Lux Amber, Corp. and Subsidiaries
Lux Amber, Corp. and Subsidiaries
Consolidated Balance Sheets
April 30, 2020, December 31, 2019 And December
31, 2018
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April 30, 2020
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December 31, 2019
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December 31, 2018
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|
ASSETS
|
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|
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|
|
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|
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CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
49,185
|
|
|
$
|
408,338
|
|
|
$
|
104,812
|
|
Accounts receivable
|
|
|
106,876
|
|
|
|
85,359
|
|
|
|
51,997
|
|
Inventory
|
|
|
131,205
|
|
|
|
145,747
|
|
|
|
69,197
|
|
Prepaid expenses
|
|
|
8,711
|
|
|
|
1,298
|
|
|
|
27,312
|
|
Other current assets
|
|
|
770
|
|
|
|
90,770
|
|
|
|
2,765
|
|
Total current assets
|
|
|
296,747
|
|
|
|
731,512
|
|
|
|
256,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOODWILL
|
|
|
2,294,953
|
|
|
|
2,294,953
|
|
|
|
2,294,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLES
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER LONG-TERM ASSETS
|
|
|
12,700
|
|
|
|
12,700
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FIXED ASSETS
|
|
|
|
|
|
|
|
|
|
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Furniture, fixtures, and office equipment
|
|
|
26,191
|
|
|
|
–
|
|
|
|
–
|
|
Vehicles and trailers
|
|
|
194,140
|
|
|
|
194,140
|
|
|
|
208,693
|
|
Equipment
|
|
|
608,274
|
|
|
|
573,267
|
|
|
|
458,001
|
|
Leasehold improvements
|
|
|
12,190
|
|
|
|
12,190
|
|
|
|
28,854
|
|
Assets in process
|
|
|
44,551
|
|
|
|
41,061
|
|
|
|
–
|
|
|
|
|
885,345
|
|
|
|
820,658
|
|
|
|
695,548
|
|
Accumulated depreciation
|
|
|
(316,086
|
)
|
|
|
(269,128
|
)
|
|
|
(178,554
|
)
|
Fixed assets, net
|
|
|
569,259
|
|
|
|
551,530
|
|
|
|
516,994
|
|
|
|
|
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|
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RIGHT OF USE ASSETS
|
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|
423,815
|
|
|
|
439,240
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
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|
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TOTAL ASSETS
|
|
$
|
3,612,474
|
|
|
$
|
4,044,935
|
|
|
$
|
3,068,030
|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
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CURRENT LIABILITIES
|
|
|
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|
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Accounts payable
|
|
$
|
288,864
|
|
|
$
|
167,539
|
|
|
$
|
169,149
|
|
Accrued expenses
|
|
|
805,853
|
|
|
|
646,410
|
|
|
|
126,751
|
|
Related party payables
|
|
|
85,603
|
|
|
|
108,058
|
|
|
|
461,913
|
|
Notes payable – current portion
|
|
|
762,889
|
|
|
|
512,889
|
|
|
|
36,543
|
|
Right of use liabilities – current portion
|
|
|
190,262
|
|
|
|
186,805
|
|
|
|
–
|
|
Total current liabilities
|
|
|
2,133,471
|
|
|
|
1,621,701
|
|
|
|
794,356
|
|
|
|
|
|
|
|
|
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NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
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|
|
Notes payable
|
|
|
27,585
|
|
|
|
35,660
|
|
|
|
55,126
|
|
Right of use liabilities
|
|
|
236,782
|
|
|
|
242,574
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
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|
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|
|
COMMITMENTS AND CONTINGENCIES
|
|
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STOCKHOLDERS' EQUITY (DEFICIT)
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Common stock, $0.0001 par value, 75,000,000 shares authorized; 29,441,708 issued and outstanding as of April 30, 2020, and 28,053,167 issued and outstanding as of December 31, 2019, and 25,531,293 issued and outstanding as of December 31, 2018.
