UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

(Mark One)

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

       OF 1934

For the Quarterly Period Ended November 30, 2012

or

[ ] 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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

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

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

As of January 22, 2013, there were 33,753,492 shares of Common Stock ($0.001 par value) outstanding.

TABLE OF CONTENTS

PART 1 – FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated balance sheets of Novation Holdings, Inc. and subsidiary (a development stage company) (the "Company”) at November 30, 2012 (with comparative figures as at August 31, 2012); and the  consolidated statements of operations for the three months ended November 30, 2012 and November 30, 2011, and for the period from September 24, 1998 (date of inception) to November 30, 2012; the consolidated statement of stockholders’ equity (deficit) for the period from September 24, 1998 (date of inception) to November 30, 2012; and the consolidated statements of cash flows for the three months ended November 30, 2012 and November 30, 2011 and for the period from September 24, 1998 (date of inception) to November 30, 2012 have been prepared by the Company’s management in conformity with accounting principles generally accepted in the United States of America.

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

Consolidated operating results for the three months ended November 30, 2012 are not necessarily indicative of the results that can be expected for the year ending August 31, 2013.

1

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

2

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

3

4

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

5

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

6

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 1.           ORGANIZATION

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

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

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

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

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

Nature of Operations

The Company formed a wholly-owned subsidiary, SureScreen Medical, Inc., a Florida corporation, through which it entered into a licensing agreement with AVM Licensing 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.  A European patent has been granted for the technology and a patent application to the US Patent and Trademark Office is still pending.  If and when all patent applications have been awarded, the Company then will contract for the development of a working prototype for the device and submit the required approval applications to the FDA and similar agencies in Europe so the marketing and sale of the device can be initiated.  It is estimated that the FDA review and approval process could commence as early as mid-2014.

In addition, effective December 1, 2012, we acquired the operating assets of an Internet Service Provider (ISP) based in Utah and plan to continue the existing, profitable operations as well as to acquire similar ISPs located across the US.  To date, the Company has identified 5 possible acquisition targets.  See, Note 9, Subsequent Events.

7

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation of Interim Period Financial Statements

The accompanying unaudited consolidated financial statements of the Company at November 30, 2012 and November 30, 2011 have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles (‘GAAP’) for interim financial statements, instructions to Form 10-Q, and Regulation S-X.

In management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make the Company’s financial statements not misleading have been included. The results of operations for the periods ended November 30, 2012 and November 30, 2011 presented are not necessarily indicative of the results to be expected for the full year.

Development Stage

The Company's financial statements are presented as those of a development stage enterprise through August 31, 2012 and through the date of this interim report. 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 quarter beginning December 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.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A significant estimate as of November 30, 2012 and August 31, 2012 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 Equivalents

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.  The Company had no cash equivalents at November 30, 2012 and August 31, 2012, respectively. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.  There were no balances that exceeded the federally insured limit at November 30, 2012 and August 31, 2012, respectively.

8

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Earnings per Share

In accordance with Financial Accounting Standards Board “FASB” Accounting Standards Codification “ASC” Topic 260, “Earnings per Share,”  basic earnings (loss) per share (“EPS”) is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. The computation of basic and diluted loss per share for the period from September 24, 1998 (inception) to November 30, 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. At the Annual Meeting of Shareholders held on October 24, 2012, the shareholders approved the adoption of the Novation Holdings, Inc. 2012 Stock Incentive Plan, and the setting aside of 4,500,000 shares of post-reverse split common stock for grants under the Plan.  There have been no grants of any stock or other equity under the Plan, or otherwise, as of November 30, 2012.

On July 1, 2011, the Company issued 333,333 post-split shares of common stock valued at $2,100,000 to the Company’s 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 111,111 post-split shares at August 31, 2012 was one-third of the original issuance valued as of the original issue date at $700,000, of which Mr. Gelmon holds 37,037 shares to be received, with a current market value of less than $600.  

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.

