`WASHINGTON, DC
                                   FORM 10-KSB


[X] ANNUAL  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003.

Commission File No. 000-31170

                             TETON PETROLEUM COMPANY
                 (Name of small business issuer in its charter)

      DELAWARE                                        1482290
(State or other jurisdiction                      (I.R.S. Employer
of incorporation or organization)                Identification No.)

                            1600 Broadway, Suite 2400
                            Denver, Co. 80202 - 4921
                    (Address of principal executive offices)

Issuer's telephone number:  303.542.1878

Securities registered pursuant to Section 12(b) of the Exchange Act:  None

Securities registered pursuant to Section 12(g) of the Exchange Act:

                                   Common Stock
                                 (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during the  preceding  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 [
]

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ X ]

The issuer's revenue for its most recent fiscal year was $11,437,802

The  aggregate  market value of the common stock held by  non-affiliates  of the
issuer,   8,061,882   shares  of  common  stock,  as  of  March  25,  2004,  was
approximately  $31,763,815,  based on the closing bid of $3.94 for the  issuer's
common stock as reported on the American Stock Exchange.  Shares of common stock
held by each  director,  each officer  named in Item 9, and each person who owns
10% or more of the  outstanding  common  stock  have  been  excluded  from  this
calculation  in  that  such  persons  may  be  deemed  to  be  affiliates.   The
determination of affiliate status is not necessarily conclusive.

As of March 25, 2004, the issuer had 8,584,068 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE - NONE

Transitional Small Business Disclosure Format (Check one):  YES      [     ]  NO
[X]




                                   FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                      INDEX

PART I
Item 1.   Description of Business
Item 2.   Description of Property
Item 3.   Legal Proceedings
Item 4.   Submission of Matters to a Vote of Security Holders

PART II

Item 5.   Market for the Registrant's Common Equity and
          Related Stockholder Matters
Item 6.   Management's Discussion and Analysis or Plan of Operation
Item 7.   Financial Statements
Item 8.   Changes in and Disagreements with Accountants on
          Accounting and Financial Disclosure
Item 8A.  Controls and Procedures

PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons; Compliance
            with Section 16(A) of the Exchange Act.
Item 10.  Executive Compensation
Item 11.  Security Ownership of Certain Beneficial Owners and Management
Item 12.  Certain Relationships and Related Transactions
Item 13.  Principal Accountant Fees and Services

PART IV

Item 14.  Exhibits and Reports on Form 8-K

SIGNATURES






                                     PART I

                  Caution Concerning Forward-Looking Statements

We  have   included  in  this   report,   statements   which  are   intended  as
"forward-looking  statements" under the Private Securities Litigation Reform Act
of 1995. These include  statements that are not simply a statement of historical
fact but describe what we "believe,"  "anticipate,"  or "expect" will occur.  We
caution you not to place undue reliance on the  forward-looking  statements made
in this report.  Although we believe these statements are reasonable,  there are
many factors, which may affect our expectation of our operations.  These factors
include, among other things, the following:

o     general economic conditions
o     the market price of oil
o     our ability to service our existing indebtedness
o     our ability to raise additional capital,  obtain debt financing,  or generate
      sufficient revenues to fund our operating and development plan
o     our success in completing development and exploration activities
o     political stability in Russia
o     changes in Russian law, currency regulations, and taxation
o     our present company structure
o     our accumulated deficit
o     other factors discussed elsewhere in this document
o     uncertainty  regarding  certain  disputed  matters  with our Russian  partner
      -Russneft


                                     Summary

Teton Petroleum Company, through its consolidated subsidiary,  is engaged in oil
and gas exploration, development, and production in Western Siberia, Russia.

In 2001, four wells were drilled and completed on the license area. This brought
the total  number of  producing  wells on the  license  area to 7. At the end of
2001,  the field was producing  approximately  2,500 barrels of oil per day, 625
barrels  of oil  per  day  net to  Teton.  The  construction  of a  40-kilometer
(25-mile) pipeline was also completed.  The pipeline enables us to transport and
produce oil on a year-round basis.

In 2002, 6 additional wells were drilled and completed on the license area. This
brought the total number of producing wells on the license area to 13.

Teton  reorganized  its  structure  in 2002.  After MOT  withdrew  from  Goltech
Petroleum,  LLC, Teton became the sole owner of Goltech. Goltech owns 35.295% of
the shares of Goloil. Goloil holds the oil and gas license. In this report, "we"
or "Teton" may include activities conducted by Teton, Goltech, and/or Goloil.

In  2002,  Teton  raised  net  proceeds  of  $4,143,643  from  the  issuance  of
convertible  debt,  which  was  converted  into  common  stock and  warrants  on
September 1, 2002, and  $3,333,460  from the sales of common stock under private
placement  offerings.  Thus, at the end of 2002,  Teton had no outstanding  debt
obligations,  exclusive  of our  proportionate  share of notes  payable  owed to
affiliate.

During 2003,  Teton's  Goloil  affiliate  drilled seven new wells,  bringing the
total  number of wells that are capable of producing  to 21 and  completing  its
drilling program for the year. Of the 21 wells, one is awaiting completion,  and
four are off-line pending upgrades to the gathering system. Consequently,  as of
the end of  December,  there  were 16  producing  wells.  During  the  month  of
December,  the Goloil  license  produced an average of 7,164  barrels of oil per
day, of which 1,791 was net to Teton.  Goloil management expects to complete the
above-mentioned gathering sytem upgrade during first half of 2004, at which time
it also expects to commence the operation of its co-generation  plant, which has
been delayed by permitting issues.

In September  2003, OAO NK Russneft,  a Russian  independent oil producer became
Teton's  partner in Goloil,  by acquiring  Mediterranean  Overseas Trust and its
affiliates and all other Goloil  shareholders.  Russneft succeeds  Mediterranean
Overseas  Trust as  Manager of Goloil,  but at this point  continues  to operate
through MOT. It is Teton's view that the agreements with MOT governing  Goloil's
operations remain in effect until new agreements,  now being negotiated,  are in
place.  Please refer to the Management  Discussion and Analysis for an extensive
discussion on various disputes with Russneft.

In 2003, Teton raised net proceeds of $10,251,924 from the issuance of preferred
and common stock. At the end of 2003, Teton had no outstanding debt obligations,
exclusive of our proportionate share of notes payable owed to affiliate, Goloil.




Item 1.  DESCRIPTION OF BUSINESS.


Structure of Teton Through our wholly-owned  subsidiary,  Goltech Petroleum LLC,
we  own  35.295%  of  the  Russian  Joint  Stock  Company   Goloil   ("Goloil").
Mediterranean  Overseas Trust (together with its affiliates,  including McGrady,
Fenlex, Petromed, and Energosoyuz-A ("ESA"),  (collectively "MOT")) owns 35.295%
of Goloil and serves as Manager of Goloil.  InvestPetrol,  another Russian Joint
Stock Company, owns the remainder (29.41%) of Goloil. In September of this year,
Goloil and its  affiliates,  along with  InvestPetrol  were  acquired  by OAO NK
RussNeft,  a Russian  independent  oil producer.  Russneft  succeeds  McGrady as
Manager  of Goloil,  but at this point  continues  to operate  through  McGrady.
Consequently,  our discussions pertaining to Teton's structure and operations of
the Goloil  License  will  continue  to refer to  McGrady  (and  affiliates)  as
Goloil's Manager and the operator of the Goloil License.

Goloil  holds the  license to produce  oil and gas in Western  Siberia.  MOT and
Teton (via Goltech) are  obligated to each fund 50% of the Capital  Expenditures
of Goloil under their Memorandum of Understanding. InvestPetrol is currently not
funding any of this development.  Based on the current structuring of Goloil and
the  development  agreements  with Teton and MOT, until Goltech and McGrady each
has been repaid its  investments  in Goloil,  each  receives a proportion of the
production and revenues from Goloil (after the production  payment to MOT) equal
to the proportion of its investment to the total investments in Goloil. Since it
is expected that this will continue for the foreseeable future, when we describe
"net" amounts to Teton,  these  calculations are based on Teton's right (through
its  ownership of Goltech) to receive 50% of the  production  and revenues  from
Goloil  (after the  production  payment to ESA).  The  agreements  affecting the
Goloil license are discussed below under "MOT Agreements."

Goltech Petroleum LLC is a limited liability company organized under the laws of
Texas. For tax purposes it is treated as a partnership.  We are the sole manager
of Goltech and have complete  authority to manage its business.  Petromed  (MOT)
withdrew  as a member and  manager of Goltech in 2002.  In  connection  with its
withdrawal,  Petromed  received a  distribution  consisting of Goloil shares and
return of its original $1 million contribution.

Goloil is a closed  joint  stock  company  organized  under the laws of  Russia.
Russian  joint stock  companies are  corporate  entities with limited  liability
similar to corporations formed under United States laws. Shareholders of Russian
joint stock companies  generally are not liable for debts and obligations of the
company.  However,  shareholders  of a bankrupt  joint stock company may be held
liable for debts and obligations of the bankrupt  company if they have exercised
their  authority  to  undertake an action  knowing  that  bankruptcy  would be a
possible  result of their actions.  Any transfer of shares by a shareholder to a
third party is subject to a right of first refusal by the other shareholders.

Under  Russian law, a simple  majority of voting shares is sufficient to control
adoption of most resolutions.  Resolutions  concerning  amendment of the company
charter,  reorganizations  (including  mergers),  liquidation,  any  increase in
authorized shares, or certain "large"  transactions  require the approval of the
shareholders holding 75% of the outstanding shares.

A Russian  joint stock company has no obligation to pay dividends to the holders
of common shares.  Any dividends paid to shareholders must be recommended by the
board of directors and then  approved by a majority vote at the general  meeting
of shareholders.  The Memorandum of Understanding between McGrady and Teton (the
controlling shareholders) provides that any excess cash will be used to pay back
investments on a quarterly basis.


Teton History

Teton was formed by the November  1998 merger of EQ Resources  Ltd. and American
Tyumen Exploration Company. EQ was incorporated in Ontario,  Canada, on November
13, 1962,  under the name Mangesite  Mines  Limited.  Its name was changed to EQ
Resources Ltd. in August 1989. EQ was domesticated in Delaware immediately prior
to the merger. In the merger,  EQ, the survivor  corporation,  was renamed Teton
Petroleum Company.

At the time of the  merger,  Teton's  holdings  consisted  of  licenses  for the
exploration of gold in Ghana, licenses for oil and gas in Dagestan,  Russia, and
the Goloil  license.  Following the merger,  we decided to focus our efforts and
resources on development of the Goloil  license.  We disposed of our interest in
the Ghana gold licenses.  We also wrote down the value of the Dagestan  licenses
to zero on our  financial  statements  in 1998,  and disposed of our  subsidiary
Teton Oil, Inc. which held the Dagestan licenses  effective May 24, 2001. In our
opinion,  political  instability  in the  Dagestan  region  made  operations  in
Dagestan  too  risky.  Due to  inactivity  most  of our  Dagestan  licenses  had
terminated prior to our disposition of Teton Oil, Inc.


MOT Agreements

In June 2000,  Teton,  Goltech  and Fenlex  Nominee  Services  Limited,  as sole
trustee of the Mediterranean Overseas Trust, a trust organized under the laws of
Malta entered into a Master  Agreement.  The Master  Agreement  contemplated the
following transactions:

(a)   Purchase of 50% of the interest in Goltech in exchange for $1,000,000.
(b)   Additional investment by MOT, of up to $5,600,000, through an oilfield
      development and leasing arrangement, paid on an as needed basis to cover
      certain costs related to the pipeline, processing facility, and drilling of
      five additional wells.
(c)   Payment of leasing fees and repayment of amounts advanced by MOT through a
      production payment in the form of crude oil.
(d)   Additional work, as agreed to by the parties.

The purchase of 50% of the  interests  in Goltech was  completed in August 2000.
See, also "Structure of Teton."

As contemplated in the Master  Agreement,  Goloil and MOT (through  Energosoyuz)
entered into an oilfield  development  agreement  and a lease  agreement.  These
agreements provided,  among other things, for the drilling and operation of five
additional  wells on the Goloil license lands and for  Energosoyuz to fund up to
$5,600,000  to cover  certain  costs  related to  development  of a pipeline and
processing facility and the drilling of five additional wells.

The wells and facilities  constructed  by  Energosoyuz  pursuant to the oilfield
development  agreement are leased to Goloil for a seven-year production payment.
The production  payment is equal to 50% of the crude oil produced by the new and
existing  Goloil wells.  The  production  payment period will be extended if the
production  payment falls below an average of 80,000 tons  (583,200  barrels) of
oil per year or if the  market  price of Ural Oil Blend  falls  below a weighted
average of $17 per barrel,  for oil sold outside of Russia,  over the seven year
period.

At March  2002,  the full  $5,600,000  contemplated  in the MOT  agreements  was
invested by MOT. The pipeline and four of the wells were  completed in 2001. The
fifth well was completed in early 2002.  Construction of a processing  plant was
completed in 2003.

After the production payment is paid in full, the MOT agreements provide that one
of the following shall occur:

1.    Energosoyuz will merge into Goltech.

2.    100% of the capital stock of Energosoyuz will be transferred to Goltech.

3.    The outstanding capital stock of Energosoyuz will be distributed equally
      between Teton and MOT or its nominee.

4.    Any other action agreed to by the parties resulting in a division of the
      revenues of Energosoyuz between Teton and MOT or its nominees in proportion
      to their respective ownership in Goltech.

In late 2002,  MOT elected to withdraw  from  Goltech in exchange for its 50% of
the  shares  in  Goloil  held by  Goltech.  This has been  accomplished  under a
Memorandum  of  Understanding  and  withdrawal  agreement.   As  part  of  these
agreeements,  the  production  payment  agreement was clarified to state a fixed
term of 7 years from  inception  (July 1, 2000) and that all oil received  under
the agreement would be sold as Russian  domestic oil, thus allowing about 90% of
the remainder to be sold in the export markets currently.

Production and Distribution.

A  glossary  of  certain  oil and gas  terms  used in this  report  is  found at
"DESCRIPTION OF PROPERTY- Glossary of Geologic Terms."

As of December, 2003, the wells on our license area were producing 7,164 barrels
per day (1,791  barrels net to Teton).  Completion of a  40-kilometer  (25-mile)
pipeline  on June 4, 2001 has enabled oil to be pumped from these wells all year
long.  Prior to completion of the pipeline,  no oil was produced  during certain
times of the year because of transportation difficulties.  At December 31, 2001,
seven wells were  completed on our license  area. At December 31, 2002, 13 wells
were completed on our license area.

During 2003,  Teton's  Goloil  affiliate  drilled seven new wells,  bringing the
total  number of wells that are capable of producing  to 21 and  completing  its
drilling program for the year. Of the 21 wells, one is awaiting completion,  and
four are off-line pending upgrades to the gathering system. Consequently,  as of
the end of  December,  there  were 16  producing  wells.  During  the  month  of
December,  the Goloil  license  produced an average of 7,164  barrels of oil per
day, of which 1,791 was net to Teton.  Goloil management expects to complete the
above-mentioned  gathering  system  upgrade  during first half of 2004, at which
time it also expects to commence the operation of its co-generation plant, which
has been delayed by permitting  issues.  Pursuant to the MOT agreements,  MOT is
entitled to a  production  payment in kind.  See "MOT  Agreements",  above.  The
production  payment is projected to be completed in June, 2007, based on revised
leases negotiated in late 2002.

Teton  previously  paid processing and  transportation  fees to a third party to
process  and  place its oil in the  Trans-Siberia  pipeline.  Construction  of a
processing   facility  on  the  license  area  was  completed   early  in  2003.
Consequently we no longer incur the third-party processing charge.

Teton's  share of the oil  production is sold in Poland,  Germany,  Byelorussia,
Ukraine and Russia.  Sales in Poland,  Germany,  Ukraine and  Byelorussia are in
United States dollars. Oil sold in Russia is in rubles. Pursuant to the terms of
the Goloil license and pipeline quotas issued by Transneft, the government owned
pipeline monopoly, up to a maximum of 35% of Goloil's oil production may be sold
outside  of the CIS and an  additional  10% can be  sold to  other  CIS  states.
Currently,  MOT is required to sell the oil it receives as a production  payment
into the Russian domestic market.  Thus, until the production payment is paid in
full, we are able to sell 90% of our share of the production  outside of Russia.
Currently there are no long-term contracts for the sale of our oil. We currently
are not dependent on any principal customer.

The chart below sets forth  certain  production  data for the last three  fiscal
years.  Additional  oil  and  gas  disclosure  can be  found  in  Note 12 of the
Financial Statements.

