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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Novus Robotics Inc (PK) | USOTC:NRBT | OTCMarkets | Common Stock |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.0139 | -19.89% | 0.056 | 0.0553 | 0.10 | 0.059 | 0.056 | 0.059 | 400 | 21:02:27 |
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, 2018 |
| [ ] | 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 Kimbal 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 |
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 | [ ] | 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
Indicate by checkmark whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]
Applicable Only to Corporate Registrants.
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most practicable date:
| Class | Outstanding as of May 14, 2018 | |||
| Common Stock, $0.001 | 54,296,641 | |||
NOVUS ROBOTICS INC.
Form 10-Q
| 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 |
NOVUS ROBOTICS INC.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2018
NOVUS ROBOTICS INC.
| March 31,2018 | December 31,2017 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 1,355,880 | $ | 1,705,806 | ||||
| Amounts receivable, net | 171,486 | 382,187 | ||||||
| Inventory | 1,140,047 | 691,737 | ||||||
| Sales tax recoverable | 72,387 | 42,089 | ||||||
| Security deposits | 10,239 | 10,518 | ||||||
| Prepaid expense | 1,349 | 10,901 | ||||||
| Total current assets | 2,751,388 | 2,843,238 | ||||||
| Fixed assets | ||||||||
| Fixed assets, net of deprecation | 121,039 | 131,561 | ||||||
| Total assets | $ | 2,872,427 | $ | 2,974,799 | ||||
| LIABILIITIES | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 299,044 | $ | 349,309 | ||||
| Customer deposits | 659,048 | 828,184 | ||||||
| Warranty provision | 14,418 | 18,529 | ||||||
| Income taxes payable | 409,538 | 372,691 | ||||||
| Obligation under capital lease | 12,359 | 14,718 | ||||||
| Total current liabilities | 1,394,408 | 1,583,431 | ||||||
| Deferred income taxes | 27,408 | 27,408 | ||||||
| Total liabilities | 1,421,816 | 1,610,839 | ||||||
| COMMITMENTS AND CONTINGENCIES - Note 6 | - | - | ||||||
| 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, 2017 - 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, 2017- 54,296,641 common shares) | 54,296 | 54,296 | ||||||
| Additional paid in capital | 58,354 | 58,354 | ||||||
| Accumulated other comprehensive loss | (400,856 | ) | (385,308 | ) | ||||
| Retained earnings | 1,737,817 | 1,635,618 | ||||||
| Total stockholders’ equity | 1,450,611 | 1,363,960 | ||||||
| Total liabilities and stockholders’ equity | $ | 2,872,427 | $ | 2,974,799 | ||||
The accompanying notes are an integral part of these consolidated financial statements
| 4 |
NOVUS ROBOTICS INC.
Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
| For The Three Months Ended March 31, | 2018 | 2017 | ||||||
| Revenue | $ | 521,298 | $ | 2,088,292 | ||||
| Cost of sales | 241,392 | 1,100,198 | ||||||
| Gross Profit | 279,905 | 988,094 | ||||||
| Expenses | ||||||||
| Compensation | 56,955 | 196,185 | ||||||
| Occupancy costs | 18,598 | 18,667 | ||||||
| Travel | 14,280 | 38,148 | ||||||
| Professional fees | 50,353 | 17,953 | ||||||
| Communication | 2,222 | 2,235 | ||||||
| Office and general | 19,753 | 17,662 | ||||||
| Total operating expenses | 162,162 | 290,851 | ||||||
| Income before other income and income taxes | 117,744 | 697,243 | ||||||
| Other income (expense) | ||||||||
| Foreign exchange gain (loss) | 21,302 | (8,053 | ) | |||||
| Recovery of scientific research and development expenditures | - | 60,336 | ||||||
| Total other income (expense) | 21,302 | 52,283 | ||||||
| Net income before income taxes | 139,047 | 749,526 | ||||||
| Provision for income taxes | (36,848 | ) | (198,624 | ) | ||||
| Net income | 102,199 | 550,902 | ||||||
| Other comprehensive income (loss) | ||||||||
| Foreign exchange adjustment | (15,548 | ) | 14,168 | |||||
| Comprehensive Income | $ | 86,651 | $ | 565,070 | ||||
| Basic loss per share | $ | 0.00 | $ | 0.01 | ||||
| Diluted income per share | $ | 0.00 | $ | 0.01 | ||||
| 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.
