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 June 30, 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:
000-29323

|                                                                      | 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 August 17, 2007 was 33,757,500.

Transition Small Business Disclosure
Format.  Yes      No



---

TABLE OF CONTENTS

|                  |                                                                                                                                                                                                                      | Page 
|----------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -----
|                  | PART I                                                                                                                                                                                                               |      
|ITEM 1.           | FINANCIAL STATEMENTS                                                                                                                                                                                                
|                  | Unaudited Balance Sheets as of June 30, 2007                                                                                                                                                                         | 3    
|                  | Unaudited Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2007 and 2006
and the period from re-entering the Development Stage (October 6, 2006) through to June 30, 2006 | 4 - 5
|                  | Unaudited Statement of Stockholders' Deficit for the six months ended June 30, 2007
and the period from re-entering the Development Stage (October 6, 2006) through to June 30, 2006                                 | 6    
|                  | Unaudited Statements of Cash Flows for the six months ended June 30, 2007 and 2006
and the period from re-entering the Development Stage (October 6, 2006) through to June 30, 2006                                  | 7    
|                  | Notes to the Unaudited Financial Statements                                                                                                                                                                          | 8    
|ITEM 2.           | MANAGEMENT'S DISCUSSION AND ANALYSIS                                                                                                                                                                                 | 18   
|ITEM 3.           | CONTROLS AND PROCEDURES                                                                                                                                                                                              | 22   
|                  | PART II                                                                                                                                                                                                              |      
|ITEM 3.           | DEFAULT UPON SENIOR SECURITIES                                                                                                                                                                                       | 24   
|ITEM 6.           | EXHIBITS                                                                                                                                                                                                             | 24   
|SIGNATURES        | 25                                                                                                                                                                                                                  
|INDEX TO EXHIBITS | 26                                                                                                                                                                                                                  

-2-



---

# PART I 
FINANCIAL INFORMATION

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

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)Balance SheetsJune 30, 2007Unaudited

|                                                                         | 2007 |  | December 31,
2006
(Audited) |           
|------------------------------------------------------------------------ | ---- |  | --------------------------- | ----------
|ASSETS                                                                   |      |  |                             |           
|Current                                                                  |      | 
|Cash                                                                     |      |  | $                           | 4,361,144 
|Marketable securities (note 4)                                           |      |  |                             | 201,099   
|Loan receivable                                                          |      |  |                             | -         
|Prepaid expenses                                                         |      |  |                             | 664,842   
|                                                                         |      |  |                             |           
|Total Current Assets                                                     |      |  |                             | 5,227,085 
|                                                                         |      |  |                             |           
|Deferred Financing Costs (note 5)                                        |      |  |                             | 510,689   
|                                                                         |      |  |                             |           
|Total Assets                                                             |      |  | $                           | 5,737,774 
|                                                                         |      |  |                             |           
|LIABILITIES                                                              |      |  |                             |           
|Current                                                                  |      | 
|Accounts payable                                                         |      |  | $                           | 23,311    
|Accrued liabilities                                                      |      |  |                             | 833,393   
|Advance from related party (note 6)                                      |      |  |                             | 2,785     
|Loan payable                                                             |      |  |                             | -         
|                                                                         |      |  |                             |           
|Total Current Liabilities                                                |      |  |                             | 859,489   
|Convertible Debentures (note 7)                                          |      |  |                             | 7,500,000 
|                                                                         |      |  |                             |           
|Total Liabilities                                                        |      |  |                             | 8,359,489 
|                                                                         |      |  |                             |           
|STOCKHOLDERS' (DEFICIT) EQUITY                                           |      |  |                             |           
|Capital Stock(note 8)                                                    |      | 
|Authorized                                                               |      | 
|5,000,000 preferred stock, par value $0.001 per share                    |      | 
|225,000,000 common stock, par value $0.001 per share                     |      | 
|Issued                                                                   |      | 
|29,007,500 common stock (2006 - 28,737,500)                              |      |  |                             | 29,008    
|Additional Paid-in Capital                                               |      |  |                             | 2,165,795 
|Accumulated Deficit and Deficit Accumulated During the Development Stage |      |  |                             | (4,816,518
|                                                                         |      |  |                             |           
|Total Stockholders' (Deficit) Equity                                     |      |  |                             | (2,621,715
|                                                                         |      |  |                             |           
|Total Liabilities and Stockholders' (Deficit) Equity                     |      |  | $                           | 5,737,774 
|                                                                         |      |  |                             |           

