ETHEMA HEALTH Corp - Quarter Report: 2011 March (Form 10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

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

For the Quarterly Period ended March 31, 2011

Commission File number 0-15078

NOVA NATURAL RESOURCES CORPORATION

(Name of Small Business Issuer in its charter)

Colorado	84-1227328
(State or other	(I.R.S. Employer of
jurisdiction of incorporation	Incorporation
Identification No.)	Identification No.)

Suite 300, 5734 Yonge Street,

North York, Ontario, Canada M2M 4E7
(Address of principal executive offices)

 (416) 222-5501)

(issuer's phone number)

Securities registered under Section 12(b) of the Act: NONE

Securities registered under Section

12(g) of the Act:

Common Stock, $.01 Par Value

(Title of Class)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12months (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. Yes      . No  X .

Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-Q or any amendment to this Form 10-Q.  X .

Issuer's revenues for its most recent fiscal year totaled: $191,256Documents Incorporated by Reference: None

Transitional Small Business Disclosure Format: Yes      . No  X .

As of March 31, 2011, the Registrant had outstanding no shares of Convertible Preferred Stock, $1.00 par value issued and outstanding.

Number of Shares of Common Stock Outstanding $.01 par value as of March 31, 2011, 5,021,764

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NOVA NATURAL RESOURCES CORPORATION

Index to Form 10-Q

PART 1.	FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements	3
	Balance Sheet at March 31, 2011 (unaudited)	6
	Statements of Operation and Accumulated Deficit for the three months ended March 31, 2011(unaudited)	7
	Statements of Cash Flow ended March 31, 2011 (unaudited)	8
	Notes to the Financial Statements	9
Item 2.	Management discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative disclosure about Market Risk	16
Item 4.	Controls and Procedures	16
PART 2	OTHER INFORMATION	17
Item 1	Legal Proceedings	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.	Defaults upon Senior Securities	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
Item 5.	Other Information	17
Item 6.	Exhibits	17

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PART 1

NOVA NATURAL RESOURCES CORPORATION

Consolidated Financial Statements

For the Three Months Ended March 31, 2011

Unaudited

  

  

  

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NOVA NATURAL RESOURCES CORPORATION

Consolidated Financial Statements

For the Three Months Ended March 31, 2011

Unaudited

 

CONTENTS

 

			Page(s)
Report of Independent Registered Public Accounting Firm			5
Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010			6
Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010			7
Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010			8
Notes to the Consolidated Financial Statements			9

  

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders

Nova Natural Resources Corporation

 

I have examined the accompanying balance sheets of Nova Natural Resources Corporation (the Company) as of March 31, 2011, and the related statements of operations, changes in stockholders’ equity, and cash flows for the period from January 1, 2011 to March 31, 2011. A review includes primarily applying analytical procedures to management’s financial data and making inquiries of company management.  A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole.  Accordingly, I do not express such an opinion.

 

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.

My responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.  Those standards require me to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. I believe that the results of my procedures provide a reasonable basis for my report.

Based on my review, I are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Eddy Chin Chartered Accountant

Licensed Public Accountant

Thornhill, Ontario

April 15, 2011

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NOVA NATURAL RESOURCES CORPORATION
Consolidated Balance Sheets
		March 31,			December 31,
		2011			2010
		Unaudited
ASSETS
Current assets
	Cash	$	244,531		$	48,376
	Accounts receivable		105,925			40,907
	Prepaid expenses		54,321			52,436
	Other current assets		11,307			10,965
Total current assets			416,084			152,684
	Fixed assets, net of accumulated depreciation of $78,182 and $52,781		346,802			342,695
Total assets		$	762,886		$	495,379
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
	Bank overdraft	$	-		$	15
	Accounts payable and accrued liabilities		410,027			298,529
	Notes payable, current portion		842,680			420,601
	Related party payables		301,693			404,895
Total current liabilities			1,554,400			1,124,040
	Notes payable, net of current portion		92,680			25,000
Total liabilities			1,647,080			1,149,040
Stockholders' deficit
	Common stock; $0.01 par value, 50,000,000 shares authorized;5,021,764 shares issued and outstanding		50,218			50,218
	Additional paid-in capital		5,631,664			5,631,664
	Other comprehensive loss		(12,153)			(12,855)
	Accumulated deficit		(6,553,923)			(6,322,688)
Total stockholders' deficit			(884,194)			(653,661)
Total liabilities and stockholders' deficit		$	762,886		$	495,379
See accompanying notes to the financial statements

