**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, 2007**                                                                                                                                               |
|  **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**

----

**Financing      Risks**

**Risks      Associated with Management of Growth**

**Conflicts      of Interest**

**ITEM      2. DESCRIPTION OF PROPERTY.**

| Property                            |   | December 31, 2007 |    | December 31, 2006 |   |
|-------------------------------------|--------|-----------------------------|---------|-----------------------------|--------|
| Cash                and equivalents |   | $                           | 728     |                        | $      | 1,191 |   |
| Notes                               |   | $                           | 319,000 |                        | $      | -0- |   |
| Equipment                           |   | $                           | 2,466   |                        | $      | 3,470 |   |
| LLC                Investment       |   | $                           | 1,000   |                        | $      | 1,000 |   |
| Asher                #1 Well        |   | $                           | 103,077 |                        | $      | 103,077 |   |
| Asher                #2 Project     |   | $                           | 5,008   |                        | $      | -0- |   |
| West                Peach Project   |   | $                           | 52,005  |                        | $      | 36,970 |   |

----

**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 |   |
| 2007                First Quarter  |   | $    | 0.069  |   | $      | 0.020 |   |
| 2007                Second Quarter |   | $    | 0.105  |   | $      | 0.036 |   |
| 2007                Third Quarter  |   | $    | 0.065  |   | $      | 0.032 |   |
| 2007                Fourth Quarter |   | $    | 0.032  |   | $      | 0.010 |   |

**Common      Stock**

----

**Dividends**

**Sales      of Securities**

|   | a) | On                February 22, 2007, 500,000 common shares were sold to a non-related                party                for $25,000. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------|

|   | b) | On                June 1, 2007, 8,900,000 common shares were sold on notes for                $178,000. |
|--------|----|---------------------------------------------------------------------------------------------------------|

|   | c) | On                August 16, 2007, 4,700,000 common shares were sold on a note for                $94,000. |
|--------|----|------------------------------------------------------------------------------------------------------------|

|  | d) | On                October 1, 2007, 4,700,000 common shares were sold on a note for                $47,000. |
|--|----|------------------------------------------------------------------------------------------------------------|

|  | e) | On                October 4, 2007, 400,000 shares were sold to a non-related party                for                $10,000. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------|

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

----

**Liquidity      and Capital Resources.**

**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**

----

|                                                                                                                                                                                     |   | December 31, 2007 |       | December 31, 2006  |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|-----------------------------------|--------|
| ASSETS                                                                                                                                                                                   |   |
| Current                  assets                                                                                                                                                          |   |                        |       |                              |   |   |   |
| Cash                  and cash equivalents                                                                                                                                               |   | $                           | 268        |                              | $      | 748 |   |
| Advances                                                                                                                                                                                 |   |                        | 360        |                              |   | 443 |   |
| Total                  current assets                                                                                                                                                    |   |                        | 628        |                              |   | 1,191 |   |
| Other                  Assets                                                                                                                                                            |   |                        |       |                              |   |   |   |
| Property                  and equipment, net                                                                                                                                             |   |                        | 2,466      |                              |   | 3,470 |   |
| Investment                                                                                                                                                                               |   |                        | 1,000      |                              |   | 1,000 |   |
| Notes                                                                                                                                                                                    |   |                        | 319,000    |                              |   |   |   |
| Asher                  #1 Oil Well                                                                                                                                                       |   |                        | 103,077    |                              |   | 103,077 |   |
| Asher                  #2 Project                                                                                                                                                        |   |                        | 5,008      |                              |   |   |   |
| West                  Peach Project                                                                                                                                                      |   |                        | 52,005     |                              |   | 36,970 |   |
| Total                  Other Assets                                                                                                                                                      |   |                        | 482,556    |                              |   | 144,517 |   |
|                                                                                                                                                                                     |   |                        |       |                              |   |   |   |
| Total                  Assets                                                                                                                                                            |   | $                           | 483,184    |                              | $      | 145,708 |   |
|                                                                                                                                                                                     |   |                        |       |                              |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS' DEFICIT                                                                                                                                   |
| LIABILITIES                                                                                                                                                                              |   |                        |       |                              |   |   |   |
| Current                  liabilities                                                                                                                                                     |   |                        |       |                              |   |   |   |
| Accounts                  Payable                                                                                                                                                        |   | $                           | 158,419    |                              | $      | 123,747 |   |
| Payroll                  Tax Liabilities                                                                                                                                                 |   |                        | 83,085     |                              |   | 70,285 |   |
| Judgement                  payable                                                                                                                                                       |   |                        | 196,074    |                              |   | 177,489 |   |
| Deferred                  Salaries                                                                                                                                                       |   |                        | 348,000    |                              |   | 506,000 |   |
| Interest                  Payable                                                                                                                                                        |   |                        | 143,710    |                              |   | 69,282 |   |
| Loan                  Payable                                                                                                                                                            |   |                        | 51,569     |                              |   | 482,981 |   |
| Loans                  Payable-Related Parties                                                                                                                                           |   |                        | 7,086      |                              |   | 27,878 |   |
| Total                  current liabilities                                                                                                                                               |   |                        | 987,943    |                              |   | 1,457,662 |   |
|                                                                                                                                                                                     |   |                        |       |                              |   |   |   |
| Total                  liabilities                                                                                                                                                       |   |                        | 987,943    |                              |   | 1,457,662 |   |
| STOCKHOLDERS'                  DEFICIT                                                                                                                                                   |   |                        |       |                              |   |   |   |
| Common                  stock, $0.001 par value; 100,000,000 shares authorized, 69,556,783                  and                  43,593,893 shares, respectively, issued and outstanding |   |                        | 69,557     |                              |   | 43,594 |   |
| Preferred                  Stock, $0.001 par value, 10,000,000 shares authorized, 9,545,856                  and                  1,259,923 shares, respectively, issued and outstanding |   |                        | 9,546      |                              |   | 1,260 |   |
| Additional                  paid-in capital                                                                                                                                              |   |                        | 3,617,826  |                              |   | 2,360,611 |   |
| Accumulated                  deficit in the develoment stage                                                                                                                             |   |                        | (4,201,688 | )                                 |   | (3,717,419 | ) |
| Total                  stockholders' deficit                                                                                                                                             |   |                        | (504,759   | )                                 |   | (1,311,954 | ) |
|                                                                                                                                                                                     |   |                        |            |                              |   |  |   |
| Total                  liabilities and stockholders' deficit                                                                                                                             |   | $                           | 483,184    |                              | $      | 145,708 |   |

