340,716)

Balance - August 31, 2009

 3,478,000

 3,478

     190,572

     (340,716)

       (146,666)

Contributions-noncash expenses

                    -

              -

           12,600

                   -   

              12,600

Net loss for the year ended August 31, 2010

                -   

         -   

                   -   

            (22,365)

            (22,365)

Balance - August 31, 2010

3,478,000

3,478

203,172

                     (363,081)

                     (156,431)

Common stock issued for services, $6.30 per share

             533,333

                 533

                  1,679,467

                                  -

                   1,680,000

Converted notes payable to common stock, $5.40 per share

                      98,951

                 99

                     724,911

                                  -

                      735,010

Common stock issued for services, $10.86 per share

                      11,385

                    11

                     123,627

                                  -

                      123,638

Beneficial Conversion Feature-Issuance of notes payable

                              -    

                         -

                     302,265

                                  -

                      302,265

Net loss for the year ended August 31, 2011

                               -

                         -

                                 -

                  (2,475,744)

                  (2,475,744)

Balance - August 31, 2011

       4,121,669

 $    4,121

 $     3,043,442

 $    (2,838,825)

 $             208,738

Converted notes payable to common stock ($0.029-0.28/share)

               15,265,741

             15,266

                     1,272,111

                                -   

                   1,287,379

Total Elan Antidilutive

                 8,054,770

               8,055

                  2,695,904

                                -   

                   2,703,959

Total Common stock issued for services ($0.1-8.55/share)

                 2,708,213

               2,708

                     698,335

                                -   

                      701,043

Stock compensation expense

                             -   

                       -   

                     980,000

                                -   

                      980,000

Settlement of Derivative Liabilities through Conversion of Notes Payable

                             -   

                       -   

                     401,804

                                -   

                      401,804

Reverse issuance of notes payable

      (55,893)

   (56)

                 56

                        -   

                         -   

Net loss for the period ended August 31, 2012

                             -   

                       -   

                               -   

                  (6,427,618)

                  (6,427,618)

Balance - August 31, 2012

    30,094,500

 $  30,094

 $     9,091,652

 $    (9,266,443)

 $          (144,697)


-21-

Novation Holdings, Inc.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS





For the Year Ended

For the Period from September 24, 1998 (Inception) to August 31, 2012





August 31, 2012

August 31, 2011


CASH FLOWS FROM OPERATING ACTIVITIES





Net loss

 $        (6,427,618)

 $     (2,475,744)

 $        (9,266,443)


Adjustments to reconcile net loss to net






cash used by operations:






Depreciation expense

                       221

                    -

                      221



Capital contributions-noncash expenses

                           -

                         -

               151,200



Stock based compensation expense

             4,385,002

          2,080,154

6,465,156



Gain on extinguishment of debt

(523,667)

                         -

(523,667)



Gain/loss on derivatives

39,426

-

39,426



Amortization of deferred loan costs

                    14,889

800

15,689



Amortization of debt discount

1,484,607

             150,905

1,635,512


Changes in certain operating assets and liabilities:






Interest accrued on notes payable

                    44,771

                 9,964

54,735



Increase in prepaid expenses

-

               (1,000)

(1,000)



Loans receivable

                209,653

           (257,653)

                (48,000)



Increase (decrease) in accounts payable

                  11,545

           (124,223)

                 18,590

Net cash used by operating activities

              (761,171)

           (616,797)

           (1,458,581)

CASH FLOWS FROM INVESTING ACTIVITIES





Purchase of property and equipment

                  (2,120)

                         -

                  (2,120)

Net cash used by investing activities

                  (2,120)

                         -

                  (2,120)








CASH FLOWS FROM FINANCING ACTIVITIES





Additional capital contributed

                           -

             156,432

               156,432


Proceeds from issuance of common stock

                           -

                         -

                 55,450


Proceeds from notes payable

                780,064

             512,500

            1,292,564


Related party advances

                (37,500)

             (31,178)

                (42,500)

Net cash provided by financing activities

                742,564

             637,754

            1,461,946

Net increase (decrease) in cash

                (20,727)

               20,957

                   1,245

Cash and equivalents, beginning of period

                  21,972

                 1,015

                           -

Cash and equivalents, end of period

 $                 1,245

 $            21,972

 $                1,245

Supplemental cash flow information:





Cash paid for interest

 $                        -

 $                      -

 $                4,500


Cash paid for income taxes

 $                        -

 $                      -

 $                        -


Significant non-cash activities






Notes payable converted to common stock

 $        1,287,377

 $                      -

 $         1,745,872



Accrued interest converted to notes payable

 $             41,307

 $                      -

 $              41,307



Reclassification of debt discount to paid-in-capital

$           401,804

$                      -

$            401,804


See accompanying notes to consolidated financial statements.

