| NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES | Basis
of presentation These
interim consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted
in the United States and are expressed in US dollars. The functional currency of Novus is the Canadian Dollar. The
interim consolidated financial information furnished herein reflects all adjustments, which, in the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results in accordance with
General Accepted Accounting Principles in the United States ("U.S. GAAP"), have been included and properly prepared
within reasonable limits of materiality and within the framework of the significant accounting policies summarized below: Principles
of Consolidation The
interim consolidated financial statements include the accounts and operations of Novus and its wholly owned subsidiaries D&R
Technologies Inc and D&R Tools Inc. All inter-company accounts and transactions have been eliminated on consolidation. Uses
of Estimates The
preparation of interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.
Financial statement items subject to significant judgment include expense accruals, as well as income taxes and loss contingencies.
Actual results could differ from those estimates. The
areas which require management to make significant judgments, estimates and assumptions in determining carrying values include,
but are not limited to: Assets'
carrying values and impairment charges Assets, including property and
equipment and inventory, are reviewed for impairment whenever events or changes in circumstances indicate that their carrying
amount exceed their recoverable amounts. In the determination of carrying values and impairment charges, management looks at the
higher of recoverable amount or fair value less costs to sell in the case of assets and at objective evidence, significant or
prolonged decline of fair value on financial assets indicating impairment. These determinations and their individual assumptions
require that management make a decision based on the best available information at each reporting period. Income
taxes and recoverability of potential deferred tax assets In assessing
the probability of realizing income tax assets recognized, management makes estimates related to expectations of future taxable
income, applicable tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood
that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management
gives additional weight to positive and negative evidence that can be objectively verified. Estimates of future taxable income
are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. The Company
considers whether relevant tax planning opportunities are within the Company's control, are feasible, and are within management's
ability to implement. Examination by applicable tax authorities is supported based on individual facts and circumstances of the
relevant tax position examined in light of all available evidence. Where applicable tax laws and regulations are either unclear
or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially
affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit the Company from realizing the
tax benefits from the deferred tax assets. The Company reassesses unrecognized income tax assets at each reporting period. Warranty
provision In assessing
the warranty provision, management makes estimates related to expectations of future repair cost needed to service new seat
frame sales under its two year warranty terms. These determinations and their individual assumptions require that management make
a decision based on the best available information at each reporting period Long-lived
Assets In accordance
with the Financial Accounting Standards Board ("FASB") ASC No. 360, "Property, Plant and Equipment" the carrying
value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances
that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is
less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the
asset over its estimated fair value. Regulatory
Matters The Company
is subject to a variety of federal, provincial and state regulations governing land use, health, safety and environmental matters.
The Company's management believes it has been in substantial compliance with all such regulations. Cash
and Cash Equivalents The Company
considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents.
At September 30, 2015, the Company had no cash equivalents. The Company maintains its cash in bank deposit accounts which may
exceed federally insured limits. As of September 30, 2015, the Company's accounts are insured for $100,000 CDN by Canadian Deposit
Insurance Corporation for Canadian bank deposits and are insured for $250,000 by FDIC for US bank deposits. Factoring
Agreement and Accounts Receivable The Company
has a financing agreement that included a non-recourse factoring arrangement that provides nonrecourse factoring on the Company's
receivable from its primary customer Johnson Controls, Inc. to assist in its operational cash flow requirements. The factor is
based on credit approved orders, assumes the accounts receivable risk of the Company's customer in the event of insolvency or
non-payment. The Company assumes the risk on accounts receivable not factored to which is shown as accounts receivable on the
accompanying balance sheets. As of September 30, 2015 and December 31, 2014, factored accounts receivable were $Nil and $192,262
respectively. Finance charges associated with the sale of factored receivable for the period ended September 30, 2015 and 2014
were $10,041 and $11,627 and are included in office and general expense. Allowance
for Doubtful Accounts The Company
extends credit to customers in the normal course of business. The allowance for doubtful accounts represents the Company's best
estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determines the allowance
based on specific customer information, historical write-off experience and current industry and economic data. Account balances
are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. Management
believes that there are no concentrations of credit risk for which an allowance has not been established. Although management
believes that the allowance is adequate, it is possible that the estimated amount of cash collections with respect to accounts
receivable could change. As of September 30, 2015 and December 31, 2014, the Company has not deemed any accounts uncollectible. Inventory Inventory
is stated at the lower of cost or market using the first-in, first-out ("FIFO") method. Cost of work in progress and
finished goods includes raw materials, direct labor and indirect manufacturing costs. The Company's inventory balance at December
31, 2014 and September 30, 2015 was comprised of work-in-progress. This policy requires D&R to make estimates regarding the
market value of our inventory, including an assessment of excess or obsolete inventory. The Company determines excess and obsolete
inventory based on an estimate of the future demand and estimated selling prices for its products. Fixed
Assets Fixed assets
are stated at cost. Depreciation is recorded on a straight line basis reflective of the useful lives of the assets. Expenditures
for maintenance and repairs are charged to operations when incurred, while additions and betterments are capitalized. When assets
are retired or disposed, the asset's original cost and related accumulated depreciation are eliminated from accounts and any gain
or loss is reflected in income.
