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, 2006
 
 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.)
 
 115 East 57th Street 11th Floor, New York, NY 10022
 (Address
		of principal executive offices)
 
 212-939-7278
 (Issuer's
		telephone number)
 Securities
		registered pursuant to Section 12(b) of the Exchange Act: NONE
 
 Securities
		registered pursuant to Section 12(g) of the Exchange Act:
 
 Title of
		each class:
 Common
		Stock, no par value
 
 Check
		whether the issuer (1) filed all reports required to be filed by Section 13 or
		15(d) of the Exchange Act during the past 12 months (or for such shorter period
		that the registrant was required to file such reports), and (2) has been subject
		to such filing requirements for the past 90 days.
 [x] Yes  [o] No
 [x] Yes  [o] No
 Check if
		disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not
		contained in this form, and no disclosure will be contained, to the best of the
		registrant's knowledge, in definitive proxy or information statements
		incorporated by reference in part III of this form 10-KSB or any amendment to
		this Form 10-KSB. [x]
 
 State the
		issuer's revenues for its most recent fiscal year: $ -0-.
 
 The
		aggregate market value of the voting stock held by non-affiliates of the
		registrant on January 1, 2007 computed by
		reference to the price at which the stock was sold on that date:
		$4,400,081.60 .
 
 The
		number of shares outstanding of the registrant's Common Stock, no par value, as
		of March 15, 2007 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
 Current

		The Company's current business plan is the result of recent operational results
		during the fiscal year of 2006 and may change due to the amount of risk accompanied by the
		nature of its business. The Company's business is run through four subsidiary branches, with each respective
		branch focused on a particular environmental market: Amanasu Echo Frontier is involved in waste management technologies;
		Amanasu Energy, formerly Felice, is involved in solar panel technology;
		Amanasu Shinwa, formerly Shinwa Yosetsu, is involved in water purification; and finally as of September 21st 2006
		a newly formed Amanasu Water which is involved
		in drinking water. All 4 branches are at various ownership levels managed through a 91% controlled holdings
		company, Amanasu Holdings established in December 2005.Echo Frontier.
			Population growth, and ever decreasing land mass, have been key factors in the research and development of
			waste management methodologies. The primary technology used in many Asian countries today is
			the waste incinerator. Conventional incinerators, though effective in reducing the amount of space
			waste occupies, still leave environmentally harmful and unusable by-products.
			Amanasu Echo Frontier was established by Amanasu Environment and former employees of Kogure in December 2005
			and is located at 1-24-8 Iwagami-cho, Maebashi, Gunma, Japan.
			Its operations consist of the sale and manufacturing of general and industrial waste incinerators,
			and medical waste treatment plants using the
			6 proprietary technology rights purchased from Kogure. Its Rotary Kiln incineration system has two levels of
			waste processing that effectively reduce waste size in a cost effective manner. The ash by-product from the
			Rotary Kiln system can be further processed using Amanasu Echo Frontier's Swing Melter Incinerator.
			The Swing Melter's resulting residue which is primarily carbon pellets, can be recycled to be used for raw building materials involved
			in foundation construction due to the carbon pellets strong molecular structure.Energy Development.
			Energy Development, formerly Felice, was renamed on September 21st 2006 as a subsidiary of Amanasu Holdings.
			As the name suggests, Energy Development is focused on technologies that produce energy
			through environmentally friendly means. The leading technology in this arena is the photovoltaic cell,
			or more commonly known as Solar panels.
			The Solar  panel industry due to recent technological developments
			has never been more lucrative. With the recent advancements of residential
			unit powering modules, the demand of solar panels in the residential market
			will only continue to increase. With increased demand, costs of production have
			been reduced in recent years. The Company believes with the current market conditions,
			it is a good point in time to pursue the Solar power movement.

			Sanyo is a world leader in Solar panel technology, with over 30 years of experience
			in the industry. Sanyo is regarded as one of the world's top Solar power technology
			provider. In 2003, Sanyo's 200W photovoltaic module proved to have the world's
			highest conversion efficiency marketed (cell conversion efficiency of 19.5% and
			module efficiency of 17.0%). Sanyo's HIT (Heterojunction with Intrinsic Thin layer)
			solar modules have more power generating capacity per area, and perform better at
			higher temperatures. We believe that Sanyo's product has the required elements
			for success in the residential market. Thus, Energy Development will be primarily involved in the sale
			of Sanyo's Solar panel product line on a commission basis in Japan.Amanasu Shinwa.
			Amanasu Shinwa, was formerly a subcontractor for the Company, under the name Shinwa Yosetsu. Originally, Shinwa Yosetsu was
			to refine and manufacture the Ring-Tube Desalinization technology held by Amanasu Environment; however, with
			lack of commercial viability Shinwa Yosetsu was fully acquired by Amanasu Environment under Amanasu Holdings
			and Shinwa Yosetsu's existing operations were put into priority. Amanasu Shinwa is primarily involved in
			manufacturing water purification plants for use in pools, fitness centres etc, and seawater to fresh water
			purification plants.Amanasu Water.
			Keeping in line with the Company's goal of creating a cleaner and healthier future, a big part of the earth's future is water.
			Water is likely the single most important part of our daily lives. Amanasu Water will be involved in the sale of Amanasu Sui-So-Sui, or Amanasu Hydrogen-ion water.
			Hydrogen-ion water is a new product and is said to have effective and efficient anti-oxidant properties.
			Even when compared with well know anti-oxidants such as Vitamin C, Vitamin E, Co-enzyme Q10,
			is much more effective due to Hydrogen-ion water's unique ability to enter into the cell's mitochondria, the cell's power plant.
			There it acts as an anti-oxidant, without interfering with the bodies normal oxidation reactions.
  3
  The Company's principal offices are located at 115 East 57th Street 11th Floor New York, NY 10022, and its telephone number is (212) 939-7278.
		The Company also maintains an office at 1-3-38 Roppongi, Minatoku, Tokyo,
		106-0032, Japan.
 
