U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-Q

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

	For the quarterly period ended March 31, 2008

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _____ to _____

Commission File No. 0-52485

CASPIAN INTERNATIONAL OIL CORPORATION

(Name of Issuer in its Charter)

Delaware	20-5588710
(State or Other Jurisdiction of incorporation or organization)	(I.R.S. Employer I.D. No.)

4265 San Felipe, Suite 1100 Houston, TX 77027

(Address of Principal Executive Offices)

Issuer's Telephone Number: (713) 960-6618

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X

No ___

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

Large accelerated filer ___

Accelerated filer ___

Non-accelerated filer ___

Small reporting company X

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ___

No X

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

May 15, 2008

Common Voting Stock: 62,757,028 shares

CASPIAN INTERNATIONAL OIL CORPORATION

FORM 10-Q

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

	Consolidated Balance Sheet as of March 31, 2008 and December 31,2007	2-3

	Consolidated Statement of Income for the Three Month Period Ended March 31, 2008 and 2007	4

	Consolidated Statements of Cash Flows for Three Months Ended March 31 2008 , and 2007	5

	Notes to Consolidated Financial Statements	6-35

Item 2. Managements’ Discussion and Analysis of Financial Condition and Results of Operations		36-44

	Risk Factors That May Affect Future Results	39-44

	Item 3. Quantitative and Qualitative Disclosures about Market Risk	44

	Item 4. Controls and Procedures	44-45

PART II — OTHER INFORMATION

	Item 1. Legal Proceedings	45

	Item 2. Unregistered Sales of Equity Securities	45

	Item 3. Default Upon Senior Securities	45

	Item 4. Submission of Matters to a Vote of Security Holders	45

	Item 5. Other Information	45

	Item 6. Exhibits	45

	Signatures	46

Caspian International Oil Corporation

Consolidated Balance Sheets

	Note		As of March 31, 2008 USD (unaudited)		As of December 31, 2007 USD

ASSETS

Current assets
Cash		5		136,469		125,031
Accounts receivable, net		6		3,452,459		5,560,069
Inventories		7		1,206,156		1,475,137
Deferred income tax assets		19		1,329,944		1,393,167

Total current assets				6,125,028		8,553,404

Non-current assets
Investments, equity method		8		67,347		49,875
Oil exploration assets, full cost method		9		5,698,728		5,358,615
Property, plant and equipment		10		18,046,922		18,996,417
Intangible assets		11		158,233		164,747
Restricted cash				439		441

Total non-current assets				23,971,669		24,570,095

TOTAL ASSETS				30,096,697		33,123,499

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

Caspian International Oil Corporation

Consolidated Balance Sheets

	Note		As of March 31, 2008 USD (unaudited)			As of December 31, 2007 USD

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities
Accounts payable and other liabilities		12		5,044,688			5,961,857
Short-term loans		13		4,586,217			5,306,085
Taxes payable		14		1,764,910			1,888,837
Dividends payable prior to reverse merger				167,147			310,241

Total current liabilities				11,562,962			13,467,020

Non-current liabilities
Long-term loans		13		12,235,962			12,729,082
Deferred income tax liabilities		19		2,275,277			2,368,487
Obligation for historical reimbursement		15		3,210,540			3,151,916
Asset retirement obligations		16		193,575			190,032

Total non-current liabilities				17,915,354			18,439,517

Total liabilities				29,478,316			31,906,537

Minority interest				280,433			277,772

Stockholders’ equity		17
Common stock, $ 0.001 par value – authorized 200,000,000 shares; issued and outstanding 62,757,028 shares				62,757			62,757
Additional paid-in capital				3,821,850			3,822,375
Accumulated other comprehensive income				413,893			402,989
Accumulated deficit				(3,960,552	)		(3,348,931	)

Total stockholders’ equity				337,948			939,190

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY				30,096,697			33,123,499

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

Caspian International Oil Corporation

Consolidated Statements of Operations

	Note		For three months ended March 31, 2008 USD (unaudited)			For three months ended March 31, 2007 USD (unaudited)
Revenues
Sales		18		5,597,858			2,840,969
				5,597,858			2,840,969
Expenses
Production and operating expenses				(4,497,086	)		(4,136,733	)
General and administrative expenses				(1,186,161	)		(1,275,426	)
Accretion expenses				(62,167	)		(57,742	)
Loss from disposal of fixed assets				(8,776	)		(3,435	)
Income/(loss) from operating activities				(156,332	)		(2,632,367	)

Share of profits of associates				17,669			29,512
Interest expense				(449,772	)		(158,756	)
Foreign currency exchange gain/(loss), net				(53,457	)		240,816
Equipment rental income				-			93,543
Other non-operating income, net				-			3,575

Income/(loss) before income taxes and minority interest				(641,892	)		(2,423,677	)

Income tax benefit/(expense)		19		27,174			506,418

Minority interest				3,097			61,417

Net income/(loss)				(611,621	)		(1,855,842	)

Other comprehensive income:
Foreign currency translation adjustment				10,904			317,271
Comprehensive income (loss)				(600,717	)		(1,538,571	)
Basic and diluted earnings(loss) per share
Basic and diluted				(0.01	)		(0.03	)

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

Caspian International Oil Corporation

Consolidated Statements of Cash Flows

	For three months ended March 31, 2008 USD (unaudited)			For three months ended March 31, 2007 USD (unaudited)
Operating activities:
Net income/(loss)		(611,621	)		(1,855,842	)
Adjustments for non-cash items:
Depreciation, depletion and amortization		935,592			621,286
Stock-based compensation		21,646			283,706
Investment income		(17,669	)		(29,515	)
Accretion expenses		62,167			57,742
Minority interest		(3,097	)		(61,417	)
Impairment loss on fixed assets		8,776			3,435
Foreign exchange difference on long-term obligations		33,116			(205,182	)
Deferred income taxes		(27,174	)		(506,418	)
Changes in assets and liabilities
Accounts receivable		1,957,094			675,470
Inventories		359,273			100,893
Accounts and taxes payable and other liabilities		(1,345,603	)		(7,060	)
Net cash ( used in)/ provided by operating activities		1,372,500			(922,902	)
Investing activities:
Acquisition of property, plant and equipment		(34,834	)		(232,005	)
Proceeds from disposal of property, plant and equipment		43,142			2,495
Acquisition of intangible assets		(17,048	)		-
Decrease of accounts receivable (financial aid)		199,269			-
Increase in accounts receivable (financial aid)		(199,269	)		(525	)
Acquisition of oil exploration assets		(211,416	)		-
Net cash used in investing activities		(220,156	)		(230,035	)
Financing activities:
Increase in accounts payable (financial aid)		303,830			136,773
Proceeds from loans		589,276			1,309,735
Proceeds from common stock		-			200
Decrease of accounts payable (financial aid)		-			(124,099	)
Repayment of loans		(1,784,313	)		(309,030	)
Distribution by subsidiary for period prior to reverse merger		(142,383	)		(14,906	)
Net cash provided by/(used in) financing activities		(1,033,590	)		998,673


Effect of exchange rates on cash		(107,316	)		128,478
Net increase (decrease) in cash and cash equivalents		11,438			(25,786	)
Cash and cash equivalents at beginning of the period		125,031			238,900
Cash and cash equivalents at end of the period (Note 5)		136,469			213,114
Supplemental information
Interest paid		449,772			158,756
Oil and gas assets purchased as accounts payable		8,765			61,761

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

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

1 Background

(a) Organization and environment

Caspian International Oil Corporation was organized under the laws of the State of Florida on April 9, 1987 as HWS November Corporation. On May 19, 1989, the Company filed an amendment to its Articles of Incorporation changing its name to Abcor Products, Inc. On August 22, 2005, the Company filed an amendment to its Articles of Incorporation changing its name to CRSI Group, Inc. (“CRSI Group, Inc.”).

Care Recruitment Solutions International, Inc. (“CRSI”) was organized under the laws of the State of Florida on October 18, 2004. CRSI was a development stage enterprise that primarily provided international recruiting, placement and staffing of nurses to hospitals and other health care agencies.

On June 30, 2005, CRSI Group consummated an agreement with CRSI pursuant to which CRSI exchanged all of its then issued and outstanding shares of common stock for 17,995,912 (approximately 90%) of the common stock shares of CRSI Group.

