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 March 31, 2005

o	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 1925, 200 Burrard Street
Vancouver, British Columbia, Canada V6C 3L6
(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 o

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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 o No o

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:

46,737,013 common shares issued and outstanding as of May 6, 2005

Transitional Small Business Disclosure Format (Check one): Yes x No o

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PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

Our unaudited financial statements as of March 31, 2005 and for the three month periods ended March 31, 2005 and 2004 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with accounting principles generally accepted in the United States of America.

It is the opinion of management that the interim financial statements for the quarter ended March 31, 2005 include all adjustments necessary in order to ensure that the interim financial statements are not misleading.

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

March 31, 2005



	Index

Consolidated Balance Sheets	F-1

Consolidated Statements of Operations	F-2

Consolidated Statement of Changes in Stockholders’ Equity	F-3

Consolidated Statements of Cash Flows	F-4

Notes to the Consolidated Financial Statements	F-5 to F-9

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

	March 31, 2005	December 31, 2004
	(Unaudited)	(Audited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$ 10,330,827	$ 13,081,221
Prepaid expenses	317,121	332,021
Other current assets	923	762

Total current assets	10,648,871	13,414,004

OIL AND GAS PROPERTIES, unproven (Note 2)	27,906,095	35,559,413

PROPERTY AND EQUIPMENT (Note 3)	218,246	228,590

TOTAL ASSETS	$ 38,773,212	$ 49,202,007

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$ 455,086	$ 764,790
Due to related parties (Note 4)	27	10,520

Total current liabilities	455,113	775,310

LONG-TERM DEBT
Asset retirement obligations (Note 5)	642,864	562,619

TOTAL LIABILITIES	1,097,977	1,337,929

STOCKHOLDERS’ EQUITY
Preferred stock -$0.001 par value, 5,000,000 shares authorized,
3,529,412 shares issued and outstanding (December 31, 2004 - 3,529,412 shares issued and outstanding)	3,529	3,529

Common stock -$0.001 par value, 100,000,000 shares authorized,
46,737,013 shares issued and outstanding (Note 6) (December 31, 2004 – 50,070,347 shares issued, 46,737,013 shares outstanding)	46,737	46,737
Additional paid-in capital	51,456,643	51,198,763
Deficit accumulated during the exploration stage	(13,831,674)	(3,384,951)

	37,675,235	47,864,078

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 38,773,212	$ 49,202,007

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

F - 1

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31, 2005	Three Months Ended March 31, 2004	Period from Inception (August 11, 2000) Through March 31, 2005



REVENUE	$ -	$ -	$ -

EXPENSES
Accretion expense	7,910	-	18,159
Consulting (Note 4)	38,095	6,000	137,291
General and administrative	75,048	84,014	591,617
Impairment loss on oil and gas properties	9,809,527	-	9,809,527
Interest expense	-	-	52,190
Management fees (Note 4)	85,576	47,617	366,327
Office rent	61,339	11,760	193,919
Professional fees	75,610	79,872	580,072
Salaries and wages	30,395	-	30,395
Stock-based compensation (Note 1)	257,880	107,513	1,698,924
Travel and promotion	54,152	43,931	522,587

Total operating expenses	10,494,532	380,707	14,001,008

Loss from operations	(10,494,532)	(380,707)	(14,001,008)

OTHER INCOME
Interest income	47,809	21,434	169,334

NET LOSS	$ (10,446,723)	$ (359,273)	$ (13,831,674)


BASIC AND DILUTED NET LOSS PER COMMON STOCK	$ (0.22)	$ (0.01)

BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUTSTANDING	46,737,000	24,351,000

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

F - 2

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

PERIOD FROM INCEPTION (AUGUST 11, 2000) TO MARCH 31, 2005

	Number of Preferred Stock	Preferred Stock Amount	Number of Common Stock	Common Stock Amount	Additional Paid-in Capital	Stock Subscriptions Receivable	Deficit Accumulated During the Exploration 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	-	-
Exercise of options at $0.50 per share	-	-	70,000	70	34,930	-	-
Conversion of debentures at $2.00	-	-	121,345	121	242,569	-	-
Conversion of debentures at $1.00	-	-	450,016	450	449,566	-	-
Common stock issued at $2.82 per share	-	-	602,835	603	1,699,395	-	-
Common stock issued at $3.20 per share	-	-	2,754,695	2,755	8,812,268	-	-
Stock-based compensation	-	-	-	-	455,375	-	-
Less: share issue costs	-	-	-	-	(892,549)	-	-
Net loss	-	-	-	-	-	-	(1,219,393)

BALANCES, December 31, 2003	-	-	24,301,320	24,301	13,766,605	-	(1,701,538)

Common stock issued at $0.35 per share	-	-	30,000	30	10,470	-	-
Common stock issued at $0.50 per share	-	-	100,000	100	49,900	-	-
Common stock issued at $1.50 per share	-	-	23,260,909	23,261	34,868,104	(5,000,000)	-
Cancellation of stock subscription	-	-	(3,333,334)	(3,333)	(4,996,667)	5,000,000	-
Stock-based compensation	-	-	-	-	766,069	-	-
Preferred stock issued at $3.20 per share	995,305	995	-	-	3,183,981	-	-
Preferred stock converted to common stock	(995,305)	(995)	2,378,118	2,378	(1,383)	-	-
Preferred stock issued at $1.70 per share	3,529,412	3,529	-	-	5,996,471	-	-
Less: share issue costs	-	-	-	-	(2,444,787)	-	-
Net loss	-	-	-	-	-	-	(1,683,413)

BALANCES, December 31, 2004	3,529,412	3,529	46,737,013	46,737	51,198,763	-	(3,384,951)

Stock-based compensation	-	-	-	-	257,880	-	-
Net loss	-	-	-	-	-	-	(10,446,723)

BALANCES, March 31, 2005 (Unaudited)	3,529,412	$ 3,529	46,737,013	$ 46,737	$ 51,456,643	$ -	$ (13,831,674)

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

F - 3

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31, 2005	Three Months Ended March 31, 2004	Period from Inception (August 11, 2000) Through March 31, 2005


CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (10,446,723)	$ (359,273)	$ (13,831,674)

Adjustments to reconcile net loss to net cash used in operating activities:
Accretion expense	7,910	-	18,159
Accrued interest on convertible debentures	-	-	49,061
Stock-based compensation	257,880	107,513	1,698,924
Depreciation and amortization	57,749	1,674	118,365
Impairment loss on oil and gas properties	9,809,527	-	9,809,527
Increase in other current assets	(161)	-	(923)
Decrease (increase) in prepaid expenses	14,900	11,161	(317,096)
(Decrease) increase in accounts payable and accrued expenses	(309,704)	(316,767)	684,532

