AMSU Amanasu Environment Corporation (CE)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934

For the Fiscal Year Ended December 31, 2007

COMMISSION FILE NO. 0-32905

AMANASU ENVIRONMENT CORPORATION

(Name of small business issuer as specified in its charter)

NEVADA		98-0347883
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

115 East 57th Street 11th Floor, New York, NY 10022

(Address of principal executive offices)

212-939-7278

(Issuer's telephone number)

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act:

Title of each class:

Common Stock, no par value

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for 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.

[x] Yes [o] No
[x] Yes [o] No

Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this form 10-KSB or any amendment to this Form 10-KSB. [x]

State the issuer's revenues for its most recent fiscal year: $-0-.

The aggregate market value of the voting stock held by non-affiliates of the registrant on January 1, 2007 computed by reference to the price at which the stock was sold on that date: $2,442,694.80.

The number of shares outstanding of the registrant's Common Stock, no par value, as of April 15,2007 was 44,000,816 common shares.

Amanasu Environment Corporation ("Company") was incorporated in the State of Nevada on February 22, 1999 under the name of Forte International Inc. On March 27, 2001, the Company's name was changed to Amanasu Energy Corporation, and on November 13, 2002, its name was changed to Amanasu Environment Corporation.

It has acquired the exclusive, worldwide license 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, conducting limited product marketing, and testing the technologies for commercial sale. For each such technology, proto-type or demonstrational units have been constructed by each licensor or inventor of the technology. The Company has conducted various internal tests on these units to determine the commercial viability of the underlying technologies. As a result of such testing, the Company believes that the products are not commercially ready for sale, and that product refinements are necessary with respect to each of the technologies. In addition, the Company may seek 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 product design and engineering, marketing and sales, and warranty and post-warranty service and repair. The Company believes that its marketing efforts to sell any of its products will be limited until such time as it can complete the refinements of its technologies. The Company can not predict whether it will be successful in developing commercial products, or establishing affiliations with any operating company.

On June 8, 2000, the Company obtained the exclusive, worldwide license to a technology that disposes of toxic and hazardous wastes through a proprietary, high temperature combustion system, known as the Amanasu Furnace. The rights were obtained pursuant to a license agreement with Masaichi Kikuchi, the inventor of the technology, for a period of 30 years. The Company issued 1,000,000 share of common stock to the inventor and 200,000 shares of common stock to a director of the inventor's company. Under the licensing agreement; the Company is required to pay the licensor a royalty of two percent of the gross receipts from the sale of products using the technology. If the Company fails to comply with any provision of the agreement after a 90-day notice period, the licensor may terminate the agreement.

Effective September 30, 2002, the Company obtained the exclusive, worldwide license to a hot water boiler technology that incinerates waste tires in a safe and non-polluting manner and extracts heat energy from the incineration process. The rights were obtained pursuant to a license agreement with Sanyo Kogyo Kabushiki Gaisha and Ever Green Planet Corporation, both Japanese companies, for a period of 30 years. As consideration for this acquisition, the Company paid the licensors $250,000, of which the Company's President paid $95,000, issued to them 600,000 shares of common stock, and issued to an affiliate of the licensors 50,000 shares of common stock. The licensors are entitled to receive a two percent royalty on the gross receipts from the sale of the products related to the technology. If the Company fails to comply with any provision of the agreement after a 90-day notice period, the licensor may terminate the agreement.

On June 30, 2003, the Company acquired the exclusive worldwide rights to produce and market a patented technology that purifies seawater, and removes hazardous pollutants from wastewater. The rights were obtained pursuant to a license agreement with Etsuro Sakagami, the inventor, for a period of 30 years. As consideration for obtaining the license, the Company issued 1,000,000 shares to the inventor, and 50,000 shares to a finder. The licensor is entitled to receive a two percent royalty on the gross receipts from the sale of the products related to the technology. If the Company fails to comply with any provision of the agreement after a 90-day notice period, the licensor may terminate the agreement.

The Company's current business plan is the result of recent operational results during the fiscal year of 2007 and may change due to the amount of risk accompanied by the nature of its business. The Company's business is run through four branches, with each respective branch focused on a particular environmental market: Amanasu Echo Frontier is involved in waste management technologies; Amanasu Energy, formerly Felice, is involved in solar panel technology; Amanasu Shinwa, formerly Shinwa Yosetsu, is involved in water purification; and finally as of September 21st 2006 a newly formed Amanasu Water which is involved in drinking water. All 4 branches are at various ownership levels managed through a 91% controlled holdings company, Amanasu Holdings established in December 2005.

The Company's principal offices are located at 115 East 57th Street 11th Floor New York, NY 10022, and its telephone number is (212) 939-7278. The Company also maintains an office at 1-3-38 Roppongi, Minatoku, Tokyo, 106-0032, Japan.

The Chairman and Chief Executive Officer Atsushi Maki, has set a goal to enter into the NASDAQ global market in 2 years time. The Company meets all requirements except one. The Company's main focus for the next 12 months will be to raise $30,000,000, and acquire public companies in both the United States and Japan.

Echo Frontier. Population growth, and ever decreasing land mass, have been key factors in the research and development of waste management methodologies. The primary technology used in many Asian countries today is the waste incinerator. Conventional incinerators, though effective in reducing the amount of space waste occupies, still leave environmentally harmful and unusable by-products. Amanasu Echo Frontier was established by Amanasu Environment and former employees of Kogure in December 2005 and is located at 1-24-8 Iwagami-cho, Maebashi, Gunma, Japan. Its operations consist of the sale and manufacturing of general and industrial waste incinerators, and medical waste treatment plants using the 6 proprietary technology rights purchased from Kogure. Its Rotary Kiln incineration system has two levels of waste processing that effectively reduce waste size in a cost effective manner. The ash by-product from the Rotary Kiln system can be further processed using Amanasu Echo Frontier's Swing Melter Incinerator. The Swing Melter's resulting residue which is primarily carbon pellets, can be recycled to be used for raw building materials involved in foundation construction due to the carbon pellets strong molecular structure.

Energy Development. Energy Development, formerly Felice, was renamed on September 21st 2006 as a subsidiary of Amanasu Holdings. As the name suggests, Energy Development is focused on technologies that produce energy through environmentally friendly means. The leading technology in this arena is the photovoltaic cell, or more commonly known as Solar panels. The Solar panel industry due to recent technological developments has never been more lucrative. With the recent advancements of residential unit powering modules, the demand of solar panels in the residential market will only continue to increase. With increased demand, costs of production have been reduced in recent years. The Company believes with the current market conditions, it is a good point in time to pursue the Solar power movement.

Sanyo is a world leader in Solar panel technology, with over 30 years of experience in the industry. Sanyo is regarded as one of the world's top Solar power technology provider. In 2003, Sanyo's 200W photovoltaic module proved to have the world's highest conversion efficiency marketed (cell conversion efficiency of 19.5% and module efficiency of 17.0%). Sanyo's HIT (Heterojunction with Intrinsic Thin layer) solar modules have more power generating capacity per area, and perform better at higher temperatures. We believe that Sanyo's product has the required elements for success in the residential market. Thus, Energy Development will be primarily involved in the sale of Sanyo's Solar panel product line on a commission basis in Japan.

Amanasu Shinwa. Amanasu Shinwa, was formerly a subcontractor for the Company, under the name Shinwa Yosetsu. Originally, Shinwa Yosetsu was to refine and manufacture the Ring-Tube Desalinization technology held by Amanasu Environment; however, with lack of commercial viability Shinwa Yosetsu was fully acquired by Amanasu Environment under Amanasu Holdings and Shinwa Yosetsu's existing operations were put into priority. Amanasu Shinwa is primarily involved in manufacturing water purification plants for use in pools, fitness centres etc, and seawater to fresh water purification plants.