Consolidated Statements of Cash Flows
(Unaudited)
| For The Three Months Ended March 31, | 2018 | 2017 | ||||||
| Cash flow from operating activities | ||||||||
| Net income | $ | 102,199 | $ | 550,902 | ||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation | 7,181 | 6,734 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Decrease (increase) in accounts receivable | 210,701 | (247,163 | ) | |||||
| Decrease (increase) in inventory | (448,310 | ) | 854,613 | |||||
| Decrease (increase) in prepaid expenses | 9,552 | 1,768 | ||||||
| Decrease (increase) in security deposits | 278 | (84 | ) | |||||
| Increase (decrease) in accounts payable and accrued expense | (50,265 | ) | (87,423 | ) | ||||
| Increase (decrease) in customer deposits | (169,136 | ) | (939,977 | ) | ||||
| Increase (decrease) in warranty payable | (4,111 | ) | (2,423 | ) | ||||
| Increase (decrease) in taxes recoverable/payable | 6,550 | 271,370 | ||||||
| Net cash provided by (used in) operating activities | (335,360 | ) | 408,315 | |||||
| Cash Flow from Financing activity | ||||||||
| Obligation under capital lease, net of repayments | (2,359 | ) | (1,745 | ) | ||||
| Net cash used in financing activity | (2,359 | ) | (1,745 | ) | ||||
| Effect of foreign exchange rate on changes in cash | (12,207 | ) | 695 | |||||
| Increase (decrease) in cash | (349,926 | ) | 407,265 | |||||
| Cash, beginning of period | 1,705,806 | 479,380 | ||||||
| Cash, end of period | $ | 1,355,880 | $ | 886,645 | ||||
The accompanying notes are an integral part of these consolidated financial statements
| 6 |
NOVUS ROBOTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018
(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.
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 Toolings 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.
| 7 |
NOVUS ROBOTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018
(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, 2018, 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, 2018, 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.
| 8 |
NOVUS ROBOTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018
(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 31,2018, the Company had $7,796 (2017 - $Nil) of factored receivables. Finance charges associated with the sale of factored receivable for the period ended March 31, 2018 were $1,268 (2017 - $Nil) 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, 2018, 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 March 31, 2018 was comprised of work-in-progress. 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 straight line 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 |
| 9 |
NOVUS ROBOTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018
(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.
| 10 |
NOVUS ROBOTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018
(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. | Spare parts – Revenues and cost of sales are recognized at the time of sale. | |
| 2. | Service – Revenues and cost of sales are recognized at the time services are performed and accepted by customer via sign off. | |
| 3. | Seat systems and tooling – 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, 2018 and December 31, 2017 customer deposits were $659,048 and $828,184 respectively. |
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, 2018 and December 31, 2017, warranty liability was $14,418 and $18,529.
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.
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.
Recent Accounting Pronouncements
The Company has evaluated recent accounting updates and the potential impact upon adoption from which Novus has discerned that any new accounting standard updates are not expected to have a significant impact on the Company’s financial statements.
| 11 |
NOVUS ROBOTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018
(Unaudited)
3. FIXED ASSETS
Fixed assets are comprised of the following:
| March 31, 2018 | December 31, 2017 | |||||||
| Office equipment | $ | 9,028 | $ | 9,274 | ||||
| Computer equipment | 295,250 | 303,278 | ||||||
| Delivery trucks | 21,339 | 21,919 | ||||||
| Shop and machinery equipment | 393,040 | 403,727 | ||||||
| Equipment under capital lease | 49,121 | 50,456 | ||||||
| Accumulated depreciation | (646,739 | ) | (657,094 | ) | ||||
| Total fixed assets | $ | 121,039 | $ | 131,561 | ||||
Depreciation expense for the quarter ended March 31, 2018 was $7,181 (2017 - $6,734).
4. 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 exists to purchase the equipment for $4,600.
5. COMMON AND PREFERRED STOCK
On October 26, 2015, the Board of Directors approved a reverse stock split of one for three hundred reverse stock split of the Company’s total issued and outstanding shares of common stock. The Reverse Stock Split was affected on January 21, 2016 and reduced the total number of issued and outstanding common shares from 88,650,000 to 296,641. The resultant decrease in the value attributed to the common stock was transferred to Additional Paid In Capital (“APIC”) in the amount of $88,354. All share and related stock option information presented in these consolidated financial statements has been retroactively adjusted to the reduced number of shares resulting from this transaction.
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.
6. LEASES AND OTHER COMMITMENTS
The Company leases premises totaling 18,000 square feet with monthly lease payments of approximately CDN$8,400 per month. Total minimum lease payments of CDN$134,400 are required to the lease expiration date on July 31, 2019.
