**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**








**FORM
      10-QSB**


(Mark
      One)





[√]
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934








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





OR





[  
                ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      transition period
      from to______





Commission
      file number **114800**





**DEER
      VALLEY CORPORATION**


***(Exact
      name of Registrant as specified in its charter)***








**Florida**
            **20-5256635**(State
                or other jurisdiction of
            (I.R.S.
                employerincorporation
                or organization)
            identification
                no.)





**4218
                W. Linebaugh Avenue, Tampa, FL**
            **33624**(Address
                of principal executive offices)
            (Zip
                code)




Registrant's
      telephone number, including area code:  **(813)
      885-5998**





**4902
      Eisenhower Blvd., Suite 185, Tampa, FL 33634**


(Formers
      address of principal executive offices, if changed since last
      report)





Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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 [√]  No [  ]





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act). Yes [  ] No [√]





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





The
      Registrant had 8,609,063 shares of Common Stock, par value $0.001 per share,
      outstanding as of June 30, 2007.





**TABLE
      OF CONTENTS**











**PART
                I**
            **FINANCIAL
                INFORMATION**
            **PAGE**Item
                1
            Financial
                StatementsConsolidated
                Balance SheetsAs
                of June 30, 2007 (unaudited)
            F-2Consolidated
                Statements of OperationsThree
                and Six Months ended June
                30, 2007
                (unaudited)Three
                and Six Months ended July
                1, 2006
                (unaudited)
            F-3Consolidated
                Statements of Cash FlowsSix
                Months ended June
                30, 2007
                (unaudited)Six
                Months endedJuly 1,
                2006(unaudited)
            F-4Notes
                to Consolidated Financial Statements (unaudited)
            F-5Item
                2
            Management's
                Discussion and Analysis or Plan of Operation
            1Item
                3
            Controls
                and Procedures
            8**PART
                II**
            **OTHER
                INFORMATION**Item
                1
            Legal
                Proceedings
            8Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            9Item
                3
            Defaults
                Upon Senior Securities
            9Item
                4
            Submission
                of Matters to a Vote of Security Holders
            9Item
                5
            Other
                Information
            9Item
                6
            Exhibits
            10




Unless
      otherwise indicated or the context otherwise requires, all references below
      in
      this filing to “we,” “us,” the “Company,” and "Deer Valley" are to Deer
      Valley Corporation, a Florida corporation, together with its wholly-owned
      subsidiary, Deer Valley Homebuilders, Inc., an Alabama corporation.









**Item
          1.  Financial Statements**
 
 
 **Deer
          Valley Corporation & Subsidiary**
 **Condensed
          Consolidated Financial Statements**


**Contents:****Consolidated
                Balance Sheet as of June 30, 2007 (unaudited)**
            **F-2****Consolidated
                Statements of Operations for the three and six month periods ended
                June
                30, 2007 and July 1, 2006 (unaudited)**
            **F-3****Consolidated
                Statements of Cash Flows for the six month periods ended June 30,
                2007 and
                July 1, 2006 (unaudited)**
            **F-4****Notes
                to Condensed Consolidated Financial Statements
                (unaudited)**





















F-1


**Deer
        Valley Corporation & Subsidiary**
 **Consolidated
        Balance Sheets**






**ASSETS****June
                  30,****2007****(unaudited)****Current
                  Assets:**Cash
              
              $
              5,119,993Accounts
                  receivable
              
              
              3,827,124Inventory
              
              
              2,159,562Other
                  current assets
              
              
              1,090,161Total
                  Current Assets
              
              
              12,196,840**Fixed
                  Assets:**Property,
                  plant and equipment, net
              
              
              3,147,677**Other
                  Assets:**Goodwill
              
              
              5,784,340Other
                  assets
              
              
              77,509Total
                  Other Assets:
              
              
              5,861,849**Total
                  Assets**
              
              **$**
              **21,206,366****LIABILITIES
                  AND STOCKHOLDERS'EQUITY****Current
                  Liabilities:**Current
                  maturities on long term debt
              
              $
              39,051Accounts
                  payable & accrued expenses
              
              
              4,599,246Accrued
                  warranties
              
              
              2,065,000Accrued
                  preferred dividends
              
              
              203,257Total
                  Current Liabilities
              
              
              6,906,552**Long
                  Term Liabilities:**Accrued
                  earnout, net of current maturities
              
              
              1,295,149Long-term
                  debt, net of current maturities
              
              
              1,888,810Deferred
                  tax liability
              
              
              248,543**Total
                  Liabilities**
              
              
              10,339,054**Stockholders'
                  Equity:**Series
                  A Preferred stock, $0.01 par value, 750,000 shares authorized,
                  638,775
                  shares issued and outstanding
              
              
              6,387,745Series
                  B Preferred stock, $0.01 par value, 49,451 shares authorized, 0
                  shares
                  issued and outstanding
              
              
              -Series
                  C Preferred stock, $0.01 par value, 26,750 shares authorized, 26,750
                  shares issued and outstanding
              
              
              267Series
                  D Preferred stock, $0.01 par value, 132,081 shares authorized,
                  0 shares
                  issued and outstanding
              
              
              -Series
                  E Preferred stock, $0.01 par value, 1,000,000 shares authorized,
                  750,000
                  shares issued and outstanding
              
              
              7,500Common
                  stock, $0.001 par value, 100,000,000 shares authorized, 8,609,063
                  shares
                  issued and outstanding
              
              
              8,609Additional
                  paid-in capital
              
              
              34,899,091Accumulated
                  deficit
              
              
              (30,435,901
              )**Total
                  Stockholders Equity**
              
              
              10,867,311**Total
                  Liabilities and Stockholders Equity**
              
              **$**
              **21,206,366**
 *See
          notes to consolidated financial statements*
   F-2





**Deer
      Valley Corporation & Subsidiary**


**Consolidated
      Statements of Operations**






**For
                  the three month period ended**
              
              
              **For
                  the six month period ended****June
                  30,**
              
              
              **July
                  1,**
              
              
              **June
                  30,**
              
              
              **July
                  1,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006****(unaudited)**
              
              
              **(unaudited)**
              
              
              **(unaudited)**
              
              
              **(unaudited)****REVENUE**
              
              $
              15,888,025
              
              
              $
              18,952,394
              
              
              $
              27,700,367
              
              
              $
              31,865,474**COST
                  OF REVENUE**
              
              
              13,292,427
              
              
              
              15,705,760
              
              
              
              23,728,837
              
              
              
              26,601,150**GROSS
                  PROFIT**
              
              
              2,595,598
              
              
              
              3,246,634
              
              
              
              3,971,530
              
              
              
              5,264,324**OPERATING
                  EXPENSES:**Depreciation
              
              
              10,169
              
              
              
              8,797
              
              
              
              20,249
              
              
              
              16,054Selling,
                  general and administrative
              
              
              1,766,884
              
              
              
              1,693,154
              
              
              
              3,244,424
              
              
              
              2,966,950TOTAL
                  OPERATING EXPENSES
              
              
              1,777,053
              
              
              
              1,701,951
              
              
              
              3,264,673
              
              
              
              2,983,004OPERATING
                  INCOME
              
              
              818,545
              
              
              
              1,544,683
              
              
              
              706,857
              
              
              
              2,281,320**OTHER
                  INCOME (EXPENSES)**Other
                  income
              
              
              -
              
              
              
              25,002
              
              
              
              -
              
              
              
              31,245Interest
                  income
              
              
              51,935
              
              
              
              -
              
              
              
              114,569
              
              
              
              -Interest
                  expense
              
              
              (37,629
              )
              
              
              (21,798
              )
              
              
              (77,293
              )
              
              
              (35,664
              )TOTAL
                  OTHER INCOME/(EXPENSES)
              
              
              14,306
              
              
              
              3,204
              
              
              
              37,276
              
              
              
              (4,419
              )INCOME
                  BEFORE INCOME TAXES
              
              
              832,851
              
              
              
              1,547,887
              
              
              
              744,133
              
              
              
              2,276,901INCOME
                  TAX EXPENSE
              
              
              (333,318
              )*
              
              
              (559,422
              )
              
              
              (378,845
              )*
              
              
              (820,596
              )**NET
                  INCOME**
              
              **$**
              **499,533**
              
              
              **$**
              **988,465**
              
              
              **$**
              **365,288**
              
              
              **$**
              **1,456,305**Dividends
                  to preferred stockholders
              
              
              (111,479
              )
              
              
              (128,696
              )
              
              
              (203,257
              )
              
              
              (241,782
              )Deemed
                  dividend to preferred stockholders on beneficial conversion
                  feature
              
              
              -
              
              
              
              (2,079,488
              )
              
              
              -
              
              
              
              (3,570,731
              )**Net
                  Income Available to Common Shareholders**
              
              **$**
              **388,054**
              
              
              **$**
              **(1,219,719**
              **)**
              
              **$**
              **162,031**
              
              
              **$**
              **(2,356,208**
              **)****Net
                  Income/(Loss) Per Share (Basic)**
              
              **$**
              **0.05**
              
              
              **$**
              **(1.22**
              **)**
              
              **$**
              **0.02**
              
              
              **$**
              **(2.36**
              **)****Net
                  Income/(Loss) Per Share (Fully Diluted)**
              
              **$**
              **0.02**
              
              
              **$**
              **(1.22**
              **)**
              
              **$**
              **0.02**
              
              
              **$**
              **(2.36**
              **)******
              
              
              
              ****
              
              
              
              ****
              
              
              
              ******Weighted
                  Average Common Shares Outstanding**
              
              ****
              **8,609,054**
              
              
              ****
              **1,000,000**
              
              
              ****
              **8,483,359**
              
              
              ****
              **1,000,000****Weighted
                  Average Common and Common Equivalent Shares
                  Outstanding**
              