Amanasu Water. Keeping in line with the Company's goal of creating a cleaner and healthier future, a big part of the earth's future is water. Water is likely the single most important part of our daily lives. Amanasu Water will be involved in the sale of Amanasu Sui-So-Sui, or Amanasu Hydrogen-ion water. Hydrogen-ion water is a new product and is said to have effective and efficient anti-oxidant properties. Even when compared with well know anti-oxidants such as Vitamin C, Vitamin E, Co-enzyme Q10, is much more effective due to Hydrogen-ion water's unique ability to enter into the cell's mitochondria, the cell's power plant. There it acts as an anti-oxidant, without interfering with the bodies normal oxidation reactions.

The technology, known as the Amanasu Furnace, is a process that disposes of toxic and hazardous waste, through a proprietary, high temperature combustion system. The combustion system is a low cost methodology generating extremely high temperatures in excess of 2,000 Celsius. Waste matter exposed to the extreme temperature system is instantly decomposed to a gaseous matter and a magna-like liquid. The process leaves a 1-2% residue of an inert, carbon substance and oxygen which is vented out of the system. The process produces no toxins, smoke, ash, or soot.

The Company believed that the prior pricing structure for its furnaces was not competitive, and was seeking ways to lower its manufacturing costs. The Company was attempting to locate alternate suppliers that were more cost effective than currently identified ones. At the same time the Company also attempted to re-design certain components of the furnace so as to reduce the manufacturing cost per component. The aim was to alter the function of the original furnace, which managed daily waste to one that managed specific waste (i.e. industrial, and/or medical waste); however, the Company was confronted with several difficulties and started to reconsider the alteration. At the same time, the Company was also seeking affiliations with companies competitive in the furnace market in Japan. Kogure Works, had an established infrastructure, manufacturing more developed furnaces, comparatively lower in cost.

The Company then entered into an agreement with Kogure Works Co sharing its technologies and marketing resources, while making use of Kogure's manufacturing expertise. The pricing of the product to be developed was $100,000/t and eventually reducing the price by 20% was ideal.

As discussed above, the Company expected to alter the function of the Amanasu Furnace in order to specify its market place; however, there has not been a strong demand for their product due to the cost of manufacturing a unit. The Company did not reach the successful and complete refinement and cost reduction as they had planned; therefore, no further production and investment on this technology has been determined, and there is no further business relation with Kogure Works Co., Ltd. ("Kogure") on this project. The Company does not know whether the project will continue into the future; however, the exclusive rights of manufacturing and sales of the Amanasu Furnace will remain with the Company.

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 Fire Bird Boiler provides combustion efficiency and seeks to minimize dioxin generation which is generally a by-product of imperfect combustion.

The Company believes that the Fire Bird Boiler is an effective dual purpose technology for incinerating waste tires and generating heat; however, the Company has recognized that the supply of waste tires in certain markets, including the United States, has been greatly reduced due to the effect of recent efforts to recycle waste tires. Thus, the reduction in the available supply of waste tires in these markets has limited the market potential of the boiler. As a result, the Company has been confronted with severe marketing difficulties for Fire Bird at present, and will seek to refine the boiler to accept other forms of waste, such as hazardous waste.

Even though the Company decided to seek refinement to the boiler to accept other forms of waste, to be flexible in the market, the Company has determined no further production and/or investment on this technology. The estimated refinement time was not feasible for the Company, thus no further business relations will continue with Kogure on this project. The Company does not know whether the project will continue into the future; however, the exclusive rights of manufacturing and sales for the Fire Bird Boiler will still remain with the Company.

The Ring-Tube technology is used as a filter to purify seawater into drinking water and also treats sewage and waste water, 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 the 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.

The Company believes that the existing capacity of the Ring-Tube Desalination equipment is commercially insufficient for its targeted markets because the equipment is hand-manufactured, which leads to high cost production. There are many similar production companies, which promote water purification systems in Japan therefore reducing the cost of manufacturing is the key to succeed in the competitive market. Consequently, the Company entered into an agreement with Shinwa Yosetsu, a subcontract manufacturing company which could manage Sakagami's technology under instructions to lower production cost.

With the acquisition of Shinwa Yosetsu, Amanasu Shinwa now has furnace technology, as well as maintenance management businesses and welding businesses, and maintain the top level of operation in Japan. With current developments the Company has decided to discontinue the Ring-Tube Desalination project, and in 2006, the Company will focus only on producing and marketing water purification systems and seawater desalination systems utilizing and employing new technologies under the management of Amanasu Shinwa.

Echo Frontier's Rotary Kiln is an environmentally friendly general and industrial waste incineration system. They system has an advanced General or industrial waste is first shred and crushed into smaller pieces and piled in a waste pit. A ceiling crane then loads the dry waste onto a conveyer, where it is delivered into the Rotary Kiln injector device. The injector device contains two parts: Injector screw and injector shoot. These two devices protect the Rotary Kiln burn chamber from outside temperature influence, and also prevents gas reflux from the Rotary Kiln chamber itself. The injector device is also protected by a cooling jacket to regulate the extreme temperature effects of the Rotary Kiln. The shredded and crushed waste is then injected into the Rotary Kiln burn chamber where it is incinerated at 1400 C. The Rotary Kiln rotates to better distribute and equalize the incineration process. The Rotary Kiln itself has a patented coating in its interior to shield it from the extreme temperatures. After the initial incineration process, the waste is delivered into a second burn chamber tower, where further incineration is done. The remaining ash is cooled to 180 C in a cooling tower and dioxins, and carbon monoxide are filtered and the remaining smoke is released through a smoke stack. The resulting ash is 1/10 of its original volume and can be further processed with the Swing Melter to be used as an ingredient for construction materials. The entire Rotary Kiln system has an advanced cooling system that makes it possible to run 24 hours a day. Besides the initial shredding process, temperature regulation and waste delivery is almost entirely automated.

Swing Melter

Echo Frontier's Swing Melter is a incineration system specifically for pre-incinerated ash, such as the resulting ash from the Rotary Kiln incineration system. Like the Rotary Kiln, the waste, in this case ash, is loaded and delivered via a conveyer to a grinding chamber, where the ash is reduced to less than 5 mm grains. While being delivered on another conveyer, the ground ash passes a magnet removing any metallic elements. The metal free ash is then lifted via a bucket elevator into another hopper and is then injected into the Swing melter burn chamber via an injector device similar to that of the Rotary Kiln. The ash is slowly injected over a period of 45 minutes in order to maintain the Swing Melter's internal temperature. The Swing Melter chamber constantly rotates from left to right to fully incinerate the injected ash. Because of this consistent 45 minute injection process, the cooling process is much more efficient, reducing the amount of damage to the Swing Melter, and thus reducing the amount of maintenance needed. The resulting by-product is molecularly strong carbon pellets which can be recycled to be used as an ingredient in concrete and foundational construction. The Swing Melter system hourly capacity is 150 kg/hour making its daily capacity 50 t /day.

Sanyo HIT (Heterojunction with Intrinsic Thin Layer) Photovoltaic Panel

Energy Development will place its efforts in marketing in Japan the industry leading HIT solar panel by Sanyo. HIT solar cells are composed of thin mono-crystalline silicon wafers, surrounded by ultra-thin amorphous silicon layers. The proprietary solar cell configuration by Sanyo is said to improve boundary characteristics and reduce power generation losses. The HIT solar panel has the highest module efficiency (17%) in the world, even at higher temperatures effectively giving the consumer more energy conversion per unit area. Sanyo has also made its HIT solar panels pre-equipped with plug-n-play connectors, touch safe junction boxes, and other features that make installation and maintenance relatively simple. The HIT solar panels are subjected to strict inspections and maintain top industry standards, which is why Sanyo backs its product by a 20 year power out-put warranty, and a 2 year workmanship warranty.

Sanyo also provides customers with a user friendly 3 piece system, which regulates energy generated. The HIT solar panels first collects energy from the sun, a 100% emission free process, which accumulate in an energy junction box. This junction box then transfers stored energy to power conditioners which regulate power throughout the house. The unused power is then stored in an energy reserve unit. later use, or the consumer has the option of selling the power back to power companies. All of the activities of the system can be easily monitored by a control panel directly connected to the power conditioners. The control panel features an EL-packlight illuminated viewing screen, which displays power generation statistics ,and reduction of greenhouse gas emissions values.

