Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the period ended June 30, 2013

 

[     ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ________________

 

Commission File Number: 000-32905

 

 

AMANASU ENVIRONMENT CORPORATION

 

 

(Exact name of registrant as specified in its charter)

 

Nevada		98-0347883
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

445 Park Avenue Center 10th Floor New York, NY 10022

(Address of principal executive offices)

 

604 790 8799

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes

X

No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting copany" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer			Accelerated filer
Non-accelerated filer		(Do not check if a smaller reporting company)	Smaller reporting company	X

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes

No

X

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all docments and reports required to be filed by sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

Yes

No

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 44,000,816 as of August 5, 2013.

 

 

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AMANASU ENVIRONMENT CORPORATION

 

QUARTERLY REPORT ON FORM 10-Q

 

FOR THE PERIOD ENDED JUNE 30, 2013

 

TABLE OF CONTENTS

 

Reference	Section Name	Page
PART I
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Conditions and Results of Operations	6
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9
Item 4.	Controls and Procedures	9
PART II
Item 1.	Legal Proceedings	10
Item 1A.	Risk Factors	10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3.	Default Upon Senior Securities	10
Item 4.	Submission Of Matters To A Vote Of Security Holders	10
Item 5.	Other Information	10
Item 6.	Exhibits	11
Signatures	Signatures	12

 

 

 

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PART I

 

ITEM 1. FINANCIAL STATEMENTS

AMANASU ENVIRONMENT CORPORATION

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

		June  30, 2013				December 31, 2012
ASSETS
Current Assets:
Cash		$	17,841			$	3,600
Certificates of deposit			1,000				4,000
Total current assets			18,841				7,600
Fixed Assets:
Automotive equipment			25,859				25,859
Less, accumulated depreciation			25,859				25,859
Net fixed assets			-				-
Other Assets:
Due from shareholder			-				40,744
Total other assets			-				40,744
Total Assets		$	18,841			$	48,344
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued expenses		$	74,969			$	62,991
Payroll and other taxes payable			27,930				32,223
Due to shareholder			15,792				9,546
Advances from related parties			10,965				-
Total current liabilities			129,656				104,760
Stockholder's Equity:
Common stock: authorized 100,000,000 shares of $.001 par value; 44,000,816 issued and outstanding			44,001				44,001
Additional paid in capital			4,693,652				4,693,652
Deficit accumulated during development stage			(973,332	)			(917,895	)
Deficit accumulated prior to development stage			(3,879,122	)			(3,879,122	)
Accumulated other comprehensive income			3,582				2,638
Total Amanasu Environment Corporation stockholders’ equity			(111,219	)			(56,726	)
Non controlling interest			404				310
Total equity			(110,815	)			(56,416	)
Total Liabilities and Stockholder's Equity		$	18,841			$	48,344

The accompanying notes are an integral part of these financial statements.

 

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AMANASU ENVIRONMENT CORPORATION

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Month Periods Ended June 30, 2013 and 2012

(Unaudited)

 

			June 30, 2013				June 30, 2012				January 1, 2009 (Date of Commencement of Development  Stage) to June 30, 2013
Revenue		$	-			$	-			$	-
Expenses			28,690				50,447				1.012,192
Operating Loss			(28,690	)			(50,447	)			(1,012,192	)
Other Income			-				-				388
Interest income			-				13				13,107
Debt forgiveness			-				-				13,781
Net Loss			(28,690	)			(50,434	)			(984,916	)
Net (income) Loss Attributable to Noncontrolling Interest			-				(5	)			11,584
Net Loss Attributable to Amanasu Environment Corporation			(28,690	)			(50,439	)			(973,332	)
Other Comprehensive Loss:
Gain (loss) on foreign currency conversion attributable to Amanasu Environment			336				(625	)			10,068
Total Comprehensive Loss		$	(28,354	)			(51,064	)		$	(963,264	)
Net Loss Per Share - basic and diluted		$	-			$	-
Weighted average number of shares outstanding			44,000,816				44,000,816

The accompanying notes are an integral part of these financial statements.

