SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

| |  | Quarterly
  report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
quarterly period ended March 31, 2007.
| |  | ----------------------------------------------------------------------------------------------------------------------------------

| |  | Transition
  report under Section 13 or 15(d) of the Securities  Exchange Act of 1934 for the
transition  period from _________  to __________.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------

Commission file number:
000-29325

|                                                                      | Star Energy Corporation
(Name of small business issuer as specified in its charter)              |                                                
|--------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | -----------------------------------------------
|Nevada
(State or other jurisdiction of
incorporation or organization) |                                                                                                  | 87-0643634
(IRS Employer
Identification Number)
|                                                                      | 317 Madison Avenue, New York, New York 10017
(Address of Principal Executive Offices) (Zip Code) |                                                
|                                                                      | (212) 500-5006
(Issuers telephone number, including area code)                                  |                                                

Check whether the registrant: (1)
filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes      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 number of  outstanding  shares
of the issuer's  common stock,  $0.001 par value (the issuer's only class of common
 equity),  as of June 18, 2007 was 29,007,500.

Transition Small Business Disclosure
Format.  Yes      No

---

TABLE OF CONTENTS

|                  |                                                                                       | Page
|----------------- | ------------------------------------------------------------------------------------- | ----
|                  | PART I                                                                                |     
|                 
|ITEM 1.           | FINANCIAL STATEMENTS                                                                  |     
|                 
|                  | Unaudited Balance Sheet as of March 31, 2007                                          |     
|                 
|                  | Unaudited Statements of Operations for the three months ended March 31, 2007 and 2006 |     
|                 
|                  | Unaudited Statements of Cash Flows for the three months ended March 31, 2007 and 2006 |     
|                 
|                  | Notes to the Unaudited Financial Statements                                           |     
|                 
|ITEM 2.           | MANAGEMENT'S DISCUSSION AND ANALYSIS                                                  |     
|                 
|ITEM 3.           | CONTROLS AND PROCEDURES                                                               |     
|                 
|                  | PART II                                                                               |     
|                 
|ITEM 6.           | EXHIBITS                                                                              |     
|                 
|SIGNATURES       
|                 
|INDEX TO EXHIBITS |                                                                                      

---

PART I  FINANCIAL
INFORMATION

|ITEM 1. |  | FINANCIAL
STATEMENTS
|------- |  | --------------------

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Balance Sheets
March 31, 2007 and 2006

|                                                                         | 2007 |  | 2006 |           
|------------------------------------------------------------------------ | ---- |  | ---- | ----------
|ASSETS                                                                   |      |  |      |           
|Current                                                                  |      | 
|Cash                                                                     |      |  | $    | 2,446,829 
|Investment in available for sale securities (note 4)                     |      |  |      | 592,500   
|Accounts receivable                                                      |      |  |      | -         
|Loan receivable (note 5)                                                 |      |  |      | 3,000,000 
|Prepaid expenses                                                         |      |  |      | 833,215   
|Deposit - intent of business combination                                 |      |  |      | -         
|                                                                         |      | 
|Total Current Assets                                                     |      |  |      | 6,872,544 
|Oil and Gas Properties                                                   |      |  |      | -         
|Deferred Financing Costs(note 6)                                         |      |  |      | 504,167   
|                                                                         |      | 
|Total Assets                                                             |      |  | $    | 7,376,711 
|                                                                         |      | 
|                                                                         |      | 
|LIABILITIES                                                              |      | 
|Current                                                                  |      | 
|Accounts payable                                                         |      |  | $    | 5,660     
|Accrued liabilities                                                      |      |  |      | 755,010   
|Advance from related party (note 7)                                      |      |  |      | 2,785     
|Note payable                                                             |      |  |      | -         
|Convertible debentures (note 8)                                          |      |  |      | 7,500,000 
|                                                                         |      | 
|Total Current Liabilities                                                |      |  |      | 8,263,455 
|Asset Retirement Obligation                                              |      |  |      | -         
|                                                                         |      | 
|Total Liabilities                                                        |      |  |      | 8,263,455 
|                                                                         |      | 
|                                                                         |      | 
|STOCKHOLDERS' DEFICIT                                                    |      | 
|Capital Stock (note 9)                                                   |      | 
|Authorized                                                               |      | 
|5,000,000  preferred stock, par value $0.001 per share                   |      | 
|225,000,000  common stock, par value $0.001 per share                    |      | 
|Issued                                                                   |      | 
|28,987,500  common stock (2005 - 31,562,500)                             |      |  |      | 28,988    
|Additional Paid-in Capital                                               |      |  |      | 2,089,815 
|Accumulated Deficit and Deficit Accumulated During the Development Stage |      |  |      | (3,005,547
|                                                                         |      | 
|Total Stockholders' (Deficit) Equity                                     |      |  |      | (886,744  
|                                                                         |      | 
|Total Liabilities and Stockholders' Equity                               |      |  | $    | 7,376,711 
|                                                                         |      | 

(The
accompanying notes are an integral part of these financial statements.)

 1 

---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations and Comprehensive Loss 
Three Months Ended March 31, 2007 and 2006, and the Period from 
Re-entering the Development Stage through to March 31, 2007

