**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

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**FORM      10-KSB**

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| (Mark                One)                               |   |                                                                                                                                  |
|---------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------|
| þ                                                  |   | Annual                report pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934     |
|                                                    |   | **For                the fiscal year ended December 31, 2006**                                                                        |
|  **or**                                            |
| **o**                                                   |   | Transition                report pursuant to Section 13 or 15(d) of the Securities Exchange                Act of                1934 |
|                                                    |   | For                the transition period from to                                                                                      |
|                                                    |   |                                                                                                                                  |
|  **Commission                file number 0-31423** |

**FRIENDLY      ENERGY CORPORATION**

| **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**

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

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

**None**

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**ITEM      1. DESCRIPTION OF BUSINESS.**

**Our      Background**

**Our      Business.**

**Our      Oil and Gas Property. **

**ITEM      1A. RISK FACTORS**

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**Accumulated      Losses**

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

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

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

|   | · | 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 |
|--------|--------|-------------------------------------------------------------------------|

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

**Exploration      and Production Risks**

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**Financing      Risks**

**Risks      Associated with Management of Growth**

**Conflicts      of Interest**

**ITEM      2. DESCRIPTION OF PROPERTY.**

| Property                            |   | December 31, 2006 |    | December 31, 2005 |   |
|-------------------------------------|--------|-----------------------------|---------|-----------------------------|--------|
|                                |   |                        |    |                        |   |
| Cash                and equivalents |   | $                           | 1,191   |                        | $      | -0- |   |
| Equipment                           |   | $                           | 3,470   |                        | $      | 1,181 |   |
| LLC                Investment       |   | $                           | 1,000   |                        | $      | -0- |   |
| Asher                #1 Well        |   | $                           | 103,077 |                        | $      | -0- |   |
| West                Peach Project   |   | $                           | 36,970  |                        | $      | -0- |   |

----

**Facilities.**

**ITEM      3. LEGAL PROCEEDINGS.**

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

NONE

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

| Quarter                            |   | High |   | Low    |   |
|------------------------------------|--------|------|--------|--------|--------|
| 2003                First Quarter  |   | $    | 0.002  |   | $      | 0.002 |   |
| 2003                Second Quarter |   | $    | 0.002  |   | $      | 0.002 |   |
| 2003                Third Quarter  |   | $    | 0.002  |   | $      | 0.002 |   |
| 2003                Fourth Quarter |   | $    | 0.002  |   | $      | 0.002 |   |
| 2004                First Quarter  |   | $    | 0.002  |   | $      | 0.002 |   |
| 2004                Second Quarter |   | $    | 0.010  |   | $      | 0.010 |   |
| 2004                Third Quarter  |   | $    | 0.001  |   | $      | 0.001 |   |
| 2004                Fourth Quarter |   | $    | 0.001  |   | $      | 0.001 |   |
| 2005                First Quarter  |   | $    | 0.060  |   | $      | 0.042 |   |
| 2005                Second Quarter |   | $    | 0.065  |   | $      | 0.055 |   |
| 2005                Third Quarter  |   | $    | 0.078  |   | $      | 0.063 |   |
| 2005                Fourth Quarter |   | $    | 0.051  |   | $      | 0.040 |   |
| 2006                First Quarter  |   | $    | 0.188  |   | $      | 0.050 |   |
| 2006                Second Quarter |   | $    | 0.120  |   | $      | 0.055 |   |
| 2006                Third Quarter  |   | $    | 0.135  |   | $      | 0.060 |   |
| 2006                Fourth Quarter |   | $    | 0.079  |   | $      | 0.040 |   |

**Common      Stock**

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**Dividends**

**Sales      of Securities**

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

**Liquidity      and Capital Resources.**

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**Results      of Operations**

