AMANASU ENVIRONMENT CORP - Quarter Report: 2019 June (Form 10-Q)
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended: June
30, 2019
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 000-32905
AMANASU ENVIRONMENT CORPORATION
(Exact name of registrant as specified in its charter)
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Nevada
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98-0347883
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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224 Fifth Avenue, Suite D144
New York, NY 10022
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(Address of principal executive offices)
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(604) 790-8799
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(Registrant’s telephone number, including area
code)
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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N/A
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N/A
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N/A
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Securities registered pursuant to Section 12(g) of the
Act:
Common Stock $.001 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the past 12 months, and (2)
has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of
this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files. Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, smaller reporting company, or an
emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of
the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☐
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If an emerging growth company, indicate by check
mark if the registrant has elected not to use the
extended transition period for complying with any new or revised
financial accounting standards provided pursuant to
Section 7(a)(2)(B) of the Securities
Act. ☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
As of August 5, 2019, there were 44,100,816 shares outstanding of
the registrant’s common stock.
AMANASU ENVIRONMENT CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2019
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
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Item
1.
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Consolidated
Financial Statements (unaudited).
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3
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
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10
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk.
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12
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Item
4.
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Controls
and Procedures.
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13
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PART II - OTHER INFORMATION
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Item
1.
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Legal
Proceedings.
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14
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Item
1A.
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Risk
Factors.
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14
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds.
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14
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Item
3.
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Defaults
Upon Senior Securities.
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14
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Item
4.
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Mine
Safety Disclosures.
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14
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Item
5.
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Other
Information.
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14
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Item
6.
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Exhibits.
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15
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Signatures
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16
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2
PART I
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June
30,
2019
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December
31,
2018
|
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ASSETS
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Current
Assets:
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Cash
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$241
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$3,290
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Operating lease
right-of-use assets -current
|
3,408
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-
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Due from related
parties
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20,633
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6,273
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Total
current assets
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24,282
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9,563
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|
|
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Total
Assets
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$24,282
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$9,563
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LIABILITIES &
STOCKHOLDERS' DEFICIT
|
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Current
Liabilities:
|
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Accounts payable
and accrued expenses
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$9,604
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$14,244
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Accrued expenses
– related parties
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104,786
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83,909
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Accrued interest
– stockholders
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62,778
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53,399
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Operating lease
liabilities-current
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3,408
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-
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Taxes
payable
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31,275
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30,750
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Due to related
parties
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387,170
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356,720
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Total
current liabilities
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599,021
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539,022
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Stockholders'
Deficit:
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Common Stock:
authorized 100,000,000 shares of $.001 par value;44,100,816 shares
issued and outstanding
|
44,101
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44,101
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Additional paid in
capital
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4,793,552
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4,793,552
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Accumulated
deficit
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(5,416,645)
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(5,371,553)
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Accumulated other
comprehensive income
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4,565
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4,736
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Total
Amanasu Environment Corporation stockholders' deficit
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(574,427)
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(529,164)
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Non-controlling
interest in subsidiary
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(312)
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(295)
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Total
stockholders’ deficit
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(574,739)
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(529,459)
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Total
Liabilities and Stockholders' Deficit
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$24,282
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$9,563
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The
accompanying notes are an integral part of these consolidated
financial statements.
3
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
|
|
Three
Months
Ended June
30,
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Six
Months
Ended June
30,
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||
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2019
|
2018
|
2019
|
2018
|
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Revenue
|
$-
|
$-
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$-
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$-
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Cost of
revenue
|
-
|
-
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-
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-
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Gross
profit
|
-
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-
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-
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-
|
|
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General and
administrative expenses
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14,638
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$20,363
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35,713
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37,112
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Operating
loss
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(14,638)
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(20,363)
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(35,713)
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(37,112)
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Other
Expense:
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Interest expense -
stockholders
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(4,798)
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(4,350)
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(9,379)
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(8,251)
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|
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|
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Net loss before
income taxes
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(19,436)
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(24,713)
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(45,092)
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(45,363)
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Income
taxes
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-
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-
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-
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-
|
|
|
|
|
|
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Net
loss
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(19,436)
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(24,713)
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(45,092)
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(45,363)
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|
|
|
|
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Net loss
attributable to non-controlling interest
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-
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-
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-
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-
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Net loss
attributable to Amanasu Environment Corporation
Stockholders
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(19,436)
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(24,713)
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(45,092)
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(45,363)
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Other comprehensive
income (loss):
|
|
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Foreign currency
translation adjustment
|
(303)
|
458
|
(188)
|
(184)
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|
|
|
|
|
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Comprehensive
loss
|
(19,739)
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(24,255)
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(45,280)
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(45,547)
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Less: Comprehensive
income (loss) attributable to non-controlling interest
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(27)
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41
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(17)
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(17)
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Comprehensive loss
attributable to Amanasu Environment Corporation
Stockholders
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$(19,712)
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$(24,296))
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$(45,263)
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$(45,530)
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Net loss per share
– basic and diluted
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$(0.00)
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$(0.00)
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$(0.00)
|
$(0.00)
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|
Weighted average
number of shares outstanding
|
44,100,816
|
44,100,816
|
44,100,816
|
44,100,816
|
The
accompanying notes are an integral part of these consolidated
financial statements.
