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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-QSB/A

(Amendment No. 1)

(Mark One)

|x | 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

(Exact name of small business issuer as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 87-0643634                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                        |  |           
|--------------------------------------- |  | ----------
|317 Madison Avenue, New York, NY        |  | 10017     
|(Address of principal executive office) |  | (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  x    No   ̈

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

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 29,015,500.

Transition Small Business Disclosure Format.    Yes   ̈    No  x



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EXPLANATORY NOTE

Star Energy Corporation (referred to as us, we, the Company, Star or Star Energy) is filing this Amendment No. 1 (this Amendment) to amend
certain items contained in our Quarterly Report on Form 10-QSB for our quarter ended June 30, 2007, which was originally filed with the Securities Exchange Committee (the SEC) on August 20, 2007 (the Original
Report).

On April 11, 2008, our Board of Directors determined that we needed to restate the financial statements contained in our Annual Report
on Form 10-KSB for the year ended December 31, 2006 and our Quarterly Reports on Form 10-QSB for the quarterly periods ended March 31, 2007, June 30, 2007 and September 30, 2007. The determination was made by our Board of
Directors and our Chief Financial Officer based upon comments from the staff (the Staff) of the Securities and Exchange Commission, and following consultation with our senior management, legal advisor and independent registered public
accounting firm. This Amendment is in response to such comments and to effectuate certain other changes that we believe are appropriate.

The changes to
our financial statements contained in this Amendment did not result in a change in our profit or loss for any reported period other than a correction of a transposition error for the period from re-entering the development stage (October 6, 2006)
through the end of the period covered by this Amendment.

The purpose of this Amendment is to amend and restate the following Items:



| |  |  | Part I, Item 1, Financial Statements, to, among other things:
| | - |  | ---------------------------------------------------------------



| | ¡ |  | Restate our balance sheet as of December 31, 2006 and statements of stockholders (deficit) equity to record the acquisition of the capital stock of
Volga-Neft using the cost method of accounting therefor under paragraph 6a of Accounting Principles Board Opinion No.18 as opposed to a retroactively rescinded transaction, and, in the in the consolidated statements of stockholders equity for
the nine months September 30, 2007, to account for the disposition of our investment in Volga-Neft using the guidance of paragraph 23 of APB 29, Accounting for Nonmonetary Transactions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Restate our statements of operations and comprehensive loss for the three and six months ended June 30, 2006, as well as our statements of cash flows for the
six months ended June 30, 2006 and the period from re-entering the development stage (October 6, 2006) through June 30, 2007 to reflect our prior activities with respect to the Galvan Ranch Gas Wells as discontinued operations (see Note 1,
Description of Business, and Note 15, Discontinued Operations, of the Notes to Financial Statements included in Item 1of Part I of this Report).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | ¡ |  | Restate our statements of operations and comprehensive loss for the three and six months ended June 30, 2007 and the period from re-entering the development
stage (October 6, 2006) through June 30, 2007 to segregate debenture interest expense and bank charges.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Restate our statements of cash flows for the six months ended June 30, 2007 and the period from re-entering the development stage (October 6, 2006) through
June 30, 2007 to (a) reflect as non-cash stock based compensation expense the amounts of $589,280 and $692,640, respectively, which were previously reported as issuances of common stock for services and prepaid expenses, and
(b) reflect the advances of loan receivable, proceeds from collection of loan receivable, proceeds from loan payable and repayment of loan payable on a gross basis, which were previously reported on a net basis.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Reclassify certain items contained in our statements of operations and comprehensive loss, as well as our statements of cash flows from the Original Report.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Amend Note 1, Description of Business, of the Notes to Financial Statements, to describe our interest in and explain the reasons why we sold the Galvan
Ranch Gas Wells, and provide information concerning our acquisition of the capital stock of Volga-Neft and explain the reasons why we rescinded that acquisition, with cross references to additional information contained elsewhere in this Amendment
concerning the sale of the Galvan Ranch Gas Wells and our acquisition and rescission of the above acquisition of the capital stock of Volga-Neft.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Add, in Note 3, Summary of Significant Accounting Policies, of the Notes to Financial Statements, a description of our accounting policies regarding
Investments (paragraph 3 (c)), Asset Retirement Obligations (paragraph 3 (h)) and Convertible Debenture with Stock Purchase Warrants (paragraph 3 (p)), and revise the discussion of certain other accounting
policies.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Move the note concerning Financial Instruments from Note 3, Summary of Significant Accounting Policies, to a new Note 4, Financial
Instruments, of the Notes to Financial Statements.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Amend Note 6 (formerly Note 10), Investment in Volga-Neft and Rescission of Stock Purchase Agreement, of the Notes to Financial Statements to expand our
disclosure regarding the reasons we rescinded of our acquisition of Volga-Neft.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Add Note 7, Loan Receivable from Volga-Neft, of the Notes to Financial Statements to provide information concerning the incurrence and repayment of the
loans.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | ¡ |  | Add Note 10, Loan Payable, of the Notes to Financial Statements to provide information concerning a $1,000,000 loan made to us by Bluewater Partners in
2006 and repaid in February 2007.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Amend Note 11 (formerly Note 7), Convertible Debentures, of the Notes to Financial Statements concerning potential defaults thereof as a result of our
rescission of our Volga-Neft acquisition and to reflect that, prior to the rescission of our acquisition of Volga-Neft, we, through our Chief Executive Officer, obtained the oral approval of the rescission from the debenture holders.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Amend Note 12 (formerly Note 8), Capital Stock, of the Notes to Financial Statements to (a) include information concerning our re-acquisition of
3,250,000 shares of our common stock from Ruairidh Campbell and transfer of our interest in the Galvan Ranch Gas Wells to Mr. Campbell, including our accounting therefor, (b) provide information concerning the issuance of shares of our
common stock to acquire Volga-Neft and their subsequent cancellation due to the rescission of that acquisition in June 2007, and (c) add information concerning warrants issued by us in February 2007 in conjunction with our $7,500,000 principal
amount of 8% Secured Convertible Debentures.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Amend Note 13 (formerly Note 9), Income Taxes, of the Notes to Financial Statements to revise information concerning our available Federal and state net
operating loss carry forwards.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Add Note 14, Classification, of the Notes to Financial Statements.
| | - |  | --------------------------------------------------------------------



| | ¡ |  | Add Note 15, Supplemental Disclosure of Cash Flow Information, of the Notes to Financial Statements.
| | - |  | ------------------------------------------------------------------------------------------------------



| | ¡ |  | Add Note 16, Discontinued Operations, of the Notes to Financial Statements regarding our sale of the Galvan Ranch Gas Wells.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Add Note 17, Restatement of Previously Issued Financial Statements, of the Notes to Financial Statements.
| | - |  | -----------------------------------------------------------------------------------------------------------



| | ¡ |  | Amend Note 18 (formerly Note 11), Subsequent Events, of the Notes to Financial Statements to (a) provide additional information regarding our
acquisition of rights and interests to certain projects in Ukraine; (b) revise the value of the total consideration related to the projects; (c) provide information concerning common stock issued by us in August 2007; and (d) disclose
the adoption of our 2007 Stock Option Plan in August 2007.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | ¡ |  | Part I, Item 2, Managements Discussion and Analysis, to revise the discussion therein as a result of the changes made in Item 1,
Financial Statements, discussed above.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ¡ |  | Part I, Item 3, Controls and Procedures, to revise the discussion therein in light of this Amendment.
| | - |  | -------------------------------------------------------------------------------------------------------

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, this Amendment also includes as exhibits, currently dated certifications from our Chief
Executive Officer and Chief Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.

This Amendment speaks only as of
August 20, 2007, the date of filing of the Original Report, and does not reflect events that occurred subsequent to the filing of the Original Report nor does this Amendment update, modify or supersede disclosures that may have been affected by
events that occurred subsequent to August 20, 2007. Therefore, you should read this Amendment together with our reports that cover periods after June 30, 2007, including amendments thereto, and that update, modify or supersede the
information contained in the Original Report, as amended by this Amendment.



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TABLE OF CONTENTS



|                  |  |                                                                                                                                                                                                                      |  |      
|----------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                  |  |                                                                                                                                                                                                                      |  | Page 
|                  |  | PART I                                                                                                                                                                                                               |  |      
|                  |  |                                                                                                                                                                                                                     
|ITEM 1.           |  | FINANCIAL STATEMENTS                                                                                                                                                                                                 |  |      
|                  |  |                                                                                                                                                                                                                     
|                  |  | Balance Sheets as of June 30, 2007 (Unaudited) and December 31, 2006                                                                                                                                                 |  | 7    
|                  |  |                                                                                                                                                                                                                     
|                  |  | 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 June 30, 2007 (Unaudited) |  | 8-9  
|                  |  |                                                                                                                                                                                                                     
|                  |  | Statements of Stockholders Deficit for the six months ended June 30, 2007 and the period from re-entering the Development Stage (October 6, 2006) through June 30, 2007
 (Unaudited)                                |  | 10   
|                  |  |                                                                                                                                                                                                                     
|                  |  | 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 June 30, 2007 (Unaudited)                                   |  | 11   
|                  |  |                                                                                                                                                                                                                     
|                  |  | Notes to the Unaudited Financial Statements                                                                                                                                                                          |  | 12-30
|                  |  |                                                                                                                                                                                                                     
|ITEM 2.           |  | MANAGEMENTS DISCUSSION AND ANALYSIS                                                                                                                                                                                 |  | 31-37
|                  |  |                                                                                                                                                                                                                     
|ITEM 3.           |  | CONTROLS AND PROCEDURES                                                                                                                                                                                              |  | 38-39
|                  |  |                                                                                                                                                                                                                     
|                  |  | PART II                                                                                                                                                                                                              |  |      
|                  |  |                                                                                                                                                                                                                     
|ITEM 6.           |  | EXHIBITS                                                                                                                                                                                                             |  | 40   
|                  | 
|SIGNATURES        |  | 41                                                                                                                                                                                                                  
|                  | 
|INDEX TO EXHIBITS |  | 42                                                                                                                                                                                                                  



