The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
1. ORGANIZATION AND BUSINESS
Organization of Company
Amanasu Techno Holdings Corporation (the “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 $822,508 and an accumulated deficit of $2,408,290 at December 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 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.
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
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 stockholders 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 allowance 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:
Recently Adopted Authoritative 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 was adopted on January 1, 2021 and did not 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, 2021 and 2020
4. RELATED PARTY TRANSACTIONS AND BALANCES
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, 2021 and 2020, the Company borrowed $67,000 and $61,515, respectively, from a stockholder.
The balances due as of December 31, 2021 and 2020 were $499,350 and $432,350, respectively.
Interest expense associated with these loans were $21,184 and $18,272 for the years ended December 31, 2021 and 2020, respectively. Accrued interest on these loans were $132,652 and $111,468 at December 31, 2021 and 2020, respectively.
The Company has an arrangement with Lina Maki, a stockholder of the Company, for her management consulting time. The agreement is not written and no payment terms have been established. The fee is $10,000 annually. As of December 31, 2021 and 2020, amounts due to the stockholder were $70,000 and $60,000, respectively.
The Company leases its office in Vancouver Canada from a stockholder of the Company at a monthly rate $2,500 under a lease agreement that expires October 1, 2023. At December 31, 2021 and 2020, amounts due to the stockholder were $81,096 and $71,422, respectively including rent and other expenses. The Company shares the space with Amanasu Environmental Corporation (“AEC”), a reporting company under the Securities Exchange Act of 1934. AEC 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 AEC. In addition, the Company maintains an office at Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan. The net balances due from AEC as of December 31, 2021 and 2020 were $39,166 and $11,338, respectively.
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
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, 2021 and 2020 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 the scheduled reversal of deferred tax liabilities, 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 assets relating to NOLs for every period because it is more likely than not that all of the deferred tax assets will not be realized.
The Company had NOL carryforwards of approximately $1.49 million at December 31, 2021. Approximately $1.23 million will expire in the years 2022 through 2037, and $0.26 million can be carried forward indefinitely.
The tax return for the years 2018, 2019 and 2020 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:
| | 2021 | | | 2020 | |
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, 2021 and 2020 are as follows:
| | 2021 | | | 2020 | |
Net Operating Loss Carryforwards | | $ | 312,726 | | | $ | 321,913 | |
Valuation Allowance | | | (312,726 | ) | | | (321,913 | ) |
Deferred Tax Assets | | $ | - | | | $ | - | |
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2021 and 2020
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 who is also the stockholder of the Company, which expires October 1, 2023. 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 office in New York is rented at the rate of $360 each year and shares with AEC. In addition, the Company maintains an office at Suite 905, 1-6-1 Senzoku Taito-Ku Tokyo Japan, and the Company pays no rent.
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 uses an incremental borrowing rate of 5% for operating leases.
On October 1, 2019, the Company commenced a lease with a 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 on October 1, 2019. This asset was fully amortized as of September 30, 2021.
On October 1, 2021, the Company commenced a new lease with the same stockholder from October 1, 2021 to September 30, 2023 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 on October 1, 2021. For the years ended December 31, 2021 and 2020, the Company amortized $14,427 and $14,065, respectively, 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, 2021:
2022 | | $ | 15,000 | |
2023 | | | 11,250 | |
Total undiscounted future minimum lease payments | | | 26,250 | |
Less: Difference between undiscounted lease payments and discounted lease liabilities | | | (1,166 | ) |
Total operating lease liabilities | | | 25,084 | |
Less current portion | | | (14,065 | ) |
Long-term lease liabilities | | $ | 11,019 | |
Total rent expense under operating leases for the year ended December 31, 2021 was $15,750 as compared to $15,930 for the year ended December 31, 2020.
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, 2021 and 2020. No shares have been issued for these deposits as of December 31, 2021.
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of business. The Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its consolidated financial statements.
9. SUBSEQUENT EVENT
The Company evaluated subsequent events, which are events or transactions that occurred after December 31, 2021 through the issuance of the accompanying financial statements and determined that no significant subsequent event need to be recognized or disclosed.