**U.S.
                          Securities and Exchange Commission**
 **Washington,
                          DC 20549**
 
 **FORM
                          10-QSB**
 
 QUARTERLY
                          REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES
                          EXCHANGE ACT OF 1934
 
 
 For
                          the
                          Quarterly period ended **June
                          30, 2006**
 
 
 Commission
                          File Number **000-51229**
 
 
 **TRADESTAR
                          SERVICES, INC.**
 (Name
                          of
                          small business issuer in its charter)
 formerly
                          known as Frontier Staffing, Inc.
 
 **Nevada**
                                
                                **51-0482104**(State
                                    or other jurisdiction of
                                
                                (IRS
                                    Employerincorporation
                                    or organization)
                                
                                Identification
                                    No.)
 
 **3451-A
                          Candelaria NE, Albuquerque, New Mexico 87107**
 (Address
                          of principal executive offices)
 
 Registrant's
                          telephone number: **(505)
                          872-3133**
 
 Check
                          whether issuer is not required to file reports pursuant
                          to Section 13 or 15(d)
                          of the Exchange Act [ ]
 
 Check
                          whether the issuer: (1) filed all reports required to be
                          filed by Section 13 or
                          15(d) of the Exchange Act during the past 12 months (or
                          for such shorter period
                          that the 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 shares outstanding of our common stock, par value
                          $.001 per share, as
                          of June 30, 2006 was 23,490,000 common shares and the aggregate
                          market value of
                          such shares held by non-affiliates of the registrant (based
                          upon the closing bid
                          price of such shares as listed on the NASD Bulletin Board
                          on August
                          11, 2006) was approximately $7,306,000.
 
 Transitional
                          Small Business Disclosure Format (check one): Yes [ ] **No
                          [X]**
 
  
  
 **** **TRADESTAR
                          SERVICES, INC.**
 **TABLE
                          OF CONTENTS**
 
 
 **Page**PART
                                  I. FINANCIAL INFORMATIONItem
                                    1. Financial StatementsCondensed
                                    Consolidated Balance Sheets as of June 30,
                                    2006 (Unaudited)
                                  andDecember
                                    31, 2005
                                4Condensed
                                    Consolidated Statements of Operations for
                                    the three months
                                  endedJune
                                    30, 2006 and 2005 (Unaudited)
                                5Condensed
                                    Consolidated Statements of Operations for
                                    the six months ended
                                  June
                                    30, 2006
                                    and 2005 (Unaudited)
                                6Condensed
                                    Consolidated Statements of Cash Flows for the
                                    six months ended
                                  June
                                    30, 2006
                                    and 2005 (Unaudited)
                                7Notes
                                    to Condensed Consolidated Financial
                                    Statements
                                8Item
                                    2. Management's Discussion and Analysis or Plan
                                    of
                                    Operation
                                11Item
                                    3. Controls and
                                    Procedures
                                18PART
                                    II.OTHER INFORMATIONItem
                                    1. Legal Proceedings
                                19Item
                                    2. Unregistered Sales of Equity Securities and
                                    Use of
                                    Proceeds
                                19Item
                                    3. Defaults Upon Senior Securities
                                19Item
                                    4. Submission of Matters to a Vote of Security
                                    Holders
                                19Item
                                    5. Other Information
                                19Item
                                    6. Exhibits
                                19Signatures
                                20
 
  
 Return
                              to Table of Contents
  PART
                          I.FINANCIAL
                          INFORMATION
 
 All
                          references to "us", "we", or "the Company" refer to Tradestar
                          Services, Inc.,
                          and its subsidiaries.
 
 ITEM
                          1.  FINANCIAL
                          STATEMENTS
   
  **TRADESTAR
                                        SERVICES, INC.****Condensed
                                        Consolidated Balance
                                        Sheets****June
                                        30, 2006 (Unaudited)**
                                    
                                    **December
                                        31, 2005****Assets**Current
                                        assets:Cash
                                        and cash equivalents
                                    
                                    $
                                    727,111
                                    
                                    $
                                    282,248Accounts
                                        receivable, less allowance of $129,868
                                    
                                    
                                    8,150,934
                                    
                                    
                                    2,079,463Prepaid
                                        expenses and other
                                    
                                    
                                    172,147
                                    
                                    
                                    15,000Total
                                        current assets
                                    
                                    
                                    9,050,192
                                    
                                    
                                    2,376,711Property
                                        and equipment:Oil
                                        and gas properties (full cost method)
                                    
                                    
                                    16,286,834
                                    
                                    
                                    -Other
                                        property and equipment
                                    
                                    
                                    694,763
                                    
                                    
                                    152,42416,981,597
                                    
                                    
                                    152,424Less:
                                        Accumulated depreciation, depletion &
                                        amortization
                                    
                                    
                                    (141,164
                                    )
                                    
                                    (67,691
                                    )Net
                                        property and equipment
                                    
                                    
                                    16,840,433
                                    
                                    
                                    84,733Other
                                        assets:Goodwill
                                    
                                    
                                    6,757,724
                                    
                                    
                                    -Other
                                    
                                    
                                    229,361
                                    
                                    
                                    18,025Total
                                        other assets
                                    
                                    
                                    6,987,085
                                    
                                    
                                    18,025Total
                                        assets
                                    
                                    $
                                    32,877,710
                                    
                                    $
                                    2,479,469**Liabilities
                                        and Stockholders’ Equity**Current
                                        liabilities:Current
                                        portion of long-term debt
                                    
                                    $
                                    1,516,250
                                    
                                    $
                                    -Accounts
                                        payable
                                    
                                    
                                    2,156,491
                                    
                                    
                                    220,499Accrued
                                        liabilities
                                    
                                    
                                    593,246
                                    
                                    
                                    205,950Income
                                        taxes payable
                                    
                                    
                                    10,049
                                    
                                    
                                    -Total
                                        current liabilities
                                    
                                    
                                    4,276,036
                                    
                                    
                                    426,449Long-term
                                        debt, net of current portion
                                    
                                    
                                    16,198,419
                                    
                                    
                                    1,768,991Deferred
                                        income taxes
                                    
                                    
                                    4,808,155
                                    
                                    
                                    -Total
                                        liabilities
                                    
                                    
                                    25,282,610
                                    
                                    
                                    2,195,440Stockholders’
                                        equity:Preferred
                                          stock, $.01 par value per share, 1,000,000
                                          authorized,       None
                                        Issued
                                    
                                    
                                    -
                                    
                                    
                                    -Common
                                        stock, $.001 par value per share, 50,000,000
                                        authorized,23,490,000
                                        and 10,950,000 shares issued and outstanding,
                                        respectively
                                    
                                    
                                    23,490
                                    
                                    
                                    10,950Additional
                                        paid in capital
                                    
                                    
                                    8,694,756
                                    
                                    
                                    1,522,796Accumulated
                                        deficit
                                    
                                    
                                    (1,123,146
                                    )
                                    
                                    (1,249,717
                                    )Total
                                        stockholders’ equity
                                    
                                    
                                    7,595,100
                                    
                                    
                                    284,029Total
                                        liabilities and stockholders’ equity
                                    
                                    $
                                    32,877,710
                                    
                                    $
                                    2,479,469
 
 See
                          accompanying notes to condensed consolidated financial
                          statements.
 
