UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  Form 10-KSB  xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2005  o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to _____   TRANQUILITY, INC. (Exact name of registrant as specified in its charter)  Delaware0-5141352-2175900(State or other jurisdiction of incorporation)(Commission File Number)(IRS Employer Identification Number)P.O. Box 110310,
Naples, Florida 34108-0106(Address of principal executive offices)Registrants telephone number, including area code: (239) 598-2300  Securities to be registered under Section 12(b) of the Act: Title of each class N/A Securities to be registered under Section 12(g) of the Act: Common Stock (Title of Class)  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [  ] Yes [X] No  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [   ]  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  [ X ] Yes [ ] No  State issuer's revenues for its most recent fiscal year: $nil   - 1 -   State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) $0.00  State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of October 26, 2007, the Company had 5,105,740 shares outstanding.  Transitional Small Business Disclosure Format (Check one): Yes ____; No _X__          - 2 -    PART I   ITEM 1.  DESCRIPTION OF BUSINESS  BACKGROUND  The Company was incorporated under the laws of the State of Delaware on August 20, 1997. To date, the Company's only activities have been organizational ones, directed at developing its business plan and raising its initial capital. The Company has not commenced any commercial operations. The Company has no full-time employees and owns no real estate.  The Company is a development stage company, whose business plan is to seek, investigate, and, if warranted, acquire one or more properties or businesses, and to pursue other related activities intended to enhance shareholder value. The acquisition of a business opportunity may be made by purchase, merger, exchange of stock, or otherwise, and may encompass assets or a business entity, such as a corporation, joint venture, or partnership. The Company has very limited capital, and it is unlikely that the Company will be able to take advantage of more than one such business opportunity. The Company intends to seek opportunities demonstrating the potential of long-term growth as opposed to short-term earnings.  At the present time, the Company has not identified any business opportunity that it plans to pursue, nor has the Company reached any agreement or understanding with any person concerning an acquisition.  It is anticipated that the Company's officers, directors, and non-management principal shareholders named herein will contact broker-dealers and other persons with whom they are acquainted who are involved in corporate finance matters to advise them of the Company's existence and to determine if any companies or businesses they represent have a general interest in considering a merger or acquisition with a development stage company. No assurance can be given that the Company will be successful in finding or acquiring a desirable business opportunity, given the limited funds that are expected to be available for acquisitions, or that any acquisition that occurs will be on terms that are favorable to the Company or its stockholders.  The Company's search will be directed toward small and medium-sized enterprises which have a desire to become public corporations and which are able to satisfy, or anticipate in the reasonably near future being able to satisfy, the minimum asset requirements in order to qualify shares for trading on NASDAQ or on an exchange such as the American Stock Exchange. (See "Investigation and Selection of Business Opportunities").  The Company anticipates that the business opportunities presented to it will (i) either be in the process of formation, or be recently organized with limited operating history, or a history of losses attributable to under-capitalization or other factors; (ii) be experiencing financial or operating difficulties; (iii) be in need of funds to develop a new product or service or to expand into a new market; (iv) be relying upon an untested product or marketing concept; or (v) have a combination of the characteristics mentioned in (i) through (iv). The Company intends to concentrate its acquisition efforts on properties or businesses that it believes to be undervalued or that it believes may realize a substantial benefit from being publicly  - 3 -   owned. Given the above factors, investors should expect that any acquisition candidate may have little or no operating history, or a history of losses or low profitability.  The Company does not propose to restrict its search for investment opportunities to any particular geographical area or industry, and may, therefore, engage in essentially any business, to the extent of its limited resources. This includes industries such as service, finance, natural resources, manufacturing, high technology, product development, medical, communications and others. The Company's discretion in the selection of business opportunities is unrestricted, subject to the availability of such opportunities, economic conditions, and other factors.  Any entity which has an interest in being acquired by, or merging into the Company, is expected to be an entity that desires to become a public company and establish a public trading market for its securities. In connection with such a merger or acquisition, it is highly likely that an amount of stock constituting control of the Company would either be issued by the Company or be purchased from the current principal shareholders of the Company by the acquiring entity or its affiliates. If stock is purchased from the current shareholders, the transaction is very likely to be a private transaction rather than a public distribution of securities. The sale of a controlling interest by certain principal shareholders of the Company could occur at a time when the other shareholders of the Company remain subject to restrictions on the transfer of their shares.  Depending upon the nature of the transaction, the current officers and directors of the Company may resign their management positions with the Company in connection with a change in control of the Company or its acquisition of a business opportunity. In the event of such a resignation, the Company's current management would not have any control over the conduct of the Company's business following the change in control or the Company's combination with a business opportunity.  It is anticipated that business opportunities will come to the Company's attention from various sources, including its officers and directors, its other stockholders, professional advisors such as attorneys and accountants, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals. The Company has no plans, understandings, agreements, or commitments with any individual for such person to act as a finder of opportunities for the Company.  INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES  To a large extent, a decision to participate in a specific business opportunity may be made upon management's analysis of the quality of the other company's management and personnel, the anticipated acceptability of new products or marketing concepts, the merit of technological innovations, the perceived benefit the business opportunity will derive from becoming a publicly held entity, and numerous other factors which are difficult, if not impossible, to analyze through the application of any objective criteria. In many instances, it is anticipated that the historical operations of a specific business opportunity may not necessarily be indicative of the potential for the future because of the possible need to shift marketing approaches substantially, expand significantly, change product emphasis, change or substantially augment management, or make other changes.  