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 September 30, 2004
[ ] 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 98109
------------------------------------------------------
(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 [ ]
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 [ ] No [ ] 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: 43,000,816 as of November 10, 2004.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
1
AMANASU ENVIRONMENT CORPORATION
QUARTERLY REPORT ON FORM 10QSB
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS
PART1-FINANCIAL INFORMATION
--------------------------
Item 1: Page #
-------
Financial Statements:
Balance Sheets as of September 30, 2004 (unaudited)
and December 31, 2003 (audited) 4
Statement of Operations for the Nine months
ended September 30, 2004 and 2003 (unaudited) 5
Statement of Operations for the three months
ended September 30, 2004 and 2003 (unaudited) 6
Statement of Cash Flows for the Nine months
ended September 30, 2004 and 2003 (unaudited) 7
Notes to Financial Statements (unaudited) 8
Item 2: Management Discussion & Analysis of
Financial Condition and Results of Operations 9
Item 3: Controls and Procedures 13
PART2-OTHER INFORMATION
----------------------
Item 1: Legal Proceedings 14
Item 2: Changes in Securities 14
Item 3: Defaults upon Senior Securities 14
Item 4: Submission of Matters to Vote of
Security holders 14
Item 5: Other Information 14
Item 6: Exhibits and Reports on Form 8-K 14
Signatures 15
2
ITEM 1. FINANCIAL STATEMENTS
GENERAL
The Company's unaudited financial statements for the Nine months ended September
30, 2004 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 September, 2004 are not necessarily indicative of the results that
can be expected for the fiscal year ending December 31, 2004.
3
AMANASU ENVIRONMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2004 2003
(Unaudited) (Audited)
----------------------------------
ASSETS
- ------
Current Assets:
Cash $ 22,902 $ 92,055
Miscellaneous receivables 1,985 1,585
---------- --------------
Total current assets 24,887 93,640
Fixed Assets:
Automotive equipment 25,859 25,859
Less accumulated depreciation 12,201 10,910
---------- --------------
Net fixed assets 13,658 14,949
Other Assets:
Rent deposit 5,000 5,000
Licensing agreement, net of accumulated
amortization of $39,375 and $24,088 307,125 322,412
---------- --------------
Total other assets 312,125 327,412
---------- --------------
Total Assets $ 350,670 $ 436,001
=========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accrued expenses $ 1,587 $ -
Stockholder advance 100 100
Deposits for Common Stock 99,900 -
--------------- --------------
Total current liabilities 101,587 100
Stockholders' Equity:
Common stock: authorized 100,000,000 shares of
$.001 par value; issued and outstanding
43,000,816 28,801 28,821
Additional paid-in capital 772,239 872,119
Deficit accumulated during
the development stage (551,957) (465,039)
---------- --------------
Total Stockholders' equity 249,083 435,901
---------- --------------
Total Liabilities and Stockholders' Equity $ 350,670 $ 436,001
=========== =============
These statements should be read in conjunction with the year-end financial statements.
4
AMANASU ENVIRONMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
(UNAUDITED)
Nine Month Period December 1, 1997
Ended September 30, (Date of Inception)
2004 2003 To September 30, 2004
--------------------------------------------
Expenses $ 87,148 $ 79,802 $ 555,497
------------ ------------ ----------
Operating loss (87,148) (79,802) (555,497)
Other Income - interest 230 286 3,540
Loss accumulated
during development stage $ (86,918) $ (79,516) $(551,957)
------------ ------------ ----------
Loss Per Share -
Basic and Diluted $ - $ -
============ ============
Weighted average
number of shares 43,000,816 42,335,816
outstanding
These statements should be read in conjunction with the year-end financial statements.
5
AMANASU ENVIRONMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
(UNAUDITED)
Quarter December 1, 1997
Ended September 30, (Date of Inception)
2004 2003 To September 30, 2004
--------------------------------------------
Expenses $ 29,082 $ 19,623 $ 555,497
Operating loss ($29,082) ($19,623) ($555,497)
Other Income - interest 24 86 3,540
Loss accumulated
during development stage $ (29,058) $ (19,537) $ (551,957)
------------ ------------ -----------
Loss Per Share -
Basic and Diluted $ - $ -
============ ============
Weighted average
number of shares 43,000,816 43,335,816
outstanding
These statements should be read in conjunction with the year-end financial statements.
