NRBT Novus Robotics Inc (PK)

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.

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.

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.

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:

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.

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.

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.

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.