UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x
        QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period endedJune 30, 2005 o
        TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period Commission file number000-32669 HEARTLAND OIL AND GAS CORP.(Exact name of small business issuer as specified in its charter)  Nevada(State or other jurisdiction of incorporation or organization)
        
        91-1918326(I.R.S. Employer Identification No.)  Suite 1925, 200 Burrard StreetVancouver, British Columbia, Canada  V6C 3L6(Address of principal executive offices)  604.693.0177(Issuer's telephone number)   Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.      YesxNo o  Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)  Yes []
        Nox Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 46,737,013 common shares issued and outstanding as of August 3, 2005        - 2 -





PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.



HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)



BALANCE SHEET




June 30,
2005
        
        
        December 31,
2004(Unaudited)
        
        
        (Audited)ASSETSCurrent AssetsCash and cash equivalents
        $
        4,953,292
        
        $
        13,081,221Prepaid expense
        
        237,110
        
        
        332,021Receivable from officer (Note 6)
        
        42,500
        
        
        -Other current assets
        
        15,945
        
        
        762Total current assets
        
        5,248,847
        
        
        13,414,004Oil and Gas Property, unproven(Note 3)
        
        28,033,648
        
        
        35,559,413Advances to Arabian Heartland International Corp.(Note 4 )
        
        4,105,500
        
        
        -Property and Equipment(Note 5)
        
        210,315
        
        
        228,590TOTAL ASSETS
        $
        37,598,310
        
        $
        49,202,007LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable and accrued liabilities
        $
        262,927
        
        $
        764,790Due to related parties (Note 6)
        
        -
        
        
        10,520Total current liabilities
        
        262,927
        
        
        775,310Long-Term DebtAsset retirement obligations (Note 7)
        
        644,088
        
        
        562,619Total Liabilities
        
        907,015
        
        
        1,337,929Stockholders EquityPreferred stock -      $0.001 par value, 5,000,000 shares authorized,3,529,412 shares issued and outstanding
        
        3,529
        
        
        3,529Common stock -      $0.001 par value, 100,000,000 shares authorized,46,737,013 shares issued and outstanding (Note 6)
(December 31, 2004  50,070,347 shares issued, 46,737,013shares outstanding)
        
        46,737
        
        
        46,737Additional paid-in capital
        
        51,593,521
        
        
        51,198,763Deficit accumulated during the exploration stage
        
        (14,952,492)
        
        
        (3,384,951)36,691,295
        
        
        47,864,078TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
        $
        37,598,310
        
        $
        49,202,007

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









- 3 -





HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)



OPERATIONS STATEMENT

(Unaudited)




Three Months Ended
June 30,
2005
        Three Months Ended
June 30,
2004
        Six Months Ended
June 30,
2005
        Six Months Ended
June 30,
2004
        Period from
Inception
(August 11,
2000)
Through
June 30, 2005REVENUE
        $             -
        $               -
        $                 -
        $             -
        $               -EXPENSEImpairment loss on oil and gas property
        467,688
        -
        10,277,215
        -
        10,277,215General and administrative
        673,759
        410,588
        1,358,764
        791,295
        4,813,050Total operating expense
        1,141,447
        410,588
        11,635,979
        791,295
        15,090,265LOSS FROM OPERATIONS
        (1,141,447)
        (410,588)
        (11,635,979)
        (791,295)
        (15,090,265)OTHER INCOME (EXPENSE)Interest income
        20,630
        23,286
        68,438
        44,720
        189,963Interest expense
        -
        -
        -
        -
        (52,190)NET LOSS
        $  (1,120,817)
        $  (387,302)
        $ (11,567,541)
        $  (746,575)
        $ (14,952,492)BASIC AND DILUTED NET LOSS PER COMMON SHARE
        $          (0.02)
        $        (0.02)
        $            (0.25)
        $         (0.03)BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
        46,737,013
        24,402,199
        46,737,013
        24,376,815



















The accompanying notes are an integral part of these statements









- 4 -





HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)



CASH FLOW STATEMENT

(Unaudited)




Six Months Ended
June 30,
2005
        Six Months Ended
June 30,
2004
        Period from
Inception
(August 11,
2000)
Through
June 30, 2005CASH FLOW USED IN OPERATING ACTIVITYNet loss
        $(11,567,541)
        $(746,575)
        $(14,952,492)Adjustments to reconcile net loss to net cash used in operating activity:Accretion expense
        15,710
        
        25,959Accrued interest on convertible debentures
        -
        -
        49,061Stock  based compensation
        394,758
        301,051
        1,835,802Depreciation and amortization
        103,599
        3,004
        164,215Impairment loss on oil and gas property
        10,277,215
        -
        10,277,215Receivable from officer
        (42,500)
        -
        (42,500)Decrease (increase) in other assets
        (15,183)
        