 
 **Amanasu Environment's Business Overview**
 
 PRODUCTS
 Amanasu Environment
 Amanasu
      Furnace
 The technology, known as the Amanasu Furnace, is a process that disposes of toxic
		and hazardous waste, through a proprietary, high temperature combustion system.
		The combustion system is a low cost methodology generating extremely high
		temperatures in excess of 2,000 Celsius. Waste matter exposed to the extreme
		temperature system is instantly decomposed to a gaseous matter and a magna-like
		liquid. The process leaves a 1-2% residue of an inert, carbon substance and
		oxygen which is vented out of the system. The process produces no toxins, smoke,
		ash, or soot.
 
 9
 
 The Company believed that the prior pricing structure for its furnaces
		was not competitive, and was seeking ways to lower its manufacturing
		costs. The Company was attempting
		to locate alternate suppliers that were more cost effective than currently identified
		ones. At the same time the Company also attempted to re-design certain components of the furnace
		so as to reduce the manufacturing cost per component. The aim was to
		alter the function of the original furnace, which managed daily waste to one that managed
		specific waste (i.e. industrial, and/or medical waste); however, the Company was confronted
		with several difficulties and started to reconsider the alteration.
		At the same time, the Company was also seeking affiliations with companies competitive in the furnace market in Japan.
		Kogure Works, had an established infrastructure, manufacturing more developed furnaces, comparatively lower in cost.

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

		As discussed above, the Company expected to alter the function of the Amanasu
		Furnace in order to specify its market place; however, there has not been
		a strong demand for their product due to the cost of manufacturing a unit.
		The Company did not reach the successful and
		complete refinement and cost reduction as they had planned; therefore,
		no further production and investment on this technology has been determined,
		and there is no further business relation with Kogure Works Co., Ltd. ("Kogure")
		on this project. The Company does not know whether the project will continue into the future;
		however, the exclusive rights of manufacturing and sales of the Amanasu Furnace will remain with the Company.
 
 
 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 Fire Bird Boiler provides combustion efficiency
		and seeks to minimize dioxin generation which is generally a by-product of
		imperfect combustion.
 
 The Company believes that the Fire Bird Boiler is an effective dual purpose technology
		for incinerating waste tires and generating heat; however, the Company
		has recognized that the supply of waste tires in certain markets, including the
		United States, has been greatly reduced due to the effect of recent efforts to recycle
		waste tires. Thus, the reduction in the available supply of waste tires in these markets
		has limited the market potential of the boiler. As a result, the Company has been
		confronted with severe marketing difficulties for Fire Bird at present, and will seek
		to refine the boiler to accept other forms of waste, such as hazardous waste.

		Even though the Company decided to seek refinement to the boiler to accept other
		forms of waste, to be flexible in the market,
		the Company has determined no further production and/or investment on this
		technology. The estimated refinement time was not feasible for the Company, thus
		no further business relations will continue with Kogure on this project. The
		Company does not know whether the project will continue into the future; however,
		the exclusive rights of manufacturing and sales for the Fire Bird Boiler will
		still remain with the Company
 
 Ring-tube
      Desalinization Equipment
 The Ring-Tube technology is used as a filter to purify seawater into drinking
		water and also treats sewage and waste water, by removing pollutants and bacteria.
		The equipment filters bacteria and other impurities through its fine rings
		and comb type filter and reduces the presence of inhibiting scales on the
		equipment.  The impurities are then destroyed by the high pressure and
		temperature in the ring-tube.  The Company believes that its technology is
		more cost efficient to construct and operate than conventional RO equipment.
		Its fresh water recovery rate is 95% compared with the less than 40% for a RO method.
		Moreover, water produced from the Company's technology retains a certain
		amount of salt and minerals and does not required a pH adjustment. RO filtration
		removes all minerals and salt, requiring minerals to be added to improve flavor,
		and an adjustment to reduce pH levels.  The reject brine resulting from RO
		filtration is discharged in the ocean creating higher salt concentrations in
		such areas, however, the by-product from the Company's  technology is sufficiently
		condensed allowing it to be sold as a salt product.
 
 10
 
 The Company believes that the existing capacity of the Ring-Tube Desalination
		equipment is commercially insufficient for its targeted markets because
		the equipment is hand-manufactured, which leads to high cost production.
		There are many similar production companies, which promote water
		purification systems in Japan therefore reducing the cost of manufacturing
		is the key to succeed in the competitive market.  Consequently, the Company
		entered into an agreement with Shinwa Yosetsu, a subcontract manufacturing
		company which could manage Sakagami's technology under instructions to lower production cost

		With the acquisition of Shinwa Yosetsu, Amanasu Shinwa now has furnace technology,
		as well as maintenance management businesses and welding businesses, and
		maintain the top level of operation in Japan. With current developments the
		Company has decided to discontinue the Ring-Tube Desalination project, and
		in 2006, the Company will focus only on producing and marketing water
		purification systems and seawater desalination systems utilizing and
		employing new technologies under the management of Amanasu Shinwa.Echo FrontierRotary Kiln
			Echo Frontier's Rotary Kiln is an environmentally friendly general and industrial waste incineration system.
			They system has an advanced
			General or industrial waste is first shred and crushed into smaller pieces and piled in a waste pit.
			A ceiling crane then loads the dry waste onto a conveyer, where it is delivered into the Rotary Kiln injector device.
			The injector device contains two parts: Injector screw and injector shoot. These two devices protect the Rotary Kiln
			burn chamber from outside temperature influence, and also prevents gas reflux from the Rotary Kiln chamber itself.
			The injector device is also protected by a cooling jacket to regulate the extreme temperature effects of the Rotary Kiln.
			The shredded and crushed waste is then injected into the Rotary Kiln burn chamber where it is incinerated at 1400 C.
			The Rotary Kiln rotates to better distribute and equalize the incineration process. The Rotary Kiln itself has a
			patented coating in its interior to shield it from the extreme temperatures. After the initial incineration process,
			the waste is delivered into a second burn chamber tower, where further incineration is done. The remaining ash
			is cooled to 180 C in a cooling tower and dioxins, and carbon monoxide are filtered and the remaining smoke
			is released through a smoke stack. The resulting ash is 1/10 of its original volume and can be further processed
			with the Swing Melter to be used as an ingredient for construction materials. The entire Rotary Kiln system has an advanced cooling system that makes it possible
			to run 24 hours a day. Besides the initial shredding process, temperature regulation and waste delivery is almost
			entirely automated. Swing Melter

