Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED: October 31, 2020

 

OR

 

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from__________ to __________

 

COMMISSION FILE NUMBER: 000-55554

 

Lux Amber, Corp.

(Exact name of registrant as specified in its charter)

 

Nevada	98-1414834
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

 

145 Rose Lane, Suite 102

Frisco, TX 75036

Tel: (972) 214-9764

(Address and telephone number of principal executive offices)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	LXAM	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.  Yes x        No o

 

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  o       No x

 

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 o	Accelerated Filer o
Non-accelerated filer o	Smaller reporting company x
Emerging Growth Company o

 

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. o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).            Yes  o        No  x

 

The number of Registrant’s shares of common stock, $0.0001 par value, outstanding as of December 18, 2020, was 30,944,742.

 

 

 

 

TABLE OF CONTENTS

 

			Page
PART I.  FINANCIAL INFORMATION			3
	Item 1	Consolidated Financial Statements (unaudited)	3
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 4	Controls and Procedures	21
PART II.  OTHER INFORMATION			22
	Item 1	Legal Proceedings	22
	Item 1A	Risk Factors	22
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	22
	Item 3	Defaults Upon Senior Securities	22
	Item 4	Mine Safety Disclosures	22
	Item 5	Other Information	22
	Item 6	Exhibits	23
SIGNATURES			24

 

 

 

 

 

 

 

 

 

PART 1 - FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

LUX AMBER, CORP. AND SUBSIDIARIES

 

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

     

		October 31, 2020				April 30, 2020
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	–			$	49,185
Accounts receivable - trade			140,853				106,876
Inventory			162,194				131,205
Prepaid expenses			2,000				8,711
Other current assets			38,052				770
Total current assets			343,099				296,747
GOODWILL			2,294,952				2,294,952
OTHER INTANGIBLES			15,000				15,000
OTHER LONG-TERM ASSETS			17,700				12,700
FIXED ASSETS
Furniture, fixtures, and office equipment			28,740				26,191
Vehicles and trailers			269,062				194,140
Equipment			621,492				608,274
Leasehold improvements			12,190				12,190
Assets in process			45,402				44,551
			976,886				885,345
Accumulated depreciation			(391,054	)			(316,086	)
Fixed assets, net			585,832				569,259
RIGHT OF USE ASSETS			337,917				423,815
TOTAL ASSETS		$	3,594,500			$	3,612,474
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	478,266			$	288,864
Accrued expenses			1,237,691				805,853
Related party payables			67,809				85,603
Notes payable – current portion			32,889				762,889
Right of use – current portion			186,745				190,262
Total current liabilities			2,003,400				2,133,471
NON-CURRENT LIABILITIES
Notes payable			24,677				27,585
Right of use liabilities			167,744				236,782
TOTAL LIABILITIES			2,195,821				2,397,838
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock, $0.0001 par value, 75,000,000 shares authorized: 30,944,742 issued and outstanding shares as of October 31, 2020 and 29,441,708 issued and outstanding shares April 30, 2020			3,073				2,943
Additional paid-in capital			15,477,714				14,095,093
Accumulated deficit			(14,082,108	)			(12,884,427	)
Total Lux Amber Corp. stockholders' equity			1,398,679				1,213,609
Non-controlling interest			–				1,027
TOTAL EQUITY			1,398,679				1,214,636
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	3,594,500			$	3,612,474

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

 

 