4
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
For the Three Months Ended June 30, 2019 and 2018
(Unaudited)
|
|
Common
Stock
|
Paid
In
|
Accumulated
|
Comprehensive
|
Non-controlling
|
|
|
|
|
Shares
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Amount
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Capital
|
Deficit
|
Income
|
Interest
|
Total
|
|
|
|
|
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Balance April 1,
2019
|
44,100,816
|
$44,101
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$4,793,552
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$(5,397,209)
|
$4,841
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$(285)
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$(555,000)
|
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Net loss
|
-
|
-
|
-
|
(19,436)
|
-
|
-
|
(19,436)
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(276)
|
(27)
|
(303)
|
|
|
|
|
|
|
|
|
|
|
Balance June 30,
2019
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,416,645)
|
$4,565
|
$(312)
|
$(574,739)
|
|
|
Common
Stock
|
Paid
In
|
Accumulated
|
Comprehensive
|
Non-controlling
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Interest
|
Total
|
|
|
|
|
|
|
|
|
|
|
Balance April 1,
2018
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,304,073)
|
$4,417
|
$(327)
|
$(462,330)
|
|
Net loss
|
-
|
-
|
-
|
(24,713)
|
-
|
-
|
(24,713)
|
|
Other comprehensive
loss
|
-
|
-
|
-
|
-
|
417
|
41
|
458
|
|
|
|
|
|
|
|
|
|
|
Balance June 30,
2018
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,328,786)
|
$4,834
|
$(286)
|
$(486,585)
|
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
For the Six Months Ended June 30, 2019 and 2018
(Unaudited)
|
|
Common
Stock
|
Paid
In
|
Accumulated
|
Comprehensive
|
Non-controlling
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Interest
|
Total
|
|
|
|
|
|
|
|
|
|
|
Balance January 1,
2019
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,371,553)
|
$4,736
|
$(295)
|
$(529,459)
|
|
Net loss
|
-
|
-
|
-
|
(45,092)
|
-
|
-
|
(45,092)
|
|
Other comprehensive
income
|
-
|
-
|
-
|
-
|
(171)
|
(17)
|
(188)
|
|
|
|
|
|
|
|
|
|
|
Balance June 30,
2019
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,416,645)
|
$4,565
|
$(312)
|
$(574,739)
|
|
|
Common
Stock
|
Paid
In
|
Accumulated
|
Comprehensive
|
Noncontrolling
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Interest
|
Total
|
|
|
|
|
|
|
|
|
|
|
Balance January 1,
2018
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,283,423)
|
$5,001
|
$(269)
|
$(441,038)
|
|
Net loss
|
-
|
-
|
-
|
(45,363)
|
-
|
-
|
(45,363)
|
|
Other comprehensive
loss
|
-
|
-
|
-
|
-
|
(167)
|
(17)
|
(184)
|
|
|
|
|
|
|
|
|
|
|
Balance June 30,
2018
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,328,786)
|
$4,834
|
$(286)
|
$(486,585)
|
The
accompanying notes are an integral part of these consolidated
financial statements.