 

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AMANASU ENVIRONMENT CORPORATION

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Six Month Periods Ended June 30, 2013 and 2012

(Unaudited)

 

		June 30, 2013				June 30,  2012				January 1, 2009 (Date of Commencement of Development  Stage) to June 31, 2013
Revenue		$	-			$	-			$	-
Expenses			55,825				90,453				1,012,192
Operating Loss			(55,825	)			(90,453	)			(1,012,192	)
Other Income			388				-				388
Interest income			-				24				13,107
Debt forgiveness			-				-				13,781
Net Loss			(55,437	)			(90,429	)			(984,916	)
Net Loss Attributable to Noncontrolling Interest			-				984				11,584
Net Loss Attributable to Amanasu Environment Corporation			(55,437	)			(89,445	)			(973,332	)
Other Comprehensive Loss:
Gain (loss) on foreign currency conversion			1,038				162				10,162
Attributable to non-controlling interest			(94	)			(13	)			(94	)
Attributable to the Company			944				149				10,068
Total Comprehensive Loss		$	(54,493	)			(89,296	)		$	(963,264	)
Net Loss Per Share - basic and diluted		$	-			$	-
Weighted average number of shares outstanding			44,000,816				44,000,816

The accompanying notes are an integral part of these financial statements.

 

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AMANASU ENVIRONMENT CORPORATION and SUBSIDIARY

(A Development Stage Company)

CONDENSED STATEMENTS OF CASH FLOWS

For the Six Month Periods Ended June 30,

(Unaudited)

 

		2013				2012				January 1, 2009 (Date of Commencement of Development Stage) to June 30, 2013
CASH FLOWS FROM OPERATIONS:
Net loss		$	(55,437	)		$	(90,429	)		$	(984,916	)
Adjustments to reconcile net loss to net cash consumed by operating activities:
Charges not requiring the outlay of cash:
Depreciation			-				750				6,074
Write offs of bad debts			-				-				138,931
Cancellation of debts			-				-				(13,781	)
Changes in assets and liabilities:
Decrease in prepaid expense			-				2,385				-
(Decrease) increase in accounts payable and accrued expenses			12,877				15,190				68,988
(Decrease) increase in taxes payable			-				-				27,269
Increase in employee loans			-				-				(2,900	)
Net Cash Consumed By Operating Activities			(42,560	)			(72,104	)			(760,335	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash transferred on sale of subsidiary			-				-				(270	)
Redemptions of certificates of deposit			3,000				10,000				695,000
Net Cash Provided By Investing Activities			3,000				10,000				694,730
CASH FLOWS FROM FINANCING ACTIVITIES:
Short term loans			-				-				14,212
Officer advances							61,166				53,260
Officer repayments			-				-				(68,635	)
Shareholder advances			50,000				-				75,082
Shareholder repayments			-				-				(3,212	)
Advances from affiliate			3,800				-				4,975
Net Cash Provided By Finance Activities			53,800				61,166				75,682
Effect on Cash of Exchange Rate Changes			1				(16	)			181
Net Change in Cash Balances			14,241				(954	)			10,258
Cash balance, beginning of period			3,600				9,193				7,583
Cash balance, end of period		$	17,841			$	8,239			$	17,841

The accompanying notes are an integral part of these financial statements.

 

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AMANASU ENVIRONMENT CORPORATION and SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

1. BASIS OF PRESENTATION

The unaudited interim consolidated financial statements of Amanasu Environment Corporation and Subsidiary ("the Company") as of June 30, 2013 and 2012 and for the three and six month periods ended June 30, 2013 and 2012, have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of such periods. The results of operations of the six month period ended June 30, 2013 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2013.

Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company included in the annual report on Form 10-K for the year ended December 31, 2012.

2. SUPPLEMENTAL CASH FLOWS INFORMATION

There were no cash payments for interest or income taxes during any of the periods presented. In addition, there were no non-cash investing or financing activities during these periods.

3. GOING CONCERN 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 an accumulated deficit at June 30, 2013, 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.

4. EXPENSES

Major items included in expense are presented below.

		SIX MONTH PERIODS								THREE MONTH PERIODS
		2013				2012				2013				2012
Consulting fees		$	-			$	20,000			$	-			$	20,000
Travel			8,866				17,308				4,673				3,821
Rent			17,157				27,602				8,757				8,343
Professional fees			14,928				17,400				10,000				17,400

5. RELATED PARTY TRANSACTIONS

During the six month period ended June 30, 2013 the Company received cash advances of $50,000 from its parent company, and $3,800 from an affiliate. An accrued compensation award in the amount of $20,000 from prior period is owed to the Company secretary.

 

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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-KSB 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 Company's Financial Statements, including the Notes thereto, appearing elsewhere in this Quarterly Report and in the Annual Report for the year ended December 31, 2012.

