10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 2)

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July 31, 2007

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: 000-51321

TRIANGLE PETROLEUM CORPORATION

(Name of Small Business Issuer in Its Charter)

Nevada	98-0430762
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Suite 1250, 521 - 3 Avenue SW

Calgary, Alberta

Canada T2P 3T3

(Address of Principal Executive Offices)

(403) 262-4471

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o accelerated filer o Non-accelerated filer x

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

As of September 7, 2007, there were 37,113,602 shares of registrant’s common stock outstanding.

EXPLANATORY NOTE

As set forth in the table below, between December 2005 and June 2006, Triangle Petroleum Corporation (the “Company”) completed private placements with certain investors in which the Company issued convertible securities.

Transaction Date	Secured Convertible Debentures Sold		Annual Interest Rate			Conversion Price	Warrants (one share per warrant)
December 8, 2005	$	5,000,000		5	%	$5.00 or 90% of the average of the lowest three intraday trading prices during the ten trading days immediately preceding conversion		None
January 17, 2006	$	5,000,000		5	%	$5.00 or 90% of the average of the lowest three intraday trading prices during the ten trading days immediately preceding conversion		None
June 1, 2006	$	5,000,000		5	%	$5.00 or 90% of the average of the lowest three intraday trading prices during the ten trading days immediately preceding conversion		None

On April 11, 2008, the Company’s independent registered public accounting firm, KPMG LLP, Chartered Accountants (“KPMG”) notified the Company’s Chief Financial Officer (“CFO”) that it believed there were errors in the Company’s financial statements resulting from the accounting for the conversion of these convertible debentures. Upon conversion of the above convertible debentures, the Company reduced the amount recorded as a derivative liability pertaining to the embedded conversion feature with the offsetting amount recorded as a decrease to the loss for the period. KPMG advised the CFO that it believed that upon conversion of the convertible debenture two entries were required. First, the derivative liability associated with the embedded conversion feature should be adjusted to its fair value immediately prior to the conversion with the change in fair value included in the statement of operations. Second, the re-valued derivative liability should be transferred to additional paid in capital.

On April 11, 2008, the Company’s CFO further discussed the matter with Manning Elliott LLP, Chartered Accountants (“Manning Elliott”), the Company’s previous auditor.

From April 11, 2008 to April 21,2008, management of the Company, conducted an analysis of the embedded conversion feature associated with these convertible debentures, with a particular focus on the accounting treatment of the derivative when the convertible debentures are converted. Management considered the guidance contained in Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities and the Emerging Issues Task Force Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock.

On April 21, 2008, both the CFO and KPMG agreed that these facts caused them to believe that the Company’s accounting for these convertible debentures at the dates of conversion was incorrect and the Company determined that the effect of such misstatements was material to the quarterly reports on Form 10-Q for the quarters ended April 30, 2007, July 31, 2007 and October 31, 2007 (the “Reports”). As a result, the Company determined that the Reports should no longer be relied upon and that they will need to be restated. The restatements are required to properly reflect the Company’s financial results for certain non-cash and non-operational related credits to earnings associated with the embedded derivative liabilities. The Form 10-Q’s will be restated as follows:

2

April 30, 2007

	April 30, 2007 As Reported $			Adjustment $			April 30, 2007 As Restated $
Consolidated Balance Sheet
Stockholders’ Deficit
Additional Paid-In Capital		35,910,819			563,064			36,473,883
Deficit Accumulated During the Exploration Stage		(21,055,525	)		(563,064	)		(21,618,589	)

	Three Months Ended April 30, 2007 As Reported $			Adjustment $			Three Months Ended April 30, 2007 As Restated $
Consolidated Statement of Operations
Unrealized gain on fair value of derivatives		2,030,604			(563,064	)		1,467,540
Net loss for the period		(2,862,213	)		(563,064	)		(3,425,277	)
Net Loss Per Share – Basic and Diluted		(0.09	)					(0.11	)

July 31, 2007

	July 31, 2007 As Reported $			Adjustment $			July 31, 2007 As Restated $
Consolidated Balance Sheet
Stockholders’ Deficit
Additional Paid-In Capital		40,050,268			1,490,182			41,540,450
Deficit Accumulated During the Exploration Stage		(26,009,114	)		(1,490,182	)		(27,499,296	)

	Six Months Ended July 31, 2007 As Reported $			Adjustment $			Six Months Ended July 31, 2007 As Restated $
Consolidated Statement of Operations
Unrealized gain on fair value of derivatives		5,045,596			(1,490,182	)		3,555,414
Net loss for the period		(7,815,802	)		(1,490,182	)		(9,305,984	)
Net Loss Per Share – Basic and Diluted		(0.22	)					(0.26	)

3

October 31, 2007

	October  31, 2007 As Reported $			Adjustment $			October 31, 2007 As Restated $
Consolidated Balance Sheet
Stockholders’ Deficit
Additional Paid-In Capital		41,713,628			1,802,063			43,515,691
Deficit Accumulated During the Exploration Stage		(31,661,392	)		(1,802,063	)		(33,463,455	)

	Nine Months Ended October 31, 2007 As Reported $			Adjustment $			Nine Months Ended October 31, 2007 As Restated $
Consolidated Statement of Operations
Unrealized gain on fair value of derivatives		8,283,568			(1,802,063	)		6,481,505
Net loss for the period		(13,468,080	)		(1,802,063	)		(15,270,143	)
Net Loss Per Share – Basic and Diluted		(0.39	)					(0.44	)

For the convenience of the reader, this Form 10-Q/A sets forth the original Form 10-Q in its entirety. However, this Form 10-Q/A only amends our financial statements and the footnotes to our financial statements, along with the corresponding changes to our Management’s Discussion and Analysis. We also corrected typographical errors and have revised our controls and procedures disclosure as a result of these restatements. No other information in the original Form 10-Q is amended hereby. In addition, pursuant to the rules of the SEC, Item 6 of Part II to the Initial Filing has been amended to contain currently dated certifications from our Principal Executive Officer and Principal Financial Officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of our Principal Executive Officer and Principal Financial Officer are attached to this Form 10Q/A as Exhibits 31.1, 31.2, 32.1 and 32.2, respectively.

4

TRIANGLE PETROLEUM CORPORATION AND SUBSIDIARIES

INDEX
PART I.	FINANCIAL INFORMATION
	ITEM 1.	Consolidated balance sheets at July 31, 2007 (unaudited) and January 31, 2007	6
		Consolidated statements of operations for the three and six months ended July 31, 2007 and 2006 and accumulated from December 11, 2003 (date of inception) to July 31, 2007 (unaudited)	7
		Consolidated statements of cash flows for the six months ended July 31, 2007 and 2006 (unaudited)	8
		Notes to unaudited consolidated financial statements	9 – 22
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23-35
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	36
	ITEM 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION
	ITEM 1	Legal proceedings	38
	ITEM 1A	Risk factors	38
	ITEM 2	Unregistered sales of equity securities and use of proceeds	39
	ITEM 3	Defaults upon senior securities	40
	ITEM 4	Submission of matters to a vote of security holders	40
	ITEM 5	Other information	40
	ITEM 6	Exhibits	40
	SIGNATURES		41

 

5

Triangle Petroleum Corporation

(An Exploration Stage Company)

Consolidated Balance Sheets

(Expressed in U.S. dollars)

	July 31, 2007 $			January 31, 2007 $
	(Unaudited)
	(Restated Note -17)
ASSETS
Current Assets
Cash and cash equivalents		17,287,642			5,798,982
Prepaid expenses (Note 3)		280,916			2,519,009
Other receivables		845,120			344,342
Total Current Assets		18,413,678			8,662,333
Debt Issue Costs, net		685,000			916,353
Property and Equipment (Note 4)		77,153			67,091
Oil and Gas Properties (Note 5)		24,364,524			21,101,495
Total Assets		43,540,355			30,747,272
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable		1,317,348			4,199,961
Accrued interest on convertible debt		2,156,677			2,095,989
Accrued liabilities (Note 6)		2,688,264			466,112
Derivative liabilities (Note 9)		10,947,261			15,992,857
Convertible debentures, current portion, less unamortized discount of $nil and $515,626, respectively (Note 8(a))		–			2,234,374
Total Current Liabilities		17,109,550			24,989,293
Asset Retirement Obligations (Note 7)		275,014			90,913
Convertible Debentures, less unamortized discount of $8,385,734 and $12,478,642, respectively (Note 8)		12,114,266			10,771,358
Total Liabilities		29,498,830			35,851,564
Contingencies and Commitments (Notes 1 and 14)
Subsequent Event (Note 15)
Stockholders’ Equity
Common Stock (Note 11) Authorized: 100,000,000 shares, par value $0.00001 Issued: 37,113,602 shares (January 31, 2007 – 22,475,866 shares)		371			225
Additional Paid-In Capital		41,540,450			13,088,795
Deficit Accumulated During the Exploration Stage		(27,499,296	)		(18,193,312	)
Total Stockholders’ Equity		14,041,525			5,104,292
Total Liabilities and Stockholders’ Equity		43,540,355			30,747,272

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

6

Triangle Petroleum Corporation

(An Exploration Stage Company)

Consolidated Statements of Operations

(Expressed in U.S. dollars)

(Unaudited)

	Accumulated from December 11, 2003 (Date of Inception) to July 31,			Three Months Ended July 31,			Three Months Ended July 31,			Six Months Ended July 31,			Six Months Ended July 31,
	2007			2007			2006			2007			2006
	$			$			$			$			$
	(Restated Note -17)			(Restated Note -17)						(Restated Note -17)
Revenue		295,283			144,297			–			240,941			–
Operating Expenses
Oil and gas production		121,517			91,154			–			121,517			–
Depletion, depreciation and accretion		247,418			135,721			–			211,189			–
Depreciation – property and equipment		52,858			14,834			6,458			21,614			12,238
General and administrative		15,989,936			1,495,159			2,464,697			3,723,647			4,614,124
Impairment loss on oil and gas properties		6,190,615			3,891,403			44,937			3,891,403			44,937
Total Operating Expenses		22,602,344			5,628,271			2,516,092			7,969,370			4,671,299
Net Loss from Operations		(22,307,061	)		(5,483,974	)		(2,516,092	)		(7,728,429	)		(4,671,299	)
Other Income (Expense)
Accretion of discounts on convertible debentures		(17,766,183	)		(2,267,808	)		(2,250,714	)		(4,608,534	)		(4,697,631	)
Amortization of debt issue costs		(695,000	)		(113,645	)		(94,099	)		(231,353	)		(176,389	)
Interest expense		(2,784,737	)		(306,397	)		(442,258	)		(688,748	)		(838,889	)
Interest income		944,425			203,243			170,030			395,666			278,756
Unrealized gain on fair value of derivatives		32,360,525			2,087,874			5,040,582			3,555,414			9,576,949
Total Other Income (Expense)		12,059,030			(396,733	)		2,423,541			(1,577,555	)		4,142,796
Net Loss Before Discontinued Operations		(10,248,031	)		(5,880,707	)		(92,551	)		(9,305,984	)		(528,503	)
Discontinued Operations		(32,471	)		–			–			–			–
Net Loss for the Period		(10,280,502	)		(5,880,707	)		(92,551	)		(9,305,984	)		(528,503	)
Deficit adjustment related to December 8, 2005 reclassification of warrants from additional paid-in capital to a derivative liability		(17,218,794	)
Deficit accumulated during the exploration stage		(27,499,296	)
Net Loss Per Share
Basic and Diluted					(0.18	)		–			(0.26	)		(0.03	)
Weighted Average Number of Shares Outstanding					33,344,000			20,013,000			36,019,000			19,487,000