			Echo Frontier's Swing Melter is a incineration system specifically for pre-incinerated ash, such as the
			resulting ash from the Rotary Kiln incineration system. Like the Rotary Kiln, the waste, in this case ash,
			is loaded and delivered via a conveyer to a grinding chamber, where the ash is reduced to less than 5 mm grains.
			While being delivered on another conveyer, the ground ash passes a magnet removing any metallic elements.
			The metal free ash is then lifted via a bucket elevator into another hopper and is then injected into
			the Swing melter burn chamber via an injector device similar to that of the Rotary Kiln. The ash is
			slowly injected over a period of 45 minutes in order to maintain the Swing Melter's internal temperature.
			The Swing Melter chamber constantly rotates from left to right to fully incinerate the injected ash.
			Because of this consistent 45 minute injection process, the cooling process is much more efficient,
			reducing the amount of damage to the Swing Melter, and thus reducing the amount of maintenance needed. The
			resulting by-product is molecularly strong carbon pellets which can be recycled to be used as an ingredient
			in concrete and foundational construction. The Swing Melter system hourly capacity is 150 kg/hour making its daily
			capacity 50 t /day.Energy DevelopmentSanyo HIT (Heterojunction with Intrinsic Thin Layer) Photovoltaic Panel
				Energy Development will place its efforts in marketing in Japan the industry leading HIT solar panel by Sanyo.
				HIT solar cells are composed of thin mono-crystalline silicon wafers, surrounded by ultra-thin
				amorphous silicon layers. The proprietary solar cell configuration by Sanyo is said to improve
				boundary characteristics and reduce power generation losses. The HIT solar panel has the highest
				module efficiency (17%) in the world, even at higher temperatures effectively giving the consumer
				more energy conversion per unit area. Sanyo has also made its HIT solar panels pre-equipped
				with plug-n-play connectors, touch safe junction boxes, and other features that make installation
				and maintenance relatively simple. The HIT solar panels are subjected to strict inspections and
				maintain top industry standards, which is why Sanyo backs its product by a 20 year power out-put warranty,
				and a 2 year workmanship warranty.

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

				The use of HIT solar panels saves the consumer a considerable amount of energy costs in the long run,
				and also effectively reduces greenhouse gas emissions by 40%.Amanasu ShinwaKijimuna Water Purifier
				 Amanasu Shinwa's Kijimuna is an industrial strength water purifier that uses an automated mineral fortification system
				 to effectively clean small bodies of water. Kijimuna's unique design allows it to be used with various bodies of water; and
				 in cases where a body of water has at least 3 meters depth, Kijimuna has no need for
				 a water pump. The resulting purified water has a mineral content between 50 ppm and 200 ppm, with no
				 PH balancing required.Amanasu WaterAmanasu Hydrogen-ion Water (Sui-So-Sui)
					Amanasu Water's principle product is a soon to be launched drinking water called "Sui-So-Sui",
					or Hydrogen-ion water. Amanasu Hydrogen-ion water will be primarily marketed through
					fitness clubs, and professional sports arenas, and pachinko parlors across Japan, with future plans to expand its operation
					into North America. Processing and packing will be done by utilizing BMD Co,
					facilities in Japan.

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

					Hydrogen-ion water has various applications apart from normal consumption. It can
					be used as a hair tonic after showering, an eye rinse, and for other daily uses. Amanasu Hydrogen-ion Water
					will be sold in 300 ml pouches starting November 2006.
 
 MARKETING
		OF TECHNOLOGIES.
 
 The Company does not expect to continue the marketing and sale of its
		Amanasu Furnace, FireBird Boiler, and Ring-Tube Desalination
		equipment until a contract ca be made with a third-party
		who sub-licenses the technologies or there is a potential opportunity and solid
		business plan to restart or commence a new production line in regard to the three technologies.
 
 COMPETITION.
 
 Generally, the industries in which the Company expects to compete in, namely
		waste disposal and desalination, are highly competitive. These industries are
		populated by many national or international companies, with significantly greater
		resources than that of the Company. In the waste industry, many of these
		competitors dispose of toxic waste in tradition methods such as landfills, and
		incinerators. Despite the  fact  that  these  methods  may  not  be
		environmentally friendly, they are nonetheless  in  compliance with governing
		regulations, and therefore, represent significant  competition  to  the Company.
		In addition, competition will include other waste disposal systems that handle toxic
		and environmental waste in a non-pollutant manner. Desalination equipment,
		which has been used extensively in the Middle East and elsewhere, represents
		significant competition to the Company's technology.
 
 PROPRIETARY
		RIGHTS.
 
 The
		Company obtained the exclusive world-wide rights to the Amanasu Furnace for a
		period of 30 years commencing June 8, 2000 pursuant to the licensing agreement
		with Mr. Kikuchi, the inventor. In 1996, Mr. Kikuchi, the inventor, received
		a patent in Japan for the combustion technology, which expires in 2016. The
		Company anticipates that it will file for patent protection in other countries
		prior to any marketing efforts in such country.
  8
  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, 2006, the Company has two employees, Shuichi Yamada,
		Izuo kato, located at its New York, Vancouver, and Tokyo offices, respectively, and a regulatory
		assistant in its Tokyo office. The Company has no collective bargaining
		agreements with its employees and believes its relations with its employees are good.
		The Company didn't have a consultant thus no payment was made to a consultant during 2006.
 
 **Item
		2. Description Of Property** **.**
 
 The Company's executive offices are located at 115 East 57th Street 11th Floor New York, NY 10022 and Vancouver, British Columbia.
		The total premises are 2,000 square feet and are subleased
		at a monthly rate of $2,500 under a lease agreement which
		expires September 30, 2007. The Company shares the space with Amanasu
		Technologies Corporation, a reporting company under the Securities Exchange
		Act of 1934.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 $10,000 (1,250,000 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.
  9
  **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.
  2005
			
			Low
			  Bid
			
			High
			  BidFiscal Year Ending December 31, 2005
			
			
			0.55
			
			
			1.202006
			
			
			Low
			  Bid
			
			
			High
			  Bid1st
			  Quarter Ending March 31, 2006
			
			$
			0.30
			
			$
			0.552nd
			  Quarter Ending June 30, 2006
			
			
			0.30
			
			
			0.453rd
			  Quarter September 31, 2006
			
			
			0.12
			
			
			0.304thQuarter December 31, 2006
			
			
			0.10
			
			
			0.15
  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.
  10
  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
 
 The most recent  sale of unregistered  securities was during the quarter ended June 30, 2003, 20,000 shares were allotted to Reraise
		Corporation, a private Japanese company, at a price of $4.99 per share for total
		consideration of $99,900. In July 2005,  the
		Company  made the repayment of  the amount of $ 100,000 to Reraise and
		completed the liability.
 
