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, 2018March 31, 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)
 
(604) 790-8799
 
(Registrant’s telephone number, including area code)
 
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 and posted on its corporate Web site, if any, 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☐ (Do not check if a smaller reporting company)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 10, 2018,May 2, 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, 2018MARCH 31, 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.8
 10
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.11
     
Item 4.
Controls and Procedures.11
 12
     
PART II - OTHER INFORMATION
     
Item 1.
Legal Proceedings.11
 13
     
Item 1A.
Risk Factors.11
 13
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.11
 13
     
Item 3.
Defaults Upon Senior Securities.11
 13
     
Item 4.
Mine Safety Disclosures.11
 13
     
Item 5.
Other Information.11
 13
     
Item 6.
Exhibits.12
 14
     
Signatures13
 15
 
 
PART I
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 
 
June 30,
2018
 
 
December 31,
2017
 
 
March 31,
2019
 
 
December 31,
2018
 
ASSETS
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
Cash
 $5,009 
 $5,433 
 $577 
 $3,290 
Operating lease right-of-use assets -current
  6,859
 
  -
 
Due from related parties
  18,947 
  6,273 
Total current assets
  5,009 
  5,433 
  26,383
 
  9,563 
    
    
Total Assets
 $5,009 
 $5,433 
 $26,383
 $9,563 
    
    
LIABILITIES & STOCKHOLDERS' DEFICIT
    
    
Current Liabilities:
    
    
Accounts payable and accrued expenses
 $6,526 
 $6,385 
 $16,843 
 $14,244 
Accrued expenses – related parties
  64,086 
  78,593 
  94,205 
  83,909 
Accrued interest – stockholders
  44,318 
  36,067 
  57,980 
  53,399 
Operating lease liabilities-current
  6,859
 
  -
 
Taxes payable
  30,453 
  29,933 
  30,426 
  30,750 
Loans from stockholders
  343,870 
  278,255 
Due to related parties
  2,341 
  17,238 
  375,070 
  356,720 
Total current liabilities
  491,594 
  446,471 
  581,383
 
  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
�� (5,328,786)
  (5,283,423)
  (5,397,209)
  (5,371,553)
Accumulated other comprehensive income
  4,834 
  5,001 
  4,841 
  4,736 
Total Amanasu Environment Corporation stockholders' deficit
  (486,299)
  (440,769)
  (554,715)
  (529,164)
Non-controlling interest in subsidiary
  (286)
  (269)
  (285)
  (295)
Total stockholders’ deficit
  (486,585)
  (441,038)
  (555,000)
  (529,459)
    
    
Total Liabilities and Stockholders' Deficit
 $5,009 
 $5,433 
 $26,383
 
 $9,563 
 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 (Unaudited)
 
 
Three Months
Ended June 30,
 
 
Six Months
Ended June 30,
 
 
2018
 
 
2017
 
 
2018
 
 
2017
 
 
Three Months Ended
March 31,
2019
 
 
Three Months Ended
March 31,
2018
 
Revenue
 $- 
 $- 
 $- 
Cost of revenue
  - 
  - 
Gross profit
  - 
  - 
    
    
General and administrative expenses
  20,363 
  18,464 
  37,112 
  71,132 
  21,075 
  16,749 
Total operating expenses
  20,363 
  18,464 
  37,112 
  71,132 
    
    
Operating loss
  (20,363)
  (18,464)
  (37,112)
  (71,132)
  (21,075)
  (16,749)
    
    
Other Expense:
    
    
Interest expense - stockholders
  (4,350)
  (3,991)
  (8,251)
  (6,614)
Interest expenses - stockholders
  (4,581)
  (3,901)
    
    
Loss before income taxes
  (24,713)
  (22,455)
  (45,363)
  (77,746)
Net loss before income taxes
  (25,656)
  (20,650)
    
    
Income taxes
  - 
  - 
    
    
Net loss
  (24,713)
  (22,455)
  (45,363)
  (77,746)
  (25,656)
  (20,650)
    
    
Net loss attributable to non-controlling interest
  - 
  - 
    
    
Net loss attributable to Amanasu Environment Corporation Stockholders
  (24,713)
  (22,455)
  (45,363)
  (77,746)
  (25,656)
  (20,650)
    
