UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549











x Quarterly Report
      under Section 13 or 15(d) of the Securities Exchange Act of
      1934.


For the
quarterly period ended:June
30, 2008





o Transition Report
      under Section 13 or 15(d) of the Securities Exchange Act of
      1934.


For the
transition period from:  _______  to _______





Commission
file number:  2-76219-NY





VICTORY
ENERGY CORPORATION


(Exact
name of small business issuer as specified in its charter)





NEVADA
            
            87-0564472(State
      or other jurisdiction of incorporation or organization)
            
            (I.R.S.
      Employer I.D. Number)





112
N Curry Street, Carson City, Nevada 89703-4934


(Address
of principal executive offices)





(702)
989-9735


(Issuer’s
telephone number)





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports); and (2) has been subject
to such filing requirements for the past 90 days:  YESx   NOo








Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer
             ̈
            
            Accelerated
      filer
             ̈Non-accelerated
      filer
             ̈
            
            Smaller
      Reporting Company
            x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).YESo NOx





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: As of June 30, 2008, there were 96,262,089
shares of our common stock outstanding.





Transitional
Small Business Disclosure Format. YESo NOx




-1-


INDEX


Page
      No.PART 1. FINANCIAL INFORMATIONItem
      1.                      Financial
      Statements
            3Consolidated Balance Sheet, June 30,
      2008 (unaudited) and December 31, 2007
(audited)
            3Consolidated Statement of
      Operations, for the three months ended June 30, 2008 and 2007, and
      cumulative frominception to June 30,
      2008 (unaudited)
            4Consolidated Statement of
      Stockholders’ Equity (Deficit) for the period from January 7, 1982
      (inception)through June 30, 2008
      (unaudited)
            5Consolidated Statements of Cash
      Flows, for the three months ended June 30, 2008 and 2007, and cumulative
      frominception (Jan. 7, 1982) to June
      30, 2008 (unaudited)
            6Notes to Condensed Financial
      Statements (unaudited)
            7Item
      2.                      Management’s
      Discussion and Analysis or Plan of Operation
            15Item
      3.                     
      Quantitative and Qualitative Disclosures About Market
    Risk
            18Item
      4.                      Controls
      and Procedures
            19PART II. OTHER INFORMATIONItem
      1.                      Legal
      Proceedings
            20Item
      2.                      Unregistered
      Sales of Equity Securities and Use of Proceeds
            20Item
      3.                      Defaults
      Upon Senior Securities
            20Item
      4.                      Submission
      of Matters to a Vote of Security Holders
            20Item
      5.                      Other
      Information
            20Item
      6.                      Exhibits
      and Reports on Form 8-K
            20







-2-





Item
1.                    Financial Statements





VICTORY
      ENERGY CORPORATION AND SUBSIDIARIES(A
      Development Stage Company)Consolidated BalanceSheetsASSETSJune
      30,
              
              
              December
      31,2008
              
              
              2007Unaudited
              
              
              (Restated)CURRENT
      ASSETS
              
              
              
              
              Note
      8Cash
      and Cash Equivalents
              
              $
              159
              
              
              $
              3,251Subscriptions
      Receivable
              
              
              160,000
              
              
              
              160,000Prepaid
      Rent
              
              
              7,250
              
              
              
              -Total
      Current Assets
              
              
              167,409
              
              
              
              163,251FIXED
      ASSETS, NET
              
              
              -
              
              
              
              -OTHER
      ASSETSDrilling
      Costs
              
              
              3,564,000
              
              
              
              -Natural
      Gas Working Interest
              
              
              1,570,000
              
              
              
              -Investment
      in Joint Venture
              
              
              50,000
              
              
              
              50,000Total
      Other Assets
              
              
              5,184,000
              
              
              
              50,000TOTAL
      ASSETS
              
              $
              5,351,409
              
              
              $
              213,251LIABILITIES
      & STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccounts
      Payable
              
              $
              57,974
              
              
              $
              34,803Credit
      Line - WFB Business Line
              
              
              76,545
              
              
              
              81,860Prepaid
      Subscriptions
              
              
              203,500
              
              
              
              203,500Loan
      from Officer
              
              
              1,209,779
              
              
              
              1,377,879Dividend
      Payable
              
              
              3,953,621
              
              
              
              -Short
      Term Advance
              
              
              2,078,000
              
              
              
              -Total
      Current Liabilities
              
              
              7,579,419
              
              
              
              1,698,042Total
      Liabilities
              
              
              7,579,419
              
              
              
              1,698,042Commitments
      and contingencies (Note 6)STOCKHOLDERS'
      DEFICITPreferred
      Stock, $0.001 par value, 10,000,000
shares authorized,2,300,000
      issued and outstanding at June 30, 2008630,517
      issued and outstanding at December 31, 2007
              
              
              2,300
              
              
              
              631Common
      Stock, $0.001 par value, 200,000,000 shares authorized,96,262,089 issued
      and outstanding atJune 30, 200842,395,366
      issued and outstanding at December 31, 2007
              
              
              96,262
              
              
              
              42,395Additional
      paid-in capital
              
              
              10,331,845
              
              
              
              7,860,331Deficit
      accumulated in the development stage
              
              
              (12,658,417
              )
              
              
              (9,388,148
              )Total
      Stockholders' Deficit
              
              
              (2,228,010
              )
              
              
              (1,484,791
              )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              5,351,409
              
              
              $
              213,251





-3-








VICTORY
      ENERGY CORPORATION AND SUBSIDIARIES(A
      Development Stage Company)Consolidated
      Statement of OperationsUnaudited
  For
      the periodof
      Inception,For
      the
              
              
              For
      the
              
              
              from
      January 2,Three
      Months Ended
              
              
              Six
      Months Ended
              
              
              1982
      throughJune
      30,
              
              
              June
      30,
              
              
              June
      302008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              2008RevenuesNatural
      Gas Production
              
              $
              149,019
              
              
              $
              -
              
              
              $
              401,019
              
              
              $
              -
              
              
              $
              421,226Costs
      and ExpensesRoyalties
              
              
              464,728
              
              
              
              -
              
              
              
              568,428
              
              
              
              -
              
              
              
              568,428Consulting
      Expense
              
              
              687,164
              
              
              
              680,494
              
              
              
              1,707,590
              
              
              
              2,912,501
              
              
              
              9,341,411Professional
      Fees
              
              
              2,860
              
              
              
              -
              
              
              
              352,860
              
              
              
              -
              
              
              
              511,006Land
      Leases
              
              
              780
              
              
              
              4,500
              
              
              
              780
              
              
              
              6,180
              
              
              
              26,500Wages
      and Salaries
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              270,500Other
      General & Administrative
              
              
              526,697
              
              
              
              36,535
              
              
              
              656,437
              
              
              
              160,843
              
              
              
              1,873,894Total
      Expenses
              
              
              1,217,501
              
              
              
              721,529
              
              
              
