UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED:
OR
For the transition period from__________ to __________
COMMISSION FILE NUMBER:
(Exact name of registrant as specified in its charter)
| 000-55554 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File No.) |
(IRS Employee Identification No.) |
(Address of Principal Executive Offices)
(Issuer Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which registered |
| N/A |
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated Filer ☐ |
| Smaller reporting company | |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes ☐
The number of Registrant’s shares of common stock, $0.0001 par value, outstanding as of December 14, 2021, was .
TABLE OF CONTENTS
| Page | |||
| PART I. FINANCIAL INFORMATION | 4 | ||
| Item 1 | Condensed Consolidated Financial Statements | 4 | |
| Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 20 | |
| Item 4 | Controls and Procedures | 22 | |
| PART II. OTHER INFORMATION | 23 | ||
| Item 1 | Legal Proceedings | 23 | |
| Item 1A | Risk Factors | 23 | |
| Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 23 | |
| Item 3 | Defaults Upon Senior Securities | 23 | |
| Item 4 | Mine Safety Disclosures | 23 | |
| Item 5 | Other Information | 23 | |
| Item 6 | Exhibits | 23 | |
| SIGNATURES | 24 | ||
| 3 |
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
LUX AMBER, CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| October 31, 2021 | April 30, 2021 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| GOODWILL | ||||||||
| OTHER INTANGIBLES | ||||||||
| OTHER LONG-TERM ASSETS | ||||||||
| FIXED ASSETS | ||||||||
| Furniture, fixtures, and office equipment | ||||||||
| Vehicles and trailers | ||||||||
| Equipment | ||||||||
| Leasehold improvements | ||||||||
| Assets in process | ||||||||
| TOTAL FIXED ASSETS | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed assets, net | ||||||||
| RIGHT OF USE ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Related party payables | ||||||||
| Notes payable – current portion | ||||||||
| Right of use liabilities – current portion | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES | ||||||||
| Notes payable | ||||||||
| Right of use liabilities | ||||||||
| Paycheck Protection Program loans | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Common stock, $ par value, shares authorized: issued and outstanding shares as of October 31, 2021, and issued and outstanding shares as of April 30, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| 4 |
LUX AMBER, CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended October 31, 2021 | Three months ended October 31, 2020 | Six months ended October 31, 2021 | Six months ended October 31, 2020 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Product delivery expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Selling expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income)/expenses | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Other (income)/expense | ( | ) | ||||||||||||||
| Total other expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per common share: | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| 5 |
LUX AMBER, CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended October 31, 2021 and October 31, 2020
| Number of Shares | Common Stock Par | Additional Paid-in | Accumulated | Non-Controlling | Total | ||||||||||||||||||
| Issued and | Value Amount | Capital | Deficit | Interest | |||||||||||||||||||
| Outstanding | |||||||||||||||||||||||
| Balance as of July 31, 2021 | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Common stock sold | – | ||||||||||||||||||||||
| Common stock issued for outstanding payables | – | ||||||||||||||||||||||
| Stock based compensation | – | ||||||||||||||||||||||
| Net loss | – | ( |
) | ( |
) | ||||||||||||||||||
| Balance as of October 31, 2021 | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Number of Shares | Common Stock Par | Additional Paid-in | Accumulated | Total | ||||||||||||||||||
| Issued and | Value Amount | Capital | Deficit | |||||||||||||||||||
| Outstanding | ||||||||||||||||||||||
| Balance as of July 31, 2020 | $ | $ | $ | ( |
) | $ | ||||||||||||||||
| Adjustments | ( |
) | ||||||||||||||||||||
| Notes payable with interest converted | ||||||||||||||||||||||
| Share based compensation | – | |||||||||||||||||||||
| Net loss | – | ( |
) | ( |
) | |||||||||||||||||
| Balance as of October 31, 2020 | $ | $ | $ | ( |
) | $ | ||||||||||||||||
| 6 |
LUX AMBER, CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
For the Six Months Ended October 31, 2021 and October 31, 2020
