10QSB

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended June 30, 2003

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

For the transition period

Commission file number 000-32669

HEARTLAND OIL AND GAS CORP.
(Exact name of small business issuer as specified in its charter)

Nevada
(State or other jurisdiction of incorporation or organization) 91-1918326
(I.R.S. Employer Identification No.)

Suite 1500, 885 West Georgia Street
Vancouver, British Columbia, Canada V6C 3E8
(Address of principal executive offices)

604.693.0177

(Issuer's telephone number)

not applicable
(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes [X]     No [ ]

 2

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.     Yes [ ]     No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:

20,932,265 common shares outstanding as at July 15, 2003

Transitional Small Business Disclosure Format (Check one):      Yes [X]     No [ ]

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

Our unaudited financial statements as of June 30, 2003 and for the three month periods ended June 30, 2003 and 2002 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

3

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARY
(A Development Stage Company)

BALANCE SHEETS

		June 30, 2003 (Unaudited)		December 31, 2002 (Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,089,372	$	86,475
Prepaid expenses		17,252		4,341
Accounts receivable		3,000		-
Total current assets		2,109,624		90,816
OIL AND GAS PROPERTIES, unproven (Note 2)		2,215,920		2,150,084
EQUIPMENT, net of accumulated depreciation of $1,274		10,158		3,041
TOTAL ASSETS	$	4,335,702	$	2,243,941
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	118,727	$	64,256
Due to related parties (Note 5)		2,628		14,078
Convertible debentures (Note 5)		-		435,000
Total current liabilities		121,355		513,334
LONG-TERM DEBT
Convertible debenture - related party (Note 5)		-		235,399
TOTAL LIABILITIES		121,355		748,733
SHAREHOLDERS' EQUITY (Note 3)
Common stock - $0.001 per value, 100,000,000 shares authorized,
21,432,706 and 19,582,429 shares issued and outstanding, respectively		21,433		19,582
Additional paid-in capital		5,047,328		1,957,771
Deficit accumulated during the development stage		(854,414)		(482,145)
		4,214,347		1,495,208
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	4,335,702	$	2,243,941

The accompanying notes are an integral part of these statements.

4

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARY
(A Development Stage Company)

STATEMENTS OF OPERATIONS

	Six Months Ended June 30, 2003 (Unaudited)	Six Months Ended June 30, 2002 (Unaudited)	Three Months Ended June 30, 2003 (Unaudited)	Three Months Ended June 30, 2002 (Unaudited)	Period from Inception (August 11, 2000) Through June 30, 2003 (Unaudited)
REVENUE	$-	$-	$-	$-	$-
EXPENSES
Professional fees	107,503	27,111	65,464	11,206	186,425
Management fees (Note 5)	18,000	12,000	7,000	6,000	64,000
Interest expense	7,520	24,073	3,681	12,506	52,327
Stock based compensation (Note 4)	67,978	-	67,978	-	287,578
Travel and promotion	43,329	15,012	18,714	15,012	73,218
Office rent	15,004	-	8,297	-	15,004
Consulting (Note 5)	36,927	11,237	28,674	4,283	68,609
General and administrative	76,393	14,797	42,414	7,443	108,993
Total operating expenses	372,654	104,230	242,222	56,450	856,154
Loss from operations	(372,654)	(104,230)	(242,222)	(56,450)	(856,154)
OTHER INCOME
Interest income	385	339	385	169	1,740
NET LOSS	$(372,269)	$(103,891)	$(241,837)	$(56,281)	$(854,414)
BASIC AND DILUTED NET
LOSS PER COMMON SHARE	$(0.02)	$(0.01)	$(0.01)	$(0.01)
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING	20,035,584	11,697,070	20,300,682	11,332,429

The accompanying notes are an integral part of these statements

 5

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARY
(A Development Stage Company)

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

PERIOD FROM INCEPTION (AUGUST 11, 2000) TO JUNE 30, 2003

	Number of Common Shares	Stock Amount	Additional Paid-in Capital	Deficit Accumulated During the Development Stage
INCEPTION, August 11, 2000	$-	$-	$-	$-
Common stock issued at $0.005 per share	10,000,000	10,000	40,000	-
Common stock issued at $0.35 per share	1,332,429	1,332	465,018	-
Net loss	-	-	-	(10,004)
BALANCES, December 31, 2000	11,332,429	11,332	505,018	(10,004)
Net loss	-	-	-	(43,587)
BALANCES, December 31, 2001	11,332,429	11,332	505,018	(53,591)
Common stock issued at $0.50 per share	880,000	880	439,120	-
Recapitalization (Note 1)	7,090,000	7,090	402,313	-
Common stock issued at $1.40 per share	280,000	280	391,720	-
Issuance of stock warrants as compensation	-	-	219,600	-
Net loss	-	-	-	(428,554)
BALANCES, December 31, 2002	19,582,429	19,582	1,957,771	(482,145)
Common stock issued at $1.40 per share	720,000	720	1,007,280	-
Common stock issued at $0.50 per share	27,000	27	13,473	-
Conversion of debentures at $2.00	121,345	121	242,569	-
Conversion of debentures at $1.00	450,016	451	449,566	-
Common stock issued at $2.82 per share	531,916	532	1,499,471	-
Issuance of stock options as compensation	-	-	67,978	-
Less: share issue costs	-	-	(190,780)	-
Net loss	-	-	-	(372,269)
BALANCES, June 30, 2003	21,432,706	$21,433	$5,047,328	$(854,414)

The accompanying notes are an integral part of these statements.

6 

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARY
(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30, 2003 (Unaudited)	Six Months Ended June 30, 2002 (Audited)	Three Months Ended June 30, 2003 (Audited)	Three Months Ended June 30, 2002 (Audited)	Period from Inception (August 11, 2000) Through June 30, 2003 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$(372,269)	$(103,891)	$(241,837)	$(56,281)	$(854,414)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Accrued interest	22,308	23,655	10,960	12,505	36,197
Stock options issued as compensation	67,978	-	67,978	-	287,578
Depreciation, depletion and amortization	1,215	-	851	-	1,274
(Increase) decrease in exploration advance	-	6,719	-	-	-
Increase in prepaid expenses	(12,911)	(2,014)	(2,047)	64	(17,227)
(Increase) decrease in accounts receivable	(3,000)	-	(3,000)	-	(3,000)
Increase (decrease) in accounts payable
and accrued expenses	54,471	(43,460)	71,905	66,306	118,727
Net cash (used in) provided by
operating activities	(242,208)	(118,991)	(95,190)	22,594	(430,865)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of computer equipment	(8,332)	-	(5,380)	-	(11,432)
Acquisition and exploration of oil and
gas properties	(65,836)	(371,788)	(28,900)	(267,530)	(2,215,920)
Net cash (used in) provided by
investing activities	(74,168)	(371,788)	(34,280)	(267,530)	(2,227,352)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in due to related parties	(11,450)	-	(18,323)	(3,000)	224,108
Recapitalization, net of $15,896 cash received	-	-	-	-	393,808
Proceeds from notes and loan payable	-	70,000	-	-	-
Repayment of loan payable	-	(50,000)	-	-	-
Proceeds from issuance of common stock	2,330,723	440,000	1,854,324	440,000	3,679,073
Proceeds from share subscriptions	-	-	(490,000)	(390,000)	-
Proceeds from long-term debt	-	380,000	-	380,000	450,600
Net cash (used in) provided by
financing activities	2,319,273	840,000	1,346,001	427,000	4,747,589
NET INCREASE (DECREASE) IN CASH	2,002,897	349,221	1,216,531	182,064	2,089,372
CASH, beginning of period	86,475	10,755	872,841	177,912	-
CASH, end of period	$2,089,372	$359,976	$2,089,372	$359,976	$2,089,372

The accompanying notes are an integral part of these statements

 7

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Organization, Business and Going Concern

On April 10, 2002, Adriatic Holdings Limited ("Adriatic") entered into a letter of intent to acquire all of the shares of Heartland Oil and Gas Inc., a Nevada corporation ("Heartland"). Heartland was incorporated in the State of Nevada on August 11, 2000 and its principal business activity consists of exploration and development of oil and gas properties in the United States to determine whether they contain economically recoverable resources. The Company is currently in the development stage and has not generated significant revenues from its operations. Effective September 17, 2002, the acquisition of Heartland by Adriatic was completed through the issuance of one share of Adriatic common stock for each share of Heartland outstanding. At the time of the acquisition, Adriatic had 7,240,000 shares of common stock outstanding. Adriatic issued 12,212,429 shares of common stock to the shareholders of Heartland, and as a result, the Company had 19,452,429 shares of common stock outstan ding immediately after the acquisition. As part of the exchange agreement, Adriatic changed its name to Heartland Oil & Gas Corp.

The consolidated financial statements include the accounts of Adriatic since the date of the reverse acquisition (September 17, 2002) and the historical accounts of its wholly owned subsidiary, Heartland Oil and Gas Inc. (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation.

The Company has accumulated a deficit at June 30, 2003 of $854,414. The ability of the Company to continue operations is contingent upon attaining profitable operations and obtaining additional debt and/or equity capital to fund its operations.

In September 2002, the Board of Directors approved a private offering of common stock of up to 2,000,000 units (each unit consisting of one warrant and one share of common stock) at a price of $1.40 per unit, for proceeds of up to $2,800,000.

In May 2003 the Company closed the "Regulation S" private placement of 1,000,000 units, at $1.40 for gross proceeds of $1,400,000.

On June 30, 2003 the following transactions occurred:

- The Company issued 121,345 units at a price of $2.00 for the conversion of $242,690 (including interest of $20,242) outstanding on a convertible debenture. Each unit consists of one share of common stock and one common stock purchase warrant, exercisable at $2.00 per share.

- The Company issued 531,916 units at $2.82 per unit for proceeds of $1,500,003 from a private placement. Each unit consisted of one share and one half share purchase warrant exercisable at $3.38 per warrant.

- A convertible debenture for $450,016 (including interest of $15,016) was converted into 450,016 units at a price of $1.00 per unit on June 30, 2003. Each unit consists of one share of common stock and one common stock purchase warrant, exercisable at $1.00 per share.

Proceeds from these offerings are being used to advance the drilling of the Company's already initiated first five well projects, to acquire additional acreage and for general working capital.

 8 

HEARTLAND OIL & GAS CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Continued)

NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of Presentation

The accompanying consolidated financial statements of the Company are unaudited and include, in the opinion of management, all normal recurring adjustments necessary to present fairly the consolidated balance sheet as of June 30, 2003, and the related statements of operations and cash flows for the periods presented. 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. These consolidated financial statements should be read in conjunction with Heartland's audited financial statements and the related notes thereto included in the Company's Form 10-KSB filed with the Commission on March 31, 2003.

Oil and Gas Properties

The Company utilizes the full cost method to account for its investment in oil and gas properties. Under this method, all costs of acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, geological expenditures, tangible and intangible development costs and direct internal costs, are capitalized as incurred. As of June 30, 2003, the Company has no properties with proven and probable reserves. Should the Company have properties with proven reserves, the cost of these oil and gas properties will be depleted and charged to operations using the unit-of-production method based on the ratio of current production to proved oil and gas reserves as estimated by independent engineering consultants.

Costs directly associated with the acquisition and evaluation of unproved properties are excluded from the depletion computation until it is determined whether or not proved reserves can be assigned to the properties or whether impairment has occurred. If the results of a quarterly assessment indicate that the properties are impaired, the amount of the impairment along with the costs of drilling exploratory dry holes and geological and geophysical costs that cannot be directly associated with specific unevaluated properties are charged to operations for the period. The Company has not recorded any impairment charges through June 30, 2003. Should the Company have properties with proven reserves, the costs are added to the capitalized costs subject to depletion.

Internal costs not directly associated with acquisition, exploration and development activities are expensed as incurred. No internal costs are capitalized as of June 30, 2003.

Cash Equivalents

For purposes of the statement of cash flows, the Company considers cash held at banks and all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

9 

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-Based Compensation

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to account for stock-based compensation using Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and has adopted the disclosure only provisions of SFAS 123. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee is required to pay for the stock.

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"), "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services".

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows estimated to be generated by the asset.

Advertising Costs

Advertising costs are expensed as incurred.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management believes that the estimates utilized in the preparation of the consolidated financial statements are prudent and reasonable. Actual results could differ from these estimates.

10 

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

Substantially all of the Company's assets and liabilities are carried at fair value or contracted amounts that approximate fair value. Estimates of fair value are made at a specific point in time, based on relative market information and information about the financial instrument, specifically, the value of the underlying financial instrument. Assets that are recorded at fair value consist largely of cash and other assets, which are carried at contracted amounts that approximate fair value. Oil and gas properties are valued as discussed above. The Company's liabilities consist of short term liabilities and notes payable recorded at contracted amounts that approximate fair value.

Net Loss Per Share of Common Stock

Net loss per share of common stock is based on the weighted average number of shares of common stock outstanding, giving effect to the outstanding shares of Adriatic as if they were issued on the date of the reverse acquisition as discussed above. Common stock equivalents are not included in the weighted average calculation since their effect would be anti-dilutive.

Recent Accounting Pronouncements

In June 2001, the FASB issued Statement of Financial Accounting Standard No. 141 ("SFAS 141"), "Business Combinations" and No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets." SFAS 141 requires all business combinations to be accounted for using the purchase method of accounting and is effective for all business combinations initiated after June 30, 2001. SFAS 142 requires goodwill to be tested for impairment under certain circumstances, and written off when impaired, rather than being amortized as previous standards required. SFAS 142 is effective for fiscal years beginning after December 15, 2001, with early application permitted for companies with fiscal years beginning after March 15, 2001, provided that the first interim period financial statements have not been previously issued. The adoption of SFAS 141 and 142 did not have an effect on the Company's financial position or results of operations.

In August 2001, the FASB issued Statement of Financial Accounting Standard No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets." This statement supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement removes goodwill from the scope of SFAS 121, and requires long-lived assets to be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. SFAS 144 is effective for fiscal years beginning after December 15, 2001. The adoption of SFAS 144 did not have an effect on the Company's financial position or results of operations.

NOTE 2- OIL AND GAS PROPERTIES, UNPROVED

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

	Acquisition Costs	Exploration Costs	Total
Costs incurred during periods ended:
June 30, 2003	$ 49,184	$ 16,652	$ 65,836
December 31, 2002	917,003	-	917,003
December 31, 2001	506,253	591,875	1,098,128
December 31, 2000	110,000	24,953	134,953
Totals	$ 1,582,440	$ 633,480	$ 2,215,920

11

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 3- SHAREHOLDERS' EQUITY

On September 11, 2000, the Company completed a private placement of 10,000,000 common shares at a price of $0.005 per share for proceeds of $50,000. On October 20, 2000 and November 21, 2000 the Company completed additional private placements of 356,429 and 976,000 common shares at $0.35 per share for proceeds of $466,350.

In April 2002, prior to the reverse acquisition with Adriatic (see Note 1), the Company completed a private placement of 880,000 shares of common stock at $0.50 per share for proceeds of $440,000. On September 17, 2002, the Company completed its reverse acquisition with Adriatic by Adriatic issuing 12,212,429 to the shareholders of Heartland.

In October 2002, the Company commenced a private placement of units (one common share and one common stock purchase warrant exercisable at a price of $1.75 per share until August 31, 2004) at a price of $1.40 per unit. As of December 31, 2002, the Company sold 280,000 units for proceeds of $392,000.

In March 2003, the Company sold 690,000 units at $1.40 for proceeds of $966,000.

The Company sold 30,000 units at $1.40 for proceeds of $42,000 in May 2003. This sale concluded the "Regulation S" private placement of 1,000,000 units at $1.40 per unit.

During the quarter ended June 30, 2003, the Company issued 27,000 shares at $0.50 per share for proceeds of $13,500 from the exercise of stock options.

On June 30, 2003 the following transactions occurred:

• The Company issued 121,345 units at a price of $2.00 for the conversion of $242,690 (including interest of $20,242) outstanding on a convertible debenture. Each unit consists of one share of common stock and one common stock purchase warrant, exercisable at $2.00 per share.
• The Company issued 531,916 units at $2.82 per unit for proceeds of $1,500,003 from a private placement. Each unit consisted of one share and one half share purchase warrant exercisable at $3.38 per warrant.
• A convertible debenture for $450,016 (including interest of $15,016) was converted into 450,016 units at a price of $1.00 per unit on June 30, 2003. Each unit consists of one share of common stock and one common stock purchase warrant, exercisable at $1.00 per share.

As of June 30, 2003, none of the warrants had been exercised.

12

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED -FINANCIAL STATEMENTS
(Continued)

NOTE 4 - STOCK OPTIONS

On December 3, 2001, the Company's Board of Directors adopted the 2002 Officer, Director, Consultant and Advisor Stock Compensation Plans (the "Plan"), stock option plans. The aggregate number of shares of common stock that may be granted by the Company will not exceed a maximum of 1,600,000 shares during the period of the Plan. The Plan shall terminate upon the earlier of December 31, 2012 or the issuance of all shares granted under the Plan. The option prices per share are determined by the Board of Directors when the stock option is granted.

If for any reason a recapitalization, sale or merger of the Company occurs, all shares subject to the stock option Plan shall be immediately adjusted proportionally. The Board of Directors may amend the Plan at any time. Certain amendments require stockholders' approval.

Information with respect to all options is as follows:

Total Options Available

		Compensation Plan	Other Options and Warrants		Exercise Price Range		Weighted Average Exercise Price	Weighted Average Remaining Life
Balances at December 31,			-
2000		500,000		$	0.35	$	0.35	4.92 years
	Granted	-	-		-		-
	Forfeited	-	-		-		-
Balances at December 31,
2001		500,000	-		0.35		0.35	4.92 years
	Granted	670,000	280,000		0.50 - 1.75		.87
	Forfeited	-	-		-		-
Balances at December 31,
2002		1,170,000	280,000		0.35 - 1.75		0.69	3.58 years
	Granted	100,000	1,557,319		0.50 - 3.38		1.80
	Forfeited
	Exercised	(27,000)			0.50		0.50
Balances at June 30,
2003		1,243,000	1,837,319	$	0.35 - 3.38	$	1.29	2.66 years

  13

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Total Options Vested

	Compensation Plan	Other Options and Warrants		Exercise Price Range		Weighted Average Exercise Price	Weighted Average Remaining Life
Number of options
exercisable
at December 31, 2001	500,000	-	$	0.35	$	0.35	4.92 years
Number of options
exercisable at
December 31, 2002	680,000	280,000	$	0.35 - 0.50	$	0.79	3.58 years
Number of options
exercisable at
June 30, 2003	875,500	1,837,319	$	0.35 - 3.38	$	1.37	2.47 years

To evidence their ongoing commitment to the Company's continued growth, the directors have individually agreed to enter into a "lock up" agreement with the Company, whereby notwithstanding the earlier announced S-8 filing, the directors have agreed to waive all rights to sell any shares issuable under their respective incentive option agreement until January 1, 2004.

The Company measured compensation costs under APB #25 based on the fair value of the options at June 12, 2003. The 50,000 options granted and vested in June 2003 had an exercise price of $0.50 when the market value of the underlying common stock was $3.40.

An additional 50,000 options were granted and vested in June 2003 and had an exercise price of $2.00 when the market value of the underlying common stock was $3.40.

As a result of the options granted and vested in June 2003, the Company recognized $67,978 in compensation costs.

14

HEARTLAND OIL & GAS CORP.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

NOTE 5- CONVERTIBLE DEBENTURES AND RELATED PARTY TRANSACTIONS

On May 6, 2002, Adriatic issued a convertible debenture to an unrelated party in the amount of $435,000, bearing interest at 7%, and principal and interest due December 1, 2003. The convertible debenture is convertible at the option of the debenture holder into units (consisting of one share of common stock and one warrant to purchase one share of common stock) at $1.00 per unit. All accrued and unpaid interest is to be forgiven by the debenture holder if the debenture is converted. This debenture was considered to have an embedded beneficial conversion feature because the conversion price was less than the quoted market price at the time of the issuance. Accordingly, the beneficial conversion feature was valued separately and the intrinsic value, essentially interest, was recorded as a charge to operations in the amount of $108,750 with a corresponding credit to additional paid-in capital. This transaction occurred before the acquisition of Heartland by Adriatic and therefore , is not included in the accompanying statements of operations.