 
 
 *Return
                              to Table of Contents*
 4
    **TRADESTAR
                                        SERVICES, INC.****Condensed
                                        Consolidated Statements of
                                        Operations****(Unaudited)****Three
                                        Months Ended**
                                      **June
                                        30,****2006**
                                    
                                    **2005**Revenues:Staffing servicesConstruction
                                    
                                    
                                    
                                    
                                    $
                                    4,084,128
                                    
                                    $
                                    1,717,739Petroleum
                                        engineering
                                    
                                    
                                    
                                    
                                    
                                    1,946,951
                                    
                                    
                                    -Oil
                                        and gas sales
                                    
                                    
                                    
                                    
                                    
                                    342,961
                                    
                                    
                                    -Other
                                    
                                    
                                    
                                    
                                    
                                    61,911
                                    
                                    
                                    -6,435,951
                                    
                                    
                                    1,717,739Expenses:Cost
                                        of staffing servicesConstruction
                                    
                                    
                                    
                                    
                                    
                                    3,401,601
                                    
                                    
                                    1,407,774Petroleum
                                        engineering
                                    
                                    
                                    
                                    
                                    
                                    1,117,131
                                    
                                    
                                    -Lease
                                        operating expense
                                    
                                    
                                    
                                    
                                    
                                    151,833
                                    
                                    
                                    -Depreciation,
                                        depletion & amortization
                                    
                                    
                                    
                                    
                                    
                                    137,155
                                    
                                    
                                    4,356Workover
                                        expense
                                    
                                    
                                    
                                    
                                    
                                    89,360
                                    
                                    
                                    -Selling,
                                        general and administrative
                                    
                                    
                                    
                                    
                                    
                                    1,302,917
                                    
                                    
                                    314,508Interest
                                        expense
                                    
                                    
                                    
                                    
                                    
                                    145,445
                                    
                                    
                                    11,2546,345,442
                                    
                                    
                                    1,737,892Income
                                        (loss) before income taxes
                                    
                                    
                                    
                                    
                                    
                                    90,509
                                    
                                    
                                    (20,153
                                    )Provision
                                        for income taxes
                                    
                                    
                                    
                                    
                                    
                                    65,236
                                    
                                    
                                    -Net
                                        income (loss)
                                    
                                    
                                    
                                    
                                    $
                                    25,273
                                    
                                    $
                                    (20,153
                                    )Net
                                        income (loss) per share, basic and diluted
                                    
                                    
                                    
                                    
                                    $
                                    0.00
                                    
                                    $
                                    (0.00
                                    )Weighted
                                        average shares outstanding, basic
                                    
                                    
                                    
                                    
                                    
                                    16,186,484
                                    
                                    
                                    10,950,000Weighted
                                        average shares outstanding, diluted
                                    
                                    
                                    
                                    
                                    
                                    16,661,217
                                    
                                    
                                    10,950,000
  See
                          accompanying notes to condensed consolidated financial
                          statements.
  *Return
                              to Table of
                              Contents*
 5
  **TRADESTAR
                                        SERVICES, INC.****Condensed
                                        Consolidated Statements of
                                        Operations****(Unaudited)****Six
                                        Months Ended June 30,****2006**
                                    
                                    **2005**Revenues:Staffing
                                      servicesConstruction
                                    
                                    
                                    
                                    
                                    $
                                    7,428,437
                                    
                                    $
                                    2,812,049Petroleum
                                        engineering
                                    
                                    
                                    
                                    
                                    
                                    1,946,951
                                    
                                    
                                    -Oil
                                        and gas sales
                                    
                                    
                                    
                                    
                                    
                                    342,961
                                    
                                    
                                    -Other
                                    
                                    
                                    
                                    
                                    
                                    61,911
                                    
                                    
                                    -9,780,260
                                    
                                    
                                    2,812,049Expenses:Cost
                                        of staffing servicesConstruction
                                    
                                    
                                    
                                    
                                    
                                    6,071,405
                                    
                                    
                                    2,320,371Petroleum
                                        engineering
                                    
                                    
                                    
                                    
                                    
                                    1,117,131
                                    
                                    
                                    -Lease
                                        operating expense
                                    
                                    
                                    
                                    
                                    
                                    151,833
                                    
                                    
                                    -Depreciation,
                                        depletion & amortization
                                    
                                    
                                    
                                    
                                    
                                    141,164
                                    
                                    
                                    10,140Workover
                                        expense
                                    
                                    
                                    
                                    
                                    
                                    89,360
                                    
                                    
                                    -Selling,
                                        general and administrative
                                    
                                    
                                    
                                    
                                    
                                    1,837,332
                                    
                                    
                                    577,672Interest
                                        expense
                                    
                                    
                                    
                                    
                                    
                                    180,228
                                    
                                    
                                    21,8419,588,453
                                    
                                    
                                    2,930,024Income
                                        (loss) before income taxes
                                    
                                    
                                    
                                    
                                    
                                    191,807
                                    
                                    
                                    (117,975
                                    )Provision
                                        for income taxes
                                    
                                    
                                    
                                    
                                    
                                    65,236
                                    
                                    
                                    -Net
                                        income (loss)
                                    
                                    
                                    
                                    
                                    $
                                    126,571
                                    
                                    $
                                    (117,975
                                    )Net
                                        income (loss) per share, basic and diluted
                                    
                                    
                                    
                                    
                                    $
                                    0.01
                                    
                                    $
                                    (0.01
                                    )Weighted
                                        average shares outstanding, basic
                                    
                                    
                                    
                                    
                                    
                                    13,582,707
                                    
                                    
                                    10,021,154Weighted
                                        average shares outstanding, diluted
                                    
                                    
                                    
                                    
                                    
                                    14,028,827
                                    
                                    
                                    10,021,154
 See
                          accompanying notes to condensed consolidated financial
                          statements.
  *Return
                              to Table of Contents*
 6
  **TRADESTAR
                                        SERVICES, INC.****Condensed
                                        Consolidated Statements of Cash
                                        Flows****(Unaudited)****Six
                                        Months Ended June 30,****2006**
                                    
                                    **2005****Cash
                                        flows (used in) operating activities:**Net
                                        income (loss)
                                    
                                    
                                    
                                    
                                    $
                                    126,571
                                    
                                    $
                                    (117,975
                                    )Adjustments
                                        to reconcile net income(loss)
                                        to cash (used in) operations:Depreciation,
                                        depletion & amortization
                                    
                                    
                                    
                                    
                                    
                                    141,164
                                    
                                    
                                    10,140Deferred
                                        income taxes
                                    
                                    
                                    
                                    
                                    
                                    65,236
                                    
                                    
                                    -Services
                                        contributed by officers
                                    
                                    
                                    
                                    
                                    
                                    25,000
                                    
                                    
                                    25,000Other
                                        changes, net
                                    
                                    
                                    
                                    
                                    
                                    (200,218
                                    )
                                    
                                    (11,337
                                    )Changes
                                        in current assets and liabilities:Accounts
                                        receivable
                                    
                                    
                                    
                                    
                                    
                                    (829,422
                                    )
                                    
                                    (876,503
                                    )Other
                                        current assets
                                    
                                    
                                    
                                    
                                    
                                    88,777
                                    
                                    
                                    (3,160
                                    )Accounts
                                        payable and accrued liabilities
                                    
                                    
                                    
                                    
                                    
                                    (779,907
                                    )
                                    
                                    347,656Income
                                        taxes payable
                                    
                                    
                                    
                                    
                                    
                                    3,859
                                    
                                    
                                    -Net
                                        cash (used in) operating activities
                                    
                                    
                                    
                                    
                                    
                                    (1,358,940
                                    )
                                    
                                    (626,179
                                    )**Cash
                                        flows (used in) investing activities:**Net
                                        cash used in acquisition of subsidiary
                                    
                                    
                                    
                                    
                                    
                                    (27,601
                                    )
                                    
                                    -Purchase
                                        of property and equipment
                                    
                                    
                                    
                                    
                                    
                                    (122,635
                                    )
                                    