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

-3-



---

STAR ENERGY CORPORATION(A
DEVELOPMENT STAGE COMPANY)Statements of
Operations and Comprehensive LossSix Months Ended June 30, 2007 and
2006,and the Period from Re-entering the Development Stage(October 6, 2006) through to
June 30, 2007Unaudited

|                                                      | 2007 |  | 2006 |            | (Note 1)Period from
Re-entering the
Development
Stage through to
June 30, 2007 |  
|----------------------------------------------------- | ---- |  | ---- | ---------- | ------------------------------------------------------------------------------ | -
|Oil and Gas Revenues                                  |      |  | $    | -          |                                                                                | $
|                                                      |      |  |      |            |                                                                                |  
|Operating Expenses                                    |      |  |      |            |                                                                                |  
|Professional fees                                     |      |  |      | 1,068,388  |                                                                                |  
|Consulting                                            |      |  |      | 1,031,016  |                                                                                |  
|Salary and benefits                                   |      |  |      | 738,929    |                                                                                |  
|Interest and bank charges                             |      |  |      | 252,019    |                                                                                |  
|Advertising and promotion                             |      |  |      | 224,654    |                                                                                |  
|Office and general                                    |      |  |      | 116,993    |                                                                                |  
|Travel                                                |      |  |      | 43,945     |                                                                                |  
|Rent                                                  |      |  |      | 23,548     |                                                                                |  
|Insurance                                             |      |  |      | 15,108     |                                                                                |  
|Telephone                                             |      |  |      | 6,591      |                                                                                |  
|Production costs                                      |      |  |      | -          |                                                                                |  
|Depreciation - Equipment                              |      |  |      | -          |                                                                                |  
|Depreciation- Deferred financing cost                 |      |  |      | 98,211     |                                                                                |  
|                                                      |      |  |      |            |                                                                                |  
|Total Operating Expenses                              |      |  |      | 3,619,402  |                                                                                |  
|                                                      |      |  |      |            |                                                                                |  
|Operating Loss                                        |      |  |      | (3,619,402 | )                                                                              |  
|                                                      |      |  |      |            |                                                                                |  
|Other Income (Expense)                                |      | 
|Debt forgiven                                         |      |  |      | -          |                                                                                |  
|Cost associated with the rescission of the stock      |      |  |      | -          |                                                                                |  
|purchase agreement                                    |      | 
|Other income                                          |      |  |      | 12,806     |                                                                                |  
|                                                      |      |  |      |            |                                                                                |  
|Total Other Income (Expense)                          |      |  |      | 12,806     |                                                                                |  
|                                                      |      |  |      |            |                                                                                |  
|Loss Before Income Taxes                              |      |  |      | (3,606,596 | )                                                                              |  
|Provision for income taxes (note 9)                   |      |  |      | 600        |                                                                                |  
|                                                      |      |  |      |            |                                                                                |  
|Net Loss and Comprehensive Loss                       |      |  | $    | (3,607,196 | )                                                                              | $
|                                                      |      |  |      |            |                                                                                |  
|Basic and Diluted Loss Per Weighted Average Number of |      | 
|Shares Outstanding During the Period                  |      |  | $    | (0.12      | )                                                                              | $
|                                                      |      |  |      |            |                                                                                |  
|Basic and Diluted Weighted Average Number of Shares   |      | 
|Outstanding During the Period                         |      |  |      | 28,912,500 |                                                                                |  
|                                                      |      |  |      |            |                                                                                |  

