**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
        10-QSB/A**


**(Amendment
        No. 1)**





(Mark
      One)


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





**For
      the Quarterly Period Ended July 31, 2006**





**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)





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





Yes
x No
o





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 1, 2006, the Company had 20,482,530 shares of its par value $0.0001
      common stock issued and outstanding.





Transitional
      Small Business Disclosure Format (check one):





Yes
o No
x





**EXPLANATORY
        NOTE**





As
        set
        forth in the table below, between June 2005 and June 1, 2006, Triangle Petroleum
        Corporation (the “Company”) completed private placements with certain investors
        in which the Company issued convertible securities along with common stock
        purchase warrants.





Transaction Date
              
              Secured
                Convertible
                Debentures
                Sold
              
              Annual
                Interest
                Rate
              
              Conversion Price
              
              Warrants
                (one share
                per warrant)June
                  14, 2005
              
              $
              1,000,000
              
              
              8
              %
              $1.00
              
              
              1,000,000July
                  14, 2005
              
              $
              5,000,000
              
              
              8
              %
              $1.00
              
              
              5,000,000December
                  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
              
              
              NoneDecember
                  28, 2005
              
              $
              5,000,000
              
              
              7.5
              %
              $4.00
              
              
              625,000January
                  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
              
              
              NoneJanuary
                  23, 2006
              
              $
              5,000,000
              
              
              7.5
              %
              $4.00
              
              
              625,000June
                  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
        January 21, 2008, the Company’s independent registered public accounting firm,
        Manning Elliott LLP, Chartered Accountants (“Manning Elliott”) notified the
        Company’s Chief Financial Officer that it believed there were errors in the
        Company’s financial statements resulting from the conversion feature of
        some of the convertible debentures sold. On January 22, 2008, management
        of the
        Company, in conjunction with a valuation expert, conducted an analysis of
        the
        Company’s various financial instruments and agreements involving the convertible
        debentures accompanied by warrants, with a particular focus on the accounting
        treatment of derivative financial instruments under Statement of Financial
        Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
        Activities (“SFAS 133”), 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 (“EITF 00-19”), and FASB Staff Position No.
        EITF 00-19-2, “Accounting for Registration Payment Arrangements” (“FSP No. EITF
        00-19-2”), (collectively, the “Derivative Accounting Pronouncements”).





On
        January 22, 2008, the Company’s Chief Financial Officer further discussed the
        matter with Manning Elliott and both parties agreed that these facts caused
        them
        to believe that the Company’s accounting for the private placements was
        incorrect and the Company determined that the effect of such misstatements
        was
        material. As a result, the Company decided to restate its previously filed
        financial statements in the annual reports for the years ended January 31,
        2006
        and 2007 filed on Form 10-KSB, together with the quarterly reports on Form
        10-QSB for the quarters ended April 30, 2006, July 31, 2006 and October 31,
        2006
        and quarterly reports on Form 10-Q for the quarters ended April 30, 2007,
        July
        31, 2007 and October 31, 2007. The restatements are 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.


2


Historically,
        the Company recorded the fair value of the warrants and intrinsic value of
        the
        beneficial conversion features of these convertible debentures as a credit
        to
        equity with a corresponding discount to the notes payable. The Company engaged
        a
        valuation expert who reviewed the Company’s compliance with the SEC’s
        interpretation of EITF 00-19 as it relates to these convertible securities,
        detachable warrants and registration rights. The Company has determined that
        due
        to the indeterminate number of shares which might be issued under the embedded
        convertible debt host conversion feature of the December 8, 2005 convertible
        debenture, the Company should have recorded a derivative liability equal
        to the
        fair value of both the detachable warrants and the embedded convertible feature
        for certain debentures and then marked to market these derivative liabilities
        at
        the end of each quarter and fiscal period.




For
        the
        convenience of the reader, this Form 10-QSB/A sets forth the original Form
        10-QSB in its entirety. However, this Form 10-QSB/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-QSB 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 10QSB/A
        as
        Exhibits 31.1, 31.2, 32.1 and 32.2, respectively.


3


**TRIANGLE
      PETROLEUM CORPORATION**





Quarterly
      Report on Form 10-QSB for the


Quarterly
      Period Ending July 31, 2006





Table
      of
      Contents





PART
                  I. FINANCIAL INFORMATIONItem
                  1.
              Financial
                  StatementsConsolidated
                  Balance Sheets:July
                  31, 2006 (Unaudited) and January 31, 2006 (Audited)
              5Consolidated
                  Statements of Operations:Three
                  and Six Months Ended July 31, 2006 and 2005 (Unaudited)
                  andAccumulated
                  from December 11, 2003 (Date of Inception) to July 31, 2006
                  (Unaudited)
              6Consolidated
                  Statements of Cash Flows:Six
                  Months Ended July 31, 2006 and 2005 (Unaudited)
              7Notes
                  to Unaudited Consolidated Financial Statements:July
                  31, 2006
              8-20Item
                  2.
              Management
                  Discussion and Analysis
              21Item
                  3.
              Controls
                  and Procedures
              31PART
                  II. OTHER INFORMATIONItem
                  1.
              Legal
                  Proceedings
              32Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              32Item
                  3.
              Defaults
                  Upon Senior Securities
              32Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              32Item
                  5.
              Other
                  Information
              32Item
                  6.
              Exhibits
              32Signatures
              33


4





Triangle
      Petroleum Corporation




(An
      Exploration Stage Company)


Consolidated
      Balance Sheets


(Expressed
      in U.S. dollars)





July 31,
                2006
                $
              
              January 31,
                2006
                $(unaudited)(Restated –
                Note 13)ASSETSCurrent
                  AssetsCash
                  and cash equivalents
              
              
              18,972,807
              
              
              17,394,422Other
                  current assets
              
              
              308,707
              
              
              406,356Total
                  Current Assets
              
              
              19,281,514
              
              
              17,800,778Debt
                  Issuance Costs, net
              
              
              1,151,769
              
              
              903,158Property
                  and Equipment (Note 3)
              
              
              77,906
              
              
              69,266Oil
                  and Gas Properties (Note 4)
              
              
              9,324,524
              
              
              7,065,367Total
                  Assets
              
              
              29,835,713
              
              
              25,838,569LIABILITIES
                  AND STOCKHOLDERS’ DEFICITCurrent
                  LiabilitiesAccounts
                  payable
              
              
              1,251,035
              
              
              525,659Accrued
                  liabilities (Note 5)
              
              
              1,227,145
              
              
              1,116,613Derivative
                  liabilities (Note 7)
              
              
              23,376,880
              
              
              30,219,250Due
                  to related parties (Note 8)
              
              
              8,310
              
              
              1,398Total
                  Current Liabilities
              
              
              25,863,370
              
              
              31,862,920Asset
                  Retirement Obligations (Note 4)
              
              
              33,000
              
              
              33,000Convertible
                  Debentures, less unamortized discount of $18,446,622 and $20,409,674,
                  respectively (Note 6)
              
              
              10,753,378
              
              
              4,690,326Total
                  Liabilities
              
              
              36,649,748
              
              
              36,586,246Commitments
                  (Notes 1, 4 and 11)Stockholders’
                  DeficitCommon
                  Stock
                Authorized:
                  100,000,000 shares, par value $0.00001
                Issued:
                  20,082,530 shares and 19,182,530 shares, respectively
              
              
              201
              
              
              192Additional
                  Paid-In Capital
              
              
              10,385,877
              
              
              7,638,741Donated
                  Capital
              
              
              11,400
              
              
              11,400Deferred
                  Compensation (Note 9)
              
              
              (2,771,667
              )
              
              (4,486,667
              )Deficit
                  Accumulated During the Exploration Stage
              
              
              (14,439,846
              )
              
              (13,911,343
              )Total
                  Stockholders’ Deficit
              
              
              (6,814,035
              )
              
              (10,747,677
              )Total
                  Liabilities and Stockholders’ Deficit
              
              
              29,835,713
              
              
              25,838,569





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


5





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 31,2006
              
              2006
              
              2005
              
              2006
              
              2005$
              
              $
              
              $
              
              $
              
              $(Restated –
                Note 13)
              
              (Restated –
                Note
                  13)
              
              
              
              (Restated
                  –
                Note
                  13)Revenue
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Operating
                  ExpensesDepreciation
              
              
              16,855
              
              
              6,458
              
              
              –
              
              
              12,238
              
              
              4,064General
                  and administrative
              
              
              8,699,721
              
              
              2,464,697
              
              
              203,607
              
              
              4,614,124
              
              
              223,367Impairment
                  loss on oil and gas properties
              
              
              1,062,650
              
              
              44,937
              
              
              –
              
              
              44,937
              
              
              –Total
                  Operating Expenses
              
              
              9,779,226
              
              
              2,516,092
              
              
              203,607
              
              
              4,671,299
              
              
              227,431Net
                  Loss from Operations
              
              
              (9,779,226
              )
              
