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, 2004
 
 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, 2005,
com puted by
reference to the price at which the stock was sold on that date:
$22,391,369.
 
 The
number of shares outstanding of the registrant's Common Stock, no par value, as
of March 15, 2005 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.
 
 The
Company is a development stage company and significant risks exist with respect
to its business (see “Cautionary Statements” below). 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. 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 $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. 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. 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.
 
 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
has made a great effort to meet its goal, the Company has been confronted with
several difficulties and has started reconsidering to alter the function of
original furnace which manages daily wastes to a furnace which particularly
manages specific waste such as industrial and medical waste, and simultaneously,
the Company is aware of an option of business cooperation with a company in the
same industry and has more advanced technologies of furnace with less-cost
production. The Company has noticed a furnace producing company, Kogure Works
Co, Ltd., with 34 years of successful business history in Japan, and its furnace
is produced comparatively in less-cost. The pricing of the product is $100,000/t
and eventually reducing the price to 20% less is ideal. The Company may have
consideration of cooperation with them investing the capital. The Company can
not predict whether it will be successful in the alternation of structure and
achieve its desired pricing.
 
 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
proprietary combustion system of the Amanasu furnace will 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 expects 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 a cost matter of
manufacturing a unit. The Company is not planning to invest its technologies at
this moment unless there is a strong demand for their products regardless of its
cost. The Company will rather consider commencing cooperation with Kogure Seiki
investing $300,000 - $1 million by the end of 2005.
 
 **Fire
Bird Boiler** .
 
 Overview
and History .
 
 The
technology knows as the Fire Bird Boiler is a dual purpose process which
incinerates waste tires and creates a source of heat generation. During 1998,
the inventor of the technology constructed two proto-types of the boiler. The
licensor currently operates one of the units in Ishinomaki, Japan. The operating
boiler has a 5 ton/day capacity, although its capacity is not fully utilized,
and the heat by-product is used by a greenhouse t o
maintain a steady temperature 25 degrees C. The Company will be focusing on
promoting the technology and opening the market to green house sector for the
particular use.
 
 
 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” for combusting, a “water jacket” for
protecting and cooling metals in the combustion room, and an “air layer” for
insulating the heat radiation. The combustion chamber is circular, with a power
forced ventilation device which accelerates a more efficient combustion, and hot
steam in introduced at the burn point which increases the oxygen capacity
creating the high burning temperatures in the combustion chamber. During the
incineration process, temperature can reach as high as 1,000 degrees C. In other
boiler or incineration technologies, reaching temperatures of 1,000 degrees C or
more 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 tire be pulverized
prior to incineration. This process is designed to accept whole waste tires
though a conveyor and sensor which manages the condition of the combustion
operation calculating the number of tires delivered, the timing of the dumping
along with the condition of water supply temperature, quantities of hot water,
and heater temperature. The unit has a combustion capacity of 100 kilograms per
hour, and can generate 932,000 kcal 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. The Company believes
that this redesign, if successful, will increase demand of the product due to
its increased use versatility. 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 for each ton of
capacity. The Company can not predict whether it will be successful in it
redesign efforts and achieve its desired pricing. The projected sale price
$500,000 for a five ton/day capacity unit.
  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 no t been
entered into by the parties. For the case of entering a contract with Kogure for
cooperation, the Company will seek to utilize Kogure’s manufacturing facility
and equipment for the production, and the Company will have no relationship 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 believes that the Fire Bird Boiler is an effective technology for the
dual purpose of incinerating waste tires and generating heat. However, the
Company has recognized that the supply of waste tires in certain markets,
including the United States, has been greatly reduced due to the effect of
recent efforts to recycle waste tires. Thus, the reduction in the available
supply of waste tires in these markets has limited the market
potential of the boiler. As a result, the Company has been confronted with
severe marketing difficulties for Fire Bird at present, and will seek to refine
the boiler to accept other forms of waste including hazardous waste. The Company
projects that necessary refine time will be enormous to estimate, therefore the
Company will see how things go thoroughly and determine the appropriate time to
finance for the refinement.
 