    
Other comprehensive income (loss):
    
    
Foreign currency translation adjustment
  458 
  95 
  (184)
  (421)
  115 
  (642)
    
    
Total comprehensive loss
  (24,255)
  (22,360)
  (45,547)
  (78,167)
Comprehensive income (loss) attributable to non-controlling interest
  41 
  8 
  (17)
  (38)
Comprehensive loss
  (25,541)
  (21,292)
Less: Comprehensive income (loss) attributable to non-controlling interest
  10 
  (58)
    
    
Comprehensive loss attributable to Amanasu Environment Corporation Stockholders
 $(24,296)
 $(22,368))
 $(45,530)
 $(78,129)
 $(25,551)
 $(21,234)
    
    
Net loss per share – basic and diluted
 $(0.00)
 $(0.00)
 $(0.00)
Weighted average number of shares outstanding – basic and diluted
  44,100,816 
    
Average number of shares outstanding
  44,100,816 

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

AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
 
 
Common Stock
 
 
Paid In
 
 
Accumulated
 
 
Comprehensive
 
 
Noncontrolling
 
 
 
 
 
 
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
    
    
    
  (25,656)
    
    
  (25,656)
Other comprehensive income
    
    
    
    
  105 
  10 
  115 
 
    
    
    
    
    
    
    
Balance March 31, 2019
  44,100,816 
 $44,101 
 $4,793,552 
 $(5,397,209)
 $4,841 
 $(285)
 $(555,000)

 
 
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
    
    
    
  (20,650)
    
    
  (20,650)
Other comprehensive loss
    
    
    
    
  (584)
  (58)
  (642)
 
    
    
    
    
    
    
    
Balance March 31, 2018
  44,100,816 
 $44,101 
 $4,793,552 
 $(5,304,073)
 $4,417 
 $(327)
 $(462,330)
 
The accompanying notes are an integral part of these consolidated financial statements.
 


AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Six Months Ended
June 30, 2018
 
 
Six Months Ended
 June 30, 2017
 
 
Three Months Ended
March 31,
2019
 
 
Three Months Ended
 March 31,
2018
 
CASH FLOWS FROM OPERATIONS
 
 
 
 
 
 
Net loss
 $(45,363)
 $(77,746)
 $(25,656)
 $(20,650))
    
Amortization of right of use assets
 3,494
  -
 
Changes in assets and liabilities:
    
    
Accounts payable and accrued expenses
  63 
  696)
  2,648 
  (295)
Accrued expenses – related parties
  (14,633)
  20,750 
  10,375 
  (26,008)
Accrued interest - stockholders
  8,251)
  6,614)
  4,581 
  3,902)
Operating lease liabilities
  (3,494)
  - 
    
Net cash used in operating activities
  (51,682)
  (49,686)
  (8,052)
  (43,051))
    
    
CASH FLOWS FROM FINANCING ACTIVITIES
    
    
Advances from stockholders, net of repayment
  65,615 
  30,450 
  18,350 
  49,900 
Due to related parties
  (14,357)
  18,327 
  (13,011)
  (7,245)
Net Cash Provided by Financing Activities
  51,258 
  48,777 
  5,339 
  42,655 
    
    
Effect on cash of exchange rate changes
  - 
Net Change In Cash
  (424)
  (909)
  (2,713)
  (396))
    
    
Cash balance, beginning of period
  5,433 
  6,038 
  3,290 
  5,433 
    
    
Cash balance, end of period
 $5,009 
 $5,129 
 $577 
 $5,037 
 
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.
 

                                                   
AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018March 31, 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, 2018,March 31, 2019, the results of operations, for the three and six months ended June 30, 2018 and 2017, and cash flows for the sixthree months ended June 30, 2018March 31, 2019 and 2017.2018.  These results are not necessarily indicative of the results to be expected for the full year or any other period. The December 31, 20172018 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, 2017,2018, as filed with the Securities and Exchange Commission (“SEC”) on April 10, 2018.1, 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 $486,585$555,000 and an accumulated deficit of $5,328,786$5,397,209 at June 30, 2018,March 31, 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'sCompany’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. As such, the Company may need to pursue additional sources of financing. There can be no assurances that the Company can secure additional financing.
 
