**UNITED STATES					SECURITIES AND EXCHANGE COMMISSION**Washington, D.C.  20549**FORM 10-QSB**

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| [X]        | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------------------------------------------|-----------------------------------------------------------------------------------|

For the quarterly period ended September 30, 2006
| [  ]        | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|-----------------------------------------------------|------------------------------------------------------------------------------------|

For the transition period from           to _____

Commission File No. 0-10089Unioil(Exact name of small business issuer as specified in its charter)

| Nevada                          | 93-0782780          |
|---------------------------------|---------------------|
| (State or other jurisdiction of | (IRS Employer       |
| incorporation or organization)  | Identification No.) |

3817 Carson Avenue, Evans, Colorado  80620(Address of principal executive offices)(970) 330-6300(Issuer's telephone number)

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

Yes [X]  No [   ]

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

Yes [   ]  No [X]

As of November 13, 2006, 9,541,469 shares of the issuer’s common stock, par value $0.01 per share, were outstanding.				Transitional Small Business Disclosure Format:  Yes [   ]  No [X]

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**FORWARD-LOOKING STATEMENTS**

This Report includes statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this Report, other than statements of historical facts, address matters that the issuer reasonably expects, believes or anticipates will or may occur in the future. In some cases, one can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “intends,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of such terms or other, similar terminology.  All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to the issuer, or persons acting on the issuer’s behalf, are expressly qualified in their entirety by the cautionary statements included under “Risk Factors” and elsewhere in this Report. Except as required by law, the issuer undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.  Forward-looking statements include, but are not limited to the following:

    - the issuer’s future financial position, including working capital and anticipated cash flow;     amounts and nature of future capital expenditures;access to capital and financing;
- wells to be drilled or reworked;     oil and natural gas prices and demand;existing fields, wells and prospects;
- estimates of proved oil and natural gas reserves;     reserve potential;development and drilling potential;
- expansion and other development trends in the oil and natural gas industry;     the issuer’s business strategy;production of oil and natural gas;
- effects of federal, state and local regulation;     insurance coverage;employee relations;
- investment strategy and risk; and     expansion and growth of the issuer’s business and operations.
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			           Although the issuer believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Disclosure of important factors that could cause actual results to differ materially from the issuer’s expectations, or cautionary statements, are included under “Risk Factors” and elsewhere in this Report, including, without limitation, in conjunction with the forward-looking statements. Factors, among others that could cause actual results to differ materially from the issuer’s expectations, include:			- unexpected changes in business or economic conditions;     significant changes in natural gas and oil prices;timing and amount of production;
- unanticipated down-hole mechanical problems in wells or problems related to producing reservoirs or infrastructure;     changes in overhead costs;material events resulting in changes in estimates; and
- competitive factors.    
           The forward-looking statements herein are based on current expectations that involve a number of risks and uncertainties.  Such forward-looking statements are based on assumptions that the issuer will obtain or have access to adequate financing for each successive phase of its operations or growth, that there will be no material, adverse competitive or technological change affecting the issuer’s business, that the issuer’s executive officers and other significant employees will remain employed as such by the issuer, and that there will be no material, adverse change in the issuer’s operations or business, or in governmental regulation affecting the issuer.  The foregoing assumptions are based on judgments with respect to, among other things, future economic, competitive, and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the issuer’s control.
  **RISK FACTORS**            **Industry Risks**  
          As an operator of and interest holder in a number of producing oil and gas wells, the Company’s products consist of unrefined petroleum products such as crude oil, natural gas and condensates therefrom.  The Company is a relatively small producer and its position in the industry is insignificant.  The oil and gas industry is very competitive and is dominated by a number of large producers, refiners and retailers.  Such companies have substantially greater resources and expertise and significant competitive advantages over the Company.  The Company’s ability to market its products, and the prices at which it can market them, are subject to numerous factors and conditions existing in the industry over which the Company has no control. Crude oil prices are determined on

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				worldwide markets and are constantly fluctuating based on a number of political and economic factors.  The Company can sell its oil only to large refineries, oil companies and other users at whatever the prevailing price in such markets is at the time.  Also, natural gas is generally sold to a gas processing company that has pipelines and other distribution facilities sufficiently nearby to connect to the wells.  If no such facilities exist, a well may be shut in even though capable of production.  As of September 30, 2006, none of the gas-producing wells in which the Company had an interest was shut in.  As of that date, moreover, the Company had gas and oil contracts in place for all the production from the wells in which the Company had an interest.            **Management Risks**  
          Management of the Company consists of Charles E. Ayers, Jr., the Chief Executive Officer and Chief Financial Officer, and Jamie Hood, who serves as Secretary/Treasurer as well as manager of the day-to-day operations of the company. Ms. Hood is the only full-time employee of the Company and, therefore, the only person who is able to devote all of her time to the affairs of the Company. Consequently, management of the Company has historically relied upon, and will continue to rely upon for the foreseeable future, the employment of outside consultants and independent contractors such as attorneys, accountants, geologists, petroleum engineers, financial advisors, pumpers and others to assist management in conducting the business affairs of the Company. The Chief Executive Officer and directors of the Company have other business interests in which they devote their primary attention or a substantial portion of their time and they are expected to continue to do so for the foreseeable future. As a result, there are at least potential conflicts of interest which may arise because of such other commitments. Any such conflicts, however, have been and are expected to be resolved through the exercise of sound business judgment by such individuals consistent with their fiduciary duties to the Company.

