victory.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


 
x Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended: March 31, 2008

 
o Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the transition period from:  _______  to _______

Commission file number:  2-76219-NY

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

NEVADA
  
87-0564472
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer I.D. Number)

112 N Curry Street, Carson City, Nevada 89703-4934
(Address of principal executive offices)

(866) 279-9257
(Issuer’s telephone number)

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

 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
  
Accelerated filer
¨
Non-accelerated filer
¨
  
Smaller Reporting Company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).YESo NO x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of March 31, 2008, there were 60,028,124 shares of our common stock outstanding.

Transitional Small Business Disclosure Format. YESo NO x
-1-

INDEX
   
 
Page No.
   
PART 1. FINANCIAL INFORMATION
  
   
3
   
3
   
4
   
5
 
 
9
   
10
   
18
   
23
   
PART II. OTHER INFORMATION
  
   
24
   
24
   
24
   
24
   
24
   
24

-2-
Item 1.                    Financial Statements
 
VICTORY ENERGY CORPORATION AND SUBSIDIARIES
            
(A Development Stage Company)
            
Consolidated Balance Sheets
            
             
ASSETS
            
   
March 31,
    
December 31,
  
   
2008
    
2007
  
   
(Unaudited)
        
CURRENT ASSETS
            
  Cash and Cash Equivalents
   $ -     $ 3,251  
  Subscriptions Receivable
     160,000       160,000  
    Total Current Assets
     160,000       163,251  
                 
FIXED ASSETS, NET
     -       -  
                 
OTHER ASSETS
                
  Drilling Costs
     3,036,000       -  
  Investment in Joint Venture
     50,000       50,000  
      3,086,000       50,000  
                 
    TOTAL ASSETS
   $ 3,246,000     $ 213,251  
                 
LIABILITIES & STOCKHOLDERS' DEFICIT
                
                 
CURRENT LIABILITES
                
  Bank Overdraft
   $ 23,773     $ -  
  Accounts Payable
     32,485       34,803  
  Credit Line - WFB Business Line
     81,860       81,860  
  Prepaid Subscriptions
     203,500       203,500  
    Total Current Liabilities
     341,618       320,163  
                 
                 
OTHER LIABILITIES
                
   Loan from Officer
     1,369,339       1,377,879  
    Total Other Liabilities
     1,369,339       1,377,879  
                 
    Total Liabilities
     1,710,957       1,698,042  
                 
Commitments and contingencies (Note 6)
                
                 
STOCKHOLDERS' DEFICIT
                
Preferred Stock, $0.001 par value, 10,000,000 shares
                
   authorized,  585,690 and 630,517 issued and outstanding respectively
     586       631  
Common Stock, $0.001 par value, 200,000,000 shares authorized,
                
  60,028,124 and 42,395,366 shares issued and outstanding respectively
     60,028       42,395  
Additional paid-in capital
     9,110,743       7,860,331  
Deficit accumulated in the development stage
     (7,636,314 )     (9,388,148 )
                 
    Total Stockholders' Equity (Deficit)
     1,535,043       (1,484,791 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
   $ 3,246,000     $ 213,251  
                 

-3-
 
VICTORY ENERGY CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Operations
(Unaudited)
                   
               
For the period
  
               
of Inception,
  
   
For the
    
from January 7,
  
   
Three Months Ended
    
1982 through
  
   
March 31,
    
March 31,
  
   
2008
    
2007
    
2008
  
                   
                   
Revenues
   $ 252,000     $ -     $ 172,207  
                         
Costs and Expenses
                        
                         
Royalties
     103,700               103,700  
Consulting Expense
     1,020,426       1,042,988       8,554,247  
Professional Fees
     350,000               508,146  
Land Leases
             4,500       25,720  
Wages and Salaries
                     270,500  
Other General & Administrative
     26,045       121,487       1,243,502  
                         
   Total Expenses
     1,500,171       1,168,975       10,705,815  
                         
   Operating Loss
     (1,248,171 )     (1,168,975 )     (10,533,608 )
                         
Other Income and (expenses)
                        
                         
Sale of Working Interest in Wells
     3,000,000               3,000,000  
Interst Income
     5               5  
Loss on abandonment of subsidiary
                     (50,900 )
Loss from reduction in debt
                     (48,363 )
Interest Expense
                     (5,664 )
Other Income
                     2,216  
                         
                         
Total Other Income and (expenses)
     3,000,005       -       2,897,294  
                         
Net Income (Loss)
   $ 1,751,834     $ (1,168,975 )   $ (7,636,314 )
                         
 Basic and Dilutive net loss per share
   $ 0.02     $ (0.09 )        
                         
Weighted average number of shares
                        
outstanding, basic and diluted
     106,041,725       12,923,505          
                         
                         
Dilutive effect of preferred stock,
   $ 58,569,000     $ -          
(Note 2)
                        
 
-4-
 
VICTORY ENERGY CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
Unaudited
 
                                 
Accumulated
        
                           
Additional
    
Deficit During
        
   
Common Stock
    
Preferred Stock
    
Paid-in
    
Development
        
   
Shares
    
Amount
    
Shares
    
Amount
    
Capital
    
Stage
    
Total
  
                                           
Balances at January 7, 1982
     -     $ -       -     $ -     $ -     $ -     $ -  
Common stock for cash at $7.50/sh
     6,000       6                       45,000               45,006  
Common stock for cash at $0.39/sh.
     168,503       169                       65,819               65,988  
Net loss from inception to Dec. 31,'82
                                             (39,597 )     (39,597 )
Balances at Dec. 31, 1982
     174,503       175                       110,819       (39,597 )     71,397  
                                                         
Net loss, year ended Dec. 31, 1983
                                             (71,397 )     (71,397 )
Balances at Dec. 31, 1983
     174,503       175                       110,819       (110,994 )     (0 )
                                                         
Common stock for cash at $25.00/sh.
     57                               1,425               1,425  
Common stock for cash at $25.00/sh. per share
     3                               75               75  
Common stock for cash at $0.025/sh. per share
     1,580,000       1,580                       38,373               39,953  
Net loss - year ended Dec. 31, 1984
                                                     -  
Balances at Dec. 31, 1984
     1,754,563       1,755                       150,692       (110,994 )     41,453  
                                                         
