# UNITED STATESSECURITIES
AND EXCHANGE COMMISSION Washington, D.C. 20549

# FORM 10-QSB

(Mark One)

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

| | For
the quarterly period ended June 30, 2004
| | --------------------------------------------

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

| | For
the transition period
| | -------------------------

| | Commission
file number 000-32669
| | --------------------------------

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

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

|                                                                          
|--------------------------------------------------------------------------
|Suite 1925, 200 Burrard Street
Vancouver, British Columbia, Canada V6C 3L6
|(Address of principal executive offices)                                  

|                           
|---------------------------
|604.693.0177               
|(Issuer's telephone number)

|                                                                                  
|----------------------------------------------------------------------------------
|Not Applicable                                                                    
|(Former name, former address and former fiscal year, if changed since last report)

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

---

2

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

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

# APPLICABLE ONLY TO
CORPORATE ISSUERS

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

24,421,321 common shares and 995,305
preferred stock issued and outstanding as of August 10, 2004

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

# PART 1 - FINANCIAL
INFORMATION

# Item 1. Financial
Statements.

Our unaudited financial statements
as of June 30, 2004 and for the three month periods ended June 30, 2004 and 2003 form
part of this quarterly report.  They are stated in United States Dollars (US$) and are
prepared in accordance with accounting principles generally accepted in the United States
of America.

---

HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

June 30, 2004

|                                             | Index
|-------------------------------------------- | -----
|Balance Sheets                               |      
|Statements of Operations                     |      
|Statements of Cash Flows                     |      
|Statement of Changes in Stockholders' Equity |      
|Notes to the Financial Statements            |      

---

F-1

HEARTLAND OIL &GAS
CORP. (An Exploration Stage
Company)

# BALANCE SHEETS

|                                                                      | June 30,
2004 | December 31,
2003
|--------------------------------------------------------------------- | ------------- | -----------------
|                                                                     
|                                                                      | (Unaudited)   | (Audited)        
|ASSETS                                                                |               |                  
|CURRENT ASSETS                                                        |               |                  
|Cash and cash equivalents                                             |               |                  
|Prepaid expenses                                                      |               |                  
|                                                                     
|Total current assets                                                  |               |                  
|OIL AND GAS PROPERTIES, unproven (Note 2)                             |               |                  
|EQUIPMENT, net of accumulated amortization of $6,630                  |               |                  
|                                                                     
|TOTAL ASSETS                                                          |               |                  
|                                                                     
|LIABILITIES AND SHAREHOLDERS' EQUITY                                  |               |                  
|CURRENT LIABILITIES                                                   |               |                  
|Accounts payable and accrued liabilities                              |               |                  
|Due to related parties (Note 4)                                       |               |                  
|                                                                     
|Total current liabilities                                             |               |                  
|LONG-TERM LIABILITIES                                                 |               |                  
|Asset retirement obligations                                          |               |                  
|                                                                     
|TOTAL LIABILITIES                                                     |               |                  
|                                                                     
|STOCKHOLDERS' EQUITY (Note 3)                                         |               |                  
|Preferred stock - $0.001 per value, 5,000,000 shares authorized,      |               |                  
|995,305 and nil shares issued and outstanding, respectively           |               |                  
|Common stock - $0.001 per value, 100,000,000 shares authorized,       |               |                  
|24,421,320 and 24,301,320 shares issued and outstanding, respectively |               |                  
|Additional paid-in capital                                            |               |                  
|Deficit accumulated during the exploration stage                      |               |                  
|                                                                     
|TOTAL STOCKHOLDERS' EQUITY                                            |               |                  
|                                                                     
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            |               |                  
|                                                                     

The accompanying notes
are an integral part of these statements.

---

F-2

HEARTLAND OIL &GAS
CORP. (An Exploration Stage
Company)

STATEMENTS OF
OPERATIONS (Unaudited)

|                                             | Three Months
Ended
June 30,
2004 | Three Months
Ended
June 30,
2003 | Six Months
Ended
June 30,
2004 | Six Months
Ended
June 30,
2003 | Period from
Inception
(August 11,
2000)
Through
June 30, 2004
|-------------------------------------------- | -------------------------------- | -------------------------------- | ------------------------------ | ------------------------------ | -------------------------------------------------------------
|                                            
|REVENUE                                      |                                  |                                  | $                              | --                             |                                                              
|                                            
|EXPENSES                                     |                                  |                                  |                                |                                |                                                              
|Professional fees                            |                                  |                                  |                                | 8,314                          |                                                              
|Management fees (Note 4)                     |                                  |                                  |                                | 38,209                         |                                                              
|Interest expense                             |                                  |                                  |                                | --                             |                                                              
|Stock - based compensation (Note 1)          |                                  |                                  |                                | 193,538                        |                                                              
|Travel and promotion                         |                                  |                                  |                                | 66,187                         |                                                              
|Office rent                                  |                                  |                                  |                                | 29,069                         |                                                              
|Consulting (Note 4)                          |                                  |                                  |                                | --                             |                                                              
|General and administrative                   |                                  |                                  |                                | 75,271                         |                                                              
|                                            
|Total operating expenses                     |                                  |                                  |                                | 410,588                        |                                                              
|                                            
|LOSS FROM OPERATIONS                         |                                  |                                  |                                | (410,588                       | )                                                            
|OTHER INCOME                                 |                                  |                                 
|Interest income                              |                                  |                                  |                                | 23,286                         |                                                              
|                                            
|NET LOSS                                     |                                  |                                  | $                              | (387,302                       | )                                                            
|                                            
|BASIC AND DILUTED NET LOSS PER  COMMON SHARE |                                  |                                  | $                              | (0.02                          | )                                                            
|                                            
|BASIC AND DILUTED WEIGHTED AVERAGE           |                                  |                                  |                                |                                |                                                              
|NUMBER OF COMMON SHARES  OUTSTANDING         |                                  |                                  |                                | 24,402,199                     |                                                              
|                                            

The accompanying notes
are an integral part of these statements

---

F-3

HEARTLAND OIL &GAS
CORP.(An Exploration Stage
Company)

CONSOLIDATED STATEMENTS
OF CASH FLOWS(Unaudited)