              2,717,667
              
              
              
              3,079,524
              
              
              
              12,023,311Operating
      Loss
              
              
              (1,068,482
              )
              
              
              (721,529
              )
              
              
              (2,316,648
              )
              
              
              (3,079,524
              )
              
              
              (11,602,085
              )Other
      Income and (expenses)Sale
      of Working Interest in Wells
              
              
              -
              
              
              
              -
              
              
              
              3,000,000
              
              
              
              -
              
              
              
              3,000,000Loss
      on abandonment of subsidiary
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (50,900
              )Loss
      from reduction in debt
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (48,363
              )Interest
      Expense
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (5,664
              )Other
      Income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,216Total
      Other Income and (expenses)
              
              
              -
              
              
              
              -
              
              
              
              3,000,000
              
              
              
              -
              
              
              
              2,897,289Net
      Income (Loss)
              
              $
              (1,068,482
              )
              
              $
              (721,529
              )
              
              $
              683,352
              
              
              $
              (3,079,524
              )
              
              $
              (8,704,796
              )Basic
      and Dilutive net loss per share
              
              $
              (0.013
              )
              
              $
              (0.036
              )
              
              $
              0.002
              
              
              $
              (0.187
              )Weighted
      average number of sharesoutstanding,
      basic and diluted
              
              
              80,751,752
              
              
              
              19,973,370
              
              
              
              294,112,238
              
              
              
              16,467,912Dilutive
      effect of preferred stock,
              
              
              0
              
              
              
              0
              
              
              
              230,000,000
              
              
              
              0(Note
      2)
 -4-
  VICTORY
      ENERGY CORPORATION AND SUBSIDIARIES(A
      Development Stage Company)Consolidated
      Statement of Stockholders' Equity
  (Deficit)Unaudited
  AccumulatedAdditional
              
              
              Deficit
      DuringCommon Stock
              
              
              Preferred Stock
              
              
              Paid-in
              
              
              DevelopmentShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Stage
              
              
              TotalBalances
      at December 31, 2007
              
              
              42,395,366
              
              
              $
              42,395
              
              
              
              630,517
              
              
              $
              631
              
              
              $
              7,860,331
              
              
              $
              (9,388,148
              )
              
              $
              (1,484,791
              )Common
      stock for services $0.04/sh
              
              
              600,000
              
              
              
              600
              
              
              
              
              
              
              
              
              
              
              
              23,400
              
              
              
              
              
              
              
              24,000Common
      Stock for services $0.08/sh
              
              
              8,550,000
              
              
              
              8,550
              
              
              
              
              
              
              
              
              
              
              
              675,450
              
              
              
              
              
              
              
              684,000Common
      stock for services @ $0.20/sh
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              
              
              
              
              
              
              
              
              98,000
              
              
              
              
              
              
              
              100,000Preferred
      Stock converted to common
              
              
              4,482,758
              
              
              
              4,483
              
              
              
              (44,827
              )
              
              
              (45
              )
              
              
              (4,438
              )
              
              
              
              
              
              
              -Common
      Stock for services $0.23/sh
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              
              
              
              
              
              
              
              
              458,000
              
              
              
              
              
              
              
              460,000Preferred
      stock converted to common
              
              
              28,568,965
              
              
              
              28,569
              
              
              
              (285,690
              )
              
              
              (286
              )
              
              
              (28,283
              )Common
      stock for services $0.20/sh.
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              
              
              
              
              
              
              
              
              398,000
              
              
              
              
              
              
              
              400,000Common
      stock for cash
              
              
              600,000
              
              
              
              600
              
              
              
              
              
              
              
              
              
              
              
              29,400
              
              
              
              
              
              
              
              30,000Common
      stock for services $0.17/sh.
              
              
              115,000
              
              
              
              115
              
              
              
              
              
              
              
              
              
              
              
              19,435
              
              
              
              
              
              
              
              19,550Common
      stock for consulting $0.17/sh.
              
              
              100,000
              
              
              
              100
              
              
              
              
              
              
              
              
              
              
              
              16,900
              
              
              
              
              
              
              
              17,000Common
      stock for cash
              
              
              1,600,000
              
              
              
              1,600
              
              
              
              
              
              
              
              
              
              
              
              78,400
              
              
              
              
              
              
              
              80,000Warrants
      exercised for common $0.25
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              
              
              
              
              
              
              
              
              249,000
              
              
              
              
              
              
              
              250,000Common
      stock for consulting  $0.13
              
              
              1,000,000
              
              
              
              1,000
              
              
              
              
              
              
              
              
              
              
              
              129,000
              
              
              
              
              
              
              
              130,000Common
      stock for services  $0.13
              
              
              1,250,000
              
              
              
              1,250
              
              
              
              
              
              
              
              
              
              
              
              131,250
              
              
              
              
              
              
              
              132,500Preferred
      stock issued for debt $0.10/sh
              
              
              
              
              
              
              
              2,000,000
              
              
              
              2,000
              
              
              
              198,000
              
              
              
              
              
              
              
              200,000Dividend
      declared May 2, 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,953,621
              )
              
              
              (3,953,621
              )Net
      income six mo. ended June 30, 2008
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              683,352
              
              
              
              683,352Balances
      at June 30, 2008
              
              
              96,262,089
              
              
              $
              96,262
              
              
              
              2,300,000
              
              
              $
              2,300
              
              
              $
              10,331,845
              
              
              $
              (12,658,417
              )
              
              $
              (2,228,010
              )


-5-





VICTORY
      ENERGY CORPORATION AND SUBSIDIARIES(A
      Development Stage Company)Consolidated
      Statements of Cash FlowsUnaudited
  For
      the
              
              
              For
      the
              
              
              Inception
      fromThree
      Months Ended
              
              
              Six Months
      Ended
              
              
              Jan.
      7, 1982June
      30,
              
              
              June
      30,
              
              
              through2008
              
              
              2007
              
              
              2008
              
              
              2007
              
              
              Jun
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      Operating Loss
              
              $
              (1,068,482
              )
              
              $
              (1,910,549
              )
              
              $
              (2,316,648
              )
              
              $
              (3,079,524
              )
              
              $
              (11,704,796
              )Adjustments
      to reconcile net loss to net cashused
      by operating activities:DepreciationNon
      cash issue of common stock for services
              
              
              699,050
              
              
              
              
              
              
              
              1,967,050
              
              
              
              585,396
              
              
              
              8,624,532Increase
      in Short Term ReceivablesDecrease
      (Increase) in Prepaid Expenses
              
              
              (7,250
              )
              
              
              
              
              
              
              (7,250
              )
              
              
              
              
              
              
              (7,250
              )Increase
      (Decrease) in DepositsIncrease
      (Decrease) in Prepaid Subscriptions
              
              
              
              
              
              
              
              
              
              
              
              (735,000
              )
              
              
              203,500(Increase)
      Decrease in Subscriptions Receivable
              
              
              