LUX AMBER, CORP. AND SUBSIDIARIES

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

		Three months ended October 31, 2020				Three months ended October 31, 2019				Six months ended October 31, 2020				Six months ended October 31, 2019
Revenue		$	396,155			$	344,094			$	686,415			$	725,596
Cost of goods sold			211,555				292,220				425,454				517,401
Gross Profit			184,600				51,874				260,961				208,195
Product delivery expenses			159,285				70,044				301,266				138,436
General and administrative expenses			555,979				514,266				1,027,757				820,359
Selling expenses			18,513				43,311				35,755				82,673
Depreciation and amortization			37,683				28,095				74,967				52,914
Total operating expenses			771,460				655,716				1,439,745				1,094,382
Loss from operations			(586,860	)			(603,842	)			(1,178,784	)			(886,187	)
Other (income)/expenses
Interest income			–				(135	)			–				(150	)
Interest expense			19,987				6,844				23,295				9,697
Other (income)/expense			31,343				46,884				(3,280	)			15,810
Total other (income) expense			51,330				53,593				20,015				25,357
Net loss		$	(638,190	)		$	(657,435	)		$	(1,198,799	)		$	(911,544	)
Less: net loss attributable to non-controlling interest			–				(337	)			–				(642	)
Net loss attributable to Lux Amber Corp.			(638,190	)		$	(657,098	)		$	(1,198,799	)		$	(910,902	)
Loss per common share:
Basic and Diluted		$	(0.02	)		$	(0.02	)		$	(0.04	)		$	(0.03	)
Weighted Average Number of Common Shares Outstanding:
Basic and Diluted			30,606,332				26,709,293				30,262,690				26,709,293

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

 

 

 

 

 

 

 

LUX AMBER, CORP. AND SUBSIDIARIES

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

For the Six Months Ended October 31, 2020 and October 31, 2019

 

 

		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			29,441,708			$	2,943			$	14,095,093			$	(12,884,427	)		$	1,027			$	1,214,636
Common stock repurchased			(36,250	)			(5	)			(45,308	)			–				–				(45,313	)
Notes payable with interest converted to common stock			1,539,551				135				1,323,636				–				–				1,323,771
Dissolution of PCNM			–				–				–				1,118				(1,027	)			91
Share based compensation			–				–				89,106				–				–				89,106
Adjustment			(267	)			–				15,187												15,187
Net loss			–				–				–				(1,198,799	)			–				(1,198,799	)
Balance as of October 31, 2020			30,944,742			$	3,073			$	15,477,714			$	(14,082,108	)		$	–			$	1,398,679

 

		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, 2019			25,969,293			$	2,597			$	10,767,919			$	(8,461,391	)		$	(27,918	)		$	2,281,207
Warrants exercised			260,000				26				129,974				–				–				130,000
Common stock issued for cash			403,332				40				604,958				–				–				604,998
Notes payable converted to common stock			166,667				17				59,983				–				–				60,000
Share based compensation			–				–				193,183				–				–				193,183
Net loss			–				–				–				(910,902	)			(642	)			(911,544	)
Balance as of October 31, 2019			26,799,292			$	2,679			$	11,756,017			$	(9,372,293	)		$	(28,560	)		$	2,357,843

 

 

 

 

 

 

 

 

 

 

LUX AMBER, CORP. AND SUBSIDIARIES

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

 

For the Three Months Ended October 31, 2020 and October 31, 2019

 

 

		Number of Shares Issued and Outstanding				Common Stock Par Value Amount				Additional Paid-in Capital				Accumulated Deficit				Non-Controlling Interest				Total
Balance as of July 31, 2020			30,293,316			$	3,027			$	14,857,575			$	(13,443,918	)		$	–			$	1,416,684
Notes payable with interest converted to common stock			651,693				46				560,399				–				–				560,445
Share based compensation			–				–				44,553				–				–				44,553
Adjustments			(267	)			–				15,187				–				–				15,187
Net loss			–				–				–				(638,190	)			–				(638,190	)
Balance as of October 31, 2020			30,944,742			$	3,073			$	15,477,714			$	(14,082,108	)		$	–			$	1,398,679

 

 

		Number of Shares Issued and Outstanding				Common Stock Par Value Amount				Additional Paid-in Capital				Accumulated Deficit				Non-Controlling Interest				Total
Balance as of July 31, 2019			26,229,293			$	2,623			$	11,016,987			$	(8,786,389	)		$	(28,223	)		$	2,204,999
Notes payable with interest converted to common stock			166,667				17				59,983				–				–				60,000
Common stock issued for cash			403,332				40				604,958												604,998
Share based compensation			–				–				74,089				–				–				74,089
Net loss			–				–				–				(657,098	)			(337	)			(657,435	)
Balance as of October 31, 2019			26,799,292			$	2,679			$	11,756,018			$	(9,443,487	)		$	(28,560	)		$	2,286,650

