**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

----

----

**March      31, 2007**

**2-76219-NY**

**VICTORY      ENERGY CORPORATION**

| **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**

**(866)      279-9257**

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**INDEX**

|                                                                                                              | Page                No. |
|-------------------------------------------------------------------------------------------------------------------|-------------------------|
|                                                                                                              |                    |
| **PART                1. FINANCIAL INFORMATION**                                                                  |                    |
|                                                                                                              |                    |
| Item                1. Financial                Statements                                              |                    |
|                                                                                                              |                    |
| Consolidated                Balance Sheet, March 31, 2007 (unaudited) and                                         | 2                       |
| December                31, 2006 (audited)                                                              |                    |
|                                                                                                              |                    |
| Consolidated                Statement of Operations, for the three months ended March 31, 2007                    | 3                       |
| and                2006, and cumulative from inception to March 31, 2007                (unaudited)     |                    |
|                                                                                                              |                    |
| Consolidated                Statement of Stockholders’ Equity (Deficit) for the period from                 | 4                       |
| January                7, 1982 (inception) through March 31, 2007 (unaudited)                           |                    |
|                                                                                                              |                    |
| Consolidated                Statements of Cash Flows, for the three months ended                                  | 5                       |
| March                31, 2007 and 2006, and cumulative from inception (Jan. 7,                1982)               |                    |
| to                March 31, 2007 (unaudited)                                                            |                    |
|                                                                                                              |                    |
| Notes                to Condensed Financial Statements (unaudited)                                      | 7                       |
|                                                                                                              |                    |
| Item                2. Management’s                Discussion and Analysis or Plan of Operation   | 13                      |
|                                                                                                              |                    |
| Item                3. Controls                and Procedures                                           | 15                      |
|                                                                                                              |                    |
| **PART                II. OTHER INFORMATION**                                                                     |                    |
|                                                                                                              |                    |
| Item                1. Legal                Proceedings                                                 | 16                      |
|                                                                                                              |                    |
| Item                2. Unregistered                Sales of Equity Securities and Use of Proceeds       | 16                      |
|                                                                                                              |                    |
| Item                3. Defaults                Upon Senior Securities                              | 16                      |
|                                                                                                              |                    |
| Item                4. Submission                of Matters to a Vote of Security Holders          | 16                      |
|                                                                                                              |                    |
| Item                5. Other                Information                                            | 16                      |
|                                                                                                              |                    |
| Item                6. Exhibits                and Reports on Form 8-K                             | 16                      |

----

| VICTORY                  ENERGY CORPORATION AND SUBSIDIARIES  |
|---------------------------------------------------------------|
| (A                  Development Stage Company)                |
| Consolidated                  Balance                  Sheets |

|                                                                                 |       |                           |       |                              |       |
|--------------------------------------------------------------------------------------|------------|--------------------------------|------------|-----------------------------------|------------|
| **ASSETS**                                                                           |       |                           |       |                              |       |
|                                                                                 |       | **March                  31,** | ** ** | **December                  31,** | ** ** |
| ** **                                                                           | ** ** | **2007**                       | ** ** | **2006**                          |       |
| CURRENT                  ASSETS                                                      |       | **Unaudited**                  |       |                              |       |
| Cash                  and Cash Equivalents                                           |       | $                              | 592        |                              | $          | - |   |
| Subscriptions                  Receivable                                            |       |                           | 1,189,020  |                              |       | - |   |
| Total                  Curent Assets                                                 |       |                           | 1,189,612  |                              |       | - |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| FIXED                  ASSETS, NET                                                   |       |                           | -          |                              |       | - |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| OTHER                  ASSETS                                                        |       |                           |       |                              |       |   |   |
| Investment                  in Joint Venture                                         |       |                           | 50,000     |                              |       | 50,000 |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| TOTAL                  ASSETS                                                        |       | $                              | 1,239,612  |                              | $          | 50,000 |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| **LIABILITIES                  & STOCKHOLDERS' DEFICIT**                         |       |                           |       |                              |       |   |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| CURRENT                  LIABILITES                                                  |       |                           |       |                              |       |   |   |
| Bank                  Overdraft                                                      |       | $                              | -          |                              | $          | 79 |   |
| Accounts                  Payable                                                    |       |                           | 32,418     |                              |       | 19,142 |   |
| Credit                  Line - WFB Business Line                                     |       |                           | 79,847     |                              |       | 56,961 |   |
| Prepaid                  Subscriptions                                               |       |                           | 203,500    |                              |       | 203,500 |   |
| Total                  Current Liabilities                                           |       |                           | 315,765    |                              |       | 279,682 |   |
|                                                                                 |       |                           |       |                              |       |   |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| OTHER                  LIABILITIES                                                   |       |                           |       |                              |       |   |   |
| Loan                  from Officer                                                   |       |                           | 873,581    |                              |       | 690,085 |   |
| Total                  Other Liabilities                                             |       |                           | 873,581    |                              |       | 690,085 |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| Total                  Liabilities                                                   |       |                           | 1,189,346  |                              |       | 969,767 |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| Commitments                  and contingencies (Note 6)                              |       |                           |       |                              |       |   |   |
|                                                                                 |       |                           |       |                              |       |   |   |
| STOCKHOLDERS'                  DEFICIT                                               |       |                           |       |                              |       |   |   |
| Preferred                  Stock, $0.001 par value, 10,000,000 shares                |       |                           |       |                              |       |   |   |
| authorized,                  715,517 issued and outstanding                          |       |                           | 716        |                              |       | 716 |   |
| Common                  Stock, $0.001 par value, 200,000,000 shares                  |       |                           |       |                              |       |   |   |
| authorized,                  16,497,766 issued                  and outstanding |       |                           | 16,498     |                              |       | 4,518 |   |
| Additional                  paid-in capital                                          |       |                           | 6,693,348  |                              |       | 4,566,320 |   |
| Deficit                  accumulated in the development stage                        |       |                           | (6,660,296 | )                                 |       | (5,491,321 | ) |
|                                                                                 |       |                           |       |                              |       |   |   |
| Total                  Stockholders' Deficit                                         |       |                           | 50,266     |                              |       | (919,767 | ) |
|                                                                                 |       |                           |       |                              |       |   |   |
| TOTAL                  LIABILITIES AND STOCKHOLDERS' DEFICIT                         |       | $                              | 1,239,612  |                              | $          | 50,000 |   |
|                                                                                 |       |                           |       |                              |       |   |   |

