Trans-Orient Petroleum 6-K Consolidated Interim Financial Statements

TRANS-ORIENT PETROLEUM LTD.

Consolidated Interim Financial Statements

For the three months ended October 31, 2007 and 2006

(Unaudited)

In accordance with National Instrument 51-102, the Company discloses that its auditors have not reviewed the unaudited interim financial statements for the quarter ended October 31, 2007.

Consolidated Interim Balance Sheets

(Expressed in United States Dollars)

		October 31, 2007			July 31, 2007
		(Unaudited – Prepared			(Audited)
		by Management)
Assets
Current
Cash and cash equivalents	$	8,358,272		$	8,499,720
Accounts receivable		40,944			44,098
Prepaid expenses		23,464			7,600
		8,422,680			8,551,418
Restricted cash		67,561			59,828
Investments (Note 3)		4,456,528			3,514,572
Property and equipment		291,274			292,618
Total Assets	$	13,238,043		$	12,418,436
Liabilities
Current
Accounts payable and accrued liabilities	$	22,277		$	65,808
Total Liabilities		22,277			65,808
Shareholders’ Equity
Share capital (Note 6)		23,655,325			23,655,325
Contributed surplus (Note 6)		75,263			63,973
Accumulated Deficit		(11,456,778	)		(11,366,670	)
		12,273,810			12,352,628
Accumulated other comprehensive income (Note 1)		941,956			-
Total Shareholders’ Equity		13,215,766			12,352,628
Total Liabilities and Shareholders’ Equity	$	13,238,043		$	12,418,436

See accompanying notes to the consolidated interim financial statements

Consolidated Interim Statements of Operations and Deficit

(Expressed in United States Dollars)

(Unaudited – Prepared by Management)

		Three Months Three Months
		Ended			Ended
		October 31,			October 31,
		2007			2006
Expenses
General and administrative (Schedule)	$	205,756		$	108,803
Foreign exchange		(25,435	)		1,917
Amortization		1,344			1,028
Loss before other items		(181,665	)		(111,748	)
Other Items:
Interest income		102,847			34,530
Stock option compensation		(11,290	)		-
Recovery of loan receivable previously written-off		-			103,273
Exploration expense		-			(2,020	)
Net (loss) income for the period		(90,108	)		24,035
Deficit – Beginning of period		(11,366,670	)		(10,271,860	)
Deficit – End of period	$	(11,456,778	)	$	(10,247,825	)
(Loss) income per share - basic	$	(0.00	)	$	0.00
- diluted	$	(0.00	)	$	0.00
Weighted-average number of common shares outstanding		36,545,225			26,360,179

See accompanying notes to the consolidated interim financial statements

Consolidated Interim Statements of Comprehensive Gain

(Expressed in United States Dollars)

(Unaudited – Prepared by Management)

		Three Months Three Months
		Ended			Ended
		October 31,			October 31,
		2007			2006
Net (loss) income for the period	$	(90,108	)	$	24,035
Other comprehensive income in the period
Fair value adjustment to financial instruments
Investments (Note 3)		941,956			-
Comprehensive income for the period	$	851,848		$	24,035

See accompanying notes to the consolidated interim financial statements

Consolidated Interim Schedules of General and Administrative Expenses

(Expressed in United States Dollars)

(Unaudited – Prepared by Management)

		Three Months		Three Months
		Ended		Ended
		October 31,		October 31,
		2007		2006
General and Administrative Expenses
Consulting fees	$	-	$	25,539
Corporate relations and development		68,295		13,514
Directors fees		60,907		15,000
Filing and transfer agency fees		5,720		7,241
Legal		2,461		8,221
Office, rent and miscellaneous		32,212		18,804
Property report		1,682		-
Travel, promotion and accommodation		11,550		12,134
Wages and benefits		22,929		8,350
	$	205,756	$	108,803

See accompanying notes to the consolidated interim financial statements

Consolidated Interim Statements of Cash Flows

(Expressed in United States Dollars)

(Unaudited – Prepared by Management)

		Three Months			Three Months
		Ended			Ended
		October 31,			October 31,
		2007			2006
Net increase (decrease) of cash related to the following:
Operating Activities
Net (loss) income for the period	$	(90,108	)	$	24,035
Items not affecting cash:
Amortization		1,344			1,028
Stock option compensation		11,290			-
Changes in non-cash working capital items:
Accounts payable and accrued liabilities		(43,531	)		8,622
Accounts receivable		3,154			11,408
Prepaid expenses		(15,864	)		2,879
Net cash (used for) provided by operating activities		(133,715	)		47,972
Financing Activities
Restricted cash		(7,733	)		(14,655	)
Common stock issued for cash		-			4,540,250
Net cash (used for) provided by financing activities		(7,733	)		4,525,595
Investing Activities
Purchases of investments		-			(2,068,707	)
Net cash used for investing activities		-			(2,068,707	)
Net (decrease) increase in cash		(141,448	)		2,504,860
Cash - Beginning of period		8,499,720			451,969
Cash - End of period	$	8,358,272		$	2,956,829

See accompanying notes to the consolidated interim financial statements

Notes to the Consolidated Interim Financial Statements

(Expressed in United States Dollars)

(Unaudited – Prepared by Management)

For the Three Month Period Ended October 31, 2007 and 2006

NOTE 1 – ACCOUNTING POLICIES AND BASIS OF PRESENTATION

The unaudited consolidated interim financial statements of Trans-Orient Petroleum Ltd. and its wholly owned subsidiaries Orient Petroleum (NZ) Limited, Orient Petroleum (PNF) Limited and DLJ Management Corp., have been prepared in conformity with Canadian generally accepted accounting principles, which were the same accounting policies and methods of computation as the audited consolidated financial statements as at July 31, 2007.