On August 10, 2006 CRSI Group acquired all of the beneficial interest in the registered capital stock of Caspian International Oil Corporation (CIOC) B.V., a corporation organized under the laws of The Kingdom of the Netherlands (“CIOC”). CIOC is a holding company that owns 95% of the equity in each of two limited liability partnerships organized under the laws of the Republic of Kazakhstan: SIF Dank, LLP (“Dank”) and Kor-Tazh, LLP (“Kor-Tazh”). Dank is engaged in the business of providing oil field services such as 2D and 3D seismic acquisitions, data processing and interpretation, reservoir modelling and topography to the oil exploration industry in Kazakhstan. Kor-Tazh operates an oil field in western Kazakhstan. CIOC BV was treated as an acquirer for accounting purposes. A new Board of Directors was elected that is comprised primarily of the former directors of CIOC BV. The Company’s financial statements are presented as a continuation of CIOC BV, and not those of CRSI, and the capital structure of the Company is now different from that appearing in the historical financial statements of CRSI due to the effect of the recapitalization.

On October 6, 2006 Articles of Merger were filed with the Division of Corporations of the Florida Department of State, according to which CRSI Group, Inc was merged with and into its subsidiary, Caspian International Oil Corporation, for the purpose of changing the company’s domicile from Florida to Delaware. Each share of common stock of CRSI Group, Inc outstanding prior to the merger was changed and converted into one fully paid share of common stock of Caspian International Oil Corporation.

Hereinafter, Caspian International Oil Corporation and its wholly owned subsidiaries may be referred to individually or in the aggregate as the "Company".

(b) Kazakhstan business environment

Company activity is subject to economical, political and social risks inherent to doing business in Kazakhstan. Those risks include the consequences of government policy, economic conditions, legislative changes in tax and laws and currency exchange rates fluctuations.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

2 Basis of preparation

The Company’s operations are subject to country risk, being the economic, political, and social risks inherent in doing business in Kazakhstan. These risks include matters arising out of the policies of the government, economic conditions, imposition of or changes to taxes and regulations, foreign exchange fluctuations and the enforceability of contract rights.

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

The accompanying unaudited financial data as of and for the three months ended March 31, 2008 and 2007 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the Footnotes thereto included in the Company’s annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows as of and for the three months ended March 31, 2008 have been made. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the operating results for the full year.

(b) Principles of consolidation

These consolidated financial statements include the financial position and results of the Company and controlled subsidiaries of which the Company directly or indirectly owns more than 50% of the voting interest, unless minority interest shareholders have substantive participating rights. Investments in companies of which the Company directly or indirectly owns more than 50% of the voting interest but where minority interest shareholders have substantive participating rights, and investments in companies of which the Company directly or indirectly owns between 20% and 50% of the voting interest and over which it exercises significant influence but not control, are accounted for using the equity method of accounting. Equity investments and investments in other companies are included in “Investments” in the consolidated balance sheet.

All significant intercompany balances and transactions have been eliminated in consolidation.

Two Kazakhstan subsidiaries of the Company, Dank and Kor-Tazh maintain their accounting records in accordance with the legislative requirements of the Republic of Kazakhstan. CIOC BV maintains its accounting records in accordance with the legislative requirements of the Kingdom of the Netherlands. The accompanying consolidated financial statements have been prepared from those accounting records and adjusted as necessary to comply, in all material respects, with the requirements of US GAAP.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

2 Basis of preparation (continued)

(d) Functional and reporting currency

The accounting records of the entities operating in Kazakhstan (Dank and Kor-Tazh), are maintained in Kazakhstan Tenge (“KZT”). The accounting records of CIOC B.V. and the Company are maintained in EUR and USD, respectively.

The Company has determined that the functional currency of Dank and Kor-Tazh is KZT and functional currency of CIOC BV is EUR in accordance with US Statement of Financial Accounting Standards ("SFAS") No. 52, Foreign Currency Translation, based on the economic substance of the underlying events and circumstances relevant to the entities within the Company.

For the purposes of presenting consolidated financial statements prepared in conformity with US GAAP, the USD is considered to be the reporting currency of the Company.

For presentation purposes, the consolidated financial statements are translated into USD using the current-rate method. Accordingly, assets and liabilities are translated at rates of exchange in effect at the consolidated balance sheet date. Capital accounts are translated at their historical exchange rates when the capital stock was issued. Retained earnings are translated at the translated amount at the end of the prior period, plus the translated amount of the net income for the period, less the translated amount of any dividends declared during the current period. Revenues and expenses are translated at average rates of exchange in effect during the three months ended March 31, 2008. Differences arising from the translation are included in accumulated other comprehensive income as a separate component of stockholders’ equity. Exchange differences are recognised in profit or loss in the period in which they arise.

The Company has not entered into any material transactions that are denominated in hyper-inflationary currencies.

For translation purposes the Company has used the closing exchange rates of USD 1 to KZT 120.69.

(e) Convertibility of the Kazakhstan Tenge (KZT)

KZT is not a convertible currency outside the Republic of Kazakhstan. Accordingly, any conversion of KZT amounts to USD should not be construed as a representation that KZT amounts have been, could be, or will be in the future, convertible into USD at the exchange rate shown, or at any other exchange rate.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

(f) Going concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business and the continuation of the Company as a going concern. For the three month period ended March 31, 2008 the Company had a net loss of $ 611,621. As of March 31, 2008, the company had $5,437,934 of negative working capital and $136,469 of cash with which to satisfy any future cash requirements along with $1,177,678 of availability under a borrowing arrangement for Kor-Tazh which is to be used for oil development activity.

Although not as severe as the situations experienced during the first quarter of 2007, the Company did experience some weather conditions during the month of March, 2008 which prevented the full utilization of its seismic crews which resulted in an unfavourable impact on profitability for the first quarter of 2008. Barring any other unforeseen events, especially those that prevent Dank from fulfilling its contracts on schedule, the Company expects to return to profitability during 2008. Significant work remains to be done on seismic contracts signed in 2007 and the Company is aggressively pursing new contracts for 2008 and beyond. Revenues for the year 2008 are expected to exceed those of 2007. In addition, the Company has significantly reduced the General and Administrative cost of its Corporate headquarters which should have a substantial favourable impact on profits for the remainder of 2008. Therefore, the consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

3 Significant accounting policies

The following significant accounting policies have been applied in the preparation of the consolidated financial statements. These accounting policies have been consistently applied.

(a) Use of estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying value of oil exploration assets and property, plant and equipment; valuation allowances for receivables, inventories and deferred income tax assets; asset retirement obligations and assets and obligations related to employee benefits. Actual results could differ from those estimates.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

3 Significant accounting policies (continued)

(b) Cash

Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.

Trade accounts receivable are recorded at their transaction amounts less provisions for doubtful debts. Provisions for doubtful debts are recorded to the extent that there is likelihood that any of the amounts due will not be obtained.

(d) Inventories

Inventories, consisting primarily of spare parts and fuel are stated at the lower cost or market value. Cost is determined using the “average cost” method.

(e) Oil exploration and production assets

The Company follows the full cost method of accounting for the costs of acquisition, exploration and development of its oil properties. Under this method, all productive and non-productive costs incurred in connection with the acquisition of, exploration for and development of oil reserves for each cost center are capitalized. Capitalized costs include acquisition costs, geological and geophysical work, delay rentals and the costs of drilling, completing and equipping oil wells. Capitalized costs of proved oil properties are depleted on a unit of production method using estimated proved oil reserves. The amortizable base used to calculate unit of production depletion includes estimated future development costs and dismantlement, restoration, and abandonment costs, net of estimated salvage values. Sales of oil properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustment would significantly alter the relationship between capitalized costs and proved reserves.

Internal costs, including salaries, benefits and other salary related costs, which can be directly identified with acquisition, exploration or development activities, are capitalized while any costs related to production, general corporate overhead, or similar activities are charged to expense. Geological and geophysical costs not directly associated with a specific unevaluated property are included in the amortization base as incurred. Capitalized internal costs directly identified with the Company’s acquisition, exploration and development activities amounted to approximately $ 211,415 and $61,761 during the three months ended March 31, 2008 and 2007, respectively. The Company also capitalizes a portion of interest expense on borrowed funds.

Under full cost accounting rules, the net capitalized costs of evaluated oil properties shall not exceed an amount equal to the present value of future net cash flows from estimated production of proved oil reserves, based on current economic and operating conditions, including the use of oil prices as of the end of each quarter.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

3 Significant accounting policies (continued)

(e) Oil exploration assets (continued)

Given the volatility of oil prices, it is reasonably possible that the estimate of discounted future net cash flows from proved oil reserves could change. If oil prices decline, even if only for a short period of time, it is possible that impairments of oil properties could occur. In addition, it is reasonably possible that impairments could occur if costs are incurred in excess of any increases in the cost ceiling, revisions to proved oil reserves occur, or if properties are sold for proceeds less than the discounted present value of the related proved oil reserves.