                                  PRODUCTION DATA


Year Ended December 31                            2003             2002           2001           2000
                                                 ---------        -------        ------          -----

Total Gross Oil Production, barrels             2,528,260      1,884,933        425,459        178,331
                                                 =========        =======        ======          =====

Total Gross Gas Production, MCF                         -              -             -              -
                                                 =========        =======        ======          =====

Net Oil Production, barrel(1)                     632,065        471,233         94,879        142,664
                                                 =========        =======        ======          =====

Net Gas Production, MCF                                                -             -              -
                                                 =========        =======        ======          =====

Average Oil Sales Price, $/Bbl                     $18.11         $15.38         $16.43         $11.00
                                                 =========        =======        ======          =====

Average Gas Sales Price, S/MCF                          -              -             -              -
                                                 =========        =======        ======          =====

Average Production Cost per Barrel (3)           $10.75(4)       $9.96(4)        $11.22         $10.00
                                                 =========        =======        ======          =====

Gross Productive Wells Oil                         21.0           13.0              7.0            3.0
                                                 =========        =======        ======          =====

Gas                                                     -              -             -              -
                                                 =========        =======        ======          =====

Net Productive Wells(2)
Oil                                                  10.5            6.5            3.5            1.5
                                                 =========        =======        ======          =====

Gas                                                     -              -              -              -
                                                 =========        =======        ======          =====

Total                                                 10.5            6.5           3.5            1.5
                                                 =========        =======        ======          =====


(1)   Net production and net well count is based on Teton's effective net
      interest as of the end of each year. Prior to August 2000 and after
      November, 2002, Teton owned 100% of the interests in Goltech.
(2)   Average oil sales prices is a combination of domestic (Russian) and export
      price.
(3)   Excludes production payment to MOT.
(4)   If the cost of the production payment, which requires Teton to cover all
      lifting and G&A costs, is included, the cost per barrel net to Teton would
      be $15.51 per barrel in 2002 and $17.45 per barrel in of 2003. See also
      "MANAGEMENT'S DISCUSSION AND ANALYSIS - Results of Operations."

The following chart sets forth the number of productive wells and dry exploratory
and productive wells drilled and completed during the last three fiscal years in
the Goloil license area:

NET WELLS DRILLED


Year Ended December 31                  2003                  2002                  2001                 2000
======================                  ====                  ====                  ====                 ====
                                 Gross      Net(1)       Gross     Net(1)     Gross       Net(1)     Gross     Net(1)
                                 =====      ======       =====     ======     =====      ======      =====     ======
Number of Wells Drilled
Exploratory (Research)
Productive                         -           -            -          -        1.0        0.5         -          -
                                 =====      ======       =====     ======     =====      ======      =====     ======

Dry                                -           -            -          -         -          -          -          -
                                 =====      ======       =====     ======     =====      ======      =====     ======

Total                              -           -            -          -        1.0        0.5         -          -
                                 =====      ======       =====     ======     =====      ======      =====     ======

Development
Productive                        7.0         3.5          6.0       3.0        3.0        1.5         2.0        1.0
                                 =====      ======       =====     ======     =====      ======      =====     ======

Dry                                -           -            -          -         -          -           -          -
                                 =====      ======       =====     ======     =====      ======      =====     ======

Total                             7.0         3.5          6.0       3.0        3.0        1.5         2.0        1.0
                                 =====      ======       =====     ======     =====      ======      =====     ======



(1)   Net well count is based on Teton's effective net interest as of the end of
      each year. Prior to August 2000, Teton owned 100% of the interests in
      Goltech. Subsequent to August 2000 our interest was reduced to 50%. In
      November, 2002, it again became 100%.

United States Trade and Development Agency (TDA) Grants

In October 2001,  Teton finished its study of the feasibility of oil exploration
in the  Novo-Aganskoye,  Galinovaya and East Galinovaya  license area of Siberia
pursuant  to an  agreement  with  Varioganneft  JSC.  The study was  funded by a
$250,000  grant from the TDA. In 2001,  we  received a final  payment of $37,500
from the TDA for the study.  Currently, we do not expect to make any investments
in the Novo-Aganskoye,  Galinovaya and East Galinovaya license area. Thus, we do
not  expect to incur any  obligation  to repay  the  amounts  paid by the TDA in
connection with this study.

As of March 25, 2004 Teton has completed  and  submitted to TDA its  feasibility
study of the Eguryak  license area pipeline  project in 2004. This study is also
funded through a $300,000 grant from the TDA. Teton has received $255,000 of the
grant amount.  The balance of the grant funds are to be paid upon  completion of
the  study.  Teton may be  required  to repay the TDA the grant  amount if Teton
makes  certain  investments  in the Eguryak  license  area prior to December 31,
2005.

Competition

We compete in a highly competitive  industry. We encounter competition in all of
our operations, including property acquisition, and equipment and labor required
to operate and to develop our  properties.  Teton  competes with other major oil
companies,  independent oil companies,  and individual  producers and operators.
Many competitors have financial and other resources  substantially  greater than
ours.

Regulations Governing Russian Joint Stock Companies

Russian  joint stock  companies are  corporate  entities with limited  liability
similar to corporations formed under United States laws. Shareholders of Russian
joint stock companies  generally are not liable for debts and obligations of the
company.  However,  shareholders  of a bankrupt  joint stock company may be held
liable for debts and obligations of the bankrupt  company if they have exercised
their  authority  to undertake an action  knowing that  bankruptcy  would be the
result of their actions. In closed joint stock companies,  i.e. companies with a
limited  number of  shareholders,  such as Goloil,  any  transfer of shares by a
shareholder  to a third party is subject to the  pre-emptive  right of the other
shareholders to acquire such shares at the price offered to a third party.

Under  Russian law, a simple  majority of voting shares is sufficient to control
adoption of most resolutions.  Resolutions  concerning  amendment of the company
charter,  reorganizations  (including  mergers),  liquidation,  any  increase in
authorized shares, or certain "large"  transactions  require the approval of the
shareholders holding 75% of the outstanding shares.

A Russian  joint stock company has no obligation to pay dividends to the holders
of common shares.  Any dividends paid to shareholders must be recommended by the
board of directors and then  approved by a majority vote at the general  meeting
of  shareholders.  Dividends may be paid every quarter of a year. The Memorandum
of Understanding between MOT and Teton (the controlling  shareholders)  provides
that any excess cash will be used to pay back investments on a quarterly basis.

Environmental Regulation.

The government of the Russian  Federations,  Ministry of Natural Resources,  and
other  agencies   establish  special  rules,   restrictions  and  standards  for
enterprises  conducting  activities  affecting  the  environment.   The  general
principle of Russian  environmental law is that any environmental damage must be
fully  compensated.  Under  certain  circumstances,  top  officers of the entity
causing substantial environmental damage may be subject to criminal liability.

The law of the Russian  Federation on subsoil requires that all users of subsoil
ensure  safety of works  related to the use of subsoil and comply with  existing
rules and standards of environment protection. Failure to comply with such rules
and standards may result in termination or withdrawal of the Goloil license.

Goloil Taxation.

As a Russian resident entity, Goloil is subject to all applicable Russian taxes,
many of which  currently  impose  a  significant  burden  on  profits.  The most
significant Russian taxes and duties affecting Goloil include:

(i)  20% value added tax (established  pursuant to Chapter 21 of the Tax Code of
     Russia),  applicable  only to  domestic  sale of  goods in  Russia  and the
     Ukraine.  Starting from 1/1/2004 VAT was reduced to 18%. No value added tax
     is payable on goods exported to the West from Russia;

(ii) 20 to 24%  profit  tax which  includes  6% federal  profit  tax,  12 to 16%
     regional  profit tax and 2% local tax (in accordance with Chapter 25 of the
     Tax Code of  Russia).  Russian  law  allows  the carry  forward  and use of
     losses, subject to limitations;

(iii)Income tax on dividends payable to Goloil's  shareholders.  The tax must be
     withheld by Goloil from the amount  distributed  to each  shareholder.  The
     current rate of tax on dividends payable to corporate foreign  shareholders
     is 15%.  However,  dividends  payable to Goltech,  a United States resident
     company, are subject to regulations contained in the United States - Russia
     tax treaty which  limits the tax on dividends  payable to Goltech to 5% (as
     long as Goltech holds more than a 10% interest in Goloil);

(iv) Tax on  production of minerals  applicable  to all subsoil users  producing
     minerals,  including crude oil. For the period ending on December 31, 2004,
     the tax is temporarily established at 340 rubles (ca. USD 11.50) per metric
     ton produced by the taxpayer multiplied by a factor (F) calculated pursuant
     to the formula:

            F = (U-8) x R/252 where:

            U - means the average market price of Urals blend crude oil (in
            dollars per barrel) during the relevant tax period;

            R - means the average ruble for dollar exchange rate quoted by
            the Central Bank of Russia for the relevant tax period.

         After expiration of the temporary tax rate period, the tax will apply at
         the rate of 16.5% of the value of the oil produced by the taxpayer;

(v)  Unified social tax  (established  pursuant to Chapter 24 of the Tax Code of
     Russia) at the rate of up to 35.6% of the payroll;

(vi) Transport  tax  (established  pursuant  to  Chapter  28 of the Tax  Code of
     Russia)  payable by owners of motor  vehicles  at the rate  established  by
     regional  authorities  based on the type and capacity of the  vehicle.  The
     maximum  amount of tax  payable  by an owner of a motor car per year is RUR
     150 (ca. USD 5.1) per horsepower;

(vii)Oil export  duty,  currently in the amount of USD 33.9 per ton of crude oil
     being exported, increasing to USD 35.2 in 2004;

(viii) Regional property tax payable annually at 2.2% of the value of net assets
     of the entity.

The Russian tax system currently is undergoing a major  reorganization.  New tax
laws including those setting forth rules for application of the value-added tax,
profit tax, and tax on the  production of minerals were enacted  within the last
four years.  The cost of legal and accounting  advice to keep up with changes in
the Russian tax laws may be  significant  and  penalties  for  violations,  even
inadvertent  ones, may be steep. If revisions  impose  confiscatory  taxes,  our
profitability will be adversely affected.

Employees.

Teton currently has eight full time and two part time employee.  We also utilize
the  services of  independent  contractors  on an  as-needed  basis.  Teton also
employees three people in its Moscow  representative  office.  Goloil  currently
employs  approximately 100 employees in Western Siberia and Moscow.  Goloil also
uses independent contractors on as needed basis.

Item 2.  DESCRIPTION OF PROPERTY.

Glossary of Oil and Gas Terms.

     Barrel: Equal to 42 U.S. gallons.

     Basin: A depressed  sediment-filled area, roughly circular or elliptical in
     shape, sometimes very elongated.  Regarded as good areas to explore for oil
     and gas.

     Field: A geographic region situated over one or more subsurface oil and gas
     reservoirs  encompassing  at least the outermost  boundaries of all oil and
     gas accumulations known to be within those reservoirs  vertically projected
     to the land surface.

     License:  Formal  or  legal  permission  to  explore  for  oil and gas in a
     specified area.

     Productive: Able to produce oil and/or gas.

     Proved reserves:  Estimated  quantities of crude oil,  condensate,  natural
     gas,  and  natural  gas  liquids  that  geological  and  engineering   data
     demonstrate with reasonable certainty to be commercially recoverable in the
     future from known  reservoirs under existing  conditions using  established
     operating procedures and under current governmental regulations.

     Proved undeveloped reserves: Economically recoverable reserves estimated to
     exist in proved reservoirs,  which will be recovered from wells, drilled in
     the future.

     Reserves:  The  estimated  value of oil,  gas and/or  condensate,  which is
     economically recoverable.

     Tons: A ton of oil is equal to 7.29 barrels of oil.

Goloil License

The Goloil license  encompasses  187 square  kilometers (78 square miles) in the
south central portion of the west Siberian basin. It is located approximately 10
miles to the north and west of  Samotlor,  Russia's  largest  oil  field.  Three
producing  fields are located within the license area:  Golevaya,  Eguryak,  and
South  Eguryak.  The Goloil  license  expires in 2022,  and may be extended upon
compliance  with  the  specified   program  of  operations  and  undertaking  of
additional  operations  after the end of its term.  The  Goloil  license  may be
terminated  prior to its term if Goloil fails to comply with the requirements of
the license.  We believe that we are currently in  compliance  with all material
terms of the Goloil license.

Proved Reserves and Present Value Information

Important Note on Reserve Calculations:

o    Reserve  calculations require estimation of future net recoverable reserves
     of oil and gas and the  timing  and  amount of future  net  revenues  to be
     received therefrom.  Such estimates are based on numerous factors,  many of
     which are variable and uncertain.  Accordingly, it is common for the actual
     production  and revenues  later  received to vary  materially  from earlier
     estimates.  Estimates  made from the first few years of  production  from a
     property  are not  likely to be as  reliable  as later  estimates  based on
     longer production history. Hence, reserve estimates and estimates of future
     net revenues from production may vary from year to year.

o    There  can  be  no  assurance  that  the  reserves  described  herein  will
     ultimately be produced or that the proved  undeveloped  reserves  described
     herein  will be  developed  within the  periods  anticipated.  Recovery  of
     undeveloped   reserves  requires   significant  capital   expenditures  and
     successful drilling operation.  The cash flows summarized herein should not
     be construed as  representative  of the fair market value of the  reserves.
     Actual results are likely to differ greatly from the results estimated.

o    The Company has not filed reserve estimates with any federal agency.

Our estimated  proved oil reserves and present value of the estimated future net
revenues attributable to such reserves have been updated for this filing with an
effective  date of  January 1,  2004.  They are based on a report  issued by the
independent consulting firm of Gustavson Associates,  Inc. ("Gustavson") located
in Boulder,  Colorado.  The report was updated to take into  account  production
data obtained  during 2003 on some of our wells,  particularly  those  producing
from the Jurassic formation.

Reference is made to  MANAGEMENT  DISCUSSION  AND ANALYSIS and to note 10 to the
financial statements for a full discussion of the dispute with Russneft.  As the
outcome of this  dispute  cannot be  predicted  at this time,  the  Company  has
instructed Gustavson to prepare two separate proved oil reserve cases: the "Base
Case SEC reserves and Cash Flow  Projections"  and the Alternate  case. The Base
Case assumes that the Company is not  successful in it's dispute with  Russneft,
accordingly,  the price received for oil is set at 2,400 rubles per ton ($11 per
barrel) and the  production  payment is deducted  assuming 19 million rubles per
month.  The Alternate case assumes that the Company is successful in the dispute
and that Russneft and Goloil would honor all preexisting agreements. In the Base
Case,  future  cash flows are  substantially  less than in the  Alternate  case,
however oil reserves  quantities are greater as a result of payout being delayed
and how the production payment is being calculated. In order to avoid misleading
statement  readers,  Management has elected to report the lower,  alternate case
reserves, in both tables below.


As of January 1,  2004,  our proved  reserves  are  estimated  at 8,262  million
barrels, net to Teton, after deducting quantities required to be delivered under
the production payment as summarized below:


                 Base Case SEC Reserves and Cash Flow Projections

                              Before Russian Profits Tax   After Russian Profits Tax
                              --------------------------  -----------------------------

                                  Total    Present Value      Total      Present Value
                     Net      Undiscounted   Discounted   Undiscounted    Discounted
                   Reserves,    Cash Flow,      @10%       Cash Flow,       @10%,
Reserve            thousand     thousand     thousand      thousand       thousand
Category            barrels        US$          US$           US$             US$
-----------        ---------  ------------  ------------  -------------  --------------

PDP                   957      $1,330.6      $1,280.0      $1,087.9       $1,037.2
PDNP                2,859      $7,892.6      $5,621.6      $6,031.9       $4,239.5
Total Proved
Developed           3,816      $9,232.2      $6,901.6      $7,119.8       $5,276.8
PUD                 4,445     $11,697.9      $4,813.4      $6,207.2       $1,195.0
Total Proved        8,262     $20,921.2     $11,715.0     $13,327.0       $6,471.7



The  Securities  and Exchange  Commission  requires that  estimates of reserves,
estimates of future net revenues and the present  value of estimated  future net
revenues  be based on the  assumption  that oil and gas  prices  will  remain at
current levels (except for gas prices determined by fixed  contracts),  and that
production  costs will not escalate in future  periods.  All such estimates have
been  adjusted  for the  anticipated  costs  of  developing  proved  undeveloped
reserves.

The price of oil used for this  analysis  was 2400 rubles per ton (about $11 per
bbl), net of transportation,  marketing and export duties, as Goloil realized as
of year-end 2003. As discussed in the Business  section of this filing,  McGrady
and its  affiliates  were sold in September  2003 to OAO NK RussNeft,  a Russian
independent oil producer.  Commencing October 1, Russneft began selling Goloil's
production  to a related  party for a fixed  price of 2,400  rubles  per  barrel
(roughly $11 per barrel), a price  substantially  below the blended market price
Goloil formerly received selling its production into the export, near abroad and
domestic markets.  Since this pricing  arrangement  prevailed through the end of
the fourth  quarter of 2003 and beyond,  the Company has used the price of 2,400
Rubles  per  barrel in its  reserve  report  with the  effect  of  significantly
reducing the present value of its reserves effective January 1, 2004.

Teton has strenuously objected to Russneft's actions and is continuing to engage
its management in  discussions,  while  retaining  counsel with the intention of
vigorously  pursuing it rights under  previous  agreements  and as a significant
minority  shareholder in Goloil.  While counsel has advised the Company that its
position  has merit,  the outcome of this  dispute  cannot be  predicted  at the
current time.

The oil  and gas  revenues  are net to  Teton  and  include  the  impact  of the
production  payments paid as flat fee of 19 million rubles per month  (including
VAT), and financing and debt  repayment.  Cash flow amounts assume 50% economics
net to Teton without payout.  Teton's net share is 50% before payout and 35.295%
after payout.