|                                                                 | Six Months
Ended
June 30,
2004 | Six Months
Ended
June 30,
2003 | Period from
Inception
(August 11,
2000)
Through
June 30, 2004
|---------------------------------------------------------------- | ------------------------------ | ------------------------------ | -------------------------------------------------------------
|                                                                
|CASH FLOWS FROM OPERATING ACTIVITIES                             |                                |                                |                                                              
|Net loss                                                         |                                |                                | $                                                            
|Adjustments to reconcile net loss to net cash                    |                                |                               
|(used in) provided by operating activities:                      |                                |                                |                                                              
|Accrued interest on convertible debentures                       |                                |                                |                                                              
|Stock - based compensation                                       |                                |                                |                                                              
|Depreciation, depletion and amortization                         |                                |                                |                                                              
|(Increase) in accounts receivable                                |                                |                                |                                                              
|Decrease (increase) in prepaid expenses                          |                                |                                |                                                              
|(Decrease) increase in accounts payable and accrued expenses     |                                |                                |                                                              
|                                                                
|Net cash (used in) provided by operating activities              |                                |                                |                                                              
|                                                                
|CASH FLOWS FROM INVESTING ACTIVITIES                             |                                |                                |                                                              
|Purchase of computer equipment                                   |                                |                                |                                                              
|Acquisition and exploration of oil and gas properties            |                                |                                |                                                              
|                                                                
|Net cash (used in) provided by investing activities              |                                |                                |                                                              
|                                                                
|CASH FLOWS FROM FINANCING ACTIVITIES                             |                                |                                |                                                              
|Increase (decrease) in due to related parties                    |                                |                                |                                                              
|Cash received on recapitalization                                |                                |                                |                                                              
|Proceeds from issuance of common stock, net of offering costs    |                                |                                |                                                              
|Proceeds from issuance of preferred stock, net of offering costs |                                |                                |                                                              
|Proceeds from long-term debt                                     |                                |                                |                                                              
|                                                                
|Net cash provided by financing activities                        |                                |                                |                                                              
|                                                                
|NET INCREASE IN CASH                                             |                                |                                |                                                              
|CASH,beginning of period                                         |                                |                                |                                                              
|                                                                
|CASH,end of period                                               |                                |                                | $                                                            
|                                                                

The accompanying notes
are an integral part of these statements

---

F-4

HEARTLAND OIL &GAS
CORP.(An Exploration Stage
Company)

STATEMENTS OF CHANGED IN STOCKHOLDERS' EQUITY(Unaudited)

# PERIOD FROM INCEPTION (AUGUST
11, 2000) TO JUNE 30, 2004

|                                           | Number of
Preferred
Shares | Stock
Amount | Number of
Common
Shares | Stock
Amount | Additional
Paid-in
Capital | Deficit
Accumulated
During the
Exploration
Stage
|------------------------------------------ | -------------------------- | ------------ | ----------------------- | ------------ | -------------------------- | ------------------------------------------------
|                                          
|INCEPTION, August 11, 2000                 |                            |              |                         | --           |                            | $                                               
|Common stock issued at $0.005 per share    |                            |              |                         | --           |                            |                                                 
|Common stock issued at $0.35 per share     |                            |              |                         | --           |                            |                                                 
|Net loss                                   |                            |              |                         | --           |                            |                                                 
|                                          
|BALANCES, December 31, 2000                |                            |              |                         | --           |                            |                                                 
|Net loss                                   |                            |              |                         | --           |                            |                                                 
|                                          
|BALANCES, December 31, 2001                |                            |              |                         | --           |                            |                                                 
|Common stock issued at $0.50 per share     |                            |              |                         | --           |                            |                                                 
|Recapitalization (Note 1)                  |                            |              |                         | --           |                            |                                                 
|Common stock issued at $1.40 per share     |                            |              |                         | --           |                            |                                                 
|Issuance of stock warrants as compensation |                            |              |                         | --           |                            |                                                 
|Net loss                                   |                            |              |                         | --           |                            |                                                 
|                                          
|BALANCES, December 31, 2002                |                            |              |                         | --           |                            |                                                 
|Common stock issued at $1.40 per share     |                            |              |                         | --           |                            |                                                 
|Exercise of options at $0.50 per share     |                            |              |                         | --           |                            |                                                 
|Conversion of debentures at $2.00          |                            |              |                         | --           |                            |                                                 
|Conversion of debentures at $1.00          |                            |              |                         | --           |                            |                                                 
|Common stock issued at $2.82 per share     |                            |              |                         | --           |                            |                                                 
|Common stock issued at $3.20 per share     |                            |              |                         | --           |                            |                                                 
|Issuance of stock options as compensation  |                            |              |                         | --           |                            |                                                 
|Less:  share issue costs                   |                            |              |                         | --           |                            |                                                 
|Net loss                                   |                            |              |                         | --           |                            |                                                 
|                                          
|BALANCES, December 31, 2003                |                            |              |                         | --           |                            |                                                 
|Common stock issued at $0.35 per share     |                            |              |                         | --           |                            |                                                 
|Common stock issued at $0.50 per share     |                            |              |                         | --           |                            |                                                 
|Issuance of stock options as compensation  |                            |              |                         | --           |                            |                                                 
|Preferred stock issued at $3.20 per share  |                            |              |                         | 995,305      |                            |                                                 
|Less:  share issue costs                   |                            |              |                         | --           |                            |                                                 
|Net loss                                   |                            |              |                         | --           |                            |                                                 
|                                          
|BALANCES, June 30, 2004 (Unaudited)        |                            |              |                         | 995,305      |                            | $                                               
|                                          

The accompanying notes
are an integral part of these statements

---

F-5

HEARTLAND OIL &GAS
CORP.(An Exploration Stage
Company)

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# NOTE 1 
ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

# Organization, Business
and Going Concern

On April 10, 2002, Adriatic Holdings
Limited (Adriatic) entered into a letter of intent to acquire all of the
shares of Heartland Oil and Gas Inc., a Nevada corporation (Heartland).
Heartland was incorporated in the State of Nevada on August 11, 2000 and its principal
business activity consists of exploration and development of oil and gas properties in the
United States to determine whether they contain economically recoverable resources. The
Company is currently in the exploration stage and has not generated significant revenues
from its operations. Effective September 17, 2002, the acquisition of Heartland by
Adriatic was completed through the issuance of one share of Adriatic common stock for each
share of Heartland outstanding. At the time of the acquisition, Adriatic had 7,090,000
shares of common stock outstanding. Adriatic issued 12,212,429 shares of common stock to
the shareholders of Heartland, and as a result, the Company had 19,302,429 shares of
common stock outstanding immediately after the acquisition. As part of the exchange
agreement, Adriatic changed its name to Heartland Oil & Gas Corp. The acquisition of
Heartland by Adriatic is considered a reverse acquisition and accounted for under the
purchase method of accounting. Under reverse acquisition accounting, Heartland is
considered the acquirer for accounting and financial reporting purposes, and acquired the
assets and assumed the liabilities of Adriatic. Assets acquired and liabilities assumed
are reported at their historical amounts.

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

The Company has suffered recurring
losses from operations and has accumulated a deficit of $2,448,113 since inception on
August 11, 2000. At June 30, 2004, the Company has working capital of $6,979,558. Since
inception, the Company has funded operations through the issuance of capital stock and
debt. Managements plan is to continue raising additional funds through future equity
or debt financings until it achieves profitable operations from its oil and gas drilling
activities.

# Basis of Presentation

The accompanying consolidated
financial statements of the Company are unaudited and include, in the opinion of
management, all normal recurring adjustments necessary to present fairly the consolidated
balance sheet as of June 30, 2004, and the related statements of operations and cash flows
for the periods presented. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted. These consolidated
financials statements should be read in conjunction with the Companys audited
financial statements and the related notes thereto included in the Companys Form
10-KSB filed with the Securities and Exchange Commission.