The capitalized oil property costs, less accumulated depreciation, depletion and amortization and related deferred income taxes, if any, are generally limited to an amount (the ceiling limitation) equal to the sum of (a) the present value of estimated future net revenues computed by applying current prices in effect as of the balance sheet date to estimated future production of proved oil reserves, less estimated future expenditures (based on current costs) to be incurred in developing and producing the reserves using a discount factor of 10% and assuming continuation of existing economic conditions; and (b) the cost of investments in unevaluated properties excluded from the costs being amortized. In determining whether impairment of unevaluated properties has occurred, management evaluates, among other factors, current oil industry conditions, capital availability, holding periods of the properties, and available geological and geophysical data. Any impairment assessed is added to the costs being amortized. Costs of drilling exploratory dry holes are included in the amortization base immediately upon determination that a well is dry.

No ceiling write down was recorded in any of the periods presented.

The Company’s oil properties primarily include the value of the license and other capitalized costs under this method of accounting.

(f) Property, plant and equipment

Property, plant, and equipment are stated at cost.

Depreciation on plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. The estimated useful life of buildings is 12.5 years, while machinery and equipment is 5 to 12.5 years.

(g) Intangible assets

Intangible assets, which are acquired by the Company and which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. Intangible assets are amortised on a straight-line basis over their estimated useful lives from the date the asset is available for use.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

3 Significant accounting policies (continued)

(h) Impairment

In accordance with SFAS No 144, Accounting for the Impairment or Disposal of Long–lived Assets, long-lived assets, such as property, plant, and equipment, and purchased intangible assets subject to amortisation, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

(i) Restricted cash

Cash funds for which restrictions on immediate use exist are accounted for within other non-current assets.

(j) Trade and other payables

Trade and other payables are stated at cost.

(k) Asset retirement obligations

The Company follows SFAS 143, Accounting for Asset Retirement Obligations. SFAS 143 requires that the fair value of a liability for an asset’s retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement cost is capitalized as part of the carrying value of the long-lived asset. Subsequently, the asset retirement cost is amortized to expense over the useful life of the asset. The asset retirement obligation recorded relates to the expected plugging and abandonment costs of oil wells and the removal of pipeline, compressor and related production facilities.

(l) Income taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognised in the consolidated statement of income in the reporting period that includes the enactment date and is not accounted for as an adjustment of the annual effective tax rate.

(m) Revenue recognition

Revenue for oil field services companies is recognized when we determine that following criteria are met: (i) persuasive evidence an arrangement exists; (ii) services have been rendered; (iii) the fee is fixed or determinable; and (iv) collectibility is reasonable assured. All advance client payments are classified as unearned revenues until services are provided.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

3 Significant accounting policies (continued)

(m) Revenue recognition (continued)

Services are provided subject to customer acceptance provisions. Customer acceptance provisions and the related accounting take the following form: It is based on customer-specified objective criteria. The Company does not recognize revenue until it can demonstrate that the customer-specified objective criteria have been satisfied. The Company recognizes revenue upon receipt of the act of acceptance for services provided signed and stamped by the customer.

The Company uses the sales method of accounting for crude oil revenues. Under this method, revenues are recognized based on actual volumes of oil and sold to purchasers. The volumes sold may differ from the volumes to which the Company is entitled based on its interests in the properties. These differences create imbalances that are recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under produced owner to recoup its entitled share through production. There are no significant balancing arrangements or obligations related to the Company’s operations.

The oil company is at the exploration stage at the moment and does not generate any revenue.

(n) Rental income

Rental income from rent of equipment is recognized on a straight-line basis over the term of the relevant lease.

(o) Minority interest

Minority interest in the consolidated balance sheet reflects minority owners’ percentage share of capital in the subsidiaries of CIOC. The minority interest is calculated based on the stockholders’ equity capital of each subsidiary as determined under US GAAP.

(p) Earnings per share

Basic and diluted earnings per share are computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the reporting period.

(q) Segment reporting

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information requires that a business enterprise report financial and descriptive information about its reportable operating segments. The Company’s business activities are conducted predominantly through two major business segments: oil field services and oil field exploration. Oil field services represents 2D and 3D seismic acquisitions, data processing and interpretation, reservoir modelling and topography to the oil exploration industry in Kazakhstan. Oil field exploration represents operating an oil field in western Kazakhstan.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

3 Significant accounting policies (continued)

(r) Contingencies

Certain conditions may exist as of the balance sheet date, which may result in losses to the Company but impact of which will only be resolved when one or more future events occur or fail to occur. If the Company’s assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of liability can be estimated, then the estimated liability is accrued and charged to the consolidated statement of income. If the assessment indicates that a potentially material loss is not probable, but is reasonably possible, or is possible, but can not be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, is disclosed in the notes to the consolidated financial statements.

(s) Recent accounting pronouncements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued a FASB Staff Position (“FSP”) on SFAS No. 157 that permits a one –year delay of the effective date for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) . The Company adopted SFAS No. 157 effective January 1, 2008, with the exceptions allowed under the FSP described above and does not expect any significant impact on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FAS Statement No. 115. SFAS No. 159 gives companies the option of applying at specified election dates fair value accounting to certain financial instruments and other items that are not currently required to be measured at fair value. If a company chooses to record eligible items at fair value, the company must report unrealized gains and losses on those items in earnings at each subsequent reporting date. SFAS No. 159 also prescribes presentation and disclosure requirements for assets and liabilities that are measured at fair value pursuant to this standard and pursuant to the guidance in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (as amended). SFAS No. 159 will be effective for fiscal year 2008. As the provisions of SFAS No. 159 are applied prospectively, the impact to the Registrants will depend on the instruments selected for fair value measurement at the time of implementation. The Company is currently assessing the impact that SFAS No. 159 will have on its consolidated financial statements.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

3 Significant accounting policies (continued)

(s) Recent accounting pronouncements (continued)

In April 2007, the FASB issued FASB Staff Position No. FIN 39-1, Amendment of FASB Interpretation No. 39 (FSP FIN 39-1). FSP FIN 39-1 allows entities that are party to a master netting arrangement to offset the receivable or payable recognized upon payment or receipt of cash collateral against fair value amounts recognized for derivative instruments that have been offset under the same master netting arrangement in accordance with FASB Interpretation No. 39. The guidance in FSP FIN 39-1 is effective for fiscal years beginning after November 15, 2007, with early adoption permitted. Entities are required to recognize the effects of applying FSP FIN 39-1 as a change in accounting principle through retrospective application for all financial statements presented unless it is impracticable to do so. FSP Fin 39-1 has had no impact on the Company’s consolidated financial statements as of March 31, 2008.

In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 (R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a non-controlling interest in a subsidiary should be reported as equity in the consolidated financial statements, consolidated net income shall be adjusted to include the net income attributed to the non-controlling interest and consolidated comprehensive income shall be adjusted to include the comprehensive income attributed to the non-controlling interest. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company is currently evaluating the impact that SFAS No. 141 (R) and SFAS No. 160 will have on its consolidated financial statements.

In March, 2008 the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities and is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Early application is encouraged. The Company is currently evaluating the impact of SFAS No. 161 on its consolidated financial statements.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

3 Significant accounting policies (continued)

(t) Share-Based Compensation

The Company accounts for share based compensation in accordance with the provisions of SFAS No. 123R which requires that the compensation cost relating to share based payment transactions be recognized in financial statements. The Company has issued to certain employees shares of common stock and stock options in compensation for the execution of employment agreements. Following is a summary of employee awarded shares of common stock and stock options for the three months ended March 31, 2008:

	Shares
	Common Stock		Stock Options
Balance at Dec. 31, 2007		150,000		800,000

2008 Awards		0		0

2008 Cancellations		0		(191,667	)

Balance at Mar. 31, 2008		150,000		608,333

The fair value of the shares of common stock and the stock options are being amortized on a straight line basis over the respective vesting periods. The shares vest after one year of service and all shares have been amortized as of March 31, 2008. The stock options vest over three years of service. For the three months ended March 31, 2008 the Company recorded in General and Administrative Expense $21,646 as employee share based compensation cost.

Employee stock options are valued using the Black –Scholes method based on the following weighted average assumptions:

Expected Dividend Yield	0.0	%
Risk Free Interest Rate	5.0	%
Expected life (years)	1.5
Volalitility	110	%

The weighted average fair value of the 608,333 employee stock options is $0.35 per share. As of March 31, 2008 the remaining deferred compensation cost for the employee stock options is $98,154.

The fair value of the shares of common stock is based on the market value of the stock on the dates of execution of the employment agreements. The weighted average value of the 150,000 shares is $0.79 per share. At March 31, 2008 all of the shares of common stock were fully vested and have been amortized.

There were no shares of common stock or stock options issued to third parties during the three months ended March 31, 2008.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

(u) Concentrations of Credit Risk

Financial instruments that potentially subject Company to concentrations of credit risk consist primarily of accounts receivable. The Company has significant concentrations of credit risk in accounts receivable.