|
|
|
2,943
|
|
|
|
2,806
|
|
|
|
2,553
|
|
Additional paid-in-capital
|
|
|
14,095,093
|
|
|
|
13,538,623
|
|
|
|
10,020,231
|
|
Accumulated deficit
|
|
|
(12,884,427
|
)
|
|
|
(11,390,098
|
)
|
|
|
(7,778,036
|
)
|
Total Lux Amber, Corp. stockholders' equity
|
|
|
1,213,609
|
|
|
|
2,151,331
|
|
|
|
2,244,748
|
|
Non-controlling interest
|
|
|
1,027
|
|
|
|
(6,331
|
)
|
|
|
(26,200
|
)
|
Total equity
|
|
|
1,214,636
|
|
|
|
2,145,000
|
|
|
|
2,218,548
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
$
|
3,612,474
|
|
|
$
|
4,044,935
|
|
|
$
|
3,068,030
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Lux Amber, Corp. and Subsidiaries
Consolidated Statements of Operations
April 30, 2020, December 31, 2019 And December
31, 2018
|
|
For the Four Months Ended April 30,
2020
|
|
|
For the Year Ended
December 31, 2019
|
|
|
For the Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
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REVENUE
|
|
$
|
218,963
|
|
|
$
|
976,671
|
|
|
$
|
1,164,304
|
|
COST OF GOODS SOLD
|
|
|
329,666
|
|
|
|
932,032
|
|
|
|
772,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
(110,703
|
)
|
|
|
44,639
|
|
|
|
391,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
838,966
|
|
|
|
3,358,631
|
|
|
|
3,031,201
|
|
Selling
|
|
|
72,148
|
|
|
|
150,602
|
|
|
|
279,739
|
|
Depreciation and amortization
|
|
|
99,580
|
|
|
|
172,246
|
|
|
|
110,866
|
|
Total operating expenses
|
|
|
1,010,694
|
|
|
|
3,681,479
|
|
|
|
3,421,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (INCOME) EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
–
|
|
|
|
(255
|
)
|
|
|
(11
|
)
|
Interest expense
|
|
|
28,784
|
|
|
|
22,596
|
|
|
|
7,894
|
|
Other (income) expense
|
|
|
336,790
|
|
|
|
(66,989
|
)
|
|
|
60,794
|
|
Total other (income) expense
|
|
|
365,574
|
|
|
|
(44,648
|
)
|
|
|
68,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,486,971
|
)
|
|
|
(3,592,192
|
)
|
|
|
(3,098,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: net income (loss) attributable to non-controlling interest
|
|
|
7,358
|
|
|
|
19,869
|
|
|
|
(29,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS attributable to Lux Amber, Corp.
|
|
$
|
(1,494,329
|
)
|
|
$
|
(3,612,061
|
)
|
|
$
|
(3,069,776
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.05
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares - basic and diluted
|
|
|
28,046,859
|
|
|
|
26,221,108
|
|
|
|
25,008,486
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Lux Amber, Corp. and Subsidiaries
Consolidated Statements of Changes in Stockholders'
Equity (Deficit)
April 30, 2020, December 31, 2019 And December
31, 2018
|
|
Number of Shares
Issued and
Outstanding
|
|
|
Common Stock Par
Value Amount
|
|
|
Additional Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Non-Controlling Interest
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as
of December 31, 2017
|
|
|
24,300,326
|
|
|
$
|
2,430
|
|
|
$
|
7,661,882
|
|
|
$
|
(4,711,007
|
)
|
|
$
|
–
|
|
|
$
|
2,953,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercised
|
|
|
597,332
|
|
|
|
60
|
|
|
|
298,606
|
|
|
|
–
|
|
|
|
–
|
|
|
|
298,666
|
|
Common stock issued for cash
|
|
|
583,635
|
|
|
|
58
|
|
|
|
875,395
|
|
|
|
–
|
|
|
|
–
|
|
|
|
875,453
|
|
Options exercised
|
|
|
50,000
|
|
|
|
5
|
|
|
|
495
|
|
|
|
–
|
|
|
|
–
|
|
|
|
500
|
|
Share based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,171,753
|
|
|
|
–
|
|
|
|
1,171,753
|
|
Warrant modification
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
12,100
|
|
|
|
–
|
|
|
|
12,100
|
|
Cumulative retained earnings
of PCNM
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,746
|
|
|
|
2,859
|
|
|
|
5,605
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,069,776
|
)
|
|
|
(29,059
|
)
|
|
|
(3,098,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December
31, 2018
|
|
|
25,531,293
|
|
|
$
|
2,553
|
|
|
$
|
10,020,231
|
|
|
$
|
(7,778,037
|
)
|
|
$
|
(26,200
|
)
|
|
$
|
2,218,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercised
|
|
|
260,000
|
|
|
|
26
|
|
|
|
129,974
|
|
|
|
–
|
|
|
|
–
|
|
|
|
130,000
|
|
Common stock issued for cash
|
|
|
825,332
|
|
|
|
83
|
|
|
|
1,237,917
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,238,000
|
|
Options exercised
|
|
|
50,000
|
|
|
|
5
|
|
|
|
495
|
|
|
|
–
|
|
|
|
–
|
|
|
|
500
|
|
Notes payable converted to
common stock
|
|
|
1,386,542
|
|
|
|
139
|
|
|
|
499,861
|
|
|
|
–
|
|
|
|
–
|
|
|
|
500,000
|
|
Share based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
1,650,145
|
|
|
|
–
|
|
|
|
–
|
|
|
|
1,650,145
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(3,612,061
|
)
|
|
|
19,869
|
|
|
|
(3,592,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December
31, 2019
|
|
|
28,053,167
|
|
|
$
|
2,806
|
|
|
$
|
13,538,623
|
|
|
$
|
(11,390,098
|
)
|
|
$
|
(6,331
|
)
|
