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, 2005
 
 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
			  EmployerIdentification
			  No.)
 
 701 FIFTH
		AVENUE, 42nd FLOOR, SEATTLE, WA 98104
 (Address
		of principal executive offices)
 
 206-262-8188
 (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 March 15, 2006,
		com puted 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 March 15, 2006 was
		44,000,816 common
		shares.
  1
  **PART
		I**
 
 **Item
		1. Description Of Business**
 
 **General**
 
 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.
  2
  The Company's principal offices are located at 701 Fifth Avenue, 42nd Floor,
		Seattle, Washington 98104, and its telephone number is (206) 262-8188.
		The Company also maintains an office at 1-3-38 Roppongi, Minatoku, Tokyo,
		106-0032, Japan.
 
 
 **Technologies
		Of The Company**
 
 **Amanasu
		Furnace** .
 
 Overview
		and History .
 
 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 of generating extremely high
		temperatures is 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 vented out of the system. The process produces no toxins, smoke,
		ash, or soot.
 
 Mr.
		Masaichi Kikuchi, the inventor of the technology, constructed the first and only
		Amanasu furnace in 1996. The unit is located on the island of Hokkaido, Japan.
		The unit operated from 1996 to October 2002 when it was shut down for noise
		pollution to a nearby neighborhood. Although the Hokkaido unit was shut down due
		to noise pollution, the Company believes that the operating noise of the furnace
		is normal for this type of equipment.
 
 Description
		of the Amanasu Furnace .
 
 The
		Amanasu furnace is a waste disposal system that safely and efficiently disposes
		of toxic and hazardous wastes. The system has three general features; the
		proprietary combustion burner, the furnace compartment, and the gas processing
		compartment.
 
 The
		proprietary aspect of the Amanasu furnace is the unique combustion system that
		generates abnormally high temperatures in excess of 2,000 degrees Celsius within
		the furnace compartment. A proprietary formula of low cost metals, such as
		powered aluminum and iron, is combined with an air pressurized, hydrocarbon
		flame creating a superheated hydrogen combustion flame. A spray nozzle or burner
		injects the flame into the furnace compartment where the flame is irradiated
		with microwaves to create an ionized flame reaching a heat conversion
		temperature of 18,000 C but an actual measured temperature of 1,800-2,300 C
		inside the furnace compartment. By contrast, an ordinary burner, neutral flame
		reaches temperatures between 800 to 1,600 C. In order to raise the temperature
		to the 1,800 to 2,300 degrees C range, large amounts of additional energy is
		required, typically, electricity; however, the cost of this energy source is expensive
		and generally would be cost prohibitive to the operation of a furnace. The
		Company's proprietary system reaches these temperatures using approximately 20
		gallons of kerosene or light oil per hour for each one ton of daily capacity.
		For example, a five ton daily capacity unit requires five times as much
		hydrocarbon use or 100 gallons, per hour. The furnace reaches maximum
		temperatures within four to five hours after flame ignition. The resultant
		effect is a low cost methodology of generating extremely high temperatures
		within a confined furnace compartment.
  3
  The inner
		walls of furnace and the combustion burner itself are protected from the extreme
		heat by magnetrons and tokomak. Magnetrons are circular magnets that deflect the
		gaseous ions from the furnace walls to the center of the furnace. Tokomak is an
		insulating material that further protects the furnaces walls from the extreme
		heat. Waste matter enters a feed dump where a conveyor or overhead grapple
		continuously feeds the waste to the furnace compartment. Once inside the high
		temperature furnace compartment, the chemical compounds of waste matter are
		instantly ionize or disintegrated into gaseous matter and a magna-like liquid.
		The magna-like liquid is water cooled to form a dense, inert carbon matter. The
		combustion gases resulting from the ionization first receive a light irradiation
		process to prevent recombination. A primary high speed water dousing process
		follows whereby the gas is cooled to 1,300 C. A series of two to four reaction
		tanks, similar to water shower units, further cool the gases, and sulfuric acid
		and nitric acid are removed through processing. Finally, the cooled gas, in the
		form of oxygen, is filtered and vented from the system as warm air at below 60
		degrees C. The process is unlike conventional waste incinerators, as it produces
		no toxins, smoke, ash, or soot. The vented oxygen has dioxin levels below 0.01
		nanogram and dibenzoflan levels below 0.001 nanogram. The inert carbon matter
		produced in the form of pellets is no more than 2% of the original mass, and can
		be used for roadway surfaces or disposed of in landfills.
 
 The outer
		housing of the Amanasu furnace is constructed of fabricated steel. Ancillary
		equipment, other than as described above, includes feed hoppers, pipe conveyors,
		fuel polarization equipment, air polarization equipment, turbo fans, and an air
		compression system for the burner. The Company believes the furnace will have an
		estimated useful life of approximately 15 years. This estimate is based upon the
		results of the unit that operated in Hokkaido, Japan.
 
 
 Markets .
 
 Hazardous
		and toxic waste generally consists of a large number of chemicals, metals,
		pesticides, biological agents, toxic pollutants, and other substances. The
		treatment of toxic and hazardous waste worldwide is a growing and diverse
		industry. Significant legislation and regulation worldwide has contributed to
		the growth of this industry. These regulations are directed at protecting the
		environment by requiring originating parties to be responsible for managing the
		hazardous wastes that they generate. Although the proprietary furnace technology
		licensed by the Company disposes of various forms of waste, the Company will
		seek to promote its product as a toxic and hazardous waste disposal system. This
		position is premised upon the higher disposal fees for hazardous and toxic
		compared with the disposal fees of non-toxic or hazardous waste.
 