|                                                          | 2007 |  | 2006 |            | (Note 1)
Period from
Re-entering the
Development
Stage through to
Mar. 31, 2007 |  
|--------------------------------------------------------- | ---- |  | ---- | ---------- | ------------------------------------------------------------------------------- | -
|Oil and Gas Revenues                                      |      |  | $    | -          |                                                                                 | $
|Other Income                                              |      |  |      | 4,176      |                                                                                 |  
|                                                          |      | 
|                                                          |      |  |      | 4,176      |                                                                                 |  
|                                                          |      | 
|                                                          |      | 
|Operating Expenses                                        |      | 
|Consulting                                                |      |  |      | 905,000    |                                                                                 |  
|Salary and benefits                                       |      |  |      | 369,717    |                                                                                 |  
|Advertising and promotion                                 |      |  |      | 150,972    |                                                                                 |  
|Professional fees                                         |      |  |      | 135,607    |                                                                                 |  
|Interest and bank charges                                 |      |  |      | 100,660    |                                                                                 |  
|Office and general                                        |      |  |      | 53,258     |                                                                                 |  
|Travel                                                    |      |  |      | 26,604     |                                                                                 |  
|Insurance                                                 |      |  |      | 6,198      |                                                                                 |  
|Rent                                                      |      |  |      | 4,700      |                                                                                 |  
|Telephone                                                 |      |  |      | 1,252      |                                                                                 |  
|Production costs                                          |      |  |      | -          |                                                                                 |  
|Depreciation   - equipment                                |      |  |      | -          |                                                                                 |  
|- deferred financing cost                                 |      |  |      | 45,833     |                                                                                 |  
|                                                          |      | 
|Total Operating Expenses                                  |      |  |      | 1,799,801  |                                                                                 |  
|                                                          |      | 
|Operating Loss                                            |      |  |      | (1,795,625 | )                                                                               |  
|                                                          |      | 
|Other Income (Expense)                                    |      | 
|Debt forgiven                                             |      |  |      | -          |                                                                                 |  
|Cost associated with the rescission of the stock purchase |      | 
|agreement                                                 |      |  |      | -          |                                                                                 |  
|                                                          |      | 
|Total Other Income (Expenses)                             |      |  |      | -          |                                                                                 |  
|                                                          |      | 
|Loss Before Income Taxes                                  |      |  |      | (1,795,625 | )                                                                               |  
|Provision for income taxes (note 10)                      |      |  |      | 600        |                                                                                 |  
|                                                          |      | 
|Net Loss and Comprehensive Loss                           |      |  | $    | (1,796,225 | )                                                                               | $
|                                                          |      | 
|Basic and Diluted Loss Per Weighted                       |      | 
|Average Number of Shares Outstanding                      |      | 
|During the Period                                         |      |  |      | (0.0621    | )                                                                               |  
|                                                          |      | 
|Basic and Diluted Weighted Average Number                 |      | 
|of Shares Outstanding During the Period                   |      |  |      | 28,904,167 |                                                                                 |  
|                                                          |      | 

(The
accompanying notes are an integral part of these financial statements.)

 2 

---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY) 
Statement of Stockholders Deficit 
Three Months Ended March 31, 2007 and 2006 and the Period from 
Re-entering the Development Stage through to March 31, 2007

|                                           | Number of
Common
Shares |  | Capital
Stock |            | Additional
Paid-in
Capital |   | Accumulated
Deficit and
Deficit
Accumulated
During the
Development
Stage |  | Stockholders'
(Deficit) Equity
|------------------------------------------ | ----------------------- |  | ------------- | ---------- | -------------------------- | - | ------------------------------------------------------------------------ |  | ------------------------------
|                                           |                         | 
|Balance, January 1, 2006                   |                         |  |               | 31,562,500 |                            | $ | 31,563                                                                   |  | $                             
|                                           |                         | 
|Net loss for the period                    |                         |  |               | -          |                            |   | -                                                                        |  |                               
|                                           |                         | 
|                                           |                         | 
|Balance, March 31, 2006                    |                         |  |               | 31,562,500 |                            | $ | 31,563                                                                   |  | $                             
|                                           |                         | 
|                                           |                         | 
|Balance, January 1, 2007                   |                         |  |               | 28,737,500 |                            | $ | 28,738                                                                   |  | $                             
|                                           |                         | 
|Common shares issued for services (note 9) |                         |  |               | 250,000    |                            |   | 250                                                                      |  |                               
|                                           |                         | 
|Net loss for the period                    |                         |  |               | -          |                            |   | -                                                                        |  |                               
|                                           |                         | 
|                                           |                         | 
|Balance, March 31, 2007                    |                         |  |               | 28,987,500 |                            | $ | 28,988                                                                   |  | $                             
|                                           |                         | 

(The accompanying notes
are an integral part of these financial statements.)

 3 

---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statement of Cash Flows
Three Months Ended March 31, 2007 and 2006, and the Period from 
Re-entering the Development Stage through to March 31, 2007

|                                                                        | 2007 |  | 2006 |            | (Note 1)
Period from
Re-entering the
Development
Stage through to
Mar. 31, 2007
|----------------------------------------------------------------------- | ---- |  | ---- | ---------- | -------------------------------------------------------------------------------
|                                                                       
|
|Cash Flows from Operating Activities                                    |      |  |      |            |                                                                                
|Net loss                                                                |      |  | $    | (1,796,225 | )                                                                              
|Adjustment to reconcile non-cash item:                                  |      | 
|Depreciation- equipment                                                 |      |  |      | -          |                                                                                
|- deferred financing cost                                               |      |  |      | 45,833     |                                                                                
|Issuance of common stock for services                                   |      |  |      | 870,000    |                                                                                
|                                                                        |      | 
|                                                                        |      |  |      | (880,392   | )                                                                              
|Change in non-cash working capital:                                     |      | 
|Accounts receivable                                                     |      |  |      | -          |                                                                                
|Prepaid expenses                                                        |      |  |      | 247,675    |                                                                                
|Deposit - intent of business combination                                |      |  |      | -          |                                                                                
|Accounts payable                                                        |      |  |      | (369,667   | )                                                                              
|Accrued liabilities                                                     |      |  |      | 90,010     |                                                                                
|                                                                        |      | 
|                                                                        |      | 
|Net Cash Used in Operating Activities                                   |      |  |      | (912,374   | )                                                                              
|                                                                        |      | 
|                                                                        |      | 
|Cash Flows from Investing Activities                                    |      | 
|                                                                        |      | 
|Purchase of available for sale securities                               |      |  |      | (592,500   | )                                                                              
|Loan receivable                                                         |      |  |      | (2,000,000 | )                                                                              
|Proceeds from note payable                                              |      |  |      | -          |                                                                                
|                                                                        |      | 
|                                                                        |      | 
|Net Cash Used in Investing Activities                                   |      |  |      | (2,592,500 | )                                                                              
|                                                                        |      | 
|Cash Flows from Financing Activities                                    |      | 
|Proceeds from note payable                                              |      |  |      | -          |                                                                                
|Cancellation of common shares on sale of oil and gas properties         |      |  |      | -          |                                                                                
|Proceeds from issuance of convertible debentures                        |      |  |      | 7,500,000  |                                                                                
|Repayment of loan payable                                               |      |  |      | (1,000,000 | )                                                                              
|Deferred financing costs                                                |      |  |      | (550,000   | )                                                                              
|                                                                        |      | 
|                                                                        |      | 
|Net Cash Provided by Financing Activities                               |      |  |      | 5,950,000  |                                                                                
|                                                                        |      | 
|                                                                        |      | 
|Net Increase in Cash                                                    |      |  |      | 2,445,126  |                                                                                
|                                                                        |      | 
|Cash - Beginning of Period                                              |      |  |      | 1,703      |                                                                                
|                                                                        |      | 
|                                                                        |      | 
|Cash - End of Period                                                    |      |  | $    | 2,446,829  |                                                                                
|                                                                        |      | 
|                                                                        |      | 
|Supplemental Information                                                |      | 
|During the period, the Company had cash flows arising from interest and |      | 
|income taxes as follows:                                                |      | 
|Interest paid                                                    $      |      |  | $    | -          |                                                                                
|                                                                        |      | 
|Income taxes paid                                                       |      |  | $    | 600        |                                                                                
|                                                                        |      | 