The present  value of estimated  future net revenues as of January 1, 2004,  has
been adjusted for Russian profits taxes, but not U.S. income taxes. Teton is not
currently  incurring any  repatriation  tax liability due to the  structuring of
capital  input as a loan.  Management  believes  that  future  repatriation  tax
liabilities  will not be incurred if profits  from this  project are invested in
other projects within Russia. If Teton does not incur repatriation tax liability
for the life of this project,  the undiscounted  total before and after tax cash
flow,  after  production  payments  would  be  $20.92  and  $13.32  million  or,
discounted at 10%, $11.72 and $6.47 million, for total proved reserves.

Capital  expenditures  required to achieve the above cash flows will be incurred
over the next three years and are  estimated  at $14.6  million net to Teton for
development of proved reserves.  Based on our reserve  analysis,  we expect that
cash flow from operations  will fully cover both operating  expenses and capital
investment starting in 2005.

Presented  below is the Alternate Case discussed  above which assumes that Teton
is successful in its dispute with Russneft,  the resulting economic  parameters,
as of January 1, 2004 would be as presented below.



                Alternate Case Reserves and Cash Flow Projections

                                Before Russian Profits Tax      After Russian Profits Tax
                                ------------------------        --------------------------
                                               Present                         Present
                                     Total      Value                Total       Value
               Net              Undiscounted   Discount          Undiscounted  Discounted
             Reserves,  Total     Cash Flow     @10%              Cash Flow,     @10%
Reserve      thousand    Well     thousand      thous.              thous.      thous.
Category     barrels    Count       US$          US$                 US$          US$
---------   ----------  ------  -------------  ---------         ------------- -----------

PDP            957       16       $5,791       $5,323              $4,335       $3,936
PDNP         2,859        3      $23,287      $15,052             $16,358      $10,455
Total
Proved
 Developed   3,816       19      $29,078      $20,375             $20,693      $14,390
PUD          4,445       21      $27,295      $12,661             $16,894       $6,556
Total        8,262       40      $56,373      $33,036              $37,588      $20,946
Proved

The prices  used for this  Alternative  Case were as of  year-end  2003.  Goloil
normally sells its oil into three different markets:  Europe, where the price is
tied to the Urals Blend  benchmark  which itself is closely related to the price
for Brent Crude;  the domestic  Russian  market,  and to non-Russian FSU markets
such as the Ukraine and Byelorussia, generally referred to as the "near abroad".
Sales in the  domestic  and  near  abroad  markets  are  made in  batches,  when
sufficient  quantities  of produced  oil are  available to sell and there are no
spot  prices  are  published  that  apply  to these  markets.  The  markets  are
established  by  individual  transactions,  for which  the  buyers  and  sellers
generally hold the prices confidential.

Consequently,  at December 31, 2003 Teton used the Urals Blend  benchmark with a
-$2.43 basis  adjustment  for its export sales,  while polling  Moscow based oil
trading firms for year-end prices for the domestic and  near-abroad  markets and
using the lowest price returned in the polls. The prices used were $25.00/barrel
for export,  $18.00 per barrel for the near abroad,  and  $15.00/barrel  for the
domestic market. Sales were allocated to the three markets at 35% European,  10%
FSU, and 55% Russia, which is approximately the historic allocation.

The results are net to Teton and include the impact of the  production  payments
due MOT,  and  financing  and debt  repayment.  Cash  flow  amounts  assume  50%
economics  net to Teton without  payout.  Teton's net share is 50% before payout
and 35.295% after payout.

The present  value of estimated  future net revenues as of January 1, 2004,  has
been adjusted for Russian profits taxes, but not U.S. income taxes. Teton is not
currently  incurring any  repatriation  tax liability due to the  structuring of
capital  input as a loan.  Management  believes  that  future  repatriation  tax
liabilities  will not be incurred if profits  from this  project are invested in
other projects within Russia. If Teton does not incur repatriation tax liability
for the life of this project,  the undiscounted  total before and after tax cash
flow,  after  production  payments  would  be  $56.37  and  $37.59  million  or,
discounted at 10%, $33.03 and $20.95 million, for total proved reserves.

Capital  expenditures  required to achieve the above cash flows will be incurred
over the next three years and are  estimated  at $14.6  million net to Teton for
development of proved reserves.  Based on our reserve  analysis,  we expect that
cash flow from operations  will fully cover both operating  expenses and capital
investment starting in 2005.

Teton's current  agreement with MOT requires the two companies each fund half of
the capital expenditures required for development. In the event we are unable to
fund our portion of the capital  expenditures  and MOT proceeds with the planned
development,  our share of the oil production will be decreased.  The reverse is
also true.

Until cash flow from  operations is sufficient  to fund  operating  expenses and
capital investment, Teton must raise additional capital or obtain debt financing
to  fund  its  portion  of  capital  expenditures  or its  interest  in the  oil
production  will be  reduced.  There  can be no  assurance  that  Teton  will be
successful in raising such additional funds.

Changes to the Reserve Report from Prior Period

The following table summarizes the changes that took place when the report was
updated:

Reserves and Production, millions of barrels, Net to Teton


                                                             For the Years Ended
                                                                December 31,
                                                         =========================
                                                            2003           2002
                                                         ==========     ==========

Proved reserves (bbls), beginning of period .........    13,264,000     40,174,000
                                                         ==========     ==========
 Production .........................................      (632,000)      (471,000)
                                                         ==========     ==========
 Extension of reservoir .............................     2,000,000           --
                                                         ==========     ==========
 Revisions of previous estimates ....................    (4,370,000)   (28,439,000)
                                                         ==========     ==========
Proved reserves (bbls), end of period ...............     8,262,000     13,264,000
                                                         ==========     ==========
Proved Developed reserves (bbls), beginning of period     4,567,000      5,493,000
                                                         ==========     ==========
Proved Developed reserves (bbls), end of period .....     3,816,000      4,567,000
                                                         ==========     ==========



In the revised  reserve  report,  Teton's  proved  reserves  declined from 13.26
million barrels to 8.26 million barrels of which 632 thousand barrels  reflected
production during 2003. Of the remaining decline,  4.37 million barrels, was due
to a revision from the previous  estimate.  In  particular,  the  performance of
several of the Company's  Jurassic  formation  wells led its engineers to reduce
the  anticipated  primary  (before  waterflood)  recovery of reserves and revise
their  opinion  concerning  the  necessity of  waterflooding.  While the Company
anticipates it will eventually recover most of the reduction in reserves through
waterflooding,  SEC  regulations do not permit the inclusion of such reserves in
the proven  category in the absence of either a pilot program or formal  written
commitment  by the  operator  and  non-operators  in a project to  commence  the
waterflood project. The Company also removed several Jurassic locations from the
proved  category,  either  because  they  were  deemed  uneconomic  for  primary
production  alone,  based on the  performance of offsetting  Jurassic  producing
wells or in two cases  because the  operator  and Company  have not yet formally
agreed to drill them.  The company  expects to restore the reserves from the two
wells to the proven category when they are drilled.

Finally, as previously reported in its Form 10-K for the year ended December 31,
2002,  the Company  recorded a decline in its reserves for the year 2002 of 28.4
million  barrels.  The  majority  of the  reserve  reduction  in this period was
attributable  to revision of the geologic  maps of the license area based on new
and reprocessed seismic data and interpretations.  The new interpretation led to
a  reduction  in the number of  anticipated  drilling  locations  and with them,
reserves.

Developed And Undeveloped Acreage

The following table sets forth the total gross and net developed acres and total
gross and net underdeveloped  acres subject to the Goloil License as of December
31, 2003:

Eguryak License Area            Gross      Net
Total Developed Acres           1,049      525
Total Proved Undeveloped        1,494      747
 Acres
Total Other Undeveloped         6,481    3,241
Acres


Our  offices  are  located in Denver,  Colorado.  We lease our  offices  from an
unaffiliated  third party.  This year we also opened a representative  office in
Moscow, also leased from an unaffiliated third party.

Item 3.  LEGAL PROCEEDINGS.

Teton currently is not a party to any material legal proceedings.


Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters  were  submitted  to a vote of our  security  holders  during the fourth
quarter of 2003.




                                     PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.

Teton's  common stock listed on The American  Stock  Exchange,  under the symbol
"TPE," on May 6, 2003. Prior to listing on the AMEX, our common stock was quoted
on the OTC  Bulletin  Board under the symbol  "TTPT" from  November  27, 2001 to
April 25,  2003 and then under the symbol  "TTPE"  from April 28, 2003 to May 5,
2003 as a result of a 1 for 12 reverse stock split.

Prior to that and until our  voluntary  delisting  in January  2002,  our common
stock was also listed on the Canadian Venture Exchange under the symbol "YTY.U."
Beginning  November 30, 2001, our common stock is also listed for trading on the
Frankfort Stock Exchange (Germany) under the symbol "TP9."

The following table sets forth, on a per share basis,  the range of high and low
bid information for the common stock on the OTC Bulletin Board, and after May 5,
2003 on the American Stock Exchange:



                               OTC Bulletin Board

2001 Period                                        High           Low

Fourth quarter                                   $  .50          $ .17

2002 Period

First quarter                                    $  .67          $ .18
Second quarter                                   $  .65          $ .36
Third quarter                                    $  .60          $ .27
Fourth quarter                                   $  .42          $ .21

2003 Period

First quarter                                    $  .46          $ .28
Second quarter as of May 5, 2003                 $ 5.00*         $4.10*



                            The American Stock Exchange



Second quarter commencing May 6, 2003            $ 5.40          $4.10

Third quarter                                    $ 4.58          $3.71
Fourth quarter                                   $ 5.58          $3.80



*reflects a 12 for 1 reverse stock split effectuated on April 24, 2003.

The quotations reflect inter-dealer prices without retail markup, markdown, or a
commission, and may not necessarily represent actual transactions.

Holders:  As of January 23, 2004, there were approximately 195 holders of record
of Teton's common stock.

Dividends: Teton has not paid any dividends on its common stock since inception.
Teton does not anticipate declaration or payment of any dividends at any time in
the foreseeable future.

Recent Issuances of Unregistered Securities

During the fourth quarter for the year ended December 31, 2003, the Company sold
2,263,330_shares of 8% convertible preferred shares for a total consideration of
$9,845,486,  less  $520,856 in  commissions.  The  preferred  shares carry an 8%
dividend,  payable quarterly and are convertible into common stock at a price of
$4.35. If converted within 60 days of closing, the investors will be entitled to
receive (i) dividends  payable in common stock for one year;  and (ii) 2 Class B
Warrants for each 10 invested, exercisable at $6.00 per share.

Equity Compensation Plan Information

            Plan category            Number of     Weighted average     Number of
                                   securities to    exercise price      securities
                                   be issued upon   of outstanding      remaining
                                    exercise of        options,       available for
                                    outstanding      warrants and    future issuance
                                      options,          rights
                                    warrants and
                                       rights
                                        (a)               (b)              (c)
      Equity compensation plans      1,578,037           $3.48           505,296
     approved by security holders
      Equity compensation plans          0                 0                0
       not approved by security
               holders
                Total                1,578,037           $3.48           505,296



Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion and analysis of our plan of operation should be read in
conjunction with the financial  statements and the related notes.  This document
contains  forward-looking  statements  within the  meaning of Section 27A of the
Securities  Act of 1933 and Section 21E of the  Securities  Exchange Act of 1934
which are based upon current  expectations that involve risks and uncertainties,
such as our plans, objectives,  expectations and intentions.  Our actual results
and the timing of certain events could differ  materially from those anticipated
in these  forward-looking  statements as a result of certain factors,  including
those set forth under "Risk Factors," "Business" and elsewhere in this document.

We have identified  certain policies as critical to our business  operations and
the  understanding  of our results of operations.  The impact and any associated
risks  related  to  these  policies  on our  business  operations  is  discussed
throughout  Management's  Discussion  and  Analysis of Financial  Condition  and
Results of  Operations  where such  policies  affect our  reported  and expected
financial results.  See the section entitled "Critical  Accounting  Policies" at
the end of this discussion.


Overview

Teton Petroleum Company is an independent oil and gas exploration  company whose
current  focus is the  Russian  Federation,  particularly  Western  Siberia.  It
currently is the only publicly traded US independent  with all of its production
in Russia.

In 2003,  Teton achieved several  milestones in its finances and operations,  as
well as some challenges. Highlights include the following:

o    Annual sales  increased by 42.5% from  443,268 to 631,626  barrels,  net to
     Teton.

o    Seven new wells  (gross)  were  drilled  on the  Company's  Goloil  license
     bringing the total to 21 wells, 16 of which were in production at year-end.
     Of the 21 wells, one is awaiting completion,  and four are off-line pending
     upgrades to the gathering system.

o    Revenues increased 65.2%, from $6,923,320 to $11,437,802.

o    The  Company's  net  loss  for  the  year  narrowed  from   $10,973,923  to
     $5,634,844.

o    In April, Teton's Board of Directors made several changes to the management
     of the Company the most  important  of which was the  appointment  of a new
     President  and  Chief   Executive   Officer,   Karl  Arleth,   who  assumed
     responsibility  for  the  day-to-day  management  of  the  Company.   Other
     management  changes  made  at  the  time  included  the  appointment  of  a
     Controller and an interim full-time Chief Financial Officer.

o    Also in April,  the  Company  relocated  its  corporate  headquarters  from
     Steamboat Springs,  CO to Denver, CO and over the next several months hired
     several  administrative  and accounting  personnel to support the Company's
     plans for  growth.  The  Company  also took steps to tighten  its  internal
     controls,  enhance  its  ability to evaluate  potential  acquisitions,  and
     improve its information systems.

o    In May,  the  Company  effected a 1:12  reverse  share split and listed its
     shares on the American Stock Exchange.

o    Also in May,  the  Company  announced  the  signing of a purchase  and sale
     agreement to acquire the 50% ownership interest in LLC Chernogorskoye  held
     by Anderman Smith, which if completed would have added  approximately 4,000
     BOPD to the Company's net oil production. To date, however, the Company has
     been unable to close this transaction  owing to differences with the seller
     over closing price adjustments the Company believed necessary following its
     due diligence,  as well as changes in the valuations  accorded  Russian oil
     producers.  Although the Company is continuing to pursue the acquisition of
     all or part of LLC Chernogorskoye, there is no assurance it will be able to
     close any transaction.

o    In November,  the Company  successfully  concluded the private placement of
     $9.8 million  (later  increased to $10.3  million in January of 2004) of 8%
     Convertible Preferred Stock to be used primarily for working capital in the
     Goloil license and for general corporate purposes.

o    The  Company  opened a Moscow  Representative  Office in December to better
     monitor its  operations in Russia as well as to establish a higher  profile
     in the Russian oil industry and facilitate  greater deal-flow as it pursues
     acquisition opportunities there and in other FSU states.

Dispute with Russneft

Foremost among the challenges facing the Company in 2003 were those presented by
its former and present  partners in the Goloil  license.  In  September,  OAO NK
RussNeft,  a newly formed Russian  independent oil producer  acquired the shares
held by  Mediterranean  Overseas  Trust and  InvestPetrol  in Goloil and assumed
responsibility  for operating the License.  During the  transition in September,
the Company subsequently learned, Goloil sold substantially less than its export
quota into export markets where prices are substantially higher, instead selling
the production into the domestic market.

Commencing  October 1,  Russneft  began selling  Goloil's  production to a third
party for a fixed price of 2,400 rubles per barrel  (roughly $11 per barrel),  a
price  substantially  below the blended  market price Goloil  formerly  received
selling its production into the export,  near abroad and domestic markets.  As a
consequence, the Company estimates its revenues after taxes for the quarter were
reduced by approximately $1.44 million. Moreover, since this pricing arrangement
prevailed through the end of the fourth quarter and beyond,  the Company has had
to significantly  reduce the present value of its reserves  effective January 1,
2004.

Teton has strenuously objected to Russneft's actions and is continuing to engage
its management in discussions over the issue,  while retaining  counsel with the
intention of vigorously  pursuing it rights under  previous  agreements and as a
significant  minority  shareholder  in Goloil.  While  counsel  has  advised the
Company  that its  position  has merit,  the outcome of this  dispute  cannot be
predicted at the current time.


2004 Operational and Financial Objectives

In 2004, Teton intends to focus its efforts primarily in two areas:

1)    Continued development of its Goloil License; and

2)    The acquisition, development and exploitation of similar projects in the
      Russian Federation.

As a specific  target,  Teton  intends  through a  combination  of drilling  and
acquisition(s)  to increase its daily net  production  in 2004 to at least 5,000
BOPD.

Goloil will continue to expand  operations  with the drilling of four horizontal
wells on the Golevaya Field and carry out fracture stimulations on four existing
Jurassic wells in the Egurayah Field.  Also, new development plans for the South
Egurayah  Field will be  completed  once the  results of an  on-going 3D seismic
program are evaluated.  Goloil's  capital budget for 2004 is  approximately  $17
million. Most of this budget is expected to be provided for out of internal cash
flow and  borrowing by Goloil,  including  possible  cash calls to Teton.  Teton
believes it has sufficient working capital on hand to meet its share of any such
cash  calls,  but  whether  it  will  elect  to do so will  be  contingent  upon
successful  resolution  of  its  dispute  with  Russneft  over  product  pricing
described  above.  There can be no  guarantee  it will reach  such a  successful
resolution,  and if it is  unable  to,  management  intends  to look at  various
options  including legal action or the possible sale of its stake in Goloil.  In
Management's opinion the proceeds from the sale of the Company's stake in Goloil
would exceed it's investment at December 31, 2003.