                                    (58,532
                                    )Proceeds
                                        from sale of property and equipment
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    -Net
                                        cash (used in) investing activities
                                    
                                    
                                    
                                    
                                    
                                    (150,236
                                    )
                                    
                                    (58,532
                                    )**Cash
                                        flows from (used in) financing activities:**Net
                                        proceeds of stockholder advances
                                    
                                    
                                    
                                    
                                    
                                    933,097
                                    
                                    
                                    111,458Proceeds
                                        from long term debt
                                    
                                    
                                    
                                    
                                    
                                    1,020,942
                                    
                                    
                                    -Proceeds
                                        from issuance of common stock
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    600,000Cash
                                        flows from financing activities
                                    
                                    
                                    
                                    
                                    
                                    1,954,039
                                    
                                    
                                    711,458Net
                                        increase in cash and cash equivalents
                                    
                                    
                                    
                                    
                                    
                                    444,863
                                    
                                    
                                    26,747Cash
                                        and equivalents at beginning of period
                                    
                                    
                                    
                                    
                                    
                                    282,248
                                    
                                    
                                    142,807Cash
                                        and equivalents at end of period
                                    
                                    
                                    
                                    
                                    $
                                    727,111
                                    
                                    $
                                    169,554
 
 See
                          accompanying notes to condensed consolidated financial
                          statements.
  *Return
                              to Table of Contents*
 7
  **TRADESTAR
                          SERVICES, INC.**
 **Notes
                          to Condensed Consolidated Financial Statements**
 **(Unaudited)**
 
 
 **(1)**  **Basis
                          of Presentation**
 
 The
                          accompanying condensed consolidated financial statements
                          have been prepared by
                          the Company without audit, pursuant to the rules and regulations
                          of the
                          Securities and Exchange Commission and in accordance with
                          accounting principles
                          for interim financial information. In the opinion of management,
                          these condensed
                          consolidated financial statements contain all adjustments
                          (consisting only of
                          normal recurring adjustments) necessary to fairly state
                          the financial position
                          of the Company as of June 30, 2006 and the results of its
                          operations and cash
                          flows for the three month and six month periods ended June
                          30, 2006 and 2005.
                          Certain information and footnote disclosures normally included
                          in financial
                          statements prepared in accordance with generally accepted
                          accounting principles
                          have been condensed or omitted. Interim results of operations
                          are not
                          necessarily indicative of results for subsequent interim
                          periods or the
                          remainder of the full year. These financial statements
                          should be read in
                          conjunction with our Annual Report on Form 10-KSB for the
                          year ended December
                          31, 2005.
 
 
 **(2)**  **Acquisition
                          of The
                          CYMRI Corporation**
 
 Pursuant
                          to an Agreement and Plan of Merger executed between the
                          Company and The CYMRI
                          Corporation (“CYMRI”), a wholly-owned subsidiary of the Company acquired all
                          of
                          CYMRI’s outstanding common stock on May 23, 2006. CYMRI
                          and
                          its subsidiaries perform petroleum engineering services
                          for customers in North
                          and South America and are engaged in the exploration and
                          production of oil and
                          natural gas from properties located in Texas and Louisiana. The merger
                          agreement provided for the Company: (a) To pay $2,000,000
                          in cash; (b) To issue
                          its 10% secured notes payable in the amount of $3,075,000;
                          and (c) To issue
                          12,540,000 shares of its common stock, which had an average
                          30 day
                          pre-announcement closing price of $0.58 per share, for
                          total equity value of
                          $7,273,200, all as consideration to CYMRI’s common stockholders. The Company has
                          accounted for the acquisition of CYMRI as a purchase with
                          Tradestar treated as
                          the acquirer. The following is a condensed balance sheet
                          showing the fair values
                          of the assets acquired and liabilities assumed from CYMRI
                          as of the date of the
                          acquisition:
 Current
                                      assets
                                  
                                  $
                                  5,237,973Property
                                      and equipment
                                  
                                  
                                  16,774,229Goodwill
                                      arising in the acquisition
                                  
                                  
                                  6,757,724Other
                                      assets
                                  
                                  
                                  77,453Current
                                      liabilities
                                  
                                  
                                  (2,859,385
                                  )Long-term
                                      debt (see Note 3)
                                  
                                  
                                  (8,666,639
                                  )Deferred
                                      income taxes
                                  
                                  
                                  (4,723,155
                                  )$
                                  12,598,200
  Since
                          the
                          date of the acquisition, the Company has reflected the
                          results of operations of
                          CYMRI in its consolidated financial statements, after giving
                          effect to the
                          purchase accounting adjustments. The deemed effective date
                          of the acquisition
                          for accounting purposes was May 31, 2006, and the effect
                          of including CYMRI’s
                          results of operations in the Company’s consolidated financial statements since
                          that date was to increase revenues for the six months ended
                          June 30, 2006 by
                          $2,351,000 and to increase net income for the six months
                          ended June 30, 2006 by
                          $89,000 ($0.01 per share).
 
 *Return
                              to Table of Contents*
 8
  **TRADESTAR
                            SERVICES, INC.**
 **Notes
                            to Condensed Consolidated Financial Statements**
 **(Unaudited)**
  **(3)** **Long-Term
                          Debt Associated With Acquisition of CYMRI**
 
 The
                          Company assumed or incurred the following long-term debt
                          obligations in the
                          acquisition of the outstanding common stock of CYMRI (see
                          Note 2):
  Assumed$20,000,000
                                      line of credit with a bank, principal payable
                                      $50,000 per month beginning
                                      in July 2006 through maturity in November 2007,
                                      interest at 9.25% payable
                                      monthly, secured by a subsidiary’s oil and gas properties and certificates
                                    of
                                      deposit held by stockholders
                                  
                                  $
                                  6,485,079Notes
                                    (3) payable to individuals, bearing interest
                                    at 8%, payable in total
                                    monthly installments of $54,219 beginning in
                                    March 2005 through maturity
                                    at February 2010, guaranteed by certain stockholders
                                    and secured by a
                                    subsidiary’s oil and gas properties
                                  
                                  
                                  2,181,560Incurred
                                    Notes
                                        (2) payable to individuals, bearing interest
                                        at 10%, payable in total
                                        monthly installments of $65,335 beginningin
                                        June 2006 through maturity at May 2007, and
                                        secured bysubstantially
                                        all assets, subject to liens on oil and gas
                                        properties
                                  
                                  
                                  3,075,000Notes
                                      (8) payable to individuals, bearing interest
                                      at 10% interest only payable
                                      monthly beginning in July 2006 through maturity
                                      at May 2007,
                                      unsecured
                                  
                                  
                                  2,250,000$
                                  13,991,639
  
 
 **(4)**  **Common
                          Stock
                          Equivalents**
 Basic
                          earnings (loss) per common share is computed by dividing
                          the net income or loss
                          by the weighted average number of shares of common stock
                          outstanding during the
                          period, after giving effect to the issuance of 12,540,000
                          shares of common stock
                          to the former stockholders of CYMRI on May 23, 2006 (see
                          Note 2).
 Diluted
                            earnings (loss) per common share is computed by dividing
                            net income or loss by
                            the weighted average number of shares of common stock
                            outstanding during the
                            period and potentially dilutive common share equivalents,
                            consisting of stock
                            options and warrants. The effects of potential common
                            stock equivalents are not
                            included in computations when their effect is anti-dilutive.
                            Because of the net
                            loss for the three month and six month periods ended
                            June 30, 2005, the basic
                            and diluted average outstanding shares are considered
                            the same, since including
                            the shares would have an antidilutive effect on the loss
                            per share calculation.
                            For the three month and six month periods ended June
                            30, 2006, the potential
                            common stock equivalents have a dilutive effect on the
                            Earnings Per Share and
                            are included in the dilutive average outstanding shares
                            using the Treasury Stock
                            Method.
  *Return
                              to Table of Contents*
 9
 