        (15,945)Decrease (increase) in prepaid expense
        94,911
        15,705
        (237,085)(Decrease) increase in accounts payable and accrued liabilities
        (501,862)
        (151,356)
        492,373(Decrease) increase in asset retirement obligation
        (6,575)
        -
        (6,575)Net cash used in operating activity
        (1,247,468)
        (578,171)
        (2,409,972)CASH FLOW USED IN INVESTING ACTIVITYPurchase of property and equipment
        (12,985)
        (3,832)
        (263,401)Acquisition and exploration of oil and gas property
        (2,751,456)
        (3,363,583)
        (37,797,288)Advances to Arabian Heartland International Corp.
        (4,105,500)
        -
        (4,105,500)Net cash used in investing activity
        (6,869,941)
        (3,367,415)
        (42,166,189)CASH FLOW FROM FINANCING ACTIVITYIncrease (decrease) in due to related parties
        (10,520)
        (6,185)
        221,480Cash received on recapitalization
        -
        -
        15,896Proceeds from issuance of common stock, net of offering costs
        -
        55,500
        39,778,007Proceeds from issuance of preferred stock, net of offering costs
        -
        2,927,871
        8,927,868Proceeds from long-term debt
        -
        -
        586,202Net cash (used in) provided by financing activity
        (10,520)
        2,977,186
        49,529,453NET (DECREASE) INCREASE IN CASH
        (8,127,929)
        (968,400)
        4,953,292CASH, beginning of period
        13,081,221
        8,279,474
        -CASH, end of period
        $  4,953,292
        $  7,311,074
        $  4,953,292







The accompanying notes are an integral part of these statement










- 5 -

HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS





Note 1 - Organization, Operations and Significant Accounting Policies



Organization

On April 10, 2002, Adriatic Holdings Limited ("Adriatic") entered into a letter of intent to acquire all of the common stock of Heartland Oil and Gas Inc., a Nevada corporation ("Heartland").  Heartland was incorporated in the State of Nevada on August 11, 2000 and its principal business activity consists of exploration and development of oil and gas properties in the United States to determine whether they contain economically recoverable resources.  The Company is currently in the exploration stage and has not generated significant revenue from its operations.  Effective September 17, 2002, the acquisition of Heartland by Adriatic was completed through the issuance of one share of Adriatic common stock for each share of Heartland common stock outstanding.  At the time of the acquisition, Adriatic had 7,090,000 shares of common stock outstanding.  Adriatic issued 12,212,429 shares of common stock to the
stockholders of Heartland, and as a result, Adriatic 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 accompanying consolidated financial statements include the accounts of Adriatic since the date of the reverse acquisition (September 17, 2002) and the historical accounts of its wholly owned subsidiary, Heartland Oil and Gas Inc. since inception (collectively, the "Company", we or our).  All significant intercompany balances and transactions have been eliminated in consolidation.

We have suffered recurring losses from operations and has accumulated a deficit of $14,952,492 since inception on August 11, 2000.  At June 30, 2005 we have working capital of $4,985,920.  Since inception, we have funded operations through the issuance of capital stock and debt.  We plan to continue raising additional funds through future equity or debt financing until it achieves profitable operations from its oil and gas drilling and exploration activities.



Basis of Presentation

The accompanying consolidated financial statements are unaudited and include, in our opinion, all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. The financial statements should be read in conjunction with our audited financial statements and the related notes included in our December 31, 2004 Form 10-KSB.  The financial statements are interim financial statements prepared in accordance with accounting principles generally accepted in the United States and are stated in U.S. dollars.

Oil and Gas Property

We utilize the full cost method to account for our investment in oil and gas property.  As of June 30, 2005, we have no property with proven reserves.  At March 31, 2005, we recorded an impairment arising from the expiry of certain leases of $13,175, and an impairment of  $9,796,352 arising from the Engleke/Soldier Creek and the BTA pilot projects which were located on its northern acreage of the Forest City Basin.  In the quarter ended June 30, 2005 we recorded a $467,688 impairment charge on oil and gas leases we abandoned in the Forest City Basin.

Stock-Based Compensation

We account for stock-based compensation to employees and directors using Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees("APB 25") and have adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123,Accounting for Stock-Based Compensation(Statement 123).  Accordingly, we measure compensation cost for stock options at intrinsic value, which is the excess, if any, of the quoted market price of our common stock at the date of the grant over the amount an employee is required to pay for the stock.









- 6 -

HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS







Note 1 - Organization, Operations and Significant Accounting Policies (continued)

We account for stock-based compensation issued to non-employees and consultants in accordance with the provisions of Statement 123 and the Emerging Issues Task Force consensus in Issue No. 96-18 ("EITF 96-18"),

Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services.  Under our Amended 2005 Stock Option Plan, up to a maximum of 4,000,000 shares of common stock may be granted to key employees and consultants.  The options granted under the plan vest over four years except as stated otherwise in the individual grants, and are for a term not exceeding 10 years.  In addition, under our 2004 Stock Option Plan, up to a maximum of 2,000,000 shares of common stock were available for grant.