# Oil and Gas Properties

The Company utilizes the full cost
method to account for its investment in oil and gas properties. Accordingly, all costs
associated with acquisition, exploration and development of oil and gas reserves,
including such costs as leasehold acquisition costs, capitalized interest costs relating
to unproved properties, geological expenditures, tangible and intangible development costs
including direct internal costs are capitalized to the full cost pool. As of June 30,
2004, the Company has no properties with proven reserves. When the Company obtains proven
oil and gas reserves, capitalized costs, including estimated future costs to develop the
reserves and estimated abandonment costs, net of salvage, will be depleted on the
units-of-production method using estimates of proved reserves. Investments in unproved
properties and major development projects including capitalized interest, if any, are not
amortized until proved reserves associated with the projects can be determined. If the
future exploration of unproved properties are determined uneconomical the amount of such
properties are added to the capitalized cost to be amortized. As of June 30, 2004, all of
the Companys oil and gas properties were unproved and were excluded from
amortization. At June 30, 2004, management believes none of the Companys unproved
oil and gas properties were considered impaired.

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

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

# Cash and Cash Equivalents

The Company considers all highly
liquid investments with an original maturity of three months or less to be cash
equivalents.

---

F-6

HEARTLAND OIL &GAS
CORP.(An Exploration Stage
Company)

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Continued)

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

# Net Loss Per Share of
Common Stock

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

# Stock-Based Compensation

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

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

Had the Company measured compensation
cost based on the fair value of the options at the grant date for the three- and six-month
periods ended June 30, 2004 consistent with the method prescribed by SFAS 123, the
Companys net loss and loss per common share would have been increased to the pro
forma amounts indicated below:

|                                                                     | Three Months
Ended
June 30,
2004 | Three Months
Ended
June 30,
2003 | Six Months
Ended
June 30,
2004 | Six Months
Ended
June 30,
2003
|-------------------------------------------------------------------- | -------------------------------- | -------------------------------- | ------------------------------ | ------------------------------
|                                                                    
|Net loss, as reported                                                |                                  |                                  | $                              | (387,302                      
|Add:  Stock-based employee compensation expense included in reported |                                  |                                 
|net income, net of related tax effects                               |                                  |                                  |                                | 193,538                       
|Deduct:  Total stock-based employee compensation expense determined  |                                  |                                 
|under fair value based  method for all awards,  net of related tax   |                                  |                                  |                                |                               
|effects                                                              |                                  |                                  |                                | (680,183                      
|                                                                    
|Pro forma net loss                                                   |                                  |                                  | $                              | (873,947                      
|                                                                    

|                                         | Three Months
Ended
June 30,
2004 | Three Months
Ended
June 30,
2003 | Six Months
Ended
June 30,
2004 | Six Months
Ended
June 30,
2003
|---------------------------------------- | -------------------------------- | -------------------------------- | ------------------------------ | ------------------------------
|                                        
|Earnings per share:                      |                                  |                                  |                                |                               
|Basic and diluted earnings (loss) per co |                                  |                                  |                                |                               
|As reported                              |                                  |                                  | $                              | (0.0                          
|Pro forma                                |                                  |                                  |                                | (0.04                         

# Income Taxes

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

---

F-7

HEARTLAND OIL &GAS
CORP.(An Exploration Stage
Company)

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Continued)

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

# Use of Estimates

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

# Fair Value of Financial
Instruments

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

# Recent Accounting
Pronouncements

A reporting issue has arisen
regarding the application of certain provisions of SFAS No. 141 and SFAS No. 142
to companies in the extractive industries, including oil and gas companies. The issue is
whether SFAS No. 142 requires registrants to classify the costs of mineral rights
held under lease or other contractual arrangement associated with extracting oil and gas
as intangible assets in the balance sheet, apart from other capitalized oil and gas
property costs, and provide specific footnote disclosures. Historically, Heartland has
included the costs of such mineral rights associated with extracting oil and gas as a
component of oil and gas properties. If it is ultimately determined that SFAS No. 142
requires oil and gas companies to classify costs of mineral rights held under lease or
other contractual arrangement associated with extracting oil and gas as a separate
intangible assets line item on the balance sheet, Heartland would be required to
reclassify approximately $3,098,508 at June 30, 2004 and $2,372,337 at December 31, 2003
out of oil and gas properties and into a separate intangible assets line item.
Heartlands cash flows and results of operations would not be affected since such
intangible assets would continue to be depleted and assessed for impairment in accordance
with full-cost accounting rules.

In June 2001, the Financial
Accounting Standards Board (FASB) issued SFAS No. 143, Accounting
for Asset Retirement Obligations. SFAS 143 addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 is effective for January 1, 2003. SFAS 143
requires that the fair value of a liability for an assets retirement obligation be
recorded in the period in which it is incurred and the corresponding cost capitalized by
increasing the carrying amount of the related long-lived asset. The liability is accreted
to its then present value each period, and the capitalized costs is depreciated over the
useful life of the related asset. If the liability is settled for an amount other than the
recorded amount, a gain or loss is recognized The following table summarizes the
Companys asset retirement obligation transactions during the six month period ended
June 30, 2004.

|                                        | Six Months Ended
June 30,
2004
|--------------------------------------- | ------------------------------
|                                       
|Beginning asset retirement obligations  |                               
|Additions related to new properties     |                               
|Liabilities incurred                    |                               
|Deletions related to property disposals |                               
|Accretion                               |                               
|                                       
|Total asset retirement obligations      |                               
|                                       

In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections. Such standard requires any
gain or loss on extinguishments of debt to be presented as a component of continuing
operations (unless specific criteria are met) whereas SFAS No. 4 required that such
gains and losses be classified as an extraordinary item in determining net income. Upon
adoption of SFAS No. 145, the Company will reclassify any extraordinary gains and
losses on the extinguishments of debt recorded in prior periods to continuing operations.
The adoption of SFAS 145 did not have a material effect on the Companys financial
position or results of operations.

---

F-8

HEARTLAND OIL &GAS
CORP.(An Exploration Stage
Company)

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Continued)

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

# Recent Accounting
Pronouncements

In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. Such standard requires costs associated with exit or disposal activities
(including restructurings) to be recognized when the costs are incurred, rather than at a
date of commitment to an exit or disposal plan. SFAS No. 146 nullifies EITF Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). Under SFAS No. 146, a liability related to an exit or disposal
activity is not recognized until such liability has actually been incurred whereas under
EITF Issue No. 94-3 a liability was recognized at the time of a commitment to an exit
or disposal plan. The provisions of this standard are effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS 146 did not have a
material effect on the Companys financial position or results of operations.

On December 31, 2002, the FASB
issued SFAS No. 148, Accounting for Stock-Based CompensationTransition
and Disclosure. This standard amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based employee
compensation. This standard also requires prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The disclosure requirements of SFAS
No. 148 are required to be included in the summary of significant accounting policies.

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

# NOTE 2- OIL AND GAS
PROPERTIES, UNPROVEN

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

|                                     | Acquisition Costs | Exploration Costs | Total
|------------------------------------ | ----------------- | ----------------- | -----
|                                    
|Costs incurred during periods ended: |                   |                   |      
|June 30, 2004                        |                   |                   | $    
|December 31, 2003                    |                   |                   |      
|December 31, 2002                    |                   |                   |      
|December 31, 2001                    |                   |                   |      
|December 31, 2000                    |                   |                   |      
|                                    
|Totals                               |                   |                   | $    
|                                    

At June 30, 2004, all of the
Companys oil and gas properties are considered unproven. Based on the status of the
Companys exploration activities, including the drilling of test wells, management
has determined that no impairment has occurred.