Net cash used in operating activities	(608,622)	(555,692)	(1,771,125)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(7,031)	(3,832)	(257,447)
Acquisition and exploration of oil and gas properties	(2,124,248)	(569,497)	(37,170,081)

Net cash used in investing activities	(2,131,279)	(573,329)	(37,427,528)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in due to related parties	(10,493)	(4,365)	221,507
Cash received on recapitalization	-	-	15,896
Proceeds from long-term debt	-	-	586,202
Proceeds from issuance of common stock, net of offering costs	-	40,500	39,778,007
Proceeds from issuance of preferred stock, net of offering costs	-	2,927,871	8,927,868

Net cash provided by financing activities	(10,493)	2,964,006	49,529,480

NET INCREASE IN CASH AND CASH EQUIVALENTS	(2,750,394)	1,834,985	10,330,827

CASH AND CASH EQUIVALENTS, beginning of period	13,081,221	8,279,474	-

CASH AND CASH EQUIVALENTS, end of period	$ 10,330,827	$ 10,114,459	$ 10,330,827

Cash paid for:
Interest	-	-	52,190

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

F - 4

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Organization

On April 10, 2002, Adriatic Holdings Limited ("Adriatic") entered into a letter of intent to acquire all of the common stock 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 exploration 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 common stock outstanding. At the time of the acquisition, Adriatic had 7,090,000 shares of common stock outstanding. Adriatic issued 12,212,429 shares of common stock to the stockholders of Heartland, and as a result, the Company had 19,302,429 shares of common stock outstanding immediately after the acquisition. As part of the exchange agreement, Adriatic changed its name to Heartland Oil & Gas Corp. The acquisition of Heartland by Adriatic is considered a reverse acquisition and accounted for under the purchase method of accounting. Under reverse acquisition accounting, Heartland is considered the acquirer for accounting and financial reporting purposes, and acquired the assets and assumed the liabilities of Adriatic. Assets acquired and liabilities assumed are reported at their historical amounts.

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. since inception (collectively, the "Company"). All significant intercompany balances and transactions have been eliminated in consolidation.

The Company has suffered recurring losses from operations and has accumulated a deficit of $13,831,674 since inception on August 11, 2000. At March 31, 2005 the Company has working capital of $10,193,758. Since inception, the Company has funded operations through the issuance of capital stock and debt. Management’s plan is to continue raising additional funds through future equity or debt financings until it achieves profitable operations from its oil and gas drilling and exploration activities.

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 March 31, 2005, 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 have been condensed or omitted. These consolidated financials statements should be read in conjunction with the Company’s audited financial statements and the related notes thereto included in the Company’s Form 10-KSB filed with the Securities and Exchange Commission.

Oil and Gas Properties

The Company utilizes the full cost method to account for its investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, capitalized interest costs relating to unproved properties, geological expenditures, tangible and intangible development costs including direct internal costs are capitalized to the full cost pool. As of March 31, 2005, the Company has no properties with proven reserves. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects including capitalized interest, if any, are not amortized until proved reserves associated with the projects can be determined. If the future exploration of unproved properties are determined uneconomical the amount of such properties are added to the capitalized cost to be amortized. As of March 31, 2005, oil and gas property costs of $27,906,095 (December 31, 2004 - $35,559,413) were unproved and were excluded from amortization. At March 31, 2005, the Company recorded an impairment arising from the expiry of certain leases of $13,175, and an impairment of $9,796,352 arising from the Engleke/Soldier Creek and the BTA pilot projects which were located on its northern acreage of the Forest City Basin.

The capitalized costs included in the full cost pool are subject to a "ceiling test", which limits such costs to the aggregate of the estimated present value, using a ten percent discount rate, of the future net revenues from proved reserves, based on current economic and operating conditions.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in the statement of operations.

F - 5

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

Financial Instruments and Concentration of Credit Risk

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 recorded at contracted amounts that approximate fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash in excess of the federally insured amount of $100,000. To date, the Company has not incurred a loss relating to this concentration of credit risk.

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 at intrinsic value, which is 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". Under the Company’s 2004 Stock Option Plan, up to a maximum of 2,000,000 shares of common stock may be granted to key employees and consultants. The options granted under the plan generally vest over four years, and are for a term not exceeding 10 years.

Had the Company measured compensation cost based on the fair value of the options at the grant date for the three month periods ended March 31, 2005 and 2004 consistent with the method prescribed by SFAS 123, the Company’s net loss and loss per common share would have been increased to the pro forma amounts indicated below:

	Three Months Ended March 31, 2005	Three Months Ended March 31, 2004

Net loss, as reported	$(10,446,723)	$ (359,273)

Add: Stock-based compensation expense included in reported net income, net of related tax effects	257,880	107,513

Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of related tax effects	(354,924)	(104,857)

Pro forma net loss	$(10,543,767)	$ (356,617)

Earnings per share:
Basic and diluted loss per common share
As reported	$ (0.22)	$ (0.01)
Pro forma	$ (0.23)	$ (0.01)

F - 6

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Asset Retirement Obligations

The Company accounts for asset retirement obligations in accordance with the provisions of SFAS 143 “Accounting for Asset Retirement Obligations”. SFAS 143 requires the Company to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The Company recognized asset retirement obligations related to its oil and gas properties.

Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires the compensation cost related to share-based payments, such as stock options and employee stock purchase plans, be recognized in the financial statements based on the grant-date fair value of the award. SFAS 123(R) is effective for all interim periods beginning after December 15, 2005. Management is currently evaluating the impact of this standard on the Company’s financial condition and results of operations.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets” (“SFAS 153”), an amendment of APB Opinion No. 29, “Accounting for Non-monetary Transactions”. SFAS 153 requires that exchanges of non-monetary assets are measured based on fair value and eliminates the exception for exchanges of non-monetary, similar productive assets, and adds an exemption for non-monetary exchanges that do not have commercial substance. SFAS 153 will be effective for fiscal periods beginning after June 15, 2005. Management does not believe that the adoption of this standard will have a material impact on the Company’s financial condition or results of operations.