Estimated
Useful Life
Office equipment 5 years
Computer equipment 5 years
Delivery trucks 5 years
Shop and Machinery equipment 5 to 10 years Foreign
Currency Translation Gains and
losses arising upon settlement of foreign currency denominated transactions or balances are included in the determination of income.
The Company's functional currency is the Canadian dollar. Transactions in foreign currency are translated into Canadian dollars
then translated into U.S. dollars for reporting in accordance with the ASC 830-30 as follows:
· For assets and liabilities, the exchange
rate at the balance sheet date shall be used.
· For revenues, expenses, gains, and losses,
the exchange rate at the dates on which those elements are recognized shall be used. Translation
adjustments are included in accumulated other comprehensive income (loss), a separate component of shareholders' equity Financial
Instruments The carrying
values of the Company's financial instruments, which comprise cash, accounts receivable, accounts payable, payroll liabilities,
loan payable, taxes payable and due to officers/shareholders, approximate their fair values due to the immediate or short-term
maturity of these instruments. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency
risk. Fair
Value Measurements The authoritative
guidance for fair values establishes a three tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices
in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little
or no market data exists, therefore requiring an entity to develop its own assumptions. Income
Taxes Potential
benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted
ASC 740, "Accounting for Income Taxes," as of its inception. Pursuant to ASC 740, the Company is required to compute
tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized
in these financial statements because the Company cannot be assured it is more likely than not it will be able to utilize the
net operating losses carried forward in future years. Recorded
in other (income) and expenses are monies recovered relating to non-refundable, federal government Scientific Research & Experimental
Development ("SR&ED") tax credits. Due to the uncertain nature of these expenditures, the Company does not record
any amount until such time as the deduction is approved by Canadian provincial and federal governments. SR&ED expenditures
relating to 2014 taxation year were applied to recover previously paid taxes for which the Company obtained approval and received
the requisite funds in the first quarter of 2015. Novus has approximately $32,000 of non-refundable tax credits to apply against
future years taxes. Advertising
Costs Advertising
costs are expensed as incurred. No advertising costs have been incurred by the Company to date. Revenue
Recognition The Company
recognizes revenue in accordance with Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 101,"Revenue
Recognition in Financial Statements" ("SAB 101") as modified by SEC Staff Accounting Bulletin No.104. Under SAB
101, revenue is recognized on a percentage of completions basis and when collection of the resulting receivable is reasonably
assured.
1. Spare
parts Revenues and cost of sales are recognized at the time of sale.
2. Service Revenues
and cost of sales are recognized at the time services are performed and accepted by customer via sign off.
3. Seat systems and
tooling progress invoicing to the customer are recorded as deferred revenue. When the projects are installed and accepted
by the customer the final invoice is issued and all deferred revenue is recognized along with the related work in process
costs for the project. Systems generally take 20-28 weeks to design, manufacture, assemble, and then ship to our various customers.
As of September 30, 2015 and December 31, 2014 customer deposits were $108,297 and $140,343 respectively. D&R
provides standard warranties for its product from the date of shipment. Estimated warranty obligations are recorded at the time
of sale. Estimated warranty obligations are recorded at the time of sale and amortized over the two year warranty period. As of
September 30, 2015 and December 31, 2014, warranty liability was $10,598 and $9,184. Earnings
per Common Share Net income
per share is provided in accordance with ASC 260-10, "Earnings per Share". We present basic income per share ("EPS")
and diluted EPS the face of the statement of operations. Basic EPS is computed by dividing reported net income (loss) applicable
to common shareholders by the weighted average number of common shares outstanding during the period. Except where the result
would be anti-diluted to income from continuing operations, diluted earnings per share would be computed assuming the conversion
of the convertible long-term debt and the elimination of the related interest expense, and the exercise of stock warrants. Income
per common share has been computed using the weighted average number of common shares outstanding during the year. Comprehensive
Income The Company
has adopted ASC 220, "Comprehensive Income," which establishes standards for reporting and the display of comprehensive
income, its components and accumulated balances. Comprehensive income (loss) is defined to include all changes in equity except
those resulting from investments by owners or distributions to owners. Among other disclosures, ASC 220 requires that all items
that are required to be recognized under the current accounting standards as a component of comprehensive income be reported in
a financial statement that is displayed with the same prominence as other financial statements. Comprehensive income (loss) is
displayed in the balance sheet as a component of shareholders' equity. Recent
Accounting Pronouncements There have
been no recent accounting pronouncements or changes in accounting pronouncements that impacted fiscal year 2015, or which are
expected to impact future periods, that were not already adopted and disclosed in prior periods. |