---

F-9

HEARTLAND OIL &GAS
CORP.(An Exploration Stage
Company)

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Continued)

# HEARTLAND OIL &
GAS CORP.

(An Exploration Stage
Company)

# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

(Continued)

# NOTE 3-
STOCKHOLDERS EQUITY

During the three-month period ended
March 31, 2003 the Company completed the sale of 690,000 units at $1.40 per unit for
proceeds of $966,000.

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

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

During the three-month period ended
June 30, 2004 the Company issued 30,000 shares of common stock at $0.50 per share for
proceeds of $15,000 from the exercise of stock options.

# NOTE 4- RELATED PARTY
TRANSACTIONS

Amounts due to related parties on the
accompanying balance sheet as of June 30, 2004, are $842. This amount due from related
parties represents non-interest bearing advances to directors and shareholders, with no
fixed terms of repayment.

During the six-month period ended
June 30, 2004, the Company paid or accrued $85,826 in management fees and $6,000 in
consulting fees to directors of the Company.

---

3

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

# FORWARD-LOOKING
STATEMENTS

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

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

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

General

General Overview

We are an exploration stage oil and
gas company engaged in the exploration for and development of Coal Bed Methane in the
Soldier Creek Prospect located in the Forest City Basin of northeast Kansas.
Our Soldier Creek project encompasses approximately 252,000 acres of
prospective frontier coal bed methane lands. Our subsidiary, Heartland Oil and Gas Inc.,
holds the interests in the leases and operates the project.

Corporate History

On September 17, 2002 we acquired all
of the issued and outstanding stock of Heartland Oil and Gas Inc., a private Nevada
Corporation, from its stockholders in exchange for 12,212,429 shares of our common stock.
As a result, the former stockholders of Heartland Oil and Gas Inc. own a majority of our
outstanding stock. Therefore, for accounting purposes, Heartland Oil and Gas Inc. was
deemed to have acquired Adriatic Holdings Ltd. Heartland Oil and Gas Inc. survives as our
wholly-owned subsidiary. Heartland Oil and Gas Inc. is an oil and gas exploration company
that has interests in leases covering approximately 252,000 acres in central Kansas.

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

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

---

4

Our Current Business

On April 10, 2002 we entered into a
letter of intent to acquire all of the shares of Heartland Oil and Gas Inc., a private
Nevada corporation. On July 31, 2002 we entered into a formal Share Exchange Agreement
with Heartland Oil and Gas Inc. and its shareholders. On September 17, 2002 we acquired
all of the issued and outstanding stock of Heartland Oil and Gas Inc. from its
stockholders in exchange for 12,212,429 shares of our common stock. As a result, the
former stockholders of Heartland Oil and Gas Inc. own a majority of our outstanding stock.
Therefore, for accounting purposes, Heartland Oil and Gas Inc. was deemed to have acquired
Adriatic Holdings Ltd. Heartland Oil and Gas Inc. survives as our wholly-owned subsidiary.

We are an exploration stage oil and
gas company engaged in the exploration for and development of Coal Bed Methane in the
Soldier Creek Prospect located in the Forest City Basin of northeast Kansas.
Pursuant to several Oil and Gas Leases entered into with various parties, our
Soldier Creek project encompasses approximately 252,000 acres of prospective
frontier coal bed methane lands. We have a 100% working interest in all of these leases.
Our net revenue interest in these leases is 84.5%, so as a result our net acreage is
approximately 213,000 acres. Our working interest consists of our share of
gross production, revenues, burdens, field operating costs and gathering and processing
fees before deduction of royalties. Our net revenue interest means our working
interest less the royalties that are payable. Heartland Oil and Gas Inc. holds the
interests in the leases for the lands and operates the project. The expiration dates for
the leases range from dates in 2004 through 2009. Certain of the leases may be extended
upon the exercise of options on the leases. For the year ending December 31, 2004 we will
be required to pay approximately $258,000 on the current leases. There are no lease option
payments due in 2005 and for the year ending December 31, 2006 we will be required to pay
approximately $355,076 on the current leases. In addition, we are obligated to pay delay
rentals on certain leases of approximately $16,000 in 2004, 2005 and 2006.

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

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

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

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

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

The Soldier Creek area was chosen
when a privately funded, proprietary analysis of historical drilling logs from previous
drilling of deeper hydrocarbon targets revealed the existence of significant coal beds to
the North and West of where coal bed methane production was currently being successfully
developed. This analysis also indicated that the coal bed thickness at Soldier Creek was
more than four times greater than the coal beds being exploited nearby. The logs used to
map the thickness of these coal beds are not capable of indicating the productivity from
the coal beds. Further adding to the areas potential, was its proximity to a ready
market and gas pipelines.

---

5

We commenced our exploration program
consisting of three wells including our Engelke 16-18 well. The Engelke well was drilled
by Heartland Oil and Gas Inc. in the fall of 2001 and encountered 57 feet of coal. Two of
the three wells were logged and tested for permeability and all three were cased as
potential coal bed producers. To test for permeability, we hired Production Enhancement
& Reservoir Management, LLC to conduct injection falloff tests on selected coal seam
intervals in the two wells. At the Engelke 16-18 well two separate injection falloff tests
were conducted. The first test consisted of three seams near the bottom of the well; a 3
foot thick seam at 2,378 feet, a 2 foot seam at 2,406 feet, and a 3 foot seam at 2,429
feet. The second test targeted a single coal seam 4 feet thick at 1,832 feet. In each test
the coal seam was perforated and fresh water was injected at high pressure and the
pressure was then allowed to falloff. A pressure modeling program was then used to
estimate the coal seam permeability to water. This resulted in an estimated permeability
of 12.68 millidarcies (md) for the lower coals and 22.5 md for the upper coal.

At the Trout 10-2 well, two falloff
tests were conducted. In the first test, 3 coal seams near the bottom of the well were
tested; a 3 foot seam at 1,491 feet, a 2 foot seam at 1,500 feet and a 3 foot seam at
1,510 feet. The coal seam permeability to water was estimated at 40.14 md. It was noted
that the permeability in this well could be as high as 105.3 md. In the second test, a
single coal seam 3 foot thick at 1,039 feet was tested and permeability was found to be
0.187 md.

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

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

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

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

With the results from our economic
modeling, we decided to begin aggressively acquiring acreage, concentrating on the North
Engelke area, which mapping shows to be the thickest part of the basin. Coal thicknesses
here are up to 4 times thicker than in the Cherokee basin to the south, where there are
active coal bed methane operations. Many of the coals in the Cherokee basin are present at
Engelke, but Engelke also has many more coal seams. As of June 30, 2004 we have leases
totalling 252,000 acres. Of the 252,000 acres under lease, approximately 227,000 are in
the Engelke area. We have a 100% working interest in all of these leases. The net revenue
interest of these leases is 84.5%, so our net acreage is approximately 192,000 acres in
the Engelke area.

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

---

6

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

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

As of June 30, 2004, 10 CBM wells and
2 water disposal wells have been drilled, logged and cased. The drilling program is
continuing and we plan to drill two additional wells to expand the Engelke pilot. The
wells show an excellent section of thick lower Cherokee coals, which is the main producing
formation in the coalbed methane wells in other parts of the Forest City/Cherokee Basin.
As of August 11, 2004 all 17 CBM wells and all 3 water disposal wells have been drilled,
logged and cased. As of August 11, 2004 ten CBM wells had been completed and completion
operations were continuing on the remaining 7 CBM wells.