9

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Income Taxes

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

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

Concentrations of Credit Risk

The Company maintains its cash in a bank deposit account in a bank which participates in the Federal Deposit Insurance Corporation (FDIC) Program. As of November 30, 2012 and August 31, 2012, the Company had no balances in excess of federally insured limits.

Fair Value of Financial Instruments

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

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

Fair Value of Measurements

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

10

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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

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

Derivatives

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

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

Going Concern

As reflected in the accompanying consolidated financial statements, the Company has not yet emerged from the development stage, has a net loss of $273,874 and net cash used in operations of $112,888 for the three months ended November 30, 2012; and negative working capital of $404,764 and an accumulated deficit of $9,540,317 at November 30, 2012.

The accompanying consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  The Company is 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 Company’s ability to continue as a going concern.  The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainty.

11

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 2.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

Recent Accounting Pronouncements

In September 2011, the FASB issued an amendment to Topic 350, Intangibles—Goodwill and Other, which simplifies how entities test goodwill for impairment. Previous guidance under Topic 350 required an entity to test goodwill for impairment using a two-step process on at least an annual basis. First, the fair value of a reporting unit was calculated and compared to its carrying amount, including goodwill. Second, if the fair value of a reporting unit was less than its carrying amount, the amount of impairment loss, if any, was required to be measured. Under the amendments in this update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the entity to determine that it is more likely than not that its fair value is less than its carrying amount. If after assessing the totality of events or circumstances, an entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is unnecessary. If the entity concludes otherwise, then it is required to test goodwill for impairment under the two-step process as described under paragraphs 350-20-35-4 and 350-20-35-9 under Topic 350. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and early adoption is permitted. The Company 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 Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company’s financials properly reflect the change.

NOTE 3.  RESTATEMENT OF THE FINANCIAL STATEMENTS

The Company restated its previously issued financial statements for the three months ended November 30, 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 Company’s previously reported financial statements as of and for the three months ended November 30, 2011.   This restatement was reflected in an amended Form 10-Q/A filed with the SEC in July 2012 for the three months ended November 30, 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 November 30, 2012, and August 31, 2012:

12

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 4. INCOME TAXES (continued)

The valuation allowance changed by approximately $93,117 during the three months ended November 30, 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 November 30, 2012.

The Company has adopted the provisions of FASB ASC 740-10-25. As a result of its implementation, the Company performed a comprehensive review of its uncertain tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10-25. In this regard, an uncertain tax position represents the Company’s expected treatment of a tax position taken in a prepared and filed tax return, or expected to be taken in a tax return, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company does not expect any reasonably possible material changes to the estimated amount of liability associated with uncertain tax positions through November 30, 2012. The Company’s 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.  Ezequiel Rodriguez, who serves as Corporate Secretary and Assistant Corporate Counsel, and John Burke, who serves as the Company’s principal accounting officer, are both employed by Matriarch Management, Inc.

The Company is authorized to issue 500,000,000 shares of common stock, par value $0.001 per share and 10 million shares of preferred stock, par value $0.001.  

.

During the quarter ended November 30, 2012, the Company issued Company stock as follows:

In September, 2012 we issued a total of 737,780 common shares to Asher Enterprises, Inc. on a conversion totaling $16,670 in principal amounts of loans and accrued interest, at a price of $0.0225 per share, representing 50 percent of the low price for the shares during a three day trading period.

13

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

In October, 2012 we issued a total of 2,284,848 common shares to Asher Enterprises, Inc. on three conversions totaling $36,400 in principal amounts of loans and accrued interest, at prices of $0.0165, $0.015, and $0.0135 per share respectively, representing 50 percent of the low price for the shares during a three day trading period.

As a result of these transactions, there were 33,117,128 common shares outstanding at November 30, 2012.

In December, 2012 we issued a total of 636,364 common shares to Common Stock, LLC. on a conversion totaling $7,000 in principal amounts of loans, at a price of $0.011, per share, representing 60 percent of the low price for the shares during a three day trading period.

In December, 2012, we issued 1,000,000 shares of Series A Convertible Preferred Stock in connection with the acquisition of Immersion House.