The Company will be dependent upon  - 4 -   the owners of the business opportunity to identify any such problems which may exist and to implement, or be primarily responsible for the implementation of, required changes. Because the Company may participate in a business opportunity with a newly organized firm or with a firm which is entering a new phase of growth, the Company will incur further risks, because management in many instances will not have proven its abilities or effectiveness, the eventual market for the products or services of the business opportunity will likely not be established, and the business opportunity may not be profitable when acquired.  It is anticipated that the Company will not be able to diversify, but will essentially be limited to one such venture because of the Company's limited financing. This lack of diversification will not permit the Company to offset potential losses from one business opportunity against profits from another, and should be considered an adverse factor affecting any decision to purchase the Company's securities.  It is emphasized that management of the Company may effect transactions having a potentially adverse impact upon the Company's shareholders pursuant to the authority and discretion of the Company's management to complete acquisitions without submitting any proposal to the stockholders for their consideration.  Holders of the Company's securities should not anticipate that the Company necessarily will furnish such holders, prior to any merger or acquisition, with financial statements, or any other documentation, concerning a target company or its business. In some instances, however, the proposed participation in a business opportunity may be submitted to the stockholders for their consideration, either voluntarily by such directors to seek the stockholders' advice and consent or because state law so requires.  The analysis of business opportunities will be undertaken by or under the supervision of the Company's officers and directors, none of whom are professional business analysts. Although there are no current plans to do so, Company management might hire an outside consultant to assist in the investigation and selection of business opportunities, and might pay a finder's fee. Since Company management has no current plans to use any outside consultants or advisors to assist in the investigation and selection of business opportunities, no policies have been adopted regarding use of such consultants or advisors, the criteria to be used in selecting such consultants or advisors, the services to be provided, the term of service, or regarding the total amount of fees that may be paid. However, because of the limited resources of the Company, it is likely that any such fee the Company agrees to pay would be paid in stock and not in cash. Otherwise, the Company anticipates that it will consider, among other things, the following factors:  (1)      Potential for growth and profitability, indicated by new technology, anticipated market expansion, or new products;  (2)      The Company's perception of how any particular business opportunity will be received by the investment community and by the Company's stockholders;  - 5 -   (3)      Whether, following the business combination, the financial condition of the business opportunity would be, or would have a significant prospect in the foreseeable future of becoming sufficient to enable the securities of the Company to qualify for listing on an exchange or on a national automated securities quotation system;  (4)      Capital requirements and anticipated availability of required funds to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements, or from other sources;  (5)      The extent to which the business opportunity can be advanced;  (6)    Competitive position as compared to other companies of similar size and experience within the industry segment as well as within the industry as a whole;  (7)      Strength and diversity of existing management, or management prospects that are scheduled for recruitment;  (8)      The cost of participation by the Company as compared to the perceived tangible and intangible values and potential; and   (9)      The accessibility of required management expertise, personnel, raw materials, services, professional assistance, and other required items.  No one of the factors described above will be controlling in the selection of a business opportunity, and management will attempt to analyze all factors appropriate to each opportunity and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.  Potential investors must recognize that, because of the Company's limited capital available for investigation and management's limited experience in business analysis, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.  The Company is unable to predict when it may participate in a business opportunity. It expects, however, that the analysis of specific proposals and the selection of a business opportunity may take several months or more.  Prior to making a decision to participate in a business opportunity, the Company will generally request that it be provided with written materials regarding the business opportunity containing such items as a description of products, services and company history; management resumes; financial information; available projections, with related assumptions upon which they are based; an explanation of proprietary products and services; evidence of existing patents, trademarks, or services marks, or rights thereto; present and proposed forms of compensation to management; a description of transactions between such company and its affiliates during relevant periods; a description of present and required facilities; an analysis of risks and competitive conditions; a financial plan of operation and estimated capital   - 6 -   requirements; audited financial statements, or if they are not available, unaudited financial statements, together with reasonable assurance that audited financial statements would be able to be produced within a reasonable period of time not to exceed 60 days following completion of a merger transaction; and other information deemed relevant.  As part of the Company's investigation, the Company's executive officers and directors may meet personally with management and key personnel, may visit and inspect material facilities, obtain independent analysis or verification of certain information provided, check references of management and key personnel, and take other reasonable investigative measures, to the extent of the Company's limited financial resources and management expertise.  Company management believes that various types of potential merger or acquisition candidates might find a business combination with the Company to be attractive. These include acquisition candidates desiring to create a public market for their shares in order to enhance liquidity for current shareholders, acquisition candidates which have long-term plans for raising capital through the public sale of securities and believe that the possible prior existence of a public market for their securities would be beneficial, and acquisition candidates which plan to acquire additional assets through issuance of securities rather than for cash, and believe that the possibility of development of a public market for their securities will be of assistance in that process.  Acquisition candidates which have a need for an immediate cash infusion are not likely to find a potential business combination with the Company to be an attractive alternative.  At the present time, the Company has not identified any business opportunity that it plans to pursue, nor has the Company reached any agreement or understanding with any person concerning an acquisition.  