-22-





NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


Note 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Novation Holdings, Inc., Allezoe Medical Holdings, Inc., 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 Company was 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, Healthcare of Today, Inc. and Élan Health Services, Inc. agreed to rescind the acquisition of Organ Transport Systems, Inc. (OTS) from Healthcare of Today, Inc. by the Company, which closed in February, 2011.  Under the terms of the rescission, the Company agreed to return its stock in OTS to Healthcare of Today, Inc. in exchange for the return of the 5,217,000 shares of stock issued to Healthcare of Today.  However, since Healthcare of Today, Inc. had previously transferred all of the shares of the Company received in the earlier transaction to third parties, of which 3,202,507 were transferred to Élan Health Services, Inc. for the assumption of debt, it was agreed that Élan Health Services would return the 3,202,507 shares held by it immediately, and then would credit the balance of 2,014,493 common shares against the planned acquisition of BioCube, Inc. by the Company from Élan Health. The market value of the shares to be received as a credit at March 19, 2012 was $0.2325per share, or a total of $468,370, which was recorded as Loan Receivable on the balance sheet in March 2012.  The net effect of the rescission transaction has been to return OTS as a subsidiary of Healthcare of Today, Inc., and to remove OTS as a subsidiary of the Company.  The table below summarizes the effect of the rescission transaction in March 2012:



Shares

Price

Value

Acquisition of OTS-February 18, 2011

5,217,000

 $ 8.2500

N/A

Shares Returned by Élan in March 2012

(3,202,507)

 $ 0.2325

$ (744,583)

Stock still due at August 31, 2012*

2,014,493

 $ 0.2325

 $ (468,370)


·

The remaining shares due to be returned as of August 31, 2012 have been returned and have been retired.


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, 2011.



-23-





NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


Note 1 Nature of Operations and Summary of Significant Accounting Policies (continued)


The separate receivable recorded by the Company totaling $469,827 at February 29, 2012 represented amounts actually paid by the Company to or for OTS, primarily for salaries due to OTS officers and employees. This receivable was non-interest bearing and repayment by OTS was guaranteed by a security interest in all equity interests of OTS held by Healthcare of Today, Inc. as a result of the rescission. This receivable was offset by a corresponding note payable to officers of OTS of $755,320 at February 29, 2012 (See, Note 7).  Effective May 31, 2012, the Company entered into a settlement and release agreement with OTS and the OTS officers under which all of the outstanding debt owed to the former OTS officers by the Company was assumed by OTS, the OTS loan receivable was reduced to $235,000 and OTS agreed to pay the Company $235,000.  This settlement transaction was recorded at May 31, 2012 as follows:


Pre-settlement

Amounts

May 31, 2012

Adjustments

May 31, 2012

As adjusted

Loan receivable

$                    469,827

$                      234,827

$                      235,000

Long-term liabilities

$                    755,320

$                      755,320

$                                0


As a result of the settlement, the Company recorded a gain on extinguishment of debt of $520,493 as Other Income for the quarter ended May 31, 2012, which represents the difference between the $755,320 in debt transferred to OTS and the $234,827 in OTS loan receivables cancelled in the settlement.


On June 8, 2012, OTS paid $235,000 to the Company in settlement of the full amount remaining due on the OTS loan receivable.


The reverse stock split has been given retroactive recognition in this Form 10-K.  All shares and per share information has been retroactively adjusted to reflect the stock split.


Nature of Operations

The Company has a wholly-owned subsidiary, SureScreen Medical, Inc., through which it has entered into a licensing agreement with AVM Corp. for the licensing of proprietary, patent pending technology that would enable healthcare providers to "see and treat" Human Papillomavirus (HPV), the most common sexually transmitted infection and a cause of cervical cancer, In addition to offering easy, affordable, and on-the-spot HPV diagnosis, the technology offers an important alternative to the HPV vaccine.

Development Stage


The Company's financial statements are presented as those of a development stage enterprise through August 31, 2012. Activities during the development stage include company formation, equity issued for patents and technology, and fixed assets and further implementation of the business plan. The Company has not generated any revenues since inception.  We have subsequently acquired or agreed to acquire operating subsidiaries that are producing income and actively engaged in operating activities, and will no longer be required to report as a development stage company for the fiscal year beginning September 1, 2012.


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 a development stage company, including the potential risk of business failure.

-24-





NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


Note 1 Nature of Operations and Summary of Significant Accounting Policies (continued)


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 in 2012 and 2011 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.


Cash and Cash 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 August 31, 2012 and 2011, 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 August 31, 2012 and 2011, respectively.


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 August 31, 2012, 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. There have been no grants of any stock or other equity as of August 31, 2012.