 **TRADESTAR
                            SERVICES, INC.**
 **Notes
                            to Condensed Consolidated Financial Statements**
 **(Unaudited)**
 The
                              Company expects to begin applying the provisions of
                              SFAS No. 123 (revised
                              2004), " *Share-Based
                              Paymen* t"
                              ("SFAS
                              123R"), replacing SFAS No. 123, " *Accounting
                              for Stock-Based Compensation* "
                              ("SFAS
                              123") to its common stock equivalents in the third
                              quarter of 2006. The Company
                              has concluded that the impact of not applying the provisions
                              of SFAS
                              No. 123R to its common stock equivalents in the first two
                              quarters of 2006
                              was immaterial to its consolidated financial statements.
                              The only common stock
                              equivalents issued during that period were options
                              to purchase a total of
                              165,000 shares of common stock, at an exercise price
                              equal to a 10% premium over
                              the then current stock price, granted to two directors
                              and an employee in early
                              May 2006. Such options vest over a three year period.
 **(5)**  **Contributed
                          Services**
 
 The
                          Company's former President has not been paid any salary
                          for full-time services.
                          The Company has estimated the value of the forgone salary
                          at $12,500 for the
                          three months ended June 30, 2006 and 2005 and $25,000 for
                          the six months ended
                          June 30, 2006 and 2005, which has been recorded as a contribution
                          to capital.
                          The former President resigned as an officer of the Company
                          in July 2006 (see
                          Note 7).
 
 **(6)**  **Stockholder
                          Advances**
    **(7)**  **Contingencies**
  In
                            the
                            second quarter of 2006, the Company was notified by the
                            Internal Revenue Service
                            of penalty and interest charges for its failure to timely
                            remit payroll taxes
                            for the third and fourth quarters of 2005 applicable
                            to the construction
                            services business. The Company remitted these unpaid
                            payroll taxes in full in
                            the first quarter of 2006, however, the Internal Revenue
                            Service has advised the
                            Company of its intention to assess penalty and interest
                            due to the failure to
                            make timely payment. The Company is currently negotiating
                            with the Internal
                            Revenue Service regarding the amount of the penalty and
                            interest and is seeking
                            a waiver of the penalty and interest and the exact amount
                            of the settlement
                            cannot be determined at this time. A former officer and
                            director of the Company
                            has agreed to reimburse the Company for any and all of
                            the penalty and interest
                            charged to the Company by the Internal Revenue Service.
                            Due to the reimbursement
                            agreement with the former officer and director, the Company
                            has not recognized a
                            loss on this assessment.
 Two
                          of
                          CYMRI’s subsidiaries are defendants in certain lawsuits arising
                          in the normal
                          course of business. At the present time, it is not practical
                          to determine the
                          amount or likelihood of an unfavorable outcome to the Company’s consolidated
                          financial position or results of operations in any of these
                          cases. However,
                          management believes that CYMRI’s subsidiaries have meritorious defenses in each
                          case and are vigorously defending these matters.
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                              to Table of Contents*
 10
  **ITEM
                          2.****MANAGEMENT'S
                          DISCUSSION AND ANALYSIS OR PLAN OF OPERATION**
 
 The
                          following discussion of our financial condition and results
                          of operations should
                          be read in conjunction with, and is qualified in its entirety
                          by, the condensed
                          consolidated financial statements and notes thereto included
                          in Item 1 in this
                          Quarterly Report on Form 10-QSB. This item contains forward-looking
                          statements
                          that involve risks and uncertainties. Actual results may
                          differ materially from
                          those indicated in such forward-looking statements.
 
 **Forward-Looking
                          Statements**
 
 This
                          Quarterly Report on Form 10-QSB and the documents incorporated
                          herein by
                          reference contain forward-looking statements that have
                          been made pursuant to the
                          provisions of the Private Securities Litigation Reform
                          Act of 1995. Such
                          forward-looking statements are based on current expectations,
                          estimates, and
                          projections about our industry, management beliefs, and
                          certain assumptions made
                          by our management. Words such as "anticipates," expects,"
                          "intends," "plans,"
                          "believes," "seeks," "estimates," variations of such words,
                          and similar
                          expressions are intended to identify such forward-looking
                          statements. These
                          statements are not guarantees of future performance and
                          are subject to certain
                          risks, uncertainties, and assumptions that are difficult
                          to predict; therefore,
                          actual results may differ materially from those expressed
                          or forecasted in any
                          such forward-looking statements. Unless required by law,
                          we undertake no
                          obligation to update publicly any forward-looking statements,
                          whether as a
                          result of new information, future events, or otherwise.
                          However, readers should
                          carefully review the risk factors set forth in other reports
                          and documents that
                          we file from time to time with the Securities and Exchange
                          Commission,
                          particularly the Report on Form 10-SB, and future Annual
                          Reports on Form 10-KSB
                          and any Current Reports on Form 8-K.
 
 **Overview
                          and History**
 
 Tradestar
                          Services, Inc. was incorporated in the State of Nevada
                          on September 3, 2003
                          under the name Frontier Staffing, Inc. We were formed to
                          acquire Tradestar
                          Construction Services, Inc., a New Mexico corporation,
                          which is a wholly-owned
                          subsidiary operating as an employment staffing service
                          specializing in the
                          placement of both long-term and short-term skilled and
                          unskilled construction
                          labor to the New Mexico construction market. In January
                          2004, we acquired
                          Tradestar Construction Services, Inc. in a stock-for-stock
                          exchange. We issued a
                          total of 6,400,000 shares in connection with this transaction.
  We
                          develop, own, and operate employment service centers in
                          specific regional areas
                          specializing in the placement of skilled construction labor.
                          We will provide
                          both skilled commercial craftsmen and general unskilled
                          labor to the
                          construction markets located in the areas where we plan
                          to operate. We currently
                          have operations located in Albuquerque, New Mexico; Tempe
                          and Phoenix, Arizona;
                          and Las Vegas, Nevada.
 
 On
                          July
                          7, 2004, we filed a registration statement under cover
                          of Form SB-2 with the
                          SEC. This registration statement was dexlared effective
                          by the SEC on February
                          10, 2005. On March 30, 2005, we closed this public offering.
                          We raised a total
                          of $600,000 and sold a total of 2,000,000 common shares.
 
 In
                          October, 2005, we amended our Articles of Incorporation
                          to change our name to
                          Tradestar Services, Inc. We remain a Nevada corporation.
 
 On
                          May
                          23, 2006, a wholly-owned subsidiary of the Company acquired
                          all of outstanding
                          common stock of The CYMRI Corporation (“CYMRI”), pursuant to an Agreement and
                          Plan of Merger between the parties. CYMRI is engaged in
                          the exploration and
                          production of oil and natural gas from properties located
                          in Texas and Louisiana
                          and also performs petroleum engineering services for customers
                          in North and
                          South America. The total purchase price paid for the acquisition
                          of the
                          outstanding common stock of CYMRI was $12,598,200 in a
                          combination of cash,
                          notes payable and common stock.
 
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 11
  In
                          accordance with purchase accounting rules, the Company
                          has reflected the results
                          of operations of CYMRI in its consolidated financial statements
                          since the date
                          of the acquisition. The deemed effective date of the acquisition
                          for accounting
                          purposes was May 31, 2006, and the effect of including
                          CYMRI’s results of
                          operations in the Company’s consolidated financial statements since that date
                          was to increase revenues for the six months ended June
                          30, 2006 by $2,351,000
                          and to increase net income for the six months ended June
                          30, 2006 by $89,000
                          ($0.01 per share).
 
