Amanasu Environment (AMSU) 10QSB 2007 Q1 Quarterly report (small business)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-QSB

T	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the period ended March 31, 2007
*	TRANSITION REPORT UNDER 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 CORPORATION
(Exact name of small business issuer as specified in its charter)

Nevada	98-0347883
(State or other jurisdiction of organization)	(IRS Employer Identification No.)

115 East 57th Street, 11th Floor New York, NY 10022
(Address of principal executive offices)

212-939-7278
(Issuer's telephone number)

(Former name, former address and former fiscal year, if changed since last report)

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

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

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.  Yes   O   No  O     N/A   X  

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 44,000,816 as of March 31, 2007. Transitional Small Business Disclosure Format:   Yes  O      No  X  

AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES

QUARTERLY REPORT ON FORM 10QSB

FOR THE THREE MONTHS ENDED MARCH 31, 2007

TABLE OF CONTENTS

Item 1:     FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of March 31, 2007 (unaudited) and December 31, 2006 (audited)	4
Consolidated Statement of Operations three months ended March 31, 2007 and 2006 (unaudited)	5
Consolidated Statement of Cash Flows (unaudited)	6
Consolidated Notes to Financial Statements (unaudited)	7
Item 2:     MANAGEMENT’S DISCUSSION AND OR PLAN OF OPERAITON	8
Item 3:     EFFECTIVENESS OF THE REGISTRANT’S DICLOSURE CONTROLS AND PROCEDURES	12
PART2-OTHER INFORMATION
Item 1:     LEGAL PROCEEDINGS	13
Item 2:     CHANGES IN SECURITEIS	13
Item 3:     DEFAULTS UPON SENIOR SECURITES	13
Item 4:     SUBMISSION OF MATTERS TO VOTE OF SECURITEY HODERS	13
Item 5:     OTHER INFORMATION	13
Item 6:     EXHIBITS AND REPORTS ON FORM 8-K	13
SIGNATURES	14

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PART1-FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GENERAL

The Company's unaudited financial statements for the three months ended March 31, 2007 are included with this Form 10-QSB. The unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the nine months ended March 31, 2007 are not necessarily indicative of the results that can be expected for the fiscal year ending December 31, 2007.

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AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS
Current Assets:	March 31, 2007 (Unaudited)				December 31, 2006 (Audited)
Cash	$	268,315		$	523,318
Certificate Of Deposit		1,150,000			1,000,000
Accounts and notes receivables		32,588			78,434
Work in progress		3,407			19,186
Advance to vendor		94,000			94,000
Accured interest receivable		3,070			-
Advances to employees	$	110,503		$	24,179
Short-term Loan Receivables		196,597			-
Total current assets		1,854,480			1,739,117
Fixed Assets:
Machinery and equipment		485,846			485,846
Less, accumulated depreciation		90,216			71,462
Net fixed assets		395,630			414,384
Other Assets:
Advances to affiliates		1,885			101,885
Miscellaneous Receivables		4,027			-
Investments		523,643			747,370
Security Deposits		147,833			143,595
Advance to shareholders		-			42,420
Licensing agreements		10,000			10,000
Long-term Loan Receivables		51,300			-
Total other assets		738,688			1,045,270
Total Assets	$	2,988,798		$	3,198,771
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short Term Bank Loan	$	-		$	21,210
Accounts Payable		21,537			19,425
Accrued expenses		40,245			3,578
Payroll and other taxes payable		72,041			16,420
Employee loans		-			14,640
Shareholder advance		957			100
Total current liabilities		134,780			75,373
Stockholders' Equity:
Common stock: authorized 100,000,000 shares
of $.001 par value; 44,000,816 issued and
outstanding		44,001			44,001
Additional paid in capital		4,257,039			4,257,039
Minority Interest		426,014			-
Accumulated deficit		(1,311,961	)		(610,155	)
Deficit accumulated during development stage		(572,482	)		(572,482	)
Other comprehensive income		11,407			4,995
Total stockholders' equity		2,854,018			3,123,398
Total Liabilities and Stockholders' Equity	$	2,988,798		$	3,198,771

These statements should be read in conjunction with the year-end financial statements.

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AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT

(Unaudited)

		For The Three Month Periods Ended
	March 31 2007			March 31 2006
Sales	$	70,331		$	-
Cost of Goods sold		(70,457)			-
Gross Profit	$	(126)			-
Expenses		(288,556)			89,402
Operating Loss		(288,682	)		(89,402)
Other Income (expense)
Interest Income		12,434			18,071
Equity in losses of investee companies		(45,666)			-
Other income		3,764			-
Interest expense		-			-
Net Loss	$	(318,150	)	$	(71,331)
Other Comprehensive Income:
Gain on foreign currency conversion		9,819			-
Total Comprehensive Income	$	(308,331)		$	(71,331)
Loss Per Share - Basic and Diluted	$	(0.007)		$	-
Weighted average number of shares outstanding		44,000,816			44,000,816

 These statements should be read in conjunction with the year-end financial statements.