Cancellation of common stock
     (1,296,132 )     (1,297 )                                     (1,297 )
Net loss - year ended Dec. 31, 1985
                                                     -  
Balances at Dec. 31, 1985
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Net loss - year ended Dec. 31, 1986
                                                     -  
Balances at Dec. 31, 1986
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Net loss - year ended Dec. 31, 1987
                                                     -  
Balances at Dec. 31, 1987
     458,431       458                       150,692       (110,994 )     40,156  
 
-5-
                                                         
Net loss - year ended Dec. 31, 1988
                                                     -  
Balances at Dec. 31, 1988
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Net loss - year ended Dec. 31, 1989
                                                     -  
Balances at Dec. 31, 1989
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Net loss - year ended Dec. 31, 1990
                                                     -  
Balances at Dec. 31, 1990
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Net loss - year ended Dec. 31, 1991
                                                     -  
Balances at Dec. 31, 1991
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Net loss - year ended Dec. 31, 1992
                                                     -  
Balances at Dec. 31, 1992
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Net loss - year ended Dec. 31, 1993
                                                     -  
Balances at Dec. 31, 1993
     458,431       458                       150,692       (110,994 )     40,156  
                                                         
Cancellation of common stock
     (316,000 )     (316 )                                     (316 )
Net loss - year ended Dec. 31, 1994
                                             (6,656 )     (6,656 )
Balances at Dec. 31, 1994
     142,431       142                       150,692       (117,650 )     33,184  
                                                         
Common stock for cash at $0.001/sh.
     2,357,895       2,359                                       2,359  
Net loss - year ended Dec. 31, 1995
                                             (49,097 )     (49,097 )
Balances at Dec. 31, 1995
     2,500,326       2,500                       150,692       (166,747 )     (13,555 )
                                                         
Common stock for cash at $0.001/sh.
     120,000       120                                       120  
Net loss - year ended Dec. 31, 1996
     0       0                               (1,681 )     (1,681 )
Balances at Dec. 31, 1996
     2,620,326       2,620                       150,692       (168,428 )     (15,116 )
                                                         
Net loss - year ended Dec. 31, 1997
                                             (3,517 )     (3,517 )
Balances at Dec. 31, 1997
     2,620,326       2,620                       150,692       (171,945 )     (18,633 )
                                                         
Net loss - year ended Dec. 31, 1998
                                             (2,479 )     (2,479 )
Balances at Dec. 31, 1998
     2,620,326       2,620                       150,692       (174,424 )     (21,112 )
 
-6-
                                                         
Net loss - year ended Dec. 31, 1999
                                             (6,307 )     (6,307 )
Balances at Dec. 31, 1999
     2,620,326       2,620                       150,692       (180,731 )     (27,419 )
                                                         
Net loss - year ended Dec. 31, 2000
                                             (9,011 )     (9,011 )
Balances at Dec. 31, 2000
     2,620,326       2,620                       150,692       (189,742 )     (36,430 )
                                                         
Net loss - year ended Dec. 31, 2001
                                             (19,461 )     (19,461 )
Balances at Dec. 31, 2001
     2,620,326       2,620                       150,692       (209,203 )     (55,891 )
Contributed capital for rent and
                                                        
other compensation
                                     1,950               1,950  
Net loss - year ended Dec. 31, 2002
                                             (13,960 )     (13,960 )
Balances at Dec. 31, 2002
     2,620,326       2,620                       152,642       (223,163 )     (67,901 )
Contributed capital for rent and
                                                        
officer compensation
                                     488               488  
Capital contributed by shareholders
                                                        
via accounts payable and interest
                                     77,415               77,415  
                                                         
Stock issued for services $0.025/sh.
     13,389,932       13,390                       321,358               334,748  
Stock issued for services at $0.61/sh.
     100,000       100                       60,900               61,000  
Stock for consulting at $0.47/share
     10,000       10                       4,690               4,700  
Net loss - year ended Dec. 31, 2003
                                             (592,962 )     (592,962 )
Balances at Dec. 31, 2003
     16,120,258       16,120                       617,493       (816,125 )     (182,512 )
                                                         
Stock issued for services at $0.16/sh
     1,000,000       1,000                       159,000       0       160,000  
Stock issued for services at $0.17/sh.
     1,800,000       1,800                       304,200       0       306,000  
Stock issued for services at $0.165/sh
     800,000       800                       131,200       0       132,000  
Stock issued for services at $0.215/sh.
     30,000       30                       6,420       0       6,450  
Stock issued for debt at $0.45 per sh.
     150,000       150                       67,350       0       67,500  
Stock issued for services at $0.40/sh
     300,000       300                       119,700       0       120,000  
Stock issued for services at $0.34/sh.
     700,000       700                       237,300       0       238,000  
Stock issued for services at $0.41/sh.
     300,000       300                       122,700       0       123,000  
Stock issued for services at $0.27/sh.
     300,000       300                       80,700       0       81,000  
Stock issued for services at $0.22/sh.
     600,000       600                       131,400       0       132,000  
Net loss - year ended Dec. 31, 2004
                                             (1,606,057 )     (1,606,057 )
Balances at Dec. 31, 2004
     22,100,258       22,100                       1,977,463       (2,422,182 )     (422,619 )
 
                                                         
Contributed capital for general and administrative expenses
                       138,701               138,701  
Stock issued for services at $0.03/sh.
     19,860,000       19,860                       575,940               595,800  
Net loss - year ended Dec. 31, 2005
                                             (1,323,775 )     (1,323,775 )
Balances at December 31, 2005
     41,960,258       41,960                       2,692,104       (3,745,957 )     (1,011,893 )
                                                         
                                                         
Stock issued for services at $0.027/sh.
     17,583,334       17,583                       459,917               477,500  
Common stock issued in debt
                                                        
restructuring at $0.06 and $0.03
     10,666,667       10,667                       429,333               440,000  
Stock issued for debt at $0.06/ sh.
     5,000,000       5,000                       295,000               300,000  
Stock issued for services at $0.03/sh.
     2,500,000       2,500                       72,500               75,000  
Stock issued for services at $0.05/sh.
     500,000       500                       24,500               25,000  
Stock issued for services at $0.008/sh.
     10,000,000       10,000                       70,000               80,000  
Stock for consulting at $0.008/sh.
     4,500,000       4,500                       31,500               36,000  
Stock for consulting at $0.008/sh.
     500,000       500                       3,500               4,000  
Stock for consulting at $0.008/sh.
     4,000,000       4,000                       28,000               32,000  
Stock for consulting at $0.008/sh.
     700,000       700                       4,900               5,600  
Stock for consulting at $0.008/sh.
     300,000       300                       2,100               2,400  
Stock for consulting at $0.008/sh.
     3,600,000       3,600                       25,200               28,800  
Stock for consulting at $0.008/sh.
     3,000,000       3,000                       21,000               24,000  
Stock for consulting at $0.008/sh.
     4,000,000       4,000                       28,000               32,000  
Balances before reverse split
     108,810,259       108,810                       4,187,554       (3,745,957 )     550,407  
                                                         