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

-4-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Statements of Operations and Comprehensive Loss
Three Months Ended June 30, 2007 and 2006
Unaudited

|                                                                | 2007 |  | 2006 |           
|--------------------------------------------------------------- | ---- |  | ---- | ----------
|Oil and Gas Revenues                                            |      |  | $    | -         
|                                                                |      |  |      |           
|Operating Expenses                                              |      | 
|Professional fees                                               |      |  |      | 932,781   
|Consulting                                                      |      |  |      | 126,016   
|Salary and benefits                                             |      |  |      | 369,212   
|Interest and bank charges                                       |      |  |      | 151,359   
|Advertising and promotion                                       |      |  |      | 73,682    
|Office and general                                              |      |  |      | 63,735    
|Travel                                                          |      |  |      | 17,341    
|Rent                                                            |      |  |      | 18,848    
|Insurance                                                       |      |  |      | 8,910     
|Telephone                                                       |      |  |      | 5,339     
|Production costs                                                |      |  |      | -         
|Depreciation - Equipment                                        |      |  |      | -         
|Depreciation - Deferred financing cost                          |      |  |      | 52,378    
|                                                                |      |  |      |           
|Total Operating Expenses                                        |      |  |      | 1,819,601 
|                                                                |      |  |      |           
|Operating Loss                                                  |      |  |      | (1,819,601
|                                                                |      |  |      |           
|Other Income (Expense)                                          |      | 
|Other income                                                    |      |  |      | 8,630     
|                                                                |      |  |      |           
|Total Other Income (Expense)                                    |      |  |      | 8,630     
|                                                                |      |  |      |           
|Loss Before Income Taxes                                        |      |  |      | (1,810,971
|Provision for income taxes                                      |      |  |      | -         
|                                                                |      |  |      |           
|Net Loss and Comprehensive Loss                                 |      |  | $    | (1,810,971
|                                                                |      |  |      |           
|Basic and Diluted Loss Per Weighted Average Number of Shares    |      | 
|Outstanding During the Period                                   |      |  |      | (0.06     
|                                                                |      |  |      |           
|Basic and Diluted Weighted Average Number of Shares Outstanding |      | 
|During the Period                                               |      |  |      | 28,990,833
|                                                                |      |  |      |           

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

-5-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)Statements of Stockholders Deficit
Six Months Ended June 30, 2007 and the Period from Re-entering the Development Stage through to June 30, 2007
Unaudited

|                                           | Number of
Common
Shares |  | Capital
Stock |            | Additional
Paid-in
Capital |   | Accumulated
Deficit
and Deficit
Accumulated
During the
Development
Stage |   | Stockholders'
(Deficit) Equity |          
|------------------------------------------ | ----------------------- |  | ------------- | ---------- | -------------------------- | - | ------------------------------------------------------------------------ | - | ------------------------------ | ---------
|Balance, September 30, 2006, date of       |                         |  |               |            |                            |   |                                                                          |   |                                |          
|re-entering the development stage          |                         |  |               | 31,562,500 |                            | $ | 31,563                                                                   |   | $                              | 77,363   
|Common shares cancelled (note 8)           |                         |  |               | (3,250,000 | )                          |   | (3,250                                                                   | ) |                                | (41,123  
|Common shares issued for services (note 8) |                         |  |               | 425,000    |                            |   | 425                                                                      |   |                                | 1,183,825
|Net loss for the period                    |                         |  |               | -          |                            |   | -                                                                        |   |                                | -        
|                                           |                         |  |               |            |                            |   |                                                                          |   |                                |          
|Balance, December 31, 2006                 |                         |  |               | 28,737,500 |                            | $ | 28,738                                                                   |   | $                              | 1,220,065
|Common shares issued for services (note 8) |                         |  |               | 250,000    |                            |   | 250                                                                      |   |                                | 869,750  
|Common shares issued for services (note 8) |                         |  |               | 20,000     |                            |   | 20                                                                       |   |                                | 75,980   
|Net loss for the period                    |                         |  |               | -          |                            |   | -                                                                        |   |                                | -        
|                                           |                         |  |               |            |                            |   |                                                                          |   |                                |          
|Balance, June 30, 2007                     |                         |  |               | 29,007,500 |                            | $ | 29,008                                                                   |   | $                              | 2,165,795
|                                           |                         |  |               |            |                            |   |                                                                          |   |                                |          