              454,020
              
              
              
              
              
              
              
              
              
              
              
              160,000Increase
      (Decrease) in accounts payable
              
              
              25,489
              
              
              
              8,022
              
              
              
              23,171
              
              
              
              21,298
              
              
              
              57,974Increase
      (Decrease) in accrued liabilitiesIncrease
      (Decrease ) in Accrued Payroll,P'roll TaxesRepayment
      of long term debtIncrease
      in Dividends Payable
              
              
              
              
              
              
              
              
              
              
              3,953,621Non-cash
      contributed capitalNet
      Cash provided by (used by)Operating
      Activities
              
              
              (351,193
              )
              
              
              (1,448,507
              )
              
              
              3,619,944
              
              
              
              (3,207,830
              )
              
              
              (2,666,040
              )CASH
      FLOWS FROM INVESTING ACTIVITIESDrilling
      Costs
              
              
              (20,000
              )
              
              
              
              
              
              
              (3,564,000
              )
              
              
              
              
              
              
              (3,056,000
              )Investment
      in Natural Gas Working Interest
              
              
              
              
              
              
              
              (1,570,000
              )Purchase
      of Fixed AssetsInvestment
      in Joint Venture
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (50,000
              )Net
      Cash (used by) Investing Activities
              
              
              (20,000
              )
              
              
              -
              
              
              
              (5,134,000
              )
              
              
              -
              
              
              
              (3,106,000
              )CASH
      FLOWS FROM FINANCING ACTIVITIESBank
      overdraft
              
              
              (23,773
              )Proceeds
      of sale of working interest in wells
              
              
              
              
              
              
              
              3,000,000
              
              
              
              
              
              
              
              3,000,000Proceeds
      (Repayment) of LoansProceeds
      (repayment) of Credit Line
              
              
              
              
              
              
              775
              
              
              
              (5,315
              )
              
              
              23,661
              
              
              
              76,545Proceeds
      (Repayment) of Loan from Officer
              
              
              (5,315
              )
              
              
              114,984
              
              
              
              (168,100
              )
              
              
              298,480
              
              
              
              1,209,779Increase
      (Decrease) in Other Loans Payable
              
              
              (159,560
              )
              
              
              
              
              
              
              2,078,000Proceeds
      from the sale of Preferred Stock
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              246,950Proceeds
      from conversion of Preferred Stock
              
              
              
              (85
              )
              
              
              200,000
              
              
              
              (85
              )
              
              
              200,000Proceeds
      from the sale of Common Stock
              
              
              200,000
              
              
              
              14,788
              
              
              
              110,000
              
              
              
              23,980
              
              
              
              732,321Subscriptions
      Receivable for stock issued
              
              
              110,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (160,000
              )Proceeds
      of sale/exchange of warrants
              
              
              
              
              
              
              
              250,000
              
              
              
              
              
              
              
              250,000Contributed
      Capital by shareholders
              
              
              250,000
              
              
              
              1,305,693
              
              
              
              
              
              
              
              2,850,113
              
              
              
              216,604Dividends
      declared
              
              
              
              
              
              
              
              
              
              
              (3,953,621
              )Net
      Cash provided by Financing Activities
              
              
              371,352
              
              
              
              1,436,155
              
              
              
              1,510,964
              
              
              
              3,196,149
              
              
              
              5,772,199NET
      INCREASE (DECREASE) IN CASH
              
              
              159
              
              
              
              (12,352
              )
              
              
              (3,092
              )
              
              
              (11,681
              )
              
              
              159CASH
      AT BEGINNING OF PERIOD
              
              
              0
              
              
              
              592
              
              
              
              3,251
              
              
              
              (79
              )
              
              
              -CASH
      AT END OF PERIOD
              
              $
              159
              
              
              $
              (11,760
              )
              
              $
              159
              
              
              $
              (11,760
              )
              
              $
              159CASH
      PAID FOR:Interest
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Income
      Taxes
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
 -6-
  VICTORY
ENERGY CORPORATION


June 30,
2008
 
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1 -
BUSINESS AND CONTINUED OPERATIONS
  Victory
Energy Corporation (OTC symbol VYEY), formerly known as Victory Capital Holdings
Corporation (our “Company”) was organized under the laws of the State of Nevada
on January 7, 1982, under the name All Things, Inc. On March 21, 1985 the
Company’s name was changed to New Environmental Technologies Corporation and on
April 28, 2003 to Victory Capital Holdings Corporation.  The name was
changed finally to Victory Energy Corporation on May 3, 2006.
  The
Company was formed for the purpose of engaging in all lawful businesses. The
Company’s initial authorized capital consisted of 100,000,000 shares of $0.001
par value common voting stock and as of the date of this filing the authorized
capital is 200,000,000 shares of $.001 par value common stock.
 
 The
consolidated financial statements presented are those of Victory Energy
Corporation and subsidiaries.   While the information presented
in the accompanying interim nine months financial statements is unaudited, it
includes all adjustments which are, in the opinion of management, necessary to
present fairly the financial position, results of operations and cash flows for
the interim periods presented in accordance with the accounting principles
generally accepted in the United States of America. All adjustments are of a
normal recurring nature.
 
 On
October 3, 2001, the Company formed a wholly owned subsidiary named Papadog,
Inc. Papadog has since changed its name to Global Card Services, Inc. and then
to Global Card Incorporated, (“Global”).  As of the date of this
report, there has been no activity for this subsidiary.
 
 On
November 12, 2003, the Company formed a wholly owned subsidiary named On Demand
Communications, Inc., (“On Demand”).  As of the date of this report,
there has been no activity for this subsidiary.
 
 On
November 27, 2006 the company incorporated a Nevada subsidiary, Victory Energy
Resources, Inc.   The name of the subsidiary was changed to
Victory Carbon Solutions, Inc.  There has been no activity in this
company.
 
 Current
Business of the Company
  The
Company had no material business operations from 1989 to 2003. In 2004, the
Company began the search for the acquisition of assets, property or
businesses.  In 2005 management focused on projects in the oil and gas
industry, intending to drill for oil and gas on leased land.  In 2006
the company entered into a farm-out agreement with the owner of certain oil and
gas leases for a 100% working interest in acreage in Montana, subject to
overriding royalties.  These oil and gas leases were allowed to lapse
back to the State of Montana.  The Company is now working with the
State of Montana to re-acquire the leases. The Company also secured other
mineral rights in Montana and Texas, as well as a joint venture in New
Mexico.
 
 In
December 2007 the Corporation established a relationship with a private
institutional investment group contracted to acquire, through a financial
facility, interest ownership in six term assignments containing six existing and
producing gas wells in Crockett County, Texas.  The conclusion of the
transaction and recording of the wells took place in the first quarter of
2008.
 