On June 9, 2005, we entered into stock option agreements with the following directors, employees and contractors, granting the right to purchase a total of 2,555,000 shares of our common stock as follows, at an exercise price of $0.40 per share, exercisable for a period of 10 years:




Name
        Number of Stock OptionsRichard Coglon
        750,000Phil Winner
        500,000Charles Willard
        500,000Donald Sharpe
        250,000Bob Knight
        250,000John Martin
        250,000Eileen Himes
        25,000Paul Mitchell
        20,000Kim Lloyd
        10,000Total
        2,555,000All of the above options will vest 50% on the June 9, 2006 and 50% on June 9, 2007.

Had we measured compensation cost based on the fair value of the options at the grant date for the six month periods ended June 30, 2005 and 2004 consistent with the method prescribed by Statement 123, our net loss and loss per common share would have been increased to the pro forma amounts indicated below:




Three Months Ended
June 30,
2005
        Three Months Ended
June 30,
2004
        Six Months Ended
June 30, 2005
        Six Months
Ended
June 30,
2004Net loss, as reported
        $(1,120,817)
        $  (387,302)
        $(11,567,541)
        $  (746,575)Add:  Stock-based employee compensation expense included inreported net income, net of related tax effects
        136,878
        193,538
        394,758
        301,051Deduct:  Total stock-based employee compensation expense deter-mined under fair-value-based method for all awards, net ofrelated tax effects
        (312,282)
        (680,183)
        (667,206)
        (785,040)Pro forma net loss
        $(1,296,221)
        $   (873,947)
        $(11,839,989)
        $(1,230,564)









- 7 -

HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS








Note 1 - Organization, Operations and Significant Accounting Policies (continued)Three Months
Ended
June 30,
2005
        Three Months Ended
June 30,
2004
        Six Months Ended
June 30, 2005
        Six Months
Ended
June 30,
2004Loss per share:Basic and diluted earnings (loss) per common shareAs reported
        $0.02
        $    (0.02)
        $   (0.25)
        $  (0.03)Pro forma
        $0.03
        $    (0.04)
        $   (0.25)
        $  (0.05)



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



Asset Retirement Obligations

We account for asset retirement obligations in accordance with the provisions of Statement 143 Accounting for Asset Retirement Obligations.  Statement 143 requires us to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. We recognize asset retirement obligations related to our oil and gas property.



Recent Accounting Pronouncements

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

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

Reclassifications

We have reclassified certain data in the financial statements of the prior periods to conform to the current period presentation.



Note 2 - Contingencies



We have incurred significant losses since inception.  We have not sold any hydrocarbons.  As of June 30, 2005 we have limited financial resources.  The continuation of our company is dependent upon our upon our ability to exploit our mineral holdings, generate revenue from our planned business operations, attain and maintain profitable operations and raise additional capital.







- 8 -

HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS





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.

We cannot assure that we will be able to obtain further funds required for our continued operations, that additional financing will be available to us when needed or, if available, or that we can obtain it on commercially reasonable terms.  If we are not able to obtain the additional financing on a timely basis, we may be unable to conduct our operations as planned, and we may not be able to meet our other obligations as they become due.  In such event, we would be forced to scale down or perhaps even cease our operations.




Note 3
        Oil and Gas Property, Unproven

The total cost incurred and excluded from depletion is summarized as:




Acquisition
Cost
        Exploration
Cost
        Impairment
Cost
        TotalCost incurred during periods ended:June 30, 2005
        $      120,175
        $  2,631,276
        $(10,277,215)
        $ (7,525,764)December 31, 2004
        23,187,379
        8,104,863
        -
        31,292,242December 31, 2003
        839,081
        1,278,006
        -
        2,117,087December 31, 2002
        917,003
        -
        -
        917,003December 31, 2001
        506,253
        591,875
        -
        1,098,128December 31, 2000
        110,000
        24,953
        -
        134,953Totals
        $ 25,679,891
        $ 12,630,973
        $(10,277,215)
        $  28,033,649

Pipeline and marketingIn July 2005 we signed contracts to initiate gas sales from our Lancaster CBM pilot located near Paola, Kansas. The agreement is with a subsidiary of Enbridge Energy Partners, L.P. to provide for construction of a pipeline tap into a gas transportation line and for gas marketing services.  While the gas price is variable, we expect to realize a wellhead price approximating the NYMEX price minus $0.60.  The $0.60 deduction from NYMEX reflects regional price differentials and marketing expense.  We expect construction to start immediately and to take approximately 60 to 90 days to complete.



In addition, we have ordered pipe, valves, and compression necessary to construct a gathering system.  The gathering and pipeline system will be five miles long and include processing facilities.  The system will be sized to support the production from Lancaster and from other pilots capable of economic production.



Note 4Advances to Arabian Heartland International Corp.



On April 20, 2005, we entered into a joint venture agreement with Far East International Petroleum Company (FEIPCO), which has its head office in Dubai, United Arab Emirates, to form Arabian Heartland International Corp (Arabian Heartland).  Although not fully executed, the joint venture agreement was approved by our board of directors, and signed and approved by Heartlands CEO and FEIPCOs Chairman.  We own a 35% interest in the joint venture via a wholly owned subsidiary, Heartland International Corporation (HICO).  Our Board has also consented to the independent participation by our CEO in a 5% interest in the joint venture.  FEIPCO owns a 60% interest.