Reverse split 25 to 1, Oct.26, 2006
     (104,457,849 )     (104,458 )                     104,458               -  
New Stock issued for rounding
     890       1                       (1 )             -  
Balances after reverse split
     4,353,300       4,353                       4,292,011       (3,745,957 )     550,407  
                                                         
Preferred stock for cash at $0.467/sh.
                     715,517       716       246,234               246,950  
Common stock for rounding$0.50/sh.
     1                                               -  
Common stock for services $0.20/sh
     5,200       5                       1,035               1,040  
Common stock for rounding$0.20/sh.
     14                                               -  
Common stock for services $0.17/sh.
     160,000       160                       27,040               27,200  
Net loss - year ended Dec. 31, 2006
                                             (1,745,364 )     (1,745,364 )
Balances at December 31, 2006
     4,518,515       4,518       715,517       716       4,566,320       (5,491,321 )     (919,767 )
 
-7-
                                                         
Common stock for services $0.15/sh
     6,277,251       6,277                       935,310               941,587  
Common stock sold @ $0.21/sh
     5,662,000       5,662                       1,183,358               1,189,020  
Common stock for services $0.21/sh
     40,000       40                       8,360               8,400  
Common stock for services $0.21/sh
     2,787,600       2,788                       582,608               585,396  
Common stock subscribed, issued $0.21
     3,500,000       3,500                       731,500               735,000  
Preferred Stock converted to common
     8,500,000       8,500       (85,000 )     (85 )     (8,415 )             -  
Common stock for services $0.05/sh
     300,000       300                       14,700               15,000  
Common stock for services $0.04/sh
     10,310,000       10,310                       402,090               412,400  
Common stock for services $0.04/sh
     500,000       500                       19,500               20,000  
Revaluation of subscriptions receivable
                                     (575,000 )             (575,000 )
Net loss - year ended Dec. 31, 2007
                                             (3,896,827 )     (3,896,827 )
Balances at December 31, 2007
     42,395,366     $ 42,395       630,517     $ 631     $ 7,860,331     $ (9,388,148 )   $ (1,484,791 )
                                                         
Common stock for services $0.04/sh
     600,000       600                       23,400               24,000  
Common Stock for services $0.08/sh
     8,550,000       8,550                       675,450               684,000  
Common stock for services @ $0.20/sh
     2,000,000       2,000                       98,000               100,000  
Preferred Stock converted to common
     4,482,758       4,483       (44,827 )     (45 )     (4,438 )             -  
Common Stock for services $0.23/sh
     2,000,000       2,000                       458,000               460,000  
Net income - year ended Mar. 31, 2008
                                             1,751,834       1,751,834  
                                                         
Balances at March 31, 2008
     60,028,124     $ 60,028       585,690     $ 586     $ 9,110,743     $ (7,636,314 )   $ 1,535,043  
                                                         
 
-8-
 
VICTORY ENERGY CORPORATION AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
  
   
     
For the
    
From Inception
  
     
Three Months Ended
    
Jan. 7, 1982
  
     
March 31,
    
through
  
     
2008
    
2007
    
Mar. 31, 2008
  
CASH FLOWS FROM OPERATING ACTIVITIES:
                  
 
Net Loss
   $ 1,751,834     $ (1,168,975 )   $ (7,636,314 )
 
Adjustments to reconcile net loss to net cash
                        
 
used by operating activities:
                        
 
Depreciation
                     2,294  
`
Issuance of common stock for services rendered
     1,268,000       2,139,008       7,178,023  
 
 Change in operating assets and liabilities:
                        
 
Increase in Short Term Receivables
                        
 
Decrease (Increase) in Prepaid Expenses
                        
 
Increase (Decrease) in Deposits
                        
 
Incrrease (Decrease) in Prepaid Subscriptions
                     203,500  
 
(Incrrease) Decrease in Subscriptions Receivable
             (1,189,020 )     (160,000 )
 
Increase (Decrease) in accounts payable
     (2,318 )     13,276       32,485  
 
Increase (Decrease) in accrued liabilities
                        
 
Increase (Decrease ) in Accrued Payroll,P'roll Taxes
                        
 
Increase (Decrease) in Short Term Receivables
                        
 
Repayment of long term debt
                        
 
Increase (decrease) in Accrued Liabilities-Related
                        
 
Non-cash contributed capital
                        
 
Net Cash provided by (used by)
                        
 
    Operating Activities
     3,017,516       (205,711 )     (380,012 )
CASH FLOWS FROM INVESTING ACTIVITIES
                        
 
Drilling costs
     (3,036,000 )             (3,036,000 )
 
Purchase of Fixed Assets
                     (2,294 )
 
Purchase / Sale of Marketable Securities
                        
 
Investment in Joint Venture
                     (50,000 )
 
Net Cash (used by) Investing Activities
     (3,036,000 )     -       (3,088,294 )
CASH FLOWS FROM FINANCING ACTIVITIES
                        
 
Proceeds of Note Payable
                        
 
Proceeds (Repayment) of Loans
                        
 
Increase (decrease) in Credit Line
             22,886       81,860  
 
Proceeds (Repayment) of Loan from Officer
     (8,540 )     183,496       1,369,339  
 
Proceeds (Repayment) of Note Payable-Related Party
                        
 
Increase (Decrease) in Other Loans Payable
                        
 
Contributed capital for rent and officers' compensation
                     2,438  
 
Proceeds from the sale of Preferred Stock
                        
 
 Proceeds from the sale/conversion  of Common Stock
                     1,443,946  
 
 Stock sold for debt
                     300,000  
 
 Commons stock subscribed, revalued
                        
 
 Proceeds from the sale/conversion  of Preferred Stock
                     246,950  
 