          As a direct result of the Company’s lack of adequate staffing, there are, and are expected to continue to be, material weaknesses in the Company’s disclosure controls and procedures.  See Part I – Item 3 – Controls and Procedures.
             **Securities Market and Stock Ownership Risks**  
          There is no predictable method by which investors in the securities of the Company shall be able to realize any gain or return on their investment in the Company, or shall be able to recover all or any substantial portion of the value of their investment. The Company has not paid dividends on its common stock, and does not anticipate paying such dividends in the foreseeable future. There is, moreover, currently no public market for the securities of the Company, and no assurance can be given that a market will develop or that an investor will be able to liquidate his investment without considerable delay, if at all. Consequently, should the investor suffer a change in circumstances arising from an event not contemplated at the time of his investment, and should the investor therefore wish to transfer the common stock owned by him, he may find he has only a limited or no ability to transfer or market the common stock. Accordingly, purchasers of the common stock need to be prepared to bear the economic risk of their investment for an indefinite period of time. If a market should develop, the price may be highly volatile. Factors such as those discussed in this “Risk Factors” section may have a significant impact upon the market price of the securities of the Company. Owing to what may be expected to be the low price of the securities, many brokerage

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				firms may not be willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in these securities, the combination of brokerage commissions and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such securities as collateral for any loans. The Company has no agreement with any securities broker or dealer that is a member of the National Association of Securities Dealers, Inc., to act as a market maker for the Company’s securities. Should the Company fail to obtain one or more market makers for the Company’s securities, the trading level and price of the Company’s securities will be materially and adversely affected. Should the Company happen to obtain only one market maker for the Company’s securities, the market maker would in effect dominate and control the market for such securities. The Company’s registered securities are covered by a Securities and Exchange Commission rule that imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors. For purposes of the rule, the phrase “accredited investors” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written, agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell the Company’s securities and also may affect the ability of investors in securities of the Company to sell their securities in any market that might develop therefor.
          The majority of the Company’s authorized but unissued common stock remains unissued. The board of directors of the Company has authority to issue such unissued shares without the consent or vote of the stockholders of the Company. The issuance of these shares may dilute the interests of investors in the securities of the Company and will reduce their proportionate ownership and voting power in the Company.
  **PART I—FINANCIAL INFORMATION**  
**Item 1.  Financial Statements**

          See attached Financial Statements and Schedules.

**Item 1A.  Pending Tender Offer and Merger**

          As discussed in the Financial Statements submitted with this Report (“**NOTE 11 – SUBSEQUENT EVENTS**”) and as of the date of the filing of this Report, a tender offer is pending to acquire one hundred percent (100%) of the issued and outstanding shares of the Company’s common stock.  After the tender offer, a merger is expected to occur whereby the Company would  be the surviving corporation, but would apply for termination of the registration of its common stock under the Securities Exchange Act of 1934.  The pending tender offer and merger are more particularly described in the report on Form 8-K filed with the Securities and Exchange Commission by the Company on October 25, 2006 and the Schedule 14D-9 filed by the Company with the Securities and Exchange Commission on November 3, 2006.  That report on Form 8-K and that Schedule 14D-9 are incorporated herein by reference and include complete copies of the Tender Offer Agreement and the Stockholder Tender Agreement discussed below as Exhibits 2.1 and 2.2, respectively, to the Form 8-K Report. 

