The accompanying footnotes are an integral part
of these consolidated financial statements.
The accompanying footnotes are an integral part
of these consolidated financial statements.
The accompanying footnotes are an integral part
of these consolidated financial statements.
Notes to Condensed Consolidated Financial
Statements
July 31, 2021
(Unaudited)
NATURE OF BUSINESS
Lux Amber, Corp. (“LAC”), formed on
January 19, 2018, is an international specialty chemical company. Its corporate offices are currently located at 6136 Frisco Square Blvd.,
Suite 400, #237, Frisco, TX 75034. LAC’s corporate telephone number is 972-214-9764. LAC has a stock symbol of LXAM.
LAC has three (3) wholly owned subsidiaries (collectively
with LAC, the “Company”): Worldwide Specialty Chemicals, Inc. (“WSCI”), Industrial Chem Solutions, Inc. (“ICS”),
and Safeway Pest Elimination, LLC, (“SPE”), which was formed July 16, 2018. LAC and its subsidiaries serve as both producers
and distributors of environmentally safe, specialty chemicals. The Company formerly held a 49% interest in PCNM LLC, a Service-Disabled
Veteran owned small business that sold the Company’s products to government agencies. PCNM was legally dissolved on July 31, 2020.
The Company’s products utilize all-natural
and renewable resources, contain no dangerous chemicals or additives, and offer “green” solutions to its customers. ICS’
product line includes asphalt release agents, industrial cleaners, environmental remediation gels, odor control agents, and consumer friendly
cleaners for a wide range of uses, including construction, environmental remediation, hazardous materials clean-up, nuclear decommissioning,
industrial cleaning, and odor control. SPE’s products are designed for the elimination and control of pests.
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A summary of the significant accounting polices
consistently applied in the preparation of the accompanying consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America (GAAP) is as follows.
Basis of Consolidation
The consolidated financial statements include
the accounts of LAC, WSCI, ICS, SPE, and PCNM. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
FASB ASC
825-10 requires disclosure of fair value information about certain financial instruments, including, but not limited to, cash and cash
equivalents, accounts receivable, accounts payable, accrued expenses, related party payables, notes payable, and Paycheck Protection Program
loans. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management
on July 31, 2021 and April 30, 2021. The carrying value of the financial instruments included in the Company’s consolidated
financial statements approximated their fair values.
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 three months ended July 31, 2021 and 2020,
approximately 82,668 and 82,668 common stock warrants, respectively, and 6,746,418 and 6,469,750 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 receivables are recorded at invoiced
amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on experience and other
factors which, in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition
of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable, and current economic conditions.
The determination of the collectability of amounts due requires the Company to make judgments regarding future events and trends. Allowances
for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis.
This process consists of a review of historical collection experience, current aging status of the customer account, and the financial
condition of the Company’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific
customers and the accounts receivable portfolio as a whole. On July 31, 2021 and April 30, 2021, the allowance for doubtful accounts was
$0.
Revenue Recognition
Revenue is measured as the amount of consideration
expected to be received in exchange for transferring goods or providing service. Revenue from product sold is recognized when obligations
with the customer are satisfied, which generally occurs with the transfer or delivery of the product, signifying the point in time when
the customer obtains control of the promised goods. Our performance obligation is delivering the product to the customer; and therefore,
the transaction price, which is stated on the invoice, is allocated 100% to the sole performance obligation of product delivery. For the
quarters ended July 31, 2021 and 2020, all revenue was from products sold.
Our sales policies do not provide for general
rights of return, and payment is due net of 15 days. We do not record estimated reductions to revenue for customer programs and incentive
offerings including pricing arrangements, promotions, and other volume-based incentives at the time of the sale. We also do not record
estimated reserves for product returns and credits at the time of sale and anticipated uncollectible accounts.
Sales Taxes
Sales (and similar) taxes that are imposed on
the Company's sales and collected from customers are excluded from revenues.