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

-6-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)Statements of Cash Flows
Six Months Ended June 30, 2007 and the Period from Re-entering the Development Stage through to June 30, 2007
Unaudited

|                                                                | 2007 |  | 2006 |            | (Note 1)
Period from
Re-entering the
Development
Stage through to
June 30, 2007 |  
|--------------------------------------------------------------- | ---- |  | ---- | ---------- | ------------------------------------------------------------------------------- | -
|Cash Flows from Operating Activities                            |      |  |      |            |                                                                                 |  
|Net loss                                                        |      |  | $    | (3,607,196 | )                                                                               | $
|Adjustments to reconcile non-cash item:                         |      | 
|Depreciation - equipment                                        |      |  |      | -          |                                                                                 |  
|- deferred financing cost                                       |      |  |      | 98,211     |                                                                                 |  
|Issuance of common stock for services                           |      |  |      | 946,000    |                                                                                 |  
|                                                                |      |  |      |            |                                                                                 |  
|                                                                |      |  |      | (2,562,985 | )                                                                               |  
|Change in non-cash working capital:                             |      | 
|Accounts receivable                                             |      |  |      | -          |                                                                                 |  
|Prepaid expenses                                                |      |  |      | 407,548    |                                                                                 |  
|Accounts payable                                                |      |  |      | (352,016   | )                                                                               |  
|Accrued liabilities                                             |      |  |      | 176,893    |                                                                                 |  
|                                                                |      |  |      |            |                                                                                 |  
|Net Cash Used in Operating Activities                           |      |  |      | (2,330,560 | )                                                                               |  
|                                                                |      |  |      |            |                                                                                 |  
|Cash Flows from Investing Activities                            |      | 
|Purchase of marketable securities                               |      |  |      | (201,099   | )                                                                               |  
|Proceeds from collection of loan receivable                     |      |  |      | 1,000,000  |                                                                                 |  
|Proceeds from disposal of oil and gas properties                |      |  |      | -          |                                                                                 |  
|                                                                |      |  |      |            |                                                                                 |  
|Net Cash Provided by (Used in) Investing Activities             |      |  |      | 798,901    |                                                                                 |  
|                                                                |      |  |      |            |                                                                                 |  
|Cash Flows from Financing Activities                            |      | 
|Proceeds from issuance of 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                                        |      |  |      | (608,900   | )                                                                               |  
|                                                                |      |  |      |            |                                                                                 |  
|Net Cash Provided by Financing Activities                       |      |  |      | 5,891,100  |                                                                                 |  
|                                                                |      |  |      |            |                                                                                 |  
|Net Increase (Decrease) in Cash                                 |      |  |      | 4,359,441  |                                                                                 |  
|Cash - Beginning of Period                                      |      |  |      | 1,703      |                                                                                 |  
|                                                                |      |  |      |            |                                                                                 |  
|Cash - End of Period                                            |      |  | $    | 4,361,144  |                                                                                 | $
|                                                                |      |  |      |            |                                                                                 |  
|Supplemental Information                                        |      | 
|During the period, the Company had cash flows arising from      |      | 
|interest and income taxes as follows:                           |      | 
|Interest paid                                                   |      |  | $    | 55,556     |                                                                                 | $
|                                                                |      |  |      |            |                                                                                 |  
|Income taxes paid                                               |      |  | $    | 600        |                                                                                 | $
|                                                                |      |  |      |            |                                                                                 |  

