UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
| T | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | | For the period ended March 31, 2006 |
| | | |
| * | | 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: 44,000,816 as of November 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
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PART1-FINANCIAL INFORMATION
GENERAL
The Company's unaudited financial statements for the nine months ended March 31, 2006 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 nine months ended March 31, 2006 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2006.
AMANASU ENVIRONMENT CORPORATION (A Development Stage Company)
BALANCE SHEETS
(Unaudited)
| | | September 30, 2005 (Unaudited) | | December 31, 2004 (Audited) | |
ASSETS | | | | | |
| Current Assets: | | | | | |
| Cash | | $ | 175,266 | | $ | 9,459 | |
| Miscellaneous receivables | | | 95,885 | | | 1,885 | |
| Total current assets | | | 271,151 | | | 11,344 | |
| | | | | | | | |
| Fixed Assets: | | | | | | | |
| Automotive equipment | | | 25,859 | | | 25,859 | |
| Operating equipment | | | 400,000 | | | -____ | |
| Total equipment | | | 425,859 | | | 25,859 | |
| Less accumulated depreciation | | | 14,016 | | | 12,685 | |
| Net fixed assets | | | 411,843 | | | 13,174 | |
| | | | | | | | |
| Other Assets: | | | | | | | |
| Investment-Held to Maturity (certificate of deposit) | | | 2,000,000 | | | - | |
| Rent deposits | | | 143,595 | | | 5,000 | |
| Investments in joint ventures | | | 390,000 | | | - | |
| Licensing agreement, net of accumulated amortization of $59,756 and $44,470 | | | 286,744 | | | 302,030 | |
| | | | | | | | |
| Total other assets | | | 2,820,339 | | | 307,030 | |
| Total Assets | | $ | 3,503,333 | | $ | 331,548 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
| Current Liabilities: | | | | | | | |
| Accrued expenses | | $ | 1,080 | | $ | 2,990 | |
| Stockholder advance | | | 100 | | | 100 | |
| Deposit for capital stock | | | - | | | 99,900 | |
| Total current liabilities | | | 1,180 | | | 102,990 | |
| | | | | | | | |
| Stockholders’ Equity: | | | | | | | |
| Common stock: authorized 100,000,000 shares of $.001 par value; issued and outstanding 44,000,816 and 43,000,816, respectively | | | 44,001 | | | 43,001 | |
| Additional paid-in capital | | | 4,257,039 | | | 758,039 | |
| Deficit accumulated during development stage | | | (798,887 | ) | | (572,482 | ) |
| Total stockholders’ equity | | | 3,502,153 | | | 228,558 | |
| Total Liabilities and Stockholders’ Equity | | $ | 3,503,333 | | $ | 331,548 | |
These statements should be read in conjunction with the year-end financial statements.
AMANASU ENVIRONMENT CORPORATION (A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
(Unaudited)
| | | Nine Month Periods Ended March 31, | | February 22, 1999 (Date of Inception) To March 31, 2006 | |
| | | 2005 | | 2004 | | | |
| Expenses | | $ | 258,550 | | $ | 87,148 | | $ | 834,500 | |
| Operating loss | | | (258,550 | ) | | (87,148 | ) | | (834,500 | ) |
| Other Income - interest | | | 32,145 | | | 230 | | | 35,613 | |
| | | | | | | | | | | |
| Loss accumulated during development stage | | $ | (226,405 | ) | $ | (86,918 | ) | $ | (798,887 | ) |
| | | | | | | | | | | |
| Loss Per Share - | | | | | | | | | | |
| Basic and Diluted | | $ | (.01 | ) | $ | - | | | | |
| | | | | | | | | | | |
| Weighted average number of shares outstanding | | | 43,916,567 | | | 43,000,816 | | | | |
These statements should be read in conjunction with the year-end financial statements.
AMANASU ENVIRONMENT CORPORATION (A Development Stage Company)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
(Unaudited)
| | | Three Month Periods Ended September 30, | | February 22, 1999 (Date of Inception) To September 30, 2005 | |
| | | 2005 | | 2004 | | | |
| Expenses | | $ | 89,402 | | $ | 29,082 | | $ | 834,500 | |
| Operating loss | | | (89,402 | ) | | (29,082 | ) | | (834,500 | ) |
| Other Income - interest | | | 18,071 | | | 24 | | | 35,613 | |
| | | | | | | | | | | |
| Loss accumulated during development stage | | $ | (71,331 | ) | $ | (29,058 | ) | $ | (798,887 | ) |
| | | | | | | | | | | |
| Loss Per Share - | | | | | | | | | | |
| Basic and Diluted | | $ | - | | $ | - | | | | |
| | | | | | | | | | | |
| Weighted average number of shares outstanding | | | 44,000,816 | | | 43,000,816 | | | | |
These statements should be read in conjunction with the year-end financial statements.