 

 

 

 

 

LUX AMBER, CORP. AND SUBSIDIARIES

 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

         

 

		For the Six Months Ended October 31, 2020				For the Six Months Ended October 31, 2019
Cash Flows from Operating Activities
Net loss		$	(1,198,799	)		$	(911,544	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization			160,865				71,084
Loss on sale of assets			–				21,338
Share based compensation			89,106				193,183
Right of use interest			8,066				3,581
Change in current assets and current liabilities
Accounts receivable - trade			(33,977	)			(82,748	)
Inventory			(30,989	)			(53,905	)
Prepaid expenses			6,711				17,287
Other current assets			(37,282	)			7,239
Accounts payable and accrued expenses			658,990				66,657
Due to related parties			(17,794	)			(209,835	)
Net cash used in operating activities			(395,103	)			(877,663	)
Cash Flows from Investing Activities
Deposit paid			(5,000	)			(12,400	)
Expenditures for property and equipment			(91,538	)			(127,294	)
Total cash used in investing activities			(96,538	)			(139,694	)
Cash Flows from Financing Activities
Proceeds from convertible notes payable and interest payable			571,300				500,000
Payments on notes payable			(2,910	)			(8,081	)
Payments on right of use liabilities			(80,621	)			(11,002	)
Payments for the repurchase of common stock			(45,313	)			–
Proceeds from the sale of common stock			–				604,998
Proceeds from the execution of warrants			–				130,000
Net cash provided by financing activities			442,456				1,215,915
Net change in cash and cash equivalents			(49,185	)			198,558
Cash at beginning of period			49,185				251,454
Cash at end of period		$	–			$	450,012
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest		$	19,735			$	7,313
Taxes		$	–			$	–
Noncash Financing Activities
Convertible notes and accrued interest converted to common stock		$	1,323,781			$	60,000

 

The accompanying footnotes are an integral part of these consolidated financial statements.

 

 

 

 

LUX AMBER, CORP. AND SUBSIDIARIES

 

Notes to Interim Condensed Consolidated Financial Statements

 

October 31, 2020

(Unaudited)

 

 

NATURE OF BUSINESS

 

Lux Amber, Corp. (the “Company”) a Nevada corporation, is an international specialty chemical company. Its principal executive offices are located at 145 Rose Lane, Suite 102, Frisco, Texas 75036.

 

The Company has three (3) wholly owned subsidiaries: Worldwide Specialty Chemicals, Inc. (“WSCI”), Industrial Chem Solutions, Inc. (“ICS”), and Safeway Pest Elimination, LLC, (“SPE”). SPE was formed July 16, 2018. Each of ICS and SPE serves as both a producer and distributor of environmentally safe, specialty chemicals. The Company and its subsidiaries are located at 145 Rose Lane, Suite 102, Frisco, TX 75036.

 

The products sold by the Company and its subsidiaries 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 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 Worldwide Specialty Chemicals, Inc. (WSCI), Industrial Chem Solutions, Inc. (ICS), and Safeway Pest Elimination, LLC (SPE).

 

All significant intercompany accounts and transactions have been eliminated in consolidation.

 

Basis of Presentation

 

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial reporting and the instructions for Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they include all information and footnote disclosures necessary for a complete presentation of the financial position, results of operations, cash flows, and stockholder’s equity in conformity with GAAP. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

  

 

 

 

 

The unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s most recently filed Form 10-KT (as amended) as of and for the transitional period ended April 30, 2020 that was filed on August 18, 2020.

         

Operating results for the six-months ended October 31, 2020, are not necessarily indicative of the results that can be expected for the year ending April 30, 2021.

 

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, prepaid expenses, accounts payable, accrued expenses and notes payable. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management at October 31, 2020 and April 30, 2020. The carrying value of the financial instruments included in the Company’s financial statements approximated their fair values.

  

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 and Diluted Net Loss Per Share

 

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, 2020 and 2019, approximately 82,668 and 82,668 common stock warrants, respectively, and 6,366,417 and 4,983,083 common stock options, respectively, were not added to the diluted average shares because inclusion of such warrants and options would be antidilutive.