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.
| 12 |
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).
Escrow Agreement. On June 4, 2013, our Board of Directors authorized the execution of that certain escrow agreement dated June 4, 2013 (the “Escrow Agreement”) with Manhattan Transfer Registrar Co., our transfer agent (“Manhattan Transfer”). As disclosed in previous filings with the Securities and Exchange Commission, on approximately November 10, 2011, D Mecatronics Inc. (“D Mecatronics”) spun-off our wholly-owned subsidiary, 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 being held by D Mecatronics on behalf of these shareholders). The transfer agent for D Mecatronics at the time of the spin-off was Global Sentry Equity Transfer Inc. (“Global Sentry”). At the time of the spin-off, management of D Mecatronics had attempted on several occasions to contact Global Sentry with regards to its shareholder list and records. However, any and all attempts were to no avail. To date, D Mecatronics has not been able to obtain any of its records, including a shareholders list, from Global Sentry. Management has no knowledge or information as to the whereabouts of Global Sentry or its management nor of the location of its records and shareholders list. This has impeded the issuance of the shares of D&R Technology to the appropriate 28% minority shareholders of D Mecatronics and thus the reason why D Mecatronics was holding the shares in trust for the benefit of its shareholders.
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Subsequently, we entered into the Share Exchange Agreement. Our Board of Directors had 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 held 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 our wholly-owned subsidiary. The Board of Directors deemed it in the best interests of the 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.
The majority shareholders of D&R Technology approved the Share Exchange Agreement as did its Board of Directors. The Board of Directors of D&R Technology resolved in its board resolutions to issue to D Mecatronics the 16,520,000 pre-reverse stock split shares on behalf of the missing 28% minority shareholders of D&R Technology (who are also the unknown shareholders of D Mecatronics). Therefore, D Mecatronics held in trust and for the benefit of its unknown shareholders (and as shareholders of D&R Technology) the shares to be issued to them by the Company. D Mecatronics is in the process of attempting to locate the transfer agent in order to obtain its records.
We are also in the process of locating the missing shareholders of D Mecatronics (and also as shareholders of D&R Technology) to whom our shares should be issued in accordance with the terms and provisions of the Share Exchange Agreement. Therefore, we entered into the Escrow Agreement. In accordance with the terms and provisions of the Escrow Agreement, D Mecatronics returned to Manhattan Transfer the share certificate evidencing the shares of our common stock issued to it as trustee. A new share certificate was issued to Manhattan Transfer as trustee in the aggregate denomination of 16,520,000 shares to be held in escrow. Together with Manhattan Transfer, we created a shareholders list (the “Shareholders List”) indicating each record owner of the shares. Subsequent to the date of the Escrow Agreement, Manhattan Transfer has released shares to certain of the persons indicated on the Shareholders List. As of the date of this Quarterly Report, Manhattan Transfer has issued approximately 5,331,641 of the 16,520,000 shares held in escrow to the shareholders listed on the Shareholder List.
We will place on our website www.novusrobotics.com (which is currently under construction) under “Investor Relations” contact information to be used by persons/entities that believe they were shareholders of D Mecatronics. Such individuals/entities should contact our management.
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 seven 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.
Our business is in the early development and operating stages. 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 | 2018 | 2017 | ||||||
| Revenue | $ | 521,298 | $ | 2,088,292 | ||||
| Cost of sales | 241,392 | 1,100,198 | ||||||
| Gross Profit | 279,905 | 988,094 | ||||||
| Expenses | ||||||||
| Compensation | 56,955 | 196,185 | ||||||
| Occupancy costs | 18,598 | 18,667 | ||||||
| Travel | 14,280 | 38,148 | ||||||
| Professional fees | 50,353 | 17,953 | ||||||
| Communication | 2,222 | 2,235 | ||||||
| Office and general | 19,753 | 17,662 | ||||||
| Total operating expenses | 162,162 | 290,851 | ||||||
| Income (loss) before other income | 117,744 | 697,243 | ||||||
| Other (income) and expenses: | ||||||||
| Foreign exchange gain (loss) | 21,302 | (8,053 | ) | |||||
| Recovery of scientific and development expenditures | -0- | 60,336 | ||||||
| Total other income (loss) | 21,302 | 52,283 | ||||||
| Net income (loss) before income taxes | 139,047 | 749,526 | ||||||
| Provision for income taxes | (36,848 | ) | (198,624) | |||||
| Net Income (loss) | 102,199 | 550,902 | ||||||
| Foreign exchange adjustment | (15,548 | ) | 14,168 | |||||
| Comprehensive Income (loss) | 86,651 | 565,070 | ||||||
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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, 2018 Compared to Three Month Period Ended March 31, 2017.