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

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**ITEM      7. FINANCIALS**

**REPORT      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

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|                                                                                                                                                                                     |   | December 31, 2006 |       | December 31, 2005 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|-----------------------------|--------|
|  ASSETS                                                                                                                                                                             |   |
|                                                                                                                                                                                     |   |                        |       |                        |   |
| Current                  assets                                                                                                                                                          |   |                        |       |                        |   |   |   |
| Checking                  Account                                                                                                                                                        |   | $                           | 748        |                        | $      | - |   |
| Advances                                                                                                                                                                                 |   |                        | 443        |                        |   | - |   |
| Total                  current assets                                                                                                                                                    |   |                        | 1,191      |                        |   | - |   |
|                                                                                                                                                                                     |   |                        |       |                        |   |   |   |
| Other                  Assets                                                                                                                                                            |   |                        |       |                        |   |   |   |
| Property                  and equipment, net                                                                                                                                             |   |                        | 3,470      |                        |   | 1,181 |   |
| Investment                                                                                                                                                                               |   |                        | 1,000      |                        |   | - |   |
| Asher                  #1 Oil Well                                                                                                                                                       |   |                        | 103,077    |                        |   | - |   |
| West                  Peach Project                                                                                                                                                      |   |                        | 36,970     |                        |   | - |   |
| Total                  Other Assets                                                                                                                                                      |   |                        | 144,517    |                        |   | 1,181 |   |
|                                                                                                                                                                                     |   |                        |       |                        |   |   |   |
| Total                  assets                                                                                                                                                            |   | $                           | 145,708    |                        | $      | 1,181 |   |
|                                                                                                                                                                                     |   |                        |       |                        |   |   |   |
|  LIABILITIES                  AND STOCKHOLDERS' DEFICIT                                                                                                                             |   |
|                                                                                                                                                                                     |   |                        |       |                        |   |   |   |
| Current                  liabilities                                                                                                                                                     |   |                        |       |                        |   |   |   |
| Accounts                  Payable                                                                                                                                                        |   | $                           | 123,747    |                        | $      | 74,351 |   |
| Payroll                  Tax Liabilities                                                                                                                                                 |   |                        | 70,285     |                        |   | 51,937 |   |
| Judgement                  payable                                                                                                                                                       |   |                        | 177,489    |                        |   | 160,666 |   |
| Deferred                  Salaries                                                                                                                                                       |   |                        | 506,000    |                        |   | 242,000 |   |
| Interest                  Payable                                                                                                                                                        |   |                        | 69,282     |                        |   | 29,507 |   |
| Loan                  Payable                                                                                                                                                            |   |                        | 482,981    |                        |   | - |   |
| Loans                  Payable-Related Parties                                                                                                                                           |   |                        | 27,878     |                        |   | 34,335 |   |
| Total                  current liabilities                                                                                                                                               |   |                        | 1,457,662  |                        |   | 592,796 |   |
|                                                                                                                                                                                     |   |                        |       |                        |   |   |   |
| Total                  liabilities                                                                                                                                                       |   |                        | 1,457,662  |                        |   | 592,796 |   |
|                                                                                                                                                                                     |   |                        |       |                        |   |   |   |
| Stockholders'                  deficit                                                                                                                                                   |   |                        |       |                        |   |   |   |
| Common                  stock, $0.001 par value; 100,000,000 shares authorized, 43,593,893                  and                  33,576,973 shares, respectively, issued and outstanding |   |                        | 43,594     |                        |   | 33,577 |   |
| Preferred                  Stock, $0.001 par value, 10,000,000 shares authorized, 1,259,923                  and                  1,933,061 shares, respectively, issued and outstanding |   |                        | 1,260      |                        |   | 1,933 |   |
| Additional                  paid-in capital                                                                                                                                              |   |                        | 2,360,611  |                        |   | 2,265,708 |   |
| Accumulated                  deficit                                                                                                                                                     |   |                        | (3,717,419 | )                           |   | (2,892,833 | ) |
| Total                  stockholders' deficit                                                                                                                                             |   |                        | (1,311,954 | )                           |   | (591,615 | ) |
|                                                                                                                                                                                     |   |                        |            |                        |   |  |   |
| Total                  liabilities and stockholders' deficit                                                                                                                             |   | $                           | 145,708    |                        | $      | 1,181 |   |