5
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months
Ended June 30,
2019
|
Six Months
Ended
June 30,
2018
|
|
CASH
FLOWS FROM OPERATIONS
|
|
|
|
Net
loss
|
$(45,092)
|
$(45,363)
|
|
|
|
|
|
Changes
in assets and liabilities:
|
|
|
|
Accounts payable
and accrued expenses
|
(4,720)
|
63
|
|
Accrued expenses
– related parties
|
20,750
|
(14,633)
|
|
Accrued interest -
stockholders
|
9,379
|
8,251
|
|
Net
Cash Used in Operating Activities
|
(19,683)
|
(51,682)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Advances from
stockholders, net of repayment
|
30,450
|
65,615
|
|
Due to related
parties
|
(13,816)
|
(14,357)
|
|
Net
Cash Provided by Financing Activities
|
16,634
|
51,258
|
|
|
|
|
|
Net Change In
Cash
|
(3,049)
|
(424)
|
|
|
|
|
|
Cash balance,
beginning of period
|
3,290
|
5,433
|
|
|
|
|
|
Cash balance, end
of period
|
$241
|
$5,009
|
Supplemental disclosures of cash flow information:
|
Cash paid for
interest
|
$-
|
$-
|
|
Cash paid for
income taxes
|
$-
|
$-
|
The
accompanying notes are an integral part of these consolidated
financial statements.
6
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)
1. BASIS OF PRESENTATION
The
unaudited consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States for interim financial information and the rules and
regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required
by GAAP for complete financial statements. In the opinion of
management, the accompanying unaudited financial statements contain
all adjustments (consisting of normal recurring accruals) necessary
to present fairly the financial position of the Company as of June
30, 2019, the results of operations for the three and six months
ended June 30, 2019 and 2018, and cash flows for the six months
ended June 30, 2019 and 2018. These results are not
necessarily indicative of the results to be expected for the full
year or any other period. The December 31, 2018 balance sheet
included herein was derived from the audited financial statements
included in the Company’s Annual Report on Form 10-K as of
that date. Accordingly, the financial statements
included herein should be reviewed in conjunction with the
financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2018, as filed with the Securities and Exchange
Commission (“SEC”) on April 1, 2019.
2. GOING CONCERN
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the
financial statements, the Company had a working capital deficiency
of $574,739 and an accumulated deficit of $5,416,645 at June 30,
2019, and a record of continuing losses. These factors, among
others, raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not
include adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the
Company be unable to continue in operation.
The
Company’s operations to date
have been limited to conducting various tests on its technologies
and seeking financing. The Company will continue to develop
and market its technologies, which the Company believes have great
market potential. As such, the Company continues to pursue
additional sources of financing. Currently the company is exploring various
potential investment partners in Japan, as well as China.
There can be no assurances that the Company can secure additional
financing. . The present plans,
the realization of which cannot be assured, to overcome these
difficulties also include, but are not limited to, a continuing
effort to investigate business acquisitions and joint
ventures.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In
February 2016, the FASB established Topic 842, Leases, by issuing
Accounting Standards Update (ASU) No. 2016-02, which requires
lessees to recognize leases on-balance sheet and disclose key
information about leasing arrangements. Topic 842 was subsequently
amended by ASU No. 2018-01, Land Easement Practical Expedient for
Transition to Topic 842; ASU No. 2018-10, Codification Improvements
to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements.
The new standard establishes a right-of-use model (ROU) that
requires a lessee to recognize a ROU asset and lease liability on
the balance sheet for all leases with a term longer than 12 months.
Leases will be classified as finance or operating, with
classification affecting the pattern and classification of expense
recognition in the income statement. The new standard is effective
on January 1, 2019. A modified retrospective transition approach is
required, applying the new standard to all leases existing at the
date of initial application. An entity may choose to use either (1)
its effective date or (2) the beginning of the earliest comparative
period presented in the financial statements as its date of initial
application. If an entity chooses the second option, the transition
requirements for existing leases also apply to leases entered into
between the date of initial application and the effective date. The
entity must also recast its comparative period financial statements
and provide the disclosures required by the new standard for the
comparative periods. The Company adopted the new standard on
January 1, 2019 and use the effective date as the date of initial
application. Consequently, financial information will not be
updated and the disclosures required under the new standard will
not be provided for dates and periods before January 1, 2019. The
new standard provides a number of optional practical expedients in
transition. The Company elects the ‘package of practical
expedients’, which permits the Company not to reassess under
the new standard prior conclusions about lease identification,
lease classification and initial direct costs. The Company
determined that this standard will have a material effect on the
Company’s financial statements. While the Company continues
to assess all of the effects of adoption, the Company currently
believes the most significant effects relate to the recognition of
new ROU assets and lease liabilities on the Company’s balance
sheet for the Company’s real estate operating leases. On
adoption, the Company recognized additional an operating lease
liability of approximately $10,353 with corresponding ROU assets of
the same amount based on the present value of the remaining minimum
rental payments under current leasing standards for existing
operating leases.