| Number of Shares | Common Stock Par | Additional Paid-in | Accumulated | Total | ||||||||||||||||||
| Issued and | Value Amount | Capital | Deficit | |||||||||||||||||||
| Outstanding | ||||||||||||||||||||||
| Balance as of April 30, 2021 | $ | $ | $ | ( |
) | $ | ||||||||||||||||
| Options exercised (cashless) | – | ( |
) | |||||||||||||||||||
| Options exercised | – | |||||||||||||||||||||
| Common stock sold | – | |||||||||||||||||||||
| Common stock sold | ||||||||||||||||||||||
| Common stock issued for outstanding payables | ||||||||||||||||||||||
| Stock based compensation | – | |||||||||||||||||||||
| Net loss | – | ( |
) | ( |
) | |||||||||||||||||
| Balance as of October 31, 2021 | $ | $ | $ | ( |
) | $ | ||||||||||||||||
| Number
of Shares Issued and Outstanding | Common
Stock Par Value Amount | Additional
Paid-in Capital | Accumulated Deficit | Non-Controlling Interest | Total | |||||||||||||||||||
| Balance as of April 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock repurchased | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Notes payable with interest converted | ||||||||||||||||||||||||
| Dissolution of PCNM | – | ( | ) | |||||||||||||||||||||
| Adjustments | ( | ) | ||||||||||||||||||||||
| Share based compensation | – | |||||||||||||||||||||||
| Net loss | – | ( | ) | ( | ) | |||||||||||||||||||
| Balance as of October 31, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| 7 |
LUX AMBER, CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended October 31, 2021 | For the Six Months Ended October 31, 2020 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Share based compensation | ||||||||
| Right of use interest | ||||||||
| Change in current assets and current liabilities | ||||||||
| Accounts receivable - trade | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ||||||||
| Due to related parties | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Deposit paid | ( | ) | ||||||
| Expenditures for property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from convertible notes payable and interest payable | ||||||||
| Payments on notes payable | ( | ) | ||||||
| Payments on right of use liabilities | ( | ) | ( | ) | ||||
| Payments for the repurchase of common stock | ( | ) | ||||||
| Payments on promissory notes | ( | ) | ||||||
| Proceeds from promissory notes | ||||||||
| Proceeds from stock sales | ||||||||
| Proceeds from exercise of options | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during period for: | ||||||||
| Interest | $ | $ | ||||||
| Noncash Financing Activities | $ | 20,000 | $ | – | ||||
| Convertible notes and accrued interest converted to common stock | $ | $ | ||||||
| Common stock issued for reduction of outstanding payments | $ | $ | ||||||
| Common stock sold for note receivable | $ | $ | ||||||
| Right of use asset and lease liability additions | $ | $ | ||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
| 8 |
LUX AMBER, CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
October 31, 2021
(Unaudited)
NATURE OF BUSINESS
Lux Amber, Corp. (“LAC”), formed on January 19, 2018, is an international specialty chemical company. Its corporate offices are currently located at 6136 Frisco Square Blvd., Suite 400, #237, Frisco, TX 75034. LAC’s corporate telephone number is 972-214-9764. LAC has a stock symbol of LXAM.
LAC has three (3) wholly owned subsidiaries (collectively with LAC, the “Company”): Worldwide Specialty Chemicals, Inc. (“WSCI”), Industrial Chem Solutions, Inc. (“ICS”), and Safeway Pest Elimination, LLC, (“SPE”), which was formed July 16, 2018. LAC and its subsidiaries serve as both producers and distributors of environmentally safe, specialty chemicals. The Company formerly held a 49% interest in PCNM LLC, a Service-Disabled Veteran owned small business that sold the Company’s products to government agencies. PCNM was legally dissolved on July 31, 2020.
The Company’s products utilize all-natural and renewable resources, contain no dangerous chemicals or additives, and offer “green” solutions to its customers. ICS’ product line includes asphalt release agents, industrial cleaners, environmental remediation gels, odor control agents, and consumer friendly cleaners for a wide range of uses, including construction, environmental remediation, hazardous materials clean-up, nuclear decommissioning, industrial cleaning, and odor control. SPE’s products are designed for the elimination and control of pests.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting polices consistently applied in the preparation of the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) is as follows.
