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EX-32 - EXHIBIT 32 - AMANASU ENVIRONMENT CORPaeex3210k.htm
EX-31 - EXHIBIT 31 - AMANASU ENVIRONMENT CORPaeex3110k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2009

[     ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ________________

Commission File Number: 000-32905

AMANASU ENVIRONMENT CORPRATION

(Exact name of registrant as specified in its charter)

Nevada   98-0347883
(State of other jurisdiction of incorporation or organization)   (I.R.S. Eployer Identification No.)

445 Park Avenue Center 10th Floor New York, NY 10022

(Address of principal executive offices)

212-836-4727

(Registrant's telephone number, including area code)

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

Title of each class   Name of each exchange on which registered
COMMON STOCK   OTC-BB

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

(Title of class)

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes     No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes     No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.

Yes X   No  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any aadmendment to this Form 10-K.

Yes     No X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting copany" in Rule 12b-2 of the Exchange Act.

Large accelerated filer     Accelerated filer  
Non-accelerated filer   (Do not check if a smaller reporting company) Smaller reporting company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes     No X

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all docments and reports required to be filed by sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes     No  

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practiable date: 44,000,816 as of March 31, 2010.


AMANASU ENVIRONMENT CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 2009
TABLE OF CONTENTS

Reference Section Name Page
PART I 1
Item 1. Business 1
Item 1A. Risk Factors 3
Item 1B. Unresolved Staff Comments 5
Item 2. Properties 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II 5
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 6
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 7
Item 8. Financial Statements and Supplementary Data 8
Accountant's Audit Report 8
Consolidated Balance Sheets 9
Consolidated Statements of Operations 10
Consolidated Statements of Changes in Stockholder's Equity 11
Consolidated Statements of Cash Flows 12
Notes to Consolidated Financial Statements 13
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 20
Item 9A. Controls and Procedures 20
Item 9B. Other Information 20
PART III
Item 10. Directors, Executive Officers and Corporate Governance 21
Item 11. Executive Compensation 21
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 22
Item 13. Certain Relationships and Related Transactions, and Director Independence 23
Item 14. Principal Accounting Fees and Services 24
PART IV
Item 15. Exhibits and Financial Statement Schedules 25
Signatures 25

Forward Looking Statements. Certain of the statements contained in this Annual Report on Form 10-K include forward looking statements. All statements other than statements of historical facts included in this Form 10-K 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 ("Item 1A. Risk Factors") are disclosed below in the Item 1A. Risk Factors section a nd elsewhere in this Form 10-K. 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-K are expressly qualified in their entirety by the Cautionary Statements.

Part I

Item 1. Business

General

Amanasu Environment Corporation (herein after the "Company") principle business is in complete development of Environmental Technologies to improve the quality of life for the future of the planet. The Company is involved in all aspects of environmental technology development: research & development, marketing, sales. It also produces and acquires environmental technology and related patents. Environmental technologies that the Company has been apart of range from water filtration systems, industrial/medical waste incinerators, solar panels, to name a few. The Company chose to have its headquarters in the United States in order to bridge environmental technology development internationally, with particular attention to leading innovations in Japan. The Company's parent company Amanasu Corporation, is a Japanese Corporation. The Company hopes to utilize existing associations and partnerships in order to bring environmental technologies from the United States and market them in Japan and other surrounding countries.

Current

During the fiscal year ended December 31, 2008, Chairman & Chief Executive Officer Atsushi Maki, set a 2 year capital raising goal of $30,000,000 to increase the Company's potential by entering into the NASDAQ global market. The Company's main objective has not changed for the coming fiscal year ending December 31, 2010.

Aside from capital raising efforts, the company continues to support Amanasu Maritech Corporation, in development and required regulatory approval for Commercial Cargo Ship Ballast Water Purification System. The Company and Amanasu Maritech Corporation are currently working through the approval process of this type of product with the Japanese regulatory bodies. Also required documentation, and translations are being prepared for additional approval by the main global governing body for marine technologies, IMO the International Marine Organization. The Company also continues to look for partners and interested parties to further develop existing business' and technolgies acquired by Amanasu Maritech Corporation, the Company's child company.