As for growth  through  acquisitions,  Teton has been  actively  seeking to make
acquisitions  of  properties  similar to the Goloil  license since the spring of
2003. Specifically, the Company is targeting properties with existing production
ranging  from 3,000 to 10,000  BOPD with  upside  potential  from  developmental
drilling  and  other  exploitation  opportunities.  The  Company  has  a  strong
preference  to be the  operating  partner  in such  projects  in order to better
control their  development.  In addition to the LLC  Chernogorskoye  transaction
announced, but not consummated, in 2003, the Company has held talks with several
Western and Russian owned companies that are seeking to divest properties.

Teton's plans to pursue such acquisitions means that it will incur increased due
diligence and legal expenses.  The Company is now devoting  significant internal
resources  to  evaluating  acquisitions  while also  utilizing  the  services of
outside technical and legal consultants.

An even more  important  factor in  executing  its  acquisition  strategy is the
Company's  ability to attract the capital  necessary  to acquire and develop its
acquisition  targets.  Towards that end, the Company has been working to develop
strong relationships with commercial, primarily European banks, which are active
in Russia and the former  Soviet  Union.  Teton has  traditionally  financed its
operations by raising  equity,  but it is the opinion of its management that the
acquisition of properties  with  significant  production is best financed with a
combination  of debt and  equity.  This  approach  is less  dilutive to existing
shareholders  and  offers  the  Company  greater   flexibility.   Based  on  its
discussions with various lending institutions,  Teton management is confident of
its ability to secure bank financing for producing property acquisitions.

Insofar as most  acquisitions will require Teton to provide at least some equity
financing,  Management  anticipates  that it will  likely be  required  to raise
additional  equity.  The Company maintains an active investor  relations program
and is also in frequent  contact  with  investment  banks,  both in the U.S. and
abroad, as well as with institutional and industry sources of private capital.

Teton  management  expects  a rising  trend in the  cost of  producing  property
acquisitions  in Russia over the next  several  years as the export  bottlenecks
preventing  Russian oil from  leaving the country  ease and as  well-capitalized
Western E&P companies are  increasingly  drawn to the country's vast reserves of
oil and gas. Consequently,  a key challenge facing the Company is its ability to
acquire reserves on an economically  attractive basis.  Management  believes the
day is long gone when  projects with the quality of Goloil could be acquired for
as little as $0.25 per proven barrel in the ground.  Today, the asking price for
many Russian  producing  properties  is ten times that level or $2.50 per barrel
compared to $$6 - 8 per barrel currently for Texas oil and gas properties. Teton
management,  therefore,  applies rigorous economic analysis to determine if such
acquisitions   can  meet  the  Company's   economic  hurdle  rates  based  on  a
conservative  market-linked forecast of oil prices. Present indications are that
such projects are  available for sale today in Russia,  but are less common than
they used to be, necessitating that they be actively sought out.

The following table sets forth certain operating data for the periods presented:
Year ended December 31, 2003 compared to year ended December 31, 2002.

The  table  below  summarizes  some  of the  most  important  components  of our
revenues, operating costs and net loss. Please note that since Teton absorbs its
share of the  cost of  producing  the oil  paid  under  the  production  payment
(included in the cost amounts), per barrel costs are effectively doubled.


Results of Operations

            Operating Highlights for the Twelve Months ended December 31
                     (in U.S. Dollars, unless otherwise noted)

                              Fourth
                             Quarter
                               2003            2003            2002        Change(%)             Change(%)
                          ------------    ------------    ------------    ------------           --------
Sales, Barrels ........        150,938         631,626         443,268         188,358                42.5%
Average Daily Sales,
 Barrels ..............          1,654           1,730           1,214             516                42.5%
Average Selling Price,
 $/barrel .............         $15.45        $  18.11          $15.62        $   2.49                15.9%
Revenues ..............    $ 2,332,464    $ 11,437,802     $ 6,923,320      $4,514,482                65.2%

Costs of Sales and
Expenses, excl. DD&A
 Production Costs .....        563,590       2,020,447       1,218,411         802,036                65.8%
 Transportation &
  Marketing ...........          6,061         807,266         611,956         195,310                31.9%
 Taxes other than
  Income taxes ........      1,700,920       5,864,920       3,537,990       2,326,930                65.8%
Export Duties .........           --         1,492,999         910,936         582,063                63.9%
                          ------------    ------------   -------------    ------------           ---------
                             2,270,571      10,185,632       6,279,293       3,906,339                62.2%

Results from Goloil
Operations, before DD&A         61,889       1,252,170         644,027         608,143                94.4%
 Less General &
Administrative Expense,
 Goloil ...............        188,229         837,134         588,774         248,360                42.2%

Goloil operating (loss)
income before DD&A ....       (126,340)        415,036          55,253         359,783                  --


Depreciation, Depletion
 & Amortization, Goloil        919,744       1,582,513         451,930       1,130,583               250.2%
                          ------------    ------------    ------------    ------------           --------

Operating loss, Goloil      (1,046,084)     (1,167,477)       (396,677)       (770,800)                 --

General &
Administrative Expense,
 Teton ................      1,244,063       3,919,746       4,744,952        (825,206)             -17.4%
                          ------------    ------------    ------------    ------------           --------


Operating Loss, Teton .   $ (2,290,147)   $ (5,087,223)   $ (5,141,629)   $     54,406                 -
                          ============    ============    ============    ============           ========

Costs and Expenses Per Barrel during the Twelve Months ended December 31
                           (in U.S. Dollars)

                              Fourth
                              Quarter                              Change
Controllable Costs             2003        2003        2002         ($)      % Change
                         ------------------------------------------------------------
                         ------------------------------------------------------------
 Production Costs              $3.73      $ 3.20      $ 2.75       $0.45       16.4%
 G&A - Goloil                   1.25        1.33        1.33       (0.00)      -0.%
 G&A - Teton                    8.24        6.21       10.70       (4.49)     -42.0%
                               13.22       10.74       14.78       (4.04)     -27.4%

Non-Controllable Costs
 Transportation &               0.04
Marketing                                   1.28        1.38       (0.10)      -7.2%
 Taxes other than              11.27
Income Taxes                                9.29        7.98        1.31       16.4%
 Export Duties                  0.00        2.36        2.06        0.30       14.6%
                               11.31       12.93       11.42        1.51       13.2%

In 2003, Teton's net loss narrowed from $10,973,923 to $5,634,844, or $8,415,537
after giving effect to the imputed preferred stock dividends for inducements and
beneficial  conversion  charges  associated  with the  Company's 8%  convertible
preferred  stock  offering and subsequent  conversion.  In terms of earnings per
share,  Teton's  loss  narrowed  from $3.53 to $1.23 per share.  The decrease in
losses was largely  attributable to improved  operating  results at Goloil and a
significant  decline  in  non-cash  charges  related  to  financing,  offset  by
increased  salaries  and  other  expenses  related  to the  Company's  increased
staffing levels.

Oil revenues  increased from  $6,923,320 to  $11,437,802  from 2002 to 2003. The
increase was due to both a 42.5%  increase in barrels sold and a 15.9%  increase
in  the  average   price  per  barrel  sold  from  $15.62  to  $18.11  per  bbl.
Historically, Teton has not hedged its sales and this remained the case in 2003.
However,  as discussed  above revenues were less than expected during the fourth
quarter of 2004 by $1.44  million due to the fixed price paid by an affiliate of
Russneft when compared to blended market price Goloil  received  previously.  If
such affiliate continues to pay the fixed price in 2004, the Company anticipates
that a similar  reduction  in  revenues  and  operating  earnings  for each 2004
quarter.

Teton's  share of Goloil's  costs of sales and  expenses  (before  depreciation,
depletion  and  amortization  expenses  or "DD&A")  increased  62.2%,  which was
slightly less than the increase in revenues. As seen from the table above, taxes
other than income taxes and export  tariffs are both important  contributors  to
these costs and expenses accounting for more than 70% of the total costs in both
2002 and 2003. Both are tied directly to revenues, and in the case of the export
tariff,  to the price of oil as well.  Export tariffs would have been higher had
not Goloil  effectively  stopped  exporting oil at the end of the third quarter,
instead  selling  all of its  production  domestically  for a flat  fee of 2,400
rubles per barrel.

Teton's share of Goloil's operating income before DD&A increased from $55,253 to
$415,036  from 2002 to 2003,  but  after  Goloil's  DD&A its share of  operating
losses rose from $396,677 to $1,167,477.  DD&A itself increased by 250.1%,  from
$451,930 to $1,582,513,  reflecting the capital expenditures  incurred by Goloil
as it has developed its license.

General and administrative expense ("G&A") at Teton decreased from $4,774,952 to
$3,919,746 or 17.4% from 2002 to 2003. The decrease was largely  attributable to
a $1,562,575  decline in fees paid to consultants for capital raising activities
offset by  increases  in  compensation  to officers  and  employees  ($323,951),
professional fees ($109,146),  travel and entertainment ($193,773), and expenses
relating to  marketing,  advertising,  and  investor  relations  ($167,987).  In
addition to the increase in compensation relating to additional staffing to meet
Company goals and objectives, most of the other G&A increases were the result of
activities such as Teton's preferred stock offering, its listing on the American
Stock Exchange,  the filing of its registration  statement with the SEC, and due
diligence with respect to the proposed acquisition of LLC Chernogorskoye.


Liquidity and Capital Resources

Future cash flows will be influenced,  among other factors,  by the market price
of oil and gas as well as the number of  producing  properties  on line.  To the
extent that oil prices decline, the Company's revenues,  cash flows and earnings
could be adversely affected.  The Company's management believes that even if oil
prices were to decline to a level that would have a material  adverse  effect on
cash flows,  the Company would continue to meet its working capital  obligations
and its 2004 capital budget (as discussed below).

The Company had cash  balances of  $7,588,439 at December 31, 2003 and a working
capital deficit of $1,159,687.  Excluding the pro rata consolidation of Goloil's
working  capital  deficit,  Teton has a working  capital  surplus of $7,469,785.
Teton is not liable for Goloil's debts.


Sources and Uses of Funds

To date the  Company's  primary  source of liquidity is cash  provided by equity
offerings. Capital markets will continue to be utilized in order to maintain the
Company's  indebtedness  at  moderate  levels to enable the  Company to have the
necessary financial flexibility to react to future opportunities.  The Company's
primary  needs  for  cash  are  for  the  operation,  development,   production,
exploration  and  acquisition  of oil and gas  properties  and  working  capital
obligations.


Cash Flows and Capital Expenditures

Cash used in  operating  activities  for the year ended  December  31,  2003 was
$3,002,202  compared with cash used in operating  activities  for the year ended
December 31, 2002 of  $5,168,785,  resulting in a decrease of  $2,167,583.  Such
decrease is primarily the fact that operating assets and liabilities,  which are
primarily  in  Goloil,  increased  in  2003 by  $823,831  while  they  decreased
$1,129,412 in 2002.

The Company used $7,093,146 in investing activities,  substantially all of which
was  associated  with  oil and gas  property  and  equipment  expenditures.  The
Company's  pro  rata  share  of  the  construction  costs  of a new  gas-powered
electrical  generating plant which will be operational in the first half of 2004
totaled $1,700,696.  The plant will provide substantial  increases in production
levels of electricity at lower cost than the diesel  generators  being replaced.
The plant will be fueled by natural gas from our wells,  reducing or eliminating
the need to "flare" the gas. In addition  Goloil drilled seven new wells (gross)
during 2003. The Company continues to expect significant  additional investments
to be made in the  future  to drill  and  develop  additional  producing  wells.
Teton's share of 2004 Goloil's  capital  expenditure  program is estimated to be
$6.5 million.  Goloil plans to drill in 2004 four horizontal  wells,  subject to
the results of a 3 D seismic program and begin  installation  of  infrastructure
for the development of the South  Eguriakhskoe oil field. The Company's  funding
of the capital expenditure program will be included in the discussions regarding
resolving the dispute with Russneft.

Cash provided by financing  activities during 2003 was $16,812,518.  In addition
to collecting  $1,939,610  from stock  subscriptions  receivable at December 31,
2002,  the  Company  raised   $10,251,924  from  the  private  placement  of  8%
Convertible  Preferred  Stock to be used  primarily  for working  capital in the
Goloil license and for general corporate purposes.

The Company  anticipates  future operations and significant oil and gas property
expenditures  will be able to be funded  through a  combination  of note payable
advances from an affiliate,  cash raised from raising debt and equity  financing
and production of oil and gas reserves.


Income Taxes, Net Operating Losses and Tax Credits

Currently,  the  Company is paying a profits  tax in Russia  equal to 24% of net
profits  as  defined  by  Russian  income  tax  law.  As  discussed  extensively
elsewhere, including Note 10 to the financial statements, the taxation system in
Russia is evolving as the central government transforms itself from a command to
a market-oriented  economy. Based on current tax law and the U.S. Russian Income
Tax  Treaty  the  profits  tax  paid to  Russia  will be a  creditable  tax when
determining  the Company's U.S.  income taxes  payable,  if any. At December 31,
2003 the Company has a U.S. net  operating  tax carry  forward of  approximately
$18,500,000.  Based  on the  current  investments  of the  Company  and  the net
operating  loss combined  with the Company's tax basis,  the Company will not be
paying U.S. income taxes in the foreseeable future.

Critical Accounting Policies

In the  ordinary  course of  business,  we have made a number of  estimates  and
assumptions  relating to the  reporting of results of  operations  and financial
condition in the  preparation  of our financial  statements  in conformity  with
accounting  principles  generally accepted in the United States.  Actual results
could differ significantly from those estimates under different  assumptions and
conditions. We believe that the following discussion addresses our most critical
accounting policies, which are those that are most important to the portrayal of
our  financial  condition  and  results  of  operations  and  require  our  most
difficult,  subjective,  and complex judgments, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain.

Reserve Estimates:  The information regarding the Company's share of oil and gas
reserves, the changes thereto and the resulting net cash flows are all dependent
upon  assumptions  used in preparing  the  Company's  annual  reserve  study.  A
qualified  independent  petroleum  engineer,  in  accordance  with  standards of
applicable  regulatory  agencies  and the  Securities  and  Exchange  Commission
definitions,  prepares the Company's  reserve study.  Estimates of  economically
recoverable  oil and natural gas reserves and future net cash flows  necessarily
depend upon a number of variable  factors and  assumptions,  such as  historical
production from the area compared with  production  from other producing  areas,
the assumed  effects of regulations  by  governmental  agencies and  assumptions
governing  future oil and natural  gas prices,  the  exchange  rate  between the
Russian  ruble  and the U.S.  dollar,  future  operating  costs,  severance,  ad
valorem,  export,  excise and other  taxes,  development  costs and workover and
remedial  costs,  all of which  may,  in fact,  vary  considerably  from  actual
results. For these reasons, estimates of the economically recoverable quantities
of oil and natural  gas  attributable  to any  particular  group of  properties,
classifications of such reserves based on risk of recovery, and estimates of the
future  net  cash  flows  expected  there  from  may  vary  substantially.   Any
significant  variance in the assumptions  could materially  affect the estimated
quantity and value of the reserves, which could affect the carrying value of the
Company's  oil and gas  properties  and the rate of depletion of the oil and gas
properties. Management believes that the current assumptions used in preparation
of the reserve study are reasonable. The Company's revised downward its estimate
of  oil  and  gas  reserves  by  4.4  million  barrels   primarily  due  to  the
reclassification  of certain  waterflood  reserves and reserves  associated with
undrilled locations to probable. Only reserves associated with two wells planned
and budgeted for 2004 have been classified as proved undeveloped.  The Company's
estimated  proved  reserves  at  December  31,  2003 and 2002 were  prepared  by
independent petroleum engineering consultants Gustavson and Associates.

Property, Equipment and Depreciation: The Company follows the successful efforts
method of accounting for oil and gas properties.  As of December 31, 2003 all of
the Company's oil and gas assets are held in one cost center located in Siberia,
Russia.  As the Company makes  additional  acquisitions  it will have additional
cost centers.  Under the  successful  efforts  method of accounting the costs of
development wells are capitalized, but exploratory wells are capitalized only if
they are  successful.  The Company plans to increase its oil and gas reserves by
acquisition and the development of reserves in place.  Accordingly,  acquisition
and drilling costs will be capitalized.  Capitalized  costs will be depleted and
depreciated  using the units of production  method based on estimated proved oil
reserves  as  determined  by  independent  engineers,  currently  Gustavson  and
Associates. If the estimates of oil and gas reserves are changed materially then
the amount of depreciation and depletion  recorded by the Company could increase
or  decrease  materially.  In  addition  the  carrying  costs of the oil and gas
properties are subject to the requirements of SFAS No. 144,  "Accounting for the
Impairment or Disposal of Long-Lived Assets".  The Company is required to impair
the net book value for a cost  center  when such net book value is greater  than
the estimated  future cash flows for such cost center.  At December 31, 2003 the
Company's carrying value for its Siberian cost center is less than its estimated
cash flows,  even  though  such  estimated  cash flow was  calculated  using the
domestic Russian price of 2,400 rubles per ton ($11 per barrel). See discussions
above,  and in footnotes 10 and 11 to the financial  statements.  As a result of
the  downward  revision in oil  reserves  recorded by the  Company,  the Company
increased its provision for depletion, depreciation and amortization to $919,744
for the fourth  quarter  compared to $274,538  recorded in the third  quarter of
2003.

