Report of Independent
Registered Public Accounting Firm
To the
Board of Directors and Stockholders of
Amanasu
Techno Holdings Corporation
Opinion on the Financial Statements
We have
audited the accompanying consolidated balance sheets of Amanasu
Techno Holdings Corporation (the “Company”) as of
December 31, 2020 and 2019, and the related consolidated statements
of operations, changes in stockholders’ deficit, and cash
flows for each of the two years in the period ended December 31,
2020, and the related notes (collectively referred to as the
“financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for each of the two
years in the period ended December 31, 2020, in conformity with
accounting principles generally accepted in the United States of
America.
Going Concern
The
accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As described in Note
2 to the financial statements, the Company had a working capital
deficit of $739,492, and accumulated deficit of 2,328,320 at
December 31, 2020, and a record of continuing losses. These
factors, among others, raise substantial doubt about the
Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are described
in Note 2 to the financial statements. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
Basis for Opinion
These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a
public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the
PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
The Company is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the
purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Critical Audit Matters
The critical audit matters are matters arising from the current
period audit of the financial statements that were communicated or
required to be communicated to the audit committee and that: (1)
relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging,
subjective or complex judgments. We determined that there are no
critical audit matters for current period.
/s/ Prager Metis CPA’s, LLC
We have served as the Company’s auditors since
2018
Hackensack, New Jersey
March
29, 2021
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2020 and 2019
1. ORGANIZATION AND BUSINESS
Organization of Company
Amanasu
Techno Holdings Corporation ("Company") was incorporated in the
State of Nevada on December 1, 1997 under the name of Avani
Manufacturing (China) Inc. The Company changed its name to Genesis
Water Technology on August 17, 1999, and to Supreme Group
International, Inc. on December 24, 2000. On June 7, 2001, it
changed its name to Amanasu Technologies Corporation. It changed
its name again on December 21, 2007 to Amanasu Techno Holdings
Corporation. The Company is a development stage company, and has
not conducted any operations or generated any revenue since its
inception.
On
January 4, 2008, the Company invested $1,837 for a 100% interest in
a newly formed subsidiary, Amanasu Techno Holdings Japan
Corporation (Japan), which is located in Tokyo. This subsidiary is
inactive since inception.
Business
The
Company is in development stage and continues to investigate and
develop technologies, which the Company believes have great market
potential.
2. GOING CONCERN
The
accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As
shown in the consolidated financial statements, the Company had a
working capital deficiency of $739,492 and an accumulated deficit
of $2,328,320 at December 31, 2020, 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
consolidated financial statements do not include any 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 or will have to rely on
loans from stockholders and officers to support operations. There
can be no assurances that the Company can secure additional
financing.
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.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States and include the Company and its wholly-owned
subsidiary. All significant inter-company accounts and transactions
have been eliminated.
Use of Estimates:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires that management make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Development Stage Company:
The
Company is considered to be in the development stage as defined in
ASC 915 “Development Stage
Entities.” The Company is devoting substantially all
of its efforts to the development of its business plans. The
Company has elected to adopt early application of Accounting
Standards Update No. 2014-10, Development Stage Entities (Topic
915): Elimination of Certain Financial Reporting Requirements; and
does not present or disclose inception-to-date information and
other remaining disclosure requirements of Topic 915.
Reclassification:
Certain
last year’s amounts were reclassified to conform with the
current year presentation.
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2020 and 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Cash and Cash Equivalents:
For
purposes of the statements of cash flows, the Company considers all
short-term debt securities purchased with an original maturity of
three months or less to be cash equivalents.
Fair Value of Financial Instruments:
The
Company has adopted the provisions of ASC Topic 820, Fair Value
Measurements and Disclosures”, which defines the fair value
as used in numerous pronouncements, establishes a framework for
measuring fair value and expands disclosure of fair value
measurements. ASC 820 defines fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market
participants on the measurement date. ASC 820 also establishes a
fair value hierarchy, which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs
when measuring fair value. ASC 820 describes three levels of inputs
that may be used to measure fair value:
Level 1
– quoted prices in active markets for identical assets or
liabilities.
