Company Quick10K Filing
Quick10K
Novus Robotics
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
GLDW World Gold Trust 5,264
RMP Rampart Studios 563
FTMR Fortem Resources 175
RSSV Resort Savers 115
VYST VyStar 31
ABCP Ambase 13
JRVS Imine 0
MSCD Morgan Stanley Smith Barney Charter Aspect 0
SLFC Springleaf Finance 0
CFSC Caterpillar Financial Services 0
NRBT 2019-03-31
Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
EX-31.1 ex31-1.htm
EX-32.1 ex32-1.htm

Novus Robotics Earnings 2019-03-31

NRBT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm

 

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

Mark One

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the period ended March 31, 2019

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the transition period from __________ to __________

 

Commission File No. 000-53006

 

Novus Robotics Inc.

(Name of small business issuer in its charter)

 

Nevada   20-3061959
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

7669 Kimbel Street

Mississauga, Ontario

Canada L5S 1A7

(Address of principal executive offices)

 

(905) 672-7669

(Issuer’s telephone number)

 

N/A

(Former name, former address and former fiscal year, if changes since last report)

 

Securities registered pursuant to Section
12(b) of the Act:
  Name of each exchange on which
registered:
None   None 

 

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

Common Stock, $0.001

(Title of Class)

 

Indicate by checkmark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

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 (Section 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

  Large accelerated filer [  ] Accelerated filer [  ]
  Non-accelerated filer [X] Smaller reporting company [X]
  Emerging growth company [  ]    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [  ]

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

Applicable Only to Issuer Involved in Bankruptcy Proceedings During the Preceding Five Years.

 

N/A

 

 

 

 

 

 

NOVUS ROBOTICS INC.

 

Form 10-Q

 

PART I. FINANCIAL INFORMATION  
     
Item 1. Financial Statements (unaudited) 4
     
  Interim Consolidated Balance Sheets 4
     
  Interim Consolidated Statements of Earnings and Comprehensive Income 5
     
  Interim Consolidated Statements of Cash Flows 6
     
  Interim Consolidated Statements of Stockholders’ Equity 7
     
  Interim Consolidated Notes to Financial Statements 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 15
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
     
Item 4. Controls and Procedures 22
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 24
     
Item 1A. Risk Factors 24
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
     
Item 3. Defaults Upon Senior Securities 24
     
Item 4. Mine Safety Disclosures 24
     
Item 5. Other Information 24
     
Item 6. Exhibits 24

 

 2 
 

 

FORWARD LOOKING STATEMENTS

 

Statements made in this Form 10-Q that are not historical or current facts are “forward-looking statements” made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the “Act”) and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management’s best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

 

 3 
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

NOVUS ROBOTICS INC.

Interim Consolidated Balance Sheets

 

 

   March 31, 2019   December 31, 2018 
    (Unaudited)    (Audited) 
ASSETS          
Current assets          
Cash  $1,477,480   $1,309,052 
Amounts receivable, net   308,431    499,842 
Inventory   8,467    422,111 
Sales tax recoverable   56,458    67,153 
Security deposits   9,883    9,673 
Prepaid expense   73,491    48,904 
Total current assets   1,934,210    2,356,735 
           
Fixed assets          
Fixed assets, net of deprecation   103,590    94,398 
Total assets  $2,037,800   $2,451,133 
           
LIABILITIES          
Current liabilities          
Accounts payable and accrued expenses  $149,543   $97,762 
Customer deposits   14,943    587,276 
Warranty provision   40,949    27,222 
Income taxes payable   372,691    372,691 
Obligation under capital lease   -    - 
Total current liabilities   578,126    1,084,951 
           
Deferred income taxes   21,084    21,084 
Total liabilities   599,210    1,106,035 
           
COMMITMENTS AND CONTINGENCIES - Note 8   -    - 
           
STOCKHOLDERS’ EQUITY          
Preferred Stock 50,000,000 shares authorized with a par value of $0.001; Series A - 100 designated, none outstanding   -    - 
Series B - 49,999,900 designated, 1,000,000 issued and outstanding (December 31, 2018 - 1,000,000)   1,000    1,000 
Common Stock 500,000,000 shares authorized with a par value of $0.001, 54,296,641 issued and outstanding (December 31, 2018- 54,296,641 common shares)   54,296    54,296 
Additional paid in capital   58,354    58,354 
Accumulated other comprehensive loss   (465,264)   (510,687)
Retained earnings   1,790,204    1,742,136 
Total stockholders’ equity   1,438,590    1,345,099 
           
Total liabilities and stockholders’ equity  $2,037,800   $2,451,133 

 

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

 

 4 
 

 

NOVUS ROBOTICS INC.

Interim Consolidated Statements of Earnings and Comprehensive Income

(Unaudited)

 

 

For the Three Months Ended March 31,  2019   2018 
         
Revenue  $879,053   $521,298 
Cost of sales   486,753    241,393 
Gross Profit   392,300    279,905 
           
Expenses          
Compensation   115,280    56,955 
Occupancy costs   17,938    18,598 
Travel   18,089    14,280 
Professional fees   174,055    50,353 
Communication   2,574    2,222 
Office and general   13,903    19,753 
Total operating expenses   341,839    162,161 
           
Income before other income and income taxes   50,461    117,744 
           
Other income (expense)          
Foreign exchange gain   6,018    21,303 
           
Net income before income taxes   56,480    139,047 
           
Provision for income taxes   (8,410)   (36,848)
           
Net income   48,069    102,199 
           
Other comprehensive income (loss)          
Foreign exchange adjustment   45,423    (15,548)
           
Comprehensive Income (loss)  $93,492   $86,651 
           
Basic loss per share  $0.00   $0.00 
Diluted income per share  $0.00   $0.00 
           
Weighted average number of shares outstanding - basic   54,296,541    54,296,541 
Weighted average number of shares outstanding - diluted   54,296,541    54,296,541 

 

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

 

 5 
 

 

NOVUS ROBOTICS INC.

