---

United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

Quarterly Report under Section 13 or 15(D) of the Securities Exchange Act Of 1934

For the
quarter endedMarch 31, 2006

Commission file number 000-32669

Heartland Oil and Gas Corp.



|                       |  |                      
|---------------------- |  | ---------------------
|Incorporated in Nevada |  | IRS ID No. 91-1918326

1625 Broadway, Suite 1480

Denver, Colorado 80202

Telephone: (303) 405-8450

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.

The registrant is a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

The registrant is not a shell company (as defined in
Rule 12b-2 of the Exchange Act).

Heartland has 46,737,013 shares of common stock outstanding as of April 24, 2006



---



---

|Item 1. | Financial Statements.
|------- | ---------------------

Heartland Oil & Gas
Corp.

Balance Sheet



|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ----------- | - | -------------------------- | - | ----------- | -
|                                                                                                                                                                                           |  | March 31, 2006 (Unaudited) |             |   | December 31,2005 (Audited) |  
|Assets                                                                                                                                                                                     |  |                            |             |   |                            |   |             |  
|Current Assets                                                                                                                                                                             |  |                            |             |   |                            |   |             |  
|Cash and cash equivalents                                                                                                                                                                  |  | $                          | 855,073     |   |                            | $ | 2,126,156   |  
|Prepaid expense                                                                                                                                                                            |  |                            | 110,547     |   |                            |   | 145,658     |  
|Other current assets                                                                                                                                                                       |  |                            | 150,891     |   |                            |   | 3,849       |  
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|Total current assets                                                                                                                                                                       |  |                            | 1,116,512   |   |                            |   | 2,275,663   |  
|Oil and Gas Property, unproved                                                                                                                                                             |  |                            | 1,711,008   |   |                            |   | 1,776,322   |  
|Oil and Gas Property, proved (full cost method)                                                                                                                                            |  |                            | 1,245,537   |   |                            |   | 1,316,102   |  
|Pipeline and Facilities                                                                                                                                                                    |  |                            | 2,579,100   |   |                            |   | 2,332,155   |  
|Advances to Arabian Heartland International Corp.                                                                                                                                          |  |                            | 4,105,500   |   |                            |   | 4,105,500   |  
|Impairment of Arabian Heartland International Corp. advances                                                                                                                               |  |                            | (4,105,500  | ) |                            |   | (4,105,500  | )
|Property and Equipment                                                                                                                                                                     |  |                            | 150,446     |   |                            |   | 160,797     |  
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|Total Assets                                                                                                                                                                               |  | $                          | 6,802,602   |   |                            | $ | 7,861,039   |  
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|Liabilities and Stockholders Equity                                                                                                                                                       |  |                            |             |   |                            |   |             |  
|Current Liabilities                                                                                                                                                                        |  |                            |             |   |                            |   |             |  
|Accounts payable                                                                                                                                                                           |  | $                          | 269,798     |   |                            | $ | 282,297     |  
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|Long-Term Liability                                                                                                                                                                        |  |                            |             |   |                            |   |             |  
|Asset retirement obligations (Note 7)                                                                                                                                                      |  |                            | 212,753     |   |                            |   | 671,140     |  
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|Stockholders Equity                                                                                                                                                                       |  |                            |             |   |                            |   |             |  
|Preferred stock - $0.001 par value, 5,000,000 shares authorized, 3,529,412 shares issued and outstanding                                                                                   |  |                            | 3,529       |   |                            |   | 3,529       |  
|Common stock - 0.001 par value, 100,000,000 shares authorized, 46,737,013 shares issued and outstanding (Note 8) (March 31, 2006- 50,070,347
shares issued, 46,737,013 shares outstanding) |  |                            | 46,737      |   |                            |   | 46,737      |  
|Additional paid-in capital                                                                                                                                                                 |  |                            | 51,948,871  |   |                            |   | 51,817,302  |  
|Accumulated deficit                                                                                                                                                                        |  |                            | (45,679,086 | ) |                            |   | (44,959,966 | )
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|Total stockholders equity                                                                                                                                                                 |  |                            | (6,320,051  | ) |                            |   | (6,907,602  | )
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  
|Total Liabilities And Stockholders Equity                                                                                                                                                 |  | $                          | 6,802,602   |   |                            | $ | 7,861,039   |  
|                                                                                                                                                                                           |  |                            |             |   |                            |   |             |  

See accompanying notes.



2



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Heartland Oil & Gas Corp.

Operations Statement

(Unaudited)



|                                                                       |  |                             |            |   |                              |   |             |  
|---------------------------------------------------------------------- |  | --------------------------- | ---------- | - | ---------------------------- | - | ----------- | -
|                                                                       |  | Quarter Ended March 31,2006 |            |   | Quarter Ended March 31, 2005 |  
|Natural gas sales                                                      |  | $                           | 56,704     |   |                              | $ |            |  
|                                                                       |  |                             |            |   |                              |   |             |  
|Expense                                                                |  |                             |            |   |                              |   |             |  
|Lease operating expense                                                |  |                             | 60,177     |   |                              |   |            |  
|Exploration expense                                                    |  |                             | 115,459    |   |                              |   | 9,809,527   |  
|General and administrative expense                                     |  |                             | 609,639    |   |                              |   | 685,005     |  
|                                                                       |  |                             |            |   |                              |   |             |  
|Total operating expense                                                |  |                             | 785,275    |   |                              |   | 10,494,532  |  
|                                                                       |  |                             |            |   |                              |   |             |  
|Loss From Operations                                                   |  |                             | (725,571   | ) |                              |   | (10,494,532 | )
|Interest income                                                        |  |                             | 9,451      |   |                              |   | 47,809      |  
|                                                                       |  |                             |            |   |                              |   |             |  
|Net Loss                                                               |  | $                           | (719,120   | ) |                              | $ | (10,446,723 | )
|                                                                       |  |                             |            |   |                              |   |             |  
|Basic And Diluted Net Loss Per Common Share                            |  | $                           | (0.02      | ) |                              | $ | (0.22       | )
|                                                                       |  |                             |            |   |                              |   |             |  
|Basic And Diluted Weighted Average Number Of Common Shares Outstanding |  |                             | 46,737,000 |   |                              |   | 46,737,000  |  
|                                                                       |  |                             |            |   |                              |   |             |  

