ITEM 2.01 COMPLETION OF ACQUISITON OR DISPOSITION OF ASSETS
The Corporation refers to Item 1.01 above, “Entry into Material Definitive Agreement” and incorporates the contents of that section herein, as if fully set forth under this Section 2.01.
BUSINESS DEVELOPMENT
Historical Business
The Corporation was formed in the State of Nevada on June 24, 2005 under the name Guano Distributors, Inc. Prior to its incorporation, on April 15, 2005, David Wallace, its 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 the Corporation. On June 28, 2006, the Corporation amended its Articles of Incorporation to change its name to Ecoland International, Inc.
Certificate of Amendment
On March 13, 2012, we filed a Certificate of Amendment with the Nevada Secretary of State in order to change our name from “Ecoland International Inc..” to “Novus Robotics Inc.” (the “Name Change”). The Name Change was effective with the Nevada Secretary of State on March 13, 2012 when the Certificate of Amendment was filed. The Name Change was approved by our Board of Directors pursuant to written consent resolutions dated February 21, 2012 and further approved by certain shareholders holding a majority of our total issued and outstanding shares of common stock pursuant to written consent resolutions dated February 21, 2012.
We filed the appropriate documentation with FINRA in order to effectuate the Name Change in the OTC Markets. The Name Change was effected on the OTC Markets April 10, 2012. Our new cusip number is 67011H108.
Therefore, as of the date of this Current Report, our trading symbol is “NRBT”. Our management deemed it appropriate to change our name to Novus Robotics Inc. in furtherance of and to better reflect the nature of our new business operations.
DESCRIPTION OF BUSINESS OPERATIONS
General
The Corporation will be involved in the area of engineering, design and manufacture of robotics and automation technology solutions, which management believes will enable the Corporation to become a recognized technology pioneer and market leader in the area of engineering. Through its wholly-owned subsidiary, D&R Technology, the Corporation will provide state of the art automation technologies to solve its customers’ complex automation needs, increase efficiencies and improve manufacturing processes. Serving as a comprehensive engineering partner, the Corporation will work with other leading robotic manufacturers to provide the best automation technologies. The Corporation 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.
The Corporation is involved in the area of engineering, design and the manufacturing of automated solutions 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. The Corporation also makes precision components and tooling using its own custom-built manufacturing systems, process knowledge and automation technology.
The Corporation’s business is in its early development and operating stages. To date, the Corporation’s primary activities include designing and installation of retrofits to existing automotive systems, automotive spare parts, automotive maintenance and repairs. The Corporation is currently offering products such as Seat Frame Systems, IP Tube systems and Integrated Bend-Weld Systems for the automotive industry. The Corporation’s 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.
Industry
The automotive parts industry is divided into three tiers of original equipment manufacturers (“OEMs”), which supply automotive manufacturers with parts for new vehicles, and the aftermarket parts suppliers, which manufacture parts for used vehicles.
The automobile industry is one of the largest sectors of the global economy. In 2011, a market research firm valued the global automobile components sector at over $1.8 trillion dollars and the global automotive parts and equipment sector at almost $600,000,000. The global automotive manufacturing industry operates in an increasingly aggressive marketplace whose performance is tied directly to performance of the large and growing retail automobile industry. The top six companies in the global manufacturing industry are General Motors (GM), Toyota, Ford, Daimler/Chrysler, Volkswagen and Honda and, of those, the Corporation’s subsidiary, D&R Technology, has produced machines supplying parts and components for five of the top six manufacturers.
The automotive industry marketplace is the nation’s largest manufacturing industry. It is a mature, steadily growing marketplace with an estimated value in the hundreds of billions. The nation’s automotive manufacturing industry is tied to the U.S. automotive industry, which is considered one of the largest automotive retail marketplaces in the world.
Products
The Corporation provides special purpose machinery products and services to Automotive Tier I businesses and their suppliers. The Corporation’s services include design and installation of retrofits to existing systems, spare parts, maintenance, repairs and production support. The Corporation builds seat frame systems and tube processing lines. Each system consists of self contained tooling modules linked by a series of automated transfer or robots. Several modules will be integrated into a processing system by adding single or multi-axis transfer units. This approach allows uniformity of design, which provides ease of expansion, simplicity of operation, and excellent throughput rates.
The Corporation’s value propositions regarding its machinery products and services are: (i) delivery – providing on-time delivery thereby reducing customer inventory and providing them with overall cost reduction; (ii) quality – products and services that the Corporation delivers are of high quality and have attributes that enable customers to carry out their business functions; and (iii) price – products are competitively priced thus helping customers control their own overhead and expenses.
The Corporation’s primary focus will be placed on product engineering and manufacturing processes to ensure the highest quality, high level of product features, and the most efficient manufacturing process possible. The Corporation will focus its market offerings on two major customer groups: (i) automobile seating manufacturers; and (ii) manufacturers of tubing products.