4 Acquisition of subsidiaries

On August 10, 2006 the Company acquired all of the beneficial interest in the registered capital stock of CIOC B.V., a company organized under Dutch law in 1994. On May 10, 2006 CIOC B.V. acquired 95% of the equity in each of three limited liability partnerships organized under the laws of the Republic of Kazakhstan: Dank and Kor-Tazh. Dank, in turn, owns 100% of the capital stock of PGD Services, LLP. CIOC B.V. acquired the companies with funds and equity interests contributed to CIOC B.V. by Nurlan Janseitov and Timur Bergaliyev.

This business combination is accounted as a reverse acquisition. CIOC B.V. is considered the nominal acquiree and accounting acquirer and the Company is considered the nominal acquirer and accounting acquiree for financial reporting purposes. Accordingly, the consolidated balance sheet contains the net assets of the accounting acquirer and acquiree at historical cost and the statement of income includes the operations of the acquirer for the periods presented and the operations of the acquiree from the date of the transaction.

5 Cash

	As of March 31, 2008		As of December 31, 2007
	USD		USD

Cash held in bank - KZT		71,518		58,026
Cash held in bank - other currencies		32,974		25,879
Petty cash		32,157		41,126

		136,469		125,031

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

6 Accounts receivable, net

	As of March 31, 2008,			As of December 31, 2007,
	USD			USD

Trade receivables		2,271,356			4,074,138
Financial aid to related parties		420,907			531,468
Advances paid		238,280			378,471
Taxes prepaid		78,101			73,325
Receivables from employees		223,689			277,939
Loan receivable from employee		138,553			50,183
Deferred expenses		191,019			284,970
Other receivables		870			248
		3,562,775			5,670,742

Less allowance for doubtful accounts		(110,316	)		(110,673	)

		3,452,459			5,560,069

The activity in the allowance for doubtful accounts is as follows:

	For three months ended March 31, 2008			For three months ended March 31, 2007
	USD			USD

Allowance for doubtful accounts at the beginning of the period		110,673			150,529
Additions charged to impairment loss		-			-
Recovery of bad debt allowance		-			-
Foreign currency translation adjustment		(357	)		4,348

Allowance for doubtful accounts at the end of the period		110,316			154,877

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

7 Inventories

	As of March 31, 2008		As of December 31, 2007
	USD		USD

Spare parts		937,542		1,225,004
Other materials		268,614		250,133

		1,206,156		1,475,137

8 Investments

Investments as of March 31, 2008 amounting to USD 67,347 represent shares of PGD Services, LLP (“PGDS”). In accordance with the agreement, dated April 5, 2006, Dank acquired 100% of PGDS’s shares from Janseitov Nurlan Sattarovich (85%), Janseitova Irina Petrovna (5%), Safronov Gennadiy Nikolayevich (5%) and Sapozhnikov Anatoliy Ivanovich (5%). In accordance with the agreement signed between Dank and Paradigm Geophysical B.V. on providing processing and analysis of seismic data services in Kazakhstan, Paradigm Geophysical B.V. has the power to govern the financial and operating policies of the PGDS. Net income of PGDS is distributed 20% to Dank and 80% to Paradigm Geophysical in accordance with the above-mentioned agreement. PGDS provides the following services in Kazakhstan: time seismic data processing, depth imaging, structural interpretation, reservoir evaluation. Total assets of PGDS are in the amount of USD 2.1 mln. Management of the Company considers that the Company does not have control but has significant influence over PGDS. Therefore PGDS is not consolidated in the Company’s consolidated financial statements. Investments in PGD are accounted for using the equity method. Income of PGDS for three months ended March 31, 2008 in the amount of USD 17,669 was recognised in the consolidated income statement for three months ended March 31, 2008 under the equity method. Income of PGDS for three months ended March 31, 2007 in the amount of USD 29,512 was recognised in the consolidated income statement for three months ended March 31, 2007 under the equity method. The Company’s maximum exposure to loss as a result of involvement with PDS is in the amount of USD 67,347.

9 Oil exploration assets

	As of March 31, 2008		As of December 31, 2007
	USD		USD

Oil exploration assets
Evaluated		1,840,689		1,730,833
Unevaluated		3,858,039		3,627,782
Less accumulated depletion		-		-

		5,698,728		5,358,615

Credit line received by Kor-Tazh LLP is secured by the oil properties.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

10 Property, plant and equipment

	As of March 31, 2008			As of December 31, 2007
	USD			USD

Machinery and equipment		30,655,021			30,754,402
Vehicles		1,931,141			1,950,909
Land and buildings		1,828			1,834
Other property, plant and equipment		257,010			225,748
		32,845,000			32,932,893

Less accumulated depreciation		(14,798,078	)		(13,936,476	)

		18,046,922			18,996,417

Total depreciation for three months ended March 31, 2008 was USD 909,172, of which USD 890,581 (97.96%) was recorded in production expenses and USD 18,591 (2.04%) was recorded in general and administrative expenses. Total depreciation for three months ended March 31, 2007 was USD 599,390, of which USD 586,634 (97.9 %) was recorded in production expenses and USD 12,756 (2.1 %) was recorded in general and administrative expenses.

The equipment with carrying amount of USD 7,516,740 was pledged as security under bank loans as of March 31, 2008.

11 Intangible assets

	As of March 31, 2008			As of December 31, 2007
	USD			USD
Program software		612,173			597,091

Less accumulated amortization		(453,940	)		(432,344	)

		158,233			164,747

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

12 Accounts payable and other liabilities

	As of March 31, 2008		As of December 31, 2007
	USD		USD

Trade accounts payable		1,646,789		2,518,301
Payables to employees		1,241,206		1,685,385
Advances received		12,528		168,429
Financial aid from related parties		491,342		396,559
Payable to related parties		160,104		160,622
Payables to pension fund stipulated by the law of the Republic of Kazakhstan		374,728		245,004
Interest payable		698,640		644,140
Vacation provision		82,194		92,677
Other payables		337,157		50,740

		5,044,688		5,961,857

13 Loans

	As of March 31, 2008		As of December 30, 2007
	USD		USD

Bank TuranAlem:
KZT – fixed from 15% to 16%		6,928,213		7,131,780
USD – at Libor + 5.65%		9,193,944		10,406,525
		16,122,157		17,538,305
Shareholder
USD – fixed at 4.00%		116,862		116,862
		116,862		116,862
Shareholder
USD - fixed at 6.00%		550,000		350,000
		550,000		350,000
Other
USD		33,160		30,000
		33,160		30,000

		16,822,179		18,035,167

Short-term loans		4,586,217		5,306,085
Long-term loans		12,235,962		12,729,082
Total loans		16,822,179		18,035,167

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

13 Loans (continued)

Following is a summary of the Company’s significant outstanding loans with BTA as of March 31, 2008:

Company	Loan agreement #	Date issued	Date expires	Purpose of loan	Interest rate	Balance as of March 31, 2008, USD
Dank	63	May 2007	March 2012	Equipment	9.23%	4,249,357
	59	April 2005	June 2010	Equipment	11.03%	2,821,650
	62	May 2007	May 2009	Equipment	11.76%	797,175
	94-1	May 2007	May 2010	Equipment	12.90%	491,580
	94-2	August 2008	August 2010	Equipment	12.96%	327,720
	110	June 2007	June 2010	Equipment	13.20%	375,000
	131-1	August 2007	August 2010	Equipment	13.01%	131,461
	682	March 2007	March 2012	Equipment	15.00%	170,511
	755	April 2007	March 2012	Equipment	15.00%	331,427
	810	April 2007	March 2012	Equipment	15.00%	248,571
	876	April 2007	March 2012	Equipment	15.00%	248,571
	1257	June 2007	March 2012	Equipment	15.00%	207,142
	670	July 2007	March 2008	Working capital	15.00%	331,427
	1622	July 2007	July 2008	Working capital	15.00%	217,500
	2146	Dec ember 2007	November 2008	Working capital	16.00%	360,428
	81	March 2008	October 2008	Working capital	16.00%	388,600
Kor-Tazh	747	April 2007	March 2012	Develop oil field	15%	396,056
	1012	May 2007	March 2012	Develop oil field	15%	279,642
	1116	May 2007	March 2012	Develop oil field	15%	1,195,625
	1466	July 2007	March 2012	Develop oil field	15%	405,142
	1973	October 2007	March 2012	Develop oil field	15%	1,010,854
	1468	July 2007	March 2012	Develop oil field	15%	135,000
	1576	July 2007	March 2012	Develop oil field	15%	400,000

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

14 Taxes Payable

	As of March 31, 2008		As of December 31, 2007
	USD		USD
Income tax		614,944		649,202
Personal income tax		333,396		341,087
Social tax		228,106		288,313
VAT payable		466,804		431,798
Vehicle tax		7,918		7,944
Property tax		52,985		111,344
Other taxes		60,757		59,149

		1,764,910		1,888,837

15 Obligation for historical reimbursement

	As of March 31, 2008		As of December 31, 2007
	USD		USD

Obligation for historical reimbursement as of December 31, 2007		3,151,916		2,927,930
Accretion expense		58,624		223,986

Obligation for historical reimbursement as of March 31, 2008		3,210,540		3,151,916

On August 4, 2004 the subsurface contract # 1483 on Zhetibay Severo-Zapadnay oil field was assigned to Kor-Tazh. The contract was concluded for twenty years ending 2024 with five years for exploration at the date of contract commencement.

