U.S. Securities And Exchange Commission
                             Washington, D.C. 20549


                                   FORM 10-QSB



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

     For the quarterly period ended March 31, 2004

                                       OR

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

         For the transition period from                 to
                                        ---------------    --------------


                           Commission File No. 0-31547


                            AMERICAN OIL & GAS, INC.
         ---------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


             Nevada                                              88-0451554
 ------------------------------                               -----------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                    1050 17th Street, Suite 1850, Denver, CO        80265
                     --------------------------------------        --------
                    (Address of principal executive offices)      (Zip Code)


        Registrant's telephone number, including area code (303) 991-0173
                                                           --------------

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

                     (APPLICABLE ONLY TO CORPORATE ISSUERS)

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

The total shares of $.001 Par Value Common Stock outstanding at May 13, 2004 was
25,926,202


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

<PAGE>


                            AMERICAN OIL & GAS, INC.
                                   FORM 10-QSB
                                      INDEX





PART I.    FINANCIAL INFORMATION

         Item 1.  Financial Statements....................................    3

                  Balance Sheets - March 31, 2004 (Unaudited) and
                                   December 31, 2003......................    3

                  Statements of Operations - Three Months Ended
                  March 31, 2004 and March 31, 2003 (Unaudited)...........    4

                  Statements of Cash Flows - Three Months Ended
                  March 31, 2004 and March 31, 2003 (Unaudited)...........    5

                  Notes to Financial Statements...........................    6

                  Summary of Significant Accounting Policies..............    6

         Item 2.  Management's Plan of Operation and Discussion and
                  Analysis of Financial Condition and Results of
                  Operations..............................................    8

         Item 3. Controls and Procedures..................................    13

PART II. OTHER INFORMATION

         Item 2.  Changes in Securities and Use of Proceeds; Recent Sales
                   of Unregistered Securities.............................    13

         Item 6.  Exhibits and Reports on Form 8-K........................    13


Signatures................................................................    14

         Index to Exhibits................................................    15

                                       2

<PAGE>
<TABLE>
<CAPTION>


                                                 PART I

ITEM 1.   FINANCIAL STATEMENTS


                                        AMERICAN OIL & GAS, INC.
                                             BALANCE SHEETS


                                                                               3/31/04        12/31/03
                                                                              (UNAUDITED)
                                                 ASSETS

<S>                                                                          <C>            <C>
CURRENT ASSETS
   Cash                                                                      $ 2,715,844    $ 1,066,458
   Receivables                                                                    35,807         45,742
   Advances and prepaids                                                          45,693         66,789
                                                                             -----------    -----------
       Total current assets                                                    2,797,344      1,178,989

PROPERTY AND EQUIPMENT
   Office equipment                                                                7,221          7,221
   Producing oil and gas properties                                            1,019,284      1,167,279
  Undeveloped oil and gas properties                                             725,832        790,019
                                                                             -----------    -----------
       Total property and equipment                                            1,752,337      1,964,519
   Less-accumulated depreciation, depletion and amortization                     (53,640)       (33,475)
                                                                             -----------    -----------
       Net property and equipment                                              1,698,697      1,931,044

                                                                             -----------    -----------
                                                                             $ 4,496,041    $ 3,110,033
                                                                             ===========    ===========


                                  LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable and accrued liabilities                                  $   357,230    $   408,348
   Preferred dividends payable                                                    33,346         18,020
                                                                             -----------    -----------
      Total current liabilities                                                  390,576        426,368

LONG TERM LIABILITIES
   Asset retirement obligations                                                   31,118         30,688
                                                                             -----------    -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
   Series A preferred stock, $.001 par value,  authorized 175,000 shares
            Issued and outstanding - 67,000 shares at 3/31/04 and 12/31/03            67             67
   Common stock, $.001 par value, authorized 100,000,000 shares
            Issued and outstanding - 25,926,202 shares at 3/31/04
             and 24,388,702 shares at 12/31/03                                    25,926         24,389
   Additional paid-in capital                                                  5,529,808      4,018,601
   Deferred compensation expense                                                (353,125)      (423,750)
   Accumulated  (deficit)                                                     (1,128,329)      (966,330)
                                                                             -----------    -----------
                                                                               4,074,347      2,652,977
                                                                             -----------    -----------
                                                                             $ 4,496,041    $ 3,110,033
                                                                             ===========    ===========


