LUX AMBER, CORP. MANAGEMENT’S REVIEW AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)


The following discussion and analysis of the financial condition and results of operations of the Company should be read in conjunction with its unaudited condensed interim consolidated financial statements and the accompanying notes included in this quarterly report on Form 10-Q and the audited financial statements and related notes as of and for the year ended April 30, 2021.


FORWARD-LOOKING STATEMENTS


The discussion contained in this document contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the use of terminology such as “believes”, “expects”, “could”, “should” or anticipates “or by expressing such terminology negatively or similar expressions or by discussion on strategy. Form 10-Q should be read as applicable to all related forward-looking statements, wherever they appear in this Form 10-Q. The actual results of the Company could differ materially from those discussed in this report.

ACTIVITY AND PLAN OF OPERATION

Lux Amber, Corp., situated at Frisco, Texas, is an international specialty chemicals company offering many environmentally friendly products. The common description is “green chemicals”. The company employs graduate chemists with years of successful experience in the specialty chemical industry. The term “specialty chemicals” is best defined by chemicals whose formulas allow chemical compounds to perform a specific function for a class of customers. The company’s products have been used successfully in a wide range of applications, including:


  · Chemicals to protect surfaces in asphalt handling equipment




  · Chemicals to control the reproduction of pests




          ·   Military Chemical, Biological, Radiological, Nuclear, and Explosives
              (CBRNE) sites




  · Commercial nuclear power plants and nuclear-powered ships




  · Hazardous toxic industrial chemical and toxic industrial material clean-up



The Company’s business telephone number is 972-214-9764. The Company’s stock symbol is LXAM.

LAC has three (3) wholly owned subsidiaries (collectively with LAC, the “Company”): Worldwide Specialty Chemicals, Inc. (“WSC”), Industrial Chemical Solutions, Inc. (“ICS”), and Pest Control from Safeway, LLC, (“SPE”), which was formed July 16, 2018. BAC and its subsidiaries are both producers and distributors of specialized chemicals that respect the environment. The Company previously held a 49% stake in PCNM LLC, a small business owned by a veteran with a disability that sold the company’s products to government agencies. The PCNM was legally dissolved on July 31, 2020.

The company’s products use all-natural and renewable resources, contain no hazardous chemicals or additives, and offer “green” solutions to its customers. ICS’s product line includes asphalt release agents, industrial cleaners, environmental sanitizing gels, odor control agents and user-friendly cleaners for a wide range of uses, including construction, environmental remediation, cleaning of hazardous materials, nuclear decommissioning, industrial cleaning and odor control. SPE products are designed for the elimination and control of pests.

LIQUIDITY AND CAPITAL RESOURCES

During the three month period ended July 31, 2021, the main sources of liquidity were cash flows from financing activities, and in particular, the issuance of shares and promissory notes.






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From July 31, 2021, the Company had total assets of $ 3,457,896 composed of current assets of $ 347,847, $ 189,768 in receivables, $ 151,529 in inventory,
$ 6,550 in other current assets and long-term assets of $ 2,309,953 in goodwill and other intangible assets, $ 478,117 in fixed assets, $ 76,965 on other long-term assets, and $ 295,014 in right of use of assets. From April 30, 2021, the Company had total assets of $ 3,353,460, made up of current assets of $ 112,982 in receivables, $ 137,211 in inventory, $ 7,960 in prepaid expenses and other current and long-term assets. These current asset gains are due to the company’s sales increase of 45.87% compared to the same quarter of the previous comparable period, which in turn resulted in an increase in accounts receivable. The increase in inventory is the result of the company’s preparation for a comparable increase in sales in the following quarter. The increased sales and increased gross profit allowed the company to achieve a higher percentage return on its short and long term assets.

The company made other acquisitions of products and assets. Since this acquisition, assets have been judicially added which, combined, provide basic application equipment and rolling stock to support revenue significantly above the revenue generated in May, June and July of the previous year. During the current quarter, these combined assets generated revenues of forty-six
[46] percent more than in the previous quarter. In June 2021, the company’s ability to increase revenue was enhanced by the addition of a company president who has a broad network within the industries served by the company; therefore, management believes that the growth rate of revenues and asset base margins will be sustained.

The increase in total assets is mainly due to its increase in accounts receivable and inventory due to slower customer payment times due to cash flow issues across the industry due to COVID-19 and a build-up of inventory to cope with increased sales.

From July 31, 2021, the Company had total liabilities totaling $ 2,621,038
including $ 1,832,863 in current debts and accrued liabilities, $ 169,110 in debts between related parties, $ 240,627 bills payable, $ 104,752 in Paycheck Protection Program loans, and $ 273,685 on the liability side of the right of use. From April 30, 2021, the Company had total liabilities totaling $ 2,468,547 including $ 1,756,156 in accounts payable and accrued liabilities, $ 208,756 in debts between related parties,
$ 127,624 in bills payable, and $ 271,259 in rental debts, and $ 104,752 in Paycheck Protection Program Loans.

As July 31, 2021, the Company had cumulative equity of
$ 836,858 and $ 884,913 To April 30, 2021. The increase is the result of the items discussed below.



RESULTS OF OPERATIONS



Comparison of the completed three-month period July 31, 2021 and July 31, 2020.


Revenues


For the three-month period ended July 31, 2021, the Company achieved revenues of
$ 423,828, and $ 290,260 for the same period in 2020. The increase in sales of
$ 133,568 is mainly the result of 1) Business expansion with historical customers to serve other Hot Mix asphalt plants under their property; 2) increase in the selling price per unit; 3) adding new customers.

Cost of goods sold decreased as a percentage of revenue due to a change in the mix of products sold during the period and increases in gross selling prices on all products offered by the Company. The selling price increase was thirty-five [35] percent to hundred [100] percent.


Operating Expenses


For the three-month period ended July 31, 2021, the Company’s operating expenses total $ 538,095 who understood $ 153,215 in product delivery costs, $ 336,158
in general and administrative expenses, $ 7,102 in selling costs and $ 41,620
in depreciation of assets. For the three-month period ended July 31, 2020, the Company had operating expenses that totaled $ 691,085 who understood $ 141,981 in product delivery costs, $ 492,329 in general and administrative expenses, $ 19, 491 in selling costs and $ 37, 284 in depreciation.

The decrease is mainly due to 1) lower travel costs due to more efficient use of mobile assets; 2) shift the burden of delivery costs to the customer; 3) Improvement of cost accounting processes; 4) Improving purchasing processes by sourcing raw materials from multiple suppliers and purchasing in larger quantities.






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GOING CONCERN


The accompanying consolidated financial statements are presented on a going concern basis. The Company’s financial situation raises substantial doubts as to its ability to continue operating. The Company has limited liquidity, its current liabilities exceed its current assets July 31, 2021 and suffered recurring operating losses during the three months ended
July 31, 2021. The Company relies on capital from investors to meet the majority of its operating expenses.

OFF-BALANCE SHEET ARRANGEMENTS

There are no transactions, arrangements, obligations (including any obligations) or other off-balance sheet relationships with non-consolidated entities or other persons that have or could have a material effect on the financial condition, changes in the financial condition, income or expenses, results of operations, liquidity, capital expenditures or capital resources of the Company.

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