----

|                                                                          |   | For the year endedDecember 31, 2007  |       | For the year endedDecember 31, 2006  |   | From InceptionJanuary 7, 1993)through December 31, 2007  |   |
|-------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|------------|--------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |
| Revenue                                                                       |   | $                                                                  | 11,018     |                                                               | $      | -                                                                                           |   | $ | 11,018 |   |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Operating                  expenses                                           |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Amortization                  Expense                                         |   |                                                               | -          |                                                               |   | -                                                                                           |   |   | 30,000 |   |
| Depreciation                                                                  |   |                                                               | 1,004      |                                                               |   | 1,821                                                                                       |   |   | 43,362 |   |
| Dry                  Hole Cost                                                |   |                                                               | 1,348      |                                                               |   | 86,809                                                                                      |   |   | 88,157 |   |
| Intangible                  Drilling Costs                                    |   |                                                               | 17,953     |                                                               |   | 315,253                                                                                     |   |   | 333,206 |   |
| Legal                  Fees                                                   |   |                                                               | 5,907      |                                                               |   | 4,625                                                                                       |   |   | 75,735 |   |
| Officer                  Wages                                                |   |                                                               | 241,000    |                                                               |   | 264,000                                                                                     |   |   | 747,000 |   |
| Oil                  Well Operations Cost                                     |   |                                                               | 6,111      |                                                               |   | 472                                                                                         |   |   | 6,583 |   |
| Payroll                  Expenses                                             |   |                                                               | 12,800     |                                                               |   | 18,348                                                                                      |   |   | 259,045 |   |
| Professional                  Fees                                            |   |                                                               | 5,962      |                                                               |   | 19,884                                                                                      |   |   | 569,801 |   |
| Rent                                                                          |   |                                                               | -          |                                                               |   | -                                                                                           |   |   | 237,406 |   |
| Stock                  Based Compensation                                     |   |                                                               | 93,484     |                                                               |   | 24,929                                                                                      |   |   | 553,167 |   |
| Telephone                                                                     |   |                                                               | 5,451      |                                                               |   | 10,179                                                                                      |   |   | 46,005 |   |
| Travel                  & Entertainment                                   |   |                                                               | 5,951      |                                                               |   | 8,279                                                                                       |   |   | 140,837 |   |
| General                  and administrative                                   |   |                                                               | 5,303      |                                                               |   | 13,389                                                                                      |   |   | 177,205 |   |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Total                  operating expenses                                     |   |                                                               | 402,274    |                                                               |   | 767,988                                                                                     |   |   | 3,307,509 |   |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Loss                  from operations                                         |   |                                                               | (391,256   | )                                                                  |   | (767,988                                                                                    | )      |   | (3,296,491 | ) |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Other                  income (expenses):                                     |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Other                  income                                                 |   |                                                               | -          |                                                               |   | -                                                                                           |   |   | 452 |   |
| Forgiveness                  of Debt                                          |   |                                                               | -          |                                                               |   | -                                                                                           |   |   | (122,765 | ) |
| Impairment                  Loss on Asset                                     |   |                                                               | -          |                                                               |   | -                                                                                           |   |   | (442,800 | ) |
| Interest                  Expense                                             |   |                                                               | (93,013    | )                                                                  |   | (56,598                                                                                     | )      |   | (230,084 | ) |
| Lawsuit                  Judgement                                            |   |                                                               | -          |                                                               |   | -                                                                                           |   |   | (110,000 | ) |
| Total                  other income (expenses)                                |   |                                                               | (93,013    | )                                                                  |   | (56,598                                                                                     | )      |   | (905,197 | ) |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Loss                  before provision for income taxes                       |   |                                                               | (484,269   | )                                                                  |   | (824,586                                                                                    | )      |   | (4,201,688 | ) |
| Provision                  for income taxes                                   |   |                                                               | -          |                                                               |   | -                                                                                           |   |   | - |   |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Net                  loss                                                     |   | $                                                                  | (484,269   | )                                                                  | $      | (824,586                                                                                    | )      | $ | (4,201,688 | ) |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Basic                  and diluted loss per common share                      |   | $                                                                  | (0.01      | )                                                                  | $      | (0.02                                                                                       | )      | $ | (0.26 | ) |
|                                                                          |   |                                                               |       |                                                               |   |                                                                                        |   |   |   |   |
| Basic                  and diluted weighted average common shares outstanding |   |                                                               | 56,575,338 |                                                               |   | 38,585,433                                                                                  |   |   | 15,990,429 |   |