 Manufacturing
		And Suppliers .
 
 The Company believed that the prior pricing structure for its furnaces was not competitive,
		and it was seeking ways to lower its manufacturing costs. In an effort to lower manufacturing costs,
		the Company was attempting to locate alternate suppliers that were less costly
		than currently identified suppliers. It also would attempt to re-design certain
		components of the furnace so as to reduce the manufacturing cost per component.
 However, even though the Company made a great effort to meet its goal, the
		Company was confronted with several difficulties and started considering the
		alteration of the function of the original furnace, which manages daily wastes, to a furnace
		which manages specific waste, such as industrial and medical waste.
		During this period, the Company was also exploring the option of a possible business cooperation
		with a company in the same industry that had more advanced
		furnaces with a lower production cost. Kogure Works Co, Ltd.,
		with a 34 year history of successful business in Japan, was such a company.
		The pricing of their product was set at $100,000/t and eventually reducing the
		price by 20% would make it an ideal prospect. Thus, the Company then considered
		investing capital into Kogure Works.  The Company could not predict
		whether it will be successful in the alternation of structure or achieve its desired pricing.
 The proprietary combustion system of the Amanasu furnace would be manufactured
		by Kogure Works Co.,Ltd. in Takashaki-city, Gunma, Japan with a term of business cooperation.
  4
  Current
		Status .
 
 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 and technologies 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 Furnance will remain with the Company.
 
 **Fire
		Bird Boiler** .
 
 Overview
		and History .
 
 The Fire Bird Boiler is a dual purpose technology which
		incinerates waste tires, which then generates a source of heat. During 1998,
		the inventor of the technology constructed two proto-type boilers. The
		licensor currently operates one of the units in Ishinomaki, Japan. The operating
		boiler currently has a 5 ton/day capacity. Although its capacity is not fully utilized,
		and the heat by-product steadily maintains a green house at 25 C. The Company will be focusing on
		promoting the Fire Bird Boiler and opening the market to the green house sector.
 
 
 Description
		of the Fire Bird Boiler **.**
 
 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 technology provides for combustion efficiency and seeks to minimize dioxin
		generation, which is generally a by-product of imperfect combustion.
 
 The
		boiler is comprised of a "combustion room", a "water jacket" for
		protecting and cooling metals in the combustion room, and an "air layer" for
		insulating heat radiation. The combustion chamber is circular, with a power
		forced ventilation device, which accelerates the process for a more efficient combustion.
		Hot Steam is then introduced at the burn point, which increases the oxygen capacity
		creating the high burning temperatures in the combustion chamber. During the
		incineration process, temperatures can reach as high as 1,000 degrees C. In other
		boiler or incineration technologies, reaching temperatures of 1,000 degrees C
		generally takes 4 hours to prevent any internal damage caused by a rapid
		rise in temperature; however, due to the heat protection attributes of the water
		jacket, the boiler can reach 1,000 degrees C in approximately two minutes
		without causing damage to any of the internal components of the boiler. The high
		temperatures enable the waste tire to be incinerated with minimal waste, odor,
		and gas dioxins. Prior technologies have required that waste tires be pulverized
		prior to incineration. This process is designed to accept whole waste tires
		through a conveyor, while sensors manage the combustion process. The sensors calculate the number
		of tires and the timing of their delivery as well as maintaining water supply and temperature conditions.
        The unit has a combustion capacity of 100 kilograms per
		hour, and can generate 932,000 kcal of energy per hour. The Company believes that the
		operating costs of the boiler are minimal, due to the fact that the fuel source
		is the waste tires.

		The weight of the 5 ton/day capacity boiler, which is similar to the inventor's
		operating unit, is 1,939 kg, and measures 3,850 mm in length and 1,650 mm in
		width. The Company will attempt to re-design the boiler to accept waste products
		such as non-toxic bulk waste, in addition to waste tires. If successfull the Company believes
		that an increase in product versitility will increase the demand of the product.
		At this time, the Company does not have projected
		prices for a re-designed unit, although the Company will seek to achieve,
		through its re-design efforts, a retail price of $100,000 per ton of capacity.
		The Company can not predict whether it will be successful in its
		redesigning efforts and/or achieve its desired pricing.
  5
  Manufacturing
		And Suppliers .
 
 The
		Company has had discussions with Kogure Works Co., Ltd., a manufacturing company
		located in Takasaki, Japan, and believes this company can manufacture the Fire
		Bird Boiler, however, a formal agreement has not been
		entered into by both parties. If a contract with Kogure Works can be established,
		the Company will seek to utilize Kogure's manufacturing facility
		and equipment for the production, and the Company will no longer continue with
		its former manufacturing company, Ishimaki Seiki in Ishimaki-city, Japan.
		Alternatively, the Company may sub-contract the assembly and component
		manufacturing to firms located in proximity to its customer so as to eliminate
		excessive shipping charges; however, no such arrangements have been established
		by the Company at this time.
 
 Current
		Status .
 
 The Company believed that the Fire Bird Boiler was 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 was confronted with severe
		marketing difficulties for Fire Bird Boiler.  Even though the Company once decided
		to seek to refine the boiler to accept other forms of waste, including hazardous
		waste, to be flexible in the market, the Company has determined no further
		production and/or investment on this technology and no further business relation
		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
 
 **Ring-Tube
		Desalination**
 
 Overview
		and History .
 