Shipping and Handling Costs
Costs for shipping and handling activities, including
those activities that occur after transfer of control to the customer, are recorded as cost of sales and are expensed as incurred. The
Company accrues costs for shipping and handling activities that occur after control of the promised good has transferred to the customer.
Inventory
Inventory is stated at the lower of cost or net
realizable value, with cost determined on a first-in first-out basis. The carrying value of inventory is reduced for estimated obsolescence.
The Company evaluates the inventory carrying value for potential excess and obsolete inventory exposures by analyzing historical and anticipated
demand.
The following table sets forth the components
of the Company’s inventory balances as of:
|
Schedule of inventory
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2021
|
|
|
April 30,
2021
|
|
|
Finished goods
|
|
$
|
140,711
|
|
|
$
|
93,203
|
|
|
Raw materials
|
|
|
28,108
|
|
|
|
61,298
|
|
|
Obsolescence
|
|
|
(17,290
|
)
|
|
|
(17,290
|
)
|
|
Inventory, net
|
|
$
|
151,529
|
|
|
$
|
137,211
|
|
Fixed Assets
Fixed assets consist of furniture, fixtures and
office equipment, vehicles and trailers, equipment and leasehold improvements that are stated at cost, less accumulated depreciation.
Depreciation is provided in amounts sufficient to relate the cost of depreciable assets to earnings over their estimated service lives
(3 – 10 years) under the straight-line method.
Maintenance and repairs are charged to earnings
as incurred; major repairs and replacements are capitalized. When items of property or equipment are sold or retired, the related cost
and accumulated depreciation are removed from the accounts and any gain or loss is included in operations.
Goodwill
Goodwill represents the difference between the
enterprise value/cash paid less the fair value of all recognized net asset fair values including identifiable intangible asset values
in a business combination. The Company reviews goodwill for impairment annually during the fourth quarter or whenever events or changes
in circumstances indicate the carrying value of goodwill may not be recoverable. The Company considered the current and expected future
economic and market conditions surrounding COVID-19 and its impact on the reporting unit. As a result of the certain business developments
and changes in the Company's long-term projections, during the fourth quarter of fiscal 2021, the Company concluded a triggering event
had occurred that required an impairment assessment to be performed. The qualitative assessment thresholds were not met. The Company calculated
the quantitative impairment test of using the implied fair market value using market data and concluded there was no goodwill impairment
loss. Based on annual testing, the Company determined that there was no goodwill impairment in Fiscal 2021. The Company noted no triggering events as of July 31,
2021.
The Company first evaluates qualitative factors
to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of the reporting unit
is less than its carrying amount, including goodwill. If after qualitatively assessing the totality of events or circumstances, the Company
determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then further
testing is unnecessary. If after assessing the totality of events or circumstances, the Company determines that it is more likely than
not that the fair value of the reporting unit is less than its carrying amount, the Company then estimates the fair value of the reporting
unit and compares the fair value of the reporting unit with its carrying amount, including goodwill, as discussed below.
The quantitative goodwill impairment test involves
a two-step process. In the first step, the Company compares the fair value of each reporting unit to its carrying value. If the fair value
of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of the
reporting unit is less than the carrying value, the Company must perform the second step of the impairment test to measure the amount
of impairment loss. In the second step, the reporting unit's fair value is allocated to all of the assets and liabilities of the reporting
unit, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the
same manner as if the reporting unit was being acquired in a business combination. If the implied fair value of the reporting unit's goodwill
is less than the carrying value, the difference is recorded as an impairment loss.
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.
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 July 31, 2021 or 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.
License Fee
ICS pays 10% of the net selling price of
$9.50 a gallon to CBI Polymers, Inc., as a mutually acceptable license fee. E. Thomas Layton, Chairman and CEO of LAC, is also the
Chairman and CEO and controlling shareholder of CBI. During the quarters ended July 31, 2021 and 2020, the Company incurred $2,560
and $3,307 of license fees to
CBI for those sales. As of July 31, 2021 and April 30, 2021, the Company owed $2,560
and $1,670 to CBI
which is reported in accounts payable on the consolidated balance sheets.