Arabian Heartland is to pursue specific oil and gas industry opportunities in the Middle East, with the initial focus on securing contracts in Southern Iraq relating to exploration, drilling, production and marketing of hydrocarbons and the procurement or provision of related oilfield services, including drilling and related service contracts and production sharing agreements.







- 9 -

HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS





In May 2005 FEIPCO, on behalf of the parties, submitted tender offers to the Iraq Oil Ministry to drill and complete a total of 64 oil wells in Southern Iraq.  Bidding on the 64 wells is now closed and the winning bid is expected to be awarded by the Ministry of Oil in September 2005. Under the JV agreement, Heartland has the right to earn a 35% participation in the drilling project by paying its proportionate share of related cost.  If awarded the contract, in whole or in part, FEIPCO and Heartland, as joint venture partners will, as required under the JV Agreement, assign all their rights in and to the drill contracts to Arabian Heartland.  Under the JV Agreement, FEIPCO will be responsible for providing the joint venture with all aspects of logistics, material procurements, in country staffing and security.  Heartland will be responsible for providing those duties customarily undertaken by a drilling
contractor and as may be otherwise required under the tender offer contracts.

In late May 2005 FEIPCO and HICO, through Arabian Heartland, began permitting and construction of an oil field camp ("Camp").  We intend the Camp to accommodate all personnel required for the joint venture operations and to serve as the operating base for joint venture projects. The Camp is expected to be completed and ready for operations by October  2005. We have paid $3,755,500 as a deposit toward our proportionate share of the construction of the joint ventures oil field camp.  When constructed, the camp will house oil field personnel required to fulfil the joint ventures drilling obligations under the 64 well bid program, if and when awarded to the joint venture.  We have paid $350,000 and may be called upon to pay an additional $350,000 as our 35% interest in $2,000,000 of bonds paid in connection with the ventures bid proposals.

We are very much aware of the political and security issues associated with doing business in Iraq and with the assistance of Far East International Petroleum Company, we have and will continue to take all appropriate and necessary measures to ensure our personnel and our assets are safe.  Nevertheless, we cannot assure a successful venture and it is possible that we will lose our entire investment in the venture.



Note 5  Property and Equipment




Cost
        Accumulated Amortization
        June 30,
2005
Net Carrying Value
        
        December 31, 2004
Net Carrying ValueOffice furniture and equipment
        $          266,302
        $         55,987
        $         210,315
        
        $          228,590

Note 6 - Related Party Transactions



The receivable from an officer of $42,500 on the balance sheet was a payment made by us on behalf of our CEO.  Our CEO repaid the balance in July 2005.  The amount due to related parties  represented non-interest bearing expense reimbursements to directors and officers, which were subsequently paid.

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

We entered into a management consulting agreement dated August 2, 2004, as amended, with our Chief Operating Officer (COO) for the payment of management fees of $10,000 per month.  On April 1, 2005, our COO became an employee.  We agreed to pay a potential bonus to our COO of $10,000, to a maximum of $40,000 per year, for each five well program brought into production on our Forest City Basin operations.  We agreed to pay a potential bonus to our Vice President, Operations, of $5,000, to a maximum of $10,000 per year, for each five well program brought into production on our Forest City Basin operations.

During the six-months ended June 30, 2005, we incurred $152,664 (2004 - $91,826) in management and consulting fees to our directors and officers.







- 10 -

HEARTLAND OIL & GAS CORP.

(An Exploration Stage Company)

NOTES TO FINANCIAL STATEMENTS





Note 7  Asset Retirement Obligations


Six MonthsEnded
        Year EndedJune 30,
        December 31,2005
        2004


Beginning asset retirement obligations
        $562,619
        $-Additions related to new property
        -
        276,953Liabilities incurred
        72,334
        275,417Reductions related to property disposals
        (6,576)
        -Accretion
        15,710
        10,249


Total asset retirement obligations
        $644,088
        
        $562,619

Note 8 - Common Stock



During the quarter ended March 31, 2004 we 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.



On January 13, 2004 we closed a private placement of 995,305 units at $3.20 per unit for proceeds of $3,184,979, before issue cost.  Each unit is one share of convertible Series A Preferred stock and one stock purchase warrant to purchase one-half of one share of common stock for the additional consideration of $3.84 per share.  The warrants have a three year life. The preferred shares have been converted into common shares.



During the quarter ended June 30, 2004 we issued 30,000 shares of common stock at $0.50 per share for proceeds of $15,000 from the exercise of stock options.



During the quarter ended June 30, 2005 we issued no shares.












- 11 -



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

FORWARD-LOOKING STATEMENTS

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

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

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

Business Development During Last Three Years

General Overview

We are an 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.  We also participate in a joint venture to pursue specific oil and gas industry opportunities in Iraq.  Our "Soldier Creek" project encompassed approximately 252,583 acres of prospective frontier CBM lands.  Our subsidiary, Heartland Oil and Gas Inc., holds the interests in the leases and operates the project.  Effective September 27, 2004 we acquired leases covering an additional 766,000 acres of prospective CBM lands, also in the Forest City Basin.  We have not renewed some leases and as of August 3, 2005 we have leases covering approximately 853,000 acres.