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

-7-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

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

| | Star
Energy Corporation (the Company) was organized under the laws of the State of
Nevada on December 7, 1999. From November 21, 2002 until October 6, 2006, the Company was
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 in Texas, which it disposed
of on October 6, 2006. On October 6, 2006, the Company acquired 100% of the capital stock
of Volga-Neft Limited Company (Volga-Neft), a Russian company primarily
engaged in the processing and sale of crude oil in Samara, Russia. This transaction was
rescinded by an agreement dated June 14, 2003. As a result of the rescission, the Company
has not included the assets, liabilities or results of operations of Volga-Neft in its
financial statements for any period. As a result of the disposition and rescission, 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 $3,607,196 and $52,977 for the periods
ended June 30, 2007 and 2006, respectively. As of June 30, 2007, the Company had working
capital of $4,367,596 (2006: $28,527) and an accumulated deficit of $4,816,518 (2006:
$92,288). 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 7).
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.
| | ---------------------------------------------------------------------------------------

-8-

---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

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

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

| | The
Company accounts for its investments in marketable securities in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting
for Certain Investments in Debt and Equity Securities. The Companys portfolio
consists of securities classified as available-for-sale, which are recorded at fair
market values based on quoted market prices. Net unrealized gains and losses on
marketable securities (excluding other than temporary losses) are reflected in the
financial statements as a component of accumulated other comprehensive income. Net
realized gains and losses are computed on the basis of average cost and are recognized
when realized.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-9-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

|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 Securities 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 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-10-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

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

| | 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 (exceeds the total undiscounted
cash flows expected from its use and disposition) and exceeds its fair value. For the
periods ended June 30, 2007 and June 30, 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, diluted 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

-11-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

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

| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-12-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

|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  Including an Amendment of FASB Statement 115
(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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
May 2, 2007, the FASB issued FASB Interpretation FIN No. 48-1, Definition of
Settlement in FASB Interpretation 48 (FIN 48-1). FIN 48-1 amends FIN 48,
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement
No. 109", to provide guidance on how an enterprise should determine whether a tax
position is effectively settled for the purpose of recognizing previously unrecognized tax
benefits. The guidance in FIN 48-1 shall be applied upon the initial adoption of FIN 48.
Accordingly, the Company has applied the provisions of FIN 48-1 effective January 1, 2007.
The adoption of FIN 48-1 did not have a material impact on the Companys results of
operations and financial condition.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-13-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

|4. |  | Marketable
Securities
|-- |  | ---------------------

| | Marketable
securities are comprised as follows:
| | -----------------------------------------------

|Number of
Shares |  | 2007 | 2006
|---------------- |  | ---- | ----
|
|
|201,099          |  | -    |     
|                 |  |      |     

# 5. Deferred Financing
Costs

|                    | Cost |           | 2007
Accumulated
Depreciation |           | Cost |          | 2006
Accumulated
Depreciation |         
|------------------- | ---- | --------- | ----------------------------- | --------- | ---- | -------- | ----------------------------- | --------
|Financing costs     |      | $ 608,900 |                               | $  98,211 |      | $      - |                               | $      -
|                    |      |           |                               |           |      |          |                               |         
|Net carrying amount |      |           |                               | $510,689  |      |          |                               | $ -     
|                    |      |           |                               |           |      |          |                              

|6. |  | Advance
from Related Party
|-- |  | --------------------------

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

|7. |  | Convertible
Debentures
|-- |  | ----------------------

| | On
February 9, 2007, the Company entered into a securities purchase agreement, whereby the
Company sold $7,500,000 principal amount of debentures. The debentures are convertible
into common shares at the option of the holders at an conversion price of $2.00 per
share. 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 secured by all the
assets of the Company and are due three years from their date of issuance. In addition,
the debenture holders were issued warrants which allows the holders 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 per share,
subject to potential anti-dilution adjustments.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-14-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