----

|                                                                          |   |                                          |       |                                          |   |  From Inception     |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|-----------------------------------------------|--------|-----------------------------------------|--------|
|                                                                          |   |                                          |       |                                          |   |  (January 7, 1993)  |   |
|                                                                          |   |  For the year ended  |       |  For the year ended  |   |  through                      |   |
|                                                                          |   |  December 31, 2006        |       |  December 31, 2005        |   |  December 31, 2006  |   |
|                                                                          |   |                                          |       |                                          |   |                                    |   |
| Revenue                                                                       |   | $                                             | -          |                                          | $      | -                                       |   | $ | - |   |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Operating                  expenses                                           |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Amortization                  Expense                                         |   |                                          | -          |                                          |   | -                                       |   |   | 30,000 |   |
| Depreciation                                                                  |   |                                          | 1,821      |                                          |   | 5,250                                   |   |   | 42,358 |   |
| Dry                  Hole Cost                                                |   |                                          | 86,809     |                                          |   | -                                       |   |   | 86,809 |   |
| Intangible                  Drilling Costs                                    |   |                                          | 315,253    |                                          |   | -                                       |   |   | 315,253 |   |
| Legal                  Fees                                                   |   |                                          | 4,625      |                                          |   | 9,045                                   |   |   | 69,828 |   |
| Officer                  Wages                                                |   |                                          | 264,000    |                                          |   | 242,000                                 |   |   | 506,000 |   |
| Oil                  Well Operations Cost                                     |   |                                          | 472        |                                          |   | -                                       |   |   | 472 |   |
| Payroll                  Expenses                                             |   |                                          | 18,348     |                                          |   | 14,669                                  |   |   | 246,245 |   |
| Professional                  Fees                                            |   |                                          | 19,884     |                                          |   | 7,235                                   |   |   | 563,839 |   |
| Rent                                                                          |   |                                          | -          |                                          |   | -                                       |   |   | 237,406 |   |
| Stock                  Based Compensation                                     |   |                                          | 24,929     |                                          |   | 237,429                                 |   |   | 459,683 |   |
| Telephone                                                                     |   |                                          | 10,179     |                                          |   | 986                                     |   |   | 40,554 |   |
| Travel                  & Entertainment                                   |   |                                          | 8,279      |                                          |   | 4,371                                   |   |   | 134,886 |   |
| General                  and administrative                                   |   |                                          | 13,389     |                                          |   | 3,192                                   |   |   | 171,902 |   |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Total                  operating expenses                                     |   |                                          | 767,988    |                                          |   | 524,177                                 |   |   | 2,905,235 |   |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Loss                  from operations                                         |   |                                          | (767,988   | )                                             |   | (524,177                                | )      |   | (2,905,235 | ) |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Other                  income (expenses):                                     |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Other                  income                                                 |   |                                          | -          |                                          |   | -                                       |   |   | 452 |   |
| Forgiveness                  of Debt                                          |   |                                          | -          |                                          |   | -                                       |   |   | (122,765 | ) |
| Impairment                  Loss on Asset                                     |   |                                          | -          |                                          |   | -                                       |   |   | (442,800 | ) |
| Interest                  Expense                                             |   |                                          | (56,598    | )                                             |   | (57,094                                 | )      |   | (137,071 | ) |
| Lawsuit                  Judgement                                            |   |                                          | -          |                                          |   | (110,000                                | )      |   | (110,000 | ) |
| Total                  other income (expenses)                                |   |                                          | (56,598    | )                                             |   | (167,094                                | )      |   | (812,184 | ) |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Loss                  before provision for income taxes                       |   |                                          | (824,586   | )                                             |   | (691,271                                | )      |   | (3,717,419 | ) |
| Provision                  for income taxes                                   |   |                                          | -          |                                          |   | -                                       |   |   | - |   |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Net                  loss                                                     |   | $                                             | (824,586   | )                                             | $      | (691,271                                | )      | $ | (3,717,419 | ) |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Basic                  and diluted loss per common share                      |   | $                                             | (0.02      | )                                             | $      | (0.03                                   | )      | $ | (0.31 | ) |
|                                                                          |   |                                          |       |                                          |   |                                    |   |   |   |   |
| Basic                  and diluted weighted average common shares outstanding |   |                                          | 38,585,433 |                                          |   | 23,130,973                              |   |   | 12,164,261 |   |