              (2,516,092
              )
              
              (203,607
              )
              
              (4,671,299
              )
              
              (227,431
              )Other
                  Income (Expense)Accretion
                  of discounts on convertible debentures
              
              
              (7,705,296
              )
              
              (2,250,714
              )
              
              –
              
              
              (4,697,631
              )
              
              (375,000
              )Amortization
                  of debt issue costs
              
              
              (228,232
              )
              
              (94,099
              )
              
              –
              
              
              (176,390
              )
              
              –Interest
                  income
              
              
              330,230
              
              
              170,030
              
              
              4,097
              
              
              278,756
              
              
              4,097Interest
                  on long-term debt
              
              
              (1,227,145
              )
              
              (442,258
              )
              
              (435,000
              )
              
              (838,888
              )
              
              (60,000
              )Unrealized
                  gain on fair value of derivatives
              
              
              21,421,088
              
              
              5,040,582
              
              
              –
              
              
              9,576,949
              
              
              –Total
                  Other Income (Expense)
              
              
              12,590,645
              
              
              2,423,541
              
              
              (430,903
              )
              
              4,142,796
              
              
              (430,903
              )Net
                  Loss Before Discontinued Operations
              
              
              2,811,419
              
              
              (92,551
              )
              
              (634,510
              )
              
              (528,503
              )
              
              (658,334
              )Discontinued
                  Operations
              
              
              (32,471
              )
              
              –
              
              
              (15,000
              )
              
              –
              
              
              (30,000
              )Net
                  Loss for the Period
              
              
              2,778,948
              
              
              (92,551
              )
              
              (649,510
              )
              
              (528,503
              )
              
              (688,334
              )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
              
              
              (14,439,846
              )Net
                  Loss Per ShareContinuing
                  Operations – Basic and Diluted
              
              
              
              
              
              –
              
              
              (0.03
              )
              
              (0.03
              )
              
              (0.02
              )Discontinued
                  Operations – Basic and Diluted
              
              
              
              
              
              –
              
              
              –
              
              
              –
              
              
              ––
              
              
              (0.03
              )
              
              (0.03
              )
              
              (0.02
              )Weighted
                  Average Number of Shares Outstanding
              
              
              
              
              
              20,013,000
              
              
              22,087,000
              
              
              19,487,000
              
              
              33,984,000





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


6





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 31,2006
              
              2005$
              
              $(Restated –
                Note 13)Operating
                  ActivitiesNet
                  loss for the period
              
              
              (528,503
              )
              
              (688,334
              )Adjustments
                  to reconcile net loss to net cash used in operating and financing
                  activities:Accretion
                  of discounts on convertible debentures
              
              
              4,697,631
              
              
              375,000Amortization
                  of debt issuance costs
              
              
              176,389
              
              
              –Depreciation
              
              
              12,238
              
              
              4,064Donated
                  consulting services and rent
              
              
              –
              
              
              2,000Stock-based
                  compensation
              
              
              3,562,145
              
              
              93,125Unrealized
                  gain on fair value of derivatives
              
              
              (9,576,949
              )
              
              –Changes
                  in operating assets and liabilitiesOther
                  current assets
              
              
              207,257
              
              
              (86,986
              )Accounts
                  payable and accrued liabilities
              
              
              (281,735
              )
              
              83,543Due
                  to related parties
              
              
              6,912
              
              
              (28,416
              )Net
                  Cash Used in Operating Activities
              
              
              (1,724,615
              )
              
              (246,004
              )Investing
                  ActivitiesPurchase
                  of property and equipment
              
              
              (20,879
              )
              
              (2,342
              )Oil
                  and gas property expenditures
              
              
              (1,251,121
              )
              
              (597,021
              )Net
                  Cash Used in Investing Activities
              
              
              (1,272,000
              )
              
              (599,363
              )Financing
                  ActivitiesProceeds
                  from issuance of convertible debentures
              
              
              5,000,000
              
              
              6,000,000Debt
                  issuance costs
              
              
              (425,000
              )
              
              (65,000
              )Proceeds
                  from issuance of common stock
              
              
              –
              
              
              60,000Net
                  Cash Provided by Financing Activities
              
              
              4,575,000
              
              
              5,995,000Increase
                  in Cash and Cash Equivalents
              
              
              1,578,385
              
              
              5,149,633Cash
                  and Cash Equivalents – Beginning of Period
              
              
              17,394,422
              
              
              148,102Cash
                  and Cash Equivalents – End of Period
              
              
              18,972,807
              
              
              5,297,735Non-cash
                  Investing and Financing ActivitiesDiscount
                  on stock issued
              
              
              –
              
              
              1,715,000Stock
                  issued for conversion of debenture
              
              
              900,000
              
              
              –Supplemental
                  Disclosures:Interest
                  paid
              
              
              –
              
              
              –Income
                  taxes paid
              
              
              –
              
              
              –





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


7





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)





**1.**
            **Exploration
                Stage Company**




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 revenues from its planned operations. It is
        primarily engaged in the acquisition, exploration and development of oil
        and gas
        resource properties. The ability of the Company to emerge from the exploration
        stage with respect to planned principal business activities is dependent
        upon
        its successful efforts to raise additional equity financing and generate
        significant revenue. The Company has a working capital deficit of $6,581,856
        as
        at July 31, 2006. During the year ended January 31, 2006, the Company issued
        $26,000,000 of convertible debentures. During the six month period ended
        July
        31, 2006, the Company issued an additional $5,000,000 of convertible debentures.
        Management plans to raise additional capital through equity and/or debt
        financings. There is no guarantee that the proceeds from the financings raised
        by the Company, or proceeds from any future financings, will be sufficient
        to
        complete any of the above objectives. These factors raise substantial doubt
        regarding the Company’s ability to continue as a going
        concern.





**2.**
              **Summary
                  of Significant Accounting
                  Policies**




a)
            Basis
                of Presentation




The
      consolidated financial statements and related notes are presented in accordance
      with accounting principles generally accepted in the United States, and are
      expressed in US dollars. The 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)
            Use
                of Estimates




The
      preparation of consolidated 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 consolidated
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. Actual results could differ from those estimates.




c)
            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.




d)
              Foreign
                  Currency Translation




The
      Company's functional 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 consolidated financial statements, entered into derivative instruments
      to offset the impact of foreign currency fluctuations.




e)
            Interim
                Consolidated Financial Statements




These
      interim consolidated unaudited financial statements for the period ended July
      31, 2006 have been prepared on the same basis as the annual consolidated
      financial statements and in the opinion of management, reflect all adjustments,
      which include only normal recurring adjustments, necessary to present fairly
      the
      Company’s financial position, results of operations and cash flows for the
      periods shown. The results of operations for such periods are not necessarily
      indicative of the results expected for a full year or for any future
      period.


8





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)**




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
      carrying value of intangible assets and other long-lived assets is reviewed
      on a
      regular basis for the existence of facts or circumstances that may suggest
      impairment. The Company recognizes impairment when the sum of the expected
      undiscounted future cash flows is less than the carrying amount of the asset.
      Impairment losses, if any, are measured as the excess of the carrying amount
      of
      the asset over its estimated fair value.




h)
            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.




i)
            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.
      As
      of July 31, 2006, the Company had no properties with proven reserves. When
      the
      Company obtains proven oil and gas reserves, capitalized costs, including
      estimated future costs to develop the reserves proved 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 annually
      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.




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. As of July 31, 2006, all of the
      Company’s oil and gas properties were unproved and were excluded from
      amortization.


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)**




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. During
      the six month period ended July 31, 2006, the Company recognized amortization
      expense of $176,390.




k)
            Income
                Taxes




Potential
      benefits of income tax losses are not recognized in the accounts until
      realization is more likely than not. 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. 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.




l)
            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 convertible debt, 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.




m)
            Financial
                Instruments




The
      fair
      values of financial instruments, which includes cash and cash equivalents,
      other
      current assets, accounts payable, accrued liabilities and due to related parties
      approximate their carrying values due to the relatively short maturity of these
      instruments.




n)
              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.




o)
              Concentration
                  of Risk




The
      Company maintains its cash accounts in one commercial bank located in Calgary,
      Alberta, Canada. The Company's cash accounts are uninsured and insured business
      checking accounts and deposits maintained principally in U.S. dollars. As at
      July 31, 2006, 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.




p)
              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, 2006 and 2005, the
      Company has no items that represent comprehensive loss and, therefore, has
      not
      included a schedule of comprehensive loss in the financial
      statements.