Contributed Capital by shareholders
                        
 
Net Cash provided by Financing Activities
     (8,540 )     206,382       3,444,533  
NET INCREASE IN CASH
     (27,024 )     671       (23,773 )
CASH AT BEGINNING OF PERIOD
     3,251       (79 )     -  
CASH AT END OF PERIOD
   $ (23,773 )   $ 592     $ (23,773 )
CASH PAID FOR:
                        
 
Interest
   $ -     $ -     $ -  
 
Income Taxes
   $ -     $ -     $ -  
 
-9-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND CONTINUED OPERATIONS
 
Victory Energy Corporation (OTC symbol VTYE), formerly known as Victory Capital Holdings Corporation (our “Company”) was organized under the laws of the State of Nevada on January 7, 1982, under the name All Things, Inc. On March 21, 1985 the Company’s name was changed to New Environmental Technologies Corporation and on April 28, 2003 to Victory Capital Holdings Corporation.  The name was changed finally to Victory Energy Corporation on May 3, 2006.
 
The Company was formed for the purpose of engaging in all lawful businesses. The Company’s initial authorized capital consisted of 100,000,000 shares of $0.001 par value common voting stock and as of the date of this filing the authorized capital is 200,000,000 shares of $.001 par value common stock.

The consolidated financial statements presented are those of Victory Energy Corporation and subsidiaries.   While the information presented in the accompanying interim nine months financial statements is unaudited, it includes all adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.

On October 3, 2001, the Company formed a wholly owned subsidiary named Papadog, Inc. Papadog has since changed its name to Global Card Services, Inc. and then to Global Card Incorporated, (“Global”).  As of the date of this report, there has been no activity for this subsidiary.

On November 12, 2003, the Company formed a wholly owned subsidiary named On Demand Communications, Inc., (“On Demand”).  As of the date of this report, there has been no activity for this subsidiary.

On November 27, 2006 the company incorporated a Nevada  subsidiary,  Victory Energy Resources, Inc.   The name of the subsidiary was changed to Victory Carbon Solutions, Inc.  There has been no activity in this company.

Current Business of the Company
 
The Company had no material business operations from 1989 to 2003. In 2004, the Company  began the search for the acquisition of assets, property or businesses.  In 2005 management focused on projects in the oil and gas industry, intending to drill for oil and gas on leased land.  In 2006 the company entered into a farm-out agreement with the owner of certain oil and gas leases for a 100% working interest in an acreage in Montana,  subject to overriding royalties.  These oil and gas leases were allowed to lapse back to the State of Montana.  The Company is now working with the State of Montana to re-acquire the leases. The Company also secured other mineral rights in Montana and Texas, as well as a joint venture in New Mexico.

In December 2007 the Corporation established a relationship with a private institutional investment group contracted to acquire, through a financial facility, interest ownership in six term assignments containing six existing and producing gas wells in Crockett County, Texas.  The conclusion of the transaction and recording of the wells took place in the first quarter of 2008.

Jon Fullenkamp, the President/C.E.O., is the sole employee and has a great deal of experience in the oil and gas industry.  The Company retains independent contractors to assist in operating and managing the prospects and projects.

-10-
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fair Value of Financial Instruments

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures About Fair Value of Financial Instruments.”  SFAS No. 107 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value.  The carrying amounts of the Company’s financial instruments as of March 31, 2008 and  2007 approximate their respective fair values because of the short-term nature of these instruments.  Such instruments consist of cash, accounts payable and accrued expenses.  The fair value of related party payables is not determinable.

Income Taxes

The Company utilizes SFAS No. 109, “Accounting for Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company generated deferred tax credits through net operating loss carryforwards.  However, a valuation allowance of 100% has been established, as the realization of the deferred tax credits is not reasonably certain, based on going concern considerations outlined below.

Going Concern

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has suffered recurring losses.  The Company incurred an operating loss of $1,248,171 but a positive cash flow from operations of $3,017,516, primarily from the sale of a working interest in wells, for the three months ended March 31, 2008.  The company has a shareholders’ equity of $1,535,043 at March 31,2008.  The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.  If the Company is unable to obtain adequate capital, it could be forced to cease development of operations.

In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources.  Management’s plans to continue as a going concern include raising additional capital through sales of common stock.  In the interim, shareholders of the Company are committed to meeting its minimal operating expenses.  However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

-11-
Development-Stage Company

The Company is considered a development-stage company, with limited operating revenues during the periods presented, as defined by Statement of Financial Accounting Standards (“SFAS”) No. 7.  SFAS No. 7 requires companies to report their operations, shareholders deficit and cash flows since inception through the date that revenues are generated from management’s intended operations, among other things.  Management has defined inception as January 7, 1982.  Since inception, the Company has incurred operating losses totaling $7,636,314, much of which relates to stock-based compensation to officers, directors and consultants as a means to preserve working capital.  The Company’s working capital has been generated through the sales of common stock, loans made by officers of the Company and a bank line of credit. Management has provided financial data since January 7, 1982 “Inception” in the financial statements, as a means to provide readers of the Company’s financial information to make informed investment decisions.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include those of Victory Energy Corporation and its wholly owned subsidiaries, Global Card Incorporated, On Demand Communications, Inc. and Victory Energy Resources, Inc. All material inter-company items and transactions have been eliminated.  There has been no activity in the subsidiaries.

Earnings (Loss) Per Share

Statement of Financial Accounting Standards No. 128 “Earnings Per Share” requires presentation of basic earnings per share and diluted earnings per share.  Basic income (loss) per share (“Basic EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted earnings per share (“Diluted EPS”) is similarly calculated using the treasury stock method except that the denominator is increased to reflect the potential dilution that would occur if preferred stock at the end of the applicable period were exercised. These potential dilutive securities were included in the calculation of loss per share for the three months ended March 31, 2008.   They were not included in the calculation for March 31, 2007 because the Company incurred a loss in the period, and thus their effect would have been anti-dilutive.  At March 31, 2008 potentially dilutive securities consisted of 585,690 shares of preferred stock, convertible at the rate of 1 preferred share to 100 common shares.

On October 26, 2006 a reverse stock split of Common Stock occurred on a 25 to 1 basis.
The loss per share for the year ended December 31, 2006 was calculated accordingly, giving retroactive effect to the reverse stock split at the beginning of the year.