Pro Rata  Consolidationt:  The Company  currently pro rata  consolidates its 50%
interest in Goloil,  because, as of December 31, 2003,  Management believes that
to be the most meaningful presentation.  If the Company is not successful in its
dispute with Russneft,  then the Company may have to reconsider  this accounting
policy.  Such consideration will include determining the degree of influence the
Company exercises over its investment in Goloil.

Production  Payment:  During  June,  2000  the  Company  entered  into a  Master
Agreement that requires,  among other things, a seven year production payment to
Energosoyuz  equal to 50% of the oil produced from new and existing Goloil wells
in exchange for wells and  facilities  constructed by  Energosoyuz.  Because the
production  payment was for a specified amount of production and not for a fixed
and determinable dollar amount, the Company did not record such transaction as a
loan. Currently, Goloil is paying Energosoyuz a flat amount of 19,000,000 rubles
per month,  which, at current prices,  is less than 50% of the oil produced.  If
the Company is not  successful  in its dispute  with  Russneft,  and the Company
continues  with  pro rata  consolidation,  it may be  required  to  record  as a
liability the net present value in U.S. dollars of the production payment with a
corresponding  increase in the  carrying  value of its Siberian oil and gas cost
center.  The amount of increase in carrying  value can not be determined at this
time.  However,  based on the  estimated  cash flows at December 31,  2003,  the
Company would, most likely, have to record an impairment charge.

Asset  Retirement  Obligation:  During  the fourth  quarter of 2004 the  Company
applied the provisions of SFAS 143 "Accounting for Asset Retirement Obligations"
and recorded the estimated December 31, 2003 liaiblity for the retirement of its
Russian oil and gas assets along with a  corresponding  increase in the carrying
value of the related oil and gas  properties.  The liability was estimated based
on the estimated,  discounted future cost to plug the oil and gas wells existing
at December 31, 2003 plus the costs of clean up based on the  Company's  current
understanding  of the standards  that will be applied at the time of retirement.
The  Company  will  continually  review the  assumptions  it used in making such
estimate and revise the liability as required.

Item 7.       FINANCIAL STATEMENTS






                            TETON PETROLEUM COMPANY

                        Consolidated Financial Statements
                                       and
                          Independent Auditors' Report
                                December 31, 2003

                              TETON PETROLEUM COMPANY




                                 Table of Contents
                                 -----------------


Independent Auditors' Report

Consolidated Financial Statements

      Consolidated Balance Sheet

      Consolidated Statements of Operations and Comprehensive Loss

      Consolidated Statements of Changes in Stockholders' (Deficit) Equity

      Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements





                          INDEPENDENT AUDITORS' REPORT



Board of Directors and Stockholders
Teton Petroleum Company
Denver, Colorado


We have audited the accompanying  consolidated  balance sheet of Teton Petroleum
Company and  subsidiary  as of December 31, 2003,  and the related  consolidated
statements  of  operations  and  comprehensive  loss,  changes in  stockholders'
(deficit)  equity and cash flows for the years ended December 31, 2003 and 2002.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted  our audits in  accordance  with the auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the  consolidated  financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Teton  Petroleum
Company  and  subsidiary  as of  December  31,  2003,  and the  results of their
operations  and their cash flows for the years ended  December 31, 2003 and 2002
in conformity with accounting principles generally accepted in the United States
of America.


                                          /s/Ehrhardt Keefe Steiner & Hottman PC
                                             Ehrhardt Keefe Steiner & Hottman PC

March 29, 2004
Denver, Colorado




                             TETON PETROLEUM COMPANY

                           Consolidated Balance Sheet
                                December 31, 2003

                                      Assets

Current assets
   Cash ...................................................   $  7,588,439
   Proportionate share of accounts receivable .............         15,739
   Proportionate share of VAT receivable ..................      1,078,369
   Proportionate share of inventory .......................        448,812
   Prepaid expenses and other assets ......................         95,693
                                                              ------------
     Total current assets .................................      9,227,052
                                                              ------------

Non-current assets
   Oil and gas properties, net (successful efforts) .......      9,339,786
   Cogeneration plant construction in- progress ...........      1,700,696
   Other property and equipment, net ......................        450,841
                                                              ------------
     Total non-current assets .............................     11,491,323
                                                              ------------

Total assets ..............................................   $ 20,718,375
                                                              ============

                       Liabilities and Stockholders' Equity

Current liabilities
   Accounts payable and accrued liabilities ...............   $    376,429
   Proportionate share of accounts payable and accrued
    liabilities ...........................................      2,590,901
   Proportionate share of notes payable owed to
    affiliate .............................................      7,419,409
                                                              ------------
     Total current liabilities ............................     10,386,739
                                                              ------------

Non-current liabilities
   Asset retirement obligation ............................        126,500
                                                              ------------
     Total non-current liabilities ........................        126,500
                                                              ------------
     Total liabilities ....................................     10,513,239
                                                              ------------

Commitments and contingencies

Stockholders' equity
   Series A convertible preferred stock, $.001 par
    value, 25,000,000 shares authorized, 618,231 issued
    and outstanding. Liquidation preference at December
    31, 2003 of $2,689,305 ................................            618
   Common stock, $.001 par value, 250,000,000 shares
    authorized, 8,584,068 shares issued and outstanding
    at December 31, 2003 and 2002 .........................          8,584
   Additional paid-in capital .............................     37,073,366
      Unamortized preferred stock dividends ...............       (118,610)
   Accumulated deficit ....................................    (27,657,578)
   Foreign currency translation adjustment ................        898,756
                                                              ------------
     Total stockholders' equity ...........................     10,205,136
                                                              ------------

Total liabilities and stockholders' equity ................   $ 20,718,375
                                                              ============

                 See notes to consolidated financial statements.



                             TETON PETROLEUM COMPANY

          Consolidated Statements of Operations and Comprehensive Loss


                                                            For the Years Ended
                                                                December 31,
                                                        ----------------------------
                                                            2003             2002
                                                        ------------    ------------

Sales ...............................................   $ 11,437,802    $  6,923,320

Cost of sales and expenses
   Oil and gas production ...........................      2,020,447       1,218,411
   Transportation and marketing .....................        807,266         611,956
   Taxes other than income taxes ....................      5,864,920       3,537,990
   Export duties ....................................      1,492,999         910,936
   General and administrative - Goloil ..............        837,134         588,774

   General and administrative - Teton ...............      3,919,746       4,744,952
   Depreciation, depletion and amortization .........      1,582,513         451,930
                                                        ------------    ------------
     Total cost of sales and expenses ...............     16,525,025      12,064,949
                                                        ------------    ------------

Loss from operations ................................     (5,087,223)     (5,141,629)
                                                        ------------    ------------

Other income (expense)
   Other income .....................................         17,445          51,751
   Interest expense .................................       (347,740)       (385,939)
   Financing charges ................................       (132,818)     (5,498,106)
                                                        ------------    ------------
      Total other income (expense) ..................       (463,113)     (5,832,294)
                                                        ------------    ------------

Net loss before tax .................................     (5,550,336)    (10,973,923)
Foreign income tax ..................................        (84,508)           --
                                                        ------------    ------------
Net loss ............................................     (5,634,844)    (10,973,923)

Imputed preferred stock dividends for inducements and
beneficial conversion charges .......................     (2,780,693)           --
                                                        ------------    ------------

Net loss applicable to common shares ................     (8,415,537)    (10,973,923)

Other comprehensive loss, net of tax
   Effect of exchange rates .........................        168,256        (140,773)
                                                        ------------    ------------

Comprehensive loss ..................................   $ (8,247,281)   $(11,114,696)
                                                        ============    ============

Basic and diluted weighted average common shares
  outstanding .......................................      6,840,303       3,105,235
                                                        ============    ============

Basic and diluted loss per common share .............   $      (1.23)   $      (3.53)
                                                        ============    ============

                 See notes to consolidated financial statements.




                             TETON PETROLEUM COMPANY

      Consolidated Statements of Changes in Stockholders' (Deficit) Equity
                 For the Years Ended December 31, 2003 and 2002

                                                                                                                                                                Foreign                          Total
                                                                      Preferred Stock                  Common Stock            Additional      Unamortized     Currency                       Stockholders'
                                                                ----------------------------    ---------------------------      Paid-in     Preferred Stock  Translation     Accumulated      (Deficit)
                                                                   Shares          Amount          Shares         Amount         Capital        Dividends      Adjustment        Deficit         Equity
                                                                ------------    ------------    ------------   ------------   ------------    ------------    ------------    ------------    ------------

Balance - December 31, 2001 .................................           --      $       --         2,374,046   $      2,374   $  9,792,722    $       --      $    871,273     (11,048,811)   $   (382,442)

Common stock issued for cash ................................           --              --         1,223,737          1,224      3,332,236            --              --              --         3,333,460

Common stock subscriptions paid in 2003 .....................           --              --           712,045            712      1,938,898            --              --              --         1,939,610

Common stock and warrants issued for services ...............           --              --           221,198            221        836,905            --              --              --           837,126

Common stock issued for conversion of convertible
debentures ..................................................           --              --         1,758,494          1,758      5,353,231            --              --              --         5,354,989

Warrants issued and in-the-money conversion feature on
convertible debentures ......................................           --              --              --             --        4,557,845            --              --              --         4,557,845

Warrants issued with notes payable ..........................           --              --              --             --          150,016            --              --              --           150,016

Warrants issued in connection with extensions on notes
payable .....................................................           --              --              --             --          203,362            --              --              --           203,362

Net loss ....................................................           --              --              --             --             --              --              --       (10,973,923)    (10,973,923)

Foreign currency translation adjustment .....................           --              --              --             --             --              --          (140,773)           --          (140,773)
                                                                ------------    ------------    ------------   ------------   ------------    ------------    ------------    ------------    ------------

Balance - December 31, 2002 .................................           --              --         6,289,520          6,289     26,165,215            --           730,500     (22,022,734)      4,879,270

Common stock issued for cash -  net of commissions of $98,100           --              --           437,012            437      1,091,463            --              --              --         1,091,900

Common stock issued for settlement of accounts payable
and accrued liabilities .....................................           --              --            79,793             80        219,920            --              --              --           220,000

Options issued to advisory board and common stock issued
for services ................................................           --              --             1,035              1         97,901            --              --              --            97,902

Warrants issued with notes payable ..........................           --              --              --             --          110,170            --              --              --           110,170

Preferred stock issued for cash, net of commissions of
$473,838 (cash) and $99,168 (non-cash) ......................      2,226,680           2,226            --             --        9,110,830            --              --              --         9,113,056

Preferred stock converted to common stock ...................     (1,645,099)         (1,645)      1,776,708          1,777           (132)           --              --              --              --

Preferred stock issued in exchange for notes payable and
accrued interest of $9,426 ..................................         36,650              37            --             --          159,389            --              --              --           159,426

In-the-money conversion feature charges to be amortized .....           --              --              --             --        1,182,452      (1,182,452)           --              --              --

Amortization of in-the-money conversion feature charges .....           --              --              --             --       (1,063,842)      1,063,842            --              --              --

Net loss ....................................................           --              --              --             --             --              --              --        (5,634,844)     (5,634,844)

Foreign currency translation adjustment .....................           --              --              --             --             --              --           168,256            --           168,256
                                                                ------------    ------------    ------------   ------------   ------------    ------------    ------------    ------------    ------------

Balance - December 31, 2003 .................................        618,231    $        618       8,584,068   $      8,584   $ 37,073,366    $   (118,610)   $    898,756    $(27,657,578)   $ 10,205,136
                                                                ============    ============    ============   ============   ============    ============    ============    ============    ============



                  See notes to consolidated financial statements.


                             TETON PETROLEUM COMPANY

                      Consolidated Statements of Cash Flows

                                                              For the Years Ended
                                                                 December 31,
                                                         --------------------
                                                              2003          2002
                                                         -----------------------
Cash flows from operating activities
  Net loss ............................................   $ (5,634,844)   $(10,973,923)
                                                          ------------    ------------
  Adjustments to reconcile net loss to net cash used in
   operating activities
   Depreciation, depletion, and amortization ..........      1,582,513         451,930
   Stock based compensation for variable plan warrants            --              --
   Stock and stock options issued for services and
     interest .........................................        107,128            --
   Warrants issued for notes payable extensions .......        110,170          46,582
   Stock and warrants issued for services .............           --           837,126
   Debentures issued for services .....................           --           267,500
   Amortization of debenture and note payable discounts           --         5,331,412
   Changes in assets and liabilities
     Accounts receivable ..............................        462,000      (1,048,608)
     Prepaid expenses and other assets ................         (4,247)        (57,446)
     Inventory ........................................         54,177        (313,489)
     Accounts payable and accrued liabilities .........        311,901         290,131
                                                          ------------    ------------
                                                             2,623,642       5,805,138
                                                          ------------    ------------
      Net cash used in operating activities ...........     (3,011,202)     (5,168,785)
                                                          ------------    ------------

Cash flows from investing activities
  Oil and gas properties and equipment expenditures ...     (5,392,450)     (3,222,349)
   Construction in progress ...........................     (1,700,696)           --
                                                          ------------    ------------
      Net cash used in investing activities ...........     (7,093,146)     (3,222,349)
                                                          ------------    ------------

Cash flows from financing activities
  Net proceeds from  advances  under notes payable owed
   to affiliates ......................................      4,470,984       2,178,525
  Proceeds from stock subscription ....................      1,939,610            --
  Proceeds from issuance of stock, net of $473,838
   commissions ........................................     10,251,924            --
  Proceeds from issuance of convertible debentures ....           --         4,143,643
  Proceeds from notes payable .........................        628,750         300,000
  Payments on notes payable ...........................       (478,750)       (894,210)
  Issuance of common stock ............................           --         3,333,460
                                                          ------------    ------------
      Net cash provided by financing activities .......     16,812,518       9,061,418
                                                          ------------    ------------

Effect of exchange rates ..............................        168,256        (140,773)
                                                          ------------    ------------

Net increase in cash ..................................      6,876,426         529,511

Cash - beginning of year ..............................        712,013         182,502
                                                          ------------    ------------

Cash - end of year ....................................   $  7,588,439    $    712,013
                                                          ============    ============

                  See notes to consolidated financial statements.




Supplemental disclosure of cash flow information

Cash paid for:                      Interest
                                  ----------

      2003                        $     18,202
      2002                        $    120,008

Supplemental disclosure of non-cash activity:

     During the year ended  December  31,  2003,  the Company had the  following
     transactions:

          128,700  warrants  issued  with  debt  and  valued  at  $110,170  were
          initially recorded as a discount on the note payable.  At December 31,
          2003,  the full amount of the discount had been amortized as financing
          costs.

          79,793  shares of common stock were issued for  settlement of accounts
          payable and accrued liabilities valued at $220,000.

          The Company  issued  30,000  non-qualified  options to advisory  board
          members valued at $94,702.

          The Company issued 1,035 shares of common stock for services valued at
          $3,201.

          The  Company  has  accrued a  liability  for  $46,968  related  to the
          obligation  to issue  57,420  warrants  to a  consultant  for  capital
          raising services.

          12,000 preferred shares were issued to consultants for services valued
          at $52,200 related to capital raising.

          Approximately  $1,785,000  of  capital  expenditures  for  oil and gas
          properties were included in accounts payable at December 31, 2003.

     During 2002, the Company had the following transactions:

          In exchange  for the  extension  of  principal  payments on four notes
          payable,  the Company  modified  expiration  dates of certain warrants
          previously  held by the note holders and issued an  additional  10,416
          such  warrants.  The fair value of the  modification  of the  warrants
          totaled $46,582 and has been recorded as financing costs.

          A note payable of $250,000 was converted into a convertible  debenture
          with 83,333  warrants  also being  issued  under the same terms of the
          Company's private placement offering of convertible debentures.

          1,647,881  warrants were issued with convertible  debentures valued at
          $811,559 were initially  recorded as a discount on the debentures.  At
          December 31, 2002,  the full amount of the discount had been amortized
          as financing costs.

          In-the-money   conversion  features  on  convertible  debt  valued  at
          $3,746,285 were recognized as financing costs.

          The Company issued 143,678  warrants in connection  with related party
          notes  payable of $450,000  and $50,000.  The warrants  were valued at
          $156,781 and recorded as financing costs.

          $267,500 of  convertible  debentures  with 89,167  warrants  valued at
          $14,250  for a total  amount of $281,750  were  issued for  consulting
          services.

          41,667  warrants  issued with a note payable  valued at $150,016  were
          initially recorded as a discount on the note payable.  At December 31,
          2002 the full  discount had been  amortized  and recorded as financing
          costs.

          $4,661,143  of  debentures  and  accrued  interest  of  $227,075  were
          converted into 1,758,494 shares of stock with $466,771 being paid as a
          premium at conversion and recorded as financing costs.

          221,198 shares of stock were issued to consultants for services valued
          at $607,790.