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)




q)
              Stock-based
                  Compensation




Prior
      to
      February 1, 2006, the Company 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, the Company 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.




As
        a
        result of adopting SFAS 123R on February 1, 2006, the Company’s loss for the six
        month period ended July 31, 2006 is $112,034 higher than if it had continued
        to
        account for share-based compensation under APB No. 25. Basic and diluted
        loss
        per share for the six month period ended July 31, 2006 would have remained
        unchanged at $0.03 per share.




As
      there
      were no stock options granted prior to July 31, 2005, there was no effect on
      net
      loss and loss per share if the Company had applied the fair value recognition
      provisions of SFAS No. 123 for the prior period presented.




Effective
      August 5, 2005, the Company approved an incentive stock option plan (the “2005
      Incentive Stock Plan”) to issue up to 2,000,000 shares of common stock. The 2005
      Incentive Stock 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.




On
      February 21, 2006, the Company granted stock options under the 2005 Incentive
      Stock Plan to a director to acquire 200,000 common shares at an exercise price
      of $4.55 per share exercisable to February 21, 2011. The fair value for options
      granted was estimated at the date of grant using the Black-Scholes
      option-pricing model and the weighted average fair value of the stock options
      granted was $3.84 per share. On March 24, 2006, the Company granted stock
      options to a consultant to acquire 100,000 common shares at an exercise price
      of
      $3.46 per share exercisable to March 24, 2011. The fair value for options
      granted was estimated at the date of grant using the Black-Scholes
      option-pricing model and the weighted average fair value of stock options
      granted was $3.48 per share. On July 27, 2006, the Company granted stock options
      to a consultant to acquire 300,000 common shares at an exercise price of $2.90
      per share exercisable to July 27, 2011. The fair value for options granted
      was
      estimated at the date of grant using the Black-Scholes option-pricing model
      and
      the weighted average fair value of stock options granted was $2.48 per share.
      During the six month period ended July 31, 2006, the Company recorded
      stock-based compensation of $1,331,825 as general and administrative expense.




Stock-based
      compensation is recognized over the vesting period, using the straight-line
      attribution method for awards subject to graded vesting based on a service
      condition.




A
      summary
      of the Company’s stock option activity for the six months ended July 31, 2006 is
      as follows:





Number
                  of
                Options
              
              Weighted Average
                Exercise
                  Price
                $Balance,
                  January 31, 2006
              
              
              1,330,000
              
              
              3.28Granted
              
              
              600,000
              
              
              3.54Cancelled/forfeited
              
              
              (200,000
              )
              
              3.23Balance,
                  July 31, 2006
              
              
              1,730,000
              
              
              3.37





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)




q)
              Stock-based
                  Compensation (continued)




Additional
      information regarding stock options as at July 31, 2006 is as
      follows:





Outstanding
              
              ExercisableExercise prices
                $
              
              Number of
                shares
              
              Weighted
                average
                remaining
                contractual
                life
                  (years)
              
              Weighted
                average
                exercise
                price
                $
              
              Number
                  of
                shares
              
              Weighted
                average
                exercise
                price
                $2.90
              
              
              300,000
              
              
              4.99
              
              
              2.90
              
              
              60,000
              
              
              2.903.23
              
              
              930,000
              
              
              4.02
              
              
              3.23
              
              
              372,000
              
              
              3.233.46
              
              
              100,000
              
              
              4.65
              
              
              3.46
              
              
              20,000
              
              
              3.463.53
              
              
              200,000
              
              
              4.20
              
              
              3.53
              
              
              100,000
              
              
              3.534.55
              
              
              200,000
              
              
              4.56
              
              
              4.55
              
              
              40,000
              
              
              4.551,730,000
              
              
              4.21
              
              
              3.37
              
              
              592,000
              
              
              3.34




As
        at
        July 31, 2006, there was $2,283,449 of total unrecognized compensation costs
        related to non-vested share-based compensation arrangements granted under
        the
        2005 Incentive Stock Plan which are expected to be recognized over a period
        of
        21 months. A summary of the status of the Company’s non-vested shares as of July
        31, 2006, and changes during the six months ended July 31, 2006, is presented
        below:




**Non-vested
                  shares**
              
              **Shares**
              
              **Weighted-Average**
                **Grant-Date**
                **Fair
                  Value**Non-vested
                  at February 1, 2006
              
              
              1,054,000
              
              $
              2.67Granted
              
              
              600,000
              
              $
              3.10Vested
              
              
              (516,000
              )
              $
              2.77Non-vested
                  at July 31, 2006
              
              
              1,138,000
              
              $
              2.85




r)
              Recent
                  Accounting Pronouncements




In
      May
      2005, the Financial Accounting Standards Board (FASB) issued SFAS No. 154,
      “ *Accounting
      Changes and Error Corrections - A Replacement of APB Opinion No. 20 and SFAS
      No.
      3* ”.
      SFAS
      154 changes the requirements for the accounting for and reporting of a change
      in
      accounting principle and applies to all voluntary changes in accounting
      principle. It also applies to changes required by an accounting pronouncement
      in
      the unusual instance that the pronouncement does not include specific transition
      provisions. SFAS 154 requires retrospective application to prior periods’
financial statements of changes in accounting principle, unless it is
      impracticable to determine either the period-specific effects or the cumulative
      effect of the change. The provisions of SFAS No. 154 are effective for
      accounting changes and correction of errors made in fiscal years beginning
      after
      December 15, 2005. The adoption of this standard did not have a material effect
      on the Company’s results of operations or financial position.




In
      December 2004, FASB issued SFAS No. 153, “ *Exchanges
      of Nonmonetary Assets - An Amendment of APB Opinion No. 29* ”.
      The
      guidance in APB Opinion No. 29, “ *Accounting
      for Nonmonetary Transactions* ”,
      is
      based on the principle that exchanges of nonmonetary assets should be measured
      based on the fair value of the assets exchanged. The guidance in that Opinion,
      however, included certain exceptions to that principle. SFAS No. 153 amends
      Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar
      productive assets and replaces it with a general exception for exchanges of
      nonmonetary assets that do not have commercial substance. A nonmonetary exchange
      has commercial substance if the future cash flows of the entity are expected
      to
      change significantly as a result of the exchange. The provisions of SFAS No.
      153
      are effective for nonmonetary asset exchanges occurring in fiscal periods
      beginning after June 15, 2005. Early application is permitted and companies
      must
      apply the standard prospectively. The adoption of this standard did not have
      a
      material effect on the Company’s results of operations or financial
      position.




In
      2006,
      the FASB has issued SFAS No. 155 *“Accounting
      for Certain Hybrid Financial Instruments - an amendment of FASB Statements
      No.
      133 and 140”* and No.
      156 *“Accounting
      for Servicing of Financial Assets - an amendment of FASB Statement No.
      140”* ,
      but
      they will not have a material effect in the Company’s results of operations or
      financial position. Therefore, a description and its impact for each on the
      Company’s operations and financial position have not been
      disclosed.




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)




s)
              Reclassifications




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





**3.**
            **Property
                and Equipment**




Cost
              $
            
            Accumulated
              Depreciation
              $
            
            July
                31,
              2006
              Net
                Carrying
              Value
              $
            
            January
                31,
              2006
              Net
                Carrying
              Value
              $Computer
                hardware
            
            
            46,824
            
            
            8,902
            
            
            37,922
            
            
            32,804Furniture
                and equipment
            
            
            33,855
            
            
            5,003
            
            
            28,852
            
            
            29,573Geophysical
                software
            
            
            8,000
            
            
            2,444
            
            
            5,556
            
            
            6,889Leasehold
                Improvements
            
            
            6,083
            
            
            507
            
            
            5,576
            
            
            –94,762
            
            
            16,856
            
            
            77,906
            
            
            69,266





**4.**
            **Oil
                and Gas Properties**





The
      total
      costs incurred and excluded from amortization are summarized as follows:





Acquisition
              $
            
            Exploration
              $
            
            Impairment
              Loss
              $
            
            July
                31,
              2006
              Net
                Carrying
              Value
              $
            
            January
                31,
              2006
              Net
                Carrying
              Value
              $Canadian
                properties
            
            
            1,851,220
            
            
            2,361,063
            
            
            –
            
            
            4,212,283
            
            
            3,411,226US
                properties
            
            
            3,860,184
            
            
            2,269,770
            
            
            (1,017,713
            )
            
            5,112,241
            
            
            3,654,141Totals
            
            
            5,711,404
            
            
            4,630,833
            
            
            (1,017,713
            )
            
            9,324,524
            
            
            7,065,367




All
      of
      the Company’s oil and gas properties are unproven and are located in the United
      States and Canada. The Company is currently participating in oil and gas
      exploration activities in Texas and Colorado, USA, and Alberta,
      Canada.




