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, 2015, as filed with the Securities and Exchange
Commission (“SEC”) on March 31, 2016 (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
March 31, 2016, 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.
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.
COMPANY OVERVIEW
History
Amanasu
Environment Corporation ("Company") was incorporated in the State
of Nevada on February 22, 1999 under the name of Forte
International Inc. On March 27, 2001, the Company's name was
changed to Amanasu Energy Corporation, and on November 13, 2002,
its name was changed to Amanasu Environment
Corporation.
It has
acquired the exclusive, worldwide license rights to a high
temperature furnace, a hot water boiler, and ring-tube desalination
methodology. At this time, the Company is not engaged in the
commercial sale of any of its licensed technologies. Its operations
to date have been limited to acquiring the technologies, conducting
limited product marketing, and testing the technologies for
commercial sale. For each such technology, proto-type or
demonstrational units have been constructed by each licensor or
inventor of the technology. The Company has conducted various
internal tests on these units to determine the commercial viability
of the underlying technologies. As a result of such testing, the
Company believes that the products are not commercially ready for
sale, and that product refinements are necessary with respect to
each of the technologies. In addition, the Company may seek joint
venture or other affiliations with companies competitive in each
respective product market whereby the Company can capitalize on the
existing infrastructure of such other companies, such as product
design and engineering, marketing and sales, and warranty and
post-warranty service and repair. The Company believes that its
marketing efforts to sell any of its products will be limited until
such time as it can complete the refinements of its technologies.
The Company cannot predict whether it will be successful in
developing commercial products, or establishing affiliations with
any operating company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
COMPANY OVERVIEW (continued)
History (continued)
On June
8, 2000, the Company obtained the exclusive, worldwide license to a
technology that disposes of toxic and hazardous wastes through a
proprietary, high temperature combustion system, known as the
Amanasu Furnace. The
rights were
obtained pursuant to a license agreement with Masaichi Kikuchi, the
inventor of the technology, for a period of 30 years. The Company
issued 1,000,000 share of common stock to the inventor and 200,000
shares of common stock to a director of the inventor's company.
Under the licensing agreement; the Company is required to pay the
licensor a royalty of two percent of the gross receipts from the
sale of products using the technology. If the Company fails to
comply with any provision of the agreement after a 90-day notice
period, the licensor may terminate the
agreement.
Effective September 30, 2002, the Company obtained the exclusive,
worldwide license to a hot water boiler technology that incinerates
waste tires in a safe and non-polluting manner and extracts heat
energy from the incineration process. The rights were obtained
pursuant to a license agreement with Sanyo Kogyo Kabushiki Gaisha
and Ever Green Planet Corporation, both Japanese companies, for a
period of 30 years. As consideration for this acquisition, the
Company paid the licensors $250,000, of which the Company's
President paid $95,000, issued to them 600,000 shares of common
stock, and issued to an affiliate of the licensors 50,000 shares of
common stock. The licensors are entitled to receive a two percent
royalty on the gross receipts from the sale of the products related
to the technology. If the Company fails to comply with any
provision of the agreement after a 90-day notice period, the
licensor may terminate the agreement.
On June 30, 2003, the Company acquired the exclusive worldwide
rights to produce and market a patented technology that purifies
seawater, and removes hazardous pollutants from wastewater. The
rights were obtained pursuant to a license agreement with Etsuro
Sakagami, the inventor, for a period of 30 years. As consideration
for obtaining the license, the Company issued 1,000,000 shares to
the inventor and 50,000 shares to a finder. The licensor is
entitled to receive a two percent royalty on the gross receipts
from the sale of the products related to the technology. If the
Company fails to comply with any provision of the agreement after a
90-day notice period, the licensor may terminate the
agreement.
Current
During recent years, the Company has embarked on a mission to
achieve a capital-raising goal of $30,000,000 to increase the
Company’s potential by entering into the NASDAQ global
market. The Company’s main objective has not changed for the
coming fiscal year ending December 31, 2016. There can be no
assurance that the Company will be able to raise the funds on
acceptable terms or at all.
Aside from capital raising efforts, the Company has been supporting
Amanasu Maritek Corporation, in the development and required
regulatory approval for the Commercial Cargo Ship Ballast Water
Purification System. The Company and Amanasu Maritek Corporation
have been working through the approval process of this type of
product with the Japanese regulatory bodies. Also, required
documentation, and translations have been prepared for additional
approval by the main global governing body for marine technologies,
IMO the International Marine Organization. So far, the Company has
been unable to obtain approval for the Commercial Cargo Ship
Ballast Water Purification System. In adhering to the guidelines
set by the IMO and the Japanese Ministry of Land, Infrastructure,
Transport and Tourism, the Company needs to collaborate with a
shipbuilding company to conduct experiments and tests, requiring
2-3 years and a minimum budget of $10,000,000. Due to a lack of
resources, the Company is currently seeking partners who are
interested in developing such businesses and technologies acquired
by Amanasu Maritek Corporation, the Company's
subsidiary.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
COMPANY OVERVIEW (continued)
Current (continued)
Furthermore, the Company is making plans to enter the reforestation
industry in Japan, through Amanasu Maritek Corporation. Following
the Great East Japan Earthquake, approximately 1 million houses
need to be rebuilt, causing wood to be in high demand. Also, the
Japanese Government currently subsidizes new firms entering the
reforestation industry, giving the Company an opportunity to enter
an industry that is reflective of its vision.