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

7

Triangle Petroleum Corporation

(An Exploration Stage Company)

Consolidated Statements of Cash Flows

(Expressed in U.S. dollars)

(Unaudited)

	Six Months Ended July 31,			Six Months Ended July 31,
	2007			2006
	$			$
	(Restated Note -17)
Operating Activities
Net loss		(9,305,984	)		(528,503	)
Adjustments to reconcile net loss to net cash used in operating activities:
Accretion of discount on convertible debentures		4,608,534			4,697,631
Amortization of debt issue costs		231,353			176,389
Depletion, depreciation and accretion		211,189			–
Depreciation – property and equipment		21,614			12,238
Impairment loss on oil and gas properties		3,891,403			–
Stock-based compensation		2,153,614			3,562,145
Unrealized gain on fair value of derivatives		(3,555,414	)		(9,576,949	)
Changes in operating assets and liabilities:
Prepaid expenses		(49,853	)		–
Other receivables		(45,633	)		207,257
Accounts payable		209,412			(281,735	)
Accrued interest on convertible debentures		60,688			–
Accrued liabilities		224,234			–
Due to related parties		–			6,912
Net Cash Used in Operating Activities		(1,344,843	)		(1,724,615	)
Investing Activities
Purchase of property and equipment		(31,676	)		(20,879	)
Oil and gas property expenditures		(8,165,422	)		(2,259,157	)
Proceeds received from sale of oil and gas properties		983,902			–
Changes in investing assets and liabilities		738,693			1,008,036
Net Cash Used in Investing Activities		(6,474,503	)		(1,272,000	)
Financing Activities
Proceeds from issuance of common stock		20,824,000			5,000,000
Common stock issuance costs		(1,515,994	)		(425,000	)
Net Cash Provided in Financing Activities		19,308,006			4,575,000
Increase in Cash and Cash Equivalents		11,488,660			1,578,385
Cash and Cash Equivalents – Beginning of Period		5,798,982			17,394,422
Cash and Cash Equivalents – End of Period		17,287,642			18,972,807
Non-cash Investing and Financing Activities:
Common stock issued for conversion of debentures		5,500,000			900,000
Supplemental Disclosures:
Interest paid		628,058			–
Income taxes paid		–			–

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

8

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

1.    Nature of Operations and Continuance of Business

The Company was incorporated in the State of Nevada on December 11, 2003 under the name Peloton Resources Inc. In December 2003, the Company purchased six mineral claims situated in the Greenwood Mining Division in the Province of British Columbia, Canada. The Company’s principal business plan was to acquire, explore and develop mineral properties and to ultimately seek earnings by exploiting the mineral claims. During the fiscal year ended January 31, 2006, the Company abandoned its mineral property as a result of poor exploration results, and changed the Company’s principal business to that of acquisition, exploration and development of oil and gas resource properties. On May 10, 2005, the Company changed its name to Triangle Petroleum Corporation.

The Company has been in the exploration stage since its formation in December 2003 and has not yet realized any significant revenues from its planned operations. It is primarily engaged in the acquisition, exploration and development of oil and gas resource properties. The Company has incurred losses of $10,280,502 since inception on December 11, 2003 to July 31, 2007. During the year ended January 31, 2006, the Company issued $26,000,000 of convertible debentures. During the year ended January 31, 2007, the Company issued an additional $5,000,000 of convertible debentures. During the six month period ended July 31, 2007, the Company issued 10,462,000 shares of common stock for net proceeds of $19,308,006. The Company’s oil and gas capital expenditures over the next twelve months are expected to be approximately $14,800,000. As at July 31, 2007, the Company had cash and cash equivalents of $17,287,642.

Although existing cash resources are currently expected to provide sufficient funds through the upcoming fiscal year, the capital expenditures required to achieve planned principal operations may be substantial. The continuation of the Company as a going concern for a period longer than the current fiscal year is dependent upon the ability of the Company to obtain necessary equity financing to continue operations and to determine the existence, discovery and successful exploitation of economically recoverable reserves in its resource properties, confirmation of the Company’s interests in the underlying properties, and the attainment of profitable operations.

2.    Summary of Significant Accounting Policies

a) Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. These consolidated financial statements include the accounts of the Company and its two wholly-owned subsidiaries, Elmworth Energy Corporation, incorporated in the Province of Alberta, Canada, and Triangle USA Petroleum Corporation, incorporated in the State of Colorado, USA. All significant intercompany balances and transactions have been eliminated. The Company’s fiscal year-end is January 31.

b) Interim Financial Statements

The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q. They do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended January 31, 2007, included in the Company’s Annual Report on Form 10-KSB filed on May 1, 2007 with the SEC.

The consolidated financial statements included herein are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position at July 31, 2007 and January 31, 2007, and the consolidated results of its operations and consolidated cash flows for the six months ended July 31, 2007 and 2006. The results of operations for the three and six months ended July 31, 2007 are not necessarily indicative of the results to be expected for future quarters or the full year.

c) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to useful life and recoverability of long-lived assets, proved and unproved oil and gas expenditures, asset retirement obligations, stock-based compensation and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

9

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

2.    Summary of Significant Accounting Policies (continued)

d)    Foreign Currency Translation

The Company's functional and reporting currency is the United States dollar and management has adopted SFAS No. 52, “Foreign Currency Translation”. Monetary assets and liabilities denominated in foreign currencies are translated into United States dollars at rates of exchange in effect at the balance sheet date. Non-monetary assets, liabilities and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

e)    Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.

f)     Property and Equipment

Property and equipment consists of computer hardware, geophysical software, furniture and equipment and leasehold improvements, and is recorded at cost. Computer hardware and geophysical software are depreciated on a straight-line basis over their estimated useful lives of three years. Furniture and equipment are depreciated on a straight-line basis over their estimated useful lives of five years. Leasehold improvements are depreciated on a straight-line basis over their estimated useful lives of five years.

g)    Long-lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

h)    Oil and Gas Properties

The Company utilizes the full-cost method of accounting for petroleum and natural gas properties. Under this method, the Company capitalizes all costs associated with acquisition, exploration and development of oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool on a country by country basis. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the proved reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. The costs of unproved properties are not amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such determination is made the Company assesses quarterly whether impairment has occurred, and includes in the amortization base drilling exploratory dry holes associated with unproved properties.

The Company applies a ceiling test to the capitalized cost in the full cost pool. The ceiling test limits such cost to the estimated present value, using a ten percent discount rate, of the future net revenue from proved reserves, based on current economic and operating conditions. Specifically, the Company computes the ceiling test so that capitalized cost, less accumulated depletion and related deferred income tax, do not exceed an amount (the ceiling) equal to the sum of: (A) The present value of estimated future net revenue computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current cost) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus (B) the cost of property not being amortized; plus (C) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less (D) income tax effects related to differences between the book and tax basis of the property.

10

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

2.    Summary of Significant Accounting Policies (continued)

For unproven properties, the Company excludes from capitalized costs subject to depletion, all costs directly associated with the acquisition and evaluation of the unproved property until it is determined whether or not proved reserves can be assigned to the property. Until such a determination is made, the Company assesses the property at least annually to ascertain whether impairment has occurred. In assessing impairment the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data. The Company adds the amount of impairment assessed to the cost to be amortized subject to the ceiling test.

i) Asset Retirement Obligations

The Company recognizes a liability for future retirement obligations associated with the Company’s oil and gas properties. The estimated fair value of the asset retirement obligation is based on the current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate. This liability is capitalized as part of the cost of the related asset and amortized over its useful life. The liability accretes until the Company settles the obligation.

j)     Debt Issue Costs

In accordance with the Accounting Principles Board Opinion 21 “Interest on Receivables and Payables”, the Company recognizes debt issue costs on the balance sheet as deferred charges, and amortizes the balance over the term of the related debt. The Company follows the guidance in the EITF 95-13 “Classification of Debt Issue Costs in the Statement of Cash Flows” and classifies cash payments for debt issue costs as a financing activity.

k)    Revenue Recognition

The Company recognizes oil and gas revenue when production is sold at a fixed or determinable price, persuasive evidence of an arrangement exists, delivery has occurred and title has transferred, and collectibility is reasonably assured.

l)     Income Taxes

The Company has adopted SFAS No. 109 “Accounting for Income Taxes” as of its inception. Pursuant to SFAS No. 109 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

On February 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes a measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance regarding uncertain tax positions relating to derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. At July 31, 2007, the Company had no material uncertain tax positions.

m)   Basic and Diluted Net Income (Loss) Per Share

The Company computes net income (loss) per share in accordance with SFAS No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, and warrants, using the treasury stock method, and convertible securities, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. Shares underlying these securities totaled approximately 16,376,000 as of July 31, 2007.

n)    Financial Instruments

The fair values of financial instruments, which include cash and cash equivalents, other receivables, accounts payable, accrued interest on convertible debt, accrued liabilities, and convertible debentures approximate their carrying values due to the relatively short maturity of these instruments. The fair value of convertible debentures are estimated to approximate their carrying values based on borrowing rates currently available to the Company for debt with similar terms.

o)    Derivative Liabilities

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”), as amended, and EITF Issue No. 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”) the Company records derivatives at their fair values on the date that they meet the requirements of a derivative instrument and at each subsequent balance sheet date. Any change in fair value will be recorded as non-operating, non-cash income or expense at each reporting date.

11

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

2.    Summary of Significant Accounting Policies (continued)

p)    Concentration of Risk

The Company does not believe that it is exposed to interest rate risk. The Company maintains its cash accounts in one commercial bank located in Calgary, Alberta, Canada. The Company's cash accounts consist of uninsured and insured business checking accounts and deposits maintained principally in U.S. dollars. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash in excess of federally insured amounts. As at July 31, 2007, the Company has not engaged in any transactions that would be considered derivative instruments on hedging activities. To date, the Company has not incurred a loss relating to this concentration of credit risk.

q)    Comprehensive Loss

SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at July 31, 2007 and 2006, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

r)    Stock-Based Compensation

The Company records stock based compensation in accordance with SFAS 123(R), “Share-Based Payments,” which requires the measurement and recognition of compensation expense, based on estimated fair values, for all share-based awards, made to employees and directors, including stock options. In March 2005, the Securities and Exchange Commission issued SAB 107 relating to SFAS 123(R). The Company applied the provisions of SAB 107 in its adoption of SFAS 123(R).

All transactions in which goods or services are received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value or the equity instrument issued, whichever is the more reliable measure.

SFAS 123(R) requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model. The Company uses the Black-Scholes option-pricing model as its method of determining fair value. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.

No tax benefits were attributed to stock-based compensation expense because a full valuation allowance was maintained for all net deferred tax assets.

s)    Recently Issued 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”. The adoption of this statement is not expected to have a material effect on the Company's financial statements.

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 the Company's future reported financial position or results of operations.

t)    Recently Adopted Accounting Pronouncements

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 periods ending after November 15, 2006. The adoption of SAB No. 108 did not have a material effect on the Company’s financial statements.