Basis of Consolidation
The consolidated financial statements include the accounts of LAC, WSCI, ICS, SPE, and PCNM. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
FASB ASC 825-10 requires disclosure of fair value information about certain financial instruments, including, but not limited to, cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, related party payables, notes payable, and Paycheck Protection Program loans. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management on October 31, 2021 and April 30, 2021. The carrying value of the financial instruments included in the Company’s consolidated financial statements approximated their fair values.
| 9 |
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities are carried at, or approximate, fair value as of the reporting date because of their short-term nature.
The carrying value of the notes payable approximates fair value as they bear market rates of interest.
Basic net loss per share is computed using the weighted average number of common shares outstanding. Diluted loss per share has not been presented because there are no dilutive items. Diluted earnings loss per share is based on the assumption that all dilutive stock options, warrants, and convertible debt are converted or exercised by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Options, warrants and/or convertible debt will have a dilutive effect, during periods of net profit, only when the average market price of the common stock during the period exceeds the exercise or conversion price of the items.
For the six months ended October 31, 2021 and 2020, approximately and common stock warrants, respectively, and and common stock options, respectively, were not added to the diluted average shares because inclusion of such warrants and options would be antidilutive.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an initial maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash balances at several financial institutions located throughout the United States, which at times may exceed insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivables are recorded at invoiced
amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on experience and other
factors which, in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition
of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable, and current economic conditions.
The determination of the collectability of amounts due requires the Company to make judgments regarding future events and trends. Allowances
for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis.
This process consists of a review of historical collection experience, current aging status of the customer account, and the financial
condition of the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific
customers and the accounts receivable portfolio as a whole. On October 31, 2021 and April 30, 2021, the allowance for doubtful accounts
was $
Revenue Recognition
Revenue is measured as the amount of consideration expected to be received in exchange for transferring goods or providing service. Revenue from product sold is recognized when obligations with the customer are satisfied, which generally occurs with the transfer or delivery of the product, signifying the point in time when the customer obtains control of the promised goods. Our performance obligation is delivering the product to the customer; and therefore, the transaction price, which is stated on the invoice, is allocated 100% to the sole performance obligation of product delivery. For the three-month and six-month periods ended October 31, 2021 and 2020, all revenue was from products sold.
Our sales policies do not provide for general rights of return, and payment is due net of 15 days. We do not record estimated reductions to revenue for customer programs and incentive offerings including pricing arrangements, promotions, and other volume-based incentives at the time of the sale. We also do not record estimated reserves for product returns and credits at the time of sale and anticipated uncollectible accounts.
| 10 |
Sales Taxes
Sales (and similar) taxes that are imposed on the Company's sales and collected from customers are excluded from revenues.
Shipping and Handling Costs
Costs for shipping and handling activities, including those activities that occur after transfer of control to the customer, are recorded as cost of sales and are expensed as incurred. The Company accrues costs for shipping and handling activities that occur after control of the promised good has transferred to the customer.
Inventory
Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in first-out basis. The carrying value of inventory is reduced for estimated obsolescence. The Company evaluates the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated demand.
The following table sets forth the components of the Company’s inventory balances as of::
| Schedule of inventory | ||||||||
| October 31, 2021 | April 30, 2021 | |||||||
| Finished goods | $ | $ | ||||||
| Raw materials | ||||||||
| Obsolescence | ( | ) | ( | ) | ||||
| Inventory, net | $ | $ | ||||||
Fixed Assets
Fixed assets consist of furniture, fixtures and office equipment, vehicles and trailers, equipment and leasehold improvements that are stated at cost, less accumulated depreciation. Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to earnings over their estimated service lives (3 – 10 years) under the straight-line method.
Maintenance and repairs are charged to earnings as incurred; major repairs and replacements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in operations.
Goodwill
Goodwill represents the difference between the
enterprise value/cash paid less the fair value of all recognized net asset fair values including identifiable intangible asset values
in a business combination. The Company reviews goodwill for impairment annually during the fourth quarter or whenever events or changes
in circumstances indicate the carrying value of goodwill may not be recoverable. The Company considered the current and expected future
economic and market conditions surrounding COVID-19 and its impact on the reporting unit. As a result of the certain business developments
and changes in the Company's long-term projections, during the fourth quarter of fiscal 2021, the Company concluded a triggering event
had occurred that required an impairment assessment to be performed. The qualitative assessment thresholds were not met. The Company calculated
the quantitative impairment test of using the implied fair market value using market data and concluded there was no goodwill impairment
loss. Based on annual testing, the Company determined that there was
| 11 |
The Company first evaluates qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the reporting unit is less than its carrying amount, including goodwill. If after qualitatively assessing the totality of events or circumstances, the Company determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then further testing is unnecessary. If after assessing the totality of events or circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company then estimates the fair value of the reporting unit and compares the fair value of the reporting unit with its carrying amount, including goodwill, as discussed below.
