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).

CURRENT BUSINESS OPERATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2019

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

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

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

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

Cash Flows from Operating Activities

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

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

Cash Flows from Investing Activities

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

Cash Flows from Financing Activities

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

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

PLAN OF OPERATION

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

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

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

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

MATERIAL COMMITMENTS

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

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

Lease

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

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

See Footnote No. 2 to the financial statements.