The Company through its purchase of Kor-Tazh is obliged to reimburse USD 6,363,310, which represents historical costs incurred by the Republic of Kazakhstan for the oilfield as per the terms of the subsurface contract. Settlement of the obligation for historical reimbursement should be made in line with a payment schedule agreed between Kor-Tazh and the Government. The remaining amount shall be paid by equal portions starting from the ending date of the exploration period. Therefore no payments were made during three months ended March 31, 2008. The obligation is discounted at 7.65%, being the estimated credit-adjusted risk free discount rate.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

16 Asset retirement obligations

	As of March 31, 2008		As of December 31, 2007
	USD		USD

Asset retirement obligation as of December 31, 2007		190,032		176,535
Accretion expense		3,543		13,497

Asset retirement obligation as of March 31, 2008		193,575		190,032

The Company has asset retirement obligations arising from the requirements of subsurface contract on Zhetibay Severo-Zapadnay field to abandon oil wells and remove pipeline, compressor and related production facilities. The liability was initially measured at fair value USD 108,918 and subsequently is adjusted for accretion expense and changes in the amount or timing of the estimated cash flows. As of December 31, 2006 the asset retirement obligation was reassessed as result of technical audit performed by Company’s specialists in order to reflect fair value as of December 31, 2006. The corresponding asset retirement costs are capitalised as part of the carrying amount of the related oil exploration assets and depreciated over the asset’s useful life.

Management determined that asset retirement obligations should be recognised for future costs to abandon wells drilled at field before Kor-Tazh signed the subsurface contract, but which, in management’s opinion, were not properly abandoned. Management believes that this obligation is likely to be settled at the end of the exploration phase.

The asset retirement obligations in the amount of 216,000 USD are discounted at 7.65%, being the estimated credit-adjusted risk free discount rate.

17 Stockholders’ equity

On May 10, 2006 CIOC B.V. acquired three Kazakhstan companies: Dank, CGE and Kor-Tazh. The transaction was accounted as a combination under common control recognising the assets and liabilities transferred at their carrying amounts as of December 31, 2005. The difference USD 64,699 between the carrying amount of net assets received and the consideration paid is recognised in CIOC B.V. equity as an additional paid-in capital.

On June 13, 2006 CIOC B.V. issued 718 ordinary shares each with a nominal value of EUR 100, at a premium of EUR 3,479 per share. The total value of the share issue, including premium, is equivalent to USD 3,229,947.

On August 10, 2006 CIOC B.V acquired CRSI Group, Inc. (subsequently changed to CIOC) in a reverse acquisition transaction. The stockholders’ equity section of the consolidated balance sheet as of March 31, 2008 is that of the nominal acquiree CIOC B.V., not the nominal acquirer CRSI Group, Inc. (subsequently changed to CIOC). Consequently, the amount shown for capital is valued in terms of the issued capital of CIOC B.V., plus the cost of the acquisition, which is equal to zero.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

17 Stockholders’ equity (continued)

Common Stock

The number of shares of CIOC common stock issued and outstanding as of March 31, 2008 is 62,757,028 .

During first quarter 2008, there have been no shares of common stock issued to employees or to third parties. The market value of shares issued in years prior to first quarter 2008 have been amortized as General and Administrative expense.

Stock Options

The Company’s stock option activity during the quarter ended March 31, 2008 is summarized in the following table:

				Weighted Average
	Options Outstanding			Exercise Price		Fair Value

Balance,12/31/2007		950,000			0.66		0.34

Awards in first quarter 2008		0

Cancellations in first quarter 2008		(191,667	)		0.70		0.27

Balance, 03/31/2008		758,333			0.65		0.36

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

18 Revenue

The major customers of oil field services segment during first quarter 2008 and 2007 were as following:

	For three months nded March 31, 2008		For three months ended March 31, 2007
	USD		USD

Samek International		3,000,000		2,126,163
Alga Caspi Gas		1,417,170		-
Anako		1,144,960		-
Other customers		35,728		714,806

Total revenue		5,597,858		2,840,969

19 Income tax

The income tax charge in the income statement comprised of:

	For three months ended March 31, 2008		For three months ended March 31, 2007
	USD		USD

Current tax (expense)/benefit		-		-
Deferred tax (expense)/benefit		27,174		506,418

		27,174		506,418

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

19 Income Tax (continued)

Relationship between tax expenses and accounting income for three months ended March 31, 2008 and 2007 is explained as follows:

	For three months ended March 31, 2008			For three months ended March 31, 2007

Income/(loss) before income taxes		(641,892	)		(2,423,677	)
Expected tax (provision)/benefit		192,567			727,103
Add tax effect of:
Permanent differences		(165,393	)		(220,685	)
		27,174			506,418

The statutory tax rate of 30% is used in Kazakhstan.

Deferred taxes reflect the estimated tax effect of temporary differences between assets and liabilities for financial reporting purposes and those measured by tax laws and regulations. The components of deferred tax assets and deferred tax liabilities are as follows:

	As of March 31, 2008			As of December 31, 2007
	USD			USD
Deferred tax assets:
Accrued tax liabilities		81,890			122,892
Accrued vacation provision		31,312			31,413
Deferred tax related to oil properties		842,827			779,402
Tax losses carried forward		1,216,742			1,238,862
		2,172,771			2,172,569

Valuation allowance		(842,827	)		(779,402	)
		1,329,944			1,393,167
Deferred tax liabilities:
Fixed assets and intangible assets		2,275,277			2,368,487
		2,275,277			2,368,487

Net deferred tax liability		945,333			975,320

Tax losses carried forward relate to the oil field services company located in Kazakhstan and expire in three years.

Deferred taxes reflect the estimated tax effect of temporary differences between assets and liabilities for financial reporting purposes and those measured by tax laws and regulations. The changes in the deferred tax assets and deferred tax liabilities are as follows:

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

19 Income Tax (continued)

	Deferred Tax Assets As of March 31, 2008			Deferred Tax Liabilities As of March 31, 2008
	USD			USD
At the beginning of the year		1,393,167			2,368,487
Charge recognized in income		(58,382	)		(85,556	)
Foreign currency translation adjustment		(4,841	)		(7,654	)

At the end of the period		1,329,944			2,275,277

20 Earnings per share

	For three months ended March 31, 2008			For three months ended March 31, 2007
	USD			USD

Net profit/(loss) attributable to ordinary shareholders		(611,621	)		(1,855,842	)

Weighted average number of outstanding common shares		62,757,028			62,298,888
Weighted average number of outstanding common shares after dilution		62,757,028			62,298,888


Basic and diluted earnings per share		(0.01	)		(0.03	)

Basic income (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. The Company's common stock equivalents at March 31, 2008 include 758,333 unexercised options. The computation of diluted net earnings per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

21 Segment Reporting

The following table presents the Company’s segment information. For management purposes, the Company is organized into two major segments – oil field services and oil field exploration. These segments are the basis on which the Company reports its primary segment information. Oil field services segment is represented by Dank. Oil field exploration segment is represented by Kor-Tazh.