AMANASU ENVIRONMENT CORPORATION (A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
| | | Nine Month Periods Ended September 30, | | February 22, 1999 (Date of Inception) To September 30, | |
| | | 2005 | | 2004 | | 2005 | |
CASH FLOWS FROM OPERATIONS: | | | | | | | |
| Net Loss | | $ | (226,405 | ) | $ | (86,918 | ) | $ | (798,887 | ) |
| Charges Not Requiring The Outlay Of Cash: | | | | | | | | | | |
| Depreciation and amortization | | | 16,617 | | | 16,578 | | | 73,772 | |
| Services provided for common stock | | | - | | | - | | | 70,000 | |
| Changes in Assets and Liabilities: | | | | | | | | | | |
| Increase (decrease) in accrued expenses | | | (1,910 | ) | | 1,587 | | | 1,080 | |
| Increase in miscellaneous receivables | | | (94,000 | ) | | (400 | ) | | (95,885 | ) |
| | | | | | | | | | | |
Net Cash Consumed By Operating Activities | | | (305,698 | ) | | (69,153 | ) | | (749,920 | ) |
| | | | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | |
| Investment in certificate of deposit | | | (2,000,000 | ) | | - | | | (2,000,000 | ) |
| Acquisition of licensing agreement | | | - | | | - | | | (155,000 | ) |
| Investments in joint ventures | | | (390,000 | ) | | - | | | (390,000 | ) |
| Purchase of automobile | | | - | | | - | | | (25,859 | ) |
| Purchase of operation equipment | | | (400,000 | ) | | - | | | (400,000 | ) |
| Rent deposits | | | (138,595 | ) | | - | | | (143,595 | ) |
Net Cash Consumed By Investing Activities | | | (2,928,595 | ) | | - | | | (3,114,454 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | |
| Sales of common stock | | | 3,500,000 | | | - | | | 4,039,540 | |
| Advances received in anticipation of common stock sales | | | - | | | - | | | 100,000 | |
| Return of deposit for capital stock | | | (99,900 | ) | | - | | | (99,900 | ) |
Net Cash Provided By Financing Activities | | | 3,400,100 | | | - | | | 4,039,640 | |
| | | | | | | | | | | |
| Net change in cash | | | 165,807 | | | (69,153 | ) | | 175,266 | |
| Cash balance, beginning of period | | | 9,459 | | | 92,055 | | | - | |
| Cash balance, end of period | | $ | 175,266 | | $ | 22,902 | | $ | 175,266 | |
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, 2006
(Unaudited)
The unaudited interim financial statements of Amanasu Environment Corporation (“the Company”) as of September 30, 2005 and for the three month, and nine month periods ended September 30, 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 nine month period ended September 30, 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 for the year ended December 31, 2004.
The Company made several investments during the 2005 period: One is a $2,000,000 certificate of deposit; this certificate is due April 9, 2007 and bears interest at 3.48 %. A second investment is a $94,000 advance to a consultant who will provide marketing promotion of Company products; this advance bears interest at 7% and is due December 31, 2005. A third investment is a $400,000 purchase of a “Swing Melter”, a machine which dissolves ash, a by-product of many recycling plants; this machine will be used as a demonstration machine for marketing purposes; machines of this type are manufactured by Kogure Kabushikigaisha Corporation (Kogure), a firm in which the Company has made another investment, described below.
In addition to the investments noted above, the Company made two other investments during 2005. One of these is a $290,000 investment in Kogure, which originally was an equity investment. This investment has changed. The $290,000 has been applied to the acquisition from Kogure of licensing rights to the Swing Melter. Finally, $100,000 was used to form a joint venture with Shinwa Yosetsu, Ltd. This venture will manufacture in Japan, and sell, water purification and desalinization systems. This investment will be accounted for by the equity method under which the investment account will be adjusted at the end of each period to recognize the Company share of the results of operations of the joint venture.