 

For the three months ended October 31, 2020 and 2019, approximately 82,668 and 82,668 common stock warrants, respectively, and 6,366,417 and 4,983,083 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 receivable are trade receivables from product sales recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past 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, 2020 and April 30, 2020, the allowance for doubtful accounts was $0.

  

Revenue Recognition

 

On January 1, 2018, we adopted Accounting Standards Committee 606 (“ASC 606”), Revenue from Contracts with Customers, which provides guidance on how revenue with customers should be recognized.

 

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. Revenue from service, if applicable, would be recognized when the services are provided, or the customer receives the benefit, which is over time. For the period ended October 31, 2020 and 2019, all revenue was from products sold.

  

Our sales policies do not provide for general rights of return, and payment is due net of 60 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.

 

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:

 

		October 31, 2020				April 30, 2020
Finished goods		$	109,902			$	92,568
Raw materials			69,582				55,927
Obsolescence			(17,290	)			(17,290	)
		$	162,194			$	131,205

  

 

 

 

 

Prepaid Expenses

 

Prepaid expenses consist of expenses the Company has paid for prior to the service or good being provided. These prepaid expenses will be recorded as expense at the time the service has been provided.

 

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 expenses 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.

 

Property and equipment operated under material leases which transfer substantially all benefits and risks associated with the assets to the Company are capitalized. An asset and liability equal to the present or fair value, if appropriate, of minimum payments over the term of the leases are recorded. Depreciation of the asset is computed using the straight-line method over the life of the asset. Costs associated with operating leases are expensed as incurred.

 

Goodwill

 

Goodwill represents the excess of the value of the purchase price and related costs over the identifiable assets from business acquisitions. The Company conducts an annual impairment assessment, at the reporting unit level, of its recorded goodwill. The Company assesses qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. The qualitative factors evaluated by the Company include macro-economic conditions of the local business environment, overall financial performance, and other entity specific factors as deemed appropriate. If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit’s fair value is less than the carrying amount, management determines if the reporting unit’s carrying value exceeds its fair value and records an impairment for such amounts. Management determined, by assessing the qualitative factors, that it is more likely than not that the fair value of the reporting unit is greater than the carrying value. Management does not consider the value of goodwill recorded for ICS in the accompanying consolidated balance sheet to be impaired as of October 31, 2020 and April 30, 2020.

 

License Fee

 

ICS pays 10% of the net selling price to CBI Polymers, Inc., as a mutually acceptable license fee. E. Thomas Layton, Chairman and CEO of the Company, is also the Chairman and CEO and controlling shareholder of CBI Polymers, Inc. See discussion of expenses incurred at Note 7.

  

Share-Based Compensation

 

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. The Company estimates forfeitures to be 50% for options that vest over time.

  

 

 

 

 

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 ASC Topic 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, 2020 and April 30, 2020.

 

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.

 

Going Concern

 

The accompanying consolidated 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 $14,082,108 and $12,884,427 on October 31, 2020 and April 30, 2020, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are being issued. As such, the Company will need to arrange for additional financing to fully implement its business plan, including continued growth and establishment of a stronger brand.

 

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. In addition, the company is working to establish creditworthiness by establishing a line-of-credit and entering into a sale-lease back on certain assets. 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 an emerging growth 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 Recently Adopted

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill impairment (“ASU 2017-04”), which removes Step 2 of the goodwill impairment test. A goodwill impairment will now be determined by the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019, with early adoption permitted. Adoption of this guidance in the four-month period ended April 30, 2020 did not impact the Company’s financial statements.

  

 

 

 

 

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 will become 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 on October 31, 2020 and April 30, 2020:

 

		October 31, 2020				April 30, 2020
Trade receivables		$	140,853			$	106,876

 

3. NOTES PAYABLE

 

Convertible Promissory Notes Payable

 

During the period ended April 30, 2020 the Company issued a round of convertible debentures worth $750,000. The debentures are convertible into shares of the Company's common stock at the maturity date of June 15, 2020 and pay any unpaid interest at a rate of 8%. As of October 31, 2020, this round of debentures has been converted into 872,093 shares of common stock at a price of $0.86 per share and the accrued interest unpaid amount of $13,326 was converted into 15,765 shares of common stock at a price of $0.86 per share. The remaining $1,666 of accrued interest was paid as of August 11, 2020.