 In the
transaction of the purchase of 50% of the original six producing gas wells, a
100% of the net royalty interest ownership is 74%.  As Victory Energy
Corporation purchased 50% of the net royalty interest; this represents 50% of
the 74% available. The purchase resulted in acquiring 37% of the 74%, which is
equal to 50% of the net royalty interest ownership.  The Corporation
retains 15% of 50% of the net royalty interest and the investment group retains
the remainder. The investment group invested $1,430,000 for the purchase of
these original six producing wells.  Victory Energy Corporation did
not invest cash.
 -7-
 
 During
the first quarter of 2008, the Corporation drilled two additional Canyon
Sandstone gas wells in Crockett County Texas.
 
 During
the second quarter of 2008, the Corporation drilled four additional Canyon
Sandstone gas wells in Crockett County Texas.
 
 Jon
Fullenkamp, the President/C.E.O., is the sole employee and has a great deal of
experience in the oil and gas industry.  The Company retains
independent contractors to assist in operating and managing the prospects and
projects.
  NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Fair Value of Financial
Instruments
 
 The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards (“SFAS”) No. 107, “Disclosures About Fair Value of Financial
Instruments.”  SFAS No. 107 requires disclosure of fair value information
about financial instruments when it is practicable to estimate that value. 
The carrying amounts of the Company’s financial instruments as of June 30, 2008
and 2007 approximate their respective fair values because of the short-term
nature of these instruments.  Such instruments consist of cash, accounts
payable and accrued expenses.  The fair value of related party payables is
not determinable.
 
 Income
Taxes
 
 The
Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns.  Under this method, deferred tax assets and liabilities
are determined based on the difference between the tax basis of assets and
liabilities and their financial reporting amounts based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income.  Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The Company generated deferred tax credits through net
operating loss carryforwards.  However, a valuation allowance of 100%
has been established, as the realization of the deferred tax credits is not
reasonably certain, based on going concern considerations outlined
below.
 
 Going
Concern
 
 The
Company’s financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business.  The Company has
suffered recurring losses.  The Company incurred a net operating loss
of $2,316,648 in the six months ended June 30, 2008, but net income of $683,352,
primarily due to the sale of a working interest in wells.  The company
has a shareholders’ deficit of $2,228,010 at June 30, 2008.  The
Company has not yet established an ongoing source of revenues sufficient to
cover its operating costs and to allow it to continue as a going
concern.  The ability of the Company to continue as a going concern is
dependent on the Company obtaining adequate capital to fund operating losses
until it becomes profitable.  If the Company is unable to obtain
adequate capital, it could be forced to cease development of
operations.
 
 In order
to continue as a going concern, develop a reliable source of revenues, and
achieve a profitable level of operations the Company will need, among other
things, additional capital resources.  Management’s plans to continue
as a going concern include raising additional capital through sales of common
stock.  In the interim, shareholders of the Company are committed to
meeting its minimal operating expenses.  However, management cannot
provide any assurances that the Company will be successful in accomplishing any
of its plans.
 
 The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations.  The accompanying financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
 -8-
 
 Development-Stage
Company
 
 The
Company is considered a development-stage company, with limited operating
revenues during the periods presented, as defined by Statement of Financial
Accounting Standards (“SFAS”) No. 7.  SFAS No. 7 requires companies to
report their operations, shareholders deficit and cash flows since inception
through the date that revenues are generated from management’s intended
operations, among other things.  Management has defined inception as
January 7, 1982.  Since inception, the Company has incurred operating
losses totaling $12,658,417, much of which relates to stock-based compensation
to officers, directors and consultants as a means to preserve working
capital.  The Company’s working capital has been generated through the
sales of common stock, sale of a working interest, loans made by officers of the
Company and a bank line of credit. Management has provided financial data since
January 7, 1982 “Inception” in the financial statements, as a means to provide
readers of the Company’s financial information to make informed investment
decisions.
 
 Use of
Estimates
 
 The
preparation of the financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period.  Actual
results could differ from those estimates.
 
 Principles of
Consolidation
 
 The
consolidated financial statements include those of Victory Energy Corporation
and its wholly owned subsidiaries, Global Card Incorporated, On Demand
Communications, Inc. and Victory Energy Resources, Inc. All material
inter-company items and transactions have been eliminated.  There has
been no activity in the subsidiaries.
 
 Earnings (Loss) Per
Share
 
 Statement
of Financial Accounting Standards No. 128 “Earnings Per Share” requires
presentation of basic earnings per share and diluted earnings per
share.  Basic income (loss) per share (“Basic EPS”) is computed by
dividing net loss available to common stockholders by the weighted average
number of common shares outstanding during the period.  Diluted
earnings per share (“Diluted EPS”) is similarly calculated using the treasury
stock method except that the denominator is increased to reflect the potential
dilution that would occur if preferred stock at the end of the applicable period
were exercised. These potential dilutive securities were included in the
calculation of loss per share for the six months ended June 30,
2008.   They were not included in the calculation for June 30,
2007 because the Company incurred a loss in that period, and thus their effect
would have been anti-dilutive.  At June 30, 2008 potentially dilutive
securities consisted of 2,300,000 shares of preferred stock, convertible at the
rate of 1 preferred share to 100 common shares.
 
 The
following is a reconciliation of the numerators and denominators of the basic
and diluted earnings per share computations for the six months ended June 30,
2008 and 2007.
 
 June 302008
              
              
              2007Numerator:Basic and diluted net loss per
      share:Net
      Income (Loss)
              
              $
              683,352
              
              
              $
              (3,079,524
              )DenominatorBasic and diluted weighted
      averagenumber of shares
      outstanding
              
              
              294,112,238
              
              
              
              16,467,912Basic and Diluted Net
      Loss Per Share
              
              $
              0.002
              
              
              $
              (0.187
              )Dilutive effect of
      Preferred Stock
              
              
              230,000,000
              
              
              Nil
 
 -9-
 Equipment and
Fixtures
 
 Equipment
and fixtures are recorded at cost.  Depreciation is provided using
accelerated and straight-line methods over the estimated useful lives of the
related assets as follows.
 
 Description
              YearsFurniture
      and fixtures
              7Computer
      hardware and software
              3-5
 -
 Equipment
and fixtures have been fully depreciated.
 
 Accounting for Oil and Gas
Producing Activities
 
 The
company uses the successful efforts method of accounting for oil and gas
producing activities.  Under this method, acquisition costs for proved
and unproved properties are capitalized when incurred.  Exploration
costs, including geological and geophysical costs of carrying and retaining
unproved properties and exploratory dry hole drilling costs, including the costs
to drill and equip development wells, and successful exploratory drilling costs
to locate proved reserves are capitalized.
 
 Exploratory
drilling costs are capitalized when incurred pending the determination of
whether a well has found proved reserves.  A determination of whether
a well has found proved reserves is made shortly after drilling is
completed.  The determination is based on a process which relies on
interpretations of available geologic, geophysics, and engineering
data.  If a well is determined to be successful, the capitalized
drilling costs will be reclassified as part of the cost of the
well.
 
