UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period ended March 31, 2005
| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE Act of 1934 |
For the transition period from ___ to ___.
Commission file number: 000-32905
AMANASU ENVIRONMENT CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada | | 98-0347883 |
| (State or other jurisdiction of organization) | | (IRS Employer Identification No.) |
701 Fifth Avenue, 42nd Floor, Seattle, WA 98104
(Address of principal executive offices)
206-262-8188
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o N/A x
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 44,020,816 as of May 10, 2005. Transitional Small Business Disclosure Format: Yes o No x
AMANASU ENVIRONMENT CORPORATION QUARTERLY REPORT ON FORM 10QSB
FOR THE THREE MONTHS ENDED MARCH 31, 2005
TABLE OF CONTENTS
PART 1 - FINANCIAL INFORMATION |
| | |
| | |
| Item 1: | Page # |
| | |
| | |
| Financial Statements: | |
| | |
| 4 |
| | |
| 5 |
| | |
| 6 |
| | |
| 7 |
| | |
| 9 |
| | |
| 13 |
| | |
| | |
| | |
PART 2 - OTHER INFORMATION |
| | |
| | |
| 13 |
| 13 |
| 13 |
| 13 |
| 13 |
| 13 |
| | |
| 14 |
GENERAL
The Company's unaudited financial statements for the three months ended March 31, 2005 are included with this Form 10-QSB. The unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three months ended March 31, 2005 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2005.
AMANASU ENVIRONMENT CORPORATION
(A Development Stage Company)
(Unaudited)
| | | March 31, 2005 (Unaudited) | | December 31, 2004 (Audited) | |
ASSETS | | | | | |
| Current Assets: | | | | | | | |
| Cash | | $ | 2,911,796 | | $ | 9,459 | |
| Miscellaneous receivables | | | 1,885 | | | 1,885 | |
| Total current assets | | | 2,913,681 | | | 11,344 | |
| | | | | | | | |
| Fixed Assets: | | | | | | | |
| Automotive equipment | | | 25,859 | | | 25,859 | |
| Less accumulated depreciation | | | 13,129 | | | 12,685 | |
| Net fixed assets | | | 12,730 | | | 13,174 | |
| | | | | | | | |
| Other Assets: | | | | | | | |
| Rent deposits | | | 143,595 | | | 5,000 | |
| Licensing agreement, net of accumulated amortization of $49,566 and $44,470 | | | 296,934 | | | 302,030 | |
| Investments | | | 390,000 | | | - | |
| Total other assets | | | 830,529 | | | 307,030 | |
| Total Assets | | $ | 3,756,940 | | $ | 331,548 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
| Current Liabilities: | | | | | | | |
| Accrued expenses | | $ | 3,266 | | $ | 2,990 | |
| Stockholder advance | | | 100 | | | 100 | |
| Total current liabilities | | | 3,366 | | | 3,090 | |
| | | | | | | | |
| Stockholders’ Equity: | | | | | | | |
| Common stock: authorized 100,000,000 shares of $.001 par value; issued and outstanding 44,020,816 and 43,020,816, respectively | | | 44,021 | | | 43,021 | |
| Additional paid-in capital | | | 4,356,919 | | | 857,919 | |
| | | | | | | | |
| Deficit accumulated during the development stage | | | (647,366 | ) | | (572,482 | ) |
| Total Stockholders’ equity | | | 3.753,574 | | | 328,458 | |
| Total Liabilities and Stockholders’ Equity | | $ | 3,756,940 | | $ | 331,548 | |
These statements should be read in conjunction with the year-end financial statements.
AMANASU ENVIRONMENT CORPORATION
(A Development Stage Company)
ACCUMULATED DURING DEVELOPMENT STAGE
(Unaudited)
| | | Three Month Periods Ended March 31, | | February 22, 1999 (Date of Inception) | |
| | | | 2005 | | | 2004 | | To March 31, 2005 | |
| Expenses | | $ | 75,989 | | $ | 22,580 | | $ | 651,939 | |
| Operating loss | | | (75,989 | ) | | (22,580 | ) | | (651,939 | ) |
| Other Income - interest | | | 1,105 | | | 78 | | | 4,573 | |
| | | | | | | | | | | |
| Loss accumulated during development stage | | $ | (74,884 | ) | $ | (22,502 | ) | $ | (647,366 | ) |
| | | | | | | | | | | |
| Loss Per Share - | | | | | | | | | | |
| Basic and Diluted | | $ | - | | $ | - | | | | |
| | | | | | | | | | | |
| Weighted average number of shares outstanding | | | 43,765,261 | | | 41,950,816 | | | | |
These statements should be read in conjunction with the year-end financial statements.