|8. |  | Capital
Stock
|-- |  | -------------

| | On
October 6, 2006, an Assignment and Bill of Sale was entered into between the Company and
Ruairidh Campbell, a former officer and director of the Company, pursuant to which, Mr.
Campbell agreed to transfer to the Company his 3,250,000 shares of the Companys
common stock held by him for cancellation and return to the Companys authorized but
unissued common shares. In consideration thereof, the Company agreed to assign to Mr.
Campbell all of the Companys interest in a 15% working interest (12% net revenue
interest) in and to certain oil and gas wells known as the Galvan Ranch Gas Wells, which
are located in Webb County, Texas.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
November 29, 2006, the Company issued 400,000 common shares for services valued at
$1,113,000.
| | -------------------------------------------------------------------------------------------------

| | On
December 18, 2006, the Company issued 25,000 common shares for services valued at
$71,250.
| | ---------------------------------------------------------------------------------------------

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

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

-15-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

|9. |  | 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:
| | ------------------------------------------------------------

|                                                                      | 2007 |  | 2006 |           
|--------------------------------------------------------------------- | ---- |  | ---- | ----------
|Expected income tax recovery at the statutory rate - 31% (2006 - 31%) |      |  | $    | 1,132,660 
|Valuation allowance                                                   |      |  |      | (1,132,060
|                                                                      |      |  |      |           
|Provision for income taxes                                            |      |  | $    | 600       
|                                                                      |      |  |      |           

| | 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 June 30, 2007 and 2006, the Company had approximately $4,720,000 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 2026 |  |  | $ | 1,110,000 | 
|----------- |  |  | - | --------- | 
|Expiry 2027 |  |  |   | 3,610,000 | 
|            |  | 
|            |  |  | $ | 4,720,000 | 
|            |  | 

-16-



---

STAR ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to Financial Statements
June 30, 2007 and 2006
Unaudited

|10. |  | 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 that the purported  audited  pre-acquisition  financial
 statements of Volga-Neft       provided to the Company  could not be relied upon
 because the  individuals  who  purportedly  performed  the       audit were not the
auditing  firm's  representatives.  As a result of the  rescission  agreement,  the
former       shareholders  of Volga-Neft  returned the  10,000,000  common shares they
held in the Company and  Volga-Neft       issued a promissory  note to the Company in the
amount of  $4,200,000,  covering the  $3,000,000  of loans it       received  through
 June 14,  2007 plus costs and damages  associated  with the  transaction  in the amount
of       $1,200,000.  The  promissory  note  was  subsequently  sold  by  the  Company
 on a  non-recourse  basis  for       $3,000,000,  resulting in a discount of
 $1,200,000.  The Company  received the proceeds from its sale of the       promissory
note 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.  All parties are returned to their  respective  positions before they entered
      into the stock purchase agreement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. |  | Subsequent
Event
|--- |  | ----------------

| | On
August 3, 2007, the Company  entered into separate letter  agreements,  dated August 1,
2007, with each of       Firecreek Petroleum,  Inc., a wholly-owned subsidiary of EGPI
Firecreek, Inc. ("Firecreek"),  PJM Management,       Inc.  ("PJM") and Double Coin Ltd.
 ("Double  Coin")  pursuant to which the Company  acquired from Firecreek,       PJM and
Double  Coin any and all of their  rights and  interest  with  respect  to  certain
 projects  in the       Ukraine  consisting  of 100% of a project  known as the Region
 Project,  51% of a project known as the Dewon       Zao Project and 100% of a project
known as the Bukovyna  Project.  In essence,  these  agreements  afford the       Company
the right to contract for the purchase of the  interests in Projects,  which consist of
the aggregate       of seven oil and gas fields,  two of which are producing.  In
exchange,  the Company issued  2,100,000 shares       of the Company's  common stock and
paid $100,000 to Firecreek;  issued 150,000 shares of the Company's common       stock
and paid  $10,000 to PJM; and issued  2,500,000  shares of the  Company's  common stock
to Double Coin.       The shares were valued at $0.35 per share for a total consideration
of $1,772,500.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-17-



---

|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.