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

                                                   3
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<PAGE>


                            AMERICAN OIL & GAS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


--------------------------------------------------------------------------------


                                                      Three           Three
                                                      Months          Months
                                                      Ended           Ended
                                                     3/31/04         3/31/03
                                                   ------------    ------------
REVENUES
Oil and gas sales                                  $     67,914    $       --
                                                   ------------    ------------

OPERATING EXPENSES
   Lease operating                                       20,212            --
   General and administrative                           189,189         235,880
   Depletion, depreciation and amortization              20,512            --
                                                   ------------    ------------
                                                        229,913         235,880


NET (LOSS)                                             (161,999)       (235,880)

    Less dividends on preferred stock                    15,326            --
                                                   ------------    ------------

NET (LOSS) TO COMMON
STOCKHOLDERS                                       $   (177,325)   $   (235,880)
                                                   ============    ============

NET (LOSS) PER COMMON
SHARE -BASIC AND DILUTED                           $      (0.01)   $      (0.01)
                                                   ============    ============


COMMON SHARES OUTSTANDING -BASIC AND DILUTED         25,894,883      24,496,350
                                                   ============    ============


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

                                       4

<PAGE>
<TABLE>
<CAPTION>


                                 AMERICAN OIL & GAS, INC.
                                 STATEMENTS OF CASH FLOWS
                                        (UNAUDITED)



                                                                3/31/04        3/31/03
                                                              -----------    -----------

<S>                                                           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)                                                    $  (161,999)   $  (235,880)
Adjustments to reconcile net (loss) to
   net cash (used) by operating activities
    Stock issued for services                                      81,125           --
     Accretion of asset retirement obligation                         347           --
     Depletion, depreciation and amortization                      20,165           --
Changes in assets and liabilities
   Decrease (increase) in receivables                               9,936        (19,581)
   Decrease in advances and prepaids                               21,094           --
   (Decrease) increase in A/P and accrued liabilities             (51,116)       123,185
                                                              -----------    -----------
Net cash (used) by operating activities                           (80,448)      (132,276)

CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from sale of oil and gas properties                  326,247           --
   Cash paid for oil and gas properties                          (113,982)      (440,793)
                                                              -----------    -----------
Net cash provided (used) by investing activities                  212,265       (440,793)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from sale of common stock                           1,525,000      1,000,000
   Cash paid for offering costs                                    (7,431)       (66,181)
                                                              -----------    -----------
Net cash provided by financing activities                       1,517,569        933,819

                                                              -----------    -----------
NET INCREASE IN CASH                                            1,649,386        360,750

CASH, BEGINNING OF PERIODS                                      1,066,458         83,516
                                                              -----------    -----------
CASH, END OF PERIODS                                          $ 2,715,844    $   444,266
                                                              ===========    ===========


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

                                            5
</TABLE>

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          Notes to Financial Statements
                                   (UNAUDITED)
                                 March 31, 2004


     The accompanying interim financial statements of American Oil & Gas, Inc.
are unaudited. In the opinion of management, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the interim period. The results of
operations for the period ended March 31, 2004 are not necessarily indicative of
the operating results for the entire year.

     We have prepared the financial statements included herein pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosure normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. We believe the
disclosures made are adequate to make the information not misleading and
recommend that these condensed financial statements be read in conjunction with
the financial statements and notes included in our Form 10-KSB for the year
ended December 31, 2003.

Nature of  Business

     The Company is an independent energy company engaged in the exploration,
development and acquisition of crude oil and natural gas reserves and production
in the western United States.