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the years ended December 31, 2007 and 2006.
-12-

   
2007
    
2006
  
Numerator:
            
             
Basic and diluted net loss per share:
            
             
Net Income (Loss)
   $ ( 1,751,834 )   $ (1,168,975 )
                 
Denominator
                
                 
Basic and diluted weighted average
                
  number of shares outstanding
     106,041,725       2,923,505  
                 
Basic and Diluted Net Loss Per Share
   $ 0.02     $ (0.09 )
  
                
Dilutive effect of Preferred Stock
     58,569,000    
Nil
  

Equipment and Fixtures

Equipment and fixtures are recorded at cost.  Depreciation is provided using accelerated and straight-line methods over the estimated useful lives of the related assets as follows.

Description
Years
   
Furniture and fixtures
7
Computer hardware and software
3-5

Equipment and fixtures have been fully depreciated.

NOTE 3 – RELATED PARTY TRANSACTIONS

Five ledger accounts in the books of the Company relating to loans, salaries and out-of-pocket expenses payable to the President/C.E.O., Jon Fullenkamp, were combined into one account “Loan from Officer”, which totaled $1,369,339 at March 31, 2008 The loan is non-interest bearing and payable on demand.  Under the terms of the employment agreement, the employee may at his election convert any and all funds due to him into shares of the Company’s common stock at a conversion price of $0.01 per share. In practice, in prior years, funds due to him were converted at a discounted market value.
-13-

In March 2006 the company issued a promissory note to a group of stockholders for consideration of $141,458 in cash. The terms were to be repayable in one year at an interest rate of 10%, payable quarterly.  Interest was deferred. In December, 2006 the note was reclassified to prepaid subscriptions, reflecting an accommodation with the stockholders. In December 2007, the subscription was eliminated in further negotiations.
 
NOTE 4 – INVESTMENT IN OIL AND GAS PROPERTIES

In May, 2006 the Company paid $50,000 to Geosurveys, Inc, a geophysical survey company of oil and gas prospects.  This was part of an agreement with Eldorado Exploration, Inc. whereby the Company obtained a 2 ½ percent working interest in a prospective oil well called the Mesa #1 well on leased land in New Mexico.   The agreement provides for cost sharing of drilling costs.

In the first quarter of 2008 the Corporation acquired, with private institutional investors, through a financial facility, 50% of  50% of 74% net revenue interest in six term assignments containing six existing and producing gas wells in Crockett County, Texas.  The lease is known as the Adams-Baggett Canyon Sandstone gas field.    A geologists report dated January 26, 2007 from Joe C. Neal & Associates indicates the following oil and gas reserves, reported in accordance with Financial Accounting Standards Board pronouncement 69 (FAS-69):

   
PROVED
  
   
UNDEVELOPED
  
       
Net Reserves to
      
Evaluated Interests:
      
Oil, MBBL
     0  
Gas, MMCF
     11,519  
         
Future  Cash Inflows
   $ 74,877,000  
         
Ad Valorem Taxes &
        
Severance Taxes
   $ 7,694,000  
         
Operating Costs
   $ 18,768,000  
         
Capital Costs
   $ 12,000,000  
         
Future Net Cash Flows,
        
Undiscounted
   $ 36,415,000  
         
Standardized measure of
        
Per Annum Discounted
        
Future net cash flows
        
relating to proved
        
Oil and gas reserves,
        
Discounted at 10%
   $ 11,434,000  
         
Victory Energy Corporation share
        
50% x 74%
   $ 4,231,000  
 
In the first quarter of 2008 the company sold 59%  of its net revenue  interest for $3,000,000.   The percentage reduces to 49% when the purchase price is recovered.  Funds were used for drilling in the same prospect.
-14-
NOTE 5 - COMMITMENTS AND CONTINGENCIES

There were no additional commitments and contingencies in the three months ended March 31, 2008.

NOTE 6 – CAPITAL STOCK TRANSACTIONS

Reverse Common Stock Split

The Common Stock issued and outstanding at October 26, 2006 was 108,810,259.   On this date the Board of Directors declared a reverse stock split of the Company’s Common Stock, converting the common stock on a 25 to 1 basis.    Common shares outstanding were reduced by 104,457,849.  New stock outstanding after the split and after issuing 890 shares for rounding was 4,353,300.   The effect on the balance sheet was to increase Paid-in Capital by $104,458 and to reduce Common Stock by $104,458, a neutral effect on stockholders’ equity.

On October 20, 2005 one share was issued at $0.50, valued de minimus, for rounding following the reverse split.

On November 11, 2006 5,200 shares were issued for services valued at $1,040 at market value of $0.20 per share.

On December 5, 2006, 14 shares valued de minimus were issued for rounding.

On December 27, 2006, 160,000 shares were issued for services, valued at $27,200, at market value of $0.17.

2007

On January 22, 2007, 6,277,251 shares of common stock were issued for services at $0.15 per share, reflecting market value.  $941,588 was recorded as consulting fees.

On February 1, 2007, 5,662,000 shares of common stock were issued at $0.21 reflecting market value for subscriptions receivable of  $1,189,020.

On March 1, 2007, 40,000 shares of common stock were issued to a Director for services rendered at $0.21 per share reflecting market value.    $8,400 was recorded as consulting fees.

On May 7, 2007, 1,710,000 shares of common stock were issued for services at $0.21 per share,    reflecting market value.  $359,100 was recorded as consulting fees.

On June 5, 2007,  1,077,600 shares of common stock were issued for services at $0.21 per share reflecting market value. $226,296 was recorded as consulting fees.
-15-

On June 13, 2007, 850,000 shares of common stock were issued to preferred stockholders in a conversion of 85,000 shares of preferred stock to common, converted at the rate of one share of preferred stock to 100 shares of common stock.

On June 15, 3,500,000 shares of common stock were issued at $0.21 per share reflecting market value, for subscriptions receivable of $735,000.

On December 12, 2007,  300,000 shares of common stock were issued for services at $0.05 per share reflecting market value. $15,000 was recorded as consulting fees.

On December 31, 2007,  10,310,000 shares of common stock were issued for services at $0.04 per share reflecting market value. $412,400 was recorded as consulting fees.

On December 31, 2007,  500,000 shares of common stock were issued for services at $0.04 per share reflecting market value. $20,000 was recorded as consulting fees.