 **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 **.** The
prototype plant has been operated at the same rate as a sample at the same
location. It has not been commercially produced yet. The Company believes
that this existing capacity is insufficient and high-cost for its targeted
markets, and the Company is planning to rely on a subcontractor of the water
purification system manufacturer for the production, selecting out particular
and efficient parts of its technology and create more advanced and improved
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 the 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 increase
with temperature. The condition is more common with distillation process than a
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 step or two step
methods. The single step method requires more pressure to separate the fresh
water from the impurities, while the two step method use less pressure but more
energy to separate the fresh water. As a result of these pressures, special
sealing technologies and materials for piping and pumps are required to
withstand these pressures, 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 with less than 40% for a RO method.
Moreover, water produced from the Company’s technology retains a certain amount
of salt and minerals and does not required a pH adjustment. RO filtration
removes all minerals and salt, requiring minerals to be added to improve flavor,
and an adjustment to reduce pH levels. The reject brine resulting from RO
filtration is discharged in the ocean creating higher salt concentrations in
such areas, however, the by-product from the Company’s technology is
sufficiently condensed allowing it to be sold as a salt product.
  6
  Manufacturing
And Suppliers .
 
 The
Company believes that the Ring-Tube Desalination equipment can be manufactured
by Shinwa Yosetsu, a subcontract manufacture, in Akagi-city, Gunma, Japan.
However, the Company does not have a formal arrangement with the manufacturer to
produce the equipment .
 
 Current
Status .
 
 The
Company believes that the existing capacity of the Ring-Tube Desalination
equipment is commercially insufficient for its targeted market s because
the equipment is a hand-made manufacturing and it leads high cost production.
Also 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
encountered an idea which the Company joint and cooperate with a subcontract
manufacturing company which can manage Sakagami’s technology under the
instruction, that may result in less-cost production. The Company may invest
approximately $100,000-300,000 to a potential company for the joint venture
project to progress complete manufacturing and sales plan. This technology has
not been commercially produced yet. The Company will be required to raise
additional funds.
 
 MARKETING
OF TECHNOLOGIES.
 
 The
Company does not expect to commence the marketing and sale of its technologies
until such time as it has completed entering a contract with a subcontract
manufacturing company and discussion on the business plan. If successful in
these endeavors, the Company intends to rely on some major enterprises in Japan
for in targeted markets for each of its
technologies. The Company can not predict whether it will be successful in its
market and sell commercial products.
 
 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 incinerator use. 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 and, 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, 2004, the Company had four employees, Shuichi Yamada, Izuo kato,
Kyoko Morita, and Eri Takahashi, consisting of two administrative assistants
located at its Seattle and Tokyo offices, respecti vely, 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 2003.
 
 **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, 2005. The Company shares the space with Amanasu
Technologies Corporation, a reporting company under the Securities Exchange Act
of 1934, and a company controlled by the Company’s Chairman, President and
majority shareholder, and both companies share equally in the rent payment. The
Company leases a Seattle apartment for a monthly rental of $1,000 under a lease
agreement which expires October 8, 2005. The Company also shares the rental
expense of the apartment equally with Amanasu Technologies Corporation. 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 a month to
month basis at a monthly rental of $2,500 per month. Amanasu Technologies
Corporation occupies the same premises and co-pays the rental amount. 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.
  2003
    
    Low
      Bid
    
    High
      Bid4thQuarter
    
    
    0.99
    
    
    1.902004
    
    
    Low
      Bid
    
    
    High
      Bid1st
      Quarter
    
    $
    1.01
    
    $
    2.502nd
      Quarter
    
    
    0.33
    
    
    1.513rd
      Quarter
    
    
    0.47
    
    
    1.754thQuarter
    
    
    0.70
    
    
    2.75
  As of
March 15, 2005, there are 52 shareholders of record of the Company's common
stock. Although there are no restrictions on the Company's ability to declare or
pay dividends, the Company has not declared or paid any dividends since its
inception' and does not anticipate paying dividends in the future.
  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. 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.
 
 **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.
 
 The
Company is aware of an option of business cooperation with a company in the same
industry and has more advanced technologies of furnace with less-cost
production. The Company has noticed a funace producing company, Kogure Works Co,
Ltd., with 34 years of successful business history in Japan, and its
consideration of cooperation with them investing the capital of approximately
$300,000.
 The
Company is also considering co-establishing a new company with Shinwa Yosetsu, a
subcontract company of manufacturing Water desalination system. The Company will
finace approximately $100,000 for the co-establishing a new company with Shinwa
Yosetsu. The Company financial scheme for next 12 months is approximately
$400,000-1million.
 