During
the six months ended June 30, 2019, there have been no other
material changes in the Company’s significant accounting
policies to those previously disclosed in the Annual
Report.
No
recently issued accounting pronouncements had or are expected to
have a material impact on the Company’s consolidated
financial statements.
7
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)
4. RELATED PARTY TRANSACTIONS
The
Company receives periodic advances from its principal stockholders
and officers based upon the Company’s cash flow needs. There
is no written loan agreement between the Company and the
stockholders and officers. All advances bear interest at 4.45% and
no repayment terms have been established. As a result, the amount
is classified as a current liability. During the six months ended
June 30, 2019, the Company borrowed $30,450 from a stockholder. The
balances due as of June 30, 2019 and December 31, 2018 were
$387,170 and $356,720, respectively. Interest expense associated
with these loans were $4,235 and $8,260 for the three and six
months ended June 30, 2019 as compared to $3,787 and $7,133 for the
three and six months ended June 30, 2018. Accrued interest on these
loans were $52,697 and $44,437 at June 30, 2019 and December 31,
2018, respectively.
The
Company has an arrangement with Lina Maki, a stockholder of the
Company, for her management consulting time. The agreement is not
written and no payment terms have been established. The fee is
$10,000 annually. As of June 30, 2019 and December 31, 2018 amounts
due to the stockholder were $25,000 and $20,000, respectively. For
the most part, these payments are made by the Company’s
affiliate. As such, when the payments are made by the
Company’s affiliate or the lease payments are made by the
Company on behalf of the affiliate, such amounts are shown as a
reduction in or addition to the amount due from affiliate in the
accompany balance sheets.
The
Company's executive offices are located at 445 Park Avenue Center
10th Floor New York, NY 10022, and Vancouver, British Columbia. The
total premises in Vancouver are 2,000 square feet and are leased
from a stockholder at a monthly rate of $2,625 under a lease
agreement which expires October 1, 2019. At June 30, 2019 and
December 31, 2018, amounts due to the stockholder were $72,183 and
$56,433, respectively. The Company shares the space with Amanasu
Techno Holdings Corp, a reporting company under the Securities
Exchange Act of 1934. Amanasu Techno Holdings Corp is responsible
for 50% of the rent. As such, when the lease payments are made by
the Company’s affiliate or the lease payments are made by the
Company on behalf of the affiliate, such amounts are shown as a
reduction in or addition to the amount due to affiliate in the
accompanying balance sheets amounts due to related parties. The
office in New York is rented at the rate of $328 each year and is
also shared with Amanasu Techno Holdings Corp. In addition, the
Company maintains an office at Suite 905, 1-6-1 Senzoku Taito-Ku
Tokyo Japan. The net balances due from Amanasu Techno Holdings at
June 30, 2019 and December 31, 2018 were $69,601 and $55,785,
respectively.
Amanasu
Corp. is the principal stockholder of the Company. The balance
due to Amanasu Corp. was $50,000 and $50,000 at June 30, 2019 and
December 31, 2018, respectively. Interest expense associated with
this loan was $563 and $1,119 for the three and six months ended
June 30, 2019 as compared to $563 and $1,118 for the three and six
months ended June 30. 2018. No terms for repayment have been
established. As a result, the amount is classified as a current
liability. Accrued interest on this loan were $10,081 and $8,962 at
June 30, 2019 and December 31, 2018, respectively.
5. INCOME TAXES
Deferred
income taxes are recorded to reflect the tax consequences or
benefits to future years of any temporary differences between the
tax basis of assets and liabilities, and of net operating loss
carryforwards. The Company has experienced losses since its
inception. As a result, it has incurred no Federal income
tax.
The Company can carry forward net operating losses (NOL's) to be
applied against future profits for a period of twenty years in the
U.S. and 80% of the NOL can be carried forward for nine years in
Japan.