----

| VICTORY                  ENERGY CORPORATION AND SUBSIDIARIES |
|--------------------------------------------------------------|
| (A                  Development Stage Company)               |
| Consolidated                  Statement of Operations        |

|                                                         |       |                                    |       |          |       |                                 |       |
|--------------------------------------------------------------|------------|-----------------------------------------|------------|---------------|------------|--------------------------------------|------------|
|                                                         |       |                                    |       |          |       |                                 |       |
|                                                         |       |                                    |       |          |       | **For                  the period**  | ** ** |
| ** **                                                   | ** ** | ** **                              | ** ** | ** **    | ** ** | **of                  Inception,**   | ** ** |
| ** **                                                   | ** ** | **For                  the**            | ** ** | ** **    | ** ** | **from                  January 2,** | ** ** |
| ** **                                                   | ** ** | **Three                  Months Ended** | ** ** | ** **    | ** ** | **1982                  through**    | ** ** |
| ** **                                                   | ** ** | **March                  31,**          | ** ** | ** **    | ** ** | **December                  31,**    | ** ** |
| ** **                                                   | ** ** | **2007**                                | ** ** | **2006**      | ** ** | **2006**                             | ** ** |
| ** **                                                   | ** ** | **Unaudited**                           | ** ** | **Unaudited** | ** ** | **Unaudited**                        |       |
|                                                         |       |                                    |       |          |       |                                 |       |
| Revenues                                                     |       | $                                       | -          |          | $          | -                                    |       | $ | 20,207 |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Costs                  and Expenses                          |       |                                    |       |          |       |                                 |       |   |   |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Consulting                  Expense                          |       |                                    | 1,042,988  |          |       | 600,240                              |       |   | 3,989,354 |   |
| Land                  Leases                                 |       |                                    | 4,500      |          |       | 25,000                               |       |   |  |   |
| Wages                  and Salaries                          |       |                                    | -          |          |       | 22,500                               |       |   | 270,500 |   |
| General                  & Administrative                |       |                                    | 121,487    |          |       | 128,138                              |       |   | 1,154,507 |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Total                  Expenses                              |       |                                    | 1,168,975  |          |       | 775,878                              |       |   | 5,414,361 |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Operating                  Loss                              |       |                                    | (1,168,975 | )             |       | (775,878                             | )          |   | (5,394,154 | ) |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Other                  Income and (expenses)                 |       |                                    |       |          |       |                                 |       |   |   |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Loss                  on abandonment of subsidiary           |       |                                    |       |          |       |                                 |       |   | (50,900 | ) |
| Loss                  from reduction in debt                 |       |                                    |       |          |       |                                 |       |   | (48,363 | ) |
| Interest                  Expense                            |       |                                    |       |          |       |                                 |       |   | 0 |   |
| Other                  Income                                |       |                                    |       |          |       |                                 |       |   | 2,096 |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Total                  Other Income and (expenses)           |       |                                    | 0          |          |       | 0                                    |       |   | (97,167 | ) |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Net                  Loss                                    |       | $                                       | (1,168,975 | )             | $          | (775,878                             | )          | $ | (5,491,321 | ) |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Basic                  and Dilutive net loss per share       |       |                                    | ($0.09     | )             |       | ($0.02                               | )          |   |   |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Weighted                  average number of shares           |       |                                    |       |          |       |                                 |       |   |   |   |
| outstanding,                  basic and diluted              |       |                                    | 12,923,505 |          |       | 42,085,258                           |       |   |   |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |
| Dilutive                  effect of preferred stock (Note 2) |       |                                    | 0          |          |       |                                 |       |   |   |   |
|                                                         |       |                                    |       |          |       |                                 |       |   |   |   |