# 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

-18-



---

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 this
acquisition, Volga-Neft became our wholly-owned subsidiary.

On April 13, 2007, we were advised by
RSM Top-Audit that the financial statements of Volga-Neft, purportedly audited by RSM
Top-Audit in Russia for periods prior to our acquisition of Volga-Neft, were not audited
by that firm.

We therefore concluded that those
financed statements could not be relied upon. 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 to them. 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.

On July 23, 2007, we received a
report from Nixon Peabody, LLP, which was based upon certain documentation, and
certain interviews conducted with personnel, made available by us, Volga-Neft and RSM
Top-Audit, which report did not constitute a comprehensive analysis because a number of
key witnesses and certain sources of documentary evidence were not available to Nixon
Peabody.  Following receipt of that report, we concluded that it is unlikely
that RSM Top-Audit performed any audit of Volga-Nefts financial statements, that RSM
Top-Audit may not, in fact, have been engaged by Volga-Neft to perform an audit, and that,
while actions taken by various individuals in Russia, at least one of whom was employed by
RSM Top-Audit, may have resulted in our receipt of the purported audit report of RSM
Top-Audit, neither the Company nor any of its officers or directors knew of these
facts or the absence of the audits prior to RSM Top-Audits advice on April 13, 2007
that RSM Top-Audit had not audited the financial statements of Volga-Neft.

# Future Operations

In previous years, we were primarily
engaged in domestic energy operations. We have shifted entirely to operations situated in
areas of the world that are considered emerging markets and are moving towards
capitalizing on the opportunities available to us in Ukraine. In light of our prior
experience and taking into consideration the risk factors inherent to operating in
emerging markets, we have retained western legal, accounting, and geological consultants.

-19-



---

On August 3, 2007, we entered into
separate letter agreements, dated August 1, 2007, with three unaffiliated third parties
pursuant to which we acquired certain rights and interests of those parties which, in
essence, affords us the right to contract for the purchase of interests in three projects
in the Ukraine, which consist of an aggregate of seven oil and gas fields, two of which
are producing.

# Results of Operations

The Company had no operations during
the first half 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 equipment
depreciation expense in the 2007 periods.

Other income of $12,806 in the six
month and $8,630 in the second quarter of 2007 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 periods consisted of:

Professional fees for the 2007 six
and three month periods ended June 30, 2007 were $1,068,388 and $932,781, respectively.
Nearly half of the amount spent during the three months ended June 30, 2007 was used to
pay for due diligence expenses incurred for the collection of extensive geographic,
seismic, audit data on potential acquisition targets. The remaining funds were spent
primarily on general legal an auditing services, including the preparation of our Annual
Report on Form 10-KSB for the year ended December 31, 2006 and the audit of our financial
statements contained therein and preparation of our Quarterly Report on Form 10-QSB for
the quarter ended March 31, 2007.

Consulting expenses of $1,031,016 in
 the six months ended June 30, 2007 services were paid primarily for
fees of $870,000 related to the rescission of the Volga-Neft acquisition
and $130,000 for other consulting services.  For the three months ended June 30, 2007, consulting fees were
$126,016 primarily for general consulting services.

Salary and benefits were $738,929 and
$369,212 for the 2007 six month and three month periods ended June 30, 2007,
respectively. Of these amounts, $589,281 in the six month period and $297,469 of the
second quarter represents the amortized portion of compensation expense related to the
issuance of shares to certain officers and directors. The balance of these amounts,
$149,648 in the six-month period and $77,663 during the second quarter was cash
compensation and benefits for officers, directors and other employees.

Virtually all of the interest expense
and bank charges of $252,019 in the six months ended June 30, 2007 and $151,359 in the
three months ended June 30, 2007 represented accrued interest on our $7,500,000 8% Secured
Convertible Debentures issued on February 9, 2007.