AMANASU ENVIRONMENT CORPORATION
A Development Stage Company)
(Unaudited)
| | | Three Month Periods Ended March 31 | | February 22, 1999 (Date of Inception) To March 31 2005 | |
| | | 2005 | | 2004 | | | |
CASH FLOWS FROM OPERATIONS: | | | | | | | | | | |
| Net Loss | | $ | (74,884 | ) | $ | (22,502 | ) | $ | (647,366 | ) |
| Charges Not Requiring The Outlay Of Cash: | | | | | | | | | | |
| Depreciation and amortization | | | 5,540 | | | 5,539 | | | 62,695 | |
| Services provided for common stock | | | - | | | - | | | 70,000 | |
| Changes in Assets and Liabilities: | | | | | | | | | | |
| Increase (decrease) in accrued expenses | | | 276 | | | 1,948 | | | 3,266 | |
| Increase in miscellaneous receivables | | | (751 | ) | | - | | | (1,885 | ) |
| | | | | | | | | | | |
Net Cash Consumed By Operating Activities | | | (69,068 | ) | | (15,015 | ) | | (513,290 | ) |
| | | | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | |
| Acquisition of licensing agreement | | | - | | | - | | | (155,000 | ) |
| Investments in joint ventures | | | (390,000 | ) | | - | | | (390,000 | ) |
| Purchase of automobile | | | - | | | - | | | (25,859 | ) |
| Rent deposits | | | 138,595 | | | - | | | (143,595 | ) |
| | | | | | | | | | | |
Net Cash Consumed By Investing Activities | | | (528,595 | ) | | - | | | (714,454 | ) |
| | | | | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | |
| Sales of common stock | | | 3,500,000 | | | - | | | 4,139,440 | |
| Advances received in anticipation of common stock sales | | | - | | | - | | | 100 | |
| | | | | | | | | | | |
Net Cash Provided By Financing Activities | | | 3,500,000 | | | - | | | 4,139,540 | |
| | | | | | | | | | | |
| Net change in cash | | | 2,902,337 | | | (15,015 | ) | | 2,911,796 | |
| Cash balance, beginning of period | | | 9,459 | | | 92,055 | | | - | |
| | | | | | | | | | | |
| Cash balance, end of period | | $ | 2,911,796 | | $ | 77,040 | | $ | 2,911,796 | |
These statements should be read in conjunction with the year-end financial statements.
AMANASU ENVIRONMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS March 31, 2005
(Unaudited)
The unaudited interim financial statements of Amanasu Environment Corporation (“the Company”) as of March 31, 2005 and for the three month periods ended March 31, 2005 and 2004, have been prepared in accordance with accounting principles generally accepted in the United State of America. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such periods. The results of operations for the quarter ended March 31, 2005 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2005.
Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company included in the annual report on Form 10-KSB for the year ended December 31, 2004.
Shares of common stock totaling 1,000,000 shares were sold in a private transaction during the quarter, yielding proceeds of $3,500,000.
The Company made two investments during the quarter: one for $290,000 in a company that produces and markets an incinerator for the treatment of medical waste. This investment will provide the Company a 20% interest in this venture. The second investment, for $100,000 is in a joint venture to produce water purification systems. There was no activity in either of these ventures in this quarter.
AMANASU ENVIRONMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS March 31, 2005
(Unaudited)
The principal items of expense included on the statement of operations and deficit are presented below:
| | | Three Month Periods Ended | |
| | | March 31, 2005 | | March 31, 2004 | |
| | | | | | | | |
| Rent | | $ | 57,613 | | $ | 4,025 | |
| Depreciation and amortization | | | 5,540 | | | 5,540 | |
| Professional fees | | | 4,965 | | | 7,675 | |
| Salaries | | | 4,350 | | | 4,553 | |
| Other expenses | | | 3,521 | | | 787 | |
| Total expenses | | $ | 75,989 | | $ | 22,580 | |
During the quarter ended March 31, 2005, the Company leased an office and an apartment in Tokyo. Monthly rent is $12,500 for the apartment and $1,925 for the office. Security deposits totaling $138,595 were paid during the quarter.
Cautionary Statement
SAFE HARBOR
This Form 10QSB 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-KSB 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 Company's Financial Statements, including the Notes thereto, appearing elsewhere in this Quarterly Report and in the Annual Report for the year ended December 31, 2004.