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				          On October 19, 2006, the Company entered into a Tender Offer Agreement with Petroleum Development Corporation ("PDC") and Wattenberg Acquisition Corporation, a wholly-owned subsidiary of PDC ("PDC Sub"), whereby PDC Sub commenced a tender offer on November 3, 2006 for all of the issued and outstanding shares of the Company’s common stock for $1.91 per share, all in cash.  That Tender Offer is expected to be followed by a merger of PDC Sub with the Company in which any of the Company’s shares not purchased by PDC Sub in the offer will be converted into the right to receive $1.91 per share, all in cash. Following the tender offer and merger, the Company would be a wholly-owned subsidiary of PDC.				          As an inducement for PDC and PDC Sub to enter into the Tender Offer Agreement, Charles E. Ayers, Jr., the Chairman, President, Chief Executive Officer and Chief Financial Officer of the Company, and four members of his family (the “Principal Stockholders”), have entered into a Stockholder Tender Agreement with PDC dated as of October 19, 2006 (the “Stockholder Tender Agreement”). To the knowledge of the Company, the Principal Stockholders collectively own of record 7,801,939 shares of the Company’s common stock. Of this total, Charles E. Ayers, Jr. owns 6,851,983 shares and each of the four members of his family who are party to the Stockholder Tender Agreement own 237,489 shares.				          If more than 90% of the issued and outstanding Unioil common stock is acquired by PDC Sub in the offer, the merger may be effected without approval of or notice to the remaining stockholders of the Company.  If less than 90% of the issued and outstanding shares of the Company common stock is acquired by PDC Sub in the offer, the merger will require approval by holders of a majority of the Company’s common stock, which approval will be assured because of the Principal Stockholders’ commitment to tender shares representing approximately 82% of the issued and outstanding shares of the Company’s common stock to PDC Sub pursuant to the Stockholder Tender Agreement.				          The closing of the tender offer is conditioned upon, among other things, (i) there being no proceeding or governmental action challenging the acquisition of the Company by PDC and PDC Sub, (ii) no material adverse effect having occurred with respect to the Company, (iii) there being no material inaccuracies in the Company’s representations and warranties in the Tender Offer Agreement nor any breach of any material obligation, and (iv) the Stockholder Agreement to Tender being in full force and effect with no material breach by the Principal Stockholders thereunder. The Tender Offer Agreement may also be terminated under certain circumstances, as set forth in the Tender Offer Agreement.				          As a result of the proposed merger, all of the current officers and directors of the Company are expected to take such actions as are necessary to cause them to be replaced as officers and directors of the Company by persons chosen for those positions by PDC and PDC Sub.				          Under the Tender Offer Agreement, PDC and PDC Sub agreed to permit the current management of the Company to retain from revenue received or to be received by the Company in the ordinary course of business an amount of cash to pay professional fees and costs and to pay bonuses to certain employees, consultants, advisors and independent contractors who are not and will not be shareholders of the Company.  The parties agreed that those bonuses, together with professional fees and costs related to the transactions contemplated under that Agreement shall not exceed One Million One Hundred and Three Thousand Dollars ($1,103,000) in the aggregate.
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				          The foregoing summary of certain provisions of the Tender Offer Agreement and the Stockholder Tender Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreements, filed as Exhibits (d)(1) and (d)(2), respectively, to the Tender Offer Statement (Schedule TO) filed by PDC and PDC Sub with the SEC on November 3, 2006 and as Exhibits (e)(1) and (e)(2), respectively, to the Schedule 14D-9 filed by the Company with the SEC on the same date.**Item 2.  Management's Discussion and Analysis or Plan of Operation**          As a result of audit adjustments recorded as of and for the year ended December 31, 2005, the financial statements for the interim periods of that year have been restated to conform to the annual presentation. The following discussion and analysis gives effect to these restated financial statements for the quarter ended September 30, 2006.            **Liquidity and Capital Resources**            In the nine months ended September 30, 2006, Unioil (the “Company”) had two primary sources of liquidity.  The first was the Company’s cash position, held primarily in demand-deposit bank accounts.  Cash was $668,811 at September 30, 2006.  This compares to $706,382 at December 31, 2005, the end of the Company’s most recently completed fiscal year. 				          The Company’s second primary source of liquidity was cash flow from operations.  This amount is used by the Company to analyze operating performance, leverage and liquidity.  For the nine months ended September 30, 2006, the Company’s average monthly cash flow from operations was $29,388. This figure compares to average monthly cash flow from ongoing operations of $72,067 for the nine months ended September 30, 2005. The Company continues to utilize its positive operating cash flow to finance internally generated projects on Company property.				          At September 30, 2006, the Company’s net working capital had increased to $1,049,932 as compared to $743,041, at December 31, 2005.  This increase is primarily attributable to the cash flow generated from improved production due to the refracturing of five existing oil-and-gas wells (including two wells operated by the Company) during the first quarter of 2006 and the continued improvement in oil and gas prices.  Those refracturings on Company-operated wells continue the Company’s plan for the development of its assets, with the expenditures being made with internally generated cash flow.   Accounts receivable at September 30, 2006 includes approximately $132,000 in refracturing charges for which other joint interest owners in Company-operated wells are responsible.  During the third quarter of 2006, the Company completed refracturing operations on three of its Company-operated wells. 				          Management considers the Company’s liquidity and capital resources adequate to meet the Company’s current and foreseeable general and administrative expenses, and other internal needs.  Management believes such liquidity and resources to be sufficient, moreover, to support the Company’s ongoing business operations, such as continued production from the Company’s existing wells.   6           			          The Company’s liquidity, however, is highly dependent upon market prices for oil and gas.  Those prices have a history of rapid and dramatic fluctuation.  Management’s assessments of the Company’s liquidity, therefore, must be qualified in recognition of instability in the market prices for the Company’s products.  A change in those prices can be expected to have a material effect upon the Company’s liquidity.    			          Management believes, moreover, that the Company’s current liquidity and capital resources alone are inadequate for all of the Company’s possible future business operations, and are insignificant in comparison to other participants in the industry.  Such resources are not sufficient to finance more than a portion of the anticipated growth in the Company’s business operations.  The Company recognizes in this regard that its possible future business operations could include drilling its undeveloped acreage (6,990 gross acres) in Colorado on the 40-acre spacing now permitted on those properties.  As a result, the Company is, and expects to remain, dependent upon possible industry partners and other outside sources of capital.  Management is unable to predict with certainty at this time the future availability of such partners or such capital, or the terms, if any, that might govern the Company’s participation with such partners or the Company’s access to such capital.   
          **Results of Operations**

          The Company holds up to a 27.5% after-payout working interest in 43 wells drilled under the Unioil/Prima Agreement.  See Exhibits 10.1, 10.2, 10.3 and 10.4.  At September 30, 2006, 40 of the 43 wells had reached payout. At September 30, 2005, 26 of the 43 wells had reached payout. 					          The Company’s revenues from oil and gas sales increased by $968,203 and $1,578,029 to $1,369,637 and $2,692,413 from $401,434 and $1,114,384 (as restated) for the quarter and nine months ended September 30, 2006, respectively, as compared to the corresponding periods of 2005.  This increase in revenues was attributable primarily to the increase in production resulting from the Company’s completion of a previously uncompleted zone in an existing well and to the refracturing of an existing zone in a second well in late 2005, the refracturing of two additional existing wells in the last two weeks of March, 2006, and the refracturing of three additional existing wells in the third quarter of 2006.  Revenues also increased as a result of: (1) the refracturing of six wells operated by Petro-Canada; (2) the wells drilled in previous years that had reached payout under the Unioil/Prima Agreement; and (3) increases in the prices of oil and natural gas.					          Costs of production increased by $756,295 and $1,287,130 to $853,100 and $1,562,078  from $96,805 and $274,948 for the quarter and nine months ended September 30, 2006, respectively, as compared to the corresponding periods of 2005.  This increase in production costs is primarily attributable to the Company’s expenditure of approximately $1,276,807 in the refracturing of a total of 11 existing oil-and-gas wells during the first and third quarters of 2006.  Of this amount, approximately $1,131,000 was spent on a total of five Unioil operated wells, and approximately $146,000 was spent on six wells operated by another operator.  The increase was also attributable to the additional operating costs associated with 12 additional Unioil/Prima Agreement wells achieving payout, as well as the Company’s share of operating costs for newly drilled and recompleted wells, not included in the 2005 operating costs.