----

| VICTORY                  ENERGY CORPORATION AND SUBSIDIARIES            |
|-------------------------------------------------------------------------|
| (A                  Development Stage Company)                          |
| Consolidated                  Statements of Cash                  Flows |

|                                                                     |       | **For                  the**            | ** ** | ** **    | ** ** | **Inception                  from** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------------------------|------------|---------------|------------|-------------------------------------|------------|
| ** **                                                               | ** ** | **Three                  Months Ended** | ** ** | ** **    | ** ** | **Jan.                  7, 1982**   | ** ** |
| ** **                                                               | ** ** | **March                  31,**          | ** ** | ** **    | ** ** | **through**                         | ** ** |
| ** **                                                               | ** ** | **2007**                                | ** ** | **2006**      | ** ** | **Dec.                  31, 2006**  |       |
| CASH                  FLOWS FROM OPERATING ACTIVITIES:                   |       | **Unaudited**                           | ** ** | **Unaudited** | ** ** | **Unaudited**                       |       |
| Net                  Loss                                                |       | $                                       | (1,168,975 | )             | $          | (775,878                            | )          | $ | (6,660,296 | ) |
| Adjustments                  to reconcile net loss to net cash           |       |                                    |       |          |       |                                |       |   |   |   |
| used                  by operating activities:                           |       |                                    |       |          |       |                                |       |   |   |   |
| Depreciation                                                             |       |                                    |       |          |       |                                |       |   | 2,294 |   |
| Loss                  on extinguishment of debt                          |       |                                    |       |          |       |                                |       |   | 48,363 |   |
| Loss                  on abandonment of subsidiary                       |       |                                    |       |          |       |                                |       |   | 50,900 |   |
| Issuance                  of common stock for services rendered          |       |                                    | 2,139,008  |          |       | 527,500                             |       |   | 5,593,144 |   |
| Increase                  in Short Term Receivables                      |       |                                    |       |          |       |                                |       |   |   |   |
| Decrease                  (Increase) in Prepaid Expenses                 |       |                                    |       |          |       |                                |       |   |   |   |
| Increase                  (Decrease) in Deposits                         |       |                                    |       |          |       |                                |       |   |   |   |
| Incrrease                  (Decrease) in Prepaid Subscriptions           |       |                                    |       |          |       |                                |       |   | 203,500 |   |
| (Incrrease)                  Decrease in Subscriptions Receivable        |       |                                    | (1,189,020 | )             |       |                                |       |   | (1,189,020 | ) |
| Increase                  (Decrease) in accounts payable                 |       |                                    | 13,276     |          |       |                                |       |   | 32,148 |   |
| Increase                  (Decrease) in accounts payable -related        |       |                                    |       |          |       |                                |       |   |   |   |
| Increase                  (Decrease) in accrued liabilities              |       |                                    |       |          |       | (11,416                             | )          |   |   |   |
| Increase                  ( ) in Accrued Payroll and Payroll Taxes       |       |                                    |       |          |       | 76,006                              |       |   |   |   |
| Repayment                  of long term debt                             |       |                                    |       |          |       |                                |       |   |   |   |
| Increase                  (decrease) in Accrued Liabilities - Related    |       |                                    |       |          |       |                                |       |   |   |   |
| Non-cash                  contributed capital                            |       |                                    |       |          |       |                                |       |   | (524 | ) |
|  Net                  Cash provided by (used by)                    |       |                                    |       |          |       |                                |       |   |   |   |
|  Operating                  Activities                              |       |                                    | (205,711   | )             |       | (183,788                            | )          |   | (1,919,491 | ) |
| CASH                  FLOWS FROM INVESTING ACTIVITIES                    |       |                                    |       |          |       |                                |       |   |   |   |
| Purchase                  of Fixed Assets                                |       |                                    |       |          |       |                                |       |   | (2,294 | ) |
| Purchase                  and Sale of Marketable Securities              |       |                                    |       |          |       |                                |       |   |   |   |
| Investment                  in Joint Venture                             |       |                                    |       |          |       |                                |       |   | (50,000 | ) |
|  Net                  Cash (used by) Investing Activities           |       |                                    | 0          |          |       | 0                                   |       |   | (52,294 | ) |
| CASH                  FLOWS FROM FINANCING ACTIVITIES                    |       |                                    |       |          |       |                                |       |   |   |   |
| Proceeds                  of Note Payable                                |       |                                    |       |          |       |                                |       |   |   |   |
| Proceeds                  (Repayment) of Loans                           |       |                                    |       |          |       |                                |       |   |   |   |
| Increase                  (decrease) in Credit Line                      |       |                                    | 22,886     |          |       |                                |       |   | 79,147 |   |
| Proceeds                  (Repayment) of Loan from Officer               |       |                                    | 183,496    |          |       | 58,354                              |       |   | 873,581 |   |
| Proceeds                  (Repayment) of Note Payable-Related Party      |       |                                    |       |          |       |                                |       |   |   |   |
| Increase                  (Decrease) in Other Loans Payable              |       |                                    |       |          |       |                                |       |   |   |   |
| Contributed                  capital for rent and officers' compensation |       |                                    |       |          |       |                                |       |   | 2,438 |   |
| Proceeds                  from the sale of Preferred Stock               |       |                                    |       |          |       |                                |       |   |   |   |
| Issuance                  of Common Stock for Cash                       |       |                                    |       |          |       | 149,458                             |       |   | 41,960 |   |
| Proceeds                  from the sale of Common Stock                  |       |                                    |       |          |       |                                |       |   | 300,231 |   |
| Proceeds                  from the sale of Preferred Stock               |       |                                    |       |          |       |                                |       |   | 246,950 |   |
| Contributed                  Capital by shareholders                     |       |                                    |       |          |       |                                |       |   | 428,070 |   |
|  Net                  Cash provided by Financing Activities         |       |                                    | 206,382    |          |       | 207,812                             |       |   | 1,972,377 |   |
| NET                  INCREASE IN CASH                                    |       |                                    | 671        |          |       | 24,024                              |       |   | 592 |   |
| CASH                  AT BEGINNING OF PERIOD                             |       |                                    | (79        | )             |       | 4,074                               |       |   | - |   |
| CASH                  AT END OF PERIOD                                   |       | $                                       | 592        |          | $          | 28,098                              |       | $ | 592 |   |
|                                                                     |       |                                    |       |          |       |                                |       |   |   |   |
| CASH                  PAID FOR:                                          |       |                                    |       |          |       |                                |       |   |   |   |
|  Interest                                                           |       | $                                       | -          |          | $          | -                                   |       | $ | - |   |
|  Income                  Taxes                                      |       | $                                       | -          |          | $          | -                                   |       | $ | - |   |
|                                                                     |       |                                    |       |          |       |                                |       |   |   |   |