              ****
              **22,291,010**
              
              
              ****
              **1,000,000**
              
              
              ****
              **22,540,191**
              
              
              ****
              **1,000,000*****Includes
                  additional charge-See Note 7.**
 *See
          notes to consolidated financial statements*
   F-3


**Deer
      Valley Corporation & Subsidiary**


**Consolidated
      Statements of Cash Flows**






**For
                  the six month period ended****June
                  30,**
              
              
              
              **July
                  1,****2007**
              
              
              
              **2006****(unaudited)**
              
              
              
              **(unaudited)****CASH
                  FLOWS FROM OPERATING ACTIVITIES:**Net
                  income (loss)
              $
              365,288
              
              
              
              $
              1,456,305Adjustments
                  to reconcile net income (loss) to net cash provided for/used in
                  operating
                  activities:Depreciation
                  and amortization
              
              136,748
              
              
              
              
              85,372Stock
                  based compensation
              
              -
              
              
              
              
              8,651(Gain)/Loss
                  on sale of property and equipment
              
              -
              
              
              
              
              (14,624
              )Changes
                  in assets and liabilities:(Increase)/decrease
                  in receivables
              
              (1,652,126
              )
              
              
              
              (1,068,239
              )(Increase)/decrease
                  in inventories
              
              (861,919
              )
              
              
              
              (1,401,267
              )(Increase)/decrease
                  in other current assets
              
              (236,909
              )
              
              
              
              (103,343
              )Increase/(decrease)
                  in accounts payable
              
              985,380
              
              
              
              
              1,537,668Increase/(decrease)
                  in income taxes payable
              
              170,109
              
              
              
              
              820,595Increase/(decrease)
                  in estimated warranties
              
              65,000
              
              
              
              
              400,000Increase/(decrease)
                  in accrued expenses
              
              (295,483
              )
              
              
              
              (884,232
              )Increase/(decrease)
                  in deferred tax liability
              
              248,543
              
              
              
              
              -**CASH
                  FLOW PROVIDED FOR/USED IN OPERATING ACTIVITIES**
              **$**
              **(1,075,369**
              **)**
              
              
              **$**
              **836,886****CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchases
                  of equipment
              
              (67,261
              )
              
              
              
              (990,338
              )Purchase
                  of Company, net of cash acquired
              
              -
              
              
              
              
              (3,543,737
              )Proceeds
                  from sales of marketable securities
              
              -
              
              
              
              
              (2,829
              )**CASH
                  FLOW USED IN INVESTING ACTIVITIES**
              **$**
              **(67,261**
              **)**
              
              
              **$**
              **(4,536,904**
              **)****CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Proceeds
                  from preferred issuances
              
              -
              
              
              
              
              7,728,780Accrual
                  of Earnout
              
              62,873
              
              
              
              
              -Repayment
                  of notes payable
              
              (37,036
              )
              
              
              
              495,886Payment
                  of earnout
              
              (1,232,275
              )Proceeds
                  from the exercise of warrants
              
              37,910
              
              
              
              
              -Loan
                  costs
              
              -
              
              
              
              
              (98,950
              )**CASH
                  FLOW PROVIDED BY FINANCING ACTIVITIES**
              **$**
              **(1,168,528**
              **)**
              
              
              **$**
              **8,125,716****NET
                  INCREASE (DECREASE) IN CASH**
              **$**
              **(2,311,159**
              **)**
              
              
              **$**
              **4,425,698****CASH,
                  Beginning**
              **$**
              **7,431,152**
              
              
              
              **$**
              **221****CASH,
                  Ending**
              **$**
              **5,119,993**
              
              
              
              **$**
              **4,425,919****SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**
              ****
              
              
              
              
              ****Cash
                  paid during the year for:Interest
              $
              64,467
              
              
              
              $
              47,262Taxes
              $
              375,000
              
              
              
              $
              615,200****
              
              
              
              
              ******SUPPLEMENTAL
                  DISCLOSURE OF NON CASH INVESTING AND FINANCING
                  ACTIVITIES:**
              ****
              
              
              
              
              ****Additional
                  purchase price accrued under earnout provision
              $
              -
              
              
              
              $
              1,319,705Accrual
                  of dividends on preferred stock
              $
              203,257
              
              
              
              $
              241,782Deemed
                  dividend on beneficial conversion feature
              $
              -
              
              
              
              $
              3,570,731
 *See
          notes to consolidated financial statements*
   F-4


**Deer
      Valley Corporation & Subsidiary**


**Notes
      to Condensed Consolidated Financial Statements**


**(unaudited)**














**1.
      BASIS OF PRESENTATION**





The
      accompanying unaudited consolidated financial statements for the three and
      six
      month periods ended June 30, 2007 and July 1, 2006 have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America for interim financial information and pursuant to the rules and
      regulations of the  Securities and Exchange Commission for Form 10-Q.
      Accordingly, they do not include all the information and footnotes required
      by
      accounting principles generally accepted in  the United States of
      America for complete financial statements.





The
      unaudited financial information included in this report includes all adjustments
      which are, in the opinion of management, necessary to reflect a fair statement
      of the results for the interim periods. The operations for the three and six
      month periods ended June 30, 2007 and July 1, 2006 are not necessarily
      indicative of the results of the full fiscal year.





The
      condensed consolidated financial statements included in this report should
      be
      read in conjunction with the financial statements and notes thereto included
      in
      the Registrant's December 31, 2006 Annual Report on Form 10-KSB and subsequent
      filings on Form 8-K.





**2. SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





***Reclassifications
      -***Certainminorreclassifications
      in prior period
      amounts have been made to conform to the current period
      presentation.





***Stock
      Based
      Compensation******-*** In December 2004,
      the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment". SFAS 123(R)
      will provide investors and other users of financial statements with more
      complete and neutral financial information by requiring that the compensation
      cost relating to share-based payment transactions be recognized in financial
      statements. That cost will be measured based on the fair value of the equity
      or
      liability instruments issued. SFAS 123(R) covers a wide range of share-based
      compensation arrangements including share options, restricted share plans,
      performance-based awards, share appreciation rights, and employee share purchase
      plans. SFAS 123(R) replaces FASB Statement No. 123, "Accounting for Stock-Based
      Compensation", and supersedes APB Opinion No. 25, "Accounting for Stock Issued
      to Employees". SFAS 123, as originally issued in 1995, established as preferable
      a fair-value-based method of accounting for share-based payment transactions
      with employees. However, that statement permitted entities the option of
      continuing to apply the guidance in Opinion 25, as long as the footnotes to
      financial statements disclosed what net income would have been had the
      preferable fair-value-based method been used. Public entities (other than those
      filing as small business issuers) were required to apply SFAS 123(R) as of
      the
      first interim or annual reporting period that begins after June 15, 2005. For
      public entities that file as small business issuers SFAS 123(R) is applicable
      as
      of the beginning of the first interim or annual reporting period that begins
      after December 15, 2005.





Prior
      to
      January 1, 2006, the Company accounted for Stock Options and Stock Based
      Compensation under the recognition and measurement provisions of APB Opinion
      No.
      25, “Accounting for Stock Issued to Employees”, and related Interpretations, as
      permitted by FASB Statement No. 123, “Accounting for Stock-Based
      Compensation”.  Effective January 1, 2006, the Company adopted the
      fair value recognition provisions of SFAS No. 123(R), Share-Based Payment,
      using
      the modified-prospective-transition method. Under that transition method,
      compensation cost for all share-based payments granted prior to, but not yet
      vested as of January 1, 2006 are based on (a) the grant date fair value
      estimated in accordance with the original provisions of SFAS No. 123, and (b)
      compensation cost for all share-based payments granted subsequent to January
      1,
      2006 are based on the grant-date fair value estimated in accordance with the
      provisions of SFAS No.123(R).  Results for prior periods have not been
      restated.






F-5





As
      of
      June 30, 2007, the Company has not yet created a stock incentive plan which
      authorizes the issuance of options to purchase common stock.  As a
      result no stock-based employee compensation cost has been recognized in the
      Statement of Operations for the three and six month periods ended June 30,
      2007
      and July 1, 2006.





***Stock
      Options and Warrants:***





The
      following table summarizes the activity related to all Company stock options
      and
      warrants for the period ended June 30, 2007:




**Weighted
                  Average****Exercise
                  Price**
              
              
              **Exercise
                  Price****Stock**
              
              
              **Per
                  Share**
              
              
              **Per
                  Share****Warrants**
              
              
              **Options**
              
              
              **Warrants**
              
              
              
              **Options**
              
              
              **Warrants**
              
              
              
              **Options****Outstanding
                  at December 31, 2006**
              
              ****
              **22,506,977**
              
              
              ****
              **-**
              
              
              **$**
              **0.75-3.00**
              
              
              
              ****
              **-**
              
              
              **$**
              **1.64**
              
              
              
              ****
              **-**Granted
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              -
              
              
              
              -
              
              
              
              
              -Exercised
              
              
              (25,273
              )
              
              
              -
              
              
              $
              1.50
              
              
              
              
              -
              
              
              $
              1.50
              
              
              
              
              -Cancelled
                  or expired
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              -
              
              
              
              -
              
              
              
              
              -**Outstanding
                  at March 31, 2007**
              
              ****
              **22,481,704**
              
              
              ****
              **-**
              
              
              **$**
              **0.75-3.00**
              
              
              
              ****
              **-**
              
              
              **$**
              **1.64**
              
              
              
              ****
              **-**Granted
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              -
              
              
              
              -
              
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              $
              -
              
              
              
              
              -
              
              
              $
              -
              
              
              
              
              -Cancelled
                  or expired
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              
              -
              
              
              
              -
              
              
              
              
              -**Exercisable
                  at June 30, 2007**
              
              ****
              **22,481,704**
              
              
              ****
              **-**
              
              
              **$**
              **0.75-3.00**
              
              
              
              ****
              **-**
              
              
              **$**
              **1.64**
              
              
              
              ****
              **-**
 The
          warrants expire at various dates ranging from January 2011 through November
          2016.
 