 Private  Placement
 During  the  2005 fiscal year,  the  Company  issued  1,000,000  shares  of  common  stock,
		realizing  cash  proceeds  of  $3,500,000.  These  sales  were  exempt  under
		Regulation  S  under  the Securities Act of 1933, as amended, due to the foreign
		nationality  of  the  relevant  purchasers.
 
 **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.
 Fiscal Year Ended December 31, 2006


    		The Company's sales for the fiscal year ended December 31, 2006 were $472,318
    		compared to $ 478,003 for the fiscal year ended December 31, 2005.

			Interest income for the fiscal year ended December 31, 2006 was $61,634 compared to $50,783
			for the same period in 2005. The increase is due to fluctuating interest rate and the increased deposited amount in
			the Company's account.

			Equity in losses of investee companies for the fiscal year ended December 31, 2006 were $226,896,
			compared to $11,780 for the same period in 2005. The increased was principally due to subsidiary company losses.

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

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

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

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

			During the three months ended September 30, 2006 Soae, a Japanese electronics manufacturer,
			invested $426,014 into Amanasu Holdings in exchange for 4,000 shares of Amanasu Holdings.
 11
 
 Plan
		Of Operations.
 Amanasu Environment.The Company was organized February 22, 1999.
    	Its operations to date have been limited to obtaining exclusive licensing rights
    	for technologies, conducting preliminary marketing efforts, and conducting
    	product testing.

		As of August 4th, 2005, Kogure's six proprietary rights (See "Patents" below)
		to the license of the technologies and parts in connection with constructing
		the rotary kiln and its title w	ere transferred to Amanasu Environment Corporation,
		and the amount of $290,000 that the Company previously funded to Kogure for
		marketing and promotion purposes replaced in as transfer fee.  As a result,
		the Company possesses the exclusive worldwide right to the product, and can
		receive royalties from the sales of the rotary kiln by other companies including MINMETAL.
 Amanasu Holdings. As of December 16th, 2005, the Company established , Amanasu
		Holdings Corporation ("Amanasu Holdings"), located at 1-5 Suda-cho, Chiyoda-ku,
		Tokyo, as a subsidiary company of Amanasu Environment Corporation with
		100 % control. On September 21st 2006 an electronics manufacturer Soae invested 50,000,000 Yen ($500,000)
		into Amanasu holdings, thus holding 9% of Amanasu holdings. On the same day Amanasu Holdings
		Corporation has begun to implement plans to reorganize its subsidiary companies in
		an effort to concentrate the entire organization on environmental technologies/methodologies.
		As explained briefly above in the Company overview, Amanasu Holdings subsidiary companies
		will focus on four main markets within the environmental technology industry: Energy production,
		waste management, water purification, and drinking water. Amanasu Echo Frontier will continue its
		operations with its waste incineration technologies (Rotary Kiln, and Swing Melter). Amanasu Shinwa will also
		continue its operations in water purification plants for pools, and fitness clubs, as well
		as its sea water purification plants operations. Felice, originally running beauty salons under
		a membership system, will change its business plan to become Energy Development. Energy Development
		will be involved in the sale and marketing Sanyo HIT solar panels in Japan. Newly formed
		Amanasu Water will be involved in sales of Amanasu Hydrogen-ion water, a drinking water beginning its sales in Japan on November 2006 with future plans to expand into
		North America, and South East Asia. The remaining subsidiary companies BJSS, Petstyle,
		and Japan Amanasu Project Support were not able to be accommodated  within the newly organized
		plans, thus will be open for sale to any organization that have interest in its respective industry.Echo Frontier.Amanasu Holdings and the former employees of Kogure jointly
		established Echo Frontier Corporation
		("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, with 10 former technicians of Kogure. Echo Frontier
		mainly produces incinerator, furnace, and medical waste treatment plants
		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 furances for $2,440,000 (285,000,000 Yen)
		per unit in Japan and 3 medical waste treatment plants 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, made a temporary
		agreement on an incinerator order for $14,000,000
		(1,650,000,000 Yen) to be manufactured and delivered to Onyx by the end of 2007.

		Echo Frontier is considering to establish an organization
		for joint ventures with MINMETAL in China to conduct
		marketing for medical waste treatment plants.
		The establishment might take place in 2006 with a total investment of 50,000,000
		Yen, 51% of which will be invested by Amanasu Environment or Echo Frontier.
		Other Echo Frontier activities will be primarily focused on Kogure's former products
		rather than on the Company's Fire Bird Boiler, therefore there has not been any
		expense incurred by the Fire Bird Boiler during the quarter and no further
		budget is set out for the product. The Company is now also willing
		to provide the license for the Fire Bird Boiler to any business organizations
		that could make use of the technologies.
		The Company was expecting to expand the distribution line across
		Japan collaborating of Mitsui & Co., Ltd. ideally starting in
		April of 2006; however, after consulting MINMETAL, the Company decided
		to refuse the involvement of Mitsui & Co., Ltd. for this project.
 