----

| VICTORY                  ENERGY CORPORATION AND SUBSIDIARIES                               |
|--------------------------------------------------------------------------------------------|
| (A                  Development Stage Company)                                             |
| Consolidated                  Statement of Stockholders' Equity                  (Deficit) |
| Unaudited                                                                                  |

| ** **                                                                   | ** ** | ** **                                            | ** **   | ** **                                               | ** ** | ** **  | ** ** | ** **      | ** ** | ** **     | ** ** | **Accumulated**                     | ** ** | ** ** | ** ** |
|------------------------------------------------------------------------------|------------|-------------------------------------------------------|--------------|----------------------------------------------------------|------------|-------------|------------|-----------------|------------|----------------|------------|-------------------------------------|------------|------------|------------|
| ** **                                                                   | ** ** | ** **                                            | ** **   | ** **                                               | ** ** | ** **  | ** ** | ** **      | ** ** | **Additional** | ** ** | **Deficit                  During** | ** ** | ** ** | ** ** |
| ** **                                                                   | ** ** | **Common                  Stock**** **** ** | ** **   | **Preferred                  Stock**** **** ** | ** ** | **Paid-in** | ** ** | **Development** | ** ** | ** **     | ** ** |
| ** **                                                                   | ** ** | **Shares**                                            | ** **   | **Amount**                                               | ** ** | **Shares**  | ** ** | **Amount**      | ** ** | **Capital**    | ** ** | **Stage**                           | ** ** | **Total**  |       |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |
| Balances                  at January 7, 1982                                 |       |                                                  | 0            |                                                     | $          | -           |       |            | 0          |           |       | 0                                   |       | $          | -          |   | $ | - |   | $ | - |   |
| Common                  stock for cash at $7.50/sh                           |       |                                                  | 6,000        |                                                     |       | 6           |       |            |       |           |       |                                |       |       | 45,000     |   |   | 0 |   |   | 45,006 |   |
| Common                  stock for cash at $0.39/sh.                          |       |                                                  | 168,503      |                                                     |       | 169         |       |            |       |           |       |                                |       |       | 65,819     |   |   | 0 |   |   | 65,988 |   |
| Net                  loss from inception Jan 7, 1982 to Dec. 31, 1982        |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (39,597 | ) |   | (39,597 | ) |
| Balances                  at Dec. 31, 1982                                   |       |                                                  | 174,503      |                                                     |       | 175         |       |            |       |           |       |                                |       |       | 110,819    |   |   | (39,597 | ) |   | 71,397 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss, year ended Dec. 31, 1983                          |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (71,397 | ) |   | (71,397 | ) |
| Balances                  at Dec. 31, 1983                                   |       |                                                  | 174,503      |                                                     |       | 175         |       |            |       |           |       |                                |       |       | 110,819    |   |   | (110,994 | ) |   | (0 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Common                  stock for cash at $25.00/sh.                         |       |                                                  | 57           |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 1,425      |   |   | 0 |   |   | 1,425 |   |
| Common                  stock for cash at $25.00/sh. per share               |       |                                                  | 3            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 75         |   |   | 0 |   |   | 75 |   |
| Common                  stock for cash at $0.025/sh. per share               |       |                                                  | 1,580,000    |                                                     |       | 1,580       |       |            |       |           |       |                                |       |       | 38,373     |   |   | 0 |   |   | 39,953 |   |
| Net                  loss - year ended Dec. 31, 1984                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1984                                   |       |                                                  | 1,754,563    |                                                     |       | 1,755       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 41,453 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Cancellation                  of common stock                                |       |                                                  | (1,296,132   | )                                                        |       | (1,297      | )          |            |       |           |       |                                |       |       |       |   |   |   |   |   | (1,297 | ) |
| Net                  loss - year ended Dec. 31, 1985                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1985                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1986                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1986                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1987                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1987                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1988                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1988                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1989                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1989                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1990                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1990                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1991                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1991                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1992                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1992                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1993                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 0 |   |
| Balances                  at Dec. 31, 1993                                   |       |                                                  | 458,431      |                                                     |       | 458         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (110,994 | ) |   | 40,156 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Cancellation                  of common stock                                |       |                                                  | (316,000     | )                                                        |       | (316        | )          |            |       |           |       |                                |       |       |       |   |   |   |   |   | (316 | ) |