|
$
|
2,145,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock repurchased
|
|
|
–
|
|
|
|
(2
|
)
|
|
|
(22,392
|
)
|
|
|
–
|
|
|
|
–
|
|
|
|
(22,394
|
)
|
Existing LXAM shares outstanding
when acquired
|
|
|
2,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Notes payable converted to
common stock
|
|
|
1,386,541
|
|
|
|
139
|
|
|
|
499,861
|
|
|
|
–
|
|
|
|
–
|
|
|
|
500,000
|
|
Share based compensation
|
|
|
–
|
|
|
|
–
|
|
|
|
79,001
|
|
|
|
–
|
|
|
|
–
|
|
|
|
79,001
|
|
Net loss
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
(1,494,329
|
)
|
|
|
7,358
|
|
|
|
(1,486,971
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of April 30,
2020
|
|
|
29,441,708
|
|
|
$
|
2,943
|
|
|
$
|
14,095,093
|
|
|
$
|
(12,884,427
|
)
|
|
$
|
1,027
|
|
|
$
|
1,214,636
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Lux Amber, Corp. and Subsidiaries
Consolidated Statements of Cash Flows
April 30, 2020, December 31, 2019 And December
31, 2018
|
|
For the Four Months Ended
April 30,
2020
|
|
|
For the Year Ended
December 31, 2019
|
|
|
For the Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,486,971
|
)
|
|
$
|
(3,592,192
|
)
|
|
$
|
(3,098,835
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
99,580
|
|
|
|
172,246
|
|
|
|
110,866
|
|
Bad debt expense
|
|
|
–
|
|
|
|
5,709
|
|
|
|
–
|
|
Loss on sale of asset
|
|
|
1,215
|
|
|
|
35,743
|
|
|
|
44,093
|
|
Share based compensation
|
|
|
79,001
|
|
|
|
1,650,145
|
|
|
|
1,171,753
|
|
Warrant modification
|
|
|
–
|
|
|
|
–
|
|
|
|
12,100
|
|
Right to use interest
|
|
|
4,319
|
|
|
|
5,960
|
|
|
|
-–
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(21,517
|
)
|
|
|
(39,071
|
)
|
|
|
(2,394
|
)
|
Inventory
|
|
|
14,542
|
|
|
|
(76,550
|
)
|
|
|
(6,656
|
)
|
Prepaid expenses
|
|
|
(7,413
|
)
|
|
|
26,014
|
|
|
|
(19,107
|
)
|
Other current assets
|
|
|
–
|
|
|
|
1,995
|
|
|
|
28,337
|
|
Accounts payable and accrued expenses
|
|
|
280,768
|
|
|
|
518,049
|
|
|
|
153,707
|
|
Due to related parties
|
|
|
(22,455
|
)
|
|
|
(353,855
|
)
|
|
|
355,450
|
|
Net cash used in operating activities
|
|
|
(1,058,931
|
)
|
|
|
(1,645,807
|
)
|
|
|
(1,250,686
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of licenses
|
|
|
–
|
|
|
|
(15,000
|
)
|
|
|
-–
|
|
Expenditures for property and equipment
|
|
|
(65,904
|
)
|
|
|
(218,933
|
)
|
|
|
(51,405
|
)
|
Proceeds from sale of property and equipment
|
|
|
–
|
|
|
|
–
|
|
|
|
4,500
|
|
Net cash used in investing activities
|
|
|
(65,904
|
)
|
|
|
(233,933
|
)
|
|
|
(46,905
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing on convertible notes payable
|
|
|
840,000
|
|
|
|
910,000
|
|
|
|
–
|
|
Payments on notes payable
|
|
|
(8,075
|
)
|
|
|
(17,121
|
)
|
|
|
(48,102
|
)
|
Payments on right of use liabilities
|
|
|
(43,853
|
)
|
|
|
(78,113
|
)
|
|
|
–
|
|
Proceeds from the sale of common stock
|
|
|
–
|
|
|
|
1,238,000
|
|
|
|
875,453
|
|
Payments on the (repurchase) of common stock
|
|
|
(22,394
|
)
|
|
|
–
|
|
|
|
–
|
|
Proceeds from execution of warrants
|
|
|
–
|
|
|
|
130,000
|
|
|
|
298,666
|
|
Proceeds from stock options exercised
|
|
|
–
|
|
|
|
500
|
|
|
|
500
|
|
Net cash provided by financing activities
|
|
|
765,678
|
|
|
|
2,183,266
|
|
|
|
1,126,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(359,153
|
)
|
|
|
303,526
|
|
|
|
(171,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
408,338
|
|
|
|
104,812
|
|
|
|
275,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
49,185
|
|
|
$
|
408,338
|
|
|
$
|
104,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable converted to common stock
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
$
|
–
|
|
Property and equipment purchased under financing agreements
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
71,534
|
|
Non-cash relief of debt for property no longer payable due to departure of executive
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
16,931
|
|
Cumulative retained earnings impact PCNM
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
5,605
|
|
Non-cash trade in of vehicle and associated debt
|
|
$
|
30,905
|
|
|
$
|
26,000
|
|
|
$
|
24,000
|
|
Convertible notes payable in other assets
|
|
$
|
–
|
|
|
$
|
(90,000
|
)
|
|
$
|
–
|
|
Right of use asset addition
|
|
$
|
68,104
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
5,232
|
|
|
$
|
8,842
|
|
|
$
|
7,932
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Lux Amber, Corp. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF BUSINESS
Worldwide Specialty Chemicals Inc., (“WSC”)
a Delaware Corporation formed on March 26, 2014 is an international specialty chemical company. On March 26, 2020, WSC merged with
Lux Amber, Corp and WSC is now a wholly owned subsidiary of Lux Amber, Corp (“LAC”). Its principal executive offices
are located at 145 Rose Lane, Suite 102, Frisco, Texas 75036.