Advertising Costs
The Company recognizes expenses for advertising
costs as they are incurred. Advertising costs were $2,411 and $22,099 for the quarters ended July 31, 2021 and 2020.
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 $15,183,165 on July 31, 2021. The Company has a working capital deficit of $1,104,760 as of July 31, 2021.
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. Accordingly, the 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. If additional financing is not available, the Company will
need to reduce salaries, defer, or cancel development programs, planned initiatives and overhead expenditures. The failure to adequately
fund its capital requirements could have a material adverse effect on the Company’s business, financial condition, and results of
operations, including potential discontinuance of operations. Moreover, the sale of additional equity securities to raise financing will
result in additional dilution to the Company’s stockholders. Additionally, incurring additional indebtedness could involve an increased
debt service cash obligation, as well as the imposition of covenants that restrict the Company’s operations or the Company’s
ability to perform on its current debt service requirements. The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern. While the Company recognizes the significant impact of additional financing,
the Company is a smaller reporting company serving large and growing markets and it will continue to sell securities and enter into financing
programs which are deemed to be prudent.
Recently Issued Accounting Pronouncements
Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13 Financial
Instruments-Credit Losses, which amends how entities will measure credit losses for most financial assets and certain other instruments
that are not measured at fair value through net income, which applies to trade accounts receivable and the calculation of the allowance
for uncollectible accounts receivable. The new standard 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 July 31, 2021 and April 30, 2021:
|
Schedule of accounts receivable
|
|
|
|
|
|
|
|
|
|
July 31,
2021
|
|
|
April 30,
2021
|
|
|
Trade receivables
|
|
$
|
189,768
|
|
|
$
|
112,982
|
|
3. NOTES PAYABLE
Convertible Promissory Notes Payable
During the year ended April 30, 2021, the Company
issued a fourth round of convertible debentures in the principal amount of $525,500. The debentures were 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%. The debentures were
converted into 611,047 shares of common stock at a price of $0.86 per share and the accrued interest unpaid amount of $16,459 was converted
into 19,138 shares of common stock at a price of $0.86 per share
During the year ended April 30, 2021, the Company
issued a fifth round of convertible debentures in the principal amount of $204,800. The debentures were 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%. This round of debentures
was converted 163,890 shares of common stock at a price of $1.25 per share and accrued interest of $2,074 was converted into 1,660 shares
of common stock at a price of $1.25 per share.
Vehicles and Equipment Notes Payable
The Company has one note payable relating to the
purchase of a Company vehicle as of July 31, 2021. The balance outstanding under the note payable was $24,852 as of July 31, 2021. 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, 2021 with a balance outstanding of $40,474.
The Company’s future minimum principal
payments as of July 31, 2021 are as follows:
|
Schedule of future minimum debt payments
|
|
|
|
|
|
2022
|
|
$
|
8,731
|
|
|
2023
|
|
|
12,889
|
|
|
2024
|
|
|
3,232
|
|
|
Total future minimum payment
|
|
$
|
24,852
|
|
Other Notes Payable
On May 8, 2020, the Company received $100,344
from the Paycheck Protection Program. This PPP loan has a two-year 2 term and bears interest at a rate of 1%
per annum and does not require collateral. The loan was fully forgiven in November of 2020 by the SBA and a gain on extinguishment
of debt of $100,344
was recorded within other income during the year ended April 30, 2021.
On February 01, 2021, the Company received $50,000
from an investor and in turn issued a promissory note with an 8% interest rate, with collateral of 8 drag slat application units, and
is to be paid in full by February 28, 2022. During the year ended April 30, 2021, the Company had paid $666 in interest for this note.
A payment of $5,225 was made during the period ending July 31, 2021.