We generated revenue during the three month period ended March 31, 2018 in the amount of $521,298 compared to $2,088,292 generated during the three month period ended March 31, 2017 (a decrease of $1,566,994). Major components of the revenue mix for change from March 31, 2018 to March 31, 2017 are as follows:
| 1. |
Prototypes Parts – decreased $319,229 for prototypes for Adient/JCI projects as no projects were initiated in the first quarter of 2018. |
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| 2. | Spare Parts and Services - decreased $56,843 for parts required by many customers including Adient, Toyota, PWO Kitchener, Van Rob Mexico and Adient Athens to replace worn parts. | |
| 3. |
Retrofit Systems - increased $30,226. 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 benders overhauled benders for Adient - Lakewood System C, Adient – Athens, PWO - Kitchener, Adient – Ramos move machines for customers, install additional tooling units on existing benders. |
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| 4. |
Seat Frame System - decrease of $1,160,696 as one machines was sold during Q1 2017 at a higher price point compared to the single unit sold during Q1 2018. |
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| 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, 2018, cost of sales was $241,392 compared to $1,100,198 during the three month period ended March 31, 2017 (a decrease of $858,806). The change in products sold in the three month period ended March 31, 2018 contributed to a decrease in our gross margin over the three month period ended March 31, 2017. Less work for retrofit systems, where the majority of the costs are borne by the customer, did not assist in offsetting the lower product margins generated on the sale of seat frames during the three month period ended March 31, 2018.
Gross Profit. Thus, based on the above, our gross profit decreased to $279,905 during the three month period ended March 31, 2018 from $988,094 during the three month period ended March 31, 2017.
Operating expenses: During the three month period ended March 31, 2018, we incurred operating expenses in the amount of $162,162 compared to operating expenses incurred during the three month period ended March 31, 2017 of $290,851 (a decrease of $128,689). Operating expenses include: (i) compensation of $56,955 (2017: $196,185); (ii) occupancy costs of $18,598 (2017: $18,667); (iii) travel of $14,280 (2017: $38,148); (iv) professional fees of $50,353 (2017: $17,953); (v) communication of $2,222 (2017: $2,235); and (vi) office and general of $19,753 (2017: $17,662). In respect of compensation, more labor charges were capitalized to the work in process projects during the three month period ended March 31, 2017 compared to the three month period ended March 31, 2018 due to the timing and completion of specific projects resulting in a decrease of $139,230 being charged in 2018. Travel decreased by $23,868 as we focused on acquiring new customers and opportunities during the three month period ended March 31, 2017 as compared to the same period in 2018. Professional fees increased by $32,400 in the three month period ended March 31, 2018 as the additional charges associated with our auditors were incurred during this time frame, which we did not incur in 2017. Office and general expenses increased by $2,091 due to an increase in administrative expenses during 2018.
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Income from Operations. Thus, this resulted in net income before other income or expenses of $117,744 during the three month period ended March 31, 2018 compared to income before other income of $697,243 during the three month period ended March 31, 2017.
Other Income (Expense). During the three month period ended March 31, 2018, we recorded $21,302 in other income as compared to other income of $52,283 recorded in the three month period ended March 31, 2017. The continued fluctuation of the Canadian dollar in 2018 and 2017 against the United States dollar resulted during the three month period ended March 31, 2018 in a foreign exchange gain of $21,302 compared to a foreign exchange loss of ($8,053) during the three month period ended March 31, 2017 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, 2017 compared to $60,336 recovered during the three month period ended March 31, 2017.
Net income before income taxes. Thus, during the three month period ended March 31, 2018, this resulted in net income before income taxes of $139,047 compared to net income of $749,526 during the three month period ended March 31, 2017.
Provision for Income taxes. During the three month period ended March 31, 2018, we incurred ($36,848) in income taxes compared to ($198,624) during the three month period ended March 31, 2017.
Net Income. Thus, this resulted in net income of $102,199 during the three month period ended March 31, 2018 as compared to net income of $550,902 incurred during the three month period ended March 31, 2017.
Other Comprehensive Gain (Loss). During the three month period ended March 31, 2018, we recorded a foreign exchange adjustment of ($15,548) as compared to $14,168 during the three month period ended March 31, 2017.
