U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549


FORM
      10-QSB




**For
      Annual and Transition Reports pursuant to Section 13 or 15(d) of
      the**


**Securities
      Exchange Act of 1934 (Mark One)**




**x**
            **Quarterly
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the six months ended**


**June
      30, 2007**




**o**
            **Transition
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**





Commission
      File Number 000-27189




**VICTORIA
      INDUSTRIES, INC.**


(Name
      of
      Registrant as specified in its charter)




**Nevada**
            
            **98-0230423**(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                Number)





551
                Fifth Avenue, Suite 2020New
                York, New York
            
            10017(Address
                of principal executive office)
            
            (Zip
                Code)




**Issuer’s
      telephone number: (212) 973-0063**




Securities
      registered under Section 12(b) of the Exchange Act :




Title
                of each class
            
            Name
                of each exchange on which registeredCommon
                shares
            
            OTC
                Bulleting Board




Securities
      registered under Section 12(g) of the Exchange Act : Common
      Stock






Check
      weather the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act: o




Note
      -
      Checking the box above will not relieve any registrant required to file reports
      pursuant to Section 13 or 15(d) of the Exchange Act from their obligations
      under
      those Sections.





SEC
                2337 (12-05)
            
            PERSONS
                WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN
                THIS FORM
                ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY
                VALID OMB
                CONTROL NUMBER.




Check
      weather the issuer (I) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes o No x




Check
      if
      there is a disclosure of delinquent filers in response to Hem 405 of Regulation
      S-B contained in this form, and no disclosure will be contained, to the best
      of
      registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part II of this Form 10-QSB or any amendment to
      this Form 10-QSB. o




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act).      Yes o No x




Issuer’s
      revenues for its most recent fiscal year: $8,411,971




State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such equity, as of August 14,,
      2007
      within past 60 days: $1,363,770




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of August 14, 2007:




Common
                Stock; 10,965,090




Transitional
      Small Business Disclosure Format (Check one): Yes o; No x









**VICTORIA
      INDUSTRIES, INC.**




**FORM
      10-QSB**




**TABLE
      OF CONTENTS**




**PART
                  I.**
              **FINANCIAL
                  INFORMATION**
              PageItem
                  1.
              Financial
                  Statements (unaudited)Consolidated
                  Balance Sheets - June 30, 2007 and December 31, 2006
              2Consolidated
                  Statements of Operations and Comprehensive Income (Loss) - for
                  six months
                  endedJune
                  30, 2007 and June 30 2006
              3Consolidated
                  Statements of Changes in Stockholder’s Equity (Capital Deficit) - June 30,
                  2007 andDecember
                  31, 2006
              4Consolidated
                  Statements of Cash Flows - for the six months ended June 30, 2007
                  and
                  2006
              5Notes
                  to Unaudited Consolidated Financial Statements
              6Item
                  2.
              Management’s
                  Discussion and Analysis of Principal Condition and
                  Operations
              17Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              21Item
                  4.
              Controls
                  and Procedures
              24**PART
                  II.**
              **OTHER
                  INFORMATION**Item
                  1.
              Legal
                  Proceedings
              25Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              25Item
                  3.
              Defaults
                  upon Senior Securities
              25Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              25Item
                  5.
              Other
                  Information
              25Item
                  6.
              Exhibits
                  and Reports on Form 8-K
              25**SIGNATURES**
              26









**VICTORIA
      INDUSTRIES, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**(Expressed
      in US Dollars)**




**June
                30, 2007**
              **(UNAUDITED)**
            
            **December
                31,**
              **2006**ASSETSCURRENT
                ASSETSCash
                and cash equivalents
            
            $
            289,853
            
            $
            138,602Accounts
                receivable
            
            
            4,089,503
            
            
            3,118,137Related
                party receivable - current portion
            
            
            68,924
            
            
            136,245Taxes
                receivable
            
            
            6,888
            
            
            204,336Prepayments
                and other current assets
            
            
            510,982
            
            
            518,623Deferred
                interest expense
            
            
            -
            
            
            20,484Deferred
                tax asset
            
            
            128
            
            
            3,574Total
                current assets
            
            
            4,966,278
            
            
            4,140,001Property,
                plant and equipment, net
            
            
            407
            
            
            718Related
                party receivable - long term portion
            
            
            -
            
            
            -**TOTAL
                ASSETS**
            
            **$**
            **4,966,685**
            
            **$**
            **4,140,719**LIABILITIES
                AND STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESShort
                term borrowings from related parties
            
            $
            111,350
            
            $
            77,925Short
                term bank loans
            
            
            335,000
            
            
            335,000Accounts
                payable
            
            
            2,764,161
            
            
            2,056,443Taxes
                payable
            
            
            818
            
            
            -Other
                current liabilities
            
            
            134,740
            
            
            190,019Total
                current liabilities
            
            $
            3,346,069
            
            
            2,659,387Commitments
                and Contingencies (Note 20)
            
            
            -
            
            
            -STOCKHOLDERS’
                EQUITYCommon
                stock, $0.001 par value, 10,965,090 shares issued and outstanding
                as of
                June 30, 2007 and December 31, 2006
            
            
            10,965
            
            
            10,965Additional
                paid-in capital
            
            
            1,886,590
            
            
            1,867,367Accumulated
                (deficit )
            
            
            (295,184
            )
            
            (403,902
            )Accumulated
                other comprehensive (loss) - foreign currency
            
            
            18,245
            
            
            6,902Total
                stockholders' equity
            
            
            1,620,616
            
            
            1,481,332**TOTAL
                LIABILITIES AND STOCKHOLDERS' EQUITY**
            
            **$**
            **4,966,685**
            
            **$**
            **4,140,719**


The
        accompanying notes are an integral part of the consolidated financial
        statements





2




**VICTORIA
      INDUSTRIES, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)**


**(Expressed
      in US Dollars, except share amounts)**


**UNAUDITED**




**For
                the three months ended**
            
            **For
                the six months ended****June
                  30,**
                **2007**
            
            **June
                30,**
              **2006**
            
            **June
                  30,****2007**
            
            **June
                30,**
              **2006**REVENUES
            
            $
            1,111,963
            
            $
            2,386,861
            
            $
            4,036,481
            
            $
            4,842,025COST
                OF SALES
            
            
            (1,053,197
            )
            
            (2,021,565
            )
            
            (3,827,841
            )
            
            (4,123,579
            )GROSS
                PROFIT
            
            
            58,766
            
            
            365,296
            
            
            208,640
            
            
            718,446OPERATING
                EXPENSESSales,
                general and administrative
            
            
            (13,916
            )
            
            (209,954
            )
            
            (32,559
            )
            
            (386,627
            )Compensation
            
            
            (9,563
            )
            
            (9,660
            )
            
            (19,223
            )
            
            (19,508
            )Professional
                fees
            
            
            (13,432
            )
            
            (33,793
            )
            
            (28,432
            )
            
            (43,262
            )Depreciation
                and amortization
            
            
            (167
            )
            
            (312
            )
            
            (328
            )
            
            (312
            )OPERATING
                INCOME
            
            
            21,688
            
            
            111,577
            
            
            128,098
            
            
            268,737OTHER
                INCOME (EXPENSE)Interest
                income
            
            
            5,511
            
            
            5,583
            
            
            15,957
            
            
            9,747Interest
                expense
            
            
            (8,275
            )
            
            (17,771
            )
            
            (20,484
            )
            
            (23,708
            )Foreign
                exchange loss
            
            
            (2,567
            )
            
            (910
            )
            
            (2,670
            )
            
            (50,876
            )Other
                expense, net
            
            
            (107
            )
            
            
            
            
            (6,368
            )INCOME
                BEFORE TAX
            
            
            16,250
            
            
            98,479
            
            
            114,533
            
            
            203,900FOREIGN
                INCOME TAX
            
            
            (1,405
            )
            
            (15,901
            )
            
            (5,815
            )
            
            (30,577
            )NET
                INCOME
            
            
            14,845
            
            
            82,578
            
            
            108,718
            
            
            173,323Other
                comprehensive (loss)Foreign
                currency translation (loss)
            
            
            5,799
            
            
            (89,914
            )
            
            11,343
            
            
            (77,576
            )COMPREHENSIVE
                INCOME (LOSS)
            
            $
            20,644
            
            $
            (7,336
            )
            $
            120,061
            
            $
            95,747BASIC
                INCOME PER SHAREFrom
                Continuing operations
            