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PART I  FINANCIAL INFORMATION



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

STAR ENERGY
CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Balance
Sheets

June 30, 2007 and December 31, 2006

Unaudited



|                                                                         |  |              |            |   |                                     |   |            |  
|------------------------------------------------------------------------ |  | ------------ | ---------- | - | ----------------------------------- | - | ---------- | -
|                                                                         |  | June 30,2007 |            |   | Restated (Note 17) December 31,2006 |  
|                                                                         |  |              |            |  
|ASSETS                                                                   |  |              |            |   |                                     |   |            |  
|Current                                                                  |  |              |            |   |                                     |   |            |  
|Cash                                                                     |  | $            | 4,361,144  |   |                                     | $ | 1,703      |  
|Marketable securities (note 5)                                           |  |              | 201,099    |   |                                     |   |           |  
|Investment in Volga-Neft (note 6)                                        |  |              |           |   |                                     |   | 11,700,000 |  
|Loan receivable from Volga-Neft (note 7)                                 |  |              |           |   |                                     |   | 1,000,000  |  
|Prepaid expenses                                                         |  |              | 664,842    |   |                                     |   | 1,080,890  |  
|                                                                         |  |              |            |  
|                                                                         |  |             
|Total Current Assets                                                     |  |              | 5,227,085  |   |                                     |   | 13,782,593 |  
|                                                                         |  |             
|Debt Issuance Costs(note 8)                                              |  |              | 510,689    |   |                                     |   |           |  
|                                                                         |  |              |            |  
|                                                                         |  |             
|Total Assets                                                             |  | $            | 5,737,774  |   |                                     | $ | 13,782,593 |  
|                                                                         |  |              |            |  
|LIABILITIES                                                              |  |              |            |   |                                     |   |            |  
|Current                                                                  |  |              |            |   |                                     |   |            |  
|Accounts payable                                                         |  | $            | 23,311     |   |                                     | $ | 375,327    |  
|Accrued liabilities                                                      |  |              | 833,393    |   |                                     |   | 665,000    |  
|Advance from related party (note 9)                                      |  |              | 2,785      |   |                                     |   | 2,785      |  
|Loan payable (note 10)                                                   |  |              |           |   |                                     |   | 1,000,000  |  
|                                                                         |  |              |            |  
|                                                                         |  |             
|Total Current Liabilities                                                |  |              | 859,489    |   |                                     |   | 2,043,112  |  
|                                                                         |  |             
|Convertible Debentures(note 11)                                          |  |              | 7,500,000  |   |                                     |   |           |  
|                                                                         |  |              |            |  
|                                                                         |  |             
|Total Liabilities                                                        |  |              | 8,359,489  |   |                                     |   | 2,043,112  |  
|                                                                         |  |              |            |  
|STOCKHOLDERS (DEFICIT) EQUITY                                           |  |              |            |   |                                     |   |            |  
|Capital Stock(note 12)                                                   |  |              |            |   |                                     |   |            |  
|                                                                         |  |             
|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 - 38,737,500)                              |  |              | 29,008     |   |                                     |   | 38,738     |  
|                                                                         |  |             
|Additional Paid-in Capital                                               |  |              | 2,165,795  |   |                                     |   | 12,910,065 |  
|                                                                         |  |             
|Accumulated Deficit and Deficit Accumulated During the Development Stage |  |              | (4,816,518 | ) |                                     |   | (1,209,322 | )
|                                                                         |  |              |            |  
|                                                                         |  |             
|Total Stockholders (Deficit) Equity                                     |  |              | (2,621,715 | ) |                                     |   | 11,739,481 |  
|                                                                         |  |              |            |  
|                                                                         |  |             
|Total Liabilities and Stockholders (Deficit) Equity                     |  | $            | 5,737,774  |   |                                     | $ | 13,782,593 |  
|                                                                         |  |              |            |  

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



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STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Operations and Comprehensive Loss

Three Months Ended June 30, 2007 and 2006

Unaudited



|                                                                                  |  |                                                |            |   |                                                |   |            |  
|--------------------------------------------------------------------------------- |  | ---------------------------------------------- | ---------- | - | ---------------------------------------------- | - | ---------- | -
|                                                                                  |  | Restated(Note 17)Three MonthsEndedJune 30,2007 |            |   | Restated(Note 17)Three MonthsEndedJune 30,2006 |  
|                                                                                  |  |                                                |            |  
|Oil and Gas Revenues                                                              |  | $                                              |           |   |                                                | $ |           |  
|                                                                                  |  |                                               
|Operating Expenses                                                                |  |                                                |            |   |                                                |   |            |  
|Professional fees                                                                 |  |                                                | 932,781    |   |                                                |   |           |  
|Salary and benefits                                                               |  |                                                | 369,212    |   |                                                |   |           |  
|Consulting                                                                        |  |                                                | 126,016    |   |                                                |   |           |  
|Advertising and promotion                                                         |  |                                                | 109,635    |   |                                                |   |           |  
|Office and general                                                                |  |                                                | 27,782     |   |                                                |   |           |  
|Rent                                                                              |  |                                                | 18,848     |   |                                                |   |           |  
|Travel                                                                            |  |                                                | 17,341     |   |                                                |   |           |  
|Insurance                                                                         |  |                                                | 8,910      |   |                                                |   |           |  
|Telephone                                                                         |  |                                                | 5,339      |   |                                                |   |           |  
|Bank charges                                                                      |  |                                                | 1,359      |   |                                                |   |           |  
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Total Operating Expenses                                                          |  |                                                | 1,617,223  |   |                                                |   |           |  
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Operating Loss                                                                    |  |                                                | (1,617,223 | ) |                                                |   |           |  
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Other Income (Expense)                                                            |  |                                                |            |   |                                                |   |            |  
|Other income                                                                      |  |                                                | 8,630      |   |                                                |   |           |  
|Debenture interest                                                                |  |                                                | (202,378   | ) |                                                |   |           |  
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Total Other Income (Expense)                                                      |  |                                                | (193,748   | ) |                                                |   |           |  
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Loss from Continuing Operations Before Income Taxes                               |  |                                                | (1,810,971 | ) |                                                |   |           |  
|                                                                                  |  |                                               
|Provision for income taxes                                                        |  |                                                |           |   |                                                |   |           |  
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Net Loss from Continuing Operations                                               |  |                                                | (1,810,971 | ) |                                                |   |           |  
|                                                                                  |  |                                               
|Loss from Discontinued Operations, Net of Tax                                     |  |                                                |           |   |                                                |   | (44,206    | )
|                                                                                  |  |                                                |            |  
|Net Loss and Comprehensive Loss                                                   |  | $                                              | (1,810,971 | ) |                                                | $ | (44,206    | )
|                                                                                  |  |                                                |            |  
|Net Loss per Common Share from Continuing Operations - Basic and Diluted          |  | $                                              | (0.05      | ) |                                                | $ | 0.00       |  
|                                                                                  |  |                                               
|Net Loss per Common Share from Discontinued Operations - Basic and Diluted        |  |                                                | 0.00       |   |                                                |   | (0.00      | )
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Net Loss per Common Share - Basic and Diluted                                     |  | $                                              | (0.05      | ) |                                                | $ | (0.00      | )
|                                                                                  |  |                                                |            |  
|                                                                                  |  |                                               
|Basic and Diluted Weighted Average Number of Shares Outstanding During the Period |  |                                                | 37,246,841 |   |                                                |   | 31,562,500 |  
|                                                                                  |  |                                                |            |  

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



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STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Operations and Comprehensive Loss