On December 31, subscriptions receivable was reduced by $575,000 to $160,000 following an agreement with the subscribers concerned.  Additional paid-in capital was reduced accordingly.

The total of issued and outstanding common shares at December 31, 2007  was 42,395,366.

2008

In January, 2008 600,000 shares of common stock were issued for services $0.04 per share reflecting market value.   $24,000 was recorded as legal fees.

From February 1 to 21, 2008 8,550,000 shares of common stock were issued for services $0.08 per share reflecting market value.   $684,000 was recorded as consulting fees.

On February 22, 2008 2,000,000 shares of common stock were issued for services $0.20 per share reflecting market value.   $100,000 was recorded as consulting fees.

In March, 2008 2,000,000 shares of common stock were issued for services $0.23 per share reflecting market value.   $322,000 was recoded as legal fees.  $138,000 was recorded as consulting fees.

The total of issued and outstanding common shares at March 31, 2008 and 2007 was 60,028,124 and 42,395,366 respectively.
-16-
 
Preferred Stock

On August 22, 2006 the Board of Directors resolved to amend the Articles of Incorporation, to authorize 10,000,000 shares of preferred stock, having a par value of $0.001.  The stock is convertible to common stock at will in a ratio of 1 preferred to 100 common.  Preferred stockholders may vote as common stockholders on any matter on which common stockholders can vote, and in accordance with the underlying common stock held.  Preferred stock dividends may be declared by the Board of Directors.

On October 20, 2006, 715,512.23 preferred shares were issued for cash at $0.467 each pursuant to Regulation “S”, realizing $246,950.

On June 13, 2007 85,000 shares of preferred stock were converted, at the rate of one share of preferred stock to 100 shares of common stock, to 850,000 shares common stock.

On March 13, 2008 44,827.58 shares of preferred stock were converted, at the rate of one share of preferred stock to 100 shares of common stock, to 4,482,758 shares common stock.

The total of issued and outstanding preferred shares at March 31, 2008 and  2007 was 585,690 and 630,517 respectively.

  NOTE 7 – LITIGATION
 
During the second quarter of 2007, a former consultant solicited the courts for the shortfall between the original settlement amount and the amount realized in a court action.  On June 6, 2007, the Corporation delivered final settlement and the issue is completely resolved.
 
Neither the Company nor any of its officers or directors is involved in any other litigation either as plaintiffs or defendants, and have no knowledge of any threatened or pending litigation against them or any of the officers or directors.

-17-
Item 2.                     Management's Discussion and Analysis or Plan of Operation

The following discussion includes certain forward-looking statements within the meaning of the safe harbor protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that include words such as “believe,” “expect,” “should,” “intend,” “may,” “anticipate,” “likely,” “contingent,” “could,” “may,” or other future-oriented statements, are forward-looking statements. Such forward-looking statements include, but are not limited to, statements regarding our business plans, strategies and objectives, and, in particular, statements referring to our expectations regarding our ability to continue as a going concern, generate increased market awareness of, and demand for, our current products, realize profitability and positive cash flow, and timely obtain required financing. These forward-looking statements involve risks and uncertainties that could cause actual results to differ from anticipated results. The forward-looking statements are based on our current expectations and what we believe are reasonable assumptions given our knowledge of the markets; however, our actual performance, results and achievements could differ materially from those expressed in, or implied by, these forward-looking statements. Factors within and beyond our control that could cause or contribute to such differences include, among others, the following: those associated with drilling and subsequent sale of oil and gas, our critical capital raising efforts in an uncertain and volatile economical environment, our ability to maintain relationship with strategic companies, our cash preservation and cost containment efforts, our ability to retain key management personnel, our relative inexperience with advertising, our competition and the potential impact of technological advancements thereon, the impact of changing economic, political, and geo-political environments on our business, as well as those factors discussed elsewhere in this Form 10-QSB and in “Item 1 - Our Business,” “Item 6 - Management’s Discussion and Analysis,” and elsewhere in our most recent Form 10-KSB, filed with the United States Securities and Exchange Commission.

Readers are urged to carefully review and consider the various disclosures made by us in this report and those detailed from time to time in our reports and filings with the United States Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that are likely to affect our business.

Our Business

Victory Energy Corporation (OTC symbol VYEY), formerly known as Victory Capital Holdings Corporation (our “Company”) was organized under the laws of the State of Nevada on January 7, 1982, under the name All Things, Inc. On March 21, 1985, our Company’s name was changed to New Environmental Technologies Corporation; on April 28, 2003, our name was changed to Victory Capital Holdings Corporation and on May 3, 2006, it was changed to Victory Energy Corporation. Our Company was formed for the purpose of engaging in all lawful businesses. Our Company’s initial authorized capital consisted of 100,000,000 shares of $0.001 par value common voting stock and as of the date of this filing our authorized capital is 200,000,000 shares of $.001 par value common stock.

Our Company has had no material business operations since 1989. In 2004, we began the search for the acquisition of assets, property or businesses that may benefit our Company and our shareholders. Our goal has been to bring value to the Company and to our shareholders through such acquisitions. Each merger and acquisition we approach is done with the intention to position us in markets and sectors where excellent growth is anticipated. We plan to retain a percentage of stock ownership in each subsidiary while spinning them out as their own new public company if such transaction is economically feasible. The balance of the stock will be distributed to the Company’s shareholders at the time of spin out of the new public company. This is a non-dilutive method to increase shareholder value as we grow and maintain a position in the market segments selected.

Current Business of the Company

Management determined that the Company should focus on projects in the oil and gas industry. This is based upon a belief that this industry is an economically viable sector in which to conduct business operations. The Company has targeted specific prospects and intends to engage in the drilling for oil and gas. Jon Fullenkamp, the Company’s President, has a great deal of experience in the oil and gas industry and has already recruited additional experience with new directors and advisory board members.
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The Corporation has established a relationship with a private institutional investment group who are providing drilling funds to the Company for the further development of oil and gas properties. This group provides for direct participation by the investors in the production of completed wells.  The Corporation receives a 15% carried interest in the gas wells and shares in the same value of the production revenue on a monthly basis.  Once initial invested cost to acquire or drill  each well is returned  to the private institutional investment group, the Corporations participation will increase to 25%.  The Corporation will receive the same level of participation in the revenues on a monthly basis at that time.

During the fourth quarter of 2007, the Corporation negotiated the terms to acquire ownership in six term assignments containing six producing gas wells.  The term assignments and gas wells are located in Crockett County Texas located in the Permian Basin.