COMPANY OVERVIEW
The Company is a development stage company and significant risks exist with respect to its business. 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 can not predict whether it will be successful in developing commercial products, or establishing affiliations with any operating company.
PRODUCTS
Amanasu Furnace
The Amanasu furnace is a waste disposal system that safely and efficiently disposes of toxic and hazardous wastes. The system has three general features; the proprietary combustion burner, the furnace compartment, and the gas processing compartment.
The Company believed that the prior pricing structure for its furnaces was not competitive, and it was seeking ways to lower its manufacturing costs. In an effort to lower manufacturing costs, the Company was attempting to locate alternate suppliers that were less costly than currently identified suppliers. It also would attempt to re-design certain components of the furnace so as to reduce the manufacturing cost per component. However, even though the Company has made a great effort to meet its goal, the Company has been confronted with several difficulties and has started reconsidering to alter the function of original furnace which manages daily wastes to a furnace which particularly manages specific waste such as industrial and medical waste, and simultaneously, the Company also seeks to potential manufacturers and/or organizations to sell right for them to utilize the Company’s patented technologies and adopt the technologies to their own use and benefit. Additionally, the Company has entered into an agreement with a furnace producing company, Kogure Works Co, Ltd., with 34 years of successful business history, has more advanced technologies of furnac in Japan, and its furnace is produced comparatively in less-cost. The pricing of the product is $100,000/t and eventually reducing the price to 20% less is ideal. A formal agreement has been entered into by Kogure Works Co., Ltd. and the Company, and the Company has funded $290,000 to Kogure for the purpose of promotion of Kogure’s incinerator to State Environmental Protection Administration of China and to receive a purchase order from the organization. The Company will cooperate with Kogure to succeed on this project and expand its market place in Asia. The Company can not predict whether it will be successful in the alternation of structure and achieve its desired pricing.
Fire Bird Boiler.
The Fire Bird Boiler technology is a patented process which incinerates whole waste tires in a non polluting manner emitting heat or steam in the incineration process. The technology provides for combustion efficiency and seeks to minimize dioxin generation which is generally a by-product of imperfect combustion.
The Company believes that the Fire Bird Boiler is an effective technology for the dual purpose of incinerating waste tires and generating heat. However, the Company has recognized that the supply of waste tires in certain markets, including the United States, has been greatly reduced due to the effect of recent efforts to recycle waste tires. Thus, the reduction in the available supply of waste tires in these markets has limited the market potential of the boiler. As a result, the Company has been confronted with severe marketing difficulties for Fire Bird at present, and will seek to refine the boiler to accept other forms of waste including hazardous waste. The Company projects that necessary refine time will be enormous to estimate, therefore the Company will see how things go thoroughly and determine the appropriate time to finance for the refinement. The Company might need to utilize Kogure’s manufacturing facility and equipment for the case of production. However the detailed projection has not been discussed yet at this present time.
The Company will have no relationship with its former manufacturing company, Ishimaki Seiki in Ishimaki-city, Japan. Alternatively, the Company may sub-contract the assembly and component manufacturing to firms located in proximity to its customer so as to eliminate excessive shipping charges. However, no such arrangements have been established by the Company at this time.
Ring-tube Desalinization Equipment
The Ring-Tube technology is used as a filter to purify seawater into drinking water and also treats sewage and wastewater, by removing pollutants and bacteria. The equipment filters bacteria and other impurities through its fine rings and comb type filter and reduces the presence of inhibiting scales on the equipment. The impurities are then destroyed by the high pressure and temperature in the ring-tube. The Company believes that its technology is more cost efficient to construct and operate than conventional RO equipment. Its fresh water recovery rate is 95% compared with less than 40% for a RO method. Moreover, water produced from the Company's technology retains a certain amount of salt and minerals and does not required a pH adjustment. RO filtration removes all minerals and salt, requiring minerals to be added to improve flavor, and an adjustment to reduce pH levels. The reject brine resulting from RO filtration is discharged in the ocean creating higher salt concentrations in such areas, however, the by-product from the Company's technology is sufficiently condensed allowing it to be sold as a salt product.
The Company believes that the existing capacity of the Ring-Tube Desalination equipment is commercially insufficient for its targeted markets because the equipment is a hand-made manufacturing and it leads high cost production. Also there are many similar production companies which promote water purification systems in Japan therefore reducing the cost of manufacturing is the key to succeed in the competitive market. Consequently, the Company has entered into an agreement with Shinwa Yosetsu, a subcontract manufacturing company which can manage Sakagami’s technology under the instruction that may result in less-cost production. The Company joint and cooperate with Shinwa Yosetsu investing $100,000 to establish a new company for the joint venture project to progress complete manufacturing and sales plan. This technology has not been commercially produced yet.