Corporate History

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

We are an oil and gas exploration company that, prior to our recent acquisition of certain assets from Evergreen Resources, had interests in leases covering approximately 252,583 acres in central Kansas.  We have a 100% working interest in all of these leases.  Our net revenue interest in these leases is 84.5%.  We also participate in a joint venture pursuing specific oil and gas industry opportunities in the Middle East, initially focused on drilling and related service contracts and production sharing agreements in Iraq.


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







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Our Current Business

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

We are an exploration stage oil and gas company engaged in the exploration for and development of Coal Bed Methane in the "Soldier Creek Prospect" located in the Forest City Basin of northeast Kansas.  We also participate in a joint venture pursuing specific oil and gas industry opportunities in the Middle East, initially focused on drilling and related service contracts and production sharing agreements in Iraq.

Pursuant to several oil and gas leases entered into with various parties prior to our recent acquisitions of further leases from Evergreen Resources, Inc., our "Soldier Creek" project encompassed approximately 252,583 acres of prospective frontier coal bed methane lands.  We have a 100% working interest in all of these leases.  Our net revenue interest in these leases is 84.5%, so as a result our net acreage is approximately 213,000 acres.  Our "working interest" consists of our share of gross production, revenue, burdens, field operating cost 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 2005 through 2012.  Certain of our
leases may be extended upon the exercise of options on the leases.  In 2005 we expect to pay $422,000 on lease extensions.  In 2006 we expect to pay approximately $355,076 on leases extensions.  In addition, we are obligated to pay delay rentals on certain leases of approximately $75,000 in 2005 and 2006.

From 2000 through 2004 we acquired our acreage position in the Forest City Basin and conducted extensive exploration activity.  While we are venting commercial quantities of gas and are awaiting connection to a pipeline in order to market our gas, we have not yet recorded proved CBM reserves.  At March 31, 2005, we recorded an impairment of $9,796,352 arising from the Engleke/Soldier Creek and the BTA pilot projects in our northern acreage of the Forest City Basin.

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

We have shifted our primary Kansas focus to the acreage we acquired from Evergreen Resources.

Acquisition of Assets from Evergreen Resources, Inc.

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







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After the acquisition of the Evergreen assets, we held in excess of 1 million acres of prospective CBM leases at various stages of development, 91 wells, including 39 CBM wells in eight pilots that are currently dewatering and/or venting gas, 41 CBM wells awaiting stimulation, and 11 saltwater disposal wells.  As of August 1, 2005,  we have leases covering approximately 853,000 acres.  As of August 1, 2005, seventeen of the CBM wells acquired from Evergreen have been fracture stimulated and put on pump.  As of August 1, 2005, we have drilled eleven additional CBM wells in our Southern acreage, of which five have been completed in the our Lancaster pilot area.  The remaining six wells are have been completed.  Two of the six wells have initial flow rates that we believe may be economic.  The other four wells are venting gas and show increasing production rates, but their ultimate
commerciality is speculative.

We are continuing to focus our efforts on the Lancaster pilot project, located near Ottawa, Kansas.  We have been successful in cutting cost and improving the per-well performance from when we first acquired the acreage from Evergreen Resources..  The changes we implemented in the completion programs at Lancaster have increased production from an average of 3 to 5 thousand cubic feet of gas per day (mcfpd) to 15 to 20 mcfpd and reduced cost by some 40% per well.

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

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

Pipeline and marketingIn July 2005 we signed contracts to initiate gas sales from our Lancaster CBM pilot located near Paola, Kansas. The agreement is with a subsidiary of Enbridge Energy Partners, L.P. to provide for construction of a pipeline tap into a gas transportation line and for gas marketing services.  While the gas price is variable, we expect to realize a wellhead price approximating the NYMEX price minus $0.60.  The $0.60 deduction from NYMEX reflects regional price differentials and marketing expense.  We expect construction to start immediately and to take approximately 60 to 90 days to complete.



In addition, we have ordered pipe, valves, and compression necessary to construct a gathering system.  The gathering and pipeline system will be five miles long and include processing facilities.  The system will be sized to support the production from Lancaster and from other pilots capable of economic production.



Net of fuel gas, the Lancaster pilot is currently producing approximately 320 mcfpd.  In addition, we have initiated production operations on eight wells in three previously shut-in pilots.  We expect dewatering of the new wells to begin immediately.



We believe current production rates at Lancaster justify the cost of constructing a pipeline.  We hope to see additional production gains as gas sales allow us to continue to dewater and further optimize operational practices.  We are now in the process of applying our completion and production techniques to other pilots. If our expansion efforts are successful, we believe we will have established an asset base with potential to grow reserves, production, and cash flow.

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







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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 cost.