----

|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     | Additional    |   |    |   | Total   |    |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|----------------------------------|--------|---------|--------|-------------|----------|---------------|--------|---------|--------|---------|---------|
|                                                                                                                                        |   | Common                  Stock |       | Preferred                  Stock |   | Paid-in |   | Accumulated |     | Stockholders' |   |
|                                                                                                                                        |   | Shares                        |       | Amount                           |   | Shares  |   | Amount      |     | Capital       |   | Deficit |   | Deficit |    |
| Balance                  at January 7, 1993 (Date of inception)                                                                             |   |                          | 0          |                             | $      | 0       |   |        | 0        |          | $      | 0       |   | $       | 0       |   | $ | 0 |   | $ | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares issued to officers & directors for cash, $0.016 per                  share                               |   |                          | 63,750     |                             |   | 64      |   |        | 0        |          |   | 0       |   |    | 936     |   |   | 0 |   |   | 1,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Net                  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 | ) |   | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares cancelled                                                                                                    |   |                          | (63,750    | )                                |   | (64     | )      |        | 0        |          |   | 0       |   |    | 64      |   |   | 0 |   |   | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares issued for cash, $0.00 per share                                                                             |   |                          | 2,500,000  |                             |   | 2,500   |   |        | 0        |          |   | 0       |   |    | (2,490  | ) |   | 0 |   |   | 10 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Conversion                  to preferred stock                                                                                              |   |                          | (500,000   | )                                |   | (500    | )      |        | 50,000   |          |   | 50      |   |    | 450     |   |   | 0 |   |   | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Net                  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 | ) |   | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares issued relating to spin-out                                                                                  |   |                          | 15,223     |                             |   | 15      |   |        | 0        |          |   | 0       |   |    | (15     | ) |   | 0 |   |   | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares issued for cash, $0.80 per share                                                                             |   |                          | 37,500     |                             |   | 37      |   |        | 0        |          |   | 0       |   |    | 29,963  |   |   | 0 |   |   | 30,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares issued to officers and directors for cash, $0.685 per                  share                                 |   |                          | 43,750     |                             |   | 44      |   |        | 0        |          |   | 0       |   |    | 29,956  |   |   | 0 |   |   | 30,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Preferred                  shares issued to officers and directors for services, $0.04 per                  share                           |   |                          | 0          |                             |   | 0       |   |        | 750,000  |          |   | 750     |   |    | 29,250  |   |   | 0 |   |   | 30,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Net                  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 | ) |   | 26,734 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares issued for cash, $1.74 per share                                                                             |   |                          | 9,750      |                             |   | 10      |   |        | 0        |          |   | 0       |   |    | 16,990  |   |   | 0 |   |   | 17,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Common                  shares issued to officers and directors for services,                  $0.004                                       |   |                          | 2,625,000  |                             |   | 2,625   |   |        | 0        |          |   | 0       |   |    | 7,875   |   |   |   |   |   | 10,500 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Conversion                  of preferred stock                                                                                              |   |                          | 8,000,000  |                             |   | 8,000   |   |        | (800,000 | )             |   | (800    | )      |    | (7,200  | ) |   | 0 |   |   | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Net                  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 | ) |   | 21,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Cancellation                  of common stock                                                                                               |   |                          | (46,250    | )                                |   | (46     | )      |        | 0        |          |   | 0       |   |    | 46      |   |   | 0 |   |   | 0 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Preferred                  shares issued for debt settlement, $3.69 per share                                                               |   |                          | 0          |                             |   | 0       |   |        | 146,883  |          |   | 147     |   |    | 541,853 |   |   | 0 |   |   | 542,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Preferred                  shares issued for services, $3.69 per share                                                                      |   |                          | 0          |                             |   | 0       |   |        | 5,000    |          |   | 5       |   |    | 18,445  |   |   | 0 |   |   | 18,450 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| 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 | ) |   | 25,141 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Preferred                  shares issued for debt settlement, $3.69 per share                                                               |   |                          | 0          |                             |   | 0       |   |        | 174,798  |          |   | 175     |   |    | 644,825 |   |   | 0 |   |   | 645,000 |   |
|                                                                                                                                        |   |                          |       |                             |   |    |   |        |     |          |   |    |   |    |    |   |   |   |   |   |   |   |
| Issuance                  of stock related to merger with Friendly Energy Services, Inc.,                  $3.69 per                  share |   |                          | 0          |                             |   | 0       |   |        | 120,000  |          |   | 120     |   |    | 442,680 |   |   | 0 |   |   | 442,800 |   |

