**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**








(Mark
                One)x
            
            Annual
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**For
                the fiscal year ended December 31, 2005****or****o**
            
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934For
                the transition period
                from                
                to**Commission
                file number 0-31423**






**FRIENDLY
      ENERGY CORPORATION**




(Exact
      name of Small Business Issuer as specified in its charter)


**Nevada**
            
            **91-1832462**(State
                of incorporation)
            
            (I.R.S.
                employer identification no.)**502
                North Division Street, Carson City, NV**
            
            **89703**(Address
                of principal executive offices)
            
            (Zip
                code)




**702-953-0411**




(Registrant’s
      telephone number, including area code)




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





Common
                Stock, par value $.001 per share




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




****  **None**












Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o




Indicate
      by check mark whether the Registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes o  No x




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-B is contained herein, 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. o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No
x




The
      issuer's revenue for the fiscal year ended December 31, 2005 were
      $0.




On
      December 31 2005 the aggregate market value of the voting and non-voting common
      equity held by non-affiliates of the issuer was approximately $1,617,000
      computed by reference to the price at which the common equity was last
      transacted on that date.




On
      December 31, 2005, the issuer had 33,576,973 shares of Common Stock, $0.001
      par
      value issued and outstanding.




Transitional
      Small Business Disclosure Format (Check One):YES o NO x







THIS
      REPORT ON FORM 10-KSB IS FOR THE YEAR ENDING DECEMBER 31, 2005. THE REPORT
      HAS
      BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IN SEPTEMBER 2006. TO
      THE
      EXTENT PRACTICABLE, THE DISCLOSURE CONTAINED HEREIN HAS BEEN PREPARED TO SPEAK
      AS OF DECEMBER 31, 2005. FRIENDLY ENERGY CORPORATION HAS INCLUDED A SECTION
      BELOW ENTITLED "SUBSEQUENT EVENTS" WHICH DISCUSSES CERTAIN MATERIAL EVENTS
      WHICH
      OCCURRED SUBSEQUENT TO DECEMBER 31, 2005.




**ITEM
      1. DESCRIPTION OF BUSINESS.**





**Our
      Background** .
      Friendly Energy Corporation was formed under the laws of the State of Nevada
      on
      January 7, 1993 under the name Eco-Systems Marketing. Eco-Systems subsequently
      changed its name to Rama Financial Corporation. An amendment to the Articles
      of
      Incorporation was filed changing the corporate name to Friendly Energy
      Corporation.





Friendly
      Energy Corporation was originally incorporated to engage in any lawful act
      or
      activity for which corporations may be organized under the General Corporation
      Law of Nevada. Friendly Energy Corporation, from its inception in 1993 to 2005,
      was engaged primarily in establishing itself as an electric service provider
      to
      California customers.





Friendly
      Energy Corporation changed its business focus in February 2005 to pursuing
      oil
      and gas development opportunities.


2







**Our
      Business.** Friendly
      Energy Corporation was inactive from 2002 to February 2005, when the company
      began the process of identifying potential oil and gas prospects for
      development. The primary focus is on property in established oil fields to
      minimize any potential risk. We currently hold an interest in two oil field
      prospects in Central Oklahoma. On one of the prospects, a well has been drilled
      and is in the process of being completed.




**Our
      Oil and Gas Properties**




Central
      Oklahoma has many shallow to intermediate (3000' to 6000') oil wells. The
      Ordovician Simpson Group sandstones; Viola and Hunton carbonates are among
      the
      most prolific among the reservoirs in this area of Oklahoma which includes
      Pottawatomie, Garvin, McClain, Oklahoma, Cleveland, and Seminole counties.
      This
      area is characterized by broad low relief anticlines and domes that are
      interrupted by occasional vertical faults. Hydrocarbon traps are predominantly
      structural in nature for pre-Pennsylvanian objectives.




**Asher
      Prospect**





Friendly
      Energy Corporation is participating in a 4,500 foot deep oil well in central
      Oklahoma through its wholly owned subsidiary, Friendly Energy Services, Inc.
      (FES). FES owns a 50% working interest in the well. The location is on the
      Asher
      Prospect, a development/exploratory prospect, located on the western edge of
      the
      giant St. Louis Oil Field. The St. Louis Field has produced over 300 million
      barrels of oil and 26 billion cubic-feet of gas. At least four different sand
      and carbonate oil reservoirs are present and oil-bearing. The well is currently
      being completed. Our geologist, Dr. Suhm, estimates reserves of 350,000 BOPW.
      Dr. Suhm has almost 40 years of experience as a geologist and geophysicist.
      He
      was an explorationist with Humble Oil and an Associate Professor of Geology
      at
      Texas A & M University. He is currently a consulting geologist and
      geophysicist with offices in Oklahoma City. Dr. Suhm has a Doctor of Philosophy
      degree in Geology from the University of Nebraska.





**West
      Peach Creek Prospect**





Friendly
      Energy Corporation is planning to drill a 5,400 foot deep well in central
      Oklahoma through its wholly owned subsidiary, Friendly Energy Services, Inc.
      (FES). If the geophysicist and operator each purchase a 10% working interest,
      as
      expected, then FES will own an 80% working interest in the well. The location
      is
      on the West Peach Creek Prospect, a development/exploratory prospect, located
      on
      the western edge of the giant St. Louis Oil Field. The St. Louis Field has
      produced over 300 million barrels of oil and 26 billion cubic-feet of gas.
      The
      prospect is in an old, established field. Based on an analysis of over 2,000
      miles of seismic tests in the area, our geologist has found an undrilled and
      untested “attic” or structural trap. There are four reservoirs at different
      depths which have produced in the area. Dr. Suhm believes this prospect is
      low
      risk and estimates reserves of 300,000 BOPW.





**ITEM
      1A. RISK FACTORS**





In
      evaluating the Company, careful consideration should be given to the following
      risk factors, in addition to the other information included or incorporated
      by
      reference in this annual report. In addition, the "Forward-Looking Statements"
      located in this Form 10-KSB describe additional uncertainties associated with
      our business and the forward-looking statements included or incorporated by
      reference. Each of these risk factors could adversely affect our business,
      operating results and financial condition, as well as adversely affect the
      value
      of an investment in our common stock.


3








**Accumulated
      Losses**





To
      date
      the Company's operations have not generated sufficient operating cash flows
      to
      provide working capital for the Company's ongoing overhead, the funding of
      its
      lease acquisitions and the exploration and development of these properties.
      Without adequate financing, the Company may not be able to successfully develop
      any prospects that it acquires or achieve profitability from its operations
      in
      the near future or at all.





During
      the year ended December 31, 2005, Friendly incurred a net loss of $691,271
      and
      as of December 31, 2005 has an accumulated deficit of $2,892,833.





**We
      cannot predict the future price of oil and natural gas.**





Our
      revenues, profitability and liquidity are substantially dependent upon
      prevailing prices for oil and natural gas, which can be extremely volatile
      and
      in recent years have been depressed by excess total domestic and imported
      supplies. Prices also are affected by actions of state and local agencies,
      the
      United States and foreign governments, and international cartels. In addition,
      sales of oil and natural gas are seasonal in nature, leading to substantial
      differences in cash flow at various times throughout the year. These external
      factors and the volatile nature of the energy markets make it difficult to
      estimate future prices of oil and natural gas. Any substantial or extended
      decline in the price of oil and/or natural gas would have a material adverse
      effect on our financial condition and results of operations, including reduced
      cash flow and borrowing capacity. All of these factors are beyond our
      control.





**We
      could be adversely impacted by changes in the oil and gas
      market.**





The
      marketability of any future oil and gas production depends in part upon the
      availability, proximity and capacity of gas gathering systems, pipelines and
      processing facilities. Federal and state regulation of oil and gas production
      and transportation, general economic conditions, changes in supply and changes
      in demand all could adversely affect our ability to produce and market its
      oil
      and natural gas. If market factors were to change dramatically, the financial
      impact could be substantial because we would incur expenses without receiving
      revenues from the sale of production. The availability of markets is beyond
      our
      control.





**New
      government regulation and environmental risks could increase our
      costs.**





The
      production and sale of oil and gas are subject to a variety of federal, state
      and local government regulations. These include:





·
            the
                prevention of waste


·
            the
                discharge of materials into the
                environment


·
            the
                conservation of oil and natural gas, pollution, permits for drilling
                operations, drilling bonds, reports concerning
                operations


·
            the
                spacing of wells


·
            the
                unitization and pooling of
                properties


4








Many
      jurisdictions have at various times imposed limitations on the production of
      oil
      and gas by restricting the rate of flow for oil and gas wells below their actual
      capacity to produce. Because current regulations covering our operations are
      subject to change at any time, and despite our belief that we are in substantial
      compliance with applicable environmental and other government laws and
      regulations, we may incur significant costs for compliance in the
      future.





**Our
      prices may be impacted adversely by new taxes.**





The
      federal, state and local governments in which we operate impose taxes on the
      oil
      and gas products we sell. In the past, there has been a significant amount
      of
      discussion by legislators and presidential administrations concerning a variety
      of energy tax proposals. In addition, many states have raised state taxes on
      energy sources and additional increases may occur. We cannot predict whether
      any
      of these measures would have an adverse impact on oil and natural gas
      prices.