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NOVA NATURAL RESOURCES CORPORATION
Consolidated Statements of Operations Unaudited
		Three Months Ended March 31,
		2011			2010
Revenues		$	223,788		$	-
Cost of services provided			129,941			-
Gross margin			93,847			-
Operating expenses
	Travel		250			4,528
	Depreciation		23,366			-
	Professional fees		101,816			541
	Rent		114,609			-
	Meals and entertainment		1,960			-
	Salaries and wages		40,712			-
	Medical records		14,047			-
	General and administrative		28,322			786
Total operating expenses			325,082			5,855
Net loss applicable to common shareholders		$	(231,235)		$	(5,855)
Other comprehensive loss
	Foreign currency translation adjustment		(702)			-
Total comprehensive loss		$	(231,937)		$	(5,855)
Basic and diluted loss per common share		$	(0.05)		$	(0.00)
Weighted average shares outstanding			5,021,764			5,021,764
See accompanying notes to the financial statements

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NOVA NATURAL RESOURCES CORPORATION
Consolidated Statements of Cash Flows Unaudited
			Three Months Ended March 31,
			2011			2010
Operating activities
		Net loss	$	(231,235)		$	(5,855)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation		23,366			-
	Changes in operating assets and liabilities:
		Accounts receivable		(65,018)			-
		Prepaid expenses		(1,885)			-
		Other current assets		(342)			-
		Accounts payable and accrued liabilities		111,498			(728)
Net cash used in operating activities				(163,616)			(6,583)
Investing activities
		Purchase of fixed assets		(27,473)			-
Net cash provided by investing activities				(27,473)			-
Financing activities
		Repayment of bank overdraft		(15)			-
		Proceeds from notes payable		489,759			-
		Proceeds from related party payables		(103,202)			7,990
Net cash used in financing activities				386,542			7,990
	Effect of exchange rate on cash			702			-
Net change in cash				196,155			1,407
Beginning cash balance				48,376			5,550
Ending cash balance			$	244,531		$	6,957
Supplemental cash flow information
		Cash paid for interest	$	-		$	-
		Cash paid for income taxes	$	-		$	-
See accompanying notes to the financial statements

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NOVA NATURAL RESOURCES CORPORATION

Notes to the Consolidated Financial Statements

March 31, 2011

Note 1 - Nature of Business

 

Nova Natural Resources Corporation (the "Company" or “Nova”) was incorporated under the laws of the state of Colorado on April 1, 1993. As at March 31, 2010, the Trust owned 100% of the outstanding shares of each of 1816191 Ontario Limited and Greenestone Clinic Muskoka Inc., both of which were incorporated in 2010 under the laws of the Province of Ontario. These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP"). Certain comparative figures have been reclassified to conform to the current period's financial presentation.

The Company has elected a fiscal year end of December 31.

 

Note 2 - Significant Accounting Policies

 

Estimates

 

The preparation of financial statements in conformity with 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.  Actual results could differ from those estimates.

 

Cash

 

For the Statements of Cash Flows, all highly liquid investments with maturity of three months or less are considered to be cash equivalents.  There were no cash equivalents as of March 31, 2011.