The accompanying notes are an integral part of these statements



3



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Heartland Oil & Gas Corp.

Cash Flow Statement

(Unaudited)



|                                                                             |  |                            |            |   |                             |   |             |  
|---------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | --------------------------- | - | ----------- | -
|                                                                             |  | Quarter EndedMarch 31,2006 |            |   | Quarter EndedMarch 31, 2005 |  
|Cash Flow Used In Operating Activity                                         |  |                            |            |   |                             |   |             |  
|Net loss                                                                     |  | $                          | (719,120   | ) |                             | $ | (10,446,723 | )
|Adjustments to reconcile net loss to net cash used in operating activity:    |  |                            |            |   |                             |   |             |  
|Accretion expense                                                            |  |                            | 4,539      |   |                             |   | 7,910       |  
|Accrued interest on convertible debentures                                   |  |                            |           |   |                             |   |            |  
|Stock  based compensation                                                   |  |                            | 131,569    |   |                             |   | 257,880     |  
|Depreciation and amortization                                                |  |                            | 82,084     |   |                             |   | 57,749      |  
|Exploration expense (non-cash)                                               |  |                            | 115,459    |   |                             |   | 9,809,527   |  
|Decrease (increase) in other assets                                          |  |                            | (147,042   | ) |                             |   | (161        | )
|Decrease in prepaid expense                                                  |  |                            | 35,111     |   |                             |   | 14,900      |  
|(Decrease) increase in accounts payable and accrued liabilities              |  |                            | (12,499    | ) |                             |   | (309,704    | )
|(Decrease) increase in asset retirement obligation - well plugging cost paid |  |                            | (502,109   | ) |                             |   |            |  
|                                                                             |  |                            |            |   |                             |   |             |  
|Net cash used in operating activity                                          |  |                            | (1,012,008 | ) |                             |   | (608,622    | )
|Cash Flow Used In Investing Activity                                         |  |                            |            |   |                             |   |             |  
|Proceeds from the sale of used well equipment                                |  |                            | 139,166    |   |                             |   |            |  
|Purchase of property and equipment                                           |  |                            | (6,898     | ) |                             |   | (7,031      | )
|Acquisition and exploration of oil and gas property                          |  |                            | (391,343   | ) |                             |   | (2,124,248  | )
|                                                                             |  |                            |            |   |                             |   |             |  
|Net cash used in investing activity                                          |  |                            | (259,075   | ) |                             |   | (2,131,279  | )
|                                                                             |  |                            |            |   |                             |   |             |  
|Cash Flow From Financing Activity                                            |  |                            |            |   |                             |   |             |  
|Increase (decrease) in due to related parties                                |  |                            |           |   |                             |   | (10,493     | )
|                                                                             |  |                            |            |   |                             |   |             |  
|Net cash (used in) provided by financing activity                            |  |                            |           |   |                             |   | (10,493     | )
|                                                                             |  |                            |            |   |                             |   |             |  
|Net (decrease) in cash                                                       |  |                            | (1,271,083 | ) |                             |   | (2,570,394  | )
|Cash, beginning of period                                                    |  |                            | 2,126,156  |   |                             |   | 13,081,221  |  
|                                                                             |  |                            |            |   |                             |   |             |  
|Cash, end of period                                                          |  | $                          | 855,073    |   |                             | $ | 10,330,827  |  
|                                                                             |  |                            |            |   |                             |   |             |  

The accompanying notes are an integral part of these statements



4



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Heartland Oil & Gas Corp.

Notes to Financial Statements

Note 1 - Organization, Operations and
Significant Accounting Policies

Organization

Heartland Oil and Gas Corp. was incorporated in Nevada on August 11, 2000. Our principal business is exploration and development of oil and gas property in the United States. Through December 31, 2005, we
were in the exploration stage and had not generated significant revenue from our operations. We first sold natural gas in February 2006 so we are no longer an exploration stage company.

The accompanying consolidated financial statements include the accounts of Heartland Oil and Gas Corp. and its wholly owned entities. We have eliminated all significant intercompany balances and transactions in
consolidation.

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, 2005 Form 10-K. 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.

