**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549


**FORM
      10-QSB**








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





For
      the quarterly period ended:
**June 30, 2007**





[  ]  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)





**(866)
      279-9257**


(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:  YES
      [X]   NO []





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).YES [_]   NO [X]





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of August 11, 2007, there were 31,285,366
      shares of our common stock outstanding.





Transitional
      Small Business Disclosure Format. YES [ ] NO [X]





-1-


**INDEX**





Page
                No.**PART
                1. FINANCIAL INFORMATION**Item
                1.                      Financial
                Statements
            3Consolidated
                Balance Sheet, June
                30, 2007 (unaudited) andDecember
                31, 2006
                (audited)
            3Consolidated
                Statement of
                Operations, for the three months ended June 30, 2007and
                2006, and cumulative from
                inception to June 30, 2007 (unaudited)
            4Consolidated
                Statement of
                Stockholders’ Equity (Deficit) for the period fromJanuary
                7, 1982 (inception)
                through June 30, 2007 (unaudited)
            5Consolidated
                Statements of Cash
                Flows, for the three months endedJune
                30, 2007 and 2006, and
                cumulative from inception (Jan. 7, 1982)to
                June 30, 2007
                (unaudited)
            6Notes
                to Condensed Financial
                Statements (unaudited)
            7Item
                2.                      Management’s
                Discussion and Analysis or Plan of Operation
            12Item
                3.                      Controls
                and Procedures
            16**PART
                II. OTHER INFORMATION**Item
                1.                      Legal
                Proceedings
            17Item
                2.                      Unregistered
                Sales of Equity Securities and Use of Proceeds
            17Item
                3.                      Defaults
                Upon Senior Securities
            17Item
                4.                      Submission
                of Matters to a Vote of Security Holders
            17Item
                5.                      Other
                Information
            18Item
                6.                      Exhibits
                and Reports on Form 8-K
            18





-2-





VICTORY
                ENERGY CORPORATION AND SUBSIDIARIES(A
                Development Stage Company)Consolidated
                Balance Sheets**ASSETS****June
                30,**
            ****
            ****
            **December
                31,**
            ********
            ****
            **2007**
            ****
            ****
            **2006**
            ********
            ****
            **Unaudited**
            ****
            ****CURRENT
                ASSETSCash
                and Cash Equivalents
            
            $
            -
            
            
            $
            -Subscriptions
                Receivable
            
            
            735,000
            
            
            
            -Total
                Curent Assets
            
            
            735,000
            
            
            
            -FIXED
                ASSETS, NET
            
            
            -
            
            
            
            -OTHER
                ASSETSInvestment
                in Joint Venture
            
            
            50,000
            
            
            
            50,000TOTAL
                ASSETS
            
            $
            785,000
            
            
            $
            50,000**LIABILITIES
                & STOCKHOLDERS' DEFICIT**CURRENT
                LIABILITESBank
                Overdraft
            
            $
            11,760
            
            
            $
            79Accounts
                Payable
            
            
            40,440
            
            
            
            19,142Credit
                Line - WFB Business Line
            
            
            80,622
            
            
            
            56,961Prepaid
                Subscriptions
            
            
            203,500
            
            
            
            203,500Total
                Current Liabilities
            
            
            336,322
            
            
            
            279,682OTHER
                LIABILITIESLoan
                from Officer
            
            
            988,565
            
            
            
            690,085Total
                Other Liabilities
            
            
            988,565
            
            
            
            690,085Total
                Liabilities
            
            
            1,324,887
            
            
            
            969,767Commitments
                and contingencies (Note 6)STOCKHOLDERS'
                DEFICITPreferred
                Stock, $0.001 par value, 10,000,000 sharesauthorized,
                630,517 issued and outstanding
            
            
            631
            
            
            
            716Common
                Stock, $0.001 par value, 200,000,000 sharesauthorized,  31,285,366 issued
                and outstanding
            
            
            31,286
            
            
            
            4,518Additional
                paid-in capital
            
            
            7,999,041
            
            
            
            4,566,320Deficit
                accumulated in the development stage
            
            
            (8,570,845
            )
            
            
            (5,491,321
            )Total
                Stockholders' Deficit
            
            
            (539,887
            )
            