| Net                  loss - year ended Dec. 31, 1994                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (6,656 | ) |   | (6,656 | ) |
| Balances                  at Dec. 31, 1994                                   |       |                                                  | 142,431      |                                                     |       | 142         |       |            |       |           |       |                                |       |       | 150,692    |   |   | (117,650 | ) |   | 33,184 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Common                  stock for cash at $0.001/sh.                         |       |                                                  | 2,357,895    |                                                     |       | 2,359       |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 2,359 |   |
| Net                  loss - year ended Dec. 31, 1995                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (49,097 | ) |   | (49,097 | ) |
| Balances                  at Dec. 31, 1995                                   |       |                                                  | 2,500,326    |                                                     |       | 2,500       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (166,747 | ) |   | (13,555 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Common                  stock for cash at $0.001/sh.                         |       |                                                  | 120,000      |                                                     |       | 120         |       |            |       |           |       |                                |       |       | 0          |   |   | 0 |   |   | 120 |   |
| Net                  loss - year ended Dec. 31, 1996                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (1,681 | ) |   | (1,681 | ) |
| Balances                  at Dec. 31, 1996                                   |       |                                                  | 2,620,326    |                                                     |       | 2,620       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (168,428 | ) |   | (15,116 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1997                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (3,517 | ) |   | (3,517 | ) |
| Balances                  at Dec. 31, 1997                                   |       |                                                  | 2,620,326    |                                                     |       | 2,620       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (171,945 | ) |   | (18,633 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1998                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (2,479 | ) |   | (2,479 | ) |
| Balances                  at Dec. 31, 1998                                   |       |                                                  | 2,620,326    |                                                     |       | 2,620       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (174,424 | ) |   | (21,112 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 1999                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (6,307 | ) |   | (6,307 | ) |
| Balances                  at Dec. 31, 1999                                   |       |                                                  | 2,620,326    |                                                     |       | 2,620       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (180,731 | ) |   | (27,419 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 2000                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (9,011 | ) |   | (9,011 | ) |
| Balances                  at Dec. 31, 2000                                   |       |                                                  | 2,620,326    |                                                     |       | 2,620       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (189,742 | ) |   | (36,430 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Net                  loss - year ended Dec. 31, 2001                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (19,461 | ) |   | (19,461 | ) |
| Balances                  at Dec. 31, 2001                                   |       |                                                  | 2,620,326    |                                                     |       | 2,620       |       |            |       |           |       |                                |       |       | 150,692    |   |   | (209,203 | ) |   | (55,891 | ) |
| Contributed                  capital for rent and                            |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| other                  compensation                                          |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 1,950      |   |   | 0 |   |   | 1,950 |   |
| Net                  loss - year ended Dec. 31, 2002                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (13,960 | ) |   | (13,960 | ) |
| Balances                  at Dec. 31, 2002                                   |       |                                                  | 2,620,326    |                                                     |       | 2,620       |       |            |       |           |       |                                |       |       | 152,642    |   |   | (223,163 | ) |   | (67,901 | ) |
| Contributed                  capital for rent and                            |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| officer                  compensation                                        |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 488        |   |   | 0 |   |   | 488 |   |
| Capital                  contributed by shareholders                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| via                  accounts payable and interest                           |       |                                                  |         |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 77,415     |   |   | 0 |   |   | 77,415 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Stock                  issued for services $0.025/sh.                        |       |                                                  | 13,389,932   |                                                     |       | 13,390      |       |            |       |           |       |                                |       |       | 321,358    |   |   | 0 |   |   | 334,748 |   |
| Stock                  issued for services at $0.61/sh.                      |       |                                                  | 100,000      |                                                     |       | 100         |       |            |       |           |       |                                |       |       | 60,900     |   |   | 0 |   |   | 61,000 |   |
| Stock                  for consulting at $0.47/share                         |       |                                                  | 10,000       |                                                     |       | 10          |       |            |       |           |       |                                |       |       | 4,690      |   |   | 0 |   |   | 4,700 |   |
| Net                  loss - year ended Dec. 31, 2003                         |       |                                                  | 0            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   | (592,962 | ) |   | (592,962 | ) |
| Balances                  at Dec. 31, 2003                                   |       |                                                  | 16,120,258   |                                                     |       | 16,120      |       |            |       |           |       |                                |       |       | 617,493    |   |   | (816,125 | ) |   | (182,512 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Stock                  issued for services at $0.16/sh                       |       |                                                  | 1,000,000    |                                                     |       | 1,000       |       |            |       |           |       |                                |       |       | 159,000    |   |   | 0 |   |   | 160,000 |   |