 If a well
is determined to be unsuccessful, the capitalized drilling costs will be charged
to expense in the period the determination is made.  If an exploratory
well requires a major capital expenditure before production can begin, the cost
of drilling the exploratory well will continue to be carried as an asset pending
determination of whether proved reserves have been found only as long as the
well has found a sufficient quantity of reserves to justify it’s completion as a
producing well if the required capital expenditure is made and drilling of the
additional exploratory wells is under way or firmly planned for the near
future.
 
 If
drilling in the area is not under way or firmly planned, or if the well has not
found a commercially producible quantity of reserves, the exploratory well is
assumed to be impaired, and its costs are charged to expense.  In the
absence of a determination as to whether the reserves that have been found can
be classified as proved, the costs of drilling such an exploratory well is not
carried as an asset for more than one year following completion of
drilling.
 
 If after
that year has passed, a determination that proved reserves exist cannot be made,
the well is assumed to be impaired, and its costs are charged to
expense.  It’s costs can however, continue to be capitalized if a
sufficient quantity of reserves are discovered in the well to justify it’s
completion as a producing well and sufficient progress is made assessing the
reserves and the well’s economic and operating feasibility.  The
impairment of unamortized capital costs is measured as a lease level and is
reduced to fair value if it is determined that the sum of expected future net
cash flows is less than the net book value.
 
 The
company determines if impairment has occurred through either adverse changes or
as a result of the annual review of all fields.  During 2007 the
company did not record any impairment.  Development costs of proved
oil and gas properties, including estimated dismantlement, restoration and
abandonment costs and acquisition costs, are depreciated and depleted on a field
basis by the units-of-production method using proved reserves,
respectively.
 
 The Costs
of unproved oil and gas properties are generally combined and impaired over a
period that is based on the average holding period for such properties and the
company’s experience of successful drilling.  Properties related to
gathering and pipeline systems and equipment are depreciated using the
straight-line method based on estimated useful lives ranging from 10 to 25
years.  Generally pipeline and transmission systems are amortized over
12 to 25 years, gathering and compressing equipment is amortized over 10 years
and storage equipment and facilities are amortized over 10 to 16
years.
 -10-
 
 Certain
other assets are depreciated on a straight-line basis over 3 to 10
years.  Buildings are depreciated on a straight-line basis over 25
years.  Costs of retired, sold or abandoned properties that make up a
part of an amortization base (partial field) are charged to accumulated
depreciation, depletion and amortization if the units-of-production rate is not
significantly affected.  Accordingly, a gain or loss, if any, is
recognized only when a group of proved properties (entire field) that make up
the amortization base has been retired, abandoned or sold.
 
 Oil and Gas Revenue
Recognition
 
 The
company applies the sales method of accounting for natural gas
revenue.  Under thus method, revenues are recognized based on the
actual volume of natural gas sold to purchasers.
 
 NOTE 3 –
RELATED PARTY TRANSACTIONS
 
 Five
ledger accounts in the books of the Company relating to loans, salaries and
out-of-pocket expenses payable to the President/C.E.O., Jon Fullenkamp, were
combined into one account “Loan from Officer”, which totaled $1,369,339 at March
31, 2008 The loan is non-interest bearing and payable on
demand.  Under the terms of the employment agreement, the employee may
at his election convert any and all funds due to him into shares of the
Company’s common stock at a conversion price of $0.01 per share. In practice, in
prior years, funds due to him were converted at a discounted market
value.
 
 In March
2006 the company issued a promissory note to a group of stockholders for
consideration of $141,458 in cash. The terms were to be repayable in one year at
an interest rate of 10%, payable quarterly.  Interest was deferred. In
December, 2006 the note was reclassified to prepaid subscriptions, reflecting an
accommodation with the stockholders. In December 2007, the subscription was
eliminated in further negotiations.
 
 On May 5,
2008 2,000,000 preferred shares were issued to Jonathan Fullenkamp, President
and Chief Executive Officer, for consideration of $200,000 applied to Officer’s
Loan.
 
 NOTE 4 –
INVESTMENT IN OIL AND GAS PROPERTIES
 
 In May,
2006 the Company paid $50,000 to Geosurveys, Inc, a geophysical survey company
of oil and gas prospects.  This was part of an agreement with Eldorado
Exploration, Inc. whereby the Company obtained a 2 1⁄2 percent working interest in
a prospective oil well called the Mesa #1 well on leased land in New
Mexico.   The agreement provides for cost sharing of drilling
costs.
 
 In
December 2006 the Corporation contracted to purchase a 50% working interest, and
a 50% of 74% net revenue interest (a 37% net interest of the whole), in six
existing and producing gas wells in Crockett County, Texas, together with
certain drilling costs, for $3,000,000.  The lease is known as the
Adams-Baggett Canyon Sandstone gas field.  The lease was valued at $
1,430,000 and the drilling costs for future wells at $1,570,000. In January 2008
the purchase price was paid by funds from an institutional investment group,
which received a portion of the net revenue interest.  The portion
received by the investment group was 59% of the net revenue interest purchased,
representing 22 % of the whole.  The 59% is reduced to 49%,
representing 18 % of the whole, when the purchase price is
recovered.  The Company’s share of the net revenue interest is 41% of
the interest purchased, or 15% of the whole.   After the
investment group recovers the purchase price, the Company’s share increases to
51% of the purchase, representing 19% of the whole.  The investment
group invested $1,430,000 for the original six producing
wells.  Victory Energy Corporation did not invest cash.
 
 The
$3,000,000 sale of the working interest was recorded as a sale of property under
“Other Income”.   The concomitant working/net revenue interest of
$1,430,000 was capitalized, together with drilling costs of
$1,570,000.
 
 The
Company was allocated additional drilling funds of $2,134,000 from an investment
group for its working interest, raising the total capitalized drilling costs to
$2,564,000 as at June 30, 2008. The additional funds were recorded as a short
term advance, which the Company intends to pay out in the current accounting
cycle with a percentage of net working interest, as before.
 
 A
geologists report dated January 26, 2007 from Joe C. Neal & Associates
indicates the following oil and gas reserves, reported in accordance with
Financial Accounting Standards Board pronouncement 69 (FAS-69):
 -11-
 PROVEDUNDEVELOPEDNet
      Reserves toEvaluated
      Interests:Oil, MBBL
              
              
              0Gas, MMCF
              
              
              11,519Future  Cash
      Inflows
              
              $
              74,877,000Ad
      Valorem Taxes &Severance
      Taxes
              
              $
              7,694,000Operating
      Costs
              
              $
              18,768,000Capital
      Costs
              
              $
              12,000,000Future
      Net Cash Flows,Undiscounted
              
              $
              36,415,000Standardized
      measure ofPer
      Annum DiscountedFuture
      net cash flowsrelating
      to provedOil
      and gas reserves,Discounted
      at 10%
              
              $
              11,434,000Victory
      Energy Corporation share50% x 74% x
      41%  (15.17%)
              
              $
              1,734,538
  In the
six months ended June 30, 2008, the Company received $401,019 from proceeds of
the sale of gas production from the Adams-Baggett Canyon Sandstone group of
wells, in which the Company holds an interest.
 