            $
            0.00
            
            $
            (0.00
            )
            $
            0.01
            
            $
            0.01WEIGHTED
                AVERAGE COMMON SHARES OUTSTANDING
            
            
            10,965,090
            
            
            10,965,090
            
            
            10,965,090
            
            
            10,965,090





The
        accompanying notes are an integral part of the consolidated financial
        statements
 3


**VICTORIA
      INDUSTRIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT)**


**UNAUDITED**


**(Expressed
      in US Dollars, except share amounts)**




**Total****Accumulated**
              
              **Stockholders’****Additional**
              
              
              
              **Other**
              
              **Equity****Common
                  stock**
              
              **Paid-in**
              
              **Accumulated**
              
              **Comprehensive**
              
              **(Capital****Shares**
              
              **Amount**
              
              **Capital**
              
              **(Deficit)**
              
              **(Loss)**
              
              **Deficit)****DECEMBER
                  31, 2004**
              
              
              **10,965,090**
              
              **$**
              **10,965**
              
              **$**
              **1,749,878**
              
              **$**
              **(980,279**
              **)**
              **$**
              **11,721**
              
              **$**
              **792,285**Contributed
                  services
              
              
              -
              
              
              -
              
              
              73,751
              
              
              -
              
              
              -
              
              
              73,751Other
                  comprehensive (loss) for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (13,947
              )
              
              (13,947
              )Net
                  income for the year
              
              
              -
              
              
              -
              
              
              -
              
              
              162,079
              
              
              -
              
              
              162,079**DECEMBER
                  31, 2005**
              
              
              **10,965,090**
              
              
              **10,965**
              
              
              **1,823,629**
              
              
              **(818,200**
              **)**
              
              **(2,226**
              **)**
              
              **1,014,168**Contributed
                  services
              
              
              -
              
              
              -
              
              
              43,738
              
              
              -
              
              
              -
              
              
              43,738Other
                  comprehensive (loss) for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              9,128
              
              
              414,297Net
                  income for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              414,297
              
              
              -
              
              
              9,128**DECEMBER
                  31, 2006**
              
              
              **10,965,090**
              
              **$**
              **10,965**
              
              **$**
              **1,867,367**
              
              **$**
              **(403,902**
              **)**
              **$**
              **6,902**
              
              **$**
              **1,481,332**Contributed
                  services
              
              
              
              
              
              
              
              
              19,223
              
              
              
              
              
              
              
              
              19,223Net
                  gain (loss) for the year
              
              
              
              
              
              
              
              
              
              
              
              108,718
              
              
              
              
              
              108,718Other
                  comprehensive gain (loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              11,343
              
              
              11,343**JUNE
                  30, 2007**
              
              
              **10,965,090**
              
              
              **10,965**
              
              
              **1,886,590**
              
              
              **(295,184**
              **)**
              
              **18,245**
              
              
              **1,620,618**




The
        accompanying notes are an integral part of the consolidated financial
        statements




4




**VICTORIA
      INDUSTRIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(Expressed
      in US Dollars)**


**UNAUDITED**




**For
                the six months ended****June
                30,**
            
            **June
                30,****2007**
            
            **2006****CASH
                PROVIDED BY/(USED IN) OPERATING ACTIVITIES:**Net
                income
            
            $
            108,718
            
            $
            173,323Adjustments
                due to reconcile net income fromoperations
                to net cash in operating activities:Contributed
                services by shareholders
            
            
            19,223
            
            
            19,508Deferred
                tax expense (gain)
            
            
            3,446
            
            
            846Net
                imputed interest (income)
            
            
            (1,601
            )
            
            (9,747
            )Depreciation
            
            
            328
            
            
            312Changes
                in current assets and liabilities:(Increase)
                in accounts receivable
            
            
            (971,366
            )
            
            (1,591,003
            )Decrease
                in prepaid expenses and other current assets
            
            
            7,641
            
            
            118,573(Increase)
                in inventories
            
            
            -
            
            
            (16,717
            )Decrease
                (increase) in VAT receivable and other taxes prepaids
            
            
            197,448
            
            
            56,484Increase
                in accounts payable
            
            
            707,718
            
            
            1,255,841Increase
                in taxes payable
            
            
            818
            
            
            25,877Increase
                (decrease) in other accounts payable
            
            
            (55,279
            )
            
            102,671Change
                in interest payable
            
            
            20,484
            
            
            (2,360
            )NET
                CASH FLOW FROM OPERATING ACTIVITIES
            
            
            37,578
            
            
            133,608**CASH
                (USED IN) PROVIDED BY FINANCING ACTIVITIES:**Short
                term loans received
            
            
            -
            
            
            -Short
                term loans repaid
            
            
            -
            
            
            (224,401
            )Borrowings
                from related parties
            
            
            33,425
            
            
            -NET
                CASH FLOW FROM FINANCING ACTIVITIES
            
            
            33,425
            
            
            (224,401
            )**CASH
                PROVIDED BY INVESTING ACTIVITIES:**Promissory
                notes repaid
            
            
            68,922
            
            
            137,844Purchase
                of property, plant and equipment
            
            
            -
            
            
            -NET
                CASH FLOW FROM INVESTING ACTIVITIES
            
            
            68,922
            
            
            137,844**EFFECT
                OF FOREIGN EXCHANGE TRANSLATIO RATE CHANGES**
            
            
            **11,326**
            
            
            **(77,709**
            **)****(DECREASE)
                INCREASE IN CASH:**
            
            
            151,251
            
            
            (30,658
            )**CASH,
                at the beginning of the period**
            
            
            138,602
            
            
            32,301**CASH,
                at the end of the period**
            
            $
            289,853
            
            $
            1,643





(1)
      Cash
      paid for income tax in the amount of $4,999 and $2,733 for the six months ended
      June 30, 2007 and 2006, respectively.


(2)
      Cash
      paid for interest in the amount of $0 and $23,708 for the six months ended
      June
      30, 2007 and 2006, respectively.








5




**1.**
            **NATURE
                OF BUSINESS**




Victoria
      Industries, Inc. was incorporated on January 25, 2000 under the laws of the
      State of Nevada.





The
      current principal activities of Victoria Industries, Inc. and its subsidiaries
      (collectively referred to as the “Company”) as of June 30, 2007 and December 31,
      2006 were as follows:





**Operating
                Entity**
            
            **Principal
                Activity**
            
            **Country
                of**
              **incorporation**
            
            **June
                30,**
              **2007**
            
            **December
                31,**
              **2006****Control
                %**Victoria
                Industries, Inc.
            
            Holding
                company
            
            United
                States of America
            
            -
            
            -Victoria
                Resources, Inc.
            
            Marketing
                and distribution of forestry products
            
            United
                States of America
            
            100%
            
            100%Victoria
                Lumber, LLC
            
            Marketing
                and distribution of forestry products
            
            Russian
                Federation
            
            100%
            
            100%Coptent
                Trading Limited
            
            Marketing
                and distribution of forestry products
            
            Cyprus
            
            100%
            
            100%




The
      principal executive office of the Company is situated at the following address:
      551 Fifth Avenue, Suite 2020, New York, NY 10017, USA. The principal operating
      office of the Company is located at the following address: 2-B Vitebskaya
      Street, Suite 1-A, 454080 Chelyabinsk, Russian Federation. The Company’s web
      site is www.victoriaind.com.





The
      number of fulltime employees of the Company as at June 30, 2007 and December
      31,
      2006 amounted to 9.





The
      principal customers of the Company are based in Eastern Siberia and the Far
      East
      regions of Russia, and the North provinces of China: Inner Mongolia and
      Heyluntszyan.





**Going
      Concern** - These
      consolidated financial statements have been prepared on a going concern basis
      which assumes that adequate sources of financing will be obtained as required
      and that our assets will be realized and liabilities settled in the ordinary
      course of business. Accordingly, these consolidated financial statements do
      not
      include any adjustments related to the recoverability of assets and
      classification of assets and liabilities that might be necessary should we
      be
      unable to continue as a going concern.





In
      order
      to continue as a going concern, the Company requires additional financing.
      There
      can be no assurance that additional financing will be available to us when
      needed or, if available, that it can be obtained on commercially reasonable
      terms. If the Company is not able to continue as a going concern, it would
      likely be unable to realize the carrying value of the Company's assets reflected
      in the balances set out in the preparation of consolidated financial statements.
      While the company was profitable in 2006 and the six months period of 2007,
      there is no assurance that the lumber business that the Company is involved
      in
      will generate sufficient funds that will be available for operations. The
      Company's limited revenue history, high concentration of credit risk in
      consequence of its dependence on a single major customer and limited funding
      raise substantial doubt about the Company's ability to continue as a going
      concern.