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 natural gas 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 coal - an efficient storage mechanism as coal bed methane coal 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 coal; the permeability or flow characteristics of the coal; and, the thickness of the coal bed.  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 Basin.

FEIPCO Iraq Joint Venture

On April 20, 2005, we entered into a joint venture agreement with Far East International Petroleum Company (FEIPCO), which has its head office in Dubai, United Arab Emirates, to form Arabian Heartland International Corp (Arabian Heartland).  Although not fully executed, the joint venture agreement was approved by our board of directors, and signed and approved by Heartlands CEO and FEIPCOs Chairman.  We own a 35% interest in the joint venture via a wholly owned subsidiary, Heartland International Corporation (HICO).  Our Board has also consented to the independent participation by our CEO in a 5% interest in the joint venture.  FEIPCO owns a 60% interest.







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Arabian Heartland is to pursue specific oil and gas industry opportunities in the Middle East, with the initial focus on securing contracts in Southern Iraq relating to exploration, drilling, production and marketing of hydrocarbons and the procurement or provision of related oilfield services, including drilling and related service contracts and production sharing agreements.

In May  2005 FEIPCO, on behalf of the parties, submitted tender offers to the Iraq Oil Ministry to drill and complete a total of 64 oil wells in Southern Iraq.  Bidding on the 64 wells is now closed and the winning bid is expected to be awarded by the Ministry of Oil in September 2005. Under the JV agreement, Heartland has the right to earn a 35% participation in the drilling project by paying its proportionate share of related cost.  If awarded the contract, in whole or in part, FEIPCO and Heartland, as joint venture partners will, as required under the JV Agreement, assign all their rights in and to the drill contracts to Arabian Heartland.  Under the JV Agreement, FEIPCO will be responsible for providing the joint venture with all aspects of logistics, material procurements, in country staffing and security.  Heartland will be responsible for providing those duties customarily
undertaken by a drilling contractor and as may be otherwise required under the tender offer contracts.

In late May 2005 FEIPCO and HICO, through Arabian Heartland, began permitting and construction of an oil field camp ("Camp").  We intend the Camp to accommodate all personnel required for the joint venture operations and to serve as the operating base for joint venture projects. The Camp is expected to be completed and ready for operations by October  2005.  We have paid $3,755,500 as a deposit toward our proportionate share of the construction of the joint ventures oil field camp.  When constructed, the camp will house oil field personnel required to fulfil the joint ventures drilling obligations under the 64 well bid program, if and when awarded to the joint venture.  We have paid $350,000 and may be called upon to pay an additional $350,000 as our 35% interest in $2,000,000 of bonds paid in connection with the ventures bid proposals.

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

We believe that the initial opportunities Arabian Heartland is pursuing in the Middle East with FEIPCO will provide the first mover advantage needed to give shareholders of micro-cap companies such as ours growth opportunities.  We are very much aware of the political and security issues associated with doing business in these areas and with the assistance of Far East International Petroleum Company, we have and will continue to take all appropriate and necessary measures to ensure our personnel and our assets are safe.  Nevertheless, we cannot assure a successful venture and it is possible that we will lose our entire investment in the venture.

Liquidity and Capital Resources

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

Pursuant to several oil and gas leases entered into with various parties and our acquisitions from Evergreen Resources, our Soldier Creek project encompasses approximately 252,584, acres of prospective frontier coal bed methane lands.  The expiration dates for the leases range from dates in 2005 through 2012.  Certain of the leases may be extended upon the exercise of options on the leases.







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

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

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

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

As of June 30, 2005 we had working capital of $4,986,000.  Over the next twelve months we intend to use all available funds to expand on the exploration and development of our Lancaster Prospect and pursue our joint venture activity in Iraq, as shown below:

Estimated Expenditures During the Next Twelve Months




General and Administrative
        $1,800,000AcreageRentals and Option Payments
        $0New Land
        $70,000OperationsComplete 6 CBM wells
        $150,000Drill, and Complete 8 new wells, as necessary
        $800,000Gathering and Pipelines
        $1,200,000Lease Operating Expense
        $348,000Iraq Joint Venture Activity
        $350,000Total
        $4,718,000Related to performing the work described above we are planning to raise additional capital.  We may not be able to do so.  Should we not be able to do so we may reduce the scope of our activity.

During the quarter ended June 30, 2005 we spent $595,000 on exploration and acquisition of oil and gas property.   We had negative acquisition cost of $134,000 because we had previously paid funds toward acquisition of acreage which we subsequently concluded we did not wish to purchase.  Our exploration cost for the quarter was $729,000.

During the six months ended June 30, 2005 we spent $2,751,000 on exploration and acquisition of our oil and gas property.  $120,000 was acquisition cost and $2,631,000 was exploration cost.At June 30, 2005, we had $263,000 in current liabilities, compared to $775,000 at December 31, 2004.  Our total liabilities at June 30, 2005







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were $907,000, compared to $1,338,000 at December 31, 2004.  The decreases occurred because we paid down our accounts payable from $765,000 as at December 31, 2004 to $263,000 at June 30, 2005.