 NOTE 5 -
COMMITMENTS AND CONTINGENCIES
 
 There
were no additional commitments and contingencies in the three months ended June
30, 2008.
 -12-
 
 NOTE 6 –
CAPITAL STOCK TRANSACTIONS
 
 2008
 
 In
January, 2008 600,000 shares of common stock were issued for services $0.04 per
share reflecting market value.   $24,000 was recorded as legal
fees.
 
 From
February 1 to 21, 2008 8,550,000 shares of common stock were issued for services
$0.08 per share reflecting market value.   $684,000 was recorded
as consulting fees.
 
 On
February 22, 2008 2,000,000 shares of common stock were issued for services
$0.20 per share reflecting market value.   $100,000 was recorded
as consulting fees.
 
 In March,
2008 2,000,000 shares of common stock were issued for services $0.23 per share
reflecting market value.   $322,000 was recoded as legal
fees.  $138,000 was recorded as consulting fees.
 
 On April
3, April 30, May 5 and June 27, an aggregate of 28,568.96 of preferred shares
were converted at the rate of one share of preferred stock to 100 shares of
common stock to 28,568,965 common stock.
 
 On April
4, 2008, 2,000,000 shares of common stock were issued to M. Iorlano in
settlement of a consulting contract of $400,000.
 
 On April
28, 2008, 600,000 common shares were sold to R. Zamber, realizing
$30,000.
 
 On April
28, 2008 115,000 common shares were issued to R.D. Jergens in satisfaction of a
claim.  $19,550 was recorded as expense.
 
 On April
28, 100,000 shares were issued to L, Folkes.  $17.000 consulting
expense was recorded.
 
 On April
30, 2008, 1,600,000 common shares were sold to R. Zamber, realizing
$80,000.
 
 On April
30, 2008, 1,000,000 warrants were exercised by James Consulting for 1,000,000
common shares, realizing $250,000.
 
 On May 2,
2008, 1,000,000 common shares were issued to Steinfield
Consulting.   Expense of $130,000 was recorded.
 
 On May 2,
2008, 1,000,000 common shares were issued to Management
Services.   Expense of $132,500 was recorded.
 
 The total
of issued and outstanding common shares at June 30, 2008 and 2007 was
96,262,0859 and 31,285,366 respectively.
 
 Preferred
Stock
 
 On March
13, 2008 44,827.58 shares of preferred stock were converted, at the rate of one
share of preferred stock to 100 shares of common stock, to 4,482,758 shares
common stock.
 
 On April
3, April 30, May 5 and June 27, an aggregate of 28,568.96 of preferred shares
were converted, at the rate of one share of preferred stock to 100 shares of
common stock, to 28,568,965 shares of common stock.
 -13-
 
 On May 2,
2008, 2,000,000 preferred shares were issued to Jonathan Fullenkamp for proceeds
of $200,000, applied to Officer Loan.
 
 The total
of issued and outstanding preferred shares at June 30, 2008 and 2007 was
2,300,000 and 630,517 respectively.
 
 NOTE 7 –
LITIGATION
  The
Company is not subject to any reportable legal proceedings.
 
 NOTE 8 –
RESTATEMENTS
 
 Balance
Sheet.
 
 Drilling
Costs of $3,000,000 were aggregated in a previous quarterly reporting, related
to the sale of a portion of a net working interest in gas wells.  The
costs are more specifically separated into components:
 
 Drilling
      Costs
              
              $
              1,430,000Natural
      Gas Working
      Interests
              
              $
              1,570,000$
              3,000,000
 This had
no effect on net income or net equity.
 
 Officer
loan was reclassified from Other Liabilities to Current Liabilities in the
restated balance sheet, since the obligation is payable on
demand.    The reclassification had no effect on net equity,
or net income.
 
 Statement of
Operations.   Revenue is sub classified as Natural Gas
Production.   This had no effect on net income or net
equity.
 
 Statement of Cash
Flows.   Bank Overdraft in a previous quarterly filing was
included in the aggregate of ending cash.  Bank Overdraft is a
borrowing from the bank and is restated as a financing activity in the Statement
of Cash Flows.  The restatement had no effect on net equity or net
income.
 -14-





Item
2.                    
Management's Discussionand Analysisor Plan of
Operation





The
following discussion includes certain forward-looking statements within the
meaning of the safe harbor protections of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Statements that include words such as “believe,” “expect,” “should,”
“intend,” “may,” “anticipate,” “likely,” “contingent,” “could,” “may,” or other
future-oriented statements, are forward-looking statements. Such forward-looking
statements include, but are not limited to, statements regarding our business
plans, strategies and objectives, and, in particular, statements referring to
our expectations regarding our ability to continue as a going concern, generate
increased market awareness of, and demand for, our current products, realize
profitability and positive cash flow, and timely obtain required financing.
These forward-looking statements involve risks and uncertainties that could
cause actual results to differ from anticipated results. The forward-looking
statements are based on our current expectations and what we believe are
reasonable assumptions given our knowledge of the markets; however, our actual
performance, results and achievements could differ materially from those
expressed in, or implied by, these forward-looking statements. Factors within
and beyond our control that could cause or contribute to such differences
include, among others, the following: those associated with drilling and
subsequent sale of oil and gas, our critical capital raising efforts in an
uncertain and volatile economical environment, our ability to maintain
relationship with strategic companies, our cash preservation and cost
containment efforts, our ability to retain key management personnel, our
relative inexperience with advertising, our competition and the potential impact
of technological advancements thereon, the impact of changing economic,
political, and geo-political environments on our business, as well as those
factors discussed elsewhere in this Form 10-QSB and in “Item 1 - Our Business,”
“Item 6 - Management’s Discussion and Analysis,” and elsewhere in our most
recent Form 10-KSB, filed with the United States Securities and Exchange
Commission.





Readers
are urged to carefully review and consider the various disclosures made by us in
this report and those detailed from time to time in our reports and filings with
the United States Securities and Exchange Commission that attempt to advise
interested parties of the risks and factors that are likely to affect our
business.





Our
Business





Victory
Energy Corporation (OTC symbol VYEY), formerly known as Victory Capital Holdings
Corporation (our “Company”) was organized under the laws of the State of Nevada
on January 7, 1982, under the name All Things, Inc. On March 21, 1985, our
Company’s name was changed to New Environmental Technologies Corporation; on
April 28, 2003, our name was changed to Victory Capital Holdings Corporation and
on May 3, 2006, it was changed to Victory Energy Corporation. Our Company was
formed for the purpose of engaging in all lawful businesses. Our Company’s
initial authorized capital consisted of 100,000,000 shares of $0.001 par value
common voting stock and as of the date of this filing our authorized capital is
200,000,000 shares of $.001 par value common stock.