(a) On
      October 19, 2005, the Company entered into a Participation Agreement with a
      Texas based joint venture partner to earn a 30% interest in certain prospects
      located in the Southern Fort Worth Basin, Texas. The Company must pay $597,600,
      of which $300,000 has been paid, and the balance is payable on October 30,
      2006.




(b) On
      October 28, 2005, the Company entered into a Letter Agreement with a Colorado
      based joint venture partner to acquire a 25% working interest in three prospects
      located in Colorado, Wyoming and Montana. The Company paid $2,000,000 in fiscal
      2006 and is committed to pay up to an additional $2,492,334. The Company must
      pay 33.333% of the costs of drilling the first well, and 25% of the costs
      thereafter. In fiscal 2006, the Company recognized an impairment loss of
      $1,017,713 related to an evaluation well located on the Colorado acreage. This
      impairment loss includes $33,000 in asset retirement obligations accrued which
      is the Company’s estimated share of the costs to abandon and reclaim this well.
      The reclamation work is not expected to occur within the next twelve
      months.




**5.**
            **Accrued
                Liabilities**




The
      components of accrued liabilities are as follows:





July
                31,
              2006
              $
            
            January
                31,
              2006
              $Interest
            
            
            1,227,145
            
            
            388,258Oil
                and gas expenditures
            
            
            –
            
            
            725,855Professional
                fees
            
            
            –
            
            
            33,000Total
                accrued liabilities
            
            
            1,227,145
            
            
            1,116,613





13





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)





**6.**
              **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 are 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.




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 six month period ended July 31, 2006, the principal amount
        of $900,000 was converted into 900,000 shares of common stock. The unamortized
        discount on the converted debentures of $593,750 was charged to accretion
        expense. The Company will record interest expense over the term of the remaining
        convertible debentures of $4,200,000 resulting from the difference between
        the
        stated value and carrying value at the date of issuance. To July 31, 2006,
        accrued interest of $477,830 has been included in accrued liabilities, and
        $4,162,500 has been accreted increasing the carrying value of the convertible
        debentures to $2,362,500 (net of $1,800,000 in conversion). Refer to Note
        12.




On
        December 8, 2005, upon the issuance of the convertible debentures referred
        to in
        Note 7(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, 2006,
        the Company recorded a gain on the change in fair value of the derivative
        liability of $10,148,400 (July 31, 2005 - $nil) and as at July 31, 2006,
        the
        fair value of the derivative liability was $13,473,000 (January 31, 2006
        -
        $23,621,400).




(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.


14





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)




**6.**
            **Convertible
                Debentures (continued)**




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 is
        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 is 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.




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.




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 7 and 13) 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. The carrying value of the convertible
        debentures will be accreted to the face value of $15,000,000 to maturity.
        To
        July 31, 2006, accrued interest of $334,247 has been included in accrued
        liabilities and $1,606,712 has been accreted increasing the carrying value
        of
        the convertible debentures to $6,454,794. During the six months ended July
        31,
        2006, the Company recorded a loss on the change in fair value of the derivative
        liability of $2,086,201 (July 31, 2005 - $nil), recognized a derivative
        liability of $2,796,579 related to the third $5,000,000 convertible debenture
        installment issued June 1, 2006 and as at July 31, 2006 the fair value of
        the
        derivative liability was $9,703,380 (January 31, 2006 -
        $4,882,600).




(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 instalment 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
      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 is
        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 is 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




15




Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)




**6.**
              **Convertible
                  Debentures
                  (continued)**




amount
        equal to 1% of the liquidated value of the convertible debentures. The Company
        filed an SB-2 Registration Statement on January 18, 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 7 and 13) 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, 2006, accrued interest of $415,068 has been included in accrued
        liabilities, and $1,936,084 has been accreted increasing the carrying value
        of
        the convertible debentures to $1,936,084. During the six months ended July
        31,
        2006, the Company recorded a gain on the change in fair value of the derivative
        liability of $1,514,750 (July 31, 2005 - $nil) as at July 31, 2006, the fair
        value of the derivative liability was $200,500 (January 31, 2006 -
        $1,715,250).




**7.**
              **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,
        2006 as described in Note 13.




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,
        2006.




Volatility
              
              Risk
                  Free
                Rate
              
              Dividend
                Yield
              
              Term
                  in
                YearsWeighted
                  Average Assumptions at:July
                  31, 2006
              
              
              74
              %
              
              4.96
              %
              
              –
              
              
              2.55




The
        following table shows the assumptions used in the Black-Scholes calculation
        of
        the detachable warrants as at July 31, 2006.




Volatility
              
              Risk
                  Free
                Rate
              
              Dividend
                Yield
              
              Term
                  in
                YearsWeighted
                  Average Assumptions at:July
                  31, 2006
              
              
              74
              %
              
              4.99
              %
              
              –
              
              
              1.62




During
        the six month period ended July 31, 2006, the Company recorded a gain on
        derivatives of $9,576,949 equal to the difference in the fair value of the
        derivatives at January 31, 2006 and July 31, 2006, adjusted for the June
        1, 2006
        debenture derivatives fair value at issuance.


16


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)




**8.**
              **Related
                  Party Transactions**




a)
              The
                  Company paid the former Secretary of the Company $8,000 during
                  the six
                  month period ended July 31, 2005 for consulting services provided.
                  Previously, the former Secretary provided consulting services to
                  the
                  Company valued at $250 per month. No amounts were recognized for
                  donated
                  services for the six month period ended July 31,
                  2005.




b)
            During
                the six month period ended July 31, 2006, the Company incurred $20,000
                in
                director’s fees.




c)
            Effective
                September 1, 2005, the Company agreed to pay $10,700 per month for
                management services provided by the President of the Company. This
                agreement was terminated January 31, 2006, and effective February
                1, 2006,
                the Company agreed to pay a salary of Cdn$12,000 per month to the
                President of the Company. During the six month period ended July
                31, 2006,
                $63,558 (Cdn$72,000) was charged to operations.




d)
            On
                June 23, 2005, the Company entered into a management consulting agreement
                with the President of the Company’s subsidiary. 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 month
                period
                ended July 31, 2006, $120,000 was charged to operations.




e)
            On
                November 14, 2005, the Company entered into a management consulting
                agreement with the Chief Financial Officer of the Company. Under
                the terms
                of the agreement, the Company must pay $10,000 per month, as well
                as an
                annual bonus based upon mutually agreed upon targets. This agreement
                terminated December 31, 2005, and effective January 1, 2006, the
                Company
                agreed to pay a salary of $10,000 per month to the Chief Financial
                Officer. During the six month period ended July 31, 2006, $60,000
                was
                charged to operations.




f)
            As
                at July 31, 2006, the Company was indebted to the President of the
                Company
                in the amount of $7,697 (January 31, 2006 - $1,397). This amount
                is for
                reimbursable business expenses incurred on behalf of the
                Company.




g)
            As
                at July 31, 2006, the Company was indebted to an officer of the Company
                in
                the amount of $613 (January 31, 2006 - $NIL). This amount is for
                reimbursable business expenses incurred on behalf of the
                Company.





**9.**
              **Common
                  Stock**





During
      the six months ended July 31, 2006




(a)
            On
                June 1, 2006, the Company issued 200,000 shares of common stock upon
                the
                conversion of convertible debentures with a principal amount of
                $200,000.




(b)
            In
                March 2006, the Company issued 700,000 shares of common stock upon
                the
                conversion of convertible debentures with a principal amount of
                $700,000.




(c)
              Refer
                  to Note 12.




During
        the six months ended July 31, 2005




(d)
            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, 2006, $900,000 was
                charged
                to operations. During the six month period ended July 31, 2006, $675,000
                was charged to operations. The remaining amount of $1,125,000 in
                deferred
                compensation will be amortized over the remainder of the President’s two
                year employment contract.




(e)
            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, 2006, $1,473,333 was charged to operations.
                During
                the six month period ended July 31, 2006, $1,040,000 was charged
                to
                operations. The remaining amount of $1,646,667 in deferred compensation
                will be amortized over the remainder of the President’s two year
                employment contract.




