NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2016
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 has sales and manufacturing rights to an automated personal
waste collection and cleaning machine and is currently seeking
manufacturing partners.
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 $400,513 and an accumulated deficit
of $2,000,360 at December 31, 2016, 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. As such, the Company may need to
pursue additional sources of financing. There can be no assurances
that the Company can secure additional financing.
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 TOCONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2016
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 fair value as
used in numerous accounting 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 advances 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
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.
Recently Adopted Accounting Pronouncements
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant effect on the Company's
results of operations, financial position or cash
flows.
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2016
4. RELATED PARTY TRANSACTIONS
The
Company receives periodic advances 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. The balance due as of December 31, 2016 and 2015 were
$261,575 and $237,900, respectively. All advances bear interest at
4.45% and no terms for repayment have been established. During the
year ended December 31, 2016, the Company borrowed $23,675 from a
shareholder. During the year ended December 31, 2015, The Company
borrowed $28,000 from a stockholder and repaid $23,550 to the same
stockholder.
Interest
expense associated with these loans were $11,351 and $10,290 for
the years ended December 31, 2016 and 2015, respectively. Accrued
interest on these loans were $51,485 and $40,134 at December 31,
2016 and 2015, respectively. No terms for repayment have been
established. As a result, the amount is classified as a current
liability.
On
September 2, 2016, the Board of Directors approved a $20,000
consulting fee to Lina Maki a shareholder of the Company for her
management consulting time in the past. This fee is a shared
expense between the Company and its affiliate Amanasu Environment
Corporation. The Company has accrued its portion of the consulting
fee of $10,000, as of December 31, 2016.
The
Company also leases it office space from a shareholder of the
Company. At December 31, 2016 and December 31, 2015, amounts due to
the shareholder were $3,630 and $151, respectively. When the lease
payments are made by the Company’s affiliate or the lease
payments are made by the Company on behalf of the affiliate, such
amounts are shown as a reduction in or addition to the amount due
from affiliate in the accompany balance sheets (See Note
6).
5. INCOME TAXES
The
Company has experienced losses since its inception. As a result, it
has incurred no Federal income tax. The Internal Revenue Code
allows net operating losses (NOL's) to carry forward and apply
against future profits for a period of twenty years. The available
NOL's totaled approximately $2 million at December 31, 2016. The
NOL can be carried forward to offset taxable income, if any, in
future years which expire in the years 2020 through
2036.
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 asset
relating to NOLs for every period because it is more likely than
not that all of the deferred tax asset will not be
realized.
The tax
return for the years 2013, 2014, 2015 and 2016 are subject to audit
by the Internal Revenue Service.
The
reconciliation of income tax rate at the U.S. statutory rate of 34%
to the Company’s effective tax rate is as
follows:
|
|
For the
Year Eneded December 31,
|
|
|
|
|
|
Income tax expense
at statutory rate
|
34
%
|
34
%
|
|
Change in valuation
allowance
|
(34
%)
|
(34
%))
|
|
Income tax
expense
|
-
|
-
|
The tax
effects of temporary differences that give rise to the
Company’s net deferred tax assets as of December 31, 2016 and
2015 are as follows:
|
|
|
|
|
Net Operating Loss
Carryforwards
|
$
680,122
|
$
653,516
|
|
Valuation
Allowance
|
(680,122
)
|
(653,516
)
|
|
Deferred Tax
Asset
|
$
-
|
$
-
|
AMANASU TECHNO HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 2016
6. RENTALS UNDER OPERATING LEASE
The
Company's executive offices are located at 445 Park Avenue Center
10th Floor New York, NY 10022, and Vancouver, British Columbia. The
total premises in Vancouver are 2,000 square feet and are leased at
a monthly rate of $2,500 and 5% tax under a lease agreement between
the Company and the Secretary of the Company which expires on
October 1, 2017. The Company shares the space with Amanasu
Environment Corporation (“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. The
Company recorded rental expense of $15,750 for each of the years
ended December 31, 2016 and 2015.
The
following is a schedule of approximate future minimum rental
payments for operating leases subsequent to the year ended December
31, 2016 based on the Company’s share of rent:
7. COMMON STOCK
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 sheet as of December 31, 2016
and 2015. No shares have been issued for these deposits as of
December 31, 2015.
8. RESTATEMENT
The management of the Company has concluded that we should restate
our financial statements as of and for the year ended December 31,
2015 due to inaccurate allocation of expenses paid by an affiliated
company and misapplication of payments made to a
stockholder.
The effect of the restatement on specific line items in the
consolidated financial statements for the year ended December 31,
2015 is set forth in the table below:
|
|
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
Due
from affiliate
|
$
25,297
|
$
(21,643
)
|
$
3,654
|
|
Accrued
expenses - stockholders and officers
|
$
43,885
|
$
(3,600
)
|
$
40,285
|
|
Accumulated
deficit
|
$
(1,904,063
)
|
$
(18,043
)
|
$
(1,922,106
)
|
|
Stockholders'
deficit
|
$
(304,216
)
|
$
(18,043
)
|
$
(322,259
)
|
|
|
|
|
|
|
|
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
$
49,570
|
$
21,643
|
$
71,213
|
|
Interest
expense - stockholders and officers
|
$
13,890
|
$
(3,600
)
|
$
10,290
|
|
Net
loss
|
$
(63,460
)
|
$
(18,043
)
|
$
(81,503
)
|
9. SUBSEQUENT EVENT
The
Company has evaluated subsequent events that have occurred after
the date of the balance sheet through the date of issuance of these
consolidated financial statements and determined that no subsequent
event requires recognition or disclosure to the consolidated
financial statements.