The use of HIT solar panels saves the consumer a considerable amount of energy costs in the long run, and also effectively reduces greenhouse gas emissions by 40%.

Kijimuna Water Purifier

Amanasu Shinwa's Kijimuna is an industrial strength water purifier that uses an automated mineral fortification system to effectively clean small bodies of water. Kijimuna's unique design allows it to be used with various bodies of water; and in cases where a body of water has at least 3 meters depth, Kijimuna has no need for a water pump. The resulting purified water has a mineral content between 50 ppm and 200 ppm, with no PH balancing required.

Amanasu Hydrogen-ion Water (Sui-So-Sui)

Amanasu Water's principle product is a soon to be launched drinking water called "Sui-So-Sui", or Hydrogen-ion water. Amanasu Hydrogen-ion water will be primarily marketed through fitness clubs, and professional sports arenas, and pachinko parlors across Japan, with future plans to expand its operation into North America. Processing and packing will be done by utilizing BMD Co, facilities in Japan.

Hydrogen-ion water greatly reduces harmful activated oxygen ( free radicals ) in the body system, thus, maintaining healthy cells and cellular activity. The patented process dissolves large amounts of hydrogen into the water and stabilizes it to create an oxidation reduction electric potential of up to -500mv. The negative values indicate the potential for the reduction of free radicals caused by oxidation.

Hydrogen-ion water has various applications apart from normal consumption. It can be used as a hair tonic after showering, an eye rinse, and for other daily uses. Amanasu Hydrogen-ion Water will be sold in 300 ml pouches starting November 2006.

MARKETING OF TECHNOLOGIES.

The Company does not expect to continue the marketing and sale of its Amanasu Furnace, FireBird Boiler, and Ring-Tube Desalination equipment until a contract ca be made with a third-party who sub-licenses the technologies or there is a potential opportunity and solid business plan to restart or commence a new production line in regard to the three technologies.

COMPETITION.

Generally, the industries in which the Company expects to compete in, namely waste disposal and desalination, are highly competitive. These industries are populated by many national or international companies, with significantly greater resources than that of the Company. In the waste industry, many of these competitors dispose of toxic waste in tradition methods such as landfills, and incinerators. Despite the fact that these methods may not be environmentally friendly, they are nonetheless in compliance with governing regulations, and therefore, represent significant competition to the Company. In addition, competition will include other waste disposal systems that handle toxic and environmental waste in a non-pollutant manner. Desalination equipment, which has been used extensively in the Middle East and elsewhere, represents significant competition to the Company's technology.

PROPRIETARY RIGHTS.

The Company obtained the exclusive world-wide rights to the Amanasu Furnace for a period of 30 years commencing June 8, 2000 pursuant to the licensing agreement with Mr. Kikuchi, the inventor. In 1996, Mr. Kikuchi, the inventor, received a patent in Japan for the combustion technology, which expires in 2016. The Company anticipates that it will file for patent protection in other countries prior to any marketing efforts in such country.

The Company obtained the exclusive world-wide rights to the Fire-Bird Boiler for a period of 30 years commencing September 30, 2002 pursuant to the licensing agreement with the owner of such rights. In November 2001, the inventor of the Fire-Bird Boiler received a patent in the United States (#6,321,665 filed October 3, 2000). The patent expires 20 years from the date of original filing.

The Company obtained the exclusive world-wide rights to the Ring-Tube Desalination technology for a period of 30 years commencing June 30, 2003 pursuant to the licensing agreement with the owner of such rights. The inventor of the technology has filed patents in Japan for various aspects of the technology. The patents were filed in July 2002, and the patents expire 20 years from the filing date.

The Company considers the rights to the three technologies proprietary, and intends to use a combination of trade secrets, non disclosure agreements, license agreements, and patent laws to protect its proprietary rights.

GOVERNMENT REGULATIONS

Generally, the Company will be required to receive regulatory approval from various governmental agencies to conduct its operations. These regulatory approvals will require the Company to obtain and retain numerous governmental permits to conduct various aspects of its operations, any of which may be subject to revocation, modification or denial. Extensive and evolving environmental protection laws and regulations have been adopted worldwide during recent decades in response to public concern over the environment. The Company's operations and those of its future customers are subject to these evolving laws and regulations. The requirements of these laws and regulations could impose substantial potential liabilities to the Company and its customers. If the operations of the Company's furnace result in a toxic spill or other mishap, the Company and its customers could be subject to substantial fines, suspension of operation, or other significant penalties. The Company will make a continuing effort to anticipate regulatory, political, and legal developments in its principal markets in the Pacific Rim that might affect its operations, but it may not always be able to do so. The Company cannot predict the extent to which any legislation or regulation that may be enacted, amended, repealed, reinterpreted, or enforced in the future may affect its operations. Such actions could adversely affect the Company's operations or impact its future financial condition or earnings. The Company however does expect that its proprietary technologies will comply with all governing regulations in those countries that it intends to sell its products. This premise is based upon the results of operations of the proto-type units for each of the technologies.

As of December 31, 2006, the Company has two employees, Shuichi Yamada, Izuo kato, located at its New York, Vancouver, and Tokyo offices, respectively, and a regulatory assistant in its Tokyo office. The Company has no collective bargaining agreements with its employees and believes its relations with its employees are good. The Company didn't have a consultant thus no payment was made to a consultant during 2006.

PART II

Item 5. Market For Common Equity And Related Stockholder Matters

The Company's common stock has traded on the NASDAQ OTC Bulletin Board since October 2002 under the symbol "AMSU".

The table below sets forth the high and low bid prices of the Common stock of the Company as reported by NASDAQ. The quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commissions and may not necessarily represent actual transactions. There is an absence of an established trading market for the Company's common stock, as the market is limited, sporadic and highly volatile. The absence of an active market may have an effect upon the high and low priced as reported.

2007		Low Bid	High Bid
1st Quarter Ending March 31, 2007	$	0.08	0.13
2nd Quarter Ending June 30, 2007		0.09	0.15
3rd Quarter Ending September 30, 2007		0.10	0.10
4th Quarter Ending December 31, 2007		0.13	0.75

2006		Low Bid	High Bid
Fiscal Year Ending December 31, 2007	$	0.10	0.55

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. In July 2005, the Company made the repayment of the amount of $ 100,000 to Reraise Corporation thus ending the Company's liability.

Equity Compensation Plan Information
Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders (1)	-0-	-0-	-0-
Equity compensation plans not approved by security holders (2)	-0-	-0-	-0-
Total	-0-	-0-	-0-

Recent Sales Of Unregistered Securities - Deposits for Common Stock

The most recent sale of unregistered securities was 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. In July 2005, the Company made the repayment of the amount of $ 100,000 to Reraise and completed the liability.

Private Placement

During the 2005 fiscal year, the Company issued 1,000,000 shares of common stock, realizing cash proceeds of $3,500,000. These sales were exempt under Regulation S under the Securities Act of 1933, as amended, due to the foreign nationality of the relevant purchasers.

The following discussion should be read in conjunction with the Company's Financial Statements, including the Notes thereto, appearing elsewhere in this Annual Report.

Fiscal Year Ended December 31, 2007

The Company's sales for the fiscal year ended December 31, 2007 were $472,318 compared to $ 478,003 for the fiscal year ended December 31, 2006.

Interest income for the fiscal year ended December 31, 2007 was $61,634 compared to $50,783 for the same period in 2006. The increase is due to fluctuating interest rate and the increased deposited amount in the Company's account.

Equity in losses of investee companies for the fiscal year ended December 31, 2007 were $226,896, compared to $11,780 for the same period in 2006. The increased was principally due to subsidiary company losses.