12

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

2)    Summary of Significant Accounting Policies (continued)

t)    Recently Adopted Accounting Pronouncements (continued)

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(R)”. 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 the Company's financial statements.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement did not have a material effect on the Company's financial statements.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140", to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of Long-Lived Assets", to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. The adoption of this statement did not have a material effect on the Company's future reported financial position or results of operations.

u)    Reclassifications

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

3.    Prepaid Expenses

The components of prepaid expenses are as follows:

	July 31, 2007 $		January 31, 2007 $
Office space deposit		23,821		–
Prepaid insurance		89,217		151,086
Prepaid joint-venture exploration costs		79,977		2,367,923
Professional and consulting services		46,005		–
Software subscriptions		41,896		–
Total prepaid expenses		280,916		2,519,009

13

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

4.    Property and Equipment

	Cost $		Accumulated Depreciation $		July 31, 2007 Net Carrying Value $		January 31, 2007 Net Carrying Value $
Computer hardware		66,229		26,940		39,289		31,906
Furniture and equipment		47,438		12,775		34,663		25,164
Geophysical software		8,000		5,218		2,782		5,086
Leasehold improvements		7,927		7,508		419		4,935
		129,594		52,441		77,153		67,091

5.    Oil and Gas Properties

The following table summarizes information regarding the Company's oil and gas acquisition, exploration and development activities:

	July 31,			January 31,
	2007 $			2007 $
Proved Properties
Exploration costs		8,882,540			2,965,420
Less:
Accumulated depletion		(244,625	)		(36,229	)
Impairment costs		(6,190,615	)		(2,299,212	)
		2,447,300			629,979
Unproven Properties
Acquisition costs		15,111,414			14,405,798
Exploration costs		6,805,810			6,065,718
		21,917,224			20,471,516
Net Carrying Value		24,364,524			21,101,495

All of the Company’s oil and gas properties are located in the United States and Canada. The Company is currently participating in oil and gas exploration activities in Arkansas, Montana, Wyoming and Texas, USA, and Nova Scotia, New Brunswick and Alberta, Canada.

(a)   The Company, through a series of joint venture agreements with different parties, has $5,313,346 (January 31, 2007 – $6,808,802) of unproven oil and gas expenditures in Alberta and Nova Scotia, Canada. In respect to these unproven oil and gas expenditures, the Company has expended $398,745 (January 31, 2007 – $443,759) to acquire land, $2,059,151 (January 31, 2007 – $2,031,168) for geological and geophysical expenditures, and $2,855,450 (2007 – $4,333,875) for drilling related costs.

(b)   On July 18, 2007, the Company sold its 27% interest in 12,100 gross acres in northeast Hill County of Texas for gross proceeds of $983,902. The Company had incurred land and geological and geophysical costs of $1,929,305 related to this prospect which resulted in a loss of $945,403 being recorded on the Company books.

(c)   The Company’s proved property costs exceeded the ceiling test limitation as at July 31, 2007. As a result, the Company recorded a $2,946,000 non-cash impairment loss.

(d)   The Company entered into a joint venture agreement whereby the Company received $500,000 in exchange for a 17.5% working interest in a producing well in the Wapiti area of northern Alberta, Canada. This receipt was offset directly against the Company’s share of drilling the subject well.

14

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

5.    Oil and Gas Properties (continued)

The Company's unproven acquisition and exploration costs were distributed in the following geographic areas:

	July 31, 2007 $		January 31, 2007 $
Alberta		4,577,474		6,154,643
Arkansas		13,037,119		7,569,101
Nova Scotia		735,872		654,159
Rocky Mountains (Colorado, Montana, Wyoming)		2,267,407		2,187,391
Texas		1,299,352		3,906,222
		21,917,224		20,471,516

6.    Accrued Liabilities

The components of accrued liabilities are as follows:

	July 31, 2007 $		January 31, 2007 $
Oil and gas expenditures		2,688,264		466,112

7.    Asset Retirement Obligations

	July 31, 2007 $		January 31, 2007 $
Beginning asset retirement obligations		90,913		33,000
Additions related to new properties		–		–
Liabilities incurred		153,264		56,446
Deletions related to property disposals		–		–
Accretion		30,837		1,467
Total asset retirement obligations		275,014		90,913

The Company is required to recognize an estimated liability for future costs associated with the abandonment of its oil and gas properties including without limitation the costs of reclamation of drilling sites, storage and transmission facilities and access roads. The Company bases its estimate of the liability on management’s industry experience and on its current understanding of federal and state regulatory requirements. The present value calculations requires an estimate of the economic lives of the Company’s properties, assumptions of future inflation rates to apply to external estimates and the determination of the credit-adjusted risk-free rate to use. The estimated asset retirement obligations are reflected in depreciation, depletion and accretion calculations over the remaining life of the oil and gas properties.

8.    Convertible Debentures

(a)       On June 14, 2005, the Company entered into a securities purchase agreement with a single accredited investor (the “Purchase Agreement”) pursuant to which the investor purchased an 8% convertible debenture with a principal amount of $1,000,000, and warrants to purchase 1,000,000 shares of the Company’s common stock, exercisable at a price of $1.00 per share until June 15, 2008. Pursuant to the Purchase Agreement, the investor had the right to purchase up to $5,000,000 of additional convertible debentures and warrants to purchase 5,000,000 shares of common stock which was exercised on July 14, 2005, in exchange for an 8% convertible debenture with a principal amount of $5,000,000 and warrants to purchase 5,000,000 shares of the Company’s common stock, exercisable at a price of $1.00 per share until June 15, 2008.

The total convertible debentures of $6,000,000 were due and payable on June 10, 2007. The principal and accrued interest on these convertible debentures may be converted into shares of the Company’s common stock at a rate of $1.00 per share, at the option of the holder. The investor has contractually agreed to restrict the ability to convert the convertible debentures to an amount which would not exceed the difference between the number of shares of common stock beneficially owned by the holder or issuable upon exercise of the warrant held by such holder and 4.99% of the outstanding shares of common stock of the Company. The securities were issued in a private placement transaction pursuant to Regulation D under the Securities Act of 1933, as amended. The Company filed an SB-2 Registration Statement registering the resale of shares of the Company's common stock issuable upon conversion of these convertible debentures and exercise of the warrants.

15

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

8.Convertible Debentures (continued)

In accordance with EITF 98-5 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”, the Company recognized the value of the embedded beneficial conversion feature of $3,141,817 as additional paid-in capital and an equivalent discount which will be expensed over the term of the convertible debentures. In addition, in accordance with EITF 00-27 “Application of Issue No. 98-5 to Certain Convertible Instruments”, the Company has allocated the proceeds of issuance between the convertible debt and the detachable warrants based on their relative fair values. Accordingly, the Company recognized the fair value of the detachable warrants of $2,858,183 as additional paid-in capital and an equivalent discount against the convertible debentures. During the year ended January 31, 2006, a principal amount of $900,000 was converted into 900,000 shares of common stock. The unamortized discount on the converted debenture of $731,250 was charged to accretion expense. During the year ended January 31, 2007, a principal amount of $2,350,000 was converted into 2,350,000 shares of common stock. The unamortized discount on the converted debentures of $1,171,875 was charged to accretion expense. During the six month period ended July 31, 2007, a principal amount of $2,750,000 was converted into 2,750,000 shares of common stock. The unamortized discount on the converted debenture of $284,375 was charged to accretion expense. As at July 31, 2007, all of these $6,000,000 convertible debentures were converted into common stock of the company, as such the carrying value of the convertible debentures was $nil (January 31, 2007 - $2,234,374). On June 21, 2007, accrued interest of $628,058 was paid.

On December 8, 2005, upon the issuance of the convertible debentures referred to in Note 8(b), the detachable warrants no longer met the requirements for equity classification. As such, the Company reversed the previous fair value recorded on the date of issuance in additional paid-in capital of $2,858,183 and recorded the fair value of the warrants of $31,384,800 as a derivative liability pursuant to SFAS 133 and EITF 00-19. The change in the fair value of the warrants from the date of issuance to December 8, 2005 of $28,526,617 was accounted for as an adjustment to stockholders’ equity. During the six months ended July 31, 2007, the Company recorded a gain on the change in fair value of the derivative liability of $3,860,400 (July 31, 2006 - $10,148,400) and as at July 31, 2007, the fair value of the derivative liability was $6,591,000 (January 31, 2007 - $10,451,400).

(b)      On December 8, 2005, the Company entered into a Securities Purchase Agreement with a single investor pursuant to which the investor purchased 5% secured convertible debentures in the aggregate principal amount of $15,000,000. The gross proceeds of this financing will be received as follows:

(i) $5,000,000 was received on closing;

(ii) $5,000,000 was received on the second business day prior to the filing date of the SB-2 Registration Statement; and

(iii) $5,000,000 was received on the fifth business day following the effective date of the SB-2 Registration Statement

The Company agreed to pay an 8% fee on the receipt of each installment, and a $15,000 structuring fee. The convertible debentures mature on the third anniversary of the date of issue (the “Maturity Date”) and bear interest at 5% per annum. The Company is not required to make any payments until the Maturity Date. The investor may convert, at any time, any amount outstanding under the convertible debentures into shares of common stock of the Company at a conversion price per share equal to the lesser of $5.00 or 90% of the average of the three lowest daily volume weighted average prices of the common stock, as quoted by Bloomberg, LP, of the ten trading days immediately preceding the date of conversion.

The Company, at its option has the right, with three business days advance written notice, to redeem a portion or all amounts outstanding under these convertible debentures prior to the Maturity Date provided that the closing bid price of the common stock is less than $5.00 at the time of the redemption. In the event of redemption, the Company is obligated to pay an amount equal to the principal amount being redeemed plus a 20% redemption premium, and accrued interest.

In connection with the Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) providing for the filing of an SB-2 Registration Statement (the “Registration Statement”) with the U.S. Securities and Exchange Commission (“SEC”) registering the common stock issuable upon conversion of the convertible debentures. The Company was obligated to use its best efforts to cause the Registration Statement to be declared effective no later than June 30, 2006 and to insure that the Registration Statement remains in effect until all of the shares of common stock issuable upon conversion of the convertible debentures have been sold. In the event of a default of its obligations under the Registration Rights Agreement, including its agreement to file the Registration Statement with the SEC no later than January 22, 2006, or if the Registration Statement was not declared effective by June 30, 2006, it is required pay to the investor, as liquidated damages, for each month that the Registration Statement has not been filed or declared effective, as the case may be, either a cash amount or shares of common stock equal to 2% of the liquidated value of the convertible debentures. The Company filed an SB-2 Registration Statement on January 18, 2006 that was declared effective May 26, 2006.

The investor has agreed to restrict its ability to convert the convertible debentures and receive shares of the Company’s common stock such that the number of shares of common stock held by the investor in the aggregate and its affiliates after such conversion or exercise does not exceed 4.9% of the then issued and outstanding shares of the Company’s common stock.

16

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

8.    Convertible Debentures (continued)

In connection with the Securities Purchase Agreement, the Company and each of its subsidiaries executed security agreements (the “Security Agreements”) in favor of the investor granting them a first priority security interest in all of the Company’s goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. The Security Agreements state that if an event of default occurs under the convertible debentures or Security Agreements, the investor has the right to take possession of the collateral, to operate the Company’s business using the collateral, and have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise to satisfy the Company’s obligations under these agreements.