Stock-Based Compensation

Effective January 1, 2006, we account for stock-based compensation based on the fair value of the options at the grant date as provided by FASB Statement 123(R),
Stock-Based Compensation. We record compensation expense for all share-based awards granted, and for awards modified, repurchased or cancelled. We will recognize compensation expense for outstanding awards for which the requisite service had not
been rendered as of January 1, 2006, over the remaining service period using the compensation cost calculated for pro forma disclosure purposes under FASB Statement 123, adjusted for expected forfeitures. We have adopted Statement 123(R) using
a modified prospective application. Prior to January 1, 2006 we recognized employee compensation expense for our stock options plan using the intrinsic value method of accounting. Under the terms of the intrinsic value method, compensation
expense was the excess, if any, of the quoted market price of the stock at the grant date, over the amount an employee must pay to acquire the stock. Under our Amended 2005 Stock Option Plan, we may grant up to a maximum of 4,000,000 shares of
common stock 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.

For the period ended March 31, 2006, we expensed the fair value of options granted to non-employees, employees, officers and directors. For the period ended
March 31, 2005 we expensed the fair value of options granted to non-employees and disclosed the pro forma fair value of options granted to employees, officers and directors.

Had we measured compensation cost based on the fair value of the options at the grant date for the quarter ended March 31, 2005, 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:



|                                                                                                                                            |  |                              |             |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | -
|                                                                                                                                            |  | Quarter Ended March 31, 2005 |            
|Net loss, as reported                                                                                                                       |  | $                            | (10,446,723 | )
|Add: Stock-based employee compensation expense included in reported net income, net of related tax effects                                  |  |                              | 257,880     |  
|Deduct: Total stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax
effects |  |                              | (354,924    | )
|                                                                                                                                            |  |                              |             |  
|Pro forma net loss                                                                                                                          |  | $                            | (10,543,767 | )
|                                                                                                                                            |  |                              |             |  
|Loss per share:                                                                                                                             |  |                              |             |  
|Basic and diluted earnings (loss) per common share                                                                                          |  |                              |             |  
|As reported                                                                                                                                 |  | $                            | (0.22       | )
|                                                                                                                                            |  |                              |             |  
|Pro forma                                                                                                                                   |  | $                            | (0.23       | )
|                                                                                                                                            |  |                              |             |  



5



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Heartland Oil & Gas Corp.

Notes to Financial Statements



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.

Reclassifications

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

Note 2 - Going Concern

We have incurred significant losses since inception and had no revenue from inception to December 31, 2005. As of March 31, 2006, we have limited financial resources. Our continuation is dependent upon our ability to raise
additional capital, to exploit our mineral holdings, and to generate sufficient revenue from our planned operations to enable us to attain and maintain profitable operations. We sold natural gas for the first time in February, 2006.

The issuance of additional equity securities by us could result in 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, 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 |   | Expired Leaseand Impairment Cost |  |   | Total       |  
|Balance, December 31, 2005                        |  | $                | 24,459,919 |                  | $ | 12,209,431                       |  | $ | (34,893,028 | ) |  | $ | 1,776,322 |  
|Cost incurred during quarter ended March 31, 2006 |  |                  | 50,145     |                  |   |                                 |  |   | (115,459    | ) |  |   | (65,314   | )
|                                                  |  |                  |            |                  |   |                                  |  |   |             |   |  |   |           |  
|Total                                             |  | $                | 24,510,064 |                  | $ | 12,209,431                       |  | $ | (35,008,487 | ) |  | $ | 1,711,008 |  
|                                                  |  |                  |            |                  |   |                                  |  |   |             |   |  |   |           |  

Undeveloped property, Bourbon Arch, Northeast Kansas

The current status of our significant property excluded from depletion is below. If we are able to raise sufficient funding, we anticipate a development program in 2006 of as much as $15 million to develop the
property

Jake battery: Jake is a one well battery. It is located three miles east of Lancaster and is the easternmost battery in the project area.
It has been venting gas at the rate of approximately 40 Mcfgpd since August 2005. It currently shows evidence of only slight decline.



6



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Heartland Oil & Gas Corp.

Notes to Financial Statements



Osawatomie battery: Osawatomie is a four well battery drilled on 80 acre spacing by Evergreen approximately
five miles southwest of Lancaster. It has been venting gas at the rate of approximately 50 Mcfgpd and continues to show increases in production.

Beagle
battery: Beagle is a three well battery approximately four miles southwest of Osawatomie battery. Two of the three wells were drilled by Heartland as 80 acre offsets to the original Evergreen well. In total, Beagle is producing gas at rates of
approximately 120 Mcfgpd.

Undeveloped property, Forest City Basin, Northeast Kansas

Northern acreage: As of March 31, 2005, we had a total of 839,402 acres of undeveloped land under lease in eastern Kansas. Based on evaluation work done
during 2005, CBM production from the Forest City Basin acreage has been deemed uneconomic, although we retain valid leases on a substantial acreage position which expire between 2006 and 2012. We have identified areas for prospective, longer-term
conventional oil and gas exploration and development.

In the quarter ended March 31, 2006, we plugged and abandoned 46 wells in Atchison, Doniphan,
Jackson and Nemaha counties in northeastern Kansas. This completes the plugging operations in this area. The cost of these wells had been fully impaired as on December 31, 2005.