On June 30, 2003 the Company issued 450,016 units at a price of $1.00 per unit for the conversion of $450,016 (including interest of $15,016) outstanding on the convertible debenture.

Amounts due to related parties on the accompanying balance sheet as of June 30, 2003, are $2,628. This amount due to related parties represents non-interest bearing advances from directors and shareholders, with no fixed terms of repayment.

During the six months ended June 30, 2003, the Company paid or accrued $18,000 in management fees and $12,000 in consulting fees to directors of the Company.

In October 2002, the Company converted a $200,000 note payable plus accrued interest into a convertible debenture in the amount of $222,448 bearing interest at 7% per annum and is due on December 31, 2004. The debenture is convertible at $2.00 per unit (one share of common stock and one common stock purchase warrant, exercisable at $2.00 per share), at the option of the holder, at any time commencing on January 1, 2003 until maturity.

On June 30, 2003 the Company issued 121,345 units at $2.00 per unit for the conversion of $242,690 (including interest of $20,242) outstanding on this convertible debenture.

NOTE 6- SUBSEQUENT EVENTS

Subsequent to the quarter ended June 30, 2003, Heartland announced on July 14, 2003 that it has made application to list on the American Stock Exchange (AMEX).

On July 8, 2003 the Company issued 70,920 units at $2.82 per unit from a private placement of $199,994. Each unit consists of one share and one half share purchase warrant exercisable at $3.38 per warrant.

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Item 2. Management's Discussion and Analysis or Plan of Operation.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or to our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks enumerated in the section entitled "Risk Factors", that may cause our actual results or the actual results in our industry, of our levels of activity, performance or achievement to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

As used in this quarterly report, the terms "we", "us", "our" and "Heartland" mean Heartland Oil and Gas Corp., unless otherwise indicated. All dollar amounts refer to US dollars unless otherwise indicated. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.

General

General Overview

We are an oil and gas company engaged in the exploration for and development of Coal Bed Methane in the "Soldier Creek Prospect" located in the Forest City Basin of northeast Kansas. Our "Soldier Creek" project encompasses approximately 165,000 acres of prospective frontier coal bed methane (CBM) Lands. Our subsidiary, Heartland Oil and Gas Inc., holds the leases and operates the project.

Corporate History

Our company, Heartland Oil and Gas Corp., was incorporated in the State of Nevada on July 9, 1998, under the name Adriatic Holdings Ltd.

On September 17, 2002 we acquired all of the issued and outstanding stock of Heartland Oil and Gas Inc., a private Nevada Corporation, from its stockholders in exchange for 12,212,429 shares of our common stock. As a result, the former stockholders of Heartland Oil and Gas Inc. own a majority of our outstanding stock. Therefore, for accounting purposes, Heartland Oil and Gas Inc. was deemed to have acquired Adriatic Holdings Ltd. Heartland Oil and Gas Inc. survives as our wholly-owned subsidiary. Heartland Oil and Gas Inc. is an oil and gas exploration company that has under lease approximately 165,000 acres in central Kansas where three test gas wells have been drilled.

As part of the share exchange we changed our name, effective November 4, 2002, to "Heartland Oil and Gas Corp.", and increased the authorized common stock of our company from 25,000,000 to 100,000,000 with a par value of $0.001 per share.

We have not been involved in any bankruptcy, receivership or similar proceeding.

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Our Current Business

On April 10, 2002 we entered into a letter of intent to acquire all of the shares of Heartland Oil and Gas Inc., a private Nevada corporation and on September 17, 2002 we acquired all of the issued and outstanding stock of Heartland Oil and Gas Inc. from its stockholders in exchange for 12,212,429 shares of our common stock. As a result, the former stockholders of Heartland Oil and Gas Inc. own a majority of our outstanding stock. Therefore, for accounting purposes, Heartland Oil and Gas Inc. was deemed to have acquired Adriatic Holdings Ltd. Heartland Oil and Gas Inc. survives as our wholly-owned subsidiary.

We are an exploration stage oil and gas company engaged in the exploration for and development of Coal Bed Methane in the "Soldier Creek Prospect" located in the Forest City Basin of northeast Kansas. Pursuant to several Oil and Gas Leases entered into with various parties, our "Soldier Creek" project encompasses approximately 165,000 acres of prospective frontier CBM Lands. Heartland Oil and Gas Inc. holds the leases for the lands and operates the project. The expiration dates for the leases range from dates in 2004 through 2007. Certain of the leases may be extended upon the exercise of options on the leases. For the years ending December 31, 2003, 2004 and 2005 we will be required to pay approximately $19,000 per year on the current leases.

Heartland Oil and Gas Inc. signed a letter agreement dated August 25, 2000 with Topeka-Atchinson Gas & Illuminating LLC, whereby Heartland Oil and Gas Inc. engaged Topeka-Atchinson Gas & Illuminating LLC to identify three exploration areas within the Forest City Basin and to provide a detailed budget in writing for the anticipated cost of a one-well exploration program for each exploration area and a four-well pilot program. In consideration Heartland Oil and Gas Inc. advanced a non-refundable deposit of $20,000 to Topeka-Atchinson Gas & Illuminating LLC. The letter agreement provides for:

- within 60 days of receipt of the deposit, Heartland Oil and Gas Inc. was to advise of its intention to proceed with the exploration program;

- if Heartland Oil and Gas Inc. elected to proceed with the exploration program, then within 60 days from the date of the start of the last desorption test from coal, Heartland Oil and Gas Inc. could elect to proceed further with an initial 3-well exploration program; and

- within 60 days from the completion of drilling in the three exploration areas, Heartland Oil and Gas Inc. has the election to proceed with a pilot program or to drill a further test well in an additional exploration area.

Topeka-Atchinson Gas & Illuminating LLC is entitled to receive a 3% gross over-riding royalty, on an 8/8th basis, on all oil and gas leases acquired by Heartland Oil and Gas Inc. within certain areas in the Forest City Basin.

The Soldier Creek area was chosen when a privately funded, proprietary analysis of historical drilling logs from previous drilling of deeper hydrocarbon targets revealed the existence of significant coal beds to the North and West of where CBM production was currently being successfully developed. This analysis also indicated that the coal bed thickness at Soldier Creek was more than four times greater than the coal beds being exploited nearby. Further adding to the area's potential, was its proximity to a ready market and gas pipelines.

We commenced our first coal bed methane pilot program on our acreage in the forest City Basin which program consisted of three wells including our Engelke 16-18 well. The Engelke well was drilled by Heartland Oil and Gas Inc. in the fall of 2001 and encountered 57 feet of coal. All three wells were logged and tested for permeability and were cased as potential coal bed producers.

During September and October 2001 Heartland Oil and Gas Inc. drilled three test wells to test the relative coal thickness, permeability and porosity. The results, which were analyzed by Holditch Reservoir Technologies, a subsidiary of Schlumberger, compelled us to embark on a land acquisition program with the objective of acquiring enough acreage to develop several thousand CBM wells. As of March 15, 2003, we have entered into lease agreements covering approximately 165,000 acres covering the CBM fairway. This acreage is held under leases which have terms of between 3 and 5 years.

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With the results from our economic modeling, we decided to begin aggressively acquiring acreage, concentrating on the North Engelke area, which mapping shows to be the thickest part of the basin. Coal thicknesses here are up to 4 times thicker than in the Cherokee basin to the south, where there are active coal bed methane operations. Many of the coals in the Cherokee basin are present at Engelke, but Engelke also has many more coal seams. Of our existing 165,000 acres under lease, approximately 140,000 are in the Engelke area.

In deciding to expand our Soldier Creek Prospect, we considered the following factors:

- Major gas lines exist (El Paso owned ANR Pipeline Co. runs directly through our gas leases) and have available capacity translating to access to markets.

- The Forest City area's flat, sparsely populated marginal ranch or farmland makes transportation and access less expensive, minimizing surface access costs.

- Known gas coals that are already established from conventional drilling, thereby reducing exploration and development risk.

- Surplus of equipment and very competitive environment further reduces drilling and completion costs.

- The abundance of depleted wells simplifies and reduces cost of water disposal from dewatering coals, as wastewater is re-injected into depleted wells.

- As full-scale development is implemented, drilling, completing, and operating costs should drop, further enhancing the project's economics.

- The area also contains a number of black shales, which are not included in the reserve and economic calculations but which generally will add to the amount of recoverable gas.

The Coal Bed Methane Industry

During the past decade coal bed methane (CBM) has emerged as a viable source of natural gas compared to the late 1980s when there was no significant production outside of the still dominant San Juan Basin, in northwestern New Mexico, and the Black Warrior Basin in Alabama and Mississippi. As noted in USGS Fact Sheet FS-123-00 of October 2000, CBM production accounted for 7% of US natural gas production or approximately 3.6 billion cubic feet (Bcf) of gas per day or an annual 1.35 trillion cubic feet (Tcf) of gas from over 14,000 producing wells.

We believe the success of CBM developments has been largely the result of improved drilling and completion techniques, better hydraulic fracture designs and significant cost reductions as a result of highly dependable gas content and CBM reservoir performance analysis. Also aiding this sector's growth is the apparent shortage of quality domestic conventional exploration and development projects. In comparison, the total "unconventional" CBM resource across America's 25 basins (lower US) is estimated to be roughly 720 trillion cubic feet (Tcf)of which 12% or 81 Tcf is considered technically recoverable. We also believe that propelling the CBM production growth is its relatively low finding and development costs. CBM fields are often found where deeper conventional oil and gas reservoirs have already been developed, therefore, considerable exploration-cost-reducing geologic information is often readily available. This available geological information, combined with CBM re servoirs' comparatively shallow locations, reduces finding and developing costs.

Coal Bed Methane

Natural gas normally consists of 80% or more methane with the balance comprising such hydrocarbons as butane, ethane and propane. In some cases it may be sour. That is, it may contain minute quantities of highly poisonous hydrogen sulfide. CBM is, as a rule, a sweet gas consisting of 95% methane and thus is normally of pipeline quality. CBM is considered an unconventional natural gas resource because it does not rely on 'conventional' trapping mechanisms, such as a fault or anticline, or stratigraphic traps. Instead CBM is "adsorbed" or attached to the molecular structure of the coals - an efficient storage mechanism as CBM coals can contain as much as seven

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times the amount of gas typically stored in a conventional natural gas reservoir such as sandstone or shale. The adsorbed CBM is kept in place as a result of a pressure equilibrium often from the presence of water. Thus the production of CBM in many cases requires the dewatering of the coals to be exploited. This process usually requires the drilling of adjacent wells and from 6 to 36 months to complete. CBM production typically has a low rate of production decline and a long economic life of from 10 to 40 years.

The principal sources of CBM are either biogenic, producing a dry gas which is generated from bacteria in organic matter, typically at depths less than 1000 feet, or thermogenic, which is a deeper wet gas, formed when organic matter is broken down by temperature and pressure.

The three main factors that determine whether or not gas can be economically recovered from coal beds are: the gas content of the coals; the permeability or flow characteristics of the coals; and, the thickness of the coal beds. Gas content is measured in terms of standard cubic feet (Scf) per ton and varies widely from 430 Scf per ton in the deep (2,000 to 3,500 feet) San Juan, New Mexico thermogenic coals, and only 60 Scf per ton for the shallow (300 to 700 feet deep) Powder River, Wyoming biogenic coals. The San Juan coals are considered to have the industry's highest permeability. All CBM coals must have relatively high permeability, as the ability of gas to easily travel to the borehole is essential to economic CBM production. The thickness of coal beds from which CBM is economically being produced varies from as little as a few feet in some areas of the gas rich (300 Scf) Raton Basin to as much as 75 net coal bed thickness at the relatively gas poor Powder River. CBM productio n in the Cherokee/Forest City Basins has historically been economic from coal seams only a few feet thick.

The following discussion of our plan of operations for the three months ended June 30, 2003 and 2002 should be read in conjunction with our most recent audited annual financial statements, which form part of our annual report on Form 10-KSB filed on April 1, 2003, the unaudited interim financial statements forming part of this quarterly report, and, in each case, the notes thereto.

Plan of Operations

Cash Requirements

We plan on drilling a pilot program in the Engelke area, consisting of drilling new wells around our existing Engelke 16-18 well and completing all wells for potential coal bed methane. One of the new wells will be cored to allow us to estimate gas contents in the Engelke area. We also plan to acquire an existing well in the Engelke area to be used as a water disposal well for produced water from the pilot program. As we will be in a test period, no gathering systems or pipeline tie-in is planned at this time.

We also plan to acquire additional leases in the Engelke area, if available.

Pursuant to several oil and gas leases entered into with various parties, our Soldier Creek project encompasses approximately 165,000 acres of prospective frontier CBM lands. Heartland Oil and Gas Inc. holds the leases for the lands and operates the project. The expiration dates for the leases range from dates in 2004 through 2007. Certain of the leases may be extended upon the exercise of options on the leases. For the years ending December 31, 2003, 2004 and 2005 we will be required to pay approximately $19,000 per year on the leases.

We will require additional funds to implement our growth strategy in the gas exploration operations. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares. There is still no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his investment in our common stock. Further, we may continue to be unprofitable.

In order to proceed with our plans we attempted to raise funds by way of a private placement of equity securities in our company pursuant to exemptions from registration provided by Regulation S under the Securities Act of 1933. The offering consisted of units at a price of $1.40 per unit. Each unit consisted of one common share $0.001 par value and one warrant exercisable at $1.75 expiring August 30, 2004. In May, 2003 we closed the private placement having issued 1,000,000 units for gross proceeds of $1,400,000. The net proceeds received will be available to us

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as working capital to allow us to continue our ongoing lease acquisition program and to expand on the exploration and development of our Soldier Creek Prospect.

On June 24 and June 30, 2003, we sold an aggregate of 602,836 of our shares of our common stock and share purchase warrants to acquire an additional 301,418 shares of our common stock in a private placement. The private placement closed in two tranches. The first tranche of $1,500,000 closed on June 24, 2003 and involved the issuance of 531,916 shares of our common stock and share purchase warrants to acquire an additional 269,958 shares of our common stock. The share purchase warrants have an exercise price of $3.38 and expire on June 24, 2006. The second tranche of $200,000 closed on June 30, 2003 and involved the issuance of 70,920 shares of our common stock and share purchase warrants to acquire an additional 35,460 shares of our common stock. The share purchase warrants also have an exercise price of $3.38 and expire on June 30, 2006.

We had outstanding convertible debentures, which together with all outstanding accrued interest due was converted into shares of common stock on June 30, 2003.

Over the next twelve months we intend to use all available funds to continue our ongoing lease acquisition program and to expand on the exploration and development of our Soldier Creek Prospect, as follows:

Estimated Funding Required During the Next Twelve Months

General and Administrative			$240,000
Acreage
	Rentals	19,114
	New Acreage	580,886
Operations
	Acquire and work-over water disposal well	70,000
	Compete Engelke well	65,000
	Drill and complete 4 new pilot wells	685,000
	Lease Operating Expense	84,000
Working Capital		776,000
Offering Expenses		280,000
Total		$2,800,000

As at June 30, 2003, we had $121,355 in current liabilities. Our financial statements report an accumulated loss of $428,554 for the fiscal period ended December 31, 2002 compared to an accumulated loss of $43,587 for the fiscal period ended December 31, 2001. Our accumulated loss increased to $854,414 during the period ended June 30, 2003 as we reported a net loss for the period of $372,654.

We have suffered recurring losses from operations. The continuation of our company as a going concern is dependent upon our company attaining and maintaining profitable operations and raising additional capital. In this regard we have raised additional capital through the equity offerings noted above. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.

Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual consolidated financial statements of or the year ended December 31, 2002, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further financing, a successful program of acquisition and exploration, and, finally,

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achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.

Product Research and Development

Our business plan is focused on a strategy for maximizing the long-term exploration and development of our Soldier Creek Prospect, Kansas USA. To date, execution of our business plan has largely focused on acquiring prospective Coal Bed Methane (CBM) leases and drilling three initial test wells on this acreage from which to establish a going forward exploration and development plan.

During the past three years we spent $633,480 on drilling and exploration costs on our Soldier Creek Prospect.

Purchase of Significant Equipment

We do not intend to purchase any significant equipment over the twelve months ending June 30, 2004.

Employees

Currently there are no full time employees and two part-time employees who are also officers of our company. We do not expect any material changes in the number of employees over the next 12 month period. We do and will continue to outsource contract employment as needed. However, if we are successful in our initial and any subsequent drilling programs we may retain additional employees.

RISK FACTORS

Much of the information included in this registration statement includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Those forward-looking statements also involve certain risks and uncertainties. Factors, risks and uncertainties that could cause or contribute to such differences include those specific risks and uncertainties discussed below and those discussed in our Form 10-KSB Annual Report for the year ended December 31, 2002. The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in this document.

Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.

We have a limited operating history which raises substantial doubt about our ability to continue as a going concern.

Our company has a limited operating history and must be considered in the development stage. The success of the company is significantly dependent on a successful drilling, completion and production program. Our company's operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. No assurance can be given that we may be

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able to operate on a profitable basis. We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage. There can be no assurance that our business plan will prove successful, and no assurance that we may be able to operate profitably, if at all.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of its development. We are engaged in the business of exploring and, if warranted, developing commercial reserves of oil and gas. Our properties are in the exploration stage only and are without known reserves of oil and gas. Accordingly, we have not generated any revenues nor have we realized a profit from our operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.

A portion of our interest in our properties may be lost if we are unable to obtain significant additional financing.

Our ability to continue exploration and, if warranted, development of our properties will be dependent upon our ability to raise significant additional financing. If we are unable to obtain such financing, a portion of our interest in our properties may be lost to exploration partners or our properties may be lost entirely. We have limited financial resources and limited cash flow from operations and we are dependent for funds on our ability to sell our common shares, primarily on a private placement basis. There can be no assurance that we will be able to obtain financing on that basis in light of factors such as the market demand for our securities, the state of financial markets generally and other relevant factors. The method of financing employed by us to date results in increased dilution to the existing shareholders each time a private placement is conducted.

We anticipate that we may need to obtain additional bank financing or sell additional debt or equity securities in future public or private offerings. There can be no assurance that additional funding will be available to us for exploration and development of our projects or to fulfil our obligations under any applicable agreements. Although historically we have announced additional financings to proceed with the development of some of our previous properties, there can be no assurance that we will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of our projects with the possible loss of such properties.

Due to the losses incurred since inception, our stockholders' deficiencies and lack of revenues, there is substantial doubt about our ability to continue as a going concern.

There is substantial doubt about our ability to continue as a going concern due to the losses incurred since inception, our stockholders' deficiency, and lack of revenues.

There can be no assurance that, if required, any such financing will be available upon terms and conditions acceptable to us, if at all. Our inability to obtain additional financing in a sufficient amount when needed and upon terms and conditions acceptable to us could have a materially adverse effect upon our company. Although we believe that we have funds sufficient to meet our immediate needs, we require further funds to finance the development of our company. There can be no assurance that such funds will be available or available on terms satisfactory to us. If additional funds are raised by issuing equity securities, further dilution to existing or future shareholders is likely to result. If adequate funds are not available on acceptable terms when needed, we may be required to delay, scale back or eliminate the development of our company. Inadequate funding could also impair our ability to compete in the marketplace, which may result in the dissolution of our company.

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We will require substantial funds to enable us to decide whether our properties contain commercial oil and gas deposits and whether they should be brought into production, and if we cannot raise the necessary funds we may never be able to realize the potential of our properties.