The quantitative goodwill impairment test involves a two-step process. In the first step, the Company compares the fair value of each reporting unit to its carrying value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, the Company must perform the second step of the impairment test to measure the amount of impairment loss. In the second step, the reporting unit's fair value is allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of the reporting unit's goodwill is less than the carrying value, the difference is recorded as an impairment loss.
The Company recognizes compensation expense for all share-based payments in accordance with FASB Codification Topic 718, Compensation — Stock Compensation, (ASC 718). Under the fair value recognition provisions of ASC 718, the Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. The fair value at the measurement date of stock options is estimated using the Black-Scholes option-pricing model. Compensation expense is recognized on a straight-line basis over the vesting period based on the estimated number of stock options that are expected to vest.
Income Taxes
The Company accounts for Federal and state income taxes using the asset and liability approach for financial accounting and reporting for income taxes based on tax effects of differences between the financial statement and tax basis of assets and liabilities.
The Company accounts for all uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 740 – Income Taxes (“ASC 740”). ASC 740 provides guidance on de-recognition, classification, interest and penalties and disclosure related to uncertain income tax positions. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. There were no accrued interest or penalties as of October 31, 2021 or April 30, 2021.
From time to time, the Company may be audited by taxing authorities. These audits could result in proposed assessments of additional taxes. The Company believes that its tax positions comply in all material respects with applicable tax law. However, tax law is subject to interpretation, and interpretations by taxing authorities could be different from those of the Company, which could result in the imposition of additional taxes. The Company’s federal returns since 2016 are still subject to examination by taxing authorities.
License Fee
ICS pays 10% of the net selling price of $9.50
a gallon to CBI Polymers, Inc (“CBI”), as a mutually acceptable license fee. E. Thomas Layton, Chairman and CEO of LAC, is
also the Chairman and CEO and controlling shareholder of CBI. During the six-month ended October 31, 2021 and 2020, the Company incurred
$
| 12 |
Advertising Costs
The Company recognizes expenses for advertising
costs as they are incurred. During the six-month ended October 31, 2021 and 2020, the Company incurred $
Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. The Company has incurred substantial operating losses, resulting
in an accumulated deficit of $
The Company is actively seeking growth of its service offerings, both organically and via new client relationships. In the ordinary course of the Company’s business, management is trying to raise additional capital through sales of common stock as well as seeking debt financing from third parties. There are current indications that additional financing will be available on favorable terms. If additional financing is not available, the Company will need to reduce salaries, defer, or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately fund its capital requirements could have a material adverse effect on the Company’s business, financial condition, and results of operations, including potential discontinuance of operations. Moreover, the sale of additional equity securities to raise financing will result in additional dilution to the Company’s stockholders. Additionally, incurring additional indebtedness could involve an increased debt service cash obligation, as well as the imposition of covenants that restrict the Company’s operations or the Company’s ability to perform on its current debt service requirements. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. While the Company recognizes the significant impact of additional financing, the Company is a smaller reporting company serving large and growing markets and it will continue to sell securities and enter into financing programs which are deemed to be prudent.
Recently Issued Accounting Pronouncements
Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13 Financial Instruments-Credit Losses, which amends how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income, which applies to trade accounts receivable and the calculation of the allowance for uncollectible accounts receivable. The new standard became effective for the Company for annual and interim periods beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this accounting guidance will have on the consolidated financial statements.