 

Income Taxes

 

The Company accounts for income taxes under ASC 740 "Income Taxes" which codified SFAS 109, "Accounting for Income Taxes" and FIN 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No.  109.” 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 statements 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. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

Fair Value of Financial Instruments

The Company's financial instruments as defined by FASB ASC 825-10-50 include cash, trade accounts receivable, and accounts payable and accrued expenses.  All instruments are accounted for on a historical cost basis, which, due to the short maturity of these financial instruments, approximates fair value at March 31, 2011.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which requires the reporting entity to develop its own assumptions.

The Company does not have any assets or liabilities measured at fair value on a recurring basis at March 31, 2011. The Company did not have any fair value adjustments for assets and liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2011 or 2010.

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NOVA NATURAL RESOURCES CORPORATION

Notes to the Consolidated Financial Statements

March 31, 2011

Note 2 - Significant Accounting Policies (continued)

Earnings Per Share Information

FASB ASC 260, “Earnings Per Share” provides for calculation of "basic" and "diluted" earnings per share.  Basic earnings per share includes no dilution and is computed by dividing net loss applicable to common shareholders by the weighted average common shares outstanding for the period.  Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share.  Basic and diluted loss per share was the same, at the reporting dates, as there were no common stock equivalents outstanding.

Share Based Expenses

ASC 718 "Compensation - Stock Compensation" codified SFAS No. 123 prescribes accounting and reporting standards for all stock-based payments award to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights that may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity's past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50 "Equity - Based Payments to Non-Employees" which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services". Measurement of share-based payment transactions with non-employees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

Going Concern

The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern.  This contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  Currently, the Company have minimal cash and no material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern.  The Company will be dependent upon the raising of additional capital through placement of common stock in order to implement its business plan, or merge with an operating company.  There can be no assurance that the Company will be successful in either situation in order to continue as a going concern.  The officers and directors have committed to advancing certain operating costs of the Company.

Principals of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company transactions and balances have been eliminated.

The Company’s subsidiary’s functional currency is the Canadian dollar (CAD), while the Company’s reporting currency is the U.S. dollar (USD).  All transactions initiated in Canadian dollars are translated into U.S. dollars in accordance with ASC 830, "Foreign Currency Translation" as follows:

i)    Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date.

ii)   Equity at historical rates.

iii)  Revenue and expense items at the average rate of exchange prevailing during the period.

Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive income or loss.  Therefore, translation adjustments are not included in determining net loss but reported as other comprehensive income.

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NOVA NATURAL RESOURCES CORPORATION

Notes to the Consolidated Financial Statements

March 31, 2011

Note 2 - Significant Accounting Policies (continued)

Principals of Consolidation (continued)

For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date.  If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.

Recent Accounting Pronouncements

On September 9, 2009, the Company adopted Accounting Standards Update (“ASU”) No. 2009-01, “Topic 105 - Generally Accepted Accounting Principles - amendments based on Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“ASU No. 2009-01”).  ASU No. 2009-01 re-defines authoritative GAAP for nongovernmental entities to be only comprised of the FASB Accounting Standards Codification (“Codification”) and, for SEC registrants, guidance issued by the SEC.  The Codification is a reorganization and compilation of all then-existing authoritative GAAP for nongovernmental entities, except for guidance issued by the SEC.  The Codification is amended to effect non-SEC changes to authoritative GAAP.  Adoption of ASU No. 2009-01 only changed the referencing convention of GAAP in Notes to the Financial Statements.

On February 25, 2010, the FASB issued ASU No. 2010-09 Subsequent Events Topic 855 “Amendments to Certain Recognition and Disclosure Requirements,” effective immediately. The amendments in the ASU remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of US GAAP. The FASB believes these amendments remove potential conflicts with the SEC’s literature. The adoption of this ASU did not have a material impact on the Company’s financial statements.