 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 $150,000 for
the next 12 months. This amount is comprised of the following estimated
costs; $80, 000 in
annual salaries for office personnel and consultants, $ 70 ,000 for
rent, $2 0,000 for
professional fees and $12,000 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.
 
 During
the fiscal 200 4 and
2004, 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 exercise 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. The Company intends to raise
additional funds in the approximate amount of $2,000,000 to $3,000,000 in near
future through the private placement of its common stock. The proceeds from such
private placement will be used to fund the refinement of the three technologies
as described above, and to funds it annual overhead. The Company cannot predict
whether it will be successful in raising any capital, which capital is essential
to its plan of operations.
 
 Total
assets as of December 31, 200 4 we re
$331,548 representing a decrease of $104,453 fro m total
assets of $436,001
as of December 31, 2003.
 
 
 Forward
Looking Statements . Certain
of the 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:
 
 **Developmental
Stage Company** . The
Company was incorporated on February 22, 1999, and is a development stage
company. Presently, it has acquired certain technologies; however, the Company
does not have any products available for commercial sale. As a development stage
enterprise, the Company may be subject to the many pitfalls commonly associated
with development stage enterprises, such as testing and proving technologies.
These risks are in addition to normal business risks. The Company’s ability to
emerge from the development stage with respect to its planned principal business
activity is dependent upon a number of factors, including product development of
existing technologies and successfully raising additional financing to meet its
working capital needs.
 
 **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 estimates an approximate cost of $400,000 -
1 million on the project.  The
Company can not predict that even with such expenditures, 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 their technologies 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, 2 005, the
existing officers and directors, and affiliates will control
approximate ly 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. Mr. Maki also is a
director of Amanasu Technologies Corporation, a reporting company under the
federal securities laws.
 
 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, 2004, 2003, 2002, and 2001, respectively:
 
 SUMMARY
COMPENSATION
  Annual
      CompensationName
      andPrincipal
    
    
    
    Salary
    
    Bonus
    
    OtherPosition
    
    Year
    
    ($)
    
    ($)
    
    ($)Atsushi
      Maki
    
    
    2004
    
    
    -0-
    
    
    -0-
    
    
    -0-2003
    
    
    -0-
    
    
    -0-
    
    
    -0-Chairman,
      President
    
    
    2002
    
    
    -0-
    
    
    -0-
    
    
    -0-And
      Treasurer
    
    
    2001
    
    
    14,769(1)
    
    
    -0-
    
    
    -0-Lina
      Lei
    
    
    2004
    
    
    -0-
    
    
    -0-
    
    
    -0-2003
    
    
    10,000(2)
    
    
    -0-
    
    
    -0-Secretary
    
    
    2002
    
    
    -0-
    
    
    -0-
    
    
    -0-2001
    
    
    1,442(2)
    
    
    -0-
    
    
    -0-
 (1). 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. Of the total amount of shares, 246,200
shares were allocated for fiscal 1999, with the balance allocated equally
between 2000 and 2001.
 (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, 2005, 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, 2005. 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 the grant of a license theto the Amanasu Furnace to the Company. In
exchange for obtaining the license to the Technology, the Company agreed to
issue to 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. 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
president and 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 to 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 provided 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 **.**
 
 The
Company shares office space for its Seattle and Tokyo offices and shares an
apartment in Seattle with Amanasu Technologies Corporation, a reporting company
under the Securities Exchange Act of 1934, and a company controlled by the
Company’s Chairman, President and majority shareholder (See “Part I - Item 2
Description of Property”).
  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.
 Resignation
of Etsuro Sakagami as a Director of the Company as of September 29, 2003. (filed
on December 1, 2003)
 Resignation
of Takashi Yamaguchi as a Director of the Company as of May 26, 2004. (filed on
June 1, 2004)
 
 **Item
14. Principal Accountant Fees and Services** .
 
 (1).
Audit fees for 2004 were $8,495 and for 2003 were $9,635.
 (2) Audit
Related Fees for 2004 and 2003 were $0.
 (3) Tax
Fees for 2004 were $0 and 2003 were $3,025.
 (4) All
Other Fees were $0.
 (5)
N/A
 (6) Not
greater than 50% for 2004 and 2003.
  18
  **AMANASU
ENVIRONMENT CORPORATION**
 
