Item 1.

   CONSOLIDATED FINANCIAL STATEMENTS    3
  Unaudited Consolidated Balance Sheets as of September 30, 2007    3
  Unaudited Statements of Consolidated Operations and Comprehensive Loss for the three and nine months ended September 30, 2007 and 2006 and the period from re-entering the Development Stage (October 6, 2006) through to September 30, 2007    4-5
  Unaudited Statements of Consolidated Stockholders’ Deficit for the nine months ended September 30, 2007 and the period from re-entering the Development Stage (October 6, 2006) through to September 30, 2007    6
  Unaudited Statements of Consolidated Cash Flows for the nine months ended September 30, 2007 and 2006 and the period from re-entering the Development Stage (October 6, 2006) through to September 30, 2007    7
  Notes to the Consolidated Unaudited Financial Statements    8

ITEM 2.

   MANAGEMENT’S DISCUSSION AND ANALYSIS    23

ITEM 3.

   CONTROLS AND PROCEDURES    27
  PART II    29

ITEM 2.

   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS    29

ITEM 6.

   EXHIBITS    29

SIGNATURES

      30

INDEX TO EXHIBITS

      31

 

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Table of Contents

PART I – FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Consolidated Balance Sheets

September 30, 2007, and December 31, 2006

Unaudited

 

     September 30,
2007		    December 31,
2006
(Audited)		  
ASSETS  
Current      

Cash

    $ 3,239,526    $ 1,703  

Loan receivable

      -      1,000,000  

Prepaid expenses and other current assets

      268,193      1,080,890  
        

Total Current Assets

      3,507,719      2,082,593  

Option to Acquire Oil and Gas Properties (note 4)

      1,392,500      -  

Equipment (note 5)

      17,811      -  

Debt Issuance costs (note 6)

      478,099      -  
        

Total Assets

    $ 5,396,129    $ 2,082,593  
        
LIABILITIES  
Current      

Accounts payable

    $ 231,817    $ 375,327  

Accrued liabilities

      2,078,229      665,000  

Advance from related party (note 7)

      2,785      2,785  

Loan payable

      -      1,000,000  
        

Total Current Liabilities

      2,312,831      2,043,112  

Convertible Debentures (note 8)

      7,500,000      -  
        

Total Liabilities

      9,812,831      2,043,112  
        
STOCKHOLDERS’ (DEFICIT) EQUITY  

Capital Stock (note 9)

      

Authorized

      

    5,000,000 preferred stock, par value $0.001 per share

      

225,000,000 common stock, par value $0.001 per share

      

Issued and outstanding

      

29,015,500 common stock (2006 - 28,737,500)

      29,016      28,738  

Additional Paid-in Capital

      2,192,353      1,220,065  

Accumulated Deficit and Deficit Accumulated During the

      

Development Stage

      (6,638,071)      (1,209,322)  
        

Total Stockholders’ (Deficit) Equity

      (4,416,702)      39,481  
        

Total Liabilities and Stockholders’ (Deficit) Equity

    $ 5,396,129    $ 2,082,593  
        

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

 

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Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Consolidated Operations and Comprehensive Loss

Three Months Ended September 30, 2007, and 2006

Unaudited

 

     Three Months
Ended
September 30,
2007		   Three Months
Ended
September 30,
2006		  

Oil and Gas Revenues

    $ -           $ 8,410  
        

Operating Expenses

     

Due diligence

      619,153     -          

Salary and benefits

      446,466     -          

Professional fees

      90,378     -          

Travel

      65,054     -          

Office and general

      50,444     8,302  

Advertising and promotion

      39,072     -          

Consulting

      21,860     -          

Production costs

      -             2,487  

Depreciation - Equipment

      660     782  
        

Total Operating Expenses

      1,333,087     11,571  
        

Loss from Operations

      (1,333,087)     (3,161)  
        

Other Income (Expense)

     

Interest income

      1,496     -          

Gain on sale of marketable securities

      1,697     -          

Debenture interest

      (491,658)     -          
        

Total Other Income (Expense)

      (488,465)     -          
        

Loss Before Income Taxes

      (1,821,552)     (3,161)  

Provision for income taxes

      -             -          
        

Net Loss and Comprehensive Loss

    $ (1,821,552)   $ (3,161)  
        

Basic and Diluted Loss Per Weighted

     

Average Number of Common Shares

     

Outstanding During the Period

    $ (0.06)   $ -          
        

Basic and Diluted Weighted Average Number
of Common Shares Outstanding During the Period

      29,012,833     31,562,500  
        

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

 

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Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Consolidated Operations and Comprehensive Loss