**Exploration
      and Production Risks**





The
      business of exploring for and producing oil and gas involves a substantial
      risk
      of investment loss that even a combination of experience, knowledge and careful
      evaluation may not be able to overcome. Drilling oil and gas wells involves
      the
      risk that the wells will be unproductive or that, although productive, the
      wells
      do not produce oil and/or gas in economic quantities. Other hazards, such as
      unusual or unexpected geological formations, pressures, fires, blowouts, loss
      of
      circulation of drilling fluids or other conditions may substantially delay
      or
      prevent completion of any well. Adverse weather conditions can also hinder
      drilling operations.





A
      productive well may become uneconomic in the event water or other deleterious
      substances are encountered, which impair or prevent the production of oil and/or
      gas from the well. In addition, production from any well may be unmarketable
      if
      it is impregnated with water or other deleterious substances.





**Financing
      Risks**





Friendly
      has relied in the past primarily on the sale of equity capital, shareholder
      loans and other similar types of transactions to fund working capital and the
      acquisition of its prospects and related leases. Failure to generate operating
      cash flow or to obtain additional financing for the development of the Company's
      properties could result in substantial dilution of our property interests,
      or
      delay or cause indefinite postponement of further exploration and development
      of
      its prospects with the possible loss of such properties.





**Risks
      Associated with Management of Growth**





Because
      of its small size, Friendly Energy’s growth in accordance with its business
      plans, if achieved, will place a significant strain on its financial, technical,
      operation and management resources. As Friendly Energy expands its activities
      and increases the number of projects it is evaluating or in which it
      participates, there will be additional demands on its financial, technical
      and
      management resources. The failure to continue to upgrade our technical,
      administrative, operating and financial control systems or the occurrence of
      unexpected expansion difficulties, including the recruitment and retention
      of
      experienced managers, geoscientists and engineers, could have a material adverse
      effect on its business, financial condition and results of operations and its
      ability to timely execute its business plan.


5








**Conflicts
      of Interest**





Certain
      of the officers and directors of Friendly Energy will also serve as directors
      of
      other companies or have significant shareholdings in other companies. To the
      extent that such other companies participate in ventures in which Friendly
      Energy may participate, or compete for prospects or financial resources with
      Friendly Energy, these officers and directors of Friendly Energy will have
      a
      conflict of interest in negotiating and concluding terms relating to the extent
      of such participation. In the event that such a conflict of interest arises
      at a
      meeting of the board of directors, a director who has such a conflict must
      disclose the nature and extent of his interest to the board of directors and
      abstain from voting for or against the approval of such participation or such
      terms.





In
      accordance with the laws of the State of Nevada, the directors of Friendly
      Energy are required to act honestly and in good faith with a view to the best
      interests of Friendly Energy. In determining whether or not Friendly will
      participate in a particular program and the interest therein to be acquired
      by
      it, the directors will primarily consider the degree of risk to which Friendly
      may be exposed and its financial position at that time.





**ITEM
      2. DESCRIPTION OF PROPERTY.**





As
      of the
      dates specified in the following table, Friendly Energy Corporation held the
      following property in the following amounts:


Property
            December
                31, 2005
            December
                31, 2004Cash
                and equivalents
            $
                -0-
            $-0-





Friendly
      Energy Corporation defines cash equivalents as all highly liquid investments
      with a maturity of 3 months or less when purchased. Friendly Energy Corporation
      does not presently own any interests in real estate. Friendly Energy Corporation
      presently owns equipment with a net value of $1,181.





**Facilities.** Friendly
      Energy Corporation does not own any real or personal property nor does the
      Company currently lease any office space.




**ITEM
      3. LEGAL PROCEEDINGS.**





NONE




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.**





NONE


6








**ITEM
      5. MARKET PRICE FOR THE FRIENDLY ENERGY CORPORATION'S COMMON EQUITY AND RELATED
      STOCKHOLDER MATTERS.**





As
      at
      December 31, 2005 there were approximately 655 holders of the outstanding shares
      of the Friendly Energy Corporation's $0.001 par value common stock. Friendly
      Energy Corporation participates in the PinkSheets Electronic Quotation System
      maintained by the National Association of Securities Dealers, Inc., under the
      most recent trading symbol "FDEG". The Friendly Energy Corporation's common
      stock has closed at:





Quarter
            
            High
            
            Low2003
                First Quarter
            
            $
            0.002
            
            $
            0.0022003
                Second Quarter
            
            $
            0.002
            
            $
            0.0022003
                Third Quarter
            
            $
            0.002
            
            $
            0.0022003
                Fourth Quarter
            
            $
            0.002
            
            $
            0.0022004
                First Quarter
            
            $
            0.002
            
            $
            0.0022004
                Second Quarter
            
            $
            0.010
            
            $
            0.0102004
                Third Quarter
            
            $
            0.001
            
            $
            0.0012004
                Fourth Quarter
            
            $
            0.001
            
            $
            0.0012005
                First Quarter
            
            $
            0.060
            
            $
            0.0422005
                Second Quarter
            
            $
            0.065
            
            $
            0.0552005
                Third Quarter
            
            $
            0.078
            
            $
            0.0632005
                Fourth Quarter
            
            $
            0.051
            
            $
            0.040





Such
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commission and may not represent actual transactions.





The
      public may read and copy any materials filed with the SEC at the SEC's Public
      Reference Room at 450 Fifth Street NW, Washington, D.C. 20549. The public may
      also obtain information on the operation of the Public Reference Room by calling
      the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains
      reports, proxy and information statements, and other information regarding
      issuers that file electronically with the SEC. The address of that site is
      http://www.sec.gov.





**Common
      Stock** .
      Friendly Energy Corporation is authorized to issue 100,000,000 shares of common
      stock, $.001 par value, each share of common stock having equal rights and
      preferences, including voting privileges. The shares of $.001 par value common
      stock of Friendly Energy Corporation constitute equity interests in Friendly
      Energy Corporation entitling each shareholder to a pro rata share of cash
      distributions made to shareholders, including dividend payments. As of December
      31, 2005, 33,576,973 shares of the Friendly Energy Corporation's common stock
      were issued and outstanding.





The
      holders of Friendly Energy Corporation's common stock are entitled to one vote
      for each share of record on all matters to be voted on by shareholders. There
      is
      no cumulative voting with respect to the election of directors of Friendly
      Energy Corporation or any other matter, with the result that the holders of
      more
      than 50% of the shares voted for the election of those directors can elect
      all
      of the Directors.





The
      holders of Friendly Energy Corporation's common stock have no conversion,
      preemptive or other subscription rights, and there are no redemption provisions
      applicable to Friendly Energy Corporation's common stock. All of the outstanding
      shares of Friendly Energy Corporation's common stock are duly authorized,
      validly issued, fully paid and non-assessable.


7








**Dividends** . The
      holders of the Friendly Energy Corporation's common stock are entitled to
      receive dividends when, as and if declared by Friendly Energy Corporation's
      Board of Directors from funds legally available therefore; provided, however,
      that cash dividends are at the sole discretion of Friendly Energy Corporation's
      Board of Directors. In the event of liquidation, dissolution or winding up
      of
      Friendly Energy Corporation, the shareholders of common stock are entitled
      to
      share ratably in all assets remaining available for distribution to them after
      payment of liabilities of Friendly Energy Corporation and after provision has
      been made for each class of stock, if any, having preference in relation to
      Friendly Energy Corporation's common stock.





Friendly
      Energy Corporation has never declared or paid any dividends on its common stock.
      Friendly Energy Corporation does not intend to declare or pay any dividends
      in
      the foreseeable future.





**Sales
      of Securities**





2005
      Stock Transactions




During
      the year ended December 31, 2005, the Company issued:




(a)
      On
      July 1, 250,000 shares were granted to Peter Caruso for office services provided
      the company.




(b)
      On
      August 30, 500,000 shares were granted to Tim DeHerrera as a sign-up bonus
      to
      join the Company as a Vice President.




(c)
      On
      October 28, 2005, 400,000 restricted common shares were sold to a non-related
      party for $10,000.





2005
      Stock Options





During
      2005, 500,000
      stock options were granted to each of the Directors Douglas Tallant and Donald
      Trapp.





The
      terms
      of these options were set as follows: Fair market value $0.05 (recognizing
      any
      options exercised would result in restricted shares); 50% vests after 6 months
      after the date of grant and the remaining 50% vests after one year; all options
      expire after 10 years.





**ITEM
      6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF
      OPERATIONS.**





This
      following information specifies certain forward-looking statements of management
      of the company. Forward-looking statements are statements that estimate the
      happening of future events are not based on historical fact. Forward-looking
      statements may be identified by the use of forward-looking terminology, such
      as
      "may", "shall", "will", "could", "expect", "estimate", "anticipate", "predict",
      "probable", "possible", "should", "continue", or similar terms, variations
      of
      those terms or the negative of those terms. The forward-looking statements
      specified in the following information have been compiled by our management
      on
      the basis of assumptions made by management and considered by management to
      be
      reasonable. Our future operating results, however, are impossible to predict
      and
      no representation, guaranty, or warranty is to be inferred from those
      forward-looking statements.