Marketing
The Corporation’s target customers are: (i) automotive seating manufacturers, who are customers requiring customized machine tools to better serve their clients; and (ii) manufacturers of tubing products, who are customers requiring a value adding process layout. The Corporation will continue to focus its market offerings to automobile seating manufacturers and manufacturers of tubing products. The Corporation’s market research reflects that these customer segments are the most demanding in terms of the engineering, technical service support, and automated machinery design. The Corporation is particularly strong in these areas and will utilize its capacities to serve these clients. The Corporation will seek customers who require production of components used in upper-end product lines. This will provide a further possibility for the Corporation to offer its value-added engineering robotics services.
The Corporation’s market strategy is to capitalize on its expertise by manufacturing high quality, durable machinery with a significant number of product features and options, which are extremely precise in control of motions. The Corporation will focus on a segment of the market and attempt to achieve the best reputation within that segment. The Corporation’s goal in the next year is to secure more engineering and manufacturing positions. The Corporation’s goal in the next five years is to continue with its “value added” scheme that will assist the Company in achieving a strong position within the marketplace.
Suppliers
The majority of raw materials required by the Corporation are readily available at competitive prices from a variety of suppliers. For certain specialty items related to controls, the Corporation has two principal supplies: (i) Allen Bradly Controls; and (ii) Baldor Controls.
COMPETITION
The markets for special purpose automotive machinery products and services is highly competitive. Competition is based on the quality and range of such products, market availability, pricing, promotion and customer service as well as the nature of the distribution channels. Management of the Corporation believes that the Corporation has several highly significant competitive advantages: (i) engineering and technical support service; (ii) automated seat frame systems and IP beam process lines design and build expertise; (iii) vendors service and support; and (iv) current relationships with several major automotive companies. In the special purpose automotive machinery produces and services business, additional competitive factors include the demonstrated effectiveness of the products being offered, as well as available funding sources. The Corporation faces competition from other technology-based companies providing the same products and services. Competition may increase to the extent that other entities enter the market and to the extent that current competitors or new competitors develop and introduce new products that compete directly with the products distributed by the Corporation or develop or expand competitive sales channels. Management of the Corporation believes that its marketing position is unique to certain of the markets in which it competes.
RISK FACTORS
An investment in the Corporation’s common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in evaluating the Corporation and its business before purchasing shares of common stock. The business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are all of the material risks that the Corporation is currently aware of that it may be facing. Additional risks not presently known to the Corporation may also impair its business operations. You could lose all or part of your investment due to any of these risks.
Risks Related to Business
The Corporation’s operating results are difficult to predict and fluctuations in them may cause volatility in the price of its shares.
Given the nature of the markets in which the Corporation competes, its revenues and profitability are difficult to predict for many reasons, including the following:
|
·
|
Operating results are highly dependent on the volume and timing of orders received during the quarter, which are difficult to forecast. Customers generally order on an as-needed basis and the Corporation typically does not obtain firm, long-term purchase commitments from its customers. As a result, the Corporation’s revenues in any quarter depend primarily on orders shipped in that quarter.
|
|
·
|
The Corporation must incur a large portion of its costs in advance of sales orders because it must plan research and production, order components and enter into development, sales and marketing, and other operating commitments prior to obtaining firm commitments from its customers. This makes it difficult for the Corporation to adjust its costs in response to a revenue shortfall, which could adversely affect its operating results.
|
Engineering and production capacities that do not match demand for the Corporation’s products could result in lost sales or in a reduction in its gross margins.
The Corporation’s industry is characterized by rapid technological change, frequent new product introductions, short-term customer commitments and rapid changes in demand. The Corporation determines capacities based on its forecasts of demand for its products. Actual demand for its products depends on many factors, which make it difficult to forecast. The Corporation has experienced differences between its actual and its forecasted demand in the past and expects differences to arise in the future. The following problems could occur as a result of these differences:
|
·
|
If demand for the Corporation’s products is below its forecasts, the Corporation could produce excess personnel or have excess manufacturing capacity. Excess personnel could negatively impact the Corporation’s cash flows and could result in higher design costs. Excess manufacturing capacity could result in higher production costs per unit and lower margins.
|
|
·
|
If demand for the Corporation’s products exceeds its forecasts, the Corporation could have to rapidly ramp up production. The Corporation depends on suppliers and manufacturers to provide components and sub-assemblies. As a result, the Corporation may not be able to increase its production levels to meet unexpected demand and could lose sales in the short term while the Corporation tries to increase production. If customers turn to competitive sources of supply to meet their needs, the Corporation’s revenues could be adversely affected.
|
|
·
|
Rapidly increasing the Corporation’s production levels to meet unanticipated customer demand could result in higher costs for components and sub-assemblies, increased expenditures for freight to expedite delivery of materials or finished goods, and higher overtime costs and other expenses. These higher expenditures could result in lower gross margins.
|
If the Corporation does not timely introduce successful products, its business and operating results could suffer.