----

|                                                                                                                                              |   |                            |       |                               |   |    |   |        |     | 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 | ) |
|                                                                                                                                           |   |                              |       |                                 |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Preferred                      shares issued for debt settlement, $0.090 per share                                                             |   |                              | -          |                                 |   | -       |   |        | 5,222,222  |          |   | 5,222   |   |    | 464,778   |   |   | - |   |   | 470,000 |   |
|                                                                                                                                           |   |                              |       |                                 |   |    |   |        |       |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Common                      shares issued for notes $0.020                                                                                     |   |                              | 18,300,000 |                                 |   | 18,300  |   |        | -          |          |   | -       |   |    | 300,700   |   |   |   |   |   | 319,000 |   |

----

|                                                                                                                  |   |                            |       |                               |   |    |   |        |      | Additional    |   |    |   | Total   |      |
|-----------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|------------|------------------------------------|--------|---------|--------|-------------|-----------|---------------|--------|---------|--------|---------|-----------|
|                                                                                                                  |   | Common                    Stock |       | Preferred                    Stock |   | Paid-in |   | Accumulated |      | Stockholders' |   |
|                                                                                                                  |   | Shares                          |       | Amount                             |   | Shares  |   | Amount      |      | Capital       |   | Deficit |   | Deficit |      |
|                                                                                                                  |   |                            |       |                               |   |    |   |        |      |          |   |    |   |    |      |
| Issuance                    of stock options to 2 officers (vested)                                                   |   |                            | -          |                               |   | -       |   |        | -         |          |   | -       |   |    | 93,484    |   |   | - |   |   | 93,484 |   |
|                                                                                                                  |   |                            |       |                               |   |    |   |        |      |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Common                    shares issued for cash, $0.05                                                               |   |                            | 500,000    |                               |   | 500     |   |        | -         |          |   | -       |   |    | 24,500    |   |   |   |   |   | 25,000 |   |
|                                                                                                                  |   |                            |       |                               |   |    |   |        |      |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Common                    shares issued for cash, $0.025                                                              |   |                            | 400,000    |                               |   | 400     |   |        | -         |          |   | -       |   |    | 9,580     |   |   |   |   |   | 9,980 |   |
|                                                                                                                  |   |                            |       |                               |   |    |   |        |      |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Preferred                    shares issued to officers and directors for services, $0.10 per                    share |   |                            | -          |                               |   | -       |   |        | 3,740,000 |          |   | 3,740   |   |    | 370,260   |   |   | - |   |   | 374,000 |   |
|                                                                                                                  |   |                            |       |                               |   |    |   |        |      |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Conversion                    of preferred stock                                                                      |   |                            | 6,762,890  |                               |   | 6,763   |   |        | (676,289  | )             |   | (676    | )      |    | (6,087    | ) |   | - |   |   | - |   |
|                                                                                                                  |   |                            |       |                               |   |    |   |        |      |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Net                    Loss                                                                                           |   |                            | -          |                               |   | -       |   |        | -         |          |   | -       |   |    | -         |   |   | (484,269 | ) |   | (484,269 | ) |
|                                                                                                                  |   |                            |       |                               |   |    |   |        |      |          |   |    |   |    |      |   |   |   |   |   |   |   |
| Balance,                    December 31, 2007                                                                         |   |                            | 69,556,783 |                               |   | 69,557  |   |        | 9,545,856 |          |   | 9,546   |   |    | 3,617,826 |   |   | (4,201,688 | ) |   | (504,759 | ) |