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				          The Company’s general and administrative expenses increased by $83,404 to $266,898 from $183,494 (as restated) for the quarter ended September 30, 2006, as compared to the corresponding period of 2005.  General and administrative expenses increased by $17,206 to $544,007 from $526,801 (as restated) for the nine months ended September 30, 2006, as compared to the corresponding period of 2005.  The increase is primarily attributable to the payment of a bonus to the Company's chief executive officer, offset by decreases in professional fees.  The previous years' professional fees included legal, audit, accounting and other professional expenses associated with the effort to bring the Company’s filings current and additional costs associated with a proposed drilling deal that was presented on terms that were unacceptable to management.				          Depreciation, depletion and amortization expenses (“DD&A”) increased by $16,121 and $70,611 to $78,758 and $223,754 from $62,637 and $153,143 (as restated) for the quarter and nine months ended September 30, 2006, as compared to the corresponding periods of 2005.  The increase in DD&A results from the additional production from the wells that had reached payout under the Unioil/Prima Agreement and increases associated with the drilling, recompletion and refracturing activities discussed above. 				          Interest and other expenses were $78 and $253 for the quarter and nine months ended September 30, 2006 as compared to $110 and $373 for the corresponding periods of 2005.  The decrease in these expenses is attributable primarily to the reduction in the outstanding balance of the Company’s indebtedness to Ford Credit Corporation on a Company owned vehicle. 				          The Company realized an increase in net income of $79,541 and $133,786 to $121,742 and $243,323 for the quarter and nine months ended September 30, 2006, as compared to $42,201 and $109,537 (as restated) for the corresponding periods of 2005.  The increase in net income for the quarter and nine months ended September 30, 2006, as compared to the corresponding periods of the previous fiscal year, is attributable primarily to increases in revenues and the other items discussed above.            **Prior Period Adjustments**            The Company has restated prior years' financial statements to reflect the removal from its full cost pool of certain proved undeveloped reserves which had been included in reserve reports for prior years.  The cumulative effect was additional cost-ceiling write offs of $2,232,554, which in turn results in decreased depreciation, depletion and amortization in subsequent periods.  Depreciation, depletion and amortization as restated totaled $62,637 and $153,143 for the quarter and nine months ended September 30, 2005, respectively, as compared to the previously reported amount of $48,203 and $154,751, respectively.				          The comparative periods of the previous years' financial statements were also corrected for errors in the recognition of revenue and costs of revenue for the Company’s non-operated wells, the effect of which was to increase net income in the quarter ended September 30, 2005 by $4,149, while decreasing net income for the nine month period ended September 30, 2005 by $44,203.				          The Company's previous assessment of the likelihood of realization of its deferred tax assets which resulted in recording a full valuation allowance had been based upon a misinterpretation of the requirements of FASB 109 to evaluate the likelihood of utilization of operating loss carryforwards and to record a deferred tax asset accordingly.  Consequently, the Company has recorded a reduction in its deferred tax asset valuation allowance as the correction of an error, resulting in a decrease of $1,439,347 in the retained earnings deficit at December 31, 2003.  8           			          This corrected valuation allowance from previous years resulted in  the comparative periods of the previous years' financial statements being restated to record deferred income tax expense of $20,409 for the quarter and $60,086 for the nine month period ended September 30, 2005.     **Item 3.  Controls and Procedures**            Disclosure controls and procedures are designed with an objective of ensuring that information required to be disclosed in the Company’s periodic reports filed with the Securities and Exchange Commission (the “Commission”), such as this Report on Form 10-QSB, is recorded, processed, summarized and reported within the time periods specified by the Commission. Disclosure controls are designed also with an objective of ensuring that such information is accumulated and communicated to the Company’s management, including the Company's chief executive officer (who also acts as the Company's chief financial officer) in a manner that will allow timely consideration regarding required disclosures.				          The evaluation of the Company's disclosure controls by its chief executive officer included a review of the objectives and design of the controls, the operation of the controls, and the effect of the controls on the information presented in this Report.  The Company's management, including its chief executive officer, does not expect that disclosure controls can or will prevent or detect all errors or all fraud, if any.  A control system, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance that the objectives of the system are met.  Projections of any evaluation of the disclosure controls and procedures to future periods, moreover, are subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, and that the degree of compliance with the policies or procedures might deteriorate.				          As a result of his review and evaluation as of the end of the period covered by this Report (the “Evaluation Date”), and subject to the inherent limitations described above, the Company’s chief executive officer has concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are not effective, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) .				          The Company did not maintain effective controls over the segregation of duties in its manual and computer-based business processes which would mitigate the risk of management override of disbursement controls.				          A material weakness is a significant deficiency, or a combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.				          The current status of the Company's internal control remediation is as follows:  9           			          Currently, the Company’s chief executive officer and the Company’s Treasurer, the only full-time employee, continue to have sole responsibility for the Company’s receipts and disbursements.  The Company’s chief executive officer, moreover, is not involved on a day-to-day basis in the financial transactions of the Company, and does not spend a significant amount of time in the Company's offices.  See “Risk Factors – Management Risks.”  The Company does not employ any other parties on an in-house basis to prepare the Company’s financial statements and periodic public filings.  Such reliance upon the Company’s only full-time employee impairs the Company’s ability to provide for a proper segregation of duties and the ability to ensure consistently complete and accurate financial reporting and, therefore, impairs the effectiveness of the Company’s disclosure controls and procedures.    			          Because of the relatively limited scale of the Company’s business and administrative activities, management has determined that it would not be cost effective to implement a substantial increase in the in-house staffing of the Company’s accounting function.  In particular, the Company does not anticipate hiring a full time controller in the foreseeable future.  Accordingly, management recognizes that the lack of segregation of duties will constitute an ongoing deficiency in the Company’s internal controls.    			          During the quarter ended June 30, 2006, the Company engaged a CPA firm to act as a consultant to the Company on matters of accounting procedures and disclosures.  The engagement of this consultant has mitigated control deficiencies related to the level of accounting knowledge, experience and training in the application of generally accepted accounting principles for existing Company personnel identified by management in its December 31, 2005 control assessment. Specifically, the following deficiencies have been addressed since engaging this consultant:  accounting for income taxes, recording of revenue, and financial statement presentation of operator revenues.  In addition, the consultant will act as project coordinator to ensure more timely Company filings.     10      
**PART II—OTHER INFORMATION**