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

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

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

| | Known
gas coals that are already established from conventional drilling, thereby reducing
exploration and development risk. Our mapping of the existing wells in this area shows the
presence of a number of coals in the shallow part of the basin. Drilling records, when
available, often show gas as these coals are penetrated.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | As
full-scale development is implemented, drilling, completing, and operating costs are
anticipated to drop, further enhancing the projects economics.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

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

The Coal Bed Methane
Industry

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

We believe the success of coal bed
methane developments has been largely the result of improved drilling and completion
techniques, better hydraulic fracture designs and significant cost reductions as a result
of highly dependable gas content and coal bed methane reservoir performance analysis. Also
aiding this sectors growth is the apparent shortage of quality domestic conventional
exploration and development projects. In comparison, according to USGS Fact Sheet
FS-123-00 of October 2000, total unconventional coal bed methane resource
across Americas 25 basins (lower US) is estimated to be roughly 700 trillion cubic
feet (Tcf) of which 14% or 100 Tcf is considered technically recoverable with existing
technology. Technically recoverable gas volumes do not necessarily qualify as proved
reserves and we do not have any proved coal bed methane reserves at this time. We also
believe that propelling the coal bed methane production growth is its relatively low
finding and development costs. Coal bed methane fields are often found where deeper
conventional oil and gas reservoirs have already been developed, therefore, considerable
exploration-cost-reducing geologic information is often readily available. This available
geological information, combined with coal bed methane reservoirs comparatively
shallow locations, reduces finding and developing costs.

---

7

Coal Bed Methane

Natural gas normally consists of 80%
or more methane with the balance comprising such hydrocarbons as butane, ethane and
propane. In some cases it may contain minute quantities of highly poisonous hydrogen
sulfide, referred to as sour gas. Coal bed methane is, generally, a sweet gas
consisting of 95% methane and thus is normally of pipeline quality. Coal bed methane is
considered an unconventional natural gas resource because it does not rely on
conventional trapping mechanisms, such as a fault or anticline, or
stratigraphic traps. Instead coal bed methane is adsorbed or attached to the
molecular structure of the coals  an efficient storage mechanism as coal bed methane
coals can contain as much as seven times the amount of gas typically stored in a
conventional natural gas reservoir such as sandstone or shale. The adsorbed coal bed
methane is kept in place as a result of a pressure equilibrium often from the presence of
water. Thus the production of coal bed methane in many cases requires the dewatering of
the coals to be exploited. This process usually requires the drilling of adjacent wells
and from 6 to 36 months to complete. Coal bed methane production typically has a low rate
of production decline and an economic life typically from 10 to 20 years.

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

The three main factors that determine
whether or not gas can be economically recovered from coal beds are: the gas content of
the coals; the permeability or flow characteristics of the coals; and, the thickness of
the coal beds. Gas content is measured in terms of standard cubic feet (Scf) per ton and
varies widely from 430 Scf per ton in the deep (2,000 to 3,500 feet) San Juan, New Mexico
thermogenic coals, and only 60 Scf per ton for the shallow (300 to 700 feet deep) Powder
River, Wyoming biogenic coals. The San Juan coals are considered to have the
industrys highest permeability. Relatively high permeability, which can affect the
ability of gas to easily travel to the borehole, is an important factor for the success of
a coal bed methane well, but is not absolutely required. The thickness of coal beds from
which coal bed methane is economically being produced varies from as little as a few feet
in some areas of the gas rich (300 Scf) Raton Basin to as much as 75 net feet of coal bed
thickness at the relatively gas poor Powder River.

The following discussion of our plan
of operations for the three months ended June 30, 2004 and 2003 should be read in
conjunction with our most recent audited annual financial statements, which form part of
our annual report on Form 10-KSB filed on March 29, 2004, the unaudited interim financial
statements forming part of this quarterly report, and, in each case, the notes thereto.

# Plan of Operations

Cash Requirements

For the next 12 months we plan to
continue drilling a series of pilot programs in our Soldier Creek acreage area, consisting
of drilling up to 18 further new wells. Fifteen of the wells will be completed for
potential coal bed methane and 3 of the wells will be completed as salt water disposal
wells. As we will be in a test period initially, gathering systems and pipeline tie-ins
will be undertaken at the completion of the drilling program.

We also intend to undertake
additional completion operations in the Engelke area, including additional hydraulic
fracturing of existing coals and perforating and fracturing new coals in the wells.

---

8

Pursuant to several oil and gas
leases entered into with various parties, our Soldier Creek project encompasses
approximately 252,000 acres of prospective frontier coal bed methane lands. Heartland Oil
and Gas Inc. holds the interests in the leases for the lands and operates the project. The
expiration dates for the leases range from dates in 2004 through 2009. Certain of the
leases may be extended upon the exercise of options on the leases. For the year ending
December 31, 2004 we will be required to pay approximately $258,532 on the leases. There
are no lease option payments due in 2005 and for the year ending December 31, 2006 we will
be required to pay approximately $355,076 on the leases. In addition, we are obligated to
pay delay rentals on certain leases of approximately $16,000 in each of the years 2004,
2005 and 2006.

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

In order to proceed with our plans we
raised funds by way of a private placement of equity securities in our company pursuant to
exemptions from registration provided by Regulation S under the Securities Act of 1933.
The offering consisted of units at a price of $1.40 per unit. Each unit consisted of one
common share $0.001 par value and one warrant exercisable at $1.75 expiring August 30,
2004. In May, 2003 we closed the private placement having issued 1,000,000 units for gross
proceeds of $1,400,000. The net proceeds received will be used as working capital to allow
us to continue our ongoing lease acquisition program and to expand on the exploration and
development of our Soldier Creek Prospect.

In June, 2003, we sold an aggregate
of 602,836 of our shares of our common stock and share purchase warrants to acquire an
additional 301,418 shares of our common stock in a private placement for gross proceeds of
approximately $1,700,000. The share purchase warrants have an exercise price of $3.38 and
expire three years from the date of issuance.

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

On January 13, 2004 we closed a
private placement for the issuance and sale of 995,305 units at a purchase price of $3.20
per unit for total aggregate proceeds of $3,184,979. Each unit is comprised of one share
of Series A Preferred Convertible Stock and one stock purchase warrant to purchase
one-half of one share of common stock for the additional consideration of $3.84 per share
for a period of three years. Each preferred share is to be convertible into one common
share for no additional consideration. The preferred shares will not bear interest.

Our net cash provided by financing
activities during the three month period ended June 30, 2004 was $2,977,186.

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

|Estimated Funding Required During the Next Twelve Months
|--------------------------------------------------------
|General and Administrative                              
|Acreage                                                 
|Rentals and Option Payments                             
|Operations                                              
|Drill and complete 7 CBM wells                          
|Drill and equip 1 new water disposal well               
|Gathering and Pipelines                                 
|Lease Operating Expense                                 
|Corporate and Severance Taxes                           
|Working Capital                                         
|Total                                                   

---

9

As at August 11, 2004 the 7 new CBM
wells and the one new water disposal well had been drilled and were awaiting completion.
Approximately $1,100,000 had been expended by August 11, 2004.