 **(A
Development Stage Company)**
 
 **FINANCIAL
STATEMENTS**
 
 **DECEMBER
31, 2004**
 
  **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 balance sheet of Amanasu Environment Corporation (a
development stage company) as of December 31, 2004 and the related statements of
operations and deficit accumulated during development stage, changes in
stockholders’ equity, and cash flows for the years ended December 31, 2004, and
2003 and the period of December 1, 1997 (inception) to December 31, 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 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. The Company is not required to
have, nor was I engaged to perform, an audit of its internal controls over
financial reporting. My audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate under the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, I express no such opinion. 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 financial position of Amanasu Environment Corporation as
of December 31, 2004, and the results of its operations and its cash flows for
the years ended December 31, 2004 and 2003 in conformity with U.S. generally
accepted accounting principles.
 
 /s/
Robert G. Jeffrey
 ROBERT G.
JEFFREY
 March 30,
2005
 Wayne,
New Jersey
  
  **AMANASU ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **BALANCE
SHEET**
 **December
31, 2004**
 
 
 ASSETSCurrent
      Assets:Cash
    
    $
    9,459Miscellaneous
      receivables
    
    
    1,885Total
      current assets
    
    
    11,344Fixed
      Assets:Automotive
      equipment
    
    
    25,859Less,
      accumulated depreciation
    
    
    12,685Net
      fixed assets
    
    
    13,174Other
      Assets:Rent
      deposit
    
    
    5,000Licensing
      agreements, net of accumulatedamortization
      of $44,470
    
    
    302,030Total
      other assets
    
    
    307,030Total
      Assets
    
    $
    331,548LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Shareholder
      advance
    
    $
    100Payroll
      taxes payable
    
    
    2,990Total
      current liabilities
    
    
    3,090Stockholders’
      Equity:Common
      stock: authorized 100,000,000 sharesof
      $.001 par value; 43,020,816 issued andoutstanding
    
    
    43,021Additional
      paid in capital
    
    
    857,919Deficit
      accumulated during development stage
    
    
    (572,482
    )Total
      stockholders’ equity
    
    
    328,458Total
      Liabilities and Stockholders’ Equity
    
    $
    331,548
 
 The
accompanying notes are an integral part of these financial
statements.
  -2-
  **AMANASU ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **STATEMENTS
OF OPERATIONS AND DEFICIT**
 **ACCUMULATED
DURING DEVELOPMENT STAGE**
  Year2004
    
    Year2003
    
    February
      22, 1999(Date of Inception)To December 31,
      2004Revenue
    
    $
    -
    
    $
    -
    
    $
    -Expenses
    
    
    107,061
    
    
    110,498
    
    
    575,950Operating
      Loss
    
    
    (107,601
    )
    
    (110,498
    )
    
    (575,950
    )Other
      Income-interest
    
    
    158
    
    
    372
    
    
    3,468Loss
      accumulatedduring
      developmentstage
    
    $
    (107,443
    )
    $
    (110,126
    )
    $
    (572,482
    )Net
      loss per share -Basic
      and Diluted
    
    $
    -
    
    $
    (-
    )Average
      number ofshares
      outstanding
    
    
    43,020,916
    
    
    42,447,065
 
 The
accompanying notes are an integral part of these financial
statements.
  -3-
  **AMANASU ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY**
 **For
the Years Ended December 31, 2004, and 2003**
 
 Deficit
      AccumulatedCommon
      Stock
    
    Additional
    
    DuringShares
    
    Amount
    
    Paid
      in Capital
    
    Development
      Stage
    
    TotalBalance,
      January 1, 2003
    
    
    41,950,816
    
    $
    27,751
    
    $
    646,789
    
    $
    (354,913
    )
    $
    319,627Sales
      of common stock
    
    
    20,000
    
    
    20
    
    
    99,880
    
    
    
    
    
    99,900Shares
      issued as fees connected withacquisition
      of licensing agreement
    
    
    1,050,000
    
    
    1,050
    
    
    30,450
    
    
    
    
    
    31,500Shareholder
      capital contribution
    
    
    -
    
    
    -
    
    
    
    
    
    95,000
    
    
    95,000Net
      loss for period
    
    
    
    
    
    
    
    
    
    
    
    (110,126
    )
    