**Item 1.  Legal Proceedings**

          As of the date of filing this Report, no present officer or director of the Company: 1) has had any petition filed, within the past five years, in U.S. Bankruptcy or state insolvency proceedings on such person's behalf or on behalf of any entity of which such person was an officer or general partner within two years of filing; or 2) has been convicted in a criminal proceeding within the past five years or is currently a named subject of a pending criminal proceeding; or 3) has been the subject, within the past five years, of any order, judgment, decree or finding (not subsequently reversed, suspended or vacated) of any court or regulatory authority involving violation of securities or commodities laws, or barring, suspending, enjoining or limiting any activity relating to securities, commodities or other business practice.					          Unioil vs. Fred C. Jones. By a Complaint with Jury Demand filed on December 1, 2005, the Company commenced a civil action in the District Court in and for Weld County, Colorado (Case No. 2005CV2215) against Fred C. Jones, a former employee of Unioil. That Complaint alleged claims against Mr. Jones for fraud, breach of fiduciary duty, conversion and commercial theft. In compliance with applicable laws and the Colorado Rules of Civil Procedure, no amounts of monetary damages were stated in the Complaint. However, Mr. Jones failed to answer or otherwise respond to the Complaint in this action and the Company timely filed a Motion for Default Judgment on December 30, 2005, which listed and quantified the damages sought by the Company against Mr. Jones. That Motion listed those damages as including: (a) actual damages in the amount of $197,839, trebled pursuant to Colorado Revised Statutes §18-4-405 to $593,517; (b) statutory interest at the rate of 8% per annum compounded annually pursuant to Colorado Revised Statutes §5-12-102(1) on the amount of the Company’s funds wrongfully withheld, misappropriated or unlawfully converted by Mr. Jones from the date of such wrongful conduct to the date of payment; and (c) attorneys’ fees in the amount of $1,980 and costs of this action in the amount of $331.					          By Order for Default Judgment dated March 10, 2006, the District Court in and for Weld County, Colorado, entered a Judgment against Mr. Jones in the total amount of $595,828. The Judgment further provided that the damages awarded would accrue interest at the statutory rate of 8% per annum compounded annually from the date of the wrongful withholding, misappropriation or unlawful conversion of the relevant funds by Mr. Jones. By applicable rules, all such judgments are automatically stayed for a period of 15 days before any collection activity can begin. As of the date of filing of this Report, that 15-day period had expired. Unioil, therefore, may continue to pursue collection efforts.					          By Order dated May 1, 2006, Mr. Jones was required to deliver within 10 days thereafter his certificate for common stock in Unioil to Unioil’s counsel.  Mr. Jones failed to do so, but Unioil obtained an Order requiring Mr. Jones and his wife to appear at a hearing on July 7, 2006 for their depositions and to produce all documents previously requested, including Mr. Jones’ stock certificate.  On or about June 29, 2006, Unioil’s counsel did receive that stock certificate from Mr. Jones.  Mr. Jones’ certificate represents 452,500 shares of common stock of the Company after the one-for-ten reverse stock split that was effective December 29, 2005.  As a result of information and documents received from Mr. Jones during his deposition on July 7, 2006, management continues to be of the opinion that the amount of the Judgment with accrued interest substantially exceeds the remaining assets of Mr. Jones that would be available for collection. Therefore, management does not believe that Unioil will be able to collect all or substantially all of this Judgment.

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  Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds  
          For the period covered by this Report, no information is required to be furnished pursuant to this Item 2.
  **Item 3.  Defaults Upon Senior Securities**  
          For the period covered by this Report, no information is required to be furnished pursuant to this Item 3.****

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

          No matter was submitted to a vote of security holders through the solicitation of proxies or otherwise during the period covered by this Report.  The last meeting of stockholders of the Company was held on November 30, 2005.
**Item 5.  Other Information**
          For the period covered by this Report, no information is required to be furnished pursuant to this Item 5.