----

|                                                                                                              |   |                          |       |                             |   |    |   |        |       | Additional    |   |    |   | Total   |      |
|-------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|----------------------------------|--------|---------|--------|-------------|------------|---------------|--------|---------|--------|---------|-----------|
|                                                                                                              |   | Common                  Stock |       | Preferred                  Stock |   | Paid-in |   | Accumulated |       | Stockholders' |   |
|                                                                                                              |   | Shares                        |       | Amount                           |   | Shares  |   | Amount      |       | Capital       |   | Deficit |   | Deficit |      |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |
| Preferred                  shares issued for services, $3.69 per share                                            |   |                          | 0          |                             |   | 0       |   |        | 37,500     |          |   | 37      |   |    | 138,338   |   |   | 0 |   |   | 138,375 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Net                  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 | ) |   | 336,805 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Net                  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 |   |   | 148,654 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Net                  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 | ) |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| 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 |   |   | 10,000 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Common                  shares issued for servicees, $0.05 per share                                              |   |                          | 250,000    |                             |   | 250     |   |        | 0          |          |   | 0       |   |    | 12,250    |   |   | 0 |   |   | 12,500 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Common                  shares issued to officers and directors for services, $0.04 per                  share    |   |                          | 500,000    |                             |   | 500     |   |        | 0          |          |   | 0       |   |    | 19,500    |   |   | 0 |   |   | 20,000 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Preferred                  shares issued to officers and directors for services, $0.40 per                  share |   |                          | 0          |                             |   | 0       |   |        | 450,000    |          |   | 450     |   |    | 179,550   |   |   | 0 |   |   | 180,000 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Conversion                  of preferred stock                                                                    |   |                          | 19,742,000 |                             |   | 19,742  |   |        | (1,974,200 | )             |   | (1,974  | )      |    | (17,768   | ) |   | 0 |   |   | 0 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Issuance                  of stock options to two officers                                                        |   |                          | 0          |                             |   | 0       |   |        | 0          |          |   | 0       |   |    | 24,929    |   |   | 0 |   |   | 24,929 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Net                  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 | ) |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Common                  shares issued for cash, $0.05                                                             |   |                          | 500,000    |                             |   | 500     |   |        | -          |          |   | -       |   |    | 24,500    |   |   |   |   |   | 25,000 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Conversion                  of preferred stock                                                                    |   |                          | 9,516,920  |                             |   | 9,517   |   |        | (951,692   | )             |   | (952    | )      |    | (8,565    | ) |   | - |   |   | - |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Issuance                  of stock options to 2 officers (2nd half vested)                                        |   |                          | -          |                             |   | -       |   |        | -          |          |   | -       |   |    | 24,929    |   |   | - |   |   | 24,929 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Preferred                  shares issued for debt settlement, $0.195 per share                                    |   |                          | -          |                             |   | -       |   |        | 278,554    |          |   | 279     |   |    | 54,039    |   |   | - |   |   | 54,318 |   |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Net                  Loss                                                                                         |   |                          | -          |                             |   | -       |   |        | -          |          |   | -       |   |    | -         |   |   | (824,586 | ) |   | (824,586 | ) |
|                                                                                                              |   |                          |       |                             |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Balance,                  December 31, 2006                                                                       |   |                          | 43,593,893 |                             |   | 43,594  |   |        | 1,259,923  |          |   | 1,260   |   |    | 2,360,611 |   |   | (3,717,419 | ) |   | (1,311,954 | ) |