    (110,126
    )Balance,
      December 31, 2003
    
    
    43,020,816
    
    
    28,821
    
    
    872,119
    
    
    (465,039
    )
    
    435,901Adjustment
    
    
    
    
    
    14,200
    
    
    (14,200
    )
    
    (107,443
    )
    
    (107,443
    )Balance,
      December 31, 2004
    
    
    43,020,816
    
    $
    43,021
    
    $
    857,919
    
    $
    (572,482
    )
    $
    328,458
  The
accompanying notes are an integral part of these financial
statements.
  -4-
  **AMANASU ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **STATEMENTS
OF CASH FLOWS**
  Year2004
    
    Year2003
    
    February
      22, 1999(Date of Inception)To December
      31,2004**CASH
      FLOWS FROM OPERATIONS:**Net
      loss
    
    $
    (107,443
    )
    $
    (110,126
    )
    $
    (572,482
    )Charges
      not requiring the outlay of cash:Depreciation
      and amortization
    
    
    22,157
    
    
    22,406
    
    
    57,155Common
      stock issued for services
    
    
    -
    
    
    -
    
    
    70,000Changes
      in current assets and liabilities:Increase
      in miscellaneous receivables
    
    
    (300
    )
    
    (1,585
    )
    
    (1,885
    )Increase
      in payroll taxes payable
    
    
    2,990
    
    
    2,990**Net
      Cash Consumed By****Operating
      Activities**
    
    
    (82,596****
    )****
    
    ****(89,305
    ****)
    
    (444,222****
    )******CASH
      FLOWS FROM INVESTING **ACTIVITIES:****Acquisition
      of licensing agreement
    
    
    -
    
    
    -
    
    
    (155,000
    )Purchase
      of automobile
    
    
    -
    
    
    -
    
    
    (25,859
    )Rent
      deposit for warehouse lease
    
    
    -
    
    
    3,028
    
    
    (5,000
    )**Net
      Cash Provided (Consumed)****By
      Investing Activities**
    
    
    ****-
    
    
    3,028
    
    
    (185,859
    )**CASH
      FLOWS FROM FINANCING **ACTIVITIES:****Issuances
      of common stock
    
    
    -
    
    
    99,900
    
    
    639,440Advance
      received in anticipation ofcommon
      stock sale
    
    
    -
    
    
    -
    
    
    100**Net
      Cash Provided By****Financing
      Activities**
    
    
    -
    
    
    99,900
    
    
    639,540**Net
      Change in Cash Balances**
    
    
    (82,596
    )
    
    13,623
    
    
    9,459Cash
      balance, beginning of period
    
    
    92,055
    
    
    78,432
    
    
    -Cash
      balance, end of period
    
    $
    9,459
    
    $
    92,055
    
    $
    9,459
  The
accompanying notes are an integral part of these financial
statements.
  -5-
  **AMANASU ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **NOTES
TO FINANCIAL STATEMENTS**
 **December
31, 2004**
 
 **1.**
    **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **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**
 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 is 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. From
inception to December 31, 2004, the Company has been in the development stage
and all its efforts have been devoted to obtaining the worldwide licensing
rights describe above, and to testing the related equipment. Except for interest
on bank deposits no revenue had been realized through December 31,
2004.
 
 **Basis
Of Presentation**
 The
Company has incurred losses from inception to December 31, 2004 of $572,482.
Capital totaling $734,440 was raised during the period 2001to 2003, through
common stock issuances of 20,120,816 shares. This is expected to provide
adequate financing to allow the Company to begin using its licensing
rights.
 
 **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.
  -6-
  **AMANASU
ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **NOTES
TO FINANCIAL STATEMENTS**
 **December
31, 2004**
 
  **1.**
    **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONT’D)**
 
 **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 seven years for furniture and equipment and five years for
computers and automobiles.
 
 **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 is provided by the straight line method using lives
of 17 years, which is based on patent life.
 
 **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.
 
 **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**
 **(A
Development Stage Company)**
 **NOTES
TO FINANCIAL STATEMENTS**
 **December
31, 2004**
 
  **1.**
    **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONT’D)**
 
 **Advertising
Costs**
 The
Company will expense advertising costs when an advertisement occurs. There has
been no spending thus far on advertising.
 
