AMANASU ENVIRONMENT CORP - Quarter Report: 2020 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, 2020
☐ 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, 2nd
Floor
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 Augusty 3, 2020, 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, 2020
TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
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Pages
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3
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11
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13
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14
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PART II - OTHER INFORMATION
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15
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15
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15
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15
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15
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15
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16
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17
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2
PART I
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June
30,
2020
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December
31,
2019
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ASSETS
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Current
Assets:
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Cash
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$56
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$211
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Due from
affiliate
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797
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24,509
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Total
current assets
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853
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24,720
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Operating lease
right-of-use assets
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18,139
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25,084
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Total
Assets
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$18,992
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$49,804
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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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$8,308
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$13,402
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Accrued expenses
– related parties
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96,093
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82,170
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Accrued interest
– stockholders
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82,688
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72,764
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Taxes
payable
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31,251
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31,056
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Operating lease
liabilities – current
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14,421
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14,065
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Due to related
parties
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441,293
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439,765
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Total
current liabilities
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674,054
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653,222
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Operating lease
liabilities
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3,718
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11,019
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Total
Liabilities
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677,772
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664,241
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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
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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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(5,500,695)
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(5,456,421)
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Accumulated other
comprehensive income
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4,573
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4,636
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Total
Amanasu Environment Corporation stockholders' deficit
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(658,469)
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(614,132)
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Non-controlling
interest in subsidiary
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(311)
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(305)
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Total
stockholders’ deficit
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(658,780)
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(614,437)
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Total
Liabilities and Stockholders' Deficit
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$18,992
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$49,804
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The
accompanying notes are an integral part of these consolidated
financial statements.
3
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
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|
Three
Months
Ended June
30,
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Six
Months
Ended June
30,
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2020
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2019
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2020
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2019
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Revenue
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$-
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$-
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$-
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$-
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Cost of
revenue
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-
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-
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-
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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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|
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General and
administrative expenses
|
13,298
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14,638
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34,350
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35,713
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Operating
loss
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(13,298)
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(14,638)
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(34,350)
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(35,713)
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Other
Expense:
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Interest expense -
stockholders
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(4,969)
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(4,798)
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(9,924)
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(9,379)
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Net loss before
income taxes
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(18,267)
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(19,436)
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(44,274)
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(45,092)
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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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(18,267)
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(19,436)
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(44,274)
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(45,092)
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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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(18,267)
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(19,436)
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(44,274)
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(45,092)
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Other comprehensive
income (loss):
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Foreign currency
translation adjustment
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40
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(303)
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(69)
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(188)
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Total comprehensive
loss
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(18,227)
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(19,739)
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(44,343)
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(45,280)
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Comprehensive
income (loss) attributable to non-controlling interest
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4
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(27)
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(6)
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(17)
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Less Comprehensive
loss attributable to Amanasu
Environment
Corporation Stockholders
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$(18,231)
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$(19,712)
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$(44,337)
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$(45,263)
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Net loss per share
– basic and diluted
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$(0.00)
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$(0.00)
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$(0.00)
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$(0.00)
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Weighted average
number of shares outstanding
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44,100,816
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44,100,816
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44,100,816
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44,100,816
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The
accompanying notes are an integral part of these consolidated
financial statements.