Business segments	Oil field services			Oil field exploration			Eliminations			Consolidated
USD	For three months ended March 31, 2008			For three months ended March 31, 2008			For three months ended March 31, 2008			For three months ended March 31, 2008
Revenues
Sales to third parties		5,597,858			-			-			5,597,858
Inter-segment sales		-			-			-			-
Total sales		5,597,858			-			-			5,597,858
Expenses
Share of profit of associates		17,699			-			-			17,699
Production and operating expenses		(4,497,086	)		-			-			(4,497,086	)
General and administrative expenses, operating		(715,842	)		(155,887	)		-			(871,729	)
General and administrative expenses, corporate		(157,216	)		(157,216	)		-			(314,432	)
Accretion expenses		-			(62,167	)		-			(62,167	)
Interest expense		(446,212	)		(3,560	)		-			(449,772	)
Foreign currency exchange gain, net		(40,277	)		(13,180	)		-			(53,457	)
Loss from disposal of fixed assets, net		(8,776	)		-			-			(8,776	)
Income tax benefit		27,174			-			-			27,174
Net income/(loss)		(222,708	)		(392,010	)		3,097			(611,621	)
Total assets		26,532,498			8,830,945			(5,266,746	)		30,096,697

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

21 Segment Reporting (continued)

Business segments	Oil field services			Oil field exploration			Eliminations			Consolidated
USD	For three months ended March 31, 2007			For three months ended March 31, 2007			For three months ended March 31, 2007			For three months ended March 31, 2007
Revenues
Sales to third parties		2,840,969			-			-			2,840,969
Inter-segment sales		-			-			-			-
Total sales		2,840,969			-			-			2,840,969

Expenses
Share of profit of associates		29,512			-			-			29,512
Production and operating expenses		(4,136,733	)		-			-			(4,136,733	)
General and administrative expenses		(525,372	)		(61,882	)		-			(587,254	)
General and administrative expenses, corporate		(344,086	)		(344,086	)		-			(688,172	)
Accretion expenses		-			(57,742	)		-			(57,742	)
Interest expense		(150,695	)		(8,061	)		-			(158,756	)
Foreign currency exchange gain, net		160,184			80,632			-			240,816
Rent income		93,543			-			-			93,543
Loss from disposal of fixed assets, net		(3,435	)		-			-			(3,435	)
Other non-operating income (loss), net		3,591			(16	)		-			3,575
Income tax benefit		506,418			-			-			506,418

Net income		(1,526,104	)		(391,155	)		61,417			(1,855,842	)
Total assets		19,646,788			5,206,071			(4,144,775	)		20,708,084

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

22 Commitments and Contingencies

Capital Commitments

Under the terms of the subsurface contract, Kor-Tazh is required to spend a total of USD 14.6 million in exploration and development activities on the oilfield during twenty years. The failure to make these minimum capital expenditures could result in the loss of the subsurface contract.

In accordance with the subsurface contract, the Company is committed to contribute to social sphere development in the total amount of USD 844,000 for all oilfields during the twenty years. During year ended December 31, 2007, the Company made payment of USD 52,000. Management believes that the Company will meet this obligation within the exploration phase. There were no payments made during first quarter 2008.

In accordance with the subsurface contract, the Company is committed to finance professional training in the total amount of USD 146,000 for all oilfields during the twenty years. During year ended December 31, 2007, the Company made payment of USD 24,445. Management believes that the Company will meet this obligation within the exploration phase. There were no payments made during first quarter 2008.

The following table lists our significant commitments at March 31, 2008, excluding current liabilities as listed on our balance sheet:

	Payments Due By Period
Contractual obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Capital Expenditure Commitment	$	12,084,415	$	584,415	$	7,900,000	$	500,000	$	3,100,000

Historical cost Due to the Government of Kazakhstan	$	6,267,860		-	$	417,860	$	835,700	$	5,014,300
Social sphere development commitment	$	792,000	$	42,000	$	126,000	$	85,000	$	539,000
Obligation to finance professional training	$	121,555	$	6,555	$	79,000	$	5,000	$	31,000

Asset retirement obligation	$	216,000		-		-		-	$	216,000

Loans	$	16,822,179	$	4,586,216	$	6,425,440	$	5,702,659	$	107,864
Interest expense	$	5,978,307	$	1,849,815	$	2,649,299	$	1,434,261	$	44,932
Total	$	42,282,316	$	7,069,001	$	17,597,599	$	8,562,620	$	9,053,096

For interest expense computation the Company made an assumption that LIBOR rate would be consistent for the remainder of the term of the debt.

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

22 Commitments and Contingencies (continued)

Insurance

The insurance industry in Kazakhstan is in a developing state and many forms of insurance protection common in other parts of the world are not yet generally available. The Company does not have full coverage for its plant facilities, business interruption, or third party liability in respect of property or environmental damage arising from accidents on Company property or relating to Company operations. Until the Company obtains adequate insurance coverage, there is a risk that the loss or destruction of certain assets could have a material adverse effect on the Company’s operations and financial position.

Taxation contingencies:

The taxation system in Kazakhstan is relatively new and is characterised by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during the three subsequent calendar years; however, under certain circumstances a tax year may remain open longer.

These circumstances may create tax risks in Kazakhstan that are substantially more significant than in other countries. Management believes that there are no significant tax uncertainties.

Issued guarantee:

Dank SIF issued guarantee in the amount of $2,000,000 in favour of Kor-Tazh LLP in Bank Turanalem.

23 Post balance sheet events

Dank received loan in the amount of USD 580,000 subsequently to March 31, 2008.

24 Related party transactions

Related parties transactions, as defined by SFAS 57, are those that include transactions between the following:

	a)	a parent company and its subsidiaries;

	b)	subsidiaries of a common parent;

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

24 Related party transactions (continued)

an enterprise and trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of the enterprise’s management;

an enterprise and its principal owners, management, or members of their immediate families; and

affiliates.

In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. Management of the Company consider that the entities within the Company have appropriate procedures in place to identify and properly disclose transactions with related parties in this environment and has disclosed all of the relationships identified which it deemed to be significant.

The relationship between the Company and the described below related parties is as following:

“PGDS Services” LLP – is a 100% subsidiary of Dank LLP, which is Variable Interest Entity;

“Kazpromgeiphysics” JSC – Janseitov Nurlan is one of the shareholders of the company;

“Batyr” LLP – Janseitov Nurlan is one of the shareholders of the company;

“Nurtobe” LLP – Bergaliyev Timur is a Director of the company;

“Turksibstroy” LLP – Bergaliyev Timur used to be a Director of the company;

“City lux” LLP – Bergaliyev Timur is a founder and Director of the company;

“Caspian Logging” LLP – related party of “Kazpromgeophysics” LLP.

Management remuneration

Key management received the following remuneration during the year, which is included in general and administrative expenses:

	For three months ended March 31, 2008		For three months ended March 31, 2007
	USD		USD
Salaries and bonuses		174,084		175,065
Other long-term service benefits provided		-		-
Termination benefits		-		-
		174,084		175,065

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

24 Related party transactions (continued)

Transactions with other related parties

The Company’s other related party transactions are disclosed below.

USD	Transaction value		Transaction value
	For three months ended March 31, 2008		For three months ended March 31, 2007
Services provided:
Other related parties
“PGD Services” LLP		17,669		29,512

Cost of services purchased:
Other related parties
“PGD Services” LLP	-	11,991
“Batyr” Ltd	64,718	67,333
	139,892	108,836

Financial aid received:
Shareholder
Timur Bergaliyev	303,830	12,674
Other related parties
“Kazpromgeophysics” JSC	199,269	124,099
	503,099	136,773
Financial aid paid:
“Kazpromgeophysics” JSC	199,269	124,099
“Caspian Logging Services” LLP	-	32,026
	199,269	156,125

Caspian International Oil Corporation

Notes to the Consolidated Financial Statements

24 Related party transactions (continued)

	Outstanding balance As of March 31, 2008		Outstanding balance As of December 31, 2007
Financial aid received:
Shareholder
Timur Bergaliyev, payable		458,199		155,498
“Kazpromgeophysics” JSC		8,286		241,061
“Batyr” Ltd		24,857		-
		491,342		396,559
Finacial aid paid:
Other related parties
“Caspian Logging Services” LLP, receivable		157,428		282,627
“Turksibstroy” LLP, receivable		217,457		216,921
“City Lux” LLP		31,817		31,920
Other		14,205		-
		420,907		531,468
Payable to related parties:
“PGD Services” LLP		156,095		156,600
“Nurtobe” LLP		4,009		4,022
		160,104		160,622

Loans Received:
Shareholder, payable		700,022		466,862

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

A Note Regarding Forward-Looking Statements

This Report contains certain forward-looking statements regarding Caspian International Oil Corporation, its business and its financial prospects. These statements represent Management’s present intentions and its present belief regarding the Company’s future. Nevertheless, there are numerous risks and uncertainties that could cause our actual results to differ from the results suggested in this Report. Among the more significant factors are:

Ø	It will be necessary for us to incur substantial debt in order to fully implement our business plan. If the results of our operations are insufficient to allow us to service our debt, the value of our business will be significantly impaired.

Ø	The success of our oil field services business will depend on our ability to overcome strong competition, much of which is better funded than we are.

Ø	The success of our exploration business will depend on factors over which management will have little control, including the results of exploration, world oil prices, and policies of the government of Kazakhstan.

Because these and other risks may cause Caspian International’s actual results to differ from those anticipated by Management, the reader should not place undue reliance on any forward-looking statements that appear in this Report. Readers should also take note that Caspian International will not necessarily make any public announcement of changes affecting these forward-looking statements, which should be considered accurate on this date only.

Results of Operations

The Company’s revenue is currently provided by Dank, our oilfield service subsidiary. Revenues for the three months ended March 31, 2008 were $5,597,858 as compared to $2,840,969 for the three months ended March 31, 2007. The increase in 2008 revenues is due to better utilization of our seismic crews, including a fourth crew which was added in the third quarter of 2007. In the first quarter of 2007 the Company’s seismic crews were not fully utilized due to harsh weather conditions and one crew being placed on standby while our client attempted to resolve an issue with the Uzbek government.