Oil and Gas Property, Proved

In 2005 we
entered into sales agreements and committed funds necessary to establish sales from the 16 Lancaster wells. At December 31, 2005 we had $1,316,106 of proved oil and gas property which is now subject to depletion. We retained Sproule Associates
to perform an external audit of our Lancaster project at December 31, 2005. We initiated continuous gas sales on February 18, 2006. For the quarter ended March 31, 2006 we recorded $40,000 in depletion and a credit of $30,565 which
was due in part to the sale of lease and well equipment from the wells which were plugged in the North.



|                                                  |  |               |           |      |           |   |         |                 |  |   |            |   |  |   |           |  
|------------------------------------------------- |  | ------------- | --------- | ---- | --------- | - | ------- | --------------- |  | - | ---------- | - |  | - | --------- | -
|                                                  |  | Full CostPool |           |      | Depletion |   |         | Impairment Cost |  |   | Total      |  
|Balance, December 31, 2005                        |  | $             | 4,610,054 |      |           | $ |        |                 |  | $ | (3,293,952 | ) |  | $ | 1,316,102 |  
|Cost incurred during quarter ended March 31, 2006 |  |               | (30,565   | )(i) |           |   | (40,000 | )               |  |   |           |   |  |   | (70,565   | )
|                                                  |  |               |           |      |           |   |         |                 |  |   |            |   |  |   |           |  
|Balance, March 31, 2006                           |  | $             | 4,579,489 |      |           | $ | (40,000 | )               |  | $ | (3,293,952 | ) |  | $ | 1,245,537 |  
|                                                  |  |               |           |      |           |   |         |                 |  |   |            |   |  |   |           |  



|(i) | This includes the recovery of $139,166 from the disposal of used well equipment.
|--- | --------------------------------------------------------------------------------

Pipeline and Marketing

In July 2005 we
signed contracts to initiate gas sales from our Lancaster coalbed methane battery located near Paola, Kansas. The agreement was 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 85 percent of Henry Hub price posting. We have competed construction of the pipeline. We began selling methane
from our Lancaster battery in February, 2006.

Cost associated with our pipeline and facilities:



|                                       |  |      |           |                         |   |                                 |  |                                     |           |  |   |          
|-------------------------------------- |  | ---- | --------- | ----------------------- | - | ------------------------------- |  | ----------------------------------- | --------- |  | - | ---------
|                                       |  | Cost |           | AccumulatedAmortization |   | March 31, 2006Net CarryingValue |  | December 31, 2005 Net CarryingValue
|Pipeline and Processing Facilities (1) |  | $    | 1,372,177 |                         | $ | 8,557                           |  | $                                   | 1,363,620 |  | $ | 1,106,703
|Salt Water Disposal Systems            |  |      | 1,305,375 |                         |   | 89,895                          |  |                                     | 1,215,480 |  |   | 1,225,452
|                                       |  |      |           |                         |   |                                 |  |                                     |           |  |   |          
|                                       |  | $    | 2,677,552 |                         | $ | 98,452                          |  | $                                   | 2,579,100 |  | $ | 2,332,155
|                                       |  |      |           |                         |   |                                 |  |                                     |           |  |   |          



|(1) | The pipeline and processing facilities were not completed and functional as of December 31, 2005. For the quarter ended March 31, 2006, we recorded depreciation of $8,557.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7



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Heartland Oil & Gas Corp.

Notes to Financial Statements



Note 4 - Advances to Arabian Heartland.

In April 2005 we and Far East International Petroleum Corp. (FEIPCO), entered into a joint venture agreement (JV). Under the JV, the parties were to pursue
contracts in Southern Iraq relating to drilling, production, and marketing of hydrocarbons, as well as procurement of oilfield services. The parties were to form an operating company called Arabian Heartland International Corp, through which joint
venture opportunities were to be pursued.

We held a 35% interest in the venture. FEIPCO held 60% and Richard Coglon, our former CEO, held 5% (through an
entity he controlled). Our board of directors approved each interest. In April 2005 we advanced $4,105,500 to FEIPCO, representing our 35 percent share of $10,730,000 camp construction and equipping cost, and a $1,000,000 bid bond.

In September 2005 we received a notice from FEIPCO terminating the JV agreement and claiming that additional funds are owed as part of the joint venture. We are
currently conducting a due diligence investigation of FEIPCO and the merits of these claims. We sent correspondence denying any liability to FEIPCO with respect to the claims asserted and will vigorously defend any arbitration or other legal action
based upon such claims. To our knowledge, FEIPCO has not commenced a legal action. As of March 24, 2006 we are unable to determine that an outcome either favorable or unfavorable to us is either probable or remote. In addition, we are unable to
determine the status of our investment in Iraq. As a result, we have fully impaired the investment and advances to the joint venture. We cannot estimate any future possible additional loss, but we believe that any such loss will not be material to
our financial position or results of operations.

Note 5 - Property and Equipment



|                               |  |      |         |                          |   |                               |  |                                     |         |  |   |        
|------------------------------ |  | ---- | ------- | ------------------------ | - | ----------------------------- |  | ----------------------------------- | ------- |  | - | -------
|                               |  | Cost |         | Accumulated Amortization |   | March 31, 2006 Carrying Value |  | December 31,2005 Net Carrying Value
|Office furniture and equipment |  | $    | 253,678 |                          | $ | 103,233                       |  | $                                   | 150,446 |  | $ | 160,797
|                               |  |      |         |                          |   |                               |  |                                     |         |  |   |        

Note 6 - Asset Retirement Obligations



|                                       |  |                            |          |   |                            |   |        
|-------------------------------------- |  | -------------------------- | -------- | - | -------------------------- | - | -------
|                                       |  | Quarter EndedMarch 31,2006 |          |   | Year EndedDecember 31,2005
|Beginning asset retirement obligations |  | $                          | 671,140  |   |                            | $ | 562,619
|Site reclamation cost paid             |  |                            | (502,109 | ) |                            |   |       
|Liabilities incurred                   |  |                            | 39,183   |   |                            |   | 65,758 
|Accretion                              |  |                            | 4,539    |   |                            |   | 42,763 
|                                       |  |                            |          |   |                            |   |        
|Total asset retirement obligations     |  | $                          | 212,753  |   |                            | $ | 671,140
|                                       |  |                            |          |   |                            |   |        

Note 7 - Common Stock

In 2005 and in the quarter ended March 31, 2006, we had no common stock transactions.