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 us 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 assets
relating to the NOL’s for every period because it is more
likely than not that all of the deferred tax assets will not be
realized.
On December 22, 2017, legislation commonly known as the Tax Cuts
and Jobs Act, or the Tax Act, was signed in to law. The Tax Act,
among other changes, reduces the U.S. federal corporate tax rate
from 35% to 21%, requires taxpayers to pay a one-time transition
tax on earnings of certain foreign subsidiaries that were
previously tax deferred and creates new taxes on certain foreign
sourced earnings. On December 31, 2018, we did not have any
earnings from foreign subsidiaries and the international aspects of
the Tax Act are not applicable.
The Company had NOL carryforwards of approximately $3.78 million in
the U.S. and $7,500 in Japan at June 30, 2019. Approximately $3.65
million in the U.S. and $7,500 in Japan will expire in the years
2019 through 2037, and $0.13 million can be carried forward
indefinitely.
8
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(Unaudited)
6. OPERATING LEASE LIABILITY
The Company leases office space from its officer in one
location from October 2017 to September 2019 with a monthly payment
of approximately $1,250.
The
Company's lease does not provide an implicit rate, and therefore
the Company uses an estimated incremental borrowing rate as the
discount rate when measuring operating lease liabilities. The
incremental borrowing rate represents an estimate of the interest
rate the Company would incur at lease commencement to borrow an
amount equal to the lease payments on a collateralized basis over
the term of a lease. The Company used incremental borrowing rate of
5% as of January 1, 2019 for operating leases that commenced prior
to that date.
The
following table reconciles the undiscounted future minimum lease
under the non-cancelable operating leases with terms of more than
one year to the total lease liabilities recognized on the
consolidated balance sheet as of June 30, 2019:
|
Remainder
2019
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$3,750
|
|
Total
undiscounted future minimum lease payments
|
3,750
|
|
Less:
Difference between undiscounted lease payments and discounted lease
liabilities
|
342
|
|
Total
operating lease liabilities – current portion
|
$3,408
|
Total
rent expense under operating leases for the three and six months
ended June 30, 2019 was $3,750 and $7,500, respectively, as
compared to $3,750 and $7,500 for the three and six months ended
June 30, 2018.
7. SUBSEQUENT EVENTS
The Company evaluated subsequent events, which are events or
transactions that occurred after June 30, 2019 through the issuance
of the accompanying financial statements and determined that no
significant subsequent event need to be recognized or
disclosed.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Form 10Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E the Securities Exchange Act of 1934, as amended and
such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995. "Forward-looking statements" describe future expectations,
plans, results, or strategies and are generally preceded by words
such as "may," "future," "plan" or "planned," "will" or "should,"
"expected," "anticipates," "draft," "eventually" or "projected."
You are cautioned that such statements are subject to a multitude
of risks and uncertainties that could cause future circumstances,
events, or results to differ materially from those projected in the
forward-looking statements, including the risks that actual results
may differ materially from those projected in the forward-looking
statements as a result of various factors, and other risks
identified in a companies' annual report on Form 10-K and other
filings made by such company with the United States Securities and
Exchange Commission. You should consider these factors in
evaluating the forward-looking statements included herein, and not
place undue reliance on such statements.
The following discussion should be read in conjunction with
the financial statements and notes thereto included in the
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2018, as filed with the Securities and Exchange
Commission (“SEC”) on April 1, 2019 (the “Annual
Report”).
Please note that the accompanying financial statements have
been prepared assuming that the Company will continue as a going
concern. As shown in the financial statements, the Company had a
material working capital deficiency and an accumulated deficit at
June 30, 2019, and a record of continuing losses. These factors
raise substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not
include adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the
Company be unable to continue in operation.
General
Management’s discussion and analysis of results of operations
and financial condition is intended to assist the reader in the
understanding and assessment of significant changes and trends
related to the results of operations and financial position of the
Company together with its subsidiary. This discussion and analysis
should be read in conjunction with the consolidated financial
statements and accompanying financial notes, and with the Critical
Accounting Policies noted below.
Plan of Operation
The Company has three main objectives. Firstly, the Company will
continue in its goal to meet the capital objective of $30,000,000.
Currently the company is exploring various potential investment
partners in Japan, as well as China. The Company cannot predict
whether it will be successful with its objective.