The Company's principal offices were relocated on April 1, 2010 from 115 East 57th Street 11th Floor New York, NY 10022, to 445 Park Avenue Center 10th floor New York, NY 10022 Telephone: 212-836-4727. The Tokyo branch has relocated from 1-3-38 Roppongi, Minatoku, Tokyo, 106-0032, Japan to 1-7-10 Motoakasaka Building 9th Floor Motoakasaka Minato-Ku Tokyo Telephone: 03-5413-7322.

As of April 27th, 2009 Amanasu Maritech Corporation (formerly Amanasu Holdings Corporation) transferred its shares of Amanasu Water Corporation to its sister Company Amanasu Techno Holdings Corporation. Amanasu Techno Holdings plans to utilize the Amanasu Water Corporation's existing resources to enter into the Health, and Medical Devices industry. In exchange Amanasu Holdings Corporation received 200,000 shares of Amanasu Techno Holdings.

The Company is concentrating its efforts into Amanasu Maritech Corporation, and as a result will not put further resources into Amanasu Maritech Corporation's child companies Amanasu Echo Frontier, Amanasu Energy, Petstyle, Amanasu Project Support, and BJSS during the fisical year ending December 31, 2010.

1


History

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


Item 1A. Risk Factors

Ability To Develop Commercial Product

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

Rapid Technological Changes

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

Lack of Indications Of Product Acceptability

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

Management

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

Control Exercised By Management

As of March 15, 2006, the existing officers and directors, and aff iliates 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.

3


Competition

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

Protection Of Intellectual Property

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

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

Indemnification of Officers and Directors for Securities Liabilities

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

Penny Stock Regulation

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

4


Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Company's executive offices are located at 445 Park Avenue Center 10th Floor New York, NY 10022 and Vancouver, British Columbia. The total premises 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 1-7-10 Motoakasaka Building 9th Floor Motoakasaka Minato-Ku Tokyo Japan.

Item 3. Legal Proceedings

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

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.

Quarter Ended Mar. 31 Jun. 30 Sep. 30 Dec. 31 Year
Fiscal Year 2009
Common stock price per share:
High $ 0.20 $ 0.20 $ 0.19 $ 0.19 $ 0.20
Low $ 0.20 $ 0.10 $ 0.18 $ 0.10 $ 0.10
Fiscal Year 2008
Common stock price per share
High $ 0.34 $ 0.35 $ 0.30 $ 0.30 $ 0.35
Low $ 0.25 $ 0.25 $ 0.25 $ 0.20 $ 0.20

5


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-

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.

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. Selected Financial Data

Not Applicable.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Plan Of Operations

Amanasu Environment Corporation

The Company has 2 main objective's during the fiscal year ending December 31, 2010. The Company will continue in its goal to meet the capital objective of $30,000,000 by the end of 2010. Currently the company is exploring various potential investment partners in Japan, as well as China. The Company cannot predict whether it will be successful with its objective.

6


Secondly the company will support Amanasu Maritech Corporation's efforts on entering into marine technologies. The Company will assist an approximately 24 month design, and approval process for the product from at least 2 regulatory bodies: the Japanese Government, and the IMO (International Marine Organization). This approval process requires capital for additional product testing, documentation, and documentation translations. The Company believes that Amanasu Maritech Corporation's most significant hurdle will be in capital raising. The Company has already initiated documentation and application processes, and is now looking for capital to fund the project. The Company cannot predict whether it will be successful with its capital raising efforts.

Results of Operations

Total Current Assets for the fiscal year ended December 31, 2009 was $546,567 compared to $703,583 for the same period of 2008. The decrease is due primarily to transfers of funds from Certificate of Deposits to Expense Accounts and use of those funds for operational expenses.