----

|                                                                                         |   |                                    |                     |                                    |   | From Inception          |   |
|----------------------------------------------------------------------------------------------|--------|-----------------------------------------|--------------------------|-----------------------------------------|--------|-----------------------------------|--------|
|                                                                                         |   |                                    |                     |                                    |   | (January 7, 1993)  |   |
|                                                                                         |   | For the year ended  |                     | For the year ended  |   | through                      |   |
|                                                                                         |   | December 31, 2007        |                     | December 31, 2006        |   | December 31, 2007  |   |
| Cash                  flows from operating activities:                                       |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Net                  loss                                                                    |   | $                                       | (484,269                 | )                                       |   | (824,586                          | )      |   | (5,029,953 | ) |
| Adjustments                  to reconcile net loss to net cash used by operating activities: |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Depreciation                                                                                 |   |                                    | 1,004                    |                                    |   | 1,821                             |   |   | 43,362 |   |
| Stock                  Based Compensation                                                    |   |                                    | 93,484                   |                                    |   | 24,929                            |   |   | 553,167 |   |
| Impairment                  Loss                                                             |   |                                    | -                        |                                    |   | -                                 |   |   | 442,800 |   |
| Changes                  in operating assets and liabilities:                                |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Accounts                  Payable                                                            |   |                                    | 34,672                   |                                    |   | 49,444                            |   |   | 158,467 |   |
| Advances                                                                                     |   |                                    | 83                       |                                    |   | (443                              | )      |   | (360 | ) |
| Judgement                  payable                                                           |   |                                    | 18,585                   |                                    |   | 16,823                            |   |   | 145,408 |   |
| Interest                  Payable                                                            |   |                                    | 74,428                   |                                    |   | 39,775                            |   |   | 194,376 |   |
| Notes                                                                                        |   |                                    | (319,000                 | )                                       |   |                              |   |   | (319,000 | ) |
| Payroll                  Liabilities                                                         |   |                                    | 12,800                   |                                    |   | 18,348                            |   |   | 86,764 |   |
| Deferred                  Salaries                                                           |   |                                    | 241,000                  |                                    |   | 264,000                           |   |   | 747,000 |   |
| Loans                  Payable                                                               |   |                                    | 18,588                   |                                    |   | 482,981                           |   |   | 501,569 |   |
| Loans                  Payable-Related Parties                                               |   |                                    | (791                     | )                                       |   | 47,861                            |   |   | 81,405 |   |
| Net                  cash used by operating activities                                       |   |                                    | (309,416                 | )                                       |   | 120,953                           |   |   | (2,394,995 | ) |
|                                                                                         |   |                                    |                     |                                    |   |                              |   |   |   |   |
| 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 | ) |
| Asher                  #2 Project                                                            |   |                                    | (5,008                   | )                                       |   | -                                 |   |   | (5,008 | ) |
| West                  Peach Project                                                          |   |                                    | (15,035                  | )                                       |   | (36,970                           | )      |   | (52,005 | ) |
| Net                  cash used by investing activities                                       |   |                                    | (20,043                  | )                                       |   | (145,157                          | )      |   | (206,918 | ) |
|                                                                                         |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Cash                  flows from financing activities:                                       |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Proceeds                  from issuance of common stock                                      |   |                                    | 328,980                  |                                    |   | 25,000                            |   |   | 441,990 |   |
| Proceeds                  on borrowings from related parties                                 |   |                                    |      |                                    |   | -                                 |   |   | 1,335,654 |   |
| Net                  cash provided by financing activities                                   |   |                                    | 328,980                  |                                    |   | 25,000                            |   |   | 1,777,644 |   |
|                                                                                         |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Net                  increase in cash                                                        |   |                                    | (479                     | )                                       |   | 796                               |   |   | (824,269 | ) |
|                                                                                         |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Cash,                  beginning of period                                                   |   |                                    | 748                      |                                    |   | (48                               | )      |   | 700 |   |
|                                                                                         |   |                                    |                     |                                    |   |                              |   |   |   |   |
| Cash,                  end of period                                                         |   | $                                       | 269                      |                                    | $      | 748                               |   | $ | (823,569 | ) |