Six Months Ended June 30, 2007 and 2006, and the Period from Re-entering the

Development Stage (October 6, 2006)
through June 30, 2007

Unaudited



|                                                                                  |  |                                              |            |   |                                              |   |            |                                                                                          |  |   |            |  
|--------------------------------------------------------------------------------- |  | -------------------------------------------- | ---------- | - | -------------------------------------------- | - | ---------- | ---------------------------------------------------------------------------------------- |  | - | ---------- | -
|                                                                                  |  | Restated(Note 17)Six MonthsEndedJune 30,2007 |            |   | Restated(Note 17)Six MonthsEndedJune 30,2006 |   |            | Restated (Note 17)(Note 1)Period fromRe-entering theDevelopmentStage throughJune 30,2007 | 
|                                                                                  |  |                                              |            |  
|Oil and Gas Revenues                                                              |  | $                                            |           |   |                                              | $ |           |                                                                                          |  | $ |           |  
|                                                                                  |  |                                              |           
|Operating Expenses                                                                |  |                                              |            |   |                                              |   |            |                                                                                          |  |   |            |  
|Professional fees                                                                 |  |                                              | 1,068,388  |   |                                              |   |           |                                                                                          |  |   | 1,068,388  |  
|Salary and benefits                                                               |  |                                              | 738,929    |   |                                              |   |           |                                                                                          |  |   | 738,929    |  
|Consulting                                                                        |  |                                              | 1,031,016  |   |                                              |   |           |                                                                                          |  |   | 1,031,016  |  
|Advertising and promotion                                                         |  |                                              | 291,605    |   |                                              |   |           |                                                                                          |  |   | 291,605    |  
|Office and general                                                                |  |                                              | 50,042     |   |                                              |   |           |                                                                                          |  |   | 543,915    |  
|Rent                                                                              |  |                                              | 23,548     |   |                                              |   |           |                                                                                          |  |   | 23,548     |  
|Travel                                                                            |  |                                              | 43,945     |   |                                              |   |           |                                                                                          |  |   | 43,945     |  
|Insurance                                                                         |  |                                              | 15,108     |   |                                              |   |           |                                                                                          |  |   | 15,108     |  
|Telephone                                                                         |  |                                              | 6,591      |   |                                              |   |           |                                                                                          |  |   | 6,591      |  
|Bank charges                                                                      |  |                                              | 2,019      |   |                                              |   |           |                                                                                          |  |   | 2,019      |  
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Total Operating Expenses                                                          |  |                                              | 3,271,191  |   |                                              |   |           |                                                                                          |  |   | 3,765,064  |  
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Operating Loss                                                                    |  |                                              | (3,271,191 | ) |                                              |   |           |                                                                                          |  |   | (3,765,064 | )
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Other Income (Expense)                                                            |  |                                              |            |   |                                              |   |            |                                                                                          |  |   |            |  
|Debt forgiven                                                                     |  |                                              |           |   |                                              |   |           |                                                                                          |  |   | 30,000     |  
|Cost associated with the rescission of the stock purchase agreement               |  |                                              |           |   |                                              |   |           |                                                                                          |  |   | (650,000   | )
|Other income                                                                      |  |                                              | 12,806     |   |                                              |   |           |                                                                                          |  |   | 12,806     |  
|Debenture interest                                                                |  |                                              | (348,211   | ) |                                              |   |           |                                                                                          |  |   | (348,211   | )
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Total Other Income (Expense)                                                      |  |                                              | (335,405   | ) |                                              |   |           |                                                                                          |  |   | (955,405   | )
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Loss from Continuing Operations Before Income Taxes                               |  |                                              | (3,606,596 | ) |                                              |   |           |                                                                                          |  |   | (4,720,469 | )
|                                                                                  |  |                                              |           
|Provision for income taxes (note 13)                                              |  |                                              | 600        |   |                                              |   |           |                                                                                          |  |   | 600        |  
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Net Loss from Continuing Operations                                               |  |                                              | (3,607,196 | ) |                                              |   |           |                                                                                          |  |   | (4,721,069 | )
|                                                                                  |  |                                              |           
|Loss from Discontinued Operations, Net of Tax(note 16)                            |  |                                              |           |   |                                              |   | (52,977    | )                                                                                        |  |   |           |  
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Net Loss and Comprehensive Loss                                                   |  | $                                            | (3,607,196 | ) |                                              | $ | (52,977    | )                                                                                        |  | $ | (4,721,069 | )
|                                                                                  |  |                                              |            |  
|                                                                                  |  |                                              |           
|Net Loss per Common Share from Continuing Operations - Basic and Diluted          |  | $                                            | (0.09      | ) |                                              | $ | 0.00       |                                                                                          |  |   |            |  
|                                                                                  |  |                                              |           
|Net Loss per Common Share from Discontinued Operations - Basic and Diluted        |  |                                              | 0.00       |   |                                              |   | (0.00      | )                                                                                        |  |   |            |  
|                                                                                  |  |                                              |            |   |                                              |   |            |                                                                                         
|                                                                                  |  |                                              |           
|Net Loss per Common Share - Basic and Diluted                                     |  | $                                            | (0.09      | ) |                                              | $ | (0.00      | )                                                                                        |  |   |            |  
|                                                                                  |  |                                              |            |   |                                              |   |            |                                                                                         
|                                                                                  |  |                                              |           
|Basic and Diluted Weighted Average Number of Shares Outstanding During the Period |  |                                              | 38,030,870 |   |                                              |   | 31,562,500 |                                                                                          |  |   |            |  
|                                                                                  |  |                                              |            |   |                                              |   |            |                                                                                         

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



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Stockholders (Deficit) Equity

Six Months Ended June 30, 2007 and the Period from Re-entering the

Development Stage (October 6, 2006) through June 30, 2007

Unaudited



|                                                                    |  |                                        |   |  |                               |         |   |                                           |   |             |                                                                     |  |   |                                                |   |  |   |             |  
|------------------------------------------------------------------- |  | -------------------------------------- | - |  | ----------------------------- | ------- | - | ----------------------------------------- | - | ----------- | ------------------------------------------------------------------- |  | - | ---------------------------------------------- | - |  | - | ----------- | -
|                                                                    |  | Restated(Note 17)Number ofCommonShares |   |  | Restated(Note 17)CapitalStock |         |   | Restated(Note 17)AdditionalPaid-inCapital |   |             | AccumulatedDeficit and DeficitAccumulatedDuring theDevelopmentStage |  |   | Restated(Note 17)Stockholders(Deficit) Equity |  
|                                                                    |  |                                        |  
|Balance, October 6, 2006, date of re-entering the development stage |  | 31,562,500                             |   |  | $                             | 31,563  |   |                                           | $ | 77,363      |                                                                     |  | $ | (96,465                                        | ) |  | $ | 12,461      |  
|Common shares cancelled (note 12)                                   |  | (3,250,000                             | ) |  |                               | (3,250  | ) |                                           |   | (41,123     | )                                                                   |  |   |                                               |   |  |   | (44,373     | )
|Common shares issued to purchase Volga-Neft (notes 6 and 12)        |  | 10,000,000                             |   |  |                               | 10,000  |   |                                           |   | 11,690,000  |                                                                     |  |   |                                               |   |  |   | 11,700,000  |  
|Common shares issued for services (note 12)                         |  | 425,000                                |   |  |                               | 425     |   |                                           |   | 1,183,825   |                                                                     |  |   |                                               |   |  |   | 1,184,250   |  
|Net loss for the period                                             |  |                                       |   |  |                               |        |   |                                           |   |            |                                                                     |  |   | (1,112,857                                     | ) |  |   | (1,112,857  | )
|                                                                    |  |                                        |  
|Balance, December 31, 2006                                          |  | 38,737,500                             |   |  | $                             | 38,738  |   |                                           | $ | 12,910,065  |                                                                     |  | $ | (1,209,322                                     | ) |  | $ | 11,739,481  |  
|Common shares issued for services (note 12)                         |  | 250,000                                |   |  |                               | 250     |   |                                           |   | 869,750     |                                                                     |  |   |                                               |   |  |   | 870,000     |  
|Common shares issued for services (note 12)                         |  | 20,000                                 |   |  |                               | 20      |   |                                           |   | 75,980      |                                                                     |  |   |                                               |   |  |   | 76,000      |  
|Common shares cancelled (notes 6 and 12)                            |  | (10,000,000                            | ) |  |                               | (10,000 | ) |                                           |   | (11,690,000 | )                                                                   |  |   |                                               |   |  |   | (11,700,000 | )
|Net loss for the period                                             |  |                                       |   |  |                               |        |   |                                           |   |            |                                                                     |  |   | (3,607,196                                     | ) |  |   | (3,607,196  | )
|                                                                    |  |                                        |  
|Balance, June 30, 2007                                              |  | 29,007,500                             |   |  | $                             | 29,008  |   |                                           | $ | 2,165,795   |                                                                     |  | $ | (4,816,518                                     | ) |  | $ | (2,621,715  | )
|                                                                    |  |                                        |  

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



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Cash Flows

Six Months Ended June 30, 2007 and 2006, and the Period from Re-entering the

Development Stage through June 30,
2007

Unaudited



|                                                          |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  
|--------------------------------------------------------- |  | -------------------------------------------- | ---------- | - | -------------------------------------------- | - | ------- | ----------------------------------------------------------------------------------------- |  | - | ---------- | -
|                                                          |  | Restated(Note 17)Six MonthsEndedJune 30,2007 |            |   | Restated(Note 17)Six MonthsEndedJune 30,2006 |   |         | Restated (Note 17) (Note 1)Period fromRe-entering theDevelopmentStage
throughJune 30,2007 | 
|                                                          |  |                                              |            |  
|Cash Flows from Operating Activities                      |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  
|Net loss                                                  |  | $                                            | (3,607,196 | ) |                                              | $ | (52,977 | )                                                                                         |  | $ | (4,721,069 | )
|Net loss from discontinued operations                     |  |                                              |           |   |                                              |   | 52,977  |                                                                                           |  |   |           |  
|Adjustments to reconcile non-cash items:                  |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  
|Amortization-debt issuance costs                          |  |                                              | 98,211     |   |                                              |   |        |                                                                                           |  |   | 98,211     |  
|Stock-based compensation expense                          |  |                                              | 589,280    |   |                                              |   |        |                                                                                           |  |   | 692,640    |  
|Issuance of common stock for services                     |  |                                              | 887,100    |   |                                              |   |        |                                                                                           |  |   | 887,100    |  
|Changes in non-cash working capital:                      |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  
|Prepaid expenses                                          |  |                                              | (173,232   | ) |                                              |   |        |                                                                                           |  |   | (173,262   | )
|Accounts payable                                          |  |                                              | (352,016   | ) |                                              |   |        |                                                                                           |  |   | 16,964     |  
|Accrued liabilities                                       |  |                                              | 168,393    |   |                                              |   |        |                                                                                           |  |   | 833,393    |  
|                                                          |  |                                              |            |  
|Net Cash Used in Operating Activities                     |  |                                              | (2,389,460 | ) |                                              |   |        |                                                                                           |  |   | (2,366,023 | )
|                                                          |  |                                              |            |  
|Cash Flows from Investing Activities                      |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  
|Purchase of marketable securities                         |  |                                              | (201,099   | ) |                                              |   |        |                                                                                           |  |   | (201,099   | )
|Advances of loan receivable                               |  |                                              | (2,000,000 | ) |                                              |   |        |                                                                                           |  |   | (3,000,000 | )
|Proceeds from collection of loan receivable               |  |                                              | 3,000,000  |   |                                              |   |        |                                                                                           |  |   | 3,000,000  |  
|                                                          |  |                                              |            |  
|Net Cash Provided by (Used in) Investing Activities       |  |                                              | 798,901    |   |                                              |   |        |                                                                                           |  |   | (201,099   | )
|                                                          |  |                                              |            |  
|Cash Flows from Financing Activities                      |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  
|Proceeds from issuance of note payable                    |  |                                              |           |   |                                              |   | 30,000  |                                                                                           |  |   | (30,000    | )
|Proceeds from issuance of convertible debentures          |  |                                              | 7,500,000  |   |                                              |   |        |                                                                                           |  |   | 7,500,000  |  
|Proceeds from loan payable                                |  |                                              |           |   |                                              |   |        |                                                                                           |  |   | 1,000,000  |  
|Repayment of loan payable                                 |  |                                              | (1,000,000 | ) |                                              |   |        |                                                                                           |  |   | (1,000,000 | )
|Debt issuance costs                                       |  |                                              | (550,000   | ) |                                              |   |        |                                                                                           |  |   | (550,000   | )
|                                                          |  |                                              |            |  
|Net Cash Provided by Financing Activities                 |  |                                              | 5,950,000  |   |                                              |   | 30,000  |                                                                                           |  |   | 6,920,000  |  
|                                                          |  |                                              |            |  
|Cash Flows from Discontinued Operations                   |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  
|Operating cash flows                                      |  |                                              |           |   |                                              |   | (40,977 | )                                                                                         |  |   | 7,968      |  
|Investing cash flows                                      |  |                                              |           |   |                                              |   |        |                                                                                           |  |   | 44,403     |  
|Financing cash flows                                      |  |                                              |           |   |                                              |   |        |                                                                                           |  |   | (44,373    | )
|                                                          |  |                                              |            |  
|Net Cash (Used in) Provided by Discontinued Operations    |  |                                              |           |   |                                              |   | (40,977 | )                                                                                         |  |   | 7,998      |  
|                                                          |  |                                              |            |  
|Net Increase (Decrease) in Cash                           |  |                                              | 4,359,441  |   |                                              |   | (10,977 | )                                                                                         |  |   | 4,360,876  |  
|                                                          |  |                                              |           
|Cash - Beginning of Period                                |  |                                              | 1,703      |   |                                              |   | 13,975  |                                                                                           |  |   | 268        |  
|                                                          |  |                                              |            |  
|                                                          |  |                                              |           
|Cash - End of Period                                      |  | $                                            | 4,361,144  |   |                                              | $ | 2,998   |                                                                                           |  | $ | 4,361,144  |  
|                                                          |  |                                              |            |  
|Supplemental Disclosure of Cash Flow Information(note 14) |  |                                              |            |   |                                              |   |         |                                                                                           |  |   |            |  

