**United
      States**


**Securities
      And Exchange Commission**


**Washington,
      D.C. 20549**





**Amendment
          No. 4**
 **to**
 **Form
        10-KSB/A**





**Annual
      Report**


**pursuant
      to Section 13 of the**


**Securities
      Exchange Act Of 1934**




**Year
      ended December 31, 2004**




**Commission
      File Number: 000-33321**







**Fellows
      Energy Ltd.**





**Incorporated
                in Nevada**
            
            **IRS
                ID No. 33-0967648**




**370
      Interlocken Boulevard, Suite 400**


**Broomfield,
      Colorado 80021**


**(303)
      327-1525**




**Securities
      registered under Section 12(b) of the Act: None**


**Securities
      registered under Section 12(g) of the Act: Common Stock, Par Value $.001**









Fellows
      (1) has not filed all reports required to be filed by Section 13 or 15(d) of
      the
      Exchange Act during the past 12 months, and (2) has been subject to such filing
      requirements for past 90 days.




There
      is
      no disclosure of delinquent filers in response to Item 405 of Regulation S-B
      contained in this form. Disclosure will be contained, to the best of Fellows’
knowledge, in a definitive proxy statement incorporated by reference in Part
      III
      of this Form 10-KSB or an amendment to this Form 10-KSB.




Fellows
      had no revenue in 2004.




The
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold (See definition of affiliate in Rule 12b-2 of the Exchange Act.) as of
      March 18, 2005 was $36,713,424.




41,743,150
      shares of $.001 par value common stock were issued and outstanding as of March
      21, 2005.




Portions
      of Fellows’ definitive Proxy Statement on Schedule 14A for the Annual Meeting of
      Stockholders to be held in June, 2005 are incorporated by reference into Part
      III, Items 9-12 and 14.





This
      report is not in transitional small business disclosure format.









**Explanatory
        Note**
 
 This
          amended annual report on Form 10-KSB/A is filed to add inception-to-date
          numbers
          in accordance SFAS 7, as well as discontinued operations from the automotive
          fueling consulting business in accordance with SFAS 144. Additionally this
          amended report is filed to further clarify our stock issuance obligations
          and
          respective valuation. Additionally,
          this amended annual report is filed to properly value the assets acquired
          during
          the exchange of oil and gas interests from Diamond Oil and Gas and the
          3.5
          million shares of common stock issued.





**Part
        I**




**Item
      1. Description of Business**




**Business
      Development**




Fellows
      Energy Ltd. (formerly known as Fuel Centers, Inc.) was incorporated in Nevada
      on
      April 9, 2001. From 2001 through 2003 we offered business consulting services
      in
      the retail automobile fueling industry. We produced no revenue in 2003.




In
      November 2003 we changed our name from Fuel Centers, Inc. to Fellows Energy
      Ltd.
      with the filing of a Certificate of Amendment to our Articles of Incorporation
      with the Nevada Secretary of State. We changed our name in anticipation of
      a
      January 2004 change in our operational focus from automobile fueling centers
      to
      oil and gas exploration.




**Business**




On
      January 5, 2004, we acquired interests in certain oil and gas leases of the
      Johns Valley, Utah project and the rights to acquire interests in the Weston
      County, Carter Creek, Deer Creek and Gordon Creek Projects, as well as to enter
      into the Exploration Services Funding Agreement with Thomasson Partner
      Associates, Inc. of Denver, Colorado, owned by Diamond Oil & Gas
      Corporation, in exchange for 3,500,000 shares of common stock. The transaction
      was deemed to have a value of $1.05 million. We acquired the option to earn
      a
      70% working interest in 25,201 acres of oil and gas leases from Diamond, a
      corporation controlled by our CEO. As a result, we appointed new management
      while accepting the resignation of our former management and redeemed 52,610,000
      shares of common stock owned by the outgoing and former management in exchange
      for approximately $27,000. We appointed George S. Young as our President, Chief
      Executive Officer and a Director and Steven L. Prince as our Vice President
      and
      a Director. We agreed to indemnify Jeffrey Taylor and Peter Lee for any actions
      against them, including litigation, which may arise involving their service
      to
      us.




The
      operations we plan for 2005 include exploring leases we have acquired as well
      as
      seeking to acquire and explore additional property. See Item 2—Property. Our
      goal is to discover substantial commercial quantities of oil and gas, including
      coalbed methane, on the properties.




Thomasson
      Agreement for Exploration Services. In January 2004 we entered into an
      Exploration Services Agreement with Thomasson Partner Associates, Inc., Denver,
      CO. In February 2005 we amended the agreement. Thomasson provides large-scale
      exploration opportunities to the oil and gas industry. By this agreement
      Thomasson provides to us the first right to review and purchase up to a 50%
      interest (as amended, a 100% interest beginning in February 2005) in oil and
      natural gas exploration projects developed by Thomasson. Under the agreement,
      in
      2005 Thomasson will present to us a minimum of eight project opportunities
      with
      the reasonable potential of at least 200 billion cubic feet of natural gas
      reserves or 20 million barrels of oil reserves. We have the first right to
      review exploration projects developed by Thomasson and, after viewing a formal
      presentation regarding a project, we have a period of thirty days in which
      to
      acquire up to 100% of the project. We are not obligated to acquire any project.
      In consideration, in 2004 we paid to Thomasson a $400,000 overhead fee, and
      will
      pay an $800,000 fee in 2005. We also pay a fee for each project we acquire
      from
      Thomasson. The agreement continues year to year until either party gives 90
      days
      written notice of termination. Projects acquired from Thomasson include the
      Weston County project in Wyoming, the Gordon Creek project in Utah, the Carter
      Creek project in Wyoming, the Circus project in Montana and the Bacaroo project
      in Colorado. In 2004 we incurred charges from Thomasson totaling $1,255,000,
      including the $400,000 overhead fee. See Item 2—Property. Founded in 1991 by Dr.
      M. Ray Thomasson, Thomasson is staffed by a team of over twenty seasoned
      professionals, experienced in geology, geophysics, petrophysics, engineering
      and
      land. Since inception, Thomasson has sold seventy projects to industry partners,
      primarily in the Rocky Mountain region.




Capital
      Formation. On September 9, 2003, we received $350,000 for issuance of a
      convertible note payable to a third party investor. The principal was due and
      payable on March 9, 2005 together with interest at the rate of 8% per year.
      The
      note also contains a conversion feature that gave the holder the right to
      convert all or any portion of the principal indebtedness into shares of common
      stock on or before March 9, 2005. The note holder has notified us that they
      were
      exercising their right to convert the entire $350,000 note at a conversion
      rate
      of $0.1429 per share, or 2,449,265 shares.




On
      January 5, 2004 we sold 2,750,000 shares of common stock for $2,750,000, less
      related offering cost, in a private placement.




In
      connection with the transactions which closed on January 5, 2004, we incurred
      an
      obligation to a financial adviser to issue 250,000 shares of common stock as
      a
      fee, which we issued later in 2004. We valued the shares as of January 5, 2004,
      and recorded the value of $457,500 as financial consultation expense.




2




In
      June
      2004 we issued a two-year convertible debenture with a conversion price of
      $1.25
      per share of common stock, subject to anti-dilution adjustments, in a private
      placement to two purchasers. The convertible debenture is secured by our assets.
      In connection with the issuance, we also issued warrants to purchase up to
      400,000 shares of common stock at $1.50 per share. The warrants are exercisable
      for two years following conversion of the convertible debenture at an exercise
      price of $1.50. The offering resulted in gross proceeds to us, prior to the
      deduction of fees and cost, of approximately $1,000,000. We used the proceeds
      from the offering for working capital and general corporate purposes.




Over
      the
      period May through October 2004 we borrowed $741,000 on an unsecured 8% demand
      note payable to an entity controlled by our CEO. In December 2004 we paid
      $684,621 of principal on the note plus $25,681 of interest. The December 31,
      2004 balance on the note was $56,379.




In
      August
      2004 we entered into an agreement with a financial consultant in which we are
      obligated to issue the consultant 50,000 shares of common stock. In February
      2005 we extended the agreement and are obligated to issue the consultant an
      additional 50,000 shares of common stock.




In
      November 2004 we entered into a joint venture agreement with JMG Exploration,
      Inc., or JMG, an entity associated with JED Oil, Inc. and Enterra Energy Trust,
      in which JMG received a 50% interest in our Weston County and Gordon Creek
      properties in exchange for a $2,000,000 commitment for exploration and drilling
      on the properties. See Item 2—Property. In addition, JMG loaned us $1,500,000,
      50% of which we have repaid with interest and 50% of which is payable on April
      30, 2005, with interest at 18%. We have collateralized all of our assets as
      security on this loan.




In
      December 2004 we entered into an agreement with a financial consultant in which
      we are obligated to issue the consultant 150,000 shares of common stock.




In
      February 2005 we agreed to sell one of our prospects, the Circus project, for
      $1.98 million to an unrelated third party. We have received half of the proceeds
      from the sale. The buyer has committed to pay the other half upon completion
      of
      routine title work on the property. We acquired the leases in October, 2004,
      for
      $451,000 and thus realized a $1.5 million gain on the sale. We are using the
      proceeds from the sale to pay down the November 2004 note and for working
      capital.




In
      2004
      we incurred a loss of $3,760,000. Although we hold an option to acquire
      interests in the Kirby and Castle Rock projects which are now going into
      production, we have no assets at present which are able to generate oil &
gas sales without substantial exploration expenditures, the discovery or
      purchase of oil or gas reserves and substantial expenditures for the development
      of the reserves. To fully carry out our business plans we need to raise a
      substantial amount of additional capital, which we are currently seeking. We
      can
      give no assurance that we will be able to raise such capital. We will have
      limited financial resources until we are able to generate positive cash flow
      from operations. Our ability to achieve and maintain profitability and positive
      cash flow is dependent upon our ability to locate profitable natural gas or
      oil
      properties, generate revenue from our planned business operations, and control
      exploration cost. Should we be unable to raise adequate capital or to meet
      the
      other above objectives, it is likely that we would have to substantially curtail
      our business activity, and that our investors would incur substantial losses
      of
      their investment.




Employees.
      We have four employees. Our officers and third party vendors have done the
      majority of our property acquisition and development work.




Competition
      in the Oil and Gas Industry




Oil
      and
      gas exploration and acquisition of undeveloped property is a highly competitive
      and speculative business. We compete with a number of other companies, including
      major oil companies and other independent operators which are more experienced
      and which have greater financial resources. Such companies may be able to pay
      more for prospective oil and gas property. Additionally, such companies may
      be
      able to evaluate, bid for and purchase a greater number of properties and
      prospects than our financial and human resources permit. While we do not yet
      hold a significant competitive position in the oil and gas industry, we compete
      by being able to respond rapidly to opportunities we identify, and by
      establishing strong relationships with parties with whom we do business, such
      as
      our relationship with Thomasson and JMG.




Governmental
      Regulations




Exploration
      and Production. Our U.S. operations are or will be subject to various types
      of
      regulation at the federal, state and local levels. Such regulation includes
      obtaining permits for drilling wells; maintaining bonding requirements in order
      to drill or operate wells; implementing spill prevention plans; submitting
      notification and receiving permits relating to the presence, use and release
      of
      certain materials incidental to oil and gas operations; and regulating the
      location of wells, the method of drilling and casing wells, the use,
      transportation, storage and disposal of fluids and materials used in connection
      with drilling and production activities, surface usage and the restoration
      of
      properties upon which wells have been drilled, the plugging and abandoning
      of
      wells and the transporting of production. Our operations are or will be also
      subject to various conservation matters, including the regulation of the size
      of
      drilling and spacing units or proration units, the number of wells which may
      be
      drilled in a unit, and the unitization or pooling of oil and gas properties.
      In
      this regard, some states allow the forced pooling or integration of tracts
      to
      facilitate exploration while other states rely on voluntary pooling of lands
      and
      leases, which may make it more difficult to develop oil and gas property. In
      addition, state conservation laws establish maximum rates of production from
      oil
      and gas wells, generally limit the venting or flaring of gas, and impose certain
      requirements regarding the ratable purchase of production. The effect of these
      regulations is to limit the amounts of oil and gas we may be able to produce
      from our wells and to limit the number of wells or the locations at which we
      may
      be able to drill.




3


Our
      business is affected by numerous laws and regulations, including energy,
      environmental, conservation, tax and other laws and regulations relating to
      the
      oil and gas industry. We have internal procedures and policies to ensure that
      our operations are conducted in full regulatory compliance.




Failure
      to comply with any laws and regulations may result in the assessment of
      administrative, civil and criminal penalties, the imposition of injunctive
      relief or both. Moreover, changes in any of these laws and regulations could
      have a material adverse effect on our business. In view of the many
      uncertainties with respect to current and future laws and regulations, including
      their applicability to us, we cannot predict the overall effect of such laws
      and
      regulations on our future operations.




Environmental
      Matters. Operations on property in which we have an interest are subject to
      extensive federal, state and local environmental laws that regulate the
      discharge or disposal of materials or substances into the environment and
      otherwise are intended to protect the environment. Numerous governmental
      agencies issue rules and regulations to implement and enforce such laws, which
      are often difficult and costly to comply with and which carry substantial
      administrative, civil and criminal penalties and in some cases injunctive relief
      for failure to comply.




Some
      laws, rules and regulations relating to the protection of the environment may,
      in certain circumstances, impose “strict liability” for environmental
      contamination. These laws render a person or company liable for environmental
      and natural resource damage, cleanup cost and, in the case of oil spills in
      certain states, consequential damages without regard to negligence or fault.
      Other laws, rules and regulations may require the rate of oil and gas production
      to be below the economically optimal rate or may even prohibit exploration
      or
      production activity in environmentally sensitive areas. In addition, state
      law
      often requires some form of remedial action, such as closure of inactive pits
      and plugging of abandoned wells, to prevent pollution from former or suspended
      operations.




Legislation
      has been proposed in the past and continues to be evaluated in Congress from
      time to time that would reclassify some oil and gas exploration and production
      waste as “hazardous waste.” This reclassification would make this waste subject
      to much more stringent storage, treatment, disposal and clean-up requirements,
      which could significantly increase operating cost. Initiatives to further
      regulate the disposal of oil and gas waste are also proposed in certain states
      from time to time and may include initiatives at the county, municipal and
      local
      government levels. These various initiatives could significantly increase
      operating cost.




The
      regulatory burden of environmental laws and regulations increases our cost
      and
      risk of doing business and consequently affects our profitability. The federal
      Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA,
      also known as the “Superfund” law, imposes liability, without regard to fault,
      on certain classes of persons with respect to the release of a “hazardous
      substance” into the environment. These persons include the current or prior
      owner or operator of the disposal site or sites where the release occurred
      and
      companies that transported, disposed or arranged for the transport or disposal
      of the hazardous substances found at the site. Persons who are or were
      responsible for releases of hazardous substances under CERCLA may be subject
      to
      joint and several liability for the cost of cleaning up the hazardous substances
      that have been released into the environment and for damages to natural
      resources, and the federal and state governments commonly pursue such claims.