Second the Company will continue to support Amanasu Maritek
Corporation's efforts on entering into marine technologies. The
Company will assist for another 2 years in the design, and approval
process for the product from at least two regulatory bodies: the
Japanese Government, and the IMO (International Marine
Organization). This approval process requires capital for
additional product testing, documentation, and documentation
translations. The Company believes that Amanasu Maritek
Corporation's most significant hurdle will be in capital raising.
The Company has already initiated documentation and application
processes, and is now looking for capital to fund the project. The
Company cannot predict whether it will be successful with its
capital raising efforts.
Third, the Company is making plans to enter the reforestation
industry in Japan, through Amanasu Maritek Corporation. The Company
must first reach an agreement with the relevant government agencies
in Japan. The Company intends to focus on the prefectures of
Miyagi, Iwate and Niigata and begin operations within two years.
The Company cannot predict whether it will be successful with its
objective.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations
There were no revenues for the three and six months ended June 30,
2019 and 2018.
General and administrative expenses decreased $5,725 (28.1%) to
$14,638 for the three months ended June 30, 2019, as compared to
$20,363 for the three months ended June 30, 2018, primarily as a
result of lower professional fees. General and administrative
expenses decreased $1,399 (3.8%) to $35,713 for the six months
ended June 30, 2019, as compared to $37,112 for the six months
ended June 30, 2018, primarily as a result of slightly lower
professional fees.
As a result of the above, the Company incurred losses from
operations of $14,638 and $35,713 for the three and six months
ended June 30, 2019 as compared to losses from operations of
$20,363 and $37,112 for the three and six months ended June 30,
2018.
Interest expense for the three and six months ended June 30, 2019
was $4,798 and $9,379 as compared to $4,350 and $8,251 for the
three and six months ended June 30, 2018. This increase is
primarily the result of the increase in advances from stockholders
and officers.
As a result of the above, the Company incurred a net loss of
$19,436 and $45,092 for the three and six months ended June 30.
2019 as compared to net losses $24,713 and $45,363 for the three
and six months ended June 30, 2018.
LIQUIDITY AND CAPITAL RESOURCES
Total current assets at June 30, 2019 were $24,282 as compared to
$9,563 at December 31, 2018. This increase is the result of the
increase in the amount due from related parties and the increase in
operating lease Right of use assets.
Total current liabilities as of June 30, 2019 were $599,021
as compared to $539,022 at December
31, 2018.This increase is primarily due to increases in loans from
stockholders and accrued expenses and accrued interest to related
parties.
The Company's minimum cash requirements for the next twelve months
are estimated to be $60,000, including rent, audit and professional
fees. The Company does not have sufficient cash on hand to support
its overhead for the next twelve months and there are no material
commitments for capital at this time other than as described above.
The Company will need to acquire debt or issue and sell shares to
gain capital for operations or arrange for additional stockholder
or related party loans. There is no current commitment
for either of these fund sources.
Our working capital deficit increased $45,280 to $574,739 at June
30, 2019 as compared to $529,459 at December 31, 2018 primarily due
to increases in loans from stockholders and accrued expenses and
accrued interest to related parties offset partially by an increase
in the amount due from related parties.
During the six months ended June 30, 2019, the Company had a net
decrease in cash of $3,049. The Company’s principal sources
and uses of funds were as follows:
Cash used in operating activities. For the six months ended June 30, 2019, the
Company used $19,683 in cash for operations as compared to using
$51,682 in cash for the six months ended June 30, 2018, primarily
as a result of the change in accrued expenses – related
parties.
Cash provided by financing activities. Net cash provided by financing activities for the
six months ended June 30, 2019 was $16,634 as compared to $51,258
for the six months ended June 30, 2018 primarily as a result of the
decrease in loans from stockholders.
11
OFF-BALANCE SHEET ARRANAGEMENTS
The Company has no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
The
Company prepares its financial statements in accordance with
accounting principles generally accepted in the United States of
America. Preparing financial statements in accordance with
generally accepted accounting principles requires the Company to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the date of the financial statements and the
reported amounts of revenue and expenses during the reported
period.
Our critical accounting policies are described in the Notes to the
Financial Statements included in our Annual Report on Form 10-K for
the year ended December 31, 2018, as filed with the SEC on April 1,
2019 (the “Annual Report”). There have been no changes
in our critical accounting policies. Our significant accounting
policies are described in our notes to the 2018 consolidated
financial statements included in our Annual Report.