The market for the Corporation’s products is characterized by rapidly changing technology, evolving industry standards, short product life cycles and frequent new product introductions. As a result, the Corporation must continually introduce new products and technologies and enhance existing products in order to remain competitive. The success of the Corporation’s new products depends on several factors, including its ability to: (i) anticipate technology and market trends; (ii) timely develop innovative new products and enhancements; (iii) distinguish its products from those of its competitors; (iv) manufacture and deliver high-quality products; and (v) price its products competitively.
The Corporation’s failure to manage growth could harm it.
The Corporation will rapidly and significantly expand the number and types of products it sells and the Corporation will endeavor to further expand its product portfolio. This expansion places a significant strain on its management, operations and engineering resources. Specifically, the areas that are strained most by its growth include the following:
|
·
|
New product launch. With the growth of its product portfolio, the Corporation will experience increased complexity in coordinating product development, manufacturing and commissioning. As this complexity increases, it places a strain on its ability to accurately coordinate the commercial launch of its products with adequate support to meeting anticipated customer demand. If the Corporation is unable to scale and improve its product launch coordination, the Corporation could frustrate its customers and lose earned space and product sales.
|
|
·
|
Forecasting, planning and supply chain logistics. With the growth of its product portfolio, the Corporation will also experience increased complexity in forecasting customer demand and in planning for production and transportation and logistics management. If the Corporation is unable to scale and improve its forecasting, planning and logistics management, it could frustrate its customers, lose product sales or accumulate excess inventory.
|
To manage the growth of its operations, the Corporation will need to continue to improve its transaction processing, operational and financial systems, and procedures and controls to effectively manage the increased complexity. If the Corporation is unable to scale and improve them, the consequences could include delays in shipment of product, degradation in levels of customer support, lost sales and increased inventory. These difficulties could harm or limit its ability to expand.
If the Corporation does not compete effectively, demand for its products could decline and its business and operating results could be adversely affected.
The Corporation’s industry is intensely competitive. It is characterized by a trend of declining average selling prices in the market, and continual performance enhancements and new features, as well as rapid adoption of technological and product advancements by competitors in its market. Also, aggressive industry pricing practices and downward pressure on margins have resulted inincreased price competition from both our primary competitors as well as from less established ones. If the Corporation does not continue to distinguish its products through distinctive, technologically advanced features, design and services, as well as continue to build and strengthen its brand recognition, its business could be harmed. If the Corporation does not otherwise compete effectively, demand for its products will decline, its gross margins could decrease, it would lose market share, and its revenues could decline.
The Corporation depends on original equipment manufacturers and contract manufacturers who may not have adequate capacity to fulfill its needs or may not meet the Corporation’s quality and delivery objectives.
Original component manufacturers and contractors produce key portions of the Corporation’s product lines. The Corporation’s reliance on them involves significant risks, including reduced control over quality and logistics management, the potential lack of adequate capacity and discontinuance of the contractors’ assembly processes. Financial instability of the Corporation’s manufacturers or contractors could result in the Corporation having to find new suppliers, which could increase its costs and delay its product deliveries. These manufacturers and contractors may also choose to discontinue building its products for a variety of reasons. Consequently, the Corporation may experience delays in the timeliness, quality and adequacy in product deliveries, any of which could harm the Corporation’s business and operating results.
The Corporation purchases key components and products from single or limited sources, and its business and operating results could be harmed if supply were delayed or constrained or if there were shortages of required components.
Lead times for materials and components ordered by the Corporation or its contract manufacturers can vary significantly and depend on factors, such as the specific supplier, contract terms and demand for a component at a given time. From time to time, the Corporation has experienced supply shortages and fluctuations in component prices. While the Corporation is trying to manage its component levels through the purchase of buffer stock, there is no guarantee that the Corporation will be able to maintain the inventory levels sufficient to meet its product demand. Currently, the shortages have not significantly impacted its product cost. In addition, the Corporation may be at risk for these components if its customers reject or cancel orders unexpectedly or with inadequate notice.
Shortages or interruptions in the supply of components or subcontracted products, or the Corporation’s inability to procure these components or products from alternate sources at acceptable prices in a timely manner could delay shipment of its products or increase its production costs, which could have the Corporation’s business, financial condition and operating results.
The Corporation purchases some products and some key components used in its products from single or limited sources. In particular, a significant portion of its controls systems is single-sourced and the Controls Unit in its products is provided by a single supplier. If the supply of these products or key components were to be delayed or constrained, the Corporation may be unable to find a new supplier on acceptable terms or at all or its new and existing product shipment could be delayed. Any of this could harm the Corporation’s buiness, financial condition and operating results.
If the Corporation does not successfully coordinate the worldwide manufacturing and distribution of its product key components, it could lose sales.