17


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)





**10.**
                **Share
                    Purchase
                    Warrants**




As
      at
      July 31, 2006, the following share purchase warrants were
      outstanding:





Number
                of
              Warrants
            
            Exercise
                Price
            
            Expiry
                Date6,000,000
            
            $
            1.00
            
            
            June
                15, 2008625,000
            
            $
            5.00
            
            
            December
                28, 2006625,000
            
            $
            5.00
            
            
            January
                23, 20077,250,000








**11.**
                **Commitment**




On
      July
      19, 2005, the Company entered into a lease agreement commencing October 1,
      2005
      for office premises for a four year term expiring September 30, 2009. Annual
      rent is payable at $32,972 (Cdn$36,816) for the first two years and $34,663
      (Cdn$38,704) for the remaining two years. The Company must also pay its share
      of
      occupancy costs, currently at an annual rate of $18,042 (Cdn$20,145). During
      the
      six month period ended July 31, 2006, the Company paid rent expense of $22,682.
      Future minimum lease payments over the next five fiscal years are as
      follows:





2007
            
            $
            51,0002008
            
            $
            51,0002009
            
            $
            53,0002010
            
            $
            35,0002011
            
            $
            –$
            190,000




**12.**
              **Subsequent
                  Event**





On
      August
      7, 2006, the Company received a notice of conversion to issue 400,000 shares
      of
      common stock upon the conversion of a convertible debenture with a principal
      amount of $400,000.




**13.**
              **Restatement**




The
        Company has restated its consolidated financial statements for the fiscal
        period
        ended July 31, 2006 to reflect additional non-operating gains and losses
        related
        to the classification of and accounting for convertible debentures issued
        in
        fiscal 2006. The Company had previously recorded a beneficial conversion
        feature, measured using the intrinsic value method, and detachable warrants,
        measured using the Black-Scholes fair value method, and recorded them to
        additional paid in capital on a relative fair value basis. Upon further review,
        the Company has determined that the conversion features of the convertible
        debentures issued pursuant to the December 8, 2005 Security Purchase Agreement
        (refer to Note 7(b)) and the warrants issued pursuant to the June 14, 2005
        and
        December 28, 2005 Securities Purchase Agreements (refer to Notes 7(a) and
        (c)
        respectively) should have been classified as derivative liabilities pursuant
        to
        SFAS No. 133 and EITF No. 00-19. In addition, the Company has revised the
        fair
        value of the conversion features recorded with the convertible debentures
        issued
        pursuant to the December 28, 2005 Securities Purchase Agreement. The accounting
        treatment of derivative financial instruments requires that the Company record
        the derivatives at their fair values as of the inception date and at their
        fair
        values as of each subsequent balance sheet date. At the date of the conversion
        of each respective instrument or portion thereof, the corresponding derivative
        liability will be reclassified as equity.




18


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)





**13.   Restatement
        (continued)**




The
        accompanying consolidated financial statements for the period ended July
        31,
        2006 has been restated to effect the changes described above as
        follows:


July
                    31, 2006
                  As
                    Reported
                  $
                
                Adjustment
                  $
                
                July
                    31, 2006
                  As
                    Restated
                  $Consolidated
                    Balance SheetCurrent
                    LiabilitiesDerivative
                    liabilities
                
                
                –
                
                
                2,734,579
                (a)(9,576,949)
                (b)30,219,250
                (d)
                
                23,376,880Long-Term
                    LiabilitiesConvertible
                    Debentures
                
                
                17,018,427
                
                
                (2,594,635)
                (a)945,563
                (c)(4,615,977)
                (d)
                
                10,753,378Stockholders’
                    DeficitAdditional
                    Paid-In Capital
                
                
                30,510,190
                
                
                (139,944)
                (a)(19,984,369)
                (d)
                
                10,385,877Deficit
                    Accumulated During the Development Stage
                
                
                (17,452,328
                )
                
                9,576,949
                (b)(945,563)
                (c)(5,618,904)
                (d)
                
                (14,439,846
                )




(a)
              To
                  record fair values of derivative liabilities of convertible debentures
                  and
                  reduction of additional paid-in capital for the reversal of the
                  intrinsic
                  value of the beneficial conversion
                  feature.




(b) To
        record
        change in fair values of derivative liabilities.




(c) To
        record
        effect of fair value of conversion features and detachable warrants on
        accretion.




(d) To
        record
        cumulative effect of prior period restatements.




Three
                    Months Ended
                  July
                    31, 2006
                  As
                    Reported
                  $
                
                Adjustment
                  $
                
                Three
                    Months Ended
                  July
                    31, 2006
                  As
                    Restated
                  $Consolidated
                    Statement of OperationsAccretion
                    of discounts on convertible debentures
                
                
                (1,700,194
                )
                
                (550,520)
                (a)
                
                (2,250,714
                )Unrealized
                    gain on fair value of derivatives
                
                
                –
                
                
                5,040,582
                (b)
                
                5,040,582Net
                    loss for the period
                
                
                (4,582,613
                )
                
                (550,520)
                (a)5,040,582
                (b)
                
                (92,551
                )Net
                    Loss Per Share - Basic and Diluted
                
                
                (0.23
                )
                
                
                
                
                –




(a)  To
        record
        effect of fair value of conversion features and detachable warrants on
        accretion.




(b)  To
        record
        gain on derivatives based upon fair values as at July 31,
        2006.




19


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


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


(unaudited)




**13.
          Restatement (continued)**




Six
                    Months Ended
                  July
                    31, 2006
                  As
                    Reported
                  $
                
                Adjustment
                  $
                
                Six
                    Months Ended
                  July
                    31, 2006
                  As
                    Restated
                  $Consolidated
                    Statement of OperationsAccretion
                    of discounts on convertible debentures
                
                
                (3,752,068
                )
                
                (945,563)
                (a)
                
                (4,697,631
                )Unrealized
                    gain on fair value of derivatives
                
                
                –
                
                
                9,576,949
                (b)
                
                9,576,949Net
                    loss for the period
                
                
                (9,159,889
                )
                
                (945,563)
                (a)9,576,949
                (b)
                
                (528,503
                )Net
                    Loss Per Share - Basic and Diluted
                
                
                (0.47
                )
                
                
                
                
                (0.03
                )




(a)  To
        record
        effect of fair value of conversion features and detachable warrants on
        accretion.




(b)  To
        record
        gain on derivatives based upon fair values as at July 31,
        2006.




Accumulated
                    from
                  December
                    11, 2003
                  (Date
                    of Inception) to
                  July
                    31, 2006
                  As
                    Reported
                  $
                
                Adjustment
                  $
                
                Accumulated
                    from
                  December
                    11, 2003
                  (Date
                    of Inception) to
                  July
                    31, 2006
                  As
                    Restated
                  $Consolidated
                    Statement of OperationsAccretion
                    of discounts on convertible debentures
                
                
                (6,515,484
                )
                
                (945,563)
                (a)(244,249)
                (c)
                
                (7,705,296
                )Unrealized
                    gain on fair value of derivatives
                
                
                –
                
                
                9,576,949
                (b)11,844,,139
                (c)
                
                21,421,088Net
                    income (loss) for the period
                
                
                (17,452,328
                )
                
                (945,563)
                (a)9,576,949
                (b)11,599,890
                (c)
                
                2,778,948




(a)  To
        record
        effect of fair value of conversion features and detachable warrants on
        accretion.




(b)  To
        record
        gain on derivatives based upon fair values as at July 31,
        2006.




(c)  To
        record
        cumulative effect of prior period restatements.




Adjustments
        related to the accounting for the convertible debentures and derivative
        liabilities for the period ended July 31 , 2006
        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 .




20




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




The
      following discussion contains forward-looking statements that are subject to
      significant risks and uncertainties about us, our current and planned projects,
      our current and proposed marketing and sales, and our projected results of
      operations. There are several important factors that could cause actual results
      to differ materially from historical results and percentages and results
      anticipated by the forward-looking statements. The Company has sought to
      identify the most significant risks to its business, but cannot predict whether
      or to what extent any of such risks may be realized nor can there be any
      assurance that the Company has identified all possible risks that might arise.
      Investors should carefully consider all of such risks before making an
      investment decision with respect to the Company's stock. The following
      discussion and analysis should be read in conjunction with the financial
      statements of the Company and notes thereto. This discussion should not be
      construed to imply that the results discussed herein will necessarily continue
      into the future, or that any conclusion reached herein will necessarily be
      indicative of actual operating results in the future. Such discussion represents
      only the best present assessment from our Management.