 Amanasu Shinwa.Amanasu Holdings invested $84,228 (10,000,000 Yen) on December 16th, 2005 into Amanasu Shinwa for the follow items.
 (i) The Production of a model water purification plant managed by Amanasu Shinwa.
				(ii) 5 Water purification units for pools at sports clubs, which will be produced and
				distributed in Japan for the next 12 months
 Amanasu Shinwa has also started developing a new plant using ozone sterilization technologies
				, and are expecting an increase of sales by the new development.
				The new plant will be used for swimming pools, public bathing houses, kitchens and the wide
				range of other market places are being prospected.  The expecting sales for 2007 will be 300,000,000 Yen.
				Energy Development (formerly Felice).
				Amanasu Holdings invested 10,000,000 Yen and loaned 5,000,000 Yen into Felice Ltd;,
				located at 3-41 Akebono-chou Senju
				Adachi-ku Tokyo,  on December 16th ,2005.
				Felice ran beauty salons on a membership system; however, operational results
				were unsatisfactory, and along with the reorganization of Amanasu Holdings (see page 11 for details),
				Amanasu Environment decided to change Felice's business entirely. Felice will direct its focus
				on the solar panels industry under the new name Energy Development. Energy Development will begin its
				operations with promoting the sales of Sanyo's HIT solar panels in Japan. The sale agreement with Sanyo
				is a commission base of 150,000 Yen/unit for sales under 20 units, and 200,000 Yen/unit for sales
				of 20 units and above. 50,000 Yen/unit of each sale will be transferred into Amanasu Holdings.
				Sales are expected to begin on November 2006 with a monthly sales target of 6 units/month.Amanasu Water.
				As of September 21st Amanasu Holdings invested 50,000,000 Yen ($500,000) establishing
				Amanasu Water, which will be involved in the sale and marketing of "Amanasu Sui-So-Sui" or Amanasu Hydrogen-ion water.
				Amanasu water will subcontract BMD Co's processing and packing facilities and will begin distribution
				of Amanasu Hydrogen-ion water through fitness clubs and professional sports arenas across Japan
				launching on November 2006. Amanasu Hydrogen-ion water will be sold in 300 ml pouches, and 15 yen from each sale will be transferred
				to Amanasu Holdings. From the 15 yen transferred 5 yen will be transferred to Amanasu Environment.
				BJSS. 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 an additional investment of
				9,000,000 Yen on January 26th 2006. This is a temporary employment agency.
				with offices in Bangladesh and Japan. BJSS sales are increasing and
				showing the highest sales record of 100,000,000 Yen by the end of March in 2006.
				Despite increasing sales, BJSS was still not able to self sustain, and with reorganization plans
				no further investment will be made into BJSS and Amanasu Environment will make BJSS available
				to any organization whom can utilize its services.Petstyle. Amanasu Holdings invested 10,000,000 Yen into Petstyle Ltd;, which runs a pet modeling
				business, located at #406, Mansion Kyassuru,13-8 Daikanyamacho, Shibuya-ku Tokyo,
				on January 11th 2006. The company aimed to establish its business as a pioneer of the total
				management for the pets in Japan; however, Petstyle was still not able to self sustain, and with reorganization plans
				no further investment will be made into Petstyle and Amanasu Environment will make BJSS available
				to any organization whom can utilize its services.Japan Amanasu Project Support.
				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 was
				established to manage marketing for the incinerator(Amanasu Eco Frontier) and other Amanasu Holdings' products.
				It was also planning to produce a new bathing method,
				using rocks that have mineral elements, which radiate far infrared rays via heat. The heat then spreads out through
				heated rocks in a closed room similar to the sauna concept; however, due to unsatisfactory operational results and
				the reorganization of Amanasu Holdings, Japan Amanasu Project Support can no longer be accommodated for in the
				new business plan and will be made available for sale to any organization whom can utilize its services.
 
 **“Patents”**
 1.
            Rotary
                kiln (Patent number 3564012, as of July 2nd,
                2005); 2. Rotary kiln-Taiwan (Patent number 131102, as of August
                21st,
                2001); 3. Gas lark (petition number 2000-358861, patent pending);
                4. Ash
                melting furnace and incinerating system (petition number 2002-325560,
                patent pending); 5. The interior wall of the kiln (petition number
                2004-208198, patent pending); and 6. The method of cooling down the
                kiln
                (petition number 2004-208199, patent pending)
 
 During
		the fiscal 2005 and 2004 years, the Company spent $-0- and $-0- respectively on research and development.
  12
  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.


		Other than the provision of alternating business planning costs discussed above, the Company estimates that
		its operating overhead, which includes general and administrative charges, will be approximately $120,000 for the
		next 12 months. This amount is comprised of the following estimated costs; $10,000 in annual salaries for office
		personnel and consultants, $50,000 for rent, $20,000 for professional fees and $20,000 for miscellaneous expenses.
		The Company does not anticipate paying salaries to any of its officers for the next 12 months. The Company has
		sufficient cash on hand to support its overhead for the next 12 months but no material commitments for capital
		at this time other than as described above.  The Company and/or Amanasu Holdings will need to issue and sell the
		shares to gain the capital of the operation.
 
 
 Forward
		Looking Statements .
		Certain statements contained in this Annual Report on Form 10-KSB include forward looking statements.
		All statements other than statements of historical facts included in this Form 10-KSB regarding the Company's
		financial position, business strategy, and plans and objectives of management for future operations and capital
		expenditures, and other matters, are forward looking statements. These forward looking statements are based
		upon management's expectations of future events.  Although the Company believes the expectations reflected
		in such forward looking statements are reasonable, there can be no assurances that such expectations will prove
		to be correct. Additional statements concerning important factors that could cause actual results to differ
		materially from the Company's expectations ("Cautionary Statements") are disclosed below in the Cautionary
		Statements section and elsewhere in this Form 10-KSB. All written and oral forward looking statements attributable
		to the Company or persons acting on behalf of the Company subsequent to the date of this Form 10-KSB are
		expressly qualified in their entirety by the Cautionary Statements.
 
 **Cautionary
		Statements** . Certain
		risks and uncertainties are inherent in the Company's business. In addition to
		other information contained in this Form 10-KSB, the following Cautionary
		Statements should be considered when evaluating the forward looking statements
		contained in this Form 10-KSB:
 
 
 **Ability
		To Develop Commercial Product** .
		The Company presently maintains rights to three different technologies. At this time, proto-type versions of products for each
		of the three technologies have been developed, however, none of the products are commercially ready for sale.  In order to
		reach a stage of commercial sales for the products, the Company prefers to put emphasis on joint venturing and funding a
		company who has advanced technological knowledge and progressed sales history of the same field for the purpose of cooperation.
		The Company can not predict that it will be successful in developing commercially ready products for any of the technologies
		in the near future or at any time.
 