 
 **Results
                          of Operations**
 
 Except
                          where references are made below to the impact of the CYMRI
                          acquisition, the
                          following comments pertain to Tradestar’s traditional construction services
                          business. In that business, our results of operations have
                          been and may continue
                          to be subject to variations. The results for a particular
                          period may vary as a
                          result of a number of factors including:
 
 ·
                              the
                                  overall state of the staffing segment of the
                                  economy, ·
                              the
                                  development status of and demand for our services
                                  and
                                  products, ·
                              economic
                                  conditions in our markets, ·
                              the
                                  timing of expenditures in anticipation of future
                                  revenues, ·
                              the
                                  mix of services and products sold by us, ·
                              the
                                  introduction of new services and
                                  products, ·
                              product
                                  enhancements by us or our competitors,
                                  and ·
                              pricing
                                  and other competitive conditions. 
 We
                          have a
                          limited operating history in the construction services
                          business and have had a
                          history of losses in that business which may continue into
                          the future. However,
                          we had our first profitable fiscal quarter for the period
                          ended March 31. 2006
                          and this trend continued in the quarter ended June 30,
                          2006.
  *Three months ended June 30, 2006 versus three months ended
                          June 30, 2005* — Total
                          revenues for the three months ended June 30, 2006 were
                          $6,436,000 compared to
                          $1,718,000 for the three months ended June 30, 2005.
 
 Revenues
                          from construction staffing services for
                          the
                          three months ended June 30, 2006 were $4,084,000 compared
                          to $1,718,000 for the
                          three months ended June 30, 2005. This increase is due
                          primarily to the increase
                          in customers in New Mexico and the opening of our branch
                          office in Tempe,
                          Arizona .
 
 Revenues
                          from petroleum engineering services for
                          the
                          three months ended June 30, 2006 were $1,947,000, representing
                          revenues of CYMRI’s staffing services
                          business for
                          the
                          month of June 2006, the initial month that CYMRI’s revenues
                          and expenses were reflected in our consolidated financial
                          statements. In June
                          2006, CYMRI’s s taffing
                          services subsidiary, P etroleum
                          Engineering, Inc. (“PEI”), billed its customers in North and South America
                          approximately 1,600 man days at an average billing rate
                          of approximately $1,200
                          per day.
 
 Revenues
                          from oil and gas sales for the three months ended June
                          30, 2006 were $343,000,
                          representing revenues of CYMRI’s oil and
                          gas production for the month of June 2006, the initial
                          month that CYMRI’s revenues
                          and expenses were reflected in our consolidated financial
                          statements. In June
                          2006, revenues from oil production were $231,000, reflecting
                          volumes of 3,495
                          barrels at an average price of $66.08 per barrel, while gas revenues
                          were $112,000, reflecting volumes of 10,950 Mcf at an average
                          price of $10.25
                          per Mcf.
 
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                              to Table of Contents*
 12
  Cost
                          of
                          construction staffing services for the three months ended
                          June 30, 2006 was
                          $3,402,000 versus $1,408,000 for the three months ended
                          June 30, 2005. Cost of
                          construction staffing services includes all direct costs
                          incurred in providing
                          employment services. Direct costs consist of wages for
                          temporary employees,
                          federal and state payroll taxes, workers compensation and
                          per diem direct costs
                          associated with the services. Direct costs of services
                          are generally consistent,
                          except for payroll taxes where the maximum contribution
                          has been met and for
                          workers compensation, which vary with each job site. Direct
                          costs of services
                          increased slightly as a percentage of revenues to approximately
                          83% for the
                          three months ended June 30, 2006, compared to approximately
                          82% for the three
                          months ended June 30, 2005.
  Cost
                            of
                            petroleum engineering services for
                            the
                            three months ended June 30, 2006 were $1,117,000, representing
                            the cost of CYMRI’s staffing services
                            business for
                            the
                            month of June 2006, the initial month that CYMRI’s revenues
                            and expenses were reflected in our consolidated financial
                            statements. Such
                            direct costs of
                            services represented
                            approximately 57% of revenues, consistent with the historical
                            percentage
                            experienced by CYMRI’s s taffing
                            services subsidiary, PEI..
 Lease
                          operating expenses (“LOE”), including production taxes, were $152,000 for
                          the
                          three months ended June 30, 2006, representing CYMRI’s
                          LOE for the
                          month of June 2006, the initial month that CYMRI’s
                          revenues and expenses were
                          reflected in our consolidated financial statements.
 
 Depreciation,
                          depletion and amortization (“DD&A”) expense for the three months ended June
                          30, 2006 was $137,000 versus $4,000 for the three months
                          ended June 30, 2005. This
                          substantial increase reflects  DD&A of CYMRI’s oil and
                          gas properties for the month of June 2006, the initial
                          month that CYMRI’s
                          revenues and expenses were
                          reflected in our consolidated financial statements.
  CYMRI’s workover
                          expenses in South Texas for the month of June 2006, the
                          initial month that CYMRI’s revenues
                          and expenses were reflected in our consolidated financial
                          statements
 Selling,
                          general and administrative (“SG&A”) expenses for
                          the
                          three months ended June 30, 2006 were $1,303,000 compared
                          to $315,000 for the
                          three months ended June 30, 2005. This increase reflected CYMRI’s
                          SG&A expenses of $607,000 for
                          the
                          month of June 2006, the initial month that CYMRI’s
                          revenues and expenses were
                          reflected in our consolidated financial statements,  plus
                          an
                          increase in SG&A
                          expenses of $381,000 applicable
                          to our traditional construction services business. The latter
                          increase was due to the
                          costs associated with opening and operating three (3) new
                          centers plus an
                          increase in bad debt expense in the amount of $122,700.
                          The major components of
                          SG&A expenses include professional fees, salaries and associated
                          payroll
                          costs, rent and telephone expenses.
  Interest
                          expense for the three months ended June 30, 2006 was $145,000
                          versus $11,000 for
                          the three months ended June 30, 2005. This
                          substantial increase reflects interest
                          expense on CYMRI’s long
                          term debt for the month of June 2006, the initial month
                          that CYMRI’s
                          revenues and expenses were
                          reflected in our consolidated financial statements.
 
 Income
                          taxes were $65,000
                          for the three months ended June 30, 2006 versus zero for
                          the three months ended
                          June 30, 2005, and reflect a provision of 34% on cumulative
                          pre-tax earnings of
                          $192,000 in the six months ended June 30, 2006, compared
                          to a pre-tax loss in
                          the prior year period.
 
 *Six
                          months ended June 30, 2006 versus six months ended June
                          30, 2005* — Total
                          revenues for the six months ended June 30, 2006 were $9,780,000
                          compared to
                          $2,812,000 for the six months ended June 30, 2005.
 
 Revenues
                          from construction staffing services for
                          the
                          six months ended June 30, 2006 were $7,428,000 compared
                          to $2,812,000 for the
                          six months ended June 30, 2005. This increase is due primarily
                          to the increase
                          in customers in New Mexico and the opening of our branch
                          office in Tempe,
                          Arizona .
 
 Revenues
                          from petroleum engineering services for
                          the
                          six months ended June 30, 2006 were $1,947,000, representing
                          revenues of CYMRI’s staffing services
                          business for
                          the
                          month of June 2006, the initial month that CYMRI’s revenues
                          and expenses were reflected in our consolidated financial
                          statements. In June
                          2006, CYMRI’s s taffing
                          services subsidiary, P etroleum
                          Engineering, Inc. (“PEI”), billed its customers in North and South America
                          approximately 1,600 man days at an average billing rate
                          of approximately $1,200
                          per day.
 