            
            (919,767
            )TOTAL
                LIABILITIES AND STOCKHOLDERS' DEFICIT
            
            $
            785,000
            
            
            $
            50,000





-3-





VICTORY
                ENERGY CORPORATION AND SUBSIDIARIES(A
                Development Stage Company)Consolidated
                Statement of OperationsUnaudited****
            ****
            ****
            ****
            ****
            **For
                the period**
            ********
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            ****
            **of
                Inception,**
            ********
            ****
            **For
                the**
            ****
            ****
            **For
                the**
            ****
            ****
            **from
                January 2,**
            ********
            ****
            **Three
                Months Ended**
            ****
            ****
            **Six
                Months Ended**
            ****
            ****
            **1982
                through**
            ********
            ****
            **June
                30,**
            ****
            ****
            **June
                30,**
            ****
            ****
            **June
                30**
            ********
            ****
            **2007**
            ****
            ****
            **2006**
            ****
            ****
            **2007**
            ****
            ****
            **2006**
            ****
            ****
            **2007**Revenues
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            20,207Costs
                and ExpensesConsulting
                Expense
            
            
            680,494
            
            
            
            142,575
            
            
            
            2,912,501
            
            
            
            742,835
            
            
            
            6,901,855Land
                Leases
            
            
            4,500
            
            
            
            (960
            )
            
            
            6,180
            
            
            
            24,040
            
            
            
            6,180Wages
                and Salaries
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            22,500
            
            
            
            270,500General
                & Administrative
            
            
            36,535
            
            
            
            239,360
            
            
            
            160,843
            
            
            
            367,497
            
            
            
            1,315,350Total
                Expenses
            
            
            721,529
            
            
            
            380,975
            
            
            
            3,079,524
            
            
            
            1,156,872
            
            
            
            8,493,885Operating
                Loss
            
            
            (721,529
            )
            
            
            (380,975
            )
            
            
            (3,079,524
            )
            
            
            (1,156,872
            )
            
            
            (8,473,678
            )Other
                Income and (expenses)Loss
                on abandonment of subsidiary
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (50,900
            )Loss
                from reduction in debt
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (48,363
            )Interest
                Expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            0Other
                Income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,096Total
                Other Income and (expenses)
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            (97,167
            )Net
                Loss
            
            $
            (721,529
            )
            
            $
            (380,975
            )
            
            $
            (3,079,524
            )
            
            $
            (1,156,872
            )
            
            $
            (8,570,845
            )Basic
                and Dilutive net loss per share
            
            $
            (0.036
            )
            
            $
            (0.150
            )
            
            $
            (0.187
            )
            
            $
            (0.534
            )Weighted
                average number of sharesoutstanding,
                basic and diluted
            
            
            19,973,370
            
            
            
            2,535,590
            
            
            
            16,467,912
            
            
            
            2,167,655(Restated)
            
            
            
            
            
            
            (Restated)Note
                2
            
            
            
            
            
            
            Note
                2Dilutive
                effect of preferred stock,
            
            
            0
            
            
            
            
            
            
            
            0(Note
                2)





-4-





VICTORY
                ENERGY CORPORATION AND SUBSIDIARIES(A
                Development Stage Company)Consolidated
                Statements of Cash FlowsUnaudited**For
                the**
            ****
            ****
            **For
                the**
            ****
            ****
            **Inception
                from**
            ********
            ****
            **Three
                Months Ended**
            ****
            ****
            **Six Months
                Ended**
            ****
            ****
            **Jan.
                7, 1982**
            ********
            ****
            **June
                30,**
            ****
            ****
            **June
                30,**
            ****
            ****
            **through**
            ********
            ****
            **2007**
            ****
            ****
            **2006**
            ****
            ****
            **2007**
            ****
            ****
            **2006**
            ****
            ****
            **June
                30, 2007**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                Loss
            
            $
            (1,910,549
            )
            
            $
            (380,974
            )
            
            $
            (3,079,524
            )
            
            $
            (1,156,852
            )
            
            $
            (8,570,845
            )Adjustments
                to reconcile net loss to net cashused
                by operating activities:Depreciation
            
            
            
            
            
            
            599
            
            
            
            
            
            
            
            599
            
            
            
            2,294Loss
                on extinguishment of debt
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            48,363Loss
                on abandonment of subsidiary
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            50,900Issuance
                of common stock for services rendered
            
            
            
            
            
            
            400,000
            
            
            
            585,396
            
            
            