Interim Consolidated Statements of Cash Flows

Unaudited

 

 

For The Three Months Ended March 31,  2019   2018 
         
Cash flow from operating activities          
Net income  $48,069   $102,199 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Depreciation   9,480    7,181 
    57,549    109,380 
Changes in operating assets and liabilities          
Decrease (increase) in accounts receivable   191,410    210,701 
Decrease (increase) in inventory   413,644    (448,310)
Decrease (increase) in prepaid expenses   (24,588)   9,552 
Decrease (increase) in security deposits   (210)   279 
Increase (decrease) in accounts payable and accrued expense   51,781    (50,265)
Increase (decrease) in customer deposits   (572,333)   (169,136)
Increase (decrease) in warranty payable   13,727    (4,111)
Increase (decrease) in taxes recoverable/payable   10,696    6,550 
Net cash provided by (used in) operating activities   141,677    (335,360)
           
Cash Flow from investing activity          
Purchase of fixed assets   (16,582)   - 
Net cash used in investing activity   (16,582)   - 
           
Cash Flow from Financing activity          
Obligation under capital lease, net of repayments   -    (2,359)
Net cash used in financing activity   -    (2,359)
           
Effect of foreign exchange rate on changes in cash   43,333    (12,207)
           
Change in cash   168,428    (349,926)
           
Cash, beginning of period   1,309,052    1,705,806 
           
Cash, end of period  $1,477,480   $1,355,880 

 

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

 

 6 
 

 

NOVUS ROBOTICS INC.

Interim Consolidated Statements of Stockholders’ Equity

For the years ended December 31, 2018 and 2017

(Unaudited)

 

 

                       Accumulated     
   Preferred Stock   Preferred Stock        Additional       Other     
   Series A   Series B   Common Stock   Paid-In   Retained   Comprehensive     
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Earnings   Income (Loss)   Total 
Balance, December 31, 2017   -   $-    1,000,000   $1,000    54,296,641   $54,296   $58,354   $1,635,618    $(385,308)  $1,363,960 
Effect of foreign exchange rates   -    -    -    -    -    -    -    -    (15,548)   -15,548 
Net income for the period   -    -    -    -    -    -    -    102,199    -    102,199 
Balance, March 31, 2018   -   $-    1,000,000   $1,000    54,296,641   $54,296   $58,354   $1,737,817    $(400,856)  $1,450,611 
Effect of foreign exchange rates   -    -    -    -    -    -    -    -    (109,831)   -109,831 
Net income for the period   -    -    -    -    -    -    -    4,319    -    4,319 
Balance, December 31, 2018   -   $-   $1,000,000   $1,000   $54,296,641   $54,296   $58,354   $1,742,136    $(510,687)  $1,345,099 
Effect of foreign exchange rates   -   $-    -    -    -    -    -    -    45,423    45,423 
Net income for the period   -   $-    -    -    -    -    -    48,068    -    48,068 
Balance, March 31, 2019   -   $-    1,000,000   $1,000    54,296,641   $54,296   $58,354.00   $1,790,204    $(465,264)  $1,438,590 

 

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

 

 7 
 

 

NOVUS ROBOTICS INC.

Notes to Interim Consolidated Financial Statements

March 31, 2019

(Unaudited)

 

 

1. Basis of Presentation and Continuance

 

Novus Robotics Inc. (“Novus” or “the Company”) , formerly known as Ecoland International Inc. (“Ecoland”), a Nevada corporation, was incorporated on June 24, 2005 under the name Guano Distributors, Inc. for the purpose of selling Dry-Bar Cave bat guano. On June 28, 2006, the articles of incorporation were amended to change its name to Ecoland. On March 13, 2012, the articles of incorporation were amended to change the Company’s name to Novus. The Company carries on business in one segment being the engineering, design and the manufacturing of automated tube processing solutions for the automotive industry.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

These interim consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States and are expressed in US dollars. The functional currency of Novus is the Canadian Dollar.

 

The interim consolidated financial information furnished herein reflects all adjustments, which, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results in accordance with General Accepted Accounting Principles in the United States (“U.S. GAAP”), have been included and properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below. The interim consolidated financial information should be read in conjunction with the Company’s latest quarterly report on Form 10-Q.

 

Principles of Consolidation

 

The interim consolidated financial statements include the accounts and operations of Novus and its wholly owned subsidiaries D&R Technologies Inc. and D&R Tools Inc. All inter-company accounts and transactions have been eliminated on consolidation.

 

Use of Estimates

 

The preparation of interim consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Financial statement items subject to significant judgment include expense accruals, as well as income taxes and loss contingencies. Actual results could differ from those estimates.

 

The areas which require management to make significant judgments, estimates and assumptions in determining carrying values include, but are not limited to:

 

Assets’ carrying values and impairment charges

 

Assets, including property and equipment and inventory, are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount exceeds their recoverable amounts. In the determination of carrying values and impairment charges, management looks at the higher of recoverable amount or fair value less costs to sell in the case of assets and at objective evidence, significant or prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period.

 

 8 
 

 

NOVUS ROBOTICS INC.

Notes to Interim Consolidated Financial Statements

March 31, 2019

(Unaudited)

 

 

2. SIGNIFICANT ACCOUNTING POLICIES - continued

 

Income taxes and recoverability of potential deferred tax assets

 

In assessing the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. The Company considers whether relevant tax planning opportunities are within the Company’s control, are feasible, and are within management’s ability to implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of the relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses unrecognized income tax assets at each reporting period.

 

Warranty provision

 

In assessing the warranty provision, management makes estimates related to expectations of future repair cost needed to service new seat frame sales under its two year warranty terms. These determinations and their individual assumptions require that management make a decision based on the best available information at each reporting period

 

Long-lived Assets

 

In accordance with the Financial Accounting Standards Board (“FASB”) ASC No. 360, “Property, Plant and Equipment” the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.

 

Regulatory Matters

 

The Company is subject to a variety of federal, provincial and state regulations governing land use, health, safety and environmental matters. The Company’s management believes it has been in substantial compliance with all such regulations.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents. At March 31, 2019, the Company had no cash equivalents. The Company maintains its cash in bank deposit accounts which may exceed federally insured limits. As of March 31, 2019, the Company’s accounts are insured for $100,000 CDN by Canadian Deposit Insurance Corporation for Canadian bank deposits and are insured for $250,000 by FDIC for US bank deposits.

 

 9 
 

 

NOVUS ROBOTICS INC.

Notes to Interim Consolidated Financial Statements

March 31, 2019

(Unaudited)

 

 

2. SIGNIFICANT ACCOUNTING POLICIES - continued

 

Factoring Agreement and Accounts Receivable

 

The Company has a financing agreement that included a non-recourse factoring arrangement that provides nonrecourse factoring on the Company’s receivable from its primary customer Johnson Controls, Inc. to assist in its operational cash flow requirements. The factor is based on credit approved orders, assumes the accounts receivable risk of the Company’s customer in the event of insolvency or non-payment. The Company assumes the risk on accounts receivable not factored to which is shown as accounts receivable on the accompanying balance sheets. As of March 31,2019 and December 31, 2018, the Company had no factored receivables. Finance charges associated with the sale of factored receivable for the quarter ended March 31, 2019 and March 31, 2018 were $Nil and $1,268 and are included in office and general expense.