8



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Heartland Oil & Gas Corp.

Notes to Financial Statements



Note 8  Preferred Stock

On January 13, 2004, we completed the sale of 995,305 units at $3.20 per unit for proceeds of $3,184,976, before issue cost. Each unit consisted of one share of
Series A Convertible Preferred Shares and one half of a common stock purchase warrant exercisable at $3.84 per whole warrant until January 13, 2007. The preferred shares have had certain liquidation preferences and participation rights in
future equity financings.



| |  |  | The holder of a preferred share could redeem the preferred shares under certain circumstances. Management has determined that the circumstances that could trigger redemption at the
holders option are remote and effectively within our control, consequently there is no mandatory redemption feature.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We could redeem the preferred shares up to 12 months, 24 months and thereafter for 112%, 124% and 136% of the conversion price of $3.20.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The holders of the preferred shares could convert their preferred shares into common shares at any time on a 1 to 1 basis. This was a beneficial conversion feature because the
preferred stock was issued at $3.20 per share and the common stock was trading at $3.95 per share at the time of the preferred stock issuance. This beneficial conversion feature is separately valued at the time of the issuance, as provided by Issue
98-5 of the Emerging Issues Task Force (EITF) of the FASB. The value per preferred share is the difference between the $3.20 and the $3.95, or $0.75. On the 995,305 preferred shares issued this is a total value for the beneficial conversion feature
of $746,479, which is accounted for as a dividend and both charged against and credited to additional paid-in capital because we had no retained earnings at the issuance date. The dividend was deemed to have occurred on January 13, 2004, the
Series A issuance date, because the conversion right was immediately available to the Series A holders.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The holders of the preferred shares could participate in any subsequent equity financing should we do such a financing and could participate in the financing using cash, or the
preferred stock as currency based on the $3.20 price times 112%, or $3.584 per preferred share, thus giving the preferred stock holder strong antidilution protection. This is a beneficial conversion feature as provided by EITF Issue 98-5 and Issue 7
of EITF Issue 00-27 and is separately valued as of the date of the actual participation. On October 1, 2004, the holders of 100% of the Series A stock used this right and converted their shares into 2,378,118 shares of common stock for no
additional consideration to us. The value of the participation right is computed as: The $3.584 x the 995,305 Series A shares provided the Series A holders with $3,567,177 of value to apply to the participation in the common stock offering. The
common stock was sold for $1.50 per share, yielding 2,378,118 shares to the Series A holders. This is an increase of 1,382,812 shares. Valued at the common stock price on the date of the Series A issuance, $3.95, gives a value for the beneficial
participation feature of $5,462,107, which is accounted for as a dividend and credited to additional paid-in capital because we had no retained earnings at October 1, 2004, the common stock issue date.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We could require the holder of a series A preferred share to convert their preferred share into a common share at any time following
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | at least 18 months from the issuance date and
| | - |  | ---------------------------------------------



| |  |  | at any time that our shares have traded at or above 200% of the conversion price of $3.20 for 10 consecutive days.
| | - |  | ------------------------------------------------------------------------------------------------------------------

In September 2004, we completed the sale of 3,529,412 shares of Series B Convertible Preferred Stock at $1.70 per share for proceeds of $6,000,000, before issue cost.
The preferred shares have certain liquidation preferences and participation rights in future equity financings.



| |  |  | The holder of a preferred share can redeem the preferred shares under certain circumstances. Management has determined that the circumstances that could trigger redemption at the
holders option are remote and effectively within the control of the Company, consequently there is no mandatory redemption feature.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company can redeem the preferred shares up to 12 months, 24 months and thereafter for 112%, 124% and 136% of the conversion price of $1.70.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The holders of the preferred shares can convert their preferred shares into common shares at any time on a 1 to 1 basis. This is a beneficial conversion feature because the
preferred stock was issued at $1.70 per share and the common stock was trading at $2.96 per share at the time of the preferred stock issuance. This beneficial conversion feature is separately valued at the time of the issuance, as provided by Issue
98-5 of the EITF. The value per preferred share is the difference between the $1.70 and the $2.96, or $1.26. On the 3,529,412 preferred shares issued this is a total value for the beneficial conversion feature of $4,447,059, which is accounted for
as a dividend and credited to additional paid-in capital because we had no retained earnings at the issuance date. The dividend was deemed to have occurred in September 2004, the time of the Series B issuance, because the conversion right was
immediately available to the Series B holders.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9



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Heartland Oil & Gas Corp.