Miscellaneous Revenue for the fiscal year ended December 31, 2007 was $10,718,compared to $0 for the same period in 2006. The increase is due principally to the presence of Amanasu Holdings, formed on December 16, 2005, and Subsidiaries acquired during the fourth fiscal quarter ending December 31, 2005, and the first fiscal quarter ended March 31,2006. The Companies collects consulting income from all its subsidiaries.

Total expenses for the fiscal year ended December 31, 2007 was $906,495 compared to $533,125 for the same period of 2006. The increase was due principally to the presence of Amanasu Holdings, formed on December 16, 2005, and Subsidiaries acquired during the fourth fiscal quarter ending December 31, 2005, and the first fiscal quarter ended March 31,2006.

Cost of goods sold for the fiscal year ended December 31, 2007 was $349,674 compared to $271,552 for the same period of 2006. The increase was due principally to the presence of Amanasu Holdings, formed on December 16, 2005, and Subsidiaries acquired during the fourth fiscal quarter ending December 31, 2005, and the first fiscal quarter ended March 31,2006

During the year of 2005, the Company issued 1,000,000 shares of common stock, realizing cash proceeds of $3,500,000. These sales were exempt under Regulation S under the Securities Act of 1933, as amended, due to the foreign nationality of the relevant purchasers.

During the three months ended September 30, 2006 Soae, a Japanese electronics manufacturer, invested $426,014 into Amanasu Holdings in exchange for 4,000 shares of Amanasu Holdings.

Amanasu Environment. The Company was organized February 22, 1999. Its operations to date have been limited to obtaining exclusive licensing rights for technologies, conducting preliminary marketing efforts, and conducting product testing.

As of August 4th, 2005, Kogure's six proprietary rights (See "Patents" below) to the license of the technologies and parts in connection with constructing the rotary kiln and its title w ere transferred to Amanasu Environment Corporation, and the amount of $290,000 that the Company previously funded to Kogure for marketing and promotion purposes replaced in as transfer fee. As a result, the Company possesses the exclusive worldwide right to the product, and can receive royalties from the sales of the rotary kiln by other companies including MINMETAL.

The Company's current target is to enter into the NASDAQ Global Market within 2 years. The goal for the Company is to raise $30,000,000 in capital in order to meet its final pre-requisite to enter the Global market.

Amanasu Holdings. As of December 16th, 2005, the Company established , Amanasu Holdings Corporation ("Amanasu Holdings"), located at 1-5 Suda-cho, Chiyoda-ku, Tokyo, as a subsidiary company of Amanasu Environment Corporation with 100 % control. On September 21st 2006 an electronics manufacturer Soae invested 50,000,000 Yen ($500,000) into Amanasu holdings, thus holding 9% of Amanasu holdings. On the same day Amanasu Holdings Corporation has begun to implement plans to reorganize its subsidiary companies in an effort to concentrate the entire organization on environmental technologies/methodologies. As explained briefly above in the Company overview, Amanasu Holdings subsidiary companies will focus on four main markets within the environmental technology industry: Energy production, waste management, water purification, and drinking water. Amanasu Echo Frontier will continue its operations with its waste incineration technologies (Rotary Kiln, and Swing Melter). Amanasu Shinwa will also continue its operations in water purification plants for pools, and fitness clubs, as well as its sea water purification plants operations. Felice, originally running beauty salons under a membership system, will change its business plan to become Energy Development. Energy Development will be involved in the sale and marketing Sanyo HIT solar panels in Japan. Newly formed Amanasu Water will be involved in sales of Amanasu Hydrogen-ion water, a drinking water beginning its sales in Japan on November 2006 with future plans to expand into North America, and South East Asia. The remaining subsidiary companies BJSS, Petstyle, and Japan Amanasu Project Support were not able to be accommodated within the newly organized plans, thus will be open for sale to any organization that have interest in its respective industry.

Amanasu Shinwa. Amanasu Holdings invested $84,228 (10,000,000 Yen) on December 16th, 2005 into Amanasu Shinwa for the follow items.

(i) The Production of a model water purification plant managed by Amanasu Shinwa.
(ii) 5 Water purification units for pools at sports clubs, which will be produced and distributed in Japan for the next 12 months

Amanasu Shinwa has also started developing a new plant using ozone sterilization technologies , and are expecting an increase of sales by the new development. The new plant will be used for swimming pools, public bathing houses, kitchens and the wide range of other market places are being prospected. The expecting sales for 2008 will be 300,000,000 Yen.

Amanasu Water. As of September 21st Amanasu Holdings invested 50,000,000 Yen ($500,000) establishing Amanasu Water, which will be involved in the sale and marketing of "Amanasu Sui-So-Sui" or Amanasu Hydrogen-ion water. Amanasu water will subcontract BMD Co's processing and packing facilities and will begin distribution of Amanasu Hydrogen-ion water through fitness clubs and professional sports arenas across Japan launching on November 2006. Amanasu Hydrogen-ion water will be sold in 300 ml pouches, and 15 yen from each sale will be transferred to Amanasu Holdings. From the 15 yen transferred 5 yen will be transferred to Amanasu Environment.

Currently Amanasu Water has finished its previous contract with Athlete Japan Corporation, and is working on establishing other distribution routes. Amanasu water is in pre-negotiation stages of distribution with convenience stores such as 7 & i Holdings (formerly 7-11 of Japan), and pachinko parlors through Japan.

1. Rotary kiln (Patent number 3564012, as of July 2nd 2005); 2. Rotary kiln-Taiwan (Patent number 131102, as of August 21st, 2001); 3. Gas lark (petition number 2000-358861, patent pending); 4. Ash melting furnace and incinerating system (petition number 2002-325560, patent pending); 5. The interior wall of the kiln (petition number 2004-208198, patent pending); and 6. The method of cooling down the kiln (petition number 2004-208199, patent pending)

During the fiscal 2007 and 2006 years, the Company spent $-0- and $-0- respectively on research and development.

Liquidity And Capital Resources

In May 2001, the Company received $200,000 resulting from the exercising of 20,000,000 stock purchase options by the Company's principal shareholder. During 2003, in connection with the acquisition of the Fire Bird boiler, the Company's President made a contribution of capital to the Company in the amount of $95,000. In addition during the 2003 period, the Company raised $100,000 from the sale of 20,000 shares of its common stock to one investor.

Total assets as of December 31, 2007 were $3,198,771 representing an increase of $2,867,223 from the total assets of $331,548 as of December 31, 2006.

Other than the provision of alternating business planning costs discussed above, the Company estimates that its operating overhead, which includes general and administrative charges, will be approximately $120,000 for the next 12 months. This amount is comprised of the following estimated costs; $10,000 in annual salaries for office personnel and consultants, $50,000 for rent, $20,000 for professional fees and $20,000 for miscellaneous expenses. The Company does not anticipate paying salaries to any of its officers for the next 12 months. The Company has sufficient cash on hand to support its overhead for the next 12 months but no material commitments for capital at this time other than as described above. The Company and/or Amanasu Holdings will need to issue and sell the shares to gain the capital of the operation.

Forward Looking Statements

Certain statements contained in this Annual Report on Form 10-KSB include forward looking statements. All statements other than statements of historical facts included in this Form 10-KSB regarding the Company's financial position, business strategy, and plans and objectives of management for future operations and capital expenditures, and other matters, are forward looking statements. These forward looking statements are based upon management's expectations of future events. Although the Company believes the expectations reflected in such forward looking statements are reasonable, there can be no assurances that such expectations will prove to be correct. Additional statements concerning important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") are disclosed below in the Cautionary Statements section and elsewhere in this Form 10-KSB. All written and oral forward looking statements attributable to the Company or persons acting on behalf of the Company subsequent to the date of this Form 10-KSB are expressly qualified in their entirety by the Cautionary Statements.