AMANASU ENVIRONMENT CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2006
(Unaudited)
The principal items of expense included on the statement of operations and deficit are presented below:
| | | Nine Month Periods Ended | |
| | | June 30, 2005 | | June 30, 2004 | |
| | | | | | |
| Rent | | $ | 157,634 | | $ | 27,747 | |
| Depreciation and amortization | | | 16,617 | | | 16,578 | |
| Professional fees | | | 14,345 | | | 14,931 | |
| Salaries | | | 31,600 | | | 15,321 | |
| Travel | | | 12,578 | | | 10,527 | |
| Consulting | | | 20,000 | | | - | |
| Other expenses | | | 5,776 | | | 2,044 | |
| Total expenses | | $ | 258,550 | | $ | 87,148 | |
4. | SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION |
There was no cash paid for interest or income taxes during the periods being reported.
5. | RELATED PARTY TRANSACTIONS |
The wife of the president of the Company, who supervises most Company administrative activities, was paid a $20,000 consulting fee during the 2005 period.
| MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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, 2006.
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.
1. 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 licensed 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., has more advanced technologies of furnaces 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.
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. The Company is also expecting to expand its market place in China in connection with establishing a new company merging with MINMETALS in China.
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.
On April 11, 2005, the Company purchased a model plant of furnace for ash disposal called "Swing Melter" from Kogure Works Co., LTD., and paid the amount of $400,000 for the model on April 19, 2005. "Swing Melter" is a system of furnace for ash disposal currently patent pending by Kogure. Ash created and discharged from incinerators contains dioxin and other toxic substances, and the treatment of the remaining ash, in present circumstances, is in reclamation of lands in Japan. The expense of conducting the reclamation is approximately 30,000-50,000 yen / ton. The expense of the treatment of the ash using "Swing Melter" is around 15,000-20,000 yen / ton, and the by-product that remains after the process with the system is non-toxic and recyclable as construction material. In consideration of future environmental issues, the system is significant and a necessary equipment for the preservation of the earth. The Company will promote the product to various organizations and industries and will operate the model plant of "Swing Melter" to show the running system and operations to potential customers such as public cleaning/garbage management organizations (800 facilities) and industrial waste treatment agencies (4,000 facilities).
As of August 4th, 2005, Kogure's six proprietary rights (See "Patents" below) to the license of the technologies and parts in connection with constructing the rotary kiln and its title were transferred to Amanasu Technologies Corporation, and the amount of $290,000 that the Company previously funded to Kogure for marketing and promotion purposes replaced in as transfer fee. As a result, the Company possesses the exclusive worldwide right to the product, and can receive royalties from the sales of the rotary kiln by other companies including MINMETAL.
As of December 19th, 2005, the Company established a new company, Amanasu Holdings Corporation ("Amanasu Holdings"), located at 1-5 Suda-cho, Chiyoda-ku, Tokyo, as a subsidiary company of Amanasu Environment Corporation with 100 % control. Amanasu Holdings and the former employees of Kogure jointly established an incorporation, named Amanasu Echo Frontier Corporation ("Amanasu Echo Frontier"), with a capital of $240,000 (28,000,000 Yen) of which Amanasu Holdings invested $103,000 (12,000,000 Yen) in December, 2005, and have employed 10 former technicians of Kogure. Amanasu Echo Frontier, which conducts its operation as a subsidiary company of Amanasu Holdings, is mainly producing incinerator, furnace, and medical waste treatment plant using the 6 proprietary rights purchased from Kogure as stated above at a location of 1-24-8 Iwagami-cho, Maebashi, Gunma, Japan. The Company's business plan for 2006 is to sell 5 units of furnace for $2,440,000 (285,000,000 Yen) per unit in Japan and 3 units of medical waste treatment plants for $1,300,000- $1,700,000 (150,000,000-200,000,000 Yen) per unit in china. Also Amanasu Echo Frontier and Onyx, a used car sales company in Japan, has made a temporary agreement on an order of manufacturing and delivering an incinerator for $14,000,000 (1,650,000,000 Yen) to Onyx by the end of 2007.
The Company or Amanasu Echo Frontier is considering establishing an organization of a joint venture with MINMETAL in China for the purpose of conducting a joint marketing of medical waste treatment plant with MINMETAL. The establishment might take place in 2006 with total investment of 50,000,000 Yen, 51% of which will be invested by The Amanasu Environment or Amanasu Echo Frontier.