 ***Earning
          (Loss)******Per
          Share*** - The Company uses SFAS No. 128, “*Earnings Per
          Share*” for calculating the basic and diluted loss per share. Basic
          income/(loss) per share is computed by dividing net income/(loss) and net
          income/(loss) attributable to common shareholders by the weighted average
          number
          of common shares outstanding. Diluted income/(loss) per share is computed
          similar to basic loss per share except that the denominator is increased
          to
          include the number of additional common shares that would have been outstanding
          if the potential shares had been issued and if the additional shares were
          dilutive. Common equivalent shares are excluded from the computation of
          net loss
          per share if they would be anti-dilutive.
  **For
                      the three month periods
                      ending**
                  
                  
                  **For
                        the six month periods ending****June
                      30,**
                  
                  
                  **July
                      1,**
                  
                  
                  **June
                      30,**
                  
                  
                  **July
                      1,****2007**
                  
                  
                  **2006**
                  
                  
                  **2007**
                  
                  
                  **2006****Net
                      income/( loss) available to common shareholders**
                  
                  **$**
                  **388,054**
                  
                  
                  **$**
                  **(1,219,719**
                  **)**
                  
                  **$**
                  **162,031**
                  
                  
                  **$**
                  **(2,356,208**
                  **)**Weighted
                      average shares outstanding:Basic
                  
                  
                  8,609,054
                  
                  
                  
                  1,000,000
                  
                  
                  
                  8,483,359
                  
                  
                  
                  1,000,000Diluted
                  
                  
                  22,291,010
                  
                  
                  
                  1,000,000
                  
                  
                  
                  22,540,191
                  
                  
                  
                  1,000,000**Income/Loss
                      per share:****Basic**
                  
                  **$**
                  **0.05**
                  
                  
                  **$**
                  **(1.22**
                  **)**
                  
                  **$**
                  **0.02**
                  
                  
                  **$**
                  **(2.36**
                  **)****Diluted***
                  
                  **$**
                  **0.02**
                  
                  
                  **$**
                  **(1.22**
                  **)**
                  
                  **$**
                  **0.02**
                  
                  
                  **$**
                  **(2.36**
                  **)**
  *Diluted
              weighted average shares outstanding for periods ended July 1, 2006
              do not
              include the effect of the Company’s common stock equivalent shares because to do
              so would have been anti-dilutive.  Accordingly, basic and diluted net
              loss per share for this period is the same.
 
 For
              the
              periods ended June 30, 2007 diluted weighted average shares outstanding
              includes
              all of the Company’s dilutive common stock equivalent shares.  The
              Company’s dilutive common stock equivalent shares as of June 30, 2007 include
              all of the Convertible Preferred shares and any incremental shares,
              as defined
              by SFAS No. 128, “*Earnings Per Share*”, associated with the Company’s
              Class C and D outstanding warrants.
 
 See
              the
              detailed list of Common Stock Equivalents below.
 F-6
 
 
 **Common
                          Stock Equivalents**
                      **as
                        of****Exercise**
                  
                  
                  **June
                      30,**
                  
                  
                  **July
                      1,****Securities**
                  
                  **Price**
                  
                  
                  **2007**
                  
                  
                  **2006***Preferred:*Series
                      A Preferred
                  
                  
                  
                  
                  
                  8,516,993
                  
                  
                  
                  9,941,620Series
                      B Preferred
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  4,945,100Series
                      C Preferred
                  
                  
                  
                  
                  
                  2,675,000
                  
                  
                  
                  2,675,000Series
                      D Preferred
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  880,540Series
                      E Preferred
                  
                  
                  
                  
                  
                  750,000
                  
                  
                  
                  -*Warrants:*Class
                      A Warrants
                  
                  $
                  1.50
                  
                  
                  
                  10,369,351
                  
                  
                  
                  10,538,137Class
                      B Warrants
                  
                  $
                  2.25
                  
                  
                  
                  4,970,824
                  
                  
                  
                  4,970,824Class
                      C Warrants
                  
                  $
                  0.75
                  
                  
                  
                  2,000,000
                  
                  
                  
                  2,000,000Class
                      D Warrants
                  
                  $
                  0.75
                  
                  
                  
                  2,000,000
                  
                  
                  
                  2,000,000Class
                      E Warrants
                  
                  $
                  3.00
                  
                  
                  
                  880,544
                  
                  
                  
                  880,540Class
                      F Warrants
                  
                  $
                  2.25
                  
                  
                  
                  750,000
                  
                  
                  
                  -Class
                      BD-1 Warrants
                  
                  $
                  0.75
                  
                  
                  
                  -
                  
                  
                  
                  919,162Class
                      BD-2 Warrants
                  
                  $
                  1.50
                  
                  
                  
                  919,162
                  
                  
                  
                  919,162Class
                      BD-3 Warrants
                  
                  $
                  2.25
                  
                  
                  
                  459,581
                  
                  
                  
                  459,581Class
                      BD-4 Warrants
                  
                  $
                  1.50
                  
                  
                  
                  66,121
                  
                  
                  
                  66,121Class
                      BD-5 Warrants
                  
                  $
                  3.00
                  
                  
                  
                  66,121
                  
                  
                  
                  66,121**Total
                      common stock equivalents**
                  
                  
                  
                  
                  
                  ****
                  **34,423,697**
                  
                  
                  ****
                  **41,261,908**
 
 ***Recent
            Accounting Pronouncements***
 
 FASB
            Interpretation No 47, “*Accounting for Conditional Asset Retirement
            Obligations*” (“FIN 47”) was issued in March 2005 and clarifies the
            accounting prescribed in SFAS No. 143, “Accounting for Asset Retirement
            Obligations”.  FIN 47 requires the recognition of a liability for the
            fair value of a conditional asset retirement obligation if the fair value
            can be
            reasonably estimated, even though uncertainty exists as to the timing
            and method
            of settlement. Management is currently evaluating the requirements of
            FIN 47 and
            has not yet determined the impact on the financial statements.
 
 FASB
            Interpretation No 48, “*Accounting for Uncertainty in Income Taxes -- an
            interpretation of FASB Statement No. 109*” (“FIN 48”), was issued in
            July 2006. This interpretation clarifies the accounting for uncertainty in
            income taxes recognized in an entity's financial statements in accordance
            with
            SFAS No. 109, “Accounting for Income Taxes.” It prescribes a recognition
            threshold and measurement attribute for financial statement disclosure
            of tax
            positions taken, or expected to be taken, on a tax return. The Company
            will be
            required to adopt FIN 48 in the first quarter of fiscal 2008. Management
            is
            currently evaluating the requirements of FIN 48 and has not yet determined
            the
            impact on the financial statements.
  In
            September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB No.
            108”), *Considering the Effects of Prior Year Misstatements When Quantifying
            Misstatements in Current Year Financial Statements*. SAB No. 108 provides
            guidance to registrants for assessing materiality. SAB No. 108 states
            that
            registrants should use both a balance sheet approach and income statement
            approach when quantifying and evaluating the materiality of a misstatement.
            SAB
            No. 108 also provides guidance on correcting errors under the dual approach
            as
            well as transition guidance for correcting previously immaterial errors
            that are
            now considered material. We adopted SAB No. 108 as of January 1, 2007
            without
            any impact on our financial statements.
  In
            September 2006, the FASB issued SFAS No. 157, “*Fair Value
            Measurement*” (“SFAS 157”), which defines fair value, establishes a
            framework for measuring fair value and expands disclosures about assets
            and
            liabilities measured at fair value. The Company will be required to adopt
            SFAS
            157 in the first quarter of fiscal 2009. Management is currently evaluating
            the
            requirements of SFAS 157 and has not yet determined the impact on the
            financial
            statements.
   F-7
 
 In
            September 2006, the FASB issued SFAS No. 158 (“SFAS 158”),
“*Employers' Accounting for Defined Benefit Pension and Other Postretirement
            Plans -- an amendment of FASB Statements No. 87, 88, 106, and 132(R)*.”
SFAS 158 requires an employer to recognize a plan's funded status
            in its
            statement of financial position, measure a plan's assets and obligations
            as of
            the end of the employer's fiscal year and recognize the changes in a
            defined
            benefit postretirement plan's funded status in comprehensive income in
            the year
            in which the changes occur. The Company will be required to recognize
            the funded
            status of benefit plans and adopt the new disclosure requirements effective
            August 31, 2007. The Company will be required to measure plan assets and
            benefit obligations as of the date of the fiscal year-end statement of
            financial
            position effective August 31, 2009. Management is currently evaluating the
            requirements of SFAS 158, but based on the current funded status of the
            plans,
            management does not anticipate SFAS 158 will have a material impact on
            the
            Company's financial statements.
  In
            February 2007, the FASB issued SFAS No. 159, *The Fair Value Option for
            Financial Assets and Financial Liabilities*. SFAS No. 159 permits entities
            to choose to measure many financial instruments and certain other items
            at fair
            value. SFAS No. 159 will be effective
            at the beginning of fiscal year 2008.  We are presently evaluating the
            impact of the adoption of SFAS No. 159 on our results of operations and
            financial position.
  