 A
		prototype of the desalination plant was built by the inventor in 2001. The plant
		is located in Oita, Japan. The operating rate of the plant is 1.4 tons of water
		per day or 1 liter of water per minute. It has not been commercially produced yet.
		The Company believes that the existing capacity is insufficient and too costly for its targeted
		markets, and the Company is planning to rely on a subcontracted water
		purification system manufacturer for the production. The subcontracted company will attempt to
		re-engineer the technology, taking the efficient parts to create a more cost efficient system.
 
 Description
		of the Ring-Tube Desalination .
 
 Large
		scale desalination is conducted mainly by distillation or reverse osmosis
		methodologies. In the past, distillation has been used for large scale
		desalination, while reverse osmosis had been used for medium size and small
		desalination; however, recent developments in reverse osmosis have increased
		output and are now used for large scale desalination. In both methods, the
		technologies condense seawater to make fresh water; however in their
		processes, calcium carbonate and magnesium hydroxide is created in the form of
		scales which adheres to the equipment and pipes. The amount of scales increases
		with temperature. This condition is more common with distillation processes than
		reverse osmosis (RO) process. Scale inhibitors or other cleaning methods are
		introduced to the process to control or lessen the amount of scales on the
		equipment and pipes, however oftentimes, they are not completely effective, and
		are generally costly to use. RO is performed in a single or two step
		method. The single step method requires more pressure to separate the fresh
		water from the impurities, while the two step method uses less pressure, but more
		energy to separate the fresh water. As a result of the high pressure conditions, special
		sealing technologies and materials for piping and pumps are required to
		withstand these conditions, which are generally expensive.
 
 The
		Ring-Tube technology is used as a filter to purify seawater into drinking water
		and also treats sewage and wastewater, by removing pollutants and bacteria. The
		technology is different than both methodologies (distillation and RO) described
		above. 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 to the less than 40% of the RO method.
		Moreover, water produced from the Company's technology retains a certain amount
		of salt and minerals and does not require 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.
  6
  Manufacturing
		And Suppliers .
 
 The Company believed that the Ring-Tube Desalination equipment could be
		manufactured by Shinwa Yosetsu, a subcontract manufacture, in Akagi-city,
		Gunma, Japan. Later on, the Company estimated that it would be more cost efficient
		to buy out Shinwa Yosetsu, who had a complete manufacture line of the water
		purification system and experienced technicians, as a subsidiary company with
		100% control than to invest on the formation and structure from the scratch.
		As a result, the Company bought out Shinwa Yosetsu as projected investing
		$100,000, as of March 14th, 2005, and renamed it to Amanasu Shinwa Corporation.
 
 Current
		Status .
 
 The Company believes that the existing capacity of the Ring-Tube Desalination
		equipment is commercially insufficient for its targeted markets due to the fact the
		equipment is hand-manufacturing, which leads to high production cost.
		This is a cause for concern because 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 has bought
		out Shinwa Yosetsu, a former subcontract manufacturing company, now as
		Amanasu Shinwa Corporation ("Amanasu Shinwa")., located at 70 Nishishikata
		Kasakake-cho, Nitta-gun, Gunma, and has a positive projection for low-cost
		production and distribution of water purification systems.

		With the aquisition of Shinwa, 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.
 
 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.
  7
  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.
 
 EMPLOYEES.
 
 As of December 31, 2005, the Company has two employees, Shuichi Yamada,
		Izuo kato, located at its Seattle 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 2005.
 
 **Item
		2. Description Of Property** **.**
 
 The Company's executive offices are located at 701 Fifth Avenue, 42nd Floor,
		Seattle, Washington 98104. The premises consist of 1,500 square feet, and are
		leased at a monthly rental amount of $3,500 under a lease agreement which
		expires September 30, 2006. The Company shares the space with Amanasu
		Technologies Corporation, a reporting company under the Securities Exchange
		Act of 1934.
		The Company leases a Seattle apartment for a monthly rental of $1,200 under
		a lease agreement.In addition, the Company maintains an office at 1-3-38 Roppongi, Minatoku, Tokyo,
		106-0032, Japan. The premises are 1,000 square feet and are leased on an agreement
		which expires December 31, 2006 at $1,700 (200,000 Yen) per month, and also an
		apartment at 1-3-40 Roppongi, Minatoku, Tokyo at $17,000 (1,926,500 Yen) per month
		under a lease agreement which expires August, 2006.
		The Company believes additional lease space at these locations will be available to
		support its future growth.
  8
  **Item
		3. Legal Proceedings**
 
 None.
 
 **Item
		4. Submission Of Matters To A Vote Of Security Holders**
 
 None
 **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.
  2004
			
			Low
			  Bid
			
			High
			  Bid4thQuarter
			
			
			0.70
			
			
			2.752005
			
			
			Low
			  Bid
			
			
			High
			  Bid1st
			  Quarter
			
			$
			2.75
			
			$
			2.752nd
			  Quarter
			
			
			1.20
			
			
			2.753rd
			  Quarter
			
			
			1.00
			
			
			1.204thQuarter
			
			
			0.55
			
			
			1.50
  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.
  9
  Equity
		Compensation Plan Information .
  **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
 
 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  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.
 
 **Item
		6. Management's Discussion And Analysis Of Financial Condition And Results Of
		Operations** .
 
 The
		following discussion should be read in conjunction with the Company's Financial
		Statements, including the Notes thereto, appearing elsewhere in this Annual
		Report.
 
 Plan
		Of Operations.
 
 The
		Company was organized February 22, 1999 and is a development stage company. Its
		operations to date have been limited to obtaining exclusive licensing rights for
		three 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 were 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.
 