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 13
  Revenues
                          from oil and gas sales for the six months ended June 30,
                          2006 were $343,000,
                          representing revenues of CYMRI’s oil and
                          gas production for the month of June 2006, the initial
                          month that CYMRI’s revenues
                          and expenses were reflected in our consolidated financial
                          statements. In June
                          2006, revenues from oil production were $231,000, reflecting
                          volumes of 3,495
                          barrels at an average price of $66.08 per barrel, while gas revenues
                          were $112,000, reflecting volumes of 10,950 Mcf at an average
                          price of $10.25
                          per Mcf.
 
 Cost
                          of
                          construction staffing services for the six months ended
                          June 30, 2006 was
                          $6,071,000 versus $2,320,000 for the six months ended June
                          30, 2005. Cost of
                          construction staffing services includes all direct costs
                          incurred in providing
                          employment services. Direct costs consist of wages for
                          temporary employees,
                          federal and state payroll taxes, workers compensation and
                          per diem direct costs
                          associated with the services. Direct costs of services
                          are generally consistent,
                          except for payroll taxes where the maximum contribution
                          has been met and for
                          workers compensation, which vary with each job site. Direct
                          costs of services
                          decreased as a percentage of revenues to approximately
                          82% for the six months
                          ended June 30, 2006, compared to approximately 83% for
                          the six months ended June
                          30, 2005. This decrease was the result of increased billing
                          rates.
 Cost
                            of
                            petroleum engineering services for the three months ended
                            June 30, 2006 were
                            $1,117,000, representing the cost of CYMRI’s staffing services business for the
                            month of June 2006, the initial month that CYMRI’s revenues and expenses were
                            reflected in our consolidated financial statements. Such
                            direct costs of
                            services represented approximately 57% of revenues, consistent
                            with the
                            historical percentage experienced by CYMRI’s staffing services subsidiary,
                            PEI.
  Lease
                              operating expenses (“LOE”), including production taxes, were $152,000 for
                              the
                              six months ended June 30, 2006, representing CYMRI’s
                              LOE for the
                              month of June 2006, the initial month that CYMRI’s
                              revenues and expenses were
                              reflected in our consolidated financial statements.
 
 Depreciation,
                          depletion and amortization (“DD&A”) expense for the six months ended June
                          30, 2006 was $141,000 versus $10,000 for the six months
                          ended June 30, 2005. This
                          substantial increase reflects  DD&A of CYMRI’s oil and
                          gas properties for the month of June 2006, the initial
                          month that CYMRI’s
                          revenues and expenses were
                          reflected in our consolidated financial statements.
 Workover
                            expenses for the three months ended June 30, 2006 were
                            $89,000, representing
                            CYMRI’s workover expenses in South Texas for the month of June
                            2006, the initial
                            month that CYMRI’s revenues and expenses were reflected in our consolidated
                            financial statements.
 Selling,
                          general and administrative (“SG&A”) expenses for
                          the
                          six months ended June 30, 2006 were $1,837,000 compared
                          to $578,000 for the six
                          months ended June 30, 2005. This increase reflected CYMRI’s
                          SG&A expenses of $607,000 for
                          the
                          month of June 2006, the initial month that CYMRI’s
                          revenues and expenses were
                          reflected in our consolidated financial statements,  plus
                          an
                          increase in SG&A
                          expenses of $652,000 applicable
                          to Tradestar’s
                          traditional construction services business. The latter
                          increase was due to the
                          costs associated with opening and operating three (3) new
                          centers plus an
                          increase in bad debt expense in
                          the
                          amount of $122,700.
 
 Interest
                          expense for the six months ended June 30, 2006 was $180,000
                          versus $22,000 for
                          the six months ended June 30, 2005. This
                          substantial increase reflects interest
                          expense on CYMRI’s long
                          term debt for the month of June 2006, the initial month
                          that CYMRI’s
                          revenues and expenses were
                          reflected in our consolidated financial statements.
 
 Income
                          taxes were $65,000
                          for the six months ended June 30, 2006 versus zero for
                          the six months ended June
                          30, 2005, and reflect a provision of 34% on cumulative
                          pre-tax earnings of
                          $192,000 in the six months ended June 30, 2006, compared
                          to a pre-tax loss in
                          the prior year period.
 
 
 **Liquidity
                          and Capital Resources**
  *Operating*  *activities.* Cash
                          flow from operating activities for the six months ended
                          June 30, 2006 reflects
                          revenues, less direct operating expenses, in Tradestar’s traditional
                          construction services business plus one month of cash flow
                          from CYMRI’s acquired
                          operations. Cash flow from operating activities is also
                          impacted by changes in
                          working capital. Net cash flow used in operating activities
                          was $1,359,000 for
                          the six months ended June 30, 2006 versus $626,000 for
                          the six months ended June
                          30, 2005. These o perating
                          cash flow amounts are net of changes in working capital
                          which resulted in net
                          decreases of cash in the amounts of $1,517,000 and $532,000
                          in the six months
                          ended June 30 , 2006
                          and
                          2005, respectively.
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 14
  *Investing*  *activities.* Net
                          cash
                          used in investing activities for
                          the
                          six months ended June 30, 2006 was $150,000 compared to
                          $59,000 for the six
                          months ended June 30, 2005. The 2006 amount reflects net
                          cash for the
                          acquisition of CYMRI
                          in
                          the amount of $27,000, as well as CYMRI’s subsequent capital expenditures in the
                          amount of $123,000, primarily for
                          drilling and equipment costs incurred on its oil and gas
                          properties in June
                          2006, the initial month that CYMRI’s
                          cash flow activities were
                          reflected in our consolidated financial statements.
 
 *Financing
                          activities.* ** Net
                          cash
                          provided by financing activities for
                          the
                          six months ended June 30, 2006 was $1,954,000 compared
                          to $711,000 for the six
                          months ended June 30, 2005. In
                          t he
                          six
                          months ended June 30 , 2006,
                          net
                          cash proceeds from long term debt borrowings provided
                          cash in the amount of $1,021,000 while stockholder advances
                          provided net cash in
                          the amount of $933,000. In t he
                          six
                          months ended June 30 , 2005, net
                          stockholder advances provided cash in
                          the
                          amount of $111,000 and the issuance
                          of common stock in a public offering provided
                          additional cash proceeds of $600,000 .
 