As a result of the issue of these shares, we now have a total of 33,753,492 common shares and 1,000,000 preferred shares issued and outstanding as of January 18, 2013.

NOTE 7.  NOTES PAYABLE

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

The following is a summary of notes payable at November 30, 2012 and August 31, 2012:

14

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 7.  NOTES PAYABLE (continued)

15

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 7.  NOTES PAYABLE (continued)

16

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 7.  NOTES PAYABLE (continued)

17

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 7.  NOTES PAYABLE (continued)

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 three months ended November 30, 2012, the Company recognized new derivative liabilities of $220,344 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 $57,844, and was recorded as a loss on derivatives for the three months ended November 30, 2012.

As a result of conversion of notes payable described in Note 7, the Company reclassified $68,530 of derivative liabilities to equity and the change in fair value of derivatives was $9,432.

As of November 30, 2012, the fair value of the Company’s derivative liabilities was $173,197 and $9,432 was recognized as a gain on derivatives due to change in fair value of the liabilities during the three months ended November 30, 2012.

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

18

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 8.  DERIVATIVE LIABILITIES (continued)

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

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

NOTE 9.  SUBSEQUENT EVENTS

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

19

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 9.  SUBSEQUENT EVENTS  (continued)

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

Burgoyne provides Internet access, emails, and related services to customers throughout the United States, primarily in areas where high speed cable and other high speed Internet access services are not readily available.  Its web site is at www.burgoyne.com.  As a result of this initial ISP acquisition, Novation plans to undertake acquisitions of other regional ISP companies in a national roll-up strategy.  We have already identified 5 other regional ISP companies for sale and believe that, with the added infrastructure provided by Novation, the existing operating success can grow and add to the bottom line for Novation. During the two prior calendar years, ending December 31, 2011 and 2010, Burgoyne Internet Services, LLC reported the following revenues and expenses:

For its current year through October 31, 2012 (10 months), old Burgoyne reported revenues of $125,690, expenses of $76,847 and net income of $48,843.  Novation will include revenues and expenses related to new Burgoyne in its consolidated financial statements commencing December 1, 2012, in its current fiscal year ending August 31, 2013.

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

The acquisition agreement also provided that the parties would undertake a reconciliation of income and expenses as of December 31, 2012 and that ISP Holdings would then transfer the net funds due for the operations of Burgoyne through December 31, 2012 to Burgoyne Internet Services, Inc.  Thereafter, all income and expenses related to the operations of the ISP business will be recorded directly by Burgoyne Internet Services, Inc. and included in the consolidated results of operations with the Company.

The Company does not consider the transaction as resulting in the acquisition of the business of old Burgoyne, as the old Burgoyne business is continuing under ISP Holdings, LLC, which will collect all outstanding accounts receivable, file tax returns for old Burgoyne under its federal and state tax ID numbers on the cash basis of accounting, and will manage the business as it existed at closing.  Burgoyne Internet Services, Inc. will commence operations as of December 1, 2012 as a separate entity from old Burgoyne, has its own separate federal and state tax ID numbers, different staff, reports on the accrual basis and will consolidated with the Company for all financial and tax reporting matters.

20

NOVATION HOLDINGS, INC.

(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

November 30, 2012

 (UNAUDITED)

NOTE 9.  SUBSEQUENT EVENTS (continued)

On December 6, 2012, the Company also completed the acquisition of Casita de los Ninos, LLC, a California limited liability company doing business as Immersion House^™ (www.immersionhouse.com) which is devoted to helping children learn new languages and gain cultural experiences in those targeted languages. Casita de los Niños, the flagship company for Immersion House, was launched in 2009 in Northern California (Bay Area) and focuses on teaching children Spanish through learning centers and various after school enrichment programs. Immersion House learning centers, products, publications, media, partnerships, resources, and instructors are all committed to one goal: to provide the best “immersive” experience so that students and their families can learn to: Think Global, Act Global, and Be Global.  Immersion House differs from other learning language programs in the way that it “immerses” students in the target language they are learning. When students enter its learning centers they are transported into the “world” of that language. They experience the sights, sounds, and tastes of the target language they are learning. When students eat, bake, converse, play, and interact with native speakers, they not only learn the language, they experience its people, culture, and traditions. Paul Bliss, President, and Christy Bliss, the founders of Immersion House^™, remain as management.  The plan is to expand both the language experiences offered and the geographic locations of Immersion House^™ learning.