     The Company's fiscal year end is December 31.

Significant Accounting Policies

          USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires us to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

          CASH EQUIVALENTS - For purposes of reporting cash flows, we consider
as cash equivalents all highly liquid investments with a maturity of three
months or less at the time of purchase. At March 31, 2004, there were no cash
equivalents.

          OIL AND GAS PROPERTIES - The Company follows the full cost method of
accounting for oil and gas operations. Under this method all costs related to
the exploration for and development of oil and gas reserves are capitalized on a
country-by-country basis. Costs include lease acquisition costs, geological and
geophysical expenses, overhead directly related to exploration and development
activities and costs of drilling both productive and non-productive wells.
Proceeds from the sale of properties are applied against capitalized costs,
without any gain or loss being recognized, unless such a sale would
significantly alter the rate of depletion and depreciation.

          DEPLETION, DEPRECIATION AND AMORTIZATION - Depletion of exploration
and development costs and depreciation of production equipment is provided using
the unit-of-production method based upon estimated proven oil and gas reserves.
The costs of significant unevaluated properties are excluded from costs subject
to depletion. For depletion and depreciation purposes, relative volumes of oil
and gas production and reserves are converted at the energy equivalent
conversion rate of six thousand cubic feet of natural gas to one barrel of crude
oil.

                                       6

<PAGE>


          CEILING TEST - In applying the full cost method, the Company performs
a ceiling test whereby the carrying value of oil and gas properties and
production equipment, net of recorded future income taxes and the accumulated
provision for site restoration and abandonment costs, is compared annually to an
estimate of future net cash flow from the production of proven reserves. Costs
related to undeveloped oil and gas properties are excluded from the ceiling
tests. Discounted net cash flow is estimated using year end prices, less
estimated future general and administrative expenses, financing costs and income
taxes. Should this comparison indicate an excess carrying value, the excess is
charged against earnings.

          REVENUE RECOGNITION - The Company recognizes oil and gas revenues from
its interests in producing wells as oil and gas is produced and sold from these
wells.

          IMPAIRMENT - The Company has adopted SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," which requires that long-lived
assets to be held and used be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Oil and gas properties accounted for using the full cost method of
accounting, a method utilized by the Company, are excluded from this
requirement, but will continue to be subject to the ceiling test limitations.

          SHARE BASED COMPENSATION- In October 1995, SFAS No. 123 "Accounting
for Stock Based Compensation" was issued. This standard defines a fair value
based method of accounting for an employee stock options or similar equity
instrument. This statement gives entities a choice of recognizing related
compensation expense to employees by adopting the fair value method or to
continue to measure compensation using the intrinsic value approach under
Accounting Principles Board ("APB") Opinion No. 25. The Company has elected to
utilize APB No. 25 for measurement; and will, pursuant to SFAS No. 123, disclose
on a supplemental basis the pro forma effects on net income and earnings per
share of using the fair value measurement criteria.

          INCOME TAXES - We have adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.

Oil and Gas Properties

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, "Business Combinations," which requires the purchase method of
accounting for business combinations initiated after June 30, 2001 and
eliminates the pooling-of-interests method. In July 2001, the FASB issued SFAS
No. 142, "Goodwill and Other Intangible Assets," which discontinues the practice
of amortizing goodwill and indefinite lived intangible assets and initiates an
annual review for impairment. Intangible assets with a determinable useful life
will continue to be amortized over that period. The Company did not change or
reclassify contractual mineral rights included in oil and gas properties on the
balance sheet upon adoption of SFAS No. 142. The Company believes the current
accounting of such mineral rights as part of crude oil and natural gas
properties is appropriate under the full cost method of accounting. However,
there is an alternative view that reclassification of mineral rights to
intangible assets may be necessary. If a reclassification of contractual mineral
rights from oil and gas properties to long term intangible assets is required,
then the reclassified amount as of March 31, 2004 would be approximately
$1,077,586. Management does not believe that the ultimate outcome of this issue
will have a significant impact on the Company's cash flows, results of
operations or financial condition.