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



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended 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. The Company is seeking to acquire, explore and develop oil and gas properties, presently in Ukraine.

The Companys operations began on July 2, 2003 when it purchased a 15% working interest and 12% net revenue interest in eight oil and gas
producing wells known as the Galvan Ranch Gas Wells in Webb County, Texas.

During the third quarter of 2006, the Company concluded that
the Galvan Ranch Gas Wells, which had generated revenues of only $55,852 in 2005 and $33,431 for the nine months ended September 30, 2006, were not meeting expectations, were without perceived growth potential and were a distraction to the
Companys ability to raise financing and grow. The Companys then principal shareholder was not interested in pursuing a strategy of focusing on areas in Russia and the former Soviet Union, rather than the United States. Therefore, in
conjunction with the Companys acquisition of Volga-Neft Limited Company (Volga-Neft) described below, the Company transferred its interest in the Galvan Ranch Gas Wells to its then principal shareholder in exchange for 3,250,000
shares of the Companys common stock, which the Company redirected to the contemporaneous acquisition of Volga-Neft. See note 12.

Under its new strategy, on October 6, 2006, the Company acquired 100% of the capital stock of Volga-Neft, a Russian limited liability company primarily engaged in the processing and sale of crude oil in Samara, Russia.

On April 13, 2007, the Company was advised by the audit firm that purportedly audited the financial statements of Volga-Neft covering certain
periods prior to the Companys acquisition of Volga-Neft that such financial statements were not audited by that firm. The Company therefore concluded that those financial statements could not be relied upon, determined that certain
representations, warranties and covenants made by the stockholders of Volga-Neft were untrue, and determined that other information provided to the Company with respect to the business, financial condition, operations and prospects of Volga-Neft was
not reliable. Accordingly, the Company decided to seek, and obtained, rescission of the transaction through a Rescission Agreement dated June 14, 2007 among the Company, Volga-Neft and the former shareholders of Volga-Neft. See notes 6, 7, 12,
14 and 17.

As a result of the disposition of the Galvan Ranch Gas Wells and rescission of the Volga-Neft agreement, as of October 6,
2006, the Company was considered to have re-entered the development stage.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|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 six months ended June 30, 2007 and 2006, respectively. As of June 30, 2007, the Company had working capital of $4,367,596 (December 31, 2006 - $11,739,481) and an accumulated deficit of $4,816,518
(December 31, 2006 - $1,209,322). The Company has funded operations by raising $7,500,000 through debt financing (see note 11). Managements plan is to seek additional funds through future equity and/or debt financing until it achieves
profitable operations from its oil and gas drilling activities. Although the Company plans to seek additional financing there can be no assurance that the Company will be able to secure financing or obtain such on satisfactory terms, if at all. The
Companys continuation as a going concern depends upon its ability to raise funds and achieve and sustain profitable operations.

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



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

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



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

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



| | b) | Marketable Securities
| | -- | ---------------------

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



| | c) | Investments
| | -- | -----------

The Company has accounted for its investment
in Volga-Neft using the cost method of accounting for investments described in paragraph 6a, APB No. 18, The Equity Method of Accounting for Investments in Common Stock. Under the cost method of accounting, the Company carried the
investment at historical cost and periodically evaluated the fair value of the investment to determine if an other-than-temporary decline in value had occurred.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



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



| | d) | Debt Issuance Costs
| | -- | -------------------

Debt issuance costs are stated at
cost and have been amortized on a straight line basis over three years.



| | e) | 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.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



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



| | f) | 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s (SEC) Staff Accounting Bulletin No. 104
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.



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

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



| | h) | Asset Retirement Obligations
| | -- | ----------------------------

For operating properties,
costs associated with environmental remediation obligations are accrued in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations (SFAS No 143). SFAS No. 143 requires the Company to record a
liability for the present value of the estimated environmental remediation costs, and the related asset created with it, in the period in which the liability is incurred. The liability will be accreted and the asset will be depreciated over the life
of the related assets. Adjustments for changes resulting from the passage of time and changes to either the timing or amount of the original present value estimate underlying the obligation will be made.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



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



| | h) | Asset Retirement Obligations (contd)
| | -- | -------------------------------------

For
non-operating properties, costs associated with environmental remediation obligations are accrued when it is probable that such costs will be incurred and they can be reasonably estimated. Estimates for reclamation and other closure costs are
prepared in accordance with SFAS No. 5 Accounting for Contingencies, or Statement of Position 96-1 Environmental Remediation Liabilities. Accruals for estimated losses from environmental remediation obligations have
historically been recognized no later than completion of the remedial feasibility study for each facility and are charged to provision for closed operations and environmental matters. Costs of future expenditures for environmental remediation are
not discounted to their present value unless subject to a contractually obligated fixed payment schedule. Such costs are based on managements current estimate of amounts to be incurred when the remediation work is performed, within current
laws and regulations.

Future closure, reclamation and environmental-related expenditures are difficult to estimate, in many circumstances,
due to the early stage nature of investigations, and uncertainties associated with defining the nature and extent of environmental contamination and the application of laws and regulations by regulatory authorities and changes in reclamation or
remediation technology. Management periodically reviews accrued liabilities for such reclamation and remediation costs as evidence becomes available indicating that the Companys liabilities have potentially changed.



| | i) | 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.



| | j) | 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.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



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



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

The Company has adopted SFAS
No.128, Earnings per Share which requires disclosure on the consolidated 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. The computation of diluted earnings (loss) per share has not been presented as its effect would be anti-dilutive.



| | l) | 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.



| | m) | 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.



| | n) | 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.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



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



| | o) | Share-Based Payment
| | -- | -------------------

The Company has adopted the
disclosure requirements of SFAS No. 123(R), Share-Based Payment (SFAS No. 123(R)) for stock options and similar equity instruments (collectively, options) issued to employees. The Company applies the
fair-value based method of accounting as prescribed by SFAS No. 123(R). 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, the expected dividends on it, and the risk-free interest rate over the expected life of the option. SFAS No. 123(R) 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.



| | p) | Convertible Debenture with Stock Purchase Warrants
| | -- | --------------------------------------------------

The
Company has issued convertible debt with non-detachable conversion features and detachable warrants. The values assigned to the warrants and embedded conversion feature of the debt is based on the guidance of Emerging Issue Task Force
(EITF) No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios (EITF No. 98-5), EITF No. 00-19, Accounting for
Derivative Financial Instruments to, and Potentially Settled in, a Companys Own Stock (EITF No. 00-19), SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity (SFAS No. 150) and EITF No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments of the FASBs Emerging Issues Task Force (EITF No. 00-27). The
non-detachable conversion feature and detachable warrants are recorded as a discount to the related debt either as additional paid-in capital or a derivative liability, depending on the guidance, using the intrinsic value method or relative fair
value method, respectively. The debt discount associated with the warrants and embedded conversion feature, if any, is amortized to interest expense over the life of the debenture or upon earlier conversion of the debenture using either the
effective yield method or the straight-line method, as appropriate.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



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



| | q) | Recent Accounting Pronouncements
| | -- | --------------------------------

In September 2006,
Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value, establishes a
framework for measuring fair value and expands the related disclosure requirements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.
SFAS No. 157 indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market,
the most advantageous market for the asset or liability. SFAS No. 157 defines fair value based upon an exit price model. SFAS No. 157 is effective for fiscal years beginning January 1, 2008. The Company is currently assessing the
potential impact of implementing this standard.

In September 2006, FASB issued SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R) (SFAS No. 158) . The Company has adopted SFAS No. 158 except for the requirement to measure plan
assets and benefit obligations as of the date of the Companys fiscal year-end statement of financial position which is effective to fiscal years beginning after December 15, 2008. The Company is currently assessing the potential impact
that the adoption of SFAS No. 158 could have on its financial statements.