            877,500
            
            
            
            6,178,540Increase
                in Short Term Receivables
            
            
            
            
            
            
            88,300
            
            
            
            
            
            
            
            (122,684
            )Decrease
                (Increase) in Prepaid Expenses
            
            
            
            
            
            
            153,500
            
            
            
            
            
            
            
            50,000Increase
                (Decrease) in Deposits
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            153,500Incrrease
                (Decrease) in Prepaid Subscriptions
            
            
            
            
            
            
            
            
            
            
            (735,000
            )
            
            
            
            
            
            
            203,500(Incrrease)
                Decrease in Subscriptions Receivable
            
            
            454,020
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (735,000
            )Increase
                (Decrease) in accounts payable
            
            
            8,022
            
            
            
            (330,970
            )
            
            
            21,298
            
            
            
            (330,970
            )
            
            
            40,440Increase
                (Decrease) in accrued liabilities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,590Increase
                (Decrease ) in Accrued Payroll,P'roll Taxes
            
            
            
            (300,000
            )
            
            
            
            
            
            
            450,970Increase
                (Decrease) in Short Termn Receivables
            
            
            
            
            
            
            (210,984
            )Repayment
                of long term debt
            
            
            
            
            
            
            (146,431
            )Increase
                (decrease) in Accrued Liabilities-Related
            
            
            
            690,970
            
            
            
            
            
            
            
            (2,500
            )Non-cash
                contributed capital
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (524
            )Net
                Cash provided by (used by)Operating
                Activities
            
            
            (1,448,507
            )
            
            
            (35,990
            )
            
            
            (3,207,830
            )
            
            
            (75,847
            )
            
            
            (2,782,332
            )CASH
                FLOWS FROM INVESTING ACTIVITIESPurchase
                of Fixed Assets
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,294
            )Investment
                in Joint Venture
            
            
            
            
            
            
            (50,000
            )
            
            
            
            
            
            
            (50,000
            )
            
            
            (50,000
            )Net
                Cash (used by) Investing Activities
            
            
            0
            
            
            
            (50,000
            )
            
            
            0
            
            
            
            (50,000
            )
            
            
            (52,294
            )CASH
                FLOWS FROM FINANCING ACTIVITIESProceeds
                of Note Payable
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,027Proceeds
                (Repayment) of LoansIncrease
                (decrease) in Credit Line
            
            
            775
            
            
            
            
            
            
            
            23,661
            
            
            
            
            
            
            
            80,622Proceeds
                (Repayment) of Loan from Officer
            
            
            114,984
            
            
            
            58,310
            
            
            
            298,480
            
            
            
            116,664
            
            
            
            988,565Proceeds
                (Repayment) of Note Payable-Related Party
            
            
            
            (2,500
            )Increase
                (Decrease) in Other Loans PayableContributed
                capital for rent and officers' compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,438Proceeds
                from the sale of Preferred StockProceeds
                from the sale/conversion  of Common Stock
            
            
            14,788
            
            
            
            
            
            
            
            23,980
            
            
            
            
            
            
            
            342,191Proceeds
                from the sale/conversion  of Preferred Stock
            
            
            (85
            )
            
            
            
            
            
            
            (85
            )
            
            
            
            
            
            
            246,950Contributed
                Capital by shareholders
            
            
            1,305,693
            
            
            
            
            
            
            
            2,850,113
            
            
            
            
            
            
            
            1,162,100Net
                Cash provided by Financing Activities
            
            
            1,436,155
            
            
            
            55,810
            
            
            
            3,196,149
            
            
            
            119,691
            
            
            
            2,822,866NET
                INCREASE IN CASH
            
            
            (12,352
            )
            
            
            (30,180
            )
            
            
            (11,681
            )
            
            
            (6,156
            )
            
            
            (11,760
            )CASH
                AT BEGINNING OF PERIOD
            
            
            592
            
            
            
            28,098
            
            
            
            (79
            )
            
            
            4,074
            
            
            
            -CASH
                AT END OF PERIOD
            
            $
            (11,760
            )
            
            $
            (2,082
            )
            
            $
            (11,760
            )
            
            $
            (2,082
            )
            
            $
            (11,760
            )CASH
                PAID FOR:Interest
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Income
                Taxes
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -





-5-


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





NOTE
      1 -
      BUSINESS AND CONTINUED OPERATIONS




Victory
      Energy Corporation (OTC symbol VTYE), 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. These interim financial
      statements follow the same accounting policies and methods of their application
      as the Company’s December 31, 2006 annual financial statements. All adjustments
      are of a normal recurring nature. It is suggested that these abridged interim
      financial statements be read in conjunction with the Company’s December 31, 2006
      annual financial statements.