 

COMPANY OVERVIEW

 

History

 

Amanasu Environment Corporation ("Company") was incorporated in the State of Nevada on February 22, 1999 under the name of Forte International Inc. On March 27, 2001, the Company's name was changed to Amanasu Energy Corporation, and on November 13, 2002, its name was changed to Amanasu Environment Corporation.

 

It has acquired the exclusive, worldwide license rights to a high temperature furnace, a hot water boiler, and ring-tube desalination methodology. At this time, the Company is not engaged in the commercial sale of any of its licensed technologies. Its operations to date have been limited to acquiring the technologies, conducting limited product marketing, and testing the technologies for commercial sale. For each such technology, proto-type or demonstrational units have been constructed by each licensor or inventor of the technology. The Company has conducted various internal tests on these units to determine the commercial viability of the underlying technologies. As a result of such testing, the Company believes that the products are not commercially ready for sale, and that product refinements are necessary with respect to each of the technologies. In addition, the Company may seek joint venture or other affiliations with companies competitive in each respective product market whereby the Company can capitalize on the existing infrastructure of such other companies, such as product design and engineering, marketing and sales, and warranty and post-warranty service and repair. The Company believes that its marketing efforts to sell any of its products will be limited until such time as it can complete the refinements of its technologies. The Company can not predict whether it will be successful in developing commercial products, or establishing affiliations with any operating company.

 

On June 8, 2000, the Company obtained the exclusive, worldwide license to a technology that disposes of toxic and hazardous wastes through a proprietary, high temperature combustion system, known as the Amanasu Furnace. The rights were obtained pursuant to a license agreement with Masaichi Kikuchi, the inventor of the technology, for a period of 30 years. The Company issued 1,000,000 share of common stock to the inventor and 200,000 shares of common stock to a director of the inventor's company. Under the licensing agreement; the Company is required to pay the licensor a royalty of two percent of the gross receipts from the sale of products using the technology. If the Company fails to comply with any provision of the agreement after a 90-day notice period, the licensor may terminate the agreement.

 

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Effective September 30, 2002, the Company obtained the exclusive, worldwide license to a hot water boiler technology that incinerates waste tires in a safe and non-polluting manner and extracts heat energy from the incineration process. The rights were obtained pursuant to a license agreement with Sanyo Kogyo Kabushiki Gaisha and Ever Green Planet Corporation, both Japanese companies, for a period of 30 years. As consideration for this acquisition, the Company paid the licensors $250,000, of which the Company's President paid $95,000, issued to them 600,000 shares of common stock, and issued to an affiliate of the licensors 50,000 shares of common stock. The licensors are entitled to receive a two percent royalty on the gross receipts from the sale of the products related to the technology. If the Company fails to comply with any provision of the agreement after a 90-day notice period, the licensor may terminate the agreement.

 

On June 30, 2003, the Company acquired the exclusive worldwide rights to produce and market a patented technology that purifies seawater, and removes hazardous pollutants from wastewater. The rights were obtained pursuant to a license agreement with Etsuro Sakagami, the inventor, for a period of 30 years. As consideration for obtaining the license, the Company issued 1,000,000 shares to the inventor, and 50,000 shares to a finder. The licensor is entitled to receive a two percent royalty on the gross receipts from the sale of the products related to the technology. If the Company fails to comply with any provision of the agreement after a 90-day notice period, the licensor may terminate the agreement.

 

Current

 

During the recent years, the Company has embarked on a mission to achieve a capital-raising goal of $30,000,000 to increase the Company’s potential by entering into the NASDAQ global market. The Company’s main objective has not changed for the coming fiscal year ending December 31, 2013.

 

Aside from capital raising efforts, the Company has been supporting Amanasu Maritek Corporation, in the development and required regulatory approval for the Commercial Cargo Ship Ballast Water Purification System. The Company and Amanasu Maritek Corporation have been working through the approval process of this type of product with the Japanese regulatory bodies. Also, required documentation, and translations have been prepared for additional approval by the main global governing body for marine technologies, IMO the International Marine Organization. So far, the Company has been unable to obtain approval for the Commercial Cargo Ship Ballast Water Purification System. In adhering to the guidelines set by the IMO and the Japanese Ministry of Land, Infrastructure, Transport and Tourism, the Company needs to collaborate with a shipbuilding company to conduct experiments and tests, requiring 2-3 years and a minimum budget of $10,000,000. Due to a lack of resources, the Company is currently seeking partners who are interested in developing such businesses and technologies acquired by Amanasu Maritek Corporation, the Company's subsidiary.