2. ACCOUNTS RECEIVABLE
Accounts receivable relate to trade receivables from product sales made by the Company. Accounts receivable consist of the following at October 31, 2021 and April 30, 2021:
| October 31, 2021 | April 30, 2021 | |||||||
| Trade receivables | $ | $ | ||||||
| 13 |
3. NOTES PAYABLE
Convertible Promissory Notes Payable
During the year ended April 30, 2021, the Company
issued a fourth round of convertible debentures in the principal amount of $
During the year ended April 30, 2021, the Company
issued a fifth round of convertible debentures in the principal amount of $
Vehicles and Equipment Notes Payable
The Company has one note payable relating to the
purchase of a Company vehicle as of October 31, 2021. The balance outstanding under the note payable was $
The Company’s future minimum principal payments as of October 31, 2021 are as follows:
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total future minimum payment | $ |
Other Notes Payable
On May 8, 2020, the Company received $
On February 01, 2021, the Company received $
On February 11, 2021, WSC received $
On February 14, 2021, ICS received $
On March 16, 2021, SPE received $
| 14 |
On April 19, 2021, the Company received $
On May 10, 2021, the Company received $
On May 19, 2021, the Company received $
On June 7, 2021, the Company received $
On June 7, 2021, the Company received $
4. ACCRUED EXPENSES
Accrued expenses, consisting of accrued salaries for officers and executive management, include the following balance at October 31, 2021 and April 30, 2021:
| October 31, 2021 | April 30, 2021 | |||||||
| Accrued Compensation | $ | $ | ||||||
| Other Accrued Expenses | ||||||||
| Accrued expenses | $ | $ | ||||||
5. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS
Leases
As of October 31,
2021, the weighted average remaining lease term and weighted average discount rate for financing leases was
The Company’s undiscounted annual future minimum lease payments as of October 31, 2021 consist of:
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | ||||
| Interest | ( | ) | ||
| Present value of lease liabilities | $ |
Concentrations
As of October 31, 2021, the Company had three
customers which made up
For the six months ended October 31, 2021, the
Company had two customers which made up
| 15 |
6. STOCKHOLDERS’ EQUITY
Common Stock
As of October 31, 2021 and 2020, the authorized share capital of the Company consisted of shares of common stock with $ par value. No other classes of stock are authorized.
During the three-month period ended July 31, 2021,
the Company sold shares at $ per share for $
During the three-month period ended October 31,
2021, the Company issued shares at $ per share for $
During the three-month period ended October 31,
2021, the Company sold shares at $ per share for $
Warrants
On March 31, 2017, the Company issued
warrants at an exercise price of $
As of October 31, 2021, and April 30, 2020, there
were
| Period | Beg. Balance | Issued | Exercised | Expired | End. Balance | |||||||||||||||
| April 30, 2020 | ||||||||||||||||||||
| April 30, 2021 | ||||||||||||||||||||
| July 31, 2021 | ||||||||||||||||||||
| October 31, 2021 | ||||||||||||||||||||
Stock option plan
Effective February 1, 2017, the Company established the 2016 Stock Option Plan (the “Plan”). The Board of Directors of the Company has the authority and discretion to grant stock options. The maximum number of shares of stock that may be issued pursuant to the exercise of options under the Plan is . Eligible individuals include any employee or director of the Company and any consultant providing services to the Company. The expiration date and exercise price for each stock option grant are as established by the Board of Directors of the Company. No option may be issued under the Plan after February 1, 2027. On March 18, 2018, the Plan was amended to increase the maximum number of shares of stock that may be issued to 5,000,000. On July 10, 2018, the Plan was amended to increase the maximum number of shares of stock that may be issued to 5,500,000. In November of 2019, the Plan was further amended to increase the shares of stock that may be issued to 10,000,000.
During the six months ended October 31, 2021 and 2020, there were and common stock options granted. During the three months ended October 31,2021 and 2020, there were and common stock options granted.