                                       7

<PAGE>


     The Company has adopted SFAS No. 143, "Accounting for Asset Retirement
Obligations" ("SFAS No. 143"). SFAS No. 143 requires the recognition of a fair
value liability for any retirement obligation associated with long-lived assets
in the period in which it is incurred if a reasonable estimate of fair value can
be made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset and depreciated over the asset's useful
life. At March 31, 2004, we include $27,981 in oil and gas properties, and an
asset retirement obligation of $31,118, associated with our adoption of SFAS No.
143. During the quarter ended March 31, 2004, we reflect a charge to
depreciation, depletion and amortization of $455 and accretion of the asset
retirement obligation of $347.

     During the quarter ended March 31, 2004, we sold one-third of our interest
in the Big Sky project (see ITEM 2. - Management's Plan of Operation and
Discussion and Analysis of Financial Condition and Results of Operations,
Overview - Big Sky Project) for cash of $326, 247.

Common Stock

     In March 2004, we received $1,525,000 in gross proceeds in a private
placement from two accredited investors. We sold 1,525,000 shares of our common
stock at $1.00 per share and issued 1,525,000 warrants to purchase 1,525,000
shares at an exercise price of $1.00 per share. The warrants will expire on
August 31, 2004, if not exercised. We did not pay a placement commission or
agent fee associated with this funding and provided only for piggyback
registration rights. This private placement was made pursuant to exemptions from
registration under the Securities Act of 1933, including but not limited to,
Section 3(b), as well as Rule 505 of Regulation D under the Securities Act of
1933. The shares were sold without a general solicitation pursuant to Blue Sky
limited offering exemptions and were issued with a legend restricting resale. In
conjunction with this sale, we sold one-third of our interests in the Big Sky
project to an entity related to the investor that purchased 1.5 million of the
units for cash of $326,247.

Related Party Transactions

     During the quarter ended March 31, 2004, the Company reimbursed Tower
Energy Corporation for the Company's share of oil and gas related expenditures
and administrative related expenditures in the amount of $7,246. We also paid a
total of $6,840 to Tower for the Company's share of the office lease where the
Company shares common office space with Tower.

     Other than the above discussion, the Company has no significant related
party transactions and/or relationships with any individuals or entities.

ITEM 2.   MANAGEMENT'S  PLAN OF OPERATION AND  DISCUSSION  AND ANALYSIS OF
          FINANCIAL  CONDITION AND RESULTS OF OPERATIONS

Forward-looking Information

     This quarterly report contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. 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 such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. There are a number of factors that could cause our actual
results to differ materially from those indicated by such forward-looking
statements.

                                       8

<PAGE>

Overview

     We are an independent oil and gas exploration and production company,
engaged in the exploration, development and acquisition of crude oil and natural
gas reserves and production in the western United States.

     In 2003, we purchased oil and gas leasehold interests in and to
approximately 22,200 net unproved and undeveloped acres in Montana and Wyoming,
from Tower Colombia Corporation, a Colorado corporation ("Tower"), and North
Finn, LLC, a Wyoming limited liability company ("North Finn"). In that
transaction, we purchased a fifty percent (50%) ownership share of Tower and
North Finn's leasehold interests in the Krejci Prospect, located in Niobrara
County, Wyoming, the Bear Creek Prospect located in Carbon County, Montana and
in certain coal bed methane leases located in the Powder River Basin of Wyoming.
Each of these projects comprised only unproved and undeveloped mineral leases.

     In conjunction with the transaction with Tower and North Finn, a
Participation Agreement was executed on January 17, 2003 whereby Tower and North
Finn, and the principals of each, agreed to provide us with the right to
participate, on an equal basis (50% for us and 50% for them), in (i) any
financing transaction regarding an oil and/or gas exploration and production
asset, or (ii) acquisition or disposition of oil and/or gas exploration and
production assets that becomes available to any of them. The agreement expires
February 18, 2005. The principals of Tower and North Finn have also agreed to
provide us with oil and gas operational and technical expertise.