8







The
      assumptions used for purposes of the forward-looking statements specified in
      the
      following information represent estimates of future events and are subject
      to
      uncertainty as to possible changes in economic, legislative, industry, and
      other
      circumstances. As a result, the identification and interpretation of data and
      other information and their use in developing and selecting assumptions from
      and
      among reasonable alternatives require the exercise of judgment. To the extent
      that the assumed events do not occur, the outcome may vary substantially from
      anticipated or projected results, and, accordingly, no opinion is expressed
      on
      the achievability of those forward-looking statements. No assurance can be
      given
      that any of the assumptions relating to the forward-looking statements specified
      in the following information are accurate, and we assume no obligation to update
      any such forward-looking statements.




**Liquidity
      and Capital Resources.**





For
      the
      year ended December 31, 2005, we had total assets of $1,181, compared to total
      assets in 2004 of $6,431. The decrease in assets was due to the depreciation
      of
      property and equipment . At
      December 31, 2005, we had current liabilities of $592,796 which was represented
      by accounts payable, payroll liabilities, judgment payable, deferred salaries,
      interest payable and loan payable to related parties. At December 31, 2004
      we
      had current liabilities of $154,204. The increase in liabilities was due
      primarily to judgment payable and deferred salaries. At December 31, 2005,
      we
      had a working capital deficiency of $591,615 (2004 - $147,773).





We
      do not
      believe that our current cash resources will be able to maintain our current
      operations for an extended period of time. We will be required to raise
      additional funds or arrange for additional financing over the next 12 months
      to
      adhere to our development schedule. No assurance can be given, however, that
      we
      will have access to additional cash in the future, or that funds will be
      available on acceptable terms to satisfy our working capital requirements.
      If we
      are not able to arrange for additional funding or if our officers, directors
      and
      shareholders stop advancing funds to us, we may be forced to make other
      arrangements for financing such as loans or entering into strategic alliances.
      We have not identified any alternative sources of financing.




**Results
      of Operations**





We
      have
      not yet realized any revenue from operations to date. During the year ended
      December 31, 2005 the loss from operations is $524,177 (2004 - $6,295). This
      increase in loss was due primarily to an increase in officer wages, professional
      fees, and stock based compensation expenses.  From
      inception to December 31, 2005 Friendly Energy Corporation has incurred
      cumulative net losses of $2,892,833.





The
      cash
      and equivalents constitute our present internal sources of
      liquidity.





Because
      we are not generating any significant revenues, our only external source of
      liquidity is the sale of our capital stock and any advances from officers,
      directors or shareholders.





9


**Our
      Plan of Operation for the Next Twelve Months**





We
      anticipate that we will need to raise additional capital within the next 12
      months in order to continue as a going concern.  The Company is in the
      process of raising capital to fund the development of future wells . To
      the
      extent that additional capital is raised through the sale of equity or equity-
      related securities, the issuance of such securities could result in dilution
      of
      stockholders. There can be no assurance that additional funding will be
      available on favorable terms, if at all. If adequate funds are not available
      within the next 12 months, we may be required to curtail our operations
      significantly or to obtain funds through entering into arrangements with
      collaborative partners or others that may require us to relinquish rights to
      certain of our assets that we would not otherwise relinquish.





10





**ITEM
      7. FINANCIALS**





To
      the
      Board of Directors and Stockholders


Friendly
      Energy Corp.


(A
      Development Stage Company)


Orlando,
      Florida





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We
      have
      audited the accompanying balance sheets of Friendly Energy Corp. (A
      Developmental Stage Company) as of December 31, 2005 and 2004, and the related
      statements of operations, stockholders' deficit, and cash flows for the years
      ended December 31, 2005 and 2004 and for the period from January 7, 1993 (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 audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, based on our audit, the financial statements referred to above present
      fairly, in all material respects, the financial position of the Company as
      of
      December 31, 2005 and 2004 and the results of its operations and its cash flows
      for the years ended December 31, 2005 and 2004, and for the period from January
      7, 1993 (Date of Inception) through December 31, 2005, in conformity with U.S.
      generally accepted accounting principles.





11


The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern.  As
      discussed in Note 1 to the financial statements, the Company has suffered losses
      from operations, all of which raise substantial doubt about its ability to
      continue as a going concern.  Management's plans in regards to these matters are also described in Note
      1.  The
      financial statements do not include any adjustments that might result from
      the
      outcome of this uncertainty.





/s/
      De
      Joya Griffith & Company, LLC


De
      Joya
      Griffith & Company, LLC


September
      12, 2006


Henderson,
      Nevada


12


FRIENDLY
      ENERGY CORP.


(A
      DEVELOPMENT STAGE COMPANY)


BALANCE
      SHEETS





Audited
            
            AuditedAs
                of
            
            As
                ofDecember
                31, 2005
            
            December
                31, 2004ASSETSCurrent
                assetsChecking
                Account
            
            $
            0
            
            $
            0Total
                current assetsProperty
                and equipment, net
            
            
            1,181
            
            
            6,431Total
                assets
            
            $
            1,181
            
            $
            6,431LIABILITIES
                AND STOCKHOLDERS' DEFICITCurrent
                liabilitiesAccounts
                Payable
            
            $
            74,351
            
            $
            73,857Payroll
                Tax Liabilities
            
            
            51,937
            
            
            37,268Judgment
                payable
            
            
            160,666
            
            
            0Deferred
                Salaries
            
            
            242,000
            
            
            0Interest
                Payable
            
            
            29,507
            
            
            23,079Loans
                Payable-Related Parties
            
            
            34,335
            
            
            20,000Total
                current liabilities
            
            
            592,796
            
            
            154,204Total
                liabilities
            
            
            592,796
            
            
            154,204Stockholders'
                deficitCommon
                stock, $0.001 par value; 100,000,000 shares
            
            
            33,577
            
            
            12,685authorized,
                33,576,973 and 12,684,973 shares,respectively,
                issued and outstandingPreferred
                Stock, $0.001 par value, 10,000,000 shares
            
            
            1,933
            
            
            3,457authorized,
                1,933,061 and 3,457,261 shares,respectively,
                issued and outstandingAdditional
                paid-in capital
            
            
            2,265,708
            
            
            2,037,647Accumulated
                deficit
            
            
            -2,892,833
            
            
            -2,201,562Total
                stockholders' deficit
            
            
            -591,615
            
            
            -147,773Total
                liabilities and stockholders' deficit
            
            $
            1,181
            
            $
            6,431





See
      Accompanying Notes to Consolidated Financial Statements


13





FRIENDLY
      ENERGY CORP.


(A
      DEVELOPMENT STAGE COMPANY)


STATEMENTS
      OF OPERATIONS





AuditedAudited
            
            Audited
            
            From
                InceptionJanuary
                1, 2005
            
            January
                1, 2004
            
            (January
                7, 1993)through
            
            through
            
            throughDecember
                31, 2005
            
            December
                31, 2004
            
            December
                31, 2005Revenue
            
            $
            0
            
            $
            0
            
            $
            0Cost
                of goods sold
            
            
            0
            
            
            0
            
            
            0Gross
                profit
            
            
            0
            
            
            0
            
            
            0Operating
                expensesAmortization
                Expense
            
            
            0
            
            
            0
            
            
            30,000Depreciation
            
            
            5,250
            
            
            6,295
            
            
            40,537Legal
                Fees
            
            
            9,045
            
            
            0
            
            
            65,203Officer
                Wages
            
            
            242,000
            
            
            0
            
            
            242,000Payroll
                Expenses
            
            
            14,669
            
            
            0
            
            
            227,897Professional
                Fees
            
            
            7,235
            
            
            0
            
            
            543,955Rent
            
            
            0
            
            
            0
            
            
            237,406Stock
                Based Compensation
            
            
            237,429
            
            
            0
            
            
            434,754Telephone
            
            
            986
            
            
            0
            
            
            30,375Travel
                & Entertainment
            
            
            4,371
            
            
            0
            
            
            126,607General
                and administrative
            
            
            3,192
            
            
            0
            
            
            158,513Total
                operating expenses
            
            
            524,177
            
            
            6,295
            
            
            2,137,247Loss
                from operations
            
            
            -524,177
            
            
            -6,295
            
            
            -2,137,247Other
                income (expenses):Other
                income
            
            
            
            
            
            452
            
            
            452Forgiveness
                of Debt
            
            
            0
            
            
            0
            
            
            -122,765Impairment
                Loss on Asset
            
            
            0
            
            
            0
            
            
            -442,800Interest
                Expense
            
            
            -57,094
            
            
            -5,952
            
            
            -80,473Lawsuit
                Judgement
            
            
            -110,000
            
            
            0
            
            
            -110,000Total
                other income (expenses)
            
            
            -167,094
            
            
            -5,500
            
            
            -755,586Loss
                before provision for income taxes
            
            
            -691,271
            
            
            -11,795
            
            
            -2,892,833Provision
                for income taxes
            
            
            0
            
            
            0
            
            
            0Net
                loss
            
            
            ($691,271
            )
            
            ($11,795
            )
            
            ($2,892,833
            )




14


Basic
                and diluted loss per common share
            
            
            ($0.03
            )
            
            ($0.00
            )
            
            ($0.30
            )Basic
                and diluted weighted averagecommon
                shares outstanding
            
            
            20,872,168
            
            
            12,684,973
            
            
            9,746,597





See
      Accompanying Notes to Consolidated Financial Statements








15


FRIENDLY
      ENERGY CORP.