FORM OF ACQUISITION  It is impossible to predict the manner in which the Company may participate in a business opportunity. Specific business opportunities will be reviewed as well as the respective needs and desires of the Company and the promoters of the opportunity and, upon the basis of that review and the relative negotiating strength of the Company and such promoters, the legal structure or method deemed by management to be suitable will be selected. Such structure may include, but is not limited to, leases, purchase and sale agreements, licenses, joint ventures and other contractual arrangements. The Company may act directly or indirectly through an interest in a partnership, corporation or other form of organization. Implementing such structure may require the merger, consolidation or reorganization of the Company with other corporations or forms of business organization. In addition, the present management and stockholders of the Company most likely will not have control of a majority of the voting shares of the Company following a merger or reorganization transaction. As part of such a transaction, the Company's existing directors may resign and new directors may be appointed without any vote by stockholders.   - 7 -   The Securities and Exchange Commission ("SEC") maintains the view that securities issued by a blank check company such as Tranquility cannot be resold under the exemption from registration provided by Rule 144 promulgated under the Securities Act of 1933 but must be registered under the Securities Act of 1933. In some circumstances, however, as a negotiated element of the transaction, the Company may agree to register such securities either at the time the transaction is consummated, or under certain conditions at specified times thereafter. The issuance of substantial additional securities and their potential sale into any trading market that might develop in the Company's securities may have a depressive effect upon such market.  The Company will participate in a business opportunity only after the negotiation and execution of a written agreement. Although the terms of such agreement cannot be predicted, generally such an agreement would require specific representations and warranties by all of the parties thereto, specify certain events of default, detail the terms of closing and the conditions which must be satisfied by each of the parties thereto prior to such closing, outline the manner of bearing costs if the transaction is not closed, set forth remedies upon default, and include miscellaneous other terms.  As a general matter, the Company anticipates that it, and/or its principal shareholders will enter into a letter of intent with the management, principals or owners of a prospective business opportunity prior to signing a binding agreement. Such a letter of intent will set forth the terms of the proposed acquisition but will not bind any of the parties to consummate the transaction.  Execution of a letter of intent will by no means indicate that consummation of an acquisition is probable. Neither the Company nor any of the other parties to the letter of intent will be bound to consummate the acquisition unless and until a definitive agreement concerning the acquisition as described in the preceding paragraph is executed. Even after a definitive agreement is executed, it is possible that the acquisition would not be consummated should any party elect to exercise any right provided in the agreement to terminate it on specified grounds.  It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Moreover, because many providers of goods and services require compensation at the time or soon after the goods and services are provided, the inability of the Company to pay until an indeterminate future time may make it impossible to procure goods and services.  COMPETITION  The Company expects to encounter substantial competition in its efforts to locate attractive opportunities, primarily from business development companies, venture capital partnerships and corporations, venture capital affiliates of large industrial and financial companies, small investment companies, and wealthy individuals. Many of these entities may have significantly greater experience, resources and managerial capabilities than the Company and in that event, will be in a better position  - 8 -   than the Company to obtain access to attractive business opportunities.  ADMINISTRATIVE OFFICES  The Company currently maintains a mailing address at P.O. Box 110310, Naples, Florida 34108-0106. The Company's telephone number is (239) 598-2300. Other than this mailing address, the Company does not currently maintain any other office facilities, and does not anticipate the need for maintaining office facilities at any time in the foreseeable future. The Company pays no rent or other fees for the use of this mailing address.  EMPLOYEES  The Company is in the development stage and currently has no employees. Management of the Company expects to use consultants, attorneys and accountants as necessary, and does not anticipate a need to engage any full-time employees so long as it is seeking and evaluating business opportunities. The need for employees and their availability will be addressed in connection with the decision whether or not to acquire or participate in specific business opportunities.  ITEM 2. DESCRIPTION OF PROPERTY  The Company currently maintains a mailing address at P.O. Box 110310, Naples, Florida 34108-0106. The Company pays no rent for the use of this mailing address. The Company does not believe that it will need to maintain an office at any time in the foreseeable future in order to carry out its plan of operations described herein. The Company's telephone number is (239) 598-2300.  ITEM 3. LEGAL PROCEEDINGS  Neither Tranquility nor its property is the subject of any pending legal proceedings, and no such proceeding is known to be contemplated by any governmental authority. We are not aware of any legal proceedings in which any director, officer or affiliate of Tranquility, any owner of record or beneficially of more than 5% of any class of our voting securities, or any associate of any such director, officer, affiliate or security holder of Tranquility, is a party adverse to Tranquility or any of its subsidiaries or has a material interest adverse to Tranquility or any of its subsidiaries.  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  N/A   - 9 -    PART II   ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS  No public trading market exists for the Company's securities. As of the date of this report, there are approximately 28 holders of record of the Company's common stock. No dividends have been paid to date and the Company's Board of Directors does not anticipate paying dividends in the foreseeable future.   ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION  SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS  Certain statements in this report, including statements in the following discussion, are what are known as "forward looking statements", which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can accurately predict the future. Words such as "plans," "intends," "will," "hopes," "seeks," "anticipates," "expects "and the like often identify such forward looking statements, but are not the only indication that a statement is a forward looking statement. Such forward looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits. Numerous factors and future events could cause the Company to change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits. Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10-KSB and in the Company's other filings with the Securities and Exchange Commission. No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.  PLAN OF OPERATION The Company did not engage in any material operations during the fiscal year ended December 31, 2005.  For the fiscal year ending December 31, 2006, the Company expects to continue its efforts to locate a suitable business acquisition candidate and thereafter to complete a business acquisition transaction.  The Company anticipates incurring a loss for the fiscal year as a result of expenses associated with compliance with the reporting requirements of the Securities Exchange Act of 1934, and expenses associated with locating and evaluating acquisition candidates. The Company does not expect to generate revenues until it completes a business acquisition, and, depending upon the performance of the acquired business, it may also continue to operate at a loss after completion of a business combination.   - 10 -   During the next 12 months, the Company will require additional capital in order to pay the costs associated with carrying out its plan of operations and the costs of compliance with its continuing reporting obligations under the Securities Exchange Act of 1934 as amended, for the fiscal year ending December 31, 2006 and thereafter.  This additional capital will be required whether or not the Company is able to complete a business combination transaction during the current fiscal year.  Furthermore, once a business combination is completed, the Companys needs for additional financing are likely to increase substantially.  No specific commitments to provide additional funds have been made by management or other stockholders, and the Company has no current plans, proposals, arrangements or understandings to raise additional capital through the sale or issuance of additional securities prior to the location of a merger or acquisition candidate.  Accordingly, there can be no assurance that any additional funds will be available to the Company to allow it to cover its expenses.  Notwithstanding the foregoing, however, to the extent that additional funds are required, the Company anticipates that it will either continue to rely on its majority shareholder to pay expenses on its behalf, or it will seek to raise capital through the private placement of restricted securities.  The majority shareholders are under no obligation to pay such expenses.  If the Company is unable to raise additional funds, it will not be able to pursue its business plan.  In addition, in order to minimize the amount of additional cash which is required in order to carry out its business plan, the Company might seek to compensate certain service providers by issuances of stock in lieu of cash.  LIQUIDITY AND CAPITAL RESOURCES  As of December 31, 2005, the Company remains in the development stage.  As of December 31, 2005, the Companys balance sheet reflects total assets of $nil, and total current liabilities of $10,900.00.   The Company has cash on hand of $nil and a deficit accumulated in the development stage of $27,884.00.  The Company does not have sufficient assets or capital resources to pay its on-going expenses while it is seeking out business opportunities, and it has no current plans to raise additional capital through sale of securities.  As a result, although the Company has no agreement in place with its shareholders or other persons to pay expenses on its behalf, it is anticipated that the Company will continue to rely on its majority shareholders to pay expenses on its behalf at least until it is able to consummate a business transaction.  The majority shareholders are under no obligation to pay such expenses.  RESULTS OF OPERATIONS  During the period from 1997 through December 31, 2005, the Company has engaged in no significant operations. No revenues were received by the Company during this period.  The Company experienced a net loss of $6,500.00 for the fiscal year ended December 31, 2005. The net loss was the result of expenses incurred to maintain its corporate existence and comply with SEC reporting requirements. The Company does not expect to generate any revenue until it completes a business combination, but will continue to incur legal and accounting fees and other costs associated with compliance with its reporting obligations. As a result, the Company expects  - 11 -   that it will continue to incur losses each quarter at least until it has completed a business combination.  Depending upon the performance of any acquired business, the Company may continue to operate at a loss even following completion of a business combination.  We have received a report from our independent auditors on our financial statements for the fiscal year ended December 31, 2005 in which our auditors have included an explanatory paragraph indicating that our lack of on-going operations and our current state of having more current liabilities than current assets cause substantial doubt about our ability to continue as a going concern.  By issuing this opinion, our auditors have indicated that they are uncertain as to whether we have the capability to continue our operations.  If we are unable to raise additional funds, we may be unable to continue with our business plan.               - 12 -    ITEM 7.   FINANCIAL STATEMENTS AND EXHIBITS        TRANQUILITY, INC.  (A DEVELOPMENT STAGE COMPANY)  CONDENSED FINANCIAL STATEMENTS  DECEMBER 31, 2005      INDEX    PageReport of Independent Registered Public Accounting Firm14Balance sheets15Statements of operations16Statements of stockholders (deficit)/ equity17Statements of cash flows18Notes to financial statements19-28        - 13 -   Gruber & Company, LLC  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF TRANQUILITY, INC.  We have audited the accompanying balance sheets of Tranquility, Inc. (a development stage company) as of December 31, 2005 and 2004 and the related statements of operations, stockholders equity (deficit), and cash flows for the years then ended and for the period August 20, 1997 (date of inception) through December 31, 2005.  These financial statements are the responsibility of the Companys management.   Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.  In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tranquility, Inc. as of December 31, 2005 and 2004 and the results of its operations and cash flows for the years then ended and for the period August 20, 1997 (date of inception) through December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.  The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As described in Note 3 to the financial statements conditions exist which raise substantial doubt about the Companys ability to continue as a going concern unless it is able to generate sufficient cash flows to meet its obligations and sustain its operations.  Those conditions raise substantial doubt about its ability to continue as a going concern.  Managements plans regarding those matters are also described in Note 3.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.  Gruber & Company, LLC Lake Saint Louis, Missouri September 28, 2007   Member:  American Institute of Certified Public Accountants                                                                                Registered:  Public Company Accounting Oversight Board  (PCAOB)  - 14 -    TRANQULITY, INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS AS OF DECEMBER 31, 2005 AND DECEMBER 31, 2004  December 31,December 31,20052004ASSETSCURRENT ASSETSCash and cash equivalents$---$---Total current assets------PROPERTY AND EQUIPMENT, net of accumulated depreciation ofTOTAL ASSETS------LIABILITIES AND STOCKHOLDERS' DEFICITCURRENT LIABILITIESAccrued liabilities------Payable to stockholder10,9004,400TOTAL CURRENT LIABILITIES10,9004,400COMMITMENTS AND CONTINGENCIES------STOCKHOLDERS' DEFICITPreferred stock:  par value $.01; 5,000,000 shares authorized;no shares issued and outstanding------Common stock: par value $.001; 25,000,000 shares authorized;5,105,740 shares issued and outstanding5,1065,106Additional paid-in capital11,87811,878Deficit accumulated during the development stage(27,884)(21,384)TOTAL STOCKHOLDERS' DEFICIT(10,900)(4,400)TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT$---$---  See Accompanying Notes to Financial Statements  - 15 -    TRANQULITY, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS FOR YEARS ENDEDED DECEMBER 31, 2005 AND DECEMBER 31, 2004 AND FROM INCEPTION ON AUGUST 20, 1997 THROUGH DECEMBER 31, 2005   Cumulative fromFor the year endedAugust 20, 1997December 31,December 31,(inception) to20052004December 31, 2005REVENUESSales Revenues$--$--$--Cost of sales------Gross profit------OPERATING EXPENSESGeneral and administrative expenses6,5006,50027,884Total operating expenses6,5006,50027,884LOSS FROM OPERATIONS(6,500)(6,500)(27,884)OTHER INCOMEInterest income------Total other income------NET LOSS BEFORE INCOME TAX6,500(6,500)(27,884)PROVISION FOR INCOME TAXES------NET LOSS$(6,500)$(6,500)$(27,884)BASIC AND DILUTED NET LOSS PER SHARE$(0.00)$(0.00)WEIGHTED AVERAGE SHARES OUTSTANDING:BASIC AND DILUTED$5,105,740$5,105,740  See Accompanying Notes to Financial Statements   - 16 -    