**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 last year, during one of the strongest bull 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 prior year, is
      as
      follows:





**Month
                and**
              **Year**
            
            **Oil
                price**
              **per**
              **barrel**
            
            **Natural
                Gas**
              **price****Henry**
              **Hub
                Nymex**
              **(US$/mmbtu)**
            
            **Month
                and Year**
            
            **Oil
                price**
              **per
                barrel**
            
            **Natural
                Gas**
              **price
                Henry**
              **Hub
                Nymex**
              **(US$/mmbtu)**August
                2005
            
            $
            65
            
            $
            7.65
            
            
            August
                2004
            
            $
            44
            
            $
            6.05September
                2005
            
            $
            66
            
            $
            10.85
            
            
            September
                2004
            
            $
            46
            
            $
            5.08October
                2005
            
            $
            62
            
            $
            13.91
            
            
            October
                2004
            
            $
            53
            
            $
            5.72November
                2005
            
            $
            58
            
            $
            13.83
            
            
            November
                2004
            
            $
            48
            
            $
            7.63December
                2005
            
            $
            59
            
            $
            11.18
            
            
            December
                2004
            
            $
            43
            
            $
            7.98January
                2006
            
            $
            66
            
            $
            11.43
            
            
            January
                2005
            
            $
            47
            
            $
            6.21February
                2006
            
            $
            62
            
            $
            8.40
            
            
            February
                2005
            
            $
            48
            
            $
            6.29March
                2006
            
            $
            63
            
            $
            7.11
            
            
            March
                2005
            
            $
            54
            
            $
            6.30April
                2006
            
            $
            70
            
            $
            7.23
            
            
            April
                2005
            
            $
            53
            
            $
            7.32May
                2006
            
            $
            71
            
            $
            7.20
            
            
            May
                2005
            
            $
            49
            
            $
            6.75June
                2006
            
            $
            71
            
            $
            5.93
            
            
            June
                2005
            
            $
            57
            
            $
            6.12July
                2006
            
            $
            74
            
            $
            5.89
            
            
            July
                2005
            
            $
            59
            
            $
            6.98





This
      is
      consistent with most oil and gas analysts calling for continued high commodity
      prices due to strong or rising demand in the United States, China and India
      relative to regular supply disruptions in the Middle East, Gulf Coast states
      and
      other areas. 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 short term fluctuations in North American natural gas
      prices will occur based upon seasonal weather patterns and gas storage levels.




21




**Plan
      of Operations**





We
      believe that there are six critical elements for building a successful oil
      and
      gas exploration company in the current environment:


1.
              People –
                  this includes a qualified board of directors, advisory board members,
                  management, employees, and consultants;2.
              Projects
                  – a credible portfolio of projects that have the appropriate risk-return
                  ratio in order to generate potentially significant shareholder
                  value;3.
              Capital
                  – based upon the reputation of the people and the quality of the
                  projects,
                  there must be sufficient capital in order to launch the company
                  and to
                  provide for additional fundings;4.
              Technology
                  – the most advanced interpretation methods, techniques and methods
                  should
                  be utilized in order to maximize the potential for finding and
                  developing
                  oil and gas reserves;5.
              Land
                  position – the competitive nature of the oil and gas industry requires a
                  combination of approaches in order to secure sufficient land positions
                  to
                  explore for oil and gas; and6.
              Drilling
                  capability – the competitive nature of the oilfield service industry
                  requires a unique approach and a significant capital commitment
                  in order
                  to secure a drilling rig in today’s
                  marketplace.




**People:**





In
      late
      May 2005, Mark Gustafson was hired as our President, Chief Executive Officer
      and
      director with a mandate to aggressively transform us into an emerging oil and
      gas exploration company. In June 2005, we recruited two additional directors,
      John Carlson (engineer) and Ron Hietala (petrophysicist). Mr. Hietala was then
      retained as the President and director of our Alberta operating subsidiary,
      Elmworth Energy Corporation (“Elmworth”). On October 27, 2005, Mr. Hietala’s
      role was further expanded to include being appointed President of Triangle
      (USA)
      Petroleum Corporation (“Triangle USA”). Mr. Hietala’s specific mandate is to
      build a complete organization under his direction in Elmworth and Triangle
      USA
      based upon his 30 years experience in the oil and gas industry. Specifically,
      Mr. Hietala’s 19 year career and contacts at Canadian Hunter Exploration Ltd.
      continues to be critical in order to attract qualified employees and consultants
      for Elmworth and Triangle USA. In November 2005, we hired Aly Musani as our
      Chief Financial Officer to oversee all of our financial operations. In March
      2006, Mr. Musani’s role was expanded as he was appointed to the role of
      Secretary and Treasurer.





We
      have
      contracted several significant additions to the operating team in Elmworth
      based
      upon Mr. Hietala’s contacts, including landmen, geologists, geophysicists and
      engineers. We added Mr. Clarence Campbell, an industry recognized clastic
      sedimentologist and stratigrapher, who has worked extensively both domestically
      and internationally. Mr. Campbell’s practical, hands on experience in Western
      Canada is a strong asset to the integrated geological and geophysical projects.
      Another addition to the geoscience team is Mr. Arthur Bowman. Mr. Bowman
      received a BSc. from University of Toronto in 1977 and began his geophysical
      career in Calgary with Chevron Canada Resources Ltd. At Chevron, Mr. Bowman
      worked as an interpreter on various projects in Alberta and North Eastern
      British Columbia. More recently, Mr. Bowman was a founder of Defiant Energy
      Corp. The company commenced operations in 1998 and established production of
      3,500 barrels of oil equivalent per day until the company was sold to Advantage
      Energy Trust in 2004. Mr. Bowman acted as geophysicist, geologist and
      Vice-President of Exploration. We further strengthened our operational team
      with
      the hiring of Troy Wagner, P.Eng., MBA, effective August 8, 2006 as Chief
      Operating Officer and Vice-President Engineering. Mr. Wagner has spent the
      past
      10 years at a publicly traded oil and gas company where he was Vice-President
      Operations of two companies with combined production of approximately 36,000
      barrels of oil equivalent per day, a capital expenditure budget of $160 million
      Cndn and an operating budget of $110 million Cndn. His responsibilities included
      leading the technical teams (engineering and geoscience) and field based staff,
      approving all capital projects, managing budgets and integrating acquisitions.
      Mr. Wagner earned a Bachelor of Science in Mechanical Engineering from the
      University of Calgary (1992) and a Masters of Business Administration from
      Queens University in Kingston (2003).





In
      February 2006, we added Stephen A. Holditch to our board of directors. Since
      January 2004, Mr. Holditch has been the Head of the Department of Petroleum
      Engineering at Texas A&M University. Since 1976 through the present, Mr.
      Holditch has been a faculty member at Texas A&M University, as an Assistant
      Professor, Associate Professor, Professor and Professor Emeritus. Since its
      founding in 1977 until 1997, when it was acquired by Schlumberger Technology
      Corporation, Mr. Holditch was the Founder and President of S.A. Holditch & Associates,
      Inc., a petroleum
      technology company providing analysis of low permeability gas reservoirs and
      designing hydraulic fracture treatments. Mr. Holditch previously worked for
      Shell Oil Company and Pan American Petroleum Corporation. Mr. Holditch is a
      registered professional engineer in Texas, has received numerous honors, awards
      and recognitions and has authored or co-authored over 100 publications on the
      oil and gas industry. Mr.
      Holditch received his B.S., M.S. and Ph.D. in Petroleum Engineering from Texas
      A&M University in 1969, 1970 and 1976, respectively. We continue to seek
      additional qualified candidates to join our Board of Directors.




22




We
      do not
      intend to hire a significant number of employees over the next twelve months,
      as
      we intend to utilize our strong industry contacts with top quality consultants
      and contractors.





**Projects:**





During
      the six months ended July 31, 2006, we further refined our strategic plan and
      have determined that the maximum value to all of our stakeholders is best served
      by targeting three focused project areas that provide geographical
      diversification and acceptable returns for invested capital. The three major
      project areas are as follows:





*Barnett
      Shale Project - Greater Fort Worth Basin, Texas*





Through
      our operating subsidiary, Triangle USA, we have a 30% interest in a large joint
      venture area in the Barnett Shale of the Greater Fort Worth Basin. The joint
      venture was established through a strategic relationship with Kerogen Resources
      of Houston, Texas.