Results of Operations

Quarter ended June 30, 2005 compared to quarter ended June 30, 2004We incurred a net loss of $1,121,000 for the quarter ended June 30, 2005, compared to a net loss of $387,000 for the quarter ended June 30, 2004.  As a result, our accumulated net loss increased to $14,952,000 during the period from inception to June 30, 2005.  Our loss increased primarily as a result of a $468,000 impairment charge on oil and gas leases we abandoned in the Forest City Basin, and  increases in salaries of $86,000 and professional fees of $91,000.

Six months ended June 30, 2005 compared to six months ended June 30, 2004We incurred a net loss of $11,568,000 for the six months ended June 30, 2005, compared to a net loss of $747,000 for the six months ended June 30, 2004.  Our 2005 loss was primarily caused by a $10,277,000 impairment charge on our oil and gas property.  The impairment occurred primarily from the Engelke/Soldier Creek pilots and the BTA pilot projects were located on our northern acreage in Brown County, Kansas.   We had implemented a completion program in the Engelke/Soldier Creek and the BTA pilot projects.  The results of the completions did not result in any sustainable or large increase in production from the wells tested.  Rather than implementing further completion or drill programs on our northern acreage, we determined that it is best to focus our efforts on our southern acreage acquired from
Evergreen Resources, and if successful, to later implement some of the same lower cost and seemingly more effective completion procedures on our northern acreage.  Accordingly, we will be shutting in our original Engelke pilot, located near Holton, Kansas, which to date has failed to produce economic quantities of natural gas. The BTA pilot, acquired from Evergreen Resources during the last quarter of 2004, will also be shut in due to noncommercial production.  Both pilots produce gas, but despite extensive dewatering efforts, have failed to show the improvements in natural gas rate needed to justify pipeline investment and hookup.

We have incurred recurring losses from operations.  Our continuation is dependent upon a successful program of acquisition and exploration, and achieving a profitable level of operations.  We are seeking additional financing.  We have raised additional capital through the equity offerings noted above.  The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders.  Obtaining loans, assuming those loans would be available, would increase our liabilities and future cash commitments.  We cannot assure that we will be able to obtain further funds we desire for our continuing operations or, if available, that funds can be obtained on commercially reasonable terms.  If we are not able to obtain additional financing on a timely basis, we may be unable to conduct our operations as planned.  In such event, we would
have to scale down or perhaps even cease our operations.

Other

Product Research and Development

Our business plan is focused on a strategy for maximizing the long-term exploration and development of our CBM Prospect in northeastern Kansas, and fulfilling the commitments of our Iraqi joint venture.  To date, execution of our business plan has largely focused on acquiring prospective CBM leases and drilling test wells on our CBM acreage from which to establish an ongoing exploration and development plan. We also plan to pursue additional projects in our Iraqi joint venture.

Purchase of Significant Equipment

Except as may be required under our joint venture commitments with FEIPCO, we do not intend to purchase any significant equipment (excluding oil and gas activity) over the year ending June 30, 2006.







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Employees

Currently we have four full time employees other than our officers and directors.  We do not expect material changes in the number of employees over the next year except as may be arise under our Iraqi joint venture.  We do and will continue to outsource contract employment as needed.

New Accounting Pronouncements

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

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

Critical Accounting Policies

We presented our critical accounting policies in our 2004 Annual Report on Form 10-KSB.  We did not change our critical accounting policies during the six months ended June 30, 2005.



In accordance with Statement No. 144,Accounting for the Impairment of Long-Lived Assets, we review the carrying amount of long-lived assets when facts and circumstances suggest they may be impaired.  If this review indicates long-lived assets will not be recoverable as determined based on the undiscounted cash flow estimated to be generated by these assets, we reduce the carrying amount of these long-lived assets to estimated fair value or discounted cash flow, as appropriate.  As part of our preparation of these financial statements, we recognized impairment charges of $10,277,000 in the six months ended June 30, 2005, as discussed above.

RISK FACTORS

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

Those forward-looking statements also involve certain risks and uncertainties.  Factors, risks and uncertainties that could cause or contribute to such differences include those specific risks and uncertainties discussed below and those discussed in our Form 10-KSB Annual Report for the year ended December 31, 2004.  The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in this document.

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







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RISKS RELATED TO OUR BUSINESS

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

To date we have had negative cash flow from operations and we have been dependent on sales of our equity securities and debt financing to meet our cash requirements and have incurred net losses totalling $1,121,000 for the quarter ended June 30, 2005, and cumulative net losses of $14,952,000 from inception to June 30, 2005.  As of June 30, 2005 we had working capital of $4,986,000.  We do not expect positive cash flow from operations in the near term.  There is no assurance that actual cash requirements will not exceed our estimates.  In particular, additional capital may be required in the event that:

- the cost to acquire further acreage is more than we currently anticipate;

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

- we encounter greater cost associated with general and administrative expense or offering cost; or

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

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

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

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

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

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

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

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







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selling shareholders, your proportionate ownership interest and voting power will be decreased accordingly.  Further, any such issuance may result in a change of control of our corporation.