LAC has three (3) wholly owned subsidiaries,
Worldwide Specialty Chemicals, Inc. (“WSC”), Industrial Chem Solutions, Inc. (“ICS”), and Safeway Pest
Elimination, LLC, (“SPE”); a fourth subsidiary, PCNM, LLC (“PCNM”), is 49% owned. SPE was formed July 16,
2018. LAC, ICS, and SPE serve as both a producer and distributor of environmentally safe, specialty chemicals. PCNM is a Service
Disabled Veteran owned small business that sells to government agents. LAC, ICS, and SPE are located 145 Rose Lane, Suite 102,
Frisco, TX 75036.
LAC, ICS and SPE products utilize all-natural
and renewable resources, contain no dangerous chemicals or additives, and offer “green” solutions to its customers.
ICS’s 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 pest.
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, 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, prepaid expenses, accounts payable, accrued expenses, related party payables, and notes
payable. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to
management at April 30, 2020, December 31, 2019 and 2018. The carrying value of the financial instruments included in the Company’s
consolidated financial statements approximated their fair values.
The carrying value of cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities, and related party payables 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 period ended April 30, 2020, years
ended December 31, 2019 and 2018, approximately 82,668, 82,668 and 342,668 common stock warrants, respectively, and 6,469,750,
7,309,750, and 5,059,750 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 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. At April 30, 2020,
December 31, 2019, and 2018, 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 April 30, 2020 and the years ended December 31, 2019 and 2018, 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:
|
|
April
30,
2020
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Finished goods
|
|
$
|
92,568
|
|
|
$
|
89,033
|
|
|
$
|
35,963
|
|
Raw materials
|
|
|
55,927
|
|
|
|
74,004
|
|
|
|
29,292
|
|
Packaging supplies
|
|
|
–
|
|
|
|
–
|
|
|
|
3,942
|
|
Obsolescence
|
|
|
(17,290
|
)
|
|
|
(17,290
|
)
|
|
|
–
|
|
|
|
$
|
131,205
|
|
|
$
|
145,747
|
|
|
$
|
69,197
|
|
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.
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. Expenses associated with operating
leases are charged to income 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 April 30, 2020.
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 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 April 30, 2020, December 31,
2019 and 2018.
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.
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.
License Fee
ICS pays 10% of the net selling price to
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 Polymers, Inc.
Advertising Costs
The Company recognizes expenses for advertising
costs as they are incurred. Advertising costs were $12,538, $22,099, and $102,389 for the period ended April 30, 2020 and the years
ended December 31, 2019 and 2018, respectively.
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 $12,884,427 at April 30, 2020. 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,
as a publicly trading company is arranging 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-leasee 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 at April 30, 2020, December 31, 2019 And December
31, 2018:
|
|
April 30,
2020
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Trade receivables
|
|
$
|
106,876
|
|
|
$
|
85,359
|
|
|
$
|
51,997
|
|
3. NOTES PAYABLE
Convertible Promissory Notes Payable
Throughout August 2019, the Company issued
$500,000 of convertible debentures. The debentures are convertible into shares of the Company's common stock at the maturity date
of November 15, 2019 and pay any unpaid interest at a rate of 8%. On November 15, 2019, the debentures were converted into 1,386,542
shares of common stock at a rate of $0.3606093 per share. Accrued interest paid amounted to $7,310.