 

Allowance for Doubtful Accounts

 

The Company extends credit to customers in the normal course of business. The allowance for doubtful accounts represents the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on specific customer information, historical write-off experience and current industry and economic data. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. Management believes that there are no concentrations of credit risk for which an allowance has not been established. Although management believes that the allowance is adequate, it is possible that the estimated amount of cash collections with respect to accounts receivable could change. As of March 31, 2019, the Company has not deemed any accounts uncollectible.

 

Inventory

 

Inventory is stated at the lower of cost or market using the first-in, first-out (“FIFO”) method. Cost of work in progress and finished goods includes raw materials, direct labor and indirect manufacturing costs. The Company’s inventory balance at December 31, 2018 was comprised of work-in-progress. The company’s inventory balance at March 31, 2019 was comprised of direct labor and raw materials. This policy requires D&R to make estimates regarding the market value of our inventory, including an assessment of excess or obsolete inventory. The Company determines excess and obsolete inventory based on an estimate of the future demand and estimated selling prices for its products.

 

Fixed Assets

 

Fixed assets are stated at cost. Depreciation is recorded on a declining basis reflective of the useful lives of the assets . Expenditures for maintenance and repairs are charged to operations when incurred, while additions and betterments are capitalized. When assets are retired or disposed, the asset’s original cost and related accumulated depreciation are eliminated from accounts and any gain or loss is reflected in income.

 

   Estimated
   Useful Life
    
Office equipment  5 years
Computer equipment  5 years
Delivery trucks  5 years
Shop and Machinery equipment  5 to 10 years

 

 10 
 

 

NOVUS ROBOTICS INC.

Notes to Interim Consolidated Financial Statements

March 31, 2019

(Unaudited)

 

 

2. SIGNIFICANT ACCOUNTING POLICIES - continued

 

Foreign Currency Translation

 

Gains and losses arising upon settlement of foreign currency denominated transactions or balances are included in the determination of income. The Company’s functional currency is the Canadian dollar. Transactions in foreign currency are translated into Canadian dollars then translated into U.S. dollars for reporting in accordance with the ASC 830-30 as follows:

 

  For assets and liabilities, the exchange rate at the balance sheet date shall be used.
  For revenues, expenses, gains, and losses, the exchange rate at the dates on which those elements are recognized shall be used.

 

Translation adjustments are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity.

 

Financial Instruments

 

The carrying values of the Company’s financial instruments, which comprise cash, accounts receivable, accounts payable, payroll liabilities, loan payable, taxes payable and due to officers/shareholders, approximate their fair values due to the immediate or short-term maturity of these instruments. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.

 

Fair Value Measurements

 

The authoritative guidance for fair values establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

 

Income Taxes

 

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, “Accounting for Income Taxes,” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will be able to utilize the net operating losses carried forward in future years.

 

Recorded in other (income) and expenses are monies recovered relating to non-refundable, federal government Scientific Research & Experimental Development (“SR&ED”) tax credits. Due to the uncertain nature of these expenditures, the Company does not record any amount until such time as the deduction is approved by Canadian provincial and federal governments.

 

Advertising Costs

 

Advertising costs are expensed as incurred. No advertising costs have been incurred by the Company to date.

 

 11 
 

 

NOVUS ROBOTICS INC.

Notes to Interim Consolidated Financial Statements

March 31, 2019

(Unaudited)

 

 

2. SIGNIFICANT ACCOUNTING POLICIES - continued

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). In accordance with ASC 606, Novus applies the following methodology to recognize revenue:

 

  i. Identify the contract with a customer.
     
  ii. Identify the performance obligations in the contract.
     
  iii. Determine the transaction price.
     
  iv. Allocate the transaction price to the performance obligations in the contract.
     
  v. Recognize revenue when (or as) the entity satisfies a performance obligation.

 

Accordingly, the Company recognizes specific components of revenue as described below:

 

  1. Seat Frames and tooling – Performance obligation to deliver system. Recognition of revenue at a point in time, given recognition over time criteria not met pursuant to 606-10-25-24. Final transfer of control passed to customer upon installation, training, and final acceptance. Progress invoicing to the customer are recorded as deferred revenue. When the projects are installed and accepted by the customer the final invoice is issued and all deferred revenue is recognized along with the related work in process costs for the project. Systems generally take 20-28 weeks to design, manufacture, assemble, and then ship to our various customers. As of March 31, 2019 and December 31, 2018 customer deposits were $14,943 and $587,276 respectively.  
     
  2. Spare parts – Performance obligation to deliver “x” parts. recognized over time, as products are made/shipped. Typically, there is not a large volume of parts (recently), thus contract price allocated to performance obligations (ratable parts) as shipped.
     
  3. Service – “Right to invoice” practical expedient pursuant to 606-10-55-18, billed at hourly rates plus parts.

 

Disclosure of Changes in Contract Assets/Liabilities

 

Accounts Receivables for March 31, 2019 and December 31, 2018 were $308,431 and $499,842. Payments were received and final progress invoicing was done for Machine #4. Customer deposit decreased as Revenue for the System 4 was recognized upon installation - March 31, 2019 $14,943 vs December 31, 2018 $587,276. All liabilities for the system were also recognized from Inventory – March 31, 2019 $8,467 from December 31, 2018 $422,111. All performance obligations were satisfied with the Customer.

 

We have one contract as of March 31, 2019 in the amount of US$42,693. The performance obligation will be completed by June 2019.

 

D&R provides standard warranties for its product from the date of shipment. Estimated warranty obligations are recorded at the time of sale. Estimated warranty obligations are recorded at the time of sale and amortized over the two year warranty period. As of March 31, 2019 and December 31, 2018, warranty liability was $40,949 and $27,222.

 

Earnings per Common Share

 

Net income per share is provided in accordance with ASC 260-10, “Earnings per Share”. We present basic income per share (“EPS”) and diluted EPS the face of the statement of operations. Basic EPS is computed by dividing reported net income (loss) applicable to common shareholders by the weighted average number of common shares outstanding during the period. Except where the result would be anti-diluted to income from continuing operations, diluted earnings per share would be computed assuming the conversion of the convertible long-term debt and the elimination of the related interest expense, and the exercise of stock warrants. Income per common share has been computed using the weighted average number of common shares outstanding during the year. No dilutive instruments were outstanding as of March 31, 2019 or December 31, 2018.