4
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
(Unaudited)
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|
Common
Stock
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Paid
In
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Accumulated
|
Comprehensive
|
Non-controlling
|
|
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Shares
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Amount
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Capital
|
Deficit
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Income
|
Interest
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Total
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|
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Balance April 1,
2020
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44,100,816
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$44,101
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$4,793,552
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$(5,482,428)
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$4,537
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$(315)
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$(640,553)
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Net
loss
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-
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-
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-
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(18,267)
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-
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-
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(18,267)
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Other comprehensive
income
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-
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-
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-
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-
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36
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4
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40
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|
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|
|
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Balance June 30,
2020
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44,100,816
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$44,101
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$4,793,552
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$(5,500,695)
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$4,573
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$(311)
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$(658,780)
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Common
Stock
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Paid
In
|
Accumulated
|
Comprehensive
|
Non-controlling
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Interest
|
Total
|
|
|
|
|
|
|
|
|
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Balance April 1,
2019
|
44,100,816
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$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)
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-
|
-
|
(19,436)
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Other comprehensive
loss
|
-
|
-
|
-
|
-
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(276)
|
(27)
|
(303)
|
|
|
|
|
|
|
|
|
|
|
Balance June 30,
2019
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,416,645)
|
$4,565
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$(312)
|
$(574,739)
|
|
|
Common
Stock
|
Paid
In
|
Accumulated
|
Comprehensive
|
Non-controlling
|
|
|
|
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
Interest
|
Total
|
|
|
|
|
|
|
|
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|
Balance January 1,
2020
|
44,100,816
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$44,101
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$4,793,552
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$(5,456,421)
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$4,636
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$(305)
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$(614,437)
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|
Net
loss
|
-
|
-
|
-
|
(44,274)
|
-
|
-
|
(44,274)
|
|
Other comprehensive
loss
|
-
|
-
|
-
|
-
|
(63)
|
(6)
|
(69)
|
|
|
|
|
|
|
|
|
|
|
Balance June 30,
2020
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,482,428)
|
$4,573
|
$(311)
|
$(658,780)
|
|
|
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
loss
|
-
|
-
|
-
|
|
(171)
|
(17)
|
(188)
|
|
|
|
|
|
|
|
|
|
|
Balance June 30,
2019
|
44,100,816
|
$44,101
|
$4,793,552
|
$(5,416,645)
|
$4,565
|
$(312)
|
$(574,739)
|
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,
2020
|
Six Months
Ended
June 30,
2019
|
|
CASH
FLOWS FROM OPERATIONS
|
|
|
|
Net
loss
|
$(44,274)
|
$(45,092)
|
|
|
|
|
|
Changes
in assets and liabilities:
|
|
|
|
Accounts payable
and accrued expenses
|
(5,122)
|
(4,720)
|
|
Accrued expenses
– related parties
|
13,875
|
12,875
|
|
Accrued interest -
stockholders
|
9,924
|
9,379
|
|
Net
Cash Used in Operating Activities
|
(25,597)
|
(27,558)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
Advances from
stockholders, net of repayment
|
1,730
|
30,450
|
|
Due from (to)
related parties
|
23,712
|
(5,941)
|
|
Net
Cash Provided by Financing Activities
|
25,442
|
24,509
|
|
|
|
|
|
Net Change In
Cash
|
(155)
|
(3,049)
|
|
|
|
|
|
Cash balance,
beginning of period
|
211
|
3,290
|
|
|
|
|
|
Cash balance, end
of period
|
$56
|
$241
|
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, 2020
(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, 2020, the results of operations for the three and six months
ended June 30, 2020 and 2019, and cash flows for the six months
ended June 30, 2020 and 2019. These results are not
necessarily indicative of the results to be expected for the full
year or any other period. The December 31, 2019 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, 2019, as filed with the Securities and Exchange
Commission (“SEC”) on March 30, 2020.
2. GOING CONCERN AND UNCERTAINTY
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 $673,201 and an accumulated deficit of $5,500,695 at June 30,
2020, 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 that might result from the outcome of this
uncertainty.
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.
The
Company’s operations may be affected by the recent and
ongoing outbreak of the coronavirus disease 2019 (COVID-19) which
in March 2020, was declared a pandemic by the World Health
Organization. The ultimate disruption which may be caused by the
outbreak is uncertain; however, it may result in a material adverse
impact on the Company’s financial position, operations and
cash flows. Possible areas that may be affected include, but are
not limited to, disruption to the Company’s ability to obtain
funding and performing further research on certain
projects.
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 (see Note 6).
7
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(Unaudited)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Certain
amounts in the prior period financial statements have been
reclassified to conform to the presentation of the current period
financial information. These reclassifications had no effect on the
previously reported net loss.
During
the six months ended June 30, 2020, 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.
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, 2020, the Company borrowed $1,730 from a stockholder. The
balances due as of June 30, 2020 and December 31, 2019 were
$392,300 and $390,750, respectively. Interest expense associated
with these loans were $4,406 and $8,799 for the three and six
months ended June 30, 2020 as compared to $4,235 and $8,260 for the
three and six months ended June 30, 2019. Accrued interest on these
loans were $70,346 and $61,547 at June 30, 2020 and December 31,
2019, 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, 2020 and December 31, 2019 amounts
due to the stockholder were $35,000 and $30,000,
respectively.