The Company classified the conversion features as derivative liabilities pursuant to SFAS 133 and EITF 00-19. As such, the Company recorded derivative liabilities (Refer to Notes 9 and 17) related to the convertible debentures equal to the fair values of the conversion feature of $10,151,918 and an equivalent discount on the debentures of $10,151,918. During the year ended January 31, 2007, a principal amount of $1,750,000 was converted into 943,336 shares of common stock. The unamortized discount on the converted debentures of $847,164 was charged to accretion expense. During the six month period ended July 31, 2007, a principal amount of $2,750,000 was converted into 1,425,736 shares of common stock. The unamortized discount on the converted debentures of $1,090,765 was charged to accretion expense. The carrying value of the convertible debentures will be accreted to the face value of $10,500,000 to maturity. To July 31, 2007, the Company accrued interest of $991,610 (January 31, 2007 – $693,699) has been included in accrued liabilities. To July 31, 2007, accumulated accretion of $6,496,664 (January 31, 2007 - $4,056,724) has increased the carrying value of the convertible debentures to $6,844,747 (January 31, 2007 - $7,154,808) (net of conversions of $4,500,000). During the six months ended July 31, 2007, the Company recorded a loss on the change in fair value of the derivative liability of $304,986 (July 31, 2006 – a gain of $2,086,201) and as at July 31, 2006, the fair value of the derivative liability was $4,356,262 (January 31, 2006 - $5,541,457).

(c)      On December 28, 2005, the Company entered into a Securities Purchase Agreement with two accredited investors providing for the sale by the Company to the investors of 7.5% convertible debentures in the aggregate principal amount of $10,000,000, of which $5,000,000 was advanced immediately, and 1,250,000 warrants (the “Warrants”) to purchase 1,250,000 shares of the Company’s common stock, exercisable at a price of $5.00 per share until December 28,2006, of which 625,000 were issued. The second installment of $5,000,000 and 625,000 warrants was advanced on January 18, 2006, upon the filing of an SB-2 Registration Statement by the Company with the SEC. The warrants expired in full without exercise during the fiscal year ended January 31, 2007.

The convertible debentures mature on the third anniversary of the date of issuance (the “Maturity Date”) and bear interest at the annual rate of 7.5%. The Company is not required to make any payments until the Maturity Date. The investors may convert, at any time, any amount outstanding under the convertible debentures into shares of common stock of the Company at a conversion price per share of $4.00.

In connection with the Securities Purchase Agreement, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) providing for the filing of a registration statement (the “Registration Statement”) with the SEC registering the common stock issuable upon conversion of the convertible debentures and Warrants. The Company was obligated to use its best efforts to cause the Registration Statement to be declared effective no later than May 28, 2006 and to insure that the registration statement remains in effect until all of the shares of common stock issuable upon conversion of the convertible debentures have been sold. In the event of a default of its obligations under the Registration Rights Agreement, including its agreement to file the Registration Statement with the SEC no later than February 26, 2006, or if the Registration Statement was not declared effective by June 30, 2006, the Company is required pay to the investors, as liquidated damages, for each month that the Registration Statement has not been filed or declared effective, as the case may be, a cash amount equal to 1% of the liquidated value of the convertible debentures. The Company filed an SB-2 Registration Statement on January 18, 2006 that was declared effective May 25, 2006.

Each investor has agreed to restrict its ability to convert the convertible debentures or exercise the Warrants and receive shares of the Company’s common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of the Company’s common stock.

In accordance with SFAS 133 and EITF 00-19, the Company recognized the fair value of the warrants of $3,261,250 as a derivative liability (Refer to Notes 9 and 17) and an equivalent discount on the debentures. Also, the Company recorded the residual value of the embedded beneficial conversion feature of $6,738,750 as additional paid-in capital and an equivalent discount on the debentures. The carrying value of the convertible debentures will be accreted to the face value of $10,000,000 to maturity. To July 31, 2007, accrued interest of $1,165,068 (January 31, 2007 – $793,150), and $5,269,519 (January 31, 2007 – $3,616,550) has been accreted increasing the carrying value of the convertible debentures to $5,269,519 (January 31, 2007 - $3,616,550). During the six months ended July 31, 2007, the Company recorded a gain on the change in fair value of the derivative liability of $nil (July 31, 2006 - $1,514,750) and as at July 31, 2007, the fair value of the derivative liability was $nil (January 31, 2007 – $nil).

17

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

9.    Derivative Liabilities

The Company evaluated the application of SFAS 133 and EITF 00-19 for the convertible debentures and related detachable warrants issued to investors as outlined in Note 7. SFAS 133 and EITF 00-19 require the Company to bifurcate and separately account for some conversion features of convertible debentures as embedded derivatives. They also require that when detachable warrants meet certain requirements that they need to be recorded as derivative liabilities. The Company concluded that the conversion features of the December 8, 2005 debenture issuance and all warrants outstanding on that date and subsequently issued were required to be accounted for as derivatives. Pursuant to SFAS 133, the Company bifurcated the conversion feature from the December 8, 2005 debentures because the economic characteristics and risks of the conversion features were determined to not be clearly and closely related to the economic characteristics and risks of the debentures, and the number of shares issuable pursuant to the conversion features was variable. As such, the Company determined that the conversion features related to the December 8, 2005 debentures and all outstanding warrants met the attributes of a liability and therefore recorded their fair values as current liabilities. The Company is required to record their fair value on each balance sheet date at fair value with changes in the values of these derivatives reflected in the statement of operations. Also, these derivative liabilities were not previously classified as such in the Company's historical financial statements. In order to reflect these changes, the Company has restated its financial statements for the period ended July 31, 2007 as described in Note 17.

The Company uses the Black-Scholes valuation model to calculate the fair value of derivative liabilities. The following table shows the assumptions used in the calculation of the call value for the conversion features as at July 31, 2007.

	Volatility			Risk Free Rate			Dividend Yield		Term in Years
Weighted Average Assumptions at:
July 31, 2007		70	%		4.85	%		–		1.64

The following table shows the assumptions used in the Black-Scholes calculation of the detachable warrants as at July 31, 2007.

	Volatility			Risk Free Rate			Dividend Yield		Term in Years
Weighted Average Assumptions at:
July 31, 2007		70	%		4.56	%		–		0.88

During the six month period ended July 31, 2007, the Company recorded a gain on derivatives of $5,045,596 equal to the difference in the fair value of the derivatives at January 31, 2007 and July 31, 2007.

10.      Related Party Transactions

a) During the six months ended July 31, 2007, the Company incurred $15,000 (2006 - $10,000) in director’s fees.

b) Effective February 1, 2006, the Company agreed to pay a salary of Cdn$12,000 per month to the President of the Company. On November 1, 2006, the Company agreed to pay a salary of Cdn$24,000 per month to the President of the Company. During the six months ended July 31, 2007, $127,049 (2006 – $62,939) was charged to operations.

c) On June 23, 2005, the Company entered into a management consulting agreement with the President of the Company’s Canadian subsidiary (Elmworth Energy Corporation). Under the terms of the agreement, the Company must pay $20,000 per month for an initial term of two years, and, unless notice of termination is given by either party, is automatically renewed for one year periods. During the six months ended July 31, 2007, $120,000 (2006 – $120,000) was charged to operations.

d) Effective January 1, 2006, the Company agreed to pay a salary of Cdn$12,000 per month to the then Chief Financial Officer. During the six months ended July 31, 2007, $63,525 (2006 – $62,939) was charged to operations.

18

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

11. Common Stock

	Shares		Common Stock		Additional Paid- In Capital
			$		$
January 31, 2007		22,475,866		225		13,088,795
Conversion of debentures (c)		4,175,736		41		6,990,140
Private placement (d)		10,412,000		104		20,823,896
Financing fees (d)		-		-		(1,515,994	)
Investor relations services (e)		50,000		1		108,499
Stock-based compensation (a, b and Note 11)		-		-		2,045,114
July 31, 2007		37,113,602		371		41,540,450

(a) On May 16, 2005, the Company issued 4,000,000 shares of common stock to the President of the Company at $0.01 per share for cash proceeds of $40,000. As the shares were issued for below fair value, a discount on the issuance of shares of $4,160,000 was recorded as deferred compensation. During the year ended January 31, 2007, $2,080,000 was charged to operations. During the six month period ended July 31, 2007, $606,667 was charged to operations.

(b) On June 2, 2005, the Company issued 2,000,000 shares of common stock to the President of the Company’s subsidiary at $0.01 per share for cash proceeds of $20,000. As the shares were issued for below fair value, a discount on the issuance of shares of $2,700,000 was recorded as deferred compensation. During the year ended January 31, 2007, $1,350,000 was charged to operations. During the six month period ended July 31, 2007, $450,000 was charged to operations.

(c) Conversion of debentures

Date	Shares		Common Stock		Face value  (net of common stock)		Fair Value of Embedded Conversion Feature		Additional Paid-In Capital
	#		$		$				$
February 20, 2007		108,923		1		249,999		148,079		398,078
March 6, 2007		900,000		9		899,991		-		899,991
March 7, 2007		106,696		1		249,999		140,935		390,394
April 11, 2007		129,333		1		249,999		140,104		390,103
April 30, 2007		128,939		1		249,999		133,945		383,944
May 4, 2007		748,000		7		747,993		-		747,993
May 11, 2007		130,494		2		249,999		135,254		385,253
May 21, 2007		265,041		3		499,997		255,559		755,556
June 15, 2007		279,002		3		499,997		263,994		763,991
June 21, 2007		1,102,000		11		1,101,989		-		1,101,989
June 25, 2007		138,742		1		249,998		134,197		384,195
June 28, 2007		138,566		1		249,998		138,115		388,113
Total		4,175,736		41		5,499,958		1,490,182		6,990,140

(d) On February 26, 2007, the Company issued 10,412,000 shares of common stock pursuant to a private placement for net proceeds of $19,308,006 after issue costs of $1,515,994. Pursuant to the terms of sale, the Company agreed to cause a resale registration statement covering the common stock to be filed no later than 30 days after the closing and declared effective no later than 120 days after the closing. If the Company fails to comply with the registration statement filing or effective date requirements, it will be required to pay the investors a fee equal to 1% of the aggregate amount invested by the purchasers per each 30 day period of delay, not to exceed 10%. On March 14, 2007, the registration statement was declared effective. In connection with the financing the Company paid the placement agents of the offering a cash fee of 6.5% of the proceeds of the offering.

(e) On June 26, 2007, the Company issued 50,000 shares of common stock at a fair value of $108,500 for investor relation services rendered.

19

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

12. Stock Options

Effective August 5, 2005, the Company approved the 2005 Incentive Stock Plan (the “Plan”) to issue up to 2,000,000 shares of common stock. Pursuant to the Plan, stock options vest 20% upon granting and 20% every six months. As at July 31, 2007, the Company had 220,000 stock options available for granting pursuant to the Plan. The Plan allows for the granting of stock options at a price of not less than fair value of the stock and for a term not to exceed five years. The total number of options granted to any person shall not exceed 5% of the issued and outstanding common stock of the Company.