     The following is a summary of the current status of our notable oil and gas
exploration/development projects:

Big Sky Project, Richland County, Montana

     We own a 13.33% share of approximately 12,000 net leasehold acres in the
Big Sky Project in Richland County, Montana. The project is a horizontal
drilling program targeting the Mississippian Bakken Formation. The Bakken
Formation underlies most of the deeper portion of the Williston Basin in Montana
and North Dakota. While the Bakken is recognized as the primary source of oil
produced from overlying conventional Mississippian reservoirs, it is also known
as an oil reservoir in its own right. Specifically, the Bakken has yielded 30
million barrels of oil from the old upper shale play in Billings, McKenzie and
Golden Valley Counties, North Dakota, and already, an additional 3.5 million
barrels of oil from the current middle siltstone play in Richland County,
Montana. The North Dakota play succeeded or failed on the presence or lack of
natural fractures in a poor matrix reservoir. The Richland County play has a
significant advantage in that it has a primary dolomitic siltstone reservoir
with modest porosity and permeability.

     We have participated in the drilling and completion of two dual horizontal
lateral wells in this area with a .83% interest in each well. During the quarter
ended March 31, 2004, we recorded approximately $23,600 in oil and gas revenues,
net to our interests, from these two wells. We expect to participate in the
drilling of eight additional gross wells (a total of approximately 0.68 net
wells, or about seven-tenths of a well, net to our interest) through December
2004 with working interests ranging from 0.83 percent to 13.3 percent. We
anticipate that total capital required for our working interest in these eight
wells will be approximately $1.5 million. Including the wells drilled during
2004, we anticipate participating in a total of 52 gross (approximately 2.5 net
wells) over the next three years.

                                       9

<PAGE>


     Krejci Oil Project (Powder River Basin, Wyoming)

     We own a 50% working interest in a Mowry Oil Shale project located in and
around the Krejci Field. Currently, our acreage position consists of
approximately 38,100 gross (approximately 18,800 net) leasehold acres.

     Oil content of the Mowry Shale has been assayed to be 17 gallons per ton.
The oil content in the Mowry in this area could be 94 million barrels per square
mile. The amount of recoverable oil will depend on the natural fracturing that
has occurred in the area and the effectiveness of advanced drilling and
stimulation techniques. Our acreage position is located on the Southeastern edge
of the Powder River Basin near the Lance Creek (basin-bounding) thrust fault.
This fault shifts in strike from north-south to east-west in the prospect area,
causing the area to be greatly stressed and potentially fractured. In addition,
a brittle, clean siliceous sandstone lies stratigraphically in the center of the
Mowry Shale. We believe that the fracturing mechanism (out of basin faulting)
and the layer of sandstone within the shale, which are both present in the
Krejci area, make this an excellent choice for seeking to establish commercial
production from the Mowry Shale. Nevertheless, it is possible for reservoirs to
be fractured only in isolated areas, and we are not assured that wells we drill
in this area will be productive.

     Mowry oil production was established on the Prospect in the Krejci Field in
the early 1960s when three wells drilled to the lower Dakota formation were
completed in the Mowry after excellent oil shows were noted during drilling.
These three wells, in which we have no interest, produced commercial quantities
of oil without the benefit of modern stimulation techniques. We believe that by
employing modern drilling, completion and stimulation techniques, production
rates and ultimate recovery could be improved.

     Commercial production from the Mowry has also been established in another
area of the Powder River Basin. Located approximately 60 miles north of our
Krejci acreage, the ARCO Fee #1 well in the Dillinger Ranch area has produced
125,000 barrels of oil and 115 MMCF of gas from the Mowry formation. Although
the ARCO Fee #1 well is an example of potential for commercial production from
the Mowry, there is no assurance that the success of this well is indicative of
commercial production on our Krejci acreage.