The consideration for the acquisition was the issuance of one million shares of convertible preferred stock having a stated value of $100,000, carrying voting power equal to 51 percent of the total voting power of all classes of stock, a dividend preference equal to $0.01 per share, and a conversion option into shares of common stock valued at the time of conversion at 1 million dollars, based on the 5 day trailing average closing price of the stock.  If not already converted, the preferred stock converts automatically five years after issue into shares of common stock valued at the time of conversion at 2 million dollars, based on the 5 day trailing average closing price of the stock.

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

FORWARD-LOOKING INFORMATION

To the extent that the information presented in this Quarterly Report on Form 10-Q for the quarter ended November 30, 2012 discusses financial projections, information or expectations about our products, services, or markets, or otherwise makes statements about future events or statements regarding the intent, belief or current expectations of Allezoe Medical Holdings, Inc. and its subsidiary (collectively the ‘Company’), its directors or its officers with respect to, among other things, future events and financial trends affecting the Company, such statements are forward-looking. We are making these forward-looking statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. Forward-looking statements are typically identified by the words ‘believes,’ ‘expects,’ ’anticipates,’ and similar expressions. In addition, any statements that refer to expectations or other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and that matters referred to in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise these forward-looking statements because of new information, future events or otherwise, except as required by law.

OVERVIEW

We were incorporated under the laws of the State of Delaware on September 24, 1998 with authorized common stock of 25,000,000 shares at $0.001 par value. On March 9, 2007, at the Annual General Meeting of Stockholders a Resolution was approved increasing the authorized share capital to 500,000,000 common shares with a par value of $0.001 per share.  In February, 2011, our Articles of Incorporation were amended to change the corporate name to Allezoe Medical Holdings, Inc. Effective October 25, 2012, our corporate name was changed to Novation Holdings, Inc., our place of incorporation was transferred from Delaware to Florida, and we completed a reverse split of our common shares in the ratio of 1 new shares for each 15 common shares previously issued.  The amendment to our Articles also provided that we are authorized to issue up to 500 million common shares, par value $0.001, and 10 million preferred shares, par value $0.001.  The rights and preferences of any preferred shares we issue may be set by resolution of our Board of Directors.  At the date of this report, no preferred shares have been issued. The reverse stock split was given retroactive recognition in our Form 10-K filed on December 14, 2012.  All shares and per share information were retroactively adjusted to reflect the stock split.

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, education, 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.

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The 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 Novation

We are in the business of medical technology development and marketing, childhood language development, ISP management and other new businesses, 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 other market segments where the development time and cost are less and the production of operating revenues can be accelerated.

SureScreen

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.

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A European patent has been granted for the technology and a patent application to the US Patent and Trademark Office is still pending.  If and when all patent applications have been awarded, the Company then will contract for the development of a working prototype for the device and submit the required approval applications to the FDA and similar agencies in Europe so the marketing and sale of the device can be initiated.  It is estimated that the FDA review and approval process could commence as early as mid-2014.

Burgoyne ISP

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

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

Burgoyne provides Internet access, emails, and related services to customers throughout the United States, primarily in areas where high speed cable and other high speed Internet access services are not readily available.  Its web site is at www.burgoyne.com.  As a result of this initial ISP acquisition, Novation plans to undertake acquisitions of other regional ISP companies in a national roll-up strategy.  We have already identified 5 other regional ISP companies for sale and believe that, with the added infrastructure provided by Novation, the existing operating success can grow and add to the bottom line for Novation.

During the two prior calendar years, ending December 31, 2011 and 2010, Burgoyne Internet Services, LLC reported the following revenues and expenses:

 For its current year through October 31, 2012 (10 months), Burgoyne reported revenues of $125,690, expenses of $76,847 and net income of $48,843.  Novation will include revenues and expenses related to Burgoyne in its consolidated financial statements commencing December 1, 2012, in its current fiscal year ending August 31, 2013.