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AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		For The Three Month Periods Ended
	March 31, 2007			March 31, 2006
CASH FLOWS FROM OPERATIONS:
Net loss	$	(701,806	)	$	(226,405)
Charges not requiring the outlay of cash:
Depreciation and amortization		18,754			16,617
Decrease of equity in investee companies		245,230			-
Changes in current assets and liabilities:
Decrease in notes and accounts receivable		45,846			-
Decrease in work in process		15,779			-
Increases in accrued expenses		36,667			(1,910)
Increase in accrued interest receivable		(3,070)			-
Increase in advances to employees		(100,964)			-
Increase in accounts payable		2,112			-
Decrease in advance to shareholder		43,277			-
Increase in payroll and other taxes payable		55,621			-
Increase in miscellaneous receivables		(4,027)			(94,000)
Increase in Loan Receivables		(243,879)			-
Net Cash Consumed By
Operating Activities		(590,478	)		(305,698)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Certificates of Deposits		(150,000)			(2,000,000)
Investments in consolidated subsidiaries		178,497			(390,000)
Increase in security deposits		(4,238)			-
Advance to affiliate		(100,000)			-
Purchase of operation equipment		-			(400,000)
Rent deposits		-			(138,595)
Net Cash Provided (Consumed)
By Investing Activities		(75,741)			(2,928,595)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Subsidiary stock		-			3,500,000
Capital Contributions		426,014			-
Return of deposit for capital stock		-			(99,000)
Repayment of short term loan		(21,210)			-
Net Cash Provided By
Financing Activities		404,804			3,400,100
Exchange Rate Effect on cash		6,412			-
Net Change in Cash Balances		(255,003)			165,807
Cash balance, beginning of period		523,318			9,459
Cash balance, end of period	$	268,315		$	175,266

These statements should be read in conjunction with the year-end financial statements.

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AMANASU ENVIRONMENT CORPORATION and SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

March 31, 2007

(Unaudited)

1. BASIS OF PRESENTATION

The unaudited interim financial statements of Amanasu Environment Corporation and Subsidiaries ("the Company") as of March 31, 2007 and for the three and March 31, 2005, have been prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the results for such periods. The results of operations for the three months ended March 31, 2006 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2007.

Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2005.

2.            MINORITY INTEREST

On September 21, 2006, Soae, a Japanese electronics manufacturer, invested $426,014 into Amanasu Holdings in exchange for 4,000 shares of Amanasu Holdings.

3.            NEW SUBSIDIARY

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 believed to have effective and efficient anti-oxidant properties that acts as an aniti-oxidant deep within the cell.

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ITEM 2: MANAGEMENT DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement

SAFE HARBOR

This Form 10QSB contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may," "future," "plan" or "planned," "will" or "should," "expected," "anticipates," "draft," "eventually" or "projected." You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in a companies' annual report on Form 10-KSB and other filings made by such company with the United States Securities and Exchange Commission. You should consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such statements.

The following discussion should be read in conjunction with the Company's Financial Statements, including the Notes thereto, appearing elsewhere in this Quarterly Report and in the Annual Report for the year ended December 31, 2007.

COMPANY OVERVIEW

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

As of August 4th, 2005, Kogure's six proprietary rights (See "Patents" below) to the license of the technologies and parts in connection with constructing the rotary kiln and its title w ere transferred to Amanasu Environment Corporation, and the amount of $290,000 that the Company previously funded to Kogure for marketing and promotion purposes replaced in as transfer fee. As a result, the Company possesses the exclusive worldwide right to the product, and can receive royalties from the sales of the rotary kiln by other companies including MINMETAL. The Company business is in developing and marketing technologies in various environmental industries such as waste management, water purification , heat and energy production, and will continue to expand into other environmental technology markets. Initially we began by acquiring the exclusive, worldwide license rights to a high temperature furnace, a hot water boiler, and ring-tube desalinization methodology. At present, the Company is not engaged in the commercial sale of any of these licensed technologies. Our operations to date have been limited to acquiring different 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. The Company has conducted various internal tests on these units to determine their commercial viability. With the 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 we can capitalize on the existing infrastructure of such other companies: product design and engineering, marketing and sales, and warranty and post-warranty service and repair to name a few. The Company believes that the marketing efforts to sell any of our products will be limited until such time as we 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.

The Company's current business plan is the result of recent operational results during the fiscal year of 2007 and may change due to the amount of risk accompanied by the nature of its business. The Company's business is run through four 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.

Amanasu 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 effect 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.