Our decision as to whether our properties contain commercial oil and gas deposits and should be brought into production will require substantial funds and depend upon the results of exploration programs and feasibility studies and the recommendations of duly qualified engineers, geologists, or both. This decision will involve consideration and evaluation of several significant factors including but not limited to: (1) costs of bringing a property into production, including exploration and development work, preparation of production feasibility studies, and construction of production facilities; (2) availability and costs of financing; (3) ongoing costs of production; (4) market prices for the oil and gas to be produced; (5) environmental compliance regulations and restraints; and (6) political climate, governmental regulation and control. If we are unable to raise the funds necessary to properly evaluate our properties, then we may not be able to realize any potential of our properties .

We have obtained title reports, but our properties may be subject to prior unregistered agreements, native land claims or transfers which have not been recorded or detected through title searches, resulting in a possible claim against any future revenues generated by such properties.

We have obtained title reports with respect to our oil and gas properties and believe our interests are valid and enforceable; however, these reports do not guarantee title against all possible claims. The properties may be subject to prior unregistered agreements, native land claims or transfers which have not been recorded or detected through title research. Additionally, the land upon which we hold oil and gas leases may not have been surveyed; therefore, the precise area and location of such interests may be subject to challenge. If the interests in our properties is challenged, we may have to expend funds defending any such claims and may ultimately lose some or all of any revenues generated from the properties if we lose our interest in such properties.

Our accounts are subject to currency fluctuations which may materially affect our financial position and results.

We maintain our accounts in US and Canadian currencies and are therefore subject to currency fluctuations and such fluctuations may materially affect our financial position and results. We do not engage in currency hedging activities.

We may not be able to manage the significant strains that future growth may place on our administration infrastructure, systems and controls.

In the event our properties commence production, we could experience rapid growth in revenues, personnel, complexity of administration and in other areas. There can be no assurance that we will be able to manage the significant strains that future growth may place on our administrative infrastructure, systems, and controls. If we are unable to manage future growth effectively, our business, operating results and financial condition may be materially adversely affected.

The loss of Richard Coglon and Donald Sharpe would have an adverse impact on future development and could impair our ability to succeed.

We are dependent on our ability to hire and retain highly skilled and qualified personnel, including our President, Mr. Coglon, and Mr. Donald Sharpe, one of our directors. We face competition for qualified personnel from numerous industry sources, and there can be no assurance that we will be able to attract and retain qualified personnel on acceptable terms. We do not have key man insurance on any of our employees. The loss of service of any of our key personnel could have a material adverse effect on our operations or financial condition.

Our management currently engages in other oil and gas businesses and, as a result, conflicts could arise.

In addition to their interest in our company, our management currently engages, and intends to engage in the future, in the oil and gas business independently of our company. As a result, conflicts of interest between us and management of our company might arise.

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Trading of our stock may be restricted by the SEC's penny stock regulations which may limit a stockholder's ability to buy and sell our stock.

Our shares of common stock are subject to rules promulgated by the Securities and Exchange Commission relating to "penny stocks," which apply to companies whose shares are not traded on a national stock exchange or on the NASDAQ system, trade at less than $5.00 per share, or who do not meet certain other financial requirements specified by the Securities and Exchange Commission. These rules require brokers who sell "penny stocks" to persons other than established customers and "accredited investors" to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks of trading in the such penny stocks. These rules may discourage or restrict the ability of brokers to sell our shares of common stock and may affect the secondary market for our shares of common stock. These rules could also hamper our ability to raise funds in the primary market for our shares of common stock.

Since our shares are thinly traded, and trading on the OTC Bulletin Board may be sporadic because it is not an exchange, stockholders may have difficulty reselling their shares.

Our shares of common stock are currently publicly traded on the OTC Bulletin Board service of the National Association of Securities Dealers, Inc. The trading price of our shares of common stock has been subject to wide fluctuations. Trading prices of our shares of common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our shares of common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our shares of common stock, regardless of our operating performance.

In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.

Investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

Our constating documents authorize the issuance of 100,000,000 shares of common stock, each with a par value of $0.001. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.

Risks Relating to the Industry

As our properties are in the exploration and development stage there can be no assurance that we will establish commercial discoveries on our properties.

Exploration for economic reserves of oil and gas is subject to a number of risk factors. While the rewards to an investor can be substantial if an economically viable discovery is made, few of the properties that are explored are ultimately developed into producing oil and/or gas wells. Our properties are in the exploration and development stage only and are without proven reserves of oil and gas. There can be no assurance that we will establish commercial discoveries on any of our properties.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic,

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international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. The extent of these factors cannot be accurately predicted but the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring the leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. There can be no assurance that the necessary funds can be raised or that any projected work will be completed. Our budget anticipates our acquisition of additional acreage in the Forest City basin. There is no assurance that this acreage will become available or if it is available for leasing, that we will be successful in acquiring the leases. There are other competitors that have operations in the Forest City basin and the presence of these competitors could adversely affect our ability to acquire additional leases.

The marketability of nature resources will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. No assurance can be given that environmental standards imposed by federal, provincial, or local authorities will not be changed or that any such changes would not have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may b e subject to liability for pollution or other environmental damages which it may elect not to insure against due to prohibitive premium costs and other reasons.

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Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations.

In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other c ompanies in the industry.

We believe that our operations comply, in all material respects, with all applicable environmental regulations.

Our operating partners maintain insurance coverage customary to the industry; however, it is not fully insured against all environmental risks.

Risks Associated with Drilling

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

There is no assurance that the laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, will not be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect the Company. Any or all of these situations may have a negative impact on one or more of the Company's ability to operate and/or its profitably.

Item 3. Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to the filing date of this report, the Company carried out in evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's President and Chief Executive Officer. Based upon that evaluation, the Company's President and Chief Executive Officer concluded that the Company's disclosure controls and procedures are effective. There have been no significant changes in the Company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure

26

that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company's Chief Executive Officer as appropriate, to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 2. Changes in Securities.

In May 2003, we issued 300,000 units to one investor, each unit comprised of one common share and one non-transferable share purchase warrant, each such warrant entitling the holder to acquire a further common share in the capital stock of our company on or before August 31, 2004 at a price of $1.75 per share. We relied on the provisions of Regulation S promulgated under the Securities Act of 1933, as amended for issuance of the units.

On June 24 and June 30, 2003, we sold to eight accredited investors an aggregate of 602,836 of our shares of our common stock and share purchase warrants to acquire an additional 301,418 shares of our common stock in a private placement relying on the exemption from the registration requirements of the Securities Act provided by Rule 506 of Regulation D and/or Section 4(2) of the Securities Act.

On June 30, 2003, we issued to C.K. Cooper and Company, Inc., a broker dealer registered pursuant to section 15 of the Securities Exchange Act of 1934, a warrant to purchase up to 25,223 shares of our common stock, exercisable at any time during the three year period ending on June 30, 2006 at an exercise price of $3.38 per share. We issued these warrants pursuant to Rule 506 of Regulation D under the Securities Act of 1933, in partial payment of placement fees in connection with the sale of our common stock and share purchase warrants to the other selling stockholders. We also paid $144,000 in commissions to C.K. Cooper and Company, Inc.

On June 30, 2003 we issued 571,361 shares of our common stock to holders of convertible debentures pursuant to the exercise of the conversion feature of the debentures. We relied on the provisions of Regulation S promulgated under the Securities Act of 1933, as amended, for issuance of the shares upon the conversion.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

Item 6. Exhibits and Reports on Form 8-K.

Reports of Form 8-K

None

Consolidated Financial Statements Filed as a Part of the Quarterly Report

27

Our consolidated financial statements include:

Balance Sheets

Statements of Operations

Statements of Cash Flows

Statements of Stockholders' Equity

Notes to the Financial Statements

Exhibits Required by Item 601 of Regulation S-B

Exhibit Number/Description

Exhibit
Number Description

3.1* Articles of Incorporation (1)

3.2* Bylaws of Adriatic Holdings Ltd. (1)

3.3* Certificate of Amendment to Articles of Incorporation effective November 4, 2002 (2)

10.1* Share Exchange between Adriatic Holdings Ltd., Heartland Oil and Gas Inc. and the shareholders of Heartland Oil and Gas Inc., dated July 31, 2002 (3)

10.2* Form of Oil and Gas Lease (4)

10.3* 2001 Officer, Director, Employee, Consultant and Advisor Stock Compensation Plan(5)

10.4* 2002 Officer, Director, Employee, Consultant and Advisor Stock Compensation Plan(5)

10.5* Additional 2002 Officer, Director, Employee, Consultant and Advisor Stock Compensation Plan(5)

10.6** Form of Subscription Agreement in connection with the offering of 602,836 units

10.7** Managing Dealers Agreement, dated June 19, 2003, between Heartland Oil and Gas Corp. and C.K. Cooper and Company, Inc.

21.1* Heartland Oil and Gas Inc., a company incorporated pursuant to the laws of the State of Nevada

99.1** Section 906 Certifications under Sarbanes-Oxley Act of 2002

* Previously filed

** Filed herewith

(1) Incorporated by reference to the company's Form SB-2 Registration Statement filed with the Securities and Exchange Commission on October 23, 2001.

(2) Incorporated by reference to the company's Form 10-QSB filed with the Securities and Exchange Commission on November 14, 2002.

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(3) Incorporated by reference to the company's Form 8-K filed with the Securities and Exchange Commission on October 2, 2002.

(4) Incorporated by reference to the company's Form 10-KSB filed with the Securities and Exchange Commission on April 1, 2003.

(5) Incorporated by reference to the company's Form S-8 Registration Statement filed with the Securities and Exchange Commission on April 8, 2003.

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SIGNATURES

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

HEARTLAND OIL AND GAS CORP.

By: /s/ Richard Coglon
Richard Coglon, President, Chief Executive Officer and Director
(Principal Executive Officer)
July 28, 2003

30

CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard Coglon, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Heartland Oil and Gas Corp.;

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

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

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

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

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

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

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 28, 2003

By: /s/ Richard Coglon
Signature: Richard Coglon
President and Chief Executive Officer
(Principal Executive Officer)

31

CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Knight, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Heartland Oil and Gas Corp.;

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

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

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

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

b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

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

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 28, 2003

By: /s/ Robert Knight
Signature: Robert Knight
Chief Financial Officer
(Principal Financial Officer)

EX-10

Exhibit 10.6

NONE OF THE SECURITIES TO WHICH THIS PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (THE "AGREEMENT") RELATES HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAW, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS.

PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT
(U.S. Accredited Subscribers)

Personal and Confidential

TO:	HEARTLAND OIL AND GAS CORP. (the "Company") Suite 1500 - 885 West Georgia Street Vancouver, British Columbia Canada V6C 3E8
AND TO:	C.K. Cooper & Company, Inc. (the "Agent") 18300 Von Karman Avenue, Suite 440 Irvine, California USA 92612

Purchase of Securities

1.1 Subscription

1.1 On the basis of the representations and warranties and subject to the terms and conditions set forth herein, the undersigned (the "Subscriber") hereby irrevocably subscribes for and agrees to purchase __________________ units (the "Units") at a price per Unit of US$2.82 (such subscription and agreement to purchase being the "Subscription"), for an aggregate purchase price of US$____________ (the "Subscription Price").

1.2 Each Unit will consist of one common share in the capital of the Company (each, a "Share") and one common share purchase warrant (each, a "Warrant") subject to adjustment. Each Warrant shall be non-transferable and shall entitle the holder thereof to purchase one-half of one share of common stock in the capital of the Company (each, a "Warrant Share"), as presently constituted, for a period of three years commencing from the Closing (as defined hereafter), at a total price per Warrant Share of US$3.38. Certificate(s) representing the Warrants will be in the form attached as Exhibit A. The Shares, Warrants and the Warrant Shares are referred to as the "Securities".

1.3 The Company hereby irrevocably agrees to sell, on the basis of the representations and warranties and subject to the terms and conditions set forth herein, to the Subscriber that number of Units set out above the Subscriber's name on page 10, at the Subscription Price.

1.4 Subject to the terms hereof, the Subscription will be effective upon its acceptance by the Company. The Subscriber acknowledges that the offering of Units contemplated hereby is part a private placement of Units having an aggregate subscription level of up to US$3,000,000 (the "Offering"). The Offering is subject to a minimum aggregate subscription level of US$1,500,000.

2. Payment

2.1 The Subscription Price must accompany this Subscription and shall be paid by certified cheque or bank draft drawn on a Canadian chartered bank, or a bank in the United States reasonably acceptable to the Company, and made payable to "Pacific Mercantile Bank - HOGG Escrow Account" and delivered to Pacific Mercantile Bank (the "Escrow Agent").

2.2 The Subscriber acknowledges and agrees that this Subscription Agreement, the Subscription Price and any other documents delivered in connection herewith will be held on behalf of the Company. In the event that this Subscription Agreement is not accepted by the Company for whatever reason, which the Company expressly reserves the right to do, within 30 days of the delivery of an executed Subscription Agreement by the Subscriber, this Subscription Agreement, the Subscription Price (without interest thereon) and any other documents delivered in connection herewith will be returned to the Subscriber at the address of the Subscriber as set forth in this Subscription Agreement.

2.3 The Subscription Price shall be held in escrow by the Escrow Agent in accordance with the terms and conditions of the escrow agreement (the "Escrow Agreement") dated ________________, 2003 between the Company and the Escrow Agent. Pursuant to the terms of the Escrow Agreement:

(a) the Subscription Price will be deposited into a non-interest bearing bank account maintained by the Escrow Agent at a bank selected by the Escrow Agent and satisfactory to the Company;

(b) on the Closing Date, upon the Company notifying the Escrow Agent that the offering has closed and the Company delivering to the Escrow Agent the certificates representing the Shares and Warrants, the Subscription Price will be released and disbursed to the Company; and

(c) in the event the Closing Date does not occur by ____________________, 2003, subject to an extension pursuant to the Escrow Agreement, the Escrow Agent will release and disburse the Subscription Price to the Subscriber.

3. Documents Required from Subscriber

3.1 The Subscriber must complete, sign and return to the Company:

(a) an executed copy of this Subscription Agreement;

(b) a Prospective Investor Suitability Questionnaire in the form attached as Exhibit B (the "US Questionnaire"); and

(c) a British Columbia Accredited Investor Questionnaire in the form attached as Exhibit C (together with the US Questionnaire, the "Questionnaires").

3.2 The Subscriber shall complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities and applicable law.

4. Closing

4.1 Closing of the Offering (the "Closing") shall occur no later than _______________, 2003 or on such other date as may be mutually agreed to by the Agent and the Company (the "Closing Date").

4.2 The Company may, at its discretion, elect to close the Offering in one or more closings, in which event the Company may agree with one or more subscribers (including the Subscriber hereunder) to complete delivery of the Shares and the Warrants to such subscriber(s) against payment therefor at any time on or prior to the Closing Date.

5. Acknowledgements of Subscriber

5.1 The Subscriber acknowledges and agrees that:

(a) none of the Securities have been registered under the 1933 Act, under any state securities or "blue sky" laws of any state of the United States, or under any provincial securities laws, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, as that term is defined in Regulation S promulgated under the 1933 Act ("Regulation S"), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case only in accordance with any applicable securities laws;

(b) except as provided for in Section 9.1, the Subscriber acknowledges that the Company has not undertaken, and will have no obligation, to register any of the Securities under the 1933 Act;

(c) by completing the Questionnaires, the Subscriber is representing and warranting that the Subscriber is an "Accredited Investor", as the term is defined in Regulation D under the 1933 Act and in Multilateral Instrument 45-103 adopted by the British Columbia Securities Commission;

(d) the decision to execute this Agreement and purchase the Securities agreed to be purchased hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company or the Agent, and such decision is based entirely upon a review of information (the receipt of which is hereby acknowledged) which has been filed by the Company with the United States Securities and Exchange Commission ("SEC") and in compliance, or intended compliance, with applicable securities legislation, including, specifically, a review of the Risk Factors which are attached as Exhibit D (collectively, the "Public Record");

(e) although the Agent may have introduced the Subscriber to the Company, the Subscriber and the Company acknowledge and agree with, and for the benefit of, the Agent and the Company, as applicable (such acknowledgement and agreements to survive the Closing) that:

(i) the Agent and its directors, officers, employees, agents and representatives have no responsibility or liability of any nature whatsoever for the accuracy or adequacy of the information contained in this Agreement, the Public Record or any other publicly available information concerning the Company or as to whether all information concerning the Company required to be disclosed by it or them has generally been disclosed;

(ii) the Agent makes no representations or warranties herein with respect to the Securities, and neither the Agent nor its directors, officers, employees, agents or representatives shall have any liability with respect to the sale of the Securities;

(iii) the Agent has not engaged in any independent investigation or verification with respect to this Subscription or any such information; and

(iv) the Agent and the Company are entitled to rely on the representations and warranties and the statements and answers of the Subscriber contained in this Agreement and in the questionnaires and undertakings attached as schedules to this Agreement, and the Subscriber will hold harmless each of the Agent and the Company from any loss or damage it or they may suffer as a result of the Subscriber's failure to correctly complete this Agreement or such questionnaires and undertakings;

(f) by execution hereof the Subscriber has waived the need for the Company or the Agent to communicate the Company's acceptance of the purchase of the Securities pursuant to this Agreement;

(g) it will indemnify and hold harmless the Company and the Agent and, where applicable, their respective directors, officers, employees, agents, advisors and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company or the Agent in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber to the Company or the Agent in connection therewith;

(h) the issuance and sale of the Securities to the Subscriber will not be completed if the Subscription is otherwise fully subscribed, if acceptance would be unlawful or if, in the discretion of the Company, acting reasonably, acceptance is not in the best interests of the Company;

(i) it has been advised to consult its own legal, tax and other advisors with respect to the merits and risks of an investment in the Securities and with respect to applicable resale restrictions and it is solely responsible for compliance with applicable resale restrictions;

(j) the Securities are not listed on any stock exchange or subject to quotation except that currently certain market makers make market in the Shares of the Company on the National Association of Securities Dealers Inc.'s OTC Bulletin Board, and no representation has been made to the Subscriber that the Securities will become listed on any other stock exchange or subject to quotation on any other quotation system;

(k) no securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;

(l) there is no government or other insurance covering the Securities;

(m) there are risks associated with an investment in the Securities, as more fully described in certain information forming part of the Public Record;

(n) the Company has advised the Subscriber that the Company is relying on an exemption from the requirements to provide the Subscriber with a prospectus and to sell the Securities through a person registered to sell securities under the Securities Act (British Columbia) (the "B.C. Act") and, as a consequence of acquiring the Securities pursuant to this exemption, certain protections, rights and remedies provided by the B.C. Act, including statutory rights of rescission or damages, will not be available to the Subscriber;

(o) the Subscriber and the Subscriber's advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the distribution of the Securities hereunder, and to obtain additional information, to the extent possessed or obtainable without unreasonable effort or expense, necessary to verify the accuracy of the information about the Company;

(p) the books and records of the Company were available upon reasonable notice for inspection, subject to certain confidentiality restrictions, by the Subscriber during reasonable business hours at its principal place of business, and all documents, records and books in connection with the distribution of the Securities hereunder have been made available for inspection by the Subscriber, the Subscriber's lawyer and/or advisor(s);

(q) in addition to resale restrictions imposed under U.S. securities laws, there are additional restrictions on the Subscriber's ability to resell the Shares and the Warrant Shares under the B.C. Act and Multilateral Instrument 45-102 adopted by the British Columbia Securities Commission ("BCSC");

(r) the Company will refuse to register any transfer of the Shares or the Warrant Shares not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act;

(s) the statutory and regulatory basis for the exemption claimed for the offer Securities, although in technical compliance with Regulation S, would not be available if the offering is part of a plan or scheme to evade the registration provisions of the 1933 Act;

(t) the Subscriber has been advised to consult the Subscriber's own legal, tax and other advisors with respect to the merits and risks of an investment in the Securities and with respect to applicable resale restrictions, and it is solely responsible (and the Company is not in any way responsible) for compliance with:

(i) any applicable laws of the jurisdiction in which the Subscriber is resident in connection with the distribution of the Securities hereunder, and

(ii) applicable resale restrictions; and

(u) this Agreement is not enforceable by the Subscriber unless it has been accepted by the Company.