PLAN OF OPERATION
The Company was aware of an option of business cooperation with a company in the same industry. The Company has entered into an agreement with a furnace producing company, Kogure Works Co, Ltd., with 34 years of successful business history and has more advanced technologies of furnace with less-cost production in Japan, and its consideration of cooperation with them investing the capital of $290,000.
The Company has entered into an agreement for co-establishing a new company with Shinwa Yosetsu, a subcontract company of manufacturing Water desalination system. The Company has financed approximately $100,000 for the co-establishing a new company with Shinwa Yosetsu.
Other than the provision of alternating business planning costs discussed above, the Company estimates that its operating overhead, which includes general and administrative charges, will be approximately $150,000 for the next 12 months. This amount is comprised of the following estimated costs; $80,000 in annual salaries for office personnel and consultants, $70,000 for rent, $20,000 for professional fees and $12,000 for miscellaneous expenses. The Company does not anticipate paying salaries to any of its officers for the next 12 months. The Company has sufficient cash on hand to support its overhead for the next 12 months but no material commitments for capital at this time other than as described above.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company did not generate any revenues for the three months ended March 31, 2005 or for the same period in 2004 except for interest earned in bank deposits in the amount of $1,105 and $78 respectively.
Total expenses for the three months period ending March 31, 2005 was $75,989 compared to $22,580 for the same period of 2004. The increase was due principally to higher rent, the result of opening a Tokyo office during the quarter.
The Company sold 1,000,000 shares of its common stock to Hisako Kodaka and obtained yielding proceeds of $3,500,000 during the first tree months of 2005. The Company believes that the amount of liquidity and capital resources will be sufficient for the operation of the Company for next 12 months.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 2005 cash used in operating activities was $69,068 compared to $ 15,015 for the same period in 2004. The increase was due to increase in rent and salaries.
In the three months ended March 31, 2005, there were cash used in investing or financing activities. On March 8, the Company entered into an agreement with Kogure Works. Co., LTD. to fund $290,000 to Kogure for the purpose of promotion of Kogure’s incinerator to State Environmental Protection Administration of China and to receive a purchase order from the organization. And on March 8, 2005 the Company also entered into an agreement with Shinwa Yosetsu to fund $100,000 to establish a new company in order to conduct a project. That purpose of this project is to establish facilities to manufacture plants of water purification system and/or sea water desalination system and open the market in various countries in Asia. The Company paid above mentioned amount to the parties respectively.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
Item 3. Effectiveness of the registrant's disclosure controls and procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934) under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer as of a date within 90 days of the filings date of Form 10QSB. Based on and as of the date of such evaluation, the aforementioned officers have concluded that the Company's disclosure controls and procedures have functioned effectively so as to provide information necessary whether:
(i) this quarterly report on Form 10 QSB contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report on Form 10 QSB, and(ii) the financial statements, and other financial information included in this quarterly report on Form 10 QSB, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report on Form 10 QSB.
CHANGES IN INTERNAL CONTROLS
There have been no significant changes in the Company's internal controls or in other factors since the date of the Chief Executive Officer's, Chief Financial Officer's and Chief Accounting Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regards to significant deficiencies and material weaknesses.
Part II OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Securityholders.
None
Item 5. Other Information.
None
Item 6. Exhibits.
(a). Furnish the Exhibits required by Item 601 of Regulation S-B.
Exhibit 31 - Certification Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002.
Exhibit 32 - Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.
(b) Reports on Form 8-K.
On March 8, 2005, Amanasu Environment Corporation ("the Company") entered into an agreement with Kogure Works. Co., LTD. ("Kogure”) to fund $290,000 to Kogure for the purpose of promotion of Kogure’s incinerator to State Environmental Protection Administration of China and to receive a purchase order from the organization.
On March 8, 2005, Amanasu Environment Corporation ("the Company") entered into an agreement with Shinwa Yosetsu ("Shinwa Yosetsu”) to fund $ 100,000 to establish a new company in order to conduct a project. The purpose of this project is to establish facilities to manufacture plants of water purification system and/or sea water desalination system and open the market in various countries in Asia.
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMANASU ENVIRONMENT CORPORATION
Date: May 10, 2005
/s/ Atsushi Maki
_______________________________
Atsushi Maki
Chief Executive Officer
Chief Financial Officer
Chief Accounting Officer
14