 **3.
            INVENTORY**
 
 Inventory
            consisted of the following components:
  **June
                        30,****2007****(unaudited)**Raw
                        Materials
                    
                    
                    
                    1,024,078Work-in-Process
                    
                    
                    
                    433,971Finished
                        Goods
                    
                    
                    
                    701,513**Total
                        Inventory**
                    
                    **$**
                    **2,159,562**
 
 **4.
            PRODUCT WARRANTIES**
 
 The
            Company provides the retail home buyer a one-year limited warranty covering
            defects in material or workmanship in home structure, plumbing and
            electrical systems.  The Company estimated warranty costs
            are accrued at the time of the sale to the dealer following industry
            standards and historical warranty cost incurred.  Periodic
            adjustments to the estimated warranty accrual are made as events occur
            which indicate changes are necessary. As of June 30, 2007, the Company has
            provided a liability of $2,065,000 for estimated warranty costs relating
            to homes sold, based upon management's assessment of historical experience
            factors and current industry trends.
 
 Management
            reviews its warranty requirements at the close of each reporting period and
            adjusts the reserves accordingly.  The following tabular
            presentation reflects activity in warranty reserves during the periods
            presented:
 **June
                        30,****2007****(unaudited)****Balance
                        at beginning of period**
                    
                    **$**
                    **2,000,000**Warranty
                        charges
                    
                    
                    1,108,301Warranty
                        payments
                    
                    
                    (1,043,301
                    )**Balance
                        at end of period**
                    
                    **$**
                    **2,065,000**
 F-8


**5.
      COMMITMENTS AND CONTINGENCIES**





***Litigation******-***The  Company  in  the  normal  course  of  business  is  subject  to  claims
      and
      litigation.  Management  of  the  Company  is  of  the  opinion  that,
      based  on information available, such  legal matters will
      not ultimately have a material adverse effect on the financial position or
      results of operation of the Company.





***Reserve
      for Repurchase
      Commitments******-*********Deer Valley Homebuilders,
      Inc. (“DVH”) is contingently liable under the terms of repurchase agreements
      with financial institutions providing inventory financing for retailers of
      DVH’s
      products.  These arrangements, which are customary in the industry,
      provide for the repurchase of products sold to retailers in the event of default
      by the retailer.  The risk of loss under these agreements is spread
      over numerous retailers.  The price DVH is obligated to pay generally
      declines over the period of the agreement (typically 18 to 24 months) and the
      risk of loss is further reduced by the sale value of repurchased
      homes.  The maximum amount for which the Company is contingently
      liable under repurchase agreements is approximately $19,862,000 at June 30,
      2007.  DVH to date has not experienced significant losses under these
      agreements, and management does not expect any future losses to have a material
      effect on the accompanying financial statements.





***Earnout
      Agreement******-***On
      January 18, 2006, the Company's wholly-owned subsidiary, DeerValley Acquisitions
      Corp. (dissolved on July 1, 2006), entered into an Earnout Agreement (the
      "Earnout Agreement"), between Deer Valley Homebuilders, Inc., DeerValley
      Acquisitions Corp., and the former owners of Deer Valley Homebuilders, Inc.
       In connection with the Earnout Agreement additional payments may be paid
      to the former owners of Deer Valley Homebuilders, Inc. as an earnout based
      upon
      the Net Income Before Taxes of Deer Valley Homebuilders, Inc. during the next
      five (5) years, up to a maximum of $6,000,000.  In any given year
      during the term of the Earnout Agreement, 50% of the pre-tax profit exceeding
      $1,000,000 per year will be accrued and become distributable to the prior
      shareholders.  During the period ending December 31, 2006 the Company’s
      wholly owned subsidiary, Deer Valley Homebuilders, Inc., had pre-tax profit
      in
      the amount of $4,936,287, of which $3,936,287 was above the Company's earnout
      threshold of $1,000,000.  The Company accrued 50% of the amount in
      excess of earnout threshold in the amount of $1,968,143.




On
      April
      12, 2007 the Company made a payment of $1,232,275 pursuant to the Earnout
      Agreement.  The payment represented the current portion due under the
      Earnout Agreement.





For
      the
      six month period ending June 30, 2007, Deer Valley Homebuilders, Inc. had a
      pre-tax profit in the amount of $1,125,747, of which $125,747 was above the
      Company’s earnout threshold of $1,000,000.  The Company accrued 50%,
      or $62,873, of the amount in excess of earnout threshold. The maximum
      remaining potential accrual under the Earnout Agreement is
      $3,472,577.





***Loans
      and Letter of Credit
      -*** On May 26, 2006, DVH entered into a Loan Agreement with
      Fifth Third Bank (the “Lender”) providing for a loan of Two Million and No/100
      Dollars ($2,000,000) (the "Loan") evidenced by a promissory note and secured
      by
      a first mortgage on DVH’s properties in Guin, Alabama and Sulligent, Alabama,
      including the structures and fixtures located thereon, as well as DVH’s interest
      in any lease thereof. The purpose of the loan is to pay off an existing loan
      from another bank secured by the Guin property and to reduce the outstanding
      balance on DVH’s revolving credit facility with the Lender.  The net
      effect of the reduction in the revolving credit balance is to increase the
      credit available to the Company for working capital under its revolving
      facility.  The Loan has a term from May 26, 2006 through June 1, 2011
      and has a variable interest rate at 2.25% above LIBOR.  There is no
      prepayment penalty.  Future advances are available under the Loan
      Agreement, subject to approval by the Lender.  Also on May 26, 2006,
      the Company and DVA guaranteed the Loan.  Should Deer Valley default,
      thereby triggering acceleration of the Loan, the Company would become liable
      for
      payment of the Loan.





On
      April
      11, 2007, Deer Valley Corporation entered into a new Loan and Security Agreement
      providing for a revolving line of credit in an amount not to exceed Two Million
      Five Hundred Thousand and No/100 Dollars ($2,500,000.00) (the "DV Loan
      Agreement") evidenced by a revolving credit note and secured by accounts
      receivable, inventory, equipment and all other tangible and intangible personal
      property of Deer Valley Corporation and DVH. The purpose of the DV Loan
      Agreement is to provide a standby source of working capital, letters of credit
      required by the terms of certain repurchase agreements and performance bonds
      entered into in the normal course of the Company’s business, and to provide
      financing for potential acquisition(s) of new manufacturing facilities or
      subsidiaries. The DV Loan Agreement has a one year term and has a variable
      interest rate at 2.60% above LIBOR. Upon issuance of a letter of credit, Deer
      Valley Corporation is charged a letter of credit fee equal to 1.00% of the
      face
      amount of the letter of credit. The DV Loan Agreement provides for conditions
      to
      meet prior to each advance, including financial ratios.




F-9





In
      addition to the above, on April 11, 2007, DVH renewed its existing Loan and
      Security Agreement providing for a revolving line of credit in an amount not
      to
      exceed Two Million Five Hundred Thousand and No/100 Dollars ($2,500,000.00)
      (the
      "DVH Loan agreement") evidenced by a revolving credit note and secured by
      accounts receivable, inventory, equipment and all other tangible and intangible
      personal property of DVH and Deer Valley Corporation. The purpose of the DVH
      Loan is to provide standby working capital and letters of credit required by
      the
      terms of certain repurchase agreements and performance bonds entered into in
      the
      normal course of DVH’s business. The DVH Loan Agreement has a one year term and
      has a variable interest rate at 2.60% above LIBOR. Upon issuance of a letter
      of
      credit, DVH is charged a letter of credit fee equal to 1.00% of the face amount
      of the letter of credit. The DVH Loan provides for conditions to meet prior
      to
      each advance, including financial ratios.





In
      addition to the revolving line of credit described in the preceding paragraph,
      DVH, during its normal course of business, is required to issue irrevocable
      standby letters of credit in the favor of independent third party beneficiaries
      to cover obligations under repurchase agreements. As of June 30, 2007, no
      amounts had been drawn on the above irrevocable letters of credit by the
      beneficiaries.





***Dividends
      Payable******-***As
      of June 30, 2007 the total accrued dividend payable to Series A Preferred
      shareholders was $203,257.





**6.
      EQUITY TRANSACTIONS**





***Series
      A Convertible
      Preferred Stock -*********During
      the six month period ending June 30, 2007 certain shareholders converted 18,750
      shares of Series A Preferred stock, par value $187,500, into 250,000 shares
      of
      the Company’s common stock.





***Class
      A warrants -***During
      the six month period ending June 30, 2007 certain shareholders exercised 25,
      273
      Class A warrants, with a strike price of $1.50, into 25,273 shares of the
      Company’s common stock.





***Common
      Stock Dividends
      -*** On March 15, 2007, a dividend to holders of Series A
      Preferred Stock became due.  On March 29, 2007 the Company issued
      147,209 shares of the Company’s common stock to Series A Preferred shareholders
      as payment for $243,545 of dividends.







**7. INCOME
      TAX**




During
      the three month period ended June 30, 2007 the Company revised their estimation
      of income tax expense for the year ended December 31, 2006.  As a
      result of the revision the Company took a charge of $127,299 in the current
      year.





For
      the
      three month period ended June 30, 2007 the effect of the $127,299 charge was
      partially offset by a $45,528 income tax provision booked in March 31, 2007
      when
      the Company had Income Before Income Taxes of ($88,717).  The
      Company’s income tax expense for the three month period ended June 30, 2007,
      including the $127,299 charge, was $333,318 (40%).  The Company’s
      income tax expense for the three month period ended June 30, 2007, before the
      effect of the $127,299 charge, was $206,019 (25%).