Neighboring
      landowners and other third parties commonly file claims for personal injury
      or
      property or natural resource damages allegedly caused by the hazardous
      substances released into the environment. Under CERCLA, some oil and gas
      materials and products are, by definition, excluded from the term “hazardous
      substances.” At least two federal courts have held that certain waste associated
      with the production of crude oil may be classified as hazardous substances
      under
      CERCLA. Similarly, under the federal Resource, Conservation and Recovery Act,
      or
      RCRA, which governs the generation, treatment, storage and disposal of “solid
      wastes” and “hazardous wastes,” certain oil and gas materials and wastes are
      exempt from the definition of “hazardous wastes.” This exemption continues to be
      subject to judicial interpretation and increasingly stringent state
      interpretation. During the normal course of operations on property in which
      we
      have an interest, exempt and non-exempt waste, including hazardous waste, that
      is subject to RCRA and comparable state statutes and implementing regulations
      is
      generated or has been generated in the past. The federal Environmental
      Protection Agency and various state agencies continue to promulgate regulations
      that limit the disposal and permitting options for certain hazardous and
      non-hazardous waste.




4




We
      believe that the operator of the properties in which we have an interest is
      in
      substantial compliance with applicable laws, rules and regulations relating
      to
      the control of air emissions at all facilities on those properties. Although
      we
      maintain insurance against some, but not all, of the risks described above,
      including insuring the cost of clean-up operations, public liability and
      physical damage, there is no assurance that our insurance will be adequate
      to
      cover all such cost, that the insurance will continue to be available in the
      future or that the insurance will be available at premium levels that justify
      our purchase. The occurrence of a significant event not fully insured or
      indemnified against could have a material adverse effect on our financial
      condition and operations. Compliance with environmental requirements, including
      financial assurance requirements and the cost associated with the cleanup of
      any
      spill, could have a material adverse effect on our operations, earnings or
      competitive position. We do believe, however, that our operators are in
      substantial compliance with current applicable environmental laws and
      regulations. Nevertheless, changes in environmental laws have the potential
      to
      adversely affect operations.




**Our
      Business in 2003**




We
      have
      only generated minimal revenue to date. In 2003 we had no revenue. We were
      originally formed to offer consulting services in the retail automobile fueling
      industry. In January 2004 we changed our operational focus from automobile
      fueling centers to oil and gas exploration. For
      2003,
      we recorded a loss from these discontinued operations in the amount of $123,475,
      making our total loss from 2001-2003 from discontinued operations
      $197,189.




**Item
      2. Description of Property**




**Our
      Facilities**




We
      lease
      our offices at 370 Interlocken Boulevard, Suite 400, Broomfield, CO 80021;
      our
      telephone number is (303) 327-1525.




**Oil
      and Gas Property**




Reserves
      Reported to Other Agencies. We have not yet discovered or acquired any proved
      reserves. Therefore none have been reported to any agency.




Production.
      We have not yet established production on any of our property, all of which
      we
      acquired in 2004.




Productive
      Wells and Acreage. We have no productive wells or acreage.




Undeveloped
      Acreage. We lease the rights to explore for and produce oil and gas from mineral
      owners. Leases (quantified in acres) expire after their primary term unless
      oil
      or gas production is established. Prior to establishing production of oil and
      gas, leases are considered undeveloped. After production is established, leases
      are considered developed or “held-by-production.” All of Fellows’ acreage is
      undeveloped. Typically, readers consider undeveloped acreage an indication
      of
      our “raw material” and, therefore, our potential to discover reserves in the
      future. Gross acres are the total number of acres in which we have a working
      interest. Net acreage is obtained by multiplying gross acreage by our working
      interest percentage in the property. The below table includes acreage in which
      we have a contractual right to acquire or to earn through drilling projects
      and
      certain other acreage for which we have not yet received leasehold assignments.
      The below table reports our acreage position as of December 31, 2004.




**Undeveloped Acreage**
 
 **Gross**
              
              **Net**Utah
              
              
              225,002
              
              
              115,814Montana
              
              
              72,728
              
              
              28,243Wyoming
              
              
              51,726
              
              
              45,569Total
              
              
              349,456
              
              
              189,626








Below
      is
      a brief description of each of our oil & gas projects.




Weston
      County, Wyoming. In November 2004 we executed a joint venture agreement with
      JMG, and Enterra Energy Trust, to drill our Weston County and Gordon Creek
      projects. Under the agreement, JMG will receive a 50% interest in exchange
      for
      spending $2,000,000 in exploration and drilling activity on the two projects
      by
      November 7, 2005. In addition, JMG loaned $1,500,000 to Fellows with a
      short-term note.




5




The
      Weston County project is a 19,290-acre project on the east flank of the Powder
      River Basin. We anticipate that JMG will commence exploration, permitting and
      other pre-drilling activities in the second 2004 quarter. The Weston County
      project contains at least 18 previously identified conventional oil and gas
      well
      locations based on extensive seismic evaluation targeting the Turner Formation.
      The prospect is a potential extension of an existing producing field. In
      addition, the parties will target the nearby locations with potential in the
      Minnelusa sandstone and Dakota channel sandstone formations.




Gordon
      Creek, Utah. JMG will also drill on the 5,242-acre Gordon Creek project, which
      we acquired from The Houston Exploration Company for $288,000. The Gordon Creek
      project is in an area of known coal resources in Carbon County in eastern Utah
      near other operating coal bed methane projects, such as the Drunkard’s Wash
      Project, which Fellows’ project personnel successfully drilled previously for
      River Gas Corporation.




Based
      on
      exploration results, JMG has indicated its intent to sell a portion of its
      working interest to Enterra in an arrangement under which JED Oil, under a
      development agreement with Enterra, will complete any development programs
      on
      the projects.




JMG,
      JED
      Oil and Enterra are substantial industry partners on our projects. We believe
      we
      will benefit significantly from their operating experience in conventional
      oil
      and gas and coal bed methane drilling, development and operation. We believe
      that the short-term loan made by JMG is an indicator of potentially strong
      value
      in the Weston County and Gordon Creek projects.




Carter
      Creek, Wyoming. In 2004 we purchased the 10,678-acre Carter Creek Project in
      the
      southern Powder River Basin. We plan to commence drilling in the near future
      at
      the project, in which we have a 100% working interest. Based on our analysis
      of
      the geologic structure of this region, we anticipate productive sections in
      the
      Cretaceous, Niobrara, Turner (Frontier) and Mowry layers, in that several
      existing wells in the Carter Creek area currently produce oil.




Overthrust,
      Utah and Wyoming. In 2004 we optioned the Overthrust project for a 65% working
      interest in 183,000 acres of oil, gas and coal bed methane leases in
      northeastern Utah and southwestern Wyoming from Quaneco L.L.C., an Oklahoma
      company. We plan to test the three identified coal seams that run through much
      of the area. Previous drilling has included seven exploratory wells that
      identified multiple coal seams of Tertiary and Cretaceous age that appear to
      be
      prospective for coal bed methane. Some of the coal is of similar age and
      depositional condition to other productive coal bed methane fields.




We
      drilled our first well in the project in 2004, the Crane 6-7, in Rich County,
      Utah. The well reached a total depth of 4280 feet. We cored coal and
      carbonaceous shale over a combined interval of 556 feet. We used a continuous
      coring, wireline retrievable system for timely recovery of the coal and
      carbonaceous shale core samples to enable more accurate gas content analysis
      than is possible using conventional coring systems. In September 2004 we
      received the results from the gas desorption tests from the Spring Valley coal
      of the Frontier formation and the coal in the Bear River formation in the well.
      Results showed 253 cubic feet of gas per ton on an ash-free basis in the coal
      in
      the well. Lesser amounts of gas were present in the carbonaceous shale in the
      well. These tests corroborate earlier data that was generated by Quaneco, our
      partner on the project, suggesting that coal in an area of the project that
      lies
      a considerable distance north of the Crane 6-7 may contain between 200 and
      400
      cubic feet of gas per ton. We have expensed the cost of this well as exploration
      expense, although we may choose to re-enter the well at a later date. The
      overall results indicate the potential for coal in a much wider area to contain
      economic levels of coal bed methane, and will help to further guide Fellows’
ongoing logging, geologic and drilling operations. We believe the Overthrust
      project has attractive coal bed methane potential, although additional
      exploration activity will be necessary to prove up gas reserves.




Bacaroo,
      Colorado. In 2004 we optioned the Bacaroo project in Colorado through our
      affiliation with Thomasson. We believe the project is an opportunity to
      establish conventional oil and gas production with comparatively inexpensive
      drilling in areas of established production, while other projects being reviewed
      offer longer term, larger potential exploration opportunities. We are acquiring
      acreage in the prospect.




Kirby
      and
      Castle Rock projects, Powder River Basin, Montana. In March 2005 we agreed,
      subject to customary closing conditions, with Quaneco to acquire a 12.5% working
      interest in the Kirby and Castle Rock Coal Bed Natural Gas projects for
      $3,850,000 in cash and one million shares of restricted common stock. Under
      the
      terms of the agreement, we will participate in a 48 well drilling program during
      2005 on the Kirby project that will extend out from an existing 16 well pilot
      program of previously drilled wells. We will have ownership in the previously
      drilled wells, which are currently being dewatered and are expected to commence
      production later in the near future. The other working interest owners in the
      Kirby project include Quaneco (25.0%), Pinnacle Gas Resources (50%) and Galaxy
      Energy Corporation (12.5%).




6




We
      plan
      to participate in a 48 well drilling program during 2005 on the Castle Rock
      project that will extend out from 4 previously drilled core holes. The other
      working interest owners in the Castle Rock Project include Quaneco (25.0%),
      Rocky Mountain Gas, Inc. (43.75%), Carrizo (6.25%) and Galaxy Energy Corporation
      (12.5%). On February 25, 2005, Enterra Energy Trust, announced that it had
      entered into a letter of intent for the acquisition of Rocky Mountain Gas,
      Inc.
      pursuant to a merger under Wyoming law. Completion of the merger is expected
      by
      May 1, 2005.




The
      Powder River Basin coalfield of northeastern Wyoming and southeastern Montana
      is
      an unconventional gas play that offers an unusual combination of comparatively
      moderate risk and large economic potential. The large coal deposits of the
      Powder River Basin are one of the greatest accumulations of coal in the world.
      These coal deposits contain a large resource of biogenic coal bed methane
      associated with numerous thick, laterally continuous, relatively shallow (less
      than 3,000 feet deep) Tertiary coal beds.




The
      Kirby
      project is an extension of the Powder River Basin coal bed methane play, which
      produces from the Tongue River Member of the Tertiary Fort Union Formation,
      on
      the western margin of the Basin north of Sheridan, Wyoming. This portion of
      the
      Basin has already seen considerable production from property owned and managed
      by Huber Oil & Gas at Prairie Dog Field which is on the Wyoming side, and
      Fidelity Oil & Gas at CX Field which straddles the Montana/Wyoming border.
      The Kirby project has 95,000 acres of fee, state and federal leasehold about
      10
      miles north of Decker, Montana. Fidelity’s CX Field is about 6 miles south of
      the southern boundary of the prospect.




A
      16 well
      pilot well program has been drilled on the Kirby acreage and is scheduled to
      begin production in the second 2004 quarter. This pilot program will test the
      productivity of the Wall and Flowers-Goodale coal formations. Gas content data
      from mud logs and cores taken over these zones indicates that the prospective
      coal is fully saturated with gas, which we believe will lead to a short period
      of dewatering before commercial gas production volume is achieved. The
      engineering firm Sproule Associates, Inc. has been retained to perform a
      resource evaluation of the Kirby project. We believe hundreds of wells could
      potentially be drilled on the 95,000-acre Kirby project.




The
      Castle Rock project is an extension of the Powder River Basin play on the
      eastern margin of the Basin north of Gillette, Wyoming. This portion of the
      Basin is where most of the Basin’s production has occurred. The Castle Rock
      project has 140,000 acres of fee, state and federal leasehold along the Pumpkin
      Creek drainage about 20 miles west of Broadus, Montana. The eastern and northern
      boundaries of the prospect are the outcrops of the Sawyer and Flowers Goodale
      Coals. Sproule also conducted a resources evaluation of the Castle Rock project
      with favorable results.




Circus
      Project, Montana. In May 2004, we optioned the Circus project through our
      affiliation with Thomasson. We acquired the leases from Thomasson Partner
      Associates, Inc. in October, 2004, for $451,000. In February 2005 we agreed
      to
      sell the project for $1.98 million to an unrelated third party and thus realized
      a $1.5 million gain on the sale. We have received half of the proceeds from
      the
      sale. The buyer has committed to pay the other half upon completion of routine
      title work on the property. We are using the proceeds from the sale to pay
      down
      the $1.5 million November 2004 JMG note and for working capital.




Johns
      Valley Project, Utah. In early 2004 we acquired an agreement with Johns Valley
      Limited Partnership whereby we have the option to earn 70% working interest
      in
      25,201 acres of oil and gas leases from the Utah School and Institutional Trust
      Lands Administration. We acquired the option from Diamond, a corporation
      controlled by our CEO. The option is for fifteen oil and gas leases that are
      for
      terms of ten years expiring in 2010. In order to maintain the option in good
      standing, we had an obligation to spend the following sums in exploration
      drilling on or before the dates specified to better characterize the coal and
      coalbed methane potential: (1) June 15, 2004, $1,200,000; (2) January 20, 2005,
      $1,000,000; and, (3) January 20, 2006, $800,000. In connection with the above
      commitment for 2004, as of June 30, 2004, we advanced $241,000 in the form
      of a
      loan bearing 10% interest to the Johns Valley Limited Partnership. As a result,
      and in lieu of repayment, our $1.2 million 2004 work commitment was reduced
      to
      $718,000 to be spent by October 31, 2004. By that date we had actually spent
      $550,000. Due to permitting delays and other operating parameters in the field,
      we have entered into negotiations to restructure the timing and amounts of
      our
      work commitments as provided under the option assignment agreement. We have
      no
      current payment commitments or obligations pending the renegotiation.




In
      mid-2004 we drilled the 10-33C2 well in this project to its planned depth of
      1,365 feet. We drilled through a potentially productive coal seam. We cored
      the
      well and have sent the core to a lab for evaluation. We have expensed the cost
      of this well as exploration expense, although we may choose to re-enter the
      well
      at a later date.




Other
      activity in the Powder River Basin, Wyoming. In July 2004 we signed a letter
      of
      intent to acquire the operating management interest in approximately 41
      producing coalbed methane wells in the Powder River Basin in Wyoming. After
      further evaluation we elected not to pursue the project.




7




Deer
      Creek Project, Montana. Early in 2004 we purchased an option to acquire a 25%
      working interest in 37,040 net leased acres in the Deer Creek Project. After
      further evaluation of the project we concluded that stronger opportunities
      are
      available and we let our option expire.




We
      believe our exploration activity will bring additional value to our
      shareholders. There is no guarantee that the leases we have acquired and the
      exploration activity we have conducted will be successful and increase the
      value
      of our common stock.