NOTE 2-

OIL AND GAS PROPERTIES, UNPROVEN

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

	Acquisition Costs	Exploration Costs	Impairment Costs	Total

Costs incurred during periods ended:
March 31, 2005	$ 254,075	$ 1,902,134	$ (9,809,527)	$ (7,653,318)
December 31, 2004	23,187,379	8,104,863	-	31,292,242
December 31, 2003	839,081	1,278,006	-	2,117,087
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	$ 25,813,791	$ 11,901,831	$ (9,809,527)	$ 27,906,095

NOTE 3 – PROPERTY AND EQUIPMENT

	Costs	Accumulated Amortization	March 31, 2005 Net Carrying Value	December 31, 2004 Net Carrying Value


Office furniture and equipment	$ 257,447	$ 39,201	$ 218,246	$ 228,590

F - 7

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - RELATED PARTY TRANSACTIONS

Amounts due to related parties on the accompanying balance sheet as of March 31, 2005, are $27 (December 31, 2004 - $10,520). The amount due from related parties represents non-interest bearing expense reimbursements and advances to directors and officers, with no fixed terms of repayment.

During the three-month period ended March 31, 2005, the Company incurred $84,576 (2004 - $53,617) in management and consulting fees to directors and officers of the Company.

NOTE 5 – ASSET RETIREMENT OBLIGATIONS

	Three month period ended March 31, 2005	Year Ended December 31, 2004

Beginning asset retirement obligations	$ 562,619	$ -
Additions related to new properties	-	276,953
Liabilities incurred	72,335	275,417
Deletions related to property disposals	-	-
Accretion	7,910	10,249

Total asset retirement obligations	$ 642,864	$ 562,619

NOTE 6 - COMMON STOCK

During the three-month period ended March 31, 2004 the Company issued 60,000 shares of common stock at $0.50 per share for proceeds of $30,000 and 30,000 shares of common stock at $0.35 per share for proceeds of $10,500 from the exercise of stock options.

During the three-month period ended March 31, 2004 the Company completed the sale of 995,305 units at $3.20 per unit for proceeds of $3,184,976, before issue costs. Each unit is comprised of one share of convertible Series A Preferred stock and one stock purchase warrant to purchase one-half of one share of common stock for the additional consideration of $3.84 per share. Each preferred stock is convertible into one share of common stock for no additional consideration.

NOTE 7 – COMMITMENTS

a) The Company leases facilities in Ottawa, Kansas; Denver, Colorado; and Vancouver, British Columbia, Canada. The leases expire in October 2005, October 2007 and February 2008, respectively. Future minimum lease payments are as follows:


2005		$ 180,743
2006		65,743
2007		62,909
2008		8,123

		$ 317,518

b) The Company entered into management consulting agreements dated October 1, 2004, as amended, with a director for the payment of management fees of $7,500 per month, and with its President for the payment of $16,666 per month, respectively, each for a term of one year.

c) The Company entered into a management consulting agreement dated August 2, 2004, as amended, with its Chief Operating Officer (“COO”) for the payment of management fees of $15,000 per month, and it’s Vice-President, Operations for $11,250 per month, each for a term of one year. The Company also agreed to pay a bonus of $10,000, to a maximum of $40,000 per year, for each five well program brought into production on its Forest City Basin operations.

F – 8

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HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – SUBSEQUENT EVENTS

On April 20, 2005, the Company entered into a joint venture agreement (the JV Agreement) with Far East International Petroleum Company (“FEIPCO”), a Jordan company to jointly pursue a number of opportunities in the Middle East. The initial focus will be on securing contracts in Southern Iraq, relating to the exploration, drilling, production and marketing of hydrocarbons and the procurement or provision of related oilfield services, including but not limited to, drilling and related service contracts and securing production sharing agreements.

On May 10, 2005 FEIPCO, with Heartland noted as its joint venture partner, submitted a tender offer to drill several oil and or gas wells The Company is holding details confidential due to the competitive nature of the bid process. If awarded the contract, in whole or in part, FEIPCO and Heartland, as joint venture partners will, as required under the JV Agreement, assign all their rights in and to the drill contracts to their intended joint venture company Arabian Heartland. Under the JV Agreement, FEIPCO will be responsible for providing the joint venture with all aspects of logistics, material procurements, in country staffing and security. Heartland will be responsible for providing those duties customarily undertaken by a drilling contractor and as may be otherwise required under the tender offer contracts.

Under the terms of the Joint Venture Agreement, each of Heartland and FEIPCO have contracted with an independent third party to undertake the construction of an oil field camp. The Camp will be used to house oil field personnel, as may be required by the joint venture in the performance of any drilling, exploration or other related activities it may be awarded or undertake in the area. The Company has advanced $3,755,000 towards construction of the Camp.

F-9

- 14 -

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", "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.

Business Development During Last Three Years

General Overview

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. Our "Soldier Creek" project encompassed approximately 252,583 acres of prospective frontier CBM lands. Our subsidiary, Heartland Oil and Gas Inc., holds the interests in the leases and operates the project. Effective September 27, 2004 we acquired leases covering an additional 766,000 acres of prospective CBM lands, also in the Forest City Basin. We have not renewed some leases and as of April 12, 2005 we have leases covering approximately 853,000 acres.

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.

We are an oil and gas exploration company that, prior to our recent acquisition of certain assets from Evergreen Resources, had interests in leases covering approximately 252,583 acres in central Kansas. We have a 100% working interest in all of these leases. Our net revenue interest in these leases is 84.5%. Our "working interest" consists of our share of gross production, revenues, burdens, field operating costs and gathering and processing fees before deduction of royalties. Our "net revenue interest" means our working interest less the royalties that are payable.

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. On July 31, 2002 we entered into a formal Share Exchange Agreement with Heartland Oil and Gas Inc. and its shareholders. 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. acquired 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 prior to our recent acquisitions of further leases from Evergreen Resources, Inc., our "Soldier Creek" project encompassed approximately 252,583 acres of prospective frontier coal bed methane lands. We have a 100% working interest in all of these leases. Our net revenue interest in these leases is 84.5%, so as a result our net acreage is approximately 213,000 acres. Our "working interest" consists of our share of gross production, revenues, burdens, field operating costs and gathering and processing fees before deduction of royalties. Our "net revenue interest" means our working interest less the royalties that are payable. Heartland Oil and Gas Inc. holds the interests in the leases for the lands and operates the project. The expiration dates for the leases range from dates in 2004 through 2009. Certain of Heartland’s leases may be extended upon the exercise of options on the leases. In 2005 we expect to pay $422,000 on lease extensions. In 2006 we expect to pay approximately $355,076 on leases extensions. In addition, we are obligated to pay delay rentals on certain leases of approximately $75,000 in 2005 and 2006.

