Novation Holdings Inc | 2013 | FY | 3


Company management subsequently discovered certain errors in our financial statements included in our Form 10-K as previously filed for the year ended August 31, 2013. The restatement primarily comprises the write off of note receivables and the recording of a derivative liability on a convertible note payable.

 

 

 

Novation Holdings, Inc.

RESTATED CONDENSED CONSOLIDATED BALANCE SHEETS

Balance Sheets at August 31, 2013

August 31, 2013

Adjustments

Restated

ASSETS

CURRENT ASSETS

 Cash

 $                           4

 $                            4

 Accounts receivable

                   161,110

                    161,110

 Prepaid expenses

                       6,845

                        6,845

 Deferred loan costs, net of accumulated amortization of $39,148 and $15,689

                       6,853

 

                        6,853

 Total current assets

                   174,812

                    174,812

OTHER ASSETS

 Property, plant and equipment (net of accumulated

 depreciation of $645 and $221 respectively)

                     21,475

 (20,000)

 (a)

                        1,475

 Loan receivable

                   848,523

          (202,147)

 (b)

                    646,376

 Investment

                   528,000

       (476,000)

 (c)

                      52,000

 ISP Contracts/Support

                   100,000

            65,000

 (d)

                    165,000

 Goodwill

                             -  

   20,000

 (e)

                      20,000

 Advances to related parties

                     42,350

                      -  

                      42,350

 Total assets

 $             1,715,160

 $           (613,147)

 $              1,102,013

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES

 Accounts payable and accrued expenses

 $                177,528

 $                 177,528

 Accrued interest

                     47,878

                      47,878

 Due to related party

                     36,406

            (5,694)

 (f)

                      30,712

 Due to third party

                             -  

         5,694

 (g)

                        5,694

 Notes payable - net of debt discount of $48,324 and $25,861

                   108,405

              2,800

 (h)

                    111,205

 Derivative liability

                   165,090

            467,704

 (i)

                    632,794

 Total current liabilities

                   535,307

            470,504

                 1,005,811

LONG-TERM LIABILITIES

 Acquisition note payable

                   489,689

                    489,689

 Convertible note payable - net of discount of $133,907

                   335,927

              (133,907)

                    202,020

 Total liabilities

                1,360,923

          336,597

                 1,697,520

STOCKHOLDERS' EQUITY (DEFICIT)

Preferred stock, $0.001 par value; 5,000,000 shares authorized

1,000,000 and  no shares issued and outstanding at

August 31, 2013 and August 31, 2012, respectively

                       1,000

                        1,000

Common stock, $0.001 par value; 2,500,000,000 shares authorized,

509,999,997 and  30,094,500 shares issued and outstanding at

August 31, 2013 and August 31, 2012, respectively

                   510,000

                    510,000

Additional paid in capital

                9,840,746

              (7,141)

 (j)

                 9,833,605

Accumulated other comprehensive income

                             -  

                  24,000

                      24,000

Accumulated deficit

               (9,997,509)

            (966,603)

              (10,964,112)

Total stockholders' equity (deficit)

                   354,237

        (949,744)

                   (595,507)

Total liabilities and stockholders' equity

 $             1,715,160

 $           (613,147)

 $              1,102,013

 

Novation Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(RESTATED)

For the Year Ended August 31, 2013

As reported

Adjustments

Restated

REVENUES

 $                    258,521

 $                   258,521

COST OF GOODS SOLD

                         59,712

 

                        59,712

NET REVENUES

 $                    198,809

 

 $                   198,809

GENERAL AND ADMINISTRATIVE EXPENSES

Payroll and payroll taxes

                       130,000

                      130,000

Professional fees

                       391,962

                      391,962

General and administrative

                       110,193

                         15,000

 (k)

                      125,193

Bad debt expense

                                 -  

                       337,600

 (l)

                      337,600

Impairment loss

                                 -  

                       284,547

 (m)

                      284,547

Rent

                         10,301

                        10,301

Total operating expenses

                       642,456

                       637,147

                   1,279,603

Loss from operations

                     (443,647)

                     (637,147)

                 (1,080,793)

OTHER INCOME (EXPENSE)

Finance cost

                       (33,102)

                      (33,102)

Sale of subsidiary

                       418,876

                      418,876

Interest, net

                     (223,118)

                       (74,098)

(n)

                    (297,216)

Derivative expense

                     (212,516)

                       (10,471)

 (o)

                    (222,988)

Change in fair value of derivatives

                     (226,850)

                     (244,887)

 (p)

                    (471,737)

Total other income (expense)