RECENTLY ISSUED ACCOUNTING STANDARDS
No recently issued accounting pronouncements had or are expected to
have a material impact on the Company’s condensed
consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not Applicable.
12
ITEM 4. MANAGEMENT'S REPORT ON DISCLOSURE CONTROLS AND
PROCEDURES
We
maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in the reports we file
pursuant to the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) are recorded, processed, summarized and
reported within the time periods specified in the rules and forms
of the SEC, and that such information is accumulated and
communicated to our Chief Executive Officer (“CEO”) and
Chief Financial Officer (“CFO”), to allow timely
decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well
designed and operated, can only provide a reasonable assurance of
achieving the desired control objectives, and in reaching a
reasonable level of assurance, management necessarily was required
to apply its judgment in evaluating the cost-benefit relationship
of possible controls and procedures. Management designed the
disclosure controls and procedures to provide reasonable assurance
of achieving the desired control objectives.
We
carried out an evaluation, under the supervision and with the
participation of our management, including our CEO and CFO, of the
effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by
this Quarterly Report. Based upon that evaluation, the CEO and
CFO concluded that the Company’s disclosure controls and
procedures were ineffective for the reasons discussed below. In
addition, management identified the following material weaknesses
in its assessment of the effectiveness of disclosure controls and
procedures as of June 30, 2019.
The
Company did not effectively segregate certain accounting duties due
to the small size of its accounting staff. A material weakness is a
deficiency, or a combination of control deficiencies, in internal
control over financial reporting such that there is a reasonable
possibility that a material misstatement of our annual or interim
consolidated financial statements will not be prevented or detected
on a timely basis. Notwithstanding the determination that our
internal control over financial reporting was not effective, as of
December 31, 2018, and that there was a material weakness as
identified in this Quarterly Report, we believe that our financial
statements contained in this Quarterly Report fairly present our
financial position, results of operations and cash flows for the
years covered hereby in all material respects.
We plan
on increasing the size of our accounting staff at the appropriate
time for our business and its size to ameliorate our concern that
we do not effectively segregate certain accounting duties, which we
believe would resolve the material weakness in disclosure controls
and procedures, but there can be no assurances as to the timing of
any such action or that we will be able to do so.
(b) Changes in Internal Control over Financial
Reporting
There
were no changes in our internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act,
during our most recently completed fiscal quarter that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
13
PART II
ITEM 1. LEGAL PROCEEDINGS
We are
currently not involved in any litigation that we believe could have
a material adverse effect on our financial condition or results of
operations. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our
common stock, any of our subsidiaries or of our companies or our
subsidiaries’ officers or directors in their capacities as
such, in which an adverse decision could have a material adverse
effect.
ITEM 1A. RISK FACTORS
Not applicable to smaller reporting companies.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
There
were no unregistered sales of the Company’s equity securities
during the quarter ended June 30, 2019 other than those previously
reported in a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There
has been no default in the payment of principal, interest, sinking
or purchase fund installment, or any other material default, with
respect to any indebtedness of the Company.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
14
ITEM 6. EXHIBITS
Furnish the Exhibits required by Item 601 of Regulation S-K
(229.407 of this chapter).
|
Certification
by the Chief Executive Officer of Registrant pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule
15d-14(a)).*Certification Pursuant To Section 302 Of The
Sarbanes-Oxley Act Of 2002.
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Certification
by the Chief Financial Officer of Registrant pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or
Rule 15d-14(a)).*
|
|
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Certification
by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
|
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Certification
by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
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|
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101
INS
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XBRL
Instance Document*
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101
SCH
|
XBRL
Schema Document*
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|
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101
CAL
|
XBRL
Calculation Linkbase Document*
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|
|
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101
DEF
|
XBRL
Definition Linkbase Document*
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101
LAB
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XBRL
Labels Linkbase Document*
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101
PRE
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XBRL
Presentation Linkbase Document*
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* filed herewith
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused his report to be signed on its
behalf by the undersigned thereunto duly authorized.
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Amanasu Environmental Corporation
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Date: August
14, 2019
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By:
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/s/
Atsushi Maki
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Atsushi
Maki
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Chief
Executive Officer
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Chief
Financial Officer
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Chief
Accounting Officer
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16