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 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. 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 coal bed methane 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. The logs used to map the thickness of these coal beds are not capable of indicating the productivity from the coal beds. Further adding to the area's potential, was its proximity to a ready market and gas pipelines.

We commenced our exploration program consisting 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. Two of the three wells were logged and tested for permeability and all three were cased as potential coal bed producers. To test for permeability, we hired Production Enhancement & Reservoir Management, LLC to conduct injection falloff tests on selected coal seam intervals in the two wells. At the Engelke 16-18 well two separate injection falloff tests were conducted. The first test consisted of three seams near the bottom of the well; a 3 foot thick seam at 2,378 feet, a 2 foot seam at 2,406 feet, and a 3 foot seam at 2,429 feet. The second test targeted a single coal seam 4 feet thick at 1,832 feet. In each test the coal seam was perforated and fresh water was injected at high pressure and the pressure was then allowed to falloff. A pressure modeling program was then used to estimate the coal seam permeability to water. This resulted in an estimated permeability of 12.68 millidarcies (md) for the lower coals and 22.5 md for the upper coal.

At the Trout 10-2 well, two falloff tests were conducted. In the first test, 3 coal seams near the bottom of the well were tested; a 3 foot seam at 1,491 feet, a 2 foot seam at 1,500 feet and a 3 foot seam at 1,510 feet. The coal seam permeability to water was estimated at 40.14 md. It was noted that the permeability in this well could be

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as high as 105.3 md. In the second test, a single coal seam 3 foot thick at 1,039 feet was tested and permeability was found to be 0.187 md.

No flow tests were conducted as part of the injection falloff testing. We have concluded that the coal seams in these wells will require hydraulic fracturing for commercial coalbed methane development.

During September and October 2001 Heartland Oil and Gas Inc. drilled the three test wells to test the relative coal thickness, permeability, porosity and gas content. Coal thickness and porosity are estimated from well logs and permeability is estimated through injection fall off tests. Gas content is estimated through desorption and adsorption tests on coal cores. In order to conduct a desorption test, coal core samples are saved in airtight canisters at the well site, are opened in the lab and the amount of gas that may be recovered from the coal at various pressures is measured. These tests are done using a constant temperature as close to reservoir temperature as possible. An estimate must also be made for the amount of gas lost before the coal samples were put into the canisters prior to testing.

Adsorption tests measure the ultimate amount of gas the coal can hold. These tests measure the amount of gas that the coal can hold by injecting gas into the coal at increasing pressures. These tests are also run at reservoir temperature. The adsorption test typically shows a higher gas content than that measured in the desorption test, suggesting that the coals are somewhat under saturated with gas compared to the maximum amount of gas they could hold. If so, the pressure must be lowered to that corresponding to the gas content from the desorption test, which is typically done by producing water from the coal. Most coal bed methane wells need dewatering in order to produce gas.

The coal thickness, permeability, porosity and gas content data from the various wells drilled was sent to an independent laboratory for input into a coalgas simulator program, designed to estimate the amount of coal bed methane and water that may be recoverable from the wells.

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. Prior to the acquisition of the leases from Evergreen Resources in September of 2004 we had leases totalling 252,583 acres. Of the 252,583 acres under lease, approximately 227,000 are in the Engelke area. We have a 100% working interest in all of these leases. The net revenue interest of these leases is 84.5%, so our net acreage is approximately 192,000 acres in the Engelke area.

In July, 2003 we undertook the drilling of a four well pilot program surrounding the Engelke 16-18 well, the westernmost of our three initial test wells. In October, 2003 we purchased an existing wellbore in the Engelke area and converted it to a water disposal well by removing the existing tubing in the well and then perforating a deeper formation.

In November, 2003 we completed the five wells in the Engelke pilot program. We selected various coal seams in the Lower Cherokee section, in the lower part of the coal sequence, for the first completions. Eight seams, totalling approximately 16 feet of coal, were perforated, acidized and hydraulically fractured. Down-hole pumps were installed in each well and initial dewatering of the wells began in late November, 2003. As of August 11, 2004 all 5 wells were continuing to pump water with no gas production.

We commenced the drilling of the first wells in our next three 5-well pilot programs on March 19, 2004. The drilling program consists of 15 new CBM wells and three new wells to be used for salt water disposal. The new 15 pilot wells are spaced across our acreage block in the Forest City and are intended to further define the productivity of our acreage for coalbed methane production.

The wells show an excellent section of thick lower Cherokee coals, which is the main producing formation in the coalbed methane wells in other parts of the Forest City/Cherokee Basin. As of December 1, 2004 all 17 CBM

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wells and all three water disposal wells have been drilled, logged and cased. As of December 1, 2004 all 17 CBM wells had been completed and had begun dewatering.

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 many 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. Our mapping of the existing wells in this area shows the presence of a number of coals in the shallow part of the basin. Drilling records, when available, often show gas as these coals are penetrated.

•The abundance of depleted wells often 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 are anticipated to 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 may add to the amount of recoverable gas.

Acquisition of Assets from Evergreen Resources, Inc.

On September 27, 2004 we completed the acquisition of the "Forest City Basin" assets from Evergreen Resources, Inc. for a purchase price of $22,000,000. The Forest City Basin assets consist of all of Evergreen Resources, Inc.'s interest in certain oil and gas leases covering an aggregate of approximately 766,000 acres located in the State of Kansas, together with 60 well bores and all surface equipment, gathering and surface facilities and all geological, engineering, land and accounting data and records pertaining to these leases and assets.

After the acquisition of the Evergreen assets, we held in excess of 1 million acres of prospective CBM leases at various stages of development, 91 wells, including 39 CBM wells in eight pilots that are currently dewatering and/or venting gas, 41 CBM wells awaiting stimulation, and 11 saltwater disposal wells. As of April 12, 2005 we have leases covering approximately 853,000 acres. As of April 12, 2005 seventeen of the CBM wells acquired from Evergreen have been fracture stimulated and put on pump. As of April 12, 2005 eleven additional CBM wells had been drilled in our Southern acreage, of which 5 have been completed in the our Lancaster pilot area, and the remaining 6 wells are waiting on completion.

We are continuing to focus our efforts on the Lancaster pilot project, located to the south near Ottawa, Kansas. Management has been successful in cutting costs and improving the per well performance from when it had first acquired approximately 750,000 acres of CBM leases from Evergreen in October, 2004. Changes in the completion programs implemented by Heartland over the past 5 months at Lancaster have increased production from an average of 3 to 5 mcfpd to 15 to 20 mcfpd and reduced costs by some 40% per well.