(A
      DEVELOPMENT STAGE COMPANY)


STATEMENT
      OF STOCKHOLDERS' DEFICIT





Additional
            
            
            
            TotalCommon
                Stock
            
            Preferred
                Stock
            
            Paid-in
            
            Accumulated
            
            Stockholders'Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            DeficitBalance
                at January 7, 1993 (Date of inception)
            
            
            0
            
            $
            0
            
            
            0
            
            $
            0
            
            $
            0
            
            $
            0
            
            $
            0Common
                shares issued to officers & directors for
              cash,
                $0.016 per share
            
            
            63,750
            
            
            64
            
            
            0
            
            
            0
            
            
            936
            
            
            0
            
            
            1,000Net
                loss
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (1,000
            )
            
            (1,000
            )Balance
                at December 31, 1993, 1994, and 1995
            
            
            63,750
            
            
            64
            
            
            0
            
            
            0
            
            
            936
            
            
            (1,000
            )
            
            0Common
                shares cancelled
            
            
            (63,750
            )
            
            (64
            )
            
            0
            
            
            0
            
            
            64
            
            
            0
            
            
            0Common
                shares issued for cash, $0.00 per share
            
            
            2,500,000
            
            
            2,500
            
            
            0
            
            
            0
            
            
            (2,490
            )
            
            0
            
            
            10Conversion
                to preferred stock
            
            
            (500,000
            )
            
            (500
            )
            
            50,000
            
            
            50
            
            
            450
            
            
            0
            
            
            0Net
                loss
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (10
            )
            
            (10
            )Balance
                at December 31, 1996
            
            
            2,000,000
            
            
            2,000
            
            
            50,000
            
            
            50
            
            
            (1,040
            )
            
            (1,010
            )
            
            0Common
                shares issued relating to spin-out
            
            
            15,223
            
            
            15
            
            
            0
            
            
            0
            
            
            (15
            )
            
            0
            
            
            0





16





Common
                shares issued for cash, $0.80 per share
            
            
            37,500
            
            
            37
            
            
            0
            
            
            0
            
            
            29,963
            
            
            0
            
            
            30,000Common
                shares issued to officers and directors for cash, $0.685 per
                share
            
            
            43,750
            
            
            44
            
            
            0
            
            
            0
            
            
            29,956
            
            
            0
            
            
            30,000Preferred
                shares issued to officers and directors for services, $0.04 per
                share
            
            
            0
            
            
            0
            
            
            750,000
            
            
            750
            
            
            29,250
            
            
            0
            
            
            30,000Net
                loss
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (63,266
            )
            
            (63,266
            )Balance
                at December 31, 1997
            
            
            2,096,473
            
            
            2,096
            
            
            800,000
            
            
            800
            
            
            88,114
            
            
            (64,276
            )
            
            26,734Common
                shares issued for cash, $1.74 per share
            
            
            9,750
            
            
            10
            
            
            0
            
            
            0
            
            
            16,990
            
            
            0
            
            
            17,000Common
                shares issued to officers and directors for services,
                $0.004
            
            
            2,625,000
            
            
            2,625
            
            
            0
            
            
            0
            
            
            7,875
            
            
            
            
            
            10,500Conversion
                of preferred stock
            
            
            8,000,000
            
            
            8,000
            
            
            (800,000
            )
            
            (800
            )
            
            (7,200
            )
            
            0
            
            
            0Net
                loss
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (33,234
            )
            
            (33,234
            )Balance
                at December 31, 1998
            
            
            12,731,223
            
            
            12,731
            
            
            0
            
            
            0
            
            
            105,779
            
            
            (97,510
            )
            
            21,000Cancellation
                of common stock
            
            
            (46,250
            )
            
            (46
            )
            
            0
            
            
            0
            
            
            46
            
            
            0
            
            
            0Preferred
                shares issued for debt settlement, $3.69 per share
            
            
            0
            
            
            0
            
            
            146,883
            
            
            147
            
            
            541,853
            
            
            0
            
            
            542,000Preferred
                shares issued for services, $3.69 per share
            
            
            0
            
            
            0
            
            
            5,000
            
            
            5
            
            
            18,445
            
            
            0
            
            
            18,450





17





Net
                loss
            0
            0
            0
            0
            0
            (556,309)
            (556,309)Balance
                at December 31, 1999
            12,684,973
            12,685
            151,883
            152
            666,123
            (653,819)
            25,141Preferred
                shares issued for debt settlement, $3.69 per share
            0
            0
            174,798
            175
            644,825
            0
            645,000Issuance
                of stock related to merger with Friendly Energy Services, Inc., $3.69
                per
                share
            0
            0
            120,000
            120
            442,680
            0
            442,800Preferred
                shares issued for services, $3.69 per share
            0
            0
            37,500
            37
            138,338
            0
            138,375Net
                loss
            0
            0
            0
            0
            0
            (914,511)
            (914,511)Balance
                at December 31, 2000
            12,684,973
            12,685
            484,181
            484
            1,891,966
            (1,568,330)
            336,805Net
                loss
            0
            0
            0
            0
            0
            (584,851)
            (584,851)Balance
                at December 31, 2001
            12,684,973
            12,685
            484,181
            484
            1,891,966
            (2,153,181)
            (248,046)Preferred
                shares issued for debt settlement, $3.69 per share
            0
            0
            2,973,080
            2,973
            145,681
            0
            148,654Net
                loss
            0
            0
            0
            0
            0
            (12,371)
            (12,371)Balance
                at December 31, 2002
            12,684,973
            12,685
            3,457,261
            3,457
            2,037,647
            (2,165,552)
            (111,763)Net
                loss
            0
            0
            -
            0
            0
            (24,215)
            (24,215)Balance,
                December 31, 2003
            12,684,973
            12,685
            3,457,261
            3,457
            2,037,647
            (2,189,767)
            (135,978)





18





Net
                loss
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            (11,795
            )
            
            (11,795
            )Balance,
                December 31, 2004
            
            
            12,684,973
            
            
            12,685
            
            
            3,457,261
            
            
            3,457
            
            
            2,037,647
            
            
            (2,201,562
            )
            
            (147,773
            )Common
                shares issued for cash, $0.025
            
            
            400,000
            
            
            400
            
            
            0
            
            
            0
            
            
            9,600
            
            
            0
            
            
            10,000Common
                shares issued for servicees, $0.05 per share
            
            
            250,000
            
            
            250
            
            
            0
            
            
            0
            
            
            12,250
            
            
            0
            
            
            12,500Common
                shares issued to officers and directors for services, $0.04 per
                share
            
            
            500,000
            
            
            500
            
            
            0
            
            
            0
            
            
            19,500
            
            
            0
            
            
            20,000Preferred
                shares issued to officers and directors for services, $0.40 per
                share
            
            
            0
            
            
            0
            
            
            450,000
            
            
            450
            
            
            179,550
            
            
            0
            
            
            180,000Conversion
                of preferred stock
            
            
            19,742,000
            
            
            19,742
            
            
            (1,974,200
            )
            
            (1,974
            )
            
            (17,768
            )
            
            0
            
            
            0Issuance
                of stock options to two officers
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            24,929
            
            
            0
            
            
            24,929Net
                loss
            
            
            0
            
            
            0
            
            
            -
            
            
            0
            
            
            0
            
            
            (691,271
            )
            
            (691,271
            )Balance,
                December 31, 2005
            
            
            33,576,973
            
            $
            33,577
            
            
            1,933,061
            
            $
            1,933
            
            $
            2,265,708
            
            
            ($2,892,833
            )
            
            ($591,615
            )








See
      Accompanying Notes to Consolidated Financial Statements











19


FRIENDLY
      ENERGY CORP.