6
AMANASU ENVIRONMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
December 1, 1997
Nine Month Periods Ended (Date of Inception)
September 30, To September 30,
2004 2003 2004
----------------------------------------------
CASH FLOWS FROM OPERATIONS:
Net Loss (86,918) (79,516) (551,957)
Changes Not Requiring The Outlay Of Cash:
Depreciation and amortization 16,578 16,572 51,576
Services provided for common stock - - 70,000
Changes in Assets and Liabilities:
Increase in miscellaneous receivables (400) - (1,985)
Increase in accrued expenses 1,587 - 1,587
--------- --------- ----------
NET CASH CONSUMED BY
OPERATING ACTIVITIES (69,153) (62,944) (430,779)
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of licensing agreement - - (155,000)
Purchase of automobile - - (25,859)
Rent deposit for warehouse lease - 3,028 (5,000)
--------- --------- ----------
NET CASH CONSUMED BY
INVESTING ACTIVITIES - 3,028 (185,859)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of common stock - 100,000 539,540
Advances received in anticipation of
common stock sales - - 100,000
--------- --------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES - 100,000 639,540
--------- --------- ----------
Net change in cash (69,153) 40,084 22,902
Cash balance, beginning of period 92,055 78,432 -
--------- --------- ----------
Cash balance, end of period $ 22,902 $118,516 $ 22,902
--------- --------- ----------
These statements should be read in conjunction with the year-end financial statements.
7
AMANASU ENVIRONMENT CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2004
1. BASIS OF PRESENTATION
The unaudited interim consolidated financial statements of Amanasu Environment
Corporation (the "Company") as of September 30, 2004 and for the three and nine
month periods ended September 30, 2004 and 2003, respectively, have been
prepared in accordance with generally accepted accounting principles. 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 three month and
nine month periods ended September 30, 2004 are not necessarily indicative of
the results to be expected for the full fiscal year ending December 31, 2004.
Certain information and disclosures normally included in the notes to the
consolidated 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 consolidated financial
statements should be read in conjunction with the financial statements of the
Company for the year ended December 31, 2003.
2. DEPOSITS FOR COMMON STOCK
During the quarter ended June 30, 2003, 20,000 shares were allotted to Reraise
Corporation, a private Japanese company, at a price of $4.99 per share for total
consideration of $99,900. As of the date hereof, the shares have not been issued
due to pending documentation needed to affect a new share issuance. As a result,
the $99,900 consideration received should be considered a liability, as opposed
to a capital contribution, until the shares have been issued. The Company will
rectify this discrepancy prior to the December 31, 2004 year end.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND OR PLAN OF OPERATION
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, 2003.
COMPANY OVERVIEW
Amanasu Environment Corporation, formerly known as Amanasu Energy
Corporation (the "Company"), is a development stage company. It has
acquired the exclusive, worldwide licensee 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 and testing the technologies for
commercial sale. For each such technology, the Company has acquired
proto-type or demonstrational units from the respective licensor of the
technology. The Company also has conducted various testing on these
units to determine the commercial viability of the underlying
technology. As a result of such testing, the Company believes that
its technologies are commercially viable and are ready for commercial
sale. It is the present intention of the Company not to engage in
the actual production and sale of its products. Rather, it is seeking
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 warranty and
post-warranty service and repair. The Company can not predict whether
it will be successful in establishing affiliations with any such
company, or whether it will be able to successfully produce and
market its products. To date the Company has entered into negotiations with
various companies however terms have not been finalized.
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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 believes that the prior pricing structure for its furnaces
was not competitive, and it is currently seeking ways to lower its
manufacturing costs. In an effort to lower manufacturing costs, the
Company is attempting to locate alternate suppliers that are less
costly than currently identified suppliers. It also will attempt to
re-design certain components of the furnace so as to reduce the
manufacturing cost per component. The Company anticipates that it will
sell furnaces with daily disposal capacities of 50 tons, however, it
may seek to increase daily capacities based upon product demand. At
this time, the Company does not have projected prices for a
re-designed unit, although the Company is seeking to achieve, through
its re-design efforts, a retail price of $200,000 for each ton of
capacity. Thus, a furnace with a two ton capacity would be expected
to retail for approximately $400,000. The Company can not predict
whether it will be successful in it redesign efforts 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 will attempt to re-design the boiler to accept waste
products such as non-toxic bulk waste, in addition to waste tires.
The Company believes that this redesign, if successful, will increase
demand of the product due to its increased use versatility. At this
time, the Company does not have projected prices for a re-designed
unit, although the Company will seek to achieve, through its re-design
efforts, a retail price of $100,000 for each ton of capacity. The
Company can not predict whether it will be successful in it redesign
efforts and achieve its desired pricing.