The Company's principal offices were relocated on April 1, 2010
from 115 East 57th Street 11th Floor New York, NY 10022, to 445
Park Avenue Center 10th floor New York, NY 10022 Telephone:
604-790-8799. The Tokyo branch has relocated from 3-7-11
Azabujuubann Minato-Ku Tokyo Japan to Suite 905, 1-6-1 Senzoku
Taito-Ku Tokyo Japan. Telephone: 03-5808-3663.
PRODUCTS
Currently the Company is supporting Amanasu Maritek Corporation in
development and required regulatory approval for a Commercial Cargo
Ship Ballast Water Purification System. No licensing agreements
with partners have been made at this time, as the Company is also
in the process of raising capital for this project. Currently the
company is negotiating with its partners for a worldwide
manufacturing and sales agreement. The Company cannot guarantee if
the negotiations will succeed.
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.
Secondly the Company will continue to support the efforts of
Amanasu Maritek Corporation to enter into marine technologies. The
Company will assist for another year in the design, and approval
process for the product from at least 2 regulatory bodies: the
Japanese Government, and the IMO (International Marine
Organization). This approval process requires capital for
additional product testing, documentation, and documentation
translations. The Company believes that Amanasu Maritek
Corporation's most significant hurdle will be in capital raising.
The Company has already initiated documentation and application
processes, and is now looking for capital to fund the project. The
Company cannot predict whether it will be successful with its
capital raising efforts.
Thirdly, the Company is making plans to enter the reforestation
industry in Japan, through Amanasu Maritek 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 12 months.
The Company cannot predict whether it will be successful with its
objective.
Results of Operations
General and administrative expenses decreased $20,948 (58.2%) to
$15,073 for the three months ended September 30, 2016 as compared
to $36,021 for the three months ended September 30, 2015, primarily
as a result of lower consulting fees.
General and administrative expenses increased $2,683 to $52,972 for
the nine months ended September 30, 2016 as compared to $50,289 for
the nine months ended September 30, 2015. This increase is
primarily due to higher professional fees and rent expense mostly
offset by lower consulting fees.
As a result of the above, the Company incurred losses from
operations of $15,073 and $52,972 for the three and nine months
ended September 30, 2016, respectively, as compared to losses from
operations of $36,021 and $50,289 for the three and nine months
ended September 30, 2015, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Interest expense increased as a result of the increase in advances
from shareholders and officers.
As a result of the above, the Company incurred a net losses of
$17,261 and $59,842 for the three and nine months ended September
30, 2016, respectively, as compared to net losses of $37,936 and
$55,078 for the three and nine months ended September 30, 2015,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
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 issue and sell shares to gain capital for
operations or arrange for additional shareholder or related party
loans. There is no current commitment for either of
these fund sources.
Our working capital deficit increased $61,702 to $331,230 at
September 30, 2016 as compared to $269,528 at December 31, 2015
primarily due lower cash balances and an increase in accounts
payable and accrued expenses and in advances from shareholders and
officers and accrued interest.
During the nine months ended September 30, 2016, the Company had a
net decrease in cash of $39,257. The Company’s principal
sources and uses of funds were as follows:
Cash used in operating activities.
For the nine months ended September 30, 2016, the
Company used $42,897 in cash for operations as compared to $66,099
in cash for the nine months ended September 30, 2015, primarily as
a result of the increase in accounts payable and accrued
expenses.
Cash provided by investing activities.
Net cash provided by investing activities was $-0-
for the nine months ended September 30, 2016 as compared to $1,000
for the nine months ended September 30, 2015, due to a decrease in
the amount due to lower redemption of certificates of
deposit.
Cash provided by financing activities.
Net cash provided by financing activities for the
nine months ended September 30, 2016 was $3,637 as compared to
$107,129 for the nine months ended September 30, 2015 primarily as
a result of lower advances from shareholders and
officers.
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, 2015, as filed with the SEC on March
31, 2016 (the “Annual Report”). There have been no
changes in our critical accounting policies. Our significant
accounting policies are described in our notes to the 2015
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.