On March 5, 2010, the FASB issued ASU No. 2010-11 Derivatives and Hedging Topic 815 “Scope Exception Related to Embedded Credit Derivatives.” This ASU clarifies the guidance within the derivative literature that exempts certain credit related features from analysis as potential embedded derivatives requiring separate accounting. The ASU specifies that an embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to bifurcation from a host contract under ASC 815-15-25, Derivatives and Hedging — Embedded Derivatives — Recognition. All other embedded credit derivative features should be analyzed to determine whether their economic characteristics and risks are “clearly and closely related” to the economic characteristics and risks of the host contract and whether bifurcation is required. The ASU will be effective for the Company in the fourth quarter of 2010. Early adoption is permitted. The adoption of this ASU will not have a material impact on the Company’s financial statements.

In April 2010, the FASB codified the consensus reached in Emerging Issues Task Force Issue No. 08-09, “Milestone Method of Revenue Recognition.” FASB ASU No. 2010-17 provides guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions. FASB ASU No. 2010-17 is effective for fiscal years beginning on or after June 15, 2010, and is effective on a prospective basis for milestones achieved after the adoption date. The Company does not expect this ASU will have a material impact on its financial position or results of operations when it adopts this update on October 1, 2010.

Note 3 - Stockholders’ Equity

 

Common Stock

The authorized common stock of the Company consists of 50,000,000 shares with par value of $0.01.  As of March 31, 2011 the Company had 5,021,764 shares of its $0.01 par value common stock issued and outstanding.

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NOVA NATURAL RESOURCES CORPORATION

Notes to the Consolidated Financial Statements

March 31, 2011

Note 3 - Stockholders’ Equity (continued)

Net Loss Per Common Share

Net loss per common share is computed using the basic and diluted weighted average number of common shares outstanding during the period.  The weighted-average number of common shares outstanding during each period is used to compute basic loss per share.  Diluted loss per share is computed using the weighted averaged number of shares and dilutive potential common shares outstanding unless common stock equivalent shares are anti-dilutive.  Dilutive potential common shares are additional common shares that will be exercised. Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during the three months ended March 31, 2011.  

Note 4 - Income Taxes

 

Current or deferred U.S. federal income tax provision or benefits have not been provided for any of the periods presented because the company has experienced operating losses since inception. Under ACS 740 “Income Taxes,” when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit.  The company has provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that they will not earn income sufficient to realize the deferred tax assets during the carry forward period.

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the three month period ended March 31, 2011 or 2010, applicable under ACS 740.  As a result of the adoption of ACS 740, the company did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet.

The component of the Company’s deferred tax asset as of March 31, 2011 and December 31, 2010 is as follows:

	March 31,   2011			December 31, 2010
Net operating loss carry forward	$	6,553,923		$	6,322,688
Valuation allowance		(6,553,923)			(6,322,688)
Net deferred tax asset	$	-		$	-

A reconciliation of income taxes computed at the 35% statutory rate to the income tax recorded is as follows:

	March 31, 2011			December 31, 2010
Tax at statutory rate	$	80,932		$	163,544
Valuation allowance		(80,932)			(163,544)
Net deferred tax asset	$	-		$	-

The Company did not pay any income taxes during the three months ended March 31, 2011 or 2010.

The net federal operating loss carry forward will expire in 2023.  This carry forward may be limited upon the consummation of a business combination under IRC Section 381.

Note 5 - Related Party Transactions

The Company neither owns nor leases any real or personal property from a related party.  

During the year, an officer or resident agent of the corporation provided office administration services without charging the company.  Such costs are immaterial to the financial statements and accordingly, have not been reflected therein.  

The officers and directors for the Company are involved in other business activities and opportunities that, in the future, may result in potential conflicts of interest between the Company and their other business interest.  The Company has not formulated a policy for the resolution of such conflicts.  

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NOVA NATURAL RESOURCES CORPORATION

Notes to the Consolidated Financial Statements

March 31, 2011

Note 5 - Related Party Transactions (continued)

The Company has repaid advances from related parties totaling $103,202 during the period to fund operations. The net advances have been converted to notes that are non-interest bearing, due on demand and as such are included in current liabilities. Imputed interest has been considered, but is immaterial to the financial statements as a whole. These notes are convertible to common stock at the option of the holder at rates of $0.01 or $0.02 per share.