Cautionary Statements

Certain risks and uncertainties are inherent in the Company's business. In addition to other information contained in this Form 10-KSB, the following Cautionary Statements should be considered when evaluating the forward looking statements contained in this Form 10-KSB:

Ability To Develop Commercial Product

The Company presently maintains rights to three different technologies. At this time, proto-type versions of products for each of the three technologies have been developed, however, none of the products are commercially ready for sale. In order to reach a stage of commercial sales for the products, the Company prefers to put emphasis on joint venturing and funding a company who has advanced technological knowledge and progressed sales history of the same field for the purpose of cooperation. The Company can not predict that it will be successful in developing commercially ready products for any of the technologies in the near future or at any time.

Rapid Technological Changes

The industries in which the Company intends to compete with are subject to rapid technological changes. No assurances can be given that the technological advantages which may be enjoyed by the Company in respect of their technologies can not or will not be overcome by technological advances in the respective industries rendering the Company's technologies obsolete or non-competitive.

Lack of Indications Of Product Acceptability

The success of the Company will be dependent upon its ability to develop commercially acceptable products and to sell such products in quantities sufficient to yield profitable results. To date, the Company has received no indications of the commercial acceptability of any of its proposed products. Accordingly, the Company can not predict whether its products can be marketed and sold in a commercial manner.

Management

The ability of the Company to successfully conduct its business affairs will be dependent upon the capabilities and business acumen of current management including Mr. Atsushi Maki, the Company's President. Accordingly, shareholders must be willing to entrust all aspects of the business affairs of the Company to its current management. Further, the loss of any one of the Company's management team could have a material adverse impact on its continued operation.

Control Exercised By Management

As of March 15, 2006, the existing officers and directors, and affiliates will control approximately 78.80% of the shareholder votes. Consequently, management will control the vote on all matters brought before shareholders, and holders of common stock may have no power in corporate decisions usually brought before shareholders.

Conflicts of Interest

The officers of the Company are not full time employees. Presently, the Company does not have a formal conflicts of interest policy governing its officers and directors. In addition, the Company does not have written employment agreements with its officers. Its officers intend to devote sufficient business time and attention to the affairs of the Company to develop the Company's business in a prudent and business-like manner. However, the principal officer is engaged in other businesses related and unrelated to the business of the Company, and in the future, will engage in other business ventures. As a result, the principal officer and other officer of the Company may have a conflict of interest in allocating their respective time, services, and future resources, and in exercising independent business judgment with respect to their other businesses and that of the Company.

Reliance upon Third Parties

The Company does not intend on maintaining a significant technical staff nor does it intend on manufacturing its products. Rather it will rely heavily on consultants, contractors, and manufacturers to design, develop and manufacture its products. Accordingly, there is no assurance that such third parties will be available when needed at affordable prices.

Competition

Although management believes its products, if developed, will have significant competitive advantages to other products in their respective industries, with respect to such products, the Company will be competing in industries, such as the industrial waste industry, where enormous competition exists. Competitors in these industries have greater financial, engineering and other resources than the Company. No assurances can be given that any advances or developments made by such companies will not supersede the competitive advantages of the Company's products.

Protection Of Intellectual Property

The success of the Company will be dependent, in part, upon the protection of its proprietary of its various technologies from competitive use. Certain of its technologies are the subject of various patents in varying jurisdictions (See " Description of Business - Proprietary Rights"). In addition to the patent applications, the Company relies on a combination of trade secrets, nondisclosure agreements and other contractual provisions to protect its intellectual property rights. Nevertheless, these measures may be inadequate to safeguard the Company's underlying technologies. If these measures do not protect the intellectual property rights, third parties could use the Company's technologies, and its ability to compete in the market would be reduced significantly. In addition, if the sale of the Company's product extends to foreign countries, the Company may not be able to effectively protect its intellectual property rights in such foreign countries.

In the future, the Company may be required to protect or enforce its patents and patent rights through patent litigation against third parties, such as infringement suits or interference proceedings. These lawsuits could be expensive, take significant time, and could divert management's attention from other business concerns. These actions could put the Company's patents at risk of being invalidated or interpreted narrowly, and any patent applications at risk of not issuing. In defense of any such action, these third parties may assert claims against the Company. The Company cannot provide any assurance that it will have sufficient funds to vigorously prosecute any patent litigation, that it will prevail in any of these suits, or that the damages or other remedies awarded, if any, will be commercially valuable. During the course of these suits, there may be public announcements of the results of hearings, motions and other interim proceedings or developments in the litigation, which could result in the negative perception by investors, which could cause the price of the Company's common stock to decline dramatically.

Indemnification of Officers and Directors for Securities Liabilities

The Company's By-Laws eliminates personal liability in accordance with the Nevada Revised Statutes (NRS). Section 78.7502 of the NRS provides that a corporation may eliminate personal liability of an officer or director to the corporation or its stockholders for breach of fiduciary duty as an officer or director provided that such indemnification is limited if such party acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation. In so far as indemnification for liability arising from the Securities Act of 1933 ("Act") may be permitted to directors, officers or persons controlling the Company, it has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

Penny Stock Regulation

The Company's common stock may be deemed a "penny stock" under federal securities laws. The Securities and Exchange Commission has adopted regulations that define a "penny stock" generally to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These regulations impose additional sales practice requirements on any broker/dealer who sell such securities to other than established investors and accredited investors. For transactions covered by this rule, the broker/dealer must make certain suitability determinations and must receive the purchaser's written consent prior to purchase. Additionally, any transaction may require the delivery prior to sale of a disclosure schedule prescribed by the Commission. Disclosure also is required to be made of commissions payable to the broker/dealer and the registered representative, as well as current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account of the customers and information on the limited market in penny stocks. These requirements generally are considered restrictive to the purchase of such stocks, and may limit the market liquidity for such securities.

Item 7. Financial Statements.

The Financial Statements that constitute Item 7 of this Annual Report on Form 10-KSB are included immediately following Item 14 below.

Item 8. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure.

None.

Item 8A . Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed: (i) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) are ineffective (details are listed under Management's Annual Report on Internal Control over Financial Reporting).

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management's Annual Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining effective internal controls over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act, as amended.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the Company's financial statements.

Management, with the participation of the Company's principal executive and principal financial officers, assessed the effectiveness of the Company's internal control over financial reporting as of 90 days prior to this report. This assessment was performed using the criteria established under the Internal Control-Integrated Framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the assessment performed using the criteria established by COSO, management has concluded that the Company maintained ineffective internal control over financial reporting in the following areas:

Amanasu Holdings invested $84,228 (10,000,000 Yen) on December 16th, 2005 into Amanasu Shinwa Corporation. During the fiscal year ended December 31, 2007, The Company's management identified material weaknesses in Amanasu Shinwa's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)). On site cash stores used for smaller cash transactions ($50) not well documented. This material weakness is present within the Amanasu Shinwa due to lack of office staff.

As of September 21st , 2006 Amanasu Holdings invested 50,000,000 Yen ($500,000) establishing Amanasu Water Corporation. During the fiscal year ended December 31, 2007, The Company's management identified material weaknesses in Amanasu Water's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)). Approvals and authorization procedures for cash transactions lack distribution of responsibilities. This material weakness is due to the lack of office staff.

As of December 16th, 2005, the Company established, Amanasu Holdings Corporation ("Amanasu Holdings"). During the fiscal year ended December 31, 2007, The Company's management identified material weaknesses in Amanasu Holdings's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)). Approvals and authorization procedures for cash transactions lack distribution of responsibilities. This material weakness is due to the lack of office staff.

Management of the Company will take steps during the fiscal year ending December 31, 2008 to correct this material weakness.

The directors and executive officers of the Company, their ages, and the positions they hold are set forth below. The directors of the Company hold office until the next annual meeting of stockholders of the Company and until their successors in office are elected and qualified. All officers serve at the discretion of the Board of Directors.

Directors / Officers

Name	Age	Since	Position
Atsushi Maki	60	1999	Chairman/Treasurer and President
Lina Lei	47	1999	Secretary

Atsushi Maki has been the President, Chief Financial Officer, Chairman and Director of the Company since November 10, 1999. During the past ten years, Mr. Maki has been an independent businessman involved mainly in real estate development projects in Japan. In 1995, he served as a Director of the Japan-Korea Cooperation Committee along with the former Prime Minister of Japan who acted as the Chairman of the committee. In 1999, he was responsible for establishing the Japan-China Association, a foundation for fostering better relations between the two nations. He served as a director of the association, along with the Chairman of Sony Corporation and the Honorary Chairman of Toyota Motor Corporation. Mr. Maki is the husband of Lina Lei, the Secretary of the Company.