6




Management
      of the Company plans to continue to recover its losses that relates to prior
      periods through extensive marketing policy and flexible shipment terms being
      offered to its new clients for 2007. However, there is no assurance these
      policies will continue to be successful.




**2.**
            **PRESENTATION
                OF FINANCIAL STATEMENTS**





**Basis
      of Presentation**  ***-*** The
      consolidated financial statements have been prepared in accordance with the
      requirements of Statement of Financial Accounting Standards No. 52, “Foreign
      Currency Translation" (SFAS 52). The functional currency of our Cyprus
      subsidiary is U.S. Dollars. The Russian subsidiary of the Company maintains
      its
      accounting records in Russian Rubles in accordance with the accounting and
      reporting regulations of the Russian Federation. Russian statutory accounting
      principles and procedures differ substantially from those generally accepted
      under US GAAP. Accordingly, the consolidated financial statements, which have
      been prepared from the Company's Russian statutory accounting records, reflect
      adjustments necessary for such financial statements to be presented in
      accordance with US GAAP.




The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with U.S. generally accepted accounting principles
      (“GAAP”) for interim financial information and with the instructions to Form
      10-QSB. Accordingly, they do not include all of the information and footnotes
      required by GAAP for complete financial statements. In the opinion of
      management, all adjustments (consisting of normal recurring adjustments)
      considered necessary for a fair presentation have been included. Operating
      results for the six months period ended June 30, 2007 are not indicative of
      the
      results that may be expected for the year ending December 31, 2007.





As
      contemplated by the Securities and Exchange Commission (SEC) under Rules of
      Regulation S-B, the accompanying financial statements and related footnotes
      have
      been condensed and do not contain certain information that will be included
      in
      the Company’s annual financial statements and footnotes thereto. For further
      information, refer to the Company’s audited consolidated financial statements
      and related footnotes thereto included in the Company’s annual report on Form
      10-KSB for the year ended December 31, 2006.




**Use
      of Estimates and Assumptions**  ***-*** The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amount of revenues and expenses during the reporting period. Actual
      results could differ from those estimates.




**Functional
      and Reporting Currency** ***-*** The
      functional currency of the Company is the U.S. Dollar. Certain subsidiaries
      keep
      their financial records and transact most of their transactions in Russian
      Rubles, their functional currencies. Their financial statements have been
      translated into U.S. dollars using period end foreign exchange rates for assets
      and liabilities, average foreign exchange rates for income and expenses, and
      rates for common stock issuance that were in effect on the dates of the
      transactions. Translation differences from year to year resulting from varying
      exchange rates are reflected in other comprehensive income. Remeasurement
      differences from settlements of transactions in currencies other than the
      functional currency are reflected in the statement of income.




7




The
      prevailing exchange rates as at June 30, 2007 and December 31, 2006 were
      approximately 1 U.S. dollar to 25.82 and 26.33, Russian rubles, respectively.
      For the periods ended June 30, 2007 and 2006, the average exchange rate for
      1U.S. Dollar was 25.86 and 27.20, Russian rubles, respectively.




**3.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING
                POLICIES**





**Basis
      of Consolidation** ***-*** The
      consolidated financial statements incorporate the financial statements of
      Victoria Industries, Inc. and other enterprises, where the Company, directly
      or
      indirectly exercises control. Control is achieved where the Company has the
      power to govern the financial and operating policies of an invested enterprise
      so as to obtain benefits from its activities.





Where
      necessary, adjustments are made to the financial statements of subsidiaries
      to
      ensure the accounting policies are consistently applied.





All
      significant intercompany transactions, balances and unrealized gains (losses)
      on
      transactions are eliminated on consolidation.





**Revenue
      Recognition** ***-*** **** For
      revenue from product sales, the Company recognizes revenue in accordance with
      SEC Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
      Statements» ("SAB 104"). SAB 104 requires that four basic criteria must be met
      before revenue can be recognized: (1) persuasive evidence of an arrangement
      exists; (2) delivery has occurred; (3) the selling price is fixed and
      determinable; and (4) collectibility is reasonably assured.





Criterion
      (1) is met as every delivery is covered by a separate contract and the title
      passes to the customer only upon customer's acceptance at point of destination,
      which is in compliance with criterion (2). Determination of criteria (3) and
      (4)
      are based on management's judgments regarding the fixed nature of the selling
      prices of the products delivered and the collectibility of those amounts.
      Provisions for discounts and rebates to customers, and other adjustments are
      provided for in the same period the related sales are recorded. The Company
      defers any revenue for which the product has not been delivered and accepted
      by
      its customers. In accordance with the Company's standard contract terms, once
      delivered and accepted the product cannot be returned and no claims can be
      presented to the Company. The Company recognizes revenue on gross
      basis.





**Property,
      Plant and Equipment** -
      Property, plant and equipment is stated at cost.





Depreciation
      is computed under the straight-line method utilizing useful lives of the assets,
      which are:




Office
                Equipment
            
            
            4
                - 6 yearsComputer
                Equipment
            
            
            3
                years





The
      gain
      or loss arising on the disposal or retirement of an asset is determined as
      the
      difference between the sales proceeds and the carrying amount of the asset
      and
      is recognized in the income statement.





**Leasing**  ***-*** There
      were no assets held under capital leases. Operating lease expenses are written
      of in the profit and loss account in the period in which they are
      incurred.





8


**Inventories**  ***-*** Inventories are stated at the lower of cost or net realizable value. Cost
      comprises direct cost of products purchased, customs duties, transportation
      and
      handling costs. Cost is calculated using the specific identification method.
      Net
      realizable value represents the estimated selling price less all estimated
      costs
      to completion and costs to be incurred in marketing, selling and distribution.





**Accounts
      Receivable** ***-*** Accounts
      receivable are stated at their net realizable value after deducting provisions
      for uncollectible amounts. The provision for uncollectable accounts is estimated
      based on credit history of particular customers.





**Cash
      and Cash Equivalents** ***-*** Cash
      include petty cash and cash held on current bank accounts. Cash equivalents
      include short-term investments with a maturity of 3 months or less that are
      readily convertible to known amount of cash and which are subject to
      insignificant risk of changes in value.





**Loans
      and Other Non-Bank Borrowings**  ***-*** All
      loans and borrowings are initially recorded at the proceeds received, net of
      direct issue costs. After initial recognition all loans and borrowings are
      subsequently measured at amortized cost, which is calculated by taking into
      account any discount or premium on settlement.





**Value
      added tax on purchases and sales** ****** ***-*** ****** Value
      added taxes (VAT) related to sales is payable to the tax authorities upon
      collection of receivables from customers. Input VAT is reclaimable against
      sales
      VAT upon payment for purchases. The tax authorities permit the settlement of
      VAT
      on a net basis. VAT related to sales and purchases which have not been settled
      at the balance sheet date (VAT deferred) is recognized in the balance sheet
      on a
      gross basis and disclosed separately as a current asset and liability. Where
      provision has been made against debtors deemed to be uncollectible bad debt
      expense is recorded for the gross amount of the debtor, including VAT. The
      related VAT deferred liability is maintained until the debtor is settled or
      until the debtor is written off for statutory accounting purposes.





**Income
      Taxes**  ***-*** Income
      tax has been computed based on the results for the year as adjusted for items
      that are non-assessable or non-tax deductible.





The
      Company has adopted Financial Accounting Standards No. 109 ("SFAS 109"), under
      which the deferred tax is accounted for using the balance sheet liability method
      in respect of temporary differences arising from differences between the
      carrying amount of assets and liabilities in the financial statements and the
      corresponding tax basis used in the computation of taxable profit. Deferred
      tax
      liabilities are generally recognized for all taxable temporary differences
      and
      deferred tax assets are recognized to the extent that it is probable that
      taxable profits will be available against which deductible temporary differences
      can be utilized. Deferred tax assets and liabilities are offset when they relate
      to income taxes levied by the same taxation authority and the Company intends
      to
      settle its tax assets and liabilities on a net basis.





Deferred
      tax is calculated at rates that are expected to apply to the period when the
      asset is realized or the liability is settled. It is charged or credited to
      the
      income statement, except when it relates to items credited or booked directly
      to
      equity, in which case the Deferred tax is also dealt with in
      equity.