 **Rapid
		Technological Changes** .
		The industries in which the Company intends to compete with are subject to rapid technological changes.
		No assurances can be given that the technological advantages which may be enjoyed by the Company in respect of their
		technologies can not or will not be overcome by technological advances in the respective industries rendering the Company's
		technologies obsolete or non-competitive.
  13
  **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.
  14
  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.
  15
  **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
			
			
			59
			
			
			1999
			
			Chairman/Treasurer
			  and PresidentLina
			  Lei
			
			
			46
			
			
			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.
  16
  **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.
  17
  **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.
  18
  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 **.**
 
  19
  **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.
 1. Investment of 50,000,000 Yen into Amanasu Holdings from a Japanese Electronics manufacturer Soae (Filed on October 2, 2006)
		    2. Formation of New Subsidiary under Amanasu Holdings, Amanasu Water with initial investment capital of 30,000,000 Yen (Filed on October 2, 2006)
		    3. Resignation of the President of Amanasu Holdings Kazuasa Tanaka. (Filed on October 2, 2006)
		    4. Appointment of Shuichi Yamada as President of Amanasu Holdings.
 
 **Item
		14. Principal Accountant Fees and Services** .
 
 (1).
		Audit fees for 2006 were $22,000 and  $8,920  for 2005.
 (2) Audit Related Fees for 2006 and 2005 were $0.
 (3) Tax Fees for 2006 were $625 and 2005 were $0
 (4) All
		Other Fees were $0.
 (5)
		N/A
 (6) Not
		greater than 50% for 2005 and 2004.
  20
  **AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**
 
 ****
 
 **CONSOLIDATED FINANCIAL
		STATEMENTS**
 
 **DECEMBER
		31, 2006**
 
  **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, 2006 and the related consolidated
			statements of operations, changes in stockholders' equity, and cash flows for
			the years ended December 31, 2006, and 2005. 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, 2006, and the
			results of its operations and its cash flows for the years ended December 31 ,
			2006 and 2005 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, 2006**
 
 
 ASSETSCurrent
			  Assets:Cash
			
			$
			102,763Certificate Of Deposit
				
				
				1,150,000Accounts and notes receivables
				
				
				66,737Raw Materials
				
				
				3,373Advance to vendor
				
				
				94,000Short-term loan receivables
				
				
				293,152Accrued Interest Receivables
			
			
			13,236Total
			  current assets
			
			
			1,723,261Fixed
			  Assets:Machinery and
			  equipment
			
			
			342,216Less,
			  accumulated depreciation
			
			
			100,276Net
			  fixed assets
			
			
			241,940Other
			  Assets:Investments
			
			
			277,763Prepaid Expenses
				
				
				76,448Security Deposits
			
			
			143,595Miscellaneous Receivables
			
			
			893Long-term loan receivables
			  
			  
			  31,483Total
			  other assets
			
			
			530,182Total
			  Assets
			
			$
			2,495,383LIABILITIES
			  AND STOCKHOLDERS' EQUITYCurrent
			  liabilities:Accounts Payables
			
			$
			22,359Accrued expenses
			
			
			13,450Payroll and other taxes payable
				
				
				18,082Shareholders Advance
				
				
				958Total
			  current liabilities
			
			
			54,849Stockholders'
			  Equity:Common
			  stock: authorized 100,000,000 sharesof
			  $.001 par value; 44,000,816 issued andoutstanding
			
			
			44,001Minority Interest
			
			
			426,014Additional
			  paid in capital
			
			
			4,257,039Retained deficit
			
			
			(2,301,821
			)Other comprehensive income
			  
			  
			  15,301Total
			  stockholders' equity
			
			
			2,440,534Total
			  Liabilities and Stockholders' Equity
			
			$
			2,495,383
 
 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**
  Year2006
			
			Year2005Sales
			
			$
			472,318
			
			$
			478,003Cost of Goods sold
				
				
				349,674
				
				
				271,552Gross Profit
				
				
				122,644
				
				
				206,451Expenses
			
			
			906,495
			
			
			533,125Operating
			  Loss
			
			
			(783,851
			)
			
			(326,674
			)Other
			  Income(expense)Interest Income
			  
			  
			  61,634
			  
			  
			  50,783Miscellaneous Revenue
				
				
				10,718Impairment of Fixed Assets
			  
			  
			  (144,000)
			  
			  
			  -Impairment of Investments
				
				
				(263,685)
				
				
				(292,030)Net Loss
			
			$
			(1,119,184
			)
			$
			(567,921)Net
			  loss per share -Basic
			  and Diluted
			
			$
			-
			
			$
			-Average
			  number ofshares
			  outstanding
			
			
			44,001,816
			
			
			44,000,816
 
 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, 2006, and 2005**
 
 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
			
			$
			3,123,398Minority Interest
			
			
			-
			
			
			-
			
			
			426,014
			
			
			-
					  
			
			-
			
			
			426,014Net
			  loss for period
			
			
			-
			
			
			-
			
			
			-
			
			
			(1,119,184)
			  
			
			-
			
			
			(1,119,184)comprehensive income
			
			
			-
			
			
			-
			
			
			-
			
			
			-
					  
			
			10,306
			
			
			10,306Balance,
			  December 31, 2006
			
			
			44,000,816
			
			$
			44,001
			
			$
			4,683,053
			
			$
			(2,301,821
			)
				  $
				  15,301
			
			$
			2,440,534
  The
		accompanying notes are an integral part of these financial
		statements.
  -4-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **CONSOLIDATED STATEMENTS
		OF CASH FLOWS**
  Year2006
			
			Year2005**CASH
			  FLOWS FROM OPERATIONS:**Net
			  loss
			
			$
			(1,119,184
			)
			$
			(567,921)Charges
			  not requiring the outlay of cash:Depreciation
			  and amortization
			
			
			28,814
			
			
			58,777Write down of licensing agreements
			
			
			10,000
			
			
			292,030Equity in losses of investee companies
			
			
			226,896
			
			
			11,780Changes
			  in current assets and liabilities:Decrease in notes and accounts receivable
			