 

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NOVUS ROBOTICS INC.

Notes to Interim Consolidated Financial Statements

March 31, 2019

(Unaudited)

 

 

2. SIGNIFICANT ACCOUNTING POLICIES - continued

 

Comprehensive Income

 

The Company has adopted ASC 220, “Comprehensive Income,” which establishes standards for reporting and the display of comprehensive income, its components and accumulated balances. Comprehensive income (loss) is defined to include all changes in equity except those resulting from investments by owners or distributions to owners. Among other disclosures, ASC 220 requires that all items that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income (loss) is displayed in the balance sheet as a component of shareholders’ equity.

 

3. FIXED ASSETS

 

Fixed assets are comprised of the following:

 

   March 31, 2019   December 31, 2018 
Office equipment  $8,714   $8,529 
Computer equipment   284,977    278,928 
Delivery trucks   20,596    20,159 
Shop and machinery equipment   443,358    371,311 
Equipment under capital lease   -    46,405 
Accumulated depreciation   (654,056)   (630,935)
Total fixed assets  $103,590   $94,397 

 

Depreciation expense for the period ended March 31, 2019 was $9,480 (2018 - $7,181).

 

4. COMMON AND PREFERRED STOCK

 

Each share of Series A Preferred Stock is convertible on a one-for-one basis into common stock, has all of the voting rights that the holders of the common shares and has the ability to elect three directors.

 

The Series B Preferred Stock (’Series B’) has voting rights whose holders must vote together with the common stock. Each Series B share has the same number of votes equal to 5,000 common shares and in the event of a stock split, share dividend or otherwise for the common shares will retain this voting proportion.

 

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NOVUS ROBOTICS INC.

Notes to Interim Consolidated Financial Statements

March 31, 2019

(Unaudited)

 

 

5. INCOME TAXES

 

The Company applies the provisions of the ASC 740 “Income Taxes”. ASC 740-10 prescribes a recognition threshold and a measurement attributed for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. D&R Technologies Inc. is currently in the process of having its January 31, 2016 tax return examined. The Company believes that its tax positions and deductions would be sustained on audit and does not anticipate any in a material change to its consolidated financial position. To the extent possible, any estimated exposure has accrued and included in the taxes payable account. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No interest and penalties were incurred at March 31, 2019 or for the year ended December 31, 2018.

 

The parent entity (Novus) has not filed its US returns since December 31, 2011 and all open tax years are still subject to IRS examination. The Canadian subsidiaries are generally open to Canada Revenue Agency (“CRA”) examination for a time frame equal to three years from the date of assessment. Currently, tax years ending January 31,2016 to January 31,2019 are subject to Canadian government review

 

6. RELATED PARTY TRANSACTION

 

Novus paid to a company owned by the President consulting fees in the amount of $154,000 (2018 - $46,309). The consulting fees were agreed upon after discussion between Novus and Mr. Paolucci.

 

7. OBLIGATION UNDER CAPITAL LEASE

 

The Company entered into a lease to purchase equipment in November of 2015. An initial payment of $16,900 was made with the balance of the lease to be satisfied in 36 equal monthly payments of approximately $820. The interest rate related to the lease obligation is 14% with a maturity date of November 2018 at which time the option was exercised to purchase the equipment for $4,600.

 

8. LEASES AND OTHER COMMITMENTS

 

The Company leases premises totaling 18,000 square feet with monthly lease payments of approximately $6,300. Total minimum lease payments of $25,200 are required to the lease expiration date on July 31, 2019.

 

The Company implemented ASC 842 as of January 1, 2019, utilizing the transition relief guidance under the ASC 840 Comparatives option. The net present value of the remaining minimum lease payments were recorded utilizing a 5% discount rate and based on the previously-disclosed minimum payments through July 2019. Novus has reflected these remaining lease payments in prepaid expenses and accounts payable and accrued expenses accordingly in the amount of $24,735 respectively.

 

Novus has entered into purchase agreements to acquire two pre-construction rental properties totaling $ 574,758. Deposits in the amount of $43,986 have been paid and included in prepaid expenses. Closings on these properties are scheduled between November of 2019 and March 2020.

 

D&R Technology failed to comply with Section 5 of the Securities Act of 1933 regarding registration of its common shares issued to shareholders of D Mecatronics in connection with its spin-off of D&R Technology in 2011. In management’s opinion, any legal liability with this failure to comply has been deemed remote.

 

9. SUBSEQUENT EVENTS

 

All events were evaluated from period end through date of filing, noting nothing is required for disclosure.

 

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

 

GENERAL

 

We were formed in the State of Nevada on June 24, 2005 under the name Guano Distributors, Inc. Prior to our incorporation, on April 15, 2005, David Wallace, our then-chief executive officer, chief financial officer and sole director, formed Guano Distributors (Pty) Ltd., a South African registered company, for the purpose of selling Dry-Bar Cave bat guano. On May 15, 2005, Mr. Wallace transferred all of his ownership interest in Guano Distributors (Pty) Ltd. to us. On June 28, 2006, we amended our Articles of Incorporation to change our name to Ecoland International, Inc.

 

Please note that throughout this Quarterly Report, and unless otherwise noted, the words “we,” “our,” “us,” the “Company,” or “Novus Robotics,” refers to Novus Robotics Inc.