The Corporation’s business requires it to coordinate the manufacture and distribution of its product components over much of the world. The Corporation increasingly relies on third parties to manufacture its components and transport its products. On a wordwide basis, the Corporation will continue to evaluate and consider changes in both its international and domestic suppliers. If the Corporation does not successfully coordinate these changes and the timely manufacture and distribution of its components, the Corporation may have insufficient supply of products to meet customer demand and could lose sales, or the Corporation may experience a build-up in inventory.
The Corporation’s introduction of new product lines may consume significant resources and not result in significant future revenues.
The Corporation will continue to expand its product offerings with new product lines, such as Weld-Bend Systems and other products that are outside of its traditional areas of expertise. To accomplish this, the Corporation has committed resrouces to develop, sell and market these new products. With limited experience in these product lines and because these products may be based on technologies that are new to the Corporation, it may be difficult for the Corporation to accurately anticipate and forecast revenues, manufacturing costs, customer support costs and product returns. In addition, because the technologies may be new to the Corporation, it may have a greater risk of unknowingly infringing on proprietary technology. The Corporation’s ongoing investments in the development and marketing of new lines of products could produce higher costs without a proportional increase in revenues.
The Corporation may be unable to protect its proprietary rights. Unauthorized use of the Corporation’s technology may result in the development of products that compete with its products.
The Corporation’s future success depends in part on its proprietary technology, technical know-how and other intellectual property. The Corporation relies on intellectual property laws, confidentiality procedures and contractual provisions, such as nondisclosure terms, to protect its intellectual property. Others may independently develop similar technology, duplicate the Corporation’s products, or design around its intellectual property rights. In addition, unauthorized parties may attempt to copy aspects of the Corporation’s product or to obtain and use information that the Corporation regards as proprietary. Any of these events could significantly harm the Corporation’s business, financial condition and operating results.
The Corporation is also increasing its reliance on technologies that it licenses or acquires from others. The Corporation may find it necessary or desirable in the future to obtain licenses or other rights relating to one or more if its products or to current or future technologies. These licenses or other rights may not be available on commercially reasonable terms or at all. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could have a material adverse effect on the Corporation’s business, financial condition and operating results. Moreover, the use of intellectual property licensed from third parties may limit the Corporation’s ability to protect the proprietary rights in its products.
The Corporation may encounter difficulties with future acquisitions, which could adversely affect its business and operating results.
The Corporation has acquired and may continue to acquire companies that have products, personnel and technologies that complement its strategic direction and roadmap. The Corporation’s acquisitions involve risks and uncertainties including: (i) difficulties in integrating the acquired company and its operations; (ii) diversion of management’s attention from the normal operations of business; (iii) potential loss of key employees and customers of the acquired company; (iv) insufficient future revenues and profitability of the acquired company that could negatively impact the Corporation’s consolidated results; and (v) exposure to potential product quality issues, which could result in unanticipated contingent liabilities of the acquired company. Any of these and other factors could prevent the Corporation from realizing the anticpated benefits of the acquisition and could adversely affect its business and operating results. Acquisitions are inherently risky and no assurance can be given.
Risks Associated with the Corporation and Its Securities
Because the Corporation has yet to comply with rules requiring the adoption of certain corporate governance measures, its stockholders have limited protections against interested director transactions, conflicts of interest and similar matters
.
The Sarbanes-Oxley Act, as well as the rules enacted by the SEC and the national stock exchanges as a result of the Sarbanes-Oxley Act, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity and efficiency of corporate management and the securities markets and apply to securities which are listed on those exchanges. Because the Corporation has not presently complied with many of the corporate governance provisions, its stockholders have limited protections.
Until the Corporation complies with the corporate governance measures adopted by the national securities exchanges after the enactment of Sarbanes-Oxley Act, regardless of whether such compliance is required, the absence of standards of corporate governance may leave its stockholders without protections against interested director transactions which may not be favorable to the shareholders, conflicts of interest and similar matters, and investors may be reluctant to provide the Corporation with funds in the future if the Corporation determines it is necessary to raise additional capital. The Corporation intends to comply with all applicable corporate governance measures relating to director independence as soon as practicable.
New rules, including those contained in and issued under the Sarbanes-Oxley Act, may make it difficult for the Corporation to retain or attract qualified officers and directors, which could adversely affect the management of its business and its ability to obtain or maintain listing of our common stock
.
The Corporation may be unable to attract and retain those qualified officers, directors and members of board of directors committees required to provide for its effective management because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The perceived personal risk associated with the Sarbanes-Oxley Act may deter qualified individuals from accepting roles as directors and executive officers.
Further, some of these recent changes heighten the requirements for board or committee membership, particularly with respect to an individual’s independence and level of experience in finance and accounting matters. The Corporation may have difficulty attracting and retaining directors with the requisite qualifications. If the Corporation is unable to attract and retain qualified officers and directors, the management of its business and its ability to obtain or maintain the listing of our common stock on any stock exchange (assuming we elect to seek and are successful in obtaining such listing) could be adversely affected.