Amanasu Energy Development. Amanasu Energy Development, formerly Felice, was renamed on September 21st 2006 as a subsidiary of Amanasu Holdings. As the name suggests, Amanasu 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, Amanasu 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. 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.

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.

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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.

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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 2007, 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.

Amanasu Echo Frontier

Rotary Kiln

Amanasu 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

Amanasu 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.

Amanasu Energy Development

Sanyo HIT (Heterojunction with Intrinsic Thin Layer) Photovoltaic Panel

Amanasu 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 Shinwa

Kijimuna Water Purifier

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

Amanasu Water

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

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

Hydrogen ion water is said to have anti-oxidant properties that rival those of which have been scientifically established anti-oxidants. Vitamin C, Vitamin E, and Co-Enzyme Q10 are to name a few. Hydrogen-ion water, being water, has the ability to pass straight into the cell and into the mitochondria (the power plant of the cell). There it prevents disease promoting oxidation reactions , while leaving the 2% of oxidation reactions needed in daily life. Vitamin C and other minerals are not able to penetrate the cell wall. Vitamin E, and Co-enzyme Q10, are able to enter the cell wall, however, remain unable to enter the mitochondria.

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.

PLAN OF OPERATION

Amanasu Environment. The Company's main management focus for the fiscal year ending December 31, 2007 will be the activities of Amanasu Water and Amanasu Energy. The Company will utilise it's business network connections to support sales and marketing activities of both Amanasu Water and Amanasu Energy in Japan. The Company will also utilise it's business network in order to establish sales and marketing channels in the United States and South East Asia. For Amanasu Water in Japan, the Company has provided connections to Pachinko, hotel, drug store, beauty salon, and restaurant chains. On the North American front, the Company is currently gathering information on material availability, and also researching various sales channels: hospital chains, restaurant chains, hotels, and any companies related to the health and beauty industry are being compiled. For Amanasu Energy, the Company is focusing on establishing marketing channels for Amanasu Energy to support it's 100 unit/month sale goal. On the North American front, with increased interest in entering the solar market in Japan, the Company is researching and compiling information on various solar technologies that could compete in the Japanese market.

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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 Amanasu Energy Development. Amanasu Energy Development will be involved in the sale and marketing Sanyo HIT solar panels in Japan. Newly formed Amanasu Water will be involved in sales of Amanasu Hydrogen-ion water, a drinking water beginning its sales in Japan on November 2006 with future plans to expand into North America, and South East Asia. The remaining subsidiary companies BJSS, Petstyle, and Japan Amanasu Project Support were not able to be accommodated within the newly organized plans, thus will be open for sale to any organization that have interest in its respective industry.

Amanasu Echo Frontier.Amanasu Holdings and the former employees of Kogure jointly established Amanasu Echo Frontier Corporation ("Amanasu Echo Frontier"), with a capital of $240,000 (28,000,000 Yen) of which Amanasu Holdings invested $103,000 (12,000,000 Yen) in December, 2005, with 10 former technicians of Kogure. Amanasu 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. Amanasu Echo Frontier's business plans for the remaining fiscal year ending December 31, 2007 are spilt into 3 areas: China, Japan, Development of Industrial Waste Treatment Facilities. In terms of selling new units, Amanasu Eco Frontier will focus on the Chinese market: 2 units in 2007, 3 units the following year, and 5 units per year after that. Marketing in China has been entrusted to Mr. On, Director and Shareholder of Amanasu Eco Frontier, who is key in Amanasu Eco Frontier's plans.

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 ($85,000 (10,000,000 Yen) per unit) for pools at sports clubs, which will be produced and distributed in Japan for the next 12 months

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 target sales for 2007 will be 300,000,000 Yen.

Amanasu 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 and Felice decided to change Felice's business entirely. Felice will direct its focus on the solar panels industry under the new name Amanasu Energy. Amanasu Energy 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. Amanasu Energy's 2 year sales target is 100 units/month and is planning to establish 6 offices in the Tokyo area. The first Amanasu Energy office was established in Saitama-Ken Saitama-shi Omiya-ku Sakuragi-cho 4-80-1 AS Building 3F.

Amanasu Water. As of September 21, 2006 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. Amanasu Water is currently negotiating distribution contracts with Maruhan Corp., Meihou Group, Yuko Corp., Yume Corporation, Okuwa Corp, Kaguchi Yakuhin, Donki Houte and others. A distributing contract with 7-11 on the national level is also being negotiated.

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, Pestyle 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 2^nd, 2005); 2. Rotary kiln-Taiwan (Patent number 131102, as of August 21^st, 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)

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this Quarterly Report on Form 10-QSB are forward looking. We use words such as "anticipate", "believe", "expect", "intend", "estimate", (and the negative of any of these terms), "future" and similar expressions to help identify forward-looking statements. These forward-looking statements are subject to business and economic risk and reflect management's current expectations, and involve subjects that are inherently uncertain and difficult to predict. Our actual results could differ materially. We will not necessarily update information if any forward-looking statement later turns out to be inaccurate.