			
			10,804
			
			
			(78,434)Decrease in work in progress
			
			
			19,186
			
			
			(19,186)Increase in advance to vendor
			
			
			-
			
			
			(94,000)Increase in loan receivables
			
			
			(31,483)
			
			
			-Increase in advance to employees
			
			
			24,179
			
			
			(24,179)Increase in short term bank loan
			
			
			(21,210)
			
			
			21,210Increase accrued interest
			
			
			(13,236)
			
			
			-Increase in prepaid expenses
			
			
			(76,448)
			
			
			-Increase in raw materials
			
			
			(3,373)
			
			
			-Increase in accounts payable
			
			
			2,934
			
			
			19,425Increase in advance to shareholders
			
			
			43,278
			
			
			(42,420)Increase in payroll and other taxes payable
			
			
			1,662
			
			
			13,430Increase in accrued expenses
			
			
			9,872
			
			
			3,578Increase employee loans
			
			
			(14,640)
			
			
			14,640**Net
			  Cash Consumed By****Operating
			  Activities**
			
			
			(901,949****
			)****
			
			****(391,270)**CASH
			  FLOWS FROM INVESTING **ACTIVITIES:****Machinery and equipment
			
			
			143,630
			
			
			(459,987)Investments
			
			
			242,711
			
			
			(801,384)Increase in security deposits
			
			
			-
			
			
			(100,000)Advance to affiliate
				  
				  
				  (191,267)
				  
				  
				  (138,595)Investment in certificate of deposit
				  
				  
				  (150,000)
				  
				  
				  (1,000,000)**Net
			  Cash Provided (Consumed)****By
			  Investing Activities**
			
			
			****45,074
			
			
			(2,499,966)**CASH
			  FLOWS FROM FINANCING **ACTIVITIES:****Issuances
			  of common stock
			
			
			-
			
			
			3,500,000Refund of stock investment
			
			
			-
			
			
			(99,900)Capital Contribution to Subsidiary
			
			
			426,014
			
			
			-**Net
			  Cash Provided By****Financing
			  Activities**
			
			
			426,014
			
			
			3,400,100Exchange Rate Effect on cash
					
					
					10,306
					
					
					4,995**Net
			  Change in Cash Balances**
			
			
			420,555
			
			
			513,859Cash
			  balance, beginning of period
			
			
			523,318
			
			
			9,459Cash
			  balance, end of period
			
			$
			102,763
			
			$
			523,318
  The
		accompanying notes are an integral part of these financial
		statements.
  -5-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2006**
 
 **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.
			On September 21, 2006, Soae, a Japanese electronics manufacturer, invested $426,014 for a
			9% interest in Amanasu Holdings. Also, on September 21, 2006, Amanasu Holdings
			formed a new subsidiary called Amanasu Water. Amanasu Water's plan of operation is to
			market a new type of water called "Hydrogen ion water". Hydrogen-ion water is a new product and is believed
			to have effective anti-oxidant properties.
 During the year 2000, the Company acquired worldwide licensing rights for
			nuclear incinerator technology, known as "The Amanasu Furnace". The Furnace
			is a positive ion breeder incinerator process that converts domestic and
			industrial wastes to ions through high temperature exposure. The resultant
			residue consists of oxygen gas and inert slag pellets. On September 30, 2002,
			the Company was granted a worldwide exclusive license for the production and
			marketing of a hot water boiler which extracts heat energy from waste tires.
			On June 30, 2003, the Company acquired the worldwide rights to produce and
			market a patented process that purifies seawater, and removes hazardous
			pollutants from wastewater. These investments, which totaled $346,500, are
			for licensing rights to three products. During 2005 & 2006, the value of
			these rights was reviewed and impairment was found to have occurred (see Note 8).
 
 **Development
		Stage Accounting**
 The Company was, until 2005, a development stage company, as defined in
			Statement of Financial Accounting Standards No. 7. Generally accepted
			accounting principles that apply to established operating enterprises
			govern the recognition of revenue by a development stage enterprise and
			the accounting for costs and expenses. The Company is no longer in the
			development stage.
 
 **Risk and Uncertainties**
 Approximately 60% of the sales of Shinwa are to one customer. Management
			does not view this concentration as a significant risk.
 
 **Basis of Consolidation**
 The consolidated financial statements include the accounts of the Company
			and its wholly owned subsidiaries, Holdings and Shinwa. All significant
			intercompany balances and transactions have been eliminated in consolidation.
  -6-
  **AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2006**
 
  **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 equivalent
 **Concentrations
		of Credit Risk**
 Financial instruments which potentially subject the Company to concentrations
			of credit risk consist primarily of cash and cash equivalents, miscellaneous
			receivables, and miscellaneous payables. The Company does not believe that it
			is subject to unusual credit risk beyond the normal credit risk associated with
			commercial banking relationships.
 
 **Fixed
		Assets**
 Fixed assets are recorded at cost. Depreciation is computed using accelerated
			methods, with lives of five years for vehicles, and seven years for machinery
			and equipment, ten years for tools, and fifteen years for building improvements.
 
 **Licensing
		Agreement**
 During the year 2000, the Company issued 13,000,000 shares of common stock
			to a company that is wholly owned by the Company's president as a fee for
			arranging for the acquisition of the licensing agreement for the nuclear
			incinerator technology. Another 1,200,000 shares was issued in 2001 in
			connection with the acquisition of this agreement. No value has been assigned
			to this intangible asset..
 
 The license for the hot water boiler was acquired at a cost of $250,000, plus
			650,000 shares of common stock. The stock was valued at $.10 per share, bringing
			the total cost to $315,000. The license for the seawater purification process
			was acquired for 1,050,000 shares of common stock which were valued at $31,500.
			Amortization of these costs has been provided by the straight line method using
			lives of 17 years, which is based on patent life. The latter two intangible assets
			were evaluated during 2005 and 2006 and a write off was made for the entire portion of their book value. (See Note 1 and 8).
 
 **Income
		Taxes**
 Deferred income taxes are recorded to reflect the tax consequences or benefits
			to future years of any temporary differences between the tax basis of assets and
			liabilities, and of net operating loss carryforwards.
 