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

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The acquisition agreement also provided that the parties would undertake a reconciliation of income and expenses as of December 31, 2012 and that ISP Holdings would then transfer the net funds due for the operations of Burgoyne through December 31, 2012 to Burgoyne Internet Services, Inc.  Thereafter, all income and expenses related to the operations of the ISP business will be recorded directly by Burgoyne Internet Services, Inc. and included in the consolidated results of operations with the Company.

On December 6, 2012, the Company also completed the acquisition of Casita de los Ninos, LLC, a California limited liability company doing business as Immersion House^™ (www.immersionhouse.com) which is devoted to helping children learn new languages and gain cultural experiences in those targeted languages. Casita de los Niños, the flagship company for Immersion House, was launched in 2009 in Northern California (Bay Area) and focuses on teaching children Spanish through learning centers and various after school enrichment programs. Immersion House learning centers, products, publications, media, partnerships, resources, and instructors are all committed to one goal: to provide the best “immersive” experience so that students and their families can learn to: Think Global, Act Global, and Be Global.  Immersion House differs from other learning language programs in the way that it “immerses” students in the target language they are learning. When students enter its learning centers they are transported into the “world” of that language. They experience the sights, sounds, and tastes of the target language they are learning. When students eat, bake, converse, play, and interact with native speakers, they not only learn the language, they experience its people, culture, and traditions. Paul Bliss, President, and Christy Bliss, the founders of Immersion House^™, remain as management.  The plan is to expand both the language experiences offered and the geographic locations of Immersion House^™ learning.

The consideration for the acquisition was the issuance of one million shares of convertible preferred stock having a stated value of $100,000, carrying voting power equal to 51 percent of the total voting power of all classes of stock, a dividend preference equal to $0.01 per share, and a conversion option into shares of common stock valued at the time of conversion at 1 million dollars, based on the 5 day trailing average closing price of the stock.  If not already converted, the preferred stock converts automatically five years after issue into shares of common stock valued at the time of conversion at 2 million dollars, based on the 5 day trailing average closing price of the stock.

Liquidity and Capital Resources

We have historically met our capital requirements through either private placement of equity or private borrowings. Our cash balance decreased $1,388 from $1,245 at August 31, 2012 to a negative $143 at November 30, 2012.

We received loan proceeds of $40,000 in September of 2012 from Asher Enterprises, LLC, an unrelated third party, due June 7, 2013 at 8 percent interest. The note is convertible into common stock at a price equal to 51 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. We accrued interest of $792 on this note as of November 30, 2012.

We received loan proceeds of $30,000 in October of 2012 from Asher Enterprises, LLC, an unrelated third party, due July 5, 2013 at 8 percent interest. The note is convertible into common stock at a price equal to 51 percent of the three lowest trading prices for our common stock for the ten trading days prior to the notice of conversion. We accrued interest of $378 on this note as of November 30, 2012.

We received loan proceeds of $50,000 in October of 2012 from JMJ Financial, an unrelated third party, due October 3, 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. We accrued interest of $712 on this note as of November 30, 2012.

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

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Recurring Fair Value Measurements

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

Off-Balance Sheet Arrangements

None

Current Economic Environment

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

Contractual obligations

We have entered into a consulting agreement dated July 1, 2011 with Michael Gelmon, our Chairman and Chief Executive Officer, under which Mr. Gelmon provides services as an officer and director for a monthly fee of $10,000. The consulting agreement is for an initial term of three years and extends annually unless terminated by either party at the end of the term, as extended. We also entered into a consulting agreement with CFOs to GO, Inc. to provide legal, financial, accounting and similar services, including assistance in preparing, filing and converting to EDGAR and XBRL filings for a monthly fee of $10,000, and a similar agreement with Matriarch Management, Inc. for the provision of administrative, IR, PR and related services, also for a fee of $10,000 monthly. Ezequiel Rodriguez, who serves as our Secretary and Assistant General Counsel, is provided at no additional fee or charge under these consulting agreements. John Burke, who serves as consulting principal financial officer, and Robert Hipple, who serves as consulting corporate general counsel, are also provided under these consulting agreements, but neither Mr. Burke nor Mr. Hipple are officers, directors, or employees of the Company.