Total Current Liabilities for the fiscal year ended December 31, 2009 was $49,122 compared to $85,425 for the same period of 2008. The decrease is due primarily to transfers of funds from Certificate of Deposits to Expense Accounts and use of those funds for operational expenses.

Sales for the fiscal year ended December 31, 2009 was $ 0 compared to $225,697 for the same period of 2008. The decrease is due primarily to the absense of Amanasu Water Corporation.

Gross Profit for the fiscal year ended December 31, 2009 was $ 0 compared to $33,931 for the same period of 2008. The decrease is due primarily to the absense of Amanasu Water Corporation.

Cost of Goods Sold for the fiscal year ended December 31, 2009 was $ 0 compared to $191,766 for the same period of 2008. The decrease is due primarily to the absense of Amanasu Water Corporation.

Expense for the fiscal year ended December 31, 2009 was $ (290,510) compared to $(675,755) for the same period of 2008. The decrease is due primarily to the absense of Amanasu Water Corporation.

Impairment of fixed assets for the fiscal year ended December 31, 2009 was $ - compared to $(66,285) for the same period of 2008. The decrease is due primarily to the absense of Amanasu Water Corporation.

Impairment of investments for the fiscal year ended December 31, 2009 was $ 0 compared to $(79,703) for the same period of 2008. The decrease is due primarily to the absense of Amanasu Water Corporation.

Liquidity and Capital Resources

Other than the provision of alternating business planning costs discussed above, the Company's cash requirements for the next 12 months are estimated to be $165,000. This amount is comprised of the following estimate expenditures; $100,000 in annual salaries for office personnel, office expenses and travel, $30,000 for rent, $20,000 for professional fees, and $15,000 for miscellaneous expenses. 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 shares to gain capital for operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

7


Item 8. Financial Statements and Supplementary Data

AMANASU ENVIRONMENT CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009

Report of Independent Registered Public Accounting Firm

Board of Directors
Amanasu Environment Corporation

We have audited the accompanying consolidated balance sheets of Amanasu Environment Corporation and Subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted the audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we 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. We believe that our audit provides a reasonable basis for our opinion.

In our 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, 2009 and 2008 and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008 in conformity with U.S. generally accepted accounting principles.

/s/ Robert G. Jeffrey
ROBERT G. JEFFREY, Certified Public Accountants
March 31, 2010
Wayne, New Jersey

8


AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2008

2009
2008
ASSETS
 
 
 
Current Assets:
 
 
 
Cash
$ 8,467
 
$ 7,583
Certificates of deposit
536,000
 
696,000
Prepaid expense 2,100 -
Total current assets
546,567
 
703,583
 
 
 
 
Fixed Assets:
 
 
 
Machinery and equipment
25,859
 
25,859
Less, accumulated depreciation
21,560
 
19,785
Net fixed assets
4,299
 
6,074
 
 
 
 
Other Assets:
 
 
 
Investments
-
 
92,604
Other advance
50,000
 
50,000
Due from affiliate
37,944
 
38,724
Total other assets
87,944
 
181,328
 
 
 
 
Total Assets
$ 638,810
 
$ 890,985
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$ 4,843
 
$ -
Accrued expenses
31,206
 
52,537
Payroll and other taxes payable
10,332
 
8,547
Shareholder advance
867
 
-
Loan from affiliate
1,193
 
24,341
Deposits
681
 
-
Total current liabilities
49,122
 
85,425
 
 
 
 
 
 
 
 
Stockholders' Equity: Common stock: authorized 100,000,000 shares of .001 par value; 44,001,816 issued and outstanding
44,001
 
44,001
Additional paid in capital
4,707,483
 
4,634,223
Accumulated deficit
(4,228,816)
 
(3,957,283)
Other comprehensive income
75,507
 
84,250
Total Amanasu Environment Corporation Stockholders' Equity
598,175 
 
805,191 
Non controlling interest
(8,487)
 
369
Total Equity
 589,688
 
805,560 
Total Liabilities and Stockholders' Equity
$ 638,810
 
$ 890,985

The accompanying notes are an integral part of these financial statements.