(The accompanying notes
are an integral part of these financial statements.)

 4 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|1. |  | Description
of Business
|-- |  | -----------------------

| | Star
Energy Corporation (the Company) was organized under the laws of the State of
Nevada on December 7, 1999. The Company is primarily engaged in the business of
acquiring, developing and selling oil and gas properties to companies located in the
continental United States. The Companys principal operations began in June 2003
when it purchased an interest in eight oil and gas producing wells. On October 6, 2006,
the Company was considered to have re-entered the development stage.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Going
Concern
|-- |  | -------------

| | The
accompanying financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America with the assumption that
the Company will be able to realize its assets and discharge its liabilities in the
normal course of business.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is in the development stage and has realized minimal revenues from its planned
operations. The Company has sustained losses of $(1,796,225) and $(8,771) for the periods
ended March 31, 2007 and 2006, respectively. As of March 31, 2007, the Company had
working capital deficit of $1,390,911 (2006: $14,785 working capital) and an accumulated
deficit of $(3,005,547) (2006: $48,082). The Company has funded operations through the
issuance of capital stock. On February 9, 2007, the Company obtained $7,500,000 through
debt financing (see note 8). Managements plan is to continue raising additional
funds through future equity or debt financing until it achieves profitable operations
from its oil and gas drilling activities. Although the Company plans to pursue additional
financing there can be no assurance that the Company will be able to secure financing
when needed or obtain such on terms satisfactory to the Company, if at all. The Companys
continuation as a going concern depends upon its ability to raise funds and achieve and
sustain profitable operations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
accompanying financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the inability of the Company to
continue as a going concern.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Summary
of Significant Accounting Policies
|-- |  | ------------------------------------------

| | The
accounting policies of the Company are in accordance with U.S. generally accepted
accounting principles, and their basis of application is consistent with that of the
previous year. Outlined below are those policies considered particularly significant:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | a) |  | Reporting
Currency
| | -- |  | ------------------

| | The
U.S. Dollar has been used as the unit of measurement in these financial statements.
| | ---------------------------------------------------------------------------------------

| | b) |  | Marketable
securities
| | -- |  | ---------------------

| | Marketable
securities are stated at the lower of cost and market.
| | -----------------------------------------------------------------

 5 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|3. |  | Summary
of Significant Accounting Policies (contd)
|-- |  | ---------------------------------------------------

| | c) |  | Deferred
Financing Costs
| | -- |  | ------------------------

| | Deferred
financing costs are stated at cost and have been amortized on a straight line basis over
three years.
| | --------------------------------------------------------------------------------------------------------------

| | d) |  | Oil
and Gas Producing Activities
| | -- |  | --------------------------------

| | The
Company utilizes the successful efforts method of accounting for its oil and gas
producing activities. Under this method, all costs associated with productive exploratory
wells and productive or nonproductive development wells are capitalized while the costs
of nonproductive exploratory wells are expensed.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | If
an exploratory well finds oil and gas reserves, but a determination that such reserves
can be classified as proved is not made after one year following completion of drilling,
the costs of drilling are charged to operations. Indirect exploratory expenditures,
including geophysical costs and annual lease rentals are expensed as incurred. Unproved
oil and gas properties that are individually significant are periodically assessed for
impairment of value and a loss is recognized at the time of impairment allowance. Other
unproved properties are amortized based on the Companys experience of successful
drillings and average holding period. Capitalized costs of producing oil and gas
properties after considering estimated dismantlement and abandonment costs and estimated
salvage values, are depreciated and depleted by the units-of-production method. Support
equipment and other property and equipment are depreciated over their estimated useful
lives. The Company evaluates purchases for potential intangible items. However, all
intangible items have been determined to be insignificant.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
the sale or retirement of a complete unit of a proved property, the cost and related
accumulated depreciation, depletion and amortization are eliminated from the property
accounts, and the resultant gain or loss is recognized. On the retirement or sale of a
partial unit of proved property, the cost is charged to accumulated depreciation,
depletion and amortization with a resulting gain or loss recognized in income.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
the sale of an entire interest in an unproved property for cash or cash equivalent, gain
or loss on the sale is recognized, taking into consideration the amount of any recorded
impairment if the property has been assessed individually. If a partial interest in an
unproved property is sold, the amount received is treated as a reduction of the cost of
the interest retained.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 6 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|3. |  | Summary
of Significant Accounting Policies (contd)
|-- |  | ---------------------------------------------------