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

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

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



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



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



| | q) | Recent Accounting Pronouncements (contd)
| | -- | -----------------------------------------

In April
2007, the FASB issued a FASB Statement Position (FSP) on FASB Interpretation (FIN) 39-1 (FIN No. 39-1) which modifies FIN No. 39, Offsetting of Amounts relating to Certain Contracts
(FIN No. 39). FIN 39-1 addresses whether a reporting entity that is party to a master netting arrangement can offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return
cash collateral (a payable) against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement in accordance with FIN No. 39. Upon adoption of this FASB Staff Position
(FSP), a reporting entity shall be permitted to change its accounting policy to offset or not offset fair value amounts recognized for derivative instruments under master netting arrangements. The guidance in this FSP is effective for
fiscal years beginning after November 15, 2007. The Company is currently assessing the potential impact of implementing this standard.



|4. | 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.



|5. | Marketable Securities
|-- | ---------------------



|                |  |      |  |                          |  |                   |         |              |   |         |  |              |   |  |   |   | 
|--------------- |  | ---- |  | ------------------------ |  | ----------------- | ------- | ------------ | - | ------- |  | ------------ | - |  | - | - | 
|Number ofShares |  |      |  | June 30, 2007            |  | December 31, 2006 |        
|2007            |  | 2006 |  |                          |  | Cost              |         | Market Value |   | Cost    |  | Market Value |  
|                |  |      |  |                          |  |                   |         |             
|                |  |      |  |                          |  |                  
|201,099         |  |     |  | Munder Cash Invt Class A |  | $                 | 201,099 |              | $ | 201,099 |  | $            |  |  | $ |  | 
|                |  |      |  |                          |  |                   |         |             



|6. | Investment in Volga-Neft and Rescission of Stock Purchase Agreement
|-- | -------------------------------------------------------------------

The Company acquired, on October 6, 2006, 100% of the capital stock in Volga-Neft for 10,000,000 shares of the Companys common stock for an aggregate value of $11,700,000, based on the closing market price
of the Companys common stock on that date. The 100% investment in Volga-Neft has been recorded at its cost amount using the cost method of accounting for investments described in paragraph 6a of APB No. 18, The Equity Method of
Accounting for Investments in Common Stock.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|6. | Investment in Volga-Neft and Rescission of Stock Purchase Agreement(contd)
|-- | ---------------------------------------------------------------------------

On April 13, 2007, the Company was advised by the audit firm that purportedly audited the financial statements of Volga-Neft covering certain
periods prior to the Companys acquisition of Volga-Neft that those financial statements were not audited by that firm. The Company therefore concluded that those financial statements could not be relied upon, determined that certain
representations, warranties and covenants made by the stockholders of Volga-Neft were untrue, and determined that other information provided to the Company with respect to the business, financial condition, operations and prospects of Volga-Neft was
not reliable. Accordingly, the Company decided to seek, and obtained, rescission of the transaction.

Under the Stock Purchase Agreement,
the shareholders of Volga-Neft made numerous representations and warranties, including that Volga-Nefts books and records were complete and correct, represented actual transactions and were maintained in accordance with sound business
practice. As part of the Companys further investigation once it was advised that the audit firm that purportedly audited the pre-acquisition financial statements of Volga-Neft disclaimed performing an audit of the pre-acquisition financial
statements of Volga-Neft, the Company was advised by Volga-Nefts internal accountant that the revenues of Volga-Neft for the period of January 1, 2006 through December 31, 2006 were actually $47 million (rather than the $83 million
reflected in financial statements provided to the Company for the shorter January 1, 2006 through October 6, 2006 period). The Company was also advised by an accounting firm which it intended to retain to re-audit
Volga-Nefts financial statements, among other things, that documents requested were not provided, that reconciliations did not exist, that no observations of inventories had occurred in the past and that some properties listed as owned by
Volga-Neft may have been leased. These factors led to the conclusion that the books and records of Volga-Neft were not complete and correct and were not maintained in accordance with sound business practice. These factors also put into question the
Companys ability to rely on other representations and warranties made by the shareholders of Volga-Neft. In addition, because the independent auditor was unable to audit opening balances for post-acquisition financial statements of Volga-Neft,
the Company could not receive the comfort that a post-closing audit provides an acquirer with respect to the accuracy of representations and warranties.

In lieu of retaining Volga-Neft and spending the time, effort and cost of trying to establish the degree to which breaches existed and the level of damages sustained, and then seek indemnification against the
Volga-Neft shareholders in Russia, the Company determined that it was in its best interests to seek rescission of the Stock Purchase Agreement. Consequently, the Company obtained rescission of the transaction. By a Rescission Agreement dated
June 14, 2007 among the Company, Volga-Neft and the former shareholders of Volga-Neft, the Stock Purchase Agreement under which the Company acquired all of the outstanding shares of capital stock of Volga-Neft was rescinded; the Company
returned the shares of Volga-Neft it received to the former stockholders of Volga-Neft who, in turn, returned to the Company the 10,000,000 shares of the Companys common stock that had been previously issued to them, and the Company cancelled
those shares. The cancellation of the shares was accounted for at its recorded amount of $11,700,000 using the guidance of paragraph 23 of APB 29, Accounting for Nonmonetary Transactions. In addition, Volga-Neft issued a $4,200,000
promissory note in the Companys favor to repay $3,000,000 of loans made to Volga-Neft since the acquisition and to reimburse the Company for costs and damages incurred by the Company. The Company, in turn, sold the promissory note to a
non-related third party on a non-recourse basis for $3,000,000. See notes 7, 12, 14 and 17.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|7. | Loan Receivable from Volga-Neft
|-- | -------------------------------

The loan
receivable from Volga-Neft, including $2,000,000 of additional advances made to Volga-Neft during 2007, bore interest at 4% per annum, had a maturity date of December 8, 2008 and was secured by the assets of Volga-Neft.

On June 14, 2007, the Company rescinded the October 6, 2006 acquisition of Volga-Neft. As part of the Rescission Agreement, Volga-Neft issued a
$4,200,000 promissory note in the Companys favor to repay the $3,000,000 of loans made to Volga-Neft since the acquisition and to reimburse the Company for costs and damages incurred by the Company. The note was non-interest bearing provided
the principal was repaid by September 1, 2007. The Company sold the promissory note to a non-related third party on a non-recourse basis for $3,000,000.



|8. | Debt Issuance Costs
|-- | -------------------



|                    |  |      |         |                                     |   |         |  |                                         |   |  |   |   | 
|------------------- |  | ---- | ------- | ----------------------------------- | - | ------- |  | --------------------------------------- | - |  | - | - | 
|                    |  | Cost |         | June 30,2007AccumulatedAmortization |   | Cost    |  | December 30,2006AccumulatedAmortization |  
|                    |  |      |         |                                    
|                    |  |      |         |                                    
|Debt issuance costs |  | $    | 608,900 |                                     | $ | 98,211  |  | $                                       |  |  | $ |  | 
|                    |  |      |         |                                    
|                    |  |      |         |                                    
|Net carrying amount |  |      |         |                                     | $ | 510,689 |  |                                         |   |  | $ |  | 
|                    |  |      |         |                                     |   |         |  |                                         |   |  |   |   | 

The debt issuance costs were incurred in connection with the issuance of the convertible
debentures as described in note 11.



|9. | Advance from Related Party
|-- | --------------------------

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



|10. | Loan Payable
|--- | ------------

The loan was made to the Company in
2006 by Bluewater Partners and was non-interest bearing, unsecured and due on demand. In February 2007, the loan was repaid by the Company.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|11. | Convertible Debentures
|--- | ----------------------

On February 9, 2007,
the Company entered into a securities purchase agreement, whereby the Company issued $7,500,000 in principal amount of convertible debentures. The convertible debentures bear interest at 8% per annum, are secured by all the assets of the
Company and mature on February 9, 2010. The debentures were originally convertible into common shares at the option of the holders, at a conversion price of $2.00 per share. In addition, the debenture holders were issued warrants which allow
the holders to purchase, at any time until February 9, 2012, up to 2,437,500 common shares. The warrants were originally exercisable at an exercise price of $3.81 per share. The debentures have a conversion price adjustment clause to adjust the
conversion price based on certain events, including a stock split and, with certain exceptions, stock issuances at less than the conversion price.

The rescission of the acquisition of Volga-Neft could have resulted in the acceleration of the maturity of some or all of the Companys debentures issued in February 2007 and that otherwise would be due on February 9, 2010 or
earlier upon acceleration, following an event of default, pursuant to a debentures agreement. Prior thereto, the Company, through its Chief Executive Officer, obtained the oral approval of the debenture holders. Pursuant to the terms of a
registration rights agreement between the Company and the purchasers of the debentures, dated as of February 9, 2007, the Company agreed to prepare and file, by April 15, 2007, with the SEC, a registration statement for the purpose of
registering for resale all of the shares of the Companys common stock issuable upon conversion of the debentures and the exercise of the warrants. The Company has not, to date, filed the registration statement. The registration rights
agreement provided that, if the Company did not file the registration statement by April 15, 2007, and if the registration statement was not declared effective by the SEC 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), the Company was 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 debenture holders.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|12. | Capital Stock
|--- | -------------

On October 6, 2006, an
assignment and bill of sale was entered into between the Company and Ruauridh Campbell, who contemporaneously ceased being an officer, director and principal shareholder of the Company. Pursuant to the assignment, Mr. Campbell agreed to
transfer to the Company for cancellation 3,250,000 shares of the Companys common stock. In consideration thereof, the Company agreed to assign to Mr. Campbell the Companys interest in and to certain oil and gas wells, which
comprised the Companys only operating assets until that time, known as the Galvan Ranch Gas Wells, which are located in Webb County, Texas, having a book value at the time of $44,373. The closing market price of the Companys common stock
on October 6, 2006 was $1.17 per share. However, a large number of shares exchanged by Mr. Campbell were restricted securities that were not subject to a current registration statement and were subject to a relatively thin trading market
for the Companys common stock. In addition, the Galvan Ranch Gas Wells produced minimal, if any, positive cash flows to the Company. In accordance with SFAS 153, Exchanges of Nonmonetary Assets, the Company recorded the stock
received at the then book value of its interest in the Galvan Ranch Gas Wells and generated no profit or loss on the exchange.