9


AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
ACCUMULATED DURING DEVELOPMENT STAGE
For the Years Ended December 31, 2009 and 2008

2009
 
2008
Sales
$ -
 
$ 225,697
Cost of Goods Sold
-
 
191,766
 
 
 
Gross Profit
-
 
33,931
 
 
 
Expenses
(290,510
 
(675,755)
Impairment of fixed assets
-
 
(66,285)
Impairment of investments
-
 
(79,703)
Operating loss
(290,510)
 
(787,812)
 
 
 
Other Income (Expense):
 
 
 
Interest income
10,120
 
28,682
Profit on sale of subsidy
-
 
99,509
Miscellaneous revenue
1
 
4,502
Interest expense
-
 
(2,371)
Net other income
10,121
 
130,322
 
 
 
Net loss, before minority interest
(280,389)
 
(657,490)
Minority interest in loss
8,856
 
28,874
Net loss
(271,533)
 
(628,616)
 
 
 
Other Comprehensive Income
 
 
 
Gain on foreign exchange conversion
20,957
 
30,824
Total comprehensive loss
$(250,576)
 
$(597,792)
 
 
 
Net loss per share basic diluted
$.01
 
$(.01)
 
 
 
Average number of shares outstanding
44,001,816
 
44,001,816

The accompanying notes are an integral part of these financial statements.

10


AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2009 and 2008

Additional
Other
Common Stock Paid In Retained Comprehensive
Shares Amount Capital Total Income Total
Balance, December 31, 2007 44,000,816 $44,001 $4,634,223 $(3,298,967) $53,427 $1,432,684
Net loss for period - - - (628,616) 30,823 (597,792)
Transfer upon sale of subsidy - - - - (29,701) (29,701)
 
 
 
 
 
 
Balance, December 31, 2008 44,000,816 $44,001 $4,634,223 $(3,927,583) $84,250 $805,191
Net loss for period
 
 
 
(271,533) 20,957 (780,389)
Other comprehensive income (loss)
 
 
 
    25,957
Transfer upon sale of subsidiary
 
 
73,260
 
(29,700) 
93,560
 
 
 
 
 
 
Balance, December 31, 2009 44,000,816 $44,001 $4,707,483 $(4,228,116) $75,507 $589,688

The accompanying notes are an integral part of these financial statements.

11


AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2009 and 2008

Year 2009 Year 2008
CASH FLOWS FROM OPERATIONS
$(271,533)
 
$(628,616)
Net loss
 
 
 
Adjustments to reconcile net loss to net cash
 
 
 
consumed by operating activities:
 
 
 
Charges and credits not involving use of cash:
 
 
 
Depreciation and amortization
1,775
 
39,138
Bad Debt Expense
86,031 
 
-
Write down of machinery
 
 
66,285
Write offs of bad debts
 
 
85,785
Equity in losses of investee companies
 
 
211,594
Minority interests in losses
 
 
-
Profit on sale of subsidiary
(8,856) 
 
(28,874)
 
 
(99,509)
Change in current assets and liabilities:
 
 
 
Decrease (increase) in notes and accounts receivable
-
76,672
Decrease in prepaid expenses
5,568
69,115
Decrease in raw materials
-
566
Increase accounts payable
21,242
Increase in other payables
4,772
-
Increase (decrease) in payroll and other taxes payable
3,957
(17,562)
Increase (decrease) in accrued expenses
16,469
(84,910)
Increase in deposits
671
-
Net Cash Consumed By Operating Activities
(161,146) 
 
(289,074)
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Redemptions of certificates of deposit
160,000 
 
75,000
Cash received on sale of subsidiary
 
 
148,898
 
 
 
Net Cash Provided By Investing Activities
160,000 
 
233,898
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Loan from shareholder
855 
 
-
Advances from affiliate
1,175 
 
23,642
 
 
 