                     (276,711)

                     (329,456)

                    (606,168)

DISCONTINUED OPERATIONS

Loss from discontinued operations

                       (10,708)

                      (10,708)

Total loss from discontinued operations

                       (10,708)

 

                      (10,708)

Net income (loss)

 $                  (731,066)

 $                  (966,603)

 $              (1,697,669)

Net loss per share (basic and diluted)

 $                        (0.01)

 $                       (0.02)

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

                  71,289,402

                 71,289,402

Net income (loss)

 $                  (731,066)

 $                  (966,603)

 

 $              (1,697,669)

OTHER COMPREHENSIVE INCOME, NET OF TAX

Unrealized gain on investment

                                 -  

                         24,000

 (q)

                        24,000

Comprehensive loss

 $                  (731,066)

 $                  (942,605)

 $              (1,673,669)

 

Novation Holdings, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(RESTATED)

For the Year Ended August 31, 2013

As Reported

Adjustments

Restated

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

 $               (731,066)

 $               (966,603)

 $            (1,697,669)

Adjustments to reconcile net loss to net

cash used by operations:

Depreciation expense

                          424

                          424

Capital contributions-noncash expenses

                               -

                               -

Stock based compensation expense

                               -

25,760

25,760

Gain in sale of subsidiary

                               -

(418,876)

(418,876)

Loss on derivatives

                   226,850

                   244,887

                   471,737

Bad debt expense

                               -

                   337,600

                   337,600

Impairment loss

                               -

                   284,547

                   284,547

Unrealized gain on investment

                               -

                    (24,000)

                    (24,000)

Amortization of intangibles

                               -

                     15,000

                     15,000

Amortization of debt discount and non-cash derivative expense

                     45,422

                     539,219

                   584,641

Changes in certain operating assets and liabilities:

Interest accrued on notes payable

                     34,450

                     34,450

Increase in accounts receivable

                  (160,000)

                  (160,000)

Increase in prepaid expenses

                      (5,845)

                      (5,845)

Loans receivable

                               -

                               -

Increase  in accounts payable

                   170,403

 

                   170,403

Net cash used by operating activities

                  (395,903)

                     14,075

                  (381,828)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

                               -

 

                               -

Net cash used by investing activities

                               -

 

                               -

CASH FLOWS FROM FINANCING ACTIVITIES

Additional capital contributed

                               -

                               -

Proceeds from issuance of common stock

                               -

                               -

Proceeds from notes payable

                   399,975

                    (13,950)

                   386,025

Payments on notes payable

                      (6,000)

                               -

                      (6,000)

Related party advances

                          687

                         (125)

                          562

Net cash provided by financing activities

                   394,662

 

                   380,587

Net increase (decrease) in cash

                      (1,241)

                      (1,241)

Cash and equivalents, beginning of period

                       1,245

 

                       1,245

Cash and equivalents, end of period

 $                           4

 

 $                           4

Supplemental cash flow information:

Cash paid for interest

 $                            -

 $                            -

Cash paid for income taxes

 $                            -

 $                            -

Significant non-cash activities

Notes payable and accrued interest converted to common stock

 $                378,404

 $                378,404

Accrued interest converted to notes payable

 $                  15,520

 $                  15,520

Debt discount on notes payable from derivative liability

 $                555,527

212,344

 $                767,871

Reclassification of derivative liabilities to paid-in-capital

 $                652,605

7,139

 $                659,744

 

(a) Equipment that was written off for ($20,000).

(b) Uncollectible loans that were written off to bad debt expense for ($202,147).

(c) Unrecoverable investments written off for ($476,000).

(d) Reclass adjustment to ISP contracts net of amortization for $65,000 from purchase price allocations.

(e) Reclass adjustment of contracts to goodwill for $20,000 from purchase price allocations.

(f) Reclass adjustment from related party to third party liability for ($5,694).

(g) Reclass adjustment from related party to third party liability for $5,694.

(h) Net adjustments to debt discount for $2,800.

(i) Net adjustments and increase in derivative liability for $467,704.

(j) Net adjustments to additional paid in capital for ($7,141).

(k) Amortization of intangibles for $15,000.

(l) Loans receivable written off to bad debt expense for $337,600.

(m) Unrecoverable investment written off to impairment loss $284,547.

(n) Increase in interest expenses based on updated calculations for ($74,098).

(o) Increase in derivative expense based on updated calculations for ($10,472).

(p) Decrease in change in derivative value based on updated calculations for ($244,887).

(q) Increase in unrealized gain on investment based on current market value for $24,000.

 

 


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