6. Representations, Warranties and Covenants of the Subscriber

6.1 The Subscriber hereby represents and warrants to and covenants with the Company and the Agent (which representations, warranties and covenants shall survive the Closing) that:

(a) if the Subscriber is an individual or other entity, the Subscriber has the legal capacity and competence to enter into and execute this Subscription and to take all actions required pursuant hereto and, if the Subscriber is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Subscription on behalf of the Subscriber;

(b) if the Subscriber is a corporation or other entity, the entering into of this Subscription and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of any law applicable to, or the constituent documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber may be a party or by which the Subscriber is or may be bound;

(c) the Subscriber has duly executed and delivered this Subscription Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber;

(d) the Subscriber has the requisite knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the investment in the Securities and the Company, and the Subscriber is providing evidence of such knowledge and experience in these matters through the information requested in the Questionnaires;

(e) all information contained in the Questionnaires is complete and accurate and may be relied upon by the Company;

(f) the Subscriber is resident in the jurisdiction set out under the heading "Name and Address of Subscriber" on the signature page of this Subscription Agreement;

(g) the Subscriber is acquiring the Securities for investment purposes only and not with a view to resale or distribution and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons;

(h) the Subscriber is acquiring the Securities as principal for the Subscriber's own account (except for the circumstances outlined in paragraph 0), for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in such Securities;

(i) the Subscriber is not an underwriter of, or dealer in, the common shares of the Company, nor is the Subscriber participating, pursuant to a contractual agreement or otherwise, in the distribution of the Securities;

(j) if the Subscriber is acquiring the Securities as a fiduciary or agent for one or more investor accounts:

(i) the Subscriber has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgements, representations and agreements on behalf of such account, and

(ii) the investor accounts for which the Subscriber acts as a fiduciary or agent satisfy the definition of an "Accredited Investor", as the term is defined in Regulation D under the 1933 Act and in Multilateral Instrument 45-103 adopted by the BCSC;

(k) the Subscriber is not aware of any advertisement of any of the Securities; and

(l) no person has made to the Subscriber any written or oral representations:

(i) that any person will resell or repurchase any of the Securities;

(ii) that any person will refund the purchase price of any of the Securities;

(iii) as to the future price or value of any of the Securities; or

(iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently certain market makers make market in the common shares of the Company on the OTC Bulletin Board.

6.2 In this Subscription, the term "U.S. Person" shall have the meaning ascribed thereto in Regulation S and for the purpose of the Subscription includes any person in the United States.

7. British Columbia Resale Restrictions

7.1 The Subscriber acknowledges that the Securities are subject to resale restrictions in British Columbia and may not be traded in British Columbia except as permitted by the B.C. Act and the rules made thereunder.

7.2 Pursuant to Multilateral Instrument 45-102, as adopted by the BCSC, a subsequent trade in the Shares or the Warrant Shares will be a distribution subject to the prospectus and registration requirements of applicable Canadian securities legislation (including the B.C. Act) unless certain conditions are met, which conditions include a hold period (the "Canadian Hold Period") that shall have elapsed from the date on which the Securities were issued to the Subscriber and, during the currency of the Canadian Hold Period, any certificate representing the Securities is to be imprinted with a restrictive legend (the "Canadian Legend").

7.3 By executing and delivering this Agreement, the Subscriber will have directed the Company not to include the Canadian Legend on any certificates representing the Shares or the Warrant Shares to be issued to the Subscriber.

7.4 As a consequence, the Subscriber will not be able to rely on the resale provisions of Multilateral Instrument 45-102, and any subsequent trade in the Shares or the Warrant Shares during or after the Canadian Hold Period will be a distribution subject to the prospectus and registration requirements of Canadian securities legislation, to the extent that the trade is at that time subject to any such Canadian securities legislation.

8. Legending of Subject Securities

8.1 The Subscriber hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Securities will bear a legend in substantially the following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

8.2 The Subscriber hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Subscription Agreement.

9. Registration Rights

9.1 The Company will use commercially reasonable efforts to file with the SEC, not more than sixty (60) days following the Closing Date, a registration statement under the 1933 Act qualifying the resale of the Shares and the Warrant Shares.

9.2 In the event the Company fails to register the Securities within 120 days of the Closing Date, the Company will issue as a penalty Units equal to one percent (1%) of the Subscription Price paid by the Subscriber, and for each thirty days thereafter Units equal to one percent (1%) of the Subscription Price paid by the Subscriber.

10. Rights of First Refusal

10.1 Until the close of business on December 31, 2003, if the Company offers for sale any of its common stock or any other securities convertible into common stock ("Future 2003 Offering"), the Subscriber will have the right to purchase an amount of each such Future 2003 Offering determined by multiplying the amount of such Future 2003 Offering by a fraction the numerator of which is the dollar amount Subscriber invests in this offering and the denominator of which is the total dollar amount of Units purchased in this Offering.

11. Representations and Warranties of the Company

11.1 The Company acknowledges and agrees that the Subscriber is entitled to rely upon the representations and warranties of the Company contained in this Agreement and further acknowledges that the Subscriber will be relying upon such representations and warranties in purchasing the Securities.

11.2 The Company warrants that the Public Record fairly represents the status of the Company as at the dates indicated in the Public Record.

12. Commission to the Agent

12.1 The Subscriber understands that upon Closing, the Agent will receive from the Company a commission of up to seven percent (7%) of the gross proceeds raised from the Offering, payable to the Agent in cash plus a cash bonus of US$25,000 if US$2,000,000 of Units are sold by June 30, 2003. The Agent will also receive share purchase warrants which permit the acquisition of the Warrant Shares at the exercise price of US$3.38 per Warrant Share in such number as equals five percent (5%) of the gross proceeds from the Offering.

13. Acknowledgement and Waiver

13.1 The Subscriber has acknowledged that the decision to purchase the Securities was solely made on the basis of publicly available information. The Subscriber hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages (other than as expressly described herein) to which the Subscriber might be entitled in connection with the distribution of any of the Securities.

14. Costs

14.1 The Subscriber acknowledges and agrees that all costs and expenses incurred by the Subscriber (including any fees and disbursements of any special counsel retained by the Subscriber) relating to the purchase of the Shares shall be borne by the Subscriber.

15. Appointment of Agent

15.1 The Subscriber (and others for whom the Subscriber is contracting hereunder) hereby:

(a) irrevocably authorizes the Agent to swear, execute, file and record any documents necessary to accept delivery of the Securities on the Closing Date; and

(b) appoints the Agent to act as its agent to represent it with respect to all matters relating to this Subscription Agreement, including representing the Subscriber at the Closing for the purpose of all closing matters and deliveries of documents and payment of funds, and the Subscriber hereby authorizes the Agent to extend such time periods and to modify or waive such conditions as the Agent may deem appropriate, acting reasonably, provided however that the Agent shall not modify or waive any such condition where to do so would result in a material change to any of the material attributes or terms of sale of the Securities, and to correct or rectify any ambiguities, errors or omissions herein that the Agent, acting reasonably, may deem appropriate.

16. Governing Law

16.1 This Subscription Agreement is governed by the laws of the State of Nevada. The Subscriber, in its personal or corporate capacity and, if applicable, on behalf of each beneficial purchaser for whom it is acting, irrevocably attorns to the jurisdiction of the courts of the Province of British Columbia.

17. Survival

17.1 This Subscription, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the Securities by the Subscriber pursuant hereto, the completion of the issue of Securities of the Company and any subsequent disposition by the Subscriber of the Shares.

18. Assignment

18.1 This Subscription is not transferable or assignable.

19. Execution

19.1 The Company shall be entitled to rely on delivery by facsimile machine of an executed copy of this Subscription and acceptance by the Company of such facsimile copy shall be equally effective to create a valid and binding agreement between the Subscriber and the Company in accordance with the terms hereof.

20. Severability

20.1 The invalidity or unenforceability of any particular provision of this Subscription shall not affect or limit the validity or enforceability of the remaining provisions of this Subscription.

21. Termination

21.1 If, prior to Closing, the Agent determines for valid cause to terminate this Subscription Agreement, this Agreement and the obligations of the parties hereto are deemed to have terminated as at the effective date of such termination.

22. Entire Agreement

22.1 Except as expressly provided in this Agreement and in the agreements, instruments and other documents contemplated or provided for herein, this Agreement contains the entire agreement between the parties with respect to the sale of the Securities and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral or written, by statute or common law, by the Company, the Agent, the Subscriber or by anyone else.

23. Notices and Counterparts

23.1 All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Subscriber shall be directed to the address on page 11; notices to the Company shall be directed to it at Suite 1500, 885 West Georgia Street, Vancouver, British Columbia, V6C 3E8, attention of The President; notices to the Agent shall be directed to it at the address first above written.

23.2 This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall constitute an original and all of which together shall constitute one instrument.

IN WITNESS WHEREOF the Subscriber has duly executed this Subscription as of the date first above mentioned.

Number of Units

to be purchased at $2.82 U.S. each:  

Total purchase price:  US$

DELIVERY INSTRUCTIONS

1. Delivery - please deliver the Share certificate(s) to:

2. Registration - registration of the Share certificates which are to be delivered at Closing should be made as follows:

(name)

(address)

3. Delivery - please deliver the Warrant certificate(s) to:

4. Registration - registration of the Warrant certificates which are to be delivered at Closing should be made as follows:

(name)

(address)

5. The undersigned hereby acknowledges that it will deliver to the Company all such additional completed forms in respect of the Subscriber's purchase of Securities as may be required for filing with the appropriate securities commissions and regulatory authorities and stock exchanges.

(Name of Subscriber - Please type or print)

(Signature and, if applicable, Office)

(Address of Subscriber)

(City, State, Zip Code of Subscriber)

A C C E P T A N C E

The above-mentioned Subscription in respect of the Securities is hereby accepted by HEARTLAND OIL AND GAS CORP.

DATED at _______________________________________, the __________ day of ___________________________, 2003

HEARTLAND OIL AND GAS CORP.

Per:
Authorized Signatory

EXHIBIT A

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

WARRANT CERTIFICATE

WARRANT FOR PURCHASE OF COMMON SHARES

THIS WARRANT WILL BE VOID AND OF NO VALUE UNLESS EXERCISED WITHIN THE LIMITS HEREIN PROVIDED

THIS WARRANT IS NOT TRANSFERABLE

HEARTLAND OIL AND GAS CORP.
(Incorporated under the laws of the State of Nevada)

WARRANT CERTIFICATE NO. _____ _____________ WARRANTS

Each such warrant entitling the holder to purchase one-half of one Common Share at the Exercise Price of $3.38 US per Common Share if exercised at or before 5:00 p.m. (Vancouver time) on fwingdings;, 2006.

DATE OF ISSUANCE: _______, 2003

THIS IS TO CERTIFY THAT __________ (herein called the "Holder") is entitled to acquire in the manner herein provided, subject to the restrictions herein contained, during the period commencing on the date hereof and ending at 5:00 p.m. (Vancouver time) on fwingdings;, 2006 (the "Expiry Date"), up to _____________ fully paid and non-assessable common shares ("Common Shares") without nominal or par value of Heartland Oil and Gas Corp. ("the Company") as set forth above.

The Warrants are governed by the Terms and Conditions attached.

Any Common Shares issuable on exercise of the Warrants represented by this Certificate will contain the following legends:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

THE FOLLOWING ARE THE TERMS AND CONDITIONS REFERRED TO IN THIS WARRANT:

ARTICLE 1

INTERPRETATION

1.1 Definitions

In these Terms and Conditions, unless there is something in the subject matter or context inconsistent therewith:

(a) "Common Shares" means the common shares in the capital of the Company as constituted at the date hereof and any shares resulting from any subdivision or consolidation of the Common Shares;

(b) "Company" means Heartland Oil and Gas Corp. or its successor corporation as a result of consolidation, amalgamation or merger with or into any other corporation or corporations, or as a result of the conveyance or transfer of all or substantially all of the properties and estates of the Company as an entirety to any other corporation and thereafter "Company" will mean such successor corporation;

(c) "Company's Auditors" means an independent firm of accountants duly appointed as Auditors of the Company;

(d) "herein", "hereby" and similar expressions refer to these Terms and Conditions as the same may be amended or modified from time to time; and the expression "Article" and "Section" followed by a number refer to the specified Article or Section of these Terms and Conditions;

(e) "person" means an individual, corporation, partnership, trustee or any unincorporated organization and words importing persons have a similar meaning;

(f) "Warrant Holders" or "Holders" means the holders of the Warrants; and

(g) "Warrants" mean share purchase warrants issued by the Company.

1.2 Gender

Words importing the singular number include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders.

1.3 Interpretation Not Affected by Headings

The division of these Terms and Conditions into Articles and Sections, and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation thereof.

1.4 Applicable Law

The Warrants will be construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable thereto and will be treated in all respects as British Columbia contracts.

ARTICLE 2

ISSUE OF ADDITIONAL WARRANTS

2.1 Additional Warrants

The Company may at any time and from time to time issue additional warrants or grant options or similar rights to acquire or purchase Common Shares.

2.2 Issue in Substitution for Lost Warrants

(a) In case a Warrant becomes mutilated, lost, destroyed or stolen, the Company, at its discretion, may issue and deliver a new Warrant of like date and tenor as the one mutilated, lost, destroyed or stolen, in exchange for and in place of and upon cancellation of such mutilated Warrant, or in lieu of, and in substitution for such lost, destroyed or stolen Warrant and the substituted Warrant will be entitled to the benefit hereof and rank equally in accordance with its terms with all other Warrants issued or to be issued by the Company.

(b) The applicant for the issue of a new Warrant pursuant hereto will bear the cost of the issue thereof and in case of loss, destruction or theft furnish to the Company such evidence of ownership and of loss, destruction, or theft of the Warrant so lost, destroyed or stolen as will be satisfactory to the Company in its discretion and such applicant may also be required to furnish indemnity in amount and form satisfactory to the Company in its discretion, and will pay the reasonable charges of the Company in connection therewith.

2.3 Warrant Holder Not a Shareholder

A Warrant Holder is not a shareholder of the Company, is not entitled to any rights or interests as a shareholder of the Company and has only the rights and interests expressly provided herein.

ARTICLE 3

NOTICE

3.1 Notice to Warrant Holders

Any notice to be given to the Holders will be sent by prepaid registered post and will be deemed to have been received by the Holder on the fourth day following the mailing thereof or on the date of successful facsimile transmission or email. Any such notice will be addressed to the Holder at the address of the Holder appearing on the Holder's Warrant or to such other address as the Holder may advise the Company by notice in writing.

3.2 Notice to the Company

Any notice to be given to the Company may be delivered personally, or sent by facsimile or other means of electronic communication providing a printed copy ("Electronic Communication") or may be forwarded by first class prepaid registered mail to the addresses set forth below. Any notice delivered or sent by Electronic Communication shall be deemed to have been given and received at the time of delivery. Any notice mailed as aforesaid shall be deemed to have been given and received on expiration of 72 hours after it is posted, addressed as follows:

Heartland Oil and Gas Corp.
Suite 1500 - 885 West Georgia Street
Vancouver, B.C.
Canada V6C 3E8

Attention: The President

Facsimile No.: (604) 638-3525

ARTICLE 4

EXERCISE OF WARRANTS

4.1 Method of Exercise of Warrants

The right to acquire Common Shares conferred by the Warrants may be exercised by the Holder of such Warrant by surrendering the Warrant Certificate representing same, together with a duly completed and executed Exercise Form in the form attached hereto and a bank draft or certified cheque payable to the Company at its principal office in the City of Vancouver, British Columbia, for the purchase price applicable at the time of exercise in respect of the number of Warrants exercised.

4.2 Effect of Exercise of Warrants

(a) Upon surrender and payment as aforesaid the Common Shares so subscribed for will be deemed to have been issued and such person or persons will be deemed to have become the holder or holders of record of such Common Shares on the date of such surrender.

(b) Within ten (10) business days after surrender as aforesaid, the Company will forthwith cause to be delivered to the person or persons in whose name or names the Common Shares so subscribed for are to be issued as specified in such subscription or mailed to him or them at his or their respective addresses specified in such subscription, a certificate or certificates for the appropriate number of Common Shares not exceeding those which the Warrant Holder is entitled to acquire pursuant to the Warrant surrendered.

4.3 Subscription for Less Than Entitlement

The holder of any Warrant may subscribe for and acquire a number of Common Shares, less than the number which he is entitled to acquire pursuant to the surrendered Warrant. In the event of any acquisition of a number of Common Shares less than the number which can be acquired pursuant to a Warrant, the holder thereof upon exercise thereof will in addition be entitled to receive a new Warrant in respect of the balance of the Common Shares which he was entitled to acquire pursuant to the surrendered Warrant and which were not then acquired.

4.4 Warrants for Fractions of Shares

To the extent that the holder of any Warrant is entitled to receive on the exercise or partial exercise thereof a fraction of a Common Share, such right may be exercised in respect of such fraction only in combination with another Warrant or other Warrants which in the aggregate entitle the holder to receive a whole number of such Common Shares.

4.5 Expiration of Warrants

After the expiration of the period within which a Warrant is exercisable, all rights thereunder will wholly cease and terminate and such Warrant will no longer be valid and of no effect.

4.6 Time of Essence

Time will be of the essence hereof.

4.7 Adjustments

The number of Common Shares deliverable upon the exercise of the Warrants will be subject to adjustment in the event and in the manner following:

(a) if and whenever the Common Shares at any time outstanding are subdivided into a greater or consolidated into a lesser number of Common Shares the number of Common Shares deliverable upon the exercise of the Warrants will be increased or decreased proportionately as the case may be;

(b) (i) in case of any capital reorganization or of any reclassification of the capital of the Company or in the case of the consolidation, merger or amalgamation of the Company with or into any other Company (hereinafter collectively referred to as a "Reorganization"), each Warrant will after such Reorganization confer the right to acquire the number of shares or other securities of the Company (or of the Company resulting from such Reorganization) which the Warrant Holder would have been entitled to upon Reorganization if the Warrant Holder had been a shareholder at the time of such Reorganization;

(ii) in any such case, if necessary, appropriate adjustments will be made in the application of the provisions of this Article 4 relating to the rights and interest thereafter of the holders of the Warrants so that the provisions of this Article 4 will be made applicable as nearly as reasonably possible to any shares or other securities deliverable after the Reorganization or the exercise of the Warrants;

(iii) the subdivision or consolidation of Common Shares at any time outstanding into a greater or lesser number of Common Shares (whether with or without par value) will not be deemed to be a Reorganization for the purposes of this Section 4.7 (b);

(c) the adjustments provided for in this Section 4.7 are cumulative and will become effective immediately after the record date for or, if a record date is fixed, the effective date of the event which results in such adjustments.

4.8 Determination of Adjustments

If any questions will at any time arise with respect to any adjustment provided for in Section 4.7, such question will be conclusively determined by the Company's Auditors, or, if they decline to so act any other firm of chartered accountants, in Vancouver, British Columbia, that the Company may designate and who will have access to all appropriate records and such determination will be binding upon the Company and the holders of the Warrants.

ARTICLE 5

COVENANTS BY THE COMPANY

5.1 Reservation of Shares

The Company will reserve and there will remain unissued out of its authorized capital a sufficient number of Common Shares to satisfy the rights provided for herein and in the Warrants should the holders of all the Warrants from time to time outstanding determine to exercise such rights in respect of all Common Shares which they are or may be entitled to acquire pursuant thereto and hereto.

5.2 Company may Purchase

The Company may from time to time offer to purchase and purchase, for cancellation only, any Warrants in such manner, from such persons and on such terms and conditions as it determines.