The weighted average grant date fair value of stock options granted during the six month periods ended July 31, 2007 and 2006 was $1.93 and $3.10, respectively. No stock options were exercised during the six month periods ended July 31, 2007 and 2006. During the six month period ended July 31, 2007 and 2006, the Company recorded stock-based compensation of $988,447 and $1,331,825, respectively, as general and administrative expense.

A summary of the Company’s stock option activity is as follows:

	Number of Options		Weighted Average Exercise Price $		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value $
Outstanding, January 31, 2007		1,630,000		3.31
Granted		150,000		2.19
Outstanding, July 31, 2007		1,780,000		3.22		3.51		–
Exercisable, July 31, 2007		1,214,000		3.35		3.36		–

The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Period Ended July 31, 2007			Period Ended July 31, 2006
Expected dividend yield		0	%		0	%
Expected volatility		135	%		178	%
Expected life (in years)		5.0			2.5
Risk-free interest rate		4.53	%		4.56	%

As at July 31, 2007, there was $1,488,223 (January 31, 2007 - $2,187,094) of total unrecognized compensation costs related to nonvested share-based compensation arrangements granted under the Plan which are expected to be recognized over a weighted-average period of 10 months. The total fair value of shares vested during the periods ended July 31, 2007 and 2006 was $988,447 and $1,331,825, respectively.

A summary of the status of the Company’s nonvested shares as of July 31, 2007, and changes during the period ended July 31 2007, is presented below:

Nonvested shares	Number of Shares			Weighted-Average Grant-Date Fair Value $
Nonvested at January 31, 2007		782,000			2.80
Granted		150,000			1.93
Forfeited		–			–
Vested		(366,000	)		2.70
Nonvested at July 31, 2007		566,000			2.63

20

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

13. Share Purchase Warrants

The following table summarizes the continuity of the Company’s share purchase warrants:

	Number of Warrants			Weighted average exercise price $
Balance, January 31, 2006		7,250,000			1.69
Expired		(1,250,000	)		5.00
Balance, January 31, 2007 and July 31, 2007		6,000,000			1.00

As at July 31, 2007, the following share purchase warrants were outstanding:

Number of Warrants	Exercise Price		Expiry Date
6,000,000	$	1.00		June 15, 2008

14. Commitment

On February 28, 2007, the Company entered into a lease agreement commencing May 1, 2007 for office premises for a 6 year term expiring May 1, 2013. Annual rent under the new lease is payable at $176,445 (Cdn$207,680) for the first three years and $183,062 (Cdn$215,468) for the remaining three years. The Company must also pay its share of building operating costs and taxes. During the six months ended July 31, 2007, the Company paid rent expense of $77,141 (2006 - $22,682). Future minimum lease payments over the next five fiscal years are as follows:

2008	$	90,000
2009		179,000
2010		179,000
2011		179,000
2012		179,000
	$	806,000

15. Segment Disclosures

The Company operates as one operating segment which is the acquisition, exploration and development of oil and gas resource properties. The Chief Executive Officer is the Company’s Chief Operating Decision Maker (CODM) as defined by SFAS 131, “Disclosure about Segments of an Enterprise and Related Information.” The CODM allocates resources and assesses the performance of the Company based on the results of operations.

16. Subsequent Event

In August 2007, the Company granted 1,100,000 stock options to employees and consultants exercisable at $2.00 per share with an expiry five years from issuance pursuant to the 2007 Incentive Stock Plan.

17. Restatement

The Company has restated its consolidated financial statements for the fiscal period ended April 30, 2007 to reflect additional non-operating gains and losses related to the classification of and accounting for convertible debentures issued in fiscal 2006. Upon conversion of the December 8, 2005 5% convertible debentures, the Company reduced the amount recorded as a derivative liability pertaining to the embedded conversion feature with the offsetting amount recorded as a decrease to the loss for the period. Upon further review, the Company has determined that upon conversion of the convertible debenture two entries were required. First, the derivative liability associated with the embedded conversion feature should be adjusted to its fair value immediately prior to the conversion with the change in fair value included in the statement of operations. Second, the re-valued derivative liability should be transferred to additional paid in capital.

The accompanying consolidated financial statements for the period ended July 31, 2007 have been restated to effect the changes described above as follows:

21

Triangle Petroleum Corporation

(An Exploration Stage Company)

Notes to the Consolidated Financial Statements

(Expressed in U.S. dollars, except as noted)

(Unaudited)

17. Restatement (continued)

	July 31, 2007 As Reported $			Adjustment $			July 31, 2007 As Restated $
Consolidated Balance Sheet
Stockholders’ Deficit
Additional Paid-In Capital		40,050,268			1,490,182			41,540,450
Deficit Accumulated During the Exploration Stage		(26,009,114	)		(1,490,182	)		(27,499,296	)

	Three Months Ended July 31, 2007 As Reported $			Adjustment $			Three Months Ended July 31, 2007 As Restated $
Consolidated Statement of Operations
Unrealized gain on fair value of derivatives		3,014,992			(927,118	)		2,087,874
Net loss for the period		(4,953,589	)		(927,118	)		(5,880,707	)
Net Loss Per Share – Basic and Diluted		(0.15	)					(0.18	)

	Six Months Ended July 31, 2007 As Reported $			Adjustment $			Six Months Ended July 31, 2007 As Restated $
Consolidated Statement of Operations
Unrealized gain on fair value of derivatives		5,045,596			(1,490,182	)		3,555,414
Net loss for the period		(7,815,802	)		(1,490,182	)		(9,305,984	)
Net Loss Per Share – Basic and Diluted		(0.22	)					(0.26	)

	Accumulated from December 11, 2003 (Date of Inception) to July 31, 2007 As Reported $			Adjustment $			Accumulated from December 11, 2003 (Date of Inception) to July 31, 2007 As Restated $
Consolidated Statement of Operations
Unrealized gain on fair value of derivatives		33,850,707			(1,490,182	)		32,360,525
Net loss for the period		(8,790,320	)		(1,490,182	)		(10,280,502	)

(a) Adjustments related to accounting for the convertible debentures and derivative liabilities for the period ended July 31, 2007 did not have an effect on the Consolidated Statements of Cash Flows. Although some line items within the net cash used in operating activities changed, the net cash used in operating activities did not change.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report includes certain forward-looking statements. Forward-looking statements are statements that predict the occurrence of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. We have written the forward-looking statements specified in the following information on the basis of assumptions we consider to be reasonable. However, we cannot predict our future operating results. Any representation, guarantee, or warranty should not be inferred from those forward-looking statements.

The assumptions we used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty in economic, legislative, industry, and other circumstances. As a result, judgment must be exercised in the identification and interpretation of data and other information and in their use in developing and selecting assumptions from and among reasonable alternatives. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results. Accordingly we express no opinion on the achievability of those forward-looking statements. We cannot guarantee that any of the assumptions relating to the forward-looking statements specified in the following information are accurate. We assume no obligation to update any such forward-looking statements.

Overview

Prior to May 2005, we were known as Peloton Resources Inc., a mining exploration company. Peloton was actively searching for ore bodies containing gold in British Columbia. A consultant was hired to assess the economic viability of exploring for and developing gold reserves on Peloton’s properties. Based upon his report, Peloton decided to abandon all mining activities and to commence shifting towards an oil and gas exploration company. In connection with the shift in operational focus, we changed our name to Triangle Petroleum Corporation.

The changeover from a mining to an oil and gas exploration company has taken place over the past two years, during one of the strongest markets for oil and natural gas. The average monthly price for West Texas Intermediate (WTI) crude oil and natural gas (Henry Hub Nymex), currently, as compared to the past, is as follows:

23

Although these strong commodity prices have resulted in extremely competitive conditions for the supply of products and services for exploration companies, our outlook remains positive. Despite these strong fundamentals, it should be noted that significant short term fluctuations in North American natural gas prices have occurred based upon seasonal weather patterns and gas storage levels. It should also be noted that actual prices received for oil and gas are typically less than the WTI and Henry Hub prices, respectively. This discount varies from time to time and is based on location, quality and other factors.

Plan of Operations

Since our inception, we have had the opportunity to screen various projects in a variety of geographic locations with numerous potential joint venture partners. The project areas outlined below were carefully selected based on our belief in balancing overall project risk against potential project returns and the anticipated time horizons required to achieve such returns. The three core project areas (Canadian Shale, Fayetteville Shale and Rocky Mountain Conventional Programs) represent distinctive exploration opportunities. In conjunction with our joint venture partners, we intend to execute our operating plan in order to realize the full value of the initial land base that has been established. The remaining two project areas (Barnett Shale and Western Canadian Programs) are currently designated as non-core due to existing market conditions related to land acquisition costs, drilling costs and completion costs.

Eastern Canada - Canadian Shale Gas Program

Over the last 18 months, a multi-disciplined geoscience team has screened prospective basins in Eastern Canada. The screening process includes an assessment of the geologic history for a given area, estimates of pressure and temperature profiles and a determination of the ability to fracture stimulate a prospective shale package.

As a direct result of implementing this strategy, we have executed a farm-in agreement with a Canadian company to pursue a shale gas opportunity in Eastern Canada. The project covers approximately 68,000 gross acres and we believe it to be located in a favorable geological setting based on technical work performed to date and drilling activity in the area. Additional laboratory measurements will be taken on core samples and drill cuttings, which are available from previously drilled conventional wells. We will be entitled to earn an average 70% working interest in the block subsequent to the acquisition and evaluation of a seismic program and then electing to drill a test well no later than December 31, 2008.

24

In addition, we have committed to another project located in the Windsor Area of Nova Scotia, Canada covering approximately 516,000 gross acres. Based on an extensive screening process and technical work performed to date, this area is also believed to be located in a highly favorable geological setting. Additional laboratory measurements have been taken on core samples and drill cuttings which are available from previously drilled conventional wells. We will be entitled to earn an average 70% working interest in the block subsequent to drilling a test well no later than September 15, 2008.

The first Nova Scotia test well has spudded in late August 2007. Our current Windsor Basin exploration program is estimated to cost approximately $8.2 million.

A drilling rig has been contracted and drilling has commenced on the first of two vertical wells in the Windsor Basin. Both wells are expected to be drilled to a depth of approximately 4,500 to 5,000 feet and drilling should be complete by early October. These wellsite locations were chosen based upon the geological work indicated above and the close proximity to a conventional well drilled in 1975. During the drilling of these two wells, we will perform extensive coring and logging.

In addition to the two vertical wells, we are planning to acquire a 25 square mile 3-D and a 30 mile 2-D seismic program in order to further define the Horton Shale over a select area of the land block. The seismic program is currently in the permitting and field logistics phase and is expected to be acquired this fall. Processing of the data is scheduled to occur over the winter months.

We will develop a hydraulic fracture stimulation program for the two wells once the analysis of the core samples, logs, and other tests have been completed. Completion and flow testing of both wells is anticipated to occur in the fourth quarter of our fiscal year. The technical evaluation of the drilling, coring, seismic and completion programs will allow our exploration team to quantify the gas in place estimates. These results will then be reviewed and verified by independent industry experts by the end of our fiscal year.

Arkoma Basin Arkansas - Fayetteville Shale Program

We originally committed $16 million to a joint venture in the Fayetteville Shale of the Arkoma Basin with Kerogen Resources. We and Kerogen have equal 50% working interest positions in approximately 20,000 gross acres leased to date in Conway and Faulkner Counties. A measured pace of additional leasing is planned to complement the 2007 drilling program. As at July 31, 2007, we had advanced approximately $7.9 million to fund our share of land costs, $1.8 million for seismic and an additional $3.0 million to fund our share of costs related to the first vertical well.