TRANQULITY, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF STOCKHOLDERS (DEFICIT)/EQUITY FROM INCEPTION ON AUGUST 20, 1997 THROUGH DECEMBER 31, 2005   See Accompanying Notes to Financial Statements For the Period From August 20, 1997 (inception) to December 31, 2005DeficitTotalCommon stockAdditionalaccumulatedstockholders'$.001 Par Valuepaid-induring theequitySharesAmountcapitaldevelopment stage(deficit)Balance at inception (August 20, 1997)-$-$-$-$-Issuance of shares for services rendered681,110681--681(681)(681)Net loss for the periodTotal current assets-----Balance, December 31, 1997681,110681-(681)-Net loss for the year ended December 31, 1998-----Balance, December 31, 1998681,110681-(681)-Common stock issued for cash1,825,9801,8261,832-3,658Net loss for the year ended December 31, 1999---(1,628)(1,628)Balance, December 31, 19992,507,0902,5071,832(2,309)2,030Common stock issued for cash144,2501443,231-3,375Net loss for the year ended December 31, 2000---(4,898)(4,898)Balance, December 31, 20002,651,3402,6515,063(7,207)507Common stock issued for cash295,0002952,495-2,790Net loss for the year ended December 31, 2001---(3,297)(3,297)Balance, December 31, 20012,946,3402,9467,558(10,504)-Common stock issued for cash2,153,4002,1541,326-3,480Net loss for the year ended December 31, 2002---(3,740)(3,740)Balance, December 31, 20025,099,7405,1008,884(14,244)(260)Common stock issued for cash6,00062,994-3,000Net loss for the year ended December 31, 2003---(640)(640)Balance, December 31, 20035,105,7405,10611,878(14,884)2,100Net loss for the year ended December 31, 2004---(6,500)(6,500)Balance, December 31, 20045,105,7405,10611,878(21,384)(4,400)Net loss for the year ended December 31, 2005---(6,500)(6,500)Balance, December 31, 20055,105,740$5,106$11,878$(27,884)$(10,900)     - 17 -     TRANQULITY, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS  FOR THE YEAR ENDED DECEMBER 31, 2005 AND FROM INCEPTION ON AUGUST 20, 1997 THROUGH DECEMBER 31, 2005  Cumulative fromThree Months EndedAugust 20, 1997December 31,December 31,(inception) to20052004December 31, 2005CASH FLOWS FROM OPERATING ACTIVITIES:Net loss$(6,500)$(6,500)$(27,884)Adjustment to reconcile net loss to net cash used in operations:Common stock issued for services------Change in operating liabilities and assets:Accrued liabilities--2,100--Net cash used in operating activities(6,500)(4,400)(27,884)CASH FLOWS FROM FINANCING ACTIVITIESIncrease in payable to stockholder6,5004,40010,900Issuance of common stock----16,984Net cash provided by financing activities6,5004,40027,884Increase in cash and cash equivalents------Cash and cash equivalents, beginning of period------Cash and cash equivalents, end of period------Supplemental disclosures of cash flow information:Cash paid for interest----Cash paid for income taxes$--$--  See Accompanying Notes to Financial Statements      - 18 -    TRANQULITY, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005  NOTE 1 - ORGANIZATION  Tranquility, Inc. (the "Company") is currently a development stage company under the provisions of Statement of Financial Accounting Standards ("SFAS") No. 7 and was incorporated under the laws of the State of Delaware on August 20, 1997.  The Company has a December 31 year-end.  NOTE 2  SIGNIFICANT ACCOUNTING POLICIES  The Company follows the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and has adopted a year-end of December 31.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.  Use of Estimates  The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from these estimates.  Cash Equivalents  Cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.   - 19 -    Fair Value of Financial Instruments  The estimated fair values of due to stockholder, approximate their carrying value because of the short term maturity of these instruments or the stated interest rates are indicative of market interest rates.  Concentration of Credit Risk  The Company places its cash with high quality financial institutions and at times may exceed the FDIC $100,000 insurance limit.  The Company will extend credit based on an evaluation of the customers financial condition, generally without collateral.  Exposure to losses on receivables is principally dependent on each customers financial condition.  The Company will monitor its exposure for credit losses and maintains allowances for anticipated losses, if required.  Advertising Costs  Advertising costs are expensed as incurred. There were no advertising expenses for the twelve months ended December 31, 2005 and 2004.  Income Taxes  The Company accounts for income taxes under SFAS 109, "Accounting for Income Taxes." Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.  The Internal Revenue Code contains provisions that may limit the net operating loss carryforwards available if significant changes in stockholder ownership of the Company occur.  Basic and Diluted Income/(Loss) Per Share:  In accordance with SFAS No. 128, "Earnings Per Share," the basic income/(loss) per common share is computed by dividing net income/(loss) available to common stockholders by the  weighted average number of common shares outstanding. Diluted income per common share is computed similar to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of December 31, 2005, the Company does not have any equity or debt instruments outstanding that can be converted into common stock.   - 20 -   Stock-Based Compensation In March 2004, the FASB issued a proposed statement, Share-Based Payment, which addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for equity instruments of the enterprise or liabilities that are based on the grant-date fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. The proposed statement would eliminate the ability to account for share-based compensation transactions using Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and generally would require instead that such transactions be accounted for using a fair-value-based method. In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which is a revision of SFAS No. 123. Generally, the approach in SFAS No. 123(R) is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their grant-date fair values. Pro forma disclosure is no longer an alternative. As permitted by SFAS No. 123, for 2005, the Company accounted for share-based payments to employees using APB Opinion No. 25's intrinsic value method and, as such, generally recognized no compensation cost for employee stock options. Effective January 1, 2006, we have adopted SFAS No. 123(R)'s fair value method of accounting for share based payments. Accordingly, the adoption of SFAS No. 123(R)'s fair value method may have a significant impact on the Company's results of operations as we are required to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards. SFAS No. 123(R) permits public companies to adopt its requirements using either the "modified prospective" method or the "modified retrospective" method. The Company adopted SFAS No. 123(R) using the modified prospective method. In April 2005, the SEC delayed the effective date of SFAS No. 123(R), which is now effective for public companies for annual, rather than interim periods that begin after June 15, 2005. The impact of the adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. Segment Reporting  Based on the Company's integration and management strategies, the Company operated in a single business segment. For the years ended December 31, 2005 and 2004, the Company had no revenue.  Revenue Recognition  Revenue is recognized in accordance with SEC Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements.  The Company recognizes revenue when the significant risks and rewards of ownership have been transferred to the customer pursuant to applicable laws and regulations, including factors such as when there has  been evidence of a sales arrangement,  - 21 -   the performance has occurred, or service have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured.  Reporting on the Costs of Start-Up Activities  Statement of Position 98-5 (SOP 98-5), Reporting on the Costs of Start-Up Activities, which provides guidance on the financial reporting of start-up costs and organizational costs, requires most costs of start-up activities and organizational costs to be expensed as incurred.  