          133,333  warrants were issued to  consultants  for services  valued at
          $215,086.

          Approximately  $1,142,000  of  capital  expenditures  for  oil and gas
          properties were included in accounts payable at December 31, 2002.

          During the fourth quarter of 2002, the Company received  $1,939,610 of
          stock  subscriptions  receivable for 712,045 shares of stock. The cash
          for these subscriptions was paid during the first quarter of 2003.


                            TETON PETROLEUM COMPANY

                   Notes to Consolidated Financial Statements

Note 1 - Description of Business and Summary of Significant Accounting Policies
-------------------------------------------------------------------------------

Teton  Petroleum  Company  (the  Company)  is an oil  and  gas  exploration  and
production  company  whose current  focus is the Russian  Federation.  Since the
Company's  operations are exclusively in the Russian Federation it is subject to
certain  risks  not  typically  associated  with  companies  in  North  America,
including,  but not limited to,  fluctuations in currency  exchange  rates,  the
imposition of exchange  control  regulations,  the possibility of  expropriation
decree,  undeveloped  business  practices  and  laws,  and less  liquid  capital
markets.

The  exploration and  development of oil and gas reserves  involves  significant
financial  risks.  The  ability  of the  Company  to meet  its  obligations  and
commitments under the terms and conditions of its licensing agreements and carry
out its planned  exploration  activities is dependent upon  continued  financial
support from its stockholders,  the ability to develop economically  recoverable
reserves,  and its ability to obtain necessary financing to complete development
of the reserves.

Should the Company's  licenses be revoked as a result of changes in legislation,
title  disputes or failure to comply with license  agreements,  there would be a
material write-down of the oil and gas properties. The accompanying consolidated
financial  statements do not reflect any adjustments that may be required due to
these uncertainties.

The United  States dollar is the  principal  currency of the Company's  business
and,  accordingly,  these  consolidated  financial  statements  are expressed in
United States dollars.

Principles of Consolidation
---------------------------

The accompanying consolidated financial statements include the accounts of Teton
Petroleum  Company  and its wholly  owned  subsidiary,  Goltech  Petroleum,  LLC
("Goltech").  All intercompany accounts and transactions have been eliminated in
consolidation.

During 2002,  the Company  owned a 50%  interest in Goltech,  which had a 70.59%
interest in ZAO Goloil. Accordingly ZAO Goloil was consolidated into Goltech and
the Company  reflected  it's 50% share of Goltech.  As of December 31, 2002, the
other 50% member of Goltech  relinquished  their ownership  interest in exchange
for a 35.295% direct  ownership  interest in ZAO Goloil.  The audited  financial
statements  as of December 31, 2003 and 2002, as is customary in the oil and gas
industry,  reflect a pro-rata  consolidation  of the  Company's  interest in ZAO
Goloil  (a  Russian  Company)  through  its  wholly  owned  subsidiary  Goltech.
Management believes this to be the most meaningful presentation as the Company's
only significant asset is its investment in Goltech Petroleum,  LLC. The Company
is  required  to provide  50% of the  capital  expenditure  requirements  and is
entitled to a 50% operating  interest until  repayment of its investment  occurs
("Payout").  Under the pro-rata  consolidation  method the Company  includes its
pro-rata  share of the  assets  (50%),  liabilities  (50%),  revenues  (50%) and
expenses (50%) of the accounts of Goloil until repayment (payout) of our current
and any future loans to Goloil occurs. The intercompany  balances of Goltech and
Teton do not fully eliminate under the pro-rata  consolidation  method,  and the
remaining receivable on Teton's accounts has been included as a component of oil
and gas  properties,  as this balance will only be repaid  through net cash flow
generated from oil and gas properties.

In September OAO NK RussNeft acquired the shares held by Mediterranean  Overseas
Trust and  InvestPetrol in Goloil and assumed  responsibility  for operating the
License.  During the transition,  the Company  subsequently learned in November,
Goloil sold  substantially  less than its export quota into export markets where
prices  are  substantially  higher,  instead  selling  the  production  into the
domestic market.

Commencing  October 1, Russneft began selling  Goloil's  production to a related
party for a fixed price of 2400 rubles per barrel  (roughly $11 per  barrel),  a
price  substantially  below the blended  market price Goloil  formerly  received
selling its production into the export,  near abroad and domestic markets.  As a
consequence, the Company estimates its revenues after taxes for the quarter were
reduced by approximately $1.44 million. Moreover, since this pricing arrangement
prevailed through the end of the fourth quarter and beyond,  the Company has had
to significantly  reduce the present value of its reserves  effective January 1,
2004. In addition,  Russneft has adjusted the amount of production payment to be
paid to  EnergoSoyuz-A  ("ESA") to fixed amount per month which is less than the
50% of oil produced previously agreed to, based on the current price.

Teton has strenuously objected to Russneft's actions and is continuing to engage
its management in discussions over the issue,  while retaining  counsel with the
intention of vigorously  pursuing it rights under  previous  agreements and as a
significant  minority  shareholder  in Goloil.  While  counsel  has  advised the
Company  that its  position  has merit,  the outcome of this  dispute  cannot be
predicted at the current time.

Use of Estimates
----------------

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

Cash and Cash Equivalents
--------------------------

The Company considers all highly liquid  instruments  purchased with an original
maturity of three months or less to be cash equivalents. The Company continually
monitors  its  positions   with,  and  the  credit  quality  of,  the  financial
institutions  it invests with. As of the balance sheet date,  the Company had no
cash equivalents.

Revenue Recognition
-------------------

The Company  recognizes  oil sales  revenue at the point in time oil  quantities
have been delivered to purchasers.

Comprehensive Income
--------------------

Comprehensive  income is defined as the  change in equity  during a period  from
transactions and other events from non-owner  sources.  Comprehensive  income is
the  total of net  income or loss and other  comprehensive  income or loss.  The
effect of foreign  currency  exchange rates currently is the Company's only item
which constitutes comprehensive income or loss.

Oil and Gas Properties
----------------------

The Company uses the  successful  efforts  method of accounting  for oil and gas
producing  activities.  Costs  to  acquire  mineral  interests  in oil  and  gas
properties,  to drill and equip exploratory wells that find proved reserves, and
to drill and equip development wells are capitalized. Costs to drill exploratory
wells that do not find proved  reserves,  geological and geophysical  costs, and
costs of carrying and retaining  unproved  properties are expensed.  The Company
also evaluates costs  capitalized for exploratory  wells, and if proved reserves
cannot be determined  within one year from  drilling  exploration  wells,  those
costs are written-off and recorded as an expense.

Unproved  oil  and  gas  properties  that  are   individually   significant  are
periodically  assessed for impairment of value,  and a loss is recognized at the
time  of  impairment  by  providing  an  impairment  allowance.  Other  unproved
properties  are  amortized  based  on the  Company's  experience  of  successful
drilling and average  holding  period.  Currently  the Company holds no unproved
properties.

Capitalized  costs  of  producing  oil and  gas  properties,  after  considering
estimated  dismantlement and abandonment costs and estimated salvage values, are
depreciated  and  depleted  by  the   unit-of-production   method.   Significant
development  projects  are  excluded  from the  depletion  calculation  prior to
assessment  of the existence of proven  reserves  that are ready for  commercial
production.  The Company had a cogeneration plant under construction at December
31,  2003,  the  Company's  share of which  totaled  $1,700,696  which  has been
excluded from properties subject to depletion until its completion.  The Company
did not have any significant development projects, which have been excluded from
depletion  at December  31,  2002.  Support  equipment  and other  property  and
equipment are depreciated over their estimated useful lives.

On the sale or retirement of a complete unit of a proved property,  the cost and
related  accumulated  depreciation,  depletion,  and amortization are eliminated
from the property accounts, and the resulting gain or loss is recognized. On the
retirement or sale of a partial unit of proved property,  the cost is charged to
accumulated  depreciation,  depletion, and amortization with a resulting gain or
loss recognized in income based on the amount of proceeds.

On the sale of an  entire  interest  in an  unproved  property  for cash or cash
equivalent,  gain or loss on the sale is recognized,  taking into  consideration
the  amount  of any  recorded  impairment  if the  property  had  been  assessed
individually.  If a partial interest in an unproved property is sold, the amount
received is treated as a reduction of the cost of the interest retained.

All of the Company's  oil and gas assets are held in one cost center  located in
Siberia,   Russia.  The  Russian  Federation  (RF)  has  performed   substantial
exploration  efforts on properties on which the Company has received  successful
tenders  for  future  exploration  and  development.  As a result,  those  areas
accepted  under  tender by the RF are known to contain  proved  reserves and the
Company's efforts are focused on further development of such reserves.

The net carrying  value of the Company's oil and gas properties is limited to an
estimated  net  recoverable  amount.  The net  recoverable  amount  is  based on
undiscounted  future net revenues and is determined by applying factors based on
historical  experience  and other data such as primary lease terms of properties
and average holding periods.  If it is determined that the net recoverable value
is less  than  the net  carrying  value  of the  oil  and  gas  properties,  any
impairment is charged to operations.

Inventories
-----------

Inventory  includes  extracted oil  physically in the pipeline prior to delivery
for  sale  and oil  held by third  parties  valued  at the cost of  development.
Inventory also includes  various  supplies and spare parts and is valued at cost
using the weighted average method.

Property and Equipment
----------------------

Property and equipment is stated at cost. Depreciation is provided utilizing the
straight-line  method over the estimated useful lives for owned assets,  ranging
from 5 to 27 years.

Feasibility Study TDA Grants
----------------------------

Grants that are  received for use on oil and gas  properties  are recorded as an
offset to expenditures incurred under the grants.

One such  study  was  completed  in 2001.  In the  event  that  the  project  is
implemented  and a  substantial  economic  benefit is reaped,  funds  previously
advanced by the TDA may be required to be reimbursed.  Goloil may be required to
reimburse  the TDA in the  form of a  success  fee if  certain  events  occur by
December  31, 2004,  which  include:  taking an equity  position in the project,
financing  development of the license area, or obtaining  external financing for
development of the license area.

The Company has also  received a $300,000  grant from the TDA for a  feasibility
study for field development and pipeline construction.  As of March 25, 2004 the
Company has completed and submitted to TDA its feasibility  study of the Eguryak
license  area.  The Company has received  $255,000 as of December 31, 2003 under
the  grant.  In the event  that the  project is  implemented  and a  substantial
economic benefit is reaped, funds previously advanced by the TDA may be required
to be  reimbursed.  The Company may be required to reimburse the TDA in the form
of a success fee if certain events occur based  substantially  on the results of
the study by December 31, 2005, which include:  taking an equity position in the
project,  financing  development  of the  license  area  or  obtaining  external
financing for development of the license area.

For the years ended  December 31, 2003 and 2002,  the Company  received $0 under
TDA grants, respectively.

Impairment of Long-Lived Assets
-------------------------------

The Company evaluates its long-lived  assets for impairment,  in accordance with
the provisions  established under Statement of SFAS no. 144, "Accounting for the
Impairment  or Disposal of",  when events or changes in  circumstances  indicate
that the  related  carrying  amount may not be  recoverable.  An  impairment  is
considered to exist if the total estimated  future cash flows on an undiscounted
basis is less than the carrying amount of the related assets. An impairment loss
is measured and recorded  based on the discounted  estimated  future cash flows.
Changes in significant assumptions underlying future cash flow estimates or fair
values of assets may have a material effect on the Company's  financial position
and results of operations.

Asset Retirement Obligations
----------------------------

During 2003 the Company applied the provisions of SFAS No. 143,  "Accounting for
Asset Retirement  Obligations."  The Company recorded $126,500 as the fair value
of the Company's  estimated  liability for the retirement of its Russian oil and
gas assets  along with a  corresponding  increase in the  carrying  value of the
related  oil and gas  properties  as of  December  31,  2003,  as the  effect of
adopting  SFAS No.  143 on  January 1, 2003 was not  material.  Had the  Company
adopted  SFAS No.  143 on  January  1, 2002 the net loss to common  shareholders
would have been increased by $13,000.

Stock-Based Compensation
------------------------

In  December  2002,  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation-  Transition and  Disclosure."  This statement amends SFAS No. 123,
"Accounting  for Stock-Based  Compensation"  to provide  alternative  methods of
transition  for an entity that  voluntarily  changes to the fair value method of
accounting  for  stock-based  compensation.  In  addition,  SFAS 148  amends the
disclosure  provision of SFAS 123 to require more prominent disclosure about the
effects of an entity's  accounting  policy decisions with respect to stock-based
employee compensation on reported results of operations. The Company has adopted
the disclosure-only  provisions of Statement of Financial  Accounting  Standards
No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
cost has been  recognized  for stock options  issued to employees,  officers and
directors under the stock option plan. Had  compensation  cost for the Company's
options issued to employees, officers and directors been determined based on the
fair value at the grant date for awards  consistent  with the provisions of SFAS
No. 123, as amended by SFAS No. 124, the  Company's  net loss and basic loss per
common share would have been changed to the pro forma amounts indicated below:

                                                              For the Years Ended
                                                                 December 31,
                                                         ---------------------------
                                                              2003          2002
                                                         ------------   ------------

Net loss applicable to common shareholders - as reported $ (8,415,537)  $(10,973,923)
Net loss applicable to common shareholders - pro forma   $(13,389,678)  $(11,945,964)
Basic loss per common share - as reported                $      (1.23)  $      (3.53)
Basic loss per common share - pro forma                  $      (1.96)  $      (3.84)

The fair value of each warrant grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used:

                                                              For the Years Ended
                                                                 December 31,
                                                         --------------------
                                                              2003          2002
                                                         -----------------------

Approximate risk free rate                                   4.00%         4.50%
Average expected life                                      10 years       2 years
Dividend yield                                                -%            -%
Volatility                                                   100%         87.20%

Estimated fair value of total options granted             $4,974,141     $972,041


Foreign Currency Translation
----------------------------

All assets and liabilities of the Company's  subsidiary are translated into U.S.
dollars using the prevailing exchange rates as of the balance sheet date. Income
and expenses are translated  using the weighted  average  exchange rates for the
period.  Stockholders'  investments  are translated at the  historical  exchange
rates  prevailing  at the time of such  investments.  Any gains or  losses  from
foreign   currency   translation  are  included  as  a  separate   component  of
stockholders'  equity.  The  prevailing  exchange rates at December 31, 2003 and
2002  were  approximately  1 U.S.  dollar to 29.45 and  31.78,  Russian  rubles,
respectively. For the years ended 2003 and 2002, the average exchange rate for 1
U.S. dollar was 30.66 and 31.39, Russian rubles, respectively

Basic Loss Per Share
--------------------

The Company applies the provisions of Statement of Financial Accounting Standard
No. 128,  "Earnings Per Share" (FAS 128). All dilutive  potential  common shares
have an antidilutive effect on diluted per share amounts and therefore have been
excluded in determining net loss per share. The Company's basic and diluted loss
per share are  equivalent  and  accordingly  only  basic loss per share has been
presented.

The following  table reflects the effects of dilutive  securities as of December
31, 2003.


Dilutive effects of stock options                                1,578,037
Dilutive effects of warrants                                     7,389,981
Dilutive effects of convertible preferred shares                 2,381,351
                                                                ----------
Weighted average common shares outstanding including            11,349,369
the effects of dilutive securities

Fair Value of Financial Instruments
-----------------------------------

The  carrying  amounts  of  financial   instruments   including  cash,  accounts
receivable,  sundry receivables,  accounts payable,  accrued liabilities,  notes
payable and convertible  debentures  approximated  fair value as of December 31,
2003 because of the relatively short maturity of these instruments.

The carrying amounts of notes payable and debt issued  approximate fair value as
of December 31, 2003 because  interest  rates on these  instruments  approximate
market interest rates. The Company has no derivative financial instruments.

The Company is exposed to foreign currency risks to the extent that transactions
and balances are denominated in currencies  other than the United States dollar.
This risk could be significant for those  transactions and balances  denominated
in rubles, as the ruble has experienced significant devaluation in the past.

Reclassifications
-----------------

Certain  amounts  in  the  2002  consolidated  financial  statements  have  been
reclassified to conform to the 2003 presentation.

Recently Issued Accounting Pronouncements
-----------------------------------------

In May 2003,  the FASB issued SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity." SFAS No. 150
establishes  standards for how an issuer measures certain financial  instruments
with  characteristics of both liabilities and equity and requires that an issuer
classify a financial  instrument  within its scope as a  liability  (or asset in
some  circumstances).  SFAS No.  150 was  effective  for  financial  instruments
entered into or modified  after May 31, 2003 and  otherwise  was  effective  and
adopted by the Company on July 1, 2003. As the Company has no such  instruments,
the  adoption  of  this  statement  did  not  have an  impact  on the  Company's
consolidated  financial  statements.  During  December  2003,  the  FASB  issued
Interpretation  No. 46R,  "Consolidation  of Variable  Interest  Entities" ("FIN
46"),  which requires the  consolidation of certain entities that are determined
to be variable interest entities ("VIE's").  An entity is considered to be a VIE
when either (i) the entity  lacks  sufficient  equity to carry on its  principal
operations, (ii) the equity owners of the entity cannot make decisions about the
entity's  activities  or (iii) the entity's  equity  neither  absorbs  losses or
benefits  from gains.  Teton  Petroleum  owns no interests in variable  interest
entities,  and therefore this new  interpretation  will not affect the Company's
consolidated financial statements.