 Patents
 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)
 
 As of December 16th, 2005, the Company established a new company, 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.  Amanasu Holdings and the former employees of Kogure jointly established
		an incorporation, named Amanasu Echo Frontier Corporation ("Amanasu Echo Frontier"),
		with a capital of $240,000 (28,000,000 Yen) of which Amanasu Holdings invested
		$103,000 (12,000,000 Yen) in December, 2005, and have employed 10 former
		technicians of Kogure.  Amanasu Echo Frontier is mainly producing incinerator, furnace,
		and medical waste treatment plant using the 6 proprietary rights purchased from
		Kogure as stated above at a location of 1-24-8 Iwagami-cho, Maebashi, Gunma, Japan.
		The Company's business plan for 2006 is to sell 5 furnace units for $2,440,000
		(285,000,000 Yen) per unit in Japan and 3 medical waste treatment plant units
		for $1,300,000-$1,700,000 (150,000,000-200,000,000 Yen) per unit in china.
		Also Amanasu Echo Frontier and Onyx, a used car sales company in Japan, has
		made a temporary agreement on an order for an incinerator at $14,000,000 (1,650,000,000 Yen) to be manufactured and delivered
		by the end of 2007.
 Amanasu Holdings invested $85,000 (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 ($85,000 (10,000,000 Yen) per unit) for pools at sports clubs, which will be produced and
				distributed in japan for the next 12 months
 With the funds, Amanasu Shinwa has also started developing a new plant using ozone sterilization technologies
				, and are expecting increase of sales by the new development.
				The new plant will be used for swimming pools, public bathes, and kitchens and the wide
				range of other market places are being prospected.  The expecting sale for 2007 is 300,000,000 Yen.
 Amanasu Holdings invested 10,000,000 Yen and loaned it 5,000,000 Yen into Felice Ltd;,
				located at 3-41 Akebono-chou Senju
				Adachi-ku Tokyo,  on December 16th ,2005.
				Felice runs beauty salons and a new type of beauty salon is in consideration for construction.
				The business will be run by the memberships therefore Amanasu Group will encourage
				raising the number of the memberships. The goal of the sale for 2007 is 360,000,000 Yen.

				Amanasu Holdings invested 11,000,000 Yen into BJSS Ltd; located at 1-5 Suda-Chou
				Chitoda-ku Tokyo on December 16th 2005 and made additional investment of
				9,000,000 Yen on January 26th 2006. This is a temporary employment agency.
				There are offices in Bangladesh and Japan.  Their sales are increasing and
				showing the highest sales record of 100,000,000 Yen by the end of March in 2006.
				Expanding more branch offices and reaching sales of 1,800,000,000 Yen are planned in 2007.

				Amanasu Holdings invested 10,000,000 Yen into Petstyle Ltd;, which runs a pet model
				business,located at#406, Mansion Kyassuru,13-8 Daikanyamacho, Shibuya-ku Tokyo,
				on January 11th 2006. The business will be run by the memberships therefore
				Amanasu Group will encourage raising the number of the memberships.
				The pet industry is increasing in its popularity in Japan and all over the world.
				The company is aiming to establish its business as a pioneer of total
				management for the pets in Japan.  The first aim of the Company is to increase
				the number of memberships that can be beneficial to other business in the group.
				The goal is to collect 100,000 people as the members in 3 years.  The expected
				sale for 2007 is 150,000,000 Yen.

				Amanasu Holdings invested 5,000,000 Yen and loaned 5,000,000 Yen to Japan Amanasu Project
				Support Ltd;, located at 2-2-5 Nishikanda Chiyoda-ku Tokyo, on January 26th 2006. This company has been
				established to manage marketing for the incinerator(Amanasu Eco Frontie) and other products of
				Amanasu Holdings. Simultaneously, the company is planning to produce a new bathing method:
				Using rocks that have mineral elements, which radiate far infrared rays by heat, and spread out the
				heated rocks in a closed room. The concept is similar to a sauna.
				The far infrared rays have special healing attributes to the body, promoting health.
				The expected sale for 2007 is 300,000,000 Yen.
 The Company had the option of a business cooperation with Kogure investing capital of approximately $290,000;
		however, the Company discontinued discussions in regard to settlement on a business relation with
		Kogure, therefore there is no further business projects in connection with Kogure at this present time.
 The Company or Amanasu Echo Frontier is considering to establish an organization for joint ventures with
		MINMETAL in China for the purposes of conducting  joint marketing of medical waste treatment plants with MINMETAL.
		The establishment might take place in 2006 with total investment of 50,000,000 Yen, 51% of which will be invested by
		The Amanasu Environment or Amanasu Echo Frontier.
 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.
 
 During
		the fiscal 2005 and 2004 years, the Company spent $-0- and $-0- respectively on research and development.
  10
  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, 2005 were
		$3,198,771 representing an increase of $2,867,223 from the total
		assets of $331,548
		as of December 31, 2004.
 
 
 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.
  11
  **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.
  12
  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.
  13
  **Item
		8A . Controls and Procedures** .
 Within the 90-day period prior to the filing of this annual report on Form 10-KSB,
		the Company carried out an evaluation of the effectiveness of the Company's
		disclosure controls and procedures (as defined by Rule 13a-14(c) under the
		Securities Exchange Act of 1934) under the supervision and with the participation
		of the Company's chief executive officer and chief financial officer. Based on
		and as of the date of such evaluation, the aforementioned officers have concluded
		that the Company's disclosure controls and procedures have functioned effectively
		so as to provide those officers the information necessary whether:
 
 (i) this annual report on Form 10-KSB contains
		any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of
		the circumstances under which such statements were made, not misleading with respect to the period covered by this annual
		report on Form 10-KSB, and(ii) the financial statements, and other financial information included in this annual report on Form
		10-KSB, fairly present in all material respects the financial condition, results of operations and cash flows of the Company
		as of, and for, the periods presented in this annual report on Form 10-KSB.
 