 

During the three-month period ending July 31, 2020, the Company began offering a round of convertible debentures worth $1,000,000. During this period $551,300 were issued. This round of debentures has been converted into 641,048 shares of common stock at a price of $0.86 per share and the accrued interest unpaid amount of $16,459 was converted into 10,645 shares of common stock at a price of $0.86 per share.

 

During the three-month period ending October 31, 2020, the Company continued offering a round of convertible debentures worth $1,000,000, of which $20,000 had been issued. The debentures are convertible into shares of the Company's common stock at the maturity date of January 15, 2021 and pay any unpaid interest at a rate of 8%. As of October 31, 2020, this round of debentures had not been converted and there was no accrued interest unpaid.

 

Vehicles and Equipment Notes Payable

 

The Company has one note payable relating to the purchase of a Company vehicle as of October 31, 2020. The balance outstanding under the note payable was $37,564 as of October 31, 2020. The note payable bears interest of 5.99% with principal and interest due monthly. The note matures in September 2023. The Company had the same note payable relating to the purchase of a Company vehicle as of April 30, 2020 with a balance outstanding of $40,474.

 

 

 

 

 

The Company’s future minimum principal payments as of October 31, 2020 are as follows:

 

2021		$	6,931
2022			12,889
2023			12,889
2024			4,855
		$	37,564

  

4. ACCRUED EXPENSES

 

Accrued expenses, consisting of accrued salaries for officers and executive management, include the following balance on October 31, 2020 and April 30, 2020:

 

		October, 2020				April 30, 2020
Accrued Compensation		$	878,250			$	469,004
Other Accrued Expenses			359,441				336,849
		$	1,237,691			$	805,853

 

5. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

 

Leases

 

The Company adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) ASU 2016-02, Leases on January 1, 2019 on a modified retrospective basis. The initial adoption of the standard recognized right-of-use assets of $493,832 and lease liabilities of $498,361 on the Company’s consolidated balance sheet with no impact on the Company's results of operations. The Company elected the hindsight practical expedient and the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs for all leases.

 

As of October 31, 2020, the weighted average remaining lease term and weighted average discount rate for financing leases was 2.6 years and 4.07%, respectively. The Company's future financing lease obligations that have not yet commenced are immaterial. For six months ending October 31, 2020 and 2019, the Company's cash paid for financing leases was $80,621 and $11,002, and short-term lease costs were $0 and $1,128, respectively. For three months ending October 31, 2020 and 2019, the Company's cash paid for financing leases was $24,345 and $19,002, and short-term lease costs were $0 and $1,128, respectively.

 

The Company’s undiscounted annual future minimum lease payments as of October 31, 2020 consist of:

 

2021		$	91,716
2022			169,607
2023			88,298
2024			12,590
2025			10,884
Total lease payments			373,095
Interest			(18,606	)
Present value of lease liabilities		$	354,489

  

 

 

 

Concentrations

 

For the six months ended October 31, 2020, the Company had four customers which made up 63% of the outstanding accounts receivable balance. For the six months ended October 31, 2019, the Company had two customers which made up 45% of the outstanding accounts receivable balance.

 

For the six months ended October 31, 2020, the Company had two customers which made up 45% of total revenues. For the six months ended October 31, 2019, the Company had two customers which made up 41% of total revenues.

 

For the three months ended October 31, 2020, the Company had two customers which made up 48% of total revenues. For the three months ended October 31, 2019, the Company had two customers which made up 51% of total revenues.

  

6. STOCKHOLDERS’ EQUITY

 

Common Stock and Preferred Stock

 

As of October 31, 2020, and 2019, the authorized share capital of the Company consisted of 75,000,000 shares of common stock, $0.0001 par value. No other classes of stock are authorized.

  

Common Stock

 

During the six months ended October 31, 2020, the Company has 36,250 common shares repurchased at $1.25 per share for a total cash payment amount of $45,313 plus interest.

 

For the three months ended October 31, 2020, the Company had no sale or repurchase of common stock.

