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 June 30, 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 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 August 13, 2004
was 25,938,702


     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 - June 30, 2004 (Unaudited) and
              December 31, 2003 ...........................................  3

              Statements of Operations - Three Months and Six Months Ended
              June 30, 2004 and June 30, 2003 (Unaudited)..................  4

              Statements of Cash Flows - Six Months Ended June 30, 2004
              and June 30, 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 4. Submission of Matters to a Vote of Security Holders........... 14

     Item 6.  Exhibits and Reports on Form 8-K............................. 14

     Signatures............................................................ 15

     Index to Exhibits..................................................... 16

                                       2

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<TABLE>
<CAPTION>


                                                      PART I
ITEM 1. FINANCIAL STATEMENTS

                                              AMERICAN OIL & GAS, INC.
                                                   BALANCE SHEETS
                                                                                   6/30/04              12/31/03
                                                                                 (UNAUDITED)
                                                       ASSETS
<S>                                                                             <C>                   <C>
CURRENT ASSETS
   Cash and cash equivalents                                                     $ 1,837,581          $ 1,066,458
   Receivables                                                                       109,995               45,742
   Advances and prepaids                                                              27,977               66,789
                                                                                 -----------          -----------
      Total Current Assets                                                         1,975,553            1,178,989
                                                                                 -----------          -----------

PROPERTY AND EQUIPMENT
   Office equipment                                                                    7,221                7,221
   Producing oil and gas properties                                                1,123,377            1,167,279
  Undeveloped oil and gas properties                                               1,401,289              790,019
                                                                                 -----------          -----------
       Total property and equipment                                                2,531,887            1,964,519
  Less-accumulated depreciation, depletion and amortization                          (74,407)             (33,475)
                                                                                 -----------          -----------
       Net property and equipment                                                  2,457,480            1,931,044
                                                                                 -----------          -----------
                                                                                 $ 4,433,033          $ 3,110,033
                                                                                 ===========          ===========

                                         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable and accrued liabilities                                      $   385,626          $   408,348
   Preferred dividends payable                                                        48,672               18,020
                                                                                 -----------          -----------
      Total current liabilities                                                      434,298              426,368
                                                                                 -----------          -----------

LONG TERM LIABILITIES
   Asset retirement obligations                                                       31,507               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 6/30/04 and 12/31/03                      67                   67
   Common stock, $.001 par value, authorized 100,000,000 shares
      Issued and outstanding - 25,938,702 shares at 6/30/04
      and 24,388,702 shares at 12/31/03                                               25,938               24,389
   Additional paid-in capital                                                      5,540,757            4,018,601
   Deferred compensation expense                                                    (282,500)            (423,750)
   Accumulated  (deficit)                                                         (1,317,034)            (966,330)
                                                                                 -----------          -----------
                                                                                   3,967,228            2,652,977
                                                                                 -----------          -----------
                                                                                 $ 4,433,033          $ 3,110,033
                                                                                 ===========          ===========

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

                                                         3
<PAGE>


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


                                                     Three               Three                Six                 Six
                                                     Months              Months              Months              Months
                                                     Ended               Ended               Ended               Ended
                                                    6/30/04             6/30/03             6/30/04             6/30/03
REVENUES
   Oil and gas sales                              $     79,763        $       --          $    147,677        $       --
                                                  ------------        ------------        ------------        ------------
                                                        79,763                --               147,677                --

OPERATING EXPENSES
   Lease operating                                      14,710                --                34,922                --
   General and administrative                          233,625             141,424             422,813             377,304
   Depletion, depreciation and amortization             21,051                --                41,564                --
                                                  ------------        ------------        ------------        ------------
                                                       269,386             141,424             499,299             377,304

OTHER INCOME
   Investment income                                       918                --                   918                --
                                                  ------------        ------------        ------------        ------------
NET (LOSS)                                            (188,705)           (141,424)           (350,704)           (377,304)

Less dividends on preferred stock                       15,326                --                30,652                --

NET (LOSS) TO COMMON
                                                  ------------        ------------        ------------        ------------
STOCKHOLDERS-BASIC AND DILUTED                    $   (204,031)       $   (141,424)       $   (381,356)       $   (377,304)
                                                  ============        ============        ============        ============


NET (LOSS) PER COMMON
SHARE-BASIC AND DILUTED                           $      (0.01)       $      (0.01)       $      (0.02)       $      (0.02)
                                                  ============        ============        ============        ============

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING                           25,926,202          22,744,519          25,283,139          23,702,337
                                                  ============        ============        ============        ============