The Corporation’s common stock price is subject to significant volatility, which could result in substantial losses for investors.
Prices for the Corporation’s shares are determined in the marketplace and may accordingly be influenced by many factors, including, but not limited to:
|
|
o
|
limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock
|
|
|
o
|
technological innovations or new products and services by us or our competitors;
|
|
|
o
|
intellectual property disputes;
|
|
|
o
|
additions or departures of key personnel;
|
|
|
o
|
the depth and liquidity of the market for the shares;
|
|
|
o
|
quarter-to-quarter variations in our operating results;
|
|
|
o
|
announcements about our performance as well as the announcements of our competitors about the performance of their businesses;
|
|
|
o
|
changes in earnings estimates by, or failure to meet the expectations of, securities analysts;
|
|
|
o
|
our dividend policy; and
|
|
|
o
|
general economic and market conditions.
|
Additionally, the stock market often experiences significant price and volume fluctuations that are unrelated to the operating performance of the specific companies whose stock is traded. These market fluctuations could adversely affect the Corporation’s share trading price. The price at which investors purchase shares of the Corporation’s common stock may not be indicative of the price that will prevail in the trading market. Investors may be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses.
Future sales of shares of the Corporation’s common stock by its stockholders could cause the Corporation’s stock price to decline.
The Corporation cannot predict the effect, if any, that market sales of shares of its common stock or the availability of shares of common stock for sale will have on the market price prevailing from time to time. If the Corporation’s stockholders sell substantial amounts of its common stock in the public market upon the effectiveness of a registration statement, or upon the expiration of any holding period under Rule 144, such sales could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for the Corporation to raise additional financing through the sale of equity or equity-related securities in the future at a time or price that we deem reasonable or appropriate. The shares of common stock issued in the Share Exchange Agreement will be freely tradable upon the earlier of (i) effectiveness of a registration statement covering the resale of such shares; or (ii) the date on which such shares may be sold without registration pursuant to Rule 144 under the Securities Act and the sale of such shares could have a negative impact on the price of its common stock.
The Corporation may issue additional shares of its capital stock or debt securities to raise capital or complete acquisitions, which could dilute the equity interest of its stockholders.
After giving effect to the Share Exchange Agreement, there are approximately 411,350,000 authorized and unissued shares of the Corporation’s common stock which have not been reserved and are available for future issuance. Although the Corporation has no commitments as of the date of this Current Report to issue its securities, the Corporation may issue a substantial number of additional shares of its common stock, to complete a business combination or to raise capital. The issuance of additional shares of its common stock:
|
|
o
|
may significantly dilute the equity interest of its existing stockholders; and
|
|
|
o
|
may adversely affect prevailing market prices for its common stock.
|
The Corporation’s officers and directors and insiders own approximately 66.56% of the total issued and outstanding shares of its common stock, and may be able to influence control of the Corporation or decision making by management of the Corporation.
As of the date of this Current Report, the Corporation’s officers, directors and insiders own approximately 66.56% of the total issued and outstanding shares of its common stock and may be able to influence control of the Corporation or decision making by management of the Corporation. Moreover, in the event future issuances of common stock are authorized by the Board of Directors pursuant to contractual relations, the officers, directors and insiders’ control of the Corporation will increase. This may result in majority control of the voting power for all business decisions.
The application of the “penny stock” rules could adversely affect the market price of the Corporation’s common stock and increase your transaction costs to sell those shares.
The Corporation’s common stock may be subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934. The penny stock rules apply to non-NASDAQ companies whose common stock trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission, which contains the following:
|
|
o
|
a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
|
|
|
|
|
|
|
o
|
a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation of such duties or other requirements of securities laws;
|
|
|
o
|
a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the “bid” and “ask” price;
|
|
|
o
|
A toll-free telephone number for inquiries on disciplinary actions;
|
|
|
o
|
definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and
|
|
|
o
|
such other information and is in such form (including language, type, size and format), as the Securities and Exchange Commission shall require by rule or regulation.
|
Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer with the following:
|
|
o
|
the bid and offer quotations for the penny stock;
|
|
|
o
|
the compensation of the broker-dealer in the transaction;
|
|
|
o
|
the number of shares to which such bid and ask prices apply, or other comparable
information relating to the depth and liquidity of the market for such stock; and
|
|
|
o
|
monthly account statements showing the market value of each penny stock held in
the customer’s account.
|
In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
Due to the requirements of penny stock rules, many brokers have decided not to trade penny stocks. As a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Corporation remains subject to the penny stock rules for any significant period, that could have an adverse effect on the market, if any, for its securities. Moreover, if its securities are subject to the penny stock rules, investors will find it more difficult to dispose of its securities.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Current Report on Form 8-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Corporation has based these forward-looking statements on its current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about the Corporation that may cause its actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” anticipate,” believe,” estimate,” continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in the Corporation’s other Securities and Exchange Commission filings. The following discussion should be read in conjunction with its Financial Statements included elsewhere in this Current Report on Form 8-K. Throughout this Current Report on Form 8-K, we will refer to D&R Technologies Inc. as “D&R,” the “Corporation,” “we,” “us,” and “our.”