Lina Lei has been the Secretary of the Company since November 10, 1999. Ms. Lei was appointed a director in November 1999 and resigned from the board on August 21, 2002. From May 1990 to November 1999, Ms. Lei was employed by Thunder Company Ltd, Tokyo, Japan, in various capacities including as its managing director. Ms. Lei completed her university studies in Shanghai, China in 1982, and obtained a master's degree from Hitotsubashi University in Tokyo in 1990. During the past five years, Ms. Lei's work involvement has been limited to activities of the Company and that of Amanasu Technologies Corporation. Ms. Lei is the wife of Atsushi Maki, the Chairman and President of the Company.

Takashi Yamaguchi was a Director of the Company between October 1, 2001 and May 26, 2004. From 1999 to June 2001, he was president of Daiichi Building Corporation, a construction company located in Tokyo, Japan, and form June 2001 to June 2002, he acted as a consultant for the same company. From June 2002 to the present, Mr. Yamaguchi has provided managerial consulting services to a variety of companies located in Japan, and he is an individual adviser of the Company at present.

The compensation for all directors and officers individually for services rendered to the Company for the fiscal years ended December 31, 2005, 2004, 2003, and 2002, respectively:

Compensation Summary

	Annual Compensation
Name and Principle Position	Year	Salary ($)	Bonus ($)	Other ($)
Atsushi Maki (Chairman, President and Treasurer)	2007	-0-	-0-	-0-
	2006	-0-	-0-	-0-
	2005	-0-	-0-	-0-
	2004	-0-	-0-	-0-
Lina Lei (Secretary)	2007	-0-	-0-	-0-
	2006	-0-	-0-	-0-
	2005	-0-	-0-	20,000
	2004	-0-	-0-	-0-

(2). Ms. Lei received salary compensation in the form of 312,500 shares of common stock of the Company for the period from November 1999 through fiscal 2001. The shares were valued at $0.01 per share. Of the total amount of shares, 24,100 shares were allocated for fiscal 1999, with the balance allocated equally between 2000 and 2001. In 2003, Ms. Lei received $10,000 in exchange for consulting services performed for the Company.

The officers of the Company are not full time employees. Presently, the Company does not have a formal conflicts of interest policy governing its officers and directors. In addition, the Company does not have written employment agreements with its officers. Its officers intend to devote sufficient business time and attention to the affairs of the Company to develop the Company's business in a prudent and business-like manner. However, the principal officer is engaged in other businesses related and unrelated to the business of the Company, and in the future, will engage in other business ventures. A future arrangement will be subject to the approval of the Company's board of directors. Except for the arrangement with Ms. Lei, the Company and its officers have agreed that the officers of the Company will not receive any other compensation until such time as the Company reaches profitability for a full fiscal quarter. The terms of any such employment arrangement have not been determined at this time. Other than as indicated above, the Company did not have any other form of compensation payable to its officers or directors, including any stock option plans, stock appreciation rights, or long term incentive plan awards for the periods during the above fiscal years.

The Company's directors received no fees for their services in such capacity; however, they will be reimbursed for expenses incurred by them in connection with the Company's business.

The following table will identify, as of March 15, 2006, the number and percentage of outstanding shares of common stock of the Company owned by (i) each person known to the Company who owns more than five percent of the outstanding common stock, (ii) each officer and director, and (iii) and officers and directors of the Company as a group. The following information is based upon 44,000,816 shares of common stock of the Company which are issued and outstanding as of March 15, 2006. The address for each individual below is 701 Fifth Avenue, 42nd Floor, Seattle, Washington 98104, the address of the Company.

Title of Security	Name and Address of Beneficial Owner	Amount and Nature Beneficial Ownership (1)	Percent of Class
Common Stock	Amanasu Corporation (2) #902 Ark Towers 1-3-40 Roppongi Minato-ku Tokyo Japan	33,000,000	72.6%
Common Stock	Atsushi Maki (3) (4)	35,858,500	78.80%
Common Stock	Lina Lei (4)	35,858,500	78.80%
Common Stock	Officers and Directors, as a group (2 persons)	35,858,500	78.80%

(1). "Beneficial ownership" means having or sharing, directly or indirectly (i) voting power, which includes the power to vote or to direct the voting, or (ii) investment power, which includes the power to dispose or to direct the disposition, of shares of the common stock of an issuer. The definition of beneficial ownership includes shares underlying options or warrants to purchase common stock, or other securities convertible into common stock, that currently are exercisable or convertible or that will become exercisable or convertible within 60 days. Unless otherwise indicated, the beneficial owner has sole voting and investment power.

(2). Mr. Atsushi Maki, the Company's Chairman and President, is the sole shareholder of Amanasu Corporation and is deemed the beneficial owner of such shares.

(3). Includes 1,496,000 shares of common stock held individually by Mr. Maki, 1,000,000 shares of common stock deposited with a third party (see "Item 12 "Certain Relationships and Related Transactions"), 33,000,000 shares of common stock held by Amanasu Corporation, and 362,500 shares of common stock held by Mr. Maki's wife, Lina Lei. Mr. Maki disclaims beneficial ownership of the shares held by his wife.

(4). Includes 362,500 shares of common stock held individually by Ms. Lei, and 35,490,000 shares of common stock beneficially owned by Ms. Lei's husband, Atsushi Maki. Ms. Lei disclaims beneficial ownership of the shares held by her husband.

On December 15, 1999, the Company entered into an agreement with Amanasu Corporation, a Japanese corporation, under which Amanasu Corporation agreed to arrange a granting of a license to the Amanasu Furnace, to the Company. In exchange for obtaining the license to the Technology, the Company agreed to issue Amanasu Corporation 13,000,000 shares of its common stock and stock purchase options to acquire another 20,000,000 shares of common stock at a price per share of $0.01. In addition under the terms of the agreement, the Company agreed to issue 1,000,000 shares of common stock to the inventor of the technology, and 200,000 shares of common stock to the executive director of the inventor's Company. In May 2001, Amanasu Corporation exercised its option to acquire 20,000,000 shares of common stock of the Company and paid the sum of $200,000 to the Company. Mr. Atsushi Maki, the Company's Chairman and President, is the sole shareholder of Amanasu Corporation.

Mr. Maki received salary compensation in the form of 3,200,000 shares of common stock of the Company for the period from November 1999 through fiscal 2001. The shares were valued at $0.01 per share or a total of $32,000. Ms. Lei received salary compensation in the form of 312,500 shares of common stock of the Company for the period from November 1999 through fiscal 2001. The shares were valued at $0.01 per share or a total of $3,125.

On June 8, 2000, the Company entered into an exclusive licensing agreement with the inventor of the Amanasu Furnace. Under the licensing agreement, the Company obtained the worldwide production and marketing rights of the Technology for 30 years, and the Company is required to pay the inventor a royalty of 2% on gross sales of the Technology.

Effective September 30, 2002, the Company entered into a license agreement with Sanyo Kogyo Kabushiki Gaisha and Ever Green Planet Corporation, both Japanese companies, whereby the Company received the worldwide, exclusive license for a term of 30 years for the production and marketing of a hot water boiler, which incinerates waste tires in a safe and non-polluting manner and extracts heat energy from the incineration process. As consideration for this acquisition, the Company paid the licensors $250,000, of which the Company's President paid $95,000, issued to them 600,000 shares of common stock, and issued to an affiliate of the licensors 50,000 shares of common stock. The $95,000 paid by the Company's President is a contribution of capital to the Company. The licensors are entitled to receive a two percent royalty on the gross receipts from the sale of the products related to the technology.