-25-





NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


On July 1, 2011, the Company issued 333,333 post-split shares of common stock valued at $2,100,000 to the Companys Chairman and CEO, with the shares originally vesting over 5 years on a proportionate basis. As of August 31, 2011, one-fifth or 66,667 shares valued at $420,000 had vested. Mr. Gelmon conveyed two thirds of the original 333,333 post-split shares to two other parties for reasons unrelated to the Company, retaining a total of 111,111 shares. The non-vested balance at August 31, 2011 of 266,667 total shares valued at $1,680,000 had been issued but were being held in escrow for release on an annual basis each July 1. During the year ended August 31, 2012, the Company revised the vesting term to 3 years and released an additional 155,556 shares valued at $980,000. The non-vested balance of at August 31, 2012 was one-third of the original issuance or 111,111 shares valued at $700,000, of which Mr. Gelmon holds 37,037 shares to be received. In accordance with ASC 718, compensation cost related to shares issued is recognized over the vesting period with an off-setting credit to additional paid-in capital. Also, the deferred equity balance of $1,680,000 at August 31, 2011 was reclassified and netted against additional paid-in capital in the 2011 financial statements.


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


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.


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 Companys 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).


-26-






NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


Fair Value of Financial Instruments (continued)


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 are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2 - Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and includes those financial instruments that are valued using models or other valuation methodologies.

 

Level 3 - Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair value.


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 Companys 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.


Recurring Fair Value Measurements


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


-27-






NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


Recently Issued Accounting Pronouncements


In September 2011, the FASB issued an amendment to Topic 350, IntangiblesGoodwill 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 is currently evaluating whether early adoption is necessary.


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 Companys 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 Companys financials properly reflect the change.


NOTE 2. GOING CONCERN


As reflected in the accompanying financial statements, the Company has not yet emerged from the development stage, has a net loss of $6,427,618 and net cash used in operations of $761,171 for the year ended August 31, 2012; and negative working capital of $241,907 and an accumulated deficit of $9,266,443 at August 31, 2012.


The accompanying 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 a development stage company 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 Companys 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.


-28-






NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


NOTE 3.  RESTATEMENT OF THE FINANCIAL STATEMENTS


The Company restated its previously issued financial statements for the year ended August 31, 2011 to reflect the rescission of the previous acquisition of Organ Transport Systems, Inc. (OTS) in March 2012. The rescission of OTS resulted in the removal of all OTS transactions from the Companys previously reported financial statements as of and for the year ended August 31, 2011.   This restatement was reflected in an amended Form 10-K/A filed with the SEC in July 2012 for the year ended August 31, 2011.


NOTE 4. INCOME TAXES


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


The following is a schedule of deferred tax assets as of August 31, 2012, and August 31, 2011:




August 31, 2012


August 31, 2011

Net operating loss

$

9,266,443

$

2,475,744

Future tax benefit at 34%                      


3,150,591


841,753

Less: Valuation allowance


   (3,150,591)


   (841,753)

Net deferred tax asset

$

--

$

--


The valuation allowance changed by approximately $2,308,838 during the year ended August 31, 2012.


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 August 31, 2011.


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 Companys 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 August 31, 2012. The Companys continuing policy is to recognize accrued interest and penalties related to income tax matters in income tax expense.


NOTE 5. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES


Matriarch Management Inc. provides financial, accounting, and similar services to the Company at a monthly fixed fee of $10,000, commencing March 1, 2012.  Michael Gelmon, who serves the Company as CEO, is paid as a consultant to the Company at the rate of $10,000 per month, commencing July 1, 2012.  Mr. Gelmon is a Canadian citizen and resident.


-29-








NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


NOTE 6.

CAPITAL STOCK


The Company is authorized to issue 500,000,000 shares of common stock, par value $0.0015 per share and 10 million shares of preferred stock, par value $0.001.  No preferred shares have been issued.

.

During the year ended August 31, 2012, the Company issued Company stock as follows:


On September 2, 2011, the Company issued 26,087 shares of common stock for services rendered under consulting agreements.


On October 13, 2011, the Company issued 266,667, shares of common stock for services rendered under consulting agreements.


On November 8, 2011, the Company converted $50,000 of notes into 177,778 shares of common stock.


On November 17, 2011, the Company converted $50,000 of notes into 322,061 shares of common stock.


On November 29, 2011, the Company converted $60,000 of notes into 592,593 shares of common stock.


In December 2011, the Company converted $101,000 of notes into 1,216,508 shares of common stock.


In December 2011, the Company issued 2,415,459 shares of common stock for $250,000 of consulting fees.


In January 2012, the Company converted $243,870 of notes into 27,356,116 shares of common stock.


In February 2012, the Company converted $379,345 of notes into 1,823,741 shares of common stock.