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

                                                           4

<PAGE>


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

                                                                 6/30/04                  6/30/03
                                                               -----------              -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)                                                     $  (350,704)             $  (377,304)
Adjustments to reconcile net (loss) to
   net cash (used) by operating activities
    Stock issued for services                                       26,251                     --
    Deferred compensation                                          141,250                     --
     Accretion of asset retirement obligation                          632                     --
     Depletion, depreciation and amortization                       40,932                     --
Changes in assets and liabilities
   (Increase) in receivables                                       (14,252)                  (9,116)
   Decrease in advances and prepaids                                38,810                     --

   (Decrease) increase in A/P and accrued liabilities             (387,954)                  50,197
                                                               -----------              -----------
Net cash (used) by operating activities                           (505,035)                (336,223)

CASH FLOWS FROM INVESTING ACTIVITIES
    Proceeds from sale of oil and gas properties                   326,247                     --
   Cash paid for oil and gas properties                           (567,659)                (864,553)
                                                               -----------              -----------
Net cash provided (used) by investing activities                  (241,412)                (864,553)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from sale of common stock                            1,525,000                2,330,000
   Cash paid for offering costs                                     (7,430)                (146,021)
                                                               -----------              -----------
Net cash provided by financing activities                        1,517,570                2,183,979

                                                               -----------              -----------
NET INCREASE IN CASH                                               771,123                  983,203

CASH, BEGINNING OF PERIODS                                       1,066,458                   83,516
                                                               -----------              -----------
CASH, END OF PERIODS                                           $ 1,837,581              $ 1,066,719
                                                               ===========              ===========

SUPPLEMENTAL SCHEDULE OF CASH FLOW                                6/30/04                 6/30/03
INFORMATION
                                                               -----------              -----------
   Cash paid for interest                                      $      --                $      --
                                                               ===========              ===========

SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
                                                               -----------              -----------
   Stock issued for services                                   $    26,251              $      --
                                                               ===========              ===========

                                                               -----------              -----------
   Stock based deferred compensation                           $   141,250              $      --
                                                               ===========              ===========
                                                               -----------              -----------
   Warrants issued for oil and gas consulting services         $    10,537              $      --
                                                               ===========              ===========


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

                                              5
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<PAGE>


                            AMERICAN OIL & GAS, INC.
                          Notes to Financial Statements
                                   (UNAUDITED)
                                  June 30, 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 June 30, 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.

Note 1 - 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 June 30, 2004, we had $1,810,918 in 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 employee stock options or similar equity instruments.
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.

Note 2 - 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 oil and 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 June 30, 2004 would be approximately $1,449,631.
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 June 30, 2004, we include $28,085 in oil and gas properties, and an
asset retirement obligation of $31,507, associated with our adoption of SFAS No.
143. During the quarter ended June 30, 2004, we reflect a charge to
depreciation, depletion and amortization of $1,043 and accretion of the asset
retirement obligation of $285.

Note 3 - 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.

Note 4 - Related Party Transactions

     During the quarter ended June 30, 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 $61,659. 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. Patrick O'Brien, our Chief
Executive Officer and Chairman, and Kendell Tholstrom, another of our directors,
together own a majority of Tower.


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

     This discussion and analysis should be read in conjunction with the
accompanying financial statements and related notes. Our discussion and analysis
of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of financial statements in conformity with accounting principles generally
accepted in the United States of America requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of any contingent liabilities at the financial statement date and
reported amounts of revenue and expenses during the reporting period. On an
on-going basis we review our estimates and assumptions. Our estimates were based
on our historical experience and other assumptions that we believe to be
reasonable under the circumstances. Actual results are likely to differ from
those estimates under different assumptions or conditions, but we do not believe
such differences will materially affect our financial position or results of
operations. Our critical accounting policies, the policies we believe are most
important to the presentation of our financial statements and require the most
difficult, subjective and complex judgments, are outlined in our notes to
financial statements.

     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 currently own interests in three gross (.0285 net) producing wells here,
and during the quarter ended June 30, 2004 these wells produced a cumulative
total of 97,400 boe (678 barrels of oil equivalent net to the Company's
interest). We own a 13.3% working interest in the Matador 1-13H well, which
recently finished drilling and is awaiting completion. We currently anticipate
that this well should be producing by early September 2004. We own a 1.67%
working interest in the recently completed Obergfell Trust 13X-13 well, which
was drilled in the southeastern portion of the producing area. We own a 6.48%
working interest in the Avenger 1-12H well, which commenced drilling on July 31,
2004 and is expected to take approximately 45 days to drill. In addition to the
above wells, we expect to participate in four additional wells and own interests
in 10 gross wells (approximately 7/10th's of one net well) here by year-end
2004. 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.