 There have been no significant changes in
		the Company's internal controls or in other factors since the date of the Chief Executive Officer's and Principal Financial
		Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regards to
		significant deficiencies and material weaknesses.
 
 
 **PART
		III**
 
 **Item
		9. Directors, Executive Officers, Promoters And Control
		Persons** .
 
 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.
 
 Director/OfficerName
			
			Age
			
			Since
			
			PositionAtsushi
			  Maki
			
			
			57
			
			
			1999
			
			Chairman/Treasurer
			  and PresidentLina
			  Lei
			
			
			44
			
			
			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.
  14
  **Item
		10. Executive Compensation.**
 
 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:
 
 SUMMARY
		COMPENSATION
  Annual
			  CompensationName andPrincipal
			
			
			
			Salary
			
			Bonus
			
			OtherPosition
			
			Year
			
			($)
			
			($)
			
			($)Atsushi
			  Maki
			
			
			2005
			
			
			-0-
			
			
			-0-
			
			
			-0-2004
			
			
			-0-
			
			
			-0-
			
			
			-0-2003
			
			
			-0-
			
			
			-0-
			
			
			-0-Chairman,
			  President
			
			
			2002
			
			
			-0-
			
			
			-0-
			
			
			-0-And
			  TreasurerLina
			  Lei
			
			
			2005
			
			
			-0-
			
			
			-0-
			
			
			20,0002004
			
			
			-0-
			
			
			-0-
			
			
			-0-2003
			
			
			10,000(1)
			
			
			-0-
			
			
			-0-Secretary
			
			
			2002
			
			
			-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.
  15
  **Item
		11. Security Ownership Of Certain Beneficial Owners And
		Management.**
 
 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
			
			Name
			  and Address
			
			Amount
			  and nature
			
			Percentof
			  Security
			
			of
			  Beneficial Owner
			
			Beneficial
			  Ownership(1)
			
			of
			  ClassCommon
			
			Amanasu
			  Corporation(2)
			
			
			33,000,000
			
			
			72.6
			%Stock
			
			#902
			  Ark Towers, 1-3-40,Roppongi,
			  Minatoku,Tokyo,
			  JapanCommon
			  Stock
			
			Atsushi
			  Maki(3)(4)
			
			
			35,858,500
			
			
			78.80
			%Common
			  Stock
			
			Lina
			  Lei(4)
			
			
			35,858,500
			
			
			78.80
			%Common
			  Stock
			
			Officers
			  andDirectors,
			  as agroup
			  (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.
 
 **Item
		12. Certain Relationships And Related Transactions.**
 
 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.
  16
  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 **.**
 
  17
  **Item
		13(A). Exhibits.**
 
 Number
			Description3(i)(a)
			Articles
			  of Incorporation of the Company (Incorporated by reference to
			  theCompany's
			  Form 10-SB filed on June 20, 2001).3(i)(b)
			Certificate
			  of Amendment to Articles of Incorporation(Incorporated byreference
			  to the Company's Form 10-SB filed on June 20, 2001).3(i)(c)
			Certificate
			  of Amendment to Articles of Incorporation (Incorporated byreference
			  to the Company's Form 10-KSB filed on March 31, 2003).3(ii)(a)
			Amended
			  and Restated By - Laws of the Company (Incorporated byreference
			  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 onJune
			  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
			  June9,
			  2001. (Incorporated by reference to the Company's Form 10-SB filed onJune
			  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 onAugust
			  9, 2001).10(v)
			License
			  Agreement made as of September 30, 2002 by and between the
			  Companyand
			  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
			  betweenthe
			  Company and Sanyo Kogyo Kabushiki Gaisha and Ever Green
			PlanetCorporation.
			  (Incorporated by reference to the Company's Form 10-KSBfiled
			  on March 31, 2003).10(vii)
			Stock
			  Purchase Agreement dated May 14, 2003 by and between the
			  Companyand
			  Jipangu, Inc.10(viii)
			Desalination
			  License Agreement made as of May 30, 2003 by and between
			theCompany
			  Etsuro Sakagami. (Incorporated by reference to the
			Company'sForm
			  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.
 The Company has reached the conclusion of establishing a new subsidiary company
		named AMANASU HOLDING CORPORATION ("AMANASU HOLDINGS"), and an amount
		of $831,000 was paid by the Company on December 9th, 2005 as Capital investment
		for the initiation. (Filed on December 28, 2005)
 Extension of the expiration date on the
		term of Loan Contract concluded between Amanasu Environment Corporation ("the Company")
		and Mr. Izuo Kato ("Mr. Kato").  (Filed on December 28, 2005)
 On April 8, 2005, Amanasu Environment Corporation ("the Company") entered into an agreement with Mr.
		Izuo Kato ("Mr. Kato") to loan $94,000 to Kato for the purpose of marketing, researching, development,
		networking and other expenses regarding a marketing promotion of the Company's products. (Filed on August 9, 2005)
 On April 11, 2005, Amanasu Environment Corporation ("the Company") purchased a model furnace plant
		for ash disposal called the "Swing Melter" from Kogure Works Co., LTD. ("Kogure"), and paid the amount of $400,000
		for the model on April 19, 2005. (Filed on August 9, 2005)
 On March 8, 2005, Amanasu Environment Corporation ("the Company") entered into an agreement with Kogure
		Works. Co., LTD. ("Kogure") to fund $290,000 to Kogure for the purposes of promoting Kogure's incinerator
		to State Environmental Protection Administration of China and to receive a purchase order from the organization.
		(Filed on May 10, 2005)
 On March 8, 2005, Amanasu Environment Corporation ("the Company") entered into an agreement with Shinwa
		Yosetsu ("Shinwa Yosetsu") to fund $ 100,000 to establish a new company in order to conduct a project.
		(Filed on May 10, 2005)
 