The first vertical test well of the Fayetteville joint venture reached its targeted depth of 8,300 feet on April 4, 2007. Drill cuttings and other samples were taken from the well and sent in for further lab work and analysis. Concurrent with the first drilling operation, a new multi-component 3-D seismic survey had also commenced. The seismic survey was shot over approximately half of the 24 square mile target area and sent for processing in April 2007. Depending on the results of the seismic program, the vertical test well and leasing of additional acreage, we may initiate a horizontal drilling program.

States of Colorado, Montana and Wyoming - Rocky Mountain Program

We have embarked on a joint venture with Hunter Energy LLC of Denver, Colorado. We made an initial commitment to participate in the drilling of three projects. We have a 25% working interest in the three Hunter Energy projects. The project areas are geographically located in northwestern Colorado, southwestern Wyoming, and northern Montana. The gross acreage position in the three areas is approximately 77,000 acres. We have advanced approximately $3.5 million dollars in land, prospect fees and drilling costs relating to this project.

Although the initial test well in Colorado was not successful, plans for this project include working with area operators to continue the exploration program. Drilling on the Wyoming project is expected to commence in the fourth quarter of calendar 2007 and the Montana project is anticipated to commence in early to mid 2008 with consideration being given to service industry equipment availability and prevailing short-term winter weather conditions. It is anticipated that our share of costs to drill these two wells will be approximately $1.4 million.

25

Greater Fort Worth Basin Texas - Barnett Shale Program (non-core project)

We acquired a 30% working interest position in a five-county joint venture program with Kerogen. Approximately 13,000 gross acres have been leased. As of July 31, 2007, we have expended approximately $2.5 million in prospect fees, land costs and, geological and geophysical expenditures. In July 2007, we received proceeds of $984,000 from the sale of our working interest position in approximately 12,100 gross acres held by the joint venture group mentioned above. Our investment in this land position was approximately $1.9 million. The acreage sold was undeveloped land and not the area containing our active well positions.

During 2006, we participated in four lower working interest (approximately 6%) horizontal wells (one in Johnson County and three in Hill County). The four wells are currently producing at various rates. The operator of these wells has commenced voluntary bankruptcy proceedings. As a result, we have not received our monthly production revenue since January 2007, however the amounts owing to us have been set aside by the bankruptcy trustee in a separate bank account. In addition, we continue to receive monthly statements detailing our share of production revenue and related production royalties and operating expenses. We have spent approximately $1.1 million on drilling and completing these four wells.

In late 2006, we participated in four Barnett Shale gas wells with working interests ranging between 11% and 15%. We have commenced production from two of the first four horizontal wells (Hood County) and the other two wells (Parker County) have been drilled and are awaiting a pipeline tie-in prior to completion. We have spent approximately $1.8 million on these four wells to date.

Alberta Canada Deep Basin - Western Canadian Program (non-core project)

We originally licensed a 120 square mile seismic data set, at a cost of approximately $1.3 million, to assist in the generation of the most prospective drilling sites. To date, we have access to thirty-one sections of land (approximately 22,000 gross acres), which are in various stages of earning with a number of joint venture partners.

We have participated in drilling and/or completing eight Deep Basin wells at a total cost of approximately $8.5 million net to us. These eight wells were drilled as part of four different joint ventures with varying working interests.

We have commenced production from two of three wells drilled in the late 2006 in the Alberta Deep Basin. The first well located in the Kakwa Area has been tested at a facility restricted rate of 3.6 mmcfpd or 600 BOED (barrels of oil equivalent per day). We paid 20% of the well costs for an 18% interest before payout (and 12% after payout) in this well. Due to restricted plant capacity this well is not expected to commence full production until the fourth quarter of calendar 2007. The second well is located in the Wapiti Area and we have an approximate 35% working interest in this well. Subsequent to completion, the well was connected to a nearby pipeline and initial production rates ranged from 0.4 to 0.6 mmcfpd or 60 to 100 BOED. The third well was also drilled in the Wapiti Area and we have a 50% interest in this well that was testing the Cadomin and Falher zones. The Cadomin zone was completed but tested wet and the Falher zone tested gas but at rates that were uneconomic to tie-in this past winter season.

Of the remaining five wells drilled by us prior to this past winter, one of the wells drilled in late 2005 tested fresh water, with no natural gas present. Another well tested gas but at rates that that were uneconomic to warrant a pipeline tie-in based on today’s natural gas pricing environment. The final three wells were taken over by a new operator during mid 2006 and we are waiting for the new operator to propose a potential completion strategy for these wells.

26

Results of Operations for the three and six months ended July 31, 2007 compared to the three and six months ended July 31, 2006

Daily Sales Volumes, Working Interest before royalties

		Three Months Ended July 31,				Six Months Ended July 31,
		2007		2006		2007		2006
Barnett Shale in Texas, USA	Mcfpd		148		-		130		-
Deep Basin in Alberta, Canada	Mcfpd		136		-		86		-
Total Company	Mcfpd		284		-		216		-
Total Company	Boepd		47		-		36		-

Net Operating Results

		Three Months Ended July 31,				Six Months Ended July 31,
		2007		2006		2007		2006
Volumes	Mcf		26,025		-		39,090		-
Price	$/Mcf		5.54		-		6.16		-
Revenue		$	144,297	$	-	$	240,941	$	-
Royalties and production expenses			91,154		-		121,517		-
Netback		$	53,143	$	-	$	119,424	$	-

For the three and six month periods ended July 31, 2007, we realized $144,297 and $240,941, respectively, in revenue from sales of natural gas and natural gas liquids, as compared to $nil for the comparable periods in 2006. This revenue was the result of production from six small working interest wells located in the Barnett Shale in Texas and two wells located in the Deep Basin of Alberta. Royalties and production expenses related to this revenue totaled $91,154 and $121,517 for the three and six month periods ended July 31, 2007, respectively, as compared to $nil for the comparable periods in 2006.

Depletion, Depreciation and Accretion (“DD&A”) and impairment

	Three Months Ended July 31,				Six Months Ended July 31,
	2007		2006		2007		2006
DD&A – oil and gas properties	$	135,721	$	-	$	211,189	$	-
Depreciation – property and equipment		14,834		6,458		21,614		12,238
Total	$	150,555	$	6,458	$	232,803	$	12,238
Total per BOE	$	34.71	$	-	$	35.73	$	-

Due to the startup of production in the second half of fiscal 2007, depletion on the proven oil and gas properties was calculated and expensed at approximately $35/BOE. Also, a $2,946,000 non-cash impairment loss was booked against proved properties as a result of applying what is commonly called a “ceiling test” under rules prescribed by the U.S. Securities and Exchange Commission for exploration and development companies that use the “full cost” accounting method. These impairment charges relate to the Barnett Shale and Western Canadian programs and were mainly the result of low gas prices, higher costs to drill and complete the wells than anticipated and lower production and reserves than forecasted. Management now considers these assets as non-core.

Unproven property costs of $21,917,224 were excluded from costs subject to depletion in the current three and six month periods.

On July 18, 2007, we sold our 27% interest in 12,100 gross acres in northeast Hill County of Texas for gross proceeds of $983,902. We had incurred land and geological & geophysical costs of $1,929,305 related to this prospect which resulted in an impairment loss of $945,403 being recorded.

27

General and Administrative (“G&A”)

	Three Months Ended July 31,				Six Months Ended July 31,
	2007		2006		2007		2006
Salaries, wages and consulting fees	$	349,417	$	188,260	$	623,242	$	427,086
Other travel and office expense		617,664		311,660		946,791		624,893
Stock-based compensation		528,078		1,964,777		2,153,614		3,562,145
G&A	$	1,495,159	$	2,464,697	$	3,723,647	$	4,614,124

General and administrative expenses have decreased significantly primarily due to decreased stock-based compensation expense mainly as a result of shares issued to our executives that have now been fully recognized.

Convertible debentures

Carrying value of convertible debentures:

	July 31, 2007						January 31, 2007
	Face Value		Discount		Carrying Value		Face Value		Discount		Carrying Value
June 14, 05 convertible debenture	$	-	$	-	$	-	$	2,750,000	$	515,626	$	2,234,374
Dec. 8, 05 convertible debenture		10,500,000		3,655,253		6,844,747		13,250,000		6,095,192		7,154,808
Dec. 28, 05 convertible debenture		10,000,000		4,730,481		5,269,519		10,000,000		6,383,450		3,616,550
Total convertible debentures	$	20,500,000	$	8,385,734	$	12,114,266	$	26,000,000	$	12,994,268	$	13,005,732

Accretion of discounts on convertible debentures:

	Three Months Ended July 31,				Six Months Ended July 31,
	2007		2006		2007		2006
June 14, 2005 convertible debenture	$	115,626	$	637,500	$	515,626	$	1,668,750
December 8, 2005 convertible debenture		1,311,999		773,031		2,439,940		1,375,913
December 28, 2005 convertible debenture		840,183		840,183		1,652,968		1,652,968
Total accretion of discounts	$	2,267,808	$	2,250,714	$	4,608,534	$	4,697,631

Accretion of discounts on convertible debentures were consistent in the three and six months periods ended July 31, 2007 compared to the comparable periods of 2006 due primarily to the June 14, 2005 debenture discounts being fully converted during the quarter offset by increased accretion being recognized related to the December 8, 2005 debentures conversion in the current year.

Interest expense:

	Three Months Ended July 31,					Six Months Ended July 31,
	2007			2006		2007		2006
June 14, 2005 convertible debenture	$	(23,878	)	$	86,094	$	18,918	$	177,930
December 8, 2005 convertible debenture		141,234			167,123		297,911		289,040
December 28, 2005 convertible debenture		189,041			189,041		371,918		371,918
Total interest expense	$	306,397		$	442,258	$	688,747	$	838,888

Interest expense deceased in the three and six months periods ended July 31, 2007 compared to the comparable periods of 2006 due primarily to the June 14, 2005 debenture discounts being fully converted during the quarter.

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Liquidity and Capital Resources

As at July 31, 2007, we had working capital of $1,305,128 resulting primarily fro our cash and cash equivalents or $17,287,647 offset by non-cash derivative liabilities of $10,947,261 and accounts payables of $4,005,612. For the six months ended July 31, 2007, we had net cash outflow from operating activities of $1,344,843. Cash used in investing activities totaled $6,474,503 for the six months ended July 31, 2007, which was used to fund our share of costs relating to the first vertical well drilled in Fayetteville Shale Project in the Arkoma Basin, acquiring additional land and 3-D seismic in Fayetteville Shale Project, as well as the remaining capital commitments for the three Deep Basin gas wells drilled in Alberta during the winter of the prior year. Cash provided by financing activities totaled $19,308,006 for the six months ended July 31, 2007. On February 26, 2007, we sold an aggregate of 10,412,000 shares of our common stock to 24 accredited investors in a private placement transaction for aggregate proceeds of $20,824,000.

We expect significant capital expenditures during the next 12 months for seismic data acquisitions, land and drilling rights acquisitions, drilling programs, overhead and working capital purposes. We believe we have sufficient funds to conduct our operations for the balance of fiscal 2008. If additional financing is required, there can be no assurance that it will be available in amounts or on terms acceptable to us, if at all.