**Fair
      value of Financial Instruments** ***-*** The
      Company's financial instruments consist of cash, accounts receivable, short
      term
      loans given, accounts payable and accrued liabilities and amounts due to
      directors. Unless otherwise noted, it is management's opinion that the Company
      is not exposed to significant interest, currency or credit risks arising from
      these financial instruments. The fair value of financial instruments approximate
      their carrying values due to the immediate or short term maturity of these
      financial instruments.




9


**Income
      per Share** ***-*** Income
      per share is computed in accordance with SFAS No. 128, "Earnings Per Share".
      Basic income per share is calculated by dividing the net income available to
      common stockholders by the weighted average number of shares outstanding during
      the year. Diluted earnings per share reflect the potential dilution of
      securities that could share in earnings of an entity. In a loss year, dilutive
      common equivalent shares are excluded from the loss per share calculation as
      the
      effect would be anti-dilutive. Basic and diluted income per share are the same
      for the years presented.




**Comprehensive
      Income (Loss)** *-* Statement
      of SFAS 130, “Reporting Comprehensive Income,” establishes standards for
      reporting and displaying of comprehensive income, its components and accumulated
      balances. Comprehensive income is defined to include all changes in equity
      except those resulting from investments by owners and distributions to owners.
      Among other disclosures, SFAS 130 requires that all items that are required
      to
      be recognized under current accounting standards as components of comprehensive
      income be reported in a financial statement that is displayed with the same
      prominence as other financial statements.




**Retirement
      Benefit Costs**  ***-*** The
      operating entities of the Group situated in the Russian Federation contribute
      to
      the state pension, medical and social insurance and employment funds on behalf
      of all its current employees. Any related expenses are recognized in the income
      statement as incurred. No other retirement plans have been
      established.





**Segment
      Reporting**  ***-*** The
      Company’s business operations are located in the Russian Federation and relate
      primarily to marketing and distribution of forestry products. Therefore,
      business activities are subject to the same risks and returns and addressed
      in
      the consolidated financial statements of the Company as one reportable
      segment.





**4.**
              **ESTABLISHMENT
                  AND DISPOSAL OF SUBSIDIARIES**





**Victoria
      Resources, Inc. - 100%**





In
      September 2003, the Company contributed $1,000 into the establishment of a
      wholly-owned subsidiary, Victoria Resources, Inc. in the State of New York
      for
      the purpose of pursuing opportunities in the lumber resource sector.





**Victoria
      Lumber, LLC** - **100%**





In
      December 2003 the Company’s subsidiary, Victoria Resources, Inc., contributed
      approximately $300,000 into the establishment of new 100% owned subsidiary,
      Victoria Lumber, LLC, based in Chelyabinsk, Ural region of the Russian
      Federation.





Victoria
      Lumber LLC, was established in order to focus on marketing and distribution
      of
      high-value added forestry products.




**Coptent
      Trading Ltd - 100%**





In
      April
      2004 the Group’s subsidiary, Victoria Resources Inc contributed $10,095 into the
      establishment of new 100% owned subsidiary, Coptent Trading Ltd., registered
      in
      Cyprus. The subsidiary was established in order to provide better marketing
      and
      administration functions of lumber sales on the Chinese market.





10


**5.**
            **ACCOUNTS
                RECEIVABLE**





As
      of
      June 30, 2007 and December 31, 2006 accounts receivable were comprised of
      receivables mostly from three parties: Yun Chou of $3,493,615 and $2,585,266
      ,
      respectively; and Ladoga of $373,677 and $207,492, Promtekhresurs 119,498 and
      189,897 respectively. All amounts were due for the Company’s forestry products
      sold to these parties. No provisions were accrued as management of the Company
      considers all receivables to be fully collectible, in accordance with the terms
      of the contracts.





**6.**
            **RELATED
                PARTY RECEIVABLE**





In
      August
      2004 the Company elected to dispose of its shareholding in Siberian Wood LLC.
      On
      or about December 31, 2004 the Company signed an agreement with
      TK Promtekhresurs (a related party) to transfer the Company’s interest in
      exchange for an interest free note of $551,377 payable by TK Promtekhresures.
      The Company considers this transaction to be in accordance with market terms,
      and that these terms represent an arms-length transaction. The current balance
      of the note receivable is as follows:





**At
                net present value****At
                cost**
            
            **June
                30,**
              **2007**June
                30, 2007
            
            $
            68,924
            
            $
            68,924**Total**
            
            **$**
            **68,924**
            
            **$**
            **68,924**





As
      of
      June 30, 2007, the outstanding amount has not been paid.





**7.**
            **TAXES
                RECEIVABLE**




**6/30/2007**
            
            **12/31/2006**VAT
                receivable
            
            $
            5,159
            
            $
            203,502Profit
                tax receivable
            
            
            2,545
            
            
            1,601Less
                other taxes prepaids
            
            
            (816
            )
            
            (767
            )**Total**
            
            **$**
            **6,888**
            
            **$**
            **204,336**





As
      of
      June 30, 2007 and December 31, 2006, taxes receivable consisted mostly of VAT
      receivable and were discounted at 15% annual rate based on an average six months
      turnover period.




**8.**
            **INVENTORIES**





As
      of
      June 30, 2007 and December 31, 2006 the Company did not have any inventory
      balances.




11




**9.**
            **PREPAYMENTS
                AND OTHER CURRENT ASSETS******




As
      of
      June 30, 2007 and December 31, 2006 amounts of $510,982 and $518,623,
      respectively, represent advances to Cenex Continental, the Company’s payment
      agent, prepaid in order to purchase certain amounts of forestry products and
      Exintra.




**10.**
            **DEFERRED
                INTEREST EXPENSE**





On
      September 15, 2006, the Company obtained a short term loan from Thor United
      Corporation (the Lender) in amount of $335,000 with interest on the loan set
      at
      $35,000, which, in accordance with the terms of the Loan agreement, was withheld
      in full by the Lender immediately following the receipt of funds (Note 14).
      Accordingly the respective amount of interest was capitalized and is being
      charged to expense pro rata at the end of each quarter. During the six months
      ended June 30, 2007, amount charged to expense was $20,484.





**11.**
            **INCOME
                TAX**





The
      Company’s provision for income tax for the periods ended June 30, 2007 and
      December 31, 2006 were as follows:








**6/30/2007**
            
            **12/31/2006**Current
                tax
            
            $
            2,369
            
            $
            (28,927
            )Deferred
                tax (gain) expense
            
            
            3,446
            
            
            3,383**Total
                income tax credit**
            
            **$**
            **5,815**
            
            **$**
            (25,544
            )





Deferred
      taxes reflect the net tax effects of temporary differences, due to the
      discounting of VAT receivable, between the carrying amounts of assets and
      liabilities for financial reporting purposes and the amounts used for tax
      purposes.





The
      change for the periods in the Company’s deferred tax position is as
      follows:




**6/30/2007**
            
            **12/31/2006**Net
                asset (liability) at the beginning of the period
            
            $
            3,574
            
            $
            6,957Charged
                to (expense) income for the period
            
            
            (3,446
            )
            
            (3,383
            )**Net
                asset at the end of the period**
            
            **$**
            **128**
            
            **$**
            **3,574**




12




The
      tax
      effect on the major temporary differences that give rise to the deferred tax
      assets as at June 30, 2007 and December 31, 2006 is presented
      below:





**6/30/2007**
            
            **12/31/2006****Temporary
                differences that give rise to Deferred tax assets**Valuation
                of VAT receivable
            
            $
            373
            
            $
            14,730Difference
                in depreciable value of PPE
            
            
            160
            
            
            160**Total**
            
            **$**
            **534**
            
            **$**
            **14,890****Temporary
                differences that give rise to Deferred tax
                liabilities**
            
            
            **-**
            
            
            **-****Net
                deferred tax asset**
            
            **$**
            **534**
            
            **$**
            **14,890**




The
      deferred tax assets as at June 30, 2007 and December 31, 2006, calculated at
      effective Russian income tax rate of 24%, consist of the following:




**6/30/2007**
            
            **12/31/2006****Deferred
                tax assets**Valuation
                of VAT receivable
            
            $
            90
            
            $
            3,536Difference
                in depreciable value of PPE
            
            
            38
            
            
            38**Total**
            
            
            **128**
            
            
            **3,574****Deferred
                tax liabilities**
            
            
            -**Net
                deferred tax asset**
            
            **$**
            **128**
            
            **$**
            **3,574**





The
      taxation charge for the year is different from that which would be obtained
      by
      applying the federal US statutory income tax rate to the net income before
      income tax. Below is a reconciliation of theoretical income tax at 34% to the
      actual expense recorded in the Company’s income statement:





**6/30/2007**
              
              **12/31/2006**Income
                  (loss) before income tax
              
              $
              114,533
              
              $
              388,753Theoretical
                  income tax at statutory rate
              
              
              38,941
              
              
              132,176Non
                  deductible fair value compensation adjustment
              
              
              19,223
              
              
              38,763Change
                  in income tax estimates
              
              
              -
              
              
              (32,364
              )Other
                  permanent differences
              
              
              (52,349
              )
              
              (113,031)**Income
                  tax expense (benefit)**
              
              **$**
              **5,815**
              
              **$**
              **25,544**




As
      at
      June 30, 2007 and December 31, 2006 the Company had a net operating loss carry
      forwards for purposes of US federal income tax of approximately $140,000 and
      $120,000 for the respective above periods. No deferred tax asset has been
      recorded because of the uncertainty of realization.  The carry forward
      expires during the period from 2022 to 2024.