The
      Barnett Shale trend was pioneered by Mitchell Energy starting in 1981.
      Commercialization of the project was slow to occur until the application of
      large water fracturing stimulations at the Newark East Field in 1997. A second
      technology breakthrough occurred with the application of horizontal wells and
      selective stimulations. The Barnett Shale trend now supports daily production
      in
      excess of 1.2 bcf per day of natural gas with the USGS (United States Geological
      Survey) estimating a resource potential of greater than 25 tcf (trillion cubic
      feet) of natural gas. The Barnett Shale trend is the largest gas field in Texas
      with the productive limits being expanded regularly. Triangle USA has entered
      into the Barnett Shale trend through a joint venture with Kerogen Resources
      Inc.
      of Houston, Texas. Kerogen’s focus is to identify and exploit present and future
      shale gas projects within the United Sates and internationally. The principals
      of Kerogen also have many years of shale gas evaluation experience coupled
      with
      active involvement in the drilling, completion and production phases of Barnett
      Shale gas. Triangle USA, along with the joint venture partners, have commenced
      a
      land acquisition phase in the Fort Worth Basin (Texas). To
      date,
      9,500 acres have been secured through the Kerogen joint venture. A ten square
      mile initial 3-D seismic program has been designed. The data has been recently
      processed and interpreted, however, further evaluation is needed before
      determining the course of action for this project. Well spacing for the Barnett
      Shale ranges from 40 to 100 acres across the productive areas. Triangle
      USA believes the Barnett Shale trend to be an exploration opportunity that
      will
      continue to benefit from the application of new technology and sound field
      procedures.





Triangle
      USA is also currently participating in the drilling of three Barnett Shale
      wells
      in the Greater Fort Worth Basin. The wells are anticipated to be an extension
      of
      the productive trend. The drilling and completion program is a pilot project
      for
      a new completion technique designed to access incremental reserves and to
      establish higher levels of initial well productivity. Triangle USA has a 6.75%
      working interest in the project. The three horizontal wells in this multi-well
      project have been drilled to the projected total depth. The timing of the
      stimulation will be coordinated with the construction of pipeline and production
      facilities. Stimulation procedures and techniques developed in this first pilot
      project will be applied to the significant land block currently held by Triangle
      USA and its partner group.





Triangle
      USA’s third project in Johnson County has completed drilling operations. The
      well has been multi-stage fracture stimulated and is currently on production.
      This well is located in the active development area of the Barnett Shale.
      Triangle USA Petroleum has a 6% working interest in this Johnson County project.





Triangle
      USA along with its joint venture partner, Kerogen, will also evaluate other
      shale gas projects outside of the Greater Fort Worth Basin.




23




*West
      Central Alberta Deep Basin Opportunities*





Based
      upon Mr. Hietala’s successful career at Canadian Hunter Exploration Ltd. in
      developing natural gas in northwestern Alberta (Deep Basin), our board decided
      in June 2005 to consider exploring for natural gas in this area. In order to
      confirm the potential upside for Elmworth in exploring for natural gas in this
      area, two consulting firms were engaged. Calgary based Sproule Associates
      Limited prepared an independent geological assessment of the target area in
      June
      and concluded that there was approximately 820 bcf (billion cubic feet) of
      discovered and undiscovered recoverable raw gas remaining to be produced from
      the targeted horizons. In July 2005, Calgary based Petrel Robertson Consulting
      Ltd. prepared a broader geological resource assessment of this target area
      and
      concluded that the estimated gas in place is approximately 2,000 bcf. Based
      upon
      Mr. Hietala’s experience and these two reports, we have decided to explore these
      zones.





In
      October 2005, Elmworth participated in a 2,500 meter (8,250 feet) drilling
      project in the Deep Basin of West Central Alberta. This first evaluation well
      allowed us to earn the right to drill in five additional sections of land
      (approximately 3,200 acres). Elmworth has paid 38.5% of the costs. A hydraulic
      fracture stimulation program was performed on the exploration target identified
      by the operator. Commercial quantities of gas have not been tested from this
      well to date. However, Elmworth acquired proprietary well log data from this
      location that will be used to interpret the extensive 3-D seismic data currently
      under review.





In
      November 2005, Elmworth participated in a joint venture which targeted
      exploration opportunities in the south Deep Basin area of Alberta. 23 sections
      of land (approximately 14,700 acres) were earned upon the drilling of three
      commitment wells. Elmworth is participating for a 25% working interest in the
      first well. The first well was rig released in early December. A hydraulic
      fracture stimulation program was initiated on the Upper Cretaceous exploration
      targets. The primary horizon was not productive although a shallower interval
      is
      scheduled for completion. The second well is currently being evaluated for
      completion by the operator while the third well was plugged back to a shallower
      horizon. A completion program for the second well is currently under review.





*Hunter
      Energy Joint Venture Opportunity*





On
      October 31, 2005, we executed a joint venture agreement with Hunter Energy
      of
      Denver Colorado for a 25% working interest in three project areas. The joint
      venture currently has approximately 64,000 acres of mineral rights in three
      prospect areas in Colorado, Wyoming and Montana. At least one well will be
      drilled in each area. Triangle USA has committed a minimum of $4.5 million
      to
      this joint venture. Based upon the results of the initial exploratory program,
      we have the option to participate in additional land acquisitions and drilling
      programs. Hunter has a unique exploration team whose members are led by Mr.
      John
      Masters, a co-founder of Canadian Hunter Exploration Limited. Canadian Hunter
      pioneered the exploration concepts of pervasive gas saturated reservoir
      accumulations that today are known as Basin Centered Gas Fields. The
      observations and the technical understanding led by John Masters and the
      Canadian Hunter team have resulted in multi-TCF’s (trillion cubic feet) of gas
      being produced to date in the Western Canadian Sedimentary Basin. The greater
      Deep Basin today continues to be a cornerstone in the asset base of many
      Canadian and international companies. The business environment of the Rocky
      Mountain basins is attractive to establishing new projects, due to the fact
      that
      land costs, drilling density and hydrocarbon potential are all favorable in
      the
      areas selected by the experienced team at Hunter.





Triangle
      USA Petroleum Corporation has a 25% working interest in the joint venture
      properties comprised of 64,000 acres of mineral rights in three prospect areas
      in Colorado, Wyoming and Montana. The first exploration test well in Colorado
      was drilled in November 2005, the first evaluation of well logs and drill
      cuttings indicated that the well encountered the targeted objective as planned.
      The drilling rig finished operations in early January, successfully drilling
      to
      the target formations. The completion rig for the exploration test located
      in
      northwest Colorado was released in the middle of March and all technical and
      operational data gathered to date has not established the presence of commercial
      hydrocarbons. Triangle USA has reviewed the operator’s technical assessment of
      the exploration test. Triangle USA will also work with Hunter Energy to evaluate
      other hydrocarbon opportunities on the large land block that has been earned
      by
      the drilling of this first well.





**Capital:**





Based
      upon a new board of directors and an exploration program for Elmworth, we were
      able to secure a $6 million convertible debenture financing. The first tranche
      of $1 million was received in June 2005 and the balance
      of $5 million was received in July 2005. This funding was completed with one
      accredited investor and with no fees, other than legal costs to prepare a
      registration statement. This financing allowed us to proceed in the execution
      of
      our operating plan.




24




In
      anticipation of the significant funds required to undertake the projects
      mentioned above and to acquire additional seismic data, acquire land positions,
      and launch drilling programs, we anticipated that we would require approximately
      $25 million in additional funding. We secured a $15 million funding commitment
      from one institutional investor. We also secured a $10 million funding
      commitment from two institutional investors.





**Technology:**





One
      of
      the keys to finding natural gas is the use of available resources and advanced
      technological methods. In June 2005, Elmworth acquired new, high quality three
      dimensional seismic data covering 30 square miles in northwestern Alberta.
      This
      initial seismic data has been interpreted by the experienced team of geologists
      and geophysicists. This review was finalized during the first fiscal quarter
      of
      2006. **** The
      initial objective here was to identify preliminary locations to target within
      the selected area. The acquired seismic data will be used to establish
      opportunities in this multi-horizon area. We have recently made an additional
      seismic purchase in order to continue the interpretation and drilling location
      selection process. In addition to state of the art seismic interpretation,
      Elmworth will utilize advanced reservoir analysis techniques and the technical
      experience of its geological and geophysical team to further the opportunity
      identification process.




Elmworth
      has concluded two strategic technology partnerships. The first initiative is
      with the Department of Geophysics at the Colorado School of Mines under its
      Reservoir Characterization Project. This highly regarded, industry sponsored
      project, is developing advanced techniques to identify production from “Basin
      Centered” gas accumulations similar to the projects being pursued by Elmworth in
      the Alberta Deep Basin and also by Hunter Energy in the Rocky Mountain areas
      of
      the United States. The second initiative is with the Department of Geophysics
      at
      Stanford University. This project should provide Elmworth with key expertise
      related to seismic attribute analysis. Seismic attribute analysis is believed
      to
      provide new insights that will be used to identify drilling opportunities in
      the
      extensive 3-D seismic surveys being acquired by Elmworth in the Deep Basin.
      The
      strategic technology initiatives should support the Elmworth geo-science team
      and allow the team to focus on opportunity identification and land acquisition.