As at June 30, 2004, we had $342,822
in current liabilities. Our financial statements report a net loss of $387,302 for the
three month period ended June 30, 2004 compared to a net loss of $414,209 for the three
month period ended June 30, 2003. As a result, our accumulated loss increased to
$2,448,113 during the period from inception to June 30, 2004. Our losses decreased
primarily as a result of stock-based compensation expenses, decreased expenses associated
with professional fees and increased expenses associated with administration activities.
Stock-based compensation for the three month period ended June 30, 2004 was $193,538, as
compared to $204,350 for the three month period ended June 30, 2003.

Our total liabilities as of June 30,
2004 were $432,822, as compared to total liabilities of $500,363 as of December 31, 2003.
The decrease was due to the decrease of our accounts payable.

During the three month period ended
June 30, 2004 we spent $3,363,583 on exploration and acquisition of our oil and gas
properties. Of this amount, $726,171 was attributable to acquisitions costs and $2,547,412
was attributable to explorations costs. We have capitalized these amounts on our balance
sheet, in addition to $90,000 related to asset retirement obligations.

We have suffered recurring losses
from operations. The continuation of our company is dependent upon our company attaining
and maintaining profitable operations and raising additional capital. In this regard we
have raised additional capital through the equity offerings noted above.

The continuation of our business is
dependent upon obtaining further financing, a successful program of acquisition and
exploration, and, finally, achieving a profitable level of operations. The issuance of
additional equity securities by us could result in a significant dilution in the equity
interests of our current stockholders. Obtaining commercial loans, assuming those loans
would be available, will increase our liabilities and future cash commitments.

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

Product Research and
Development

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

Purchase of Significant
Equipment

We do not intend to purchase any
significant equipment (excluding oil and gas activities) over the twelve months ending
June 30, 2005.

Employees

Currently we have one full time
employee and two part-time employees who are also officers of our company. We do not
expect any material changes in the number of employees over the next 12 month period. We
do and will continue to outsource contract employment as needed. However, if we are
successful in our initial and any subsequent drilling programs we may retain additional
employees. On August 6, 2004 we added one full time employee.

---

10

New Accounting
Pronouncements

A reporting issue has arisen
regarding the application of certain provisions of SFAS No. 141 and SFAS No. 142 to
companies in the extractive industries, including oil and gas companies. The issue is
whether SFAS No. 142 requires registrants to classify the costs of mineral rights held
under lease or other contractual arrangement associated with extracting oil and gas as
intangible assets in the balance sheet, apart from other capitalized oil and gas property
costs, and provide specific footnote disclosures. Historically, Heartland has included the
costs of such mineral rights associated with extracting oil and gas as a component of oil
and gas properties. If it is ultimately determined that SFAS No. 142 requires oil and gas
companies to classify costs of mineral rights held under lease or other contractual
arrangement associated with extracting oil and gas as a separate intangible assets line
item on the balance sheet, Heartland would be required to reclassify approximately
$3,098,508 at June 30, 2004 and $2,372,337 at December 31, 2003 from oil and gas
properties and into a separate intangible assets line item. Heartlands cash flows
and results of operations would not be affected since such intangible assets would
continue to be depleted and assessed for impairment in accordance with full-cost
accounting rules.

In June 2001, the Financial
Accounting Standards Board (FASB) issued SFAS No. 143, Accounting
for Asset Retirement Obligations. SFAS 143 addresses accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS 143 is effective for January 1, 2003. SFAS 143
requires that the fair value of a liability for an assets retirement obligation be
recorded in the period in which it is incurred and the corresponding cost capitalized by
increasing the carrying amount of the related long-lived asset. The liability is accreted
to its then present value each period, and the capitalized costs is depreciated over the
useful life of the related asset. If the liability is settled for an amount other than the
recorded amount, a gain or loss is recognized The following table summarizes our asset
retirement obligation transactions during the six month period ended June 30, 2004.

|                                        | Six Months Ended
June 30,
2004
|--------------------------------------- | ------------------------------
|                                       
|Beginning asset retirement obligations  |                               
|Additions related to new properties     |                               
|Liabilities incurred                    |                               
|Deletions related to property disposals |                               
|Accretion                               |                               
|                                       
|Total asset retirement obligations      |                               
|                                       

In April 2002, the FASB issued
SFAS No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical Corrections. Such standard requires any
gain or loss on extinguishments of debt to be presented as a component of continuing
operations (unless specific criteria are met) whereas SFAS No. 4 required that such
gains and losses be classified as an extraordinary item in determining net income. Upon
adoption of SFAS No. 145, we will reclassify any extraordinary gains and losses on
the extinguishments of debt recorded in prior periods to continuing operations. The
adoption of SFAS 145 did not have a material effect on our financial position or results
of operations.

In June 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities. Such standard requires costs associated with exit or disposal activities
(including restructurings) to be recognized when the costs are incurred, rather than at a
date of commitment to an exit or disposal plan. SFAS No. 146 nullifies EITF Issue
No. 94-3, Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). Under SFAS No. 146, a liability related to an exit or disposal
activity is not recognized until such liability has actually been incurred whereas under
EITF Issue No. 94-3 a liability was recognized at the time of a commitment to an exit
or disposal plan. The provisions of this standard are effective for exit or disposal
activities initiated after December 31, 2002. The adoption of SFAS 146 did not have a
material effect on our financial position or results of operations.

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11

On December 31, 2002, the FASB
issued SFAS No. 148, Accounting for Stock-Based CompensationTransition
and Disclosure. This standard amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based employee
compensation. This standard also requires prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The disclosure requirements of SFAS
No. 148 are required to be included in the summary of significant accounting policies.

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

Application of Critical
Accounting Policies

Our financial statements and accompanying
notes are prepared in accordance with generally accepted accounting principles in the
United States. Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue, and
expenses. These estimates and assumptions are affected by managements application of
accounting policies. We believe that understanding the basis and nature of the estimates
and assumptions involved with the following aspects of our consolidated financial
statements is critical to an understanding of our financials.

Our consolidated financial statements
have been prepared on the going concern basis, which assumes the realization of assets and
liquidation of liabilities in the normal course of operations. The financial statements
have been prepared assuming we will continue as a going concern. However, certain
conditions exist which raise doubt about our ability to continue as a going concern. We
have suffered recurring losses from operations and have accumulated a deficit of
$2,448,113 since inception of Heartland Oil and Gas Inc. through June 30, 2004.

Since our inception, we have funded
operations through the issuance of capital stock and debt. Our ability to continue as a
going concern is dependent upon achieving profitable operations and the raising of
additional capital. Our plans in this regard are to secure additional funds through future
equity and debt financing which will enable us to develop our oil and gas properties.

We consider all highly liquid
investments with an original maturity of three months or less to be cash equivalents.

Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123), encourages, but does not require, companies to record compensation cost for
stock-based employee compensation plans at fair value. We have chosen to account for
stock-based compensation Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB25) and have adopted the disclosure only
provisions of SFAS123. Accordingly, compensation for stock options is measured as the
excess, if any, of the quoted market price of our stock at the date of grant over the
amount an employee is required to pay for the stock.