**Item 6.  Exhibits and Reports of Form 8-K**
            **Exhibits**  
          Except as listed below, exhibits to this Report consist of documents previously filed, which documents are incorporated herein as exhibits to this Report by reference to registration statements and other reports previously filed by the Company pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934.

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Exhibit No.

Description

Location
     
10.1

Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil & Gas Company and the Company.

Incorporated by reference to Exhibit No. 10.1 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998 (Commission File No. 0-10089)
   
10.2

Extension, dated March 24, 1999, of Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil and Gas Company and the Company

Incorporated by reference to Exhibit No. 10.3 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999 (Commission File No. 0-10089).
    
10.3

Extension, dated February 21, 2001, of Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil and Gas Company and the Company

Incorporated by reference to Exhibit No. 10.4 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001 (Commission File No. 0-10089).
    
10.4

Extension, dated December 13, 2001, of Farmout/Farmout Option Agreement, Weld County, Colorado, dated November 7, 1996, by and between Prima Oil and Gas Company and the Company

Incorporated by reference to Exhibit No. 10.4 to the Registrant’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 (Commission File No. 0-10089).
    
31

Certification of Mr. Ayers Pursuant to Rules 13a-14 or 15d-14

  
    
32

Certification of Mr. Ayers Pursuant to Section 1350

  
  
13
****
****

**SIGNATURES**

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

                                                                                      **UNIOIL**
Date:  November 20, 2006   /s/ Charles E. Ayers, Jr.                                        Charles E. Ayers, Jr., Chairman(on behalf of the registrant, and as principal executiveofficer, principal financial officer, and principalaccounting officer of the registrant)
14
     
**UNIOIL					UNAUDITED CONDENSED FINANCIAL STATEMENTS					September 30, 2006**
    15      
**UNIOIL					CONTENTS**
  **PAGE**         Unaudited Condensed Balance Sheets,17     September 30, 2006 and December 31, 2005    Unaudited Condensed Statements of Operations,								18     For the three months and nine months     ended September 30, 2006 and 2005   Unaudited Condensed Statements of Cash Flows,								19     For the nine months ended September 30, 2006 and 2005    Notes to Unaudited Condensed Financial Statements20-23  
16
    
**UNIOIL****UNAUDITED CONDENSED BALANCE SHEETS**

****

****

September 30,

December 31,

 2006 

 2005 

**CURRENT ASSETS:**

Cash
								$
668,811

  
								$
706,382

Joint interest and trade accounts receivable, net of allowance

for doubtful accounts of $ 7,024 and $ 6,777, respectively

1,018,909

  

346,297

Prepaid assets

18,236

9,662

Current deferred tax asset

2,820

2,511

Total Current Assets

1,708,776

1,064,852

   

**PROPERTY AND EQUIPMENT,**net****

16,390

24,523

     

**INVESTMENT IN OIL AND GAS PRODUCING**

**PROPERTIES**, full cost method, net of depletion****

1,216,113

1,137,118

  

**DEFERRED TAX ASSETS**

1,082,454

1,224,467
      
**TOTAL ASSETS**
								$
4,023,733
								$
3,450,960
==========================  
  

**LIABILITIES AND STOCKHOLDERS' EQUITY**

  

**CURRENT LIABILITIES:**

Note payable - current portion
								$
10,099
								$
9,964

Joint interest and trade accounts payable

296,916

95,354

Accrued taxes

351,829

216,493

Total Current Liabilities

658,844

321,811

  

**NOTE PAYABLE,**less current portion****

3,404

10,987

Total Liabilities

662,248

332,798

   

**STOCKHOLDERS' EQUITY:**

Common stock, $.01 par value, 100,000,000 shares authorized,

 9,541,469 and 9,993,969 shares issued and outstanding, respectively

95,415

   99,940

Capital in excess of par value

19,818,094

19,813,569

Retained deficit

(16,552,024)

(16,795,347)

Total Stockholders' Equity

3,361,485

3,118,162

  

**TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY**
								$
4,023,733
								$
3,450,960
==========================
The accompanying notes are an integral part of these unaudited condensed financial statements.

17

**UNIOIL****UNAUDITED CONDENSED STATEMENTS OF OPERATIONS**

Three months ended

Nine months ended

September 30,

September 30,

2006

2005

2006

2005

(restated)

(restated)

(restated)

**REVENUE:**
							   
    Oil and gas sales

1,369,637
							  
401,434
							  
2,692,413

1,114,384

  

** EXPENSES:**

    Production costs and related taxes

      853,100

        96,805

      1,562,078

274,948

    General and administrative

      266,898

      183,494

      544,007

      526,801

    Depreciation, depletion and amortization

78,758

62,637

223,754

153,143

   

 Total Expenses

1,198,756

342,936

2,329,839

954,892

  

** INCOME BEFORE OTHER INCOME(EXPENSE)**

      170,881

        58,498

      362,574

      159,492

   

** OTHER INCOME (EXPENSE):**

    Interest and other income

          13,312

          4,222

          22,706

          10,504

    Interest and other expense

(78)

(110)

(253)

(373)

   

Total Other Income (Expense)

13,234

4,112

22,453

10,131

  

** INCOME BEFORE INCOME TAXES**

      184,115

       62,610

      385,027

      169,623

   

** CURRENT TAX (EXPENSE) BENEFIT**

  

** DEFERRED TAX (EXPENSE) BENEFIT**

(62,373)

(20,409)

(141,704)

(60,086)

  

** NET INCOME **
							$
121,742
							$
42,201
							$
243,323
							$
109,537
							===========							===========							===========							===========
    

** NET INCOME PER COMMON SHARE**
							$
0.01
							$
0.00
							$
0.02
							$
0.01
							===========							===========							===========							===========  
The accompanying notes are an integral part of these unaudited condensed financial statements.
  