| | e) |  | Revenue
Recognition
| | -- |  | -------------------

| | Revenue
is recognized from oil sales at such time as the oil is delivered to the buyer. Revenue
is recognized from gas sales when the gas passes through the pipelines at the well head.
The Company believes that both oil and gas revenues should be recognized at these times
because ownership of the oil and gas generally passes to the customer at these times.
Management believes that this policy meets the criteria of the Security and Exchange
Commission (SEC) Staff Accounting Bulletin No. 101 Revenue Recognition
in Financial Statements in that there is persuasive evidence of an existing
contract or arrangement, delivery has occurred, the price is fixed and determinable and
collectability is reasonably assured.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company does not have any gas balancing arrangements.
| | ---------------------------------------------------------

| | f) |  | Financial
Instruments
| | -- |  | ---------------------

| | Unless
otherwise noted, it is managements opinion that the Company is not exposed to
significant interest, currency or credit risks arising from the financial instruments.
The fair value of the financial instruments approximates their carrying values, unless
otherwise noted.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | g) |  | Comprehensive
Income (Loss)
| | -- |  | ---------------------------

| | The
Company adopted Statement of Financial Accounting Standards (SFAS) No. 130,
Reporting Comprehensive Income. (SFAS No. 130). SFAS No. 130
establishes standards for reporting and presentation of comprehensive income (loss) and
its components in a full set of financial statements. Comprehensive income (loss) is
presented in the statements of operations, and consists of net income and unrealised
gains (losses) on available for sale marketable securities; foreign currency translation
adjustments and changes in market value of future contracts that qualify as a hedge; and
negative equity adjustments recognized in accordance with SFAS No. 87. SFAS No. 130
requires only additional disclosures in the financial statements and does not affect the
Companys financial position or results of operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 7 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|3. |  | Summary
of Significant Accounting Policies (contd)
|-- |  | ---------------------------------------------------

| | h) |  | Income
Tax
| | -- |  | ----------

| | The
Company accounts for income taxes pursuant to SFAS No. 109, Accounting for Income
Taxes (SFAS No. 109). Deferred taxes are provided under a liability
method whereby deferred tax assets are recognized for deductible temporary differences,
and deferred tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and liabilities
and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | i) |  | Impairment
of Long-lived Assets
| | -- |  | -------------------------------

| | The
Company evaluates the recoverability of long-lived assets and the related estimated
remaining lives when events or circumstances lead management to believe that the carrying
value of an asset may not be recoverable. Recoverability is assessed based on the
carrying amount of a long-lived asset compared to the sum of the future undiscounted cash
flows expected to result from the use and the eventual disposal of the asset. An
impairment loss is recognized when the carrying amount is not recoverable and exceeds the
total undiscounted cash flows expected from its use and disposition. For the periods
ended March 31, 2007 and March 31, 2006, no events or circumstances occurred for which an
evaluation of the recoverability of long-lived assets was required.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | j) |  | Earnings
(Loss) per Share
| | -- |  | -------------------------

| | The
Company adopted SFAS No.128, Earnings per Share which requires disclosure on
the financial statements of basic and diluted earnings (loss) per share. Basic earnings
(loss) per share is computed by dividing net income (loss) by the weighted average number
of common shares outstanding for the year. In contrast, dilated earnings (loss) per share
considers the potential dilution that occurs from other financial instruments that would
increase the total number of outstanding shares of common stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | k) |  | Pension
and Post-employment Benefits
| | -- |  | ------------------------------------

| | The
Companys mandatory contributions to the governmental pension plan are expensed when
incurred. Discretionary pensions and other post-employment benefits are not material.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 8 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|3. |  | Summary
of Significant Accounting Policies (contd)
|-- |  | ---------------------------------------------------

| | l) |  | Concentration
of Credit Risk
| | -- |  | ----------------------------

| | SFAS
No. 105, Disclosure of Information About Financial Instruments with Off-Balance
Sheet Risk and Financial Instruments with Concentration of Credit Risk, requires
disclosure of any significant off-balance-sheet risk and credit risk concentration. The
Company does not have significant off-balance-sheet risk or credit concentration.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company provides credit to its clients in the normal course of its operations. It carries
out, on a continuing basis, credit checks on its clients and maintains provisions for
contingent credit losses that, once they materialize, are consistent with managements
forecasts.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | For
other receivables, the Company determines, on a continuing basis, the probable losses and
sets up a provision for losses based on the estimated realizable value.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | m) |  | Use
of Estimates
| | -- |  | ----------------

| | Preparation
of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and related notes to financial statements. These estimates are
based on managements best knowledge of current events and actions the Company may
undertake in the future. Actual results may ultimately differ from those estimates,
although management does not believe such changes will materially affect the financial
statements in any individual year.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | n) |  | Share-Based
Payment
| | -- |  | -------------------

| | The
Company adopted the disclosure requirements of SFAS No. 123R, Share-Based Payment (SFAS
No. 123R) for stock options and similar equity instruments (collectively, options)
issued to employees. The Company applies the fair value base method of accounting as
prescribed by SFAS No. 123R. Under the fair value based method, compensation cost is
measured at the grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. For stock options, the fair value is
determined using an option-pricing model that takes into account the stock price at the
grant date, the exercise price, the expected life of the option, the volatility of the
underlying stock and the expected dividends on it, and the risk-free interest rate over
the expected life of the option. SFAS No. 123R also applies to transactions in which an
entity issues its equity instruments to acquire goods or services from non-employees.
Those transactions must be accounted for based on the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more reliably
measurable, as described in note 10.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 9 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|3. |  | Summary
of Significant Accounting Policies (contd)
|-- |  | ---------------------------------------------------

| | o) |  | Recent
Accounting Pronouncements
| | -- |  | --------------------------------