Notes to Financial Statements



| |  |  | The holders of the Series B shares may participate in any subsequent equity financing should we do such a financing and may participate in the financing using cash, or the
preferred stock as currency based on the $1.70 price times 112%, or $1.904 per preferred share, thus giving the preferred stock holder strong antidilution protection. This is a beneficial conversion feature as provided by EITF Issue 98-5 and Issue 7
of EITF Issue 00-27 and will be separately valued as of the date of the actual participation, should such participation occur. The participation right expires on September 30, 2006.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The company may require the holder of a series A preferred share to convert their preferred share into a common share at any time following
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | At least 18 months from the issuance date and
| | - |  | ---------------------------------------------



| |  |  | At any time that the Company shares have traded at or above 200% of the conversion price of $1.70 for 10 consecutive days.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

Note 9 - Warrants

Below is a summary of our warrant activity:



|                                 |  |           |  |               |            |                 |          
|-------------------------------- |  | --------- |  | ------------- | ---------- | --------------- | ---------
|                                 |  | Warrants  |  | ExercisePrice |            | ExpirationDates
|Outstanding at December 31, 2004 |  | 2,339,377 |  | $             | 3.38-$3.84 |                 | 2006-2007
|Outstanding at December 31, 2005 |  | 2,339,377 |  | $             | 3.38-$3.84 |                 | 2006-2007
|Outstanding at March 31, 2006    |  | 2,339,377 |  | $             | 3.38-$3.84 |                 | 2006-2007

In June 2003 we sold 602,836 units at $2.82 per unit for total proceeds of $1,699,998. Each unit consisted of one
common share and one half of a common stock purchase warrant exercisable at $3.38 per whole warrant until June 24, 2006. We issued 25,223 commission warrants (whole warrants) exercisable at $3.38 per warrant until June 24, 2006, in
relation to this offering.

In August 2003 we sold 2,754,695 units at $3.20 per unit for total proceeds of $8,815,023. Each unit consisted of one common
share and one half of a common stock purchase warrant exercisable at $3.84 per whole warrant until August 26, 2006. We issued 137,735 commission warrants (whole warrants) exercisable at $3.84 per warrant until August 26, 2006 in relation
to this offering.

In January 2004 we sold 995,305 units at $3.20 per unit for total proceeds of $3,184,976. Each unit consisted of one Series
A preferred share and one half of a common stock purchase warrant exercisable at $3.84 per whole warrant until January 13, 2007.

Note 10 - Related Party Transactions

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 $7,500CN per month, and with our former President for the payment of $16,666 per month, respectively, each for a term of one year. We also entered into a consulting agreement for
services on an hourly basis with our contract CFO. For the three months ending March 31, 2006, he was paid $31,395 for services rendered.

Effective
January 1, 2006, we approved the payment of Directors fees for non-employee Directors at the rate of $200.00 per hour.

During the three-months
ended March 31, 2006 and March 31, 2005, we incurred $59,830 and $84,575, respectively, in management and consulting fees to our directors and officers.



10



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This discussion reports material changes from December 31, 2005, through March 31, 2006, as well as other information. We encourage the reader to also read Managements Discussion and Analysis of
Financial Condition and Results of Operations in our 2005 Form 10-K.

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 in this report and in our 2005 annual report on Form 10-K, 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.

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.

Changes in Business

Heartland Oil and Gas Corp. is an oil and gas company primarily engaged in exploration, development, and sale of Coal Bed Methane (CBM) in the Bourbon Arch of northeast Kansas. We incorporated in Nevada in
1998. Heartland Gas Gathering LLC, our wholly-owned affiliate, is responsible for gas sales and operation of our pipeline and associated facilities. Heartland Oil and Gas, Inc., our wholly-owned subsidiary, holds our interest in nearly
1 million acres and operates our project areas in eastern Kansas.

In the quarter ended September 30, 2005, we recorded a year-to-date impairment
of $31,600,000 arising from the uneconomic CBM exploration pilots in the Forest City Basin acreage. In addition, we have commenced plugging and reclamation activity on 56 wells drilled in the original Heartland acreage position (Soldier
Creek) and the northern Evergreen acreage block. As of March 31, 2006, we have plugged all of our wells in the Forest City Basin.

By the end of
2005 we contracted to sell our gas and committed funds to construct a 5.5 mile gas gathering line and processing plant to initiate gas sales from Lancaster, our largest battery. We initiated continuous gas sales in February 2006. Gas from the other
three batteries is being vented while awaiting pipeline hook-up. A battery is a well, or group of wells and associated production facilities in one general area.

Lancaster is currently producing approximately 330 thousand cubic feet of gas per day (Mcfgpd). Sales average approximately 250 Mcfgpd net of fuel gas, shrinkage, and carbon dioxide extraction. After processing, the gas
delivered to the sales line averages 1008 million British thermal units per thousand cubic feet. The system and facilities are sized to support production growth from Lancaster, the adjacent batteries currently venting gas, and future
development drilling between existing project areas. The adjacent batteries are currently venting approximately 200 mcfgpd.

We require additional capital
to execute our growth strategies. We are in the process of seeking new capital, but we cannot assure that we will be able to obtain such funding. Should we be unable to obtain additional funding we may have to reduce or cease operations.

Liquidity and Capital Resources

We
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. We may not be able to obtain such funds. If we are not able to do so we will have to significantly reduce the scope of our operations or cease operations entirely. This would result in substantial losses for our investors.



11



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As of March 31, 2006 we had working capital of $846,714. Over the next twelve months we intend to use all available
funds to produce our Lancaster Prospect as shown below:

Estimated Expenditures During the Next Twelve Months



|                           |  |   |           
|-------------------------- |  | - | ----------
|General and Administrative |  | $ | 1,350,000 
|Oil and Gas                |  |   |           
|New leases                 |  |   | 50,000    
|New drilling               |  |   | 13,000,000
|Gathering and Pipelines    |  |   | 2,000,000 
|Lease Operating Expense    |  |   | 1,350,000 
|                           |  |   |           
|Total                      |  | $ | 17,750,000

The activities described above require additional capital. We may not be able to raise adequate capital. Should we
not be able to do so, we will reduce the scope of our activities.