(A
      DEVELOPMENT STAGE COMPANY)


STATEMENTS
      OF CASH FLOWS





AuditedAuditedJanuary
                1, 2005
            
            AuditedJanuary
                1, 2004
            
            From
                  Inception(January 7, 1993)through
            
            through
            
            throughDecember
                31, 2005
            
            December
                31, 2004
            
            December
                31, 2005Cash
                flows from operating activities:Net
                loss
            
            
            ($691,271
            )
            
            ($11,795
            )
            
            ($2,892,833
            )Adjustments
                to reconcile net loss tonet
                cash used by operating activities:Depreciation
            
            
            5,250
            
            
            6,295
            
            
            40,537Stock
                Based Compensation
            
            
            237,429
            
            
            0
            
            
            434,754Impairment
                Loss
            
            
            0
            
            
            0
            
            
            442,800Changes
                in operating assets and liabilities:Accounts
                Payable
            
            
            494
            
            
            (452
            )
            
            74,351Judgement
                payable
            
            
            110,000
            
            
            0
            
            
            110,000Interest
                Payable
            
            
            57,094
            
            
            5,952
            
            
            80,173Payroll
                Liabilities
            
            
            14,669
            
            
            0
            
            
            51,937Deferred
                Salaries
            
            
            242,000
            
            
            0
            
            
            242,000Loans
                Payable-Related Parties
            
            
            14,335
            
            
            0
            
            
            34,335Net
                cash used by operating activities
            
            
            (10,000
            )
            
            0
            
            
            (1,381,946
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            0
            
            
            0
            
            
            (41,718
            )Net
                cash used by investing activities
            
            
            0
            
            
            0
            
            
            (41,718
            )0Cash
                flows from financing activities:
            
            
            
            
            
            
            
            
            0Proceeds
                from issuance of common stock
            
            
            10,000
            
            
            0
            
            
            88,010Proceeds
                on borrowings from related parties
            
            
            0
            
            
            0
            
            
            1,335,654Net
                cash provided by financing activities
            
            
            10,000
            
            
            0
            
            
            1,423,664Net
                increase in cash
            
            
            0
            
            
            0
            
            
            0Cash,
                beginning of period
            
            
            0
            
            
            0
            
            
            0Cash,
                end of period
            
            $
            0
            
            $
            0
            
            $
            0





See
      Accompanying Notes to Consolidated Financial Statements


20




NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS





1.
            DESRCRIPTION
                OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT
                POLICIES





Description
      of business and history -
      Friendly Energy Corp., Nevada corporation, (hereinafter referred to as the
      “Company” or “Friendly Energy”) was incorporated in the State of Nevada on
      January 7, 1993. The company was originally in the business of selling electric
      power and related services to small and medium sized businesses in a newly
      deregulated California market. The Company operations have been limited to
      general administrative operations and is considered a development stage company
      in accordance with Statement of Financial Accounting Standards No.
      7.





Management
      of Company - The
      company filed its articles of incorporation with the California Secretary of
      State on January 7, 1993, indicating G. Alfred Roensch as the incorporator.





The
      company filed its annual list of officers and directors with the California
      Secretary of State on January 7, 1993, indicating its President is G. Alfred
      Roensch and its Secretary and Treasurer is Owen Stephenson and were both listed
      as directors on this filing. The current President is Douglas Tallant and the
      current Secretary and Treasurer is Donald Trapp.





Going
      concern - The
      Company incurred net losses of approximately $2,892,833 from the period of
      January 7, 1993 (Date of Inception) through December 31, 2005 and has commenced
      its operations on a very limited basis. However, it is still in the development
      stages, raising substantial doubt about the Company’s ability to continue as a
      going concern. The Company may seek additional sources of capital through the
      issuance of debt or equity financing, but there can be no assurance the Company
      will be successful in accomplishing its objectives.





The
      ability of the Company to continue as a going concern is dependent on additional
      sources of capital and the success of the Company’s plan. The financial
      statements do not include any adjustments that might be necessary if the Company
      is unable to continue as a going concern.





Year
      end - The
      Company’s year end is December 31.





Principles
      of consolidation - The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries. All significant intercompany transactions and balances have been
      eliminated.





Use
      of
      estimates - The
      preparation of consolidated financial statements in conformity with generally
      accepted accounting principles 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 revenue and expenses during the reporting
      period. Actual results could differ from those estimates.





Property
      and equipment -
      Property and equipment are stated at cost less accumulated depreciation.
      Depreciation is provided principally on the straight-line method over the
      estimated useful lives of the assets, which are generally 3 to 27 years. The
      amounts of depreciation provided are sufficient to charge the cost of the
      related assets to operations over their estimated useful lives.





The
      Company periodically evaluates whether events and circumstances have occurred
      that may warrant revision of the estimated useful life of fixed assets or
      whether the remaining balance of fixed assets should be evaluated for possible
      impairment. The Company uses an estimate of the related undiscounted cash flows
      over the remaining life of the fixed assets in measuring their
      recoverability.





Income
      taxes - The
      Company accounts for its income taxes in accordance with Statement of Financial
      Accounting Standards No. 109, which requires recognition of deferred tax assets
      and liabilities for future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax bases and tax credit carry forwards. 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. The effect on deferred tax assets and liabilities
      of a
      change in tax rates is recognized in operations in the period that includes
      the
      enactment date.


21








Management
      feels the Company will have a net operating loss carryover to be used for future
      years. Such losses may not be fully deductible due to the significant amounts
      of
      non-cash service costs. The Company has not established a valuation allowance
      for the full tax benefit of the operating loss carryovers due to the uncertainty
      regarding realization.





Net
      loss per common share - The
      Company computes net loss per share in accordance with SFAS No. 128, Earnings
      per Share (SFAS 128) and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under
      the provisions of SFAS 128 and SAB 98, basic net loss per share is computed
      by
      dividing the net loss available to common stockholders for the period by the
      weighted average number of shares of common stock outstanding during the period.
      The calculation of diluted net loss per share gives effect to common stock
      equivalents; however, potential common shares are excluded if their effect
      is
      antidilutive. For the period from January 7, 1993 (Date of Inception) through
      December 31, 2005, no options and warrants were excluded from the computation
      of
      diluted earnings per share because their effect would be antidilutive.





Stock-Based
      Compensation -- The
      Company follows SFAS
      No. 123(R),
      Accounting for Stock-Based Compensation, and accordingly has expensed the fair
      value of the stock options which vested during the period and is reflected
      in
      the net loss for the period.





The
      following table represents the effect on net loss and loss per share for the
      Company.





2004
            
            2005Net
                loss as reported
            
            $
            (691,271
            )
            $
            (11,795
            )Add:
                Stock-based employee compensationexpense
                included in reported loss,net
                of related tax effects
            
            
            24,029
            
            
            -0-Deduct:
                Total stock-based employeecompensation
                expense determined underfair
                value based methods of all awards,net
                of related tax effects.
            
            $
            (24,929
            )
            $
            -0-Proforma
                net loss
            
            $
            (691,271
            )
            $
            (11,795
            )Net
                loss per common share
            
            $
            (0.03
            )
            $
            (0.00
            )Basic
                and diluted loss, pro forma
            
            $
            (0.03
            )
            $
            (0.00
            )





Concentration
      of risk - A
      significant amount of the Company’s assets and resources are currently dependent
      on the financial support of Douglas Tallant and Donald Trapp. Should they
      determine to no longer finance the operations of the company before new capital
      is raised, it may be unlikely for the company to continue.





Revenue
      recognition - The
      Company has no revenues to date from its operations. Once the revenue is
      generated, the company will recognize
      revenues as it is received.





Inventory
      valuation - At
      this time the Company is not expected to hold inventory.





Legal
      Procedures - The
      Company is not aware of, nor is it involved in any pending legal proceedings.





New
      accounting pronouncements -





In
      November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment
      of
      ARB No. 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43, Chapter
      4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle
      facility expense, freight, handing costs, and spoilage. This statement requires
      that those items be recognized as current period charges regardless of whether
      they meet the criterion of "so abnormal" which was the criterion specified
      in
      ARB No. 43. In addition, this Statement requires that allocation of fixed
      production overheads to the cost of production be based on normal capacity
      of
      the production facilities. This pronouncement is effective for the Company
      beginning October 1, 2005. The Company expects no impact on adopting this new
      standard.


22







In
      December 2004, the FASB issued SFAS No. 123 (revised 2004). Share-Based Payment,
      which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation.
      SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued
      to
      Employees, and amends SFAS No. 95, Statement of Cash Flows. 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 fair values. Pro forma disclosure is no longer an
      alternative. The new standard will be effective for the Company in the first
      interim or annual reporting period beginning after December 15, 2005. The
      Company expects the adoption of this standard will not have a material impact
      on
      its financial statements.




In
      December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-monetary Assets,
      an amendment of APB Opinion No. 29 "effective for non-monetary asset exchanges
      occurring in the fiscal year beginning January 1, 2006. SFAS No. 153 requires
      that exchanges of productive assets be accounted for at fair value unless fair
      value cannot be reasonably determined or the transaction lacks commercial
      substance. SFAS No. 153 is not expected to have a material effect on the
      company's Consolidated Financial Statements.





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
      Corrections” (“SFAS 154”). SFAS 154 replaces Accounting Principles
      Board Opinion No. 20 “Accounting Changes” and SFAS No. 3,
“Reporting Accounting Changes in Interim Financial Statements-An Amendment of
      APB Opinion No. 28.” SFAS 154 provides guidance on the accounting for
      and reporting of accounting changes and error corrections. SFAS 154
      requires “retrospective application” of the direct effect of a voluntary change
      in accounting principle to prior periods’ financial statements where it is
      practicable to do so. SFAS 154 also redefines the term “restatement” to
      mean the correction of an error by revising previously issued financial
      statements. SFAS 154 is effective for accounting changes and error
      corrections made in fiscal years beginning after December 15, 2005 unless
      adopted early. We do not expect the adoption of SFAS 154 to have a material
      impact on its consolidated financial position, results of operations or cash
      flows, except to the extent that the statement subsequently requires
      retrospective application of a future item.