For
      the
      six month period ended June 30, 2007, the Company’s income tax expense,
      including the $127,299 charge, was $378,845 (51%).  The Company’s
      income tax expense for the six month period ended June 30, 2007, before the
      effect of the $127,299 charge, was $251,547 (34%).





**8.
      SUBSEQUENT EVENTS**





On
      July 23, 2007, in exchange for 250,000 shares of outstanding
      registered common stock, the Company issued 250,000 shares of Series E
      Convertible Preferred Stock and a warrant exercisable for 250,000 shares of
      common stock with an exercise price of $2.25 per share.  Subject to
      certain conditions, each share of Series E Convertible Preferred Stock is
      convertible into 1 share of common stock.  The securities were offered
      to a single institutional shareholder of the Company, and the transaction was
      exempt under Section 3(a)(9) of the Securities Act, as amended.




F-10





On
      August
      10, 2007, Deer Valley Homebuilders, Inc. (“DVH”) entered into a Revolving Bridge
      Loan and Security Agreement with Fifth Third Bank, providing for a line of
      credit in an amount not to exceed Five Million and No/100 Dollars
      ($5,000,000.00), evidenced by a revolving credit note and secured by accounts
      receivable, inventory, equipment and all other tangible and intangible personal
      property of DVH. The purpose of the new facility is to provide a standby source
      of working capital for fulfillment of one or more contracts with the State
      of
      Mississippi to construct housing units under the “Mississippi Alternative Pilot
      Program.” This facility has a six month term and has a variable interest rate at
      2.50% above LIBOR.  The Loan and Security Agreement permits
      acceleration upon certain payment and covenant defaults.






















F-11





**Item
        2.   Management’s Discussion and Analysis or Plan of
        Operation**
 
 **Cautionary
        Notice Regarding Forward Looking Statements**
 
 We
        desire to take advantage of the
“safe harbor” provisions of the Private Securities Litigation Reform Act of
        1995.  This filing contains a number of forward-looking statements
        which reflect management’s current views and expectations with respect to our
        business, strategies, products, future results and events, and financial
        performance.  All statements made in this filing other than statements
        of historical fact, including statements addressing operating performance,
        events, or developments which management expects or anticipates will or may
        occur in the future, including statements related to distributor channels,
        volume growth, revenues, profitability, new products, adequacy of funds from
        operations, statements expressing general optimism about future operating
        results, and non-historical information, are forward looking
        statements.  In particular, the words “believe,” “expect,” “intend,”
“anticipate,” “estimate,” “may,” variations of such words, and similar
        expressions identify forward-looking statements, but are not the exclusive
        means
        of identifying such statements, and their absence does not mean that the
        statement is not forward-looking.  These forward-looking statements
        are subject to certain risks and uncertainties, including those discussed
        below.  Our actual results, performance or achievements could differ
        materially from historical results as well as those expressed in, anticipated,
        or implied by these forward-looking statements.  We do not undertake
        any obligation to revise these forward-looking statements to reflect any
        future
        events or circumstances.
 
 Readers
        should not place undue reliance
        on these forward-looking statements, which are based on management’s current
        expectations and projections about future events, are not guarantees of future
        performance, are subject to risks, uncertainties and assumptions (including
        those described below), and apply only as of the date of this
        filing.  Our actual results, performance or achievements could differ
        materially from the results expressed in, or implied by, these forward-looking
        statements.  Factors which could cause or contribute to such
        differences include, but are not limited to, risks discussed in our Annual
        Report on form 10-KSB.  We undertake no obligation to publicly update
        or revise any forward-looking statements, whether as a result of new
        information, future events, or otherwise.
 
 **Overview**
 
 The
        Company, through its wholly-owned
        subsidiary, Deer Valley Homebuilders, Inc. (“DVH”), an Alabama corporation with
        its business offices located at 205 Carriage Street, P.O. Box 310, Guin,
        Alabama
        35563, is engaged in the production, sale and marketing of factory-built
        homes
        in the southeastern and south central U.S. housing market.  As of the
        date of this filing, we manufacture all of our factory-built homes in two
        manufacturing facilities, one located in Guin, Alabama and one located in
        Sulligent, Alabama.  We rely upon a team of regional sales directors
        and approximately 80 independent dealers to market our factory-built homes
        in
        over 100 retail locations.  As of the date of this filing, we are
        selling our factory-built homes in 13 states through our network of independent
        dealers and retail centers.
 
 In
        recent years, the factory-built
        housing industry has suffered a downturn in sales as a result of a tightening
        of
        credit standards, restricted availability of retail and wholesale financing,
        and
        excessive inventory levels.  This industry decline began in 1999,
        approximately five years before we successfully launched and began to rapidly
        grow our business in January, 2004.  We have excelled in a tough
        industry through efficient manufacturing at our production facilities, industry
        leading products, an experienced and capable, relations oriented sales and
        management teams, stringent cost controls, and attention to dealer support,
        customer satisfaction, and service efforts.
 
 Beginning
        in the second quarter of
        calendar year 2007, state and federal agencies, and other government sponsored
        entities, began distributing Requests for Proposals (RFPs) for housing designed
        to test and evaluate future disaster recovery housing units for the Gulf
        Coast
        region.  These RFPs present an opportunity for a near term upswing in
        production for Deer Valley and other companies in the industry serving the
        Gulf
        Coast.
 
 The
        Company has been aggressively
        seeking to take advantage of its Alabama location and reputation in the Gulf
        Coast area to become a significant participant in the permanent rebuilding
        of
        the Gulf Coast region and the production of prototypes for future disaster
        recovery housing units.  As an immediate result of its efforts, in
        June 2007 the Company’s plant in Guin, Alabama was selected by the State of
        Mississippi to produce 50 two-bedroom and 100 three-bedroom cottages as part
        of
        a program that is designed to test and evaluate future disaster housing units.  The
        total combined value of the pilot phase contracts awarded to the Company
        is
        valued at $7,535,000. All units to be produced by the Company under this
        phase
        of the program are expected to be delivered before the end of the third quarter,
        2007.  The Company will deliver all units to state designated staging
        areas located near the Gulf Coast.  As a participant in the pilot
        program, the Company anticipates receiving additional contracts, but no
        assurance can be made that his will occur.
   1
 
 In
        addition, as part of its strategic plan to continue its growth in a challenging
        industry, the Company has increased its involvement in the modular segment
        of
        the factory built housing industry.  As its initial entry into
        the modular
        segment, the Company is targeting the production of smaller units (less than
        3,000 square feet) that are readily produceable, in a cost efficient manner,
        using the Company’s existing manufacturing capabilities. The Company
        intends to sell these models to large tract developers and independent
        dealers.  Modular homes are typically built in a factory in sections
        and transported to a site to be joined together on a permanent
        foundation.  Unlike homes constructed in accordance with the Federal
        Manufactured Home Construction and Safety Standards (“HUD Code homes”), modular
        homes generally do not have integrated steel frames and axles.
 
 To
        facilitate our growth strategy in
        the modular home market and to provide increased flexibility to fulfill
        government contracts, on April 11, 2007, the Company increased the availability
        under its revolving line of credit from $2.5 million to $5 million (see
        paragraph below titled “*Liquidity and Capital Resources*”).
 
 **Manufacturing
        Operations**
 
 We
        currently produce all of our
        factory-built homes at two manufacturing facilities in Guin and Sulligent,
        Alabama.  Our facilities normally function on a single-shift, five-day
        work week basis.  However, beginning in January, 2007 and continuing
        through the first quarter of 2007, we restricted our production to four days
        per
        week or approximately 80% of our “normal” production rate.  In
        addition, we extended the annual Christmas holiday by one week and closed
        our
        manufacturing facilities for the last week of March.  The reductions
        during the first quarter reflected the industry wide softness in demand during
        the first quarter of 2007 for HUD Code housing units.   In the
        second quarter of 2007, we have experienced an increase in demand for our
        manufactured homes.  As a result, the Company has resumed its normal
        five days per week production schedule at both manufacturing facilities
        beginning in mid–April, 2007.
 
 Our
        sales backlog, without including
        the 50 two-bedroom and 100 three-bedroom cottages that we are scheduled to
        manufacture for the State of Mississippi during the third quarter of 2007,
        is
        approximately two weeks.  Once the cottages for the State of
        Mississippi are included, our total sales backlog increases to approximately
        four to five weeks.
 
 While
        our HUD Code and modular homes
        are constructed with many of the same components and building materials used
        in
        site-built homes, we utilize a cost-efficient assembly line manufacturing
        process which enables us to produce a quality home at a significantly lower
        cost
        per square foot than a traditional, site-built home.  Our homes are
        built with residential features, including 1/2 inch drywall, thermally sealed
        double-paned windows from CapitolTM, enhanced insulation, oak cabinets, cultured
        marble vanities, and two inch by six inch exterior wall construction
        standards.
 
 The
        extent of customization of our
        homes varies to a significant degree with the price of the homes. In the
        higher
        price range of the market, the home buyer is often less sensitive to the
        price
        increase associated with significant design modifications.  Our
        experience in producing a customized home on a cost-effective basis has allowed
        us to offer customized homes, factory-provided trim-out services, and
        walk-through inspections of homes.
 
 Our
        modular homes must be constructed
        in accordance with the local building codes in effect at the point of
        delivery.  These codes vary from state to state and also within
        states.  Such variance in standards is not conducive to standardized
        factory construction of a quality home.  Accordingly, we build our
        modular homes to the standards of the International Residential Code (“IRC”),
        which is generally more stringent than local building codes.  The IRC
        has been adopted wholesale by several states and by selected localities in
        many
        others.
 