The
Company leases its office space in Vancouver from a stockholder of
the Company at a monthly rate of $2,500 under a lease agreement
which expires October 1, 2021. At June 30, 2020 and December
31, 2019 amounts due to the stockholder were $52,495 and $44,620,
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.
The
office in New York is rented at the rate of approximately $360 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.
Amanasu
Corp. is the principal stockholder of the Company. The balance
due to Amanasu Corp. was $50,000 and $50,000 at June 30, 2020 and
December 31, 2019, respectively. Interest expense associated with
this loan were $563 and $1,125 for the three and six months ended
June 30, 2020, respectively, as compared to $563 and $1,119 for the
three and six months ended June 30, 2019, respectively. No terms
for repayment have been established. As a result, the amount is
classified as a current liability in due to related parties.
Accrued interest on this loan were $12,342 and $11,217 at June 30,
2020 and December 31, 2019, respectively.
8
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(Unaudited)
5. INCOME TAXES
In
accordance with the current tax laws in the U.S., the Company is
subject to a corporate tax rate of 21% on its taxable income. No
provision for taxes is made for U.S. income tax for the six months
ended June 30, 2020 and 2019 as it has no taxable income in the
U.S.
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 three years in
Japan.
The Company had NOL carryforwards of approximately $3.87 million in
the U.S. and $6,200 in Japan at June 30, 2020. Approximately $3.65
million in the U.S. and $6,200 in Japan will expire in the years
2020 through 2037, and $0.22 million can be carried forward
indefinitely.
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. 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, the “Tax Cuts and Jobs Act”
(“The 2017 Tax Act”) was enacted in the United States.
Under the provisions of the Act, the U.S. corporate tax rate
decreased from 34% to 21%. Accordingly, the Company has re-measured
its deferred tax assets on net operating loss carry forwards in the
U.S at the lower enacted cooperated tax rate of 21%. However, this
re-measurement has no effect on the Company’s income tax
expenses as the Company has provided a 100% valuation allowance on
its deferred tax assets previously.
Additionally, the 2017 Tax Act implemented a modified territorial
tax system and imposing a tax on previously untaxed accumulated
earnings and profits (“E&P”) of foreign
subsidiaries (the “Toll Charge”). The Toll Charge is
based in part on the amount of E&P held in cash and other
specific assets as of December 31, 2017. The Toll Charge can be
paid over an eight-year period, starting in 2018, and will not
accrue interest. The 2017 Tax Act also imposed a global intangible
low-taxed income tax (“GILTI”), which is a new tax on
certain off-shore earnings at an effective rate of 10.5% for tax
years beginning after December 31, 2017 (increasing to 13.125% for
tax years beginning after December 31, 2025) with a partial offset
for foreign tax credits. The Company has determined that this
one-time Toll Charge has no effect on the Company’s income
tax expenses as the Company has no undistributed foreign earnings
at either of the two testing dates of November 2, 2017 and December
31, 2017. For purposes of the inclusion of GILTI, the Company has
determined that the Company has no taxable off-shore earnings as of
June 30, 2020 and 2019, respectively. Therefore, this is no accrual
of US income tax for GILTI as of June 30, 2020.
The extent of the Company’s operations involves dealing with
uncertainties and judgments in the application of complex tax
regulations in a multitude of jurisdictions. The final taxes paid
are dependent upon many factors, including negotiations with taxing
authorities in various jurisdictions and resolution of disputes
arising from federal, state and international tax audits. The
Company recognizes potential liabilities and records tax
liabilities for anticipated tax audit issues in the United States
and other tax jurisdictions based on its estimate of whether, and
the extent to which, additional taxes will be due.
9
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(Unaudited)
6. OPERATING LEASE LIABILITY
The
Company's executive offices are located at 244 Fifth Avenue 2nd
Floor New York, NY 10001 and Vancouver, British Columbia. The total
premises in Vancouver are 2,000 square feet and are leased at a
monthly rate of $2,500 under a lease agreement between the Company
and the Secretary of the Company which expired October 1, 2019. The
Company entered into a new lease with the Secretary of the Company
at a monthly rate of $2,500, which expires October 1, 2021. The
Company shares the space with AEC, a reporting company under the
Securities Exchange Act of 1934. Our major shareholder and officer
own approximately 81% of AEC’s outstanding shares of common
stock. AEC is responsible for 50% of the rent or $1,250 each month.