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

Since inception through June 30, 2005, we have incurred aggregate net losses of $14,952,000.  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 flow 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 revenue, 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.

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.







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

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

A majority of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States.  As a result, it 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 revenue nor have we realized a profit from our operations to date and there is little likelihood that we will generate any revenue 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 revenue, we will have to raise additional monies through the sale of our equity securities or debt in
order to continue our business operations.

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

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

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

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







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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 high 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.

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.







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

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

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

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

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

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

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

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk



We currently invest our excess cash balances in money market accounts, and short-term and long-term investments that are subject to interest rate risk.  The amount of interest income we earn on these funds will change as interest rates in general change.  Our investments are subject to a loss of principal if market interest rates increase and they are sold prior to maturity.  However, due to the short-term nature of the majority of our investments, the high credit quality of our portfolio and our ability to hold our investments until maturity, an immediate 1% change in interest rates would not have a material impact on our financial position, results of operations or cash flow.

Item 4. 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, 2005.  This evaluation was carried out under the supervision and with the participation of our company's management, including our company's chief executive officer and chief financial officer.  Based upon that evaluation, our company's chief executive officer and chief financial officer concluded that our company's disclosure controls and procedures are effective as of 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.







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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.

Any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met.  In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.  Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

Effective May 30, 2005, Michael David resigned as our Chief Financial Officer.  Effective July 19, 2005 Robert L. Poley was appointed as our Chief Financial Officer in place of Michael David.

Item 6. Exhibits.

Exhibits Required by Item 601 of Regulation S-B

Exhibit Number/Description

The following Exhibits are filed with this Quarterly Report:


ExhibitNumber
        Description3.1
        Articles of Incorporation (1)3.2
        Bylaws of Adriatic Holdings Ltd. (1)







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3.3
        Certificate of Amendment to Articles of Incorporation effective November 4, 2002 (2)3.4
        Certificate of Amendment to Articles of Incorporation effective December 10, 2003 (12)3.5
        Certificate of Designation for shares of Series A Convertible Preferred Stock, effective December 18, 2003 (9)3.6
        Certificate of Designation for shares of Series B Convertible Preferred Stock, effective October 1, 2004 (12)4.1
        2005 Stock Option Plan (13)10.1
        Form of Oil and Gas Lease (4)10.2
        Managing Dealers Agreement, dated June 19, 2003, between Heartland Oil and Gas Corp. and C.K. Cooper and Company, Inc. (5)10.3
        Managing Dealers Agreement, dated July 29, 2003 between Heartland Oil and Gas Corp. and C.K. Cooper and Company, Inc. (8)10.4
        Form of Subscription Agreement in connection with private placements on June 24 and June 30, 2003 (5)10.5
        Form of Subscription Agreement in connection with private placement on August 19, 2003 (6)10.6
        Consulting Agreement dated July 1, 2003, between Heartland Oil and Gas Corp. and Donald Sharpe (8)10.7
        Consulting Agreement dated July 1, 2003, between Heartland Oil and Gas Corp. and Richard Coglon (8)10.8
        Letter Agreement between Topeka-Atchison Gas & Illuminating LLC with Heartland Oil and Gas Inc., dated August 25, 2000 (8)10.9
        Form of Oil and Gas Lease with Option (7)10.10
        Form of Subscription Agreement in connection with private placement of Series A Preferred shares, dated September 24, 2003 (10)10.11
        Purchase and Sale Agreement between Heartland Oil and Gas Corp. and Evergreen Resources, Inc, dated effective September 27, 2004 (12)10.12
        Form of Securities Purchase Agreement in connection with private placement of Series B Preferred shares, dated October 1, 2004  (11)10.13
        Form of Subscription Agreement in connection with the private placement on September 27, 2004 (12)10.14
        Amended Consulting Agreement dated November 1, 2004 with Richard Coglon (13)10.15
        Amended Consulting Agreement dated November 1, 2004 with Donald Sharpe (13)







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10.16
        Joint Venture Agreement dated April 20, 2005 between Far East International Petroleum Company (14)10.17
        Agreement for Services dated July 19, 2005 with Robert Poley (15)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
        
        Certification of Chief Executive Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended) *31.2
        
        Certification of Chief Financial Officer (pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as amended) *32.1#
        
        Certification of Chief Executive Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350)) *32.2#
        
        Certification of Chief Financial Officer (pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. Section 1350)) *

______________________

* Filed herewith



#This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.



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



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



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



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



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



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



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



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









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



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



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



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



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



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



(15)Incorporated by reference to the company's current report on Form 8-K filed with the Securities and Exchange Commission on July 21, 2005.













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SIGNATURES

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

HEARTLAND OIL AND GAS CORP.

By:  /s/ Richard Coglon

Richard Coglon, President, Chief Executive Officer and Director

(Principal Executive Officer)

August 12, 2005




By:
        /s/ Robert L. PoleyRobert L. Poley, Chief Financial Officer

(Principal Financial and Accounting Officer)

August 12, 2005