Throughout December 2019, the Company issued a second round of $500,000 of convertible debentures. The debentures are convertible
into shares of the Company's common stock at the maturity date of April 15, 2020 and pay any unpaid interest at a rate of 8%. As
of December 31, 2019, $90,000 had not yet been funded and is recorded in other current assets on the balance sheet. The second
round of debentures had not been converted and the accrued interest unpaid amounted to $1,035 as of December 31, 2019. In April
2020, the debentures noted above were converted to 1,386,541 shares of common stock at a price of $0.3606093 per share and all
accrued interest was paid in the amount of $11,566.
During the first four months ended April
30, 2020, the Company issued a third round of convertible debentures worth $750,000. The debentures are convertible into shares
of the Company's common stock at the maturity date of September 15, 2020 and pay any unpaid interest at a rate of 8%. As of April
30, 2020, this third round of debentures had not been converted and the accrued interest unpaid amounted to $14,992.
Vehicles and Equipment Notes Payable
The Company has one note payable relating
to the purchase of a Company vehicle as of April 30, 2020. The balance outstanding under the note payable was $40,474 as of April
30, 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 vehicles as of December 31, 2019. The balance outstanding
under the note payable was $48,549 at December 31, 2019.
The Company’s future minimum principal
payments as of April 30, 2020 are as follows:
2021
|
|
$
|
12,889
|
|
2022
|
|
|
12,889
|
|
2023
|
|
|
12,889
|
|
2024
|
|
|
1,807
|
|
|
|
$
|
40,474
|
|
4. ACCRUED EXPENSES
Accrued expenses, consisting of accrued
salaries for officers and executive management, include the following balance at April 30, 2020, December 31, 2019 and 2018:
|
|
April 30,
2020
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Accrued Compensation
|
|
$
|
469,004
|
|
|
$
|
237,000
|
|
|
$
|
126,751
|
|
Other Accrued Expenses
|
|
|
336,849
|
|
|
|
409,410
|
|
|
|
–
|
|
|
|
$
|
805,853
|
|
|
$
|
646,410
|
|
|
$
|
126,751
|
|
5. INCOME TAXES
The Company elected C Corporation tax status
upon inception in 2014. Net operating losses (“NOL”) totaled $13,047,319 as of April 30, 2020, and may be carried forward
to offset future taxable income. As future taxable income is uncertain, a full valuation allowance has been recorded and accordingly,
no current provision for income tax has been recorded in the accompanying statements of operations. NOL carry-forward benefits
begin to expire in 2035.
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 April 30, 2020 and years ended December 31:
|
|
April 30,
2020
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Tax benefit calculated at statutory rate
|
|
|
21.00%
|
|
|
|
21.00%
|
|
|
|
21.00%
|
|
Expense not deductible
|
|
|
(0.05
|
)
|
|
|
(0.06
|
)
|
|
|
(0.15
|
)
|
Changes to valuation allowance
|
|
|
(20.95
|
)
|
|
|
(20.94
|
)
|
|
|
(20.85
|
)
|
Provision for income taxes
|
|
|
0%
|
|
|
|
0%
|
|
|
|
0%
|
|
A deferred tax liability or asset is determined
based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse. Deferred tax expense or benefit in the accompanying consolidated
statements of operations are the result of changes in the assets and liabilities for deferred taxes. The measurement of deferred
tax assets is reduced, if necessary, by the amount for any tax benefits that, based on available evidence, are not expected to
be realized. Income tax expense is the current tax payable or refundable for the year plus or minus the net change in the deferred
tax assets and liabilities. Deferred income taxes of the Company arise from the temporary differences between financial statement
and income tax recognition of NOL carry-forwards.
The deferred tax assets and liabilities
in the accompanying consolidated balance sheets include the following components:
|
|
April 30,
2020
|
|
|
December 31,
2019
|
|
|
December 31,
2018
|
|
Net non-current deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry-forward
|
|
$
|
2,739,937
|
|
|
$
|
2,418,457
|
|
|
$
|
1,673,655
|
|
Fixed assets
|
|
|
13,929
|
|
|
|
23,147
|
|
|
|
52,286
|
|
Net non-current deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
(9,293
|
)
|
|
|
(10,067
|
)
|
|
|
(10,841
|
)
|
Net
|
|
|
2,744,573
|
|
|
|
2,431,537
|
|
|
|
1,715,100
|
|
Less valuation allowance
|
|
|
(2,744,573
|
)
|
|
|
(2,431,537
|
)
|
|
|
(1,715,100
|
)
|
Net deferred taxes
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
6. 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 April
30, 2020, the weighted average remaining lease term and weighted average discount rate for financing leases was 2.9 years and 4.29%,
respectively. The Company's future financing lease obligations that have not yet commenced are immaterial. For period ended April
30, 2020, and year ended December 31, 2019, the Company's cash paid for financing leases was $40,757 and $77,618, and short-term
lease costs were $0 and $82,579, respectively.