Note 2 - Investments in Goltech Petroleum, LLC
----------------------------------------------

Effective  in August 2000,  the Company  entered  into a  transaction  agreement
selling a 50% equity  interest in Goltech in exchange for $1,000,000  cash and a
$5.6 million investment in the license area for drilling additional wells on the
license  area,  completion  of a pipeline and the  construction  of a processing
facility (the oilfield  development  program).  The $1,000,000 received was also
invested in the license area to complete the oilfield  development  program. The
party to the  agreement  obtained the right to name 50% of the board of managers
and became the general manager of Goltech. No gain or loss was recognized on the
transaction  as  the  proceeds  were  immediately   reinvested  into  the  field
development  and pipeline  completion  project.  ZAO Goloil was also required to
make a production  payment to compensate  the other party for its  investment in
the license area. The production  payment  requires ZAO Goloil to deliver 50% of
the production from existing and future wells through July 2007. The other party
is obligated  under an agreement to only sell their share of the  production  in
the Russian  domestic  market.  Effective  December  31,  2002,  the other party
withdrew as a member of Goltech and in exchange for relinquishment of 50% of its
membership  interests in Goltech,  it received  35.295% of the ZAO Goloil shares
and the  return of its  $1,000,000  initial  contribution.  ZAO  Goloil is still
obligated under the production payment.

The  other  membership  holder  (the  "affiliate")  to  Goltech  Petroleum,  LLC
(Goltech) had invested  approximately $ 7,000,000 under the oilfield development
agreement outside of Goltech and Goloil as of December 31, 2003. These costs are
reflected in the accounts of another entity  controlled by the affiliate and are
not  reflected  anywhere  in the  financial  statements  of the  Company.  These
expenditures  were used to drill and complete four additional wells and complete
a pipeline on the Company's  license area that provides the ability to transport
oil directly  through this  pipeline  year-round  to other larger  pipelines for
ultimate  sale.  The  Company has  compensated  the  affiliate  in the form of a
production  payment of approximately  2,262,343  barrels of oil through December
31, 2003.  The Company also has the obligation to compensate the affiliate for a
minimum of 4,088,000 barrels of oil (1,825,657 barrels remaining at December 31,
2003)  over  a  seven-year   period  for  its  investments  under  the  oilfield
development  agreement.  See Note 10 for a discussion of the changes made to the
production  payment being  proposed by OAO NK RussNeft,  a newly formed  Russian
independent oil producer ("Russneft").

Additionally,  the  affiliate  has net direct  loans to Goloil of  approximately
$14,839,000,  which  have  been  used  to help  fund  capital  expenditures  for
completion of a processing facility and to help fund other related expenses. The
Company has reflected a 50% of these loans in its financial statements under the
pro-rata consolidation method (Note 6).



Note 3 - Property and Equipment
-------------------------------

Property and equipment consist of the following at December 31, 2003:

Building                                                 $     123,942
Vehicles                                                       178,598
Computers and equipment                                         30,053
Other equipment                                                175,707
Furniture and fixtures                                          27,689
                                                         -------------
                                                               535,989
Less: Accumulated depreciation                                (85,148)
                                                         -------------
                                                         $     450,841
                                                         =============


Note 4 - Oil and Gas Properties
-------------------------------

Goloil License
--------------

The Company  holds an interest in the license for the Eguryak  license  area for
exploration  and  production  of oil and gas  through its  investment  in Goloil
(which is held through its 100% owned subsidiary,  Goltech). This license grants
Goloil the  exclusive  right to explore and develop an area in Siberia  covering
186.8 square  kilometers and includes the Eguriakhskoe,  South  Eguriakhskoe and
Golevoye oil fields situated in the  Nizhnevartovsk  Region. The license expires
on May 21, 2022,  subject to  additional  extensions  as approved by  applicable
bodies of the  Russian  Federation.  The  license  may also be  canceled  by the
Company with a 90-day written notice.

The  license  requires  Goloil to drill a minimum of five wells over four years,
conduct an additional  seismic  survey  aggregating  30 square  kilometers,  and
evaluate geological data from the 186.8 square kilometers of the license. Goloil
was also  required to conduct  production  tests on six wells  between  1997 and
2000. In addition to performing its duties under the license, Goloil must comply
with Russian  environmental and archeological laws.  Currently,  the Company has
fulfilled its requirements under the license. Management is continuing to pursue
completion of future required  performance criteria and believes that there will
be no adverse  effects on the  Company's  license for failure to comply with any
past license requirements.

The license requires Goloil to pay all taxes including mining tax,  property tax
and certain  ecological taxes. All geological  information  obtained at Goloil's
expense is the property of Goloil, while all geological  information obtained at
the  expense  of the  Russian  government  may be  used by  Goloil.  Oil and gas
produced from the licensed property, subject to certain royalty payments, is the
property of Goloil.

During  2003,  Goloil  began  the  construction  of  a  gas-powered   electrical
generating plant which will be operational in the first quarter of 2004.

See note 10 for a discussion of a dispute with Russneft, the operator of Goloil.



Note 5 - Notes Payable
----------------------

During 2003:

The Company received  proceeds of $628,750 from the issuance of promissory notes
to three shareholders.  In connection with these notes,  128,700 warrants valued
at $110,170 were issued.  At December 31, 2003,  the full amount of the discount
had been amortized and recorded as a non-cash  financing charge. The Company has
recorded  the value of these  warrants  using the  Black-Scholes  option-pricing
model using the following  assumptions:  volatility of 73%, a risk-free  rate of
3.5%, zero dividend payments, and a life of one year.

The Company paid $478,750 of the  promissory  notes issued during the year.  The
remaining  $150,000  along with  accrued  interest of $9,426 was  exchanged  for
Teton's 8% convertible preferred shares.

During 2002:

The scheduled  March 1, 2002  principal  payments on two notes payable  totaling
$250,000 to  stockholders  were extended to April 15, 2002. In exchange for this
extension,  the holders were issued  10,417  stock  purchase  warrants,  with an
exercise  price of $6.00 that expired  February  2004,  which had been valued at
$14,469  using the Black  Scholes  option  pricing  model  with  assumptions  of
volatility  of  100%,  risk  free  rate of 5.5%  and no  dividend  yield.  These
extensions were recorded in the first quarter of 2002 as financing costs.  These
notes were fully paid off in 2002.

The Company  issued  143,678  warrants in  connection  with related  party notes
payable of $450,000  and  $50,000.  The  warrants  were  valued at $156,781  and
recorded as financing costs. Additionally, in the first quarter of 2002, the due
dates of the two notes payable totaling $500,000 were extended by the holders to
April 15, 2002. As consideration for this extension the Company agreed to modify
the expiration  dates of certain  warrants  previously  held by the note holders
from October 31, 2002 to January 31, 2003.  These  extensions  were valued based
upon the  incremental  fair value of the  warrants on the date of  modification,
which totaled approximately  $32,000. The values were calculated using the Black
Scholes  option-pricing  model under the  assumptions  described in the previous
paragraph,  and were  recorded  in the first  quarter of 2002,  the  quarter the
modifications occurred.

During 2002, the Company paid $200,000 of a $450,000 note payable outstanding at
December 31, 2001.  The  remaining  $250,000 was  converted  into a  convertible
debenture  with  83,333  warrants  also  being  issued  in  connection  with the
Company's private placement offering of convertible debentures.

The  Company  also paid off a $50,000  note  payable  to a  stockholder  and the
$94,210  note  payable to an officer  during  2002,  which were  outstanding  at
December 31, 2001.

During 2002, the Company received  proceeds of $300,000 on a note payable from a
stockholder.  In connection  with the note,  41,667  warrants valued at $150,016
were issued and recorded as financing charges. The Company paid off this note in
November  2002.  The Company has recorded the value of these  warrants using the
Black Scholes option-pricing model using the following  assumptions:  volatility
of 138%,  a risk-free  rate of 4.5%,  zero  dividend  payments,  and a life of 2
years.

Total  expense  recorded   associated  with  the  above  warrant  issuances  and
modifications  totaled $353,  379 and have been  recorded as non-cash  financing
charges during the year ended December 31, 2002.



Note 6 - Proportionate Share of Liabilities
-------------------------------------------

The  proportionate   share  of  accounts  payable  and  accrued  liabilities  of
$2,590,901  at  December  31,  2003 are  obligations  of  Goloil  and not  Teton
Petroleum nor have they been guaranteed by Teton Petroleum.

The following  notes  reflect the Company's 50% pro-rata  share of notes payable
advances  made by and owed to Goloil owed to an  affiliate.  These  advances are
obligations of Goloil at December 31, 2003 and not Teton Petroleum nor have they
been guaranteed by Teton Petroleum.

Pro-rata  share of Goloil  notes  payable  owed to an  affiliate.  The
proceeds  were used to pay  certain  operating  expenses  and  capital
expenditures  of Goloil.  These notes  provide for  interest  rates of
8%, with interest  payable either  quarterly or on maturity , maturing
through December 2004.  These notes are secured by  substantially  all
Goloil  assets.  The notes  payable will be repaid from cash flow from
ZAO Goloil as available, or extended to future periods.                $7,419,409
                                                                       ---------

  Less: current portion                                               $(7,419,409)
                                                                       -------------

Note 7 - Stockholders' Equity
-----------------------------

Changes in Stockholders' Equity during 2003
-------------------------------------------

     On March 19, 2003, the stockholders authorized an increase in the Company's
     common shares from  100,000,000  to 250,000,000  and authorized  25,000,000
     shares of preferred stock for future issuance.

   Private Placements of Common Stock
   ----------------------------------

     During the year ended December 31, 2003 the Company  received the following
     proceeds from the issuance of privately placed common stock:

o    $1,091,900 (net of costs of $98,100) from the issuance of 437,012 shares of
     common stock.  In connection with the private  placement,  the Company also
     issued a warrant for each $3.00 stock investment.  The warrants have a term
     of two years and an exercise price of $6.00,

o    $1,939,610  during the year ended  December 31, 2003 related to outstanding
     stock subscriptions receivable at December 31, 2002,

o    80,828 common  shares valued at $317,902 were issued for (i)  settlement of
     accounts  payable and accrued  liabilities  of $220,000;  and (ii) services
     provided by the advisory board of $97,902.

   Private Placements of Series A Convertible Preferred Stock
   -----------------------------------------------------------

     During the year ended December 31, 2003 the Company  received the following
     proceeds from the issuance of privately placed preferred stock issued at an
     offering price of $4.35 per share.



o    Proceeds of  $9,145,450  (net of cash costs of $473,888  and net of $46,968
     related to the obligation to issue  warrants for capital  raising) from the
     issuance of 2,266,680 shares of 8% convertible preferred stock.

o    $14,574  from the  issuance of 40,000  preferred  shares in exchange  for a
     $150,000 note payable outstanding and accrued interest of $9,426.

     We also issued 12,000  preferred shares to a consultant for capital raising
     services valued at $52,200.

The preferred shares carry an 8% dividend,  payable quarterly commencing January
1, 2004 and are convertible into common stock at a price of $4.35 per share. The
preferred  stock is entitled to vote on all matters  presented to the  Company's
common  stockholders,  with the  number of votes  being  equal to the  number of
underlying  common  shares.  The  preferred  stock also  contains a  liquidation
preference  of $4.35 per share plus  accrued  unpaid  dividends.  The  preferred
shares can be redeemed  by the  Company  after one year for $4.35 per share upon
proper notice of redemption being provided by the Company.

In connection with the preferred  share private  placement for Tranches 1 and 2,
certain  placements  were entered into when the  underlying  price of the common
stock to which the preferred  shares are convertible  into,  exceeded $4.35, the
stated conversion rate. As a result of the underlying shares being in-the-money,
the Company was required to compute a  beneficial  conversion  charge,  which is
calculated  as the  difference  between  the  conversion  price of $4.35 and the
closing stock price on the effective  date of each  offering,  multiplied by the
total of the related common shares to be issued upon conversion of the preferred
stock.  These charges are reflected as a dividend to the preferred  shareholders
and are  recognized  over the period in which the preferred  stock first becomes
convertible.  For the Tranche 1 shares the charge was immediately  recognized as
the shares were immediately  convertible  into common.  For Tranche 2 the shares
could not be converted  until a shareholder  vote on January 27, 2004 took place
approving the issuance of additional  common shares.  The calculated  beneficial
conversion feature on Tranche 2 was therefore  amortized from the effective date
of each issuance  through  January 27, 2004.  This resulted in total  beneficial
conversion charges of $ 1,182,452,  of which $1,063,842 were recorded during the
fourth quarter of 2003, and $118,610 will be amortized and recorded as preferred
dividends in January of 2004.

     The Company also sent each  preferred  shareholder  an inducement  offer to
     convert their shares of preferred into common shares.  If converted  within
     60 days of closing, the investors will be entitled to receive (i) dividends
     payable in common stock  equivalent  to one years worth of  dividends;  and
     (ii) 2 Class B Warrants  for each $10  invested,  exercisable  at $6.00 per
     share.

     In  connection  with the preferred  share private  placement for Tranche 1,
     shareholders  converted  1,645,099 of 8%  convertible  preferred  shares to
     common stock at a price of $4.35 per share.  Common  share  dividends of 8%
     for a full year were paid  totaling  $546,173 and  1,431,237  warrants were
     issued valued at $1,170,678,  for a total  inducement  charge of $1,716,851
     recognized  as a  preferred  dividend  during the fourth  quarter for those
     investors  which accepted the inducement  offer.  The warrants  issued were
     valued using the  black-scholes  option  pricing  model using the following
     assumptions:  volatility of 55%, a risk-free rate of 1.875%,  zero dividend
     payments, and a life of two years

     In connection with the preferred  share private  placement for Tranche 2, a
     common share dividend of 8% for a full year was paid totaling  $157,601 and
     warrants were issued valued at $337,805 , for a total inducement  charge of
     $495,406  which will be  recognized  as a  preferred  dividend in the first
     quarter of 2004,  associated  with the  preferred  stock  inducement  offer
     ending  on March  27,2004.  The  warrants  issued  were  valued  using  the
     black-scholes  option  pricing  model  using  the  following   assumptions:
     volatility of 55%, a risk-free rate of 1.875%, zero dividend payments,  and
     a life of two years.

   Warrants to Purchase Common Shares
   ----------------------------------

     During  2003,  the Company  issued  440,140  warrants to entities for their
     services directly related to raising capital under private placements.  The
     Company also issued  128,700  warrants in  conjunction  with debt valued at
     $110,170.

     During 2003,  the Company  issued  1,019,883  warrants in  connection  with
     common stock private placement  offerings,  with an exercise price of $6.00
     that expire December 30, 2004.

Changes in Stockholder Equity during 2002
-----------------------------------------

   Private Placements of Common Stock
   ----------------------------------

     During the year ended December 31, 2002 the Company  received the following
     proceeds from the issuance of privately placed common stock:

o    $3,333,460  from the  issuance  of  1,223,737  shares of common  stock.  In
     connection with the private placement offerings,  the Company also issued a
     warrant for each $3.00 stock  investment.  The warrants  have a term of two
     years and an exercise price of $6.00.

o    $605,136 from the issuance of 221,198  common shares issued for  consulting
     services.

o    $23,200 from the issuance of 7,407 common  shares for services  provided in
     2001. The Company accrued a liability for this amount at December 31, 2002.

      Convertible Debentures
      ----------------------

          During 2002,  the Company  received  proceeds of  $4,163,143  from the
          private placement of convertible debentures. The debentures had a term
          of three years from April 1, 2002 and provided for interest at 10% per
          annum payable  annually.  The debentures  provided that the holder may
          convert the debenture and accrued interest into shares of common stock
          at a $3 conversion rate.

          The  debentures  also included  warrants to purchase  common stock and
          have an exercise  price of $6 and a term of two years.  Each debenture
          holder  received one warrant for each $.25  (pre-split)  of investment
          made in debentures.

          On September 1, 2002, the Company redeemed all debentures  outstanding
          for shares of its common stock.  The debentures  were redeemed at 110%
          of their face value by issuing  one share of common  stock for each $3
          of redemption  value,  which also  incorporates  any accrued  interest
          through  September 1, 2002.  Financing  charges were  recorded for the
          difference  between the cumulative 10%  contractual  interest  accrued
          through  September 1, 2002 and the 10% premium  paid upon  redemption,
          which totaled $466,771.

          As  a  result  of  the  warrants   issued  with  the   debentures  and
          in-the-money   conversion  features  present  at  issuance,   non-cash
          financing  charges of  $4,714,625  were  expensed.  While the stock to
          which the conversion  rights and warrants  apply is restricted  stock,
          the valuation with respect to this stock in  calculating  the discount
          was "as if" the stock was immediately  salable.  The effect of this is
          to make the amount of  discount  and its related  amortization  higher
          than it would otherwise have been. Management believes these costs are
          non-recurring  and will  manage  future  capital  raising  programs to
          minimize or eliminate these costs.

      Warrants to Purchase Common Shares
      ----------------------------------

          During 2002, the Company issued  133,333  warrants to consultants  for
          services  valued at  $215,086.  The  Company  also  issued  616,793 to
          employees and directors for services performed.