 Each
        of our HUD Code homes is
        constructed in accordance with the Federal Manufactured Home Construction
        and
        Safety Standards promulgated by the U.S. Department of Housing and Urban
        Development, better known as the “HUD Code.”  Our production and
        marketing efforts have concentrated on multi-section homes.
   2
 
 Because
        the cost of transporting a
        factory-built home is significant, substantially all of our homes are sold
        to
        dealers within a 500 mile radius of our manufacturing facility.  DVH
        arranges, at dealers’ expense, for the transportation of finished homes to
        dealer locations using independent trucking companies. Customary sales terms
        are
        cash­-on-delivery or guaranteed payment from a floor-plan financing source.
        Dealers or other independent installers are responsible for placing the home
        on
        site and connecting utilities.
 
 When
        evaluating the Company’s operating
        performance, the key performance indicators management examines are (1) the
        Company’s production rate, in “floors” produced per day, (2) the cost of sales,
        and (3) the size of the Company’s sales backlog.  For more information
        on these performance indicators, please see the attached financial statements
        and notes thereto and the section of the Company’s Annual Report on Form 10-KSB
        titled “Description of Business.”
 
 In
        recognition of an important trend in
        the housing market toward modular homes, the Company’s executives are currently
        focusing on several areas to develop its presence in the modular segment
        of the
        factory built housing industry.  Initially, management has
        targeted the production of  modular units of less than 3,000 square
        feet that are readily produceable using the Company’s existing manufacturing
        capabilities.As
        an important step in this process, on March 28,2007,
        the
        Company showcased its new modular homes at the South Central Manufactured
        Housing Institute Show in Tunica, Mississippi.  The specific modular
        units shown in Tunica were designed to be sold through the Company’s existing
        dealer network and large tract developers.  Also,
        the Company will continue to participate in the bidding process to provide
        small
        modular unitsthrough government sponsored programs to provide disaster
        recovery housing for victims of Hurricane Katrina and other 2005 storms,
        as well
        as pilot programs for future disaster relief.  In addition, management
        is seeking to develop its engineering capability and appropriate sales channels
        for customizable modular houses that are beyond the scope of its existing
        engineering capability and its existing dealer base.
 
 **Results
        of Operations**
 
 *The
        following discussion examines the
        results of the Company’s operations for the three and six month periods ended
        June 30, 2007.  This discussion of our financial condition and results
        of operations should be read in conjunction with our financial statements
        and
        notes to the financial statements, included herewith.  This discussion
        should not be construed to imply that the results discussed herein will
        necessarily continue into the future, or that any conclusion reached herein
        will
        necessarily be indicative of actual operating results in the
        future.  Such discussion represents only the best present assessment
        by our management.  It is also imperative that one read our December
        31, 2006 Annual Report on Form 10-KSB and subsequent filings on Form
        8-K.*
 
 **HISTORICAL
        RESULTS - PERIODS ENDED JUNE 30, 2007 AND JULY 1, 2006.**
 
 ***Revenues.***  Overall
        gross revenue for the three and six month periods ended June 30, 2007 were
        $15,888,025 and $27,700,367, respectively, compared to $18,952,394 and
        $31,865,474, respectively, for the three and six month periods ended July
        1,
        2006.  Revenue for the three and six month periods ended June 30, 2007
        declined from the previous three and six month periods, primarily due to
        the
        Company’s controlled reduction of  the number of production days per
        week and fewer (two) production weeks during the first quarter of this year,
        and
        the Company’s accelerated production schedule during the second quarter of 2006
        to eliminate excessive backlog that had accrued prior to bringing on line
        the
        Company’s second plant in Sulligent, Alabama.  Our reduced production
        schedule during the first quarter reflected the industry wide softness in
        demand
        for HUD Code housing units.
 
 ***Selling,
        General, and Administrative Expenses.***Selling, general and
        administrative expenses consisted of payroll and related expenses for executive,
        accounting, and administrative personnel, professional fees, and other general
        corporate expenses.  Selling, general, and administrative expenses for
        the three and six month periods ended June 30, 2007 were $1,766,884 and
        $3,244,424, respectively, compared to $1,693,154 and $2,966,950, respectively,
        for the three and six month periods ended July 1, 2006.  General and
        administrative costs increased for the six month period ending June 30, 2007,
        in
        comparison to the corresponding period for 2006, primarily due to increased
        production capacity, increased trade show participation, and increased sales
        and
        operating expenses.  Our cost of goods sold as a percentage of
        revenue has generally remained the same for the six month period ending June
        30,
        2007, when compared to the corresponding period for 2006.
   3
 ***Net
        Income (Loss).***The net income for the three and six
        month periods ended June 30, 2007 was $499,533 and $365,288, respectively,
        compared to $988,465 and $1,456,305, respectively, for the three and six
        month
        periods ended July 1, 2006.  After accounting for the dividend payable
        to preferred shareholders and the deemed dividend to preferred shareholders
        on
        beneficial conversion features, the net income to common stockholders for
        the
        three month and six month periods ended June 30, 2007 was $388,054 and $162,031,
        respectively, compared to net losses of $1,219,719 and $2,356,208, respectively,
        for the three and six month periods ended July 1, 2006.  The
        significant increases in net income to common stockholders for the three
        and six
        month periods ended June 30, 2007 versus those same periods ended July, 2006
        are
        partially attributable to the elimination of an $8.78 million non-recurring,
        non-cash, deemed dividend to preferred shareholders on beneficial conversion
        features that burdened the reported earnings attributable to common shareholders
        for the first three fiscal quarters of 2006.
 
 **Liquidity
        and Capital Resources**
 
 Management
        believes that the Company
        currently has sufficient cash flow from operations, available bank borrowings,
        cash, and cash equivalents to meet its short-term working capital
        requirements.  The Company had $5,119,993 in cash and cash equivalents
        as of June 30, 2007, compared to $4,425,919 in cash and cash equivalents
        as of
        July, 1, 2006.  Should our costs and expenses prove to be greater than
        we currently anticipate, or should we change our current business plan in
        a
        manner which will increase or accelerate our anticipated costs or capital
        demand, such as through the acquisition of new products, our working capital
        could be depleted at an accelerated rate.
 
 The
        net cash used in operating
        activities for the six month period ended June 30, 2007 was
        $1,075,369.  The net cash provided from operating activities for the
        six month period ended July 1, 2006 was $836,886.  The reduction of
        cash provided by operating activities for the first six months of 2007, in
        comparison to the same period from the Company’s prior fiscal year, is
        attributable, in part, to a temporary increase in receivables at the end
        of the
        second quarter related to the delivery of several units during June 2007
        which
        had been delayed while waiting for specialty products, as well as reduced
        total
        revenues for the first six months of 2007 relative to the same period in
        2006.
 
 The
        net cash used in investing
        activities for the six month period ending June 30, 2007 was $67,261, which
        primarily reflects purchases of equipment.  The net cash used in
        financing activities for the six month period ending July 1, 2007 was
        $1,168,528, which primarily reflects the $1,232,275 cash payment made to
        the
        former shareholders (and current officers) of Deer Valley Homebuilders, under
        the Earnout Agreement related to the purchase of Deer Valley
        Homebuilders.   The net cash provided by financing activities for
        the six month period ending July 1, 2006 was $8,125,716, the majority of
        which
        resulted from the issuance of preferred stock during the first and second
        quarter of 2006.
 
 We
        anticipate that our accounts
        receivable and short term debt will temporarily increase during the third
        quarter of 2007, due to our production of disaster housing units for the
        State
        of Mississippi.   Because all units being produced by the Company
        under this phase of the program are scheduled for delivery during the third
        quarter, we anticipate receiving payment during the fourth quarter of 2007
        and
        our accounts receivable and borrowings returning to normal levels during
        the
        fourth quarter of 2007.
 
 On
        April 11, 2007, Deer Valley
        Corporation entered into a new Loan and Security Agreement providing for
        a
        revolving line of credit in an amount not to exceed Two Million Five Hundred
        Thousand and No/100 Dollars ($2,500,000.00) (the "DV Loan Agreement") evidenced
        by a revolving credit note and secured by accounts receivable, inventory,
        equipment and all other tangible and intangible personal property of Deer
        Valley
        Corporation and DVH.  The purpose of the DV Loan Agreement is to
        provide a standby source of working capital, letters of credit required by
        the
        terms of certain repurchase agreements and performance bonds entered into
        in the
        normal course of the Company’s business, to provide financing for potential
        acquisition(s) of new manufacturing facilities or subsidiaries, and to provide
        funding for the Company’s entry into the modular home market.  The DV
        Loan Agreement has a one year term and has a variable interest rate at 2.60%
        above LIBOR.  Upon issuance of a letter of credit, Deer Valley
        Corporation is charged a letter of credit fee equal to 1.00% of the face
        amount
        of the letter of credit.  The DV Loan Agreement provides for
        conditions to meet prior to each advance, including financial
        ratios.
 
 In
        addition to the above, on April 11,
        2007, DVH renewed its existing Loan and Security Agreement providing for
        a
        revolving line of credit in an amount not to exceed Two Million Five Hundred
        Thousand and No/100 Dollars
        ($2,500,000.00) (the "DVH Loan agreement") evidenced by a revolving credit
        note
        and secured by accounts receivable, inventory, equipment and all other tangible
        and intangible personal property of DVH and Deer Valley
        Corporation.  The purpose of the DVH Loan is to provide standby
        working capital and letters of credit required by the terms of certain
        repurchase agreements and performance bonds entered into in the normal course
        of
        DVH’s business.  The DVH Loan Agreement has a one year term and has a
        variable interest rate at 2.60% above LIBOR.  Upon issuance of a
        letter of credit, DVH is charged a letter of credit fee equal to 1.00% of
        the
        face amount of the letter of credit.  The DVH Loan provides for
        conditions to meet prior to each advance, including financial
        ratios.
  4
 
 We
        are contingently liable under the
        terms of repurchase agreements with financial institutions providing inventory
        financing for retailers of our products.  For more information on the
        repurchase agreements, including the Company’s contingent liability thereunder,
        please see “Reserve for Repurchase Commitments” below.
 