Net Cash Provided By Financing Activities
2,030 
 
26,642
 
 
 
Exchange Rate Effect on Cash
 
30,824
Net Change in Cash Balances
884
 
(10,710)
Balance, beginning of period
7,583
 
18,293
 
 
 
Balance, end of period
$8,467
 
$7,583

The accompanying notes are an integral part of these

12


AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009

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 were involved in a variety of businesses. 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 Corporation, a Japanese electronics manufacturer, invested $426,014 for a 9% interest in Holdings. Also on September 21, 2006, Holdings formed another subsidiary, named Amanasu Water Corporation (Water). Water's plan of operation was to market a new type of water called "Hydrogen-ion water". Hydrogen-ion water is believed to have effective anti-oxidant properties.

Investments in the five companies mentioned above have either been repaid, written off by the absorption of accumulated losses, or written off because of abandonment.

On July 1, 2008, the Company sold its equity interest in Shinwa to the president of Shinwa for cash. On the same day, Holdings also sold its equity interest in Shinwa to the president of Shinwa for a cash payment of $56,655 and the right to collect a $37,780 debt that was owed to Shinwa by a corporation controlled by the Company president. The Company realized a profit on these transactions of $99,509.

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

13


1. ORGANIZATION AND BUSINESS (CONT'D) Business (CONT'D)

Company made a $143,187 investment in the new company. In addition to its equity interest in the new company, the Company was to receive patent royalties on sales of the Swing Melter. During 2006, 2007, and 2008, the values of the investment and the demonstration model were reviewed and in each case impairment was found to have occurred, and write downs were made. The remaining balances of these investments were written off in 2008.

On April 27, 2009, Holdings sold 100% of the capital stock of Water to a company which is controlled by the principal Company shareholder, who is also chairman of the Board of Directors of the Company. Consideration for this sale was 200,000 shares of the common stock of the buyer (Amanasu Techno Holdings Corporation), which had a fair market value at the time of the sale of $191,100. No profit or loss was recognized on this sale as it was accounted for under pronouncements of the Financial Accounting Standards Board (FASB) as a sale of an entity under common control.

Basis of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries; the operating results of Shinwa and Water are included up to the date of their respective sales. All significant intercompany balances and transactions have been eliminated in consolidation.

The equity interest in each of the five investee companies mentioned above was not more than 50% and the companies were not consolidated in these financial statements; they were accounted for by the equity method of accounting.

14


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash

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

Concentrations of Credit Risk

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

Fixed Assets

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

Income Taxes

Deferred income taxes are recorded to reflect the tax consequences or benefits to future years of any temporary differences between the tax bases and the book values of assets and liabilities, and of net operating loss carryforwards.

Recognition Of Revenue

Revenue was 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.

15


AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009

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), which is the functional currency. They are translated into US dollars as follows:

1. Assets and liabilities at the rate of exchange in effect at the balance sheet date;
2. Equity accounts at the exchange rates prevailing at the time of the transactions that established the equity accounts; and
3. Revenues and expenses, at the average rates of exchange for each 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. Principal among these has been unrealized gains and losses from exchange rate fluxuation.

Advertising Costs

The Company will expense advertising costs when an advertisement occurs. There were no advertising costs incurred during the periods presented in these financial statements.

Segment Reporting

Management treats 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 and cash equivalents, approximate their fair values at December 31, 2009.

Net Income (Loss) Per Share

The Company computes net income (loss) per common share in accordance with pronouncements of the FASB and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under provisions of these pronouncements, basic and diluted net income (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 will have a significant effect on the Company's results of operations, financial position or cash flows.

16


AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009

3. RELATED PARTY TRANSACTIONS

A company controlled by the Company president (Affiliate) made advances to Water that totaled $17,702 during 2008. The same controlled company made advances to Holdings during 2009, which totaled $1,193.