On June 30, 2003, the Company acquired the exclusive worldwide rights to produce and market a patented process that purifies seawater, and removes hazardous pollutants from wastewater. The term of the license is 30 years from the date of the agreement. As consideration for obtaining the license, the Company issued 1,000,000 shares to Etsuro Sakagami, the licensor, and 50,000 shares to a finder. The licensor is entitled to receive a two percent royalty on the gross receipts from the sale of the products related to the technology.

On May 14, 2003, the Company entered into a Stock Purchase Agreement to acquire from Jipangu Inc. ("Jipangu"), a private, unaffiliated Japanese company, 10,000,000 shares of Kyoei Reiki Industrial Corporation Ltd ("Kyoei"), a publicly traded company in Tokyo, Japan. The purchase price for the shares is $4,993,000. The agreement called for the payment of 20% of the purchase price on May 31, 2003, and the balance was due on June 25, 2003. On or about May 31, 2003, Atsushi Maki, the Company's President and controlling shareholder, deposited with Jipangu 1,000,000 shares of common stock of the Company owned by Mr. Maki. However, the Stock Purchase Agreement with Jipangu stated that if Kyoei becomes bankrupt or is under receivership for bankruptcy before the remaining amount (80%) is due, Jipangu waives the right to collect the final amount. On June 25, 2003, Kyoei was placed under receivership with Tokyo District Court. The Company believes that it is not required to pay Jipangu the remaining amount due under the Stock Purchase Agreement. The deposit of common stock made to Jipangu by Mr. Maki was made on behalf of the Company. On December 10, 2003, the Company transferred its rights under the agreement with Jipangu to Mr. Maki, and Mr. Maki has released and indemnified the Company from any obligation under the Jipangu agreement

Name	Description
3(i)(a)	Articles of Incorporation of the Company (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
3(i)(b)	Certificate of Amendment to Articles of Incorporation(Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
3(i)(c)	Certificate of Amendment to Articles of Incorporation (Incorporated by reference to the Company's Form 10-KSB filed on March 31, 2003).
3(ii)(a)	Amended and Restated By - Laws of the Company (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
10(i)	Agreement between Family Corporation and the Company dated December 15, 1999. (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
10(ii)	License agreement between the Company and Masaichi Kikuchi dated June 8, 2000. (Incorporated by reference to the Company's Form 10-SB filed on June 20,2001).
10(iii)	Technical Consulting Agreement the Company and Masaichi Kikuchi dated June 9, 2001. (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
10(iv)	Amendment No. 1 to Licensing Agreement dated July 30, 2001, however, effective June 8, 2000 by and between the Company and Masaichi Kikuchi. (Incorporated by reference to the Company's Form 10-SB/A filed on August 9, 2001).
10(v)	License Agreement made as of September 30, 2002 by and between the Company and Sanyo Kogyo Kabushiki Gaisha and Ever Green Planet Corporation. (Incorporated by reference to the Company's Form 10-KSB filed on March 31, 2003).
10(vi)	Addendum to License Agreement made as of September 30, 2002 by and between the Company and Sanyo Kogyo Kabushiki Gaisha and Ever Green Planet Corporation. (Incorporated by reference to the Company's Form 10-KSB filed on March 31, 2003).
10(vii)	Stock Purchase Agreement dated May 14, 2003 by and between the Company and Jipangu, Inc.
10(viii)	Desalination License Agreement made as of May 30, 2003 by and between the Company Etsuro Sakagami. (Incorporated by reference to the Company's Form 10-QSB filed on August 13, 2003).

31 Certification under Section 906 of the Sarbanes-Oxley Act.
32 Certification under Section 906 of the Sarbanes-Oxley Act.

(b). Reports on Form 8-K.

1. Audit fees for 2006 were $22,000 and $8,920 for 2005.
2. Audit Related Fees for 2006 and 2005 were $0.
3. Tax Fees for 2006 were $625 and 2005 were $0.
4. All Other Fees were $0.
5. N/A.
6. Not greater than 50% for 2005 and 2004.

Accountant's Audit Report	1
Balance Sheet	2
Statements of Operations	3
Statements of Changes in Stockholder's Equity	4
Statements of Cash Flows	5
Notes to Financial Statements	6

LICENSED TO PRACTICE
IN NEW YORK AND NEW JERSEY
MEMBER OF AICPA
PRIVATE COMPANIES PRACTICE SECTION
MEMBER CENTER FOR PUBLIC COMPANY AUDIT FIRMS
REGISTERED PUBLIC ACCOUNTING FIRM WITH
PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD

TEL: 973-628-0022
FAX: 973-696-9002
E-MAIL: rgjcpa@optonline.net

Board of Directors Amanasu Environment Corporation

I have audited the accompanying consolidated balance sheet of Amanasu Environment Corporation and Subsidiaries as of December 31, 2007 and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended December 31, 2007, and 2006. These financial statements are the responsibility of the Company management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted the audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Amanasu Environment Corporation and Subsidiaries as of December 31, 2007, and the results of its operations and its cash flows for the years ended December 31 , 2007 and 2006 in conformity with U.S. generally accepted accounting principles.

/s/ Robert G. Jeffrey
ROBERT G. JEFFREY
April 14, 2007
Wayne, New Jersey

Assets

Current Assets
Cash	$	102,763
Certificate of Deposit		1,150,000
Accounts and Notes Receivables		66,737
Raw Materials		3,373
Advance to Vendor		94,000
Short Term Loan Receivables		293,152
Accrued Interest Receivables		13,236
Total Current Assets		1,723,261
Fixed Assets
Machinery and Equipment		342,216
Less, Accumulated Depreciation		100,276
Net Fixed Assets		241,940
Other Assets:
Investments		277,763
Prepaid Expenses		76,448
Security Deposits		143,595
Miscellaneous Receivables		893
Long Term Loan Receivables		31,483
Total Other Assets		530,182
Total Assets	$	2,495,383
Liabilities And Stockholders' Equity
Current Liabilities
Accounts Payable	$	22,359
Accrued Expenses		13,450
Payroll and Other Taxes Payable		18,082
Shareholders Advance		958
Total Current Liabilities		54,849
Stockholders' Equity:
Common Stock: authorized 100,000,000 shares of $0.01 par value; 44,000,816 issued and outstanding		44,001
Minority Interest		426,014
Additional Paid In Capital		4,257,039
Retained Deficity		(2,301,821)
Other Comprehensive Income		15,301
Total Stockholders' Equity		2,440,534
Total Liabilities and Stockholders' Equity	$	2,495,383
The accompanying notes are an integral part of these financial statements.

2

	Year 2007			Year 2006
Sales	$	472,318		$	478,003
Cost of Goods Sold		349,674			271,552
Gross Profit		122,644			206,451
Expenses		906,495			533,125
Operating Loss		(783,851)			(326,674)
Other Income (Expense)
Interest Income		61,634			50,783
Miscellaneous Revenue		10,718
Impairment of Fixed Assets		(144,000)			-
Impairment of Investments		(263,685)			(292,030)
Net Loss	$	(1,119,184)		$	(567,921)
Net loss per share basic and diluted	$	-		$	-
Average number of shares outstanding	$	44,001,816		$	44,00,816
The accompanying notes are an integral part of these financial statements.

	Common Stock					Additional			Retained			Other Comprehensive			Total
	Shares		Amount			Paid in Capital			Deficit			Income
Balance December 31, 2003	43,020,816		$	28,821		$	872,119		$	(465,039)		$	-		$	435,901
Adjustments	(20,000)			14,180			(114,080)			-			-			(99,000)
Net loss For Period	-			-			-			(149,677)			-			(149,677)
Balance December 31, 2004	43,000,816			43,001			758,039			(614,716)			-			186,324
Sales of Common Stock	1,000,000			1,000			3,499,000			-			-			3,500,000
Net loss for period	-			-			-			(567,921)			-			(567,921)
Comprehensive Income	-			-			-			-			4,995			4,995
Balance December 31, 2005	44,000,816		$	44,001		$	4,257,039		$	(1,182,637)		$	4,995		$	3,123,398
Minority Interest	-			-			426,014			-			-			426,014
Net loss for period	-			-			-			(1,119,184)			-			(1,119,184)
Comprehensive Income	-			-			-			-			10,306			10,306
Balance December 31, 2006	44,000,816		$	44,001		$	4,683,053		$	(2,301,821)		$	15,301		$	2,440,534
The accompanying notes are an integral part of these financial statements.