In
      February 2006, the FASB issued Statement of Financial Accounting Standards
      No. 155, *Accounting
      for Certain Hybrid Financial Instruments* (“SFAS
      No. 155”), which amends Statement of Financial Accounting Standards
      No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* (“SFAS
      No. 133”) and Statement of Financial Accounting Standards No. 140, *Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities* (“SFAS
      No. 140”). SFAS No. 155 permits fair value measurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, establishes a requirement to evaluate interests in
      securitized financial assets to identify interests that are freestanding
      derivatives or hybrid financial instruments containing embedded derivatives.
        We expect the adoption of SFAS 155 to have a material impact on
      its consolidated financial position, results of operations or cash
      flows.





In
      March
      2006, the FASB issued Statement of Financial Accounting Standards No. 156, *Accounting
      for Servicing of Financial Assets* (“SFAS
      No. 156”), which amends FASB Statement No. 140 (“SFAS No. 140”). SFAS 156 may be
      adopted as early as January 1, 2006, for calendar year-end entities, provided
      that no interim financial statements have been issued. Those not choosing to
      early adopt are required to apply the provisions as of the beginning of the
      first fiscal year that begins after September 15, 2006 (e.g., January 1, 2007,
      for calendar year-end entities).  The intention of the new statement is to
      simplify accounting for separately recognized servicing assets and liabilities,
      such as those common with mortgage securitization activities, as well as to
      simplify efforts to obtain hedge-like accounting.  Specifically, the FASB
      said FAS No. 156 permits a servicer using derivative financial instruments
      to
      report both the derivative financial instrument and related servicing asset
      or
      liability by using a consistent measurement attribute, or fair value.  We
      do not expect the adoption of SFAS 155 to have a material impact on its
      consolidated financial position, results of operations or cash
      flows.





2. FIXED
      ASSETS





Fixed
      assets consist of the following as of December 31, 2005 and 2004:


2005
            
            2004Furniture
                and fixtures
            
            $
            20,102
            
            $
            20,102Computers
                and equipment
            
            
            21,616
            
            
            21,61641,718
            
            
            41,718Less:
                accumulated depreciation
            
            
            (40,537
            )
            
            (35,287
            )1,181
            
            
            6,431




23





3.
              RELATED
                  PARTY TRANSACTIONS





In
      2005,
      the officers agreed with the Company to defer their salaries totaling $242,000.,
      see note 7.




As
      of
      December 31, 2005 and 2004, loans payable from related parties consists of
      the
      following:




2005
            
            2004Notes
                payable from officers ofthe
                Company bearing no interestunsecured
                and due on demand
            
            $
            14,335
            
            $
            0Note
                payable from an officer ofthe
                Company bearing interest at 8%,unsecured
                and due on demand
            
            
            20,000
            
            
            20,000$
            34,335
            
            $
            20,000


4.
            OTHER
                CURRENT LIABILITIES


The
      company has accrued for unpaid federal payroll taxes in the amounts of $51,937
      and $37,268 for the years ended December 31, 2005 and 2004, respectively. The
      $37,268 is owed from 2000 and 2001 unpaid federal payroll taxes; the Company
      has
      filed the payroll taxes with the Internal Revenue Service. The $14,699 owed
      for
      2005 is accrued payroll taxes on deferred salaries; the Company has yet to
      file
      the payroll tax forms with the Internal Revenue Service or related state taxing
      authorities.


The
      company has accrued deferred salaries owed to three officers in the amount
      of
      $242,000 and $ -0- for the years ended December 31, 2005 and 2004, respectively.




The
      accrued interest of $29,507 for 2005 consists of $19,550 on unpaid payroll
      taxes, and $9,957 on related party loans.





5.
            STOCKHOLDERS’
                DEFICIT





Common
      Shares : As
      of
      December 31, 2005 and 2004 there were 33,576,973 and 12,684,973 shares of common
      stock outstanding.





a)
            In
                1993, the company issued 63,750 shares of common stock for cash at
                $0.016
                per share to officers and directors.


b)
            On
                June 2, 1996, in connection with the acquisition of the Company by
                Granite
                Development Corporation ("Granite"), the Company cancelled all outstanding
                shares of common stock and issued a total of 2,500,000 shares to
                Granite
                for consideration of $10.


c)
            In
                1996, 500,000 common shares were converted to 50,000 shares of preferred
                stock.


d)
            In
                1997, the Company issued 15,223 shares of common stock relating to
                the
                spin out from Granite Development Corporation.


e)
            On
                April 21, 1997, the company issued 21,875 shares of common stock
                for cash
                at $0.685 per share to officers and
                directors.


f)
            On
                July 31, 1997, the company issued 37,500 shares of common stock for
                cash
                at $0.80 per share.


g)
            On
                August 14, 1997, the company issued 21,875 shares of common stock
                for cash
                at $0.685 per share to officers and directors.


h)
            From
                February 18, 1998, through March 16, 1998, a total of 9,750 shares
                of
                common stock were sold for cash pursuant to Regulation D, Rule 504
                offering at $1.74 per share.


i)
            On
                October 29, 1998, 625,000 shares of common stock were issued for
                cash at
                $0.004.


j)  On
      October 30, 1998, 8,000,000 shares of common stock were issued as a result
      of
      the conversion of 800,000 preferred shares.


k)
            On
                November 11, 1998, the company issued 2,000,000 shares of common
                stock for
                cash at $0.004 per share.


l)
            During
                1999, the company cancelled 46,250 shares of common stock.


m)
            On
                March 29, 2005, 1,200,000 shares of the company’s preferred stock were
                converted to 1,200,000 shares of common
                stock.


24





n)
            On
                May 28, 2005, 528,000 shares of the company’s preferred stock were
                converted to 5,280,000 shares of common
                stock.


o)
            On
                June 22, 2005, 122,000 shares of the company’s preferred stock were
                converted to 1,220,000 shares of common
                stock.


p)
            On
                July 1, 2005, the company issued 250,000 shares of common stock at
                $0.05
                per share for services.


q)
            On
                July 7, 2005, 5000 shares of the company’s preferred stock were converted
                to 50,000 shares of common stock.


r)
            On
                August 8, 2005, 300,000 shares of the company’s preferred stock were
                converted to 3,000,000 shares of common
                stock.


s)
            On
                August 23, 2005, 150,000 shares of the company’s preferred stock were
                converted to 1,500,000 shares of common
                stock.


t)
            On
                August 30, 2005, the company issued 500,000 shares of common stock
                as a
                sign-up bonus to an officer of the company valued at $0.04 per share.


u)
            On
                September 19, 2005, 146,200 shares of the company’s preferred stock were
                converted to 1,462,000 shares of common
                stock.


v)
            On
                September 29, 2005, 150,000 shares of the company’s preferred stock were
                converted to 1,500,000 shares of common
                stock.


w)
            On
                October 14, 2005, 3,000 shares of the company’s preferred stock were
                converted to 30,000 shares of common
                stock.


x)
            On
                October 31, 2005, the Company issued 400,000 shares of common stock
                for
                cash at $0.025 per share.


y)
            On
                November 3, 2005, 300,000 shares of the company’s preferred stock were
                converted to 3,000,000 shares of common
                stock.


z)
            On
                December 5, 2005, 150,000 shares of the company’s preferred stock were
                converted to 1,500,000 shares of common stock.


.


Preferred
      Shares :
      Each
      share of preferred stock is convertible into ten shares of common stock and
      has
      voting rights equal to ten shares of common stock. The board of directors has
      not specified any other rights or privileges with respect to the preferred
      stock.





As
      of
      December 31, 2005 and 2004 there were 1,933,061 and 3,457,261 shares of
      preferred stock outstanding.





a)
            During
                1996, 500,000 common shares were converted to 50,000 shares of preferred
                stock.


b)
            During
                1997 the company issued 750,000 shares of preferred stock to officers
                and
                directors for services valued at $0.04 per share.


c)
            On
                October 30, 1998, 800,000 shares of preferred stock were converted
                to
                8,000,000 shares of common stock.


d)
            On
                February 26, 1999, the company issued 24,390 shares of preferred
                stock in
                satisfaction of debt valued at $3.69 per
                share.


e)
            On
                April 30, 1999, the company issued 16,290 shares of preferred stock
                in
                stock in satisfaction of debt valued at $3.69 per share.


f)
            On
                April 30, 1999, the company issued 21,680 shares of preferred stock
                in
                stock in satisfaction of debt valued at $3.69 per
                share.


g)
            On
                September 30, 1999, the company issued 33,062 shares of preferred
                stock in
                stock in satisfaction of debt valued at $3.69 per share.


h)
            On
                December 30, 1999, the company issued 51,491 shares of preferred
                stock in
                stock in satisfaction of debt valued at $3.69 per
                share.


i)
            On
                December 22, 1999, the company issued 5,000 shares of preferred stock
                for
                a year end bonus valued at $3.69 per share.


j)
            On
                January 30, 2000, the company issued 2,500 shares of preferred stock
                for a
                sign up bonus valued at $3.69 per share.


k)
            On
                March 31, 2000, the company issued 56,911 shares of preferred stock
                in
                stock in satisfaction of debt valued at $3.69 per
                share.


l)
            On
                April 21, 2000, the company issued 10,000 shares of preferred stock
                for
                services of an officer valued at $3.69 per share.


m)
            On
                May 1, 2000, the company issued 2,500 shares of preferred stock for
                a sign
                up bonus valued at $3.69 per share.


n)
            On
                May 1, 2000, the company issued 10,000 shares of preferred stock
                for a
                sign up bonus valued at $3.69 per share.


o)
            On
                June 30, 2000, the company issued 58,266 shares of preferred stock
                in
                stock in satisfaction of debt valued at $3.69 per
                share.


p)
            On
                June 30, 2000, the company issued 2,500 shares of preferred stock
                for a
                sign up bonus valued at $3.69 per share.





q)
            On
                September 19, 2000, the company issued 100,000 shares in exchange
                for
                100,000 shares of Friendly Energy Services Inc valued at $3.69 per
                share.