13




**12.**
            **PROPERTY,
                PLANT AND EQUIPMENT**





Property,
      plant and equipment as of June 30, 2007 and December 31, 2006 consisted of
      the
      following:





**3/31/2007**
            
            **12/31/2006**Computer
                equipment
            
            $
            2,326
            
            $
            2,281Accumulated
                Depreciation
            
            
            (1,919
            )
            
            (1563
            )**Net
                Book Value**
            
            **$**
            **407**
            
            **$**
            **718**




**13.**
            **SHORT
                TERM BORROWINGS FROM RELATED
                PARTIES**





Borrowings
      from related parties as of June 30, 2007 and December 31, 2006 in the amounts
      of
      $111,350 and $77,925 represented non-interest bearing borrowings payable on
      demand, which the Company borrowed in order to finance certain administrative
      expenses relating to the Company’s New York office.





**14.**
            **SHORT
                TERM LOANS**





Short-term
      loans as of June 30, 2007 and December 31, 2006 were as follows:





**%,
                currency**
            
            **6/30/2007**
            
            **12/31/2006**Thor
                United Corporation
            
            
            US
                Dollars
            
            $
            335,000
            
            $
            335,000**Total**
            
            
            
            
            **$**
            **335,000**
            
            **$**
            **335,000**





On
      September 15, 2006 The Company obtained a loan of $335,000 from Thor United
      Corporation (The Lender) with the interest affixed in amount of $35,000 at
      the
      rate of 14.6%, which was withheld by the Lender upon closing (Note
      10).





The
        short
        term loan obtained from Thor United Corporation in the amount of $335,000
        was
        secured by the shares of common stock held by the Company’s CEO. Proceeds of the
        loans were used mainly for immediate working capital requirements. Proceeds
        of the loans were used mainly for immediate working capital requirements.
        As at
        June 30, 2007 the loan extension was being negotiated.




**15.**
            **TAXES
                PAYABLE**





Taxes
      payable as of June 30, 2007 and December 31, 2006 consisted of the
      following:





**6/30/2007**
            
            **12/31/2006**Income
                Tax-Coptent Trading
              (Republic
                of Cyprus)
            
            $
            -
            
            $
            -Taxes
                withheld from employees
            
            
            282Other
                taxes
            
            
            536**Total**
            
            **$**
            **818**
            
            **$**
            **-**




14




**16.**
            **OTHER
                CURRENT LIABILITIES**





Other
      accounts payable in the total amounts of $134,740 and $190,019 as of June 30,
      2007 and December 31, 2006 were mostly comprised of $66,997 (2006: $129,736)
      payable to Exintra and represents amounts of transportation, storage and other
      expenses that are to be reimbursed by the Company in accordance with the Agency
      Agreement.





**17.**
            **INTEREST
                PAYABLE**




As
      of
      June 30, 2007 and December 31, 2006 no interest was payable as all interest
      on
      the loan was paid up-front.





**18.**
            **COMMON
                STOCK**





There
      are
      75,000,000 common shares authorized by the Company’s Amended and Restated
      Certificate of Incorporation. There are 10,965,090 ordinary shares with a par
      value of $0.001 US dollar issued and outstanding as of June 30, 2007 and
      December 31, 2006.





The
      holders of ordinary shares have voting rights but no guarantee of dividends.
      Distributable profits are determined on the basis of profits reported in
      statutory financial statements of the Company’s entities. These profits differ
      from profits recorded under US GAAP.





No
      dividends were declared or paid during the periods ended June 30, 2007 and
      December 31, 2006.





**19.**
            **RELATED
                PARTIES**





Related
      parties include shareholders, affiliates and entities under common ownership,
      over which the Company has the ability to exercise a significant influence
      and/or control.





Transactions
      with related parties are performed on terms that may differ from those that
      would be available to unrelated parties.





For
      details of related party balances outstanding as of June 30, 2007 and December
      31, 2006 see Notes 4, 6 and 13.





**20.**
            **COMMITMENTS
                AND CONTINGENCIES**





**Lease
      commitments** ***--*** The
      Company leases office space on a year by year basis and its outstanding lease
      commitments as of June 30, 2007, are as follows:





**2007**Office
                lease
            
            $
            4,192**Total**
            
            **$**
            **4,192**





**Litigation**  ***-*** The
      Company has been and continues to be the subject of legal proceedings and
      adjudications from time to time, none of which has had, individually or in
      the
      aggregate, a material adverse impact on the Company. Management believes that
      the resolution of all business matters will not have a material impact on the
      Company’s financial position or operating results.





15




**Russian
      Federation Tax and Regulatory Environment**  ***-*** The
      government of the Russian Federation continues to reform the business and
      commercial infrastructure in its transition to a market economy. As a result
      laws and regulations affecting businesses continue to change rapidly. These
      changes are characterized by poor drafting, different interpretations and
      arbitrary application by the authorities. In particular taxes are subject to
      review and investigation by a number of authorities enabled by law to impose
      fines and penalties. While the Company believes it has provided adequately
      for
      all tax liabilities based on its understanding of the tax legislation, the
      above
      facts may create tax risks for the Company.





**21.**
            **RISK
                MANAGEMENT POLICIES**





The
      main
      risks inherent to the Company’s operations are those related to credit risk
      exposures, market movements in foreign exchange rates and in interest rates.
      A
      description of the Company’s risk management policies in relation to those risks
      are as follows.





**Credit
      risk** ***-*** **** The
      Company is exposed to credit risk which is the risk that one party to a
      financial instrument will fail to discharge an obligation and cause the other
      party to incur a financial loss.


The
      Company structures the levels of credit risk it undertakes by placing limits
      on
      the amount of risk accepted in relation to one customer, or groups of customers.
      Limits on the level of credit risk by customer are approved by the Credit
      Committee.




**Currency
      risk** ***-*** Currency
      risk is defined as the risk that the value of a financial instrument will
      fluctuate due to changes in foreign exchange rates.




The
      Credit Committee sets limits on the level of exposure by currencies (primarily
      US Dollar), by entities and in total.




**Concentration
      of Sales** ***-*** Sales
      in
      excess of 5% to any one customer for the periods ended June 30, 2007 and 2006
      were as follows:




**6/30/2007**
            
            **6/30/2006**Yon
                Chou
            
            $
            2,156,829
            
            $
            4,769,583Promtekhresurs
            
            
            738,876Ladoga
            
            
            1,006,070**Other**
            
            
            134,705
            
            
            72,442**Total**
            
            **$**
            **4,036,481**
            
            **$**
            **4,842,025**





The
      Company’s customers are Russian and Chinese lumber traders. Our main suppliers
      in excess of 5% over the cost of goods sold during the periods ended June 30,
      2007 and 2006 were as follows:




**6/30/2007**
            
            **6/30/2006**Geomashproject
            
            $
            745,775Speztekhsbyt
            
            
            907,087
            
            
            -Kedr
                L
            
            
            1,000,307
            
            
            -Exintra
            
            $
            1,156,005
            
            $
            2,669,924Stroitransservice
            
            
            -
            
            
            1,453,655Other
            
            
            18,665
            
            
            -**Total**
            
            **$**
            **3,827,841**
            
            **$**
            **4,123,579**




16




To
      reduce
      certain of the risks associated with remote location of forestry producers
      and
      to facilitate tracking and monitoring of such productions and the Company’s
      sales, which consist mostly of the sales of Victoria Lumber, the Company’s
      operating subsidiary, the Company engaged Exintra to provide tracking and
      monitoring services as well as a range of related logistical services. As
      compensation for these services, Exintra receives a fee for the amounts of
      product sold by the Company.