SOP 98-5 is effective for fiscal years beginning after December 15, 1998.  With the adoption of SOP 98-5, there has been little or no effect on the Companys financial statements.  Dividends  The Company has not yet adopted any policy regarding payment of dividends.  No dividends have been paid or declared since inception.  New Accounting Pronouncements  In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." The objective of this Issue is to provide guidance for identifying impaired investments. EITF 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the FASB issued a FASB Staff Position (FSP) EITF 03-1-1 that delays the effective date of the measurement and recognition guidance in EITF 03-1 until after further deliberations by the FASB. The disclosure requirements are effective only for annual periods ending after June 15, 2004. The Company has evaluated the impact of the adoption of the disclosure requirements of EITF 03-1 and does not believe it will have an impact to the Company's overall combined results of operations or combined financial position. Once the FASB reaches a final decision on the measurement and recognition provisions, the Company will evaluate the impact of the adoption of EITF 03-1.  In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4, (" SFAS No. 151"). The amendments made by SFAS 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004.  The Company has evaluated the impact of the adoption of SFAS 151, and does not believe the impact will be significant to the Company's overall results of operations or financial position.  In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate Time-Sharing Transactions-an amendment of FASB Statements No. 66 and 67" ("SFAS 152") SFAS 152 amends SFAS No. 66, "Accounting for Sales of Real Estate", to reference the financial accounting and  - 22 -   reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing Transactions". SFAS 152 also amends SFAS No. 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects", to state that the guidance for (a) incidental operations and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to the guidance in SOP 04-2. SFAS 152 is effective for financial statements for fiscal years beginning after June 15, 2005, with earlier application encouraged. The Company has evaluated the impact of the adoption of SFAS 152, and does not believe the impact will be significant if any, to the Company's overall results of operations or financial position since the Company does not enter into such transactions.  In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions." The amendments made by SFAS 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. That exception required that some nonmonetary exchanges, although commercially substantive, to be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the FASB believes SFAS No.153 produces financial reporting that more faithfully represents the economics of the transactions. SFAS No.153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The provisions of SFAS No.153 shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 153, and does not believe the impact will be significant to the Company's overall results of operations or financial position.  In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment" ("SFAS 123(R)"). SFAS 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. SFAS 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. SFAS 123(R) replaces SFAS No. 123, "Accounting for Stock-Based Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued to Employees". SFAS 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been  - 23 -   had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply SFAS 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. This pronouncement is effective for the Company, a small business issuer, as of the first interior annual reporting period that begins after December 15, 2005. The Company has evaluated the impact of the adoption of SFAS 123(R), and does not believe the impact will be significant to the Company's overall results of operations or financial position.  In May, 2005, The FASB issued SFAS No. 154, entitled Accounting Changes and Error Corrections  a replacement of APB Opinion No. 20 and FASB  Statement No. 3.This Statement replaces APB Opinion No. 20, Accounting Changes and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle.  This statement applies to all voluntary changes in accounting principle.  It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions.  Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle.  This Statement requires retrospective applicationto prior periods financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change.  This Statement defines as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a change in the reporting entity.  This statement also redefines restatementas the revising of previously issued financial statements to reflect the correction of an error.  The adoption of SFAS 154 did not impact the financial statements.  In February, 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Statements.  SFAS No. 155 amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activitiesand SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.  SFAS No. 155, permits fair value measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial statements that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.  This statement is effective for all financial instruments acquired or issued after the beginning of the Companys first fiscal year that begins after September 15, 2006.  Management believes that this statement will not have a significant impact on the financial statements.  In March, 2006 FASB issued SFAS 156 Accounting For Servicing of Financial Assetsthis 
Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of  - 24 -   Financial Assets and Extinguishment of Liabilities,with respect to the accounting for separately recognized servicing assets and servicing liabilities.  This Statement:  1. Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract. 2. Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable. 3. Permits an entity to choose Amortization method or Fair value measurement method for each class of separately recognized servicing assets and servicing liabilities. 4. At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entitys exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value. 5. Requires separate presentation of servicing assets and liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities.  Management believes that this statement will not have a significant impact on the financial statements.  In September 2006, FASB issued SFAS 157 Fair Value Measurements. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Management is currently evaluating the effect of this pronouncement on financial statements.  In September 2006, FASB issued SFAS 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R).  This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006.  - 25 -   An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements. The requirement to measure plan assets and benefit obligations as of the date of the employers fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on financial statements.  NOTE 3  GOING CONCERN UNCERTAINITY  The Company has had no significant operations, assets or liabilities since inception and, accordingly, is fully dependent on either future sales of securities or upon its current management and/or advances or loans from significant stockholders or corporate officers to  provide  sufficient  working  capital to  preserve  the integrity of the corporate entity.  Because of these factors, our auditors have issued an audit opinion for the Company which includes a statement describing our going concern status.  This means, in our auditors opinion, substantial doubt about our ability to continue  as a going  concern  exists at the date of their opinion. The Companys continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis.  The Company anticipates offering future sales of equity securities.  