     Our acreage position is located on the Southeastern edge of the Powder
River Basin near the Lance Creek 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
drilling to the same formation in this area, and 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 recently signed an agreement for a private company to drill either two
horizontal or four vertical wells to test the Mowry formation within this
acreage. The agreement covers approximately 20,000 gross (approximately 10,000
net) leasehold acres. The private company will retain 100% working interest in
each well drilled and in three of the eight offset locations surrounding that
well. We expect to benefit not only from the information received from drilling,
but also from the addition of one or more proved undeveloped locations for each
successful well drilled. Under a continuous drilling obligation, the private
company has the right to drill up to 10 additional wells and earn three more
offset locations for each well drilled. We have retained the right to
participate in any or all drilling and could own up to 18.75% in each of the
private company initial and offset wells, 31.25% to 50% in the other offset
locations and 50% in all other acreage. We expect drilling to commence by August
31, 2004, subject to rig availability.

Douglas Project - Southern Powder River Basin, Wyoming

     During the quarter ended June 30, 2004, we, entered into an option
agreement which will allow us to earn a 50% interest in approximately 103,000
gross (approximately 98,000 net) undeveloped leasehold acres in Converse and
Niobrara counties, Wyoming, in the area of our Douglas project. We have a 50%
interest in the option acquired, and Tower and North Finn have the remaining 50%
interest. We have identified multiple exploration opportunities within the
identified acreage block.

     Our initial focus will be on the Fetter Field, which is a Niobrara/Frontier
natural gas field originally discovered in the 1960's. The Niobrara/Frontier
here is in an over-pressured area of the Powder River Basin, and occurs at about
11,500 feet. There have been a number of wells drilled at various times over the
past 40 years and there is current production in the field from four 1990's
wells that are owned by others. We believe that the potential economics from new

                                       10

<PAGE>


wells drilled here could be enhanced by; 1) advances in drilling equipment that
could significantly reduce drilling times, thereby reducing drilling costs, 2)
advances in drilling techniques, such as under-balanced and horizontal drilling
that could enable us to reduce or eliminate reservoir damage and increase
reservoir contact, resulting in enhanced flow rates, and 3) advances in
stimulation technologies, primarily fracturing techniques that have been used
successfully in other areas to increase production profiles and lengthen
productive lives of wells. As an additional advantage, there is a natural gas
processing facility with excess capacity located within our acreage that, if we
are successful with initial drilling, should enable us to immediately connect
wells to sales lines. We continue to perform geological and engineering
evaluations and have begun to present this project to potential joint venture
participants.

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 6,400 gross (3,200 net to our interest) leasehold acres, that
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.

     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

                                       11

<PAGE>


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.

Coalbed Methane Projects (Powder River Basin, Wyoming)

     We have evaluated our ownership in the 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 and in the seven currently
producing wells that we own at West Recluse. Because this is not a core area of
development and because we feel our other projects offer greater opportunity for
larger development potential, we have decided to sell a major portion of our
ownership in this area and redeploy sales proceeds into our other projects.

     During the quarter ended June 30, 2004, we signed a purchase and sale
agreement to sell 90% of our interest in this acreage position. We will also
sell 90% of our interest in the existing seven producing West Recluse wells. The
sale is expected to close by November 1, 2004. As part of the agreement, the
purchaser is required to drill and equip at least twelve new wells on this
acreage by September 1, 2004. The purchaser will pay 100% of the costs, and we
will retain a 5% carried working interest in these wells and in any future wells
on these acreage positions. We expect to receive sales proceeds of approximately
$1.2 million.

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.

The quarter ended June 30, 2004 compared with the quarter ended June 30, 2003.

     We recorded losses of $188,705 (one cent per common share) and $141,424
(one cent per common share) for the quarters ended June 30, 2004 and 2003,
respectively.

     During the quarter ended June 30, 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.

     We recorded $49,236 in revenues from the sale of 11,228 MCF of natural gas
for the quarter ended June 30, 2004, for an average net price of $4.39 per MCF.
We recorded $30,527 in revenues from the sale of 815 barrels of oil for the
quarter ended June 30, 2004, for an average net price of $37.47 per barrel.
Lease operating expenses and production taxes were $14,710, so that net income
from oil and gas operations was $65,053. We recorded depreciation, depletion and
amortization expense associated with our oil and gas operations for the quarter
ended June 30, 2004 of $19,305, or $7.18 per barrel of oil equivalent produced.

     We recorded $233,625 and $141,424 in general and administrative expenses
during the quarters ended June 30, 2004 and 2003, respectively. Included in the
quarter ended June 30, 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, and a $15,738 non-cash charge to Directors' expense for
the value of common stock paid to one of our Directors.

                                       12

<PAGE>


The six months ended June 30, 2004 compared with the six months ended June 30,
2003.

     We recorded losses of $350,704 (two cents per common share) and $377,304
(two cents per common share) for the six months ended June 30, 2004 and 2003
respectively.

     During the six months ended June 30, 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.