The
      Company sells lumber to its major Chinese customer, Yun Chou through its
      operating subsidiary, Coptent Trading, Ltd., which provides marketing and
      administration services facilitating such transactions. Sales by Coptent are
      facilitated through Exintra, and the inter-company amounts attributable to
      these
      sales are eliminated on consolidation. Revenues reported in the Company’s
      Statements of Operations consist of Coptent’s sales to Yun Chou, the final
      customer, as well as of amounts that were sold by Victoria Lumber itself to
      third parties. Because the company also owes Exintra other fees due to the
      above
      services and other logistical services rendered, Exintra may act as both a
      vendor and a customer for the Company.




**Interest
      rate risk** ***-*** Interest
      rate risk arises from the possibility that changes in interest rates will affect
      the value of the financial instruments used by or that otherwise relate to
      the
      Company and its operations.




Currently,
      the Company’s approach to reducing the interest risk is borrowing at fixed
      rates.





**22.**
            **CONCENTRATION OF BUSINESS
                RISK**





The
      Company's business activities are presently limited to the Russian Federation,
      China, Mongolia, and Cyprus. Laws and regulations affecting businesses operating
      in the these countries are subject to rapid changes and the Company's assets
      and
      operations could be at risk due to negative changes in the political and
      business environment of any of these regions.





**23.**
            **SUBSEQUENT
                EVENTS**





On
      July
      12, 2007, the Company issued a press release announcing its intention to dispose
      of its lumber trading business in the Russian Federation. The above decision
      was
      caused by the inability to raise financing and attract investor interest for
      its
      lumber trading business. The Company believes that it will dispose of the lumber
      trading business before the end of 2007.




**ITEM
      2. MANAGEMENT DISCUSSION AND ANALYSIS OF PRINCIPAL CONDITIONS AND
      OPERATIONS**




**Discussion
      and Analysis of Financial Condition**




**Results
      of Operations**




Revenues
      recognized for the periods ended June 30, 2007 and 2006 amounted to $4,036,481
      and $4,842,025, respectively. Cost of sales for the respective periods, 2007
      and
      2006, consisted mainly of purchased logs and transportation cost in the amounts
      of $3,827,841 and $4,123,579, for each of the above respective
      periods.





The
      revenues for June 30, 2007 primarily consisted of birch sales of $2,126,542,
      spruce sales of $30,287, construction materials of $162,442 and spare parts
      of
      $1,683,696.




17




Cost
      of
      sales for the six months ended June 30, 2007 consisted primarily of birch,
      construction materials and spare parts amounting to $1,969,020, $28,044,
      $156,708 and $1,640,555 respectively.





Our
      gross
      margin decreased from approximately 14.8% in the first six months of 2006 to
      approximately 5.2% in six months 2007 primarily as a result of the strengthening
      of the Russian Rouble against US dollar. While our sales contracts are
      denominated in US dollars, our purchasing prices in Russia are denominated
      in
      Russian Roubles and we were unable to pass the increased timber purchasing
      costs
      on to our customers primarily due to our focus on maintaining and increasing
      our
      market share. Another contributing factor was the change of delivery basis
      from
      DAF to FCA. Under FCA, the Company incurred significantly lower transportation
      expenses which were assumed by the buyer. The above change in the delivery
      terms
      caused us to reduce our prices. However, the latter effect on the gross margin
      was compensated by a reduction in our Sales, General and Administration expenses
      from $386,627 to $32,559. Our operating profit went down from $268,737 in the
      first six months of 2006 to $128,098 in the first six months of 2007 while
      our
      before tax earnings fell from $203,900 in the first six months of 2006 to
      $114,533 in the first six months of 2007.





Prices
      for our products are subject to volatility depending on seasonal demand for
      forestry products. These can be seen by the relatively low gross margin during
      the six months of 2007, which resulted from unfavorable market
      conditions.




In
      the
      event, the Company does not dispose of its timber trading business in 2007
      (Note
      23), in the near future, no assurance can be given as to if and when we become
      an established supplier and as to whether or not this would allow us to sell
      at
      prevailing market prices. We also expect to secure better terms from our
      suppliers, which may further improve our gross margin in the future. There
      is no
      assurance as to when and if these will be achieved.





Trade
      accounts receivable as of June 30, 2007 and December 31, 2006, were comprised
      of
      amounts receivable for forestry products, construction materials and spare
      parts
      delivered to customers in the amount of $4,089,503 and $3,118,137. The
      significant increase in the first six months of 2007 was due to the extension
      of
      better credit terms to customers. Based on the contract terms with customers
      and
      on the Company's management estimates, no provision for doubtful debts is
      required, as all outstanding amounts are considered to be recoverable. Other
      accounts receivable are comprised mostly of prepayments for forestry products
      in
      the amounts of $510,982 as of June 30, 2007 and 518,623 as of December 31,
      2006.





The
      current liabilities of the Company as of June 30, 2007 and December 31, 2006
      mainly consisted of trade payables in a total amount of $2,764,161 (December
      31,
      2006: $2,056,443), short term borrowings from related parties totaling $111,350
      (December 31, 2006: $77,925), short-term loans of $335,000 (December 31, 2006:
      $335,000) and other accounts payable of $134,740 (December 31, 2006: $190,019),
      each for the respective above referenced periods. Other accounts payable are
      represented mostly by payables to Exintra, for logistical and other services
      that are reimbursed by the Company in accordance with the terms of the agreement
      between the parties. There were no long term liabilities as of June 30, 2007
      and
      December 31, 2006.





The
      continuation of the Company is dependent upon maintaining a profitable level
      of
      operations, expanding the Company’s business, continuing financial support of
      creditors and stockholders as well as obtaining long-term financing. Management
      plans to raise equity capital to finance the current cash requirements of the
      Company. Capital raised will be used to expand current operations, finance
      working capital and acquire fixed assets. While the Company is undertaking
      its
      best efforts to achieve the above plans, there is no assurance that any such
      activity will generate funds that will be sufficient to expand our operations
      or
      maintain their current level. If the Company is not successful in raising
      financing, the Company's expected business volumes may be adjusted or may not
      materialize at all. Additionally, the Company may lose its current business,
      which may lead to significant curtailment or suspension of operations. In
      addition, as disclosed in Note 23, the Company may dispose of its current timber
      trading business by the end of 2007.





18




**Capital
      Expenditures**





As
      of
      June 30, 2007 and December 31, 2006 the Company did not have significant fixed
      assets as it operated solely as a trader and not a producer.





In
      the
      event, the Company does not dispose of its timber trading business in 2007
      (Note
      23), in the near future, we may need to add certain fixed assets or obtain
      timberland leases to maintain and further grow our business. The fixed assets
      may be in the form of warehouse space, manufacturing facilities, processing
      machinery, logging machinery, automotive vehicles and tractors, chainsaws and
      other equipment used for logging and lumber processing. We may also elect to
      form new partnerships, invest into and/or acquire other companies operating
      in
      the same segment. In order to finance future capital expenditures, we may need
      to raise substantial funds. There is no assurance that the required financing
      will be raised. Further, there is no assurance that the Company will be able
      to
      continue successfully in operating existing businesses if the required Capital
      expenditures are not made.




**Competition**




We
      compete in a highly competitive industry that is open to new entrants without
      significant barriers to entry. We encounter competition in all of our
      operations, including the acquisition of goods from suppliers and sale of these
      goods to customers. Many of our competitors have financial and other resources
      substantially greater than ours.




**Cash
      Requirements**




In
      the
      event, the Company does not dispose of its timber trading business in 2007
      (Note
      23), the Company anticipates it will require around $3,000,000 to sustain
      operations and develop its subsidiaries over the next twelve months. The Company
      believes it will be able to raise these funds through equity and debt financing;
      however, there is no guarantee that funds will be raised.





**Liquidity
      and Capital Resources**





Since
      inception, the Company has financed its operations from private sources. The
      Company began operations in 2003 and in 2004 acquired its subsidiaries’
businesses, which included, Victoria Siberian Wood, Victoria Lumber and Coptent
      Trading Ltd.





During
      the six months period of 2007 we recognized a net profit of $108,718. As of
      June
      30, 2007 the Company had total current assets of $4,966,278 and total current
      liabilities of $3,346,067. As of June 30, 2007, the Company had cash balance
      of
      $289,853.