	Year 2007			Year 2006
CASH FLOWS FROM OPERATIONS:
Net loss	$	(1,119,184)		$	(567,921)
Charges not requiring the outlay of cash:
Depreciation and amortization		28,814			58,777
Write down of licensing agreements		10,000			292,030
Equity in losses of investee companies		26,896			11,780
Change in current assets and liabilities:
Decrease in notes and accounts receivable		10,804			(78,434)
Decrease in work in progress		19,186			(19,186)
Increase in advance to vendor		-			(94,000)
Increase in loan receivables		(31,483)			-
Increase in advance to employees		24,179			(24,179)
Increase in short term bank loan		(21,210)			21,210
Increase accrued interest		(13,236)			-
Increase in prepaid expenses		(76,448)			-
Increase in raw materials		(3,373)			-
Increase in accounts payable		2,934			19,425
Increase in advance to shraeholders		43,278			(42,420)
Increase in payroll and other taxes payble		1,662			13,430
Increase in accrued expenses		9,872			3,578
Increase employee loans		(14,640)			14,640
Net Cash Consumed By Operating Activities		(901,949)			(391,270)
CASH FLOWS FROM INVESTING ACTIVITIES
Machinery and equipment		143,630			(459,987)
Investments		242,711			(801,384)
Increase in security deposits		-			(100,000)
Advance to affiliate		(191,267)			(138,595)
Investment in certificate of deposit		(150,000)			(1,000,000)
Net Cash Provided (Consumed) By Investing Activities		45,074			(2,499,966)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of common stock		-			3,500,000
Refund of stock investment		-			(99,900)
Capital Contribution to Subsidiary		426,014			-
Net Cash Provided By Financing Activities		426,014			3,400,100
Exchange Rate Effect on Cash		10,306			4,995
Net Change in Cash Balances		420,555			513,859
Cash Balance, beginning of period		523,318			9,459
Cash balance, end of period	$	102,763		$	523,318
The accompanying notes are an integral part of these financial statements.

Organisation of Company

The Company is a Nevada Corporation, formed February 22, 1999, as Forte International, Inc. The name was changed to Amanasu Energy Corporation on March 27, 2001, and to Amanasu Environment Corporation on October 18, 2002.

Business

On October 19, 2004, the Company invested $100,000 for a 100% interest in a newly formed subsidiary, Amanasu Shinwa Corporation (Shinwa), which is located in Gunma, Japan. On December 16, 2005, a second 100% owned subsidiary was formed, Amanasu Holdings, Inc. (Holdings), which is located in Tokyo, Japan. Holdings made investments in five other Japanese companies during 2005, including an $84,288 investment in Shinwa. The investee companies are involved in a variety of businesses, described in Note 8. Shinwa performs fabricating services, principally welding, on stainless steel piping; it has also developed, and continues development of systems for cleaning the waters of rivers, streams and lakes. On September 21, 2006, Soae, a Japanese electronics manufacturer, invested $426,014 for a 9% interest in Amanasu Holdings. Also, on September 21, 2006, Amanasu Holdings formed a new subsidiary called Amanasu Water. Amanasu Water's plan of operation is to market a new type of water called "Hydrogen ion water". Hydrogen-ion water is a new product and is believed to have effective anti-oxidant properties.

During the year 2000, the Company acquired worldwide licensing rights for nuclear incinerator technology, known as "The Amanasu Furnace". The Furnace is a positive ion breeder incinerator process that converts domestic and industrial wastes to ions through high temperature exposure. The resultant residue consists of oxygen gas and inert slag pellets. On September 30, 2002, the Company was granted a worldwide exclusive license for the production and marketing of a hot water boiler which extracts heat energy from waste tires. On June 30, 2003, the Company acquired the worldwide rights to produce and market a patented process that purifies seawater, and removes hazardous pollutants from wastewater. These investments, which totaled $346,500, are for licensing rights to three products. During 2005 & 2006, the value of these rights was reviewed and impairment was found to have occurred (see Note 8).

Development Stage Accounting

The Company was, until 2005, a development stage company, as defined in Statement of Financial Accounting Standards No. 7. Generally accepted accounting principles that apply to established operating enterprises govern the recognition of revenue by a development stage enterprise and the accounting for costs and expenses. The Company is no longer in the development stage.

Risk and Uncertainties

Approximately 60% of the sales of Shinwa are to one customer. Management does not view this concentration as a significant risk.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Holdings and Shinwa. All significant intercompany balances and transactions have been eliminated in consolidation.

For purposes of the statements of cash flows, the Company considers all short term debt securities purchased with a maturity of three months or less to be cash equivalent

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, miscellaneous receivables, and miscellaneous payables. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Fixed Assets

Fixed assets are recorded at cost. Depreciation is computed using accelerated methods, with lives of five years for vehicles, and seven years for machinery and equipment, ten years for tools, and fifteen years for building improvements.

Licensing Agreement

During the year 2000, the Company issued 13,000,000 shares of common stock to a company that is wholly owned by the Company's president as a fee for arranging for the acquisition of the licensing agreement for the nuclear incinerator technology. Another 1,200,000 shares was issued in 2001 in connection with the acquisition of this agreement. No value has been assigned to this intangible asset.

The license for the hot water boiler was acquired at a cost of $250,000, plus 650,000 shares of common stock. The stock was valued at $.10 per share, bringing the total cost to $315,000. The license for the seawater purification process was acquired for 1,050,000 shares of common stock which were valued at $31,500. Amortization of these costs has been provided by the straight line method using lives of 17 years, which is based on patent life. The latter two intangible assets were evaluated during 2005 and 2006 and a write off was made for the entire portion of their book value. (See Note 1 and 8).

Income Taxes

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 carryforwards.

Recognition Of Revenue

Revenue is realized from sales of products and services. Recognition occurs upon delivery. In determining recognition, the following criteria are considered: persuasive evidence exists that there is an arrangement between the buyer and seller; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured.

Use Of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimated.

Foreign Currency Translation

Substantial Company assets are located in Japan. These assets and related liabilities are recorded on the books of the Company in the currency of Japan (Yen). They are translated into US dollars as follows:

1. Current assets, current liabilities and long term monetary assets and liabilities, at the rate of exchange in effect as at the balance sheet date;
2. Non-monetary assets and liabilities at the exchange rates prevailing at the time of the acquisition of the assets or assumptions of liabilities; and,
3. Revenues and expenses, at the average rate of exchange for the year.

Other Comprehensive Income

The Company reports as other comprehensive income revenues, expenses, and gains and losses that are not included in the determination of net income. No such transactions occurred during the years 2005 or 2004.

Advertising Costs

The Company will expense advertising costs when an advertisement occurs. Amounts expensed were $146,351 during 2006; and $3,750 in 2005.

Segment Reporting

Management will treat the operations of the Company as one segment.

Fair Value of Financial Instruments

The carrying amounts of the Company's financial instruments, which include cash, miscellaneous receivables, and payroll taxes payable, approximate their fair values at December 31, 2006.

Net Loss Per Share

The Company computes net income (loss) per common share in accordance with SFAS No. 128, "Earnings Per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted net loss per common share are computed by dividing the net income (loss) available to common shareholders for the period by the weighted average number of shares of common stock outstanding during the period. Accordingly, the number of weighted average shares outstanding as well as the amount of net income (loss) per share are presented for basic and diluted per share calculations for all periods reflected in the accompanying consolidated financial statements.

The Company does not anticipate the adoption of recently issued accounting pronouncement to have a significant effect on the Company's results of operations, financial position or cash flows.