On August 1, 2007 the Company adopted the new Canadian Institiute of Chartered Accountants (“CICA”) standards for Comprehensive Income (CICA 1530), Financial Instruments (CICA 3855) and Hedges (CICA 3865). The new standards bring Canadian rules into line with current rules in the United States. The standards have introduced the concept of Comprehensive Income” to Canadian GAAP and will require that an enterprise: a) classify items of comprehensive income by their nature in the financial statements and b) display the accumulated balance of comprehensive income seperately from retained earnings and additional paid-in capital in the equity section of the statement of financial position. Derivative contracts will be carried on the balance sheet at their mark-to-market value, with any change in value flowing to either net income or comprehensive income. Gains and losses on instruments that are identified as hedges will flow initially to comprehensive income and be brought into net income at the time the underlying hedged item is settled. Any instruments that do not qualify for hedge accounting treatment will be marked-to-market with the tax-effected adjustment flowing through the income statement. The Company did not identify any derivatives but did identify financial instruments that have required comprehensive income to be presented as a result of adopting the CICA 3855 and CICA 1530 standards.

The disclosure which follows is incremental to the disclosure included in the annual consolidated financial statements. These interim financial statements to October 31, 2007 should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended July 31, 2007.

Refer to Note 4

NOTE 2 – FUTURE OPERATIONS

The Company does not generate sufficient cash flow from operations to adequately fund its activities and has therefore relied principally upon the issuance of securities and the sale of investments for financing. The Company intends to continue relying upon the issuance of securities and the sale of investments to finance its operations and activities to the extent they are available to the Company and under terms acceptable to the Company. Accordingly, the Company’s consolidated interim financial statements are presented on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of operations.

NOTE 3 - INVESTMENTS

At October 31, 2007, the Company’s ownership interests in investments accounted for under the cost method of accounting are as follows:

			July 31,				October 31,
	Number of		2007				2007	Percentage
	Common		Carrying		Comprehensive		Market	of
	Shares		Value		Income		Value	Ownership/
	Held
AMG Oil Ltd.	826,431	$	1	$	413,215	$	413,216	3.56%/
Austral Pacific Energy	3,110,240		3,514,571		528,741		4,043,312	9.59%/
		$	3,514,572	$	941,956	$	4,456,528

As at October 31, 2007, and in accordance with CICA 3855, the Company’s investments are recorded at market value at October 31, 2007.

Refer to Note 1

NOTE 4 - PROPERTY AND EQUIPMENT

						Depletion			Net Book
		Working		Net Book	Additions	Recoveries and			Value at
		Interest		Value at	During the	Write-offs			October 31,
		%		July 31, 2007	Period	During The Period			2007
Oil and Gas Properties
Unproved
New Zealand:
PEP 38348		100	$	67,792		-		$	67,792
PEP 38349		100		- 136,389	-	-			136,389
				- 204,181	-	-			204,181
Other:				-	-
Apartment and office
equipment	��			88,437	-	(1,344	)		87,093
			$	292,618	-	(1,344	)		291,274

NOTE 5 - RELATED PARTY TRANSACTIONS

The Company is of the view that the amounts incurred for services provided by related parties approximates what the Company would incur to arms-length parties for the same services.

Consulting Agreements

Pursuant to an agreement dated September 1, 2006 the Company paid a Director of the Company monthly compensation of $5,000 until December 31, 2007. Beginning January 1, 2007, the monthly compensation increased to $10,000 per month.

On April 1, 2007, the Company extended for one year an agreement entered into during the 2005 fiscal year with a private company wholly-owned by the Company’s President to provide executive services to the Company. The agreement includes monthly compensation of $5,000.

Pursuant to an agreement dated August 1, 2007 the Company paid a Director of the Company monthly compensation of $5,000.

Refer to Note 7

NOTE 6 - SHARE CAPITAL

Authorized and Issued Share Capital

The authorized share capital of the Company consists of an unlimited number of common shares without par value.

	Number
Issued and fully paid:	Of Shares		Amount
Balance at October 31, 2007 and July 31, 2007	36,545,225	$	23,655,325

At October 31, 2007, the following share purchase warrants are outstanding:

Number	Price	Expiry
of Shares	per Share	Date
12,922,142	US$0.70	August 29, 2008
2,952,500	US$1.35	May 18, 2008
15,874,642

At October 31, 2007, the following stock options are outstanding:

Number	Price	Expiry
of Shares	per Share	Date
200,000	US$1.00	September 1, 2011
200,000	US$0.70	November 1, 2011
400,000

During the three month period ended October 31, 2007, the Company applied the Black-Scholes option pricing model using the closing market prices on the grant dates, a volatility ratio of 40% and the risk free interest rate of 7% to calculate an option benefit at the date of grant of $108,580 which is amortized over the two year vesting period of the options resulting in stock option compensation for the period ended October 31, 2007 being recorded of $11,290.

NOTE 7 – SUBSEQUENT EVENT

On December 1, 2007 the Company further amended an agreement dated September 1, 2006 to increase the monthly compensation to $15,000 per month.

NOTE 8 – COMPARATIVE FIGURES

Certain of the prior periods’ comparative figures may have been reclassified in conformity with the current period’s presentation.