----

|                                                                                                          |   |                                    |     |                                    |   | From Inception          |   |
|---------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|-----------------------------------------|--------|-----------------------------------|--------|
|                                                                                                          |   |                                    |     |                                    |   | (January 7, 1993)  |   |
|                                                                                                          |   | For the year ended  |     | For the year ended  |   | through                      |   |
|                                                                                                          |   | December 31, 2006        |     | December 31, 2005        |   | December 31, 2006  |   |
| Cash                  flows from operating activities:                                                        |   |                                    |     |                                    |   |                              |   |   |   |   |
| Net                  loss                                                                                     |   | $                                       | (824,586 | )                                       |   | (691,271                          | )      |   | (4,545,684 | ) |
| Adjustments                  to reconcile net loss to net cash used by operating                  activities: |   |                                    |     |                                    |   |                              |   |   |   |   |
| Depreciation                                                                                                  |   |                                    | 1,821    |                                    |   | 5,250                             |   |   | 42,358 |   |
| Stock                  Based Compensation                                                                     |   |                                    | 24,929   |                                    |   | 237,429                           |   |   | 459,683 |   |
| Impairment                  Loss                                                                              |   |                                    | -        |                                    |   | -                                 |   |   | 442,800 |   |
| Changes                  in operating assets and liabilities:                                                 |   |                                    |     |                                    |   |                              |   |   |   |   |
| Accounts                  Payable                                                                             |   |                                    | 49,444   |                                    |   | 494                               |   |   | 123,795 |   |
| Advances                                                                                                      |   |                                    | (443     | )                                       |   | -                                 |   |   | (443 | ) |
| Judgement                  payable                                                                            |   |                                    | 16,823   |                                    |   | 110,000                           |   |   | 126,823 |   |
| Interest                  Payable                                                                             |   |                                    | 39,775   |                                    |   | 57,094                            |   |   | 119,948 |   |
| Payroll                  Liabilities                                                                          |   |                                    | 18,348   |                                    |   | 14,669                            |   |   | 73,964 |   |
| Deferred                  Salaries                                                                            |   |                                    | 264,000  |                                    |   | 242,000                           |   |   | 506,000 |   |
| Loans                  Payable                                                                                |   |                                    | 482,981  |                                    |   |                              |   |   | 482,981 |   |
| Loans                  Payable-Related Parties                                                                |   |                                    | 47,861   |                                    |   | 14,335                            |   |   | 82,196 |   |
| Net                  cash used by operating activities                                                        |   |                                    | 120,953  |                                    |   | (10,000                           | )      |   | (2,085,579 | ) |
|                                                                                                          |   |                                    |     |                                    |   |                              |   |   |   |   |
| Cash                  flows from investing activities:                                                        |   |                                    |     |                                    |   |                              |   |   |   |   |
| Purchase                  of property and equipment                                                           |   |                                    | (4,110   | )                                       |   | -                                 |   |   | (45,828 | ) |
| Investment                                                                                                    |   |                                    | (1,000   | )                                       |   | -                                 |   |   | (1,000 | ) |
| Asher                  #1 Oil Well                                                                            |   |                                    | (103,077 | )                                       |   | -                                 |   |   | (103,077 | ) |
| West                  Peach Project                                                                           |   |                                    | (36,970  | )                                       |   | -                                 |   |   | (36,970 | ) |
| Net                  cash used by investing activities                                                        |   |                                    | (145,157 | )                                       |   | -                                 |   |   | (186,875 | ) |
|                                                                                                          |   |                                    |     |                                    |   |                              |   |   |   |   |
| Cash                  flows from financing activities:                                                        |   |                                    |     |                                    |   |                              |   |   |   |   |
| Proceeds                  from issuance of common stock                                                       |   |                                    | 25,000   |                                    |   | 10,000                            |   |   | 113,010 |   |
| Proceeds                  on borrowings from related parties                                                  |   |                                    | -        |                                    |   | -                                 |   |   | 1,335,654 |   |
| Net                  cash provided by financing activities                                                    |   |                                    | 25,000   |                                    |   | 10,000                            |   |   | 1,448,664 |   |
|                                                                                                          |   |                                    |     |                                    |   |                              |   |   |   |   |
| Net                  increase in cash                                                                         |   |                                    | 796      |                                    |   | -                                 |   |   | (823,790 | ) |
|                                                                                                          |   |                                    |     |                                    |   |                              |   |   |   |   |
| Cash,                  beginning of period                                                                    |   |                                    | (48      | )                                       |   | -                                 |   |   | (48 | ) |
|                                                                                                          |   |                                    |     |                                    |   |                              |   |   |   |   |
| Cash,                  end of period                                                                          |   | $                                       | 748      |                                    | $      | -                                 |   | $ | (823,838 | ) |

----

| 1. | DESCRIPTION                  OF BUSINESS, HISTORY AND SUMMARY OF SIGNIFICANT                  POLICIES |
|----|--------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                             |   | 2006   |     | 2005   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|
|                                                                                                                                                                                                             |   |   |     |   |   |
| Net                  loss as reported                                                                                                                                                                            |   | $      | (824,586 | )      | $      | (691,271 | ) |
| Add:                  Stock-based employee compensation expense included in reported                  loss, net                  of related tax effects                                                          |   |   | 24,929   |   |   | 24,929 |   |
| Deduct:                  Total stock-based employee compensation expense determined under                  fair                  value based methods of all awards, net of related tax                  effects. |   | $      | (24,929  | )      | $      | (24,929 | ) |
|                                                                                                                                                                                                             |   |   |     |   |   |   |   |
| Proforma                  net loss                                                                                                                                                                               |   | $      | (824,586 | )      | $      | (691,271 | ) |
|                                                                                                                                                                                                             |   |   |     |   |   |   |   |
| Net                  loss per common share                                                                                                                                                                       |   | $      | (0.02    | )      | $      | (0.03 | ) |
|                                                                                                                                                                                                             |   |   |     |   |   |   |   |
| Basic                  and diluted loss, pro forma                                                                                                                                                               |   | $      | (0.02    | )      | $      | (0.03 | ) |

----

*Accounting        for Certain Hybrid Financial Instruments*
*Accounting        for Derivative Instruments and Hedging Activities*
*Accounting        for Transfers and Servicing of Financial Assets and Extinguishments of        Liabilities*

