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Amanasu Environment (AMSU)

Filed: 13 Aug 20, 12:05pm
 

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)
 
Nevada 98-0347883
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
224 Fifth Avenue, 2nd Floor
New York, NY 10022
(Address of principal executive offices)
 
(604) 790-8799
(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 filerAccelerated filer
Non-accelerated filerSmaller 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 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
 
 
 
2
 
 
PART I
 
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 
 
 
June 30,
2020
 
 
December 31,
2019
 
ASSETS
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash
 $56 
 $211 
Due from affiliate
  797 
  24,509 
Total current assets
  853 
  24,720 
 
    
    
Operating lease right-of-use assets
  18,139 
  25,084 
 
    
    
Total Assets
 $18,992 
 $49,804 
 
    
    
LIABILITIES & STOCKHOLDERS' DEFICIT
    
    
Current Liabilities:
    
    
Accounts payable and accrued expenses
 $8,308 
 $13,402 
Accrued expenses – related parties
  96,093 
  82,170 
Accrued interest – stockholders
  82,688 
  72,764 
Taxes payable
  31,251 
  31,056 
Operating lease liabilities – current
  14,421 
  14,065 
Due to related parties
  441,293 
  439,765 
Total current liabilities
  674,054 
  653,222 
 
    
    
Operating lease liabilities
  3,718 
  11,019 
 
    
    
Total Liabilities
  677,772 
  664,241 
 
    
    
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
  (5,500,695)
  (5,456,421)
Accumulated other comprehensive income
  4,573 
  4,636 
Total Amanasu Environment Corporation stockholders' deficit
  (658,469)
  (614,132)
Non-controlling interest in subsidiary
  (311)
  (305)
Total stockholders’ deficit
  (658,780)
  (614,437)
 
    
    
Total Liabilities and Stockholders' Deficit
 $18,992 
 $49,804 
 
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,
 
 
 
2020
 
 
2019
 
 
2020
 
 
2019
 
Revenue
 $- 
 $- 
 $- 
 $- 
Cost of revenue
  - 
  - 
  - 
  - 
Gross profit
  - 
  - 
  - 
  - 
 
    
    
    
    
General and administrative expenses
  13,298 
  14,638 
  34,350 
  35,713 
 
    
    
    
    
Operating loss
  (13,298)
  (14,638)
  (34,350)
  (35,713)
 
    
    
    
    
Other Expense:
    
    
    
    
Interest expense - stockholders
  (4,969)
  (4,798)
  (9,924)
  (9,379)
 
    
    
    
    
Net loss before income taxes
  (18,267)
  (19,436)
  (44,274)
  (45,092)
 
    
    
    
    
Income taxes
  - 
  - 
  - 
  - 
 
    
    
    
    
Net loss
  (18,267)
  (19,436)
  (44,274)
  (45,092)
 
    
    
    
    
Net loss attributable to non-controlling interest
  - 
  - 
  - 
  - 
 
    
    
    
    
Net loss attributable to Amanasu Environment Corporation Stockholders
  (18,267)
  (19,436)
  (44,274)
  (45,092)
 
    
    
    
    
Other comprehensive income (loss):
    
    
    
    
Foreign currency translation adjustment
  40 
  (303)
  (69)
  (188)
 
    
    
    
    
Total comprehensive loss
  (18,227)
  (19,739)
  (44,343)
  (45,280)
Comprehensive income (loss) attributable to non-controlling interest
  4 
  (27)
  (6)
  (17)
 
    
    
    
    
Less Comprehensive loss attributable to Amanasu
    Environment Corporation Stockholders
 $(18,231)
 $(19,712)
 $(44,337)
 $(45,263)
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
(Unaudited)
 
 
 
Common Stock
 
 
Paid In
 
 
Accumulated
 
 
Comprehensive
 
 
Non-controlling
 
 
 
 
 
 
Shares
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
Income
 
 
Interest
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance April 1, 2020
  44,100,816 
 $44,101 
 $4,793,552 
 $(5,482,428)
 $4,537 
 $(315)
 $(640,553)
Net loss
  - 
  - 
  - 
  (18,267)
  - 
  - 
  (18,267)
Other comprehensive income
  - 
  - 
  - 
  - 
  36 
  4 
  40 
 
    
    
    
    
    
    
    
Balance June 30, 2020
  44,100,816 
 $44,101 
 $4,793,552 
 $(5,500,695)
 $4,573 
 $(311)
 $(658,780)
 
 
 
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 loss
  - 
  - 
  - 
  - 
  (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 January 1, 2020
  44,100,816 
 $44,101 
 $4,793,552 
 $(5,456,421)
 $4,636 
 $(305)
 $(614,437)
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.
 
 
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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.
 
 
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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.
 
 
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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 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.
 
 
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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, 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.
 
 
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ITEM 6. EXHIBITS
 
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.*
101 INSXBRL Instance Document*
  
101 SCHXBRL Schema Document*
  
101 CALXBRL Calculation Linkbase Document*
  
101 DEFXBRL Definition Linkbase Document*
  
101 LABXBRL Labels Linkbase Document*
  
101 PREXBRL 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 13, 2020By:/s/  Atsushi Maki 
  Atsushi Maki 
  Principal Executive Officer 
  Principal Accounting Officer 
 
 
 
 
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