 

Warrants

 

During the six months ended October 31, 2020 and 2019, there were 0 and 260,000 warrants exercised at $.50 per share for a total cash amount of $0 and $130,000, respectively.

 

For the three months ended October 31, 2020, the Company had no sale or repurchase of warrants.

 

As of October 31, 2020, and 2019, there were 82,668 and 82,668 common stock warrants outstanding, respectively, with an exercise price of $.50.

 

Stock option plan

 

On the effective date of the March 23, 2020 merger transaction, the Company assumed all of WSCI’s rights and obligations under WSCI’s Second Amended Stock Option Plan (the “Plan”), as well as WSCI’s obligations under the stock options granted on or prior to March 23, 2020. 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 10,000,000. 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.

 

 

 

 

During the six months ended October 31, 2020 and 2019, there were 0 and 150,000 common stock options granted. The options granted have an exercise price of $1.50 and vested immediately.

 

Stock option activity during the six-month 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			7,309,750			$	0.00 - 1.50			$	1.18			113 months
Granted			–			$	–			$	–			–
Exercised			–			$	–			$	–			–
Canceled or expired			–			$	–			$	–			–
Outstanding - end of period			7,309,750			$	0.00 - 1.50			$	1.15			105 months
Exercisable - end of period			6,469,750							$	0.91			89 months

   

Stock option activity during the six-month period ended October 31, 2019 is summarized as follows:

 

		Shares Under Option				Price Per Share				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life
Outstanding - beginning of period			5,386,418			$	0.00 - 1.50			$	0.79			98 months
Granted			150,000			$	1.50			$	1.50			–
Exercised			–			$	–			$	–			–
Canceled or expired			–			$	–			$	–			–
Outstanding - end of period			5,686,418			$	0.00 - 1.50			$	0.79			95 months
Exercisable - end of period			4,983,083							$	0.74			95 months

 

The fair value of each option grant is calculated using the following assumptions:

 

		October 31, 2020				October 31, 2019
Expected life – years			NA				5
Interest rate			NA				1.78-2.03%
Volatility			NA				71.70%
Dividend yield			–%				–%

 

 

 

 

 

Total share-based compensation expense (including stock grants) included in salaries and wages was $89,106 and $193,183 for the six months ended October 31, 2020 and 2019, respectively. Total share-based compensation expense (including stock grants) included in salaries and wages was $44,553 and $29,295 for the three months ended October 31, 2020 and 2019, respectively. Unamortized share-based compensation expense amounted to $371,275, which is expected to be recognized over the next 28 months as of October 31, 2020.

 

7. RELATED PARTY TRANSACTIONS

 

During the six months ended October 31, 2020 and 2019, the Company incurred consulting fees of $120,442 and $151,488 to five separate entities owned by five current shareholders. An additional $36,000 and $2,625 in consulting fees were incurred by the Company from an entity owned by the spouse of the CEO during the six months ended October 31, 2020 and 2019, respectively. The total related party consulting fees unpaid balance due was $30,240 and $14,000 as of October 31, 2020 and 2019, respectively, and is included in accounts payable in the accompanying consolidated financial statements.

 

During the three months ended October 31, 2020 and 2019, the Company incurred consulting fees of $48,647 and $58,562 to four separate entities owned by four current shareholders. The total related party consulting fees unpaid balance due was $47,647 and $0 as of October 31, 2020 and 2019, respectively, and is included in accounts payable in the accompanying consolidated financial statements.

 

The Company is in effect a sales representative of CBI Polymers, Inc. pursuant to the Exclusive Patent License Agreement between the Company and CBI Polymers. CBI Polymers 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 Polymers and the Company other than those discussed in this report. There was $0 due to CBI Polymers as of October 31, 2020 and April 30, 2020, respectively.

 

In fiscal year April 2020, the Company received $35,000 from a related party, Maine Consultants, Inc. and in exchange therefor, issued a promissory note to Maine Consultants. On May 13, 2020, the promissory note was paid in full.