In March 2012, the Company converted $95,619 of notes into 3,944,259 shares of common stock.


In April 2012, the Company converted $91,350 of notes into 1,135,714 shares of common stock.


In May 2012, the Company converted $75,924 of notes into 1,462,714 shares of common stock.


In June 2012, the Company converted $13,000 of notes into 293,785 shares of common stock.


In July 2012, the Company converted $53,000 of notes into 1,038,793 shares of common stock.


In August 2012, the Company converted $72,970 of notes into 2,143,097 shares of common stock.


The Company issued an additional 8,054,770 shares to Élan Health Services, Inc., pursuant to the original OTS acquisition agreement and closing whereby in the event that additional common shares were issued to other parties, then additional common shares would also be issued to maintain its ownership percentage of the then outstanding common shares at 60 percent. Though the Company agreed to return its stock in OTS to Healthcare of Today, Inc. in exchange for the return of the 5,217,000 shares of stock previously issued to Healthcare of Today, Inc., pursuant to the agreement to rescind the acquisition of OTS, the additional 8,054,770 shares that were issued were not returned and were considered to be issued and outstanding as of August 31, 2012. These shares have been recorded at fair market value and are included in payroll related expenses on the statement of operations and stock based compensation on the statement of cash flows for the year ended August 31, 2012.

-30-





NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


NOTE 6. CAPITAL STOCK (continued)


As a result of these transactions, there were 30,094,500 common shares outstanding at August 31, 2012.


On July 1, 2011, the Company issued 5,000,000 shares of common stock valued at $2,100,000 to the Companys Chairman and CEO, with the shares originally vesting over 5 years on a proportionate basis. As of August 31, 2011, one-fifth or 1,000,000 shares valued at $420,000 had vested. Mr. Gelmon conveyed two thirds of the original 5,000,000 shares to two other parties for reasons unrelated to the Company, retaining a total of 1,666,667 pre-split shares. The non-vested balance at August 31, 2011 of 4,000,000 total pre-split shares valued at $1,680,000 had been issued but were being held in escrow for release on an annual basis each July 1. During the year ended August 31, 2012, the Company revised the vesting term to 3 years and released an additional 2,333,333 pre-split shares (155,556 post split) valued at $980,000. The non-vested balance of at August 31, 2012 was one-third of the original issuance or 1,666,667 shares valued at $700,000, which is now 111,111 shares as a result of the 1:15 reverse split, of which Mr. Gelmon holds 37,037 shares to be received.. In accordance with ASC 718, compensation cost related to shares issued is recognized over the vesting period with an off-setting credit to additional paid-in capital. Also, the deferred equity balance of $1,680,000 at August 31, 2011 was reclassified and netted against additional paid-in capital in the 2011 financial statements.



NOTE 7.  NOTES PAYABLE


* The Company analyzed the conversion option for derivative accounting consideration under ASC 815-15    "Derivatives and Hedging" and determined that the instrument should be classified as liabilities once the conversion option became effective after 180 days 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 August 31, 2012 and August 31, 2011:


Description

August 31, 2012


August 31, 2011

Asher Enterprises, Inc. *




On July 7, 2011, the Company issued its promissory note in the amount of $53,000 to an unrelated third party for additional working capital. The note was due on April 11, 2012 and carried interest at 8 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 58 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 35,917, respectively. The note was fully converted at August 31, 2012.

-


17,083

Asher Enterprises, Inc. *




On August 16, 2011, the Company issued its promissory note in the amount of $40,000 to an unrelated third party for additional working capital. The note was due on May 18, 2012 and carried interest at 8 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 58 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 $33,320, respectively. The note was fully converted at August 31, 2012.

-


6,680

-31-





NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


NOTE 7.  NOTES PAYABLE (continued)


Description

August 31, 2012


August 31, 2011





Asher Enterprises, Inc. *




On April 25, 2012, the Company issued its promissory note in the amount of $37,500 to an unrelated third party for additional working capital. The note is due on January 30, 2013 and carried 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 outstanding as of August 31, 2012.

37,500


            -

Asher Enterprises, Inc. *




On March 12, 2012, the Company issued its promissory note in the amount of $35,000 to an unrelated third party for additional working capital. The note is due on December 14, 2012 and carried 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 50 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 outstanding as of August 31, 2012.

35,000


-

Asher Enterprises, Inc. *




On January 20, 2012, the Company issued its promissory note in the amount of $40,000 to an unrelated third party for additional working capital. The note was due on October 23, 2012 and carried interest at 8 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 50 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 $8,288 and $0, respectively. $25,000 was converted to common stock at August 31, 2012.

6,712


-

Crystal Falls Investments, LLC.