Operating
      results for the six months ended June 30, 2007 are not necessarily indicative
      of
      the results that can be expected for the year ended December 31,
      2007.





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.   There was no activity in
      this company during 2007.  The name of the subsidiary was changed to
      Victory Carbon Solutions. There was no activity in this company during
      2007.




**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.  The Company also secured mineral rights in
      Montana and Texas, as well as a joint venture in New Mexico.  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.








-6-


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, 2007
      and December 31, 2006 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 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.





Development-Stage
      Company





The
      Company is considered a development-stage company, with no 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 $8,570,845, 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, 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.





-7-


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
      Carbon Solutions, Inc. 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 was no activity in the subsidiaries in the first
      six months of 2007 and during 2006.





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 not included in the
      calculation of loss per share for the six months ended June 30, 2007 because
      the
      Company incurred a loss in the period, and thus their effect would have been
      anti-dilutive.  At June 30, 2007, potentially dilutive securities
      consisted of 630,517 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,
      2007 and 2006.





In
      2006 a
      reverse stock split of Common Stock occurred on a 25 to 1 basis.


The
      June
      30, 2006 loss per share for the first three months and six months of 2006 has
      been restated accordingly, giving retroactive effect to the reverse stock
      split.




**June
                30, 2007**
            
            ****
            **June
                30, 2006**Numerator:Basic
                and diluted net loss per
                share:Net
                Loss
            
            $
            (3,079,524
            )
            
            $
            (1,156,87
            )DenominatorBasic
                and diluted weighted
                averagenumber
                of shares
                outstanding
            
            
            16,467,912
            
            
            
            2,167,655Basic
                and Diluted Net Loss Per Share
            
            $
            (0.19
            )
            
            $
            (0.53
            )(Restated)Dilutive
                effect of Preferred Stock
            
            Nil
            
            
            N/A





-8-


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.




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 $988,565 at June
      30, 2007.  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
      the
      six months ended June 30, 2007 and 2006 the President/CEO incurred
      $63,178 and $111,184 respectively in reimbursable expenses on behalf of the
      Company.





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.





NOTE
      4 –
INVESTMENT IN JOINT VENTURE





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.





NOTE
      5 -
      COMMITMENTS AND CONTINGENCIES





There
      were no additional commitments and contingencies in the six months ended June
      30, 2006.





-9-


NOTE
      6 –
CAPITAL STOCK TRANSACTIONS





Reverse
      Common Stock Split





The
      Common Stock issued and outstanding at October 26, 2006 was
      108,810,259.   On this date the Board of Directors declared a
      reverse stock split of the Company’s Common Stock, converting the common stock
      on a 25 to 1 basis.    Common shares outstanding were
      reduced by 104,457,849.  New stock outstanding after the split and
      after issuing 890 shares for rounding was 4,353,300.   The effect
      on the balance sheet was to increase Paid-in Capital by $104,458 and to reduce
      Common Stock by $104,458, a neutral effect on stockholders’ equity.





On
      October 20, 2005 one share was issued at $0.50, valued de minimus, for rounding
      following the reverse split.





On
      November 11, 2006 5,200 shares were issued for services valued at $1,040 at
      market value of $0.20 per share.





On
      December 5, 2006, 14 shares valued de minimus were issued for
      rounding.





On
      December 27, 2006, 160,000 shares were issued for services, valued at $27,200,
      at market value of $0.17.





2007





On
      January 22, 2007, 6,277,251 shares of common stock were issued for services
      at  $0.15 per share.  $941,588 was recorded as consulting
      fees.





On
      February 1, 2007, 5,662,000 shares of common stock were issued at $0.21 for
      subscriptions receivable of  $1,189,020.





On
      March
      1, 2007, 40,000 shares of common stock were issued to a Director for services
      rendered at $0.21 per share.    $8,400 was recorded as
      consulting fees.





On
      May 7,
      2007, 1,710,000 shares of common stock were issued for services at $0.21 per
      share.    $359,100 was recorded as consulting
      fees.