| Stock                  issued for services at $0.17/sh.                      |       |                                                  | 1,800,000    |                                                     |       | 1,800       |       |            |       |           |       |                                |       |       | 304,200    |   |   | 0 |   |   | 306,000 |   |
| Stock                  issued for services at $0.165/sh                      |       |                                                  | 800,000      |                                                     |       | 800         |       |            |       |           |       |                                |       |       | 131,200    |   |   | 0 |   |   | 132,000 |   |
| Stock                  issued for services at $0.215/sh.                     |       |                                                  | 30,000       |                                                     |       | 30          |       |            |       |           |       |                                |       |       | 6,420      |   |   | 0 |   |   | 6,450 |   |
| Stock                  issued for debt at $0.45 per sh.                      |       |                                                  | 150,000      |                                                     |       | 150         |       |            |       |           |       |                                |       |       | 67,350     |   |   | 0 |   |   | 67,500 |   |
| Stock                  issued for services at $0.40/sh                       |       |                                                  | 300,000      |                                                     |       | 300         |       |            |       |           |       |                                |       |       | 119,700    |   |   | 0 |   |   | 120,000 |   |
| Stock                  issued for services at $0.34/sh.                      |       |                                                  | 700,000      |                                                     |       | 700         |       |            |       |           |       |                                |       |       | 237,300    |   |   | 0 |   |   | 238,000 |   |
| Stock                  issued for services at $0.41/sh.                      |       |                                                  | 300,000      |                                                     |       | 300         |       |            |       |           |       |                                |       |       | 122,700    |   |   | 0 |   |   | 123,000 |   |
| Stock                  issued for services at $0.27/sh.                      |       |                                                  | 300,000      |                                                     |       | 300         |       |            |       |           |       |                                |       |       | 80,700     |   |   | 0 |   |   | 81,000 |   |
| Stock                  issued for services at $0.22/sh.                      |       |                                                  | 600,000      |                                                     |       | 600         |       |            |       |           |       |                                |       |       | 131,400    |   |   | 0 |   |   | 132,000 |   |
| Net                  loss - year ended Dec. 31, 2004                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   | (1,606,057 | ) |   | (1,606,057 | ) |
| Balances                  at Dec. 31, 2004                                   |       |                                                  | 22,100,258   |                                                     |       | 22,100      |       |            |       |           |       |                                |       |       | 1,977,463  |   |   | (2,422,182 | ) |   | (422,619 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Contributed                  capital for general and administrative expenses |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       | 138,701    |   |   |   |   |   | 138,701 |   |
| Stock                  issued for services at $0.03/sh.                      |       |                                                  | 19,860,000   |                                                     |       | 19,860      |       |            |       |           |       |                                |       |       | 575,940    |   |   |   |   |   | 595,800 |   |
| Net                  loss - year ended Dec. 31, 2005                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   | (1,323,775 | ) |   | (1,323,775 | ) |
| Balances                  at December 31, 2005                               |       |                                                  | 41,960,258   |                                                     |       | 41,960      |       |            | 0          |           |       | 0                                   |       |       | 2,692,104  |   |   | (3,745,957 | ) |   | (1,011,893 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Stock                  issued for services at $0.027/sh.                     |       |                                                  | 17,583,334   |                                                     |       | 17,583      |       |            |       |           |       |                                |       |       | 459,917    |   |   |   |   |   | 477,500 |   |
| Common                  stock issued in debt                                 |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| restructuring                  at $0.06 and $0.03                            |       |                                                  | 10,666,667   |                                                     |       | 10,667      |       |            |       |           |       |                                |       |       | 429,333    |   |   |   |   |   | 440,000 |   |
| Stock                  issued for debt at $0.06/ sh.                         |       |                                                  | 5,000,000    |                                                     |       | 5,000       |       |            |       |           |       |                                |       |       | 295,000    |   |   |   |   |   | 300,000 |   |
| Stock                  issued for services at $0.03/sh.                      |       |                                                  | 2,500,000    |                                                     |       | 2,500       |       |            |       |           |       |                                |       |       | 72,500     |   |   |   |   |   | 75,000 |   |
| Stock                  issued for services at $0.05/sh.                      |       |                                                  | 500,000      |                                                     |       | 500         |       |            |       |           |       |                                |       |       | 24,500     |   |   |   |   |   | 25,000 |   |