Our total liabilities at March 31, 2006 were $482,551, compared to $953,437 at
December 31, 2005. The decrease occurred because we completed plugging the northern wells and reduced our asset retirement obligation by $458,387.

We have no significant off-balance sheet arrangements.

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. It is likely we will need additional financing for ongoing operations. 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.

Results of Operations

During the quarter
ended March 31, 2006, we received revenue from natural gas sales, net of taxes and transportation in the amount of $56,704. We sold approximately 9,100 mcf of gas and an average price of $6.10. We recorded lease operating costs for our wells
and gas gathering facilities in the amount of $60,177. For the quarters ended March 31, 2006 and 2005, we recorded $609,639 and $685,005, respectively for general and administrative costs, the reduction in cost is due in part to lower costs for
management fees and lower rent costs for the Kansas field office.

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 will need additional financing for ongoing operations. 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.



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Exploration Expense:

For the quarters ended March 31, 2006 and March 31, 2005, we recorded exploration expense of $115,459 and $9,809,527, respectively. The expense of $115,459 during the quarter ended March 31, 2006 was a
result of leases expiring in our southern acreage. For the quarter ended March 31, 2005 we recorded $13,175 for expiring leases and $9,796,352 due to the impairment of the Engleke/Soldier Creek and BTA pilot projects which were located in the
Forest City Basin.

Capital Expenditures

We plan to spend approximately $15 million in 2006. These expenditures will be directed toward developing existing proved and probable reserves on the Bourbon Arch, constructing additional pipelines, and evaluating
new project areas. For 2006, we plan to invest approximately $15 million, or 100% of the budget, in our Bourbon Arch assets. Approximately 90% of the capital budget is focused on attempting to convert probable and possible reserves into proved
reserves.

We project that our 2006 capital program will allow us to create value by drilling 100 net wells and installing 14.5 miles of transportation
lines and associated facilities necessary to support the drilling program and to hook up currently stranded gas, compared to the 2005 program in which we drilled 11 wells and installed 5.5 miles of pipeline and associated gas processing facilities.
If successful, we believe we can achieve a 2006 exit rate of 3 to 4 gross MMcfgpd per day from the Bourbon Arch project. We have currently secured the necessary pipeline right of ways to achieve the 2006 program. We expect production to be 100%
natural gas and anticipate funding our capital program from outside financing sources and internally generated cash flow. Successes may also encourage the initiation of additional discretionary projects.

We are trying to obtain adequate financing so we can develop our Bourbon Arch project into a nucleus for future growth. We cannot assure that we will be able to obtain
such financing. Without it, we will have to significantly reduce the scope of our operations or cease operations.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

We conduct no hedging activity. We have no derivative contracts. We have no debt.



|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 March 31, 2006. 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.

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



13



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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.

There have been no changes in internal control over financial reporting that occurred during the quarter that have materially affected, or are
reasonably likely to affect, our internal control over financial reporting.

Part II - Other Information



|Item 1. | Legal Proceedings
|------- | -----------------

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, Concret GMBH, for
3,333,334 common shares, for proceeds of $5,000,000, failed to complete their purchase and provide the purchase price. In 2005, the 3,333,334 common shares were returned to treasury. In 2004 we filed a lawsuit against Concret to recover committed
funds. Concret has not replied to our filing. The matter is still pending. However, we believe that Concret may no longer be in business. Accordingly we may not be able to recover such funds.

One or our wholly-owned subsidiaries entered into a joint venture agreement with the Far East International Petroleum Company (FEIPCO) on April 20,
2005, to establish a joint venture to drill, case and complete oil wells in the area known to the parties as West Qurnah and North Rumailia fields, Republic of Iraq. As part of the joint venture agreement, we provided approximately $4.1 million to
FEIPCO and our then current Chief Executive Officer provided approximately $585,000 of his own money to the joint venture for initial construction cost. We have received correspondence from FEIPCO claiming that additional funds are owed as part of
the joint venture. We are currently conducting a due diligence investigation of FEIPCO and the merits of these claims. We sent correspondence denying any liability to FEIPCO with respect to the claims asserted and will vigorously defend any
arbitration or other legal action based upon such claims. To our knowledge, FEIPCO has not commenced a legal action.



|Item 1A. | 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-K Annual
Report for the year ended December 31, 2005. The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in this document.

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

Risks Related To Our Business

We have had negative cash 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 $44,959,966
for the year ended December 31, 2005. We have cumulative net losses of $45,679,086 from inception to March 31, 2006. As of March 31, 2006 we had working capital of $846,714. Additional capital will be required to maintain ongoing
operations.



14



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We will depend almost exclusively on new 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, it may not 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.

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

We have no history of revenues from operations and have no significant tangible assets. We have yet to generate positive earnings and
there can be no assurance that we will ever operate profitably. Our company has a limited operating history and must be considered in the development stage. Our success 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.

Actual quantities of recoverable oil and
gas reserves and future cash flow from those reserves, future production, oil and gas prices, revenue, taxes, development expenditures and operating expenses most likely will vary from estimates.