Lancaster production continues to improve on the original nine wells drilled on 80 acre spacing. We collected detailed pressure and production data from isolated coal intervals in five new 40 acre infill wells, and have started accelerating dewatering now that data collection is complete. We plan to monitor progress, evaluate completion techniques and the impact of 40 acre downspacing, and evaluate pipeline alternatives to see if economic viability can be achieved.

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The wells at Lancaster continue to show signs of improvement, but are still just below our economic threshold. Although there is no guarantee the rate will continue to increase, we plan to continue to monitor the per well averages.

We had earlier implemented a revised completion program on two of its northern areas. The results of the completions did not result in any sustainable or large increase in production from the wells tested. Before implementing a revised completion or drill program on its Northern acreage, we had determined that it is best to focus our efforts on the Southern Acreage and if successful, implement some of the same lower cost and seemingly more effective completion procedures on its Northern acreage. Accordingly, we will be shutting in our original Engleke pilot, located near Holton, Kansas, which to date has failed to produce economic quantities of gas. The BTA pilot, acquired from Evergreen Resources during the last quarter of 2004, will also be shut in due to noncommercial production. Both pilots produce gas, but despite extensive dewatering efforts, have failed to show the improvements in gas rate needed to justify pipeline investment and hookup.

The Coal Bed Methane Industry

During the past decade coal bed methane 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, coal bed methane 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 coal bed methane 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 coal bed methane reservoir performance analysis. Also aiding this sector's growth is the apparent shortage of quality domestic conventional exploration and development projects. In comparison, according to USGS Fact Sheet FS-123-00 of October 2000, total "unconventional" coal bed methane resource across America's 25 basins (lower US) is estimated to be roughly 700 trillion cubic feet (Tcf) of which 14% or 100 Tcf is considered technically recoverable with existing technology. Technically recoverable gas volumes do not necessarily qualify as proved reserves and we do not have any proved coal bed methane reserves at this time. We also believe that propelling the coal bed methane production growth is its relatively low finding and development costs. Coal bed methane 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 coal bed methane reservoirs' 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 contain minute quantities of highly poisonous hydrogen sulfide, referred to as "sour gas". Coal bed methane is, generally, a sweet gas consisting of 95% methane and thus is normally of pipeline quality. Coal bed methane 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 coal bed methane is "adsorbed" or attached to the molecular structure of the coals - an efficient storage mechanism as coal bed methane coals can contain as much as seven times the amount of gas typically stored in a conventional natural gas reservoir such as sandstone or shale. The adsorbed coal bed methane is kept in place as a result of a pressure equilibrium often from the presence of water. Thus the production of coal bed methane 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. Coal bed methane production typically has a low rate of production decline and an economic life typically from 10 to 20 years.

The principal sources of coal bed methane 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.

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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. Relatively high permeability, which can affect the ability of gas to easily travel to the borehole, is an important factor for the success of a coal bed methane well, but is not absolutely required. The thickness of coal beds from which coal bed methane 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 feet of coal bed thickness at the relatively gas poor Powder River.

FEIPCO Iraq Joint Venture

On April 20, 2005, we entered into a joint venture agreement with Far East International Petroleum Company having its head office in Dubai, United Arab Emirates. Under the terms of the Joint Venture Agreement, Heartland and Far East International Petroleum Company have agreed to form a company to be operated under the name Arabian Heartland International Company. We will hold our 35% working interest in the joint venture via a to be formed wholly owned subsidiary “Heartland International Oil Corporation.” Our Board has also consented to the independent participation by our President of a 5% working interest in the joint venture.

Arabian Heartland is to pursue a number of opportunities in the Middle East, with the initial focus being on securing contracts in Southern Iraq relating to the exploration, drilling, production and marketing of hydrocarbons and the procurement or provision of related oilfield services, including, but not limited to, drilling and related service contracts and securing production sharing agreements.

On May 10, 2005 FEIPCO, with Heartland noted as its joint venture partner, submitted a tender offer to drill several oil and or gas wells. We are holding details confidential due to the competitive nature of the bid process. If awarded the contract, in whole or in part, FEIPCO and Heartland, as joint venture partners will, as required under the JV Agreement, assign all their rights in and to the drill contracts to their intended joint venture company Arabian Heartland. Under the JV Agreement, FEIPCO will be responsible for providing the joint venture with all aspects of logistics, material procurements, in country staffing and security. Heartland will be responsible for providing those duties customarily undertaken by a drilling contractor and as may be otherwise required under the tender offer contracts.

Under the terms of the Joint Venture Agreement each of Heartland and FEIPCO have contracted with an independent third party to undertake the construction of an oil field camp. The Camp will be used to house oil field personnel, as may be required by the joint venture in the performance of any drilling, exploration or other related activities it may be awarded or undertake in the area.

Prior to the Iran/Iraq war in the 1980’s oil production was some 3.5 million barrels per day. Current production capacity is 2.8 million barrels per day, but actual production output is 1.5 million barrels per day. Our company’s management believes the minimal investment of technical and financial capital in Iraq’s oil sector over the past 20 years creates substantial growth opportunities for companies like Arabian Heartland and correspondingly, our shareholders.

Our management believes that the initial opportunities Arabian Heartland is pursuing in the Middle East with Far East International Petroleum Company will provide the “first mover advantage” needed to give shareholders of micro-cap companies such as ours growth opportunities. We are very much aware of the political and security issues associated with doing business in these areas and with the assistance of Far East International Petroleum Company, we have and will continue to take all appropriate and necessary measures to ensure our personnel and our assets are safe.

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Competitors

The three largest coal bed methane producers in America's lower 48 states are BP Amoco, Burlington Resources and Phillips Petroleum, all producing most of their production from the now-in-decline San Juan basin. Though it ranks fourth in terms of natural gas production, the leading coal bed methane participant in terms of growth and technology is, in our view, Devon Energy. Devon is aggressively expanding coal bed methane production in the Powder River Basin located in Wyoming and Montana and Raton Basin located in Colorado and has coal bed methane production in the San Juan Basin located in New Mexico and Wind River Basin located in Wyoming. Devon is also developing the coal bed methane potential of southeastern Kansas where it has amassed over 400,000 acres. Its project is centered in Cherokee Basin, that is the southern end of the coal bed methane fairway.

Other companies are also active in the coal bed methane fairway, including Anadarko Petroleum Corporation, JM Huber Corporation and Whiting Petroleum.