ARTICLE 6

WAIVER OF CERTAIN RIGHTS

6.1 Immunity of Shareholders, Etc.

The Warrant Holder, as part of the consideration for the issue of the Warrants, waives and releases and will not have any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future incorporator, shareholder, director or officer (as such) of the Company for the issue of Common Shares pursuant to any Warrant or on any covenant, agreement, representation or warranty by the Company herein contained or in the Warrant.

ARTICLE 7

MODIFICATION OF TERMS, MERGER, SUCCESSORS

7.1 Modification of Terms and Conditions for Certain Purposes

From time to time the Company may, subject to the provisions of these Terms and Conditions, modify the Terms and Conditions hereof, for the purpose of correction or rectification of any ambiguities, defective provisions, errors or omissions herein.

7.2 Transferability

The Warrant and all rights attached to it are not transferable or assignable.

IN WITNESS WHEREOF HEARTLAND OIL AND GAS CORP. has caused this Warrant to be signed by its duly authorized officers under its corporate seal, and this Warrant to be dated as of the date of issuance first above written.

SIGNED BY:

HEARTLAND OIL AND GAS CORP.

Per: ______________________________
Authorized Signatory

Per: ______________________________
Authorized Signatory

Date: ______________________________

EXERCISE FORM

TO: Heartland Oil and Gas Corp.

The undersigned holder of Warrants hereby exercises the right to acquire _____________ Common Shares without nominal or par value of Heartland Oil and Gas Corp. (the "Company") (or such number of other securities or property to which such Warrants entitle the undersigned in lieu thereof or in addition thereto under the provisions set forth in the Warrant Certificate) according to the terms set forth in the Warrant Certificate.

Such securities or property are to be issued as follows:

Name:

Address in Full:

The undersigned acknowledges that the certificates representing the Common Shares issuable hereunder shall bear such legends as may be required under applicable securities law.

DATED this ______ day of ______________________, _____.

____________________________________
Signature

____________________________________
(Print full name)

____________________________________
(Print full address)

Instructions:

The registered holder may exercise his right to acquire Common Shares by completing the above form, surrendering this Warrant Certificate and providing payment by bank draft, money order or certified check to the Company at its principal office in Vancouver, British Columbia. For the protection of the holder, it would be prudent to register if forwarding by mail. Certificates for Common Shares will be delivered or mailed as soon as practicable after the exercise of the Warrants. The rights of the registered holder cease if the Warrants are not exercised prior to 5:00 p.m. (Vancouver time) on the Expiry Date

EXHIBIT B

U.S. SECURITIES LAW QUESTIONNAIRE

All capitalized terms herein, unless otherwise defined, have the meanings ascribed thereto in the Subscription Agreement.

1. The Subscriber covenants, represents and warrants to the Company that:

(a) the Subscriber is a U.S. Person;

(b) the Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the transactions detailed in the Subscription Agreement and it is able to bear the economic risk of loss arising from such transactions;

(c) the Subscriber is acquiring the Securities for investment only and not with a view to resale or distribution and, in particular, it has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons; provided, however, that the Subscriber may sell or otherwise dispose of any of the Securities pursuant to registration thereof pursuant to the Securities Act of 1933 (the "1933 Act") and any applicable State securities laws unless an exemption from such registration requirements is available or registration is not required pursuant to Regulation S under the 1933 Act or registration is otherwise not required under the 1933 Act;

(d) the Subscriber satisfies one or more of the categories indicated below (please check the appropriate box):

[ ]	Category 1	An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of US $5,000,000;
[ ]	Category 2	A natural person whose individual net worth, or joint net worth with that person's spouse, on the date of purchase exceeds US $1,000,000;
[ ]	Category 3	A natural person who had an individual income in excess of US $200,000 in each of the two most recent years or joint income with that person's spouse in excess of US $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
[ ]	Category 4	A "bank" as defined under Section (3)(a)(2) of the 1933 Act or savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act acting in its individual or fiduciary capacity; a broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934 (United States); an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 (United States) or a business development company as defined in Section 2(a)(48) of such Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958 (United States); a plan with total assets in excess of $5,000,000 established and maintained by a state, a political subdivision thereof, or an agency or instrumentality of a state or a political subdivision thereof, for the benefit of its employees; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 (United States) whose investment decisions are made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000, or, if a self-directed plan, whose investment decisions are made solely by persons that are accredited investors;
[ ]	Category 5	A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940 (United States);
[ ]	Category 6	A director or executive officer of the Company;
[ ]	Category 7	A trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the 1933 Act; or
[ ]	Category 8	An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories; and

(e) the Subscriber is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio, or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

2. The Subscriber acknowledges and agrees that:

(a) if the Subscriber decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such securities directly or indirectly, unless:

(i) the sale is to the Company;

(ii) the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the 1933 Act and in compliance with applicable local laws and regulations;

(iii) the sale is made pursuant to the exemption from the registration requirements under the 1933 Act provided by Rule 144 thereunder if available and in accordance with any applicable state securities or "Blue Sky" laws; or

(iv) the Securities are sold in a transaction that does not require registration under the 1933 Act or any applicable U.S. state laws and regulations governing the offer and sale of securities, and it has prior to such sale furnished to the Company an opinion of counsel reasonably satisfactory to the Company;

(b) any of the Warrants may not be exercised in the United States or by or on behalf of a U.S. Person unless registered under the 1933 Act and any applicable state securities laws unless an exemption from such registration requirements is available;

(c) the Subscriber has not acquired the Securities as a result of, and will not itself engage in, any "directed selling efforts" (as defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of any of the Securities; provided, however, that the Subscriber may sell or otherwise dispose of any of the Securities pursuant to registration of any of the Securities pursuant to the 1933 Act and any applicable state securities laws or under an exemption from such registration requirements and as otherwise provided herein; '

(d) upon the issuance thereof, and until such time as the same is no longer required under the applicable requirements of the 1933 Act or applicable U.S. State laws and regulations, the certificates representing any of the Securities will bear a legend in substantially the following form:

"THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS."

(e) the Company may make a notation on its records or instruct the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described herein; and

(f) the Subscriber, if an individual, is a resident of the state or other jurisdiction in its address on the Subscriber's execution page of the Subscription Agreement, or if the Subscriber is not an individual, the office of the Subscriber at which the Subscriber received and accepted the offer to acquire the Securities is the address listed on the Subscriber's execution page of the Subscription Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the ________day of __________________, 2003.

If a Corporation, Partnership or Other Entity:	If an Individual:
Print or Type Name of Entity	Signature
Signature of Authorized Signatory	Print or Type Name
Type of Entity	Social Security/Tax I.D. No.

EXHIBIT C

MULTILATERAL INSTRUMENT 45-103

ACCREDITED INVESTOR QUESTIONNAIRE

The purpose of this Questionnaire is to assure Heartland Oil and Gas Corp. (the "Company") that the undersigned (the "Subscriber") will meet certain requirements for the registration and prospectus exemptions provided for under Multilateral Instrument 45-103 ("MI 45-103"), as adopted by the British Columbia Securities Commission and the Alberta Securities Commission, in respect of a proposed private placement of securities by the Company (the "Transaction"). The Company will rely on the information contained in this Questionnaire for the purposes of such determination.

The undersigned Subscriber covenants, represents and warrants to the Company that:

1. the Subscriber has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the Transaction and the Subscriber is able to bear the economic risk of loss arising from such Transaction;

2. the Subscriber satisfies one or more of the categories of "accredited investor" (as that term is defined in MI 45-103) indicated below (please check the appropriate box):

[ ]	an individual who beneficially owns, or who together with a spouse beneficially own, financial assets (as defined in MI 45-103) having an aggregate realizable value that, before taxes but net of any related liabilities, exceeds CDN.$1,000,000;
[ ]	an individual whose net income before taxes exceeded CDN.$200,000 in each of the two more recent years or whose net income before taxes combined with that of a spouse exceeded $300,000 in each of those years and who, in either case, has a reasonable expectation of exceeding the same net income level in the current year;
[ ]	an individual registered or formerly registered under the Securities Act (British Columbia), or under securities legislation in another jurisdiction of Canada, as a representative of a person or company registered under the Securities Act (British Columbia), or under securities legislation in another jurisdiction of Canada, as an adviser or dealer, other than a limited market dealer registered under the Securities Act (Ontario);
[ ]	a Canadian financial institution as defined in National Instrument 14-101, or an authorized foreign bank listed in Schedule III of the Bank Act (Canada);
[ ]	the Business Development Bank of Canada incorporated under the Business Development Bank Act (Canada);
[ ]	an association under the Cooperative Credit Associations Act (Canada) located in Canada;
[ ]	a subsidiary of any company referred to in any of the foregoing categories, where the company owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;
[ ]	a person or company registered under the Securities Act (British Columbia), or under securities legislation of another jurisdiction of Canada, as an adviser or dealer, other than a limited market dealer registered under the Securities Act (Ontario);
[ ]	a pension fund that is regulated by either the Office of the Superintendent of Financial Institutions (Canada) or a provincial pension commission or similar regulatory authority;
[ ]	an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in any of the foregoing categories in form and function;
[ ]	the government of Canada or a province, or any crown corporation or agency of the government of Canada or a province;
[ ]	a municipality, public board or commission in Canada;
[ ]	a national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency thereof;
[ ]	a registered charity under the Income Tax Act (Canada);
[ ]	a corporation, limited partnership, limited liability partnership, trust or estate, other than a mutual fund or non-redeemable investment fund, that had net assets of at least CDN.$5,000,000 as reflected on its most recently prepared financial statements;
[ ]	a mutual fund or non-redeemable investment fund that, in British Columbia, distributes it securities only to persons or companies that are accredited investors;
[ ]	a mutual fund or non-redeemable investment fund that, in British Columbia, distributes its securities under a prospectus for which a receipt has been issued by the executive director of the British Columbia Securities Commission; or
[ ]	a person or company in respect of which all of the owners of interests, direct or indirect, legal or beneficial, are persons or companies that are accredited investors.

The Subscriber acknowledges and agrees that the Subscriber may be required by the Company to provide such additional documentation as may be reasonably required by the Company and its legal counsel in determining the Subscriber's eligibility to acquire the Shares under relevant Legislation.

IN WITNESS WHEREOF, the undersigned has executed this Questionnaire as of the ________ day of __________________, 2003.

If a Corporation, Partnership or Other Entity:	If an Individual:
Print or Type Name of Entity	Signature
Signature of Authorized Signatory	Print or Type Name
Type of Entity	Social Security/Tax I.D. No.

EXHIBIT D

RISK FACTORS

As used in this Exhibit, the terms "we", "us", "our" and "Heartland" mean Heartland Oil and Gas Corp., unless otherwise indicated. All dollar amounts refer to US dollars unless otherwise indicated. The following discussion should be read in conjunction with our financial statements and the related notes.

Much of the information included in our Public Record includes or is based upon estimates, projections or other "forward looking statements". Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.

Those forward-looking statements also involve certain risks and uncertainties. Factors, risks and uncertainties that could cause or contribute to such differences include those specific risks and uncertainties discussed below and those discussed in our Form 10-KSB Annual Report for the year ended December 31, 2002. The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in our Public Record.

Our common shares are considered speculative during the development of our new business operations. Prospective investors should consider carefully the risk factors set out below.

We have a limited operating history which raises substantial doubt about our ability to continue as a going concern.

Our company has a limited operating history and must be considered in the development stage. The success of the company is significantly dependent on a successful drilling, completion and production program. Our company's operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. No assurance can be given that we may be able to operate on a profitable basis. We are in the development stage and potential investors should be aware of the difficulties normally encountered by enterprises in the development stage. There can be no assurance that our business plan will prove successful, and no assurance that we may be able to operate profitably, if at all.

Because of the early stage of development and the nature of our business, our securities are considered highly speculative.

Our securities must be considered highly speculative, generally because of the nature of our business and the early stage of its development. We are engaged in the business of exploring and, if warranted, developing commercial reserves of oil and gas. Our properties are in the exploration stage only and are without known reserves of oil and gas. Accordingly, we have not generated any revenues nor have we realized a profit from our operations to date and there is little likelihood that we will generate any revenues or realize any profits in the short term. Any profitability in the future from our business will be dependent upon locating and developing economic reserves of oil and gas, which itself is subject to numerous risk factors as set forth herein. Since we have not generated any revenues, we will have to raise additional monies through the sale of our equity securities or debt in order to continue our business operations.

A portion of our interest in our properties may be lost if we are unable to obtain significant additional financing.

Our ability to continue exploration and, if warranted, development of our properties will be dependent upon our ability to raise significant additional financing. If we are unable to obtain such financing, a portion of our interest in our properties may be lost to exploration partners or our properties may be lost entirely. We have limited financial resources and limited cash flow from operations and we are dependent for funds on our ability to sell our common shares, primarily on a private placement basis. There can be no assurance that we will be able to obtain financing on that basis in light of factors such as the market demand for our securities, the state of financial markets generally and other relevant factors. The method of financing employed by us to date results in increased dilution to the existing shareholders each time a private placement is conducted.

We anticipate that we may need to obtain additional bank financing or sell additional debt or equity securities in future public or private offerings. There can be no assurance that additional funding will be available to us for exploration and development of our projects or to fulfil our obligations under any applicable agreements. Although historically we have announced additional financings to proceed with the development of some of our previous properties, there can be no assurance that we will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of our projects with the possible loss of such properties.

Due to the losses incurred since inception, our stockholders' deficiencies and lack of revenues, there is substantial doubt about our ability to continue as a going concern.

There is substantial doubt about our ability to continue as a going concern due to the losses incurred since inception, our stockholders' deficiency, and lack of revenues.

There can be no assurance that, if required, any such financing will be available upon terms and conditions acceptable to us, if at all. Our inability to obtain additional financing in a sufficient amount when needed and upon terms and conditions acceptable to us could have a materially adverse effect upon our company. Although we believe that we have funds sufficient to meet our immediate needs, we require further funds to finance the development of our company. There can be no assurance that such funds will be available or available on terms satisfactory to us. If additional funds are raised by issuing equity securities, further dilution to existing or future shareholders is likely to result. If adequate funds are not available on acceptable terms when needed, we may be required to delay, scale back or eliminate the development of our company. Inadequate funding could also impair our ability to compete in the marketplace, which may result in the dissolution of our company.

We will require substantial funds to enable us to decide whether our properties contain commercial oil and gas deposits and whether they should be brought into production, and if we cannot raise the necessary funds we may never be able to realize the potential of our properties.

Our decision as to whether our properties contain commercial oil and gas deposits and should be brought into production will require substantial funds and depend upon the results of exploration programs and feasibility studies and the recommendations of duly qualified engineers, geologists, or both. This decision will involve consideration and evaluation of several significant factors including but not limited to: (1) costs of bringing a property into production, including exploration and development work, preparation of production feasibility studies, and construction of production facilities; (2) availability and costs of financing; (3) ongoing costs of production; (4) market prices for the oil and gas to be produced; (5) environmental compliance regulations and restraints; and (6) political climate, governmental regulation and control. If we are unable to raise the funds necessary to properly evaluate our properties, then we may not be able to realize any potential of our properties .

We have obtained title reports, but our properties may be subject to prior unregistered agreements, native land claims or transfers which have not been recorded or detected through title searches, resulting in a possible claim against any future revenues generated by such properties.

We have obtained title reports with respect to our oil and gas properties and believe our interests are valid and enforceable; however, these reports do not guarantee title against all possible claims. The properties may be subject to prior unregistered agreements, native land claims or transfers which have not been recorded or detected through title research. Additionally, the land upon which we hold oil and gas leases may not have been surveyed; therefore, the precise area and location of such interests may be subject to challenge. If the interests in our properties is challenged, we may have to expend funds defending any such claims and may ultimately lose some or all of any revenues generated from the properties if we lose our interest in such properties.

Our accounts are subject to currency fluctuations which may materially affect our financial position and results.

We maintain our accounts in US and Canadian currencies and are therefore subject to currency fluctuations and such fluctuations may materially affect our financial position and results. We do not engage in currency hedging activities.

We may not be able to manage the significant strains that future growth may place on our administration infrastructure, systems and controls.

In the event our properties commence production, we could experience rapid growth in revenues, personnel, complexity of administration and in other areas. There can be no assurance that we will be able to manage the significant strains that future growth may place on our administrative infrastructure, systems, and controls. If we are unable to manage future growth effectively, our business, operating results and financial condition may be materially adversely affected.

The loss of Richard Coglon and Donald Sharpe would have an adverse impact on future development and could impair our ability to succeed.

We are dependent on our ability to hire and retain highly skilled and qualified personnel, including our President, Mr. Coglon, and Mr. Donald Sharpe, one of our directors. We face competition for qualified personnel from numerous industry sources, and there can be no assurance that we will be able to attract and retain qualified personnel on acceptable terms. We do not have key man insurance on any of our employees. The loss of service of any of our key personnel could have a material adverse effect on our operations or financial condition.

Our management currently engages in other oil and gas businesses and, as a result, conflicts could arise.

In addition to their interest in our company, our management currently engages, and intends to engage in the future, in the oil and gas business independently of our company. As a result, conflicts of interest between us and management of our company might arise.

Trading of our stock may be restricted by the SEC's penny stock regulations which may limit a stockholder's ability to buy and sell our stock.

Our shares of common stock are subject to rules promulgated by the Securities and Exchange Commission relating to "penny stocks," which apply to companies whose shares are not traded on a national stock exchange or on the NASDAQ system, trade at less than $5.00 per share, or who do not meet certain other financial requirements specified by the Securities and Exchange Commission. These rules require brokers who sell "penny stocks" to persons other than established customers and "accredited investors" to complete certain documentation, make suitability inquiries of investors, and provide investors with certain information concerning the risks of trading in the such penny stocks. These rules may discourage or restrict the ability of brokers to sell our shares of common stock and may affect the secondary market for our shares of common stock. These rules could also hamper our ability to raise funds in the primary market for our shares of common stock.

Since our shares are thinly traded, and trading on the OTC Bulletin Board may be sporadic because it is not an exchange, stockholders may have difficulty reselling their shares.

Our shares of common stock are currently publicly traded on the OTC Bulletin Board service of the National Association of Securities Dealers, Inc. The trading price of our shares of common stock has been subject to wide fluctuations. Trading prices of our shares of common stock may fluctuate in response to a number of factors, many of which will be beyond our control. The stock market has generally experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies with no current business operation. There can be no assurance that trading prices and price earnings ratios previously experienced by our shares of common stock will be matched or maintained. These broad market and industry factors may adversely affect the market price of our shares of common stock, regardless of our operating performance.

In the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted. Such litigation, if instituted, could result in substantial costs for us and a diversion of management's attention and resources.

If plans to phase-out the OTC Bulletin Board are implemented, we may not qualify for listing on the proposed Bulletin Board Exchange or any other marketplace, in which event investors may have difficulty buying and selling our securities.

We understand that in 2003, subject to approval of the Securities and Exchange Commission, the NASDAQ Stock Market intends to phase-out the OTC Bulletin Board, and replace it with the "Bulletin Board Exchange" or "BBX". As proposed, the BBX will include an electronic trading system to allow order negotiation and automatic execution. The NASDAQ Stock Market has indicated its belief that the BBX will bring increased speed and reliability to trade execution, as well as improve the overall transparency of the marketplace. Specific criteria for listing on the BBX have not yet been finalized, and the BBX may provide for listing criteria which we do not meet. If the OTC Bulletin Board is phased-out and we do not meet the criteria established by the BBX, there may be no market on which our securities may be included. In that event, shareholders may have difficulty reselling any of the shares they own.

Investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.

Our constating documents authorize the issuance of 100,000,000 shares of common stock, each with a par value of $0.001. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors' interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.

Risks Relating to the Industry

As our properties are in the exploration and development stage there can be no assurance that we will establish commercial discoveries on our properties.

Exploration for economic reserves of oil and gas is subject to a number of risk factors. While the rewards to an investor can be substantial if an economically viable discovery is made, few of the properties that are explored are ultimately developed into producing oil and/or gas wells. Our properties are in the exploration and development stage only and are without proven reserves of oil and gas. There can be no assurance that we will establish commercial discoveries on any of our properties.