On
      June
      5, 2007, 1,077,600 shares of common stock were issued for services at $0.21
      per
      share.    $226,296 was recorded as consulting
      fees.





On
      June
      13, 2007, 850,000 shares of common stock were issued to preferred stockholders
      in a conversion of 85,000 shares of preferred stock to common, converted at
      the
      rate of one share of preferred stock to 100 shares of common stock.





On
      June
      15, 3,500,000 shares of common stock were issued at $0.21 per share for
      subscriptions receivable of $735,000.





-10-


The
      total
      of issued and outstanding common shares at June 30, 2007 and 2006  was
      31,285,366  and 2,701,7 44 respectively, (June 30, 2006 restated for
      25 to 1 stock split October 26, 2006).





Preferred
      Stock





On
      August
      22, 2006 the Board of Directors resolved to amend the Articles of Incorporation,
      to authorize 10,000,000 shares of preferred stock, having a par value of
      $0.001.  The stock is convertible to common stock at will in a ratio
      of 1 preferred to 100 common.  Preferred stockholders may vote as
      common stockholders on any matter on which common stockholders can vote, and
      in
      accordance with the underlying common stock held.  Preferred stock
      dividends may be declared by the Board of Directors.





On
      October 20, 2006, 715,512.23 preferred shares were issued for cash at $0.467
      each pursuant to Regulation “S”, realizing $246,950.





On
      June
      13, 2007 85,000 shares of preferred stock were converted, at the rate of one
      share of preferred stock to 100 shares of common stock, to 850,000 shares common
      stock.





The
      total
      of issued and outstanding preferred shares at June 30, 2007 and 2006 was 630,517
      and zero, respectively.




NOTE
        7 –
LITIGATION





During
      the second quarter of 2007, a former consultant solicited the courts for the
      shortfall between the original settlement amount and the amount realized in
      a
      court action.  On June 6, 2007, the Corporation delivered final
      settlement, but appealed the court’s decision.  The appeal process
      will take approximately 12 months to be reviewed by the appellate
      court.




Neither
      the Company nor any of the officers or directors is involved in any other
      litigation either as plaintiffs or defendants and have no knowledge of any
      threatened or pending litigation against them or any of the officers or
      directors.




-11-


**Item
      2.                    
Management's Discussion and Analysis or 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
      fiscal year ends on December 31. References to a fiscal year refer to the
      calendar year in which such fiscal year ends.




**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
      has determined that the Company will focus on projects in the oil and gas
      industry. This is based upon a belief that this industry is becoming an
      economically viable sector in which to conduct business operations. We have
      targeted specific prospects and intend to engage in the drilling for oil and
      gas. Jon Fullenkamp, our President, has a great deal of experience in the oil
      and gas industry and has already recruited additional experience with the
      addition of new directors and advisory board member.





-12-


Victory
      Carbon Solutions Inc. was formed as a wholly owned subsidiary of the Corporation
      to participate in the Green House Gas opportunities currently available in
      today’s energy markets and for the Corporation to join in the Carbon Credits
      exchange currently offered as part of the Chicago Climate
      Exchange.  In addition the Corporation will utilize this platform to
      establish a fund having a focus of investing in Carbon Credits as well as
      financing eco-friendly projects like, windmill farms, geothermal production,
      solar farms, and other energy saving projects.





Management
      has recently negotiated the mineral rights on a prospect for Victory in the
      Palo
      Duro Basin located in Briscoe County Texas. Victory has established a letter
      of
      intent which sets out the substantive terms of a Formal Agreement (“Agreement”)
      that Victory intends to complete and execute. Under the Agreement, we will
      be
      required to commit up to one hundred thousand dollars ($100,000.00) for seismic
      evaluation to determine the first three drilling targets. In exchange, we will
      receive 50% of the mineral rights of all hydrocarbon deposits on the first
      eight
      sections, approximately 10 sections of land. During the evaluation of the
      drilling targets, and including the time to drill the first three wells, we
      will
      have the ability to exercise its irrevocable option to lease up to a total
      of
      100,000 acres of mineral rights within the Palo Duro Basin.