**Land:**





There
      are
      four different methods to acquire or participate in the leasing of oil and
      gas
      rights under the land in the target area:





(a)
            conventional
                crown land postings - under the current highly competitive environment,
                Elmworth will attempt to bid for oil and gas rights on lands that
                the
                province of Alberta owns pursuant to their regular land auction
                process.


(b)
            joint
                venture farm-ins - companies that own the oil and gas rights on land
                that
                Elmworth wishes to pursue may not be able to drill on their land
                for a
                variety of reasons (lack of capital, non-core area, etc.), which
                allows
                Elmworth the opportunity to farm-in on their lands (i.e. drill on
                their
                lands in order to earn a working interest in the
                well).


(c)
            drilling
                rig leverage - since drilling rigs are in such high demand, then
                there is
                an opportunity to utilize a secured rig as a negotiating tool to
                access
                drilling sites from other companies that have not secured a
                rig.


(d)
            technology
                leverage - through the technical strength of Elmworth’s consultants,
                contractors and advisory group there will be situations in which
                companies
                offer access to their land as a direct result of Elmworth’s willingness to
                work with their internal teams.





The
      acquisition of mineral rights on lands within the targeted area is an ongoing
      process that will continue throughout the drilling programs. To date, Elmworth
      has acquired oil and gas interests primarily via joint venture
      farm-ins.




25




**Drilling
      capability:**


Calgary
      based Crest Energy Consultants has been engaged by Elmworth to design and
      supervise all phases of the drilling and completion programs for the company
      in
      Canada.





**Projected
      Quarterly Milestones**





August
      2006 to October 2006


Ø
            Continue
                to evaluate Canadian winter drilling
                programs


Ø
            Continue
                to evaluate the Barnett Shale
                project


Ø
            Continue
                evaluating new complementary shale gas
                projects


Ø
            Establish
                limited initial production base





November
      2006 to January 2007


Ø
            Commence
                Canadian drilling program


Ø
            Commence
                drilling second well in the Hunter Energy
                program


Ø
            Continue
                evaluating and drilling wells in shale gas
                projects


Ø
            Continue
                evaluating new complementary projects and
                companies


Ø
            Expand
                upon initial production base





February
      2007 to April 2007


Ø
            Continue
                Canadian drilling program


Ø
            Continue
                drilling wells in shale gas projects


Ø
            Commence
                drilling third well in Hunter Energy
                program


Ø
            Continue
                evaluating new complementary projects and
                companies


Ø
            Continue
                to increase production base





May
      2007
      to July 2007


Ø
            Plan
                for next stage of Canadian drilling
                program


Ø
            Continue
                drilling wells in shale gas
                projects


Ø
            Evaluate
                results of the Hunter Energy drilling
                programs


Ø
            Continue
                evaluating new complementary projects and
                companies


Ø
            Continue
                to increase production base





**Liquidity
      and Capital Resources**





As
        at
        July 31, 2006, we a had working capital deficit of $6,581,856 resulting
        primarily from a derivative liability of $23,376,880 offset by our cash and
        cash
        equivalents of $18,972,807. For the six months ended July 31, 2006, we had
        net
        cash outflow from operating activities of $1,724,615. General and administrative
        expenses for the three and six months ended July 31, 2006 totaled $2,464,697
        and
        $4,614,124 respectively. Included in these amounts were $1,964,777 and
        $3,562,145 of stock based compensation expense for three and six months ended
        July 31, 2006 respectively. Also included in the above total were salaries,
        wages and consulting fees of $259,139 and $524,758 for the three and six
        months
        ended July 31, 2006. The remaining $240,781 and $527,221 of general and
        administrative expenses for the three and six months ended July 31, 2006,
        respectively, is comprised of travel and other office related expenses. Cash
        used in investing activities totaled $1,272,000, which was primarily utilized
        for Triangle USA’s share of costs relating to its land acquisition and drilling
        activities within the Barnett Shale, and Elmworth’s acquisition of additional
        seismic data. Cash provided by financing activities totaled $4,575,000 for
        the
        six months ended July 31, 2006. On June 1, 2006 we received the final $5
        million
        installment relating to the December 8, 2005 Secured Convertible Debenture
        Financing ** detailed
        below. The receipt of this final installment will provide us with the liquidity
        to fully execute our fiscal 2007 budget.





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 have sufficient funds to conduct our operations
      for existing budgeted projects for the next 12 months, but not for new or
      expanded projects. There can be no assurance that additional financing 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.




26




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 the
      Company is 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 from interest income and have incurred
      operating losses in every quarter. Our registered independent auditors have
      stated in their report dated April 10, 2006, that we are an early exploration
      company and have not generated revenues from operations. These factors among
      others may 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, 2006, all
        of
        the warrants remained outstanding and were marked to market with a fair value
        of
        $13,473,000 (January 31, 2006 - $23,621,400), which was recorded as a non-cash
        derivative liability on the balance sheet under current liabilities .





The
        convertible debenture is due and payable on June 10, 2007. The principal
        and
        accrued interest on the convertible debenture may be converted into shares
        of
        our 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. As of July 31, 2006, $4,200,000 (January 31, 2006 - $5,100,000)
        of
        the issued debentures were outstanding and $1,800,000 (January 31, 2006 -
        $900,000) had been converted. 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, 2006 has been accreted to $2,362,500 (January 31, 2006 -
        $1,593,750).





In
      connection with the private placement, we granted the investor registration
      rights. Pursuant to the registration rights agreement, if we did not file the
      registration statement by August 18, 2005, or if we did not have the
      registration statement declared effective within 120 days thereafter, we are
      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. We did not file the registration
      statement until October 7, 2005, however, the investor orally agreed to waive
      any liquidated damages.




27




***December
      8, 2005 Secured Convertible Debenture Financing***





To
      obtain
      funding for our ongoing operations, we entered into a Securities Purchase
      Agreement with 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
        1, 2006, 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
        $2.44
        and, therefore, the conversion price for the secured convertible notes was
        $2.196. Based on this conversion price, the $15,000,000 in secured convertible
        debentures, excluding interest, were convertible into 6,830,602 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 July 31, 2006, all
        $15,000,000 of the issued debentures were outstanding and none 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, 2006 has been accreted to $6,454,794 (January 31, 2006 - $2,813,470).
        As of
        July 31, 2006, the conversion features were marked to market with a fair
        value
        of $9,703,380 (January 31, 2006 - $4,882,600), 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. ****





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 Cornell, 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.




28





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.




**Sample
      Conversion Calculation**





The
      number of shares of common stock issuable upon conversion of the secured
      convertible debentures is determined by dividing that portion of the principal
      of the secured convertible debentures to be converted and interest, if any,
      by
      the conversion price. For example, assuming conversion of the $15,000,000 of
      secured convertible debentures, at a conversion price of $2.196 as of September
      1, 2006, the number of shares issuable upon conversion would be:





$15,000,000/$2.196
      = 6,830,601 shares





***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 July 31, 2006, all of the warrants remained
        outstanding and were marked to market with a fair value of $200,500 (January
        31,
        2006 - $1,715,250), which was recorded as a non-cash derivative liability
        on the
        balance sheet under current liabilities.





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. **** 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 July
        31,
        2006 has been accreted to $1,936,084 (January 31, 2006 -
        $283,106).





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.




29





**Critical
      Accounting Policies**





*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,
      2006, we had no properties with proven reserves. When we obtain 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.




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,
      using an estimated discount rate, of the future net revenues from proved
      reserves, based on current economic and operating conditions and the estimated
      value of unproven properties.




*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.




*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.




*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.




30


**ITEM
      3. 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-QSB 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-QSB that have materially affected,
        or are reasonably likely to materially affect, our internal control over
        financial reporting.





31




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





None.





**Item
      3. Defaults Upon Senior Securities.**





None.




**Item
      4. Submission of Matters to a Vote of Security Holders.**





On
      July
      18, 2006, we held our annual meeting of the stockholders, at which the majority
      of stockholders approved the following actions:





1.
      To
      elect four (4) directors to serve until the 2007 Annual Meeting of Stockholders
      or until their successors have been duly elected and qualified; and





2.
      To
      adopt the Company’s 2005 Stock Incentive Plan.





At
      the
      meeting, the stockholders did not approve an action to amend our articles of
      incorporation to authorize the creation of 1,000,000 shares of blank check
      preferred stock.




**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)





32




**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:
                  March 6, 2008
              By:**/s/
                  MARK GUSTAFSONMark
                  GustafsonPresident
                  (Principal Executive Officer)Date:
                  March 6, 2008
              By:**/s/
                  SHAUN TOKERShaun
                  TokerChief
                  Financial Officer (Principal Financial Officer and Principal Accounting
                  Officer)




33