MANAGEMENT DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
RESULTS OF OPERATION
Overview
The Corporation will be involved in the area of engineering, design and manufacture of robotics and automation technology solutions, which management believes will enable the Corporation to become a recognized technology pioneer and market leader in the area of engineering. Through its wholly-owned subsidiary, D&R Technology, the Corporation will provide state of the art automation technologies to solve its customers’ complex automation needs, increase efficiencies and improve manufacturing processes. Serving as a comprehensive engineering partner, the Corporation will work with other leading robotic manufacturers to provide the best automation technologies. The Corporation 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.
Fiscal Year Ended December 31, 2011 Compared to Fiscal Year Ended December 31, 2010
|
|
|
Fiscal Years Ended December 31,
2011 and 2010
|
|
|
|
|
$
|
2011
|
|
|
$
|
2010
|
|
|
Revenues
|
|
|
3,620,878
|
|
|
|
2,097,570
|
|
|
Cost of Goods Sold
|
|
|
2,350,570
|
|
|
|
1,933,827
|
|
|
Gross Profit
|
|
|
1,270,308
|
|
|
|
163,743
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
374,612
|
|
|
|
405,029
|
|
|
Occupancy costs
|
|
|
85,149
|
|
|
|
132,503
|
|
|
Travel
|
|
|
114,098
|
|
|
|
57,054
|
|
|
Professional fees
|
|
|
39,310
|
|
|
|
22,996
|
|
|
Communication
|
|
|
30,330
|
|
|
|
23,420
|
|
|
Office and general
|
|
|
83,101
|
|
|
|
109,416
|
|
|
Total Operating Expenses
|
|
|
726,600
|
|
|
|
750,418
|
|
|
Net Income (Loss) before income tax
|
|
|
543,708
|
|
|
|
(586,675
|
)
|
|
Income tax (expense) benefit
|
|
|
(78,742
|
)
|
|
|
75,535
|
|
|
Net Income (Loss)
|
|
|
464,966
|
|
|
|
(511,140
|
)
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
Foreign exchange adjustment
|
|
|
(4,425
|
)
|
|
|
138
|
|
|
Comprehensive income (loss)
|
|
|
461,541
|
|
|
|
(511,002
|
)
|
The financial information in the table above is derived from the audited financial statements. The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this Current Report on Form 8-K. 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 Current Report on Form 8-K. The financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Revenues. The increase in revenues was due to increased sales to consumers of the Corporation’s special purpose machinery products and services. During fiscal year ended December 31, 2011, management focused its efforts on increasing sales to its consumers and sales volume increased accordingly.
Costs and expenses. The increase in cost of sales was due to the increase in sales.
Operating Expenses. The incurrence of operating expenses reflects the additional expenses incurred as a result of the Corporation’s increased sales during fiscal year ended December 31, 2011. Operating expenses include overhead expenses such as rent, management and staff salaries, general insurance, marketing, accounting, legal and office expenses.
Due to transactions denominated and settled in foreign currency, we generated a loss on foreign translation of ($4,425) during fiscal year ended December 31, 2011.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements during fiscal year ended December 31, 2011 that have, or are reasonably likely to have, a current or future affect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to the Corporation’s interests.
LIQUIDITY AND CAPITAL RESOURCES
Fiscal Year Ended December 31, 2011
As at fiscal year ended December 31, 2011, the Corporation’s current assets were $2,176,637 and our current liabilities were $1,587,223, which resulted in a working capital surplus of $589,414. As of the fiscal year ended December 31, 2011, current assets were comprised of: (i) $969,502 in cash; (ii) $367,136 in accounts receivable; (iii) $798,066 in inventory; (iv) $39,063 in taxes recoverable; and (v) $2,870 in prepaid expense. As at fiscal year ended December 31, 2011, current liabilities were comprised of: (i) $254,799 in accounts payable; (ii) $6,254 due to related party; (iii) $1,277,005 in deferred revenue; and (iv) $49,165 in warranty provision.
As of the fiscal year ended December 31, 2011, our total assets were $2,338,467 comprised of: (i) current assets of $2,176,637; (ii) security deposits of $14,450; and (iii) fixed assets, net of depreciation of $147,380. As at fiscal year ended December 31, 2011, our total liabilities were $1,587,223 comprised of current liabilities.