On July 26, 2011, the Company issued its promissory note in the amount of $100,000 to an unrelated third party for additional working capital. The note was due on January 31, 2012 and carried interest at 9 percent per annum, payable at maturity. The note was convertible into common stock of the Company immediately after issuance, at the election of the Holder, at $0.29. The carrying amount of the debt discount was $0 and $59,185, respectively. $60,000 was converted to common stock at August 31, 2012 and the remaining $40,000 was sold to Asher Enterprises, Inc. and subsequently converted.

-


40,815

-32-







NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


NOTE 7.  NOTES PAYABLE (continued)

Description

August 31, 2012


August 31, 2011





Common Stock LLC *




On January 20, 2012, the Company issued its promissory note in the amount of $20,000 to an unrelated third party for additional working capital. The note was due on October 31, 2012 and carried interest at 6 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 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 $8,493 and $0, respectively. $6,000 was converted to common stock at August 31, 2012.

                5,507


            -

Common Stock LLC *




On March 19, 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 December 19, 2012 and carried 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 Note was fully outstanding at August 31, 2012.

20,000


-

Common Stock LLC *




On May 8, 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 carried interest at 6 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 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 Note was fully outstanding at August 31, 2012.

20,000


-

Panache Group *




On January 10, 2012, the Company issued its promissory note in the amount of $50,000 to an unrelated third party for additional working capital. The note is due on January 10, 2013 and carried interest at 10 percent per annum, payable at maturity. The note is immediately convertible into common stock of the Company, at the election of the Holder, at 75 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 $3,580 and $0, respectively. $40,320 was converted to common stock at August 31, 2012.

6,100


-


-33-






NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


NOTE 7.  NOTES PAYABLE (continued)

Description

August 31, 2012


August 31, 2011





JMJ Financial *




On July 30, 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 July 30, 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 at a discount of $6,000, of which $5,500 unamortized portion remains at August 31, 2012. There were no conversions at August 31, 2012.

50,500

 

-

Total notes payable current

181,319

 

64,578


NOTE 8.  DERIVATIVE LIABILITIES


The Company has various convertible instruments outstanding more fully described in Note 7. 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 year ended August 31, 2012, the Company recognized new derivative liabilities of $1,072,447 as a result of convertible debt issuances having embedded conversion options. The fair value of these derivative liabilities exceeded the principal balance of the related notes payable by $169,878, and was recorded as a loss on derivatives for the year ended August 31, 2012.


As a result of conversion of notes payable described in Note 7, the Company reclassified $1,172,084 of derivative liabilities to equity and the change in fair value of derivatives was $130,452.


As of August 31, 2012, the fair value of the Companys derivative liabilities was $30,815 and $130,452 was recognized as a gain on derivatives due to change in fair value of the liabilities during the year ended August 31, 2012.


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, 2011

  

$

ASC 815-15 additions

  

 

 1,072,447

Change in fair value

  

 

130,452

ASC 815-15 deletions

  

 

(1,172,084)

Balance at August 31, 2012

  

30,815

-34-





NOVATION MEDICAL HOLDINGS, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

August 31, 2012


NOTE 8.  DERIVATIVE LIABILITIES (continued)


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

 

  

Included in Other Income (Expense) on Consolidated Statement of Operations

Gain/(Loss) on Derivative Liability:

  

 

 

Change in fair value of derivatives

  

$

130,452

Derivative expense

  

 

 (169,878)

Balance at August 31, 2012

  

 (39,426)

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

  

 

0.24% - 0.30% 

Expected volatility

  

 

100% - 300%

Expected life

  

 

 9 months 12 months


NOTE 9.  SUBSEQUENT EVENTS


Common Stock Transactions:


In September, 2012, the Company issued a total of 737,778 common shares to Asher. on one conversion totaling $16,700 in principal amount of loans, at a price equal to $0.0225 per share.


In October, 2012, the Company issued a total of 2,284,848 common shares to Asher. on three conversions totaling $35,000 in principal amount of loans, at a price equal to $0.0165, $0.015, and $0.0135 per share.


As a result of the issue of these shares, the Company had a total of 33,287,857 common shares issued and outstanding as of November 7, 2012.


Effective November 7, 2012, the Company completed a reverse split of its common stock, resulting in the number of shares of common stock being reduced on the basis of one new common shares for each fifteen old common shares outstanding.   Accordingly, as of November 7, 2012, there were 33,287,857 common shares issued and outstanding. The reverse stock split has been given retroactive recognition in this Form 10-K.  All shares and per share information has been retroactively adjusted to reflect the stock split.


In November, 2012, the Company issued a total of 60,060 common shares to Asher on one conversion totaling $10,000 in principal amount of loans, at a price equal to $0.1665 per share.