On February 11, 2021, WSC received $40,625
from the Paycheck Protection Program. The PPP Loan has a 5 five-year term and bears interest at a rate of 1% per annum and does not
require collateral. Monthly principal and interest payments are deferred for ten months after the date of disbursement. The PPP Loan
may be prepaid at any time prior to maturity with no prepayment penalties. WSC has not yet applied for forgiveness but believes it
will be forgiven.
On February 14, 2021, ICS received $48,510
from the Paycheck Protection Program. The PPP Loan has a 5 five-year term and bears interest at a rate of 1% per annum and does not
require collateral. Monthly principal and interest payments are deferred for ten months after the date of disbursement. The PPP Loan
may be prepaid at any time prior to maturity with no prepayment penalties. ICS has not yet applied for forgiveness but believes it
will be forgiven.
On March 16, 2021, SPE received $15,657
from the Paycheck Protection Program. The PPP Loan has a 5 five-year term and bears interest at a rate of 1% per annum and does not
require collateral. Monthly principal and interest payments are deferred for ten months after the date of disbursement. The PPP Loan
may be prepaid at any time prior to maturity with no prepayment penalties. SPE has not yet applied for forgiveness but believes it
will be forgiven.
On April 19, 2021, the Company received $50,000
from an investor and in turn issued a promissory note with an 8% interest rate to reduce debt. This note does not require collateral and
is to be paid in full by May 19, 2022. No payments have been made at this time.
On May 10, 2021, the Company received $25,000
from an investor and in turn issued a promissory note with an 6% interest rate to reduce debt. This note does not require collateral and
is to be paid in full by August 6, 2021. No payments have been made at this time.
On May 19, 2021, the Company received $50,000
from an investor and in turn issued a promissory note with an 8% interest rate to reduce debt. This note does not require collateral and
is to be paid in full by May 19, 2022. No payments have been made at this time.
On June 7, 2021, the Company received $26,000
from an investor and in turn issued a promissory note with an 6% interest rate to reduce debt. This note does not require collateral and
is to be paid in full by August 7, 2021. No payments have been made at this time.
On June 7, 2021, the Company received $20,000
from another investor and in turn issued a promissory note with an 6% interest rate to reduce debt. This note does not require collateral
and is to be paid in full by August 7, 2021. No payments have been made at this time.
4. ACCRUED EXPENSES
Accrued expenses, consisting of accrued salaries
for officers and executive management, include the following balance at July 31, 2021 and April 30, 2021:
|
Schedule of accrued expenses
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2021
|
|
|
April 30,
2021
|
|
|
Accrued Compensation
|
|
$
|
1,006,111
|
|
|
$
|
934,104
|
|
|
Other Accrued Expenses
|
|
|
197,312
|
|
|
|
267,464
|
|
|
Accrued expenses
|
|
$
|
1,203,423
|
|
|
$
|
1,201,568
|
|
5. COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS
Leases
As of July 31, 2021,
the weighted average remaining lease term and weighted average discount rate for financing leases was 2.1 years and 4.25%, respectively.
The Company's future financing lease obligations that have not yet commenced are immaterial. For three months ending July 31, 2021 and
July 31, 2020, the Company's cash paid for financing leases was $8,679 and $36,150, and short-term lease costs were $0 and $0, respectively.
The Company’s undiscounted annual future
minimum lease payments as of July 31, 2021 consist of:
|
Schedule of future minimum lease payments
|
|
|
|
|
|
2022
|
|
$
|
129,955
|
|
|
2023
|
|
|
92,315
|
|
|
2024
|
|
|
16,811
|
|
|
2025
|
|
|
16,044
|
|
|
2026
|
|
|
13,993
|
|
|
Total lease payments
|
|
|
269,118
|
|
|
Interest
|
|
|
(12,385
|
)
|
|
Present value of lease liabilities
|
|
$
|
256,733
|
|
Concentrations
As of July 31, 2021, the Company had four customers
which made up 78% of the outstanding accounts receivable balance. For the three months ended July 31, 2020, the Company had three customers
which made up 41% of the outstanding accounts receivable balance.