     We, along with Tower and North Finn, will attempt to establish a joint
venture agreement with an industry participant or participants in order to
exchange a portion of our acreage position in return for initial exploratory
drilling. If we are able to establish a joint venture agreement and if initial
drilling is successful, of which there is no assurance, we expect the Krejci
project could provide us with increased capital requirements associated with
expanded drilling operations, as well as increased cash flows from oil and gas
operations.

Coalbed Methane Projects (Powder River Basin, Wyoming)

     We control a 50% working interest in approximately 4,400 gross (2,200 net
to our interest) leasehold acres in the Powder River Basin of Wyoming, in areas
we refer to as West Recluse, Glasgow and Bill.

     Our West Recluse Prospect acreage is in an active production area and has
economic potential for production from three separate coal seams. The first
coal, the Canyon Coal, is approximately 40 feet thick and occurs at about 500
feet deep. A second coal, the Cook Coal, is also approximately 40 feet thick and
occurs at about 700 feet deep. The third major producing coal is the Wall Coal.
With approximately 30 feet of thickness at a depth of about 900 feet, this coal
is in the early dewatering stages of development and is just starting to produce
gas. The coal thicknesses and depths identified here are estimates based only on
well bore samples, which are very small in size relative to the expanse of the
acreage in which they are located. The estimates of coal thicknesses and depths
are not always reliable.

     We own a 100% working interest in seven wells that have been drilled at our
West Recluse Area. Four of those wells have been connected to sales lines and
are producing natural gas; the three other wells commenced initial production
subsequent to March 31, 2004. We believe that a total of 47 more wells could be
drilled on this acreage, where we own a 50% working interest with Tower and
North Finn owning the other 50%.

                                       10

<PAGE>


     Our Glasgow and Bill Prospects are expected to have two prospective coals,
the Upper and Lower Wyodak. The Upper Wyodak Coal is approximately 500 feet deep
and approximately 35 feet thick. The Lower Wyodak Coal is approximately 700 feet
deep and approximately 40 feet thick. The estimates of coal thicknesses and
depths are not always reliable.

     We, along with Tower and North Finn, are currently evaluating our continued
involvement in these coalbed methane projects and are attempting to either farm
out our interest and retain a carried working interest in the remaining wells or
sell our producing wells and acreage to a third party for cash.

Bear Creek Coal Bed Methane Prospect (Big Horn Basin, Montana)

     We own a 50% working interest in this approximately 18,000 gross leasehold
acres (approximately 9,000 leasehold acres net to our interest) coalbed methane
prospect in Carbon County Montana (Northern Big Horn Basin). Tower and North
Finn own the remaining 50% working interest. We estimate the prospect contains
nine different coalbeds with total net thickness estimated to range from 30 to
130 feet. Other highlights of this prospect are high quality gas composition,
water quality that may allow surface discharge, and market potential for any gas
production.

     Published and other data, including coal gas desorption values as high as
670 SCF/ton, indicate the potential presence of a significant coalbed methane
resource. The pioneering attempt to develop the resource by another company in
the early 1990s ended prematurely due to a contentious legal battle in 1992 when
a district county court in Montana ruled that the company that drilled initial
wells here did not own rights to the methane in the coals. That company saw this
lower court decision overturned by the Supreme Court of Montana three years
later.

     Despite the 1995 reversal, that company, having already spent several
hundred thousand dollars on legal expenses, was reluctant to risk additional
funds until a similar case (Amoco Production Co. v. Southern Ute Indian Tribe)
was settled in the US Supreme Court. By the time the US Supreme Court issued its
June 1999 decision in favor of Amoco (and that company), the original oil and
gas lease had expired. We believe the Bear Creek prospect area was incompletely
and inadequately evaluated because of these legal problems. The legal
impediments as to title have been removed and we intend to pursue oil and gas
operations in this project. Depending on our available capital, we, along with
Tower and North Finn, may pursue oil and gas operations by drilling initial
wells ourselves, selling down our interests for cash and/or a carried working
interest, or by farming out our acreage.