| | In
September 2006, Financial Accounting Standards Board (FASB) issued SFAS No.
157, Fair Value Measurements, (SFAS No. 157) which is effective
for calendar year companies on January 1, 2008. The statement defines fair value,
establishes a framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value measurements. The
statement codifies the definition of fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The standard clarifies the principle that fair
value should be based on the assumptions market participants would use when pricing the
asset or liability and establishes a fair value hierarchy that prioritises the
information used to develop those assumptions. The Company is currently assessing the
potential impacts of implementing this standard.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Liabilities (SFAS No. 159), which permits entities to
measure many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. An entity would report unrealized gains
and losses on items for which the fair value option has been elected in earnings at each
subsequent reporting date. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by
measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions. The decision about whether to elect the fair value option is
applied instrument by instrument, with a few exceptions; the decision is irrevocable; and
it is applied only to entire instruments and not to portions of instruments.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
statement requires disclosures that facilitate comparisons (a) between entities that
choose different measurement attributes for similar assets and liabilities and (b)
between assets and liabilities in the financial statements of an entity that selects
different measurement attributes for similar assets and liabilities.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | SFAS
No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption
is permitted as of the beginning of a fiscal year provided the entity also elects to
apply the provisions of SFAS No. 157. Upon implementation, an entity shall report the
effect of the first remeasurement to fair value as a cumulative-effect adjustment to the
opening balance of retained earnings. Since the provisions of SFAS No. 159 are applied
prospectively, any potential impact will depend on the instruments selected for fair
value measurement at the time of implementation.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 10 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|4. |  | Investment
in Available for Trade Securities
|-- |  | --------------------------------------------

|Number of
Shares |  |  |                                 | 2007 |  |   |         | 2006 |  
|---------------- |  |  | ------------------------------- | ---- |  | - | ------- | ---- | -
|
|200,000          |  |  | - American Gen Finance Disc CP. |      |  | $ | 197,500 |      | $
|200,000          |  |  | - Intesa Funding LLC Disc CP.   |      |  |   | 197,500 |      |  
|200,000          |  |  | - New Center Asset Disc CP      |      |  |   | 197,500 |      |  
|                 |  |  |                                
|                 |  |  |                                 |      |  | $ | 592,500 |      | $
|                 |  |  |                                

|5. |  | Loan
Receivable
|-- |  | ---------------

| | The
loan receivable from Volga-Neft Limited Company (Volga-Neft), a society with
limited liability organized under the laws of the Russian Federation, bears interest at
4% per annum, matures December 8, 2008 and is secured by the assets of Volga-Neft and by
a guarantee from Volga-Neft.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 14, 2007, the Company rescinded the October 6, 2006 purchase of Volga-Neft (see note
10). As part of the rescission agreement, the loan to Volga-Neft were converted to a
promissory note. The note is non-interest bearing if the principal is repaid by September
1, 2007. On June 18, 2007 the note was repaid.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 11 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|6. |  | Deferred
Financing Costs
|-- |  | ------------------------

|                    | Cost |  | 2007
Accumulated
Depletion |         | Cost |   | 2006
Accumulated
Depletion | 
|------------------- | ---- |  | -------------------------- | ------- | ---- | - | -------------------------- | 
|Financing costs     |      |  | $                          | 550,000 |      | $ | 45,833                     | 
|                    |     
|                    |      | 
|Net carrying amount |      |  |                            |         |      | $ | 504,167                    | 
|                    |     

|7. |  | Advance
from Related Party
|-- |  | --------------------------

| | The
advance from a director is non-interest bearing, unsecured and has no specified terms of
repayment.
| | -------------------------------------------------------------------------------------------------------

|8. |  | Convertible
Debentures
|-- |  | ----------------------

| | On
February 9, 2007, the Company entered into a securities purchase agreement, whereby the
Company sold $7,500,000 in principal amount of debentures. The debentures are convertible
into common shares at the option of the holder at an exercise price of $2.00. The
debentures have a conversion price adjustment clause to adjust the conversion price based
on certain events including a stock split or a stock offering at less than $2.00 per
share. The debentures bear interest at 8% per annum, are guaranteed by Volga-Neft up
until the date of the rescission agreement and are due 3 years from their date of
issuance. In addition, the debenture holders were issued warrants which allows the
purchaser to purchase up to 2,437,500 common shares being equal to 65% of such purchasers
subscription amount divided by the initial conversion price, with an exercise price equal
to $3.81, subject to adjustments therein.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is currently in default of a debt covenant as it has not filed all its SEC
reports required to be filed. As such, the convertible debentures are due on demand and
bear interest at 18% per annum. The cause of the breach was as a result of the
acquisition of Volga-Neft as the Company was unable to consolidate the entity due to the
unreliability of the financial statements. The Company is currently attempting to rectify
the breach of the covenant. It entered into the rescission agreement on June 14, 2007 as
disclosed in note 11. As such, in managements opinion, the Company is not required
to consolidate Volge-Neft and therefore management expects to file the December 31, 2006
10-K report and the March 31, 2007 10-Q currently. To date, the debenture holders have
not taken any action on the breach of the covenant.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 12 

---

STAR ENERGY CORPORATION 
(A DEVELOPMENT STAGE COMPANY) 
Notes to Financial Statements
March 31, 2007 and 2006

|9. |  | Capital
Stock
|-- |  | -------------

| | On
March 1, 2007, the Company issued 250,000 common shares for finance services which were
valued at $870,000.
| | --------------------------------------------------------------------------------------------------------------

|10. |  | Income
Taxes
|--- |  | ------------

| | The
Company accounts for income taxes pursuant to SFAS No. 109. This standard prescribes the
use of the liability method whereby deferred tax asset and liability account balances are
determined based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates. The effects of future changes
in tax laws or rates are not anticipated.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
SFAS No. 109 income taxes are recognized for the following: a) amount of tax payable for
the current year, and b) deferred tax liabilities and assets for future tax consequences
of events that have been recognized differently in the financial statements than for tax
purposes.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
provision for income taxes has been computed as follows:
| | ------------------------------------------------------------

|                                                                     |  | 
|-------------------------------------------------------------------- |  | 
|Expected income tax recovery at the statutory rate -31% (2005 - 31%) |  | 
|                                                                     |  | 
|Valuation allowance                                                  |  | 
|                                                                     |  | 
|Provision for income taxes                                           |  | 
|                                                                     |  | 

| | The
Company has tax losses available to be applied against future years income. Due to the
losses incurred in the current period and expected future operating results, management
determined that it is more likely than not that the deferred tax asset resulting from the
tax losses available for carryforward and stock option compensation expense will not be
realized through the reduction of future income tax payments, accordingly a 100%
valuation allowance has been recorded for deferred income tax assets.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of March 31, 2007 and 2006, the Company had approximately $565,000 and $42,000
respectively, of Federal and state net operating loss carryforwards available to offset
future taxable income. The Company has the following losses which expire in 20 years from
the date the loss was incurred.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|            | 
|----------- | 
|Expiry 2025 | 
|Expiry 2026 | 
|Expiry 2027 | 
|            | 
|            | 
|            | 