For the three months ended July 31, 2021, the
Company had three customers which made up 60% of total revenues. For the three months ended July 31, 2020, the Company had two customers
which made up 41% of total revenues.
6. STOCKHOLDERS’ EQUITY
Common Stock
As of July 31, 2021 and 2020, 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.
During the period ended July 31, 2021, the Company
sold 400,000 shares at $.50 per share for $150,000 in cash proceeds and $50,000 in an assigned note receivable.
Warrants
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.
As of April 30, 2021, and 2020, December 31,
2019, there were 82,668 common stock warrants outstanding,
respectively, with an exercise price of $0.50.
|
Schedule of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
Beg. Balance
|
|
|
Issued
|
|
|
Exercised
|
|
|
Expired
|
|
|
End. Balance
|
|
|
April 30, 2020
|
|
|
82,668
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
82,668
|
|
|
April 30, 2021
|
|
|
82,668
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
82,668
|
|
|
July 31, 2021
|
|
|
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 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. On March 18, 2018, the Plan was amended to increase the maximum number of shares of stock that may be
issued to 5,000,000. On July 10, 2018, the Plan was amended to increase the maximum number of shares of stock that may be issued to 5,500,000.
In November of 2019, the Plan was further amended to increase the shares of stock that may be issued to 10,000,000.
During the three months ended July 31, 2021 and
2020, there were 500,000 and 0 common stock options granted.
Stock option activity during the period ended July 31, 2021 is summarized
as follows:
|
Schedule of option activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
Under
Option
|
|
|
Price Per
Share
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - beginning of quarter
|
|
|
7,289,750
|
|
|
|
$0.00 - 1.50
|
|
|
$
|
1.11
|
|
|
95 months
|
|
Granted
|
|
|
500,000
|
|
|
|
1.99
|
|
|
|
1.99
|
|
|
120 months
|
|
Exercised
|
|
|
(1,000,000
|
)
|
|
|
0-0.01
|
|
|
|
0-0.01
|
|
|
–
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
–
|
|
Outstanding - end of quarter
|
|
|
6,789,750
|
|
|
|
$0.00 - 1.99
|
|
|
$
|
1.32
|
|
|
96 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - end of quarter
|
|
|
6,746,418
|
|
|
|
|
|
|
$
|
1.15
|
|
|
87 months
|
Stock option activity during the period ended July 31, 2020, is summarized
as follows:
|
|
|
Shares
Under
Option
|
|
|
Price Per
Share
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - beginning of quarter
|
|
|
7,309,750
|
|
|
|
$0.00 - 1.50
|
|
|
$
|
1.18
|
|
|
|
113 months
|
|
|
Granted
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Exercised
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Canceled or expired
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Outstanding - end of quarter
|
|
|
7,309,750
|
|
|
|
$0.00 - 1.50
|
|
|
$
|
1.15
|
|
|
|
109 months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - end of quarter
|
|
|
6,469,750
|
|
|
|
|
|
|
$
|
0.91
|
|
|
|
92 months
|
|
7. RELATED PARTY TRANSACTIONS
During the three months ended July 31, 2021 and
2020, the Company incurred consulting fees of $39,000 and $52,675 to four separate entities owned by four current shareholders. The total
related party consulting fees unpaid balance due was $18,000 and $28,550 as of July 31, 2021 and April 30, 2021, respectively, and is
included in accounts payable in the accompanying consolidated balance sheets.
The Company is in effect a sales representative
of CBI 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 $2,560 and $1,670
due to CBI Polymers as of July 31, 2021 and April 30, 2021, respectively.