----

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

----

|                                                                                                                                                                                                                             |   | 2007   |     | 2006   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|
|                                                                                                                                                                                                                             |   |   |     |   |   |
| Net                    loss as reported                                                                                                                                                                                          |   | $      | (484,269 | )      | $      | (824,586 | ) |
| Add:                      Stock-based employee compensation expense included in reported                      loss, net                      of related tax effects                                                              |   |   | 62,322   |   |   | 24,929 |   |
| Deduct:                      Total stock-based employee compensation expense determined                      under fair                      value based methods of all awards, net of related tax                      effects. |   | $      | (62,322  | )      | $      | (24,929 | ) |
|                                                                                                                                                                                                                             |   |   |     |   |   |   |   |
| Proforma                      net loss                                                                                                                                                                                           |   | $      | (484,269 | )      | $      | (824,586 | ) |
|                                                                                                                                                                                                                             |   |   |     |   |   |   |   |
| Net                      loss per common share                                                                                                                                                                                   |   | $      | (0.01    | )      | $      | (0.02 | ) |
|                                                                                                                                                                                                                             |   |   |     |   |   |   |   |
| Basic                      and diluted loss, pro forma                                                                                                                                                                           |   | $      | (0.01    | )      | $      | (0.02 | ) |

----

*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 |
|----|---------------------------------|

|                                                                  |   | 2007   |    | 2006   |   |
|-----------------------------------------------------------------------|--------|--------|---------|--------|--------|
| Furniture                    and fixtures                             |   | $      | 20,102  |   | $      | 20,102 |   |
| Computers                    and equipment                            |   |   | 25,726  |   |   | 25,726 |   |
|                                                                  |   |   | 45,828  |   |   | 45,828 |   |
| Less:                    accumulated depreciation                     |   |   | (43,362 | )      |   | (42,358 | ) |
| Net                    Furniture, fixtures, computers & equipment |   |   | 2,466   |   |   | 3,470 |   |
| LLC                    Investment                                     |   |   | 1,000   |   |   | 1,000 |   |
| West                    Peach Exploration Costs                       |   |   | 52,005  |   |   | 36,970 |   |
| Asher                    #1 Oil Well                                  |   |   | 103,077 |   |   | 103,077 |   |
| Asher                    #2 Exploration Costs                         |   |   | 5,008   |   |   | 0 |   |
| Total                    Fixed Assets                                 |   |   | 163,556 |   |   | 144,517 |   |

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

|                                                                                                                                                     |   | 2007   |   | 2006   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Notes                    payable from officers of the Company bearing interest at 8% unsecured                    and                    due on demand   |   | $      | 7,086  |   | $      | 7,877 |   |
|                                                                                                                                                     |   |   |   |   |   |   |   |
| Note                    payable from an officer of the Company bearing interest at 8%,                    unsecured                    and due on demand |   |   | 0      |   |   | 20,000 |   |
|                                                                                                                                                     |   | $      | 7,086  |   | $      | 27,877 |   |

----

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

|   | gg) | On                    February 22, 2007, the Company issued 500,000 shares of common                    stock for                    cash at $0.050 per share. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | hh) | On                    May 8, 2007, 350,000 shares of the company’s preferred stock were                    converted to 3,500,000 shares of common                    stock. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii) | On                    June 1, 2007, the Company issued 8,900,000 shares of common stock                    for                    notes at $0.02 per share. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | jj) | On                    July 17, 2007, 100,000 shares of the company’s preferred stock were                    converted to 1,000,000 shares of common                    stock. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | kk) | On                    August 16, 2007, the Company issued 4,700,000 shares of common                    stock for                    notes at $0.02 per share. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ll) | On                    August 30, 2007, 226,289 shares of the company’s preferred stock were                    converted to 2,262,890 shares of common                    stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | mm) | On                    October 1, 2007, the Company issued 4,700,000 shares of common                    stock for                    notes at $0.02 per share. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | nn) | On                    October 4, 2007, the Company issued 400,000 shares of common                    stock for                    cash at $0.025 per share. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 to                    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. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | aa) | On                    March 10, 2007, the company issued 5,222,222 shares of preferred                    stock in                    stock in satisfaction of debt valued at $0.090 per                    share. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | bb) | On                    December 28, 2007, the company issued 3,740,000 shares of preferred                    stock                    to two officers of the company for services valued at $0.10. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