Part of the proceeds of the sale of Shinwa (see Note 1) was the right to collect a $44,256 advance that had been made to Affiliate by Shinwa. This amount was partly offset by advances previously made by the Company to Affiliate. At December 31, 2008, Affiliate was indebted to the Company for this advance in the amount of $38,724. This advance is due on demand and does not bear interest.

Affiliate also made advances to Water of $6,638 during 2007 and $17,702 during 2008. Thus, $24,340 was owed to Affiliate by Water at December 31, 2008. These advances are due on demand and do not bear interest.

Similar advances of $6,638 had been made to Water prior to 2008, bringing the total due to Affiliate at December 31, 2008 to $24,341. These advances remained obligations of Water on the date of its sale of Water (Note 1).

At December 31, 2008, Water was indebted to the Company president and one of its directors for unpaid salaries that totaled $45,762. These unpaid salaries remained obligations of Water on the date of its sale.

The Company shares office space in Vancouver, New York, and Tokyo with a company that is controlled by the Company president. This arrangement is on a month to month basis. Until 2006, the two companies shared the cost of operating these offices. There has been no cost sharing since 2006, as the other company is largely inactive.

The president of Shinwa and two of his sons received advances from Shinwa totaling $44,504. These advances did not bear interest and were being repaid by monthly installments of $1,259. These advances were eliminated with the sales of the equity interests of Shinwa.

4. 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 total of these NOL's at December 31, 2009 was $1,275,878. The potential benefit of these NOL's has been recognized on the books of the Company, but it has been offset by a valuation allowance.

Under provisions of the pronouncements of the FASB, 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 decreased during 2009 by $3,722, result of adding the potential benefit of 2009 losses, eliminating the losses of Water, and converting Japanese currency amounts at the December 31, 2009 conversion rate rather than at the December 31, 2008 rate.

Deferred Tax Assets

$

382,762

Valuation Allowance

382,762

Balance Recognized

$

-

17


5. INCOME TAXES (CONT'D)

If not used, these carryforwards will expire as follows:

  • 2012: $280,975
  • 2013: 421,463
  • 2014: 223,367
  • 2015: 250,922
  • 2016: 99,151

5. RENTALS UNDER OPERATING LEASES

The Company conducts its operations from leased office facilities in Vancouver, British Columbia, New York City, and Tokyo, under month to month arrangements. During 2009 and 2008, the Company incurred rent expense of $34,944 and $38,731, respectively.

6. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

Cash payments were made for interest during 2008 in the amount of $2,371. There was no interest paid during 2009. Cash paid for income taxes was $1,063 during 2009 and $1,522 during 2008. There was no non-cash financing or investing activity during these years.

7. SUBSEQUENT EVENTS

During January and February 2010, the Company relocated its Tokyo office. Costs totaling $36,760 were incurred in making the move. These included a six month advance payment of rent, a rent deposit, fees, and the cost of the physical move.

18


(Blank Page)

19


Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934 ("Exchange Act"). For purposes of the foregoing, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission ("SEC"). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officer, or persons performing similar functions, and is appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

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

Management's Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15 under the Exchange Act, as amended. As of December 31, 2009, under the supervision and with the participation of management, including the Company's Chief Executive Officer and Chief Financial Officer, an evaluation was conducted of the effectiveness of the Company's internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management of the Company, including the chief executive officer and the chief financial officer, concluded that the Company's internal control over financial reporting was effective as of December 31, 2009.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This Annual Report does not include an attestation report of the Company's registered public accounting firm regarding internal controls over financial reporting. Management's Report was not subject to attestation by the Company's public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only Management's Report in this Annual Report.

Item 9A (T). Controls and Procedures

Not Applicable.

Item 9B. Other Information

Not Applicable.

20


Part III

Item 10. Directors, Executive Officers and Corporate Governance

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

Directors / Officers
Name Age Since Position
Atsushi Maki 62 1999 Chairman & Chief Executive Officert
Lina Lei 49 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.

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.

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.