The potential profitability of oil and gas ventures depends upon factors beyond the control of our company

The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.

Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas which may be acquired or discovered will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. The extent of these factors cannot be accurately predicted but the combination of these factors may result in our company not receiving an adequate return on invested capital.

Competition in the oil and gas industry is highly competitive and there is no assurance that we will be successful in acquiring the leases.

The oil and gas industry is intensely competitive. We compete with numerous individuals and companies, including many major oil and gas companies, which have substantially greater technical, financial and operational resources and staffs. Accordingly, there is a high degree of competition for desirable oil and gas leases, suitable properties for drilling operations and necessary drilling equipment, as well as for access to funds. There can be no assurance that the necessary funds can be raised or that any projected work will be completed. Our budget anticipates our acquisition of additional acreage in the Forest City basin. There is no assurance that this acreage will become available or if it is available for leasing, that we will be successful in acquiring the leases. There are other competitors that have operations in the Forest City basin and the presence of these competitors could adversely affect our ability to acquire additional leases.

The marketability of nature resources will be affected by numerous factors beyond our control which may result in us not receiving an adequate return on invested capital to be profitable or viable.

The marketability of natural resources which may be acquired or discovered by us will be affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.

Oil and gas operations are subject to comprehensive regulation which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.

Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal, state, and local laws and regulations which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. No assurance can be given that environmental standards imposed by federal, provincial, or local authorities will not be changed or that any such changes would not have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may b e subject to liability for pollution or other environmental damages which it may elect not to insure against due to prohibitive premium costs and other reasons.

Exploration and production activities are subject to certain environmental regulations which may prevent or delay the commencement or continuance of our operations.

In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other c ompanies in the industry.

We believe that our operations comply, in all material respects, with all applicable environmental regulations.

Our operating partners maintain insurance coverage customary to the industry; however, it is not fully insured against all environmental risks.

Risks Associated with Drilling

Exploratory drilling involves many risks and we may become liable for pollution or other liabilities which may have an adverse effect on our financial position.

Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.

There is no assurance that the laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, will not be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.

The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.

EX-10

74669/97871"

Exhibit 10.7

MANAGING DEALER AGREEMENT

June 19, 2003

C. K. Cooper & Company, Inc.
18300 Von Karman Avenue
Suite 440
Irvine, California 92612

Dear Sirs:

Heartland Oil and Gas Corp., a Nevada corporation (the "Company") desires to increase the capital of the Company in the maximum amount of $2,000,000 (or, at our mutual consent, $3,000,000) by the sale of units ("Units") consisting of one share of Common Stock, par value $0.001 per share, of the Company (the "Common Stock") and one stock purchase warrant (a "Warrant") to purchase one-half share of the Company's Common Stock on the terms and in the amounts set forth in the Warrants. The subscribers therefor, each of whom will be named in a subscription agreement substantially similar to the form of subscription agreement attached as Exhibit A hereto hereinafter referred to (the "Subscription Agreement"), and by which all such subscribers will be bound, will, at the election of and sole discretion of the Company, become holders of the Common Stock and the Warrants.

SECTION 1. Representations and Warranties of the Company

(a) The Company represents and warrants to, and agrees with you for your benefit as of the date hereof, and as of the Minimum Subscription Closing Date (as defined below) and each Additional Issuance Date (as defined below), if any, as follows:

(i) The Company has not prepared a complete confidential private placement memorandum for the proposed offering. The Company has, however, prepared, and made available to prospective subscribers, an offering document dated June 19, 2003, containing certain information about itself, including without limitation, certain risk factors and the Company's public reports as filed with the Securities and Exchange Commission ("Commission") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such offering document is hereafter referred to herein as the "Memorandum." The offering and sale of the Units will be made without complying with the registration requirements of the Securities Act of 1933, as amended (the "Act"), in reliance on the exemption provided by Regulation D of the regulations under the Act (the "Regulations"). The Memorandum contains all information required to be included therein for an "accredited investors" only offering in order to satisfy the requirements of Regu lation D.

(ii) The Articles of Incorporation of the Company (the "Articles of Incorporation"), as amended to be effective on the Minimum Subscription Closing Date (as defined below), provides for the issuance and sale of the shares of Common Stock and Common Stock issuable upon exercise of the Warrants comprising the Units; all action required to be taken by the Company and its officers as a condition to the issuance and sale of the Units to qualified subscribers therefor has been, or prior to the Minimum Subscription Closing Date, will have been, taken.

(iii) The Company is duly organized and validly existing as a corporation in good standing under the laws of the State of Nevada. The Company is duly qualified and licensed and in good standing under the laws of each other jurisdiction, if any, in which such qualification and license is necessary in order to protect the limited liability of the Shareholders and to enable the Company to conduct the business in which it is engaged or proposes to engage as described in the Memorandum; the Company is qualified as a foreign corporation in good standing in each other jurisdiction which (a) requires such qualification or (b) may require such qualification and the failure to so qualify might result in material adverse consequences to the Company. The Company has full power and authority (corporate and other) and has obtained any and all necessary authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental or regulatory officials and bodies (including, without limitation, those having jurisdiction over environmental or similar matters), to invest in, acquire, hold, maintain, operate, lease, license, sell, transfer, explore, develop and otherwise engage in the exploration and development of oil and gas properties as referred to in the Memorandum or to engage in the financing transactions referred to or to be referred to in the Memorandum, and to conduct the business in which it is engaged or proposes to engage as described in the Memorandum. The Company is and has been doing business in compliance with all material authorizations, approvals, orders, licenses, certificates, franchises and permits and all federal, foreign, state and local laws, rules and regulations, or if a failure to so comply exists, such failure would not materially and adversely affect the condition, financial or otherwise, or the earnings, business affairs, position, prospects, value, operation, properties, business or results of operations of the Company taken as a whole; and the Company has n ot received any notice of proceedings relating to the revocation or modification of any such authorization, approval, order, license, certificate, franchise or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the condition, financial or otherwise, or the earnings, business affairs, position, prospects, value, operation, properties, business or results of operations of the Company taken as a whole. The disclosures in the Memorandum concerning the effects of federal, state and local laws, rules and regulations on each of the Company's businesses as currently conducted and as contemplated are correct in all material respects and do not omit to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances in which they were made.

(iv) When the Memorandum is distributed and at all times subsequent thereto up to the Minimum Subscription Closing Date and each Additional Issuance Date, if any, neither the Memorandum, nor any amendment or supplement thereto, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this paragraph shall not apply to statements in or omissions from the Memorandum made in reliance upon and in conformity with written information furnished to the Company by you expressly for use in the Memorandum.

(v) The Company has a duly authorized, issued and outstanding capitalization as set forth in the Memorandum and will have the adjusted capitalization set forth therein on the Minimum Subscription Closing Date and each Additional Issuance Date, if any, based upon the assumptions set forth therein. The Company is not a party to or bound by any material instrument, agreement or other arrangement, including, but not limited to, any voting trust agreement, stockholders' agreement or other agreement or instrument, affecting the securities or options, warrants or rights or obligations of security holders of the Company or providing for any of them to issue, sell, transfer or acquire any capital stock, rights, warrants, options or other securities of the Company, except (i) for this Managing Dealer Agreement, (ii) existing stock option plan(s) and option agreement(s) previously disclosed to you, (iii) the Subscription Agreement and (iv) as described or referred to in the Memorandum. The Units and all other sec urities issued or issuable by the Company conform or, when issued and paid for, will conform in all material respects to all statements with respect thereto contained in the Memorandum. All issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto and are not subject to personal liability for the Company's acts or omissions solely by reason of being such holders; and none of such securities was issued in violation of the preemptive rights of any security holder of the Company or similar contractual rights granted by the Company. The Units will be issued pursuant to the terms and conditions of the Subscription Agreement, and the provisions of the Subscription Agreement described in the Memorandum will conform to the description thereof contained in the Memorandum but such description is qualified by reference to the actual terms of the Subscription Agreement. The sec urities comprising the Units have been duly authorized and, when validly authenticated, issued, delivered and paid for in the manner contemplated by the Subscription Agreement, will be duly authorized, validly issued and outstanding obligations of the Company entitled to the benefits of the Subscription Agreement. The shares of Common Stock issuable upon exercise of the Warrants (the "Underlying Stock") will, upon such issuance, be duly authorized, validly issued, fully paid and nonassessable, and the Company has duly authorized and reserved for issuance upon exercise of the Warrants the Common Stock issuable upon such exercise. The Units, the Common Stock and the Underlying Stock are not and will not be subject to any preemptive or other similar rights of any securityholder of the Company; the holders thereof will not be subject to any liability for the Company's acts or omissions solely as such holders; all corporate action required to be taken for the authorization, issue and sale of the Units and the Und erlying Stock has been duly and validly taken; and the certificates representing the Common Stock and the Underlying Stock will be in due and proper form. Upon the issuance and delivery of the Units pursuant to the terms of this Managing Dealer Agreement and the Subscription Agreement, the purchasers of the Units will acquire good and marketable title to the securities comprising the Units, free and clear of any lien, charge, claim, encumbrance, pledge, security interest, defect or other restriction or equity of any kind whatsoever resulting from the affirmative act of the Company or from a judgment or nonconsensual lien rendered against the Company.

(vi) The accountants who certified the financial statements included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2002 (the "Annual Report") and incorporated in the Memorandum by reference are, with respect to the Company, independent public accountants.

(vii) The financial statements of the Company together with the related notes thereto included in the Memorandum fairly present the financial position, income, change in stockholders' equity, cash flow and the results of operations of the Company at the respective dates and for the respective periods to which they apply. There has been no adverse change or development involving a material prospective change in the condition, financial or otherwise, or in the earnings, business affairs, position, prospects, value, operation, properties, business or results of operations of the Company, whether or not arising in the ordinary course of business, since the date of the financial statements included in the Memorandum, except as set forth in the Memorandum, and the outstanding debt, the property, both tangible and intangible, and the businesses of the Company described in the Memorandum conform in all material respects to the descriptions thereof contained in the Memorandum. Financial information set forth in the Memorandum fairly presents, on the basis stated in the Memorandum, the information set forth therein and has been derived from or compiled on a basis consistent with that of the audited financial statements included in the Annual Report and incorporated in the Memorandum by reference.

(viii) The Company (A) has paid all federal, state and local taxes for which it is currently liable, including, but not limited to, withholding taxes and amounts payable under Chapters 21 through 24 of the Internal Revenue Code of 1986, as amended (the "Code"), and applicable state taxing or income withholding laws, and has furnished all information returns it is required to furnish pursuant to the Code and applicable state taxing or income withholding laws, (B) has established adequate reserves for such taxes that are not due and payable or are being contested in good faith by the Company and (C) does not have any material tax deficiency or claims outstanding, proposed or assessed against its respective business or assets.

(ix) No U.S. transfer tax, stamp duty or other similar tax is payable by you or on your behalf in connection with (A) the issuance by the Company of the Units or the Underlying Stock, or (B) the consummation by the Company of any of its obligations under this Managing Dealer Agreement and the Subscription Agreement.

(x) The Company maintains insurance policies, including, but not limited to, general liability insurance and surety bonds which insures the Company and its professional staffs against such losses and risks generally insured against by comparable businesses. The Company (A) has not failed to give notice or present any insurance claim with respect to any matter, including, but not limited to, the Company's businesses, property or professional staff, under any insurance policy or surety bond in a due and timely manner, (B) has no disputes or claims against any underwriter of such insurance policies or surety bonds or has failed to pay any premiums due and payable thereunder or (C) has failed to comply with all conditions contained in such insurance policies and surety bonds. The Company has not received notice of facts or circumstances under any such insurance policy or surety bond which would relieve any insurer of its obligation to satisfy in full any valid claim of the Company.

(xi) There is no material action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding (including, without limitation, those having jurisdiction over environmental or similar matters), domestic or foreign, pending or, to the best of the Company's knowledge after due inquiry, threatened against, or involving the properties or businesses of, the Company which (A) questions the validity of the capital stock of the Company, this Managing Dealer Agreement and the Subscription Agreement or of any action taken or to be taken by the Company pursuant to or in connection with this Managing Dealer Agreement or the Subscription Agreement, (B) is undisclosed in the Memorandum (and such proceedings as are summarized in the Memorandum are accurately summarized in all respects) or (C) materially and adversely affects the condition, financial or otherwise, or the earnings, business affairs, position, prospects, stockholders' equity, value, operation, properties, businesses or res ults of operations of the Company taken as a whole. For the purposes hereof, a material action shall be an action resulting in liability to the Company in excess of five percent of its net worth, as reflected on its most recent balance sheet.

(xii) The Company has full legal right, power and authority to authorize, issue, deliver and sell the Units and the Underlying Stock, to enter into this Managing Dealer Agreement and the Subscription Agreement and to consummate the transactions provided for in such agreements; and this Managing Dealer Agreement and Subscription Agreement have each been duly and properly authorized, executed and delivered by the Company. Each of the Managing Dealer Agreement and the Subscription Agreement constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, and none of the Company's issue and sale of the Units and the Underlying Stock, the execution or delivery of this Managing Dealer Agreement and the Subscription Agreement, its performance hereunder and thereunder, its consummation of the transactions contemplated herein and therein or the conduct by it of its businesses as described in the Memorandum or any amendments or supplements thereto conf licts or will conflict with or results or will result in any breach or violation of any of the terms or provisions of, or constitutes or will constitute a default under, or results or will result in the creation or imposition of any lien (other than the lien created by the Subscription Agreement), charge, claim, encumbrance, pledge, security interest, defect or other restriction or equity of any kind whatsoever upon any property or assets (tangible or intangible) of the Company pursuant to the terms of, (A) the Articles of Incorporation or by-laws of the Company, (B) any material license, contract, indenture, mortgage, deed of trust, voting trust agreement, stockholders' agreement, note, loan or credit agreement or other agreement or instrument to which the Company is a party or by which it is or may be bound or to which its properties or assets (tangible or intangible) is or may be subject, or any indebtedness, or (C) to the best of the Company's knowledge, any statute, judgment, decree, order, rule or regu lation applicable to the Company of any arbitrator, court, regulatory body or administrative agency or other governmental agency or body (including, without limitation, those having jurisdiction over environmental or similar matters), domestic or foreign, having jurisdiction over the Company or any of its respective activities or properties.

(xiii) No consent, approval, authorization or order of, and no filing with, any domestic court, regulatory body, government agency or other body is required for the issuance of the Units pursuant to the Memorandum, the performance of this Managing Dealer Agreement and the Subscription Agreement or the transactions contemplated hereby or thereby, including, without limitation, any waiver of any preemptive, first refusal or other rights that any entity or person may have for the issue and/or sale of any of the Units, except such as have been or may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Units.

(xiv) The Company shall have duly and validly authorized, executed and delivered each material agreement, contract or other document to which it is a party or by which it may be bound or to which its assets, properties or businesses may be subject, and each such agreement, contract or other document constitutes its legal, valid and binding agreement enforceable against it in accordance with its terms. The descriptions in the Memorandum of agreements, contracts and other documents are accurate but such descriptions are qualified by reference to the actual terms of such agreements, contracts and other documents.

(xv) Subsequent to the respective dates as of which information is set forth in the Memorandum, and except as may otherwise be indicated or contemplated herein or therein, the Company has not (A) entered into any material transaction other than in the ordinary course of business or (B) declared or paid any dividend or made any other distribution on or in respect of its capital stock of any class and there has not been any material change in the capital stock, debt (long or short term) or liabilities (except for (x) financing in connection with acquisition of assets of the Company through purchase money financing, (y) debt incurred to finance capital improvements to existing properties not to exceed $200,000 outstanding and (z) debt for working capital not to exceed $200,000 outstanding) or any material change in or affecting the general affairs, management, financial operations, stockholders' equity or results of operations of the Company.

(xvi) No material default exists in the due performance and observance of any material term, covenant or condition of any license, contract, indenture, mortgage, installment sale agreement, lease, deed of trust, voting trust agreement, stockholders' agreement, note, loan or credit agreement, purchase order, agreement or instrument evidencing an obligation for borrowed money or other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which the property or assets (tangible or intangible) of the Company is subject or affected. For the purposes hereof, a material default shall be a default resulting in liability to the Company in excess of five percent of its net worth, as reflected on its most recent balance sheet.

(xvii) The Company is in material compliance with all federal, state, local and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours. The Company has not received notice of any pending investigations involving the Company by the U.S. Department of Labor or any other governmental agency responsible for the enforcement of such federal, state, local or foreign laws and regulations. The Company has not received notice of any unfair labor practice charge or complaint against the Company pending before the National Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened against or involving the Company or any of the Subsidiaries, or any predecessor entity of the Company, and none has ever occurred. No collective bargaining agreement or modification thereof is currently being negotiated by the Company. No material labor dispute with the employees of the Company exists or, to the best of the Company's knowledge, is imminent.

(xviii) The Company does not maintain, sponsor or contribute to any program or arrangement that is an "employee pension benefit plan," an "employee welfare benefit plan" or a "multi-employer plan" ("ERISA Plans") as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The Company does not maintain or contribute to, now or at any time previously, a defined benefit plan as defined in Section 3(35) of ERISA. The Company has never completely or partially withdrawn from a "multi-employer plan" as so defined.

(xix) The Company (A) to the best of the Company's knowledge, owns or possesses, or has a license or other right to use, all copyrights, trademarks, service marks and trade names, together with all applications for any of the foregoing, presently used or held for use by it in connection with its businesses as described in the Memorandum, (B) has not received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, might have a material adverse effect on the condition, financial or otherwise, or the business affairs, position, prospects, properties, results of operations or net worth of the Company, taken as a whole, and (C) is not obligated or under any liability whatsoever to make any material payments by way of royalties, fees or otherwise to any owner or licensee of, or other claimant to, any trademark, service mark, trade name or copyright or other in tangible asset with respect to the use thereof or in connection with the conduct of its business or otherwise. None of the copyrights, trademarks, service marks and trade names presently owned or used by the Company or any of the Subsidiaries are in dispute or, to the best of the Company's knowledge, are in conflict with the right of any other person or entity.

(xx) The Company has good and marketable title to, or valid and enforceable leasehold estates in, all material items of real and personal property described in the Memorandum, including all royalty, working and participating interests in mineral producing properties, to be owned or leased by it, in each case free and clear of all liens, charges, claims, encumbrances, pledges, security interests, defects and other restrictions and equities of any kind whatsoever, other than those referred to in the Memorandum and liens for taxes not yet due and payable.

(xxi) Neither the Company nor any of its respective executive officers, principal stockholders, or, to the best of the Company's knowledge, employees or agents nor any other person acting on behalf of the Company has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or any official or employee of any governmental agency (domestic or foreign), or any instrumentality of any government (domestic or foreign), or any political party or candidate for office (domestic or foreign), or any other person who was, is or may be in a position to help or hinder the businesses of the Company (or assist the Company in connection with any actual or proposed transaction) which (A) might subject the Company, or any of such others to any damage or penalty in any civil, criminal or governmental litigation or proceeding (domestic or fore ign), (B) if not given in the past, might have had a materially adverse effect on the assets, businesses or operations of the Company or (C) if not continued in the future, might adversely affect the assets, businesses, operations or prospects of the Company or any of the Subsidiaries.

(xxii) Except as set forth in the Memorandum, no officer, director, principal stockholder or key employee of the Company, or any "affiliate" or "associate" (as these terms are defined in Rule 405 promulgated under the Regulations) of any of the foregoing persons or entities, has or has had, either directly or indirectly, (A) any interest in any person or entity which furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by the Company or (B) a material interest in any person or entity which purchases from or sells or furnishes to the Company any goods or services or (C) a beneficial interest in any material contract or agreement to which the Company is a party or by which the Company may be bound or affected. Except as set forth in the Memorandum, there are no existing material agreements, arrangements, understandings or transactions, or proposed agreements, arrangements, understandings or transactions, between or among the Company and any such offi cer, director, principal stockholder or key employee or any "affiliate" or "associate."