However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional  equity  securities  or, that such  funding,  if available, will be obtained on terms favorable to or affordable by the Company.  If no additional operating capital is received during the next twelve months, the Company  will be  forced  to rely on  existing  cash in the  bank  and upon additional funds  loaned  by  management  and/or  significant  stockholders  to preserve the integrity of the corporate  entity at this time. In the event, the Company is unable to acquire advances from management and/or significant stockholders, the Company's ongoing operations would be negatively impacted.  It  is  the  intent  of  management  and  significant  stockholders  to  provide sufficient working  capital  necessary to support and preserve the integrity of the corporate entity.  However, no formal commitments or arrangements to advance or loan funds to the Company or repay any such advances or loans exist. There is no legal obligation for either management or significant stockholders to provide additional future funding.  In such a restricted cash flow scenario, the Company would be unable to complete our  business  plan  steps,  and  would,  instead,   delay  all  cash  intensive activities.  Without necessary cash flow, the Company may become dormant during the next twelve months, or until such time as necessary funds could be raised in the equity securities market.  - 26 -    While the Company is of the opinion that good faith estimates of the Companys ability to secure additional  capital in the future to reach our goals have been made, there is no guarantee that the Company will receive  sufficient funding to sustain operations or implement any future business plan steps. These conditions raise substantial doubt about the Company's ability to continue as a going concern.  These financial statements do not include any adjustments that might arise from this uncertainty. NOTE 4  PAYABLE TO STOCKHOLDER At December 31, 2005 the company had an advance from a officer / stockholder in the amount of $10,900.  The advance was unsecured, bore no interest and was payable on demand.  During 2005,   the stockholder paid expenses on behalf of the Company in the amount of $6,500 leaving a balance due to  stockholder for professional fees incident to maintaining corporate existence. NOTE 5  STOCK BASED COMPENSATION 2001 COMPENSATORY STOCK OPTION PLAN On February 14, 2001, the Company adopted its 2001 Compensatory Stock Option Plan.  Pursuant to the 2001 plan, the Company may grant nonstatutory (nonqualified) stock options to employees of the Company.  A total of 2,000,000 shares of common stock have been reserved for issuance under the Plan. The maximum term of options granted under the 2001 Compensatory Stock Option Plan is five years.  Options granted are nontransferable and generally expire within six months after termination of the grantees employment. The exercise price of compensatory stock options must not be less than fair value of the common stock on the date of the grant.  The authority to grant new options under the Plan will terminate on February 13, 2011, unless the Plan is terminated prior to that time by the board of directors. To date, no compensatory stock options have been granted pursuant to the Plan. 2001 EMPLOYEE STOCK COMPENSATION PLAN On February 14, 2001, the Company adopted its 2001 Employee Stock Compensation Plan.  Pursuant to the 2001 plan, the Company may issue shares of its common stock to employees or others who provide services to the Company.  A total of 1,500,000 shares of common stock have been reserved for issuance under the Plan. The authority to grant shares of common stock under the Plan will terminate on February 13, 2011, unless the Plan is terminated prior to that time by the board of directors. To date, no shares of common stock have been granted pursuant to the Plan.  - 27 -   NOTE 6  INCOME TAXES The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes.  The sources and tax effects of the differences are as follows: U.S. federal statutory rate (34.0%) Valuation reserve 34.0% Total -% As of December 31, 2005, the Company has a net operating loss carryforward of $ 27,884.  NOTE 7  RELATED PARTY TRANSACTIONS  The Company does not lease or rent any property.  Office space and services are provided without charge by an officer / shareholder.  Such costs are immaterial to the financial statements and, accordingly, have not been reflected therein.  The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities.  If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests.  The Company has not formulated a policy for the resolution of such conflicts.            - 28 -    ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.  None.  ITEM 8A. CONTROLS AND PROCEDURES.  The Securities and Exchange Commission defines the term disclosure controls and procedures to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. DiscolusreDisclosure 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 Securities Exchange Act of 1934 is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.  As of the date of the filing of this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified.  Our chief executive officer and chief financial officer also concluded that our disclosure controls and procedures were effective as of October 26, 2007 to provide reasonable assurance of the achievement of these objectives.  There was no change in the Company's internal control over financial reporting during the fiscal year ended December 31, 2005, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.  ITEM 8B.     OTHER INFORMATION.  None.   - 29 -    PART III   ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.  The directors and executive officers currently serving the Company are as follows:  NameAgePositionDominick Pope72President, Treasurer, DirectorJose Acevedo49Secretary, Director   The directors named above will serve until the next annual meeting of the Company's stockholders. Thereafter, directors will be elected for one-year terms at the annual stockholders' meeting. Officers will hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. There is no arrangement or understanding between any of the directors or officers of the Company and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current directors to the Company's board. There are also no arrangements, agreements or understandings between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of the Company's affairs.  The directors and officers will devote their time to the Company's affairs on an "as needed" basis, which, depending on the circumstances, could amount to as little as two hours per month, or more than forty hours per month, but more than likely will fall within the range of five to ten hours per month. There are no agreements or understandings for any officer or director to resign at the request of another person, and none of the officers or directors are acting on behalf of, or will act at the direction of, any other person.  Biographical Information  Dominick Pope  Dominick Pope is the President, Treasurer and a Director of the Company and has been a President and Director of the Company since its inception. In addition to his work with the Company, Mr. Pope is currently the President of L.J. Loeffler Systems, Inc.  Mr. Pope has also been the Secretary and a Director of Arrow Capital Group, Inc. since May 1997. Mr. Pope is also Secretary and a Director of F-Pack International Inc.  Additionally, Mr. Pope served as President, Treasurer and Chairman of the Board of Directors of Intercom Technologies Corp. until 1999.  Mr. Pope attended the Baruch School of Business at the City University of New York. In addition to serving as a director of the Company, Mr. Pope is a director of the following publicly-reporting company: Goldeneye Capital Group, Inc.  - 30 -   Jose Acevedo  Jose Acevedo, Secretary, is 49 years old and holds a Bachelor's degree in finance from Trinity University.  Mr. Acevedo was employed by Manufacturers Hanover Trust Company from 1977 through 1999.  During that period, Manufacturers Hanover Trust merged with Chemical Bank, and subsequently Chase Manhattan Bank, to become the nation's largest bank.  At Chase Manhattan, Mr. Acevedo held a management position where he managed portfolios valued at $34 million dollars.  From 1999 to 2005 Mr. Acevedo was a free-lance corporations consultant.  He is currently a Supervisor in a State run detention facility.  ITEM 10.    EXECUTIVE COMPENSATION.  No officer or director has received any remuneration or compensation from the Company. Until the Company acquires additional capital, it is not anticipated that any officer or director will receive additional compensation from the Company other than reimbursement for out-of-pocket expenses incurred on behalf of the Company. See "Certain Relationships and Related Transactions."  The following table sets forth the compensation of our management for the past three years:  Summary Compensation Table  Name & Principal PositionFiscal YearBase SalaryBonusAnnual CompensationRestricted Stock AwardsUnderlying OptionsLTI PayoutsOther CompensationDominick Pope, President and Treasurer2003
