ITEM 2. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This
quarterly report on Form 10-Q and other reports filed by Amanasu
Environmental Corporation and its wholly owned subsidiaries,
collectively the “Company”, “we”,
“our”, and “us”) from time to time with the
U.S. Securities and Exchange Commission (the “SEC”)
contain or may contain forward-looking statements and information
that are based upon beliefs of, and information currently available
to, the Company’s management as well as estimates and
assumptions made by Company’s management. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which are only predictions and speak only as of the
date hereof. When used in the filings, the words
“anticipate,” “believe,”
“estimate,” “expect,” “future,”
“intend,” “plan,” or the negative of these
terms and similar expressions as they relate to the Company or the
Company’s management identify forward-looking
statements. Such statements reflect the current view of
the Company with respect to future events and are subject to risks,
uncertainties, assumptions, and other factors, including the risks
contained in the “Risk Factors” section of the
Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 2020, as filed with the Securities and Exchange
Commission (“SEC”) on March 30, 2021 (the “Annual
Report”), relating to the Company’s industry, the
Company’s operations and results of operations, and any
businesses that the Company may acquire. Should one or
more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may differ
significantly from those anticipated, believed, estimated,
expected, intended, or planned.
Although
the Company believes that the expectations reflected in the
forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance, or
achievements. Except as required by applicable law,
including the securities laws of the United States, the Company
does not intend to update any of the forward-looking statements to
conform these statements to actual results.
Our
unaudited condensed consolidated financial statements are prepared
in accordance with accounting principles generally accepted in the
United States (“GAAP”). These accounting principles
require us to make certain estimates, judgments and assumptions. We
believe that the estimates, judgments and assumptions upon which we
rely are reasonable based upon information available to us at the
time that these estimates, judgments and assumptions are
made. These estimates, judgments and assumptions can
affect the reported amounts of assets and liabilities as of the
date of the consolidated financial statements as well as the
reported amounts of revenues and expenses during the periods
presented. Our consolidated financial statements would be affected
to the extent there are material differences between these
estimates and actual results. In many cases, the accounting
treatment of a particular transaction is specifically dictated by
GAAP and does not require management’s judgment in its
application. There are also areas in which management’s
judgment in selecting any available alternative would not produce a
materially different result. The following discussion should
be read in conjunction with our consolidated financial statements
and notes thereto appearing elsewhere in this report.
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 $729,665 and an accumulated deficit of $5,564,468 at March 31,
2021, 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 that might result from the outcome of this
uncertainty.
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. The Company will also continue to
investigate and develop technologies, which the Company believes
have great market potential. As such, the Company may need to
pursue additional sources of financing. There can be no assurances
that the Company can secure additional financing.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
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.
The Company’s operations may be affected by the recent and
ongoing outbreak of the coronavirus disease 2019 (COVID-19) which
in March 2020, was declared a pandemic by the World Health
Organization. The ultimate disruption which may be caused by the
outbreak is uncertain; however, it may result in a material adverse
impact on the Company’s financial position, operations and
cash flows. Possible areas that may be affected include, but are
not limited to, disruption to the Company’s ability to obtain
funding and performing further research on certain
projects.
Results of Operations
There were no revenues for the three months ended March 31, 2021
and 2020.
General and administrative expenses decreased $758 (3.6%) to
$20,294 for the three months ended March 31, 2021 as compared to
$21,052 for the three months ended March 31, 2020. These decreases
are mostly attributed mostly to the lower travel expenses and
professional fees.
As a result of the above, the Company incurred a loss from
operations of $20,294 for the three months ended March 31, 2021 as
compared to a loss from operations of $21,052 for the three months
ended March 31, 2020.
For the three months ended March 31, 2021, interest expense
decreased $16 to $4,939 as compared to $4,955 for the three months
ended March 31, 2020.
As a result of the above, the Company incurred a net loss of
$25,233 for the three months ended March 31, 2021 as compared to
$26,007 for the three months ended March 31, 2020.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
LIQUIDITY AND CAPITAL RESOURCES
Total current assets at March 31, 2021 were $1,161 as compared to
$47 at December 31, 2020. This increase is the result of a slightly
higher cash balance. Total current liabilities as of March 31, 2021
were $730,826 as compared to
$708,890 at December 31, 2020.This increase is primarily due to
increases in accrued expenses to related parties, accounts payable
and accrued expenses.
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 $20,822 to $729,665at March 31,
2021 as compared to $708,843 at December 31, 2020 primarily due to
increases in accrued expenses to related parties, accounts payable
abd accrued expenses to related parties.
During the three months ended March 31, 2021, the Company had a net
increase in cash of $1,114. The Company’s principal sources
and uses of funds were as follows:
Cash used in operating activities. For the three months ended March 31, 2021, the
Company used $3,036 in cash for operations as compared to using
$105 in cash for the three months ended March 31, 2020, primarily
as a result of the lower increase in accrued expenses to related
parties.
Cash provided by financing activities. Net cash provided by financing activities for the
three months ended March 31, 2021 was $4,150 as compared to using
$30 for the three months ended March 31, 2020 primarily as a result
of the increase in amounts due to affiliate and loans from
stockholders and officers.
OFF-BALANCE SHEET ARRANAGEMENTS
The Company has no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
The
Company prepares its financial statements in accordance with
accounting principles generally accepted in the United States of
America. Preparing financial statements in accordance with
generally accepted accounting principles requires the Company to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities as of the date of the financial statements and the
reported amounts of revenue and expenses during the reported
period.
Our critical accounting policies are described in the Notes to the
Financial Statements included in our Annual Report on Form 10-K for
the year ended December 31, 2020, as filed with the SEC on March
30, 2021 (the “Annual Report”). There have been no
changes in our critical accounting policies. Our significant
accounting policies are described in our notes to the 2020
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.
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 Principal Executive Officer (“PEO”)
and Principal Accounting Officer (“PAO”), 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 PEO and PAO, 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 PEO and
PAO concluded that the Company’s disclosure controls and
procedures were 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, 2021.
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
March 31, 2021, 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.