Drilling
      Activity. In 2004 we drilled an exploratory well on the Overthrust project,
      Utah
      and Wyoming, above, and an exploratory well on the Johns Valley Project, Utah,
      above. We drilled no development wells. We had no drilling activity prior to
      2004.




Present
      Activity. We described our present activity in detail by project in Undeveloped
      Acreage, above. We have no wells currently drilling, although upon closing
      the
      purchase on the Kirby and Castle Rock projects we will have interests in 16
      wells that are commencing the production phase and in drilling programs with
      96
      wells during 2005. We also have plans to finance and drill on the Overthrust
      project, the Carter Creek project, the Bacaroo project and the Johns Valley
      project during 2005. Our partner, JMG, will also be drilling on the Weston
      County and Gordon Creek projects in 2005. We are seeking capital which we need
      in order to perform these projects.




**Item
      3. Legal Proceedings**




We
      were
      sued in the Sixth Judicial District Court, Garfield County, Utah on November
      10,
      2004, by Midway Perforating and Drilling, Inc. in a complaint alleging
      nonpayment of charges connected with drilling the Johns Valley 10-33C2 well
      in
      Garfield County, UT. The complaint seeks damages of $100,000 and costs of
      $10,000. We filed our Answer and Counterclaim on January 19, 2005. We plan
      to
      vigorously defend this case because we believe that the plaintiff failed to
      follow our instructions to use appropriate equipment for controlling deviation
      of the wellbore, and that such failure caused the well to be unusable. The
      suit
      is in its early stages. Although we believe we have a strong defense and
      counterclaim, we cannot predict the final outcome of the suit.




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




We
      submitted no matters to a security holders vote during the quarter ended
      December 2004.







8





**PART
      II**




**Item
      5. Market for Common Equity and Related Stockholder Matters**




**Prices
      of Common Stock**




We
      participate in the OTC Bulletin Board, an electronic quotation medium for
      securities traded outside of the Nasdaq Stock Market. Prices for our common
      stock are published on the OTC Bulletin Board under the trading symbol “FLWE.”
On March 21, 2005, we traded at $0.96. Quotes reflect inter-dealer prices,
      without retail mark-up, mark-down or commission, and may not represent actual
      transactions.




**Period**
            
            
            **High**
            
            
            **Low**2004Fourth
                quarter
            
            $
            1.00
            
            $
            .72Third
                quarter
            
            
            1.07
            
            
            .75Second
                quarter
            
            
            1.26
            
            
            .89First
                quarter
            
            
            2.16
            
            
            1.162003Fourth
                quarter
            
            
            1.78
            
            
            .043Third
                quarter
            
            
            .15
            
            
            .043Second
                quarter
            
            
            .15
            
            
            .15First
                quarter
            
            
            .15
            
            
            .15





*
            High
                and low closing prices for common stock per share, as reported by
                NASDAQ
                and adjusted for stock splits.




We
      are
      authorized to issue 100,000,000 shares of $.001 par value common stock, each
      share of common stock having equal rights and preferences, including voting
      privileges. As of March 21, 2005, we had 41,743,150 shares of our $.001 par
      value common stock issued and outstanding. We are also authorized to issue
      25,000,000 shares of $.001 par value preferred stock, none of which is issued
      and outstanding.




We
      have
      22 common shareholders of record as of March 21, 2005.




We
      have
      the following outstanding securities convertible into common stock:




•
            
            On
                September 9, 2003, we received $350,000 for issuance of a convertible
                note
                payable to a third party investor. The principal is due and payable
                on
                March 9, 2005 together with interest at the rate of 8% per year.
                The note
                also contains a conversion feature that gives the holder the right
                to
                convert all or any portion of the principal indebtedness into shares
                of
                common stock on or before March 9, 2005. The note holder has notified
                us
                that they were exercising their right to convert the entire $350,000
                note
                at a conversion rate of $0.1429 per share, or 2,449,265 shares.




•
            
            In
                June 2004 we issued a two-year convertible debenture with a conversion
                price of $1.25 per share of common stock, subject to anti-dilution
                adjustments, in a private placement to two purchasers. The convertible
                debenture is secured by our assets. In connection with the issuance,
                we
                also issued warrants to purchase up to 400,000 shares of common stock
                at
                $1.50 per share. The warrants are exercisable for two years following
                conversion of the convertible debenture at an exercise price of $1.50.
                The
                offering resulted in gross proceeds to us, prior to the deduction
                of fees
                and cost, of approximately $1,000,000. We used the proceeds from
                the
                offering for working capital and general corporate purposes. The
                conversion price of the convertible debenture and the exercise price
                of
                the warrants are subject to customary anti-dilution rights. In addition,
                if we issue common stock at a price less than the conversion price
                of the
                convertible debenture, then the conversion price will be reduced
                to the
                lower price. Under such circumstances, the exercise price of the
                warrants
                will be adjusted to the same price as the conversion price. As part
                of the
                placement, we agreed to provide piggyback registration rights to
                register
                for resale all of the shares of common stock issuable upon conversion
                of
                the debenture and upon exercise of the warrants. We issued the above
                securities utilizing an exemption from registration requirements
                of the
                Securities Act of 1933 pursuant to Section 4(2) of the Securities
                Act and
                Regulation D promulgated under the Securities Act based on the
                representations of the Purchaser that it was an “accredited investor” (as
                defined under Rule 501 of Regulation D) and that it was purchasing
                the
                securities without a present view toward a distribution of the securities.
                In addition, we conducted no general solicitation in connection with
                the
                sale of the securities.•
            
            In
                August 2004 we entered into an agreement with a financial consultant
                in
                which we are obligated to issue the consultant 50,000 shares of common
                stock. In February 2005 we extended the agreement and are obligated
                to
                issue the consultant an additional 50,000 shares of common stock.






9




•
            
            In
                October 2004, in connection with the acquisition of oil & gas leases,
                we incurred an obligation to issue 200,000 shares of common stock.




•
            
            In
                December 2004 we entered into an agreement with a financial consultant
                in
                which we are obligated to issue the consultant 150,000 shares of
                common
                stock.




There
      are
      6,500,000 restricted shares of common stock outstanding.




There
      have been no cash dividends declared on our common stock. Dividends are declared
      at the sole discretion of our Board of Directors.




**Stock
      Option Plan**




On
      October 9, 2003, we adopted an incentive stock option plan, pursuant to which
      shares of our common stock are reserved for issuance to satisfy the exercise
      of
      options. The purpose of the incentive stock option plan is to retain qualified
      and competent officers, employees and Directors. As noted in the table below,
      the incentive stock option plan for our executive officers authorizes up to
      2,000,000 shares of authorized common stock, $.001 par value per share, to
      be
      purchased pursuant to the exercise of Options. The effective date of the stock
      option plan was October 9, 2003, and the stock option plan was approved by
      shareholders on November 10, 2003. On September 15, 2004, we granted an option
      for 200,000 shares to our CEO, 150,000 shares to our vice president and 125,000
      shares to an employee. These options are exercisable at $0.80 per share, the
      price of our stock on the grant date. The options vested 50% on the grant date
      and vest 50% on September 15, 2005.




Our
      Board
      of Directors, or a committee thereof, administers the stock option plan and
      is
      authorized, in its discretion, to grant options thereunder to all of our
      eligible employees, including officers, and to our Directors, whether or not
      those Directors are also our employees. Options will be granted pursuant to
      the
      provisions of the incentive stock option plan on such terms, subject to such
      conditions and at such exercise prices as shall be determined by our Board
      of
      Directors. Options granted pursuant to the stock option plan will not be
      exercisable after the expiration of ten years from the date of grant.




Equity
      Compensation Plan Information




**Number
                  of**
                **securities to be**
                **issued
                  upon**
                **exercise
                  of**
                **outstanding**
                **options, warrants**
                **and
                  rights**
                **(a)**
              
              **Weighted-**
                **average exercise**
                **price
                  of**
                **outstanding**
                **options,**
                **warrants
                  and**
                **rights**
                **(b)**
              
              **Number
                    of**
                  **securities**
                  **remaining**
                  **available for future**
                  **issuance
                    under**
                  **equity**
                  **compensation**
                  **plans
                    (excluding**
                  **securities
                    reflected**
                  **in
                    column (a))**
                  **(c)**Equity
                  compensation plans approved by security holders
              
              
              475,000
              
              $
              .80
              
              
              1,525,000Equity
                  compensation plans not approved by security holders
              
              
              0
              
              
              0
              
              
              0Total
              
              
              475,000
              
              $
              .80
              
              
              1,525,000


**Sale
      of Nonregistered Securities**




In
      August
      2004 we entered into an agreement with a financial consultant in which we are
      obligated to issue the consultant 50,000 shares of common stock. In February
      2005 we extended the agreement and are obligated to issue the consultant an
      additional 50,000 shares of common stock.




In
      October 2004, in connection with the acquisition of oil & gas leases, we
      incurred an obligation to issue 200,000 shares of common stock.




10


In
      December 2004 we entered into an agreement with a financial consultant in which
      we are obligated to issue the consultant 150,000 shares of common stock.




**Penny
      Stock Regulation**




Shares
      of
      our common stock are subject to rules adopted by the Securities and Exchange
      Commission that regulate broker-dealer practices in connection with transactions
      in “penny stocks.” Penny stocks are generally equity securities with a price of
      less than $5.00 (other than securities registered on certain national securities
      exchanges or quoted on the Nasdaq system, provided that current price and volume
      information with respect to transactions in those securities is provided by
      the
      exchange or system). The penny stock rules require a broker-dealer, prior to
      a
      transaction in a penny stock not otherwise exempt from those rules, to deliver
      a
      standardized risk disclosure document prepared by the Securities and Exchange
      Commission, which contains the following:




•
            
            a
                description of the nature and level of risk in the market for penny
                stocks
                in both public offerings and secondary trading;




•
            
            a
                description of the broker’s or dealer’s duties to the customer and of the
                rights and remedies available to the customer with respect to violation
                to
                such duties or other requirements of securities’ laws;




•
            
            a
                brief, clear, narrative description of a dealer market, including
“bid”
                and “ask” prices for penny stocks and the significance of the spread
                between the “bid” and “ask” price;




•
            
            a
                toll-free telephone number for inquiries on disciplinary actions;




•
            
            definitions
                of significant terms in the disclosure document or in the conduct
                of
                trading in penny stocks; and




•
            
            such
                other information and in such form (including language, type, size
                and
                format), as the Securities and Exchange Commission shall require
                by rule
                or regulation.




Prior
      to
      effecting any transaction in penny stock, the broker-dealer also must provide
      the customer the following:




•
            
            the
                bid and offer quotations for the penny stock;




•
            
            the
                compensation of the broker-dealer and its salesperson in the transaction;




•
            
            the
                number of shares to which such bid and ask prices apply, or other
                comparable information relating to the depth and liquidity of the
                market
                for such stock; and




•
            
            monthly
                account statements showing the market value of each penny stock held
                in
                the customer’s account.




In
      addition, the penny stock rules require that prior to a transaction in a penny
      stock not otherwise exempt from those 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 acknowledgment of the receipt
      of a risk disclosure statement, a written agreement to transactions involving
      penny stocks, and a signed and dated copy of a written suitably statement.
      These
      disclosure requirements may have the effect of reducing the trading activity
      in
      the secondary market for a stock that becomes subject to the penny stock rules.
      Holders of shares of our common stock may have difficulty selling those shares
      because our common stock is subject to the penny stock rules.







11





**Item
      6. Plan of Operation**




**Overview**




On
      January 5, 2004, we began operations as an oil and gas exploration company.
      We
      acquired interests in certain oil and gas leases of the Johns Valley, Utah
      project and the rights to acquire interests in the Weston County, Carter Creek,
      Deer Creek and Gordon Creek Projects, as well as to enter into the Exploration
      Services Funding Agreement with Thomasson Partner Associates, Inc. of Denver,
      Colorado, owned by Diamond Oil & Gas Corporation, in exchange for 3,500,000
      shares of common stock. The transaction was deemed to have a value of
      $6,405,000. We acquired the option to earn a 70% working interest in 25,201
      acres of oil and gas leases from Diamond, a corporation controlled by our CEO.
      As a result, we appointed new management while accepting the resignation of
      our
      former management and redeemed 52,610,000 shares of common stock owned by the
      outgoing and former management in exchange for approximately $27,000. We
      appointed George S. Young as our President, Chief Executive Officer and a
      Director and Steven L. Prince as our Vice President and a Director. The
      operations we plan for 2005 include exploring leases we have acquired as well
      as
      seeking to acquire and explore additional property. See Item 2—Property. Our
      goal is to discover substantial commercial quantities of oil and gas, including
      coalbed methane, on the properties.




Thomasson
      Agreement for Exploration Services. In January 2004 we entered into an
      Exploration Services Agreement with Thomasson Partner Associates, Inc., Denver,
      CO. In February 2005 we amended the agreement. Thomasson provides large-scale
      exploration opportunities to the oil and gas industry. By this agreement
      Thomasson provides to us the first right to review and purchase up to a 50%
      interest (as amended, a 100% interest beginning in February 2005) in oil and
      natural gas exploration projects developed by Thomasson. Under the agreement,
      in
      2005 Thomasson will present to us a minimum of eight project opportunities
      with
      the reasonable potential of at least 200 billion cubic feet of natural gas
      reserves or 20 million barrels of oil reserves. We have the first right to
      review exploration projects developed by Thomasson and, after viewing a formal
      presentation regarding a project, we have a period of thirty days in which
      to
      acquire up to 100% of the project. We are not obligated to acquire any project.
      In consideration, in 2004 we paid to Thomasson a $400,000 overhead fee, and
      will
      pay an $800,000 fee in 2005. We also pay a fee for each project we acquire
      from
      Thomasson. The agreement continues year to year until either party gives 90
      days
      written notice of termination. Projects acquired from Thomasson include the
      Weston County project in Wyoming, the Gordon Creek project in Utah, the Carter
      Creek project in Wyoming, the Circus project in Montana and the Bacaroo project
      in Colorado. In 2004 we incurred charges from Thomasson totaling $1,255,000,
      including the $400,000 overhead fee. See Item 2—Property. Founded in 1991 by Dr.
      M. Ray Thomasson, Thomasson is staffed by a team of over twenty seasoned
      professionals, experienced in geology, geophysics, petrophysics, engineering
      and
      land. Since inception, Thomasson has sold seventy projects to industry partners,
      primarily in the Rocky Mountain region.




As
      a
      result of this change in direction, our 2003 financial results are of limited
      assistance in understanding our present operations.




Risks
      Associated with the Oil & Gas Industry and Operations




We
      have a
      limited operating history in the oil and gas business and we may not discover
      commercially productive reserves. Our future success depends on our ability
      to
      economically locate oil and gas reserves in commercial quantities. Our
      anticipated exploration and development activity is subject to reservoir and
      operational risks. Even when oil and gas is found in what is believed to be
      commercial quantities, reservoir risks, which may be heightened in new
      discoveries, may lead to increased cost and decreased production. These risks
      include the inability to sustain deliverability at commercially productive
      levels as a result of decreased reservoir pressures, large amounts of water,
      or
      other factors that might be encountered.