Drilling contractors competing for business in the Middle East include, but are not limited to, Weatherford, LukeOil, and Halliburtion.

Governmental Regulations

Our oil and gas operations are subject to various United States federal, state and local governmental regulations. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, and pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state, provincial and local laws and regulations relating primarily to the protection of human health and the environment. To date, expenditures related to complying with these laws, and for remediation of existing environmental contamination, have not been significant in relation to the results of operations of our company. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

Plan of Operations

Cash Requirements

For the next 12 months we plan to continue to evaluate the coal bed methane potential of the Lancaster pilot area. We have no drilling obligations or commitments, so all our activity is discretionary. We contemplate our evaluation program to include completing additional wells in and around Lancaster and to initiate construction of pipeline connections should gas production continue to improve and appear sustainable. In addition, we plan to pursue our joint venture in Iraq with Far East International Oil Company.

Pursuant to several oil and gas leases entered into with various parties and our acquisitions from Evergreen Resources, our Soldier Creek project encompasses approximately 252,584, acres of prospective frontier coal bed methane lands. Heartland Oil and Gas Inc. holds the interests in the leases for the lands and operates the project. The expiration dates for the leases range from dates in 2004 through 2012. Certain of the leases may be extended upon the exercise of options on the leases.

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We may require additional funds to implement our growth strategy in our 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 raised 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 have been used 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.

In June, 2003, we sold an aggregate of 602,835 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 for gross proceeds of approximately $1,700,000. The share purchase warrants have an exercise price of $3.38 and expire three years from the date of issuance.

On August 19, 2003, we sold an aggregate of $8,815,024 of our shares of our common stock and share purchase warrants to acquire additional shares of our common stock in a private placement. The private placement involved the issuance of 2,754,695 shares of our common stock and share purchase warrants to acquire an additional 1,377,348 shares of our common stock. The share purchase warrants have an exercise price of $3.84 and expire on August 19, 2006.

On January 13, 2004 we closed a private placement for the issuance and sale of 995,305 units at a purchase price of $3.20 per unit for total aggregate proceeds of $3,184,979. Each unit was comprised of one share of Series A Preferred Convertible Stock and one stock purchase warrant to purchase one-half of one share of common stock for the additional consideration of $3.84 per share for a period of three years. The preferred shares have been converted into common shares.

Effective September 27, 2004 we entered into subscription agreements with 48 investors, whereby we issued a total of 23,260,909 shares of our common stock at a purchase price of $1.50 per share for total aggregate proceeds of $34,891,363. However, one subscriber for 3,333,334 common shares, for proceeds of $5,000,000, has not yet completed their purchase and provided the purchase price. Subsequent to the year ended December 31, 2004, the 3,333,334 common shares were returned to treasury. We agreed to pay a commission of 6% of the gross proceeds realized from the sale of the securities to C.K. Cooper & Company, which will be split 55% to C.K. Cooper & Company and 45% to Sterne Agee & Leach, Inc.

Effective September 30, 2004 we entered into subscription agreements with two investors, whereby we issued 3,529,412 series B convertible preferred shares at a purchase price of $1.70 per share for total aggregate proceeds of $6,000,000.

As at March 31, 2005 we had working capital of $10,193,758. Over the next twelve months we intend to use all available funds to expand on the exploration and development of our Lancaster Prospect and pursue our joint venture activity in Iraq, as follows:

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Estimated Funding Required During the Next Twelve Months

General and Administrative	$1,800,000
Acreage
Rentals and Option Payments	$0
New Land	$70,000

Operations
Complete 6 CBM wells	$150,000
Drill, and Complete 10 new wells, as necessary	$1,000,000
Gathering and Pipelines, if commercial	$1,800,000
Lease Operating Expense	$348,000
Iraq Joint Venture Expenses*	$4,000,000

Working Capital	$1,025,758

Total	$10,193,758

(* Of this amount, $3,755,000 has been paid by us as a deposit towards our proportionate share of the construction of the joint venture’s Oil Field Camp. When constructed, the Camp will house oil field personnel required to fulfil the joint venture’s drilling obligations under the 64 well bid program, if and when awarded to the joint venture.)

As at March 31, 2005, we had $455,113 in current liabilities, as compared to current liabilities of $775,310 as of December 31, 2004. Our financial statements report a net loss of $10,446,723 for the three month period ended March 31, 2005 compared to a net loss of $359,273 for the three month period ended March 31, 2004. As a result, our accumulated net loss increased to $13,831,674 during the period from inception to March 31, 2005. Our losses increased primarily as a result of an increase in expenses associated with office rent, management fees and stock-based compensation and the recognition of an impairment charge of $9,809,527 related to our oil and gas leases in the Forest City Basin. Office rent increased from $11,760 for the three month period ended March 31, 2004 to $61,339 for the three month period ended March 31, 2005. Management fees increased from $47,617 for the three month period ended March 31, 2004, to $85,576 for the three month period ended March 31, 2005 as a result of increases in fees paid to our management team as a result of our substantially expanded operations. Stock-based compensation for the three month period ended March 31, 2005 was $257,880, as compared to $107,513 for the three month period ended March 31, 2004 due to additional stock option grants during the 2004 fiscal year. At March 31, 2005, we recorded an impairment arising from the expiry of certain leases of $13,175, and an impairment of $9,796,352 arising from the Engleke/Soldier Creek pilots and the BTA pilot project which were located on its northern acreage. This compares to $nil for the three month period ended March 31, 2004.

Our total liabilities as of March 31, 2005 were $1,097,977, as compared to total liabilities of $1,337,929 as of December 31, 2004. The decrease was due to a decrease in our accounts payable from $764,790 as at December 31, 2004 to $455,086 as at March 31, 2005.

During the three month period ended March 31, 2005 we spent $2,143,035 on exploration and acquisition of our oil and gas properties. Of this amount, $253,075 was attributable to acquisition costs and $1,902,134 was attributable to exploration costs. Acquisition costs of $23,187,379 for the fiscal year ended December 31, 2004 include $22,000,000 that we paid for the purchase of certain oil and gas leases and related equipment and data from Evergreen Resources. We have capitalized these amounts on our balance sheet, which include $642,864 related to asset retirement obligations. We have also recognized an impairment charge of $9,809,527 as at March 31, 2005.