On
October 6, 2006, the Company issued 10,000,000 common shares to acquire Volga-Neft valued at $11,700,000. The investment in Volga-Neft has been recorded at its cost amount using the cost method of accounting for investments described in
paragraph 6a of APB No. 18, The Equity Method of Accounting for Investments in Common Stock.

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

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

On March 1, 2007, the Company issued 250,000 common shares for
consulting and other services valued at $870,000.

On April 11, 2007, the Company issued 4,500 common shares for investor relations
services valued at $17,100.

On April 11, 2007, the Company issued 15,500 common shares for finance services valued at $58,900.

On June 14, 2007, the Company rescinded its acquisition of Volga-Neft and cancelled the 10,000,000 common shares returned to the
Company by Volga-Neft. The cancellation of the shares was accounted for at its recorded amount of $11,700,000 using the guidance of paragraph 23 of APB 29, Accounting for Nonmonetary Transactions.

All the shares issued were valued based on the closing market price of the Companys common stock on the date of their issuance.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|12. | Capital Stock(contd)
|--- | ---------------------

Warrants

On February 9, 2007, the Company issued warrants to the debenture holders which allow the holders to purchase, at any time until
February 9, 2012, up to 2,437,500 common shares. The warrants were originally exercisable at a price of $3.81 per share.

On
February 12, 2007, the Company issued warrants to a third party in connection with the placement of the debentures which allow the holders to purchase, at any time until February 12, 2012, up to 262,500 common shares at a price of $3.81
per share.

Outstanding stock warrants have not been included in the calculation of the diluted earnings per share as their inclusion would
be anti-dilutive.

As of June 30, 2007, warrants to purchase 2,700,000 shares were outstanding, having an exercise price of $3.81 per
share with a weighted average exercise price of $3.81 per share and an average remaining contractual life of 4.58 years.



|                              |  |                   |  |                              |      |                                         |           
|----------------------------- |  | ----------------- |  | ---------------------------- | ---- | --------------------------------------- | ----------
|                              |  | Number ofWarrants |  | WeightedAverageExercisePrice |      | WeightedAverageRemainingContractualTerm
|                              |  |                  
|Balance, January 1, 2006      |  |                  |  | $                            |     |                                         |           
|                              |  |                   | 
|Issued during the year        |  |                  |  |                              |     |                                         |           
|Exercised during the year     |  |                  |  |                              |     |                                         |           
|Forfeitures during the year   |  |                  |  |                              |     |                                         |           
|Expired during the year       |  |                  |  |                              |     |                                         |           
|                              |  |                   |  |                             
|                              |  |                   | 
|Balance, December 31, 2006    |  |                  |  |                              |     |                                         |           
|                              |  |                   | 
|Issued during the period      |  | 2,700,000         |  |                              | 3.81 |                                         |           
|Exercised during the period   |  |                  |  |                              |     |                                         |           
|Forfeitures during the period |  |                  |  |                              |     |                                         |           
|Expired during the period     |  |                  |  |                              |     |                                         |           
|                              |  |                   |  |                             
|                              |  |                   | 
|Balance, June 30, 2007        |  | 2,700,000         |  | $                            | 3.81 |                                         | 4.58 years
|                              |  |                   |  |                             

Warrants were valued using the Black-Scholes model, using the weighted average key assumptions of
volatility of 0%, a risk-free interest rate of 4.82%, a term equivalent to the life of the warrant, and reinvestment of all dividends in the Company at zero percent.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|13. | 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  |   |      | $ | 16,423  |  
|Valuation allowance                                                   |  |      | (1,132,060 | ) |      |   | (16,423 | )
|                                                                      |  |      |            |  
|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 December 31, 2006, the Company had approximately $4,819,000 and $1,212,000, respectively, of Federal and state net operating loss carryforwards available to offset future taxable
income, which expire in 20 years from the date the loss was incurred as follows:



|     |  |   |          
|---- |  | - | ---------
|2025 |  | $ | 42,000   
|2026 |  |   | 1,170,000
|2027 |  |   | 3,607,000
|     |  |   |          
|     |  | $ | 4,819,000
|     |  |   |          



|14. | Classification
|--- | --------------

Certain figures for the three and
six months ended June 30, 2007 and the period from re-entering the development stage (October 6, 2006) through June 30, 2007 have been reclassified to conform with the current periods financial statement presentation.



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|15. | Supplemental Disclosure of Cash Flow Information
|--- | ------------------------------------------------



|                                                                                                 |  |                                              |            |   |                                              |   |                                                                                            |  |   |             |  
|------------------------------------------------------------------------------------------------ |  | -------------------------------------------- | ---------- | - | -------------------------------------------- | - | ------------------------------------------------------------------------------------------ |  | - | ----------- | -
|                                                                                                 |  | Restated(Note 17)Six MonthsEndedJune 30,2007 |            |   | Restated(Note 17)Six MonthsEndedJune 30,2006 |   | Restated (Note 17) (Note 1)Period fromRe-entering theDevelopmentStage throughJune 30, 2007 | 
|                                                                                                 |  |                                              |            |  
|Non-cash investing activities are as follows:                                                    |  |                                              |            |   |                                              |   |                                                                                            |  |   |             |  
|Acquisition of Volga-Neft (note 6)                                                               |  | $                                            |           |   |                                              |   |                                                                                           |  | $ | (11,700,000 | )
|Rescission of the Volga-Neft acquisition (note 6)                                                |  |                                              | 11,700,000 |   |                                              |   |                                                                                           |  |   | 11,700,000  |  
|Increase in loan receivable due to damages related to the Volga Neft rescission (note 6)         |  |                                              | 1,200,000  |   |                                              |   |                                                                                           |  |   | 1,200,000   |  
|Discount on proceeds from collection of loan receivable (note 6)                                 |  |                                              | (1,200,000 | ) |                                              |   |                                                                                           |  |   | (1,200,000  | )
|                                                                                                 |  |                                              |            |  
|                                                                                                 |  |                                              |           
|Total non-cash investing activities                                                              |  | $                                            | 11,700,000 |   |                                              | $ |                                                                                           |  | $ |            |  
|                                                                                                 |  |                                              |            |  
|Non-cash financing activity is as follows:                                                       |  |                                              |            |   |                                              |   |                                                                                            |  |   |             |  
|Issuance of common stock for debt issuance costs (notes 8 and 12)                                |  | $                                            | 58,900     |   |                                              | $ |                                                                                           |  | $ | 58,900      |  
|                                                                                                 |  |                                              |            |  
|During the period, the Company had cash flows arising from interest and income taxes as follows: |  |                                              |            |   |                                              |   |                                                                                            |  |   |             |  
|Interest                                                                                         |  | $                                            | 55,556     |   |                                              | $ |                                                                                           |  | $ | 55,556      |  
|                                                                                                 |  |                                              |            |  
|                                                                                                 |  |                                              |           
|Income taxes                                                                                     |  | $                                            | 600        |   |                                              | $ |                                                                                           |  | $ | 600         |  
|                                                                                                 |  |                                              |            |  



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##### Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|16. | Discontinued Operations
|--- | -----------------------

As of October 6,
2006, the Company was considered to have re-entered the development stage as a result of the disposition of the Galvan Ranch Gas Wells and rescission of the Volga-Neft agreement described in note 1. Thus, in accordance with SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144), the Companys results of operations, financial position and cash flows up to October 6, 2006 have been classified separately as
discontinued operations for all periods presented. For the six months ended June 30, 2007, the Company had loss in the amount of $0 (six months ended June 30, 2006 - $52,977), net of tax, from discontinued operations.

Results of the discontinued operations are summarized below:



|                                              |  |                                              |   |                                              |   |         |                                                                                          |  |   |   | 
|--------------------------------------------- |  | -------------------------------------------- | - | -------------------------------------------- | - | ------- | ---------------------------------------------------------------------------------------- |  | - | - | 
|                                              |  | Restated(Note 17)Six MonthsEndedJune 30,2007 |   | Restated(Note 17)Six MonthsEndedJune 30,2006 |   |         | Restated(Note 17)(Note 1)Period
fromRe-entering theDevelopmentStage throughJune 30, 2007 | 
|                                              |  |                                              |   |                                             
|Net sales                                     |  | $                                            |  |                                              | $ | 25,021  |                                                                                          |  | $ |  | 
|                                              |  |                                              |   |                                             
|                                              |  |                                              |  
|Expenses from discontinued operations:        |  |                                              |   |                                              |   |         |                                                                                          |  |   |   | 
|Office and general                            |  |                                              |  |                                              |   | 64,807  |                                                                                          |  |   |  | 
|Production costs                              |  |                                              |  |                                              |   | 11,362  |                                                                                          |  |   |  | 
|Depreciation                                  |  |                                              |  |                                              |   | 1,829   |                                                                                          |  |   |  | 
|                                              |  |                                              |   |                                             
|                                              |  |                                              |  
|Total expenses from discontinued operations   |  |                                              |  |                                              |   | 77,998  |                                                                                          |  |   |  | 
|                                              |  |                                              |   |                                             
|                                              |  |                                              |  
|Loss from discontinued operations             |  |                                              |  |                                              |   | (52,977 | )                                                                                        |  |   |  | 
|Income tax                                    |  |                                              |  |                                              |   |        |                                                                                          |  |   |  | 
|                                              |  |                                              |   |                                             
|                                              |  |                                              |  
|Loss from discontinued operations, net of tax |  | $                                            |  |                                              | $ | (52,977 | )                                                                                        |  | $ |  | 
|                                              |  |                                              |   |                                             



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STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|17. | Restatement of Previously Issued Financial Statements
|--- | -----------------------------------------------------

The statements of operations and comprehensive loss for the three and six months ended June 30, 2006, and the statements of cash flows for the six months ended June 30, 2006 and the period from re-entering the development stage
(October 6, 2006) through June 30, 2007 have been corrected to segregate discontinued operations from continuing operations, which is required by U.S. generally accepted accounting principles. The changes have not been set forth in this note as
the restatement only reclassified certain non material operating income and expenses and other expenses between continuing operations and discontinued operations, which is readily determinable from the financial statements (note 16).