25





r)
            On
                September 19, 2000, the company issued 20,000 shares to employees
                of
                Friendly Energy Services Inc. relating to an assumed obligation from
                the
                merger with Friendly Energy Services Inc. valued at $3.69 per
                share.


s)
            October
                4, 2000, the company issued 59,621 shares of preferred stock in stock
                in
                satisfaction of debt valued at $3.69 per
                share.


t)
            On
                October 16, 2000, the company issued 10,000 shares of preferred stock
                for
                a sign up bonus valued at $3.69 per share.


u)
            On
                January 8, 2002, the company issued 120,000 shares of preferred stock
                in
                stock in satisfaction of debt valued at $0.05 per
                share.


v)
            On
                March 5, 2002, the company issued 701,200 shares of preferred stock
                in
                stock in satisfaction of debt valued at $0.05 per
                share.


w)
            On
                March 5, 2002, the company issued 551,880 shares of preferred stock
                in
                stock in satisfaction of debt owed to an officer of the company valued
                at
                $0.05 per share.


x)
            On
                June 6, 2002, the company issued 1,600,000shares of preferred stock
                in
                stock in satisfaction of debt valued at $0.05 per
                share.


y)
            On
                April 21, 2005, the company issued 450,000 shares of preferred stock
                as
                two officers of the company for services valued at $0.40.




During
      2005, as noted above in the common shares section, 1,924,000 shares of preferred
      stock were converted to 19,240,000 shares of common stock.




During
      2000, 11,000 shares of preferred stock were cancelled. As of December 31, 2005
      the issue was not completely resolved and the stock agent had not received
      the
      returned share certificates. Therefore the 11,000 shares are still reflected
      in
      the preferred stock balance.




6.
            STOCK
                OPTIONS





In
      2005,
      the Company granted stock options for 1,000,000 common shares to its officers
      on
      April 21, 2005. The option price is $0.05. 50% vest after six months from the
      date of the grant and the remaining 50% vest after one year. All options expire
      ten years from the date of grant. There were no other outstanding options as
      of
      December 31, 2005. No options were exercised or granted in 2004. The Company
      may
      issue additional stock options in the future.





The
      following table summarizes the Company’s stock option activity.





Number
            
            WeightedOf
                Average
            
            ExerciseShares
            
            PriceBalance,
                December 31, 2003
            
            
            --
            
            $
            --Options
                granted and assumed
            
            
            --
            
            
            --Options
                expired
            
            
            --
            
            
            --Options
                canceled
            
            
            --
            
            
            --Options
                exercised
            
            
            --
            
            
            --Balance,
                December 31, 2004
            
            
            --
            
            $
            --Options
                granted and assumed
            
            
            1,000,000
            
            
            .05Options
                expired
            
            
            --
            
            
            --Options
                canceled
            
            
            --
            
            
            --Options
                exercised
            
            
            --
            
            
            --Balance,
                December 31, 2005
            
            
            1,000,000
            
            $
            .05





The
      Company estimates the fair value of these options granted to the officers by
      using the Black-Scholes option pricing-model with the following assumptions
      used
      for grants in 2005 using specific grant dates; no dividend yield; expected
      volatility of 185%; risk free interest rates of 3.50%; and expected life of
      10
      years for all employee stock options. Accordingly, the Company valued the
      services under SFAS No. 123R relating to stock options for $49,858 as of
      December 31, 2005. given that only 50% have vested as of December 31, 2005,
      the
      Company has only taken an expense for $24,929.





The
      following table summarizes information about options granted during the year
      ended December 31, 2005:


26








Exercise
                PriceEquals,
                Exceeds orNumber
                of
            
            is
                Less Than Mkt.
            
            Weighted
            
            WeightedOptions
                Granted
            
            Price
                of Stock
            
            Average
            
            Range
                of
            
            AverageDuring
                2005
            
            on
                Grant Date
            
            Exercise
                Price
            
            Exercise
                Price
            
            Fair
                Value--
            
            
            Equals
            
            $
            --
            
            
            $
              --to $ --
            
            $
            ----
            
            
            Exceed
            
            $
            --
            
            
            $--to
                $ --
            
            $
            --1,000,000
            
            
            Less
                Than
            
            $
            0.05
            
            
            $0.05
                to $0.05
            
            $
            0.051,000,000
            
            
            
            
            $
            0.05
            
            
            $0.05to
                $0.05
            
            $
            0.05





7.
            COMMITMENTS
                AND CONTINGENCIES





Employment
      contracts -





Douglas
      Tallant - The Company entered into an employment agreement with Douglas Tallant
      effective February 1, 2005. Pursuant to the terms of the agreement, Mr. Tallant
      is to be paid an annual salary of $144,000 in consideration of which Mr. Tallant
      agreed to act as the Company’s President. The term of the agreement is for an
      indefinite period, unless otherwise terminated pursuant to the terms of the
      agreement.





Tim
      DeHerrera - The Company entered into an employment agreement with Tim DeHerrera
      effective February 1, 2005. Pursuant to the terms of the agreement, Mr.
      DeHerrera is to be paid an annual salary of $60,000 and a “sign up” bonus of
      500,000 restricted common shares on execution of the agreement, in consideration
      of which Mr. DeHerrera agreed to act as the Company’s Vice President. The term
      of the agreement is for an indefinite period, unless otherwise terminated
      pursuant to the terms of the agreement.





Donald
      Trapp - The Company entered into an employment agreement with Donald Trapp
      effective February 1, 2005. Pursuant to the terms of the agreement, Mr. Trapp
      is
      to be paid an annual salary of $60,000 in consideration of which Mr. Trapp
      agreed to act as the Company’s Corporate Secretary and Treasurer. The term of
      the agreement is for an indefinite period, unless otherwise terminated pursuant
      to the terms of the agreement.





8.
            LITIGATION




In
      2005,
      a vendor received a defaulted judgment against the Company concerning the case
      Bowers v. Friendly Energy Corporation, San Diego Superior Court Case No. 775084.
      The default judgment in the principle sum of $434,211.50 was reduced to a
      principal amount of $110,000, with interest from October 13, 2000. The
      transaction has been recorded on the financial statements along with accrued
      interest of $50,666. The total of $160,666 is reported in the liability section
      of the balance sheet.





9.
            SUBSEQUENT
                EVENTS





There
      have been no subsequent events after the end of the period, December 31, 2005
      which are material to the financial statements.







Friendly
      Energy Corporation does anticipate some expenditures within the next 12 months
      for new acquisitions. The Company may elect to raise funds for potential
      drilling through equity financing or possible joint ventures and participation
      agreements. If Friendly Energy Corporation is successful in raising anticipated
      funds the company anticipates a significant change in the number of its
      employees within the next 12 months.




**ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.**





There
      have been no disagreements with Friendly Energy Corporation's auditors since
      formation of the company that require disclosure pursuant to Item 304 of
      Regulation S-B.







27





**ITEM
        8A. CONTROLS AND PROCEDURES**
 
 **Evaluation
        of Disclosure Controls and Procedures**
 
 Our
        Chief
        Executive Officer, and our Chief Financial Officer, have performed an evaluation
        of the Company's disclosure controls and procedures, as that term is defined
        in
        Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
        Act"), as of December 31, 2005 and each has concluded that such disclosure
        controls and procedures were not effective in ensuring that information required
        to be disclosed in our periodic reports filed under the Exchange Act is
        recorded, processed, summarized and reported within the time periods specified
        by the Securities and Exchange Commission's rules and forms. The audit for
        2005
        took much longer than expected which caused a delay in filing reports. Revised
        procedures have been adopted and we expect reports required after the filing
        date of this report will be timely.
 
 **Management's
        Report on Internal Control Over Financial Reporting**
 
 Our
        management is responsible for establishing and maintaining adequate internal
        control over financial reporting, as such term is defined in Exchange Act
        Rule
        13a-15(f). The Company's internal control over financial reporting is a process
        designed to provide reasonable assurance regarding the reliability of financial
        reporting and the preparation of financial statements for external purposes
        in
        accordance with generally accepted accounting principles.
 
 Because
        of its inherent limitations, internal control over financial reporting may
        not
        prevent or detect misstatements. Also, projections of any evaluation of
        effectiveness to future periods are subject to the risk that controls may
        become
        inadequate because of changes in conditions, or that the degree of compliance
        with the policies or procedures may deteriorate.
 