Comprehensive Income. Thus, during the three month period ended March 31, 2018, our comprehensive income was $86,651 or $0.00 per share compared to comprehensive income of $565,070 or $0.01 for the three month period ended March 31, 2017. The weighted average number of shares outstanding was 54,296,541 for the three month periods ended March 31, 2018 and March 31, 2017, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2018
As of March 31, 2018, our current assets were $2,751,385 and our current liabilities were $1,394,408, which resulted in a working capital surplus of $1,356,980. As of March 31, 2018, current assets were comprised of: (i) $1,355,880 in cash; (ii) $171,486 in amounts receivable, net; (iii) $1,140,047 in inventory; (iv) $72,387 in sales tax recoverable; (v) $10,239 in security deposits; and (vi) $1,347 in prepaid expenses. As of March 31, 2018, current liabilities were comprised of: (i) $299,044 in accounts payable and accrued expenses; (ii) $659,048 in customer deposits; (iii) $14,418 in warranty provision; (iv) $409,538 in incomes taxes payable; and (v) $12,359 in obligations under capital lease.
As of March 31, 2018, our total assets were $2,872,424 comprised of: (i) $2,751,385 in current assets; and (ii) $121,039 in fixed assets, net of depreciation. The slight decrease of total assets of $102,375 during the three month period ended March 31, 2018 from fiscal year ended December 31, 2017 was primarily due a decrease in amounts receivable, net of $210,701 and a decrease in cash of $349,926.
As of March 31, 2018, our total liabilities were $1,421,816 comprised of: (i) $1,394,408 in current liabilities; and (ii) $27,408 in deferred income taxes. The decrease in total liabilities of $189,023 during the three month period ended March 31, 2018 from December 31, 2017 was primarily due to a decrease in accounts payable and accrued expenses, a decrease in customer deposits of $169,136 and a decrease in warranty provision of $4,111 which was offset by an increase in estimated taxes payable of $36,848.
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Total stockholders’ equity increased from $1,363,960 as of December 31, 2017 to $1,450,611 as of March 31, 2018.
Cash Flows from Operating Activities
For the three month period ended March 31, 2018, net cash flows used by 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) an increase of $448,310 in inventory; (iii) a decrease of $9,552 in prepaid expenses; (iv) a decrease of $278 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.
For the three month period ended March 31, 2017, net cash flows provided by operating activities was $408,315 consisting primarily of net loss of $550,902. Net cash flows provided by operating activities was adjusted by $6,734 in depreciation. Net cash flow from operating activities was further changed by: (i) a decrease of $247,163 in accounts receivable; (ii) a decrease of $854,613 in inventory; (iii) a decrease of $1,768 in prepaid expenses; (iv) an increase of $84 in security deposit; (v) a decrease of $87,423 in accounts payable and accrued expense; (vi) a decrease of $939,977 in customer deposits; (vii) a decrease of $2,423 in warranty payable; and (viii) an increase of $271,370 in taxes recoverable/payable.
Cash Flows from Investing Activities
For the three month periods ended March 31, 2018 and March 31, 2017, net cash flows used in investing activity was $-0-.
Cash Flows from Financing Activities
For the three month period ended March 31, 2018, net cash flow used in financing activity was $2,359 comprised of obligation under capital lease, net of repayments compared to net cash flow used in financing activity of $1,745 during the three month period ended March 31, 2017 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 2018, 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, JCI, Adient and Constellium, are consistently submitting new projects. We had $828,216 of project work in process at the end of December 31, 2017 with a total contract value of approximately $2,123,990. We have received committed future orders of over $230,268, which are anticipated to be completed during the first half of 2018. 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, 2018.
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 CDN$8,400 per month. Total minimum lease payments of CDN$134,400 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, 2018 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. |
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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, 2018, management identified significant deficiencies related to: (i) the absence of an Audit Committee as of March 31, 2018; 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. |
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision and with the participation of the Company’s management, including the chief executive officer and principal financial officer, we evaluated the effectiveness of our internal control over financial reporting as of March 31, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO 2013”) in Internal Control-Integrated Framework. Based on our assessment, no progress toward remediation of our previously disclosed material weaknesses has been implemented.
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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, 2018.
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.
No report required.
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.
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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| 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 * | |
| 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.
| 25 |
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 15, 2018 | By: | /s/ Berardino Paolucci |
| Berardino Paolucci, | ||
| President/Chief | ||
| Executive Officer | ||
| 26 |
1 Year Novus Robotics (PK) Chart |
1 Month Novus Robotics (PK) Chart |
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