The
      Corporation also holds interest as a joint venture partner in the Mesa Gas
      Prospect located in Roosevelt County New Mexico.****This
      Prospect is a 12,000-acre field targeted primarily for
      gas.  Additionally, the Corporation owns the mineral rights in a
      prospective oilfield identified as N.E. Glasgow Prospect located in Valley
      County Montana.  This particular acreage has a Wrench Fault identified
      geologically.  The acreage also has indications of Lodgepole Reef
      deposits.   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.





We
      have
      no other employees at this time and 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. Once we can establish
      a
      revenue base with cash flow, we will seek opportunities more aggressive in
      nature.




**Plan
        of Operation**




Our
      plan
      of operation for the next 12 months will be the continued acquisition of
      economically viable oil and gas prospects. Once acquired, we intend to develop
      and produce the prospects assuming they are commercially economical to produce
      based on a complete due diligence process. In that case, we can expect to derive
      revenues from operations. We intend to diversify our holdings in both oil and
      gas producing wells to take advantage of what we believe is a potentially strong
      window of opportunity that currently exists in the oil and gas industry for
      the
      next several years.




We
      completed due diligence on other projects which ultimately proved to be too
      expensive to pursue. We have continued to seek out other viable
      opportunities.




**Results
      of Operations for Period Ended June 30, 2007**




As
        of
        June 30, 2007, the Company has not earned any revenues and has incurred a
        net
        loss to date of $8,570,845. 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.
 
 -13-
 During
        the six month period ended June 30, 2007, we incurred operating expenses
        in the
        amount of $3.079,524. 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.




-14-


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.




-15-


**Item
      3.  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
      were 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,
      2007
      that have materially affected, or are reasonably likely to materially affect,
      our internal controls over financial reporting. 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.




-16-




**PART
      II - OTHER INFORMATION**




**Item
      1.  Legal Proceedings**




During
      the second quarter of 2007, the former consultant solicited the courts for
      the
      shortfall between the original settlement amount and the amount
      realized.  On June 6, 2007, the Corporation delivered final
      settlement, but appealed the court’s decision.  The appeal process
      will take approximately 12 months to be reviewed by the appellate
      court.




On
      July
      24, 2006, all litigation was settled between the Company and a former
      consultant. The Company settled the case for an estimated value of $280,000
      to
      be realized over a 10-month period ending in May of 2007.




In
      May
      2006, we settled a past debt with Treetop Investments for 5,000,000 shares
      of
      our restricted common stock in a transaction combining settlement of debt and
      purchase of stock.




Neither
      the Company nor any of our officers or directors is involved in any other
      litigation either as plaintiffs or defendants and we have no knowledge of any
      threatened or pending litigation against us or any of our officers or
      directors.




**Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds**




During
      the three months ended June 30, 2007, we issued 14,787,600 shares of common
      stock of which was a conversion of 85,000 shares of preferred to 8,500,000
      shares to common stock.




**Item
      3.  Defaults Upon Senior Securities**




During
      the three months ended June 30, 2007, we were not in default on any of our
      indebtedness.




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




On
      April
      18, 2007, we submitted certain matters to a vote of our shareholders at our
      annual meeting. Pursuant to a majority vote of shareholders of record as of
      March 23, 2007, we received approval and ratification of the following
      actions:


1.
              Election
                  of Jon Fullenkamp to serve as CEO, President and Chairman of the
                  Board of
                  Directors;


2.
            Election
                of Rick May as a Director;


3.
            Election
                of Perry Mansell as a Director;


4.
            Ratification
                of the Company’s name change effective May 3,
                2006;


5.
            Ratification
                of a 25:1 reverse split of the Corporation’s common stock on November 19,
                2006;


6.
            Ratification
                of the authorization of 10,000,000 shares of Preferred Stock with
                rights
                and preferences to be determined by the Board of Directors at the
                time of
                issuance.




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




-17-


**Item
      5.  Other Information.**




None




**Item
      6.  Exhibits**




**Exhibit
                No.**
            **Description
                of
                Exhibit**31
            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




-18-


**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
      Corporation**





Date:
      August 14,
      2007                                                                                     */s/  Jon
      Fullenkamp*


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


Jon
      Fullenkamp


Principal
      Executive
      Officer


Principal
      Financial
      Officer


Principal
      Accounting
      Officer


and
      Director





Date:  August
      14,
      2007                                                                                  */s/
      Rick May*


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


Rick
      May, Director








Date:  August
      14,
      2007                                                                                  */s/
      Perry Mansell*


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


Perry
      Mansell, Director








-19-