The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(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, 2022, the results of operations for the three and six months ended June 30, 2022 and 2021, and cash flows for the six months ended June 30, 2022 and 2021. These results are not necessarily indicative of the results to be expected for the full year or any other period. The December 31, 2021 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, 2021, as filed with the Securities and Exchange Commission (“SEC”) on April 5, 2022.
2. GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the consolidated financial statements, the Company had a working capital deficiency of $834,638 and an accumulated deficit of $5,664,414 at June 30, 2022, 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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 or will need to rely on loans from stockholders and officers to support the operations. There can be no assurance that the Company can secure additional financing.
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
New Accounting Pronouncements
During the three and six months ended June 30, 2022, there have been no 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.
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
4. RELATED PARTY TRANSACTIONS AND BALANCES
The Company receives periodic loans 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 loans bear interest at 4.45%, due on demand 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, 2022 and 2021, the Company borrowed $3,655 and $2,975 from a stockholder. During the three months ended June 30, 2022 and 2021, the Company borrowed $2,905 and $1,725 from a stockholder. The balances due as of June 30, 2022 and December 31, 2021 were $403,740 and $400,085, respectively. Interest expense associated with these loans were $4,526 and $8,979 for the three and six months ended June 30, 2022 as compared to $4,451 and $8,834 for the three and six months ended June 30, 2021, respectively. Accrued interest on these loans were $106,159 and $97,181 at June 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, respectively. No terms of payment have been established and, as a result, the amount is classified as a current liability. The amounts bear interest of 4.45% annually. Interest expenses associated with this loan were $562 and $1,118 for the three and six months ended June 30, 2022, as compared to $563 and $1,119 for the three and six months ended June 30, 2021, respectively. Accrued interest on this loan was $16,854 and $15,735 at June 30, 2022 and December 31, 2021, respectively.
The Company has an arrangement with a stockholder of the Company to perform consulting services. The agreement is not written, and no payment terms have been established. The fee is $10,000 annually. As of June 30, 2022 and December 31, 2021, amounts due to the stockholder were $55,000 and $50,000, 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 payments are made by the Company on behalf of the affiliate, such amounts are shown as an addition to or reduction in the amount due to affiliate in the accompanying balance sheets.
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 from a stockholder at a monthly rate of $2,500 under a lease agreement which expires October 1, 2023. At June 30, 2022 and December 31, 2021, amounts due to the stockholder were $83,996 and $76,121, respectively. The Company shares the space with Amanasu Techno Holdings Corp. (“ATH”), a reporting company under the Securities Exchange Act of 1934. ATH is responsible for 50% of the rent. The office in New York is rented at the rate of $360 each year and is also shared with ATH. In addition, the Company maintains an office at Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan. The net balance due to ATH at June 30, 2022 was $57,454 as compared to $39,166 at December 31, 2021.
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 three and six months ended June 30, 2022 and 2021 as it has no taxable income in the U.S. The Company can carry forward net operating losses (NOL) 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 $3.7 million in the U.S. at June 30, 2022. Approximately $3.41 million in the U.S. will expire in the years 2022 through 2037, and $0.29 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.
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
5. INCOME TAXES (continued)
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 NOLs for every period because it is more likely than not that all of the deferred tax assets will not be realized.
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’s board of directors who is also the stockholder of the Company, which expires October 1, 2023. The Company shares the space with ATH, a reporting company under the Securities Exchange Act of 1934. Our major stockholder and officer own approximately 86% of ATH’s outstanding shares of common stock. ATH 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 ATH. In addition, the Company maintains an office at Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan, and the Company pays no rent.
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 uses an incremental borrowing rate of 5% for operating leases.
On October 1, 2019, the Company commenced a lease with a stockholder 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 on October 1, 2019. This asset was fully amortized as of September 30, 2021.
On October 1, 2021, the Company commenced a new lease with the same stockholder from October 1, 2021 to September 30, 2023 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 on October 1, 2021. For the three and six months ended June 30, 2022, the Company amortized $3,495 and $6,945 of right-of-use assets as compared to $3,673 and $7,300 for the three and six months ended June 30, 2021 , respectively.
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, 2022:
2022 – remaining six months | | $ | 7,500 | |
2023 | | | 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, 2022 was $3,750 and $7,500, as compared to $3,750 and $7,500 for the three and six months ended June 30, 2021, respectively.
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
7. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. There are no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of its operations and there are no proceedings in which any of the Company’s directors, officers, or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to the Company’s interest.
8. SUBSEQUENT EVENT
The Company evaluated subsequent events or transaction that occurred after June 30, 2022 through the issuance date of the accompanying financial statements and determined that no significant subsequent event need to be recognized or disclosed.