During fiscal year ended December 31, 2011, net cash provided by operating activities was $542,484. This provision of cash was primarily due to an increaseof $200,263 in accounts receivable, a decreaseof $513,844 in inventory, a decrease of $455,472 in accounts payable and accrued expense, a decrease of $78,742 in deferred tax asset, a decrease of $23,422 in deferred revenue, an increase of $37,678 in warranty provision and a decrease of $88,233 in taxes recoverable.
The Corporation used cash of $213,091 in financing activities during fiscal year ended December 31, 2011 of which $104,670 was return of capital and $115,078 was repayments to officers shareholders, which was offset by $6,657 in change due to related party.
The Corporation’s principal demands for liquidity are to increase capacity, inventory purchase, sales distribution, and general corporate purposes.
The Corporation intends to meet its 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.
During December 31, 2011, gross profit increased to 35% compared to 8% in 2010 due to repeat business that did not require as much labor- engineering and programming cost were at zero for the projects.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Beneficial Ownership Chart
The following table sets forth certain information, as of the date of this Current Report, with respect to the beneficial ownership of the outstanding common stock by: (i) any holder of more than five (5%) percent; (ii) each of the Corporation’s executive officers and directors; and (iii) the Corporation’s directors and executive officers as a group. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned. Unless otherwise indicated, each of the stockholders named in the table below has sole voting and investment power with respect to such shares of common stock. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. As of the date of this Current Report, there are 88,650,000 shares of common stock issued and outstanding.
|
Name and Address of Beneficial Owner
(1)
|
|
Amount and Nature of Beneficial Ownership
(1)
|
|
|
Percentage of Beneficial Ownership
|
|
|
Directors and Officers:
|
|
|
|
|
|
|
|
Berardino Paolucci
7669 Kimbal Street
Mississauga, Ontario
Canada L5S 1A7
|
|
|
28,320,000
|
|
|
|
31.95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Drasko Karanovic
7669 Kimbal Street
Mississauga, Ontario
Canada L5S 1A7
|
|
|
14,160,000
|
|
|
|
15.97
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Velijko Pjevac
7669 Kimbal Street
Mississauga, Ontario
Canada L5S 1A7
|
|
|
-0-
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (3 person)
|
|
|
42,480,000
|
|
|
|
47.93
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Shareholders Greater than 10%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D Mecatronics Inc.
7669 Kimbal Street
Mississauga, Ontario
Canada L5S 1A7
|
|
|
16,520,000
|
|
|
|
18.63
|
%
|
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding as of the date of this Current Report. As of the date of this Current Report, there are 88,650,000 shares issued and outstanding.
|
EXECUTIVE OFFICERS AND DIRECTORS
The Corporation refers to Item 1.01 and Item 3.02 above concerning the change in control.
|
Name
|
|
Position
|
|
Age
|
|
|
Berardino Paolucci
|
|
President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and a Director
|
|
62
|
|
|
Velijko Pjevac
|
|
Director
|
|
45
|
|
|
Drasko Karanovic
|
|
Director
|
|
61
|
|
Our directors hold office for one-year terms or until their successors have been elected and qualified.
The biographies of the new directors and officers are set forth below as follows:
Berardino Paolucci.
Mr. Paolucci is the President/Chief Executive Officer, Secretary and Treasurer/Chief Financial Officer and a member of the Board of Directors of the Corporation. Mr. Paolucci has over twenty years experience in customer and quality-focused business and provides strategic vision and leadership qualities that drive operational process, productivity, efficiency and improvement at multisite manufacturing organizations. He is an expert in combining financial and business planning with tactical execution to optimize long-term gains in performance, revenues and profitability. His breadth of experience includes quality and manufacturing operations, lean concept, root cause and corrective action preventive action (CAPA) analysis, team concepts, total preventive maintenance, set-up reduction and standard work. Mr. Paolucci has been employed by D&R Technologies Inc. from 1994 through 2004 where he held the position of manufacturing supervisor. His previous responsibilities included: (i) manage and direct all electrical, mechanical, hydraulic and process functions within departments; (ii) continuously impact and improve the key performance indicators across the process such as machine mechanical, hydraulic, pneumatic and electrical build, process improvement, identification and sourcing of new equipment as well as the payout and reallocation of equipment and workforce; (iii) develop and initiate appropriate actions that lead to optimizing production capabilities of all machinery, equipment and resources resuling in improved machine utilization, labor efficiency, expense reduction and on-time delivery; (iv) recommend solutions to customers for preventative maintenance, machine layouts and configuration of machinery for the purpose of proaction planning as well as responding to day to day service issues; and (v) manage and develop department’s team members by conducting regular appraisal, developing performance improvement plans, administering salary and compensation as per company policy and providing direction and support for the development of individuals within the department.
Drasko Karanovic.