 

Furthermore, the Company is making plans to enter the reforestation industry in Japan, through Amanasu Maritek Corporation. Following the Great East Japan Earthquake, approximately 1 million houses need to be rebuilt, causing wood to be in high demand. Also, the Japanese Government currently subsidizes new firms entering the reforestation industry, giving the Company an opportunity to enter an industry that is reflective of its vision.

 

The Company's principal offices were relocated on April 1, 2010 from 115 East 57th Street 11th Floor New York, NY 10022, to 445 Park Avenue Center 10th floor New York, NY 10022 Telephone: [phone]. The Tokyo branch has relocated from 1-7-10 Motoakasaka Minato-Ku Tokyo Japan to 3-7-11 Azabujuubann Minato-Ku Tokyo Japan. Telephone: [phone].

 

PRODUCTS

 

Currently the Company is supporting Amanasu Maritek Corporation in development and required regulatory approval for a Commercial Cargo Ship Ballast Water Purification System. No licensing agreements with partners have been made at this time, as the Company is also in the process of raising capital for this project. Currently the company is negotiating with its partners for a worldwide manufacturing and sales agreement. The Company cannot guarantee if the negotiations will succeed.

 

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PLAN OF OPERATION

 

The Company has 3 main objectives during the fiscal year ending December 31, 2013. 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.

 

Secondly the Company will continue to support the efforts of Amanasu Maritek Corporation to enter into marine technologies. The Company will assist for another 2 years in the design, and approval process for the product from at least 2 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.

 

Thirdly, the Company is making plans to enter the reforestation industry in Japan, through Amanasu Maritek Coporation. 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 12 months. The Company cannot predict whether it will be successful with its objective.

 

FINANCIAL RESULTS

 

Total Current Assets as of June 30, 2013 was $18,841, compared to $7,600 as of December 31, 2012.

 

Total Other Assets as of June 30, 2013 was - nil -, compared to $40,744 as of December 31, 2012.

 

Interest Income for the quarter ended June 30, 2013 was $ 0, compared to $ 13 for the same period of 2012. The decrease is due to the decreased balance in certificates of deposit.

 

The net loss of the three month period ended June 30, 2013 was $28,690, compared to $50,434 for the same period of 2012.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Other than the provision of alternating business planning costs discussed above, the Company's cash requirements for the next 12 months are estimated to be $165,000. This amount is comprised of the following estimate expenditures: $100,000 in annual salaries for office personnel, office expenses and travel, $30,000 for rent, $20,000 for professional fees, and $15,000 for miscellaneous expenses. There are no material commitments for capital at this time other than as described above. The Company and/or Amanasu Maritek will need to issue and sell shares to gain capital for operations.

 

OFF-BALANCE SHEET ARRANAGEMENTS

 

The Company has no off-balance sheet arrangements.

 

 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not Applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

The Company carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934) under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer as of a date within 90 days of the filings date of Form 10Q. Based on and as of the date of such evaluation, the aforementioned officers have concluded that the Company's disclosure controls and procedures have not functioned effectively so as to provide information necessary whether:

 

(i) this quarterly report on Form 10 Q contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report on Form 10 Q, and (ii) the financial statements, and other financial information included in this quarterly report on Form 10 Q, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report on Form 10 Q.

 

CHANGES IN INTERNAL CONTROLS

 

There have been no significant changes in the Company's internal controls or in other factors since the date of the Chief Executive Officer's, Chief Financial Officer's and Chief Accounting Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regards to significant deficiencies and material weaknesses.

 

 

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PART II

 

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

Not required by smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

 

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ITEM 6. EXHIBITS

Furnish the Exhibits required by Item 601 of Regulation S-K (229.407 of this chapter).

 

Exhibit 31	Certification Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002.
Exhibit 32	Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.
101 INS	XBRL Instance Document*
101 SCH	XBRL Schema Document*
101 CAL	XBRL Calculation Linkbase Document*
101 DEF	XBRL Definition Linkbase Document*
101 LAB	XBRL Labels Linkbase Document*
101 PRE	XBRL Presentation Linkbase Document*

 

* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

 

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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.

Amanasu Environment Corporation

Date: August 10, 2013

/s/ Atsushi Maki

Atsushi Maki

Chief Executive Officer

Chief Financial Officer

Chief Accounting Officer

 

 

 

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