 **Recognition Of Revenue**
 Revenue is realized from sales of products and services. Recognition occurs
			upon delivery. In determining recognition, the following criteria are considered:
			persuasive evidence exists that there is an arrangement between the buyer and
			seller; delivery has occurred; the sales price is fixed or determinable; and
			collectability is reasonably assured.
 
 **Use
		Of Estimates**
 The preparation of financial statements in conformity with generally accepted
			accounting principles requires management to make estimates and assumptions
			that affect certain reported amounts and disclosures of contingent assets and
			liabilities at the date of the financial statements and the reported amounts
			of revenues and expenses during the reporting periods. Actual results could
			differ from those estimated.
  -7-
  **AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2006**
 
  **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 $146,351 during 2006; and $3,750 in 2005.
 
 **Segment
		Reporting**
 Management will treat the operations of the Company as one segment.
 
 **Fair
		Value of Financial Instruments**
 The carrying amounts of the Company's financial instruments, which include
				cash, miscellaneous receivables, and payroll taxes payable, approximate
				their fair values at December 31, 2006.
 
 **Net
		Loss Per Share**
 The Company computes net income (loss) per common share in accordance with
				SFAS No. 128, "Earnings Per Share" and SEC Staff Accounting Bulletin No. 98
				("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic and diluted
				net loss per common share are computed by dividing the net income (loss)
				available to common shareholders for the period by the weighted average number
				of shares of common stock outstanding during the period. Accordingly, the
				number of weighted average shares outstanding as well as the amount of net
				income (loss) per share are presented for basic and diluted per share calculations
				for all periods reflected in the accompanying consolidated financial statements.
 **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, 2006**
   **3.**
			**RELATED
			  PARTY TRANSACTIONS**
 
 The Company president received a $45,000 advance from Shinwa in December 2005.
 
 **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 $1,246.
 
  -9-
  **AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**
 ****
 **NOTES
		TO FINANCIAL STATEMENTS**
 **December
		31, 2006**
 
  **5.**
			**INCOME
			  TAXES**
 
 The Company has experienced losses since inception. As a result, it has incurred
			no Federal income tax. The Japanese Tax Code allows net operating losses (NOL's)
			to be carried forward and applied against future profits for a period of seven
			years. The NOL's total was $2,287,246. The potential benefit of the NOL has been
			recognized on the books of the Company, but it has been offset by a valuation allowance.
 
 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 presented below. These deferred tax assets increased during
			2006 by $297,336, the results of adding the potential benefit of 2006 losses.
 
 Deferred
			  Tax Assets
			
			$
			686,174Valuation
			  Allowance
			
			
			686,174Balance
			  Recognized
			
			$
			-
  **6.**
			**INVESTMENTS**
 
 During December 2005 and January 2006, Holdings made investments in the six
		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 OfDebt
			
			Equity
			
			2005 LossBJSS, Inc.
			
			
			$                    -
			
			$
			-
			
			$
			(92,094)Energy Development (formerly Felice, Inc.)
			
			
			59,055
			
			
			93,061
			
			
			17,517Echo Frontier Corp.
			
			
			42,114
			
			
			-
			
			
			(103,149)Project Support
			
			
			42,114
			
			
			-
			
			
			(42,979)Petstyle
			
			
			-
			
			
			-
			
			
			6,191Creative Ducks Corp.
			
			
			106,969
			
			
			-
			
			
			-Total
			
			
			251,174
			
			$
			93,061
			
			$
			(226,896)




-10-


**AMANASU
		ENVIRONMENT CORPORATION and SUBSIDIARIES**


****


**NOTES
		TO FINANCIAL STATEMENTS**


**December
		31, 2006**








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





BJSS, Inc.
			This is a temporary employment agency with offices in Bangladesh and Japan.Energy Development (formerly Felice, Inc.)
			This company will operate in the solar panel industry in JapanEcho 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.Project Support
			This company will produce a new bathing method, using rocks that have mineral elements, which radiate far infrared rays via heat.
			Petstyle
			This company runs a pet modeling business in Japan.


**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. During 2006, the values of the investment and
			the demonstration model were reviewed and impairment was found to have occurred. (See note 9 and 10)


**8.**
			**IMPAIRMENT OF LICENSING RIGHTS**





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.
		The remaining $10,000 was written off in 2006.


**9.**
			**IMPAIRMENT OF INVESTMENTS**





The Company has investments in BJSS, Inc. of $77,321 and Petstyle of $81,066
		(see Note 6). During 2006, the value of these investments was reviewed and impairment
		was found to have occurred. As a result, the remaining value of these investments
		was reduced to $0 through a $158,387 loss provision.


**10.**
			**IMPAIRMENT OF MACHINERY**





In April 2005, the Company purchased, for $400,000, a demonstration model of the
		Swing Melter for use in attracting customers. In 2006, the value of this demonstration
		model was reviewed and impairment was found to have occurred, As a result, the
		unamortized cost of this machinery was reduced to $256,000 through a $144,000 loss provision.


**11.**
			**RENTALS UNDER OPERATING LEASES**





The Company conducts its operations from a leased office facility in Vancouver,
			British Columbia under a 1-year operating lease, which expires September 30, 2007.
			During 2006, the Company incurred rent expense of $98,671. In 2005, rent expense was $206,823.








**12.**
			**SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION**





There was no cash paid for interest or income taxes during the years 2006 and 2005.
		There was no non-cash financing or investing activity during these years.


**13.**
			**SUBSEQUENT EVENTS**





On February 10, 2006, a law suit was commenced in which the Company, an affiliated company,
			and an officer of the Company were named as defendants.  During the course of that law suit,
			$652,409 of Company funds was frozen by court order.  The lawsuit was subsequently settled o
			n March 27, 2007.  Under the terms of the settlement, the Company, its affiliate, and the
			officer are obligated to pay $260,000 in monthly installments of $10,000 each.  The Company
			does not expect to incur any expense as a result of this settlement, because the officer
			involved in the suit has agreed to take personal responsibility for the settlement.
			Of the Company funds which had been frozen, all except $130,000 have been released.
			This remaining $130,000 amount will be released when the terms of the settlement have been satisfied.




-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
			April 13, 2007PresidentAnd
			  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, 2007/s/ Atsushi
			  MakiDirector




12