Mr. Karanovi is a member of the Board of Directors of the Corporation. Mr. Karanovic has over sixteen years of experience in progressive design, supervisory and management experience in engineering fields, comprehensive knowledge of engineering technology, strong management, communication, interpersonal and customer service skills, extensive knowledge of CAD systems and tooling engineering and development expertise. He was employed with Dieco Technologies from 1994 through 2004 and D Mecatronics Inc. from 2004 to current date. His responsbilities included: (i) member of senior management team in setting strategic operation direction; (ii) prepare proposals, evaluating future equipment performance and recommend improvements for new and existing products; (iii) direct personnel activities of staff, i.e. hire, train, appraise, reward, motivate, discipline, recommend termination (iv) direct, coordinate and exercise functional authority for planning, organization, control, integration and completion of engineering projects; (v) supervising staff of mechanical, electrical and hydraulic designers, production engineering support staff in the custom design, development, improvement and modification of machinery; (vi) direct the research and development effort leading to new or improved products; and (vii) develop and maintain overall product development plan so that new or improved products are timely delivered to market.
Velijko Pjevac.
Mr. Pjevac is a member of the Board of Directors of the Corporation. Mr. Pjevac has over thirty-five years of experience as an engineer and worldwide industrial manager in the industrial automation field. He has successfully dealt with strategy and engineering issues within small companies and large corporations, all at management levels. He also has extensive knowledge of strategic planning, resource allocation, leadership techniques, production methods and coordination of people and resources. Mr. Pjevac was previously employed with Dieco Technologies Inc. from 1998 through 2004 and has been employed with D&R Technologies from 2004 to current date as an engineering manager. He provides the strategic vision and leadership qualities that drive engineering process, productivity, efficiency and bottom-line improvements. Mr. Pjevac’s responsibilities include: (i) provides technical direction for the development, design, and systems from definition phase through implementation; (ii) applies significant knowledge of industry trends and developments to improve service to our clients; and (iii) reviews work of development and sales team.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below summarizes all compensation awarded to, earned by, or paid to the executive officers by any person for all services rendered in all capacities for the fiscal years ended December 31, 2011.
|
Name and Principal Position
|
Fiscal
Year
|
|
Annual Salary
|
|
|
Bonus
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
Total
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Berardino Paolucci President/Chief
Executive Officer
|
2011
|
|
$
|
104,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
$
|
104,000
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
As of December 31, 2011, there were no outstanding equity awards held by executive officers.
BOARD INDEPENDENCE
Messrs. Pjevac and Karanovic qualify as “independent” directors, as that term is defined by applicable listing standards of The NASDAQ Stock Market and SEC rules, including the rules relating to the independence standards of an audit committee and the non-employee director definition of Rule 16b-3 promulgated under the Exchange Act. As a requirement to listing the Corporation’s common stock on The Bulletin Board or the NASDAQ Capital Market or other exchange, the Corporation intends to retain independent directors. The Board of Director’s composition (and that of its committees) will be subject to the corporate governance provisions of its primary trading market, including the requirement for appointment of independent directors in accordance with the Sarbanes-Oxley Act of 2002, and regulations adopted by the SEC and NASD pursuant thereto.
Director Compensation
The Corporation does not currently compensate our directors with cash for acting as such, although we may do so in the future. The Corporation also reimburses its directors for reasonable expenses incurred in connection with their service as directors.
Code of Ethics
The Corporation intends to adopt a code of ethics that applies to its officers, directors and employees, including our Chief Executive Officer and Chief Financial Officer, but has not done so to date.
BOARD COMMITTEES
Audit Committee.
The Corporation intends to establish an audit committee of the Board of Directors, which will consist of independent directors, of which at least one director will qualify as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. The audit committee’s duties would be to recommend to the Board of Directors the engagement of independent auditors to audit the Corporation’s financial statements and to review its accounting and auditing principles. The audit committee would review the scope, timing and fees for the annual audit and the results of audit examinations performed by the internal auditors and independent public accountants, including their recommendations to improve the system of accounting and internal controls. The audit committee would at all times be composed exclusively of directors who are, in the opinion of the Board of Directors, free from any relationship which would interfere with the exercise of independent judgment as a committee member and who possess an understanding of financial statements and generally accepted accounting principles.
Compensation Committee.
The Corporation intends to establish a compensation committee of the Board of Directors. The compensation committee would review and approve the Corporation’s salary and benefits policies, including compensation of executive officers. The compensation committee would also administer any stock option plans and recommend and approve grants of stock options under such plans.
STOCK INCENTIVE PLANS
The Corporation currently does not have any stock incentive plan adopted. The Corporation may adopt a stock incentive plan in the future in order to further the growth and general prosperity of the Corporation by enabling our employees, contractors and service providers to acquire its common stock, increasing their personal involvement in the Corporation and thereby enabling the Corporation to attract and retain its employees, contractors and service providers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no transactions with any related persons (as that term is defined in Item 404 in Regulation SK) since the beginning of the Corporation’s last fiscal year, or any currently proposed transaction, in which the Corporation was or is to be a participant and the amount involved was in excess of $120,000 and in which any related person had a direct or indirect material interest.