| Stock                  issued for services at $0.008/sh.                     |       |                                                  | 10,000,000   |                                                     |       | 10,000      |       |            |       |           |       |                                |       |       | 70,000     |   |   |   |   |   | 80,000 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 4,500,000    |                                                     |       | 4,500       |       |            |       |           |       |                                |       |       | 31,500     |   |   |   |   |   | 36,000 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 500,000      |                                                     |       | 500         |       |            |       |           |       |                                |       |       | 3,500      |   |   |   |   |   | 4,000 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 4,000,000    |                                                     |       | 4,000       |       |            |       |           |       |                                |       |       | 28,000     |   |   |   |   |   | 32,000 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 700,000      |                                                     |       | 700         |       |            |       |           |       |                                |       |       | 4,900      |   |   |   |   |   | 5,600 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 300,000      |                                                     |       | 300         |       |            |       |           |       |                                |       |       | 2,100      |   |   |   |   |   | 2,400 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 3,600,000    |                                                     |       | 3,600       |       |            |       |           |       |                                |       |       | 25,200     |   |   |   |   |   | 28,800 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 3,000,000    |                                                     |       | 3,000       |       |            |       |           |       |                                |       |       | 21,000     |   |   |   |   |   | 24,000 |   |
| Stock                  for consulting at $0.008/sh.                          |       |                                                  | 4,000,000    |                                                     |       | 4,000       |       |            |       |           |       |                                |       |       | 28,000     |   |   |   |   |   | 32,000 |   |
| Balances                  before reverse split                               |       |                                                  | 108,810,259  |                                                     |       | 108,810     |       |            | 0          |           |       | 0                                   |       |       | 4,187,554  |   |   | (3,745,957 | ) |   | 550,407 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Reverse                  split 25 to 1                                       |       |                                                  | (104,457,849 | )                                                        |       | (104,458    | )          |            | 0          |           |       | 0                                   |       |       | 104,458    |   |   |   |   |   | 0 |   |
| New                  Stock issued for rounding                               |       |                                                  | 890          |                                                     |       | 1           |       |            |       |           |       |                                |       |       | (1         | ) |   |   |   |   | 0 |   |
| Balances                  after reverse split                                |       |                                                  | 4,353,300    |                                                     |       | 4,353       |       |            | 0          |           |       | 0                                   |       |       | 4,292,011  |   |   | (3,745,957 | ) |   | 550,407 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Preferred                  stock for cash at $0.467/sh.                      |       |                                                  |         |                                                     |       |        |       |            | 715,517    |           |       | 716                                 |       |       | 246,234    |   |   |   |   |   | 246,950 |   |
| Common                  stock for rounding$0.50/sh.                          |       |                                                  | 1            |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   |   |   |   | 0 |   |
| Common                  stock for services $0.20/sh                          |       |                                                  | 5,200        |                                                     |       | 5           |       |            |       |           |       |                                |       |       | 1,035      |   |   |   |   |   | 1,040 |   |
| Common                  stock for rounding$0.20/sh.                          |       |                                                  | 14           |                                                     |       | 0           |       |            |       |           |       |                                |       |       | 0          |   |   |   |   |   | 0 |   |
| Common                  stock for services $0.17/sh.                         |       |                                                  | 160,000      |                                                     |       | 160         |       |            |       |           |       |                                |       |       | 27,040     |   |   |   |   |   | 27,200 |   |
| Net                  loss - year ended Dec. 31, 2006                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   | (1,745,364 | ) |   | (1,745,364 | ) |
| Balances                  at December 31, 2006                               |       |                                                  | 4,518,515    |                                                     |       | 4,518       |       |            | 715,517    |           |       | 716                                 |       |       | 4,566,320  |   |   | (5,491,321 | ) |   | (919,767 | ) |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |
| Common                  stock for services $0.15/sh                          |       |                                                  | 6,277,251    |                                                     |       | 6,278       |       |            |       |           |       |                                |       |       | 935,310    |   |   |   |   |   | 941,588 |   |
| Common                  stock sold @ $0.21/sh                                |       |                                                  | 5,662,000    |                                                     |       | 5,662       |       |            |       |           |       |                                |       |       | 1,183,358  |   |   |   |   |   | 1,189,020 |   |
| Common                  stock for services $0.21/sh                          |       |                                                  | 40,000       |                                                     |       | 40          |       |            |       |           |       |                                |       |       | 8,360      |   |   |   |   |   | 8,400 |   |
| Net                  loss - 3 mo ended Nar. 31, 2006                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   | (1,168,975 | ) |   | (1,168,975 | ) |
| Balances                  at March 31, 2006                                  |       |                                                  | 16,497,766   |                                                     |       | 16,498      |       |            | 715,517    |           |       | 716                                 |       |       | 6,693,348  |   |   | (6,660,296 | ) |   | 50,266 |   |
|                                                                         |       |                                                  |         |                                                     |       |        |       |            |       |           |       |                                |       |       |       |   |   |   |   |   |   |   |

