NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED January 31, 2020
(Unaudited)
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
Lux Amber, Corp. (referred as the “Company”, “we”, “our”) was incorporated in the State of Nevada and established on January 19, 2018. We are a development-stage company formed to commence operations to provide jewelry design service.
Our office is located at Shaoyaoju Beili 207, 712 Beijing China 100029.
NOTE 2 – GOING CONCERN
The Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
As reflected in the financial statements, the Company had an accumulated deficit of $88,438 at January 31, 2020. The Company has not generated any revenues and has cash balance of $3,680 at January 31, 2020. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management intends to raise additional funds by way of a private or public offering. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFCANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America.
The Company’s year-end is April 30.
Interim Financial Information
The unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) applicable to interim financial information and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosure required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.
These consolidated financial statements should be read in conjunction with the audited financial statements for the year ended April 30, 2019, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim consolidated financial statements follow the same accounting policies and methods of computations as the audited financial statements for the year ended April 30, 2019.
Development Stage Company
The Company is a development stage company as defined in ASC 915 “Development Stage Entities”. The Company is devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since Inception has been considered as part of the Company's development stage activities.
The Company has elected to adopt application of Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. Upon adoption, the Company no longer presents or discloses inception-to-date information and other remaining disclosure requirements of Topic 915.
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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with the original maturities of three months or less to be cash equivalents.
Property, Plant and Equipment
The Company records depreciation and amortization when appropriate using straight-line balance method over the estimated useful life of the assets. The estimated useful lives as follows:
Capitalized software development
|
5 years
|
Expenditures for maintenance and repairs are charged to expense as incurred. Additions, major renewals and replacements that increase the property's useful life are capitalized. Property sold or retired, together with the related accumulated depreciation is removed from the appropriated accounts and the resultant gain or loss is included in net income. We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets.
Fair Value of Financial Instruments
AS topic 820 "Fair Value Measurements and Disclosures" establishes a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
These tiers include:
Level 1:
|
defined as observable inputs such as quoted prices in active markets;
|
Level 2:
|
defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
|
Level 3:
|
defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
|
The carrying value of cash and the Company’s loan from shareholder approximates its fair value due to their short-term maturity.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Revenue Recognition
We have purchased a website where we plan to generate revenues by providing jewelry designing services through the website. We plan to hire web designer to help us with the design and improvement of our website.
In 2014, the FASB issued guidance on revenue recognition (“ASC 606”), with final amendments issued in 2016. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes.
The Company’s jewelry design services are considered to be one performance obligation; therefore revenue is recognized when services have been provided as each performance obligation is satisfied.
As of January 31, 2020, the Company has not generated any revenue.
Basic Income (Loss) Per Share
The Company computes income (loss) per share in accordance with FASB ASC 260 “Earnings per Share”. Basic loss per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.
As of January 31, 2020, there were no potentially dilutive debt or equity instruments issued or outstanding.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. To date, the Company has not adopted a stock option plan and has not granted any stock options.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases, replacing existing lease accounting guidance. The new standard introduces a lessee model that would require entities to recognize assets and liabilities for most leases, but recognize expenses on their income statements in a manner similar to current accounting. The ASU does not make fundamental changes to existing lessor accounting. However, it modifies what qualifies as a sales-type and direct financing lease and related accounting and aligns a number of the underlying principles with those of the new revenue standard, ASU No. 2014-09, such as evaluating how collectability should be considered and determining when profit can be recognized. The guidance eliminates existing real estate-specific provisions and requires expanded qualitative and quantitative disclosures. The standard requires modified retrospective transition by which it is applied at the beginning of the earliest comparative period presented in the year of adoption. For the Company, the ASU is effective January 1, 2019. The Company is currently assessing this ASU’s impact on the Company’s consolidated results of operations and financial condition.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment
|
|
January 31,
2020
|
|
|
April 30,
2019
|
|
|
|
|
|
|
|
|
Website Development
|
|
$
|
-
|
|
|
$
|
15,000
|
|
Accumulated Amortization
|
|
|
-
|
|
|
|
(2,508
|
)
|
Impairment loss
|
|
|
-
|
|
|
|
(12,492
|
)
|
Total, net
|
|
$
|
-
|
|
|
$
|
-
|
|
Amortization expense for the period ended January 31, 2020 was $nil.