The office in New York is rented at the rate of $360 each year and
shares with AEC. In addition, the Company maintains an office at
Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan, and the Company pays
no rent.
Upon
adoption of ASC 842, Leases, on January 1, 2019 the Company
recorded $10,353 of right-of-use assets and related operating lease
liabilities. This asset was fully amortized as of September 30,
2019.
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% for operating
leases that commenced prior to that date.
On
October 1, 2019, the Company commenced a new lease with its
shareholder from October 1, 2019 to September 30, 2021 with a
monthly payment of approximately $1,250. As such, the Company
recorded $28,492 of right-of-use assets and related operating
leases liabilities. For the six months from January 1, 2020 through
June 30, 2020, the Company amortized $6,945of right-of-use
assets.
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, 2020:
|
2020
– six months
|
$7,500
|
|
2021
|
11,250
|
|
Total
undiscounted future minimum lease payments
|
18,750
|
|
Less:
Difference between undiscounted lease payments and discounted lease
liabilities
|
(611)
|
|
Total
operating lease liabilities
|
18,139
|
|
Less
current portion
|
(14,421)
|
|
Long-term
lease liabilities
|
$3,718
|
Total
rent expense under operating leases for the three and six months
ended June 30, 2020 was $3,750 and $7,500, respectively, as
compared to $3,750 and $7,500 for the three and six months ended
June 30, 2019, respectively.
7. SUBSEQUENT EVENTS
The Company evaluated subsequent events, which are events or
transactions that occurred after June 30, 2020 through the issuance
of the accompanying financial statements and determined that no
significant subsequent event need to be recognized or
disclosed.
10
ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This
quarterly report on Form 10-Q and other reports filed by Amanasu
Environmental Corporation and its wholly owned subsidiaries,
collectively the “Company”, “we”,
“our”, and “us”) from time to time with the
U.S. Securities and Exchange Commission (the “SEC”)
contain or may contain forward-looking statements and information
that are based upon beliefs of, and information currently available
to, the Company’s management as well as estimates and
assumptions made by Company’s management. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which are only predictions and speak only as of the
date hereof. When used in the filings, the words
“anticipate,” “believe,”
“estimate,” “expect,” “future,”
“intend,” “plan,” or the negative of these
terms and similar expressions as they relate to the Company or the
Company’s management identify forward-looking
statements. Such statements reflect the current view of
the Company with respect to future events and are subject to risks,
uncertainties, assumptions, and other factors, including the risks
contained in the “Risk Factors” section of the
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2019, as filed with the Securities and Exchange
Commission (“SEC”) on March 30, 2020 (the “Annual
Report”), relating to the Company’s industry, the
Company’s operations and results of operations, and any
businesses that the Company may acquire. Should one or
more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated,
expected, intended, or planned.
Although
the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance, or
achievements. Except as required by applicable law,
including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to
conform these statements to actual results.
Our
unaudited condensed consolidated financial statements are prepared
in accordance with accounting principles generally accepted in the
United States (“GAAP”). These accounting principles
require us to make certain estimates, judgments and assumptions. We
believe that the estimates, judgments and assumptions upon which we
rely are reasonable based upon information available to us at the
time that these estimates, judgments and assumptions are
made. These estimates, judgments and assumptions can
affect the reported amounts of assets and liabilities as of the
date of the consolidated financial statements as well as the
reported amounts of revenues and expenses during the periods
presented. Our consolidated financial statements would be affected
to the extent there are material differences between these
estimates and actual results. In many cases, the accounting
treatment of a particular transaction is specifically dictated by
GAAP and does not require management’s judgment in its
application. There are also areas in which management’s
judgment in selecting any available alternative would not produce a
materially different result. The following discussion should
be read in conjunction with our consolidated financial statements
and notes thereto appearing elsewhere in this report.