The statements of operations and comprehensive loss for the three and six months ended June 30, 2007 and the period from re-entering the development
stage (October 6, 2006) through June 30, 2007 have been corrected to segregate debenture interest from bank charges, which is required by U.S. generally accepted accounting principles.

The balance sheet as of December 31, 2006, and the statements of stockholders (deficit) equity for the six months ended June 30, 2007 and
the period from re-entering the development stage (October 6, 2006) through June 30, 2007 have been corrected to record the acquisition and cancellation of the shares of Volga Neft using the cost method (note 6). The specific changes are to
reflect the investment in Volga Neft of $11,700,000 in the balance sheet as of December 31, 2006, and the related issuance and cancellation of 10,000,000 shares of the Companys common stock valued at $11,700,000 in the balance sheets as
of June 30, 2007 and December 31, 2006, and statement of stockholders (deficit) equity for the six months ended June 30, 2007 and the period from re-entering the development stage (October 6, 2006) through June 30, 2007.

The statements of cash flows for the six months ended June 30, 2007 and the period from re-entering the development stage (October 6,
2006) through June 30, 2007 have been corrected to include the actual non cash stock based compensation expense which was previously incorrectly reported in the issuance of common stock for services and prepaid expenses. The advances of loan
receivable, proceeds from collection of loan receivable, proceeds from loan payable and repayment of loan payable have been corrected to disclose them on a gross basis which was previously incorrectly reported on a net basis.

The notes to the financial statements have been corrected to include the disclosure of stock warrants, which is required by U.S. generally accepted
accounting principles and was not previously reported.



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STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Notes to Financial Statements

Six Months Ended June 30, 2007 and 2006

Unaudited



|18. | Subsequent Events
|--- | -----------------

Option to Acquire Oil and Gas
Properties

On August 1, 2007, the Company entered into separate agreements with each of Firecreek Petroleum, Inc.
(Firecreek), a wholly-owned subsidiary of EGPI Firecreek, Inc., PJM Management, Inc. (PJM) and Double Coin Ltd. (Double Coin), pursuant to which the Company acquired from Firecreek and Double Coin any and all of
their rights and interests with respect to certain projects in 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 (the
Projects). Of the rights held by Firecreek and Double Coin, one was a letter of intent for Anglo-Ukr-Energy LLC (AUE) to acquire the Region Project for $5.5 million, the second was an oral understanding pursuant to which the
Company entered into a letter of intent to acquire 51% of the Dewon ZAO Project for $40 million and the third was a contract for AUE to acquire the Bukovyna Project for $20 million. AUE was a company being formed on behalf of Firecreek and Double
Coin in Ukraine to acquire the Projects. The Company was granted the right to complete, and did complete, the organization of AUE as a subsidiary of the Company. In exchange for the Companys acquisition of the rights of Firecreek and Double
Coin, the Company issued 2,100,000 shares of the Companys common stock and paid $100,000 to Firecreek and issued 2,500,000 shares of the Companys common stock to Double Coin. The Company issued 150,000 shares of the Companys common
stock and paid $10,000 to PJM which acted as a finder for Firecreek and Double Coin. The shares were valued at $0.27 per share for a total consideration of $1,392,500. The purchase price for the Companys acquisition of the rights of Firecreek
and Double Coin and PJMs finders fee was negotiated with them and was equal to approximately 2.1% of the total purchase price that was to be paid to the owners of the Projects, based on the market value of the Companys common stock
at the time the Company entered into the agreements with Firecreek, PJM and Double Coin. Firecreek, PJM and Double Coin are not related to the Company, its officers, directors and affiliates.

Capital Stock

On August 1, 2007, the
Company issued 8,000 common shares for finance services valued at $2,560.

Stock Options

On August 15, 2007, the Board of Directors of the Company adopted the Companys 2007 Stock Option Plan (2007 Plan) to allow options
to purchase up to 4,000,000 shares of the Companys common stock to be granted to employees and non-employee directors.



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|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 locate and acquire high oil and gas producing properties, or rights with respect to or interests in high producing properties; 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 to any properties we may acquire or in which we may acquire rights
or interests; 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.



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Overview

We were
incorporated in Nevada on December 7, 1999. Our operations began on July 2, 2003 when we purchased a 15% working interest and 12% net revenue interest in eight oil and gas producing wells known as the Galvan Ranch Gas Wells in
Webb County, West Texas. The wells were on five separate parcels of land spread over 425 acres of the Galvan Ranch.

During the third quarter of 2006, we
believed that the Galvan Ranch Gas Wells, which had generated revenues of only $55,852 in 2005 and $33,431 for the nine months ended September 30, 2006, were not meeting expectations, were without perceived growth potential and were a
distraction to our ability to raise financing and grow. Mr. Ruairidh Campbell, at the time a principal shareholder and one of our officers and directors, was not interested in pursuing a strategy of focusing on areas in Russia and the former
Soviet Union, rather than the United States.

On October 6, 2006, we entered into an Assignment and Bill of Sale with Mr. Campbell 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 shares of common stock, the
3,250,000 shares of common stock owned by him. As a result, since October 6, 2006, we have no longer had any interest in the Galvan Ranch Gas Wells and are no longer engaged in the oil and gas business in the United States.

Under our new strategy, pursuant to a Stock Purchase Agreement, on October 6, 2006, we acquired 100% of the capital stock of Volga-Neft Limited Company, a Russian
limited liability company primarily engaged in the processing and sale of crude oil in Samara, Russia (Volga-Neft), in consideration for our issuance to the stockholders of Volga-Neft of an aggregate of 10,000,000 shares of our common
stock, representing, at the time, 25.6% of our issued and outstanding shares. Thereafter, we borrowed and advanced $3,000,000 of working capital to Volga-Neft.

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

Under the Stock Purchase Agreement, the shareholders of Volga-Neft made numerous representations and warranties, including that Volga-Nefts books and records were
complete and correct, represented actual transactions and were maintained in accordance with sound business practice. As part of our further investigation once we were advised that RSM Top-Audit disclaimed performing an audit of the pre-acquisition
financial statements of Volga-Neft, we were advised by Volga-Nefts internal accountant that the revenues of Volga-Neft for the period January 1, 2006 through the December 31, 2006 were actually $47 million (rather than the $83
million reflected in financial statements provided to us for the shorter January 1, 2006 through October 6, 2006 period). We were also advised by an accounting firm which we intended to retain to re-audit Volga-Nefts
financial statements, among other things, that documents requested were not provided, that reconciliations did not exist, that no observations of inventories had occurred in the past and that some properties listed as owned by Volga-Neft may have
been leased. These factors led us to conclude that the books and records of Volga-Neft were not complete and correct and were not maintained in accordance with sound business practice.



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These factors also put into question our ability to rely on other representations and warranties made by the stockholders of Volga-Neft. In addition, because
our independent auditor was unable to audit opening balances for post-acquisition financial statements of Volga-Neft, we could not receive the comfort that a post-closing audit provides an acquirer with respect to the accuracy of representations and
warranties. In lieu of retaining Volga-Neft and spending the time, effort and cost of trying to establish the degree to which breaches existed and the level of damages sustained, and then seek indemnification against the Volga-Neft stockholders in
Russia, we determined that it was in our best interests to seek rescission of the Stock Purchase Agreement. By a Rescission 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 of Volga-Neft 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 to repay $3,000,000 of loans we made to Volga-Neft since the acquisition and to reimburse us for costs and damages incurred by us. We, in turn, sold the promissory note to a
non-related third party on a non-recourse basis for $3,000,000.

We subsequently received a report from Nixon Peabody, LLP, which was based upon
certain documentation and 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 we nor any
of our 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.

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. Our
investment in Volga-Neft from October 6, 2006 through June 14, 2007 was recorded at its cost amount using the cost method of accounting for investments described in paragraph 6a of APB No. 18, The Equity Method of Accounting for
Investments in Common Stock. While the Rescission Agreement does not affect the rights that any third parties may have against us with respect to agreements entered into, actions taken, or transactions or events that occurred, directly by or
with us, we do not believe we have any such obligations. The Rescission Agreement also did not relieve us with respect to breaches of agreements to which we are a party that may have resulted from the Rescission Agreement.

In this regard, prior to the rescission, we through our Chief Executive Officer, obtained the oral approval of the debenture holders to the rescission of the acquisition
of Volga-Neft which 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 Potential Acceleration of Our 8% Secured Convertible Debentures, below.



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On August 1, 2007, we entered into separate agreements with each of Firecreek Petroleum, Inc.
(Firecreek), a wholly-owned subsidiary of EGPI Firecreek, Inc., PJM Management, Inc. (PJM) and Double Coin Ltd. (Double Coin), pursuant to which we acquired from Firecreek and Double Coin any and all of their
rights and interests they had with respect to certain projects in 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 (the
Projects). Of the rights held by Firecreek and Double Coin, one was a letter of intent for Anglo-Ukr-Energy LLC (AUE) to acquire the Region Project for $5.5 million, the second was an oral understanding pursuant to which we
entered into a letter of intent to acquire 51% of the Dewon ZAO Project for $40.0 million and the third was a contract for AUE to acquire the Bukovyna Project for $20.0 million. AUE was a company being formed on behalf of Firecreek and Double Coin
in Ukraine to acquire the Projects. We were granted the right to complete, and did complete, the organization of AUE as our subsidiary. In exchange for our acquisition of the rights of Firecreek and Double Coin, we issued 2,100,000 shares of our
common stock and paid $100,000 to Firecreek and issued 2,500,000 shares of our common stock to Double Coin. We issued 150,000 shares of our common stock and paid $10,000 to PJM which acted as a finder for Firecreek and Double Coin. The shares were
valued at $0.27 per share for a total consideration of $1,392,500. The purchase price for our acquisition of the rights of Firecreek and Double Coin and PJMs finders fee was negotiated with them and was equal to approximately 2.1% of the
total purchase price that was to be paid to the owners of the Projects, based on the market value of our common stock at the time we entered into the agreements with Firecreek, PJM and Double Coin. Firecreek, PJM and Double Coin are not related to
our officers, directors and affiliates.