Level 2
– quoted prices for similar assets and liabilities in active
markets or inputs that are observable.
Level 3
– inputs that are unobservable (for example cash flow
modeling inputs based on assumptions).
The
estimated fair value of certain financial instruments, including
cash, accrued expenses and loans from stockholder and officers are
carried at historical cost basis, which approximates fair values
because of the short-term maturing of these instruments. We have no
financial assets or liabilities measured at fair value on a
recurring basis.
Income Taxes:
The Company accounts for income taxes under the provisions of FASB
ASC Topic 740, “Income Tax,” which requires recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the consolidated
financial statements or tax returns. Deferred tax assets and
liabilities are recognized for the future tax consequence
attributable to the difference between the tax bases of assets and
liabilities and their reported amounts in the financial statements.
Deferred tax assets and liabilities are measured using the enacted
tax rate expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date. The Company establishes a valuation
when it is more likely than not that the assets will not be
recovered.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise’s financial
statements and prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken in a tax return.
ASC Topic 740.10.40 provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure, and transition. We have no material uncertain
tax positions for any of the reporting periods
presented.
New Accounting Pronouncements:
In
December 2019, the FASB issued ASU No. 2019-12, Income Taxes -
simplifying the accounting for income taxes (Topic 740), which is
meant to simplify the accounting for income taxes by removing
certain exceptions to the general principles in Topic 740, Income
Taxes. The amendment also improves consistent application and
simplify GAAP for other areas of Topic 740 by clarifying and
amending existing guidance. This ASU is effective January 1,
2021, and we do not expect the adoption of this standard to have a
significant impact on our financial position and results of
operations.
No
other recently issued accounting pronouncements had or are expected
to have a material impact on the Company’s consolidated
financial statements.
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2020 and 2019
4. RELATED PARTY TRANSACTIONS
The
Company receives periodic loans from its principal stockholders and
officers based upon the Company’s cash flow needs. There is
no written loan agreement between the Company and stockholders and
officers. All loans bear interest at 4.45% and due on demand. No
terms for repayment have been established. As a result, the amount
is classified as a current liability.
During
the years ended December 31, 2020 and 2019, the Company borrowed
$61,515 and $57,205, respectively, from a stockholder.
The
balances due as of December 31, 2020 and 2019 were $432,350 and
$370,835, respectively.
Interest
expense associated with these loans were $18,272 and $15,283 for
the years ended December 31, 2020 and 2019, respectively. Accrued
interest on these loans were $111,468 and $93,196 at December 31,
2020 and 2019, respectively.
The
Company has an arrangement with a stockholder of the Company to
perform consulting service. The agreement is not written and no
payment terms have been established. The fee is $10,000 annually.
As of December 31,2020 and 2019, amounts due to the stockholder
were $60,000 and $50,000, respectively.
The
Company leases it office in Vancouver Canada from a stockholder of
the Company at a monthly rate $2,500 under a lease agreement that
expires October 1, 2021. At December 31, 2020 and 2019, amounts due
to the stockholder were $71,422 and $46,943, including rent and
other expenses, respectively. The Company shares the space with
Amanasu Environmental Corporation, a reporting company under the
Securities Exchange Act of 1934. Amanasu Environmental Corporation
is responsible for 50% of the rent.
The
office in New York is rented at the rate of approximately $360 each
year and is also shared with Amanasu Environmental Corporation. In
addition, the Company maintains an office at Suite 905, 1-6-1
Senzoku Taito-Ku Tokyo Japan.
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2020 and 2019
5. INCOME TAXES
In accordance with the current tax law in the
U.S., the Company is subject to a corporate tax rate of 21% on its
taxable income. No provision for taxes is made for U.S. income tax
for the years ended December 31, 2020 and 2019 as it had no taxable
income.
Deferred income taxes are recorded to reflect the tax consequences
or benefits to future years of any temporary differences between
the tax basis of assets and liabilities, and of net operating loss
("NOL") carryforwards.