(xxiii) The minute books of the Company have been made available to you, contain a complete summary of all actions of the directors and stockholders of the Company since the time of its incorporation and reflect all transactions referred to in such minutes accurately in all respects.

(xxiv) No holders of any securities of the Company or of any options, warrants or other convertible or exchangeable securities of the Company have the right to include any securities issued by the Company in the Memorandum and no person or entity holds any anti-dilution rights with respect to any securities of the Company that would be triggered by the issuance of the Units or the Underlying Stock as described in the Memorandum.

(xxv) There exists no actual or, to the best of the Company's knowledge, threatened termination, cancellation or limitation of, or any adverse modification or change in, the business relationship of the Company, or the business of the Company, with any customer or supplier or any group of customers or suppliers whose purchases or inventories provided to the Company's business are individually or in the aggregate material to the condition of the Company, and there exists no present condition or state of fact or circumstances that would adversely affect the condition of the Company or prevent the Company from conducting such business relationships or such business with any such customer, supplier or group of customers or suppliers in the same manner as heretofore conducted by the Company.

(xxvi) The Company is in material compliance with all applicable Environmental Laws. There is no civil, criminal or administrative judgment, action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter pending or, to the best of the Company's knowledge, threatened against the Company pursuant to Environmental Laws; and, to the best of the Company's knowledge, there are no past or present events, condition, circumstances, activities, practices, incidents, agreements, actions or plans which could reasonably be expected to prevent compliance with, or which have give rise to or will give rise to liability under, Environmental Laws. For purposes herein, "Environmental Laws" means federal, state, local and foreign laws, principles of common laws, civil laws, regulations, and codes, as well as orders, decrees, judgments or injunctions, issued, promulgated, approved or entered thereunder relating to pollution, protection of the environment or public health and s afety.

(xxvii) The Company has never received a notice, orally or in writing, with respect to the denial of any license the Company has sought to obtain, and the Company-approved operating procedures and practices of the Company are, to the best of the Company's knowledge, in material compliance with, federal, state and local laws, rules and regulations.

(xxviii) The Company has taken all steps necessary to comply with all applicable portions of the Sarbanes-Oxley Act of 2002, and rules promulgated thereunder by the Commission.

(xxix) On the date hereof, and at all times through the Offering Termination Date, referred to below, the Company is not and shall not be an investment company as that term is defined in the Investment Company Act of 1940, as amended.

(xxx) Neither the Company nor any affiliate thereof shall give any information or make any representation in connection with the offering of Units other than those contained in the Memorandum or such other material as may be provided or approved by you.

(b) Any certificate signed by the Company and delivered to you or to Arter & Hadden LLP for the purposes of this Managing Dealer Agreement shall be deemed a representation and warranty by the Company to you as to the matters covered thereby.

SECTION 2. Offering and Sale of Common Stock

(a) On the basis of the representations, warranties and covenants herein contained, but subject to the terms and conditions herein set forth, you, as the Managing Dealer, are hereby appointed the agent of the Company during the term herein specified (the "Offering Period") for the purpose of finding subscribers for the Units for the account and risk of the Company through a private placement offering exempt from the registration requirements of the Act, and subject to the performance by the Company of all of its obligations to be performed hereunder and to the completeness and accuracy of all the representations and warranties contained herein, you hereby accept such agency and agree on the terms and conditions herein set forth to use your best efforts during the Offering Period to find subscribers for the Units at an offering price of $2.82 per Unit. Except as provided in Section 2(g) hereof, your agency hereunder is not terminable by the Company without your permission, shall continue until t he close of business on such date not later than June 30, 2003 unless extended by the Company with your consent. The offering may be terminated at any time by the Company and you (the close of business of such date being hereinafter referred to as the "Offering Termination Date").

(b) A signature page to the Subscription Agreement must be completed by or on behalf of each person desiring to purchase Units in form and substance satisfactory to the Company, and you shall provide such other information the Company deems reasonably necessary, and all documents, if any, required under state securities laws. You shall ascertain that each signature page to the Subscription Agreement sent in by or on behalf of a prospective purchaser of Units has been properly completed and executed. You shall return the Subscription Agreements together with the subscribers' checks (in the amount or amounts required by paragraph (a) above) payable to Pacific Mercantile Bank - HOGC Escrow Account (the "Bank") by the end of the next business day following receipt of the subscriber's check.

You will comply with the requirements of Rule 15c2-4 promulgated under the Exchange Act.

(c) You agree to retain in your records and make available to us, for a period of at least four years after the Offering Termination Date, information establishing that each purchaser of the Units pursuant to a Subscription Agreement solicited by you is within the permitted class of investors under the requirements, if any, of the jurisdiction in which such purchaser is a resident. In addition, you agree that you shall be responsible for determining that each purchaser of Units pursuant to a Subscription Agreement solicited by you meets the suitability requirements for investors contained in the Memorandum and you agree to retain records evidencing such compliance with the suitability requirement for each investor.

(d) The Company, upon receipt of the aforementioned signature pages to the Subscription Agreement, will determine as soon as practicable (but in no event more than 30 days after receipt) whether it expects to accept the proposed purchaser as a shareholder of the Company, it being understood the Company reserves the right to reject the tender of any signature page to the Subscription Agreement and to reject all tenders after all of the Units have been sold. Should the Company determine to accept the tender of the signature page to the Subscription Agreement, the Company will promptly advise you of such action. Should the Company determine to reject the tender of the signature page to the Subscription Agreement, it will promptly notify you in writing (and, if the Company elects, the prospective purchaser), of such determination, and will promptly cause the return of the tendered signature page to the Subscription Agreement and the check in payment of the purchase price of the Units directly to you or to the prospective purchaser.

(e) Prior to the Minimum Subscription Closing Date (as hereinafter defined), the Company will have no right to obtain such funds from the Bank. The right of the Company to receive such funds on the Minimum Subscription Closing Date is subject to fulfillment of the conditions specified in Section 6 hereof.

(f) "Minimum Subscription Closing Date" as used herein shall mean the date, no later than June 30, 2003 (as such date may be extended to July 31, 2003 by us with your consent), or such later date as funds deposited in escrow with the Bank on June 30, 2003 or such extended date have been collected in good funds, on which the Company and the Bank shall notify you in writing that subscriptions and payments for an aggregate of at least 531,915 Units ($1,500,000) shall have been received and accepted by the Company. Releases from the escrow established at the Bank shall occur on the first full business day following the Minimum Subscription Closing Date or such day thereafter as shall be mutually agreed upon by you and the Company.

(g) In the event the offering is commenced and subscriptions for at least 531,915 Units shall not have been received by the Minimum Subscription Closing Date, all funds received from subscribers (if any) shall be returned in full, without deduction of any escrow or other fees and expenses; and your agency and this Managing Dealer Agreement shall terminate without obligation on your part or on the part of the Company, except as provided in Section 5 hereof and except that the indemnification or contribution, as the case may be, provided in Section 7 hereof shall continue after such termination of this Managing Dealer Agreement.

(h) Subject to fulfillment of the conditions specified in Section 6 hereof, at the Minimum Subscription Closing Date payment of the purchase price for the Units for which you have found acceptable subscribers as of said Minimum Subscription Closing Date, and delivery, with respect to each subscriber for Units, of a copy of the Subscription Agreement signed by such subscriber, shall be made to the Company at the office of the Bank, or at such other place as shall be agreed between you and the Company.

(i) If at least 531,915 Units but less than all of the Units have been subscribed and paid for and accepted by the Company at the Minimum Subscription Closing Date, the Offering Period shall continue until the earlier to occur of the Offering Termination Date or the date on or before June 30, 2003 on which all Units shall have been subscribed and paid for and accepted by the Company. At all times during the Offering Period you shall follow the procedures prescribed by Section 2(b) hereof. At periodic intervals to be mutually agreed upon by you and the Company during the Offering Period, dates shall be established on which additional subscribers shall be issued Units by the Company (the "Additional Issuance Dates"). On each of the Additional Issuance Dates, you shall notify the Company of the aggregate number of additional Units for which you have received subscriptions and shall make delivery of such executed subscriptions and payment of the purchase price for each of the additional Units, and deli very of a copy of the Subscription Agreement signed by each such prospective purchaser shall be made by you to the Company at the office of the Bank or at such other place as you and the Company may agree.

(j) As consideration for your services, your compensation will be paid to you as follows:

(i) If at least $1,500,000 of the Units are subscribed for and the payments and deliveries provided for in Section 2(b), 2(h) and 2(i) are made at the Minimum Subscription Closing Date and all conditions precedent hereunder to the obligations of you and the Company are satisfied on the Minimum Subscription Closing Date, you will be (A) paid a cash commission per Unit subscribed and paid for at the Minimum Subscription Closing Date in the amount of seven percent of the gross proceeds from the sale of Units and (B) issued Warrants in the same form as included in a Unit having a value equal to five percent of the gross proceeds from the sale of Units;

(ii) If at least $2,000,000 of Units are subscribed for and the payments and deliveries provided for in Sections 2(b), 2(h) and 2(i) are made at June 30, 2003, and all conditions precedent hereunder to the obligations of you and the Company are satisfied on that date, you will be paid a bonus of $25,000;

(iii) After the Minimum Subscription Closing Date, you will be paid at each Additional Issuance Date a commission pursuant to the above schedule and issued Warrants in the amount described above, for Units purchased subsequent to the Minimum Subscription Closing Date; and

(iv) Regardless of whether the Minimum Subscription Closing Date occurs, you will be paid an expense allowance (on account of your marketing services) in an amount not to exceed to $11,000 as presented by you.

Such commissions and bonus will be paid to you directly by the Bank on the Minimum Subscription Closing Date and each Additional Issuance Date. The Warrants shall be issued directly to you or your designees by the Company and such expenses shall be paid to you by the Company.

(k) Neither you, the Company, nor any dealer participating in the offering of the Units shall, directly or indirectly, pay or award any finder's fees, commissions or other compensation to any person engaged by a potential investor for investment advice as an inducement to such advisor to the purchase of Units.

(l) You agree that you will not disseminate or publish any advertisement relating to your solicitation of subscribers for the Units (including, without limitation, any advertisement relating to seminars) the form of which has not been approved by the Company.

(m) For purposes of determining the number of Warrants to be issued to you under this Section 2, the value of the Warrants shall equal five percent of the gross proceeds from the sale of the Units. For example, if gross proceeds from the sale of Units equals $2,000,000, the value of the Warrants to be issued to you under this Section 2 would be $100,000 (five percent of $2,000,000) and the number of common shares issuable upon exercise of such Warrants shall be that number of shares issuable at the exercise price as stated in the Warrants. If the exercise price is $3.38 per share, then, in this example, that would result in the issuance of Warrants to purchase 29,585 shares of the Company's common stock.

SECTION 3. Covenants of the Company

The Company covenants with you as follows:

(a) During the period when the Memorandum is required to be delivered pursuant to the Act, the Company will comply, so far as it is able and at its own expense, with all requirements imposed upon it by the Act, as now and hereafter amended, and by the Regulations, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in, the Units during such period in accordance with the provisions herein and as set forth in the Memorandum.

(b) If any event relating to or affecting the Company or any of its assets, property or business shall occur as a result of which it is necessary, in the opinion of Arter & Hadden LLP, to amend or supplement the Memorandum in order to make the Memorandum not misleading in the light of the circumstances existing at the time it is delivered to a subscriber, the Company will forthwith prepare and furnish to you, without expense to you, a reasonable number of copies of an amendment or amendments of, or a supplement or supplements to, the Memorandum (in form and substance satisfactory to Arter & Hadden LLP) which will amend or supplement the Memorandum so that as amended or supplemented it will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time the Memorandum is delivered to a subscriber, not misleading. For the purposes of this subsection the Company will fu rnish such information with respect to itself as you or Arter & Hadden LLP, may from time to time reasonably request.

(c) It will endeavor in good faith, in cooperation with you, to comply with the applicable securities or "blue sky" laws of such jurisdictions as you may designate regarding distribution of the Units; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify to do business or to qualify as a dealer in securities in any jurisdiction in which it is not so qualified.

(d) It will, so long as any Units remain outstanding, furnish directly to you the following:

(i) concurrently with furnishing such quarterly reports to its securityholders, statements of income of the Company for each quarter in the form furnished to the Company's securityholders and certified by the Company's principal financial or accounting officer;

(ii) concurrently with furnishing such annual reports to its securityholders, a balance sheet of the Company as at the end of the preceding fiscal year, together with statements of operations, stockholders' equity and cash flows of the Company for such fiscal year, accompanied by a copy of the report thereon of independent certified public accountants;

(iii) as soon as they are available, copies of all reports (financial or other) mailed to stockholders;

(iv) as soon as they are available, copies of all reports and financial statements furnished to or filed with the Commission, any state securities commission, the OTCBB, NASDAQ/SCMS, the NASD or any securities exchange;

(v) every press release and every material news item or article of interest to the financial community in respect of the Company or its respective affairs which was released or prepared by or on behalf of the Company; and

(vi) any additional information of a public nature concerning the Company or any of the Subsidiaries (and any future subsidiaries) or their respective businesses which you may request.

During such period, if the Company has active subsidiaries, the foregoing financial statements will be on a consolidated basis to the extent that the accounts of the Company and its subsidiaries are consolidated, and will be accompanied by similar financial statements for any significant subsidiary which is not so consolidated.

(e) The Company will act as the transfer agent and registrar for the Common Stock and Warrants. The Company may designate a third party to be the transfer agent and registrar.

(f) Neither the Company nor any of its executive officers, directors, principal stockholders or affiliates (within the meaning of the Regulations) will take, directly or indirectly, any action designed to, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any securities of the Company in violation of the Exchange Act.

(g) The Company shall apply the net proceeds from the sale of the Units in the manner, and subject to the conditions, set forth under "NATURE OF PROJECT TO BE FINANCED AND USE OF PROCEEDS" in the Memorandum. No portion of the net proceeds will be used, directly or indirectly, to acquire or redeem any securities issued by the Company other than as described under "Nature of Project to be Financed and Use of Proceeds" in the Memorandum.

(h) Until the completion of the distribution of the Units, the Company shall not, without your prior written consent and your counsel, issue, directly or indirectly, any press release or other communication or hold any press conference with respect to the Company, its respective activities or the offering contemplated hereby, other than trade releases issued in the ordinary course of the Company's business consistent with past practices with respect to the Company's operations.

(i) Within 60 days of the end of the Offering Period, the Company shall file a registration statement with the Commission and make any necessary filings under applicable blue sky or other state securities laws and comply with applicable regulations issued under the Act and any other governmental requirements or regulations) with respect to the Common Stock and Underlying Stock included in the Units as would permit or facilitate the sale and distribution of all or a portion of the Common Stock and Underlying Stock. If the registration statement is not declared effective by the Commission and applicable state securities regulators within 120 days of the Offering Termination Date, the Issuer shall issue to each investor one percent of the gross amount such investor invested in the form of additional Units, and two percent for every thirty days thereafter.

(j) Upon execution of this Managing Dealer Agreement, the Company agrees that it will not enter into any form of engagement letter, term sheet or financing agreement with any other brokerage firm or investment banking firm or other source of financing until after December 31, 2003, unless the break up fee described in Section 5 is paid.

(k) Until the close of business on December 31, 2003, you shall be offered a first right of refusal on all investment banking work required by the Company for a period of three months from the earlier of (i) the final Additional Issuance Date, if any, (ii) the Minimum Subscription Closing Date or (iii) the Offering Termination Date. Upon receipt by you from the Company of a statement of needed brokerage or investment banking services, you shall have five business days to accept or decline the opportunity. Such acceptance or non-acceptance shall be in writing addressed and delivered as set forth in Section 10 hereof.

SECTION 4. Your Covenants

You covenant with the Company as follows:

(a) You agree to manage the distribution of the Units and to sell the Units according to all of the terms and conditions of the NASD, all applicable state and federal laws, including the Act, and any and all regulations related thereto. You shall not have any authority to give any information or make any representations in connection with any offer or sale of the Units other than as contained in the Memorandum or as is otherwise expressly authorized in writing by the Company.

(b) The Units shall be offered and sold only where the Units may be legally offered and sold, and only to such persons in such states who shall be legally qualified to purchase the Units.

(c) Neither you nor any person associated with you shall give any information, written or oral, or make any representation, written or oral, in connection with the offering other than those contained in the Memorandum or such other material as may be provided or approved by the Company.

(d) You agree to engage as Soliciting Dealers only entities which are also members of the NASD.

SECTION 5. Payment of Expenses and Fees

The Company will pay all expenses incident to the performance of the obligations of the Company under this Managing Dealer Agreement, including (i) the printing and delivery to you in quantities as you deem necessary of copies of the Memorandum and any supplements or amendments thereto, and of the Subscription Agreement; (ii) the printing, execution, filing and delivery to you in quantities as you deem necessary of copies of any supplemental sales material to be used in connection with the offering approved by the Company and utilized in sales of the Units directly to the public; (iii) any filings regarding distribution of the Units necessary to comply with the securities or "blue sky" laws of the jurisdictions designated by you in accordance with the provisions of Section 3(f), including filing fees and the fees and disbursements of any counsel incurred in connection therewith; and (iv) the fees and disbursements of counsel and accountants for the Company. In the event that the offering is commenced and whether or not subscriptions for at least $1,500,000 of Units shall have been received, the Company will pay you an accountable expense allowance not to exceed $11,000.

In the event (a) the offering of Units is cancelled by us without your consent prior to the Offering Termination Date, (b) you inform us that the Memorandum contains an untrue statement of a material fact or fails to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (c) any of our representations, warranties or agreements contained in Section 1(a) are not true and correct at the Minimum Subscription Closing Date, the Company shall pay you a break-up fee equal to $25,000, provided that no such break-up fee shall be payable if either of the events specified in (b) and (c) are cured prior to the Minimum Subscription Closing Date and the event specified in clause (a) has not occurred.

SECTION 6. Conditions of Your Obligations

Your obligations hereunder are subject to the accuracy of and compliance with the representations and warranties of Company, to the performance by the Company of its obligations hereunder and to the following further conditions:

(a) At the Minimum Subscription Closing Date and on each Additional Issuance Date thereafter you shall receive the opinion of Clark, Wilson, as counsel for the Company, in the form set forth in Exhibit B hereto.

(b) At the Minimum Subscription Closing Date and on each Additional Issuance Date thereafter you shall receive a certificate signed by the Company to the effect that (i) the signer has carefully examined the Memorandum and, in the signer's opinion, at the time the Memorandum was dated and at the Minimum Subscription Closing Date and Additional Issuance Date, as the case may be, the Memorandum did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Memorandum did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (ii) since the date of the Memorandum no event has occurred which should have been set forth in an amendment of, or supplement to, the Memorandum but which has not been so set forth; (iii) no proceedings have been instituted or threatened by the Commission or any state securities administrator preventing, suspending or stopping the offer or sale of the Units and not rescinded; (iv) the representations, warranties and agreements contained in Section 1(a) are true and correct in all material respects with the same effect as though expressly made at the Minimum Subscription Closing Date and Additional Issuance Date as the case may be; and (v) since the date of the Memorandum, no material adverse change in circumstance has occurred with regard to the transactions described in any letters of intent described in the Memorandum which should have been set forth in an amendment of, or supplement to, the Memorandum, but which has not been so set forth, provided, however, that with respect to clauses (i) and (ii) above, such certificate may exclude from its coverage any matters relating to you.

(c) At the time the Memorandum is dated, you shall have received from Spicer, Jeffries a letter, in form and substance satisfactory to you and your counsel, advising that (i) they are independent public accountants as required by the Act and the published Regulations, (ii) it is their opinion that the audited financial statements of the Company for the year ended December 31, 2002 included in the Memorandum or incorporated therein by reference to the Annual Report, and covered by their opinions therein, comply as to form in all material respects with the applicable accounting requirements of the Act and the Regulations relating to financial statements in registration statements on Form 10-KSB.