Results of Operations

We had no operations during the first six months of 2007 as a result of our disposition of the Galvan Ranch Wells in October 2006 and the rescission of our acquisition of Volga-Neft.

As a result of the disposition and rescission, we had no sales.

Our
principal operating expenses for the six and three month periods ended June 30, 2007 consisted of:

Professional fees for the 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
seismic, legal and financial data on potential acquisition targets in Ukraine. The remaining funds were spent primarily on legal an auditing services.

Salary and benefits costs were $738,929 and $369,212 for the six and three month periods ended June 30, 2007, respectively. Of these amounts, $589,280 in the six month period and $297,468 in the second quarter represent the amortized
portion of compensation expense related to the issuance of shares to certain officers and directors. The balance of $149,649 in the six month period and $71,744 during the second quarter was cash compensation and benefits for officers and other
employees.



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Consulting fees for the six and three month periods ended June 30, 2007 were $1,031,016 and $126,016, respectively.
For the six month period, these expenses reflect fees of $870,000, paid through the issuance of 250,000 shares of our common stock, related to Volga-Neft. The remaining costs were largely incurred for general consulting services in both periods.

Advertising and promotion expenses were $291,605 and $109,635 for the six and three month periods ended June 30, 2007, respectively. Of these
amounts, $223,500 in the six month period and $73,682 in the second quarter represent costs related to promotional activities subsequent to the acquisition of Volga-Neft. The balance of $68,105 for the six month period and $35,953 during the second
quarter related to investor and public relations costs.

Office and general expenses were $50,042 for the six month period and $27,782 for the second
quarter. These costs were primarily incurred for Board of Directors fees of $30,000 and $15,000, as well as office and computer supplies of $8,054 and $7,608 during the respective periods. The year-to-date expenses include a $5,000 fee paid in
conjunction with an application to be listed on the American Stock Exchange, which was filed in the first quarter and subsequently abandoned.

Rent
expenses of $23,548 and $18,848 for the six and three month periods ended June 30, 2007, respectively, were incurred for the office premises in New York City.

Travel costs of $43,945 for the six month period and $17,341 for the second quarter stemmed primarily from trips to the Russian Federation in connection with our investment in Volga-Neft and visits to Ukraine for due diligence gathering.

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

Telephone expenses were $6,591 for the six month period and $5,339 for the second quarter. These costs were primarily incurred in conjunction
with Volga-Neft and our search for new properties in Ukraine.

Other income of $12,806 and $8,630 for the six and three month periods ended June 30,
2007, respectively, was primarily interest income from the investment of the proceeds of our private placement in February 2007 of $7,500,000 of 8% Secured Convertible Debentures.

The Debenture interest expense of $348,211 for the six month period and $202,378 for the second quarter consisted of accrued interest of $250,000 and $150,000, respectively, on our $7,500,000 of 8% Secured Convertible
Debentures issued on February 9, 2007, and amortization of deferred debt issuance costs, related to the issuance of the Debentures, of $98,211 and $52,378 during the corresponding periods.



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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 of the Debentures), plus $25,000 in reimbursement of its expenses, under a placement agency agreement. An additional $58,900
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 of $6,950,000, we repaid a loan of $1,000,000 that we incurred in 2006, the proceeds of which were used to pay liabilities of Volga-Neft, and we advanced an additional $2,000,000 to Volga-Neft for capital
expenditures. 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 had against Volga-Neft or its stockholders. We, in turn, sold the promissory note to a non-related third party on a non-recourse basis for $3,000,000.

During the six months ended June 30, 2007, we used $2,389,460 for operating activities primarily to fund our net loss of $2,032,605 on a cash basis (net loss for
financial reporting purposes of $3,607,196 less the following non-cash expenses: $887,100 for the issuance of shares of our common stock for services; $589,280 for stock-based compensation; and $98,211 of amortized deferred debt issuance costs).

Investing activities during the six months ended June 30, 2007 provided net cash of $798,901 principally from $3,000,000 collected from the sale of
the note we received from Volga-Neft as discussed above, partially offset by advances made to Volga-Neft of $2,000,000 prior to the rescission (which were repaid to us from the proceeds of the $4,200,000 note we received and sold in June 2007) and a
$201,099 investment in commercial paper.

Financing activities provided net cash of $5,950,000 during the six months ended June 30, 2007, resulting
from the Debenture Financing discussed above. We used $550,000 of the proceeds of this financing for debt issuance costs to the placement agent and $1,000,000 to repay the loan we incurred in 2006 to fund liabilities of Volga-Neft and which was
repaid to us in June 2007 as part of the sale of the note we received from the stockholders of Volga-Neft and sold as discussed in Investing Activities above.

We intend to use the $4,361,144 balance of our cash at June 30, 2007 to fund strategic initiatives and to repay certain liabilities. We expect such funds to be sufficient to sustain our operations in 2007.

Potential Acceleration of Our 8% Secured Convertible Debentures

As a result of the rescission on June 14, 2007 of the Stock Purchase Agreement which resulted in the return by us of all of the capital stock of Volga-Neft to the former shareholders thereof and the return by
them to us of 10,000,000 shares of our common stock, each holder of an 8% Secured Debenture issued by us as part of the offering and sale of an aggregate $7,500,000 of the Debentures in February 2007 could seek to elect, commencing June 28,
2007 as a result of the rescission of the Volga-Neft acquisition, to declare the outstanding principal amount of such holders Debenture, plus accrued and unpaid interest, liquidated damages and other amounts owing in respect of the
holders Debenture due and payable at its Mandatory Default Amount. The Mandatory Default Amount is



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defined in the Debenture, which, at a minimum, would be 130% of the outstanding principal amount of the Debenture plus all accrued and unpaid interest
thereon. Commencing five trading days after the occurrence of an event of default that results in the eventual acceleration of a Debenture, the interest rate on the Debenture shall accrue interest at an interest rate equal to the lesser of
18% per annum or the maximum rate permitted under applicable law. Prior to the rescission, we, through our Chief Executive Officer, obtained the oral approval of the debenture holders.

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

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

Off-Balance Sheet Financing

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

Plans for Future
Operations

In previous years, we were primarily engaged in domestic energy operations. We have shifted our focus entirely to operations situated in
the Commonwealth of Independent States that are considered emerging markets and, particularly, are seeking to capitalize on the opportunities available to us in Ukraine. With the disposition of the Galvan Ranch Wells and the rescission of the
Volga-Neft acquisition, we are not currently engaged in an active business. In light of our prior experience and taking into consideration the risks inherent to operating in emerging markets, we have retained western legal, accounting and geological
consultants. Although we are in discussions regarding potential acquisitions, we are not currently a party to any agreement to acquire properties or rights with respect to oil or gas properties or production.



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

Evaluation of Disclosure Controls and
Procedures

Disclosure controls and procedures are the controls and other procedures of a company that are designed to provide reasonable assurance
that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), 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 a company in
the reports that it files or submits under the Exchange Act is accumulated and communicated to the company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 Exchange Act, at the end of the period covered by this report. Based upon this evaluation, our principal executive officer and principal
financial officer concluded that the following are material weaknesses in our disclosure controls and procedures and that our disclosure controls and procedures were not effective for the following reasons.



| |  |  | In connection with the preparation of the Original Report, we identified a deficiency 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. Subsequent to the filing of the Original Report, we caused an
investigation to be under taken concerning the events and procedures involving the Volga-Neft audit, and our controls and procedures regarding our 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 now retain western legal, accounting and geological consultants to aid us in our due diligence of prospective acquisitions. In addition, we hired
a full-time Chief Financial Officer. We believe these measures will benefit us by reducing the likelihood of a similar event occurring in the future.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Subsequent to the filing of the Original Report, we determined that we needed to restate the financial statements contained in the Original Report and Quarterly
Reports on Form 10-QSB that we filed for the quarterly periods ended March 31, 2007, June 30, 2007 and September 30, 2007 not only with respect to the accounting treatment afforded to our prior Galvan Ranch Gas Wells and
acquisition and rescission of our acquisition of Volga-Neft, but also in several other ways, as described in the Explanatory Note to this Amendment. We believe our new Chief Financial Officer we hired in August 2007, together with improved
communication with our auditors, will help us to overcome similar issues in the future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | In addition, we have in the past failed to timely file certain Current Reports on Form 8-K that we reported in subsequent periodic reports filed with the SEC.
Management, including the Companys principal executive officer and principal financial officer, have been reviewing with legal counsel the Form 8-K rules and improved communication with counsel concerning significant events to aid us in timely
complying with corporate and regulatory policies and procedures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Due to our relatively small size and not having present operations, our chief financial officer also performs all accounting functions for us. Thus, we do not have
segregation of duties which is a deficiency in our disclosure controls. We do not presently have the resources to cure this deficiency.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

While we are in the process of overcoming the issues we have faced, it should be noted that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover
failures to disclose material information otherwise required to be set forth in our periodic reports. Furthermore, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events and reflects the
fact that there are resource constraints such that the benefits of controls must be considered relative to their cost. Accordingly, there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions.

Changes in Internal Control over Financial Reporting

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



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PART II - OTHER INFORMATION



|ITEM 6. | EXHIBITS
|------- | --------



|            |  |                                                                                                                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                       
|            | 
|31.1        |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (included herein)
|            | 
|31.2        |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (included herein)
|            | 
|32.1        |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (included herein)                                            
|            | 
|32.2        |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (included herein)                                            



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##### Table of Contents

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 15th day of October, 2008.



|                                             
|---------------------------------------------
|STAR ENERGY CORPORATION                      
|                                             
|/s/ Michael Kravchenko                       
|Michael Kravchenko                           
|Chief Financial Officer                      
|(Principal Financial, and Accounting Officer)



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                       
|            | 
|31.1        |  | Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (included herein)
|            | 
|31.2        |  | Certification of the Chief Financial Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (included herein)
|            | 
|32.1        |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (included herein)                                            
|            | 
|32.2        |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 (included herein)                                            



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