Stock option activity during the six-month period ended October 31, 2021 is summarized as follows:
| Shares Under Option | Price Per Share | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | |||||||||||
| Outstanding - beginning of period | $0.00 - 1.50 | $ | months | |||||||||||
| Granted | 1.99 | months | ||||||||||||
| Exercised | ( | ) | 0.01 | – | ||||||||||
| Canceled or expired | – | – | ||||||||||||
| Outstanding - end of period | $0.00 - 1.50 | $ | months | |||||||||||
| Exercisable - end of period | $ | months | ||||||||||||
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Stock option activity during the period ended October 31, 2020, is summarized as follows:
| Shares Under Option | Price Per Share | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | |||||||||||
| Outstanding - beginning of period | $0.00 - 1.50 | $ | months | |||||||||||
| Granted | – | – | ||||||||||||
| Exercised | – | – | ||||||||||||
| Canceled or expired | – | – | ||||||||||||
| Outstanding - end of period | $0.00 - 1.50 | $ | months | |||||||||||
| Exercisable - end of period | $ | months | ||||||||||||
7. RELATED PARTY TRANSACTIONS
During the six months ended October 31, 2021 and 2020, the Company incurred consulting fees of $ and $ to four separate entities owned by four current shareholders. During the three-month period ended October 31, 2021 and 2020, the Company incurred $ and $ in consulting fees to three separate entities owned by three current shareholders. The total related party consulting fees unpaid balance due was $ and $ as of October 31, 2021 and April 30, 2021, respectively, and is included in accounts payable in the accompanying consolidated balance sheets.
The Company is in effect a sales representative
of CBI. pursuant to the Exclusive Patent License Agreement between the Company and CBI. CBI and the Company are companies under the common
control of E. Thomas Layton, the Company’s chairman and chief executive officer. There are no other transactions or contracts between
CBI and the Company other than those discussed in this report. There was $
Two separate related parties are allowing the
Company to rent vehicles for a monthly fee of $1,650 and $2,957. For the six months ended October 31, 2021, the Company paid a total of
$
8. INCOME TAXES
For the six months ended October 31, 2021 and 2020, the effective tax rate of 0% varies from the U.S. federal statutory rate primarily due to net losses and the valuation allowance associated with the net operating loss carryforwards. The Company continually reviews the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. The Company continues to record a full valuation allowance against its net deferred tax assets. The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than not” standard. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded valuation allowance. Based on the Company’s review of this evidence at October 31, 2021, management determined that a full valuation allowance against all of the Company’s deferred tax assets at October 31, 2021 was appropriate.
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The following table summarizes the difference between the actual tax provision and the amounts obtained by applying the statutory tax rates to the income or loss before income taxes for the period ending October 31, 2021 and 2020:
| October 31, 2021 |
October 31, 2020 |
|||||||
| Tax benefit calculated at statutory rate | ||||||||
| Expense not deductible | ( |
( |
||||||
| Changes to valuation allowance | ( |
( |
||||||
| Provision for income taxes | ||||||||
9. CORONA VIRUS
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (“COVID-19”). The pandemic has significantly impacted the economic conditions in the U.S., accelerating during the first half of March, as federal, state and local governments react to the public health crisis, creating significant uncertainties in the U.S. economy. In March 2020, we noticed a strong decline in orders from our customers, as businesses around the country began to cease their operations due to COVID-19. In an attempt to mitigate the ongoing impact of the pandemic on our cash flows certain actions were taken. The actions include targeted reductions in discretionary operating expenses such as advertising and payroll expenses, reducing capital expenditures, and reducing travel for business development purposes. As of October 31, 2020, we have noticed an increase in monthly orders as businesses have reopened, coupled with the spring/summer construction season. We have begun to increase our associated expenses including business travel and development.
The Paycheck Protection Program (“PPP”)
provides loans from the U.S. Small Business Administration (“SBA”) to help businesses keep their workforce employed during
the Coronavirus (COVID-19) crisis. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used
for payroll, rent, mortgage interest, or utilities. On May 8, 2020, the Company received a PPP loan in the amount of $
On February 11, 2021, WSC received $
On February 14, 2021, ICS received $
On March 16, 2021, SPE received $
Continued impacts of the pandemic have had a material adverse impact on our revenues, earnings, liquidity and cash flows, and may require additional actions in response, including, but not limited to, employee layoffs, reduced production, or further expense reductions, all in an effort to mitigate such impacts. The extent of the impact of the pandemic on our business and financial results will depend largely on future developments, including the duration of the spread of the outbreak within the U.S., and the related /impact on consumer confidence and spending, all of which are highly uncertain and cannot be predicted. This situation is rapidly changing and additional impacts to the business may arise that we are not aware of currently. While the disruption is currently expected to be temporary, there is uncertainty around the duration. The ultimate impact of the pandemic on the Company’s results of operations, financial position, liquidity, or capital resources cannot be reasonably estimated at this time.