In the first quarter of 2008, the Corporation acquired the ownership in six term assignments containing six producing gas wells.   Victory’s acquired ownership in the six term assignments is 50% working interest and 50% of 74% net revenue interest in six existing and producing gas wells on the six term assignments in the Canyon Sandstone gas zone, in the Texas Permian Basin. 26% of the interest is set aside for royalty interest owners of each term assignment. The recording of ownership of the term lease assignments is schedule to be recorded at the Crockett County Court house during the second quarter of 2008.  Additionally during the first quarter of 2008, the Corporation drilled two additional Canyon Sandstone gas wells in Crockett County Texas.

Funds for the transaction were provided by a private institutional investment group in exchange for a portion of Victory’s interest ownership in each term assignment.  Currently Victory maintains 15% of the interest ownership until such time the revenues have paid back the original acquisition investment, then Victory’s interest ownership will increase to 25%.

The Corporation has targeted the prolific Canyon Sandstone gas field in the Texas Permian Basin, with the intent to focus on the drilling and completion of natural gas wells in this existing field.  The opportunity is of reduced risk due to the extensive historical information available from this specific natural gas field.  The commercial success of this field is over 97%, indicating that 97% of the wells drilled here are commercially productive.
 
The Canyon Sandstone gas play is located in the Texas Permian Basin as part of the large prolific Adams-Baggett Canyon Sandstone gas field. The Canyon Sandstone formation is found at a depth of 4,300 feet to 4,900 feet. Initial production for these wells is approximately 250,000 cubic feet of gas per day per well. The average life span of a Canyon Sandstone gas well is approximately 30 years.

Natural gas from the Canyon Sandstone gas zone receives a 20% premium in price above the standard price due to its higher BTU content per cubic foot of natural gas.

Within this existing gas field are two deeper zones, Strawn Limestone and the Ellenburger Dolomite. The Strawn Limestone gas zone will produce approximately 1.5 BCF and the Ellenburger Dolomite gas zone will produce approximately 5.0 BCF, over an average life span of approximately 30 years. The Strawn zone is usually found at 9,000 to 9,800 feet, while the depth of the Ellenburger zone is between 10,500 and 11,500 feet.

To reduce risk in the field, each well drilled has the opportunity to have the Canyon Sandstone gas zone available to produce from.  For each of the deeper gas wells drilled in this field, the Corporation will always have the Canyon Sandstone zone available as a fall back opportunity to produce from and recover any additional drilling expenses incurred from drilling a deeper well.

The underlying opportunity in drilling a deeper gas well is to first produce the deepest zone, Ellenburger Dolomite, until it is depleted.  The next step is then to produce the shallower Strawn Limestone until depletion and finally to produce the Canyon Sandstone zone to depletion.  Offsets of deeper gas wells in this field are producing average of 2.5 million cubic feet of gas per day.
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The Corporation received its first revenue from production sales from this field in March of 2008.

We also hold an interest as a joint venture partner in the Mesa Gas Prospect located in Roosevelt County New Mexico.  The Company had held 1,960 acres in a prospective oilfield identified as N.E. Glasgow Prospect located in Montana where plans were to incorporate this prospect into the Company’s developments in Valley County Montana.  The acreage was allowed to lapse back to the State of Montana.  The Company now is currently working with the State of Montana to reacquire the acreage.  We had taken on the evaluation of a prospect in Oklahoma identified as the Skedee Prospect. As we progressed into the due diligence of these prospects and the potential production, management determined that the development of the prospect was not worth the required investment capital. Even with the potential reduction in investment dollars, the prospects had an unacceptable pay back time for the initial investment. Management felt the shareholders would be better served by seeking other prospects.

Other than our President, we have no other employees at this time and we will seek to retain independent contractors to assist in operating and managing the prospects as well as to carry out the principal and necessary functions incidental to the oil and gas business. With the intended acquisition of oil and natural gas, we intend to establish ourselves as an industry partner within the industry. With our established revenue base with cash flow, we will seek opportunities more aggressive in nature.
 
Plan of Operation

Management determined that the Company should focus on projects in the oil and gas industry. This is based upon a belief that this industry is an economically viable sector in which to conduct business operations. The Company has targeted specific prospects and intends to engage in the drilling for oil and gas. Jon Fullenkamp, the Company’s President, has a great deal of experience in the oil and gas industry and has already recruited additional experience with new directors and advisory board members.
 
The Corporation has established a relationship with a private institutional investment group who are providing drilling funds to the Company for the further development of oil and gas properties. This group provides for direct participation by the investors in the production of completed wells.  The Corporation receives a 15% carried interest in the gas wells and shares in the same value of the production revenue on a monthly basis.  Once initial invested cost to acquire or drill  each well is returned  to the private institutional investment group, the Corporations participation will increase to 25%.  The Corporation will receive the same level of participation in the revenues on a monthly basis at that time.

During the fourth quarter of 2007, the Corporation negotiated the terms to acquire ownership in six term assignments containing six producing gas wells.  The term assignments and gas wells are located in Crockett County Texas located in the Permian Basin.

In the first quarter of 2008, the Corporation acquired the ownership in six term assignments containing six producing gas wells.   Victory’s acquired ownership in the six term assignments is 50% working interest and 50% of 74% net revenue interest in six existing and producing gas wells on the six term assignments in the Canyon Sandstone gas zone, in the Texas Permian Basin. 26% of the interest is set aside for royalty interest owners of each term assignment. The recording of ownership of the term lease assignments is schedule to be recorded at the Crockett County Court house during the second quarter of 2008.  Additionally during the first quarter of 2008, the Corporation drilled two additional Canyon Sandstone gas wells in Crockett County Texas.
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Funds for the transaction were provided by a private institutional investment group in exchange for a portion of Victory’s interest ownership in each term assignment.  Currently Victory maintains 15% of the interest ownership until such time the revenues have paid back the original acquisition investment, then Victory’s interest ownership will increase to 25%.

The Corporation has targeted the prolific Canyon Sandstone gas field in the Texas Permian Basin, with the intent to focus on the drilling and completion of natural gas wells in this existing field.  The opportunity is of reduced risk due to the extensive historical information available from this specific natural gas field.  The commercial success of this field is over 97%, indicating that 97% of the wells drilled here are commercially productive.
 