We have incurred recurring losses from operations. The continuation of our company 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 continuation of our business is dependent upon obtaining further financing, a successful program of acquisition and exploration, and, finally, achieving a profitable level of operations. The issuance of additional

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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. 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 CBM Prospect, Kansas USA, and fulfilling our commitments under our Joint Venture with FEIPCO. To date, execution of our business plan has largely focused on acquiring prospective Coal Bed Methane (CBM) leases and drilling test wells on our FCB acreage from which to establish a going forward exploration and development plan. Going forward management will also undertake such additional projects as they may arise resulting from our joint venture with FEIPCO.

Purchase of Significant Equipment

Except as may be required under our joint venture commitments with FEIPCO, we do not intend to purchase any significant equipment (excluding oil and gas activities) over the twelve months ending March 31, 2006.

Employees

Currently we have six full time employees not including the officers and directors of our company. We do not expect any material changes in the number of employees over the next 12 month period except as may be required under our joint venture with FEIPCO. We do and will continue to outsource contract employment as needed.

New Accounting Pronouncements

In May, 2003, SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", was issued. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Generally, a financial instrument, whether in the form of shares or otherwise, that is mandatorily redeemable, i.e. that embodies an unconditional obligation requiring the issuer to redeem it by transferring its shares or assets at a specified or determinable date (or dates) or upon an event that is certain to occur, must be classified as a liability (or asset in some circumstances). In some cases, a financial instrument that is conditionally redeemable may also be subject to the same treatment. This Statement does not apply to features that are embedded in a financial instrument that is not a derivative (as defined) in its entirety. For public entities, this Statement is effective for financial instruments entered into or modified after May 31, 2003. The adoption of SFAS 150 did not effect our financial position or results of operations.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires the compensation cost related to share-based payments, such as stock options and employee stock purchase plans, be recognized in the financial statements based on the grant-date fair value of the award. SFAS 123(R) is effective for all interim periods beginning after December 15, 2005. We are currently evaluating the impact of this standard on our financial condition and results of operations.

In December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets” (“SFAS 153”), an amendment of APB Opinion No. 29, “Accounting for Non-monetary Transactions”. SFAS 153 requires that

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exchanges of non-monetary assets are measured based on fair value and eliminates the exception for exchanges of non-monetary, similar productive assets, and adds an exemption for non-monetary exchanges that do not have commercial substance. SFAS 153 will be effective for fiscal periods beginning after June 15, 2005. We do not believe that the adoption of this standard will have a material impact on our financial condition or results of operations.

Application of Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials. The Company has not produced significant revenue from its principal business and is a development stage company as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting by Development Stage Enterprises”.

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. We have chosen to account for stock-based compensation Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB25") and have adopted the disclosure only provisions of SFAS123. Accordingly, compensation cost for stock options is measured at intrinsic value, which is the excess, if any, of the quoted market price of our stock at the date of grant over the amount an employee is required to pay for the stock.

We account 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".

We utilize the full cost method to account for our investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs, geological expenditures, tangible and intangible development costs including direct internal costs are capitalized to the full cost pool. As of March 31, 2005, we have no properties with proven reserves. When we obtain proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined. If the future development of unproved properties are determined uneconomical the amount of such properties is added to the capitalized cost to be amortized. As of March 31, 2005, all of our oil and gas properties costs of $27,906,095 were unproved and were excluded from amortization. At March 31, 2005, we recorded an impairment arising from the expiry of certain leases of $13,175, and an impairment of $9,796,352 arising from the Engleke/Soldier Creek pilots and the BTA pilot project which were located on its northern acreage.

Transaction amounts denominated in foreign currencies are translated at exchange rates prevailing at transaction dates. Carrying values of monetary assets and liabilities are adjusted at each balance sheet date to reflect the exchange rate at that date. Non-monetary assets and liabilities are translated at the exchange rate on the original transaction date. Gains and losses from restatement of foreign currency monetary and non-monetary assets and

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liabilities are included in the statement of operations. Revenue and expenses are translated at the dates such items are recognized in the statement of operations.

Substantially all of our 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. Our liabilities consist of short term liabilities recorded at contracted amounts that approximate fair value. Financial instruments that potentially subject us to concentrations of credit risk consists primarily of cash in excess of the federally insured amount of $100,000. To date, we have not incurred a loss relating to this concentration of credit risk.

We account for asset retirement obligations in accordance with the provisions of SFAS 143 “Accounting for Asset Retirement Obligations”. SFAS 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which we incur a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. We have recognized asset retirement obligations related to our oil and gas properties.

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, 2004. 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.

RISKS RELATED TO OUR BUSINESS

We have had negative cash flows from operations and if we are not able to continue to obtain further financing our business operations may fail.

To date we have had negative cash flows from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements and have incurred net losses totalling approximately $10,446,723 for the three months ending March 31, 2005, and accumulative net losses of $13,831,674 since inception to March 31, 2005. As of March 31, 2005 we had working capital of $10,193,758 as a result of recent financing activities. We do not expect positive cash flow from operations in the near term. There is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:

- the costs to acquire further acreage are more than we currently anticipate;

- drilling and completion costs for further wells increase beyond our expectations;

- we encounter greater costs associated with general and administrative expenses or offering costs; or

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- we require additional funding for our joint venture project in Iraq.

The occurrence of any of the aforementioned events could adversely affect our ability to meet our business plans.

We will depend almost exclusively on outside capital to pay for the continued exploration and development of our properties. Such outside capital may include the sale of additional stock and/or commercial borrowing. Capital may not continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us would 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.

If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business and as a result may be required to scale back or cease operations for our business, the result of which would be that our stockholders would lose some or all of their investment.

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations.

A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital. Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, we may not be able to raise additional capital or generate funds from operations sufficient to meet our obligations.

If we issue additional shares in the future this may result in dilution to our existing stockholders.

Our Certificate of Incorporation authorizes the issuance of 100,000,000 shares of common stock and 5,000,000 shares of preferred stock. Our board of directors have the authority to issue additional shares up to the authorized capital stated in the certificate of incorporation. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares may result in a reduction of the book value or market price of the outstanding shares of our common stock. If we do issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, if you acquire shares from the selling shareholders, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance may result in a change of control of our corporation.

We have a history of losses and fluctuating operating results which raise substantial doubt about our ability to continue as a going concern.

Since inception through March 31, 2005, we have incurred aggregate net losses of $13,831,674. There is no assurance that we will operate profitably or will generate positive cash flow in the future. In addition, our operating results in the future may be subject to significant fluctuations due to many factors not within our control, such as the unpredictability of when customers will purchase our services, the size of customers' purchases, the demand for our services, and the level of competition and general economic conditions. If we cannot generate positive cash flows in the future, or raise sufficient financing to continue our normal operations, then we may be forced to scale down or even close our operations.