 **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, 2004.
 
 **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 financial statements.
  -8-
  **AMANASU
ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **NOTES
TO FINANCIAL STATEMENTS**
 **December
31, 2004**
   **2.**
    **RELATED
      PARTY TRANSACTIONS**
 
 The
president of a Company which is the majority shareholder made a capital
contribution during 2003 of $95,000 by paying a Company obligation.
 
 On May
14, 2003, the Company entered into an agreement (Stock Purchase Agreement) to
acquire 10,000,000 shares of the common stock of Kyoei Reiki Industrial
Corporation, Ltd. (Kyoei Reiki), a Japanese company publicly traded on a
Japanese exchange. The purchase price was 580,000,000 Japanese Yen
(approximately $4,993,000). The president of a Company which is the majority
shareholder deposited 1,000,000 shares of Company stock to secure this
transaction. The purchase price of this transaction has not been paid and the
purchased stock has not been delivered to the Company. The Stock Purchase
Agreement contains a provision that the balance due on the contract will be
waived if Kyoei Reiki becomes bankrupt or is placed under receivership for
bankruptcy. On June 25, 2003, Kyoei Reiki was placed under receivership with
Tokyo District Court, thereby relieving the Company of its obligation for the
balance due on the Stock Purchase Agreement. The value of the Kyoei Reiki stock
has declined significantly since May 14, 2003, and management is attempting to
renegotiate the terms of the contract. No assurance can be given that these
negotiations will be successful. The president of a Company which is the
majority shareholder has assumed responsibility for this transaction and has
indemnified the Company against any loss arising therefrom.
 
 The
president of the Company is the majority shareholder; he is also the majority
shareholder of another publicly owned Company which shares office space with the
Company. See Note 4.
  -9-
  **AMANASU
ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **NOTES
TO FINANCIAL STATEMENTS**
 **December
31, 2004**
 
  **3.**
    **INCOME
      TAXES**
 
 The
Company has experienced losses during each year since 1999, which have totaled
$572,482. 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 2023.
 
 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
    
    $
    194,644Valuation
      Allowance
    
    
    194,644Balance
      Recognized
    
    $
    -
  **4.**
    **RENTALS
      UNDER OPERATING LEASES**
 
 The
Company conducts its operations from a leased office facility in Seattle,
Washington under a noncancelable operating lease which expires September 30,
2005. In addition, the Company leases a Seattle apartment under an operating
lease that expires October 9, 2005. The cost of these facilities is shared by
another publicly owned company which also occupies this space. During 2003, the
Company incurred rent expense of $32,100; another $16,000 was paid by the other
company. In 2003, rent expense was $12,308.
 
 The
following is a schedule of future minimum rental payments required under the
above operating leases as of December 31, 2004.
 
 Year
      endingDecember
      31,
    
    Amount2005
    
    $
    36,000
  -10-
  **AMANASU
ENVIRONMENT CORPORATION**
 **(A
Development Stage Company)**
 **NOTES
TO FINANCIAL STATEMENTS**
 **December
31, 2004**
 
 
 **5.**
    **SUPPLEMENTAL
      DISCLOSURES OF CASH FLOWS
INFORMATION**
 
 There was
no cash paid for interest or income taxes during the years 2004 and
2003.
 
 The
following non-cash financing and investing activity occurred:
 
 During
the year 2003, 1,050,000 shares were issued to obtain the seawater purification
licensing agreement.
 
 The
president and controlling shareholder of a company which is the majority owner
of Company stock paid a $95,000 obligation on behalf of the Company during 2003.
This obligation was the balance due for the licensing rights of the hot water
boiler.
 
 
 **6.**
    **CONTINGENCY**
 
 The
Company is a party to a Stock Purchase Agreement (See Note 2). Two factors
protect the Company from loss on this transaction. First, the president and
controlling shareholder of a company which is the majority owner of Company
stock has indemnified the Company from loss on this transaction. Second, the
Stock Purchase Agreement contains a provision that the balance due on the
contract will be waived if Kyoei Reiki becomes bankrupt or is placed under
receivership for bankruptcy, and on June 25, 2003 Kyoei Reiki was placed under
receivership with Tokyo District Court. For these reasons, the transaction has
not been recorded on the books of the Company.
  -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
  Atsushi
      Maki
    April
      13, 2005PresidentAnd
      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.
  April
      13, 2005,Atsushi
      MakiDirector




32