The Company’s undiscounted annual
future minimum lease payments as of April 30, 2020 consist of:
2020
|
|
$
|
175,865
|
|
2021
|
|
|
161,431
|
|
2022
|
|
|
85,699
|
|
2023
|
|
|
11,483
|
|
2024
|
|
|
10,526
|
|
Total lease payments
|
|
|
445,004
|
|
Interest
|
|
|
(17,960
|
)
|
Present value of lease liabilities
|
|
$
|
427,044
|
|
Concentrations
For the year ended April 30, 2020, the
Company had one customer that represented 12% of total sales.
For the year ended December 31, 2019, the
Company had two customers that represented 19% and 14% of total sales.
For the year ended December 31, 2018, the
Company had one customer that represented 12% of total sales.
As of April 30, 2020, the Company had two
customers that accounted for 30% and 11%, respectively of accounts receivable. As of December 31, 2019, the Company had three customers
that accounted for 38%, 22%, and 15% of accounts receivable. As of December 31, 2018, the Company had four customers that accounted
for 29%, 18%, 15%, and 12% of accounts receivable.
7. STOCKHOLDERS’ EQUITY
Common and Preferred Stock
As of April 30, 2020, December 31, 2019,
and 2018, the authorized share capital of the Company consisted of 75,000,000 shares of common stock with $0.0001 par value. No
other classes of stock are authorized.
Warrants
Through June 30, 2017, there were $2,885,000
in notes payable issued. These notes came with one warrant for each dollar borrowed for a total 2,885,000 warrants at an exercise
price of $0.50, all of which expire on December 31, 2017. On February 9, 2018, the expiration date of the warrants was extended
to December 31, 2018. The fair value of these warrants upon issuance was $0. These warrants expired on December 31, 2018.
On March 31, 2017, the Company issued 600,000
warrants at an exercise price of $.50 for services provided to a consultant. The warrants expire on March 31, 2024. The fair value
of these warrants upon issuance was $302.
There were 260,000 warrants exercised during
the year ended December 31, 2019 at $.50 per share for a total cash amount of $130,000. There were 597,332 warrants exercised during
the year ended December 31, 2018 at $.50 per share for a total cash amount of $298,666.
As of April 30, 2020, December 31, 2019,
and 2018, there were 82,668, 82,668 and 342,668 common stock warrants outstanding, respectively, with an exercise price of $0.50.
On December 31, 2018, 170,000 warrants expired.
Period
|
|
Beg. Balance
|
|
|
Issued
|
|
|
Exercised
|
|
|
Expired
|
|
|
End. Balance
|
|
2014
|
|
|
–
|
|
|
|
2,500,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,500,000
|
|
Q4 2016
|
|
|
2,500,000
|
|
|
|
385,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,885,000
|
|
Q1 2017
|
|
|
2,885,000
|
|
|
|
2,500,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
5,385,000
|
|
Q2 2017
|
|
|
5,385,000
|
|
|
|
600,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
5,985,000
|
|
Q3 2017
|
|
|
5,985,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
2,500,000
|
|
|
|
3,485,000
|
|
Q4 2017
|
|
|
3,485,000
|
|
|
|
–
|
|
|
|
2,375,000
|
|
|
|
–
|
|
|
|
1,110,000
|
|
Q1 2018
|
|
|
1,110,000
|
|
|
|
–
|
|
|
|
80,000
|
|
|
|
–
|
|
|
|
1,030,000
|
|
Q2 2018
|
|
|
1,030,000
|
|
|
|
–
|
|
|
|
332,332
|
|
|
|
–
|
|
|
|
697,668
|
|
Q3 2018
|
|
|
697,668
|
|
|
|
–
|
|
|
|
125,000
|
|
|
|
–
|
|
|
|
572,668
|
|
Q4 2018
|
|
|
572,668
|
|
|
|
–
|
|
|
|
60,000
|
|
|
|
170,000
|
|
|
|
342,668
|
|
Q1 2019
|
|
|
342,668
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
342,668
|
|
Q2 2019
|
|
|
342,668
|
|
|
|
–
|
|
|
|
70,000
|
|
|
|
–
|
|
|
|
272,668
|
|
Q3 2019
|
|
|
272,668
|
|
|
|
–
|
|
|
|
190,000
|
|
|
|
–
|
|
|
|
82,668
|
|
Q4 2019
|
|
|
82,668
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
82,668
|
|
April 30, 2020
|
|
|
82,668
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
82,668
|
|
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 5,500,000. 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. 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.