We
      maintain insurance against some, but not all, of the risks associated with
      drilling and production in amounts that we believes to be reasonable in
      accordance with customary industry practices. The occurrence of a significant
      event, however, that is not likely to be fully insured could have a material
      adverse effect on our financial condition and results of operations.




Oil
      and
      gas prices are volatile and an extended decline in prices could hurt our
      business prospects. Our future operations and the anticipated carrying value
      of
      our oil and gas property will depend heavily on then prevailing market prices
      for oil and gas. We expect the markets for oil and gas to continue to be
      volatile. If we are successful in establishing production, any substantial
      or
      extended decline in the price of oil or gas could:




•
            
            have
                a material adverse effect on our results of operations;




•
            
            limit
                our ability to attract capital;






12




•
            
            make
                the formations we are targeting significantly less economically
                attractive;




•
            
            reduce
                our cash flow and borrowing capacity; and




•
            
            reduce
                the value and the amount of any future reserves.




Various
      factors beyond our control will affect prices of oil and gas, including:




•
            
            worldwide
                and domestic supplies of oil and gas;




•
            
            the
                ability of the members of the Organization of Petroleum Exporting
                Countries to agree to and maintain oil price and production controls;




•
            
            political
                instability or armed conflict in oil or gas producing regions;




•
            
            the
                price and level of foreign imports;




•
            
            worldwide
                economic conditions;




•
            
            marketability
                of production;




•
            
            the
                level of consumer demand;




•
            
            the
                price, availability and acceptance of alternative fuels;




•
            
            the
                availability of processing and pipeline capacity, weather conditions;
                and




•
            
            actions
                of federal, state, local and foreign authorities.




These
      external factors and the volatile nature of the energy markets make it difficult
      to estimate future prices of oil and gas.




**Forward-looking
      Statements**




Certain
      of the information in this Form 10-KSB includes our forward-looking statements.
      Forward-looking statements are statements that estimate the happening of future
      events are not based on historical fact. Forward-looking statements may be
      identified by the use of forward-looking terminology, such as “may”, “shall”,
“will”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”,
“possible”, “should”, “continue”, or similar terms, variations of those terms or
      the negative of those terms. We have compiled the forward-looking statements
      specified in the following information on the basis of our assumptions which
      we
      consider to be reasonable. Our future operating results, however, are impossible
      to predict. You should infer no representation, guaranty, or warranty from
      those
      forward-looking statements. Some of the factors that may cause these forward
      looking statements not to be realized are identified above under the heading
      “Risks Associated with Oil and Gas Industry and Operations.”




The
      assumptions used for purposes of the forward-looking statements specified in
      the
      following information represent estimates of future events and are subject
      to
      uncertainty as to possible changes in economic, legislative, industry, and
      other
      circumstances. As a result, the identification and interpretation of data and
      other information and their use in developing and selecting assumptions from
      and
      among reasonable alternatives require the exercise of judgment. To the extent
      that the assumed events do not occur, the outcome may vary substantially from
      anticipated or projected results, and, accordingly, we express no opinion on
      the
      achievability of those forward-looking statements. We cannot assure that any
      of
      the assumptions relating to the forward-looking statements specified in the
      following information are accurate, and we assume no obligation to update any
      such forward-looking statements.




**Operations
      Plans**




During
      the year 2005, we expect to pursue oil and gas operations on some or all of
      our
      property, including the acquisition of additional acreage through leasing,
      farmout or option and participation in the drilling of oil and gas wells. We
      intend to continue to evaluate additional opportunities in areas where we feel
      there is potential for oil and gas reserves and production and may participate
      in areas other than those already identified, although we cannot assure that
      additional opportunities will be available, or if we participate in additional
      opportunities, that those opportunities will be successful.




13




Our
      current cash position is not sufficient to fund our cash requirements during
      2005, including operations and capital expenditures. We intend to continue
      equity and/or debt financing efforts to support our current and proposed oil
      and
      gas operations and capital expenditures. We may sell interests in our
      properties. We cannot assure that continued funding will be available.




We
      have
      not entered into commodity swap arrangements or hedging transactions. Although
      we have no current plans to do so, we may enter into commodity swap and/or
      hedging transactions in the future in conjunction with oil and gas production.
      We have no off-balance sheet arrangements.




Our
      future financial results continue to depend primarily on (1) our ability to
      discover or purchase commercial quantities of oil and gas; (2) the market price
      for oil and gas; (3) our ability to continue to source and screen potential
      projects; and (4) our ability to fully implement our exploration and development
      program with respect to these and other matters. We cannot assure that we will
      be successful in any of these respects or that the prices of oil and gas
      prevailing at the time of production will be at a level allowing for profitable
      production.




**Critical
      Accounting Policy and Estimates**




This
      Plan
      of Operation discusses our financial statements, which we have prepared in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these financial statements requires us to make estimates
      and
      assumptions that affect the reported amounts of assets and liabilities at the
      date of the financial statements and the reported amounts of revenue and expense
      during the reporting period. On an on-going basis, we evaluate our estimates
      and
      judgments, including those related to revenue recognition, accrued liabilities,
      financing operations, and contingencies and litigation. We base our estimates
      and judgments on historical experience and on various other factors that we
      believe to be reasonable under the circumstances. The results of the estimates
      form the basis for making judgments about the carrying value of assets and
      liabilities. Actual results may differ from these estimates under different
      assumptions or conditions. The most significant accounting estimates inherent
      in
      the preparation of our financial statements include estimates as to the
      appropriate carrying value of certain assets and liabilities which are not
      readily apparent from other sources. These accounting policies are described
      at
      relevant sections in this Plan of Operation and in the notes to the consolidated
      financial statements included herein in our Annual Report on Form 10-KSB
      for the year ended December 31, 2004.




**Liquidity
      and Capital Resources**




In
      2004
      we incurred a loss of $3,760,000. At December 31, 2004, we had $149,000 of
      cash.
      Our current liabilities totaled $2,341,000, including accounts payable,
      $1,556,000 notes payable and a $350,000 convertible note. In February 2005
      we
      agreed to sell one of our prospects, the Circus project, for $1.98 million
      to an
      unrelated third party. We acquired the leases in October, 2004, for $451,000
      and
      thus realized a $1.5 million gain on the sale. The buyer has committed to pay
      the other half upon completion of routine title work on the property. We are
      using the proceeds from the sale to pay down the $1.5 million November 2004
      note
      and for working capital.




Although
      we hold an option to acquire interests in the Kirby and Castle Rock projects
      which are now going into production, we have no assets at present which are
      able
      to generate oil & gas sales without substantial exploration expenditures,
      the discovery or purchase of oil or gas reserves and substantial expenditures
      for the development of the reserves. To fully carry out our business plans
      we
      need to raise a substantial amount of additional capital, which we are currently
      seeking. We can give no assurance that we will be able to raise such capital.
      We
      have limited financial resources until such time that we are able to generate
      positive cash flow from operations. Our ability to achieve and maintain
      profitability and positive cash flow is dependent upon our ability to locate
      profitable natural gas or oil properties, generate revenue from our planned
      business operations, and control exploration cost. Should we be unable to raise
      adequate capital or to meet the other above objectives, it is likely that we
      would have to substantially curtail our business activity, and that our
      investors would incur substantial losses of their investment.




On
      September 9, 2003, we received $350,000 for issuance of a convertible note
      payable to a third party investor. The principal was due and payable on March
      9,
      2005 together with interest at the rate of 8% per year. The note also contains
      a
      conversion feature that gave the holder the right to convert all or any portion
      of the principal indebtedness into shares of common stock on or before March
      9,
      2005. The note holder has notified us that they were exercising their right
      to
      convert the entire $350,000 note at a conversion rate of $0.1429 per share,
      or
      2,449,265 shares.




On
      January 5, 2004 we sold 2,750,000 shares of common stock for $2,750,000, less
      related offering cost, in a private placement.




In
      connection with the transactions which closed on January 5, 2004, we incurred
      an
      obligation to a financial adviser to issue 250,000 shares of common stock as
      a
      fee, which we issued later in 2004. We valued the shares as of January 5, 2004,
      and recorded the value of $457,500 as financial consultation expense.




14


In
      June
      2004 we issued a two-year convertible debenture with a conversion price of
      $1.25
      per share of common stock, subject to anti-dilution adjustments, in a private
      placement to two purchasers. The convertible debenture is secured by our assets.
      In connection with the issuance, we also issued warrants to purchase up to
      400,000 shares of common stock at $1.50 per share. The warrants are exercisable
      for two years following conversion of the convertible debenture at an exercise
      price of $1.50. The offering resulted in gross proceeds to us, prior to the
      deduction of fees and cost, of approximately $1,000,000. We used the proceeds
      from the offering for working capital and general corporate purposes.




Over
      the
      period May through October 2004 we borrowed $741,000 on an unsecured 8% demand
      note payable to an entity controlled by our CEO. In December 2004 we paid
      $684,621 of principal on the note plus $25,681 of interest. The December 31,
      2004 balance on the note was $56,379.




In
      November 2004 we entered into a joint venture agreement with JMG in which JMG
      received a 50% interest in certain of our properties in exchange for a
      $2,000,000 commitment for exploration and drilling on the properties. In
      addition, JMG loaned us $1,500,000, 50% of which we have repaid with interest
      and 50% of which is payable on April 30, 2005, with interest at 18%. We have
      collateralized all of our assets as security on this loan.




Cash
      flow. In 2004 we used $2,746,000 of cash in our operating activity. We used
      $2,601,000 of cash in investing activity, primarily to acquire unproved oil
      and
      gas property. We funded these cash requirements with $5,204,000 of financing
      activity, primarily including $2,675,000 proceeds from the private placement
      of
      common stock, $1,556,000 proceeds from notes payable net of payments on notes,
      and $1,000,000 of proceeds from a convertible debenture. We reduced our December
      31, 2003 cash balance of $291,000 by $142,000 to $149,000 at December 31, 2004.




**Results
      of Operations**




Revenue.
      For the years ended December 31, 2004 and 2003, we had no revenue.




Operating
      Expense. In 2004 our exploration expense was $2,253,000, which included
      $1,897,000 of intangible drilling cost on two wells which we drilled. The
      remainder of the exploration expense was delay rentals paid to retain oil and
      gas leases, as well as geological and geophysical expense.




Our
      2004
      general and administrative expense was $914,000, which primarily included
      $383,000 of financial and investor services (including $169,000 of noncash
      stock
      issuance obligations), $181,000 of legal fees, $177,000 of employee compensation
      and $79,000 of accounting fees.




Our
      2004
      operating expense increased substantially in all of the above areas from 2003
      because of the change of the scope of our business operations to oil and gas
      exploration at the beginning of 2004. In 2003 our operations consisted of
      business consulting services in the retail automobile fueling industry.




Our
      2003
      loss from our discontinued operations of the automotive fuel business was
      $123,475. Our total loss form this discontinued business from 2001-2003
      was $197,189.




Our
      2004
      interest expense was $136,000, up by $126,000 from 2003 interest of $10,000
      because of a sharp increase in borrowing.




15





**Item
      7. Financial Statements**




**Fellows
      Energy Ltd.**


**(Formerly
      Fuel Centers, Inc.)**


(A
        Development Stage Company)
 **Report
      And Financial Statements**




**December
      31, 2004 and 2003**




Contents




**Page**Report
                of Independent Registered Public Accounting
                Firm
            
            17Financial
                StatementsBalance
                Sheet
            
            18Operations
                Statement
            
            19Statement
                of Changes in Stockholders’
                Equity
            
            20Cash
                Flow Statement
            
            21Notes
                to Financial Statements
            
            22







16





Report
      of Independent Registered Public Accounting
      Firm






To
      the
      Stockholders of


Fellows
      Energy Ltd.




We
      have
      audited the accompanying balance sheet of Fellows Energy Ltd. (formerly, Fuel
      Centers, Inc.), a development stage company, as of December 31, 2004 and 2003,
      and the related operations statement, statement of changes in stockholders’
equity, and cash flow statement for the years then ended and for the period
      from
      inception (November 12, 2003) through December 31, 2004. These financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.




We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. The Company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audits included consideration of internal control
      over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the Company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit includes examining,
      on a test basis, evidence supporting the amounts and disclosures in the
      financial statements. An audit also includes assessing the accounting principles
      used and significant estimates made by management, as well as evaluating the
      overall financial statement presentation. We believe that our audits provide
      a
      reasonable basis for our opinion.




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Fellows Energy Ltd., a development
      stage company. as of December 31, 2004 and 2003, and the results of its
      operations and its cash flow for the years then ended and for the period from
      inception (November 12, 2003) through December 31, 2004 in conformity with
      accounting principles generally accepted in the United States of America.




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company has significant losses from operations which raise
      substantial doubt about its ability to continue as a going concern. Management’s
      plans in regard to these matters are


described
      in Note 2. The financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.




As
        discussed in Note 12, the financial statements have been restated to correct
        the
        value of the acquisition cost of oil and gas property in exchange for 3,500,000 shares
        of
        the Company's common stock on January 5, 2004.




/s/
      Hall
& Company





HALL
      & COMPANY


Irvine,
      California


March
        29,
        2005, except for Note 12, as to which the date is Februay 13, 2006


17




Fellows
      Energy Ltd.  (Formerly
      Fuel Centers, Inc.)


(A
        Development Stage Company)


Balance
      Sheet






**Year
                    Ended**
                  **Dec.
                    31, 2004**
                
                **Year
                    Ended**
                  **Dec.
                    31, 2003**Assets
                
                **(as
                      restated)**Cash
                
                $
                149,027
                
                $
                291,445Total
                    current assets
                
                
                149,027
                
                
                291,445Unproved
                    oil & gas property (as restated)
                
                
                9,043,648
                
                
                —Equipment,
                    net of $5,027 accumulated depreciation
                
                
                16,563
                
                
                —Restricted
                    cash
                
                
                135,000
                
                
                —Total
                    assets
                
                $
                9,344,238
                
                $
                291,445Liabilities
                    And Stockholders’ EquityAccounts
                    payable
                
                $
                434,411
                
                $
                50,781Notes
                    payable
                
                
                1,556,379
                
                
                —Total
                    current liabilities
                
                
                1,990,790
                
                
                50,781Convertible
                    note payable
                
                
                350,000
                
                
                350,000Convertible
                    debenture
                
                
                1,000,000
                
                
                —Stockholders’
                    equity:Preferred
                    stock, $.001 par value; 25,000,000 shares authorized; none
                    outstanding
                
                
                —
                
                
                —Common
                    stock, $.001 par value; 100,000,000 shares authorized; 41,743,150
                    and
                    87,853,150 issued and outstanding
                
                
                41,743
                
                
                87,853Additional
                    paid-in capital (as restated)
                
                
                9,556,702
                
                
                —Stock
                    issuance obligation
                
                
                362,500
                
                
                —Accumulated
                    deficit
                
                
                (197,189
                )
                
                (197,189
                )Deficit
                    accumulated during the development stage
                
                
                (3,760,308
                )
                
                —Total
                    stockholders’ equity
                
                
                6,003,448
                
                
                (109,336
                )Total
                    liabilities and stockholders’ equity
                
                $
                9,344,238
                
                $
                291,445






See
      accompanying notes.