 

Share Exchange Agreement

 

Ecoland International, Inc., now known as Novus Robotics Inc., D&R Technology Inc., a private corporation (“D&R Technology”) and, Berardino Paolucci and Drakso Karanovic, the shareholders of D&R Technology Inc. (the “D&R Shareholders”) entered into that certain share exchange agreement dated January 27, 2012 (the “Share Exchange Agreement”). Our Board of Directors approved the execution and consummation of the transaction under the Share Exchange Agreement on February 1, 2012. In accordance with the terms and provisions of the Share Exchange Agreement, we issued an aggregate of 59,000,000 pre-Reverse Stock Split shares of our restricted common stock to the D&R Shareholders (which consisted of Messrs. Paolucci and Karanovic and D Mecatronics, which is holding the shares for the benefit of the remaining shareholders of D&R Technology) in exchange for 100% of the total issued and outstanding shares of D&R Technology, thus making D&R Technology its wholly-owned subsidiary. Our Board of Directors deemed it in the best interests of our shareholders to enter into the Share Exchange Agreement pursuant to which it would acquire all the technology and assets and assume all liabilities of D&R Technology. This resulted in a change in control and our overall business operations thus bringing potential value to our shareholders. D&R Technology was previously the wholly-owned subsidiary of D Mecatronics Inc., a Delaware corporation. On approximately November 10, 2011, D Mecatronics spun-off D&R Technology. D&R Technology subsequently issued shares of its restricted common stock to the shareholders of D Mecatronics on a pro-rata basis in accordance with their respective equity holdings in D Mecatronics. The equity percentages regarding the issuance of shares by D&R Technology were 48% to Berardino Paolucci, 24% to Drasko Karanovic and 28% to various shareholders (which shares were previously held by D Mecatronics on behalf of these shareholders).

 

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CURRENT BUSINESS OPERATIONS

 

We are involved in the area of engineering, design and manufacture of robotics and automation technology solutions for tube bending machines, which management believes will enable us to become a recognized technology pioneer and market leader in the area of engineering. Through our wholly-owned subsidiary, D&R Technology, we will provide state of the art automation technologies through its automated tube bending machines which we design, engineer and build for the automotive industry to solve its customers’ complex automation needs, increase efficiencies and improve manufacturing processes. Serving as a comprehensive engineering partner, we will work with other leading robotic manufacturers to provide the best automation technologies. We will provide automation solutions to a wide spectrum of customers and industries ranging from large Fortune 500 companies to small privately-held businesses. Our automated solutions can be found in manufacturing, assembly and processing lines throughout the United States, Canada, Mexico and South America. D&R Technology, has served the automotive industry for more than fourteen years and is currently applying its service solutions to other markets, such as medical robotics, personal robotic devices and water treatment industry. Management believes that increasing use of robotics in sectors such as food handling and processing, clean technology and energy, as well as pharmaceutical and general consumer goods production, will lead to increased demand for company’s products as manufacturers look to improve the speed, quality and reliability of production through automation. As of the date of this Quarterly Report, we have not generated any revenue from the medical robotics, personal robotic devices, water treatment industry, food handling and processing, clean technology and energy or pharmaceutical and general consumer goods production.

 

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We are involved in the area of engineering, design and the manufacturing of automated solutions through its automated tube bending machines for the automotive industry and intends to rapidly become one of the leading providers of automated manufacturing solutions, which are used primarily by three of the top ten Tier I automotive part suppliers in the world. We also make precision components and tooling using our own custom-built manufacturing systems, process knowledge and automation technology. We purchase from third parties components for the electrical cabinet, which creates the automation and controls section of the machinery. The electrical cabinet consists of fuses, holders, relays, cables, wiring, controls and sensors, which we purchase from our suppliers, i.e. Gerrie Electric, Beckhoff, Allen Bradley and others. We integrate these purchased parts from our suppliers into our electrical and controls design to make the automated tube bending machines operational. We provide all the programming of the electrical cabinet as well. The computer programming is based upon the specific needs.

 

To date, our primary activities include designing and installation of retrofits to existing automated systems, automated spare parts for our tube bending machines, automated maintenance and repairs. We are currently offering products such as Seat Frame Systems, IP Tube systems and Integrated Bend-Weld Systems for the automotive industry. Our primary focus will be placed on product engineering and manufacturing processes as discussed above to ensure the highest quality, product features and efficient manufacturing processing.

 

We are a full service provider of turn-key production solutions, specializing in tubular components for our tube bending machines. Our experience is firmly rooted in fabrication solutions for automated components, such as seat frames and instrument panel beams. Our expertise is in the areas of automation and machinery for computer numerical control (CNC) bending, forming, piercing and laser cutting, which is applicable to a wide range of production solutions. We produce spare parts for the manufacturing equipment we design. We do not produce spare parts for automobiles.

 

MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS

 

RESULTS OF OPERATION

 

For the Three Months Ended March 31  2019   2018 
         
Revenue  $879,053   $521,298 
Cost of sales   486,753    241,392 
Gross Profit   392,300    279,905 
           
Expenses          
Compensation   115,280    56,955 
Occupancy costs   17,938    18,598 
Travel   18,089    14,280 
Professional fees   174,055    50,353 
Communication   2,574    2,222 
Office and general   13,903    19,753 
           
Total operating expenses   341,839    162,162 
           
Income (loss) before other income   50,461    117,744 
Other (income) and expenses:          
Foreign exchange gain (loss)   6,018    21,302 
Recovery of scientific and development expenditures   -0-    -0- 
           
Total other income (loss)   6,018    21,302 
           
Net income (loss) before income taxes   56,480    139,047 
Provision for income taxes   (8,410)   (36,848)
Net Income (loss)   48,069    102,199 
Foreign exchange adjustment   45,423)   (15,548)
Comprehensive Income (loss)   93,492    86,651 

 

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The financial information in the table above is derived from the quarterly unaudited financial statements. The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. The Corporation’s actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this Quarterly Report on Form 10-Q. The financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

Three Month Period Ended March 31, 2019 Compared to Three Month Period Ended March 31, 2018.

 

We generated revenue during the three month period ended March 31, 2019 in the amount of $879,053 compared to $521,298 generated during the three month period ended March 31, 2018 (a increase of $357,755). Major components of the revenue mix for change from March 31, 2019 to March 31, 2018 are as follows:

 

  1.

Prototypes Parts – no projects were initiated in the first quarter of 2019 and 2018.

     
  2. Spare Parts and Services - decreased $9,617 for parts required by many customers including Adient, Toyota, PWO Kitchener, Van Rob Mexico and Adient Athens to replace worn parts.
     
  3.

Retrofit Systems - decreased $47,239. We assess old machines and recommend that specified work needs to be done on them. This includes all mechanical , electrical, hydraulic and pneumatics as required. We then replace worn parts on old overhauled benders for Adient - Lakewood System C, Adient – Athens, PWO - Kitchener, Adient – Ramos move machines for customers, install additional tooling units on existing benders.

     
  4.

Seat Frame System - increase of $414,611 as one machine was sold during Q1 2019 at a higher price point compared to the single unit sold during Q1 2018.

     
  5. Medical robotics, personal robotic devices and water treatment industry We have not generated revenue from these sources as yet and will continue to investigate opportunities in these areas to augment its core business.