Stock option activity during the period ended April 30, 2020
is summarized as follows:
|
|
Shares Under Option
|
|
|
Price Per Share
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - beginning of year
|
|
|
7,309,750
|
|
|
$
|
0.00 - 1.50
|
|
|
$
|
1.18
|
|
|
117 months
|
Granted
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
Exercised
|
|
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
Outstanding - end of year
|
|
|
7,309,750
|
|
|
$
|
0.00 - 1.50
|
|
|
$
|
1.18
|
|
|
113 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - end of year
|
|
|
6,469,750
|
|
|
|
|
|
|
$
|
0.91
|
|
|
95 months
|
Stock option activity during the year ended December 31, 2019
is summarized as follows:
|
|
Shares Under Option
|
|
|
Price Per Share
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - beginning of year
|
|
|
5,059,750
|
|
|
$
|
0.00
- 1.50
|
|
|
$
|
0.39
|
|
|
104 months
|
Granted
|
|
|
2,300,000
|
|
|
$
|
1.50
|
|
|
$
|
1.50
|
|
|
|
Exercised
|
|
|
50,000
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
Outstanding - end of year
|
|
|
7,309,750
|
|
|
$
|
0.00 - 1.50
|
|
|
$
|
1.18
|
|
|
117 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - end of year
|
|
|
6,366,417
|
|
|
|
|
|
|
$
|
0.91
|
|
|
99 months
|
Stock option activity during the year ended December 31, 2018
is summarized as follows:
|
|
Shares Under Option
|
|
|
Price Per Share
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Life
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - beginning of year
|
|
|
3,439,750
|
|
|
$
|
0.00 - 1.50
|
|
|
$
|
0.39
|
|
|
|
Granted
|
|
|
1,670,000
|
|
|
$
|
0.00 - 1.50
|
|
|
$
|
0.39
|
|
|
|
Exercised
|
|
|
50,000
|
|
|
$
|
0.01
|
|
|
$
|
0.01
|
|
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
Outstanding - end of year
|
|
|
5,059,750
|
|
|
$
|
0.00 - 1.50
|
|
|
$
|
0.39
|
|
|
104 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - end of year
|
|
|
4,099,417
|
|
|
|
|
|
|
$
|
0.42
|
|
|
106 months
|
The fair value of each option grant is
calculated using the following assumptions:
|
|
April 30,
2020
|
|
2019
|
|
|
2018
|
|
Expected life – years
|
|
NA
|
|
|
3.25 – 5
|
|
|
|
3.25 – 10
|
|
Interest rate
|
|
NA
|
|
|
1.60-2.56%
|
|
|
|
2.55-2.85%
|
|
Volatility
|
|
NA
|
|
|
71.70%
|
|
|
|
71.70%
|
|
Dividend yield
|
|
–%
|
|
|
–%
|
|
|
|
–%
|
|
Aggregate intrinsic value for all options
outstanding as of April 30, 2020, December 31, 2019, and December 31, 2018, respectively, was $2,339,120, $2,339,120, and $5,616,323.
Aggregate intrinsic value for all options exercisable as of April 30, 2020, December 31, 2019, December 31, 2018 respectively,
was $3,817,152, $3,756,186, and $4,427,370. The fair value of all shares that vested during period ended April 30, 2020 and the
years ended December 31, 2019 and 2018 was $1,729,145, $1,569,105 and $1,146,974, respectively.
Total share-based compensation expense
(including stock grants) included in salaries and wages was $79,001 for the period ended April 30, 2020 and the years ended December
31, 2019 and 2018 was $1,650,145 and $1,171,753, respectively. Unamortized share-based compensation expense as of April 30, 2020
amounted to $460,381, which is expected to be recognized over the next 31 months.
8. RELATED PARTY TRANSACTIONS
Throughout the year ending April 30, 2020
and 2019, the Company incurred consulting fees of $217,000 and $299,710, respectively, to three current shareholders. The unpaid
balance due was $176,000 and $80,000 as of April 30, 2020 and December 31, 2019, respectively, is included in accounts payable
in the accompanying consolidated financial statements.
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. As of April 30, 2020, $590 was due to CBI Polymers.
In fiscal year 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 four month period ended April 30, 2020, the Company
paid a total of $6,600 and $5,628 for those vehicles. For the year ended December 31, 2019, the Company paid a total of $12,391
and $24,195 for those same vehicles.
9. SUBSEQUENT EVENTS
Throughout May 2020, the Company has issued
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 September 15, 2020 and pay any unpaid interest at the rate of 8%. As of July 31, 2020, $525,500 has been
funded.
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.
The Paycheck Protection
Program (“PPP”) loan is a loan from the U.S. Small Business Administration (“SBA”) that helps 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.
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.