Our
Company has had no material business operations since 1989. In 2004, we began
the search for the acquisition of assets, property or businesses that may
benefit our Company and our shareholders. Our goal has been to bring value to
the Company and to our shareholders through such acquisitions. Each merger and
acquisition we approach is done with the intention to position us in markets and
sectors where excellent growth is anticipated. We plan to retain a percentage of
stock ownership in each subsidiary while spinning them out as their own new
public company if such transaction is economically feasible. The balance of the
stock will be distributed to the Company’s shareholders at the time of spin out
of the new public company. This is a non-dilutive method to increase shareholder
value as we grow and maintain a position in the market segments
selected.





Current
Business of the Company





Management
determined that the Company should focus on projects in the oil and gas
industry. This is based upon a belief that this industry is an economically
viable sector in which to conduct business operations. The Company has targeted
specific prospects and intends to engage in the drilling for oil and gas. Jon
Fullenkamp, the Company’s President, has a great deal of experience in the oil
and gas industry and has already recruited additional experience with new
directors and advisory board members.




The
Corporation has established a relationship with a private institutional
investment group who are providing drilling funds to the Company for the further
development of oil and gas properties. This group provides for direct
participation by the investors in the production of completed
wells.  The Corporation receives a 15% carried interest in the gas
wells and shares in the same value of the production revenue on a monthly
basis.  Once initial invested cost to acquire or drill  each
well is returned  to the private institutional investment group, the
Corporations participation will increase to 25%.  The Corporation will
receive the same level of participation in the revenues on a monthly basis at
that time.


-15-





During
the fourth quarter of 2007, the Corporation negotiated the terms to acquire
ownership in six term assignments containing six producing gas
wells.  The term assignments and gas wells are located in Crockett
County Texas located in the Permian Basin.





In the
first quarter of 2008 the Corporation acquired, with private institutional
investors, through a financial facility, 50% of 50% of 74% net revenue
interest in six term assignments containing six existing and producing gas wells
in Crockett County, Texas.  In the transaction of the purchase of 50% of
the original six producing gas wells, a 100% of the net royalty interest
ownership is 74%.  As Victory Energy Corporation purchased 50% of the
net royalty interest; this represents 50% of the 74% available. The purchase
resulted in acquiring 37% of the 74%, which is equal to 50% of the net royalty
interest ownership.  The Corporation retains 15% of 50% of the net
royalty interest and the investment group retains the remainder. The investment
group invested $1,430,000 for the purchase of these original six producing
wells.  Victory Energy Corporation did not invest cash.





During
the first quarter of 2008, the Corporation drilled two additional Canyon
Sandstone gas wells in Crockett County Texas.





During
the second quarter of 2008, the Corporation drilled four additional Canyon
Sandstone gas wells in Crockett County Texas.





Funds for
the transaction were provided by a private institutional investment group in
exchange for a portion of Victory’s interest ownership in each term
assignment.  Currently Victory maintains 15% of the interest ownership
until such time the revenues have paid back the original acquisition investment,
then Victory’s interest ownership will increase to 25%.





The
Corporation has targeted the prolific Canyon Sandstone gas field in the Texas
Permian Basin, with the intent to focus on the drilling and completion of
natural gas wells in this existing field.  The opportunity is of
reduced risk due to the extensive historical information available from this
specific natural gas field.




The
Canyon Sandstone gas play is located in the Texas Permian Basin as part of the
large prolific Adams-Baggett Canyon Sandstone gas field. The Canyon Sandstone
formation is found at a depth of 4,300 feet to 4,900 feet. Initial flow
test for these wells is approximately 250,000 cubic feet of gas per day per
well. The average life span of a Canyon Sandstone gas well is approximately 30
years, the decline production curve starting during the second
year.





Natural
gas from the Canyon Sandstone gas zone receives a 20% premium in price above the
standard price due to its higher BTU content per cubic foot of natural
gas.





Within
this existing gas field are two deeper zones, Strawn Limestone and the
Ellenburger Dolomite. The Strawn zone is usually found at 9,000 to 9,800 feet,
while the depth of the Ellenburger zone is between 10,500 and 11,500
feet.





To reduce
risk in the field, each well drilled has the opportunity to have the Canyon
Sandstone gas zone available to produce from.  For each of the deeper
gas wells drilled in this field, the Corporation will always have the Canyon
Sandstone zone available as a fall back opportunity to produce from and recover
any additional drilling expenses incurred from drilling a deeper
well.





The
underlying opportunity in drilling a deeper gas well is to first produce the
deepest zone, Ellenburger Dolomite, until it is depleted.  The next
step is then to produce the shallower Strawn Limestone until depletion and
finally to produce the Canyon Sandstone zone to
depletion.




The
Corporation received its first revenue from production sales from this field in
March of 2008.





We also
hold an interest as a joint venture partner in the Mesa Gas Prospect located in
Roosevelt County New Mexico.  The Company had held 1,960 acres in a
prospective oilfield identified as N.E. Glasgow Prospect located in Montana
where plans were to incorporate this prospect into the Company’s developments in
Valley County Montana.  The acreage was allowed to lapse back to the
State of Montana.  The Company now is currently working with the State
of Montana to reacquire the acreage.  We had taken on the evaluation
of a prospect in Oklahoma identified as the Skedee Prospect. As we progressed
into the due diligence of these prospects and the potential production,
management determined that the development of the prospect was not worth the
required investment capital. Even with the potential reduction in investment
dollars, the prospects had an unacceptable pay back time for the initial
investment. Management felt the shareholders would be better served by seeking
other prospects.


-16-





Other
than our President, we have no other employees at this time and we will seek to
retain independent contractors to assist in operating and managing the prospects
as well as to carry out the principal and necessary functions incidental to the
oil and gas business. With the intended acquisition of oil and natural gas, we
intend to establish ourselves as an industry partner within the industry. With
our established revenue base with cash flow, we will seek opportunities more
aggressive in nature.




Results
of Operations for Period Ended June 30, 2008





As of
June 30, 2008, the Company has earned revenues of $401,019 and has incurred a
net loss to date of $12,658,417. Operations have been primarily seeking
potential opportunities in the oil and gas industry through the location of
commercially economical prospects, and raising capital and developing revenue
generating opportunities and strategic relationships.





During
the three month period ended June 30, 2008, we incurred operating expenses in
the amount of $1,217,501. These operating expenses included due diligence
expenses, consulting fees, professional fees, land leases, oil and gas leases,
and office and general expenses.





Liquidity
and Capital Resources




To date,
we have financed our operations from funds put into the Company by our CEO. We
intend to raise future capital from the sale of a percentage of our prospects to
fund development and production or through the sale of our common stock to
finance the prospects in their entirety.