 Under
        the
        supervision and with the participation of our management, including our Chief
        Executive Officer and Chief Financial Officer, the Company conducted an
        assessment of the effectiveness of its internal control over financial reporting
        as of December 31, 2005. Based on this assessment, management concluded that
        our
        internal control over financial reporting was effective as of December 31,
        2005.
        This assessment has been disclosed to our auditors, an independent registered
        public accounting firm. There were no significant deficiencies or material
        weaknesses in the design or operation of internal control over financial
        reporting. And there was no fraud involving management or employees who have
        a
        significant role in financial reporting.
 
 **Changes
        in Internal Controls**
 
 No
        changes in the Company's internal controls over financial reporting occurred
        during the period ending December 31, 2005 that have materially affected,
        or are
        reasonably likely to materially affect, the Company's internal control over
        financial reporting




**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH
      SECTION 16(a) OF THE EXCHANGE ACT.**





1.
      Officers and Directors of the Company


DATE
                  OF APPOINTMENTNAME
              AGE
              POSITION
              TO
                  BOARD OF DIRECTORSDouglas
                  Tallant
              62
              President
                  & Director
              February
                  6, 2002Donald
                  Trapp
              67
              CFO,
                  Secretary, Treasurer
              February
                  8, 2005&
                  DirectorTim
                  DeHerrera
              48
              Vice
                  President
              April
                  4, 2005





The
      chart
      above specifies Friendly Energy Corporation's officers and directors as of
      December 31, 2005.


28








All
      directors of the Company hold office until the next annual meeting or until
      their successors have been elected and qualified. All officers serve at the
      discretion of the Board of Directors.





Douglas
      Tallant, President. Douglas Tallant was born and raised in Oklahoma. He has
      owned several businesses including the largest automobile dealership in Denver
      and physical therapy clinics in Denver and Oklahoma City. He has formed and
      managed several public companies including Entec, the developer of the original
      breathalyzer. Mr. Tallant has a Bachelor of Science degree in Mechanical
      Engineering from the University of Oklahoma.





Donald
      Trapp Chief Financial Officer. He also serves as the corporation’s Secretary. He
      has worked as an engineer and financial analyst. He was the CFO of Infohighway
      International, Inc., an Internet service provider. He has bought and sold oil
      and gas leases, been the operator of two oil wells, and the General Partner
      of
      four oil & gas partnerships in New Mexico. Mr. Trapp has a Master of Science
      degree in Nuclear Engineering from M.I.T.





Tim
      DeHerrera Vice President. Mr. DeHerrera was President of Atlantis Business
      Development Corporation, a public company regulated under Section 54 of the
      Investment Company Act of 1940. Prior to joining Atlantis he was in the
      financial services sector for over fifteen years most recently as president
      and
      founder of Alternative Finance Advisors, Inc, a consulting company to the credit
      industry. Throughout his career Mr. DeHerrera has been a principle in numerous
      companies both public and private. He has a lengthy background in investment
      banking, capital formation, capital restructures, private placements and deal
      origination.





There
      are
      no familial relationships between our officers and directors.





**Section
      16(a) Beneficial Ownership Reporting Compliance** . We
      believe that our officers, directors, and principal shareholders have not filed
      all reports required to be filed on, respectively, a Form 3 (Initial Statement
      of Beneficial Ownership of Securities), a Form 4 (Statement of Changes of
      Beneficial Ownership of Securities), or a Form 5 (Annual Statement of Beneficial
      Ownership of Securities).




**ITEM
      10. EXECUTIVE COMPENSATION - RENUMERATION OF DIRECTORS AND
      OFFICERS.**




Name
                of Individual or
            
            Capacities
                in which
            
            Aggregate
                RemunerationIdentity
                of Group
            
            Remuneration
                  wasreceived
            
            For
                2003
            
            For
                2004
            
            For
                2005Douglas
                Tallant
            
            
            President
                and Director
            
            $
            -0-
            
            $
            -0-
            
            $
            132,000Donald
                Trapp
            
            
            Director,
                Secretary &Treasurer
            
            $
            -0-
            
            $
            -0-
            
            $
            55,000Tim
                DeHerrera
            
            
            Vice
                President
            
            $
            -0-
            
            $
            -0-
            
            $
            55,000





**Compensation
      of Directors.**





There
      was
      no compensation paid to any Officer or Director in 2003 or 2004. The following
      compensation was paid in 2005: 350,000 preferred shares paid to Douglas Tallant
      and 100,000 preferred shares paid to Donald Trapp. These shares were paid for
      deferred salaries for services prior to 2005.





**Stock
      Based Compensation** . During
      the year ended December 31, 2005, $82,358 in stock based compensation was
      recorded in our financial statements. Stock based compensation is an estimate
      of
      the intrinsic value placed in respect to stock granted to officers, directors,
      employees using the Black-Scholes option pricing model. We do expect further
      stock based compensation in 2006.





**Transactions
      with Promoters**





NONE





**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT.**





The
      following table sets forth information as of December 31, 2005, with respect
      to
      the ownership of the Friendly Energy Corporation's common stock by each person
      known by Friendly Energy Corporation to be the beneficial owner of more than
      five percent (5%) of Friendly Energy Corporation's common stock, by each
      director and officer and by all officers and directors as a
      group.


29








Name
                of
            
            Address
                of
            
            Amount
                of Shares
            
            %
                ofBeneficial
                Holder
            
            Beneficial
                Holder
            
            Beneficially
                Owned
            
            Outstanding
              Common
                StockDouglas
                Tallant
            
            
            (1
            )
            
            39,416
            
            
            0.1
            %President
                /DirectorDonald
                Trapp
            
            
            (1
            )
            
            439,533
            
            
            1.3
            %DirectorTim
                DeHerrera
            
            
            (1
            )
            
            767,000
            
            
            2.3
            %All
                directors and Officers as a group
            
            
            
            
            
            1,245,949
            
            
            3.7
            %





(1)
      502
      North Division Street, Carson City, NV 89703




Beneficial
      ownership is determined in accordance with the rules of the Securities and
      Exchange Commission and generally includes voting or investment power with
      respect to securities. In accordance with Securities and Exchange Commission
      rules, shares of our common stock which may be acquired upon exercise of stock
      options or warrants which are currently exercisable or which become exercisable
      within 60 days of the date of the table are deemed beneficially owned by the
      optionees. Subject to community property laws, where applicable, the persons
      or
      entities named in the table above have sole voting and investment power with
      respect to all shares of our common stock indicated as beneficially owned by
      them. Currently there are only the stock options listed above issued or
      outstanding.





**Changes
      in Control.** Our
      management is not aware of any arrangements which may result in "changes in
      control" as that term is defined by the provisions of Item 403(c) of Regulation
      S-B.




**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**





NONE





All
      related party transactions are in the normal course of business and are measured
      at the exchange amount, which is the amount of consideration established and
      agreed to by the related parties.





**ITEM
      13. PRINCIPAL ACCOUNTANT FEES AND SERVICES**




1.
      Audit
      Fees: Aggregate fees billed for each of the last two (2) fiscal years for
      professional services rendered by the principal accountant for the audit of
      the
      annual financial statements and review of financial statements included on
      Form
      10-KSB:




2004:
      $0


2005:
      $7,500




2.
      Audit-Related Fees: Aggregate fees billed in each of the last two (2) fiscal
      years for assurance and related services by the principal accountant that are
      reasonably related to the performance of the audit or review of the financial
      statements and are not reported previously.


2004:
      $0


2005:
      $0




3.
      Tax
      Fees: Aggregate fees billed in each of the last two (2) fiscal years for
      professional services rendered by the principal accountant for tax compliance,
      tax advice, and tax planning.


2004:
      $0


2005:
      $0




4.
      All
      Other Fees: Aggregate fees billed in each of the last two (2) fiscal years
      for
      products and services provided by the principal accountant, other than the
      services previously reported.


2004:
      $0


2005:
      $250




5.
      Audit
      Committee Pre-Approval Procedures. The Board of Directors has not, to date,
      appointed an Audit Committee.


30










**ITEM
      14. EXHIBITS**





Exhibit
      31.1 - Amended Section 906 Certification of Periodic Report of the Chief
      Executive Officer.


Exhibit
      31.2 - Amended Section 906 Certification of Periodic Report of the Chief
      Financial Officer.


Exhibit
      32.1 - Amended Section 302 Certification of Periodic Report of the Chief
      Executive Officer.


Exhibit
      32.2 - Amended Section 302 Certification of Periodic Report of the Chief
      Financial Officer.





The
      following documents are incorporated by reference in this Form
      10-KSB/A:





NONE




**SIGNATURES**


Pursuant
      to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
      of
      1934, the Registrant has duly caused to be signed on its behalf by the
      undersigned, whereunto duly authorized.





FRIENDLY
      ENERGY CORPORATION





Date:
      September 14, 2006





By:
      /s/
      Douglas Tallant


---------------------------


Douglas
      Tallant, Director and President




Pursuant
      to the requirements of the Securities and Exchange Act of 1934, this amended
      report has been signed below by the following persons on behalf of the
      registrant and in the capacities and on the dates included.





Date:
      September 14, 2006





By:
      /s/
      Donald Trapp


-----------------------------


Donald
      Trapp, Director





31