 

Cost of sales: During the three month period ended March 31, 2019, cost of sales was $486,753 compared to $241,393 during the three month period ended March 31, 2018 (a increase of $245,360). The change in products sold in the three month period ended March 31, 2019 contributed to an increase in our gross margin over the three month period ended March 31, 2018. Less work for retrofit systems, where the majority of the costs are borne by the customer, did not affect product margins generated on the sale of seat frames during the three month period ended March 31, 2019.

 

Gross Profit. Thus, based on the above, our gross profit increased to $392,300 during the three month period ended March 31, 2019 from $279,905 during the three month period ended March 31, 2018.

 

Operating expenses: During the three month period ended March 31, 2019, we incurred operating expenses in the amount of $341,839 compared to operating expenses incurred during the three month period ended March 31, 2018 of $162,161 (a increase of $179,678. Operating expenses include: (i) compensation of $115,280 (2018:$56,955); (ii) occupancy costs of $17,938 (2018: $18,598); (iii) travel of $18,089 (2018: $14,280); (iv) professional fees of $174,055 (2018: $50,353); (v) communication of $2,574 (2018: $2,222); and (vi) office and general of $13,903 (2018: $19,753). In respect of compensation, more labor charges were capitalized to the work in process projects during the three month period ended March 31, 2019 compared to the three month period ended March 31, 2018 due to the timing and completion of specific projects resulting in a increase of $58,325 being charged in 2019. Travel increased by $3,809 as we focused on acquiring new customers and opportunities during the three month period ended March 31, 2019 as compared to the same period in 2018. Professional fees increased by $123,702 in the three month period ended March 31, 2019 as Mr. Paolucci received a bonus . Office and general expenses decreased by $5,850 due to an decrease in administrative expenses during 2019.

 

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Income from Operations. Thus, this resulted in net income before other income or expenses of $50,461 during the three month period ended March 31, 2019 compared to income before other income of $117,744 during the three month period ended March 31, 2018.

 

Other Income (Expense). During the three month period ended March 31, 2019, we recorded $6,018 in other income as compared to other income of $21,303 recorded in the three month period ended March 31, 2018. The continued fluctuation of the Canadian dollar in 2019 and 2018 against the United States dollar resulted during the three month period ended March 31, 2019 in a foreign exchange gain of $45,423 compared to a foreign exchange loss of ($15,548) during the three month period ended March 31, 2018 on denominations transacted and settled in foreign currencies, primarily being sales to the United States from which the monies are being converted and used to satisfy Canadian dollar operational requirements. We recovered $-0- in expenses associated with recovery of scientific research and development expenditures during the three month period ended March 31, 2019 compared to $-0- recovered during the three month period ended March 31, 2018.

 

Net income before income taxes. Thus, during the three month period ended March 31, 2019, this resulted in net income before income taxes of $56,480 compared to net income of $139,047 during the three month period ended March 31, 2018.

 

Provision for Income taxes. During the three month period ended March 31, 2019, we incurred ($8,410) in income taxes compared to ($36,848) during the three month period ended March 31, 2018.

 

Net Income. Thus, this resulted in net income of $48,069 during the three month period ended March 31, 2019 as compared to net income of $102,199 incurred during the three month period ended March 31, 2018.

 

Other Comprehensive Gain (Loss). During the three month period ended March 31, 2019, we recorded a foreign exchange adjustment of $45,423 as compared to ($15,548) during the three month period ended March 31, 2018.

 

Comprehensive Income. Thus, during the three month period ended March 31, 2019, our comprehensive income was $93,492 or $0.00 per share compared to comprehensive income of $86,651 or $0.00 for the three month period ended March 31, 2018. The weighted average number of shares outstanding was 54,296,541 for the three month periods ended March 31, 2019 and March 31, 2018, respectively.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2019

 

As of March 31, 2019, our current assets were $1,934,210 and our current liabilities were $578,126, which resulted in a working capital surplus of $1,356,084. As of March 31, 2019, current assets were comprised of: (i) $1,477,480 in cash; (ii) $308,431 in amounts receivable, net; (iii) $8,467 in inventory; (iv) $56,458 in sales tax recoverable; (v) $9,883 in security deposits; and (vi) $73,491 in prepaid expenses. As of March 31, 2019, current liabilities were comprised of: (i) $149,543 in accounts payable and accrued expenses; (ii) $14,943 in customer deposits; (iii) $40,949 in warranty provision; (iv) $372,691 in incomes taxes payable.

 

As of March 31, 2019, our total assets were $2,037,800 comprised of: (i) $1,934,210 in current assets; and (ii) $103,590 in fixed assets, net of depreciation. The decrease of total assets of $413,333. during the three month period ended March 31, 2019 from fiscal year ended December 31, 2018 was primarily due a decrease in amounts receivable, net of $191,411. and a decrease in inventory of $413,644 and an increase in prepaids of $24,735.

 

As of March 31, 2019, our total liabilities were $599,210 comprised of: (i) $578,126 in current liabilities; and (ii) $21,084 in deferred income taxes. The decrease in total liabilities of $506,825 during the three month period ended March 31, 2019 from December 31, 2018 was primarily due to a increase in accounts payable and accrued expenses of $51,781, a decrease in customer deposits of $572,333 and a increase in warranty provision of $13,727 and an increase of $27,046. in accounts payable.

 

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Total stockholders’ equity increased from $1,345,099 as of December 31, 2018 to $1,438,590 as of March 31, 2019..

 

Cash Flows from Operating Activities

 

For the three month period ended March 31, 2019, net cash flows used by operating activities was $141,677 consisting primarily of net income of $48,069. Net cash flows provided by operating activities was adjusted by $9,480 in depreciation. Net cash flow from operating activities was further changed by: (i) a decrease of $191,410 in accounts receivable; (ii) an decrease of $413,644 in inventory; (iii) a decrease of $147 in prepaid expenses; (iv) a increase of $210 in security deposit; (v) a increase of $27,046 in accounts payable and accrued expense; (vi) a decrease of $572,333 in customer deposits; (vii) a increase of $13,727 in warranty payable; and (viii) an increase of $10,696 in taxes recoverable/payable.