At the Minimum Subscription Closing Date and on each Additional Issuance Date you shall receive from Clark, Wilson a letter dated as of the Minimum Subscription Closing Date or such Additional Issuance Date to the effect that they reaffirm, as of such date and as though made at such date, the statements made in the letter furnished by such accountants pursuant to subsection (c) of this Section 6, except that the specified date referred to in such subsection will be a date not more than five days prior to the Minimum Subscription Closing Date or such Additional Issuance Date.

(d) No order suspending the sale of the Units in any jurisdiction designated by you shall have been issued on either the Minimum Subscription Closing Date or the relevant Additional Issuance Date, if any, and no proceedings for that purpose shall have been instituted or shall be contemplated.

(e) If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Managing Dealer Agreement to be fulfilled, this Managing Dealer Agreement and all your obligations hereunder may be cancelled by you by notifying the Company of such cancellation in writing or by telegram at any time at or prior to the Minimum Subscription Closing Date, or at any time after the Minimum Subscription Closing Date, all your obligations hereunder may be cancelled or terminated by you by notifying the Company of such cancellation or termination in writing or by telegram at any time at or prior to the Offering Termination Date and any such cancellation or termination shall be without liability of any party to any other party except for the break-up fee as otherwise provided in Section 5.

SECTION 7. Indemnification

(a) The Company agrees to indemnify and hold harmless you, your representatives and employees, and each person, if any, who controls you within the meaning of Section 15 of the Act, you and such person (referred to collectively as the "Indemnified Parties"), as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever arising out of any untrue statement or alleged untrue statement of a material fact contained in the Memorandum (or any amendment or supplement thereto) or any omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in the Memorandum (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such untrue statement or omission was made in reliance upon and in conformity with information furnished to the Company in writing by you expressly for use in the Memorandum (or any amendment or supplement thereto);

(ii) against any and all loss, liability, claim, damage and expense whatsoever arising out of any untrue statement or alleged untrue statement of a material fact contained in any supplemental sales material approved by the Company for use by you, or any omission or alleged omission therefrom of a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made and in conjunction with the Memorandum delivered therewith, not misleading; provided, however, that with respect to any indemnification relating to supplemental sales material designated for broker-dealer use only such indemnification shall be limited to any untrue statement or alleged untrue statement of a material fact or any omission or alleged omission of a material fact related to the Memorandum or the offering;

(iii) against any and all loss, liability, claim, damage and expense whatsoever to the extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any such alleged untrue statement or omission as provided in subparagraph (a)(i) and (a)(ii) above, if such settlement is effected with the written consent of the Company; and

(iv) against any and all expense whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under clause (a)(i), (a)(ii) or (a)(iii) above.

The foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, alleged untrue statement, omission or alleged omission made in the Memorandum or any supplemental sales material, it shall not inure to the benefit of any of the Indemnified Parties if you failed to send or give a copy of the Memorandum (as amended or supplemented, if the Company shall have furnished any amendment or supplement thereto to you which shall correct such untrue statement or omission which is the basis of the loss, liability, claim, damage or expense for which indemnification is sought) to the person asserting any such loss, liability, claim, damage or expense prior to or together with the written confirmation of the receipt of the subscription for Units from such person; or if you sell any Units and deliver to the person asserting any such loss, liability, claim, damage or expense a Memorandum containing an alleged untrue statement or omission which is the basis of the loss, liab ility, claim, damage or expense for which indemnification is sought at a time subsequent to having been notified by the Company that it believes that such Memorandum should be amended or supplemented; or if you delivered any copies of the Memorandum to potential subscribers in a state in which the offer or sale of the Units were not authorized or for which there was no exemption for such offer and sale.

(b) You agree to indemnify and hold harmless the Company, each of its representatives and employees, and each person, if any, who controls any such person, within the meaning of Section 15 of the Act, to the same extent as the foregoing indemnity from the Company in Section 7(a) but only with respect to statements or omissions in the Memorandum (or any amendment or supplement thereto) or relating to you or your affiliates in the supplemental sales literature distributed to the public made in reliance upon and in conformity with information furnished to the Company in writing by you expressly for use in the Memorandum (or any amendment or supplement thereto) or the supplemental sales literature distributed to the subscribers; or if you fail to send or give a copy of the Memorandum to the person asserting a claim against the Company; or if you delivered any copies of the Memorandum to potential subscribers in a state in which the offer or sale of Units were not authorized or for which there was no ex emption for such offer and sale. In case any action shall be brought against the Company based on the Memorandum (or any amendment or supplement thereto) or the supplemental sales literature distributed to the subscribers and in respect of which indemnity may be sought against you, you shall have the rights and duties given to the Company by the provisions of Sections 7(a) and 7(c).

(c) In no case shall the Company be liable under this Section 7 for indemnity with respect to any claim made against any of the Indemnified Parties unless the Company shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof, but failure so to notify the Company shall not relieve it from any liability which it may have otherwise than on account of this Section 7 for indemnity. In no case shall the Company be liable under this Section 7 for indemnity to the Indemnified Parties for any loss, liability, claim, damage or expense described in Section 7(a) above if such loss, liability, claim, damage or expense arose entirely or primarily, directly or indirectly, from your gross negligence or willful misconduct. For purposes of the foregoing sentence, an Indemnified Party shall be considered having been grossly negligent or engaged in willful misconduct for purposes of this Managing Dealer Agreement only if, without limitation, any court having jurisdict ion has made a final determination as to such circumstances and issued an order with respect thereto or any settlement agreement approved by any court having jurisdiction has been entered into. The Company shall be entitled to participate at its own expense in the defense or, if it so elects within a reasonable time after receipt of such notice, to assume the defense of any suit so brought, which defense shall be conducted by counsel chosen by it and satisfactory to the Indemnified Parties, defendant or defendants therein. In the event that the Company elects to assume the defense of any such suit and retain such counsel, the Indemnified Parties, defendant or defendants in the suit, shall bear the fees and expenses of any additional counsel thereafter retained by them. In the event that the parties to any such action (including impleaded parties) include the Company and any of the Indemnified Parties and such Indemnified Party or Parties shall have been advised by counsel chosen by such Indemnified Party or Parties and satisfactory to Company that there may be one or more legal defenses available to such Indemnified Party or Parties which are different from or additional to those available to the Company, the Company shall not have the right to assume the defense of such action on behalf of such Indemnified Party or Parties and will reimburse such Indemnified Party or Parties as aforesaid for the reasonable fees and expenses of any counsel retained by such Indemnified Party or Parties, it being understood that the Company shall not, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for such Indemnified Party or Parties, which firm shall be designated in writing by such Indemnified Party or Parties. The Company agrees to notify you within a reasonable time of the assertion of any claim in connection with the sa le of the Units against it, any of its officers or directors or any person who controls the Company within the meaning of Section 15 of the Act.

(d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in this Section 7 is for any reason held by a court of competent jurisdiction to be unavailable to you from the Company or to the Company from you, as the case may be, for any matters covered by Sections 7(a) or 7(b), the Company and you shall contribute to the aggregate losses, claims, expenses, damages and liabilities (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted) to which the Company and you may be subject as a result of a matter referred to in Sections 7(a) or 7(b) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and you and your affiliates on the other from the offering of the Units and the operation of the Company or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and you and your affiliates on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and you and your affiliates on the other shall be deemed to be in the same proportions so that you and your affiliates are responsible for that portion represented by the percentage that the sales commission and other compensation from the proceeds of the offering received by you or your affiliates in the aggregate bears to the aggregate payments made for the purchase of the Units, and the Company shall be responsible for the balance. The relative fault of the Company on the one hand and you and your affiliates shall be determined by reference to, amon g other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by you and your affiliates and the parties' relative intent, knowledge and access to information. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 7(d), notify such party or parties from whom contribution may be sought; and the omission so to notify such party or parties will relieve the party or parties from whom contribution may be sought from any obligation it or they may have hereunder as to the particular item for which contribution is then being sought but not from any other liability which it or they may have to the party seeking contribution.

SECTION 8. Representations, Warranties and Agreements to Survive Delivery.

All representations, warranties and agreements contained in this Managing Dealer Agreement (including your covenants provided in Section 4 hereof) or contained in certificates of the Company submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by, or on behalf of, you or any person who controls you, or by or on behalf of the Company and shall survive the Offering Termination Date.

SECTION 9. Effective Date of this Agency Agreement and Termination Thereof

(a) This Managing Dealer Agreement shall become effective on the date of the Memorandum. The Company may prevent this Managing Dealer Agreement from becoming effective without liability of any party to any other party, except for the break-up fee and expenses as otherwise provided in Section 5, by giving the notice indicated below in this Section prior to the time when this Managing Dealer Agreement would otherwise become effective as herein provided.

(b) You shall have the right to terminate this Managing Dealer Agreement by giving the notice indicated below in this Section 9 (A) at any time at or prior to the Minimum Subscription Closing Date or any Additional Issuance Date if there shall have been, since the dates as of which information is given in the Memorandum, any material adverse change in the condition of the Company, financial or otherwise, or in the earnings, affairs or business prospects of the Company, whether or not arising in the ordinary course of business, or (B) at any time at or prior to the Minimum Subscription Closing Date (i) if there shall have occurred any new outbreak of hostilities or other national or international calamity or crisis (including acts of terrorism conducted in the United States or against the economic, political or property interests of the United States domestically or abroad), or a bankruptcy default with respect to the debt obligations of, or the institution of proceedings under the Federal bankruptc y laws by or against, any State of the United States, the effect of such outbreak, calamity or crisis on the financial markets of the United States being such as in your judgment would make the offering or delivery of the Units impracticable, or (ii) if trading on the New York Stock Exchange shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required on such Exchange, or if a banking moratorium shall have been declared by either Federal or California authorities. If you terminate this Managing Dealer Agreement as provided in this Section, such termination shall be without liability of any party to any other party except for the break-up fee and expenses as otherwise provided in Section 5.

(c) If you elect to prevent this Managing Dealer Agreement from becoming effective or to terminate this Managing Dealer Agreement as provided in this Section 9, the Company shall be notified promptly by you, by telephone or telegram, confirmed by letter. If the Company elects to prevent this Managing Dealer Agreement from becoming effective as provided in this Section 9, you shall be notified promptly by the Company by telephone or telefax, confirmed by letter.

SECTION 10. Notices and Authority to Act

All communications hereunder shall be in writing and, if sent to you, shall be mailed, delivered or telegraphed and confirmed to you at C. K. Cooper & Company, Inc., 18300 Von Karman Avenue, Suite 440, Irvine, California 92612, Attention: Sara Butler, with a copy to Ronald Warner, Esq. at Arter & Hadden LLP, 725 South Figueroa Street, Suite 3400, Los Angeles, California 90017 or, if sent to the Company, shall be delivered or telegraphed and confirmed at Heartland Oil and Gas Corp., Suite 1500, 885 West Georgia Street, Vancouver, B.C., Canada V6C 3R8, Attention: Richard Coglon, Chief Executive Officer, with a copy to Clark, Wilson Barristers & Solicitors, 800-885 West Georgia Street, Vancouver, B.C., Canada V6C 3H1.

SECTION 11. Notices and Authority to Act

This Managing Dealer Agreement shall inure to the benefit of and be binding upon each of you, the Company and the Company's respective successors, this Managing Dealer Agreement and the conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the parties hereto and their respective successors and controlling persons, and for the benefit of no other person, firm or corporation, except as otherwise specifically provided herein.

SECTION 12. Applicable Law

This Managing Dealer Agreement shall be construed in accordance with the laws of the State of California.

If the foregoing is accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument along with all counterparts will become a binding agreement among you and the Company in accordance with its terms.

Very truly yours,

HEARTLAND OIL AND GAS CORP.,
a Nevada corporation

By /s/ Richard Coglon
Name: Richard L. Coglon (B.Com/LL.B)
Title: President

Confirmed and Accepted
as of the date first above written:

C. K. COOPER & COMPANY, INC.

By /s/ Alexander G. Montano
Name: Alexander G. Montano
Managing Director

EXHIBIT A

Subscription Agreement

[to be attached]

EXHIBIT B

[Law Firm Letterhead]

_______________, 2003

C. K. Cooper & Company, Inc.
18300 Von Karman Avenue
Suite 440
Irvine, California 92612

Re: Private Placement of Securities of Heartland Oil and Gas Corp.

Ladies and Gentlemen:

This opinion is furnished to you, C. K. Cooper & Company, Inc. as managing dealer to Heartland Oil and Gas Corp., a Nevada corporation (the "Company"), pursuant to Section 6(a) of that certain Managing Dealer Agreement dated June __, 2003 (the "Agency Agreement"), by and between the Company and you.

We have acted as counsel to the Company in connection with the proposed issuance and sale of up to $3,000,000 of its Common Stock (the "Stock") and stock purchase warrants (the "Warrants") (the Stock and the Warrants are collectively referred to as the "Securities") offered and sold pursuant to the Company's Confidential Private Placement Memorandum, dated _______________, 2003 (the "Memorandum"). Capitalized terms used in this opinion, unless specifically defined in this opinion, have the meanings given them in the Agency Agreement.

Documents Reviewed

In connection with rendering the opinions set forth herein, we examined the Company's Certificate of Incorporation and its By-Laws, each as amended to date, and the proceedings of the Company's Board of Directors and shareholders taken in connection with issuing the Securities, and the following additional documents:

1. The Agency Agreement;

2. The Memorandum;

3. The form of Subscription Agreement (the "Subscription Agreement") by and among the Company and each of the purchasers of the Securities (the "Investors");

4. Good Standing Certificate, dated _______________, 2003, issued by the Nevada Secretary of State; and

5. Good Standing Certificates from applicable agencies of other states wherein the Company is qualified to do business.

Assumptions

In conducting our examination, we have assumed the following: (i) that any agreement relating to the issuance of the Securities, including, without limitation, the Agency Agreement and the Subscription Agreement, has been executed by each of the parties thereto in the same form as the forms which we have examined, (ii) the genuineness of all signatures, the legal capacity of natural persons, the authenticity and accuracy of all documents submitted to us as originals, and the conformity to originals of all documents submitted to us as copies, and (iii) that the Memorandum and each of the Agreements has been duly and validly authorized, executed, and delivered by the party or parties thereto other than the Company.

Opinions

Based upon and subject to the assumptions, qualifications and limitations set forth in this letter, we are of the opinion that:

1. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Nevada. The Company does not, directly or indirectly, own or control or have any interest in, any corporation, partnership, limited liability company, association or other entity.

2. The Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Memorandum.

3. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the ownership or leasing of its properties or the conduct of its business requires such qualification except to the extent that failure to so qualify would not have a material adverse effect on the Company.

4. The authorized, issued and outstanding capital stock of the Company is as set forth in the Memorandum, including, without limitation, as stated in the "Capitalization" section of the Memorandum but excepting the financial statements and related schedules or other financial or statistical data on which we express no opinion; the issued and outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid and nonassessable, and, to our knowledge, will not have been issued in violation of or subject to any preemptive right, co-sale right, registration right, right of first refusal or other similar right, except for registration rights that have been fulfilled by the Company.

5. When delivered to the Investors against payment of the agreed consideration therefor in accordance with the provisions of the Subscription Agreement, the Securities, as described in the Agreements, will be duly authorized and validly issued, fully paid and nonassessable, and will not have been issued in violation of or subject to any preemptive right, co-sale right, registration right, right of first refusal or other similar right.

6. The Company has the requisite corporate power and authority to execute, deliver and perform the Agreements and to issue, sell and deliver to the Investors the Securities and the Stock to be issued upon the conversion or exercise of the Securities.

7. The Subscription Agreement and the Agency Agreement have been duly authorized by all necessary corporate action on the part of the Company, and have been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties thereto, each is a valid and binding agreement of the Company, enforceable in accordance with its respective terms, except as rights to indemnification thereunder may be limited by applicable law and except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally or by equitable principles.

8. The performance of the Agreements and the consummation of the transactions, therein contemplated, including, without limitation, the issuance of the Securities and the Common Stock to be issued upon exercise of the Warrants do not (a) violate any provision of the Company's Certificate of Incorporation or By-Laws or (b) result in a breach or violation of any of the terms and provisions of, or constitute a default under, any bond, debenture, note or other evidence of indebtedness, or any lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other agreement or instrument known to us to which the Company is a party or by which its properties are bound the effect of which would have a material adverse effect on the business of the Company or the consummation of the transaction contemplated by the Subscription Agreement or the Agency Agreement, or any applicable statute, rule or regulation known to us, or any order, writ or decree of any court, government or governmental ag ency or body having jurisdiction over the Company or over any of their properties or operations.

9. No consent, approval, authorization or order of or qualification with any court, government or governmental agency or body having jurisdiction over the Company, or over any of their properties or operations is necessary in connection with the consummation by the Company of the transactions contemplated in the Subscription Agreement or the Agency Agreement, including, without limitation, the issuance of the Securities and the Common Stock to be issued upon exercise of the Warrants, except such as may be required under state or other securities or Blue Sky laws in connection with the purchase and the distribution of the Securities by the Company.

10. Assuming the representations and warranties of the Investors in the Subscription Agreement are true, the offer and sale of the Securities by the Company in accordance with the terms of the Subscription Agreement and the Agency Agreement is exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Securities Act").

11. To our knowledge, except as described in the Memorandum, there are no legal or governmental proceedings pending or threatened against the Company.

12. To our knowledge, the Company is not presently (a) in violation of its Articles of Incorporation or By-Laws, or (b) in breach of any applicable statute, rule or regulation known to such counsel or, to our knowledge, any order, writ or decree of any court or governmental agency or body having jurisdiction over the Company, or over any of its properties or operations.

In connection with our review of the Memorandum and the Subscription Agreement and the Agency Agreement, we participated in conferences with officers and representatives of the Company, and with representatives of the Company's independent certified public accountants, at which we made inquiries of such officers and representatives and discussed the contents of the Memorandum and related matters, and performed such other examinations as we deemed necessary; without taking further action to verify independently the statements made in the Memorandum, nothing has come to our attention that would lead us to believe that the Memorandum or any amendment or supplement thereto made by the Company prior to the date hereof, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that in connection with the opinion set forth in this sentence, we express no opinion as to financial st atements and related schedules and other financial or statistical data therein.

Whenever a statement herein is qualified by "known to us," "to our knowledge," or similar phrase, it is intended to indicate that, during the course of our representation of the Company, no information that would give us current actual knowledge of the inaccuracy of such statement has come to the attention of _____________________________________________ _____________________________________________, the attorneys in this firm who have rendered legal services in connection with the transaction described in the first two paragraphs of this letter. However, we have not undertaken any independent inquiry to determine the accuracy of such statement, and any limited inquiry undertaken by us should not be regarded as such an investigation. No inference as to our knowledge of any matters bearing on the accuracy of such statement should be drawn from the fact of our representation of the Company.

Limitations

This opinion is based solely upon the laws of the United States and the State of Nevada, as currently in effect, and does not include an interpretation or statement concerning the laws of any other state or jurisdiction.

This opinion is rendered as of the date set forth above solely for your benefit and the benefit of your counsel and may not be reviewed, relied upon, used, circulated, referred to or quoted to any party without our prior written consent.

We make no undertaking to supplement this opinion if, after the date hereof, facts or circumstances come to our attention or changes in the law occur which could affect such opinion.

Very truly yours

EX-99.906 CERT

Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Oil and Gas Corp. (the "Company") on Form 10-QSB for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Richard Coglon, President and Chief Executive Officer (Principal Executive Officer) of the Company certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

Richard Coglon

/s/ Richard Coglon
President & Chief Executive Officer
(Principal Executive Officer)

July 28, 2003

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Heartland Oil and Gas Corp. (the "Company") on Form 10-QSB for the period ended June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert Knight, Chief Financial Officer (Principal Financial Officer) of the Company certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

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

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

Robert Knight

/s/ Robert Knight
Chief Financial Officer
(Principal Financial Officer)

July 28, 2003