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. Anentity 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 sixthree months ended June 30, 2018,March 31, 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.
 
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 sixthree months ended June 30, 2018,March 31, 2019, the Company borrowed $65,615$18,350 from a stockholder. The balancebalances due as of June 30, 2018March 31, 2019 and December 31, 20172018 were $343,870$375,070 and $278,255,$356,720, respectively. Interest expense associated with these loans were $3,787 and $7,133for$4,025 for the three and six months ended June 30, 2018, respectively,March 31, 2019 as compared to $3,991 and $6,614$3,345 for the three and six months ended June 30, 2018, respectively.March 31, 2018. Accrued interest on these loans were $36,494$48,462 and $29,361$44,437 at June 30, 2018March 31, 2019 and December 31, 2017,2018, 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, 2018March 31, 2019 and December 31, 20172018 amounts due to the stockholder were $15,000$22,500 and $10,000,$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.
 


AMANASU ENVIRONMENTAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018March 31, 2019
(Unaudited)
 
4. RELATED PARTY TRANSACTIONS (continued)
 
The Company also leases it office spaceCompany'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 the Company.$2,625 under a lease agreement which expires October 1, 2019. At June 30, 2018March 31, 2019 and December 31, 2017,2018, amounts due to the stockholder were $40,683$64,308 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 fromto affiliate in the accompanyaccompanying balance sheets. Duringsheets amounts due to related parties. The office in New York is rented at the six months ended June 30, 2018,rate of $328 each year and is also shared with Amanasu Techno Holdings Corp. In addition, the Company paid the stockholder $31,500 for accrued rent.maintains an office at Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan. The net balances due from Amanasu Techno Holdings at March 31, 2019 and December 31, 2018 were $68,796 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, 2018March 3, 2019 and December 31, 2017,2018, respectively. Interest expense associated with this loan was $556 for the three months ended March 31, 2019 as compared to $556 for the three months ended March 31. 2018. No terms for repayment have been established. Interest expense associated with this loan were $563 and $1,118 for the three and six months ended June 30, 2018 as compared to $1,113 and $1,113 for the three and six months ended June 30, 2017. As a result, the amount is classified as a current liability. Accrued interest on this loan were $7,824$9,518 and $6,706$8,962 at June 30, 2018March 31, 2019 and December 31, 2017,2018, 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) generate before December 31, 2017 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. The available NOL’s totaled approximately $3.6 million in the U.S. and $36,000 in Japan at December 31, 2017, which will expire in the years 2018 through 2037.The Company had approximately $45,000 NOL generated in the six months ended June 30, 2018 in the U.S., which can be used to offset 80 percent of future taxable income and can be carried forward indefinitely.
 
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, 2017,2018, we did not have any earnings from foreign subsidiaries and the international aspects of the Tax Act are not applicable.
 
In connection with the initial analysisThe Company had NOL carryforwards of the impact of the Tax Act, we remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverseapproximately $3.72 million in the future, which is generally 21%. As a result, we recorded a decreaseU.S. and $7,500 in net deferred tax assets of approximately $500,000 with a corresponding net adjustment to deferred income tax expense. These adjustments were fully offset by a decreaseJapan at March 31, 2019. Approximately $3.6 million in the valuation allowance. We have completedU.S. and recorded$7,500 in Japan will expire in the adjustments necessary under Staff Accounting Bulletin No. 118 related to the Tax Act.years 2019 through 2037, and $0.12 million can be carried forward indefinitely.
6. OPERATING LEASE LIABILITY
 
6. NEW AUTHORITATIVE ACCOUNTING GUIDANCEThe 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 CompanyCompany's lease does not expect recent accounting pronouncementsprovide 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 haveborrow an amount equal to the lease payments on a material effectcollateralized 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 its financial position, resultsthe consolidated balance sheet as of operations or cash flows.March 31, 2019:
Remainder 2019
$7,500
Total undiscounted future minimum lease payments
7,500
Less: Difference between undiscounted lease payments and discounted lease liabilities
641
Total operating lease liabilities – current portion
$6,859
Total rent expense under operating leases for the three months ended March 31, 2019 and 2018 was $3,750 and $3,750, respectively.
 