18


Fellows
      Energy Ltd.


(Formerly
      Fuel Centers, Inc.)


(A
        Development Stage Company)


Operations
      Statement




**Year
                    Ended**
                  **Dec.
                    31, 2004**
                
                
                **Year
                    Ended**
                  **Dec.
                    31, 2003**
                
                
                **Inception**
                  **(Nov.
                    12, 2003) to**
                  **Dec.
                    31, 2004**Net
                    revenue
                
                $
                —
                
                $
                —
                
                $
                —Exploration
                    expense
                
                
                2,253,295
                
                
                —
                
                
                2,253,295General
                    and administrative expense
                
                
                1,371,280
                
                
                —
                
                
                1,371,280Loss
                    from continuing operations
                
                
                (3,624,575
                )
                
                —
                
                
                (3,624,575
                )Interest
                    expense
                
                
                135,733
                
                
                —
                
                
                135,733Loss
                    before income tax
                
                
                (3,760,308
                )
                
                —
                
                
                (3,760,308
                )Income
                    tax expense
                
                
                —
                
                
                —Net
                    loss from continuing operations
                
                
                (3,760,308
                )
                
                —
                
                
                (3,760,308
                )Loss
                    from discontinued operationsAutomotive
                    fuel centers (net of tax effect)
                
                
                —
                
                
                (123,475
                )
                
                —Net
                    loss
                
                $
                (3,760,308
                )
                $
                (123,475
                )
                $
                (3,760,308
                )Loss
                    per common share—basic and dilutedContinuing
                    operations
                
                $
                (.09
                )
                $
                —
                
                $
                (.09
                )Discontinued
                    operations
                
                $
                —
                
                $
                —
                
                $
                —Weighted
                    average of common shares—basic and diluted
                
                
                42,065,000
                
                
                87,853,150
                
                
                42,065,000






See
        accompanying notes.







19




Fellows
      Energy Ltd.


(Formerly
      Fuel Centers, Inc.)


(A
        Development Stage Company)


Statement
      of Changes in Stockholders’ Equity




April
        9,
        2001 through December 31, 2004










**Deficit****Accumulated****Additional**
                
                **Stock**
                
                
                
                **During****Common
                    Stock**
                
                **Paid-In**
                
                **Issuance**
                
                **Accumulated**
                
                **Development****Shares**
                
                **Amount**
                
                ****Capital****
                
                **Obligation**
                
                ****Deficit****
                
                **Stage**
                
                **Total****(as restated)**Balance,
                    April 9, 2001
                
                ---
                
                $               
                    ---
                
                $---
                
                $               
                    —
                
                $---
                
                ---
                
                $                ---Issuance
                    of common stock
                
                
                6,005,000
                
                
                6,005
                
                
                18,145
                
                
                —
                
                
                ---
                )
                
                ---
                
                
                24,150Expenses
                    paid by officer
                
                
                —
                
                
                —
                
                
                6,419
                
                
                —
                
                
                —
                
                
                —
                
                
                6,419Net
                    loss/comprehensive loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (20,467
                )
                
                ---
                
                
                (20,467
                )Balance,
                    December 31, 2001
                
                
                6,005,000
                
                $
                6,005
                
                $
                24,564
                
                $
                —
                
                $
                (20,467
                )
                
                ---
                
                $
                10,102Expenses
                    paid by officer
                
                
                —
                
                
                —
                
                
                22,936
                
                
                —
                
                
                —
                
                
                —
                
                
                22,936Issuance
                    of forward common stock split
                
                
                6,545,450
                
                
                6,545
                
                
                (6,545
                )
                
                —
                
                
                ---
                
                
                ---
                
                
                —Net
                    loss/comprehensive loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (21,319
                )
                
                ---
                
                
                (21,319
                )Balance,
                    December 31, 2002
                
                
                12,550,450
                
                $
                12,550
                
                $
                40,955
                
                $
                —
                
                $
                (41,786
                )
                
                ---
                
                $
                11,719Expenses
                    paid by officer
                
                
                —
                
                
                —
                
                
                2,420
                
                
                —
                
                
                —
                
                
                —
                
                
                2,420Issuance
                    of forward common stock split
                
                
                75,302,700
                
                
                75,303
                
                
                (43,375
                )
                
                —
                
                
                (31,928
                )
                
                ---
                
                
                —Net
                    loss/comprehensive loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (123,475
                )
                
                ---
                
                
                (123,475
                )Balance,
                    December 31, 2003
                
                
                87,853,150
                
                $
                87,853
                
                $
                —
                
                $
                —
                
                $
                (197,189
                )
                
                ---
                
                $
                (109,336
                )Retire
                    shares held by former Management
                
                
                (52,610,000
                )
                
                (52,610
                )
                
                25,610
                
                
                —
                
                
                —
                
                
                —
                
                
                (27,000
                )Issue
                    shares in exchange for oil and gas interests (as restated)
                
                
                3,500,000
                
                
                3,500
                
                
                6,401,500
                
                
                —
                
                
                —
                
                
                —
                
                
                6,405,000Private
                    placement
                
                
                2,750,000
                
                
                2,750
                
                
                2,672,342
                
                
                —
                
                
                —
                
                
                —
                
                
                2,675,092Issue
                    shares as fee for January 5, 2004 transactions
                
                
                250,000
                
                
                250
                
                
                457,250
                
                
                —
                
                
                —
                
                
                —
                
                
                457,500Obligation
                    to issue 200,000 shares with acquisition of oil and gas
                    interests
                
                
                
                
                
                
                
                
                
                
                
                194,000
                
                
                —
                
                
                —
                
                
                194,000Obligation
                    to issue 200,000 shares to financial advisers
                
                
                —
                
                
                —
                
                
                —
                
                
                168,500
                
                
                —
                
                
                —
                
                
                168,500Net
                    loss/comprehensive loss
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                —
                
                
                (3,760,308
                )
                
                (3,760,308
                )Balance,
                    December 31, 2004
                
                
                41,743,150
                
                $
                41,743
                
                $
                9,556,702
                
                $
                362,500
                
                $
                (197,189
                )
                
                (3,760,308
                )
                $
                6,003,448
 See
        accompanying notes.








20


Fellows
      Energy Ltd.


(Formerly
      Fuel Centers, Inc.)


(A
        Development Stage Company)


Cash
      Flow Statement






**Year
                    Ended**
                  **Dec.
                    31, 2004**
                
                
                **Year
                    Ended**
                  **Dec.
                    31, 2003**
                
                **Inception
                    (Nov. 12, 2003) to Dec.31, 2004**Cash
                    flow from operating activityNet
                    loss
                
                $
                (3,760,308
                )
                $
                (123,475
                )
                $
                (3,760,308
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activityGain
                    on extinguishment of debt
                
                
                ---
                
                
                —
                
                
                ---Depreciation
                
                
                5,027
                
                
                —
                
                
                5,027Expense
                    paid by officer
                
                
                —
                
                
                2,420
                
                
                ---Expense
                    paid with stock issuance
                
                
                457,500
                
                
                —
                
                
                457,500Expense
                    paid with stock issuance obligation
                
                
                168,500
                
                
                —
                
                
                168,500Changes
                    in operating assets and liabilitiesDecrease
                    in prepaid expense
                
                
                —
                
                
                7,880
                
                
                ---Decrease
                    in interest receivable
                
                
                —
                
                
                35,308
                
                
                ---Increase
                    in accounts payable
                
                
                383,630
                
                
                19,129
                
                
                383,630Net
                    cash used in operating activity
                
                
                (2,745,651
                )
                
                (58,738
                )
                
                (2,745,651
                )Cash
                    flow from investing activityUnproved
                    oil & gas property
                
                
                (2,444,648
                )
                
                —
                
                
                (2,444,648)Equipment
                
                
                (21,590
                )
                
                —
                
                
                (21,590)Restricted
                    cash
                
                
                (135,000
                )
                
                —
                )
                
                (135,000)Cash
                    used in investing activity
                
                
                (2,601,238
                )
                
                —
                )
                
                (2,601,238)Cash
                    flow from financing activityProceeds
                    from notes payable
                
                
                2,241,000
                
                
                35,000
                
                
                2,241,000Payment
                    on notes payable
                
                
                (684,621
                )
                
                (35,000
                )
                
                (684,621
                )Proceeds
                    from convertible note payable
                
                
                —
                
                
                350,000
                
                
                ---Proceeds
                    from convertible debenture
                
                
                1,000,000
                
                
                —
                
                
                1,000,000Retirement
                    of former management’s stock
                
                
                (27,000
                )
                
                —
                )
                
                (27,000)Proceeds
                    from private placement of common stock
                
                
                2,675,092
                
                
                —
                
                
                2,675,092Net
                    cash provided by financing activities
                
                
                5,204,471
                
                
                350,000
                
                
                5,204,471Net
                    (decrease) increase in cash
                
                
                (142,418
                )
                
                291,262
                )
                
                (142,418Cash,
                    beginning of period
                
                
                291,445
                
                
                183
                
                
                291,445Cash,
                    end of period
                
                $
                149,027
                
                $
                291,445
                
                $
                149,027Supplemental
                    Disclosure Of Cash Flow and Noncash Investing and Financing
                    Activity
  Income
                    tax paid
                
                $
                —
                
                
                —
                
                $
                ---Interest
                    paid
                
                
                25,681
                
                
                ---
                
                
                25,681Noncash:Contribution
                    of oil & gas interests in exchange for stock (as
                    restated)
                
                
                6,405,000
                
                
                ---
                
                
                6,405,000Contribution
                    of oil & gas interests in exchange for stock issuance
                    obligation
                
                
                194,000
                
                
                ---
                
                
                194,000Fee
                    for January 5, 2004 transactions, in exchange for stock
                
                
                457,500
                
                
                ---
                
                
                457,500




See
      accompanying notes.





21


**Fellows
      Energy Ltd.**


**(Formerly
      Fuel Centers, Inc.)**


(A
        Development Stage Company)
  **Notes
        to Financial Statements**


**December
      31, 2004 and 2003**




**Note
      1 - Nature Of Operations And Significant Accounting Policies**




Nature
      of
      Operations - Fellows Energy Ltd., formerly Fuel Centers, Inc. is engaged in
      the
      exploration, extraction, processing and reclamation of coalbed methane, natural
      gas, and oil projects within the Western United States. We incorporated in
      the
      state of Nevada on April 9, 2001 as Fuel Centers, Inc. On November 12, 2003,
      we
      changed our name to Fellows Energy Ltd. Our principal offices are in Broomfield,
      Colorado.




Cash
      Equivalents - We consider all highly liquid debt instruments purchased with
      maturity of three months or less to be cash equivalents. At December 31, 2004
      and 2003, we had no cash equivalents.




Fair
      Value of Financial Instruments - The carrying amount of our financial
      instruments, which includes cash and accounts payable, approximate their fair
      value due to the short period to maturity of these instruments.




Restricted
      Cash - Restricted cash is cash balances held in the form of bank certificates
      of
      deposit. At December 31, 2004, $135,000 of restricted cash was deposited with
      custodians to secure reclamation of oil and gas property. At December 31, 2003,
      we had no restricted cash.




Revenue
      Recognition - we record revenue when title passes, delivery occurs to our
      customers and the customer assumes the risks and rewards of ownership, when
      the
      price is fixed and determinable, and when collectibility is reasonably assured.




Income
      Tax - We recognize deferred tax assets and liabilities based on differences
      between the financial reporting and tax bases of assets and liabilities using
      the enacted tax rates and laws that are expected to be in effect when the
      differences are expected to be recovered. We provide a valuation allowance
      for
      deferred tax assets when we consider realization of such assets to be less
      likely than not.




Net
      Loss
      per Common Share - We have adopted Statement of Financial Accounting Standards
      No. 128, Earnings Per Share. Statement 128 requires the reporting of basic
      and
      diluted earnings/loss per share. We calculate basic loss per share by dividing
      net loss by the weighted average number of outstanding common shares during
      the
      period.




Comprehensive
      Loss - We apply Statement of Financial Accounting Standards No. 130, Reporting
      Comprehensive Income. Statement 130 establishes standards for the reporting
      and
      display of comprehensive income or loss, requiring its components to be reported
      in a financial statement. For the years ended December 31, 2004 and 2003, our
      only component of comprehensive income or loss was the net loss reported in
      the
      operations statement.




Use
      of
      Estimates - Accounting principles generally accepted in the United States
      require us 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
      expense during the reporting period. Actual results could differ from those
      estimates.




Concentration
      of Credit Risk - Financial instruments that potentially subject us to
      concentration of credit risk consist of cash. At December 31, 2004, we had
      $49,028 in cash in excess of federally insured limits.




Oil
      and
      Gas Activity - We follow the successful-efforts method of accounting for oil
      and
      gas property. Under this method of accounting, we capitalize all property
      acquisition cost and cost of exploratory and development wells when incurred,
      pending determination of whether the well has found proved reserves. If an
      exploratory well does not find proved reserves, we charge to expense the cost
      of
      drilling the well. We include exploratory dry hole cost in cash flow from
      investing activities within the cash flow statement. We capitalize the cost
      of
      development wells whether productive or nonproductive. We had no exploratory
      well cost that had been suspended for one year or more as of December 31, 2004.




We
      expense as incurred geological and geophysical cost and the cost of carrying
      and
      retaining unproved property. We will provide depletion, depreciation and
      amortization (DD&A) of capitalized cost of proved oil and gas property on a
      field-by-field basis using the units-of-production method based upon proved
      reserves. In computing DD&A we will take into consideration restoration,
      dismantlement and abandonment cost and the anticipated proceeds from equipment
      salvage. When applicable, we will apply the provisions of Statement of Financial
      Accounting Standards No. 143, Accounting for Asset Retirement Obligations,
      which
      provides guidance on accounting for dismantlement and abandonment cost.





22





**Fellows
      Energy Ltd.**


**(Formerly
      Fuel Centers, Inc.)**


(A
        Development Stage Company)


**Notes
      to Financial Statements**


**December
      31, 2004 and 2003**




We
      review
      our long-lived assets for impairment when events or changes in circumstances
      indicate that an impairment may have occurred. In the impairment test we compare
      the expected undiscounted future net revenue on a field-by-field basis with
      the
      related net capitalized cost at the end of each period. We will calculate
      expected future cash flow on all proved reserves using a 15% discount rate
      and
      escalated prices. Should the net capitalized cost exceed the undiscounted future
      net revenue of a property, we will write down the cost of the property to fair
      value, which we will determine using discounted future net revenue. We will
      provide an impairment allowance on a property-by-property basis when we
      determine that the unproved property will not be developed.