Three months ended March 31, 2007

The Company's sales for the three months ended March 31, 2007 were $70,331 up 100% compared to the three months ended March 31, 2005. The increase in sales were due principally to the absence of Amanasu Shinwa. The acquisition of Amanasu Shinwa, took place during the fourth fiscal quarter ending December 31, 2005, which is the basis behind the large increase.

Interest income for the three months ended March 31, 2007 was $12,434 compared to $18,071 for the same period in 2005. The decrease was due to fluctuating interest rates and the withdrawal of cash for the capital investment in initiating Amanasu Holdings on December 9, 2005 in the amount of $831,000.

Other income for the three months ended March 31, 2007 was $3,764 up 100% compared to the same period in 2005. The increase was principally due to the absence Petstyle in the three months ended March 31, 2005. Amanasu Holdings received management fees from Petstyle.

Equity in losses of investee companies for the three months ended March 31, 2007 were $45,666 compared to nil for the same period in 2005. The losses were principally due to the absence of Amanasu Holdings & Subsidiaries ,which were acquired in the fourth quarter ending December 31 2007.

Gain on foreign currency conversion for the three ended March 31, 2007 was $9,819 as compared to nill for the same period in 2005. The increase was due to the absence of Amanasu Holdings & Subsidiaries, which were acquired in the fourth quarter ending December 31 2007.

Total expenses for the three months period ending March 31, 2007 was $288,556 compared to $89,402 for the same period of 2005. The increase was due principally to the presence of Amanasu Shinwa, which was acquired during the fourth fiscal quarter ending December 31, 2005.

Cost of goods sold for the three months period ending March 31, 2007 was $70,457 compared to nothing for the same period of 2005. The increase was due principally to the presence of Amanasu Shinwa, which was acquired during the fourth fiscal quarter ending December 31, 2005.

LIQUIDITY AND CAPITAL RESOURCES

In the three months ended March 31, 2007 cash used in operating activities was $590,478 compared to $305,698 for the same period in 2005. The $284,780 increase in cash used was due principally to the absence in the 2005 period of Amanasu Shinwa. The acquisition of Amanasu Shinwa, took place during the fourth fiscal quarter ending December 31, 2005, which is the basis behind the large increase. In addition, on September 21, 2006 there was cashed used in the establishment of Amanasu Water as a subsidiary of the Company under Amanasu holdings.

Total assets as of March 31, 2007 were $2,988,798 representing a decrease of $209,973 from total assets of $3,198,771 as of December 31, 2005. This decrease is comprised of the $3.5 million dollars capital raised, on March 11, 2005, offset by the 2006 losses.

Other than the provision of alternating business planning costs discussed above under Plan of operation, the Company estimates that its operating overhead, which includes general and administrative charges, will be approximately $1,120,000 for the next 12 months. This amount is comprised of the following estimated costs; $375,000 in annual salaries for office personnel and consultants, $375,000 for rent, $150,000 for professional fees and $220,000 for miscellaneous expenses. The Company does not anticipate paying salaries to any of its officers for the next 12 months. The Company believes that the amount of liquidity and capital resources will be sufficient for the operation of the Company 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 shares to gain capital for operations.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

Item 3: EFFECTIVENESS OF THE REGISTRANT’S DISCLOSURE CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Company carried out an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined by Rule 13a-15(e) 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 as of a date within 90 days of the filings date of Form 10QSB. 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 information necessary whether:

(i) this quarterly report on Form 10 QSB 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 quarterly report on Form 10 QSB, and(ii) the financial statements, and other financial information included in this quarterly report on Form 10 QSB, 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 quarterly report on Form 10 QSB.

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CHANGES IN INTERNAL CONTROLS

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, Chief Financial Officer's and Chief Accounting Officer’s evaluation that could significantly affect any internal control, including any corrective actions with regards to significant deficiencies and material weaknesses.

PART2-OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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 on 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.

Item 2. CHANGES IN SECURITEIES

None

Item 3. DEFAULTS UPON SENIOR SECURITEIS

None

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

None

Item 5. OTHER INFORMATION

None

Item 6. EXHIBITS

(a). Furnish the Exhibits required by Item 601 of Regulation S-B.

Exhibit 31 - Certification Pursuant To Section 302 Of The Sarbanes-Oxley Act Of 2002.

Exhibit 32 - Certification Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.

(b) Reports on Form 8-K.

None

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMANASU ENVIRONMENT CORPORATION

Date: May 21, 2007

/s/ Atsushi Maki

Atsushi Maki

Chief Executive Officer

Chief Financial Officer

Chief Accounting Officer

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