Acquisitions:


On November 21, 2012, the Company acquired Burgoyne Internet Services, LLC, which became a wholly-owned subsidiary of the Company.  The terms of the acquisition and pro forma financial statements for Burgoyne are included in the Current report on Form 8-K filed with the SEC on November 26, 2012.


On November 27, 2012, the Company agreed to acquire La Casita de los Niños, LLC a California company doing business as Immersion House, and providing early language training in a full immersion program.  Details of the acquisition were reported in a Current Report on Form 8-K filed with the SEC on November 29, 2012.                                                                                   

-35-

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.


ITEM 9A,

CONTROLS AND PROCEDURES

 

The Companys Chief Executive Officer and consulting principal accounting officer have evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending August 31, 2012 covered by this Annual Report on Form 10-K. Based upon such evaluation, the Chief Executive Officer and consulting principal accounting officer have concluded that, as of the end of such period, the Companys disclosure controls and procedures were not effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act.


Managements Annual Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

 

The Companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

 

Management, under the supervision of the Companys Chief Executive Officer and consulting principal accounting officer, conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Companys internal control over financial reporting was not effective as of August 31, 2012 under the criteria set forth in the Internal ControlIntegrated Framework.


A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that material weaknesses exist due to the lack of an independent Audit Committee Chair, as well as a lack of segregation of duties, inadequate staffing with our accounting department, lack of consistent accounting policies and procedures, inadequate monitoring of controls, and lack of staff with SEC reporting experience all resulting from the Companys limited resources.

 

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only managements report in this Annual Report on Form 10-K.

-36-





Changes in Internal Control Over Financial Reporting

 

No change in the Companys internal control over financial reporting occurred during the fourth quarter of the year ended August 31, 2012, that materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

 


ITEM 9B

OTHER INFORMATION

 

None


PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 Set forth below is certain information concerning the directors and executive officers of the Company as of August 31, 2012:


Name:


Age:


Position:

Michael Gelmon1


46


President, Chief Executive Officer and Chairman

Michael Choo2


46


Director

Michael Holder3


49


Former Director, President and CEO of Organ Transport Systems, Inc.

Carole Pinell4


39


Director

Hyman White5


68


Director, Secretary, Treasurer


1  Mr. Gelmon was named a director on May 31, 2011 and, Chairman and CEO on June 24, 2011.

2  Mr. Choo was named a director on May 31, 2011.

3  Mr. Holder served as a director from February 18, 2011 to November 22, 2011 when he resigned for personal

   reasons.  He also served as Chairman and CEO from February 18, 2011 to June 24, 2011.

4  Ms Pinell was named as a director on May 31, 2011 and became President and Chief Operating Officer in May, 2012

5  Mr. White was named a director, Secretary and Treasurer on February 18, 2011, as a result of the acquisition of

  Organ Transport Systems, Inc.  He also served as a director and Vice President of Organ Transport Systems, Inc. Mr. White resigned as an officer and director n November, 2012.


Biographies


MICHAEL GELMON, 46, an experienced CEO and Director of several publicly traded companies, has been involved in consulting and turn- rounds or work outs for various public and private companies. As part of the work outs, he has been actively involved with management in cutting costs, increasing sales as well as compliance issues, including consulting and assisting investment groups in structuring and restructuring debt in several private and public companies; advising various investor and investment groups as lawyers conducting due diligence on target companies; and consulting and advising on management restructuring.


He is also founder and a partner of Gelmon Brothers Real Estate Consultants which has developed and consulted on commercial real estate developments in excess of $100 million; was a founder of Proteus Currency Fund, a Cayman Island based Hedge Fund involved in the Forex marketplace utilizing Dynex Corporation trading in Monaco and Jacobsen Asset Management in London; and, as a founding-shareholder, Director, as well as Head of Acquisitions and Real Estate for Domino's Pizza of Canada Ltd., the Domino's Pizza Master Franchisor in Canada, he was an integral part of the team that was responsible for turning around the Dominos operations in Canada in the 1990s, growing the Domino's chain to 200 stores located in every region of Canada with system-wide sales of approximately CAD $80,000,000 per annum.


Mr. Gelmon received his Law Degree from the University of London, Kings College.