Estimating accumulations of oil and gas is complex. The process relies on interpretations of available geologic, geophysical, engineering and production data. The
extent, quality and reliability of this data can vary. The process also requires certain economic assumptions, such as oil and gas prices, drilling and operating expenses, capital



15



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expenditures, taxes and availability of funds, some of which are mandated by the SEC. The accuracy of a reserve estimate is a function of:



| |  |  | quality and quantity of available data;
| | - |  | ---------------------------------------



| |  |  | interpretation of that data; and
| | - |  | --------------------------------



| |  |  | accuracy of various mandated economic assumptions.
| | - |  | --------------------------------------------------

Any significant
variance could materially affect the quantities and present value of our reserves. In addition, we may adjust estimates of proved reserves to reflect production history, results of development and exploration and prevailing oil and gas prices.

In accordance with SEC requirements, we base the estimated discounted future net cash flows from proved reserves on prices and costs on the date of the
estimate. Actual future prices and costs may be materially higher or lower than the prices and costs as of the date of the estimate.

The loss of key
personnel could adversely affect our business. We depend to a large extent on the efforts and continued employment of our executive Management team and other key personnel.

The loss of the services of these or other key personnel could adversely affect our business, and we do not maintain key man insurance on the lives of any of these persons. Our drilling success and the success of
other activities integral to our operations will depend, in part, on our ability to attract and retain experienced geologists, engineers, landmen and other professionals. Competition for many of these professionals is intense. If we cannot retain
our technical personnel or attract additional experienced technical personnel, our ability to compete could be harmed.

As many of our properties are in
the exploration and development stage we cannot assure that we will establish commercial discoveries on those properties.

Exploration for economic
reserves of oil and gas is subject to a number of risk factors. Many properties that are explored are ultimately not developed into producing oil and/or gas wells. Many of our properties are in the exploration and development stage and are without
proved reserves of oil and gas.

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

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

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

Competition in the oil and gas industry is high. We cannot assure that we will be successful in acquiring leases we wish to acquire.

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



16



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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.

Acquisitions are subject to the uncertainties of evaluating recoverable reserves and
potential liabilities.

We expect that our future growth will be dependent in part on acquisitions. Successful acquisitions require an assessment of a
number of factors, many of which are beyond our control. These factors include recoverable reserves, exploration potential, future oil and natural gas prices, operating costs, production taxes and potential environmental and other liabilities. Such
assessments are inexact and their accuracy is inherently uncertain. In connection with our assessments, we perform a review of properties which we believe is generally consistent with industry practices. However, such a review will not reveal all
existing or potential problems. In addition, our review may not allow us to become sufficiently familiar with the properties, and we do not always discover structural, subsurface and environmental problems that may exist or arise. Our review prior
to signing a definitive purchase agreement may be even more limited.

We generally are not entitled to contractual indemnification for preclosing
liabilities, including environmental liabilities, on acquisitions. Often, we acquire interests in properties on an as is basis with limited remedies for breaches of representations and warranties. If material breaches are discovered by
us prior to closing, we could require adjustments to the purchase price or if the claims are significant, we or the seller may have a right to terminate the agreement. We could, however, fail to discover breaches or defects prior to closing and
incur significant unknown liabilities, including environmental liabilities, or experience losses due to title defects, for which we would have limited or no contractual remedies or insurance coverage.

There are risks in acquiring producing properties, including difficulties in integrating acquired properties into our business, additional liabilities and expenses
associated with acquired properties, diversion of Management attention, and costs of increased scope, geographic diversity and complexity of our operations.

Increasing our reserve base through acquisitions is an important part of our business strategy. Our failure to integrate acquired businesses successfully into our existing business, or the expense incurred in consummating future
acquisitions, could result in our incurring unanticipated expenses and losses. In addition, we may have to assume cleanup or reclamation obligations or other unanticipated liabilities in connection with these acquisitions. The scope and cost of
these obligations may ultimately be materially greater than estimated at the time of the acquisition.

In connection with future acquisitions, the process
of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant Management attention and financial resources that would otherwise be available for the ongoing development or
expansion of existing operations. Possible future acquisitions could result in our incurring additional debt, contingent liabilities and expenses, all of which could have a material adverse effect on our financial condition and operating results.

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 us.

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 we 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 activity is subject to certain environmental regulations which may prevent or delay 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. 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 labor, 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.

Two of our directors and our former CEO reside outside the United States. As a result it may be difficult for investors to enforce within the United States any judgments obtained against those directors or the officer

Two of our directors and our former CEO 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 those directors or officer, or enforce within the United States or Canada any judgments obtained against those directors or
officer, 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.

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 U.S. 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 as defined in Regulation D promulgated under the Securities Act of 1933, as amended. 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



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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.



|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.
|------- | ------------------

None



|Item 6. | Exhibits.
|------- | ---------

Exhibits Required by Item 601 of Regulation S-B

The following Exhibits are filed with this Quarterly Report:



|              |  |                                                                                                                                                                                                                          
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                              
|3.7           |  | Amended and Restated Bylaws, effective March 20,2006 (1)                                                                                                                                                                 
|              | 
|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 8-K filed with the Securities and Exchange Commission on March 24, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------



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Signatures

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



|             |  |  |  |                                                
|------------ |  |  |  | -----------------------------------------------
|             |  |  |  | HEARTLAND OIL AND GAS CORP.                    
|             |  | 
|May 15, 2006 |  |  |  | /s/ Philip S. Winner                           
|             |  |  |  | Philip S. Winner                               
|             |  |  |  | President, Chief Executive Officer and Director



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