Until such time as we generate revenues, we expect an increase in development costs and operating costs. Consequently, we expect to incur operating losses and negative cash flow until our properties enter commercial production.

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Our stock is a penny stock. 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 stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors". The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

NASD sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

In addition to the "penny stock" rules described above, the NASD has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We have a limited operating history and if we are not successful in continuing to grow our business, then we may have to scale back or even cease our ongoing business operations.

We have no history of revenues from operations and have no significant tangible assets. We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. 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 acquisition, 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. We may be unable to locate recoverable reserves or 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. If our business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in our company.

A majority of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.

A majority of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it

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may be difficult for investors to effect service of process on our directors or officers, or enforce within the United States or Canada any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them. In addition, investors may not be able to commence an action in a Canadian court predicated upon the civil liability provisions of the securities laws of the United States. The foregoing risks also apply to those experts identified in this prospectus that are not residents of the United States.

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.

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. Few 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. We may not 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. These factors cannot be accurately predicted and 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. We cannot predict if the necessary funds can be raised or that any projected work will be completed. Our budget anticipates our

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acquisition of additional acreage in the Forest City basin. This acreage may not become available or if it is available for leasing, that we may not 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 natural 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. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may 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 be 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. To date we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.

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 companies in the industry.

We believe that our operations comply, in all material respects, with all applicable environmental regulations. However, we are not fully insured against all possible environmental risks.

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 we cannot adequately insure or which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.

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

The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States or any other jurisdiction, may 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.

Item 3. Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures as of the end of the period covered by this quarterly report, being March 31, 2005. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's president and chief executive officer. Based upon that evaluation, our company's president and chief executive officer concluded that our company's disclosure controls and procedures are effective as at the end of the period covered by this report. There have been no significant changes in our company's internal controls or in other factors, which could significantly affect internal controls subsequent to the date we carried out our evaluation.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our company's 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 that information required to be disclosed in our company's reports filed under the Exchange Act is accumulated and communicated to management, including our company's president and 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. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

Effective May 5, 2005, Randy Buchamer and Michael Bodino have resigned as directors of our company. On May 7, 2005 we appointed John Martin as a director of our company in place of Randy Buchamer.

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Item 6. Exhibits.

Exhibits Required by Item 601 of Regulation S-B

Exhibit Number/Description

The following Exhibits are filed with this Quarterly Report:

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)
3.4	Certificate of Amendment to Articles of Incorporation effective December 10, 2003 (12)
3.5	Certificate of Designation for shares of Series A Convertible Preferred Stock, effective December 18, 2003 (9)
3.6	Certificate of Designation for shares of Series B Convertible Preferred Stock, effective October 1, 2004 (12)
4.1	2005 Stock Option Plan (13)
10.1	Form of Oil and Gas Lease (4)
10.2	Managing Dealers Agreement, dated June 19, 2003, between Heartland Oil and Gas Corp. and C.K. Cooper and Company, Inc. (5)
10.3	Managing Dealers Agreement, dated July 29, 2003 between Heartland Oil and Gas Corp. and C.K. Cooper and Company, Inc. (8)
10.4	Form of Subscription Agreement in connection with private placements on June 24 and June 30, 2003 (5)
10.5	Form of Subscription Agreement in connection with private placement on August 19, 2003 (6)
10.6	Consulting Agreement dated July 1, 2003, between Heartland Oil and Gas Corp. and Donald Sharpe (8)
10.7	Consulting Agreement dated July 1, 2003, between Heartland Oil and Gas Corp. and Richard Coglon (8)
10.8	Letter Agreement between Topeka-Atchison Gas & Illuminating LLC with Heartland Oil and Gas Inc., dated August 25, 2000 (8)
10.9	Form of Oil and Gas Lease with Option (7)
10.10	Form of Subscription Agreement in connection with private placement of Series A Preferred shares, dated September 24, 2003 (10)

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10.11	Purchase and Sale Agreement between Heartland Oil and Gas Corp. and Evergreen Resources, Inc, dated effective September 27, 2004 (12)
10.12	Form of Securities Purchase Agreement in connection with private placement of Series B Preferred shares, dated October 1, 2004 (11)
10.13	Form of Subscription Agreement in connection with the private placement on September 27, 2004 (12)
10.14	Amended Consulting Agreement dated November 1, 2004 with Richard Coglon (13)
10.15	Amended Consulting Agreement dated November 1, 2004 with Donald Sharpe (13)
10.16	Joint Venture Agreement dated April 20, 2005 between Far East International Petroleum Company (14)
14.1	Code of Business Conduct and Ethics (10)
21.1	Heartland Oil and Gas Inc., a company incorporated pursuant to the laws of the State of Nevada

* 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.

(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 10-QSB filed with the Securities and Exchange Commission on July 28, 2003.

(6) Incorporated by reference to the company's Form 8-K filed with the Securities and Exchange Commission on August 21, 2003.

(7) Incorporated by reference to the company's Form 10-KSB/A filed with the Securities and Exchange Commission on October 22, 2003.

(8) Incorporated by reference to the company's Form SB-2 Registration Statement filed with the Securities and Exchange Commission on August 29, 2003, as amended.

(9) Incorporated by reference to the company's Form SB-2 Registration Statement filed with the Securities and Exchange Commission on February 17, 2004.

(10) Incorporated by reference to the company's Form 10-KSB filed with the Securities and Exchange Commission on March 29, 2004, as amended on May 27, 2004.

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(11) Incorporated by reference to the company's Form 8-K filed with the Securities and Exchange Commission on October 6, 2004.

(12) Incorporated by reference to the company's Form SB-2 Registration Statement filed with the Securities and Exchange Commission on November 15, 2004.

(13) Incorporated by reference to the company's Form 10-KSB filed with the Securities and Exchange Commission on April 15, 2005.

(14) Incorporated by reference to the company's current report on Form 8-K filed with the Securities and Exchange Commission on May 13, 2005.

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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)

May 20, 2005

By: /s/ Michael J. David

Michael J. David, Chief Financial Officer

(Principal Financial Officer)

May 20, 2005

Dated: May 20, 2005


		/s/ Richard Coglon
		Richard Coglon
		President and Chief Executive Officer,
		Heartland Oil and Gas Corp.


		/s/ Michael David
		Michael David
		Chief Financial Officer,
		Heartland Oil and Gas Corp.