 **Recent
        Developments**
 
 In
        June 2007, the Company’s plant in
        Guin, Alabama was selected by the State of Mississippi to produce 50 two-bedroom
        and 100 three-bedroom cottages as part of a program that is designed to test
        and
        evaluate future disaster housing units. The Company is one of four manufactured
        housing companies selected to participate in this initial phase of a procurement
        that will ultimately total several thousand units.  The initial total
        combined value of the pilot phase contracts awarded to the Company is valued
        at
        $7,535,000. All units to be produced by the Company under this phase of the
        program are expected to be delivered before the end of the third quarter,
        2007.
 
 Also,
        see Item 5 below.
 
 **Critical
        Accounting Policies**
 
 Our
        discussion and analysis of our
        financial condition and results of operations are based upon our financial
        statements, which have been prepared in accordance with accounting principles
        generally accepted in the United States of America.  The preparation
        of these consolidated financial statements requires us to make
        estimates  and judgments which affect the reported amounts of assets,
        liabilities, revenues and expenses, and related disclosures of contingent
        assets
        and  liabilities.  For a description of those estimates, see
        Note 2, Summary of Significant Accounting Policies, contained in the explanatory
        notes to the Company’s financial statements for the quarter ended June 30, 2007,
        contained in this filing.  On an ongoing basis, we evaluate our
        estimates, including those related to reserves,
        deferred  tax  assets, valuation allowances, impairment of
        long-lived assets,
        fair  value  of  equity  instruments  issued  to  consultants  for  services,
        and estimates  of  costs to complete
        contracts.  We base our estimates on historical
        experience  and  on  various  other
        assumptions which we believe to be reasonable
        under  the  circumstances,  the  results  of  which  form  the  basis
        for making
        judgments  about  the  carrying  value  of  assets  and
        liabilities which are not
        readily  apparent  from  other  sources.  Actual
        results  may differ from these
        estimates  under  different  assumptions or
        conditions.  However, we believe that our estimates, including those
        for the above-described items, are reasonable.
 
 **Critical
        Accounting Estimates**
 
 Management
        is aware that certain
        changes in accounting estimates employed in generating financial statements
        can
        have the effect of making the Company look more or less profitable than it
        actually is.  Management does not believe that either the Company or
        its auditors have made any such changes in accounting estimates.  A
        summary of the most critical accounting estimates employed by the Company
        in
        generating financial statements follows below.
 
 **Warranties**
 
 We
        provide our retail buyers with a
        one-year limited warranty covering defects in material or workmanship, including
        plumbing and electrical systems.  We record a liability for estimated
        future warranty costs relating to homes sold, based upon our assessment of
        historical experience and industry trends.  In making this estimate,
        we evaluate historical sales amounts, warranty costs related to homes sold
        and
        timing in which any work orders are completed.  The Company has
        recorded a warranty liability of $2,065,000 on its balance sheet as of June
        30,
        2007.  Although we maintain reserves for such claims, there can be no
        assurance that warranty expense levels will remain at current levels or that
        the
        reserves that we have set aside will continue to be adequate.  A large
        number of
        warranty claims which exceed our current warranty expense levels could have
        a
        material adverse affect upon our results of operations.
   5
 
 **Volume
        Incentives Payable**
 
 We
        have relied upon volume incentive
        payments to our independent dealers who retail our products.  These
        volume incentive payments are accounted for as a reduction to gross sales,
        and
        are estimated and accrued when sales of our factory-built homes are made
        to our
        independent dealers.  Volume incentive reserves are recorded based
        upon the annualized purchases of our independent dealers who purchase a
        qualifying amount of home products from us.  We accrue a liability to
        our dealers, based upon estimates derived from historical payout
        rates.  Volume incentive costs represent a significant expense to us,
        and any significant changes in actual payouts could have an adverse affect
        on
        our financial performance.  We had a reserve for volume incentives
        payable of $638,448 as of June 30, 2007, as compared to $632,428 as of July
        1,
        2006.
 
 **Reserve
        for Repurchase Commitments**
 
 Most
        of our independent dealers finance
        their purchases under a wholesale floor plan financing arrangement under
        which a
        financial institution provides the dealer with a loan for the purchase price
        of
        the home and maintains a security interest in the home as
        collateral.  When entering into a floor plan arrangement, the
        financial institution routinely requires that we enter into a separate
        repurchase agreement with the lender, under which we are obligated, upon
        default
        by the independent dealer, to repurchase the factory-built home at our original
        invoice price less the cost of administrative and shipping
        expenses.  Our potential loss under a repurchase obligation depends
        upon the estimated net resale value of the home, as compared to the repurchase
        price that we are obligated to pay.  This amount generally declines on
        a predetermined schedule over a period that usually does not exceed 24
        months.
 
 The
        risk of loss that we face under
        these repurchase agreements is lessened by several factors, including the
        following:
 
 (i)
              the
                sales of our products are spread over a number of independent
                dealers, (ii)
              we
                have had only isolated instances where we have incurred a repurchase
                obligation, (iii)
              the
                  price we are obligated to pay under such repurchase agreements
                  declines
                  based upon a predetermined amount over a period which usually does
                  not
                  exceed 24 months, and
 (iv)
              we
                  have been able to resell homes repurchased from lenders at current
                  market
                  prices, although there is no guarantee that we will continue to
                  be able to
                  do so.
 
 The
        maximum amount for which the
        Company is contingently liable under such agreements amounted to approximately
        $19,862,000 as of June 30, 2007, as compared to $13,546,000 as of July 1,
        2006.  As of June 30, 2007 and July 1, 2006, we had reserves of
        $100,000 and $65,275, respectively, established for future repurchase
        commitments, based upon our prior experience and evaluation of our independent
        dealers’ financial conditions.  Because Deer Valley to date has not
        experienced any significant losses under these agreements, management does
        not
        expect any future losses to have a material effect on our accompanying financial
        statements.
 
 **Revenue
        Recognition**
 
 Revenue
        for our products sold to
        independent dealers are generally recorded when all of the following conditions
        have been met:  (i) an order for the home has been received from the
        dealer, (ii) an agreement with respect to payment terms has been received,
        and
        (iii) the home has been shipped and risk of loss has passed to the
        dealer.
 
 **Recent
        Accounting Pronouncements**
 
 FASB
        Interpretation No 47, “Accounting
        for Conditional Asset Retirement Obligations” (“FIN 47”) was issued in
        March 2005 and clarifies the accounting prescribed in SFAS No. 143,
“Accounting for Asset Retirement Obligations”.  FIN 47 requires the
        recognition of a liability for the fair value of a conditional asset retirement
        obligation if the fair value can be reasonably estimated, even though
        uncertainty exists as to the timing and method of
        settlement. Management is currently evaluating the requirements of FIN 47
        and
        has not yet determined the impact on the financial statements.
   6
 
 FASB
        Interpretation No 48, “Accounting
        for Uncertainty in Income Taxes -- an interpretation of FASB Statement
        No. 109” (“FIN 48”), was issued in July 2006. This interpretation
        clarifies the accounting for uncertainty in income taxes recognized in an
        entity's financial statements in accordance with SFAS No. 109, “Accounting
        for Income Taxes.” It prescribes a recognition threshold and measurement
        attribute for financial statement disclosure of tax positions taken, or expected
        to be taken, on a tax return. The Company will be required to adopt FIN 48
        in
        the first quarter of fiscal 2008. Management is currently evaluating the
        requirements of FIN 48 and has not yet determined the impact on the financial
        statements.
 
 In
        September 2006, the SEC issued Staff
        Accounting Bulletin No. 108 (“SAB No. 108”), *Considering the Effects of
        Prior Year Misstatements When Quantifying Misstatements in Current Year
        Financial Statements*. SAB No. 108 provides guidance to registrants for
        assessing materiality. SAB No. 108 states that registrants should use both
        a
        balance sheet approach and income statement approach when quantifying and
        evaluating the materiality of a misstatement. SAB No. 108 also provides guidance
        on correcting errors under the dual approach as well as transition guidance
        for
        correcting previously immaterial errors that are now considered material.
        We
        adopted SAB No. 108 as of January 1, 2007 without any impact on our financial
        statements.
 
 In
        September 2006, the FASB issued
        SFAS No. 157, “Fair Value Measurement” (“SFAS 157”), which defines fair
        value, establishes a framework for measuring fair value and expands disclosures
        about assets and liabilities measured at fair value. The Company will be
        required to adopt SFAS 157 in the first quarter of fiscal 2009. Management
        is
        currently evaluating the requirements of SFAS 157 and has not yet determined
        the
        impact on the financial statements.
 
 In
        September 2006, the FASB issued
        SFAS No. 158 (“SFAS 158”), “Employers' Accounting for Defined Benefit
        Pension and Other Postretirement Plans -- an amendment of FASB Statements
        No. 87, 88, 106, and 132(R).” SFAS 158 requires an employer to recognize a
        plan's funded status in its statement of financial position, measure a plan's
        assets and obligations as of the end of the employer's fiscal year and recognize
        the changes in a defined benefit postretirement plan's funded status in
        comprehensive income in the year in which the changes occur. The Company
        will be
        required to recognize the funded status of benefit plans and adopt the new
        disclosure requirements effective August 31, 2007. The Company will be
        required to measure plan assets and benefit obligations as of the date of
        the
        fiscal year-end statement of financial position effective August 31, 2009.
        Management is currently evaluating the requirements of SFAS 158, but based
        on
        the current funded status of the plans, management does not anticipate SFAS
        158
        will have a material impact on the Company's financial statements.
 