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11. SUBSEQUENT EVENTS
On November 22, 2021, the Company amended its stock option plan to increase the number of options available to 15,000,000.
On November 22, 2021, the Company granted 4,010,000 options to 13 people at an exercise price of $0.25 per option.
On December 1, 2021, the Company granted 800,000 options to two investors at an exercise price of $0.25 per option for the cancellation of indebtedness owed by the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with its unaudited interim condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the fiscal year ended April 30, 2021.
FORWARD-LOOKING STATEMENTS
The discussion contained herein contains "forward-looking statements" that involve risk and uncertainties. These statements may be identified by the use of terminology such as "believes," "expects," "may," "should" or anticipates" or expressing this terminology negatively or similar expressions or by discussions of strategy. The cautionary statements made in this Form 10-Q should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. The Company’s actual results could differ materially from those discussed in this report.
BUSINESS AND PLAN OF OPERATION
Lux Amber, Corp., based in Frisco, Texas, is an international specialty chemical company with many products that are friendly to the environment. The common description is “green chemicals.” The Company has degreed chemists on staff with years of successful experience in the specialty chemical industry. The term “specialty chemicals” is best defined by those chemicals whose formulas allow the chemical compounds to perform a specific function for a class of customers. The Company’s products have been used successfully in a diverse array of applications, including:
| · | Chemicals to protect surfaces in asphalt handling equipment |
| · | Chemicals to control the reproduction of pests |
| · | Military Chemical, Biological, Radiological, Nuclear, and Explosives (CBRNE) sites |
| · | Commercial nuclear power plants and nuclear-powered ships |
| · | Hazardous toxic industrial chemical and toxic industrial material clean-up |
The Company’s corporate telephone number is 972-214-9764. The Company’s stock symbol is LXAM.
LAC has three (3) wholly owned subsidiaries (collectively with LAC, the “Company”): Worldwide Specialty Chemicals, Inc. (“WSC”), Industrial Chem Solutions, Inc. (“ICS”), and Safeway Pest Elimination, LLC, (“SPE”), which was formed July 16, 2018. LAC and its subsidiaries serve as both producers and distributors of environmentally safe, specialty chemicals. The Company formerly held a 49% interest in PCNM LLC, a Service-Disabled Veteran owned small business that sold the Company’s products to government agencies. PCNM was legally dissolved on July 31, 2020.
The Company’s products utilize all-natural and renewable resources, contain no dangerous chemicals or additives, and offer “green” solutions to its customers. ICS’ product line includes asphalt release agents, industrial cleaners, environmental remediation gels, odor control agents, and consumer friendly cleaners for a wide range of uses, including construction, environmental remediation, hazardous materials clean-up, nuclear decommissioning, industrial cleaning, and odor control. SPE’s products are designed for the elimination and control of pests.
LIQUIDITY AND CAPITAL RESOURCES
During the six-month period ended October 31, 2021, the primary sources of liquidity were cash flows from financing activities, and in particular, issuance of stock and promissory notes.
As of October 31, 2021, the Company had total assets of $3,407,314 consisting of current assets of $277,601, $178,556 in receivables, $85,528 in inventory, $13,517 in prepaid expenses and other current assets, and long-term assets of $2,309,953 in goodwill and other intangibles, $451,136 in fixed assets, $26,965 on other long-term assets, and $341,659 in right of use assets. As of April 30, 2021, the Company had total assets of $3,353,460, consisting of current assets of $112,982 in receivables, $137,211 in inventory, $7,960 in prepaid expenses and other current assets and long-term assets of $2,309,953 in goodwill and other intangibles, and $512,697 in fixed assets and $272,657 in right of use assets.
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As of October 31, 2021, the Company had total liabilities totaling $2,820,283 including $2,088,675 in current payables and accrued expenses, $66,522 in related party payables, $240,627 notes payable, $104,752 in Paycheck protection program loans, and $319,707 in right of use liabilities. As of April 30, 2021, the Company had total liabilities totaling $2,468,547 including $1,756,156 in accounts payable and accrued expenses, $208,756 in related party payables, $127,624 in notes payable, and $271,259 in lease liabilities, and $104,752 in Paycheck protection program loans.