Recent
Accounting Pronouncements




In
February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities –
Including an Amendment of FASB Statement No. 115”.  This statement
permits entities to choose to measure many financial instruments and certain
other items at fair value. Most of the provisions of SFAS No. 159 apply only to
entities that elect the fair value option. However, the amendment to SFAS No.
115 “Accounting for Certain Investments in Debt and Equity Securities” applies
to all entities with available-for-sale and trading securities. SFAS No. 159 is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provision of SFAS No. 157, “Fair Value Measurements”. In February
2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Financial Liabilities – Including an
Amendment of FASB Statement No. 115”.  This statement permits entities
to choose to measure many financial instruments and certain other items at fair
value. Most of the provisions of SFAS No. 159 apply only to entities that elect
the fair value option. However, the amendment to SFAS No. 115 “Accounting for
Certain Investments in Debt and Equity Securities” applies to all entities with
available-for-sale and trading securities. SFAS No. 159 is effective as of the
beginning of an entity’s first fiscal year that begins after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that begins on
or before November 15, 2007, provided the entity also elects to apply the
provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this
statement is not expected to have a material effect on our financial
statements.




In
September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
the effects of prior year uncorrected misstatements should be considered when
quantifying misstatements in current year financial statements. SAB No. 108
requires companies to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in
quantifying an error that is material in light of relevant quantitative and
qualitative factors. SAB No. 108 is effective for period ending after November
15, 2006. We are currently evaluating the impact of adopting SAB No. 108 but
does not expect that it will have a material effect on its financial
statements




In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106, and 132®”. This statement requires employers to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit
organization.  This statement also requires an employer to measure the
funded status of a plan as of the date of its year-end statement of financial
position, with limited exceptions. The provisions of SFAS No. 158 are effective
for employers with publicly traded equity securities as of the end of the fiscal
year ending after December 15, 2006. The adoption of this statement did not have
a material effect on our reported financial position or results of
operations.


-17-





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS No. 157 is to increase consistency and comparability in fair
value measurements and to expand disclosures about fair value
measurements.  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. SFAS No. 157 applies
under other accounting pronouncements that require or permit fair value
measurements and does not require any new fair value measurements. The
provisions of SFAS No. 157 are effective for fair value measurements made in
fiscal years beginning after November 15, 2007. The adoption of this statement
is not expected to have a material effect on our future reported financial
position or results of operations.




In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes, an interpretation of FASB Statements No. 109”. FIN 48 clarifies
the accounting for uncertainty in income taxes by prescribing a two-step method
of first evaluating whether a tax position has met a more likely than not
recognition threshold and second, measuring that tax position to determine the
amount of benefit to be recognized in the financial statements. FIN 48 provides
guidance on the presentation of such positions within a classified statement of
financial position as well as on derecognition, interest and penalties,
accounting in interim periods, disclosure, and transition. FIN 48 is effective
for fiscal years beginning after December 15, 2006. The adoption of this
statement is not expected to have a material effect on our future reported
financial position or results of operations.




In
September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how
the effects of prior year uncorrected misstatements should be considered when
quantifying misstatements in current year financial statements. SAB No. 108
requires companies to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results in
quantifying an error that is material in light of relevant quantitative and
qualitative factors. SAB No. 108 is effective for period ending after November
15, 2006. We are currently evaluating the impact of adopting SAB No. 108 but do
not expect that it will have a material effect on our financial
statements.




In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements
No. 87, 88, 106, and 132®”. This statement requires employers to recognize the
overfunded or underfunded status of a defined benefit postretirement plan (other
than a multiemployer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the year in
which the changes occur through comprehensive income of a business entity or
changes in unrestricted net assets of a not-for-profit
organization.  This statement also requires an employer to measure the
funded status of a plan as of the date of its year-end statement of financial
position, with limited exceptions. The provisions of SFAS No. 158 are effective
for employers with publicly traded equity securities as of the end of the fiscal
year ending after December 15, 2006. The adoption of this statement did not have
a material effect on our reported financial position or results of
operations.





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The
objective of SFAS No. 157 is to increase consistency and comparability in fair
value measurements and to expand disclosures about fair value
measurements.  SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles,
and expands disclosures about fair value measurements. SFAS No. 157 applies
under other accounting pronouncements that require or permit fair value
measurements and does not require any new fair value measurements. The
provisions of SFAS No. 157 are effective for fair value measurements made in
fiscal years beginning after November 15, 2007. The adoption of this statement
is not expected to have a material effect on our future reported.





Item
3. Quantitative and Qualitative Disclosures About Market
Risk





None


-18-





Item
4T.  Controls and Procedures




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the Company. Under the supervision and with
the participation of our management, including the Principal Executive Officer
and Principal Financial Officer, we have evaluated the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to
Exchange Act Rules 13a-15 and 15d-15 as of the end of the period covered by this
report. Based on that evaluation, the Principal Executive Officer and Principal
Financial Officer have concluded that these disclosure controls and procedures
require updating to specifically comply with item 601(b) (31) of Regulation S-B
and SOX 404 to be effective such that the material information required to be
filed in our SEC reports is recorded, processed, summarized and reported within
the required time periods specified in the SEC rules and forms. There were no
changes in our internal control over financial reporting during the quarter
ended June 30, 2008 that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting. Within the
next 15 days the Company will engage a consultant to assist the Company in
establishing internal controls. By September 30th the Company will establish an
Audit Committee, a Compensation Committee, a Corporate Governance and Nominating
Committee, and a Public Policy Committee.   Potential investors
should be aware that the design of any system of controls and procedures is
based in part upon certain assumptions about the likelihood of future events.
 There can be no assurance that any system of controls and procedures will
succeed in achieving its stated goals under all potential future conditions,
regardless of how remote.




-19-




PART
II - OTHERINFORMATION







Item
1.  Legal Proceedings





The
Company is not subject to any reportable legal proceedings.




Item
2.  Unregistered Sales of Equity Securitiesand Useof Proceeds




During
the three months ended June 30, 2008, we issued 7,665,000 shares of common
stock.




Item
3.  Defaults Upon SeniorSecurities




During
the three months ended June 30, 2008, we were not in default on any of our
indebtedness.




Item
4.  Submission of Matters to a Vote of Security
Holders




There
were no matters submitted to a vote of our shareholders.




Item
5.  Other Information.




None




Item 6. Exhibits




Exhibit
      No.
            Description
      of Exhibit31
            Certification of Chief
      Executive/Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 200232
            Certification of Chief
      Executive/Financial Officer pursuant to Section
    906




-20-





SIGNATURE







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




Victory
      Energy CorporationDate:  August
      19, 2008
            By:
            /s/ Jon
      FullenkampJon
      FullenkampPrincipal
      Executive Officer
              Principal
      Financial Officer
              Principal
      Accounting Officer
              and
      Director




Date:  August
      19, 2008
            By:
            /s/ Rick
      MayRick
      MayDirector




Date:  August
      19, 2008
            By:
            /s/  Perry
      MansellPerry
      MansellDirector







-21-