The Canyon Sandstone gas play is located in the Texas Permian Basin as part of the large prolific Adams-Baggett Canyon Sandstone gas field. The Canyon Sandstone formation is found at a depth of 4,300 feet to 4,900 feet. Initial production for these wells is approximately 250,000 cubic feet of gas per day per well. The average life span of a Canyon Sandstone gas well is approximately 30 years.

Natural gas from the Canyon Sandstone gas zone receives a 20% premium in price above the standard price due to its higher BTU content per cubic foot of natural gas.

Within this existing gas field are two deeper zones, Strawn Limestone and the Ellenburger Dolomite. The Strawn Limestone gas zone will produce approximately 1.5 BCF and the Ellenburger Dolomite gas zone will produce approximately 5.0 BCF, over an average life span of approximately 30 years. The Strawn zone is usually found at 9,000 to 9,800 feet, while the depth of the Ellenburger zone is between 10,500 and 11,500 feet.

To reduce risk in the field, each well drilled has the opportunity to have the Canyon Sandstone gas zone available to produce from.  For each of the deeper gas wells drilled in this field, the Corporation will always have the Canyon Sandstone zone available as a fall back opportunity to produce from and recover any additional drilling expenses incurred from drilling a deeper well.

The underlying opportunity in drilling a deeper gas well is to first produce the deepest zone, Ellenburger Dolomite, until it is depleted.  The next step is then to produce the shallower Strawn Limestone until depletion and finally to produce the Canyon Sandstone zone to depletion.  Offsets of deeper gas wells in this field are producing average of 2.5 million cubic feet of gas per day.

The Corporation received its first revenue from production sales from this field in March of 2008.

We also hold an interest as a joint venture partner in the Mesa Gas Prospect located in Roosevelt County New Mexico.  The Company had held 1,960 acres in a prospective oilfield identified as N.E. Glasgow Prospect located in Montana where plans were to incorporate this prospect into the Company’s developments in Valley County Montana.  The acreage was allowed to lapse back to the State of Montana.  The Company now is currently working with the State of Montana to reacquire the acreage.  We had taken on the evaluation of a prospect in Oklahoma identified as the Skedee Prospect. As we progressed into the due diligence of these prospects and the potential production, management determined that the development of the prospect was not worth the required investment capital. Even with the potential reduction in investment dollars, the prospects had an unacceptable pay back time for the initial investment. Management felt the shareholders would be better served by seeking other prospects.

Other than our President, we have no other employees at this time and we will seek to retain independent contractors to assist in operating and managing the prospects as well as to carry out the principal and necessary functions incidental to the oil and gas business. With the intended acquisition of oil and natural gas, we intend to establish ourselves as an industry partner within the industry. With our established revenue base with cash flow, we will seek opportunities more aggressive in nature.
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Results of Operations for Period Ended March 31, 2008

As of March 31, 2008, the Company has earned revenues of $252,000 and has incurred a net loss to date of $1,751,834. Operations have been primarily seeking potential opportunities in the oil and gas industry through the location of commercially economical prospects, and raising capital and developing revenue generating opportunities and strategic relationships.

During the three month period ended March 31, 2008, we incurred operating expenses in the amount of $1,248,171. These operating expenses included due diligence expenses, consulting fees, professional fees, land leases, oil and gas leases, and office and general expenses.

Liquidity and Capital Resources
 
To date, we have financed our operations from funds put into the Company by our CEO. We intend to raise future capital from the sale of a percentage of our prospects to fund development and production or through the sale of our common stock to finance the prospects in their entirety.
 
Recent Accounting Pronouncements
 
In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. In February 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”.  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement is not expected to have a material effect on our financial statements.
 
In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for period ending after November 15, 2006. We are currently evaluating the impact of adopting SAB No. 108 but does not expect that it will have a material effect on its financial statements
 
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132®”. This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization.  This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement did not have a material effect on our reported financial position or results of operations.
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In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on our future reported financial position or results of operations.
 
In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109”. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on our future reported financial position or results of operations.
 
In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for period ending after November 15, 2006. We are currently evaluating the impact of adopting SAB No. 108 but do not expect that it will have a material effect on our financial statements.
 
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132®”. This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization.  This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement did not have a material effect on our reported financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on our future reported.

Item 4.  Controls and Procedures
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15 as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures were effective such that the material information required to be filed in our SEC reports is recorded, processed, summarized and reported within the required time periods specified in the SEC rules and forms. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Potential investors should be aware that the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events.  There can be no assurance that any system of controls and procedures will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
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PART II - OTHER INFORMATION
 
Item 1.  Legal Proceedings
 
During the second quarter of 2007, the former consultant solicited the courts for the shortfall between the original settlement amount and the amount realized.  On June 6, 2007, the Corporation delivered final settlement and the issue is completely resolved.
 
On July 24, 2006, all litigation was settled between the Company and a former consultant. The Company settled the case for an estimated value of $280,000 to be realized over a 10-month period ending in May of 2007.
 
In May 2006, we settled a past debt with Treetop Investments for 5,000,000 shares of our restricted common stock in a transaction combining settlement of debt and purchase of stock.
 
Neither the Company nor any of our officers or directors is involved in any other litigation either as plaintiffs or defendants and we have no knowledge of any threatened or pending litigation against us or any of our officers or directors.
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
 
During the three months ended March 31, 2008, we issued 13,150,000 shares of common stock.
 
Item 3.  Defaults Upon Senior Securities
 
During the three months ended March 31, 2008, we were not in default on any of our indebtedness.
 
Item 4.  Submission of Matters to a Vote of Security Holders
 
There were no matters submitted to a vote of our shareholders.
 
Item 5.  Other Information.
 
None
 
Item 6.  Exhibits
 
Exhibit No.
Description of Exhibit
   
31
32

 
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SIGNATURE
 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
 
  Victory Energy Corporation  
       
Date:  May 20, 2008
By:
/s/ Jon Fullenkamp  
    Jon Fullenkamp  
   
Principal Executive Officer
Principal Financial Officer
Principal Accounting Officer
and Director
  
       
 
     
       
Date:  May 20, 2008
By:
/s/ Rick May  
    Rick May  
   
Director
  
       
 
     
       
Date:  May 20, 2008
By:
/s/  Perry Mansell  
     Perry Mansell  
   
Director
  
       

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