18

**UNIOIL****UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS**

****

Nine Months Ended

 September 30,

 2006 

 2005 
*(Restated)**(Restated)*
**Cash Flows From Operating Activities:**

Net income
							$
243,323
							  							$
109,537

Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation, depletion and amortization

223,754

153,143

Deferred income tax

141,704

60,086

Changes in assets and liabilities:

(Increase) decrease in joint interest and trade

 

   accounts receivable

(672,612)

40,736

(Increase) in prepaid assets

(8,574)

(847)

Increase in joint interest and trade accounts payable

       201,562

      375,552

(Decrease) in accrued payroll taxes

-

(44,834)

Increase (decrease) in accrued taxes

135,336

(44,767)

  

Net Cash Provided by Operating Activities

264,493

648,606
  
**Cash Flows From Investing Activities:**

Investment in oil and gas properties

(294,616)

(249,410)

Proceeds from sale of oil and gas producing property

-

7,000

  

Net Cash (Used) by Investing Activities

(294,616)

(242,410)

  

**Cash Flows From Financing Activities:**

Payments of notes payable

(7,448)

(7,328)

  

Net Cash (Used) by Financing Activities

(7,448)

(7,328)

  

**Net Increase (decreased) in Cash**

(37,571)

398,868

  

**Cash at Beginning of Period**

706,382

420,321

  

**Cash at End of Period**
							$
668,811
							$
819,189
							=============							=============
  

**Supplemental Disclosures of Cash Flow Information:**

Cash paid during the period:

Interest
							$
253
							$
351
							=============							=============
Income Taxes
							$
-
							$
-
							=============							=============   						
****

**Supplemental Schedule of Non-cash Investing and Financing Activities:**

For the nine months ended September 30:

none

none

					The accompanying notes are an integral part of these unaudited condensed financial statements.
    19      
**UNIOIL					NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS**
  **NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**  
**Condensed Financial Statements****-** The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at September 30, 2006 and 2005 and for the periods then ended have been made.  The September 30, 2005 financial statements have been restated to give effect to audit adjustments made for the year ended December 31, 2005.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2005 audited financial statements.  The results of operations for the periods ended September 30, 2006 and 2005 are not necessarily indicative of the operating results for the full year.
  ****  NOTE 2 - BACK PAYMENT OF INTERESTS IN NON-OPERATED WELLS  
During 2006, the Company contacted Petro-Canada to get updates as to the payout status of wells drilled under the terms of a farm-out agreement.  Petro-Canada subsequently updated the payout status of two of the drilling packages that resulted in the Company receiving approximately $475,000 in revenues less approximately $75,000 in operating expenses during November 2006.  These amounts have been accrued in the quarter ended September 30, 2006.
  NOTE 3 - PROPERTY AND EQUIPMENT  
The following is a summary of property and equipment - at cost, less accumulated depreciation as of:
  										September 30,										December 31,       										2006										2005              Office Equipment                            										$										5,315										$										5,315Transportation equipment										48,905										48,905   										54,220										54,220Less:  accumulated depreciation										(37,830)										(29,697)										$										16,390										$										24,523========================
Depreciation expense for the nine months ended September 30, 2006 and 2005 amounted to $8,133 and $8,761, respectively.
  **NOTE 4 - OIL AND GAS ACTIVITIES**  
The Company’s activities primarily consist of operating existing wells and monitoring the status of its leases.  Depletion expense on oil and gas properties was $215,621 and $144,382 for the nine months ended September 30, 2006 and 2005, respectively.
    20      **UNIOIL				NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS**  ****  NOTE 5 - NOTE PAYABLE  
In January 2003, the Company signed a note payable in the amount of $48,905 to a financing institution.  The note is secured by a vehicle with a net book value of $12,226 at September 30, 2006.  The note has an annual interest rate of 1.9% and matures in January 2008.

The note payable matures as follows for the twelve-month periods ended:
											September 30,                    											Principal Due											2007											$											10,099											2008											3,404											2009											-											2010											-$											13,503  **NOTE 6 - RELATED PARTY TRANSACTIONS**  
The Company paid a director/shareholder of the Company $4,500 and $-0- as director’s fees during the nine months ended September 30, 2006 and 2005, respectively.

The Company paid an officer/shareholder of the Company $45,000 and $40,000 as director’s fees during the nine months ended September 30, 2006 and 2005, respectively.  The Company also paid this officer/shareholder of the Company $137,589 and $-0- as compensation during the nine months ended September 30, 2006 and 2005, respectively.
  NOTE 7 - CONCENTRATIONS OF CREDIT RISKS  
As of September 30, 2006, the Company had cash balances in excess of federally insured amounts of $586,881.
  NOTE 8 - INCOME TAXES  ****  
Income tax expense is recorded based on annualized interim results.  The components of income tax expense are as follows:
                                   For the Nine Months Ended September 30,								2006								   								  								2005*(Restated)**(Restated)*Current tax (expense) benefit 								-Deferred tax (expense) benefit    								$								(141,704)								$								(60,086)   Total income tax (expense) benefit    $								(141,704)								$								(60,086)============================    21          **UNIOIL				NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS**  **NOTE 9 - INCOME PER SHARE**  
The following data show the amounts used in computing income per share:

Three months ended

Nine months ended

September 30,

September 30,

2006

2005

2006

2005
*(Restated)**(Restated)**(Restated)*
   

Income available to common shareholders								(numerator)
							$
121,742
							  							$
42,201
							      
$

 243,323
							  							$
109,537

      

Weighted average number of common								shares outstanding used in computation of								income per share (denominator)

9,541,469

9,993,969

9,839,821

9,993,969
				Dilutive loss per share was not presented, as the Company had no options, warrants or other dilutive potential securities outstanding at September 30, 2006 or 2005.  **NOTE 10 – LITIGATION SETTLEMENT RECOVERY**  
On June 29, 2006, Unioil received 452,500 shares of its common stock previously held by a former officer in partial satisfaction of a judgment against the officer in favor of the Company.  Due to the uncertainty of collection of any part of the outstanding judgment, the Company had, in previous periods, charged all amounts receivable from the former officer to operations.  The Company’s Form 10-QSB for the quarter ended June 30, 2006 originally recorded $181,000 in debt recovery income, equal to the fair value of the shares received, and an associated deferred tax expense of $69,920.  The Company plans to restate its June 30, 2006 financial statements to eliminate the debt recovery income and related tax effect.  The effect of this restatement will reduce net income for the quarter and six-month period ended June 30, 2006 by $111,080, or $0.01 per share.  Results of operations for the nine months ended September 30, 2006 in the accompanying financial statements reflect this planned restatement in that no income has been recognized for the $181,000 reduction in the allowance offsetting the Company’s judgment receivable from the former officer.
  **NOTE 11 - SUBSEQUENT EVENTS**  
**Compensation Payment -** On October 17, 2006, the Company paid an officer/shareholder of the Company $129,093 as compensation.
  ****  
**Tender Offer and Merger -** On October 19, 2006, the Company entered into a Tender Offer Agreement with Petroleum Development Corporation ("PDC") and Wattenberg Acquisition Corporation, a wholly-owned subsidiary of PDC ("PDC Sub"), whereby PDC Sub commenced a tender offer on November 3, 2006 for all of the issued and outstanding shares of the Company’s common stock for $1.91 per share, all in cash.  That Tender Offer is expected to be followed by a merger of PDC Sub with the Company in which any of the Company’s shares not purchased by
        22          **UNIOIL				NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS**  
**NOTE 11 - SUBSEQUENT EVENTS (CONTINUED)**
  
PDC Sub in the offer will be converted into the right to receive $1.91 per share, all in cash.  Following the tender offer and merger, the Company would be a wholly-owned subsidiary of PDC.

As an inducement for PDC and PDC Sub to enter into the Tender Offer Agreement, Charles E. Ayers, Jr., the Chairman, President, Chief Executive Officer and Chief Financial Officer of Unioil, and four members of his family (the “Principal Stockholders”), have entered into a Stockholder Tender Agreement with PDC dated as of October 19, 2006 (the “Stockholder Tender Agreement”). To the knowledge of Unioil, the Principal Stockholders collectively own of record 7,801,939 shares of Unioil common stock. Of this total, Charles E. Ayers, Jr. owns 6,851,983 shares and each of the four members of his family who are party to the Stockholder Tender Agreement own 237,489 shares.

If more than 90% of the issued and outstanding Unioil common stock is acquired by PDC Sub in the offer, the merger may be effected without approval of or notice to the remaining stockholders of the Company.  If less than 90% of the issued and outstanding shares of the Company’s common stock is acquired by PDC Sub in the offer, the merger will require approval by holders of a majority of the Company’s common stock, which approval will be assured because of the Principal Stockholders’ commitment to tender shares representing approximately 82% of the issued and outstanding shares of the Company’s common stock to PDC Sub pursuant to the Stockholder Tender Agreement.

The closing of the tender offer is conditioned upon, among other things, (i) there being no proceeding or governmental action challenging the acquisition of the Company by PDC and PDC Sub, (ii) no material adverse effect having occurred with respect to the Company, (iii) there being no material inaccuracies in the Company’s representations and warranties in the Tender Offer Agreement nor any breach of any material obligation, and (iv) the Stockholder Tender Agreement being in full force and effect with no material breach by the Principal Stockholders thereunder. The Tender Offer Agreement may also be terminated under certain circumstances, as set forth in the Tender Offer Agreement.

As a result of the proposed merger, all of the current officers and directors of the Company are expected to take such actions as are necessary to cause them to be replaced as officers and directors of the Company by persons chosen for those positions by PDC and PDC Sub.

Under the Tender Offer Agreement, PDC and its Sub agreed to permit the current management of the Company to retain from revenue received or to be received by the Company in the ordinary course of business an amount of cash to pay professional fees and costs and to pay bonuses to certain employees, consultants, advisors and independent contractors who are not and will not be shareholders of the Company.  The parties agreed that those bonuses, together with professional fees and costs related to the transactions contemplated under that Agreement shall not exceed One Million One Hundred and Three Thousand Dollars ($1,103,000) in the aggregate.

The foregoing summary of certain provisions of the Tender Offer Agreement and the Stockholder Tender Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of such agreements, filed as Exhibits (d)(1) and (d)(2), respectively, to the Tender Offer Statement (Schedule TO) filed by PDC and its Sub with the SEC on November 3, 2006 and as Exhibits (e)(1) and (e)(2), respectively, to the Schedule 14D-9 filed by the Company with the SEC on the same date.
    23