A summary of notes payable by the Company at November 30, 2012 and August 31, 2012 is contained in Note 7 to the Financial Statements included in this Quarterly Report and which summary is incorporated here by reference.

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

Results of Operations

For the three months ended November 30, 2012 and November 30, 2011, the Company had no operating revenues.  Since inception, the Company has yet to earn operating revenues and has incurred cumulative net losses of $9,540,317.  For the three months ended November 30, 2012, the Company had a net loss of $273,874. For the three months ended November 30, 2011, the Company had a net loss of $1,248,931. Our activities have been attributed primarily to start up and business development.

For the quarters ended November 30, 2012 and November 30, 2011, we incurred operating expenses of $119,402 and $1,003,938, respectively.

Market Information

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There are no common shares subject to outstanding options, warrants or securities convertible into common equity of our Company at November 30, 2012, except certain convertible promissory notes as detailed in Note 7 to the financial statements included in this Report.

There are no shares that have been offered pursuant to an employee benefit plan or dividend reinvestment plan as of November 30, 2012. Our shares are traded on the OTCBB under the symbol NOHO. Although the OTCBB does not

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

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

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

Trends

We are in the development stage and have not generated any revenue as of November 30, 2012. We are unaware of any known trends, events or uncertainties that have had, or are reasonably likely to have, a material impact on our business or income, either in the long term or short term, as more fully described under “Risk Factors” in our annual report on Form 10-K filed with the SEC on December 14, 2012.

ITEM 4. CONTROLS AND PROCEDURES

(a)

Evaluation of disclosure controls and procedures

It is management’s responsibility for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, we have evaluated the effectiveness of our disclosure controls and procedures as required by the Exchange Act Rule 13a-15(d) as of November 30, 2012 (the “Evaluation Date”). Based on the evaluation by management, they have concluded these disclosure controls and procedures were not effective as of the Evaluation Date as a result of material weaknesses in internal control over financial reporting as more fully discussed below.

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

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As of November 30, 2012, our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments.

Management concluded, during the three months ended November 30, 2012, internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules. Management realized there are deficiencies in the design or operation of our internal control that adversely affected our internal controls which management considers to be material weaknesses.

Material Weaknesses

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

(a)

Changes in control over financial reporting

There were no changes in our internal controls over financial reporting during the three months ended November 30, 2012 that have materially affected, or are reasonably likely to material affect, our internal control over financial reporting.

PART II– OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A RISK FACTORS

The list of risk factors contained in our Annual Report on Form 10-K for the year ended August 31, 2012, under Part 1 ITEM 1A, Risk Factors, are incorporated by reference.

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

In September, 2012 we issued a total of 737,780 common shares to Asher Enterprises, Inc. on a conversion totaling $16,670 in principal amounts of loans and accrued interest, at a price of $0.0225 per share, representing 50 percent of the low price for the shares during a three day trading period.

In October, 2012 we issued a total of 2,284,848 common shares to Asher Enterprises, Inc. on three conversions totaling $36,400 in principal amounts of loans and accrued interest, at prices of $0.0165, $0.015, and $0.0135 per share respectively, representing 50 percent of the low price for the shares during a three day trading period.

In December, 2012 we issued a total of 636,364 common shares to Common Stock, LLC. on a conversion totaling $7,000 in principal amounts of loans, at a prices of $0.011, per share, representing 60 percent of the low price for the shares during a three day trading period.

In December, 2012, we issued 1,000,000 shares of Series A Convertible Preferred Stock in connection with the acquisition of Immersion House.

As a result of the issue of these shares, we now have a total of 33,753,492 common shares issued and outstanding as of January 18, 2012.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. (Removed and Reserved)

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURES

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

NOVATION HOLDINGS, INC. (Registrant)

Dated: January 22, 2013

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