**Going
      Concern**





These
      financial statements have been prepared on a going concern basis which assumes
      that adequate sources of financing will be obtained as required and that our
      assets will be realized and liabilities settled in the ordinary course of
      business. Accordingly, these consolidated financial statements do not include
      any adjustments related to the recoverability of assets and classification
      of
      assets and liabilities that might be necessary should we be unable to continue
      as a going concern.




19




In
      order
      for us to continue as a going concern, we require additional financing. There
      can be no assurance that additional financing will be available to us when
      needed or, if available, that it can be obtained on commercially reasonable
      terms. If we are not able to continue as a going concern, we would likely be
      unable to realize the carrying value of our assets reflected in the balances
      set
      out in the preparation of financial statements. While the Company was profitable
      in 2006 and the first half of 2007, there is no assurance that the lumber
      business that the Company is involved in will generate sufficient funds that
      will be available for operations. The Company’s limited revenue history, high
      concentration of credit risk in consequence of its dependence on a single major
      customer and limited funding raise substantial doubt about the Company’s ability
      to continue as a going concern.





Accordingly,
      our independent auditors included an explanatory paragraph in their report
      of
      the December 31, 2006 financial statements regarding concerns about our ability
      to continue as a going concern. Our financial statements contain additional
      notes and disclosures describing the circumstances that lead to this disclosure
      by our independent auditors.





**Cash
      flow**





Cash
      provided by (used in) operating activities for the periods ended June 30, 2007
      and 2006, amounted to $37,576 and $133,608, respectively. The reduction in
      operating cashflow resulted from the lower net income that went down from
      $200,321 during six months of 2006 to $108,718 during six months
      2007.





Cash
      provided by financing activities during the six months ended June 30, 2007
      and
      2006 resulted from shareholder advances of $33,425.





There
      were no significant activities effecting Cash Flow from Investing Activities
      during the period.





**Income
      Taxes, Net Operating Losses and Tax Credits**





Currently,
      the Company is liable for the Russian income tax at the rate of 24% of the
      pre-tax earnings as defined by the Russian income tax law. The taxation system
      in Russia is evolving as the central government transforms itself from a command
      to a market-oriented economy. Based on current tax law and the United
      States-Russia income tax treaty, the income tax paid in Russia will be a
      credited when determining the Company's US income tax liability.




**Application
      of Critical Accounting Policies**




**Use
      of Estimates**




The
      preparation of financial statements in accordance with United States generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosures of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could materially differ from these
      estimates.





**Revenue
      Recognition**





For
      revenue from product sales, the Company recognizes revenue in accordance with
      SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial
      Statements” ("SAB 104"). SAB 104 requires that four basic criteria must be met
      before revenue can be recognized: (1) persuasive evidence of an arrangement
      exists; (2) delivery has occurred; (3) the selling price is fixed and
      determinable; and (4) collectibility is reasonably assured.





Criterion
      (1) is met as every delivery is covered by a separate contract and the title
      passes to the customer only upon customer's acceptance at point of destination,
      which is in compliance with criterion (2). Determination of criteria (3) and
      (4)
      are based on management's judgments regarding the fixed nature of the selling
      prices of the products delivered and the collectibility of those amounts.
      Provisions for discounts and rebates to customers, and other adjustments are
      provided for in the same period the related sales are recorded. The Company
      defers any revenue for which the product has not been delivered and accepted
      by
      its customers. In accordance with the Company's standard contract terms, once
      delivered and accepted the product cannot be returned and no claims can be
      presented to the Company. The Company recognizes revenue on gross basis.




20




**ITEM
        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK.**
 
 Much
        of
        the information included in this report includes or is based upon estimates,
        projections or other “forward looking statements". Such forward looking
        statements include any projections or estimates made by us and our management
        in
        connection with our business operations. While these forward-looking statements,
        and any assumptions upon which they are based, are made in good faith and
        reflect our current judgment regarding the direction of our business, actual
        results will almost always vary, sometimes materially, from any estimates,
        predictions, projections, assumptions or other future performance suggested
        herein.
 
 Such
        estimates, projections or other "forward looking statements" involve various
        risks and uncertainties as outlined below. We caution the reader that important
        factors in some cases have affected and, in the future, could materially
        affect
        actual results and cause actual results to differ materially from the results
        expressed in any such estimates, projections or other "forward looking
        statements".
 
 Our
        common shares are considered speculative during our search for a new business
        opportunity. Prospective investors should consider carefully the risk factors
        set out below
 
 **Limited
        operating history; anticipated losses; uncertainty of future
        results**
 
 The
        Company has a limited operating history upon which an evaluation of its
        prospects can be made. There can be no assurance that the Company will
        effectively execute its business plan or manage any growth of the business,
        or
        that the Company’s future operating and financial forecast will be met. Future
        development and operating results will depend on many factors, including
        access
        to adequate capital, the demand for the Company's products, the level of
        product
        and price competition, the Company’s success in setting up and expanding
        distribution channels, and whether the Company can control costs. Many of
        these
        factors are beyond the control of the Company. In addition, the Company's
        future
        prospects must be considered in light of the risks, expenses, and difficulties
        frequently encountered in establishing a new business in the forest products
        industry, which is characterized by intense competition, rapid technological
        change, highly litigious competitors and significant
        regulation.
 
 **Limited
        public market**
 
 The
        Company’s Common Stock is currently quoted on the NASD OTC Bulletin Board under
        the ticker symbol VIIN. As of August 14, 2007 there were approximately
        10,965,090 shares of Common Stock outstanding. There can be no assurance
        that a
        trading market will be sustained in the future. Factors such as, but not
        limited
        to, technological innovations, new products, acquisitions or strategic alliances
        entered into by the Company or its competitors, failure to meet security
        analysts' expectations, government regulatory action, proprietary rights
        developments, and market conditions for lumber products in general could
        have a
        material effect on the volatility of the Company's stock price.
 
 **Political
        Risks**
 
 The
        markets in Russia, China and Mongolia are monitored by their respective
        governments, which could impose taxes or restrictions at any time that would
        make operations unprofitable and infeasible and cause a write-off of capital
        investment in lumber opportunities.
  21
 
 A
        number
        of factors, beyond the Company's control, the effect of which cannot be
        accurately predicted, may affect the marketing of the Company's products
        and its
        lumber operations. These factors include political policy on foreign ownership,
        political policy to open the doors to foreign investors, and political policy
        on
        lumber exports.
 
 **Risks
        Associated with International Markets**
 
 Commencing
        in 2004 the Company started trading with clients located in the Peoples’
Republic of China. The future success of the Company will depend in part
        on its
        ability to generate sales to its international clients and markets outside
        of
        its operational locations. There can be no assurance, however, that the Company
        will be successful in generating these sales. In addition, such transactions
        will be subject to a number of risks, including: foreign currency risk; the
        risks that agreements may be difficult or impossible to enforce and receivables
        difficult to collect through a foreign country's legal system; foreign customers
        may have longer payment cycles; or foreign countries could impose withholding
        taxes or otherwise tax the Company's foreign income, impose tariffs, embargoes,
        or exchange controls, or adopt other restrictions on foreign trade. In addition,
        the laws of certain countries do not protect the Company’s offerings to the same
        extent as the laws of the United States.
 
 Although
        none of our present officers or directors individually is a key to our
        continuing operations, we rely upon the continued service and performance
        of
        these officers and directors, and our future success depends on the retention
        of
        these individuals, whose knowledge of our business and whose technical expertise
        would be difficult to replace. At this time, none of our officers or directors
        are bound by employment agreements, and as a result, any of them could leave
        with little or no prior notice.
 
 Competition
        for qualified individuals is likely to intensify, and we may not be able
        to
        attract, assimilate, or retain additional highly qualified personnel in the
        future. The failure to attract, integrate, motivate and retain these employees
        could harm our business.
  **Lack
        of Diversification**
 
 The
        Company is currently exclusively in the business of trading in forest products.
        This lack of diversification into a number of areas may subject us to economic
        fluctuations within the forest products industry, thereby increasing the
        risks
        associated with our operations.
 
 **Exposure
        to Natural Disasters**
 
 The
        forest products industry is subject to natural events such as forest fires,
        adverse weather conditions, insect infestation, disease and other natural
        disasters. The occurrence of any of these events could adversely affect our
        ability to trade in forest products which would result in a material adverse
        consequence to the Company.
 