The Company was expecting to expand the distribution line over the country of Japan having a cooperation of Mitsui & Co., Ltd. ideally starting in April of 2006. However, consulting MINMETAL's will, the Company decided to refuse the involvement of Mitsui & Co., Ltd. to this project.
At this time the Company prefers to focus on the business of Kogure's products than on the Company's Fire Bird Boiler. Therefore, there has not been any expense incurred by the Fire Bird Boiler during the quarter and no further budget is set out respecting the product. However, the Company is willing to provide the license of Fire Bird Boiler to any business organizations that could make use of the technologies for their benefit.
The Company has entered into an agreement for co-establishing a new company with Shinwa Yosetsu, a subcontracted company manufacturing Water desalination system. The Company financed approximately $100,000 for the co-establishing of the new company, Amanasu Shinwa Corporation, as of March 14th, 2005. As of December 16th, 2005 Amanasu holdings invested an additional ? 10,000,000 into Amanasu Shiwa, in Japan. Amanasu Shinwa Corporation manufactures and distributes water purification systems and it had made a sale of approximately 30,000,000 YEN by the month of September 2005. Amanasu Holdings will invest $85,000 (10,000,000 Yen) for the following items:
1. Production of a model plant for the water purification system, managed by Amanasu Shinwa.
2. Five water purification units ($85,000 (10,000,000 Yen) per unit) for pools at sports clubs, that will be produced and distributed in Japan for the next 12 months.
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 $120,000 for the next 12 months. This amount is comprised of the following estimated costs; $10,000 in annual salaries for office personnel and consultants, $50,000 for rent, $20,000 for professional fees and $20,000 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. The Company and/or Amanasu Holdings will need issue and sell the shares to gain the capital of the operation. On April 8, 2005, the Company") entered into an agreement with Mr. Izuo Kato ("Mr. Kato") to loan $94,000 to Kato for the purpose of marketing, researching, development, networking and other expenses regarding a marketing promotion of the Company's products. Mr. Kato is the sole representative of the Company in the Japan area, and he strives for the Company to move on to a new stage where the Company could commence sales of its products and earn a profit. The Company loans him such amount to facilitate his project and assist in the success of the operation. Mr. Kato was expected to reimburse the amount on December 31, 2005; however, The Company granted Mr. Kato an extension of the reimbursement date to December 31, 2006. The Company will compensate him depending on the level of the achievement of his mission by the time of expiration date of this loan contract.
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.
“Patents”
| 1. | Rotary kiln (Patent number 3564012, as of July 2nd, 2005); 2. Rotary kiln-Taiwan (Patent number 131102, as of August 21st, 2001); 3. Gas lark (petition number 2000-358861, patent pending); 4. Ash melting furnace and incinerating system (petition number 2002-325560, patent pending); 5. The interior wall of the kiln (petition number 2004-208198, patent pending); and 6. The method of cooling down the kiln (petition number 2004-208199, patent pending) |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company did not generate any revenues for the three months ended September 30, 2005 or for the same period in 2004 except for interest earned in bank deposits in the amount of $18,071 and $24 respectively.
Total expenses for the nine months period ending September 30, 2005 was $258,550 compared to $87,148 for the same period of 2004. The increase was due principally to higher rent, the result of opening a Tokyo office during the quarter.
Total expenses for the three months period ending September 30, 2005 was $ 89,402 compared to $29,082 for the same period in 2004. The increase was due to an increase in management and marketing activities in Tokyo.
The Company sold 1,000,000 shares of its common stock at $3.50 per share to Hisako Kodaka and obtained proceeds of $3,500,000 during the first three 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 nine months ended September 30, 2005 cash used in operating activities was $305,698 compared to $ 69,153 for the same period in 2004. The increase was due to increase in rent and expenses.
Total assets as of September 30, 2005 were $3,503,333 representing an increase of $3,171,785 from total assets of $331,548 as of December 31, 2004.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
| 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 any internal control, including any corrective actions with regards to significant deficiencies and material weaknesses.
None
None
| DEFAULTS UPON SENIOR SECURITEIS |
None
| SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS |
None
None
| (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.
None
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 22, 2006
| /s/ Atsushi Maki | |
| | |
| Atsushi Maki | |
| Chief Executive Officer | |
| Chief Financial Officer | |
| Chief Accounting Officer | |
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