By adjusting our operations to the level of capitalization, we believe we have sufficient capital resources to meet projected cash flow deficits. However, if during that period or thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations liquidity and financial condition.

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief history and historical operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

We will still need additional investments in order to continue operations until we are able to achieve positive operating cash flow. Additional investments are being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of our common stock and a downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

To date, we have generated minimal revenues and have incurred operating losses in every quarter. Our registered independent auditors have stated in their report dated April 2, 2007, that we are an early exploration company, have not generated significant revenues from operations and has incurred significant losses since inception. These factors among others raise substantial doubt about our ability to continue as a going concern.

June 14, 2005 Convertible Debenture Financing

On June 14, 2005, to obtain funding for our ongoing operations, we entered into a securities purchase agreement with a single accredited investor pursuant to which the investor purchased an 8% convertible debenture with a principal amount of $1,000,000, and a warrant to purchase 1,000,000 shares of our common stock, exercisable at a price of $1.00 per share until June 15, 2008. Pursuant to the securities purchase agreement, the investor had the right during the next 60 days, but not the obligation, to purchase up to $5,000,000 of additional convertible debentures and warrants to purchase 5,000,000 shares of common stock. The investor exercised the purchase right and invested the additional $5,000,000 on July 14, 2005, in exchange for an 8% convertible debenture with a principal amount of $5,000,000 and a warrant to purchase 5,000,000 shares of our common stock, exercisable at a price of $1.00 per share until June 15, 2008. . Accordingly, we have received a total of $6,000,000 pursuant to the securities purchase agreement and issued 6,000,000 warrants. As of July 31, 2007, all of the warrants remained outstanding and were marked to market with a fair value of $6,591,000 (January 31, 2007 - $10,451,400), which was recorded as a non-cash derivative liability on the balance sheet under current liabilities.

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The convertible debenture was due and payable on June 10, 2007. On or prior to June 10, 2007, all of the convertible debentures were converted into shares of common stock at a rate of $1.00 per share, at the option of the holder. The investor has contractually agreed to restrict its ability to convert or exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of our common stock. Due to the embedded beneficial conversion feature and detachable warrants issued, we recognized a discount of $6,000,000 against the convertible debenture liability on the balance sheet, with $3,141,817 being recorded to additional paid in capital and $2,858,183 being recorded to additional paid in capital at the time the convertible debentures were issued, which was reclassified to derivative liabilities on December 8, 2008. The carrying value of the convertible debentures liability on the balance sheet as at July 31, 2007 was $nil (January 31, 2007 - $2,234,374).

December 8, 2005 Secured Convertible Debenture Financing

To obtain funding for our ongoing operations, we entered into a Securities Purchase Agreement with YA Global Investments, L.P. (formerly, Cornell Capital Partners, L.P.), an accredited investor, on December 8, 2005 for the sale of $15,000,000 in secured convertible debentures. They provided us with an aggregate of $15,000,000 as follows:

· $5,000,000 was disbursed on December 8, 2005;

· $5,000,000 was disbursed on January 17, 2006; and

· $5,000,000 was disbursed on June 1, 2006.

The secured convertible debentures bear interest at 5%, mature three years from the date of issuance, and are convertible into our common stock, at the selling stockholders' option, at the lower of (i) $5.00 or (ii) 90% of the average of the three lowest daily volume weighted average prices of our common stock, as quoted by Bloomberg, LP, of the 10 trading days immediately preceding the date of conversion. Accordingly, there is in fact no limit on the number of shares into which the secured convertible debentures may be converted. As of September 7, 2007, the average of the three lowest intraday trading prices for our common stock during the preceding 10 trading days as quoted by Bloomberg, LP was $1.4367 and, therefore, the conversion price for the secured convertible notes was $1.29303. Based on this conversion price, the $10,500,000 in secured convertible debentures remaining outstanding, excluding interest, were convertible into 8,120,462 shares of our common stock. The sale of such a large number of shares of common stock could significantly deflate the market price of our common stock, which would have the further effect of requiring us to issue additional shares upon conversion of the secured convertible debentures. Depending on our stock price, the conversion of the secured convertible debentures could lead to the sale of potentially controlling amounts of shares of common stock. As of September 7, 2007, $4,500,000 of the debenture had been converted into 2,369,072 shares of common stock and $10,500,000 remained outstanding. As of July 31, 2007, $10,500,000 (January 31, 2007 - $13,250,000) of the issued debentures were outstanding and $4,500,000 (January 31, 2007 - $1,750,000) had been converted. Since the conversion feature had a fair value of $10,151,918 at the time the convertible debentures were issued, we recognized a discount of $10,151,918 against the convertible debenture liability and recorded an equivalent amount to derivative liabilities on the balance sheet. The carrying value of the convertible debentures liability on the balance sheet as at July 31, 2007 has been accreted to $6,844,747 (January 31, 2007 - $7,154,808). As of July 31, 2007, the conversion features were marked to market with a fair value of $4,356,262 (January 31, 2007 - $5,541,457), which was recorded as a non-cash derivative liability on the balance sheet under current liabilities.

The investor has contractually agreed to restrict its ability to convert the debentures and receive shares of our common stock such that the number of shares of common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of common stock.In addition, the investor is restricted from converting more than $1,500,000 in principle amount of the debenture in any thirty day period, with no more than $1,000,000 of such amount at the variable market conversion price.

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We have the right, at our option, with three business days advance written notice, to redeem a portion or all amounts outstanding under the secured convertible debentures prior to the maturity date provided that the closing bid price of our common stock, is less than $5.00 at the time of the redemption. In the event of a redemption, we are obligated to pay an amount equal to the principal amount being redeemed plus a 20% redemption premium, and accrued interest.

In connection with the Securities Purchase Agreement dated December 8, 2005, we granted the investor registration rights. We were obligated to use our best efforts to cause the registration statement to be declared effective no later than June 30, 2006 and to insure that the registration statement remains in effect until all of the shares of common stock issuable upon conversion of the secured convertible debentures have been sold. In the event of a default of our obligations under the Registration Rights Agreement, including if the registration statement is not declared effective by June 30, 2006, we are required pay to YA Global Investments, as liquidated damages, for each month that the registration statement has not been filed or declared effective, as the case may be, either a cash amount or shares of our common stock equal to 2% of the liquidated value of the secured convertible debentures. The registration statement was declared effective on May 25, 2006.

In connection with the Securities Purchase Agreement dated December 8, 2005, we and each of our subsidiaries executed security agreements in favor of the investor granting them a first priority security interest in all of our goods, inventory, contractual rights and general intangibles, receivables, documents, instruments, chattel paper, and intellectual property. The security agreements state that if an event of default occurs under the secured convertible debentures or security agreements, the investors have the right to take possession of the collateral, to operate our business using the collateral, and have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private sale or otherwise to satisfy our obligations under these agreements.

December 28, 2005 Convertible Debenture and Warrants Financing

To obtain funding for our ongoing operations, we entered into Securities Purchase Agreements with two accredited investors on December 28, 2005 for the sale of (i) $10,000,000 in convertible debentures and (ii) warrants to purchase 1,250,000 shares of our common stock. The two accredited investors, Bank Sal. Oppenheim Jr. & Cie., (Schweiz) AG and Centrum Bank each subscribed for 50% of the total offering.

The investors provided us with an aggregate of $10,000,000 as follows:

· $5,000,000 was disbursed on December 28, 2005; and

· $5,000,000 was disbursed on January 23, 2006.

Pursuant to the Securities Purchase Agreements, we issued to each investor 625,000 warrants to purchase shares of common stock on December 28, 2005 and January 23, 2006 exercisable at a price of $5.00 per share. Accordingly, we issued a total of 1,250,000 warrants. As of January 31, 2007, all of the warrants had expired.

The convertible debentures bear interest at 7.5%, mature three years from the date of issuance, and are convertible into our common stock, at the selling stockholders' option, at a rate of $4.00 per share. The investors have contractually agreed to restrict their ability to convert its debentures or exercise its warrants and receive shares of our common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.As of July 31 and September 7, 2007, all $10,000,000 of the issued debentures were outstanding and none had been converted. Due to the embedded beneficial conversion feature and detachable warrants issued, we recognized a discount of $10,000,000 against the convertible debenture liability on the balance sheet, with $6,738,750 being recorded to additional paid in capital and $3,261,250 being recorded to derivative liabilities. The carrying value of the convertible debentures liability on the balance sheet as at July 31, 2007 has been accreted to $5,269,519 (January 31, 2007 - $3,616,550).

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In connection with the Securities Purchase Agreement dated December 28, 2005, we granted the investors registration rights. Pursuant to the registration rights agreement, if we did not have the registration statement declared effective on or before May 27, 2006, we were obligated to pay liquidated damages in the amount of 1.0% for each 30-day period or pro rata for any portion thereof following the date by which such registration statement should have been filed for which no registration statement is filed or should have been declared effective. The registration statement was declared effective on May 25, 2006.

February 26, 2007 Private Placement

On February 26, 2007, we sold an aggregate of 10,412,000 shares of our common stock to 24 accredited investors in a private placement transaction for aggregate proceeds of $20,824,000. Pursuant to the terms of sale, we agreed to cause a resale registration statement covering the common stock to be filed no later than 30 days after the closing and declared effective no later than 120 days after the closing. If we fail to comply with the registration statement filing or effective date requirements, we will be required to pay the investors a fee equal to 1% of the aggregate amount invested by the purchasers per each 30 day period of delay, not to exceed 10%. We paid the placement agents of the offering a cash fee of 6.5% of the proceeds of the offering. The registration statement was declared effective on March 14, 2007.

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Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We regularly evaluate estimates and assumptions related to useful life and recoverability of long-lived assets, asset retirement obligations, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Investment in Oil and Gas Properties

We utilize the full cost method to account for our investment in oil and gas properties. Accordingly, all costs associated with acquisition and exploration of oil and gas reserves, including such costs as leasehold acquisition costs, interest costs relating to unproved properties, geological expenditures and direct internal costs are capitalized into the full cost pool. As of July 31, 2007, we had two countries with proven reserves. For our proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects including capitalized interest, if any, are not amortized until proved reserves associated with the projects can be determined. If the future exploration of unproved properties is determined uneconomical, the amounts of such properties are added to the capitalized cost to be amortized.

The capitalized costs included in the full cost pool are subject to a “ceiling test”, which limits such costs to the aggregate of the estimated present value, discounted at 10%, of the future net revenues from proved reserves, based on current economic and operating conditions and the estimated value of unproven properties (adjusted for related income tax effects).

Long-lived Assets

In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, we test long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Recoverability is assessed based on the carrying amount of the asset and its fair value which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Asset Retirement Obligations

We recognize a liability for future retirement obligations associated with our oil and gas properties. The estimated fair value of the asset retirement obligation is based on the current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate. This liability is capitalized as part of the cost of the related asset and amortized over its useful life. The liability accretes until we settle the obligation.

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Revenue Recognition

We recognize oil and gas revenue when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectibility of the revenue is probable.

Stock-Based Compensation

Prior to February 1, 2006, we accounted for stock-based awards under the recognition and measurement provisions of Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees” using the intrinsic value method of accounting. Effective February 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123R “Share Based Payments”, using the modified prospective transition method. Under that transition method, compensation cost is recognized for all share-based payments granted prior to, but not yet vested as of February 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and compensation cost for all share-based payments granted subsequent to February 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. Results for prior periods have not been restated.