 

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, 2020, the Company paid a total of $8,250 and $19,942. For the three months ended October 31, 2020, the Company paid a total of $4,950 and $5,916. For the three and six-month periods ended October 31, 2019, the Company had not yet entered into these agreements, thus $0 and $0 was paid.

   

8. INCOME TAXES

 

For the six-months ended October 31, 2020 and 2019, 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 on October 31, 2020, management determined that a full valuation allowance against all of the Company’s deferred tax assets at October 31, 2020 was appropriate.

 

 

 

 

 

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, 2020 and 2019:

 

		October 31, 2020				October 31, 2019
Tax benefit calculated at statutory rate			21.00%				21.00%
Expense not deductible			(0.05)				(0.06)
Changes to valuation allowance			(20.95)				(20.94)
Provision for income taxes			0%				0%

 

9. VARIABLE INTEREST ENTITIES

 

As of April 30, 2020, the Company owned 49% of the entity PCNM. As the Company was directly involved with the management of the entity, the Company considered itself to be the primary beneficiary, thus requiring consolidation. On June 15, 2020, PCNM was legally dissolved.

 

10. 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 $100,344. The Company expects the loan will be fully forgiven and has filed for the forgiveness in November of 2020.

  

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.

 

11. SUBSEQUENT EVENTS

 

Throughout November of 2020, the Company continued offering an additional $1,000,000 of convertible debentures. The debentures are convertible into shares of the Company’s common stock at the maturity date of January 15, 2021 and pay any unpaid interest at the rate of 8%. As of December 15, 2020, $118,000 has been funded since October 31, 2020.

 

 

 

 

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 transitional period ended April 30, 2020.

 

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 currently operates from a 12,000 square foot chemical production and distribution facility in Frisco, TX. Most of the chemical formulas are protected by patents or trade secrets. For certain specific markets, the Company provides customized applications systems that assure safe and proportioned product delivery. The Company may elect to apply for patents on one or more of the application systems.

 

The Company’s principal executive offices are located at 145 Rose Lane, Suite 102, Frisco, TX 75036. The Company’s corporate telephone number is 972-214-9764. The Company’s stock symbol is LXAM.

 

The Company has three wholly owned subsidiaries: Worldwide Specialty Chemicals, Inc. (“WSCI”), Industrial Chem Solutions, Inc. (“ICS”), and Safeway Pest Elimination, LLC (“SPE”); a fourth entity, PCNM, LLC (“PCNM”), is 49% owned. Each of ICS and SPE serves as both a producer and distributor of environmentally safe, specialty chemicals. PCNM is a Service-Disabled Veteran owned small business that sells to government agencies. The Company and its subsidiaries are located at 145 Rose Lane, Suite 102, Frisco, TX 75036.

  

 

 

 

 

ICS’ 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 refines, packages and markets compound derived from natural sources that are formulated to eliminate and/or control pests.

 

LIQUIDITY AND CAPITAL RESOURCES

 

During the six-month period ended October 31, 2020, the primary sources of liquidity were cash flows from financing activities, and in particular, promissory notes from a related party.

 

As of October 31, 2020, the Company had total assets of $3,594,500 consisting of $140,853 in receivables, $162,194 in inventory, $40,052 in other current assets, and long-term assets of $2,294,952 in goodwill and $15,000 other intangibles, $585,832 in fixed assets, $17,700 on other long-term assets, and $337,917 in right of use assets. As of April 30, 2020, the Company had total assets of $3,612,474, consisting of current assets of $49,185 in cash, $106,876 in receivables, $131,205 in inventory, $9,481 in prepaid expenses and other current assets. The decrease in total assets of $13,450, was primarily due to the decrease in its cash of $49,185 and increase in of inventory $30,989 as a result of slower customer pay times due to cash flow issues industry wide as a result of COVID-19 and a build-up of inventory to accommodate the increase in sales.

 

As of October 31, 2020, the Company had total liabilities totaling $2,003,400 including $1,715,957 in current payables and accrued expenses, $67,809 in related party payables, $32,889 in notes payable, and $186,745 in right of use liabilities. Long term liabilities total $192,421 and included both notes payable and right of use liabilities. As of April 30, 2020, the Company had total liabilities totaling $2,397,838 including $1,094,717 in accounts payable and accrued expenses, $85,603 in related party payables, $762,889 in notes payable and $190,262 in right of use liabilities. Long term liabilities totaled $264,367 and included both notes payable and right of use liabilities. The decrease in liabilities of $394,438, was largely the result of a decrease in notes payable of $730,000 due to debenture conversions and right of use liabilities of $39,038 from scheduled payments, with the remainder being offset by an increase in operating expenses.

