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.
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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.
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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.
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