 

For the three month period ended March 31, 2018, net cash flows used in operating activities was $335,360 consisting primarily of net income of $102,199. Net cash flows provided by operating activities was adjusted by $7,181 in depreciation. Net cash flow from operating activities was further changed by: (i) a decrease of $210,701 in accounts receivable; (ii) a increase of $448,310 in inventory; (iii) a decrease of $9,552 in prepaid expenses; (iv) an decrease of $279 in security deposit; (v) a decrease of $50,265 in accounts payable and accrued expense; (vi) a decrease of $169,136 in customer deposits; (vii) a decrease of $4,111 in warranty payable; and (viii) an increase of $6,550. in taxes recoverable/payable.

 

Cash Flows from Investing Activities

 

For the three month periods ended March 31, 2019 and March 31, 2018, net cash flows used in investing activity was $16,582. The company purchased a Used Forklift Truck to use for loading and unloading steel and machinery.

 

Cash Flows from Financing Activities

 

For the three month period ended March 31, 2019, net cash flow used in financing activity was $-0- comprised of obligation under capital lease, net of repayments compared to net cash flow used in financing activity of $2,359 during the three month period ended March 31, 2018 comprised of obligation under capital lease, net of repayments.

 

We expect that working capital requirements will continue to be funded through a combination of our existing funds and generation of revenues. Our working capital requirements are expected to increase in line with the growth of our business.

 

PLAN OF OPERATION

 

Our principal demands for liquidity are to increase capacity, inventory purchase, sales distribution, and general corporate purposes. We are in the process of being accepted as a global prototype supplier by Johnson Controls compared to our prior role as a supplier for North America. We had been involved in discussions with Johnson Controls regarding prototypes and parts production. Johnson Controls visited our facility during early 2012 to conduct an audit for global recommendation. Their goal was to understand the processes we use to run the business and the controls that we have in place so that we were assured to have utmost control over the quality of work. The audit was based on our employees and their qualifications, data management, processes, tooling and equipment and parts and material management. Johnson Controls conducted a tour of our facility, which was followed up with a final review on May 3, 2012. Subsequently we received a call from Johnson Controls stating that we had been accepted and recommended for their global work. Therefore, we have been accepted for global work and thus provided the basis for previously disclosed projections. We may achieve those revenue projections during fiscal year 2019, however, we may also not achieve that level of revenue.

 

We intend to meet our liquidity requirements, including capital expenditures related to the purchase of equipment, purchase of inventory, and the expansion of its business, through cash flow provided by operations and funds raised through proceeds from the issuance of debt or equity.

 

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With a flexible labor force, workers are hired on a project by project basis, and strong inventory management, we are able to manage our cash flow to meet the ever changing needs of the business. We can expand and contract very quickly based on customer demand. Our major customers, Adient, Toyota Boshoku and Constellium, are consistently submitting new projects. We had $422,111 of project work in process at the end of December 31, 2018 with a total contract value of approximately $812,000. We have received committed future orders of $42,693, which is anticipated to be completed during the first half of 2019. Other revenue opportunities have historically materialized to supplement this revenue being service and retooling.

 

We have not paid any sums for public relations or investor relations.

 

MATERIAL COMMITMENTS

 

Other than the lease obligation and note referenced below, we have no other reportable material commitments for the three month period ended March 31, 2019.

 

Novus has entered into purchase agreements to acquire two pre-construction rental properties totaling $ 574,758. Deposits in the amount of $43,986 have been paid and included in prepaid expenses. Closings on these properties are scheduled between November of 2019 and March 2020

 

Lease

 

We currently have a three-year lease on a standalone building located at 7669 Kimbel Street, Mississauga, Ontario, Canada, which is 18,000 square feet. The building is located on approximately one acre of land. The building has two floors of office/engineering space, 1,500 square feet, and the balance is used for its welding, assembly and machining areas. We also have two loading docks for shipping.

 

We lease the premises with monthly lease payments of approximately US$6,300 per month. Total minimum lease payments of US$25,200 are required to the lease expiration date on July 31, 2019.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

We evaluated recent accounting updates and the potential impact upon adoption. See Footnote No. 2 to the financial statements.

 

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

 

The discussion and analysis of our financial condition and plan of operations is based upon our interim consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these interim financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates including, among others, those affecting revenue, the allowance for doubtful accounts, the salability of inventory and the useful lives of tangible and intangible assets. The discussion below is intended as a brief discussion of some of the judgments and uncertainties that can impact the application of these policies and the specific dollar amounts reported on our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. Many of our estimates or judgments are based on anticipated future events or performance, and as such are forward-looking in nature, and are subject to many risks and uncertainties, including those discussed elsewhere in this Quarterly Report on Form 10-Q. We do not undertake any obligation to update or revise this discussion to reflect any future events or circumstances.

 

See Footnote No. 2 to the financial statements.

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for smaller reporting company.

 

ITEM 4. CONTROLS AND PROCEDURES

 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of March 31, 2019 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

 

Based on such evaluation, our Chief Executive Officer/Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our internal controls over financial reporting were not effective:

 

  to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and
     
  to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

 22 
 

 

We believe that the foregoing steps will remediate the significant deficiencies identified above, and we will continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate. A material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.

 

During our assessment of the effectiveness of internal control over financial reporting as of March 31, 2019, management identified significant deficiencies related to: (i) the absence of an Audit Committee as of March 31, 2019; and (ii) a lack of segregation of duties within accounting functions.

 

We began preparing to be in compliance with the internal control obligations, including Section 404, for our fiscal year ending December 31, 2018. In an effort to improve our internal control environment, management has engaged a Chartered Accountant to review the work prepared by the controller. He is independent of the daily accounting function. He prepares the quarterly financial statement after reviewing and recommending adjustments to the records based on his analysis of the financial information presented. This review includes vouching and reconciling key accounts to source documents.

 

In order to correct the foregoing weaknesses, we have taken certain further remediation measures and designed new internal controls and procedures to ensure: (a) effectiveness and efficiency of operations; (b) reliability of financial reporting; and (c) compliance with laws and regulations. To that end, management will provide a controlled environment which organizes and influences its people.

 

(a) Management is establishing an information and communication system for its executives and employees allowing them to carry out their responsibilities in an organized and process driven manner.
   
(b) The firm engaged the Chartered Accountant to assist with: (a) compiling and maintaining our financial records; (b) assisting the bookkeeping staff with proper recording of transactions; (c) maintaining permanent accounting records and proper backup procedures; and (d) providing continuous monitoring of accounting functions throughout the company. In addition, the Chartered Accountant will perform a risk assessment which identifies and analyzes the relevant risks management should address in order to achievement of its objectives. The Chartered Accountant will also assist with the preparation of written policies and procedures that will help ensure management directives are carried out.
   