-37-





MICHAEL O. CHOO, 46, President & Chief Executive Officer of Bellflower Medical Center, Los Angeles, CA. Previously served as Principal, Managing Partner & President & Chief Executive Officer of Integra Healthcare, Inc.,

Principal, Managing Partner, & Chairman of The Board of Directors of Doctors Hospital of Shreveport, and Principal, Managing Partner & Senior Vice President of Operations for Ethicus Healthcare Management, LLC. Mr. Choo was also previously the Senior Vice President of Promise Healthcare, Inc. and Chief Executive Officer of Promise Specialty Hospital of Shreveport, a 146 bed JCAHO long-term acute care, acute rehabilitation, gerontologic and adult psych turnaround hospital located in Shreveport, Louisiana. As second in command of the Company, he had corporate oversight of the Companys 14 other facilities from the standpoint of corporate recruitment, new business development, and operational turnaround. Before his departure from Promise Healthcare, Inc., he brought together over 120+ collective years of corporate operational experience, leadership, structure, team concept and organization to the Promise Healthcare Executive team. Mr. Choo has over 29 years of experience in healthcare with expertise in Operational Executive Management, Hospital Turnarounds, Hospital Acquisitions, and Ground Floor Start-ups. He has vast experience in the clinical setting as well as the operational and organizational development & structure of hospitals and healthcare organizations to comply with state & federal regulatory agency guidelines. Mr. Choo is finishing his Masters degree in Business Administration from California Coast University, and served in executive positions with various hospitals and companies managing hospitals. He held a previous position as the Chief Executive Officer of HealthSouth in Reno a 63 Acute Rehabilitation Freestanding Hospital in Reno, NV acting as Team Leader for the HealthSouth Surgical center, and HealthSouth Sports Clinic in Carson City, NV. He also has been the Vice President of NPSI with responsibility for 4 major hospitals in the Los Angeles and San Diego area, and Regional Chief Operations Officer of ARMS with responsibilities for 5 hospital turnarounds and 2 ground floor start-ups. Mr. Choo brings experience from the acute care industry, LTAC industry, Behavioral Health Industry, and Acute Rehabilitation Industry to the organization.


CAROLINE PINELL, 39, is an attorney and medical doctor and currently serves as a high level healthcare operations consultant to various clients, including Hospitals, Independent Physician Associations, Physician Groups and Networks, Medical Practices, Attorneys, and various Medicare and Medicaid Health Plans. She was formerly President and Chief Executive Officer of ATRIO Health Plans, a Medicare Advantage (MA-PD) Plan located in Oregon. It services three counties including Douglas, Coos, and Klamath Counties with expansion plans in place for Washington County. The Plan covers approximately 4500 lives with significant growth expected over the next three years. The Provider Network included 99% of all providers in each of the counties it currently services. From 2006 to 2008, she served as Executive Vice President, Director of Physician Relations, Business Development and Managed Care for HCA-Bayshore Medical Center in Pasadena, Texas, and previously has served in management capacities with several large physician associations and provider networks.


Dr. Pinell studied medicine at the University of Texas Health Science Center and holds a JD degree from South Texas College of Law in Houston, Texas.


COMMITTEES

 

The Company has established committees of the Board of Directors, and adopted appropriate committee charters.  The current Committees of the Board, and their members, are:


Audit Committee:


 Michael Choo, Chair

Caroline Pinell


Compensation Committee:

Michael Choo, Chair

Caroline Pinell


Governing and Nominating Committee:

Caroline Pinell (Chair)

Michael Choo

-38-





CODE OF ETHICS

 

We have adopted a code of ethics meeting the requirements of Section 406 of the Sarbanes-Oxley Act of 2002. We believe our code of ethics is reasonably designed to deter wrong doing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of violations; and provide accountability for adherence to the provisions of the code of ethic.


ITEM 11.

EXECUTIVE COMPENSATION

 

The following table sets forth information concerning the aggregate compensation paid or to be paid by the Company to its executive officers.

 

SUMMARY COMPENSATION TABLE  

Name and Principal Position

Year

Salary

Bonus

Stock Awards

Option Awards

Non-equity Incentive Plan Compensation

Nonqualified Deferred Compensation

All Other Compensation

Total



($)

($)

($)

($)

($)

($)

($)

($)

Michael Gelmon1, Chairman of the Board

2012

120,000

0

12,000

0

0

0

0

132,000


2011

60,000

0

420,000

0

0

0

0

480,000

Jancy Gregorio2

 Former Chairman of the Board

2011

0

0

0

0

0

0

0

0


2010

0

0

0

0

0

0

0

0

Reynan Ballan3

 Former CFO, Secretary and Treasurer

2011

0

0

0

0

0

0

0

0


2010

0

0

0

0

0

0

0

0


1  Mr. Gelmon receives a base salary of $10,000 per month as Chairman and CEO, commencing July 1, 2011.  He was also awarded a grant of 333,333 shares of common stock, vesting annually over 3 years at 111,111 shares per year as of July 1 of each year.  The July 1, 2012 grant of 111,111 shares was valued at $12,000, based on the closing price of $0.0072 for the common stock on July 1, 2012

2  Mr. Gregorio resigned effective February 18, 2011.

3  Mr. Ballan resigned effective February 18, 2011.



In addition to the amounts paid or accrued for officers and directors, as noted above, the Company also pays a consulting fee of $10,000 per month to CFOs to Go, Inc. under a consulting agreement, for legal and financial services, and a consulting fee of $10,000 per month for financial, accounting and other services, including the provision of Mr. John Burke as principal accounting officer of the Company and Mr. Ezequiel Rodriguez as corporate Secretary.  Mr. Burke is not compensated directly by the Company for his services and is not an elected officer of the Company. Mr. Rodriguez is not compensated directly by the Company, although he serves as corporate Secretary.