Item 11. Executive Compensation

The compensation for all directors and officers individually for services rendered to the Company for the fiscal years ended December 31,2009, 2008, 2007, and 2006 respectively:

Compensation Summary
  Annual Compensation
Name and Principle Position Year Salary ($) Bonus ($) Other ($)
Atsushi Maki (Chairman, President) 2009 -0- -0- -0-
  2008 -0- -0- -0-
  2007 -0- -0- -0-
  2006 -0- -0- -0-
         
Lina Lei (Secretary, Treasurer) 2009 -0- -0- -0-
  2008 -0- -0- -0-
  2007 -0- -0- -0-
  2006 -0- -0- 20,000

21


(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.

Item 12. Security Ownership of Certain benficial Owners and Management and Related Stockholder Matters

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 445 Park Avenue Center 10th Floor New York, NY 10022, the address of the Company.

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

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

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

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

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

22


Item 13. Certain Relationships and Related Transactions, and Director Independence

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

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

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

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

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

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

23


Item 14. Principal Accounting Fees and Services

  1. Audit Fees during 2009 and 2008 were $25,000.00 and $25,000.00 respectively.
  2. Audit Related Fees during 2009 and 2008 were $6,930.00 and $7,020.00 respectively.
  3. Caption Tax Fees during 2009 and 2008 were $690.00 and $675.00 respectively.
  4. All Other Fees during 2009 and 2008 were $-0- and $-0- respectively.
  5. N/A
    (i) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X. (ii) Disclose the percentage of services described in each of Items 9(e)(2) through 9(e)(4) of Schedule 14A that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
  6. Not greater than 50% for 2009 and 2008.
    If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

24


Part IV

Item 15. Exhibits Financial Statement Schedules

  1. Financial Statements and Schedules
    The financial statements are set forth under Item 8 of this Annual Report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.
  2. Exhibit Listing
    • 3(i)(a) Articles of Incorporation of the Company (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
      3(i)(b) Certificate of Amendment to Articles of Incorporation(Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
      3(i)(c) Certificate of Amendment to Articles of Incorporation (Incorporated by reference to the Company's Form 10-KSB filed on March 31, 2003).
      3(ii)(a) Amended and Restated By - Laws of the Company (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
      10(i) Agreement between Family Corporation and the Company dated December 15, 1999. (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
      10(ii) License agreement between the Company and Masaichi Kikuchi dated June 8, 2000. (Incorporated by reference to the Company's Form 10-SB filed on June 20,2001).
      10(iii) Technical Consulting Agreement the Company and Masaichi Kikuchi dated June 9, 2001. (Incorporated by reference to the Company's Form 10-SB filed on June 20, 2001).
      10(iv) Amendment No. 1 to Licensing Agreement dated July 30, 2001, however, effective June 8, 2000 by and between the Company and Masaichi Kikuchi. (Incorporated by reference to the Company's Form 10-SB/A filed on August 9, 2001).
      10(v) License Agreement made as of September 30, 2002 by and between the Company and Sanyo Kogyo Kabushiki Gaisha and Ever Green Planet Corporation. (Incorporated by reference to the Company's Form 10-KSB filed on March 31, 2003).
      10(vi) Addendum to License Agreement made as of September 30, 2002 by and between the Company and Sanyo Kogyo Kabushiki Gaisha and Ever Green Planet Corporation. (Incorporated by reference to the Company's Form 10-KSB filed on March 31, 2003).
      10(vii) Stock Purchase Agreement dated May 14, 2003 by and between the Company and Jipangu, Inc.
      10(viii) Desalination License Agreement made as of May 30, 2003 by and between the Company Etsuro Sakagami. (Incorporated by reference to the Company's Form 10-QSB filed on August 13, 2003).
      31 Certification under Section 906 of the Sarbanes-Oxley Act.
      32 Certification under Section 906 of the Sarbanes-Oxley Act.

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 15, 2010
Chairman & Chief Executive Officer
Chief Financial 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.

/s/ Atsushi Maki

April 15, 2010
Director

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