     We recorded $93,129 in revenues from the sale of 23,361 MCF of natural gas
for the six months ended June 30, 2004, for an average net price of $3.99 per
MCF. We recorded $54,548 in revenues from the sale of 1,587 barrels of oil for
the six months ended June 30, 2004, for an average net price of $34.37 per
barrel. Lease operating expenses and production taxes were $34,922, so that net
income from oil and gas operations was $112,755. We recorded depreciation,
depletion and amortization expense associated with our oil and gas operations
for the six months ended June 30, 2004 of $38,597, or $7.04 per barrel of oil
equivalent produced.

     We recorded $422,813 and $377,304 in general and administrative expenses
during the six months ended June 30, 2004 and 2003, respectively. Included in
the six months ended June 30, 2004 is a non-cash charge of $141,250 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, and a $26,238 non-cash charge to
Directors' expense for the value of common stock paid to one of our Directors.

Liquidity and Capital Resources

     During the six months ended June 30, 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, together with
warrants to purchase 1,525,000 shares of our common stock at $1.00 per share
through August 31, 2004. We also received a total of $326,247 from the sale of
one-third of our interests in our Big Sky Project. At June 30, 2004, we had a
working capital amount of approximately $1,541,000.

     We anticipate that our current cash position will be sufficient to fund our
known cash requirements for the next 12 months, 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 $2,400,000 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 drilling and other related costs in our
identified and in 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 $568,000 during the six months ended June 30, 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

                                       13

<PAGE>


Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of June 30, 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 June 30, 2004 that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.


                                    PART II.
                                OTHER INFORMATION

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

          The following matters were submitted to a vote of security holders at
     the annual meeting of stockholders which was held on July 12, 2004:

          The stockholders voted to re-elect Patrick D. O'Brien, Alan Gelfand,
     Andrew P. Calerich, Kendell Tholstrom, Nick DeMare and M.S. ("Moni")
     Minhas to continue as directors of the Company. A total of 14,857,524 votes
     were represented with respect to this matter, with voting on each specific
     nominee as follows:
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------
                                                                                      BROKER
                                        FOR          AGAINST        WITHHELD        NON-VOTES
-----------------------------------------------------------------------------------------------
<S>                                 <C>                              <C>
      Patrick D. O'Brien            14,824,784          -            32,740             -
-----------------------------------------------------------------------------------------------
         Alan Gelfand               14,824,784          -            32,740             -
-----------------------------------------------------------------------------------------------
      Andrew P. Calerich            14,824,784          -            32,740             -
-----------------------------------------------------------------------------------------------
       Kendell Tholstrom            14,824,784          -            32,740             -
-----------------------------------------------------------------------------------------------
          Nick DeMare               14,824,784          -            32,740             -
-----------------------------------------------------------------------------------------------
      M.S. (Moni) Minhas            14,824,784          -            32,740             -
-----------------------------------------------------------------------------------------------


          A proposal to ratify the selection of Wheeler Wasoff, P.C. as
     Certified Public Accountants was approved by the stockholders. A total of
     14,857,524 votes were represented with a total of 14,299,684 (96.2%) shares
     voting for the proposal, 7,600 shares voting against the proposal, and
     550,240 shares abstaining from voting.

          A proposal to approve the Company's 2004 Stock Option Plan was
     approved by the stockholders. A total of 8,478,780 votes were represented
     with a total of 7,671,685 (90.5%) shares voting for the proposal, 237,095
     shares voting against the proposal, and 570,000 shares abstaining from
     voting.

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.

                                       14

<PAGE>


          (b) During the quarter ended June 30, 2004, we filed three reports on
     Form 8-K:

               A Form 8-K was filed on April 19, 2004 disclosing a news release
          dated April 15, 2004, which announced the Company's 2003 financial
          results and year-end reserves.

               A Form 8-K was filed on April 22, 2004 disclosing a news release
          dated April 22, 2004, which announced the signing of a letter of
          intent to acquire interests in undeveloped oil and gas leases.

               A Form 8-K was filed on May 18, 2004 disclosing a news release
          dated May 17, 2004, which announced the Company's first quarter 2004
          financial results.



                                   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             August 16, 2004
------------------------      Chairman of The Board of Directors
Patrick D. O'Brien



 /s/ Andrew P. Calerich       President, Chief Financial Officer      August 16, 2004
-----------------------       and Director
Andrew P. Calerich
</TABLE>

                                       15

<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
---------------- ----------------------------------------------

3(i)             Articles of Incorporation of the Company (1)

3(ii)            By laws of the Company (as revised on December 12, 2002) (2)

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


-----------
(1)  Incorporated by reference from the Company's Form 10-SB, file number
     0000-31547, filed on September 18, 2000.

(2)  Incorporated by reference from the Company's Form 10/KSB/A filed on
     November 18, 2003.

                                       16