*Accounting        for Servicing of Financial Assets *

----

| 2. | FIXED                  ASSETS |
|----|-------------------------------|

|                                                                |   | 2006   |    | 2005   |   |
|---------------------------------------------------------------------|--------|--------|---------|--------|--------|
| Furniture                  and fixtures                             |   | $      | 20,102  |   | $      | 20,102 |   |
| Computers                  and equipment                            |   |   | 25,726  |   |   | 21,616 |   |
|                                                                |   |   | 45,828  |   |   | 41,718 |   |
| Less:                  accumulated depreciation                     |   |   | (42,358 | )      |   | (40,537 | ) |
| Net                  Furniture, fixtures, computers & equipment |   |   | 3,470   |   |   | 1,181 |   |
| LLC                  Investment                                     |   |   | 1,000   |   |   | 0 |   |
| West                  Peach Exploration Costs                       |   |   | 36,970  |   |   | 0 |   |
| Asher                  #1 Oil Well                                  |   |   | 103,077 |   |   | 0 |   |
| Total                  Fixed Assets                                 |   |   | 144,517 |   |   | 1,181 |   |

| 3. | RELATED                  PARTY TRANSACTIONS |
|----|---------------------------------------------|

|                                                                                                                                               |   | 2006   |   | 2005   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Notes                  payable from officers of the Company bearing interest at 8% unsecured                  and                  due on demand   |   | $      | 7,877  |   | $      | 14,335 |   |
|                                                                                                                                               |   |   |   |   |   |   |   |
| Note                  payable from an officer of the Company bearing interest at 8%,                  unsecured                  and due on demand |   |   | 20,000 |   |   | 20,000 |   |
|                                                                                                                                               |   | $      | 27,877 |   | $      | 34,335 |   |

| 4. | OTHER                  CURRENT LIABILITIES |
|----|--------------------------------------------|

**$**

----

| 5. | STOCKHOLDERS’                  DEFICIT |
|----|----------------------------------------------|

|   | 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. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | aa) | On                  January 9, 2006, 150,000 shares of the company’s preferred stock were                  converted to 1,500,000 shares of common                  stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | bb) | On                  February 10, 2006, 150,000 shares of the company’s preferred stock were                  converted to 1,500,000 shares of common                  stock. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | cc) | On                  March 1, 2006, 150,000 shares of the company’s preferred stock were                  converted to 1,500,000 shares of common                  stock. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | dd) | On                  March 6, 2006, 496,692 shares of the company’s preferred stock were                  converted to 4,966,920 shares of common                  stock. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ee) | On                  July 18, 2006, the Company issued 500,000 shares of common stock                  for cash                  at $0.050 per share. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ff) | On                  August 11, 2006, 5,000 shares of the company’s preferred stock were                  converted to 50,000 shares of common                  stock. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 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. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | z) | On                  September 29, 2006, the company issued 278,554 shares of preferred                  stock                  in stock in satisfaction of debt valued at $0.195 per                  share. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6. | STOCK                  OPTIONS |
|----|--------------------------------|

|                                         |   | Number                  of                  Shares |      | Weighted                  Average                  Exercise Price |   |
|----------------------------------------------|--------|----------------------------------------------------|-----------|------------------------------------------------------------------------|--------|
| Balance,                  December 31, 2004  |   |                                               | —   |                                                                   | $      | — |   |
| Options                  granted and assumed |   |                                               | 1,000,000 |                                                                   |   | .05 |   |
| Options                  expired             |   |                                               | —   |                                                                   |   | — |   |
| Options                  canceled            |   |                                               | —   |                                                                   |   | — |   |
| Options                  exercised           |   |                                               | —   |                                                                   |   | — |   |
| Balance,                  December 31, 2005  |   |                                               | —   |                                                                   | $      | — |   |
| Options                  granted and assumed |   |                                               | 1,500,000 |                                                                   |   | .0625 |   |
| Options                  expired             |   |                                               | —   |                                                                   |   | — |   |
| Options                  canceled            |   |                                               | —   |                                                                   |   | — |   |
| Options                  exercised           |   |                                               | —   |                                                                   |   | — |   |
|                                         |   |                                               |      |                                                                   |   |   |   |
| Balance,                  December 31, 2005  |   |                                               | 2,500,000 |                                                                   | $      | .0575 |   |