10. COMPARATIVE CONSOLIDATED FINANCIALS
(UNAUDITED)
Lux Amber, Corp. and Subsidiaries
Comparative Consolidated Statement of Operations
April 30, 2020 And April 30, 2019 (Unaudited)
|
|
For the Four Months Ended
April 30,
2020
|
|
|
For the Four Months Ended
April 30,
2019
(Unaudited)
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
218,963
|
|
|
$
|
186,880
|
|
COST OF GOODS SOLD
|
|
|
329,666
|
|
|
|
167,476
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
(110,703
|
)
|
|
|
19,404
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
838,966
|
|
|
|
706,302
|
|
Selling
|
|
|
72,148
|
|
|
|
57,993
|
|
Depreciation and amortization
|
|
|
99,580
|
|
|
|
1,927
|
|
Total operating expenses
|
|
|
1,010,694
|
|
|
|
766,222
|
|
|
|
|
|
|
|
|
|
|
OTHER (INCOME) EXPENSE
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
–
|
|
|
|
(44
|
)
|
Interest expense
|
|
|
28,784
|
|
|
|
2,536
|
|
Other (income) expense
|
|
|
336,790
|
|
|
|
(64,238
|
)
|
Total other (income) expense
|
|
|
365,574
|
|
|
|
(61,746
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,486,971
|
)
|
|
|
(685,072
|
)
|
|
|
|
|
|
|
|
|
|
Less: net loss attributable to non-controlling interest
|
|
|
7,358
|
|
|
|
(1,718
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS attributable to Lux Amber, Corp.
|
|
$
|
(1,494,329
|
)
|
|
$
|
(683,354
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.05
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares - basic and diluted
|
|
|
28,046,859
|
|
|
|
25,969,293
|
|
Lux Amber, Corp. and Subsidiaries
Consolidated Statements of Cash Flows
April 30, 2020 And April 30,2019 (Unaudited)
|
|
For the Four Months Ended
April 30,
2020
|
|
|
For the Four Months Ended
April 30, 2019
(Unaudited)
|
|
|
|
|
|
|
|
|
CASH FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,486,971
|
)
|
|
$
|
(685,072
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
99,580
|
|
|
|
1,927
|
|
Loss on sale of asset
|
|
|
1,215
|
|
|
|
9,668
|
|
Interest expense accrued
|
|
|
–
|
|
|
|
168,428
|
|
Share based compensation
|
|
|
79,001
|
|
|
|
165,232
|
|
Right to use interest
|
|
|
4,319
|
|
|
|
–
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(21,517
|
)
|
|
|
(48,621
|
)
|
Inventory
|
|
|
14,542
|
|
|
|
(149,855
|
)
|
Prepaid expenses
|
|
|
(7,413
|
)
|
|
|
9,086
|
|
Other current assets
|
|
|
–
|
|
|
|
(11,545
|
)
|
Accounts payable and accrued expenses
|
|
|
280,768
|
|
|
|
255,378
|
|
Right of use interest
|
|
|
–
|
|
|
|
–
|
|
Due to related parties
|
|
|
(22,455
|
)
|
|
|
(124,454
|
)
|
Net cash used in operating activities
|
|
|
(1,058,931
|
)
|
|
|
(409,828
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Deposits on hand
|
|
|
–
|
|
|
|
(300
|
)
|
Purchase of licenses
|
|
|
–
|
|
|
|
(15,000
|
)
|
Expenditures for property and equipment
|
|
|
(65,904
|
)
|
|
|
20,867
|
|
Net cash used in investing activities
|
|
|
(65,904
|
)
|
|
|
5,567
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Borrowing on convertible notes payable
|
|
|
840,000
|
|
|
|
–
|
|
Payments on notes payable
|
|
|
(8,075
|
)
|
|
|
(28,927
|
)
|
Payments on right of use liabilities
|
|
|
(43,853
|
)
|
|
|
(2,671
|
)
|
Proceeds from sale (repurchase) of common stock
|
|
|
(22,394
|
)
|
|
|
582,000
|
|
Proceeds from execution of warrants
|
|
|
–
|
|
|
|
–
|
|
Proceeds from stock options exercised
|
|
|
–
|
|
|
|
500
|
|
Net cash provided by financing activities
|
|
|
765,678
|
|
|
|
550,902
|
|
|
|
|
|
|
|
|
|
|
TOTAL (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(359,153
|
)
|
|
|
146,641
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
|
|
408,338
|
|
|
|
104,812
|
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD
|
|
$
|
49,185
|
|
|
$
|
251,453
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes payable converted to common stock
|
|
$
|
500,000
|
|
|
$
|
–
|
|
Non-cash trade in of vehicle and associated debt
|
|
$
|
30,905
|
|
|
$
|
26,000
|
|
Right of use asset addition
|
|
$
|
68,104
|
|
|
$
|
–
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
5,232
|
|
|
$
|
5,232
|
|