NOTE 5 – NOTE PAYABLE
On September 27, 2018, the Company entered into a promissory note agreement in the amount of $15,000 with Guo Zhen for the website development services payable. The note has an interest rate of 10% with a maturity date of September 27, 2020. The interest is payable on the first day of each month commencing the first month after the date of the Note.
The interest expense was $375 and $1,125 for the three and nine months ended January 31, 2020.
The interest expense was $375 and $500 for the three and nine months ended January 31, 2019.
NOTE 6 – RELATED PARTY TRANSACTIONS
As of January 31, 2020, the Company owed $20,668 to the Company’s sole director, Yulia Baranets, for the Company’s working capital advances.
Ms. Baranets also provides services to the Company for which she is compensated $1,500 per month. As of January 31, 2020, the outstanding accounts payable amount to Ms. Baranets was $29,250 which is included in accounts payable.
The amounts above are non-interest bearing, due upon demand and unsecured.
NOTE 7 – COMMON STOCK
The Company has 75,000,000, $0.0001 par value shares of common stock authorized.
On January 20, 2018 the Company issued 2,000,000 shares of common stock to a director for services rendered estimated to be $200 at $0.0001 per share.
During the year ended April 30, 2019, the Company issued 1,150,000 of common shares at $0.02 per share for a total price of $23,000
There were 3,150,000 shares of common stock issued and outstanding as of January 31, 2020.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
Our sole officer and director, Yuliia Baranets, has agreed to provide her own premise for office needs free of charge.
NOTE 9 – INCOME TAXES
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“Tax Reform Act”). The legislation significantly changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a transition tax on deemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the reduction in the U.S. corporate income tax rate from 34% to 21% under the Tax Reform Act, the Company revalued its ending net deferred tax assets.
The reconciliation of income tax benefit (expenses) at the U.S. statutory rate at 21% and 34% for the period ended as follows:
|
|
January 31,
2020
|
|
|
April 30,
2019
|
|
|
|
|
|
|
|
|
Tax benefit (expenses) at U.S. statutory rate
|
|
$
|
18,572
|
|
|
|
11,437
|
|
Change in valuation allowance
|
|
|
(18,572
|
)
|
|
|
(11,437
|
)
|
Tax benefit (expenses), net
|
|
$
|
-
|
|
|
$
|
-
|
|
The tax effects of temporary differences that give rise to significant portions of the net deferred tax assets are as follows:
|
|
January 31,
2020
|
|
|
April 30,
2019
|
|
Net operating loss
|
|
$
|
7,135
|
|
|
$
|
10,239
|
|
Valuation allowance
|
|
|
(7,135
|
)
|
|
|
(10,239
|
)
|
Deferred tax assets, net
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2020
|
|
|
April 30,
2019
|
|
Balance-Beginning
|
|
$
|
11,437
|
|
|
|
1,198
|
|
Increase/(Decrease) in Valuation allowance
|
|
|
7,135
|
|
|
|
10,239
|
|
Balance-Ending
|
|
$
|
18,572
|
|
|
$
|
11,437
|
|
The Company has accumulated approximately $88,438 of net operating losses (“NOL”) carried forward to offset future taxable income indefinitely, if any, in future years. Such NOL carryover can only offset eighty percent (80%) of taxable income without regard to the new section 199A deduction. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.
NOTE 10 – SUBSEQUENT EVENTS
In accordance with ASC 855-10 the Company has analyzed its operations subsequent to January 31, 2020 to the date these financial statements were issued on February 6, 2020, and has determined that it does not have any material subsequent events to disclose in these financial statement.
FORWARD LOOKING STATEMENTS
Statements made in this Form 10-Q that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.