Nine Months Ended September 30, 2007, and 2006, and the Period from Re-entering

the Development Stage (October 6, 2006) through to September 30, 2007

Unaudited

 

     Nine Months
Ended
September 30,
2007		    Nine Months
Ended
September 30,
2006		    

(Note 1)

Period from

Re-entering the
Development
Stage through to
September 30,
2007

  

Oil and Gas Revenues

    $ -            $ 33,431     $ (508)  
        

Operating Expenses

        

Due diligence

      1,086,484      -               1,086,484  

Salary and benefits

      1,185,395      -               1,185,395  

Professional fees

      691,436      -               691,436  

Travel

      108,999      -               108,999  

Office and general

      145,278      73,109       638,644  

Advertising and promotion

      333,151      -               333,151  

Consulting

      1,052,876      -               1,052,876  

Production costs

      -              13,849       -          

Depreciation - Equipment

      660      2,611       660  
        

Total Operating Expenses

      4,604,279      89,569       5,097,645  
        

Loss from Operations

      (4,604,279)      (56,138)       (5,098,153)  
        

Other Income (Expense)

        

Debt forgiven

      -              -               30,000  

Costs associated with the rescission of the stock purchase agreement

      -              -               (650,000)  

Interest income

      6,982      -               6,982  

Gain on sale of marketable securities

      9,017      -               9,017  

Debenture interest

      (839,869)      -               (839,869)  
        

Total Other Income (Expense)

      (823,870)      -               (1,443,870)  
        

Loss Before Income Taxes

      (5,428,149)      (56,138)       (6,542,023)  

Provision for income taxes (note 10)

      600      -               600  
        

Net Loss and Comprehensive Loss

    $ (5,428,749)    $ (56,138)     $ (6,542,623)  
        

Basic and Diluted Loss Per Weighted

        

Average Number of Common Shares

        

Outstanding During the Period

    $ (0.19)    $ -            
          

Basic and Diluted Weighted Average

        

Number of Common Shares Outstanding

        

During the Period

      28,945,944      31,562,500    
          

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

 

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Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Consolidated Stockholders’ Deficit

Nine Months Ended September 30, 2007, and the Period from Re-entering the Development

Stage (October 6, 2006) through to September 30, 2007

Unaudited

 

                    Accumulated     
                    Deficit     
                    and Deficit     
                    Accumulated     
     Number of         Additional    During the     
     Common    Capital    Paid-in    Development    Stockholders’
     Shares    Stock    Capital    Stage    (Deficit) Equity
    

Balance, October 6, 2006, date of re-entering the development stage

    31,562,500    $ 31,563    $ 77,363    $ (96,465)    $ 12,461

Common shares cancelled (note 9)

    (3,250,000)      (3,250)      (41,123)      -      (44,373)

Common shares issued for services (note 9)

    425,000      425      1,183,825      -      1,184,250

Net loss for the period

    -      -      -      (1,112,857)      (1,112,857)
    

Balance, December 31, 2006

    28,737,500      28,738      1,220,065      (1,209,322)      39,481

Common shares issued for services (note 9)

    250,000      250      869,750      -      870,000

Common shares issued for services (note 9)

    20,000      20      75,980      -      76,000

Common shares issued for services (note 9)

    8,000      8      2,552      -      2,560

Options vested for employee services (note 9)

    -      -      24,006      -      24,006

Net loss for the period

    -      -      -      (5,428,749)      (5,428,749)
    

Balance, September 30, 2007

    29,015,500    $ 29,016    $ 2,192,353    $ (6,638,071)    $ (4,416,702)
    

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

 

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Table of Contents

STAR ENERGY CORPORATION

(A DEVELOPMENT STAGE COMPANY)

Statements of Consolidated Cash Flows

Nine Months Ended September 30, 2007, and 2006, and the Period from Re-entering

the Development Stage through to September 30, 2007

Unaudited

 

     2007    2006   

(Note 1)

Period from

Re-entering the
Development
Stage through to
September 30,
2007

  

Cash Flows from Operating Activities

         

Net loss

    $ (5,428,749)    $ (56,138)    $ (6,542,623)  

Adjustments to reconcile non-cash items:

         

Depreciation - equipment

      660      2,641      630  

Amortization - deferred financing costs

      130,801      -      130,801  

Amortization - deferred compensation

      887,776      -      887,776  

Issuance of common stock for services

      948,560      -      2,132,810  

Wages and salaries paid by options

      24,006      -      24,006  

Changes in working capital:

         

Accounts receivable

      -      323      7,968  

Prepaid expenses and other current assets

      (75,079)      1,900      (1,155,969)  

Accounts payable

      (143,510)      4,782      225,471  

Accrued liabilities

 &nb