 13 

---

|11. |  | Rescission
Agreement of Stock Purchase Agreement
|--- |  | ------------------------------------------------

| | On
October 6, 2006 the Company entered into a stock purchase agreement to acquire 100% of
Volga-Neft resulting in the issuance of 10,000,000 restricted common shares, valued at
$11,700,000. However, on June 14, 2007 the Company entered into an agreement to rescind
the October 6, 2006 stock purchase agreement due to the Company discovering material
inaccuracies in certain representations and warranties made by Volga-Neft and the Companys
dissatisfaction with the transactions described in the stock purchase agreement. As a
result of the rescission agreement, Volga-Neft returned the 10,000,000 common shares they
hold in the Company and provided a promissory note in the amount of $4,200,000 covering
the $3,000,000 of loans they received as at June 14, 2007 plus costs and damages
associated with the rescission agreement in the amount of $1,200,000. The promissory note
was subsequently sold for $3,000,000 resulting in a discount of $1,200,000. The
promissory note was collected on June 18, 2007.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
managements opinion, after consulting with their legal council, as the stock
purchase agreement was rescinded by the Rescission Agreement, the original stock purchase
agreement was nullified and therefore treated as if it never existed.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12. |  | Subsequent
Event
|--- |  | ----------------

| | On
April 11, 2007, the Company issued 20,000 common shares for finance services which were
valued at $76,000.
| | -------------------------------------------------------------------------------------------------------------

| | On
June 14, 2007, the Company signed a rescission agreement as described in note 11, whereby
the purchase of Volga-Neft was rescinded and the loan receivable was repaid.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 14 

---

|ITEM 2. |  | MANAGEMENT'S
DISCUSSION AND ANALYSIS
|------- |  | ------------------------------------

The following discussion should be
read in conjunction with our financial statements and notes thereto included in this
report.

# Forward Looking
Statements and Factors That May Affect Future Results and Financial Condition

This
Managements Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this report contain forward-looking statements that involve
risks and uncertainties. Forward-looking statements can be identified by words such as
may, should, anticipates, intends,expects, believes, plans, predicts,estimates, strategy and
similar terms. Forward-looking statements are not guarantees of future performance and
our actual results may differ significantly from the results discussed in the
forward-looking statements. These statements are subject to risks and uncertainties and
are based upon assumptions and beliefs that may or may not materialize. These risks and
uncertainties include, but are not limited to, the following, many of which are beyond
our control: our ability to obtain waivers or renegotiate the terms of our 8% Secured
Convertible Debentures; the sufficiency of existing capital resources; our ability to
raise additional capital to fund cash requirements for future operations; our ability to
obtain and maintain sufficient energy reserves to fund and maintain operations; the
market for any oil and gas production we may generate; domestic and foreign political
conditions; the overall level of supply of and demand for oil and gas; the price of
imports of oil and gas; weather conditions; the price and availability of alternative
fuels; the proximity and capacity of oil pipelines and other transportation facilities;
uncertainties related to our future business prospects, including with possible future
acquisitions; the volatility of the stock market in general and our common stock
specifically; our ability to maintain the quotation of our common stock on the Over the
Counter Bulletin Board; and general economic conditions.

We
also wish to advise readers not to place any undue reliance on the forward looking
statements contained in this report, which reflect our beliefs and expectations only as
of the date of this report. We assume no obligation to update or revise these forward
looking statements to reflect new events or circumstances or any changes in our beliefs
or expectations, other than as required by law.

 15 

---

# Overview

We
were incorporated in Nevada on December 7, 1999. From November 21, 2002, until October 6,
2006, we were engaged, as an independent oil and natural gas producer, in the exploration,
development, production and sale of gas derived from five oil and gas wells, known as the
Galvan Ranch Gas Wells, located in Webb County, West Texas, Texas, in each of
which we had a 15% working interest and a 12% net revenue interest. The wells were on five
separate parcels of land spread over 425 acres of the Galvan Ranch.

On
October 6, 2006, we entered into an Assignment and Bill of Sale with Ruairidh Campbell, at
the time one of our officers and directors, pursuant to which we assigned to Mr. Campbell
all of our interests in and to the Galvan Ranch Gas Wells. In consideration therefor, Mr.
Campbell transferred to us, for cancellation and return to our authorized but unissued
common shares, the 3,250,000 shares of our common stock owned by him. As a result, since
October 6, 2006, we no longer have had any interest in the Galvan Ranch Gas Wells and are
no longer engaged in the oil and gas business in Texas.

Pursuant
to a Stock Purchase Agreement, on October 6, 2006, we acquired 100% of the capital stock
of Volga-Neft Limited Company, a Russian limited liability company primarily engaged in
the processing and sale of crude oil in Samara, Russia (Volga-Neft) in
consideration for our issuance to the stockholders of Volga-Neft of an aggregate of
10,000,000 shares of our common stock, representing at the time 25.6% of our issued and
outstanding shares. Thereafter we advanced $3,000,000 of working capital to Volga-Neft.
Volga-Neft (i) sells to local oil exporters, wholesalers, and distributors crude oil it
has purchased from local oil developers and (ii) processes crude oil purchased from local
oil developers, selling the processed petroleum products in the local market to oil
exporters, wholesalers, and distributors. As a result of such acquisition, Volga-Neft
became our wholly-owned subsidiary.