As October 31, 2021, the Company had an accumulated stockholders’ equity of $587,031 and $884,913 at April 30,2021. The increase is result of the items discussed below.
RESULTS OF OPERATIONS
Comparison of the three and six-month periods ended October 31, 2021 and October 31, 2020.
Revenues
For the three-month period ended October 31, 2021, the Company had revenues of $433,920, and $396,155 for the same period in 2020. The increase in sales is primarily the result of 1) expanded business with legacy customers to service additional Hot Mix Asphalt Plants under their ownership; 2) increase in sales price per unit; 3) addition of new customers.
For the six-month period ended October 31, 2021, the Company had revenues of $857,748, and $686,415 for the same period in 2020. The increase in sales is primarily the result of 1) expanded business with legacy customers to service additional Hot Mix Asphalt Plants under their ownership; 2) increase in sales price per unit; 3) addition of new customers.
Cost of Goods Sold decreased as a percentage of revenues due to a change in the mix of products sold during the period and increases in the gross selling prices on all the products offered by the company.
Operating Expenses
For the six-month period ended October 31, 2021, the Company’s operating expenses totaled $1,082,454 which included $272,639 in product delivery expenses, $719,302 in general and administrative expenses, $10,542 in selling expenses and $79,971 in depreciation of assets. For the six-month period ended October 31, 2020, the Company had operating expenses that totaled $1,439,745 which included $301,266 in product delivery expenses, $1,027,757 in general and administrative expenses, $35,755 in selling expenses and $74,967 in depreciation.
For the three-month period ended October 31, 2021, the Company’s operating expenses totaled $544,359 which included $119,424 in product delivery expenses, $383,144 in general and administrative expenses, $3,440 in selling expenses and $38,351 in depreciation of assets. For the three-month period ended October 31, 2020, the Company had operating expenses that totaled $771,460 which included $159,285 in product delivery expenses, $555,979 in general and administrative expenses, $18,513 in selling expenses and $37,683 in depreciation.
The decrease is primarily due to 1) Less travel cost due to more efficient use of mobile assets; 2) Shifting the cost burden of delivery to the customer; 3) Improved cost accounting processes; 4) Improved purchasing processes by sourcing raw materials from multiple vendors and buying in larger quantities.
GOING CONCERN
The accompanying consolidated financial statements are presented on a going concern basis. The Company's financial condition raises substantial doubt about the Company's ability to continue as a going concern. The Company has limited cash, its current liabilities exceed its current assets as of October 31, 2021 and has incurred reoccurring losses from operations during the six months ended October 31, 2021. The Company is relying on capital from investors to meet the majority of its operating expenses.
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OFF-BALANCE SHEET ARRANGEMENTS
There are no off-balance sheet transactions, arrangements, obligations (including contingent obligations), or other relationships with unconsolidated entities or other persons that have, or may have, a material effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company’s management, with the participation of its President and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, its disclosure controls and procedures are not effective.
INTERNAL CONTROL OVER FINANCIAL REPORTING
As indicated in the Company’s Form 10-K filed on September 30, 2021, the Company’s Principal Executive Officer and Principal Financial Officer concluded that its internal control over financial reporting was not effective during the 2021 fiscal year.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the period covered by this report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no material changes to the risks to the Company’s business from those described in its Annual Report on Form 10-K for the fiscal year ended April 30, 2021, as filed with the SEC on September 30, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
To assist the Company to obtain and preserve working capital to support its current operations the Company entered into the following transactions:
On July 13, 2021, the Company sold 200,000 common shares at $0.50 per share for a total cash amount of $100,000.
On July 23, 2021, the Company sold 100,000 common shares at $0.50 per share for a total cash amount of $50,000.
On July 23, 2021, the Company sold 100,000 common shares at $0.50 per share for an assigned note receivable.
On September 20, 2021, the Company issued 60,000 shares of at $0.33 per share for payment of $20,000 of outstanding payables.
On September 20, 2021, the Company issued 300,000 shares of at $0.33 per share for a total cash amount of $100,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: December 17, 2021
| Lux Amber, Corp. | ||
| By: | /s/ E. Thomas Layton | |
| E. Thomas Layton, CEO and Director | ||
| By: | /s/ Paul O. Williams | |
| Paul O. Williams, CFO and Director | ||
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