Quarterly Report (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)

 

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

 

224 Fifth Avenue, Suite D144 New York, NY 10022

(Address of principal executive offices)

 

[phone]

(Registrant’s telephone number, including area code)

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

                    

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

 

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

 

PART I - FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (unaudited).	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	12
Item 4.	Controls and Procedures.	13
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings.	14
Item 1A.	Risk Factors.	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	14
Item 3.	Defaults Upon Senior Securities.	14
Item 4.	Mine Safety Disclosures.	14
Item 5.	Other Information.	14
Item 6.	Exhibits.	15
Signatures		16

 

 

 

 

2

 

 

PART I

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

 

AMANASU ENVIRONMENT CORPORATION

CONSOLIDATED BALANCE SHEETS

 (Unaudited)

 

	June 30, 2019	December 31, 2018
ASSETS
Current Assets:
Cash	$ 241	$ 3,290
Operating lease right-of-use assets -current	3,408	-
Due from related parties	20,633	6,273
Total current assets	24,282	9,563
Total Assets	$ 24,282	$ 9,563
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$ 9,604	$ 14,244
Accrued expenses – related parties	104,786	83,909
Accrued interest – stockholders	62,778	53,399
Operating lease liabilities-current	3,408	-
Taxes payable	31,275	30,750
Due to related parties	387,170	356,720
Total current liabilities	599,021	539,022
Stockholders' Deficit:
Common Stock: authorized 100,000,000 shares of $.001 par value;44,100,816 shares issued and outstanding	44,101	44,101
Additional paid in capital	4,793,552	4,793,552
Accumulated deficit	(5,416,645 )	(5,371,553 )
Accumulated other comprehensive income	4,565	4,736
Total Amanasu Environment Corporation stockholders' deficit	(574,427 )	(529,164 )
Non-controlling interest in subsidiary	(312 )	(295 )
Total stockholders’ deficit	(574,739 )	(529,459 )
Total Liabilities and Stockholders' Deficit	$ 24,282	$ 9,563

 

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,		Six Months Ended June 30,
	2019	2018	2019	2018
Revenue	$ -	$ -	$ -	$ -
Cost of revenue	-	-	-	-
Gross profit	-	-	-	-
General and administrative expenses	14,638	$ 20,363	35,713	37,112
Operating loss	(14,638 )	(20,363 )	(35,713 )	(37,112 )
Other Expense:
Interest expense - stockholders	(4,798 )	(4,350 )	(9,379 )	(8,251 )
Net loss before income taxes	(19,436 )	(24,713 )	(45,092 )	(45,363 )
Income taxes	-	-	-	-
Net loss	(19,436 )	(24,713 )	(45,092 )	(45,363 )
Net loss attributable to non-controlling interest	-	-	-	-
Net loss attributable to Amanasu Environment Corporation Stockholders	(19,436 )	(24,713 )	(45,092 )	(45,363 )
Other comprehensive income (loss):
Foreign currency translation adjustment	(303 )	458	(188 )	(184 )
Comprehensive loss	(19,739 )	(24,255 )	(45,280 )	(45,547 )
Less: Comprehensive income (loss) attributable to non-controlling interest	(27 )	41	(17 )	(17 )
Comprehensive loss attributable to Amanasu Environment Corporation Stockholders	$ (19,712 )	$ (24,296 ))	$ (45,263 )	$ (45,530 )
Net loss per share – basic and diluted	$ (0.00 )	$ (0.00 )	$ (0.00 )	$ (0.00 )
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	Amount	Capital	Deficit	Income	Interest	Total
Balance April 1, 2019	44,100,816	$ 44,101	$ 4,793,552	$ (5,397,209 )	$ 4,841	$ (285 )	$ (555,000 )
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	$ 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 t he 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.

 

 

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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.

 

 

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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.

 

 

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ITEM 6. EXHIBITS

 

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

 

Exhibit 31.1	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.
Exhibit 31.2	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)).*
Exhibit 32.1	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.*
Exhibit 32.2	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.*
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*

 

* filed herewith

 

 

 

   

 

 

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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 Environmental Corporation
Date: August 14, 2019	By:	/s/  Atsushi Maki
		Atsushi Maki
		Chief Executive Officer
		Chief Financial Officer
		Chief Accounting Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

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