In
April 2007, we were advised that the financial statements of Volga-Neft purportedly
audited by RSM Top-Audit in Russia for periods prior to our acquisition of Volga-Neft,
that we filed with the Securities and Exchange Commission on a Form 8-K/A on
December 8, 2006, should no longer be relied upon because the individuals who
purportedly performed the audit were not the auditing firms representatives. These
financial statements pertain to the audited balance sheets of Volga-Neft as of October 6,
2006 and December 31, 2005, and the related statements of income, stockholders
equity, and cash flows for the period January 1, 2006 through October 6, 2006 and the
year ended December 31, 2005. We filed a Current Report on Form 8-K to disclose these
developments on May 11, 2007.

Together
with our audit committee, we are carefully examining the events leading to the auditing
firms determination that the financial statements for Volga-Neft included in our
December 8, 2006 Form 8-K/A could not be relied upon and whether the management of
Volga-Neft acted complicitly with those who prepared the audit. With the assistance and
approval of our audit committee and company management, we have engaged special
investigative counsel in relation to this matter. We are continuing our investigation and
intend to provide updated disclosure through a Current Report on Form 8-K when the
investigation is completed, which we anticipate will be shortly.

 16 

---

By
a Rescission Agreement of Stock Purchase Agreement dated June 14, 2007 among us,
Volga-Neft and the individuals from whom we acquired the shares of Volga-Neft, the Stock
Purchase Agreement was rescinded, we returned the shares of Volga-Neft we received to the
former stockholders who, in turn, returned to us the 10,000,000 shares of our common stock
that we had previously issued. In addition, Volga-Neft issued a $4,200,000 promissory note
in our favor which we, in turn, sold to an unaffiliated third party on a non-recourse
basis for $3,000,000.

As
a result of the rescission, we have not included the assets, liabilities or results of
operations of Volga-Neft in our financial statements for any period. However, the
Rescission Agreement does not affect the rights that any third parties may have against us
with respect to agreements, transactions or events under or with respect to agreements or
understandings entered into, or transactions or events that occurred, prior to the
Rescission Agreement or with respect to breaches of agreements to which we are a party
that may have resulted from the Rescission Agreement.

In
this regard, the rescission of the acquisition of Volga-Neft may result in the
acceleration of the maturity of some or all of our $7,500,000 principal amount of 8%
Secured Convertible Debentures we issued in February 2007 and that otherwise would be due
on February 11, 2010, or earlier upon acceleration following an event of default, as
defined in the Debentures. See Liquidity and Capital Resources, below.

# Results of Operations

The
Company had no operations during the first quarter of 2007, as a result of its disposition
of the Galvan Ranch Wells in October 2006, and, therefore, had no oil and gas revenues,
production costs or depreciation expense in the 2007 period.

Other
income in the 2007 period was primarily interest income related to the investment of the
proceeds of the companys private placement in February 2007 of $7,500,000 of 8%
Secured Convertible Debentures.

Our
principal operating expenses for the 2007 period consisted of:

Consulting
expense consisted primarily of $870,000 payable in stock and $35,000 payable in cash to
consultants.

Salary
and benefits consisted of $291,812 representing the amortized portion of compensation
expense related to the issuance of shares to certain officers and directors in 2006,
$57,000 for officers salaries and benefits and $14,985 for salaries and benefits for
other employees.

Professional
fees of $135,607 were for legal and accounting fees.

Virtually
all of the interest expense of $100,660 represents accrued interest on our $7,500,000 8%
Secured Convertible Debentures issued on February 9, 2007.

 17 

---

Office
and general expense was $34,844 higher in the 2007 three month period than the 2006 three
month period due to higher general expenses for investor relations.

Travel
expense represents trips to the Russian Federation in connection with Volga-Neft.

Deferred
financing costs relates to the amortized portion of the fee payable to the placement agent
for the offering of our Debentures.

# Liquidity and Capital
Resources

In
February 2007, we issued On February 9, 2007, we entered into a Securities Purchase
Agreement with institutional investors pursuant to which we sold $7,500,000 principal
amount of our 8% Secured Convertible Debentures for a total gross purchase price of
$7,500,000 (the Debenture Financing). We paid Rodman & Renshaw LLC,
placement agent for the Debenture Financing, $525,000 (7% of the gross proceeds from the
sale of such Debentures), plus $25,000 in reimbursement of its expenses, under a placement
agency agreement dated February 9, 2007.

Of
the net proceeds of the Debenture Financing, estimated at $6,975,000, we advanced
$3,000,000 to Volga-Neft for the payment of its liabilities. At the time of the rescission
of our acquisition of Volga-Neft, we received, in addition to the return of the 10,000,000
shares of our common stock that we had issued in consideration for our acquisition, a
$4,200,000 promissory note in full settlement of all monetary claims we may have against
Volga-Neft or its stockholders from which we acquired Volga-Neft. We, in turn, sold the
promissory note to an unaffiliated third partyon a non-recourse basis for
$3,000,000.

We
intend to use these proceeds and the balance of the funds obtained in the Debenture
Financing, to fund strategic initiatives and to repay certain liabilities. We expect such
funds to be sufficient to fund our operations in 2007.

# Potential Acceleration
of Our 8% Secured Convertible Debentures

As
a result of the rescission on June 14, 2007 of the Stock Purchase Agreement which resulted
in the return by us of all of the capital stock of Volga-Neft to the former shareholders
thereof and the return by them to us of 10,000,000 shares of our common stock, each holder
of an 8% Secured Debenture issued by us as part of the offering and sale of an aggregate
$7,500,000 of the Debentures in February 2007 may elect, commencing June 28, 2007 as a
result of the rescission of the Volga-Neft acquisition, to declare the outstanding
principal amount of such holders Debenture, plus accrued and unpaid interest,
liquidated damages and other amounts owing in respect of the holders Debenture due
and payable at its Mandatory Default Amount. The Mandatory Default Amount is
defined in the Debenture, which, at a minimum would be 130% of the outstanding principal
amount of the Debenture plus all accrued and unpaid interest thereon. Commencing five
trading days after the occurrence of an event of default that results in the eventual
acceleration of a Debenture, the interest rate on the Debenture shall accrue interest at
an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under
applicable law.