 

On October 31, 2020, the Company had an accumulated stockholders’ equity of $1,398,679 and $1,214,636 on April 30, 2020. The decrease is result of the items discussed above.

 

RESULTS OF OPERATIONS

  

Comparison of the three and six-month periods ended October 31, 2020 and October 31, 2019.

 

Revenues

 

For the six-month period ended October 31, 2020, the Company had revenues of $686,415, and $725,596 for the same period in 2019. The decrease in sales is primarily the result of the decrease in SPE’s sales by $179,000 offset by an increase in ICS’s sales of $81,198. SPE was selling a proprietary product to a single customer. Due to a change in the marketing strategy of the single customer, that customer’s requirement for the product was discontinued. From time-to-time there will be other opportunities for the Company to produce custom products for specific customers, which may not have continuing revenues from one financial period to another.

 

 

 

 

For the three-month period ended October 31, 2020, the Company had revenues of $396,155, and $344,094 for the same period in 2019. The decrease in sales is primarily the result of the decrease in SPE’s sales by $76,200 offset by an increase in ICS’s sales of $64,665. SPE was selling a proprietary product to a single customer. Due to a change in the marketing strategy of the single customer, that customer’s requirement for the product was discontinued. From time-to-time there will be other opportunities for the Company to produce custom products for specific customers, which may not have continuing revenues from one financial period to another.

 

Operating Expenses

 

For the six-month period ended October 31, 2020, the Company’s operating expenses totaled $1,439,745, and $1,094,382 for the same period in 2019. The increase of $345,363 is primarily related to 1) expenses related to the purchase of Lux Amber Corp, which was not capitalized; 2) accrued but not paid increased officer salary expense; 3) accrued but not paid in full professional fees relating to consulting, audit and legal; and 4) offset by a decreased in product delivery costs.

 

For the three-month period ended October 31, 2020, the Company’s operating expenses totaled $771,460, and $655,716 for the same period in 2019. The increase of $115,744 is primarily related to 1) accrued but not paid officer salary; 2) accrued but not paid in full professional fees relating to consulting, audit and legal to the merger of Lux Amber which was not capitalized 3) offset by decrease of product delivery costs.

 

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, 2020 and has incurred reoccurring losses from operations during the six months ended October 31, 2020. The Company is relying on capital from investors to meet the majority of its operating expenses.

 

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-KT filed on August 18, 2020 the Company’s Principal Executive Officer and Principal Financial Officer concluded that its internal control over financial reporting was not effective during the 2019 fiscal year.

 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

 

During the period covered by this report, there were not 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.

 

 

 

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 Form 10-KT (as amended) for the transitional period ended April 30, 2020, as filed with the SEC on August 18, 2020.

 

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:

 

The Company’s third round of debentures was converted into 872,093 shares of common stock at a price of $0.86 per share and the accrued interest unpaid amount of $13,325 was converted into 15,765 shares of common stock at the same conversion rate.

 

The Company’s fourth round of debentures was converted into 641,048 shares of common stock at a price of $0.86 per share and the accrued interest unpaid amount of $9,155 was converted into 10,645 shares of common stock at the same conversion rate.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

 

 

 

 

ITEM 6. - EXHIBITS

 

Exhibit No.	Description
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2020, formatted in XBRL (extensible Business Reporting Language); (i) Consolidated Balance Sheets at October 31, 2020 (unaudited) and April 30, 2020, (ii) Consolidated Statement of Operations for the six months October 31, 2020 and 2019, (unaudited) (iii) Consolidated Statement of Cash Flows for the six months ended October 31, 2020 and 2019 (unaudited), and (iv) Notes to Consolidated Financial Statements. (unaudited)

 

 

 

 

 

 

 

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 21, 2020 

 

	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