DIRECTOR COMPENSATION

 

Directors receive no compensation for serving on the Board.

 



-39-



ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information as of August 31, 2012, with respect to the beneficial ownership of our common stock by each beneficial owner of more than 5% of the outstanding shares of common stock of the Company, each director, each executive officer named in the Summary Compensation Table and all executive officers and directors of the Company as a group, and sets forth the number of shares of common stock owned by each such person and group. Unless otherwise indicated, the owners have sole voting and investment power with respect to their respective shares.

 

Name of Beneficial Owner

 

Number of

Shares

Beneficially

Owned

  

Percentage

of

Outstanding

Common

Stock

Owned1

 

Michael Gelmon, CEO

111,111

  

.4%

 






Michael Choo, Director

--


--


Carole Pinell, Director

--


--


Michael Holder, Former CEO, CEO of Organ Transport Systems

--


--


Hyman White, Former Director

--


--


Ezequiel Rodriguez, Secretary

--


--


John Burke, Principal Accountant

--




All Directors and executive officers as a group (5 person)(2)

            111,111

  

-







Élan Health Services, Inc.(3)

7,062,885


23

%

Lin-Han Century Corp.(4)

816,233


3%



(1)

Based on a total of 30,094,500 common shares outstanding at August 31, 2012.

(2)

Mr. Gelmon was awarded a total of 333,333 shares of common stock at the time he was retained as Chairman and CEO of the Company, with the shares vesting over 3 years on a proportionate basis.  As of August 31, 2012, two-thirds of the shares had vested and the balance has been issued but is held in escrow for release on July 1, 2013.   On the original issue, Mr. Gelmon requested that a portion of the shares be issued to other named parties, as to which he disclaims any beneficial interest.  

(3)

Élan Health Services currently holds 7,062,885 common shares as of November 7, 2012.

(4)

Lin-Han Century Corp. is the majority shareholder of Élan Health Services, Inc.



ITEM 13.


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

None

 

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Audit Fees

 

During the years ended, August 31, 2012 and 2011, we were billed by our then independent registered public accounting firm, Moss, Krusick and Associates, LLC approximately $48,500 and $51,300 for audit and review fees associated with our 10-K and 10-Q.



-40-





Tax Fees

 

During the years ended, August 31, 2012 and 2011, our independent registered public accounting firm, Moss, Krusick and Associates, LLC, did not perform any tax services for the Company.

 

All Other Fees

 

During the years ended, August 31, 2012 and 2011, our independent registered public accounting firm, Moss, Krusick and Associates, LLC, did not perform any other work.

 

Board of Directors Pre-Approval Process, Policies and Procedures

 

Our principal auditors have performed their audit procedures in accordance with pre-approved policies and procedures established by our Board of Directors. Our principal auditors have informed our Board of Directors of the scope and nature of each service provided. With respect to the provisions of services other than audit, review, or attest services, our principal accountants brought such services to the attention of our Board of Directors prior to commencing such services.


ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

 

 

Exhibit

Number

  

Exhibit

  3.1 3(i)

  

Certificate of Incorporation, as amended (1)

  3.2 3(i)

  

Certificate of Amendment (1)

  3.3 3(ii)

  

Bylaws (1)

 3(i)

 19

 21

   

Articles of Amendment dated October 25, 2012.(1)

Schedule 14A Proxy Statement dated September 17, 20121

List of Subsidiaries







31.1 31

  

Rule 13a-14(a) Certifications of Chief Executive Officer and Principal Accounting Officer
















32.1 32

  

Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer and Principal Accounting Officer

  (1)

Previously filed


SIGNATURES  


 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

ALLEZOE MEDICAL HOLDINGS, INC.

 

 

 

Dated December 14, 2012

 

By:

 

/s/ Michael Gelmon

 

 

 

 

Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

 

 

 

Dated: December 14, 2012

 

By:

 

/s/ John Burke

 

 

 

 

Principal Accountant
















 

__/s/ Michael Gelmon________________________

December 14, 2012

Michael Gelmon, Director


__/s/ Michael Choo  ________________________

December 14, 2012

Michael Choo, Director


__/s/ Carole Pinell ________________________

December 14, 2012

Carole Pinell, Director

-41-