2004
20050
0
00
0
00
0
00
0
00
0
00
0
00
0
0Jose Acevedo, Secretary2003
2004
20050
0
00
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0   On February 14, 2001, the Company adopted its 2001 Compensatory Stock Option Plan. Pursuant to the 2001 plan, the Company may grant nonstatutory (nonqualified) stock options to employees of the Company. A total of 2,000,000 shares of common stock have been reserved for issuance under the Plan. The exercise price of compensatory stock options must not be less than the fair value of the common stock on the date of the grant. The authority to grant new options under the Plan will terminate on February 13, 2011, unless the Plan is terminated prior to that time by the board of directors. To date, no compensatory stock options have been granted pursuant to the Plan.  On February 14, 2001, the Company adopted its 2001 Employee Stock Compensation Plan. Pursuant to the 2001 plan, the Company may issue shares of its common stock to employees or others who provide services to the Company. A total of 1,500,000 shares of common stock have been reserved for issuance under the Plan. The authority to grant shares of common stock under the Plan will terminate on February 13, 2011, unless the Plan is terminated prior to that time by the board of directors. To date, no shares of common stock have been granted pursuant to the Plan.  - 31 -   The Company may employ a spouse of an officer or director, or an employee of a company owned by an officer or director, to perform administrative or secretarial services required by the Company. Such individuals would be paid standard, "going rate" hourly compensation for services rendered.  ITEM 11.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.  As of December 31, 2005, the Company has a total of 5,105,740 shares of common stock issued and outstanding. The following table sets forth, as of December 31, 2005, the number of shares of Common Stock owned of record and beneficially by persons who hold 5% or more of the outstanding Common Stock of the Company as well as the number of shares of Common Stock owned of record and beneficially by officers and directors of the Company.  Name and AddressNumber of Shares Owned BeneficiallyPercent of Class OwnedDominick Pope (1)
P.O. Box 110310
Naples, Florida 34108-0106110,0002.15%Jose Acevedo (1)
312 East 206th Street
Apt. H
Bronx, NY  1046700%Mid-Continental Securities Corp.
P.O. Box 110310
Naples, Florida 34108-01061,350,88026.46%Glenn Little
211 West Wall
Midland, TX 797011,000,00019.59%Equity Investors
P.O. Box 110310
Naples, FL 34108-01061,500,00029.38%All Officers and Directors (2 in number)110,0002.15%  _________ (1) Officer or director  The SEC maintains the view that securities issued by a blank check company such as Tranquility cannot be resold under the exemption from registration provided by Rule 144 promulgated under the Securities Act of 1933 but must be registered under the Securities Act of 1933.  - 32 -    ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.  No officer, director, promoter, or affiliate of the Company has, or proposes to have, any direct or indirect material interest in any asset proposed to be acquired by the Company through security holdings, contracts, options, or otherwise. The Company has adopted a policy under which any consulting or finder's fee that may be paid to a third party for consulting services to assist management in evaluating a prospective business opportunity would be paid in stock rather than in cash. Any such issuance of stock would be made on an ad hoc basis. Accordingly, the Company is unable to predict whether, or in what amount, such a stock issuance might be made.  It is not currently anticipated that any salary, consulting fee, or finder's fee shall be paid to any of the Company's directors or executive officers, or to any other affiliate of the Company except as described under "Executive Compensation" above.  The Company does not maintain an office, but it does maintain a mailing address at P.O. Box 110310, Naples, Florida 34108-0106, for which it pays no rent, and for which it does not anticipate paying rent in the future. It is likely that the Company will not establish an office until it has completed a business acquisition transaction, but it is not possible to predict what arrangements will actually be made with respect to future office facilities.  Although management has no current plans to cause the Company to do so, it is possible that the Company may enter into an agreement with an acquisition candidate requiring the sale of all or a portion of the Common Stock held by the Company's current stockholders to the acquisition candidate or principals thereof, or to other individuals or business entities, or requiring some other form of payment to the Company's current stockholders, or requiring the future employment of specified officers and payment of salaries to them. It is more likely than not that any sale of securities by the Company's current stockholders to an acquisition candidate would be at a price substantially higher than that originally paid by such stockholders. Any payment to current stockholders in the context of an acquisition involving the Company would be determined entirely by the largely unforeseeable terms of a future agreement with an unidentified business entity.  ITEM 13. EXHIBITS  3.1 Articles of Incorporation incorporated by reference to the filing on Form 10-SB dated July 5, 2005.  3.2 Bylaws incorporated by reference to the filing on Form 10-SB dated July 5, 2005  31.1 Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  31.2 Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  - 33 -    32.1 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  32.2 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.   ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES  The aggregate fees billed by Gruber & Company, LLC for an audit of the Company's annual financial statements were $ 2,500.00 for the fiscal year ended December 31, 2005, and $ 0.00 for the fiscal year ended December 31, 2004. The aggregate fees billed by Gruber & Company, LLC for review of the Company's financial statements included in its quarterly reports on Form 10QSB were $1,200.00 during the period ended December 31, 2005, and $ 0.00 during the period ended December 31, 2004.  Audit-Related Fees  Gruber & Company, LLC did not bill the Company any amounts for assurance and related services that were related to its audit or review of the Company's financial statements during the fiscal years ending December 31, 2005 and December 31, 2004.  Tax Fees  The aggregate fees billed by Gruber & Company, LLC for tax compliance, advice and planning were $ 0.00 for the fiscal year ended December 31, 2005 and $ 0.00 for the fiscal year ended December 31, 2004.   - 34 -    SIGNATURES  In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  TRANQUILITY, INC.  By: /s/ Dominick Pope Dominick Pope, CEO  Date: October 29, 2007  By: /s/ Dominick Pope Dominick Pope, CFO  Date: October 29, 2007          - 35 -