 18 

---

Pursuant
to the terms of a Registration Rights Agreement by and between us and the purchasers of
the Debentures, dated as of February 9, 2007, we agreed to prepare and file by
April 15, 2007 with the Securities and Exchange Commission a registration statement
on Form SB-2 for the purpose of registering for resale all of the shares of our common
stock issuable upon conversion of the Debentures and the exercise of the Warrants. We have
not, to date, filed the Registration Statement. The Registration Rights Agreement provided
that, if we did not file the Registration Statement by April 15, 2007, the
Registration Statement were not declared effective by the Securities and Exchange
Commission by July 15, 2007, and in certain other circumstances (including if the
Registration Statement did not remain continuously effective except for certain limited
periods for specified reasons), we are to pay, on the applicable date and each monthly
anniversary of that date, as partial liquidated damages, 1.5% of the principal amount of
the Debentures then held by the Debentureholders. If we fail to pay any of these amounts
within seven days after the date payable, the Registration Rights Agreement provides that
we are to pay interest thereon at the rate of 18% per annum.

We
intend to seek appropriate waivers from the holders of the Debentures. There can be no
assurance that we will be successful in our efforts or, if we are successful, the terms of
any modification of the Debentures or Registration Rights Agreement.

# Off-Balance Sheet
Financing

The
Company has no off-balance sheet financing arrangements, within the meaning of Item 303(c)
of Securities and Exchange Commission Regulation S-B.

|ITEM 3. |  | CONTROLS
AND PROCEDURES
|------- |  | -----------------------

# Evaluation of Disclosure
Controls and Procedures

Disclosure controls and procedures
are the controls and other procedures of an issuer that are designed to provide reasonable
assurance that information required to be disclosed by the issuer in the reports that it
files or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time period specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the Securities
Exchange Act of 1934 is accumulated and communicated to the issuers management,
including its principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the
participation of our management, including our principal executive officer and principal
financial officer, we evaluated the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (Exchange Act), as of December 31, 2006 (the
end of the period covered by this report). Based upon this evaluation, our principal
executive officer and principal financial officer concluded that our disclosure controls
and procedures were not effective to ensure that all material information required to be
disclosed in this Annual Report on Form 10-KSB had been recorded and made known to them in
a timely fashion. Specifically, we identified deficiencies in our disclosure controls and
procedures related to the retention, supervision and communication with the appropriate
personnel involved with the audit of Volga-Neft, and in our procedures pertaining to the
engagement of auditors of Volga-Neft. Management evaluated the impact of these control
deficiencies on our company, including our inability to timely file this Form 10-KSB, and
has concluded that the control deficiencies represent a material weakness in our controls.

 19 

---

We have begun an investigation into
the events and procedures involving the Volga-Neft audit and our controls and procedures
regarding engagement and communication with our independent auditors. We believe that any
measures taken with regard to our controls and procedures as a result of the investigation
will benefit us by reducing the likelihood of a similar event occurring in the future.

Additional evaluation is required to
remedy these deficiencies and we are currently in the process of improving and
strengthening our controls and procedures. As part of our efforts to remedy existing
deficiencies we are seeking to improve supervision over our accounts and improve
communication with outside vendors, including auditors we hire. We are also implementing
policies to better define the responsibilities and authority of our audit committee
through the adoption of an audit committee charter.

# Changes in Internal
Controls

Management has not identified any
change in our internal control over financial reporting that occurred during the fourth
quarter of the fiscal year ended December 31, 2006 that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial
reporting.

Our management, including the chief
executive officer and chief financial officer, do not expect that our disclosure controls
or internal controls will prevent all errors and all fraud, but are designed to provide
reasonable assurance in achieving its objectives. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. In addition, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of
simple error or mistake.

Individual persons perform multiple
tasks which normally would be allocated to separate persons and therefore extra diligence
must be exercised during the period these tasks are combined. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion of two or more people
or by the override of the control. The design of any systems of controls is based in part
upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential
future conditions. Because of these inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

 20 

---

PART II  OTHER
INFORMATION

|Item 2. |  | Unregistered
Sales of Equity Securities and Use of Proceeds.
|------- |  | ------------------------------------------------------------

On March 1, 2007, we issued 250,000
shares of our common stock to a merchant banking firm for consulting services rendered. We
believe that the issuance of the shares was exempt from the registration provisions of the
Securities Act by virtue of the exemption afforded under Section 4(2) of the Securities
Act.

|Item 3. |  | Defaults
Upon Senior Securities.
|------- |  | --------------------------------

Reference is made to the information
under the caption Managements Discussion and Analysis  Potential
Acceleration of Our 8% Secured Convertible Debentures, in Item 2 of Part I of this
Report.

|Item 6. |  | Exhibits
|------- |  | --------

| | Exhibit No. |  | Description
| | ----------- |  | -----------

| | 31.1 |  | Certification
of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities and Exchange Act
of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(included herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 |  | Certification
of the Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act
of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(included herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 |  | Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section                                 906 of the Sarbanes-Oxley Act of 2002 (included
herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 |  | Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section                                 906 of the Sarbanes-Oxley Act of 2002 (included
herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 21 

---

SIGNATURES

In accordance with the requirements
of the Securities Exchange Act of 1934, the registrant caused this report to be signed on
its behalf by the undersigned, hereunto duly authorized, this June 18, 2007.

|STAR ENERGY CORPORATIONMarcus Segal
Marcus Segal
Chief Financial Officer
(Principal Financial, and Accounting Officer) | 
|---------------------------------------------------------------------------------------------------------------------- | 

 22 

---

Exhibit Index

| | Exhibit No. |  | Description
| | ----------- |  | -----------

| | 31.1 |  | Certification
of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities and Exchange Act
of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(included herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 |  | Certification
of the Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act
of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(included herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 |  | Certification
of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section                                 906 of the Sarbanes-Oxley Act of 2002 (included
herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.2 |  | Certification
of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section                                 906 of the Sarbanes-Oxley Act of 2002 (included
herein)
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

 23 

---