|                                           |   | Number |       | Weighted                          |   |
|------------------------------------------------|--------|--------|------------|-----------------------------------|--------|
|                                           |   | of     |       | Average                           |   |
|                                           |   | Shares |       | Exercise                    Price |   |
| Balance,                    December 31, 2005  |   |   | 1,000,000  |                              | $      | .05 |   |
| Options                    granted and assumed |   |   | 1,500,000  |                              |   | .0625 |   |
| Options                    expired             |   |   | —    |                              |   | — |   |
| Options                    canceled            |   |   | —    |                              |   | — |   |
| Options                    exercised           |   |   | —    |                              |   | — |   |
| Balance,                    December 31, 2006  |   |   | —    |                              | $      | — |   |
| Options                    granted and assumed |   |   | 7,500,000  |                              |   | .010 |   |
| Options                    expired             |   |   | —    |                              |   | — |   |
| Options                    canceled            |   |   | —    |                              |   | — |   |
| Options                    exercised           |   |   | —    |                              |   | — |   |
|                                           |   |   |       |                              |   |   |   |
| Balance,                    December 31, 2007  |   |   | 10,000,000 |                              | $      | .0219 |   |

|                 |   | Exercise Price              |                         |                |   |                |   |            |                                    |
|----------------------|--------|----------------------------------|------------------------------|---------------------|--------|---------------------|--------|-----------------|-----------------------------------------|
|                 |   | Equals, Exceeds or     |                         |                |   |                |   |            |                                    |
| Number of       |   | is Less Than Mkt. |                         | Weighted            |   |                |   | Weighted        |                                    |
| Options Granted |   | Price of Stock         |                         | Average             |   | Range of       |   | Average         |                                    |
| During 2007     |   | on Grant Date          |                         | Exercise Price |   | Exercise Price |   | Fair Value |                                    |
| —              |   |                             | Equals                       |                | $      | —             |   | $               | —                    to $ — |   | $ | — |   |
| —              |   |                             | Exceeds                      |                | $      | —             |   | $               | —                    to $ — |   | $ | — |   |
| 7,500,000            |   |                             | Less                    Than |                | $      | 0.010               |   | $               | 0.010 to $0.010               |   | $ | 0.010 |   |
|                 |   |                             |                         |                |   |                |   |            |                                    |   |   |   |   |
| 7,500,000            |   |                             |                         |                | $      | 0.010               |   | $               | 0.010 to $0.010               |   | $ | 0.010 |   |

----

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

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

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

----

**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 |   | 63     |   | President                & Director                                |   | February                6, 2002      |
| Donald                Trapp    |   | 68     |   | CFO,                Secretary, Treasurer &                Director |   | February                8, 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 2005               |    | For 2006 |   | For 2007 |   |
| Douglas                Tallant       |   | President              and Director             |   | $                           | 132,000 |          | $      | 144,000 |   | $ | 180,000 |   |
| Donald                Trapp          |   | Director,              Secretary &Treasurer |   | $                           | 55,000  |          | $      | 60,000 |   | $ | 60,000 |   |
| Tim                DeHerrera         |   | Vice              President                     |   | $                           | 55,000  |          | $      | 60,000 |   | $ | 1,000 |   |

**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 President                /Director |   |                   |      | (1)                        |   | 39,416                     |   |   | 0.1 | % |
|                                                              |   |                   |                     |                       |   |                       |   |   |   |   |
| Donald                Trapp Director                              |   |                   |                     | (1)                        |   | 439,533                    |   |   | 0.6 | % |
|                                                              |   |                   |                     |                       |   |                       |   |   |   |   |
| Tim                DeHerrera                                      |   |                   |                     | (1)                        |   | 767,000                    |   |   | 1.1 | % |
|                                                              |   |                   |                     |                       |   |                       |   |   |   |   |
| All                directors and Officers as a group              |   |                   |                     |                       |   | 1,245,949                  |   |   | 1.8 | % |

----

**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 |

----