Note 6 - Warrants and Options

There were 1,533 stock options previously outstanding that were rescinded during the year ended December 31, 2010.

Note 7 – Convertible Debentures

The Series A convertible debentures were issued on December 1, 2010 for cash consideration. These debentures bear no interest and are convertible into common shares of Nova at the rate of $0.10 per share between June 1, 2011 and their maturity date of December 1, 2012. All convertible debentures still outstanding as at their date of maturity will automatically be converted into common stock at the rate of $0.10 per share.

On March 1, 2011 the Trust issued $48,000 of Series B convertible debentures in satisfaction of liabilities related to services provide to Nova. These debentures bear no interest and are convertible into common shares of Nova at the rate of $0.10 per share between six months after their date of issuance and their maturity date of two years from their date of issuance. All convertible debentures still outstanding as at their date of maturity will automatically be converted into common stock at the rate of $0.10 per share.

On March 30 and 31, 2011 the Trust issued $400,000 of Series C convertible debentures for cash consideration. These debentures bear no interest and are convertible into common shares of Nova at the rate of $0.15 per share between September 30, 2011 and their maturity date of March 31, 2013. All convertible debentures still outstanding as at their date of maturity will automatically be converted into common stock at the rate of $0.15 per share

Note 8 – Commitments and Contingencies

The Company has entered into an operating sub-lease for office space that expires in July 31, 2013. The rental payments are approximately $247,000 in 2011, $269,000 in 2012 and $169,000 in 2013. Total rental payments through the life of the lease are approximately $763,000.

The Company entered into an agreement to lease premises in Bala, Ontario at market terms and conditions with a company controlled by a director of the Company for the operation of Nova’s second medical facility.

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NOVA NATURAL RESOURCES CORPORATION

Notes to the Consolidated Financial Statements

March 31, 2011

Note 9 – Convertible Debt

During the year ended December 31, 2010, the Company issued a total of $245,500 USD and $420,559 CAD of convertible notes. During the three months ended March 31, 2011 the Company issued a total of $65,000 USD and $335,000 CDN of convertible notes. The notes are convertible at the option of the holder up to the mandatory conversion date. The Company has adequate common shares in its treasury to cover the conversions if all notes are exercised. There are the following convertible notes issued at the conversion rate indicated.

*Actual number of shares issued if converted will vary depending on the exchange rate at time of conversion.

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Item 2. Management Discussion and Analysis

The following Management's Discussion and Analysis ("MD&A) for the three month period ended March 31, 2011 compared with the three month period ended March 31, 2010 provides readers with an overview of the operations of Nova Natural Resources Corporation ("Nova"). The MD&A provides information that the management of Nova believes is important to access and understand the results of operations and the financial condition of the Company.

Our objective is to present readers with a view of Nova through the eyes of management.

This discussion and analysis should be read in conjunction with Nova's financial statements and accompanying notes to the financial statements for the here month period ended March 31, 2011.

About Nova Natural Resources Corporation

Nova has been a business in transition since the divesture of the electronic business. Management has reviewed many business opportunities but has passed on those that did not ensure the company with free and clear assets and exclusive protection of the opportunity. On March 29, 2010 the company entered into an agreement with Greenestone Clinic Inc. (“Greenestone”) whereby it would provide consulting services to Nova for the development and operation of medical clinics in the province of Ontario, Canada. The term of the agreement was for one year whereby Greenestone would provide both the medical and business expertise in the initial startup of private clinics. Greenestone will provide the technical assistance to ensure the clinics are in compliance with governmental policy and procedure requirements and the necessary detailed operational requirements to operate the clinics. At the time of entering into this agreement, Greenestone had an operational facility with some services Nova plans to offer in its first Ontario facility.

Nova opened its first clinic in the last days of the second quarter of 2010 in North York, Ontario.  During the third quarter of 2010, the operations at the North York Clinic increased its medical services with 146 medical procedures performed. The volume of operations continued to increase during the fourth quarter of 2010, such that 172 medical procedures were performed.