Impairment
        of Unproved (Non-Producing) Properties
 
 Unproved
        properties are assessed periodically to determine whether or not they have
        been
        impaired. We will provide an impairment allowance on unproved property at
        any
        time we determine that a property will not be developed. At December 31,
        2004,
        we were making sufficient progress on assessing our acquired properties and
        considered them all still economically and operationally viable, in accordance
        with FAS 19 and 144. In determining that there was no impairment of the unproved
        properties, we considered such factors our commitment of project personnel
        and
        cost being incurred to develop as well as the existence of our active
        negotiations with Thomasson and other venture partners, among others. In
        addition, the Company had no unproved properties that were surrendered or
        abandoned during the year ended December 31, 2004 that may have also given
        rise
        to and impairment charge.




Sales
      of
      Producing and Nonproducing Property - We will account for the sale of a partial
      interest in a proved property as normal retirement. We will recognize no gain
      or
      loss as long as this treatment does not significantly affect the
      unit-of-production depletion rate. We will recognize a gain or loss for all
      other sales of producing properties and include the gain or loss in the results
      of operations.




We
      will
      account for the sale of a partial interest in an unproved property as a recovery
      of cost when substantial uncertainty exists as to recovery of the cost
      applicable to the interest retained. We will recognize a gain on the sale to
      the
      extent that the sales price exceeds the carrying amount of the unproved
      property. We will recognize a gain or loss for all other sales of nonproducing
      properties and include the gain or loss in the results of operations.




Stock
      Options - On October 9, 2003, we adopted an incentive stock option plan,
      pursuant to which shares of our common stock are reserved for issuance to
      satisfy the exercise of options. The purpose of the incentive stock option
      plan
      is to attract and retain qualified and competent officers, employees and
      directors. The plan authorizes up to 2,000,000 shares of authorized common
      stock
      to be purchased pursuant to the exercise of options. Our stockholders approved
      the plan on November 10, 2003. On September 15, 2004, we granted an option
      for
      200,000 shares to our CEO, 150,000 shares to our vice president and 125,000
      shares to an employee. These options are exercisable at $0.80 per share, the
      price of our stock on the grant date. The options vested 50% on the grant date
      and vest 50% on September 15, 2005.




We
      account for stock options to employees in accordance with Accounting Principles
      Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and
      related interpretations. Pursuant to APB No. 25, we record no compensation
      expense to employees on the date of grant because in issuing the grants we
      set
      the exercise price of the underlying stock at or above the market value of
      the
      stock on the date of the grant. Stock options granted to consultants are
      accounted for under the fair value method, in accordance with Statement of
      Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.




Statement
      123 and Statement 148, Accounting for Stock-Based Compensation Transition and
      Disclosure, require disclosure of pro forma information regarding net income
      and
      earnings per share. The Statements require that the information be determined
      as
      if we had accounted for employee stock options under the fair value method
      of
      the statements. We estimate the fair value of the options we grant at the date
      of grant using a Black-Scholes option pricing model with the following
      weighted-average assumptions for the year ended December 31, 2004: a risk-free
      interest rate of 3%; no expected dividend; a volatility factor of 30.4%; and
      a
      maturity date of ten years.




For
      purposes of pro forma disclosures, we amortize to expense the estimated fair
      value of the options over the options’ vesting period. We issued no options in
      2003. Our pro forma information 2004 is:







23





**Fellows
      Energy Ltd.**


**(Formerly
      Fuel Centers, Inc.)**


(A
      Development Stage
      Company)




**Notes
      to Financial Statements**


**December
      31, 2004 and 2003**




**Year
                  Ended**
                **December 31, 2004**Net
                  loss as reported
              
              $
              (3,760,308
              )Deduct:
                  Total stock-based employee compensation expense determined under
                  fair
                  value based method for all awards
              
              
              (102,200
              )Pro
                  forma net loss
              
              $
              (3,862,508
              )Basic
                  and diluted loss per share—as reported
              
              $
              (0.09
              )Pro
                  forma basic and diluted loss per share
              
              $
              (0.09
              )






The
      Black-Scholes option-pricing model was developed for use in estimating the
      fair
      value of traded options that have no vesting restrictions, are fully
      transferable, and are not subject to trading restrictions or blackout periods.
      In addition, option valuation models require the input of highly subjective
      assumptions, including the expected stock price volatility. Because our employee
      stock options have characteristics significantly different from those of traded
      options, and because changes in the subjective input assumptions can materially
      affect the fair value estimate, it is our opinion that the existing models
      do
      not necessarily provide a reliable single measure of the fair value of our
      employee stock options.




We
      have
      not adopted any of the early transition methods provided for in Statement No.
      148. In December 2004 the Financial Accounting Standards Board issued Statement
      No. 123 (Revised 2004), Share-Based Payment. This statement requires companies
      to recognize the fair value of stock options and other stock-based compensation
      as expense for reporting periods beginning in July 2005. For awards issued
      prior
      to the effective date, the standard requires companies to utilize prior
      valuation models of fair value and recognize as expense the remaining unvested
      portion of the awards over the remaining vesting periods. The adoption of this
      statement is not expected to have a material impact on the Company’s operating
      results, financial position or cash flow.




**Note
      2 - Going concern**




As
      shown
      in the accompanying financial statements, we have incurred significant operating
      losses since inception and previously incurred a loss on our discontinued
      automotive fuel business. As of December 31, 2004, we have limited financial
      resources until such time that we are able to generate positive cash flow from
      operations. These factors raise substantial doubt about our ability to continue
      as a going concern. Our ability to achieve and maintain profitability and
      positive cash flow is dependent upon our ability to locate profitable mineral
      properties, generate revenue from our planned business operations, and control
      exploration cost. Management plans to fund its future operation by obtaining
      additional financing and commencing commercial production. However, there is
      no
      assurance that we will be able to obtain additional financing from investors
      or
      private lenders.




**Note
      3 - Convertible Note Payable**




On
      September 9, 2003, we received $350,000 for issuance of a convertible note
      payable to a third party investor. The principal is due and payable on March
      9,
      2005 together with interest at the rate of 8% per year. The note also contains
      a
      conversion feature that gives the holder the right to convert all or any portion
      of the principal indebtedness into shares of common stock on or before its
      due
      date. On March 3, 2005, the note holder notified us that they were exercising
      their right to convert the entire $350,000 note at a conversion rate of $0.1429
      per share, or 2,449,265 shares.







24





**Fellows
      Energy Ltd.**


**(Formerly
      Fuel Centers, Inc.)**


(A
      Development Stage
      Company)




**Notes
      to Financial Statements**


**December
      31, 2004 and 2003**




**Note
      4 - Debenture**




In
      June
      2004 we issued a two-year convertible debenture with a conversion price of
      $1.25
      per share of common stock, subject to anti-dilution adjustments, in a private
      placement to two purchasers. The convertible debenture is secured by our assets
      and is due in June 2006. In connection with the issuance, we also issued
      warrants to purchase up to 400,000 shares of common stock at $1.50 per share.
      The warrants are exercisable for two years following conversion of the
      convertible debenture at an exercise price of $1.50. The offering resulted
      in
      gross proceeds to us, prior to the deduction of fees and cost, of approximately
      $1,000,000. We used the proceeds from the offering for working capital and
      general corporate purposes.




The
      conversion price of the convertible debenture and the exercise price of the
      warrants are subject to customary anti-dilution rights. In addition, if we
      issue
      common stock at a price less than the conversion price of the convertible
      debenture, then the conversion price will be reduced to the lower price. Under
      such circumstances, the exercise price of the warrants will be adjusted to
      the
      same price as the conversion price. As part of the placement, we agreed to
      provide piggyback registration rights to register for resale all of the shares
      of common stock issuable upon conversion of the debenture and upon exercise
      of
      the warrants.




We
      issued
      the above securities utilizing an exemption from registration requirements
      of
      the Securities Act of 1933 pursuant to Section 4(2) of the Securities Act and
      Regulation D promulgated under the Securities Act based on the representations
      of the Purchaser that it was an “accredited investor” (as defined under Rule 501
      of Regulation D) and that it was purchasing the securities without a present
      view toward a distribution of the securities. In addition, we conducted no
      general solicitation in connection with the sale of the securities.




Note
      5 -
      Note Payable - In November 2004 we entered into a joint venture agreement with
      an unrelated company in which the company received a 50% interest in certain
      of
      our properties in exchange for a $2,000,000 commitment for exploration and
      drilling on the properties. In addition, the company loaned us $1,500,000,
      50%
      of which was due on January 31, 2005 and we have repaid with interest and 50%
      of
      which is payable on April 30, 2005, with interest at 18%. This note is secured
      by all of our assets.




**Note
      6 - Common Stock**




In
      November 2003 our Board of Directors approved a seven-to-one stock split of
      our
      issued and outstanding common stock, which was done with a dividend of six
      shares for each share of common stock outstanding as of the record date. The
      dividend was payable on November 17, 2003, for shareholders of record on
      November 14, 2003. The common stock continues to be $.001 par value.




In
      November 2003 we amended the Articles of Incorporation to change our name from
      Fuel Centers, Inc. to Fellows Energy Ltd. The amendment also ratified an
      increase in the authorized number of shares of our $.001 par value common stock
      from 50,000,000 to 100,000,000 shares and an increase in the number of preferred
      shares from 5,000,000 to 25,000,000.




In
        January 2004 we acquired interest in certain oil and gas leases of the Johns
        Valley, Utah projects and the rights to acquire interest in the Weston County,
        Carter Creek, Deer Creek and the Gordon Creek Projects, as well as to enter
        into
        the Exploration Services Funding Agreement with Thomasson Partner
        Associates, Inc. of Denver, Colorado, owned by Diamond Oil and Gas
        Corporation, in exchange for 3,500,000 shares of common stock. Initially,
        the transaction was deemed to have value of $1,050,000 based on the $0.30
        stock
        price at the time the agreement was negotiated. Since determining that there
        were conditions precedent to close this transaction, we have restated the
        valuation of these assets and interests to properly account for them under
        the
        guidance of EITF 98-16.  The transaction is deemed to have value of
        $6,405,000 under this guidance, at the stock price of $1.83. For related
        discussion see Note 12.




In
      January 2004 we completed a private placement of $2,750,000, less related
      offering cost, pursuant to which we issued 2,750,000 shares of common stock
      at
      $1.00 per share.




In
      connection with the transactions which closed on January 5, 2004, we incurred
      an
      obligation to a financial adviser to issue 250,000 shares of common stock as
      a
      fee, which we issued later in 2004. We valued the shares as of January 5, 2004,
      and recorded the value of $457,500 as financial consultation expense.




In
      August
      2004 we entered into an agreement with a financial consultant in which we are
      obligated to issue the consultant 50,000 shares of common stock. In February
      2005 we extended the agreement and are obligated to issue the consultant an
      additional 50,000 shares of common stock.




In
      October 2004, in connection with the acquisition of oil & gas leases, we
      incurred an obligation to issue 200,000 shares of common stock.




In
      December 2004 we entered into an agreement with a financial consultant in which
      we are obligated to issue the consultant 150,000 shares of common stock.






There
      were no conditions for issuance associated with the above third and fourth
      quarter share issuance obligations, although all are restricted under rule
      144.
      The breakdown of the above third and fourth quarter share issuance obligations
      were valued using the respective dates obligations were incurred and their
      corresponding share prices, as follows:






Date
            
            Stock
                Price
            
            #
                  of Shares
            
            Share
                Valuation8/1/04
            
            $
            .97
            
            
            50,000
            
            $
            48,50010/11/04
            
            $
            .97
            
            
            200,000
            
            $
            194,00012/1/04
            
            $
            .80
            
            
            150,000
            
            $
            120,000Totals
            
            
            
            
            
            400,000
            
            $
            362,500








25





**Fellows
      Energy Ltd.**


**(Formerly
      Fuel Centers, Inc.)**


(A
        Development  Stage
        Company)


**Notes
      to Financial Statements**


**December
      31, 2004 and 2003**




**Note
      7 - Related Party Transactions**




In
      2003
      we occupied office space provided by our former officer. Accordingly, we
      allocated occupancy cost to the Company based on the square foot percentage
      assumed multiplied by the former officer’s total monthly cost. This is shown in
      the accompanying operations statement for 2003 and is considered an additional
      capital contribution by the former officer.




On
      January 5, 2004, we acquired interests in certain oil and gas leases of the
      Johns Valley, Utah project and the rights to acquire interests in the Weston
      County, Carter Creek, Deer Creek and Gordon Creek Projects, as well as to enter
      into the Exploration Services Funding Agreement with Thomasson Partner
      Associates, Inc. of Denver, Colorado, owned by Diamond Oil & Gas
      Corporation, in exchange for 3,500,000 shares of common stock. The transaction
      was deemed to have a value of $1.05 million.




We
      acquired the option to earn a 70% working interest in 25,201 acres of oil and
      gas leases from Diamond, a corporation controlled by our CEO. As a result,
      we
      appointed new management while accepting the resignation of our former
      management and redeemed 52,610,000 shares of common stock owned by the outgoing
      and former management in exchange for approximately $27,000.




Over
      the
      period May through October 2004 we borrowed $741,000 on an unsecured 8% demand
      note payable to an entity controlled by our CEO. In December 2004 we paid
      $684,621 of principal on the note plus $25,681 of interest. The December 31,
      2004 balance on the note was $56,379.




**Note
      8 - Income Tax**




At
      December 31, 2004, we have available for federal income tax purposes a net
      operating loss carryforward of approximately $3,300,000, expiring at various
      times through 2024 that may be used to offset future taxable income. Therefore,
      we have provided no provision for income tax.




In
      addition, we have deferred tax assets of approximately $1,120,000 at December
      31, 2004. We have not recorded a benefit from our net operating loss
      carryforward because realization of the benefit is uncertain and, therefore,
      a
      valuation allowance of $(1,120,000) has been provided for the deferred tax
      assets. The following table reports our carryforwards and the related deferred
      tax assets by year through December 31, 2004:




**Year**
              
              
              **NOL carryforward**
              
              
              **Deferred tax asset**2001
              
              $
              10,241
              
              $
              3,4812002
              
              
              21,560
              
              
              7,3302003
              
              
              122,915
              
              
              41,7912004
              
              
              3,138,118
              
              
              1,066,960Less:
                  valuation allowance
              
              
              —
              
              
              (1,119,562
              )Totals:
              
              $
              3,292,834
              
              $
              —







26





**Fellows
      Energy Ltd.**


**(Formerly
      Fuel Centers, Inc.)**


(A
      Development Stage
      Company)




**Notes
      to Financial Statements**


**December
      31, 2004 and 2003**




**Note
      9 - Commitments and contingencies**




With
      our
      Exploration Services Funding Agreement with Thomasson, as amended, we are
      committed to paying Thomasson an $800,000 fee in 2005 for the first right to
      review and purchase up to a 100% interest in oil and natural gas exploration
      projects they develop as well as fees for any projects that we acquire from
      Thomasson. Under the agreement, in 2005 Thomasson will present to us an average
      of eight projects per year with an area of interest of 10,000 to 80,000 acres
      per project with a reasonable potential of at least 200 billion cubic feet
      of
      natural gas reserves or 20 million barrels of oil reserves. After viewing a
      formal presentation regarding a project, we have a period of thirty days in
      which we have the option to acquire the project. We are not obligated to acquire
      any project. The agreement continues year to year until either party gives
      90
      days written notice of termination.