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

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12

We utilize the full cost method to
account for our investment in oil and gas properties. Accordingly, all costs associated
with acquisition, exploration and development of oil and gas reserves, including such
costs as leasehold acquisition costs, geological expenditures, tangible and intangible
development costs including direct internal costs are capitalized to the full cost pool.
As of June 30, 2004, we have no properties with proven reserves. When we obtain proven oil
and gas reserves capitalized costs, including estimated future costs to develop the
reserves and estimated abandonment costs, net of salvage, will be depleted on the
units-of-production method using estimates of proved reserves. Investments in unproved
properties and major development projects are not amortized until proved reserves
associated with the projects can be determined. If the future development of unproved
properties are determined uneconomical the amount of such properties is added to the
capitalized cost to be amortized. As of June 30, 2004, all of our oil and gas properties
were unproved and were excluded from amortization. At June 30, 2004, none of our unproved
oil and gas properties were considered impaired.

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

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

Revenue from sales or services will
be recognized at the time the product is delivered or at the time the service is
performed.

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

Our financial instruments consist of
cash, prepaid expenses and other liabilities. The carrying amounts of financial
instruments approximate fair value due to their short maturities.

Financial instruments that
potentially subject us to concentrations of credit risk consists primarily of cash in
excess of the federally insured amount of $100,000. To date, we have not incurred a loss
relating to this concentration of credit risk.

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

Earnings per share requires
presentation of both basic earnings per common share and diluted earnings per common
share. Common stock equivalents are not included in the weighted average calculation since
their effect would be anti-dilutive.

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

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13

# RISK FACTORS

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

Those forward-looking statements also
involve certain risks and uncertainties. Factors, risks and uncertainties that could cause
or contribute to such differences include those specific risks and uncertainties discussed
below and those discussed in our Form 10-KSB Annual Report for the year ended December 31,
2003. The cautionary statements made in this document should be read as being applicable
to all related forward-looking statements wherever they appear in this document.

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

We have had negative cash
flows from operations.

To date we have had negative cash
flows from operations and we have been dependent on sales of our equity securities and
debt financing to meet our cash requirements and have incurred losses totalling
approximately $387,302 for the three months ending June 30, 2004, and accumulative losses
of $2,448,113 since inception to June 30, 2004. As of June 30, 2004 we had working capital
of $6,979,558 as a result of recent financing activities. We do not expect positive cash
flow from operations in the near term. There is no assurance that actual cash requirements
will not exceed our estimates. In particular, additional capital may be required in the
event that:

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

 we
encounter greater costs associated with general and administrative expenses or offering
costs.

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

We will depend almost exclusively on
outside capital to pay for the continued exploration and development of our properties.
Such outside capital may include the sale of additional stock and/or commercial borrowing.
Capital may not continue to be available if necessary to meet these continuing development
costs or, if the capital is available, that it will be on terms acceptable to us. The
issuance of additional equity securities by us would result in a significant dilution in
the equity interests of our current stockholders. Obtaining commercial loans, assuming
those loans would be available, will increase our liabilities and future cash commitments.

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

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

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

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14

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

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

We have a history of
losses and fluctuating operating results.

Since inception through June 30,
2004, we have incurred aggregate losses of approximately $2,448,113. Our loss from
operations for the three month period ended June 30, 2004 was $387,302. There is no
assurance that we will operate profitably or will generate positive cash flow in the
future. In addition, our operating results in the future may be subject to significant
fluctuations due to many factors not within our control, such as the unpredictability of
when customers will purchase our services, the size of customers purchases, the
demand for our services, and the level of competition and general economic conditions. If
we cannot generate positive cash flows in the future, or raise sufficient financing to
continue our normal operations, then we may be forced to scale down or even close our
operations. Until such time as we generate revenues, we expect an increase in development
costs and operating costs. Consequently, we expect to incur operating losses and negative
cash flow until our properties enter commercial production.

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

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

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15

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

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

Trading on the OTC Bulletin Board
may be sporadic because it is not a stock exchange, and stockholders may have difficulty
reselling their shares.

Our common stock is quoted on the OTC
Bulletin Board. Trading in stock quoted on the OTC Bulletin Board is often thin and
characterized by wide fluctuations in trading prices, due to many factors that may have
little to do with the companys operations or business prospects. Moreover, the OTC
Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin
Board is often more sporadic than the trading of securities listed on a quotation system
like Nasdaq or a stock exchange like Amex.

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

We have no history of revenues from
operations and have no significant tangible assets. We have yet to generate positive
earnings and there can be no assurance that we will ever operate profitably. Our company
has a limited operating history and must be considered in the development stage. The
success of the company is significantly dependent on a successful acquisition, drilling,
completion and production program. Our companys operations will be subject to all
the risks inherent in the establishment of a developing enterprise and the uncertainties
arising from the absence of a significant operating history. We may be unable to locate
recoverable reserves or operate on a profitable basis. We are in the development stage and
potential investors should be aware of the difficulties normally encountered by
enterprises in the development stage. If our business plan is not successful, and we are
not able to operate profitably, investors may lose some or all of their investment in our
company.

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

We do not currently maintain a
permanent place of business within the United States. In addition, a majority of our
directors and officers are nationals and/or residents of countries other than the United
States, and all or a substantial portion of such persons assets are located outside
the United States. As a result, it may be difficult for investors to effect service of
process on our directors or officers, or enforce within the United States or Canada any
judgments obtained against us or our officers or directors, including judgments predicated
upon the civil liability provisions of the securities laws of the United States or any
state thereof. Consequently, you may be effectively prevented from pursuing remedies under
U.S. federal securities laws against them. In addition, investors may not be able to
commence an action in a Canadian court predicated upon the civil liability provisions of
the securities laws of the United States. The foregoing risks also apply to those experts
identified in this prospectus that are not residents of the United States.

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

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

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16

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

Exploration for economic reserves of
oil and gas is subject to a number of risk factors. Few properties that are explored are
ultimately developed into producing oil and/or gas wells. Our properties are in the
exploration and development stage only and are without proven reserves of oil and gas. We
may not establish commercial discoveries on any of our properties.

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

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

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

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

The oil and gas industry is intensely
competitive. We compete with numerous individuals and companies, including many major oil
and gas companies, which have substantially greater technical, financial and operational
resources and staffs. Accordingly, there is a high degree of competition for desirable oil
and gas leases, suitable properties for drilling operations and necessary drilling
equipment, as well as for access to funds. We cannot predict if the necessary funds can be
raised or that any projected work will be completed. Our budget anticipates our
acquisition of additional acreage in the Forest City basin. This acreage may not become
available or if it is available for leasing, that we may not be successful in acquiring
the leases. There are other competitors that have operations in the Forest City basin and
the presence of these competitors could adversely affect our ability to acquire additional
leases.

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

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

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17

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

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

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

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

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

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

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

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

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

The laws, regulations, policies or
current administrative practices of any government body, organization or regulatory agency
in the United States or any other jurisdiction, may be changed, applied or interpreted in
a manner which will fundamentally alter the ability of our company to carry on our
business.

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

# Item 2. Description of
Property.

Our executive and head offices are
located at Suite 1925, 200 Burrard Street, Vancouver, British Columbia, V6C 3L6. The
offices are approximately 2,935 square feet in size and are leased on an annual basis,
expiring February 29, 2008, at an annual rent of approximately CDN$58,700.Our
current premises are adequate for our current operations and we do not anticipate that we
will require any additional premises in the foreseeable future.