 **Exposure
        to foreign exchange rate fluctuations**
 
 The
        majority of our operations are located in the Russian Federation, China and
        Mongolia, The majority of our expenses are denominated in Russian rubles.
        We
        currently do not, and do not plan in the near future, to engage in hedging
        our
        exposure to changing foreign exchange rates. Any unfavorable changes in the
        relevant foreign exchange rates may have a material effect on our financials
        and
        performance.
 
 22
  **"Penny
        Stock" Rules May Restrict the Market for the Company's
        Shares**
 
 Our
        common shares are subject to rules promulgated by the Securities and Exchange
        Commission relating to "penny stocks," which apply to companies whose shares
        are
        not traded on a national stock exchange or on the NASDAQ system, trade at
        less
        than $5.00 per share, or who do not meet certain other financial requirements
        specified by the Securities and Exchange Commission. These rules require
        brokers
        who sell "penny stocks" to persons other than established customers and
        "accredited investors" to complete certain documentation, make suitability
        inquiries of investors, and provide investors with certain information
        concerning the risks of trading in such penny stocks. These rules may discourage
        or restrict the ability of brokers to sell our common shares and may affect
        the
        secondary market for our common shares. These rules could also hamper our
        ability to raise funds in the primary market for our common
        shares.
  **Possible
        Volatility of Share Prices**
 
 Our
        common shares are currently quoted on the OTC BB service. The trading price
        of
        our common shares has been subject to wide fluctuations. Trading prices of
        our
        common shares may fluctuate in response to a number of factors, many of which
        will be beyond our control. The stock market has generally experienced extreme
        price and volume fluctuations that have often been unrelated or disproportionate
        to the operating performance of companies with no current business operation.
        There can be no assurance that trading prices and price earnings ratios
        previously experienced by our common shares will be matched or maintained.
        These
        broad market and industry factors may adversely affect the market price of
        our
        common shares, regardless of our operating performance.
 
 In
        the
        past, following periods of volatility in the market price of a company's
        securities, securities class-action litigation has often been instituted.
        Such
        litigation, if instituted, could result in substantial costs for us and a
        diversion of management's attention and resources.
  **Indemnification
        of Directors, Officers and Others**
 
 Our
        by-laws contain provisions with respect to the indemnification of our officers
        and directors against all expenses (including, without limitation, attorneys'
        fees, judgments, fines, settlements, and other amounts actually and reasonably
        incurred in connection with any proceeding arising by reason of the fact
        that
        the person is one of our officers or directors) incurred by an officer or
        director in defending any such proceeding to the maximum extent permitted
        by
        Nevada law.
 
 Insofar
        as indemnification for liabilities arising under the Securities Act of 1933
        may
        be permitted to directors, officers and controlling persons of our company
        under
        Nevada law or otherwise, we have been advised the opinion of the Securities
        and
        Exchange Commission is that such indemnification is against public policy
        as
        expressed in the Securities Act of 1933 and is, therefore,
        unenforceable.
  **Future
        Dilution**
 
 Our
        corporate documents authorize the issuance of 75,000,000 common shares, each
        with a par value of $0.001. In the event that we are required to issue any
        additional shares or enter into private placements agreements to raise financing
        through the sale of equity securities, investors' interests in our Company
        will
        be diluted and investors may suffer dilution in their net book value per
        share
        depending on the price at which such securities are sold. If we issue any
        such
        Additional shares, such issuances also will cause a reduction in the
        proportionate ownership and voting power of all other shareholders. Further,
        any
        such issuance may result in a change in our control.
  23
  **Anti-Takeover
        Provisions**
 
 We
        do not
        currently have a shareholder rights plan or any anti-takeover provisions
        in our
        By-laws. Without any anti-takeover provisions, there is no deterrent for
        a
        take-over of our Company, which may result in a change in our management
        and
        directors.
  **Reports
        to Security Holders**
 
 Under
        the
        securities laws of Nevada, we are not required to deliver an annual report
        to
        our shareholders but we intend to send an annual report to our
        shareholders.
 
 **ITEM
        4. CONTROLS AND PROCEDURES**
 
 As
        of the
        end of the period covered by this Quarterly Report on form 10-QSB, an evaluation
        was performed under the supervision and with the participation of our
        management, including the Chief Executive Officer and Chief Financial Officer,
        of the effectiveness of the design and operation of our disclosure controls
        and
        procedures (as defined in Rules 13a-15(e). Based on that evaluation, our
        Chief
        Executive Officer and Chief Financial Officer concluded that our disclosure
        controls and procedures are effective to ensure that information we are required
        to disclose in reports that we file or submit under the Securities and Exchange
        Act of 1934 (a) is recorded, processed, summarized and reported within the
        periods specified in Securities and Exchange Commission rules and forms,
        and (b)
        is accumulated and communicated to our management, including our Chief Executive
        Officer and Chief Financial Officer, as appropriate, to allow timely decisions
        regarding required disclosure. Our disclosure controls and procedures are
        designed to provide reasonable assurance that such information is accumulated
        and communicated to our management. Our disclosure controls and procedures
        include components of our internal control over financial reporting.
        Management’s assessment of the effectiveness of our internal control over
        financial reporting is expressed at the level of reasonable assurance that
        the
        financial statements and other information presented herewith are materially
        correct.
 
 The
        registrants' principal executive officers and principal financial officer
        have
        concluded that there were no significant changes in the registrants' internal
        controls or in other factors that could significantly affect these controls
        as
        of the end of the period covered by this report based on such evaluation,
        and
        that there was no significant deficiencies or material weaknesses in the
        registrant's internal controls.
 
 24
  **PART
        II.**
 
 **ITEM
        1. LEGAL PROCEEDINGS**
 
 We
        know
        of no material, active or pending legal proceedings against us, nor are we
        involved as a plaintiff in any material proceedings or pending litigation.
        To
        the best of our knowledge, there are no proceedings in which any of our
        directors, officers or affiliates, or any registered or beneficial shareholders
        are an adverse party or have a material interest adverse to us.
 
 **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS**
 
 None
 
 **ITEM
        3. DEFAULTS UPON SENIOR SECURITIES**
 
 None
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None
 
 **ITEM
        5. OTHER INFORMATION**
 
 None
 
 **ITEM
        6. EXHIBITS FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
        8-K**
 
 ***Reports
        on Form 8-K***
  A
        current
        report on Form 8-K. Item 8.01: Status of certain corporate events was filed
        on
        July 12, 2007.
 
 The
        following Consolidated Financial Statements pertaining to Victoria Industries
        are filed as part of this quarterly report:
 
 Consolidated
        Balance Sheets as of June 30 2007 and December 31, 2006
 
 Consolidated
        Statements of Changes in Stockholders' Equity (Capital Deficit) for the periods
        ended June 30, 2007 and December 31, 2006.
 
 Consolidated
        Statements of Operations and Comprehensive Loss for the six months ended
        June
        30, 2007 and 2006
 
 Consolidated
        Statements of Cash Flows for the six months ended June 30, 2007 and
        2006.
 
 Notes
        to
        the Consolidated Financial Statements for the six months ended June 30, 2007
        and
        the year ended December 31, 2006.
 
 25
 
 **EXIBITS
        REQUIRED BY ITEM 601 OF REGULATION S-B**
 
 Articles
        of Incorporation and Corporate Charter of the Registrant* (incorporated by
        reference from our Registration Statement on Form 10-SB filed on October
        4,
        2000)
 
 By-laws
        of the Registrant* (incorporated by reference from our Registration Statement
        on
        Form 10-SB filed on October 4, 2000)
 
 Exhibit
        31.1 - Section 302 Certification
  Exhibit
        31.2 - Section 302 Certification
  Exhibit
        32.1 - Section 906 Certification
  Exhibit
        32.2 - Section 906 Certification
 
 *
        Previously filed as an exhibit to the Company's Form 10-SB filed on October
        4,
        2000
  *
        CERTAIN
        PARTS OF THIS DOCUMENT HAVE NOT BEEN DISCLOSED AND HAVE BEEN FILED SEPARATELY
        WITH THE SECRETARY, SECURITIES AND EXCHANGE COMMISSION, AND IS SUBJECT TO
        A
        CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24B-2 OF THE SECURITIES ACT
        OF
        1934.
 
 **SUBSIDIARIES:**
 
 As
        at
        June 30, 2007 and December 31, 2006
 
 Victoria
        Resources Inc.
 Victoria
        Lumber LLC
 Coptent
        Trading Ltd
 
 **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused
        this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  Date: August 14, 2007
              
              Victoria Industries,
                Inc./s/ Albert AbdoullineAlbert
                AbdoullinePresident
 
 26