West Rozel, Box Elder County, Utah

     We, along with our partners Tower and North Finn, were the successful
bidders on two leases in the May 2003 State of Utah lease sale. We have a 50%
interest in these two leases in Box Elder County, which consist of approximately
5,120 gross (approximately 2,560 net to our interest) leasehold acres, and
completely covers a large accumulation of heavy oil at a depth of about 2,250
feet. Tower and North Finn own the remaining 50% interest.

     The West Rozel field was discovered by Amoco as a result of an extensive
exploration program conducted over the Great Salt Lake from mid-1978 to early
1981. The seismically defined structure at West Rozel is a complexly faulted
anticline about three miles long and over a mile wide. The reservoir is Pliocene
basalt with an oil column up to 290 feet in thickness. All three test wells
drilled by Amoco on the structure, encountered oil pay, although none of the
wells have been commercially produced.

                                       11

<PAGE>


     West Rozel was not put on production in 1981 due to high costs associated
with offshore development and heavy oil. We believe that new drilling and
production technologies developed over the last twenty years and improved
economic incentives could combine to make development of this resource possible.
We do not intend to undertake activity on this project without significant
outside industry participation and continue to research the optimum
developmental procedure for this project. Because the target area is beneath the
Great Salt Lake, we may encounter greater resistance from environmental groups
and permitting authorities then in other areas, which could result in higher
costs.

Southern Powder River Basin Acreage, Wyoming

     Subsequent to March 31, 2004, we, along with Tower and North Finn, signed a
letter of intent to enter into an option agreement which will allow the Company
to earn a 50% interest in approximately 90,000 gross undeveloped leasehold acres
in Converse County, Wyoming. Tower and North Finn will earn the remaining 50%
interest. The option allows earning of the interests through a series of cash
payments and drilling commitments. Subject to due diligence, the Company expects
to sign a formal purchase and sale agreement on or before June 1, 2004. The
Company has identified multiple exploration opportunities within the identified
acreage block.

Results of Operations

     The following discussion should be read in conjunction with the audited
financial statements and notes thereto included in our annual report on Form
10-KSB for the fiscal year ended December 31, 2003; and should further be read
in conjunction with the financial statements and notes thereto included in this
report.

     We recorded losses of $161,999 (one cent per common share) and $235,880
(one cent per common share) for the quarters ended March 31, 2004 and 2003
respectively.

     During the quarter ended March 31, 2003, we did not have any oil and gas
operations, and our primary activities were the raising of capital and the
transition into the business of oil and gas exploration and production. During
the quarter ended March 31, 2004, we recorded income from oil and gas operations
and our general and administrative expenses (especially the actual cash paid)
are significantly lower.

     We recorded $43,893 in revenues from the sale of 12,133 MCF of natural gas
for the quarter ended March 31, 2004, for an average net price of $3.62 per MCF.
We recorded $24,021 in revenues from the sale of 772 barrels of oil for the
quarter ended March 31, 2004, for an average net price of $31.12 per barrel.
Lease operating expenses and production taxes were $20,212, so that net income
from oil and gas operations was $47,702. We had no oil or gas producing
operations during the quarter ended March 31, 2003

     We recorded $189,189 and $235,880 in general and administrative expenses
during the quarters ended March 31, 2004 and 2003, respectively. Included in the
quarter ended March 31, 2004 is a non-cash charge of $70,625 to compensation
expense to reflect the pro-rata quarterly value of common stock to be paid to
our President and CFO through the second quarter of 2005, as a component of his
employment agreement. Also included in the quarter ended March 31, 2004 is a
$10,500 non-cash charge to Directors' expense for the value of common stock paid
to one of our Directors.