 As
                          result
                          of the CYMRI acquisition, the Company’s capital expenditure profile has changed
                          dramatically. In Tradestar’s traditional construction services business, capital
                          expenditure requirements are relatively low, except for
                          the periodic opening of
                          new construction services centers. Likewise, capital expenditure
                          requirements of
                          CYMRI’s  s taffing
                          services subsidiary, P etroleum
                          Engineering, Inc. (“PEI”) are relatively
                          low .
                          However, CYMRI’s
                          exploration and production business is highly capital intensive.
                          In this
                          business, expenditures for the drilling and equipping of
                          oil and gas wells are
                          typically required to maintain existing production levels
                          and production often
                          declines in a relatively short period of time if maintenance
                          capital is not
                          invested timely. In order to significantly increase production
                          levels, an even
                          higher level of drilling and equipment expenditures is
                          usually required and, in
                          many cases, may need to be supplemented by the acquisition
                          of additional lease
                          acreage upon which to drill future oil and gas wells. As
                          is the case with most
                          companies in the exploration and production business, the
                          Company expects to
                          finance its capital expenditure requirements through a
                          combination of cash flow
                          from operations, secured bank borrowings and occasional
                          injections of new
                          equity.
 In
                            addition to the impact on the Company’s capital expenditure profile, the CYMRI
                            acquisition has substantially increased the Company’s long term debt obligations
                            (see Note 2, “Long Term Debt Associated with Acquisition of CYMRI”). A
                            substantial portion of the new long term debt is in the
                            form of a bank credit
                            facility secured by the Company’s producing oil and gas properties. The
                            Company’s periodic payment obligations under the bank credit
                            facility are
                            dependent upon a semi-annual evaluation of its producing
                            oil and gas properties
                            and its continued compliance with certain financial covenants
                            contained in the
                            bank credit agreement. As presently structured, borrowings
                            outstanding under the
                            bank credit facility in the amount of $6,485,079 are
                            due in November 2007. In
                            conjunction with the CYMRI acquisition, the Company also
                            established a working
                            capital line of credit with another bank, which is secured
                            by the Company’s
                            accounts receivable. Borrowings outstanding under this
                            line of credit as of June
                            30, 2006 were $3,570,932.  Other than normal operating leases for office
                            space, the Company did not assume any other long term
                            contractual obligations as
                            a result of the CYMRI acquisition.
 In
                            Tradestar’s traditional construction services, our principal source
                            of liquidity
                            has been stockholder advances, proceeds received from
                            notes payable and the sale
                            of common stock. Our operating cash flow is closely tied
                            to the economy of each
                            city where we have operations and the U.S. economy. A
                            slow down in construction
                            will have a negative impact to our business. In any case,
                            we try to operate with
                            minimal overhead. Our primary activity will be to seek
                            to expand the number of
                            our centers and, consequently, our revenues. If we succeed
                            in expanding our
                            customer base and generating sufficient revenues, we
                            will become profitable in
                            each new center.
 
 Beginning
                          in July 2005, we entered an agreement with a number of
                          investors for the
                          issuance of 9% secured promissory notes, due along with
                          any unpaid interest 18
                          months after issuance. Our Chairman and Chief Executive
                          Officer is part of the
                          investor group. Under the terms of the notes, we granted
                          the lenders a security
                          interest in our accounts receivable and any of our other
                          assets as set forth in
                          a security agreement. We began to make interest-only payments
                          monthly in August
                          2005. We also agreed to pay the lenders an origination
                          fee of five percent (5%)
                          of the principal amount of the notes, a total of $58,239,
                          which is being
                          amortized over the term of the notes. In addition, the
                          lenders were granted
                          warrants to purchase 116,479 shares of common stock. The
                          warrants vest
                          immediately, are exercisable at $.30 per share and expire
                          in 2010. The estimated
                          value of the warrants, $29,892, was recorded as a debt
                          discount and is being
                          amortized over the term of the notes.
 
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 15
 
 **Plans
                          to **Integrate
                          CYMRI Operations****
 
 With
                            the
                            successful acquisition of CYMRI, we plan to devote a
                            substantial portion of our
                            near-term efforts toward the integration of this acquisition
                            and the operation
                            of our traditional construction services centers. Therefore,
                            plans regarding the
                            possible opening of new construction services staffing
                            centers or expansion of
                            our petroleum engineering staffing services are presently
                            uncertain.
 
 However,
                            when considering opening additional construction services
                            centers or expansion
                            of our petroleum engineering staffing services in the
                            future, our plan will
                            remain consistent. We will perform an analysis of specific
                            markets or regions
                            before making a decision. We will begin by looking at
                            construction or petroleum
                            engineering services markets or regions for activity
                            and number of dollars
                            spent. We will also look at the competitors in the market
                            as we believe that
                            they provide a gauge of the sales in the market. We will
                            look at sales channels
                            in construction services or petroleum engineering services
                            that our competitors
                            may not be servicing for value added complements to our
                            services we offer
                            clients. We will look at the employment rates in construction
                            services and
                            petroleum engineering services to see if an ample inventory
                            of labor is
                            available to us to service our clients in the market.
                            We will also look at wage,
                            benefit and workers compensation rates being paid to
                            see if they allow a
                            reasonable return on investment to be made. Workers compensation
                            insurance is an
                            area we analyze thoroughly because of its large impact
                            on gross profit. For the
                            opening of potential new construction services centers,
                            we will analyze the
                            ability of a new service center to generate at least
                            $3.0 million in sales as
                            our minimum sales criteria. We will continue to review
                            our criteria for
                            additional construction services centers and have not
                            yet finalized our decision
                            on a center in either Texas, Utah or Colorado. However,
                            we believe that these
                            areas are promising for a center.
 
 It
                            is our
                            plan to be profitable after approximately twelve months
                            of full operations in
                            construction services each center, although we cannot
                            guarantee that we will. We
                            believe that we have finally developed sufficient business
                            in the Albuquerque
                            market to be profitable in this center. The Phoenix center
                            has become profitable
                            since its opening in February of 2005. We do not expect
                            to be fully profitable
                            in the Las Vegas center until the third quarter of 2006.
 
 **Recently
                          Issued Accounting Pronouncements**
 
 In
                          July
                          2006, the
                          Financial Accounting Standards Board ("FASB") issued
                          Financial Interpretation No. 48, " *Accounting
                          for Uncertainty in Income Taxes - an interpretation of
                          FASB Statement
                          No. 109* "
                          ("FIN
                          48"), to clarify certain aspects of accounting for uncertain
                          tax positions,
                          including issues related to the recognition and measurement
                          of those tax
                          positions. This interpretation is effective for fiscal
                          years beginning after
                          December 15, 2006. We are in the process of evaluating the impact
                          of the
                          adoption of this interpretation on our consolidated financial
                          position, results
                          of operations or cash flows.
 
 In
                          March 2006, the FASB issued SFAS No.156, " *Accounting
                          for Servicing of Financial Assets* "
                          ("SFAS
                          156"), which requires all separately recognized servicing
                          assets and servicing
                          liabilities be initially measured at fair value. SFAS 156
                          permits, but does not
                          require, the subsequent measurement of servicing assets
                          and servicing
                          liabilities at fair value. Adoption is required as of the
                          beginning of the first
                          fiscal year that begins after September 15, 2006. Early adoption is
                          permitted. The adoption of SFAS 156 is not expected to
                          have a material effect on
                          our consolidated financial position, results of operations
                          or cash flows.
 
 In
                          February 2006, the FASB issued SFAS No. 155, " *Accounting
                          for Certain Hybrid Financial Instruments, an amendment
                          of FASB Statements No.
                          133 and 140* "
                          ("SFAS
                          155"). SFAS 155 clarifies certain issues relating to embedded
                          derivatives and
                          beneficial interests in securitized financial assets. The
                          provisions of SFAS 155
                          are effective for all financial instruments acquired or
                          issued after fiscal
                          years beginning after September 15, 2006. We are currently
                          assessing the impact
                          that the adoption of SFAS 155 will have on our consolidated
                          financial position,
                          results of operations or cash flows.
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 16
  In
                          December 2004, the FASB issued SFAS No. 123 (revised 2004), " *Share-Based
                          Paymen* t"
                          ("SFAS
                          123R"), replacing SFAS No. 123, " *Accounting
                          for Stock-Based Compensation* "
                          ("SFAS
                          123"), and superseding Accounting Principles Board ("APB")
                          Opinion No. 25,
                          " *Accounting
                          for Stock Issued to Employees* "
                          ("APB
                          25"). SFAS 123R requires recognition of share-based compensation
                          in the
                          financial statements. For small business issuers, SFAS
                          123R is effective as of
                          the first annual reporting period that begins after December
                          15, 2005. 
The
                          Company expects to begin applying the provisions of SFAS
                          123R in the third
                          quarter of 2006. The Company has concluded that the impact
                          of not applying the
                          provisions of SFAS No. 123R in the first two quarters of 2006 was
                          immaterial to its consolidated financial statements.
  **Critical
                          Accounting Policies and Estimates**
 
 Our
                          discussion and analysis of our financial condition and
                          results of operations are
                          based on consolidated financial statements which have been
                          prepared in
                          accordance with generally accepted accounting principles
                          in the United States.
                          The preparation of these financial statements requires
                          us to make estimates and
                          judgments that affect the reported amounts or assets, liabilities,
                          revenues and
                          expenses. We believe that certain accounting policies affect
                          our more
                          significant judgments and estimates used in the preparation
                          of our consolidated
                          financial statements. Our 2005 Annual Report on Form 10-KSB,
                          includes a
                          discussion of our critical accounting policies.
 