10
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.
PLAN OF OPERATION
The Company's plan of operations for the next 12 months is to
initiate, and if successful, complete the product refinement of the
three of the acquired technologies through joint venture or other
affiliations with companies competitive in each respective product
market in order to minimize expenditures. Product refinement includes
product redesign, improvements, or enhancements, and testing of existing
technologies. The product refinement costs of the three technologies
are estimated to be $1,500,000. The Company will be required to raise
funds in order fund the projected refinement costs. The Company is
presently in discussions with an engineering design firm and a furnace
company both located in Japan. The parties are discussing potential
arrangements where the Company would acquire an equity interest in
both companies. The terms of such arrangements have not been finalized
at this time. If successful, the Company would seek to capitalize on
the engineering expertise of companies, and sales, marketing, and
warranty repair of the furnace company. The Company cannot predict
whether it will be successful in raising the necessary capital or
whether it will be successful in its current negotiations or other
negotiations with prospective companies. Until such time as it
completes the product refinements of its technologies as discussed
herein, the Company does not expect to generate any revenues from
operations.
Given sufficient funds are raised, the Company plans on refining the Amanasu
Furnace first as sales of similar furnaces in Japan have increased over the past
year. The Company will compete in the market by lowering its manufacturing
costs and thus selling price by locating alternate suppliers that are less
costly than currently identified suppliers and attempting to re-design
certain components of the furnace so as to reduce the manufacturing
cost per component. To date the Company has entered into negotiations with
various suppliers and affiliations with companies competitive in each respective
product market however terms have not been finalized at this time. The Company
will market the Amanasu furnace with a two ton capacity which would be
expected to retail for approximately $400,000. The Company can not
predict whether it will be successful in it redesign efforts and
achieve its desired pricing.
11
The Company's cash requirements for the next 12 months other than product
refinement costs are estimated to be $150,000. This amount is comprised of the
following estimate expenditures:
- - $ 43,000 for administrative salaries including salaries paid to current
and projected staff and consultants,
- - $ 85,000 for office expenses including meals and entertainment, travel,
and rental of office in Seattle,
- - $ 22,000 for audit and other professional fees,
The Company is seeking to raise a minimum of $150,000 in the next 12 months
through shareholder advances from Mr. Atsushi Maki, a principle shareholder and
Director, to support its working capital needs as described above. The Company
also plans on raising a further $50,000 through the public or private offering
of its debt or equity securities.
In addition to the above described capital requirements, the Company will be
required to raise additional funds in order for it to commence full scale
production. The amount of such funds is estimated to be $1,500,000. The Company
cannot predict whether it will be successful in raising any capital
efforts. If the Company is unsuccessful in raising at least $150,000, it may
not be able to complete its plan of operations as discussed above.
The Company has no material commitments for capital at this time other than as
described above.
The Company does not expect to acquire new or sell its existing technologies
within the next 12 months.
The Company expects to hire additional employees in its office in Japan to fill
positions relating to sales and marketing of its products.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company did not generate any revenues for the nine months ended September
30, 2004 or for the same period in 2003 except for interest earned in bank
deposits in the amount of $ 230 and $286 respectively.
Total expenses for the nine month period ending September 30, 2004 was $ 87,148
compared to $ 79,802 for the same period of 2003. The increase was due to
increase in rent and salaries.
Total expenses for the 3 month period ending September 30, 2004 was $ 29,058
compared to $19,537 for the same period in 2003. The increase was due to an
increase in rent and salaries.
In the event that the Company does not generate revenues in the next 12
months, the Company plans to obtain additional private placements and
loans from the Company's Director, Atsushi Maki in the amount of $150,000
without interest or stated terms of repayment. The Company does anticipate
business opportunities, however those opportunities remain uncertain to
date.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2004, working capital was negative $76,700 and the deficit
accumulated was $ 551,957. Past recurring losses and inability to generate
sufficient cash flow from normal operations to meet its obligations as they
become due, raises doubt about the Company's ability to continue as a going
concern. The Company's ability to continue in existence is dependent upon
obtaining the necessary $150,000 needed to fund working capital needs and the
further $1,500,000 needed to commence full scale production.
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.
13
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.
None
14
SIGNATURES
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: November 15, 2004
/s/ Atsushi Maki
_______________________________
Atsushi Maki
Chief Executive Officer
Chief Financial Officer
Chief Accounting Officer
15