 **Item
		14. Principal Accountant Fees and Services** .
 
 (1).
		Audit fees for 2005 were $8,920 and for 2004 were $8,495.
 (2) Audit Related Fees for 2005 and 2004 were $0.
 (3) Tax Fees for 2005were $0 and 2004 were $0
 (4) All
		Other Fees were $0.
 (5)
		N/A
 (6) Not
		greater than 50% for 2005 and 2004.
  18
  **AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**
 
 ****
 
 **CONSOLIDATED FINANCIAL
		STATEMENTS**
 
 **DECEMBER
		31, 2005**
 
  **CONTENTS**
  PageAccountant's Audit Report
			1Balance Sheet
			2Statements of Operations
			3Statements of Changes in Stockholder's
			Equity
			4Statements of Cash Flows
			5Notes to Financial Statements
			6
  
  ROBERT G. JEFFREY
 
 **CERTIFIED
		PUBLIC ACCOUNTANT**
 **61
		BERDAN AVENUE**
 **WAYNE,
		NEW JERSEY 07470**
 
 LICENSED
			  TO PRACTICE
			
			TEL:
			  973-628-0022IN
			  NEW YORK AND NEW JERSEY
			
			FAX:
			  973-696-9002MEMBER
			  OF AICPA
			
			E-MAIL:
			  rgjcpa@optonline.net
 PRIVATE
		COMPANIES PRACTICE SECTION
 MEMBER
		CENTER FOR PUBLIC COMPANY AUDIT FIRMS
 REGISTERED
		PUBLIC ACCOUNTING FIRM WITH
 PUBLIC
		COMPANY ACCOUNTING OVERSIGHT BOARD
 
 
 Board of
		Directors
 Amanasu
		Environment Corporation
 
 I have audited the accompanying consolidated balance sheet of Amanasu Environment
			Corporation and Subsidiaries as of December 31, 2005 and the related consolidated
			statements of operations, changes in stockholders' equity, and cash flows for the
			years ended December 31, 2005, and 2004.  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, 2005, and the
			results of its operations and its cash flows for the years ended December 31
			, 2005 and 2004 in conformity with U.S. generally accepted accounting principles.
 
 /s/
		Robert G. Jeffrey
 ROBERT G.
		JEFFREY
 May 18,
		2006
 Wayne,
		New Jersey
  
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **BALANCE
		SHEET**
 **December
		31, 2005**
 
 
 ASSETSCurrent
			  Assets:Cash
			
			$
			523,318Certificate Of Deposit
				
				
				1,000,000Accounts and notes receivables
				
				
				78,434Work in progress
				
				
				19,186Advance to vendor
				
				
				94,000Advances to employees
			
			
			24,179Total
			  current assets
			
			
			1,739,117Fixed
			  Assets:Machinery and
			  equipment
			
			
			485,846Less,
			  accumulated depreciation
			
			
			71,462Net
			  fixed assets
			
			
			414,384Other
			  Assets:Advances to affiliates
			
			
			101,885Investments
				
				
				747,370Security Deposits
			
			
			143,595Advance to shareholders
			
			
			42,420Licensing agreements
			  
			  
			  10,000Total
			  other assets
			
			
			1,045,270Total
			  Assets
			
			$
			3,198,771LIABILITIES
			  AND STOCKHOLDERS' EQUITYCurrent
			  liabilities:Short Term Bank Loan
			
			$
			21,210Accounts Payable
			
			
			19,425Accrued expenses
				
				
				3,578Payroll and other taxes payable
				
				
				16,420Employee loans
				
				
				14,640Shareholder advance
				
				
				100Total
			  current liabilities
			
			
			75,373Stockholders'
			  Equity:Common
			  stock: authorized 100,000,000 sharesof
			  $.001 par value; 44,000,816 issued andoutstanding
			
			
			44,001Additional
			  paid in capital
			
			
			4,257,039Retained deficit
			
			
			(1,182,637
			)Other comprehensive income
			  
			  
			  4,995Total
			  stockholders' equity
			
			
			3,123,398Total
			  Liabilities and Stockholders' Equity
			
			$
			3,198,771
 
 The
		accompanying notes are an integral part of these financial
		statements.
  -2-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **CONSOLIDATED STATEMENTS
		OF OPERATIONS AND DEFICIT**
 **ACCUMULATED
		DURING DEVELOPMENT STAGE**
  Year2005
			
			Year2004Sales
			
			$
			478,003
			
			$
			-Cost of Goods sold
				
				
				271,552
				
				
				-Gross Profit
				
				
				206,451
				
				
				-Expenses
			
			
			533,125
			
			
			149,835Operating
			  Loss
			
			
			(326,674
			)
			
			(149,835
			)Other
			  Income(expense)Interest Income
			  
			  
			  50,783
			  
			  
			  158Impairment Charge - write downof licensing agreements
				
				
				(292,030
				)
				
				
				-Net Loss
			
			$
			(567,921
			)
			$
			-Net
			  loss per share -Basic
			  and Diluted
			
			$
			-
			
			$
			-Average
			  number ofshares
			  outstanding
			
			
			43,940,542
			
			
			43,000,916
 
 The
		accompanying notes are an integral part of these financial
		statements.
  -3-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **CONSOLIDATED STATEMENT
		OF CHANGES IN STOCKHOLDERS' EQUITY**
 **For
		the Years Ended December 31, 2005, and 2004**
 