----

| Number of                  Options Granted                  During 2006 |   | Exercise Price                  Equals, Exceeds or                  is Less Than Mkt.                  Price of Stock                  on Grant Date |           | Weighted                  Average                  Exercise Price |   | Range of                  Exercise Price |   | Weighted                  Average                  Fair Value |                                  |
|----------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|------------------------------------------------------------------------|--------|----------------------------------------------------|--------|--------------------------------------------------------------------|---------------------------------------|
| —                                                                                |   |                                                                                                                                                                                                   | Equals         |                                                                   | $      | —                                            |   | $                                                                  | —                  to $ — |   | $ | — |   |
| —                                                                                |   |                                                                                                                                                                                                   | Exceeds        |                                                                   | $      | —                                            |   | $                                                                  | —                  to $ — |   | $ | — |   |
| 1,500,000                                                                              |   |                                                                                                                                                                                                   | Less Than |                                                                   | $      | 0.0625                                             |   | $                                                                  | 0.0625                  to $0.0625    |   | $ | 0.0625 |   |
|                                                                                   |   |                                                                                                                                                                                                   |           |                                                                   |   |                                               |   |                                                               |                                  |   |   |   |   |
| 1,500,00                                                                               |   |                                                                                                                                                                                                   |           |                                                                   | $      | 0.0625                                             |   | $                                                                  | 0.0625 to $0.0625           |   | $ | 0.0625 |   |

| 7. | COMMITMENTS                  AND CONTINGENCIES |
|----|------------------------------------------------|

| 8. | LITIGATION |
|----|------------|

| 9. | SUBSEQUENT                  EVENTS |
|----|------------------------------------|

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

----

**ITEM      8A. CONTROLS AND PROCEDURES**

**Evaluation      Of Disclosure Controls And Procedures**

**Management's      Report On Internal Control Over Financial Reporting**

**Changes      In Internal Controls**

**Code      of Ethics**

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

|                           |   |   |   |                                      |   | DATE                OF APPOINTMENT   |
|--------------------------------|--------|--------|--------|-------------------------------------------|--------|--------------------------------------|
| NAME                           |   | AGE    |   | POSITION                                  |   | TO                BOARD OF DIRECTORS |
|                           |   |   |   |                                      |   |                                 |
| Douglas                Tallant |   | 62     |   | President & Director        |   | February 6, 2002           |
| Donald Trapp              |   | 67     |   | CFO, Secretary, Treasurer  |   | February 8, 2005           |
|                           |   |   |   | & Director                       |   |                                 |
| Tim DeHerrera             |   | 48     |   | Vice President                       |   | April                4, 2005         |

----

**Section      16(a) Beneficial Ownership Reporting Compliance**

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

| Name of Individual or |   | Capacities in which       |                                              | Aggregate Remuneration |   |          |   |
|--------------------------------------|--------|-------------------------------------|---------------------------------------------------|-----------------------------|--------|---------------|--------|
| Identity of Group     |   | Remuneration was received |                                              | For 2004               |   | For 2005 |   | For 2006 |   |
| Douglas                Tallant       |   |                                | President                and Director             |                        | $      | -0-           |   | $ | 132,000 |   | $ | 144,000 |   |
| Donald                Trapp          |   |                                | Director,                Secretary &Treasurer |                        | $      | -0-           |   | $ | 55,000 |   | $ | 60,000 |   |
| Tim                DeHerrera         |   |                                | Vice                President                     |                        | $      | -0-           |   | $ | 55,000 |   | $ | 60,000 |   |

**Stock      Based Compensation**

**Transactions      with Promoters**

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

| Name of                                    |   | Address of        |   | Amount of Shares |   | % of Outstanding |   |
|------------------------------------------------------|--------|------------------------|--------|----------------------------|--------|----------------------------|--------|
| Beneficial Holder                               |   | Beneficial Holder |   | Beneficially Owned    |   | Common Stock          |   |
|                                                 |   |                   |   |                       |   |                       |   |
| Douglas                Tallant                       |   |                   |   | (1)                        |   | 39,416                     |   |   | 0.1 | % |
| President                /Director                   |   |                   |   |                       |   |                       |   |   |   |   |
|                                                 |   |                   |   |                       |   |                       |   |   |   |   |
| Donald                Trapp                          |   |                   |   | (1)                        |   | 439,533                    |   |   | 1.0 | % |
| Director                                             |   |                   |   |                       |   |                       |   |   |   |   |
|                                                 |   |                   |   |                       |   |                       |   |   |   |   |
| Tim                DeHerrera                         |   |                   |   | (1)                        |   | 767,000                    |   |   | 1.8 | % |
|                                                 |   |                   |   |                       |   |                       |   |   |   |   |
| All                directors and Officers as a group |   |                   |   |                       |   | 1,245,949                  |   |   | 2.9 | % |

----

**Changes      in Control.**

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

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

**ITEM      14. EXHIBITS**

----

**SIGNATURES**

| By:                /s/ Douglas Tallant                 |   |
|--------------------------------------------------------|--------|
| Douglas                Tallant, Director and President |   |

| By:                /s/ Donald Trapp   |   |
|---------------------------------------|--------|
| Donald                Trapp, Director |   |

----