 As
                          result
                          of the CYMRI acquisition, the Company has adopted certain
                          new accounting
                          policies with respect to CYMRI’s exploration and production operations beginning
                          in May 2006. The most significant of these new policies
                          relates to the “full
                          cost” method of accounting for oil and gas properties. Under
                          full cost
                          accounting, all costs associated with acquisition, exploration,
                          and development
                          of oil and gas reserves, including directly related overhead
                          costs, are
                          capitalized. Other significant features of full cost accounting
                          are as follows:
 
 ·
                              All
                                  capitalized costs of oil and gas properties, including
                                  the estimated
                                  future costs to develop proved reserves, are amortized
                                  on the
                                  unit-of-production method using estimates of proved
                                  reserves. Investments
                                  in unproved properties and major development projects
                                  are not amortized
                                  until proved reserves associated with the projects
                                  can be determined or
                                  until impairment occurs. If the results of an assessment
                                  indicate that the
                                  properties are impaired, the amount of the impairment
                                  is added to the
                                  capitalized costs to be amortized. ·
                              The
                                  capitalized costs are subject to a “ceiling test,” which basically limits
                                  such costs to the aggregate of the “estimated present value,” discounted
                                  at a 10-percent interest rate, of future net revenues
                                  from proved
                                  reserves, based on current economic and operating
                                  conditions, plus the
                                  lower of cost or fair market value of unproved
                                  properties. ·
                              Sales
                                  of proved and unproved properties are accounted
                                  for as adjustments of
                                  capitalized costs with no gain or loss recognized,
                                  unless such adjustments
                                  would significantly alter the relationship between
                                  capitalized costs and
                                  proved reserves of oil and gas, in which case the
                                  gain or loss is
                                  recognized in income. Abandonments of properties
                                  are accounted for as
                                  adjustments of capitalized costs with no loss recognized. 
 For
                          a
                          complete discussion of the new accounting policies adopted
                          by the Company as a
                          result of the CYMRI acquisition, see the Company’s Form 8-K/A filed on August 9,
                          2006, Exhibit 99.1, “The CYMRI Corporation - Notes to Consolidated Financial
                          Statements,” beginning on page F-6.
 
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 17
 
 Item
                            3. CONTROLS AND PROCEDURES
 As
                          of the
                          date of this report, our Chief Executive Officer and our
                          Chief Financial Officer
                          evaluated the effectiveness of the design and operation
                          of our disclosure
                          controls and procedures pursuant to Rule 13a-15b under
                          the Securities Exchange
                          Act of 1934. Based on their review of our disclosure controls
                          and procedures,
                          they have concluded that our disclosure controls and procedures
                          are effective in
                          timely alerting each of them to material information relating
                          to us that is
                          required to be included in our periodic SEC filings. Further,
                          there were no
                          significant changes in the internal controls or in other
                          factors that could
                          significantly affect these disclosure controls after the
                          evaluation date and the
                          date of this report. Nor were there any significant deficiencies
                          or material
                          weaknesses in such disclosure controls and procedures requiring
                          corrective
                          actions. As a result, no corrective actions were taken.
 
 Except
                            for the impact of the CYMRI acquisition described in
                            Note 2 of the Condensed
                            Consolidated Financial Statements, the Company has made
                            no changes in its
                            disclosure controls and procedures in the most recent
                            quarterly reporting
                            period. As a result of the CYMRI acquisition on May 23,
                            2006, the Company is
                            currently evaluating its disclosure controls and procedures
                            on a consolidated
                            company basis. Upon completion of that evaluation, the
                            Company expects that
                            certain key controls underlying its disclosure controls
                            and procedures will be
                            enhanced or modified due to administrative efficiencies
                            resulting from combining
                            certain support operations in the construction and petroleum
                            engineering
                            staffing businesses.
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 18
  **PART
                          II.****OTHER
                          INFORMATION**
 
 
 **ITEM
                          1.****LEGAL
                          PROCEEDINGS**
 
 See
                          Note
                          7 to Condensed Consolidated Financial Statements.
 
 **ITEM
                          2.****UNREGISTERED
                          SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**
 
 In
                          March
                          2006, we received an additional $1,250 in proceeds from
                          the sale of the 9%
                          Secured promissory notes, due along with any unpaid interest
                          18 months after
                          issuance. Under the terms of the Notes, we also granted
                          the investors a security
                          interest in our accounts receivable and in any other of
                          our assets as set forth
                          in a Security Agreement. We make interest only payments
                          monthly. We also agreed
                          to pay the investors an origination fee of five percent
                          (5%) of the Principal
                          Amount of the Notes at the execution of the Notes. The
                          origination fee was
                          assessed at five percent (5%) of the Principal Amount at
                          the inception of the
                          loan. Consequently, we received net proceeds of $1,187.
                          In addition to the loan
                          origination fee, the lenders were also granted warrants
                          to purchase common stock
                          equal to 10% of the loan principal (i.e. covering 125 shares).
                          The warrants vest
                          immediately, are exercisable at $.30 per share and expire
                          in 2011.
 
 **ITEM
                          3.****DEFAULTS
                          UPON SENIOR SECURITIES**
 
 None.
 
 **ITEM
                          4.****SUBMISSION
                          OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 
 None.
 
 **ITEM
                          5.****OTHER
                          INFORMATION**
 
 None.
 
 **ITEM
                          6.****EXHIBITS**
 
 31.1
                                Certification
                                    of Chief Executive Officer pursuant to Rule
                                    13a-14(a)/15(d)-14(a)
  31.2
                                Certification
                                    of Chief Financial Officer pursuant to Rule
                                    13a-14(a)/15(d)-14(a)
  32.1
                                Certification
                                    of Chief Executive Officer pursuant to 18 U.S.C.
                                    Section 1350, as
                                    adoptedpursuant
                                    to Section 906 of the Sarbanes-Oxley Act of
                                    2002
  32.2
                                Certification
                                    of Chief Executive Officer pursuant to 18 U.S.C.
                                    Section 1350, as adoptedpursuant
                                    to Section 906 of the Sarbanes-Oxley Act of
                                    2002
  
 
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 19
  **SIGNATURES**
 
 Pursuant
                          to the requirements of the Securities Exchange Act of 1934,
                          the registrant has
                          duly caused this report to be signed on its behalf by the
                          undersigned thereunto
                          duly authorized.
 
 
 **TRADESTAR
                                  SERVICES, INC.**Date: August
                                  14, 2006
                                By:
                                /s/ Frederick
                                  A. HuttnerFrederick A. HuttnerChief
                                  Executive Officer
 
 **TRADESTAR
                                    SERVICES, INC.**Date: August
                                    14, 2006
                                  By:
                                  /s/ Kenneth
                                    L. ThomasKenneth L. ThomasChief
                                      Financial Officer
 
 20
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                          Contents*