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 $673,201 and an accumulated deficit of $5,500,695 at June 30,
2020, 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 present plans, the realization of which cannot be
assured, to overcome these difficulties include, but are not
limited to, a continuing effort to investigate business
acquisitions and joint ventures. The Company will also continue to
investigate and develop technologies, which the Company believes
have great market potential. As such, the Company may need to
pursue additional sources of financing. There can be no assurances
that the Company can secure additional financing.
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.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
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.
The Company’s operations may be affected by the recent and
ongoing outbreak of the coronavirus disease 2019 (COVID-19) which
in March 2020, was declared a pandemic by the World Health
Organization. The ultimate disruption which may be caused by the
outbreak is uncertain; however, it may result in a material adverse
impact on the Company’s financial position, operations and
cash flows. Possible areas that may be affected include, but are
not limited to, disruption to the Company’s ability to obtain
funding and performing further research on certain
projects.
Results of Operations
There were no revenues for the three and six and three months ended
June 30, 2020 and 2019.
General and administrative expenses decreased $1,340 (9.2%) and
$1,363 (3.8%) to $13,298 and $34,350 for the three and six months
ended June 30, 2020, respectively, as compared to $14,638 and
$35,713 for the three and six months ended June 30 2019
respectively. These decreases are mostly attributed mostly to the
lower travel expenses.
As a result of the above, the Company incurred loss from operations
of $13,298 and $34,350 for the three and six months ended June 30,
2020, respectively, as compared to losses from operations of
$14,638 and $35,713 for the three and six months ended June 30,
2019, respectively.
For the three and six months ended June 30, 2020, interest expense
increased $171 and $545 to $4,969 and $9,924, respectively, as
compared to $4,798 and $9,379 for the three and six months ended
June 30, 2019, respectively, as a result of the increased interest
associated with additional advances from stockholders.
As a result of the above, the Company incurred net losses of
$18,267 and $44,274 for the three and six months ended June 30,
2020, respectively, as compared to $19,436 and $45,092 for the
three and six months ended June 30, 2019,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
Total current assets at June 30, 2020 were $853 as compared to
$24,720 at December 31, 2019. This decrease is the result of the
decrease in the amount due from affiliate.
Total current liabilities as of June 30, 2020 were $674,054
as compared to $653,222 at December
31, 2019.This increase is primarily due to increases in 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 $44,699 to $673,201 at June
30, 2020 as compared to $628,502 at December 31, 2019 primarily due
to increases in and accrued expenses and accrued interest to
related parties.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES (continued)
During the six months ended June 30, 2020, the Company had a net
decrease in cash of $155. The Company’s principal sources and
uses of funds were as follows:
Cash used in operating activities. For the six months ended June 30, 2020, the
Company used $25,597 in cash for operations as compared to using
$27,558 in cash for the six months ended June 30, 2019, 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, 2020 was $25,442 as compared providing
$24,509 for the six months ended June 30, 2019 primarily as a
result of the increase in amounts due from related
parties.
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, 2019, as filed with the SEC on March
30, 2020 (the “Annual Report”). There have been no
changes in our critical accounting policies. Our significant
accounting policies are described in our notes to the 2019
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.
13
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 Principal Executive Officer (“PEO”)
and Principal Accounting Officer (“PAO”), 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 PEO and PAO, 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 PEO and
PAO 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, 2020.
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
June 30, 2020, 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.
14
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, 2020 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.
15
Furnish the Exhibits required by Item 601 of Regulation S-K
(229.407 of this chapter).
|
Certification
of the Principal 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.
|
|
|
Certification
of the Principal Accounting Officer of Registrant pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or
Rule 15d-14(a)).*
|
|
|
Certification
of the Principal Executive Officer pursuant to 18 U.S.C. 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
|
|
|
Certification
of the Principal Accounting 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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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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|
|
|
|
101
DEF
|
XBRL
Definition Linkbase Document*
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|
|
|
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101
LAB
|
XBRL
Labels Linkbase Document*
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|
|
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101
PRE
|
XBRL
Presentation Linkbase Document*
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* filed herewith
16
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
13, 2020
|
By:
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/s/
Atsushi Maki
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Atsushi
Maki
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Principal
Executive Officer
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|
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Principal
Accounting Officer
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17