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18

Our Soldier Creek project currently
encompasses approximately 252,000 acres of prospective frontier coal bed methane lands
located in the Forest City Basin of northeast Kansas. As at the date hereof we had a total
of 252,000 acres of undeveloped land under lease, of which 227,000 acres were concentrated
in Nemaha County, Brown County and the northern part of Jackson County, Kansas. We have a
100% working interest in all of these leases. Our net revenue interest in these leases is
84.5%, so as a result our net acreage is approximately 213,000 acres.

We had no productive wells as at the
date hereof and no developed acreage. In September and October of 2001, Heartland Oil and
Gas Inc. drilled three coal bed methane stratigraphic/exploration wells on its property.
All three wells have been cased pending completion. In July 2003 we drilled four more coal
bed methane stratigraphic/exploration wells on our property. These four additional wells
have been cased and are awaiting results from testing. Cased means that metal
casing has been cemented in place in the well to protect the well from fluids, pressures
and/or wellbore stability problems in the wells, in anticipation of testing and/or
production. In November 2003, five of the wells located in the Engelke area were fracture
stimulated and pumps were installed to begin dewatering the coals. At August 11, 2004 all
of these wells were continuing to produce water.

We commenced the drilling of the
first wells in our next three 5-well pilot programs on March 19, 2004. The drilling
program consists of 15 new CBM wells and three new wells to be used for salt water
disposal. The new 15 pilot wells are spaced across our acreage block in the Forest City
and are intended to further define the productivity of our acreage for coalbed methane
production. As of August 11, 2004, all 15 CBM wells have been drilled, cased and logged.
We also have drilled, logged and cased 2 new CBM wells to expand our Engelke pilot. As of
August 11, 2004 10 of the new CBM wells have been completed and have begun pumping water.
Completion operations for the remaining 7 new CBM wells will begin by August 15, 2004 and
are expected to take about 30 days. After completion these wells will be connected to the
water disposal wells and will begin pumping water.

In July 2004, we received
venting/flaring permit for the wells at our Engelke pilot. On August 6, 2004 we began
venting gas from the wells at our Engelke pilot in order to assess the flow rates and
pressures before making a decision on tying in the wells to a pipeline.

# Item 3. Controls and
Procedures

As required by Rule 13a-15 under the
Exchange Act, we have carried out an evaluation of the effectiveness of the design and
operation of our companys disclosure controls and procedures as of the end of the
period covered by this quarterly report, being June 30, 2004. This evaluation was carried
out under the supervision and with the participation of our companys management,
including our companys president and chief executive officer. Based upon that
evaluation, our companys president and chief executive officer concluded that our
companys disclosure controls and procedures are effective as at the end of the
period covered by this report. There have been no significant changes in our
companys internal controls or in other factors, which could significantly affect
internal controls subsequent to the date we carried out our evaluation.

Disclosure controls and procedures
are controls and other procedures that are designed to ensure that information required to
be disclosed in our companys reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in our companys reports filed under the
Exchange Act is accumulated and communicated to management, including our companys
president and chief executive officer as appropriate, to allow timely decisions regarding
required disclosure.

# PART II  OTHER
INFORMATION

# Item 1. Legal
Proceedings.

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

---

19

# Item 2. Changes in
Securities.

On May 28, 2004, we issued an
aggregate of 30,000 shares of common stock upon exercise of stock options previously
granted under the terms of a stock option plan. The shares had been registered on a
Registration Statement on Form S-8.

# Item 3. Defaults Upon
Senior Securities.

None.

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

None.

# Item 5. Other
Information.

None.

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

Reports of Form 8-K

None.

Consolidated Financial
Statements Filed as a Part of the Quarterly Report

Our consolidated financial statements
include:

Balance
Sheets

Statements
of Operations

Statements of
Cash Flows

Notes
to the Financial Statements

Exhibits Required by Item
601 of Regulation S-B

Exhibit Number/Description

Exhibit

Number
Description

| | 3.1
              Articles of Incorporation (1)
| | -----------------------------------------------

| | 3.2
              Bylaws of Adriatic Holdings Ltd. (1)
| | ------------------------------------------------------

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

| | 3.4
Certificate of Designation for shares of Series A Convertible Preferred Stock, effective
December 18, 2003 (9)
| | ------------------------------------------------------------------------------------------------------------------

---

20

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

| | 10.2
             Form of Oil and Gas Lease (4)
| | -----------------------------------------------

| | 10.3
Managing Dealers Agreement, dated June 19, 2003, between Heartland Oil and Gas Corp. and
C.K. Cooper and Company, Inc. (5)
| | -------------------------------------------------------------------------------------------------------------------------------

| | 10.4
             Managing Dealers Agreement, dated July 29, 2003 between Heartland Oil and
Gas Corp.          and C.K. Cooper and Company, Inc. (8)
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5
             Form of Subscription Agreement in connection with the private placements on
June 24          and June 30, 2003(5)
| | -----------------------------------------------------------------------------------------------------------------------------------

| | 10.6
             Form of Subscription Agreement in connection with the private placement on
August 19,       2003(6)
| | ---------------------------------------------------------------------------------------------------------------------

| | 10.7
             Consulting Agreement dated July 1, 2003, between Heartland Oil and Gas Corp.
and          Donald Sharpe (8)
| | -----------------------------------------------------------------------------------------------------------------------------

| | 10.8
             Consulting Agreement dated July 1, 2003, between Heartland Oil and Gas Corp.
and          Richard Coglon (8)
| | ------------------------------------------------------------------------------------------------------------------------------

| | 10.9
Letter Agreement between Topeka-Atchison Gas & Illuminating LLC with Heartland Oil and
Gas Inc., dated August 25, 2000 (8)
| | -------------------------------------------------------------------------------------------------------------------------------

| | 10.10
            Form of Oil and Gas Lease with Option (7)
| | -----------------------------------------------------------

| | 10.11
            Form of Subscription Agreement in connection with the private placement of
preferred       stock (10)
| | -----------------------------------------------------------------------------------------------------------------------

| | 14.1
             Code of Business Conduct and Ethics (10)
| | ----------------------------------------------------------

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

| | 31.1*           Section 302 Certifications under Sarbanes-Oxley Act of 2002
| | ---------------------------------------------------------------------------

| | 32.1*        Section 906 Certifications under Sarbanes-Oxley Act of 2002
| | ------------------------------------------------------------------------

*        Filed
herewith

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

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

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

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

| | (5) | Incorporated by reference to the companys Form 10-QSB filed with the
                    Securities and Exchange Commission on July 28, 2003.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------

---

21

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

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

| | (8) | Incorporated by reference to the companys Form SB-2 filed with the
                    Securities and Exchange Commission on August 29, 2003.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------

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

| | (10) | Incorporated by reference to the Companys Form 10-KSB filed with the
                    Securities and Exchange Commission on March 29, 2004.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------

---

22

# SIGNATURES

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

# HEARTLAND OIL AND GAS
CORP.

By: /s/ Richard Coglon Richard Coglon,
President, Chief Executive Officer and Director(Principal Executive Officer)August 12, 2004

By: /s/ Robert KnightRobert Knight, Chief
Financial Officer and Director(Principal Financial Officer)August 12, 2004