7. SUBSEQUENT EVENTS
 
The Company evaluated subsequent events, which are events or transactions that occurred after June 30, 2018March 31, 2019 through the issuance of the accompanying financial statements and determined that no significant subsequent event need to be recognized or disclosed.
 

 
ITEMITEM 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, 2017,2018, as filed with the Securities and Exchange Commission (“SEC”) on April 10, 20181, 2019 (the “Annual Report”).
 
Please note that 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 material working capital deficiency and an accumulated deficit at June 30, 2018,March 31, 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.
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.
 
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.
 

 
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, 2018March 31, 2019 and 2017.2018.
 
General and administrative expenses increased $1,899 (10.3%$4,326 (25.8%) to $20,363$21,075 for the three months ended June 30, 2018,March 31, 2019, as compared to $18,464$16,749 for the three months ended June 30, 2017,March 31, 2018, primarily as a result of by higher utility expenseprofessional and consulting and professionalregistration fees partially offset partially by lower entertainment and rent expenses. General and administrative expenses decreased $34,020 (47.8%) to $37,112 for the six months ended June 30, 2018, as compared to $71,132 for the six months ended June 30, 2017, primarily as a result of lower consulting and professional fees offset partially by higher automobile and utilitytravel expenses.
 
As a result of the above, the Company incurred lossesa loss from operations of $20,363 and $37,112$21,075 for the three and six months ended June 30, 2018March 31, 2019 as compared to $18,464 and $71,132$16,749 for the three and six months ended June 30, 2017.March 31, 2018.
 
Interest expense for the three and six months ended June 30, 2018 were $4,350 and $8,251, respectively,March 31, 2019 was $4,581 as compared to $3,991 and $6,614$3,901 for the three and six months ended June 30, 2017, respectively. These increases areMarch 31, 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 lossesloss of $24,713 and $45,363$25,656 for the three and six months ended June 30, 2018March 31. 2019 as compared to $22,455 and $77,746$20,650 for the three and six months ended June 30, 2017.March 31, 2018.
 
LIQUIDITY AND CAPITAL RESOURCES
 
Total current assets at June 30, 2018March 31, 2019 were $5,009$26,383 as compared to $5,433$9,563 at December 31, 2017.2018. 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, 2018March 31, 2019 were $491,594$581,383 as compared to $446,471$539,022 at December 31, 2017.This2018.This increase is primarily due to increases in advancesloans from stockholders.stockholders and accrued expenses 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 $45,547$25,541 to $486,585$555,000 at June 30, 2018March 31, 2019 as compared to $441,038$529,459 at December 31, 20172018 primarily due to increases in loans from stockholders and accrued expenses to related parties offset partially by an increase in advancesthe amount due from stockholders.related parties.
 
During the sixthree months ended June 30, 2018,March 31, 2019, the Company had a net decrease in cash of $424.$2,713. The Company’s principal sources and uses of funds were as follows:
 
Cash used in operating activities. For the sixthree months ended June 30, 2018,March 31, 2019, the Company used $51,682$8,052 in cash for operations as compared to using $49,686$43,051 in cash for the sixthree months ended June 30, 2017,March 31, 2019, primarily as a result of the decreasechange in accrued expenses – related parties offset mostly by the lower net loss.parties.
 
Cash provided by financing activities. Net cash provided by financing activities for the sixthree months ended June 30, 2018March 31, 2019 was $51,258$5,339 as compared to $48,777$42,655 for the sixthree months ended June 30, 2017March 31, 2018 primarily as a result of higher advances from stockholders and officers offset partially by athe decrease in amounts due to related parties.loans from stockholders.
 

 
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, 2017,2018, as filed with the SEC on April 10, 20181, 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 20172018 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.
 

ITEMITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Not Applicable.
 
ITEM
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.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 March 31, 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.
 
PART II
 
ITEMPART 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.
 
ITEMITEM 1A. RISK FACTORS
 
Not applicable to smaller reporting companies.
 
ITEMITEM 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 March 31, 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 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEMITEM 5. OTHER INFORMATION
 
None.
 

 
ITEMITEM 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
 

  
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, 2018May 15, 2019By:/s/  Atsushi Maki 
  Atsushi Maki 
  Chief Executive Officer 
  Chief Financial Officer 
  Chief Accounting Officer 
 
 
 
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