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**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS **

**Current        Business of the Company**

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|                                                                            |   | **March                  31, 2007 ** |                         | **March                  31, 2006** |   |
|---------------------------------------------------------------------------------|--------|-------------------------------------------|------------------------------|-------------------------------------|--------|
| Numerator:                                                                      |   |                                      |                         |                                |   |
|                                                                            |   |                                      |                         |                                |   |
| Basic                  and diluted net loss per share:                          |   |                                      |                         |                                |   |
|                                                                            |   |                                      |                         |                                |   |
| Net                  Loss                                        |   | $                                         | (                  1,168,975 | )                                   | $      | (                  775,878 | ) |
|                                                                            |   |                                      |                         |                                |   |   |   |
| Denominator                                                           |   |                                      |                         |                                |   |   |   |
|                                                                            |   |                                      |                         |                                |   |   |   |
| Basic                  and diluted weighted average                             |   |                                      |                         |                                |   |   |   |
| number                  of shares outstanding                         |   |                                      | 12,923,505                   |                                |   | 42,085,258 |   |
|                                                                            |   |                                      |                         |                                |   |   |   |
| Basic                  and Diluted Net Loss Per Share                      |   | $                                         | (0.09                        | )                                   | $      | (0.02 | ) |
|                                                                            |   |                                      |                         |                                |   |   |   |
| 2006                  Loss per share                  giving retroactive effect |   |                                      |                         |                                |   |   |   |
| to                  reverse stock split in 2006:                 |   |                                      |                         |                                |   |   |   |
|                                                                            |   |                                      |                         |                                |   |   |   |
| Basic                  and diluted weighted average                             |   |                                      |                         |                                |   |   |   |
| number                  of shares outstanding               |   |                                      |                              |                                |   | 1,683,410 |   |
|                                                                            |   |                                      |                         |                                |   |   |   |
| Basic                  and Diluted Net Loss Per Share       |   |                                      |                              |                                | $      | (0.46 | ) |
|                                                                            |   |                                      |                         |                                |   |   |   |
|                                                                            |   |                                      |                         |                                |   |   |   |
| Dilutive                  effect of Preferred Stock                   |   |                                      | Nil                          |                                |   | N/A |   |

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| Description                                | Years  |
|-------------------------------------------------|--------|
|                                            |   |
| Furniture                  and fixtures         | 7      |
| Computer                  hardware and software | 3-5    |

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**Item        2.** **Management's Discussion and Analysis or Plan of        Operation**

**Our      Business**

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**Current      Business of the Company**

**Plan      of Operation**

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**Results      of Operations for Period Ended March 31, 2007**

**Liquidity      and Capital Resources**

**Item      3. Controls and Procedures**

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**PART      II - OTHER INFORMATION**

**Item      1. Legal Proceedings**

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

**Item      3. Defaults Upon Senior Securities**

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

**Item      5. Other Information.**

**Item      6. Exhibits and Reports on Form 8-K**

| **Exhibit                No.** | **Description                of Exhibit**                                                                                                        |
|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |                                                                                                                                             |
| 31                   | Certification                of Chief Executive/Financial Officer                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002  |
| 32                   | Certification                of Chief Executive/Financial Officer                pursuant to Section 906                                    |
| 23.1                      | Consent                of Independent Registered Public Accountant                                                                     |

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**SIGNATURE**

**Victory      Energy Corporation**

*/s/      Jon Fullenkamp*

*/s/      Rick May*

*/s/      Perry Mansell*

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