 Common
			  Stock
			
			Additional
			
			Retained
			 
			Other ComprehensiveShares
			
			Amount
			
			Paid
			  in Capital
			
			Deficit
			
			Income
			
			TotalBalance,
			  December 31, 2003
			
			
			43,020,816
			
			$
			28,821
			
			$
			872,119
			
			$
			(465,039)
			
			$
			-
			
			$
			435,901Adjustments
			
			
			(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)
			
			
			-
			
			
			186,324Sales of common stock
			
			
			1,000,000
			
			
			1,000
			
			
			3,499,000
			
			
			-
					  
			
			-
			
			
			3,500,000Net
			  loss for period
			
			
			-
			
			
			-
			
			
			-
			
			
			(567,921)
			  
			
			-
			
			
			(567,921)comprehensive income
			
			
			-
			
			
			-
			
			
			-
			
			
			-
					  
			
			4,995
			
			
			4,995Balance,
			  December 31, 2005
			
			
			44,000,816
			
			$
			44,001
			
			$
			4,257,039
			
			$
			(1,182,637
			)
				  $
				  4,995
			
			$
			3,123,398
  The
		accompanying notes are an integral part of these financial
		statements.
  -4-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **CONSOLIDATED STATEMENTS
		OF CASH FLOWS**
  Year2005
			
			Year2004**CASH
			  FLOWS FROM OPERATIONS:**Net
			  loss
			
			$
			(567,921
			)
			$
			(149,077Charges
			  not requiring the outlay of cash:Depreciation
			  and amortization
			
			
			58,777
			
			
			22,406Write down of licensing agreements
			
			
			292,030
			
			
			-Equity in losses of investee companies
			
			
			11,780
			
			
			-Changes
			  in current assets and liabilities:Increase in notes and accounts receivable
			
			
			(78,434)
			
			
			-Increase in work in progress
			
			
			(19,186)
			
			
			-Increase in advance to vendor
			
			
			(94,000)
			
			
			-Increase in advance to employees
			
			
			(24,179)
			
			
			-Increase in short term bank loan
			
			
			21,210
			
			
			-Increase in accounts payable
			
			
			19,425
			
			
			-Increase in advance to shareholders
			
			
			(42,420)
			
			
			-Increase in payroll and other taxes payable
			
			
			13,430
			
			
			2,990Increase in accured expenses
			
			
			3,578
			
			
			-Increase employee loans
			
			
			14,640
			
			
			-**Net
			  Cash Consumed By****Operating
			  Activities**
			
			
			(391,270****
			)****
			
			****(123,681)**CASH
			  FLOWS FROM INVESTING **ACTIVITIES:****Acquisition of machinery and equipment
			
			
			(459,987)
			
			
			-Investments
			
			
			(801,384)
			
			
			-Increase in security deposits
			
			
			(100,000)
			
			
			-Advance to affiliate
				  
				  
				  (138,595)
				  
				  
				  -Investment in certificate of deposit
				  
				  
				  (1,000,000)
				  
				  
				  -**Net
			  Cash Provided (Consumed)****By
			  Investing Activities**
			
			
			****(2,499,966)
			
			
			-**CASH
			  FLOWS FROM FINANCING **ACTIVITIES:****Issuances
			  of common stock
			
			
			3,500,000
			
			
			-Refund of stock investment(99,000)
			
			
			-**Net
			  Cash Provided By****Financing
			  Activities**
			
			
			3,400,100
			
			
			-Exchange Rate Effect on cash
					
					
					4,995
					
					
					-**Net
			  Change in Cash Balances**
			
			
			513,859
			
			
			(123,681)Cash
			  balance, beginning of period
			
			
			9,459
			
			
			133,140Cash
			  balance, end of period
			
			$
			523,318
			
			$
			9,459
  The
		accompanying notes are an integral part of these financial
		statements.
  -5-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2005**
 
 **1.**
			**ORGANIZATION and BUSINESS**
 
 **Organization
		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.
 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.
 
 **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.
  -6-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2005**
 
  **2.**
			**SUMMARY
			  OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Cash**
 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 equivalents.
 **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 a write off was made of a substantial portion of their
		book value.  (See Note 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.
  -7-
  **AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2005**
 
  **2	.**
			**SUMMARY
			  OF SIGNIFICANT ACCOUNTING POLICIES
		(CONT'D)**
 
 **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:
 (a)	Current assets, current liabilities and long term monetary assets and liabilities, at the rate of exchange in effect as at the balance sheet date;
				(b)	Non-monetary assets and liabilities at the exchange rates prevailing at the time of the acquisition of the assets or assumptions of liabilities; and, 
				(c)	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 $3,750 during 2005; there was no such expense in 2004.
 
 **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, 2005.
 
 **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.
 **Recent Accounting Pronouncements**
 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.
  -8-
  **AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2005**
   **3.**
			**RELATED
			  PARTY TRANSACTIONS**
 
 The Company advanced $100,000 in October, 2005 to a company with which the
				Company president is affiliated.  Another $100,000 was advanced to that Company
				in January 2006.  Both advances were repaid, without interest, in March 2006.
 
 The Company president received a $27,000 advance from Shinwa in November 2004,
				and a $45,000 advance from Shinwa in December 2005.  The $27,000 advance was repaid,
				without interest, in December 2004.
 
 **4.**
			**PROVISION FOR DOUBTFUL ACCOUNTS**





The balance of notes and accounts receivable has been reduced by a provision for doubtful accounts in the amount of $1,347.