Johns
      Valley Project, Utah. In early 2004 we acquired an agreement with Johns Valley
      Limited Partnership whereby we have the option to earn 70% working interest
      in
      25,201 acres of Utah oil and gas leases. In order to maintain the option in
      good
      standing, we had an obligation to spend the following sums in exploration
      drilling on or before the dates specified to better characterize the coal and
      coalbed methane potential: (1) June 15, 2004, $1,200,000; (2) January 20, 2005,
      $1,000,000; and, (3) January 20, 2006, $800,000. In connection with the above
      commitment for 2004, as of June 30, 2004, we advanced $241,000 in the form
      of a
      loan bearing 10% interest to the Johns Valley Limited Partnership. As a result,
      and in lieu of repayment, our $1.2 million 2004 work commitment was reduced
      to
      $718,000 to be spent by October 31, 2004. By that date we had actually spent
      $550,000. Due to permitting delays and other operating parameters in the field,
      we have entered into negotiations to restructure the timing and amounts of
      our
      work commitments as provided for under the option assignment agreement. We
      have
      no current payment commitments or obligations pending the renegotiation.




Operating
      Lease - We have a one year operating lease through January 2006 for use of
      our
      office facilities with an option to renew at market rate. The rent is $1,681
      per
      month. Aggregate minimum rental payments are $20,172 in 2005.




We
      were
      sued in the Sixth Judicial District Court, Garfield County, Utah on November
      10,
      2004, by Midway Perforating and Drilling in a complaint alleging nonpayment
      of
      charges connected with drilling the Johns Valley 10-33C2 well in Garfield
      County, UT. The complaint seeks damages of $100,000 and costs of $10,000. We
      filed our Answer and Counterclaim on January 19, 2005. We believe we have a
      strong defense and counterclaim in that the plaintiff failed to follow our
      instructions to use appropriate equipment for controlling deviation of the
      wellbore, and that such failure caused significant deviation of the wellbore,
      causing the well to be unusable. The suit is in its early stages. Although
      we
      believe we have a strong defense and counterclaim, we cannot predict the final
      outcome of the suit.






**Note
        10 - Discontinued Operations**
 
 **Fuel
        Centers, Inc.** ****
 
 In
        December 2003, the Company disposed of its subsidiary, Fuel Centers, Inc.,
        which
        was engaged in the automotive fuel and supercenter operations. At December
        31,
        2003, the Company recorded a loss on discontinuance in the statement of
        operations of $123,475.




**Note
      11 - Subsequent Events**




In
      February 2005 we agreed to sell the Circus project for $1.98 million to an
      unrelated third party. We have received half of the proceeds from the sale.
      The
      buyer has committed to pay the other half upon completion of routine title
      work
      on the property. We acquired the leases in October, 2004, for $451,000 and
      thus
      realized a $1,493,000 gain on the sale. We are using the proceeds from the
      sale
      to pay down the $1.5 million November 2004 note and for working capital.




In
      February 2005 we extended our agreement with a financial consultant and are
      obligated to issue an additional 50,000 shares as well as a monthly fee of
      $7,500 for three months through April 2005.




In
      March
      2005 we agreed, subject to customary closing conditions, with Quaneco to acquire
      a 12.5% working interest in the Kirby and Castle Rock Coal Bed Natural Gas
      projects for $3,850,000 in cash and one million shares of restricted common
      stock. Under the terms of the agreement, we will participate in a 48 well
      drilling program during 2005 on the Kirby project that will extend out from
      an
      existing 16 well pilot program of previously drilled wells. We will have
      ownership in the previously drilled wells, which are currently being dewatered
      and are expected to commence production in the near future. The other working
      interest owners in the Kirby project include Quaneco (25.0%), Pinnacle Gas
      Resources (50%) and Galaxy Energy Corporation (12.5%).






In
        April
        2005, we issued shares valued at $362,500 to comply with our obligation of
        issuance. The shares issued were as follows:
  Date
                
                Stock
                    Price
                
                #
                      of Shares
                
                Share
                    Valuation8/1/04
                
                $
                .97
                
                
                50,000
                
                $
                48,50010/11/04
                
                $
                .97
                
                
                200,000
                
                $
                194,00012/1/04
                
                $
                .80
                
                
                150,000
                
                $
                120,000Totals
                
                
                
                
                
                400,000
                
                $
                362,500
   Note
              12 -
              Restatement
  The
              accompanying consolidated financial statements as of December 31, 2004
              have been
              restated. The restatement reflects the correction of an error in the
              acquisition
              cost of certain oil and gas property in exchange for 3,500,000 shares
              of the
              Company’s common stock on January 5, 2004.
  On
              January 5, 2004, we acquired interests in certain oil and gas leases of the
              Johns Valley, Utah project and the rights to acquire interests in the
              Weston
              County, Carter Creek, Deer Creek and Gordon Creek Projects, as well
              as to enter
              into the Exploration Services Funding Agreement with Thomasson Partner
              Associates, Inc. of Denver, Colorado, owned by Diamond Oil & Gas
              Corporation, in exchange for 3,500,000 shares of common stock. Initially,
              the
              transaction was deemed to have value of $1,050,000 based on the $0.30 stock
              price at the time the agreement was negotiated. Since determining that
              there
              were conditions precedent to close this transaction, we have restated the
              valuation of these assets and interests to properly account for them
              under the
              guidance of ETIF 98-16.  The transaction is deemed to have value of
              $6,405,000 under this guidance, at the share price on date of acquisition
              of
              $1.83, which was the value of the stock on the date that performance
              under the
              agreement was completed.
  Upon
              applying the criteria of EITF 98-16, the Company increased the valuation
              of its
              oil and gas property acquired by $5,355,000 to $6,405,000 from $1,050,000,
              as
              previously stated. Accordingly, the $5,355,000 adjustment has been
              recorded by
              increasing the stated value of the Company’s Oil and Gas Property and by
              increasing Additional Paid in Capital on the Company’s balance sheet for the
              year ended December 31, 2004. There was no effect on the Company’s statements of
              operations for the years ended December 31, 2004 and 2003 or for the
              period from
              inception (November 13, 2003) through December 31, 2004.
   Following
              is the effect of our restatement on our Balance Sheet for the year
              ended
              December 31, 2004:
   As
                          Previously Reported
                      
                      Adjustment
                      
                      As
                          RestatedOil
                          and gas property
                      
                      $
                      3,688,648
                      
                      $
                      5,355,000
                      
                      $
                      9,043,648Additional
                          paid in capital
                      
                      $
                      (4,201,702
                      )
                      $
                      (5,355,000
                      )
                      $
                      (9,556,702
                      )$
                      --





27





**Item
      8. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure**




None.




**Item
      8A. Controls and Procedures**




We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed by us in the reports that we file or submit
      to the Securities and Exchange Commission under the Securities Exchange Act
      of
      1934, as amended, is recorded, processed, summarized and reported within the
      time periods specified by the SEC’s rules and forms, and that information is
      accumulated and communicated to our management, including our principal
      executive and principal financial officers (whom we refer to in this periodic
      report as our Certifying Officers), as appropriate to allow timely decisions
      regarding required disclosure. Our management evaluated, with the participation
      of our Certifying officers, the effectiveness of our disclosure controls and
      procedures as of December 31, 2004, pursuant to Rule 13A-15(b) under the
      Exchange Act. Based upon that evaluation, our Certifying Officers concluded
      that, as of December 31, 2004, our disclosure controls and procedures were
      effective.




There
      were no changes in our internal control over financial reporting that occurred
      during our fiscal quarter ended December 31, 2004 that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financing reporting.




**Item
      8B. Other Information**




Circus
      Project, Montana. In May 2004, we optioned the Circus project through our
      affiliation with Thomasson. In February 2005 we agreed to sell the project
      for
      $1.98 million to an unrelated third party. We have received half of the proceeds
      from the sale. The buyer has committed to pay the other half upon completion
      of
      routine title work on the property. We acquired the leases in October, 2004,
      for
      $451,000 and thus realized a $1,493,000 gain on the sale. We are using the
      proceeds from the sale to pay down the $1.5 million November 2004 JMG note
      and
      for working capital.




Kirby
      and
      Castle Rock projects, Powder River Basin, Montana. In March 2005 we agreed,
      subject to customary closing conditions, with Quaneco to acquire a 12.5% working
      interest in the Kirby and Castle Rock Coal Bed Natural Gas projects for
      $3,850,000 in cash and one million shares of restricted common stock. See Item
      2—Property, “Kirby and Castle Rock projects.”




Consulting
      Agreements. In February 2005, we retained CEOcast, Inc. as a consultant for
      a
      three month period, pursuant to which we agreed to pay a monthly fee of $7,500
      and issue 50,000 shares of our common stock. In December 2004, we agreed to
      pay
      a referral fee to Axiom Capital Management, under which Axiom would receive
      fees
      from financings or projects that Axiom presents to us.







28





**Part
      III**




**Item
      9. Directors, Executive Officers, Promoters and Control Persons; Compliance
      with
      Section 16(a) of the Exchange Act.**




Executive
      Officers and Directors




We
      are
      dependent on the efforts and abilities of certain of our senior management.
      The
      interruption of the services of key management could disrupt our operations,
      reduce profits and hinder future development, if suitable replacements are
      not
      promptly obtained. We anticipate that we will enter into employment agreements
      with each of our key executives. We cannot guarantee that each executive will
      remain with us during or after the term of his or her employment agreement.
      In
      addition, our success depends, in part, upon our ability to attract and retain
      other talented personnel. Although we believe that our relations with our
      personnel are good and that we will continue to be successful in attracting
      and
      retaining qualified personnel, we cannot guarantee that we will be able to
      continue to do so. Our officers and directors will hold office until their
      resignations or removal.




The
      following table has information regarding our executive officers and directors:




**Name**
            
            **Age**
            
            **Position
                held**George S. Young
            
            53
            
            President,
                Chief Executive Officer and DirectorSteven L. Prince
            
            46
            
            Vice
                President and Director




George
      S.
      Young. On January 5, 2004, our board of directors appointed Mr. Young as our
      President, Chief Executive Officer and Chairman of the board of directors.
      Mr.
      Young is an experienced business executive in the mining and petroleum
      industries. He is an attorney and engineer by profession, and began his legal
      career in the law department of Exxon Company USA. Mr. Young also worked at
      Kennecott Copper Corporation as a metallurgical engineer involved in the
      construction and start-up of a new copper smelter. From 1998 to 2002, Mr. Young
      was in the private practice of law. Prior to that Mr. Young was the president
      of
      Oro Belle Resources Corporation in Golden, Colorado from 1996 to 1998. Previous
      positions also include General Counsel and Acting General Manager for the
      Intermountain Power Project, a $4.4 billion coal-fired power project; Domestic
      Minerals Division Counsel for Getty Oil Company; and General Counsel for Bond
      International Gold, Inc. Most recently, Mr. Young currently serves as a director
      and president of Palladon Ventures Ltd., a British Columbia corporation which
      trades on the TSX Venture Exchange under the trading symbol PLL.V. He holds
      a
      B.Sc. in Metallurgical Engineering which he earned in 1975 from the University
      of Utah and a J.D. degree which he earned in 1979 from the University of Utah.
      Mr. Young is a member of the Society of Mining Engineers, and the state bars
      of
      Utah, Colorado and Texas. Mr. Young is not an officer or director or director
      of
      any other reporting company.




Steven
      L.
      Prince. As of January 5, 2004, our board of directors appointed Mr. Prince
      as
      our Vice President and a member of our board of directors. Mr. Prince is a
      petroleum engineer with over 14 years of operating experience in conventional
      oil and gas drilling and in coal bed methane drilling and field development.
      In
      2003 and the beginning of 2004 Mr. Prince was a Senior Petroleum Engineer for
      the Navajo Indian Nation. From 2001 to 2003, Mr. Prince was an Operations
      Manager with CBM Production consultants. From 1997 to 2002, he served as
      Executive Director of the Castle Valley Gas Producers Council, a gas industry
      trade association. Previous positions also include Drilling Engineer with Shell
      Western Exploration & Production; Operations Manager and Engineering Manager
      with River Gas Corporation in which he played a significant role in developing
      the Drunkard’s Wash Field, one of the most successful coal bed methane fields in
      the United States, located in Central Utah. Mr. Prince is a member of the
      Society of Petroleum Engineers and the Rocky Mountain Association of Geologists.
      Mr. Prince received his B.S. in Petroleum Engineering from Montana College
      of
      Mining, Science and Technology in 1987. Mr. Prince is not an officer or director
      of any other reporting company.




There
      is
      no family relationship between any of our officers or directors. There are
      no
      orders, judgments, or decrees of any governmental agency or administrator,
      or of
      any court of competent jurisdiction, revoking or suspending for cause any
      license, permit or other authority to engage in the securities business or
      in
      the sale of a particular security or temporarily or permanently restraining
      any
      of our officers or directors from engaging in or continuing any conduct,
      practice or employment in connection with the purchase or sale of securities,
      or
      convicting such person of any felony or misdemeanor involving a security, or
      any
      aspect of the securities business or of theft or of any felony. Nor are any
      of
      the officers or directors of any corporation or entity affiliated with us so
      enjoined.




Our
      directors will serve until the next annual meeting of stockholders. Our
      executive officers are appointed by our board of directors and serve at the
      discretion of the board of directors.







29





**Section
      16(a) Beneficial Ownership Reporting Compliance**




Our
      officers, directors, and principal shareholders have filed all reports required
      to be filed on, respectively, a Form 3 (Initial Statement of Beneficial
      Ownership of Securities), a Form 4 (Statement of Changes of Beneficial Ownership
      of Securities), or a Form 5 (Annual Statement of Beneficial Ownership of
      Securities). However, George S. Young, our CEO, President and Chairman of our
      board of directors, and Steven L. Prince, our Vice President and Director,
      each
      inadvertently did not file a Form 4 on a timely basis in 2004 to disclose one
      option grant by us to each of them; the two required forms have subsequently
      been filed.




**Code
      of Ethics**




We
      have
      adopted a code of ethics that applies to our principal executive officers,
      principal financial officer, principal accounting officer or controller, or
      persons performing similar functions. We filed our code of ethics as an exhibit
      to a previous SEC filing. We incorporate it by reference as an exhibit to this
      Form 10-KSB/A.




**Audit
      Committee Financial Expert**




We
      do not
      yet have an audit committee financial expert serving on our audit committee
      because we have been focusing our efforts on our new operational direction
      in
      the oil and gas business.






**Item
      10. Executive Compensation**




The
      compensation received by our officers and directors is determined from time
      to
      time by our board of directors. Our officers and directors are reimbursed for
      any out-of-pocket expenses incurred on our behalf.