Although not as severe as the harsh weather experienced in 2007, our seismic crew operating activities were negatively impacted by unfavorable weather conditions during the month of March, 2008. As a result, there was a loss from operating activities of $156,332 for the three months ended March 31, 2008. This compares to a loss of $2,632,367 for the three months ended March 31, 2007. The crews impacted by the unfavorable weather conditions in March, 2008 were able to return to full utilization during the month of April, 2008. Barring any unforeseen events that prevent Dank from fulfilling its contracts on schedule, the Company expects revenues for 2008 to exceed those of 2007.

Expenses for the three months ended March 31, 2008 were higher than those in the comparable 2007 period due primarily to the increased costs associated with adding a fourth seismic crew including increased depreciation expense for the additional seismic equipment. One category of expense that was lower for the three months ended March 31, 2008 was Corporate Office overhead which decreased to $314,432 for the three months ended March 31, 2008 as compared to $688,172 for the three months ended March 31, 2007.

A significant portion of the lower Corporate Office overhead is a reduction in the cost of the Company’s stock based compensation. The reduction is principally due to the cancellation of award shares and stock options of the Company’s former CEO whose contract was terminated in July, 2007. In addition, no shares or stock options have been issued to third parties during the three months ended March 31, 2008. Stock based compensation is not expected to be a significant amount of our General and Administrative expense in the immediate future.

Interest expense for the three months ended March 31, 2008 was $449,772 as compared to $158,756 for the three months ended March 31, 2007. The higher interest expense was due to the increased level of borrowing by Dank, principally for equipment needed to meet the increased demand for its services. Our oil exploration and production subsidiary, Kor-Tazh, also incurred substantial interest costs. However the majority of interest cost incurred by Kor-Tazh in the development of its oil field is being capitalized as oil exploration and production assets on our balance sheet.

Income tax benefits of $27,174 were recorded for the three months ended March 31, 2008 as compared to tax benefits of $506,418 for the three months ended March 31, 2007. We are accruing tax benefits on losses incurred by Dank as we anticipate being able to offset those losses against taxable income as Dank returns to profitability in 2008. However, no tax benefit is being recorded for the loss attributable to the general and administrative expenses of our U.S. corporate office.

Our net loss for the three months ended March 31, 2008 was $611,621 as compared to a net loss of $1,855,842 for the three months ended March 31, 2007. Higher revenues from improved utilization of Dank’s seismic crews in 2008 coupled with a significant reduction in Corporate overhead were the principal factors in the improvement in 2008. Management is continuing to analyze overhead expenses to determine if further reductions can be made.

Liquidity and Capital Resources

The primary source of the Company’s capital resources have been from lines of credit with Bank Turan Alem “BTA”. Our aggregated debt service obligations at March 31, 2008 are shown in the following table:

Contractual Obligation	Total		Less than 1 year		1-3 years		4-5 years		Over 5 years

BTA-Dank	$	12,299,835	$	3,886,194	$	6,425,440	$	1,880,337	$	107,864

BTA-Kor-Tazh	$	3,822,322		-		-	$	3,822,322		-

Total BTA	$	16,122,157	$	3,886,194	$	6,425,440	$	5,702,659	$	107,864

Other	$	700,022	$	700,022		-		-		-

Total Loans	$	16,822,179	$	4,586,216	$	6,425,440	$	5,702,659	$	107,864

Interest	$	5,978,307	$	1, 849,815	$	2,649,299	$	1,434,261	$	44,932

For the interest computation the Company made an assumption that the Libor rate would remain constant for the remaining term of the debt.

During the first quarter of 2008, the debt obligation related to our BTA-Dank loan was reduced by approximately $1.4 million.

Our BTA-Kor-Tazh loan balance remained at $3.8 million at March 31, 2008, leaving approximately $1.2 million available under Kor-Tazh’s $5 million credit line. It is anticipated that this $1.2 million will be used in the development of Kor-Tazh’s oil field, NW Zhetybai, during the second and third quarters of 2008, principally for well re-entry costs.

Cash Flow

Our cash flow for the three months ended March 31, 2008 and 2007 is summarized in the following table :

	Three months ended March 31, 2008			Three months ended March 31, 2007
Net Cash:
(Used in)/ provided by operating activities	$	1,372,500		$	(922,902	)
(Used in)/ investing activities	$	(220,156	)	$	(230,035	)
Provided by/ (used in) financing activities	$	(1,033,590	)	$	998,673

NET INCREASE ( DECREASE) IN CASH AND CASH EQUIVALENTS	$	11,438		$	(25,786	)

Net cash provided by operating activities improved for the three months ended March 31, 2008 over the three months ended March 31, 2007 due to the increased Dank revenues resulting from the utilization of our seismic crews, including the fourth crew added during the third quarter of 2007.

The cash flow of Dank at this time is adequate to satisfy its working capital requirements and its debt service. Kor-Tazh will be able to utilize the remaining balance of its credit line for the well re-entry portion of its development plan. However the capital spending required by Dank to remain competitive and operate efficiently coupled with the funds needed by Kor-Tazh to continue oil development activities in the North-West Zhetybai Field will likely result in an increase in the Company’s debt.

The Company will continue its efforts to obtain the funds needed to meet the future capital requirements of Dank and Kor-Tazh and to maximize the value of its assets, including possibly retiring or refinancing its existing debt. Although discussions have taken place, no commitment has been received at this time.

Off-Balance Sheet Arrangement

The Company and its subsidiaries do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on their financial condition or results of operations.

Risk Factors That May Affect Future Results

You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

I. Risks attendant to our oil services business

Cyclical declines in oil and natural gas prices may result in reduced use of our services, affecting our business, financial condition and results of operation and our ability to meet our capital expenditure obligations and financial commitments.

The oil and natural gas exploration and drilling business is highly cyclical. Generally, as oil and natural gas prices decrease, exploration and drilling activity declines as marginally profitable projects become uneconomic and are either delayed or eliminated. Declines in the number of operating drilling rigs result in reduced use of and prices for our services. Accordingly, when oil and natural gas prices are relatively low, our revenues and income will suffer. Oil and natural gas prices depend on many factors beyond our control, including the following:

·	worldwide economic conditions;

·	changes in global supply and demand for oil and natural gas;

·	the level of production of the Organization of Petroleum Exporting Countries;

·	the level of production of non-OPEC countries;

·	political conditions, including embargoes, affective oil and gas production;

·	global petroleum inventories; and

·	advances in exploration and production techniques.

Depending on the market prices of oil and natural gas, companies exploring for oil and natural gas may cancel or curtail their drilling programs, thereby reducing demand for drilling services. Our contracts are generally short-term, and oil and natural gas companies tend to respond quickly to upward or downward changes in prices. Any reduction in the demand for drilling services may materially erode both pricing and utilization rates for our services and adversely affect our financial results. As a result, we may suffer losses, be unable to make necessary capital expenditures and be unable to meet our financial obligations.

Our industry is highly competitive.

The markets in which we operate are highly competitive. Contracts are traditionally awarded on a competitive bid basis. Pricing is often the primary factor in determining which qualified contractor is awarded a job. The competitive environment has intensified as recent mergers among oil and natural gas companies have reduced the number of available customers. In Kazakhstan, the general upturn in economic conditions in this decade has attracted a large number of new competitors. Some of them are equipped with state-of-the-art vehicles, drilling equipment and technology, yet bid for contracts at highly competitive prices. Some of them are also substantially larger than we are and have resources that are significantly greater than our resources. These competitors are better able to withstand industry downturns, compete on the basis of price and acquire new equipment and technologies, all of which could affect our revenues and profitability. These competitors compete with us both for customers and for acquisitions of other businesses. This competition may cause our business to suffer. We believe that competition for contracts will continue to be intense in the foreseeable future.

Suppliers

The equipment utilized in our business is generally available new from manufacturers or at auction. Currently, due to the high level of activity in the oilfield services industry, there is a high demand for new and used equipment. Consequently, there is a limited amount of many types of equipment available at auction and significant backlogs on new equipment. Our business plan contemplates that we will follow a program of acquiring capital equipment as needed to maintain our competitive position in the Kazakhstan oil industry. We have already contracted for our immediate equipment needs. However, the cost of acquiring new equipment to expand our business could increase as a result of the high demand for equipment in the industry.

Severe weather conditions may affect our operations.

Our business may be materially affected by severe weather conditions in the areas in which we operate. In particular, severe winter weather has in the past, and may in the future require us to suspend our surveying operations, which is likely to result in loss of revenue and inefficient use of our resources. Moreover, as our oil exploration subsidiary, Kor-Tazh, will soon be commencing exploration and development activities, we face the risk that severe weather conditions may delay drilling and, under certain circumstances, result in damage to our equipment. Any of these situations would have an adverse effect on our financial results.