-9-


**AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**


****


**NOTES
		TO FINANCIAL STATEMENTS**


**December
		31, 2005**







**5.**
			**INCOME
			  TAXES**





The Company has experienced losses during each year since 1999, which have
		totaled $1,143,640.  As a result, it has incurred no Federal income tax.
		The Internal Revenue Code allows net operating losses (NOL's) to be carried forward
		and applied against future profits for a period of twenty years.  The potential benefit
		of the NOL has been recognized on the books of the Company, but it has been offset
		by a valuation allowance.  If not used, a portion of the NOL carryforward will expire each
		year during the years 2019 to 2024.





Under Statement of Financial Accounting Standards No. 109, recognition of deferred
		tax assets is permitted unless it is more likely than not that the assets will not
		be realized.  The Company has recorded noncurrent deferred tax assets as follows:





Deferred
			  Tax Assets
			
			$
			388,838Valuation
			  Allowance
			
			
			388,838Balance
			  Recognized
			
			$
			-




**6.**
			**INVESTMENTS**





On December 16, 2005, Holdings made investments in four operating companies
		which are located in Japan. The equity interest in each of these companies is
		not more than 50% and the companies are not consolidated in these financial
		statements.  They are accounted for by the equity method of accounting.  These
		investments are summarized below, along with a brief description of each:





|                     |  |            |                        |                  |   |           |  |   |        |  | 
|-------------------- |  | ---------- | ---------------------- | ---------------- | - | --------- |  | - | ------ |  | 
|                     |  | Investment |                        | Company Share Of |   |           |  |   |        |  | 
|                     |  | Debt       |                        | Equity           |   | 2005 Loss
|                     |  |            |                        |                  |   |           |  |   |        |  | 
|BJSS, Inc.           |  |            | $                    - |                  | $ | 89,346    |  | $ | 3,307 
|Felice, Inc.         |  |            | 42,114                 |                  |   | 84,228    |  |   | 8,473 
|Echo Frontier Corp.  |  |            | 42,114                 |                  |   | 101,073   |  |   | -     
|Creative Ducks Corp. |  |            | 106,969                |                  |   | -         |  |   | -     
|Total                |  |            | 191,197                |                  | $ | 274,647   |  | $ | 11,780

During January 2006, investments totaling $129,000 were made in two other companies located in Japan.







-10-


**AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**


****


**NOTES
		TO FINANCIAL STATEMENTS**


**December
		31, 2005**








**6.**
			**INVESTMENTS (CONT'D)**





BJSS, Inc.
			This is a temporary employment agency with offices in Bangladesh and Japan.Felice, Inc.
			This company will operate beauty salons.  The salons will be operated on a membership basis.Echo Frontier Corp.
			This company will manufacture products for which the Company holds patents.  The Company expects to receive patent royalties on the sales of this company.Creative Ducks Corp.
			This company will produce plants for sterilization systems, primarily to treat the ozone effect.


**7.**
			**INVESTMENT IN SWING MELTER**





In March 2005, the Company made a $290,000 equity investment in Kogure Susakusho Ltd.,
			(Kogure), a Japanese company which held patents for an industrial incinerator, called the Swing Melter.
			The original intention was that the Company would receive 20% of the profits on sales of the incinerator.
			In April 2005, the Company purchased, for $400,000, a demonstration model of the Swing Melter for use in
			attracting customers.  Subsequently, Kogure ceased doing business and the Company exchanged its
			investment for the Kogure patents.  In October 2005, a new company, now named Echo Frontier Corp.,
			was formed by former employees of Kogure to produce the Swing Melter.  On December 16, 2005, the
			Company made a $143,187 investment in the new company.  In addition to its equity interest in the new company,
			the Company will receive patent royalties on sales of the Swing Melter.


**8.**
			**IMPAIRMENT**





The Company has investments, which totaled $346,500, in licensing rights to three
		products (see Note 1).  During 2005, the value of these rights was reviewed and
		impairment was found to have occurred.  As a result, the remaining unamortized
		cost of these rights was reduced to $10,000 through a $292,030 loss provision.


**9.**
			**SHORT TERM BANK LOAN**





The short term bank loan bears interest at 8% and is due June 7, 2006.


**10.**
			**RENTALS UNDER OPERATING LEASES**





The Company conducts its operations from a leased office facility in Seattle,
		Washington under a non-cancelable operating lease, which expires September 30, 2005.
		In addition, the Company leases a Seattle apartment under an operating lease that expires October 10, 2006.
		The Company also leases office facilities and an apartment in Tokyo under operating leases.
		During 2005, the Company incurred rent expense of $206,823.  In 2004, rent expense was $32,100.
		The following is a schedule of future minimum rental payments required under the above operating leases as of December 31, 2005.Year
			  endingDecember
			  31,
			
			Amount2006
			
			$

			210,4932007
			
			$

			170,493

		
		
		**11.**
			**SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION**
		
		There was no cash paid for interest or income taxes during the years 2005 and 2004.
		There was no non-cash financing or investing activity during these years.
		
		-11-
		
		SIGNATURES
		
		In
		accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
		registrant has duly caused this report to be signed on its behalf by the
		undersigned, thereunto duly authorized.
		
		Amanasu
		Environment Corporation
		
		/s/ Atsushi
			  Maki
			May 14, 2006PresidentAnd
			  Principal Accounting Officer
		
		In
		accordance with the Exchange Act, this report has been signed below by the
		following persons on behalf of the registrant and in the capacities and on the
		dates indicated.
		
		May 14, 2006,/s/ Atsushi
			  MakiDirector




12