Liquidity and Capital Resources

     During the quarter ended March 31, 2004, we received a total of $1,525,000
(approximately $1,518,000 net of fees and commissions) through the sale of
1,525,000 shares of Common Stock at $1.00 per share. We also received a total of
$326,247 from the sale of one-third of our interests in our Big Sky Project. At
March 31, 2004, we had a working capital amount of approximately $2,407,000.

                                       12

<PAGE>


     We expect that our current cash position will be sufficient to fund our
known cash requirements during the calendar year 2004, although we intend to
continue financing efforts to support additional oil and gas operations. We
expect our total cash requirements for the next 12 months to be approximately
$2,500,000 to fund drilling operations at our Big Sky Project, to fund our
general and administrative expenses and to fund other oil and gas related costs
such as land and geological costs. We expect to be able to fund these
requirements with existing capital and expected cash flow from oil and gas
operations. We may require additional capital to fund additional drilling in our
identified and other projects. Accordingly, we may need to raise additional
capital through sale of equity or debt.

     We have not entered into any commodity swap arrangements or hedging
transactions. Although we have no current plans to do so, we may enter into
commodity swap and/or hedging transactions in the future in conjunction with oil
and gas production. We have no off-balance sheet arrangements. We paid
approximately $114,000 during the quarter ended March 31, 2004 for drilling and
completion costs, leasehold costs, acquisition of acreage and delay rentals with
respect to our identified oil and gas projects.

ITEM 3.  CONTROLS AND PROCEDURES

     In accordance with Exchange Act Rules 13a-15 and 15d-15, we carried out an
evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of March 31, 2004 to provide reasonable assurance
that information required to be disclosed in our 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.

     There has been no change in our internal controls over financial reporting
that occurred during the quarter ended March 31, 2004 that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.

                                    PART II.
                                OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds; Recent Sales Of Unregistered
Securities

          During the quarter ended March 31, 2004, the Company sold, pursuant to
     Section 3(b), as well as Rule 505 of Regulation D under the Securities Act
     of 1933, 1,525,000 shares of its common stock at a price of $1.00 per share
     to a total of two (2) accredited investors. Net of fees and commissions,
     the Company received proceeds of approximately $1,518,000.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits

               Exhibits required to be attached by Item 601 of Regulation S-B
          are listed in the Index to Exhibits beginning on page 15 of this Form
          10-QSB, which is incorporated herein by reference.

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<PAGE>


     (b) During the quarter ended March 31, 2004, we filed two reports on Form
8-K:

               A Form 8-K was filed on March 18, 2004 disclosing a news release
          dated March 18, 2004, which announced the Company's receipt of $1.826
          million from a private placement and asset sale.

               A Form 8-K was filed on March 30, 2004 disclosing a news release
          dated March 30, 2004, which provided an operations overview.




                                   SIGNATURES

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

       Signatures                        Title                         Date
       ----------                        -----                         ----

/s/  Patrick D. O'Brien      Chief Executive Officer and            May 14, 2004
------------------------     Chairman of The Board of Directors
     Patrick D. O'Brien



/s/  Andrew P. Calerich      President, Chief Financial Officer     May 14, 2004
------------------------     and Director
     Andrew P. Calerich

                                       14

<PAGE>



                                INDEX TO EXHIBITS

      Exhibits marked with an asterisk have been filed previously with the
      commission and are incorporated herein by reference.

------------- ----------------------- ------------------------------------------
EXHIBIT NO.          DESCRIPTION
------------- ------ -----------------------------------------------------------

------------- ------ -----------------------------------------------------------
31.1                 302 Certification of Chief Executive Officer
------------- ------ -----------------------------------------------------------
31.2                 302 Certification of Chief Financial Officer
------------- ------ -----------------------------------------------------------
32.1                 906 Certification of Chief Executive Officer
------------- ------ -----------------------------------------------------------
32.2                 906 Certification of Chief Financial Officer
------------- ------ -----------------------------------------------------------

------------- ------ -----------------------------------------------------------

                                       15