For the first quarter 2011, 437 endoscopy procedures were performed giving rise to gross revenue of $223,788, substantially all of which was earned from the Ontario Health Insurance Plan (“OHIP”). As amounts owing from OHIP are backed by the government of Ontario, we see very little credit risk attributable to revenues billed to or owing from OHIP from time to time.

Key components of operating expenses during the quarter ended March 31, 2010, 2010 were as follows:

-payments to doctors performing services: in general, the doctor performing the actual medical procedure will receive 60% of the amounts we receive from OHIP as payment for the procedure performed; included in operating expenses for the first quarter 2011 is $129,941 of such amounts owing to doctors

-salaries and wages (primarily) to medical support staff (e.g. nurses, technicians, etc.) in the amount of $40,712

-premises rent of $59,710.82, and

-professional and management fees to third-party executive level service providers (in Canada) of $101,816

During the first quarter the company completed its site inspection by the College of Physicians and Surgeons of Ontario and was given a pass.  This is an intensive review by the College to ensure quality and safety for all patients seen at the clinic. The company agreed to operate a second endoscopy clinic within a Medical center in downtown Toronto.  It is anticipated that this clinic at 807 Broadview Avenue will be operational in the fourth quarter 2011.

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During the first quarter Greenestone, a consultant to the Company offered to give up premises in Bala, Ontario previously leased by Greenestone and operated as a private medical resort and also allowed the company to use its name.  The company though a wholly owned subsidiary Greenestone Clinc Muskoka Inc.  (“Greenestone Muskoka”) entered into a new lease with the owner of the Bala, Ontario property to operate a mental health and addiction treatment center at the property.  The owner of the property is company wholly owned by the president of Nova.  The lease is a five year lease with renewal options at the end of the first and second years of the five year term.  The lease is a net lease and the company has a non-disturbance agreement from the mortgage lenders on the property for the whole term. The company has an option to purchase the property at any time during the term of the lease at appraised values.  Greenestone Muskoka purchased all of the assets of the owned by Greenestone that were used for the operation of the Bala property.   The new subsidiary will operate all private medical services provided to clients of the company including private executive medicals, coaching, counciling, and addiction treatment.  The addiction treatment center is expected to be operational in the third quarter of 2011.  Greenestone Muskoka raised $400,000 through the issue of convertible notes during the first quarter to finance the asset purchases and the operational shortfalls prior to opening.   

Management's discussion of anticipated future operations contains predictions and projections which may constitute forward looking statements. The Private Securities Litigation Reform Act of 1995, including provisions contained in Section 21E of the Securities Exchange Act of 1934, provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements.

Forward-looking Information

This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-K which is not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may", "will", "expect", "believe", "anticipate", "estimate", or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties and actual results may differ materially depending on a variety of factors, many of which are not within the Company's control.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Not applicable because we are a smaller reporting company.

Item 4.  Controls and Procedures I

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America

Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) 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 (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. 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 or procedures may deteriorate. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. Our management made an internal assessment of the effectiveness of our internal control over financial reporting as of 3/31/2011. In making this assessment, it used the experience of the President and CEO. Based on this evaluation, our management concluded that the internal control is effective.

Part 2. OTHER INFORMATION

Item 1. Legal Proceedings

The subsidiary 1816191 Ontario Inc. received notice during the first quarter that an individual that suffered a perforated colon during a colonoscopy procedure intended to litigate against the 1816191 Ontario Inc. and the Doctor that performed the Procedure.  The insurer for the doctor and the company were notified and there is no claim filed during the quarter or subsequent to the quarter end.  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Securities Holders

Not applicable

Item 5. Other Matters

Not applicable

ITEM 6.  Exhibits .

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

NOVA NATURAL RESOURCES CORP.
Registrant

DATE: July 25, 2011

By: /s/ Shawn Leon       

Shawn Leon

                                                                                                   

President & CEO

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