Advertising and promotion of $224,654
in the six month period ended June 30, 2007 includes expenses related to investor
presentations and promotion related to our acquisition of Volga-Neft, of which only
$73,682 was spent in the second quarter of the period before we were advised, on
April 13, 2007, by RSM Top-Audit that the financial statements of Volga-Neft,
purportedly audited by RSM Top-Audit in Russia for periods prior to our acquisition of
Volga-Neft, were not audited by that firm.

Office and general expense was
$116,993 for the six month period ended June 30, 2007 was primarily for investor relations
services of $60,514 and Board of Director fees of $30,000 and for the second quarter was
$63,735 consisting primarily of $30,000 for investor relations services and $15,000 for
Board of Directors fees.

-20-



---

Travel expenses of $43,945 for the
six month period and $17,341 in the second quarter of 2007 were for trips to the Russian
Federation with respect to Volga-Neft and also to the Ukraine for due diligence gathering
and for a Board of Directors meeting at our New York headquarters.

During the first half and second
quarter of 2007 we incurred rent expenses of $23,548 and $18,848, respectively, with
respect to our move in 2007 into different premises in New York City.

Insurance expenses were $15,108 and
$8,910 in the six and three month ended June 30, 2007, respectively, related to director
and officer insurance.

Telephone expense was $6,591 and
$5,339 for the first half and second quarter of 2007, respectively, most of which was
long-distance telephone related to Volga-Neft and our search for other foreign properties.

# Liquidity and Capital
Resources

In February 2007, we sold $7,500,000
principal amount of our 8% Secured Convertible Debentures to institutional investors for a
total 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 ofsuch Debentures),plus $25,000 in reimbursement of
its expenses, under a placement agency agreement. An additional $58,000 was paid to an
unaffiliated third party in shares of our common stock for its assistance in identifying
potential institutional investors.

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.

During the six months ended June 30,
2007, we used $2,330,560 in operating activities, mostly to support our cash loss of
$2,562,985 (being our loss for financial reporting purposes of $3,607,196 less non-cash
expenses of $946,000 of expenses paid through our issuance of shares of our stock and
$98,211 of deferred financing costs.

Investing activities during the first
six months of 2007 provided net cash of $798,901 principally from our collection of a loan
receivable from Volga-Neft of $1,000,000 partially offset by our investment of $201,099 of
cash in marketable securities.

Financing Activities provided net
cash of $5,891,100 during the first half of 2007 resulting from the Debenture Financing
discussed above, $1,000,000 of the net proceeds of which was used to repay a loan.

We intend to use our remaining
available cash of $4,361,144 at June 30, 2007 to fund strategic initiatives and to repay
certain liabilities. We expect that these funds will 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

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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
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 Debentures are to accrue interest
at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted
under applicable law.

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 issued in the private
placement. We have not, to date, filed the Registration Statement. The Registration Rights
Agreement provides that, if we did not file the Registration Statement by April 15,
2007, the Registration Statement was 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. To date, we have not made any
of these payments.

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

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Exchange Act of 1934 (Exchange
Act), as of June 30, 2007 (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 Quarterly Report on Form 10-QSB
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-QSB, and has concluded that the control
deficiencies represent a material weakness in our controls.

We caused an investigation to be
taken into the events and procedures involving the Volga-Neft audit and our controls and
procedures regarding engagement and communication with independent auditors. As a result
of the investigation, our prior experience and taking into consideration the risk factors
inherent to operating in emerging markets, we have retained western legal, accounting, and
geological consultants. We believe this 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

Except as described above, our
management has not identified any change in our internal control over financial reporting
that occurred during the quarter ended June 30, 2007 that has materially affected, or
is reasonably likely to materially affect, the Companys internal control over
financial reporting.

Our management, including our 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.

In light of our relatively small
size, 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.

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PART II  OTHER
INFORMATION

|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.
|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.
|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.                                            
|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.                                            

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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 20th day of August, 2007.

STAR ENERGY CORPORATION

/s/ Marcus Segal
Marcus Segal
Chief Financial Officer
(Principal Financial, and Accounting Officer)

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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.
|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.
|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.                                            
|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.                                            

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