The Company has experienced losses
since its inception. As a result, it has incurred no Federal income
tax. In assessing the realization of deferred tax assets,
management considers whether it is more likely than not that some
portion or all of the deferred tax assets will be realized. The
ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in
making this assessment. Based on the assessment, management has
established a full valuation allowance against all of the deferred
tax asset relating to NOL’s for every period because it is
more likely than not that all of the deferred tax asset will not be
realized.
The Company had NOL carryforwards of approximately $1.53 million at
December 31, 2020. Approximately $1.28 million will expire in the
years 2021 through 2037, and $0.25 million can be carried forward
indefinitely.
The tax
return for the years 2017, 2018 and 2019 are subject to audit by
the Internal Revenue Service.
The
reconciliation of income tax expense at the U.S. statutory rate of
21% to the Company’s effective tax rate is as
follows:
|
|
|
|
|
Income tax expense
at statutory rate
|
21%
|
21%
|
|
Change in valuation
allowance
|
(21%)
|
(21%)
|
|
Income tax
expense
|
-
|
-
|
The tax
effects of temporary differences that give rise to the
Company’s net deferred tax assets as of December 31, 2020 and
2019 are as follows:
|
|
|
|
|
Net Operating Loss
Carryforwards
|
$321,913
|
$305,237
|
|
Valuation
Allowance
|
(321,913)
|
(305,237)
|
|
Deferred Tax
Asset
|
$-
|
$-
|
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2020 and 2019
6. OPERATING LEASE LIABILITY
The
Company's executive offices are located at 244 Fifth Avenue 2nd
Floor New York, NY 10001 and Vancouver, British Columbia. The total
premises in Vancouver are 2,000 square feet and are leased at a
monthly rate of $2,500 under a lease agreement between the Company
and the Secretary of the Company's board of directors and the
stockholder of the Company, which expires October 1, 2021. The
Company shares the space with AEC, a reporting company under the
Securities Exchange Act of 1934. Our major shareholder and officer
own approximately 81% of AEC’s outstanding shares of common
stock. AEC is responsible for 50% of the rent or $1,250 each
month.
The
Company's lease does not provide an implicit rate, and therefore
the Company uses an estimated incremental borrowing rate as the
discount rate when measuring operating lease liabilities. The
incremental borrowing rate represents an estimate of the interest
rate the Company would incur at lease commencement to borrow an
amount equal to the lease payments on a collateralized basis over
the term of a lease. The Company used incremental borrowing rate of
5% for the calculation of operating lease liabilities.
Upon
adoption of ASC 842, Leases, on January 1, 2019 the Company
recorded $10,353 of right-of-use assets and related operating
leases liabilities. This asset was fully amortized as of September
30, 2019.
On October 1, 2019, the Company commenced a new lease with the same
stockholder from October 1, 2019 to September 30, 2021 with a
monthly payment of approximately $1,250. As such, the Company
recorded $28,492 of right-of-use assets and related
operating leases liabilities. For the year ended December 31, 2020,
the Company amortized $14,065 of right-of-use assets.
The
following table reconciles the undiscounted future minimum lease
under the non-cancelable operating leases with terms of more than
one year to the total lease liabilities recognized on the
consolidated balance sheet as of December 31, 2020:
|
2021
|
$11,250
|
|
Total
undiscounted future minimum lease payments
|
11,250
|
|
Less:
Difference between undiscounted lease payments and discounted lease
liabilities
|
(231)
|
|
Total
operating lease liabilities
|
11,019
|
|
Less
current portion
|
(11,019)
|
|
Long-term
lease liabilities
|
$-0-
|
Total
rent expense under operating leases for the year ended December 31,
2020 was $15,930 as compared to $15,948 for the year ended December
31, 2019.
7. DEPOSIT ON STOCK PURCHASE
During 2015, the Company received $61,030 for a deposit for the
purchase of common stock, this amount is classified as a current
liability in the accompanying balance sheets as of December 31,
2020 and 2019. No shares have been issued for these deposits as of
December 31, 2019.
8. SUBSEQUENT EVENT
The
Company evaluated subsequent events, which are events or
transactions that occurred after December 31, 2020 through the
issuance of the accompanying financial statements and determined
that no significant subsequent event need be recognized or
disclosed.