**Summary
      Compensation Table**




The
      below
      table summarizes the annual and long-term compensation for services in all
      capacities to us payable to our Chief Executive Officer. We had no executive
      officers whose total annual salary and bonus exceeded $100,000 for the year
      ended December 31, 2004.




Summary
      Compensation Table




**Long-Term
                Compensation****Annual
                Compensation**
            
            **Awards**
            
            **Payouts****Name
                and**
              **Principal
                Position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Other**
              **Annual**
              **Compensation**
              **($)**
            
            **Restricted**
              **Stock**
              **Award(s)**
              **($)**
            
            **Securities**
              **Underlying**
              **Option/SARs**
              **(#)**
            
            **LTIP**
              **Payouts**
              **($)**
            
            **All**
              **Other**
              **Compensation**
              **($)****(a)**
            
            **(b)**
            
            **(c)**
            
            **(d)**
            
            **(e)**
            
            **(f)**
            
            **(g)**
            
            **(h)**
            
            **(i)**George
                S. Young
              (CEO,
                President, Chairman)
            
            2004
            
            $
            76,000
            
            None
            
            None
            
            None
            
            200,000
            
            None
            
            None




**Compensation
      of Directors**




Our
      directors during the reporting period were also our employees and received
      no
      extra compensation for their service on our board of directors.




**Stock
      Option Plan**




On
      October 9, 2003, we adopted an incentive stock option plan, pursuant to which
      shares of our common stock are reserved for issuance to satisfy the exercise
      of
      options. The purpose of the incentive stock option plan is to retain qualified
      and competent officers, employees and directors. The incentive stock option
      plan
      for our executive officers authorizes up to 2,000,000 shares of authorized
      common stock, $.001 par value per share, to be purchased pursuant to the
      exercise of Options. The effective date of the stock option plan was October
      9,
      2003. The stock option plan was approved by shareholders on November 10, 2003.
      On September 15, 2004, we granted an option for 200,000 shares to our CEO,
      150,000 shares to our vice president and 125,000 shares to an employee. These
      options are exercisable at $0.80 per share, the price of our stock on the grant
      date. The options vested 50% on the grant date and vest 50% on September 15,
      2005.




30


Option/Stock
      Appreciation Right Grants in 2004


Individual
      Grants




**Name**
            
            **Number of Securities**
              **Underlying
                Options**
              **Granted**
            
            
            **%
                of Total Options**
              **Granted to Employees**
              **In
                2004**
            
            
            **Exercise**
              **Price**
              **Per Share**
            
            **Expiration**
              **Date****(a)**
            
            **(b)**
            
            
            **(c)**
            
            
            **(d)**
            
            **(e)**George
                S. Young
            
            200,000
            (1)
            
            42
            %
            
            $
            0.80
            
            Sept. 15, 2014





(1)
            The
                option vested 50% on September 15, 2004 and vests 50% on September
                15,
                2005.




Note:
      We
      have no plan or other arrangement for the issuance of Stock Appreciation Rights.




Aggregate
      Option/SAR Exercises in 2004 and December 31, 2004 Option Values




**Name**
            
            **Shares Acquired**
              **on
                Exercise**
            
            **Value**
              **Realized**
            
            **Number of Securities**
              **Underlying Unexercised**
              **Options
                at 12-31-04**
              **Exercisable/Unexercisable**
            
            **Value of Unexercised**
              **In-the Money Options**
              **At
                12-31-04**
              **Exercisable/Unexercisable****(a)**
            
            **(b)**
            
            **(c)**
            
            **(d)**
            
            **(e)**George
                S. Young
            
            None
            
            None
            
            100,000/100,000
            
            $10,000/$10,000




**Item
      11. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**




**Equity
      Compensation Plan**




Our
      incentive stock option plan, described above, adopted by the board of directors
      on October 9, 2003, and approved by shareholders on November 10, 2003, reserves
      for issuance 2,000,000 shares of our common stock to satisfy the exercise of
      options. The below table reports information regarding the plan at December
      31,
      2004.




**Equity
      Compensation Plan Information**






**Number of securities**
                  **to be issued upon exercise**
                  **of
                    outstanding options,**
                  **warrants
                    and rights**
                  **(a)**
                
                
                **Weighted-average**
                  **exercise
                    price of**
                  **outstanding options,**
                  **warrants
                    and rights**
                  **(b)**
                
                
                **Number of securities**
                  **remaining available for**
                  **future
                    issuance under**
                  **equity
                    compensation**
                  **plans (excluding securities**
                  **reflected
                    in column (a))**
                  **(c)**Equity
                    compensation plans approved by security holders
                
                
                *425,000
                
                $
                0.80
                
                
                *1,575,000Equity
                    compensation plans not approved by security holders
                
                
                0
                
                
                0
                
                
                0Total
                
                
                425,000
                
                
                0
                
                
                1,575,000





*
            The
                above securities are authorized common stock, $.001 par value per
                share.







31





**Beneficial
      Ownership of Common Stock**




The
      following table reports information regarding the beneficial ownership of our
      common stock as of March 31, 2005, by each person or entity known by us to
      be
      the beneficial owner of more than 5% of the outstanding shares of common stock,
      each of our directors and named executive officers, and all of our directors
      and
      executive officers as a group.




**Title
                of Class**
            
            **Name and Address of**
              **Beneficial
                Owner**
            
            **Amount and Nature**
              **of
                Beneficial Owner**
            
            
            **Percent**
              **of Class**Common Stock
            
            Diamond
                Oil & Gas Corporation (1)
            
            3,500,000 shares
            (1)
            
            8.6
            %Common Stock
            
            George
                S. Young (1), Chief Executive Officer, President, Director
            
            3,600,000 shares
            (1)
            
            8.6
            %Common Stock
            
            Steven
                L. Prince, Vice President, Director
            
            75,000 shares
            (2)
            
            (2
            )Common Stock
            
            All
                directors and named executive officers as a group (1), (2)
            
            3,675,000
                shares
            
            
            8.8
            %





(1)
            Diamond
                Oil & Gas Corporation is owned by George S. Young; therefore, Mr.
                Young is the beneficial owner of the shares held by Diamond Oil & Gas
                Corporation. The 3,600,000 shares includes the 3,500,000 shares owned
                by
                Diamond and 100,000 shares, the portion of an option owned by Mr.
                Young
                pursuant to our incentive stock option plan, which is exercisable
                within
                60 days of March 31, 2005.





(2)
            The
                75,000 shares are the portion of an option owned by Mr. Prince pursuant
                to
                our incentive stock option plan, which is exercisable within 60 days
                of
                March 31, 2005. Mr. Young’s beneficial ownership is less than 1% of the
                class.




Beneficial
      ownership is determined in accordance with the rules of the U.S. Securities
      and
      Exchange Commission and generally includes voting or investment power with
      respect to securities. In accordance with the Commission’s rules, shares of our
      common stock which may be acquired upon exercise of stock options or warrants
      which are currently exercisable or which become exercisable within 60 days
      of
      the date of the table are deemed beneficially owned by the optionees. Subject
      to
      community property laws, where applicable, the persons or entities named in
      the
      table above have sole voting and investment power with respect to all shares
      of
      our common stock indicated as beneficially owned by them.






**Item
      12. Certain Relationships and Related Transactions.**




There
      have been no related party transactions since January 1, 2003, except for the
      following:




John
      R.
      Muellerleile, our former director, president and secretary, is the father of
      Michael J. Muellerleile, one of our shareholders and an employee of MC Law
      Group, which served during 2003 as our legal counsel.




John
      R.
      Muellerleile, our former director, president and secretary, provided office
      space to us at no charge in 2003.




Prior
      to
      Mr. Young’s becoming our CEO, Diamond Oil & Gas Corporation, a Nevada
      corporation (“Diamond”), of which Mr. Young is the sole officer, director and
      shareholder, entered into an agreement dated December 8, 2003 with us to sell
      us
      interest in certain oil and gas leases and other assets in exchange for
      3,500,000 shares of our common stock. The transaction was valued at $1.05
      million. See Item 1, Description of Business, Business in our December 31,
      2004,
      Form 10-KSB filed March 31, 2005. The transaction closed on January 5, 2004.




Over
      the
      period May through October 2004 we borrowed $741,000 on an unsecured 8% demand
      note payable to an entity controlled by our CEO, Mr. Young. In December 2004
      we
      paid $684,621 of principal on the note plus $25,681 of interest. The December
      31, 2004 balance on the note was $56,379.






32


**Item
      13. Exhibits**




**Exhibit No.**3(i)(1)
              
              Articles
                  of Incorporation (1)3(i)(2)
              
              Certificate
                  of Amendment to Articles of Incorporation (7)3(ii)
              
              Bylaws
                  (1)4.1
              
              Form
                  of Convertible Debenture issued by Fellows Energy, Ltd., dated
                  June 4,
                  2004 (2)4.2
              
              Form
                  of Warrant to Purchase Common Stock of Fellows Energy, Ltd., dated
                  June 4,
                  2004 (2)4.3
              
              Form
                  of Security Agreement of Fellows Energy, Ltd., dated June 4, 2004
                  (2)10.1
              
              Purchase
                  Agreement of October 22, 2003 with Diamond Oil and Gas Corporation
                  (3)10.2
              
              Stock
                  Option Plan** (4)10.3
              
              Exploration
                  Services Funding Agreement of January 26, 2004 with Thomasson Partner
                  Associates, Inc. (7)10.4
              
              Agreement
                  to Extend and Amend Exploration Funding Service Agreement with
                  Thomasson
                  Partner Associates, Inc., dated February 24, 2005 (7)10.5
              
              Purchase
                  and Option Agreement of March 16, 2004 with Quaneco, LLC
                  (7)10.6
              
              Amendment
                  to Purchase and Option Agreement, of September 14, 2004, with Quaneco,
                  LLC
                  (7)10.7
              
              Agreement
                  for Purchase of Interests in the Castle Rock and Kirby CBNG Projects
                  of
                  March 4, 2005 with Quaneco, LLC (7)10.8
              
              Promissory
                  Note of November 8, 2004 with JMG Exploration, Inc. (5)10.9
              
              General
                  Security Agreement of November 8, 2004 with JMG Exploration, Inc.
                  (5)10.10
              
              Exploration
                  and Development and Conveyance Agreement of November 8, 2004 with
                  JMG
                  Exploration, Inc. (5)10.11
              
              Consultant
                  Agreement, dated February 1, 2005, between Fellows Energy, Ltd.
                  and
                  CEOCast, Inc. (7)10.12
              
              Consultant
                  Agreement, dated August 1, 2004, between Fellows Energy, Ltd. and
                  CEOCast,
                  Inc. (7)10.13
              
              Letter
                  Agreement, dated December 1, 2004, between Fellows Energy, Ltd.
                  and Axiom
                  Capital Management, Inc. (7)10.14
              
              Carter
                  Creek Project Purchase Agreement, dated January 9, 2004, by and
                  between
                  Thomasson Partner Associates, Inc. and Fellows Energy Ltd.
                  (7)10.15
              
              Letter
                  Agreement regarding Bacaroo Project, dated April 14, 2004, by and
                  between
                  Thomasson Partner Associates, Inc. and Fellows Energy Ltd.
                  (7)10.16
              
              Note
                  between Deseado, LLC and Fellows Energy Ltd., dated September 24,
                  2004
                  (7)14.1
              
              Code
                  of Ethics (6)
   33
   31.1
                
                Certification
                    of Chief Executive Officer pursuant to Rule
                    13a-14 and Rule 15d-14(a), promulgated under the Securities and
                    Exchange
                    Act of 1934, as amended *31.2
                
                Certification
                    of Chief Financial Officer pursuant to Rule
                    13a-14 and Rule 15d 14(a), promulgated under the Securities and
                    Exchange
                    Act of 1934, as amended *32.1
                
                Certification
                    pursuant to 18 U.S.C. Section 1350, as
                    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002 (Chief
                    Executive Officer) *32.2
                
                Certification
                    pursuant to 18 U.S.C. Section 1350, as
                    adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                    2002 (Chief
                    Financial Officer)
                    *





*
            Filed
                with this Report





**
            A
                management compensation plan











(1)
            Incorporated
                by reference to Fellows’ registration statement on Form SB-2 filed on
                August 10, 2001





(2)
            Incorporated
                by reference to Fellows’ Form 8-K filed June 17, 2004





(3)
            Incorporated
                by reference to Fellows’ Form 8-K filed January 6, 2004





(4)
            Incorporated
                by reference to Fellows’ Schedule 14A, filed on October 22, 2003





(5)
            Incorporated
                by reference to Fellows’ Form 10-QSB, filed on November 15, 2004





(6)
            Incorporated
                by reference to Fellows’ Form 10-KSB/A filed on April 29, 2004





(7)
            Incorporated
                by reference to Fellows’ Form 10-KSB filed on March 31, 2005




**Item
      14. Principal Accountant Fees and Services**




**Audit
      Fees**




Hall
      & Company, registered independent public accountants (“Hall & Company”)
      is our principal independent accountant and has examined our financial
      statements for each of the last two years. The aggregate fees billed for each
      of
      the last two fiscal years total $110,498 for professional services rendered
      by
      the principal independent accountant for the audit of our annual financial
      statements, review of financial statements included in our 10-QSB, and services
      that are normally provided by the accountant in connection with statutory and
      regulatory filings or engagements.




**Audit-Related
      Fees**




There
      have not been any fees billed in each of the last two years for assurance and
      related services by the principal independent accountant that are reasonably
      related to the performance of the audit or review of our financial statements.




**Tax
      Fees**




The
      aggregate fees billed for each of the last two fiscal years total $5,263 for
      professional services rendered by the principal independent accountant for
      tax
      compliance, tax advice, and tax planning.




**All
      Other Fees**




No
      other
      fees have been billed in the last two years for products and services provided
      by the principal accountant other than the services reported pursuant to the
      above portions of this Item 14.




Our
      board
      of directors acts as the audit committee and had no “pre-approval policies and
      procedures” in effect for the auditors’ engagement for the audit year 2003 and
      2004. The engagement of Hall & Company was approved by our board of
      directors.








34


**Signatures**




In
        accordance with Section 13 of the Exchange Act, we caused this report to
        be
        signed on our behalf by the undersigned, who is authorized to do so, in
        Broomfeild, Colorado, on February 14, 2006.




Fellows
                Energy Ltd.a
                Nevada corporation/s/
                George S. Young
              
              George
                S. YoungChief
                  Executive Officer (Principal Executive Officer), Chief Financial
                  Officer
                  (Principal Financial Officer and Principal Accounting Officer),
                  President
                  and Chairman of the Board




In
      accordance with the Exchange Act, the following person has signed this report
      on
      our behalf and in the capacities indicated.




/s/
                  George S. Young
                
                George
                  S. Young
              
              February
                  14, 2006Chief
                    Executive Officer (Principal Executive Officer), Chief Financial
                    Officer
                    (Principal Financial Officer and Principal Accounting Officer),
                    President
                    and Chairman of the Board