High interest rates may have a negative effect on our operations.

Dank has financed its recent growth by borrowing from a Kazakh bank. Currently we carry over $18 million in debt. On approximately two-thirds of our debt we pay interest at LIBOR+5.65% per annum. On most of the remaining debt we pay interest at 14% to 16%. These high interest rates are a function of the relative volatility of the Kazakh economy and the difficulty of obtaining investment capital in Kazakhstan. We hope to utilize our status as a publicly-held company to attract equity financing including convertible debt. To some extent, however, we may still depend on debt financing to fund our expansion. Although we will attempt to obtain future debt financing at more reasonable rates, there is no assurance that we will be successful in doing so. If we are unsuccessful in these efforts, the resulting interest expense will have an adverse effect on our profitability.

Currency fluctuations may adversely affect our operating results.

Dank generates revenues and incurs expenses and liabilities in Tenge, the currency of the Republic of Kazakhstan. However, as subsidiaries of CIOC, they will report their financial results in the United States in U.S. Dollars. As a result, our financial results will be subject to the effects of exchange rate fluctuations between these currencies. From time to time, the government of Kazakhstan may take action to stimulate the Kazakh economy that will have the effect of reducing the value of Tenge. In addition, international currency markets may cause significant adjustments to occur in the value of the Tenge. Any such events that result in a devaluation of the Tenge versus the U.S. Dollar will have an adverse effect on our reported results. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.

Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.

Our future success depends on our ability to attract and retain highly skilled geophysicists, geologists, engineers, and technicians. Qualified individuals are in high demand in Kazakhstan, and there are insufficient experienced personnel to fill the demand. Therefore we may not be able to successfully attract or retain the personnel we need to succeed.

Government regulation may hinder our ability to function efficiently.

The Republic of Kazakhstan is supportive of its oil and gas exploration industry. Nevertheless, the government of Kazakhstan is highly bureaucratized, and the day-to-day operations of our business require frequent interaction with representatives of the Kazakh government institutions. The effort to obtain the registrations, licenses and permits necessary to carry out our business plans can be daunting. Significant delays can result from the need to obtain governmental approval of our activities. These delays can have an adverse effect on the profitability of our operations. In addition, future legislation, particularly legislation aimed at protecting the environment of Kazakhstan and legislation aimed at protecting the workers of Kazakhstan may increase the cost of our operations, which would adversely affect our profitability.

We may have difficulty establishing adequate management and financial controls in Kazakhstan.

The Republic of Kazakhstan has only recently begun to adopt the management and financial reporting concepts and practices with which investors in the United States are familiar. We may have difficulty in hiring and retaining employees in Kazakhstan who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.

Capital outflow policies in Kazakhstan may hamper our ability to pay dividends to shareholders in the United States.

The Republic of Kazakhstan has adopted currency and capital transfer regulations. These regulations require that Dank comply with complex regulations for the movement of capital. The current regulations require notification to the National Bank of Kazakhstan of all significant currency transactions, impose registration and licensing requirements on entities involved in currency exchange, and limit the ability of entities operating in Kazakhstan to expatriate funds. Moreover, Kazakhstan changes its currency regulations frequently. We may be unable to obtain all of the required conversion approvals for our operations, and Kazakh regulatory authorities may impose greater restrictions on the convertibility of the Tenge in the future. Because all of our future revenues will be in Tenge, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to fund business activities outside Kazakhstan. Moreover, although we do not expect that the company will pay dividends in the foreseeable future, our ability to pay dividends to our shareholders in the future could be hampered by Kazakhstan currency regulations.

II. Risks attendant to our oil exploration business

Kor-Tazh will require significant financing in order to carry out its exploration and development activities and such financing may not be available.

We anticipate that full development of Kor-Tazh’s oil field will take several years and require significant capital expenditures. If CIOC is unable to timely obtain adequate funds to finance these activities, Kor-Tazh’s ability to develop its oil reserves may be severely limited or substantially delayed. Such limitations or delay would likely result in substantial losses being reflected in our statements of operations.

We anticipate that amounts required to fund Kor-Tazh’s activities will be funded from operating cash flows, third-party financing and from joint venture partners. Kor-Tazh currently has a $5 million credit line, on which it has drawn $3.8 million. Additional funds will be required, however, as our contract with the Government of Kazakhstan requires that at least $14,600,000 be committed to development of Kor-Tazh’s oil field. No commitments of additional funds have been received, however, and there can be no assurance that Kor-Tazh will have adequate funds available to finance its operations.

The operations of Kor-Tazh will require significant expenditures of capital that may not be recovered.

We require significant expenditures of capital in order to locate and acquire producing properties and to drill exploratory and exploitation wells. In conducting exploration, exploitation and development activities from a particular well, the presence of unanticipated pressure or irregularities in formations, miscalculations or accidents may cause our exploration, exploitation, development and production activities to be unsuccessful, potentially resulting in abandoning the well. This could result in a total loss of our investment. In addition, the cost and timing of drilling, completing and operating wells is difficult to predict.

Oil and gas price fluctuations in the market may adversely affect the results of our operations.

The results of our oil exploration and production activities will be highly dependent upon the worldwide prices received for our oil production. Substantially all of our sales of oil will be made in the spot market, or pursuant to contracts based on spot market prices, and not pursuant to long-term, fixed-price contracts. Accordingly, the prices received for our oil production will be dependent upon numerous factors beyond our control. These factors include the level of consumer product demand, governmental regulations and taxes, the price and availability of alternative fuels, the level of foreign imports of oil and natural gas and the overall economic environment. Significant declines in world wide prices for oil could have a material adverse effect on our financial condition, results of operations and quantities of reserves recoverable on an economic basis.

Reserve Estimates Depend On Many Assumptions That May Turn Out To Be Inaccurate.

Any material inaccuracies in our reserve estimates or underlying assumptions could materially affect the quantities and present values of our reserves. The process of estimating oil reserves is complex. It requires interpretations of available technical data and various assumptions, including assumptions relating to economic factors. Any significant inaccuracies in these interpretations or assumptions could materially affect the estimated quantities and present value of reserves shown in this Report. In order to prepare these estimates, we must project production rates and timing of development expenditures. We must also analyze available geological, geophysical, production and engineering data, and the extent, quality and reliability of this data can vary. The process also requires economic assumptions relating to matters such as oil and natural gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. Therefore, estimates of oil and natural gas reserves are inherently imprecise.

Actual future production, oil and natural gas prices, revenues, taxes, development expenditures, operating expenses and quantities of recoverable oil and natural gas reserves most likely will vary from our estimates. A significant variance could materially affect the estimated quantities and pre-tax present value of reserves shown in this report. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development, prevailing oil and natural gas prices and other factors, many of which are beyond our control.

We may encounter operating hazards that may result in substantial losses.

Kor-Tazh will be subject to operating hazards normally associated with the exploration and production of oil, including blowouts, explosions, oil spills, cratering, pollution, earthquakes, labor disruptions and fires. The occurrence of any such operating hazards could result in substantial losses to us due to injury or loss of life and damage to or destruction of oil and gas wells, formations, production facilities or other properties. We intend to maintain insurance coverage limiting financial loss resulting from certain of these operating hazards. We may not, however, maintain full insurance coverage for all matters that may adversely affect our operations, including war, terrorism, nuclear reactions, government fines, treatment of waste, blowout expenses and business interruptions. Losses and liabilities arising from uninsured or underinsured events could reduce our revenues or increase our costs. There can be no assurance that any insurance will be adequate to cover losses or liabilities associated with operational hazards. We cannot predict the availability of insurance, or its availability at premium levels that justify its purchase.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

(a) Evaluation of disclosure controls and procedures.

The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report (the “Evaluation Date”). As a start-up company, the Company has insufficient personnel resources within its reporting functions, which constitutes a material weakness in internal controls over financial reporting. As a result, management concluded its disclosure controls and procedures were not effective. The Company is reviewing ways to improve the effectiveness, including the addition of an audit committee financial expert.

(b) Changes in internal controls.

The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer has evaluated any changes in the Company’s internal control over financial reporting that occurred during the quarterly period covered by this report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None.

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

None.

Item 3. Default Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Rule 13a-14(a) Certification – CEO
31.2	Rule 13a-14(a) Certification – CFO
32	Rule 13a-14(b) Certification

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	CASPIAN INTERNATIONAL OIL CORPORATION

Date: May 19, 2008	By:	/s/ Nurlan Janseitov
		Nurlan Janseitov, Chief Executive Officer


	By:	/s/ David Fulton
		David Fulton, Chief Financial Officer

* * * * *

CASPIAN INTERNATIONAL OIL CORP 10-Q