Two separate related parties are allowing the
Company to rent vehicles for a monthly fee of $1,650 and $1,243. For the three months ended July 31, 2021, the Company paid a total of
$4,950 and $3,729. For the three months ended July 31, 2020, the Company paid $4,950 for one vehicle.
8. INCOME TAXES
For the three-months ended July 31, 2021 and 2020,
the effective tax rate of 0% varies from the U.S. federal statutory rate primarily due to net losses and the valuation allowance associated
with the net operating loss carryforwards. The Company continually reviews the realizability of its deferred tax assets, including an
analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. The
Company continues to record a full valuation allowance against its net deferred tax assets. The Company assessed whether a valuation allowance
should be established against its deferred tax assets based on consideration of all available evidence, using a “more likely than
not” standard. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related
to the likelihood of realization of deferred tax assets. In making such assessment, more weight was given to evidence that could be objectively
verified, including recent cumulative losses. Future sources of taxable income were also considered in determining the amount of the recorded
valuation allowance. Based on the Company’s review of this evidence at July 31, 2021, management determined that a full valuation
allowance against all of the Company’s deferred tax assets at July 31, 2021 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 quarters ending July 31, 2021 and 2020:
|
Schedule of income tax reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
July 31,
2021
|
|
|
July 31,
2020
|
|
|
Tax benefit calculated at statutory rate
|
|
|
21.00%
|
|
|
|
21.00%
|
|
|
Expense not deductible
|
|
|
(0.03
|
)
|
|
|
(0.02
|
)
|
|
Changes to valuation allowance
|
|
|
(20.97
|
)
|
|
|
(20.98
|
)
|
|
Provision for income taxes
|
|
|
0%
|
|
|
|
0%
|
|
9. CORONA VIRUS
During March 2020, a global pandemic was declared
by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus ("COVID-19"). The
pandemic has significantly impacted the economic conditions in the U.S., accelerating during the first half of March, as federal, state
and local governments react to the public health crisis, creating significant uncertainties in the U.S. economy. In March 2020, we noticed
a strong decline in orders from our customers, as businesses around the country began to cease their operations due to COVID-19. In an
attempt to mitigate the ongoing impact of the pandemic on our cash flows certain actions were taken. The actions include targeted reductions
in discretionary operating expenses such as advertising and payroll expenses, reducing capital expenditures, and reducing travel for business
development purposes. As of July 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 loan
was fully forgiven in November of 2020.
On February 11, 2021, WSC received $40,625
from the Paycheck Protection Program. The PPP Loan has a 5 five-year term and bears interest at a rate of 1%
per annum and does not require collateral. Monthly principal and interest payments are deferred for ten months after the date of
disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. WSC has not yet applied for
forgiveness but believes it will be forgiven.
On February 14, 2021, ICS received $48,510
from the Paycheck Protection Program. The PPP Loan has a 5 five-year term and bears interest at a rate of 1% per annum and does not
require collateral. Monthly principal and interest payments are deferred for ten months after the date of disbursement. The PPP Loan
may be prepaid at any time prior to maturity with no prepayment penalties. ICS has not yet applied for forgiveness but believes it
will be forgiven.
On March 16, 2021, SPE received $15,657
from the Paycheck Protection Program. The PPP Loan has a 5 five-year term and bears interest at a rate of 1% per annum and does not
require collateral. Monthly principal and interest payments are deferred for ten months after the date of disbursement. The PPP Loan
may be prepaid at any time prior to maturity with no prepayment penalties. SPE has not yet applied for forgiveness but believes it
will be forgiven.
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
On August 1st, the Company leased a
regional facility at 371 Hostdale Road #1-#2, Dothan, AL 36303. The landlord is a related party to the President of the Company, Walton
Ashwander.
On September 6, 2021, Walton Ashwander was appointed
to the Board of Directors of the Company.
On September 20, 2021, the Company issued 60,000 shares of at $0.33
for $20,000.
On September 20, 2021, the Company issued 300,000 shares of at $0.33
for $100,000.