(c) Our President/Chief Executive Officer is serving as the point of communication between us and the audit firm. Communication between our President/Chief Executive Officer and the audit firm’s engagement partner has been established to ensure that the audit is aware of management’s intent and actions.

 

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Inherent Limitations on Effectiveness of Controls

 

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our CEO and our CFO have concluded that these controls and procedures are not effective at the “reasonable assurance” level.

 

Changes in internal controls

 

There were no changes in internal controls for the three month period ended March 31, 2019.

 

AUDIT COMMITTEE REPORT

 

Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. We intend to establish an audit committee during fiscal year 2017. When established, the audit committee’s primary function will be to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee’s primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management’s establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

No report required.

 

ITEM 1A. RISK FACTORS

 

No report required.

 

ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

 

No report required.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

No report required.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

No report required.

 

ITEM 5. OTHER INFORMATION

 

No report required.

 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

 

(d) Exhibits. The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.

 

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Exhibit
Number
  Description
     
3. 1   Articles of Incorporation of Ecoland International Inc. and all amendments thereto incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Registration Statement on Form SB-2 on February 1, 2007 and the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 20, 2012.
     
3.2   Bylaws of Ecoland International Inc. incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Registration Statement on Form SB-2 on February 1, 2007
     
10.1   Share Exchange Agreement between Ecoland International Inc. and D&R Technologies Inc
     
10.2   Lease Agreement between STENVI STEEL CO. LTD. (The Landlord) and D & R TECHNOLOGY INC. (The Tenant) incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on August 20, 2012.
     
10.3   Lease between Stenvi Steel Co. Ltd and D&R Technology Inc. dated March 10, 2010 incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.4   Stock Purchase Agreement among D&R Technology, Inc. and certain selling shareholders of Ecoland International Inc. dated November 7, 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.5   Rescission Agreement among D&R Technology Inc. and certain shareholders of Ecoland International Inc. dated January 27, 2012 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.6   Convertible Promissory Note between Ecoland International Inc. and Stephen Treanor dated December 15, 2006 incorporated herewith as filed with the Securities and Exchange Commission as an exhibit to the SB-2 Registration Statement on April 18, 2007.
     
10.7   Convertible Promissory Note between Ecoland International Inc. and Raymond Russell dated December 15, 2006 incorporated herewith as filed with the Securities and Exchange Commission as an exhibit to the S-1 Registration Statement on April 18, 2007.
     
10.8   Convertible Promissory Note between Ecoland International Inc. and Donna Boyle dated April 15, 2008 incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.9   Purchase Order 013863 dated March 6, 2012 from Broshco Fab Products incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.10   Purchase Order 39066968 dated September 14, 2011 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.11   Purchase Order 39073789 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.12   Purchase Order 39074711 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.13   Purchase Order 39079925 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.14   Purchase Order 39082436 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.

 

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10.15   Purchase Order 39083371 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.16   Purchase Order 39083718 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.17   Purchase Order 4006857 from Manufacturers Industrial Group incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.18   Settlement Agreement between Ecoland International Inc. and Stephen Treanor dated December 15, 2009 incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.19   Settlement Agreement between Ecoland International Inc. and Raymond Russell dated December 15, 2009 incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.20   Settlement Agreement between Ecoland International Inc. and Donna Boyle dated December 15, 2009 incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on October 11, 2012.
     
10.21   Purchase Order 39076849 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on December 17, 2012 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.22   Purchase Order 39064982 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on December 17, 2012 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.23   Purchase Order 39043224 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on December 17, 2012 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.24   Purchase Order 39061937 from Johnson Controls incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on December 17, 2012 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.25   Assignment Agreement dated January 2, 2013 between Stephen Treanor and Bernardino Paolucci 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.26   Assignment Agreement dated January 2, 2013 between Raymond Russell and Bernardino Paolucci 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.
     
10.27   Assignment Agreement dated January 2, 2013 between Donna Boyle and Bernardino Paolucci.
     
10.28   Purchase Order 39099733 Rev. 2 dated February 5, 2013 from Johnson Controls 2011 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on February 8, 2013.

 

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10.29   Purchase Order 50382 dated November 15, 2011 with PWO Canada Inc. as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on March 20, 2013.
     
10.30   Purchase Order 182366 dated November 23, 2011 Toyota Boshuku as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on March 20, 2013.
     
10.31   Purchase Order 182367 Dated November 28, 2011 with Toyota Boshuku as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on March 20, 2013.
     
10.32   Purchase Order 40863 dated February 4, 2012 with Toyota Boshuku as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on March 20, 2013.
     
10.33   Purchase Order 21052074 dated March 12, 2012 with Johnson Controls as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on March 20, 2013.
     
16.1   Letter from De Joya Griifith LLC dated April 21, 2015 filed as exhibit to Current Report on Form 8-K regarding Item 4.01 with the Securities and Exchange Commission on April 22, 2015.
     
16.1.2   Letter from De Joya Griffith LLC dated April 22, 2015 filed as an exhibit to Current Report on Form 8-K regarding Item 4.02 with the Securities and Exchange Commission on April 22, 2015.
     
21   List of Subsidiaries incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on December 17, 2012
     
99.1   Audited financial statements of D&R Technologies Inc. incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on August 20, 2012.
     
99.2   Unaudited pro forma combined financial statements of D&R and Ecoland International Inc. incorporated herewith as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on form 8-K on August 20, 2012.

 

99.3   Press Release of Novus Robotics Inc. dated January 5, 2013 as filed with the Securities and Exchange Commission as an Exhibit to the Current Report on Form 8-K on March 20, 2013.
     
31.1  

Rule 13a-15(e)/15d-15(e) Certification by the Chief Executive Officer and Chief Financial Officer

     
32.1  

Certification by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     
    All of the foregoing exhibits, except for Exhibits 31.1 and 32.1 which are included with this Report, are incorporated by reference from previous reports field by the Company on Forms 8-K, 10-Q and 10-K.
     
101.INS **   XBRL Instance Document
     
101.SCH **   XBRL Taxonomy Extension Schema Document
     
101.CAL **   XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF **   XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB **   XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE **   XBRL Taxonomy Extension Presentation Linkbase Document

 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

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

 

  NOVUS ROBOTICS INC.
     
Dated: May 17, 2019 By: /s/ Berardino Paolucci
    Berardino Paolucci,
    President/Chief
    Executive Officer

 

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