 In
        February 2007, the FASB issued SFAS
        No. 159, *The Fair Value Option for Financial Assets and Financial
        Liabilities*. SFAS No. 159 permits entities to choose to measure many
        financial instruments and certain other items at fair value. SFAS No. 159
        will
        be effective at the beginning of fiscal year 2008.  We are presently
        evaluating the impact of the adoption of SFAS No. 159 on our results of
        operations and financial position.
 
 **Off-Balance
        Sheet Arrangements**
 
 In
        connection with the Capital Stock
        Purchase Agreement, the Company entered into the Earnout Agreement, pursuant
        to
        which additional payments may be paid to the former owners of DVH, as an
        earnout, based upon the Net Income Before Taxes of DVH during the next five
        (5)
        years, up to a maximum of $6,000,000.  The business purpose of
        executing the Earnout Agreement was to set the purchase price of Deer Valley
        Homebuilders, Inc. by an objective standard, given that the owners of DVH
        and
        the Company could not agree on an outright purchase price.  The
        Company’s obligations under the Earnout Agreement could negatively affect
        liquidity, capital resources, market risk, and credit risk.
 
 During
        the term of the Earnout
        Agreement, 50% of the pre-tax profit exceeding $1,000,000 per year will be
        accrued and become distributable to the former owners of DVH.  During
        the six month period ending June 30, 2007, Deer Valley Homebuilders, Inc.
        had
        pre-tax profit in the amount of $1,125,747, of which $125,747 was above the
        Company’s earnout threshold.  The Company accrued 50% of the amount in
        excess of the earnout threshold in the amount of $62,873.  The maximum
        remaining potential accrual under the Earnout Agreement is
        $3,472,577.
   7
 **Item
        3.   Controls and Procedures**
 
 **Evaluation
        of Disclosure Controls and Procedures**
 
 The
        Company’s Chief Executive Officer and acting Chief Financial Officer has
        evaluated the effectiveness of the Company’s disclosure controls and procedures
        (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
        the
        fiscal period ending June 30, 2007 covered by this Quarterly Report on Form
        10-QSB.  Based upon such evaluation, the Chief Executive Officer
        and acting Chief Financial Officer has concluded that, as of the end of
        such period, the Company’s disclosure controls and procedures were effective
        as required under Rules 13a-15(e) and 15d-15(e) under the Exchange
        Act.
  **Changes
        in Internal Controls over Financial Reporting**
  Beginning
        with the Company’s first
        fiscal year ending after December 15, 2007, Section 404 of the
        Sarbanes-Oxley Act of 2002 will require us to include management's report
        on our
        internal control over financial reporting in our Annual Report on
        Form 10-K.  The internal control report must contain (1) a
        statement of management's responsibility for establishing and maintaining
        adequate internal control over our financial reporting, (2) a statement
        identifying the framework used by management to conduct the required evaluation
        of the effectiveness of our internal control over financial reporting,
        (3) management's assessment of the effectiveness of our internal control
        over financial reporting as of the end of our most recent fiscal year, including
        a statement as to whether or not our internal control over financial reporting
        is effective, and (4) a statement that our registered independent public
        accounting firm has issued an attestation report on management's assessment
        of
        our internal control over financial reporting.
   In
        order to achieve compliance with
        Section 404 within the prescribed period, management is planning to
        commence a Section 404 compliance project to assess the adequacy of our
        internal control over financial reporting, remediate any control deficiencies
        that may be identified, validate through testing that controls are functioning
        as documented, and implement a continuous reporting and improvement process
        for
        internal control over financial reporting.  At this time, management
        is assessing the proper parameters of a Section 404 compliance project in
        light
        of emerging guidance from the SEC on such parameters.
   Except
        as described above, during the
        quarter ended June 30, 2007, there have been no changes in our internal control
        over financial reporting that have materially affected, or are reasonably
        likely
        to materially affect, our internal control over financial
        reporting.
  **Inherent
        Limitations of the Effectiveness of Internal Control**
  A
        control system, no matter how well
        conceived and operated, can provide only reasonable, not absolute, assurance
        that the objectives of the internal control system are met.  Because
        of the inherent limitations of any internal control system, no evaluation
        of
        controls can provide absolute assurance that all control issues, if any,
        within
        a company have been detected.
  
 **PART
        II   OTHER INFORMATION**
 
 **Item
        1.   Legal Proceedings**
 
 Although
        the Company in the normal
        course of business is subject to claims and litigation, the Company is not
        a
        party to any material legal proceeding nor is the Company aware of any
        circumstance which may reasonably lead a third party to initiate legal
        proceeding against the Company.
 
 As
        of the date of this filing, there
        are no material pending legal or governmental proceedings relating to our
        Company or properties to which we are a party, and to our knowledge there
        are no
        material proceedings to which any of our directors, executive officers, or
        affiliates are a party adverse to us or which have a material interest adverse
        to us.
 
 
 8
 
 **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**
 
 On
        July
        23, 2007, in exchange for 250,000 shares of outstanding registered common
        stock,
        the Company issued 250,000 shares of Series E Convertible Preferred Stock
        and a
        warrant exercisable for 250,000 shares of  common stock with an
        exercise price of $2.25 per share.  Subject to certain conditions,
        each share of Series E Convertible Preferred Stock is convertible into 1
        share
        of common stock.  The securities were offered to a single
        institutional shareholder of the Company, and the transaction was exempt
        under
        Section 3(a)(9) of the Securities Act, as amended.
 
 On
        August 10, 2007, Deer Valley
        Homebuilders, Inc. (“DVH”) entered into a Revolving Bridge Loan and Security
        Agreement with Fifth Third Bank, providing for a line of credit in an amount
        not
        to exceed Five Million and No/100 Dollars ($5,000,000.00), evidenced by a
        revolving credit note and secured by accounts receivable, inventory, equipment
        and all other tangible and intangible personal property of DVH. The purpose
        of
        the new facility is to provide a standby source of working capital for
        fulfillment of one or more contracts with the State of Mississippi to construct
        housing units under the “Mississippi Alternative Pilot Program.” This facility
        has a six month term and has a variable interest rate at 2.50% above
        LIBOR.  The Loan and Security Agreement permits acceleration upon
        certain payment and covenant defaults.
  9
 
 
 **Item
        6.   Exhibits**
 
 **Exhibit
                  No.**
              **Description**3.01
              Articles  of  Incorporation  of  Deer
                  Valley Corporation. (1)3.02
              Bylaws  of  Deer
                  Valley Corporation. (1)4.01
              Certificate
                  of Designation, Rights, and Preferences of Series A Convertible
                  Preferred
                  Stock. (1)4.02
              Certificate
                  of Designation, Rights, and Preferences of Series B Convertible
                  Preferred
                  Stock. (1)4.03
              Certificate
                  of Designation, Rights, and Preferences of Series C Convertible
                  Preferred
                  Stock. (1)4.04
              Certificate
                  of Designation, Rights, and Preferences of Series D Convertible
                  Preferred
                  Stock. (1)4.05
              Certificate
                  of Designation, Rights, and Preferences of Series E Convertible
                  Preferred
                  Stock. (2)10.01
              Amendment
                  to Loan Agreement (3)10.02
              Form
                  of Renewal Revolving Credit Note (3)10.03
              Revolving
                  Credit Loan and Security Agreement (3)10.04
              Form
                  of Revolving Credit Note (3)10.05
              Continuing
                  Guaranty of Deer Valley Homebuilders, Inc. (3)10.06
              Continuing
                  Guaranty of Deer Valley Corporation (3)10.07
              Form
                  of Series F Warrant (4)10.08
              Revolving
                  Bridge Loan and Security Agreement (4)10.09
              Revolving
                  Bridge Note (4)10.10
              Continuing
                  Guaranty of Deer Valley Corporation (4)31.01
              Certification
                  of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a)
                  as
                  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
                  dated
                  August __, 2007. (4)31.02
              Certification
                  of Acting Chief Financial Officer pursuant to Rule 13a-14(a) and
                  15d-14(a)
                  as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002,
                  dated August __, 2007. (4)32.01
              Certification
                  of Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                  as adopted
                  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated
                  August
                  __, 2007. (4)32.02
              Certification
                  of Acting Chief Financial Officer pursuant to 18 U.S.C. Section
                  1350, as
                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
                  dated
                  August __, 2007. (4)
 
 (1)              Previously  filed  as  an  exhibit
        to the Form 8-K, filed with the SEC on July 28, 2006 and incorporated herein
        by
        reference.
 
 (2)              Previously  filed  as  an  exhibit
        to the Form 10-QSB, filed with the SEC on November 20, 2006 and incorporated
        herein by reference.
 
 (3)              Previously  filed  as  an  exhibit
        to the Form 8-K filed with the SEC on April 16, 2007 and incorporated herein
        by
        reference.
 
 (4)              Filed
        herewith.
  10
 
 
 **SIGNATURE**
 
 Pursuant
        to the requirements of the
        Securities Exchange Act of 1934, the Registrant has duly caused this report
        to
        be signed on its behalf by the undersigned thereunto duly
        authorized.
   Deer
                    Valley Corporation(Registrant)Dated:  August
                    __, 2007
                By: */s/
                    Charles G. Masters*Charles
                    G. MastersPresident
                    & Chief Executive Officer












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