Derivative Liabilities

We record derivatives at their fair values on the date that they meet the requirements of a derivative instrument and at each subsequent balance sheet date. Any change in fair value will be recorded as non-operating, non-cash income or expense at each reporting date.

Recently Issued Accounting Pronouncements

In February 2007, the 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 future reported financial position or results of operations.

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(R)”. 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 financial statements.

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.

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In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. The adoption of this statement did not have a material effect on our financial statements.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140", to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", to permit fair value re-measurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, "Accounting for the Impairment or Disposal of Long-Lived Assets", to allow a qualifying special-purpose entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. The adoption of this statement did not have a material effect on our future reported financial position or results of operations.

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ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk

Because of our relatively low level of current oil and gas production, we are not exposed to a great degree of market risk relating to the pricing applicable to our oil and natural gas production. However, our ability to raise additional capital at attractive pricing, our future revenues from oil and gas operations, our future profitability and future rate of growth depend substantially upon the market prices of oil and natural gas, which fluctuate widely. We expect commodity price volatility to continue. We do not currently utilize hedging contracts to protect against commodity price risk. As our oil and gas production grows, we may manage our exposure to oil and natural gas price declines by entering into oil and natural gas price hedging arrangements to secure a price for a portion of our expected future oil and natural gas production.

Operating Cost Risk

We have experienced rising operating costs which impacts our cash flow from operating activities and profitability. We recognize that rising operating costs could continue and continued rising operating costs would negatively impact our oil and gas operations.

Interest Rate Risk

All of our debt has fixed interest rates, so consequently we are not exposed to cash flow or fair value risk from market interest rate changes on this debt.

Financial Instruments

The fair values of financial instruments, which include cash and cash equivalents, other receivables, accounts payable, accrued interest on convertible debentures, accrued liabilities, and convertible debentures approximate their carrying values due to the relatively short maturity of these instruments. The fair value of convertible debentures are estimated to approximate their carrying values based on borrowing rates currently available to us for debt with similar terms.

Inflation and Changes in Prices

The general level of inflation affects our costs. Salaries and other general and administrative expenses are impacted by inflationary trends and the supply and demand of qualified professionals and professional services. Inflation and price fluctuations affect the costs associated with exploring for and producing oil and natural gas, which has a material impact on our financial performance.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

The Company, under the supervision and with the participation of its management, including the principal executive officer and recently appointed principal financial officer, has evaluated the effectiveness of the design and operation of its disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Act”) as of the end of the period covered by this report (the “Disclosure Controls”). Based upon the Disclosure Controls evaluation, the principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures were not effective in connection with preparing this Quarterly Report on Form 10-Q due to a material weakness in the Company’s internal control over financial reporting, mainly its financial closing, review and analysis process. The Company determined that a restatement of its financial statements was necessary due to the issuance of convertible debentures and warrants (collectively, the “Securities”) in various private placements over the last two years. This restatement is required to properly reflect the Company’s financial results for certain non-cash, and non-operational related charges or credits to earnings associated with both embedded and freestanding derivative liabilities, and the accounting for certain derivatives under the control of the issuer due to the revised interpretation and implementation under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, the Emerging Issues Task Force issued EITF Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, and FASB Staff Position No. EITF 00-19-2, “Accounting for Registration Payment Arrangements.”

The Company believes that the issues surrounding the restatement of this report, mainly the internal controls related to the financial closing, review, and analysis process has been addressed and the Company has taken additional steps to avoid the reoccurrence of this condition by adding an additional qualified person with SEC experience in the financial reporting and analysis area. The Company has instituted a policy requiring the Chief Financial Officer, at the end of each quarter, to reconcile the accounting records to the securities issuance report prepared and maintained by the corporate secretary to ensure that all issuances have been properly recorded and that appropriate adjustments to previously issued securities are recorded, if necessary. The Company believes that these additional efforts taken by new management since the end of fiscal 2008 to strengthen the Company’s internal controls will be effective in future periods.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

The Company’s internal control over financial reporting has been modified during the Company’s most recent fiscal quarter by adding additional resources to address deficiencies in the financial closing, review and analysis process, which has materially improved the Company’s internal control over financial reporting.

(b) Changes in internal control over financial reporting.

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

We made the changes as specified above in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in Part I, “Risk Factors,” of the Company’s Annual Report on Form 10-KSB for the year ended January 31, 2007, other than to update certain financial information as of and for the three and/or six months ended July 31, 2007 regarding the following risk factors.

We Have a History Of Losses Which May Continue, Which May Negatively Impact Our Ability to Achieve Our Business Objectives.

We incurred a net loss of $4,281,969 for the year ended January 31, 2007. For the six months ended July 31, 2007, we incurred a net loss of $9,305,984. We cannot assure you that we can achieve or sustain profitability on a quarterly or annual basis in the future. Our operations are subject to the risks and competition inherent in the establishment of a business enterprise. There can be no assurance that future operations will be profitable. Revenues and profits, if any, will depend upon various factors, including whether we will be able to continue expansion of our revenue. We may not achieve our business objectives and the failure to achieve such goals would have an adverse impact on us.

There Are a Large Number of Shares Underlying Our Convertible Debentures and Warrants That May be Available for Future Sale and the Sale of These Shares May Depress the Market Price of Our Common Stock.

As of September 7, 2007, we had 37,113,602 shares of common stock issued and outstanding, secured convertible debentures issued on December 8, 2005, January 17, 2006 and June 1, 2006 outstanding that may be converted into 8,620,902 shares of common stock based on current market prices, convertible debentures issued on December 28, 2005 and January 23, 2006 outstanding that may be converted into 2,500,000 shares of common stock, and outstanding warrants to purchase 6,000,000 shares of common stock. All of the shares, including all of the shares issuable upon conversion of the convertible debentures and upon exercise of our warrants, may be sold without restriction. The sale of these shares may adversely affect the market price of our common stock.

The Continuously Adjustable Conversion Price Feature of Our Secured Convertible Debentures Could Require Us to Issue a Substantially Greater Number of Shares, Which Will Cause Dilution to Our Existing Stockholders. 

Our obligation to issue shares upon conversion of our secured convertible debentures issued to YA Global Investments on December 8, 2005, January 17, 2006 and June 1, 2006 is essentially limitless. The following is an example of the number of shares of our common stock that are issuable, upon conversion of our $10,500,000 remaining face amount of secured convertible debentures (excluding accrued interest), based on market prices 25%, 50% and 75% below the market price, as of September 7, 2007 of $1.60.

			With		Number		% of
% Below	Price Per		Discount		of Shares		Outstanding
Market	Share		at 10%		Issuable		Stock
25%	$	1.20	$	1.08		9,722,223		20.76	%
50%	$	0.80	$	0.72		14,583,334		28.21	%
75%	$	0.40	$	0.36		29,166,667		44.01	%

38

As illustrated, the number of shares of common stock issuable upon conversion of our secured convertible debentures will increase if the market price of our stock declines, which will cause dilution to our existing stockholders.

If We Are Required for any Reason to Repay Our Outstanding Convertible Debentures, We Would Be Required to Deplete Our Working Capital, If Available, Or Raise Additional Funds. Our Failure to Repay the Convertible Debentures, If Required, Could Result in Legal Action Against Us, Which Could Require the Sale of Substantial Assets.

In December 2005, we entered into three securities purchase agreements for the sale of an aggregate of $25,000,000 principal amount of convertible debentures, secured and unsecured. The $15,000,000 in secured convertible debentures, of which $10,500,000 remained outstanding as of September 7, 2007, are due and payable, with 5% interest, three years from the date of issuance, unless sooner converted into shares of our common stock. Additionally, the $10,000,000 in convertible debentures, which all remained outstanding as of September 7, 2007, are due and payable, with 7.5% interest, three years from the date of issuance, unless sooner converted into shares of our common stock. In addition, any event of default such as our failure to repay the principal or interest when due, our failure to issue shares of common stock upon conversion by the holder, our failure to timely file a registration statement or have such registration statement declared effective, breach of any covenant, representation or warranty in the Securities Purchase Agreements or related convertible debentures, the assignment or appointment of a receiver to control a substantial part of our property or business, the filing of a money judgment, writ or similar process against our company in excess of $50,000, the commencement of a bankruptcy, insolvency, reorganization or liquidation proceeding against our company and the delisting of our common stock could require the early repayment of the convertible debentures, secured and unsecured, including default interest rate on the outstanding principal balance of the debentures if the default is not cured with the specified grace period. We anticipate that the full amount of the convertible debentures, secured and unsecured, will be converted into shares of our common stock, in accordance with the terms of the convertible debentures. If we were required to repay the convertible debentures, secured and unsecured, we would be required to use our limited working capital and raise additional funds. If we were unable to repay the debentures when required, the debenture holders could commence legal action against us and foreclose on all of our assets to recover the amounts due. Any such action would require us to curtail or cease operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On May 8, 2007, we issued 748,000 shares of common stock upon conversion of $748,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

On May 11, 2007, we issued 130,494 shares of common stock upon conversion of $250,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

On May 21, 2007, we issued 265,041 shares of common stock upon conversion of $500,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

On June 4, 2007, we issued 300,000 shares of common stock upon conversion of $300,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

On June 6, 2007, we issued 802,000 shares of common stock upon conversion of $802,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

On June 13, 2007, we issued 279,002 shares of common stock upon conversion of $500,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

39

On June 21, 2007, we issued 138,742 shares of common stock upon conversion of $250,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

On June 26, 2007, we issued 50,000 shares of common stock to Torrey Hills Capital for investor relations serviced provided to us. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

On June 28, 2007, we issued 138,566 shares of common stock upon conversion of $250,000 of a previously issued convertible debenture. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.

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 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a), promulgated under the Securities and Exchange Act of 1934, as amended
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)

40

SIGNATURES

In accordance with requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TRIANGLE PETROLEUM CORPORATION
Date: April 30, 2008	By:	/s/ MARK GUSTAFSON
	Mark Gustafson
	President (Principal Executive Officer)
Date: April 30, 2008	By:	/s/ SHAUN TOKER
	Shaun Toker
	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

41

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Mark Gustafson, certify that:

1. I have reviewed this amended quarterly report on Form 10-Q/A of Triangle Petroleum Corporation.

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 30, 2008

/s/ MARK GUSTAFSON

Mark Gustafson

President (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Shaun Toker, certify that:

1. I have reviewed this amended quarterly report on Form 10-Q/A of Triangle Petroleum Corporation.

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 30, 2008

/s/ SHAUN TOKER

Shaun Toker

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the amended Quarterly Report of Triangle Petroleum Corporation (the "Company") on Form 10-Q/A for the period ending July 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark Gustafson, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Triangle Petroleum Corporation and will be retained by Triangle Petroleum Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ MARK GUSTAFSON

Mark Gustafson

President (Principal Executive Officer)

April 30, 2008

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the amended Quarterly Report of Triangle Petroleum Corporation (the "Company") on Form 10-Q/A for the period ending July 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Shaun Toker, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to Triangle Petroleum Corporation and will be retained by Triangle Petroleum Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Shaun Toker

Shaun Toker

Chief Financial Officer

April 30, 2008