The following table presents the activity for warrants outstanding:

                                                                          Weighted
                                                                           Average
                                                                          Exercise
                                                             Shares         Price
                                                         ------------------------

Outstanding - December 31, 2001                                544,098 $        5.28
      Granted                                                4,068,682          5.52
      Forfeited/canceled                                      (25,000)          2.04
                                                         ---------------------------

Outstanding - December 31, 2002                              4,587,780          5.52
      Granted                                                3,210,249          2.49
      Forfeited/canceled                                     (408,048)          0.30
                                                         ---------------------------

Outstanding - December 31, 2003                              7,389,981 $        5.63
                                                         ===========================

The  following  table  presents  the   composition  of  warrants   outstanding  and
exercisable:

                                               Shares Outstanding
                                           --------------------------
         Range of Exercise Prices             Number        Price*        Life*
-----------------------------------------  ------------  ------------ ---------
      $2.72 - $4.80                             997,800  $       0.41          .27
      $6.00 - $12.00                          6,392,181          5.22          .93
                                           ------------  ------------ ------------

Total - December 31, 2003                     7,389,981  $       5.63         1.20
                                           ============  ============ ============

*Price and Life reflect the weighted average exercise price and weighted average
remaining contractual life, respectively.



Note 8 - Stock Options
----------------------

At the annual meeting on March 19, 2003, the Company's  shareholders approved an
employee stock option plan and authorized  2,083,333  shares of Common Stock for
issuance thereunder.  Under the plan, incentive and non-qualified options may be
granted.   During  the  second  quarter  of  2003,  the  Company  issued  30,000
non-qualified  options to outside advisory board members which has been recorded
as compensation  expense during the  three-months  ended June 30, 2003 valued at
$94,701,  using  the  Black-Scholes  option-pricing  model  with  the  following
assumptions: volatility of 100%, a risk-free rate of 4%, zero dividend payments,
and a life of ten years. The Company also issued 1,448,037  incentive options to
employees,  officers and directors valued at $4,571,026 using the  Black-Scholes
option-pricing  model under the same  assumptions  described above. In the third
quarter,  100,000 options valued at $308,414 were issued to a director under the
Company Plan.

As of December 31, 2003,  1,478,037 options with an exercise price of $3.48 were
outstanding  as well as 100,000  options  with an exercise  price of $3.71.  The
weighted  average price and contractual life of both issues were $3.26 and $3.71
and 8.59 and .61 years, respectively.


The following table presents the activity for stock options outstanding:

                                               Shares Outstanding
                                           --------------------------
         Range of Exercise Prices             Number        Price*        Life*
-----------------------------------------  ------------  ------------ ---------
      Outstanding - December 31, 2002                 -  $          -            -
      Issued                                  1,578,037          3.49         9.20
                                           ------------  ------------ ------------

     Outstanding - December 31, 2003          1,578,037  $       3.49         9.20
                                           ============  ============ ============


*Price and Life reflect the weighted  average  exercise price and weighted  average
remaining contractual life, respectively.

Note 9 - Income and Other Taxes

The Company has incurred  losses since inception and, as a result of uncertainty
surrounding the use of those net operating loss carry-forwards, no provision for
income taxes has been recorded.

The Company has net  operating  loss  carry-forwards  for U.S.  tax  purposes of
approximately  $18,500,000,  which expire between 2012 and 2023, if unused,  and
have been fully reserved by a valuation allowance.

Taxes  payable are tax  liabilities  of its  Russian  subsidiary,  Goloil  (held
through its wholly owned subsidiary Goltech). Tax payments made by Goloil to the
Russian  government  include profits taxes,  value-added taxes ("VAT"),  payroll
taxes and property taxes.

The Company had no income tax liabilities for the years ended December 31, 2003.
ZAO Goloil has net operating loss carry-forwards,  which are available to offset
future  taxable  income,  which  will  expire in 2013.  The  foreign  income tax
carry-forwards  for  Russian  tax  purposes  are  limited to a maximum of 30% of
taxable  income in any year.  As of December  31,  2003,  Goloil had $210,662 in
deferred tax assets  ($105,331 net to Teton) and $34,906  ($17,453 net to Teton)
in deferred tax liabilities.  These amounts can be applied against future income
taxes.

Note 10 - Commitments and Contingencies
---------------------------------------

Contingencies
-------------

Dispute  with Current  operator of Goloil In  September,  RussNeft  acquired the
shares  held by  Mediterranean  Overseas  Trust and  InvestPetrol  in Goloil and
assumed  responsibility  for  operating  the License.  During the  transition in
November, the Company subsequently learned,  Goloil sold substantially less than
its export  quota into export  markets  where prices are  substantially  higher,
instead selling the production into the domestic market. .

Commencing  October 1, Russneft began selling  Goloil's  production to a related
party of  RussNeft  (RussTrade)  for a fixed  price of 2,400  rubles  per barrel
(roughly $11 per barrel), a price  substantially  below the blended market price
Goloil formerly received selling its production into the export, near abroad and
domestic  markets.  As a consequence,  the Company  estimates its revenues after
taxes for the quarter were reduced by  approximately  $1.44  million.  Moreover,
since this pricing  arrangement  prevailed through the end of the fourth quarter
and beyond, the Company has had to significantly reduce the present value of its
reserves  effective  January 1, 2004.  In  addition,  Russneft  has adjusted the
amount of  production  payment  to be paid to  EnergoSoyuz-A  ("ESA") to a fixed
amount per month which is less than the 50% of oil  produced  previously  agreed
to, based on the current price.

Teton has strenuously objected to Russneft's actions and is continuing to engage
its management in discussions over the issue,  while retaining  counsel with the
intention of vigorously  pursuing it rights under  previous  agreements and as a
significant  minority  shareholder  in Goloil.  While  counsel  has  advised the
Company  that its  position  has merit,  the outcome of this  dispute  cannot be
predicted at the current time

Taxation
--------

The taxation system in Russia is evolving as the central  government  transforms
itself from a command to a market-oriented  economy. There were many new Russian
Federation  and  Republic  taxes  and  royalty  laws  and  related   regulations
introduced  over the last few years.  Many of these were not clearly written and
their application is subject to the  interpretation of the local tax inspectors,
Central Bank  officials and the Ministry of Finance.  Instances of  inconsistent
interpretation  between local,  regional and federal tax authorities and between
the Central Bank and Ministry of Finance are not unusual.  The current regime of
penalties and interest related to reported and discovered  violations of Russian
laws, decrees and related regulations are severe. Penalties include confiscation
of the amounts at issue (for tax law violations),  as well as fines of up to 40%
of the unpaid taxes. Interest is assessable at rates of up to 0.1% per day. As a
result,  penalties  and interest can result in amounts that are multiples of any
unreported taxes.

The Company's  policy is to accrue  contingencies  in the  accounting  period in
which a loss is deemed  probable and the amount is reasonably  determinable.  In
this regard,  because of the  uncertainties  associated with the Russian tax and
legal  systems,  the ultimate  taxes as well as penalties and interest,  if any,
assessed may be in excess of the amounts paid to date as of December 31, 2003.

Management  believes  based upon its best estimates that the Company has paid or
accrued  all taxes that are  applicable  for the current  and prior  years,  and
compiled with all essential  provisions of laws and  regulations  of the Russian
Federation.

Environmental
-------------

The Company may be subject to loss  contingencies  pursuant to Russian  national
and regional  environmental claims that may arise for the past operations of the
related  fields,  which it  operates.  As Russian  laws and  regulations  evolve
concerning environmental  assessments and cleanups, the Company may incur future
costs,  the amount of which is currently  indeterminable  due to such factors as
the current state of the Russian regulatory process, the ultimate  determination
of responsible parties associated with these costs and the Russian  government's
assessment  of  respective  parties'  ability to pay for those costs  related to
environmental reclamation.

Political
---------

The Company's  operations and financial position will continue to be affected by
Russian political  developments including the application of existing and future
legislation,  regulations and claims pertaining to production, imports, exports,
oil and gas regulations and tax regulations.  The likelihood of such occurrences
and their effect on the Company could have a significant impact on the Company's
current activity and its overall ability to continue operations. Management does
not believe that these contingencies, as related to its operations, are any more
significant than those of similar enterprises in Russia.

Commitments
-----------

Mr. Howard Cooper, Chairman,  signed an agreement on May 1, 2002. The employment
agreement is for a three-year  term,  whereby Mr. Cooper's salary is $13,333 per
month. Under the terms of the agreement,  Mr. Cooper is entitled to 24 months of
severance pay, payable in monthly  installments over 24 months, from the date of
termination.  The Company may discontinue  the severance  payments if Mr. Cooper
violates the confidentiality,  noncompetition,  or nonsolicitation provisions of
his employment agreement.

Mr. Karl Arleth,  President and Chief Executive Officer,  signed an agreement on
May 1, 2003. The employment agreement is for a three-year term, with a salary of
$10,000 per month.  Under the terms of the agreement,  Mr. Arleth is entitled to
24 months  severance  pay in the event of change of  position  or control of the
company.

Ms. Anya Cooper,  Secretary,  signed an agreement on May 1, 2002. The employment
agreement is for a three-year  term,  whereby Ms.  Cooper's salary is $6,500 per
month. Under the terms of the agreement,  Ms. Cooper is entitled to 12 months of
severance pay, payable in monthly  installments  over 12 months from the date of
termination.  The Company may discontinue  the severance  payments if Ms. Cooper
violates the confidentiality provision of her employment agreement.


Note 11 - Supplemental Oil and Gas Disclosures
----------------------------------------------

The following is a summary of costs incurred in oil and gas producing activities:

Included below is the Company's investment and activity in oil and gas producing
activities,  which  includes a  proportionate  share of ZAO Goloil's oil and gas
properties, revenues, and costs.

                                                             For the Years Ended
                                                                 December 31,
                                                         --------------------
                                                              2003          2002
                                                         -----------------------

Property acquisition costs.............................   $     --     $     --

Construction in progress ..............................    1,700,696
Development costs .....................................    5,207,931    4,150,742
                                                          ----------   ----------

       Total ..........................................   $6,908,627   $4,150,742
                                                          ==========   ==========

The following  reflects the Company's  capitalized costs associated with oil and
gas producing activities:

                                                             For the Years Ended
                                                                 December 31,
                                                        ----------------------------
                                                              2003          2002
                                                        ------------    ------------

Property acquisition costs ..........................   $    595,558    $    595,558
Construction in progress                                   1,700,696
Development costs ...................................     10,808,813       4,830,421
                                                        ------------    ------------
                                                          13,105,067       5,425,979
Accumulated depreciation, depletion, amortization and
 valuation allowances ...............................     (2,064,585)       (529,671)
                                                        ------------    ------------
Net capitalized costs ...............................   $ 11,040,482    $  4,896,308
                                                        ============    ============

Results of Operations from Oil and Gas Producing Activities
-----------------------------------------------------------

Results of operations from oil and gas producing  activities  (excluding general
and administrative expense, and interest expense) are presented as follows:

                                                             For the Years Ended
                                                                 December 31,
                                                        ----------------------------
                                                              2003          2002
                                                        ------------    ------------

Oil and gas sales                                        $  11,437,802  $  6,923,320
Oil and gas production                                     (2,020,447)    (1,218,411)
Transportation and marketing                                 (807,266)      (611,956)
Export duties                                              (1,492,999)      (910,936)

Taxes other than income taxes                              (5,864,920)    (3,537,990)
Depletion, depreciation and amortization                   (1,534,914)      (451,930)
                                                         ------------     ------------

Results of operations from oil and gas producing
 activities                                              $   (282,744)  $    192,097
                                                         ============    ===========



Reserves (Unaudited) - Base Case
--------------------------------

Proved oil and gas reserves are the estimated  quantities of crude oil,  natural
gas, and natural gas liquids which  geological and engineering  data demonstrate
with  reasonable  certainty  to  be  recoverable  in  future  years  from  known
reservoirs under existing economic and operating conditions.  Proved development
oil and gas  reserves  are  those  reserves  expected  to be  recovered  through
existing wells with existing equipment and operating  methods.  The reserve data
is based on studies prepared by an independent engineer.  All proved reserves of
oil and gas are located in Russia.

See Note 10 to the  financial  statements  for a full  discussion of the dispute
with Russneft.  As the outcome of this dispute cannot be predicted at this time,
the Company has prepared two separate  proved oil reserve cases:  the "Base Case
SEC reserves and Cash Flow  Projections" and the "Alternate Case". The Base Case
assumes  that the  Company is not  successful  in it's  dispute  with  Russneft,
accordingly,  the price received for oil is set at 2,400 rubles per ton ($11 per
barrel) and the  production  payment is deducted  assuming 19 million rubles per
month ($645,000 per month less VAT). The Alternate Case assumes that the Company
is  successful  in the  dispute  and that  Russneft  and Goloil  would honor all
pre-existing  agreements.  In the Base Case, future cash flows are substantially
less than in the Alternate Case, however oil reserves  quantities are greater as
a result  of  payout  being  delayed  and how the  production  payment  is being
calculated.  Management has elected to report the lower, alternate case reserves
as it's oil reserves.


                                                          For the Years Ended
                                                               December 31,
                                                       --------------------------
                                                           2003           2002
                                                       -----------    -----------

Proved reserves (bbls), beginning of period ........    13,264,000     40,174,000

Production .........................................      (632,000)      (471,000)

Extension of reservoir .............................          --        2,000,000

Revisions of previous estimates ....................    (4,370,000)   (28,439,000)
                                                       -----------    -----------

Proved reserves (bbls), end of period ..............     8,262,000     13,264,000
                                                       ===========    ===========

Proved developed reserves (bbls, beginning of period     4,567,000      5,493,000
                                                       ===========    ===========

Proved developed reserves (bbls), end of period ....     3,816,000      4,567,000
                                                       ===========    ===========



Standardized Measure of Discounted Future Net Cash Flows (Unaudited)
--------------------------------------------------------------------

SFAS No. 69 prescribes guidelines for computing a standardized measure of future
net cash flows and changes therein relating to estimated  proved  reserves.  The
Company has followed these guidelines, which are briefly discussed below.

Future cash inflows and future  production and development  costs are determined
by applying year-end prices and costs to the estimated quantities of oil and gas
to be  produced.  Estimated  future  income  taxes are  computed  using  current
statutory  income tax rates for those countries  where  production  occurs.  The
resulting future net cash flows are reduced to present value amounts by applying
a 10% annual discount factor.

The assumptions used to compute the standardized measure are those prescribed by
the  Financial  Accounting  Standards  Board and,  as such,  do not  necessarily
reflect the Company's  expectations for actual revenues to be derived from those
reserves  nor their  present  worth.  The  limitations  inherent  in the reserve
quantity estimation process, as discussed previously,  are equally applicable to
the standardized  measure  computations  since these estimates are the basis for
the valuation process.

The following  summarizes the Base Case standardized  measure and sets forth the
Company's future net cash flows relating to proved oil and gas reserves based on
the  standardized  measure  prescribed  in  Statement  of  Financial  Accounting
Standards  No. 69 assuming  the Company is not  successful  in it's dispute with
Russneft.

                                                                  For the Years Ended
                                                                      December 31,
                                                                  2003            2002
                                                             -------------    -------------

Future cash inflows ......................................   $ 114,992,000    $ 230,581,000

Future production costs ..................................     (80,812,000)    (151,167,000)

Future development costs .................................     (14,595,000)     (18,556,000)

Future income tax expense ................................      (7,360,000)     (16,365,000)
                                                             -------------    -------------

Future net cash flows (undiscounted) .....................      12,225,000       44,493,000
Annual  discount  of 10% for  estimated  timing  of cash
 flows ...................................................      (6,232,000)     (19,069,000)
                                                             -------------    -------------


Standardized measure of future net discounted cash flows     $   5,993,000    $  25,424,000
                                                             =============    =============



Changes in Standardized Measure Base Case (Unaudited)
-----------------------------------------------------

The following are the principal  sources of change in the  standardized  measure of
discounted future net cash flows:

                                                          For the Years Ended
                                                             December 31,
                                                     ------------------------------
                                                          2003             2002
                                                     -------------    -------------

Standardized measure, beginning of period, .......   $  25,424,000    $  40,362,000
Net changes in prices and production costs .......     (11,483,000)     189,975,000
Future development costs .........................      (3,098,000)      22,344,000
Revisions of previous quantity estimates .........     (11,806,000     (274,605,000)
Extension of reservoir ...........................            --         19,867,000
Accretion of discount ............................       2,542,000        4,036,000
Changes in income taxes, net .....................       4,414,000       23,445,000
                                                     -------------    -------------

Standardized measure, end of period, 2003 and 2002   $   5,993,000    $  25,424,000
                                                     =============    =============




Reserves (Unaudited)  - Alternate Case
--------------------------------------

The following summary sets forth the Company's future net cash flows relating to
proved oil and gas reserves  based on the  standardized  measure  prescribed  in
Statement of Financial Accounting Standards No. 69 and assuming that the Company
is successful in resolving its dispute with Russneft, the Alternate Case.

                                                                     For the Years Ended
                                                                         December 31,
                                                             -----------------------------------
                                                                  2003                  2002
                                                             -------------         -------------

Future cash inflows ......................................   $ 175,631,000         $ 230,581,000

Future production costs ..................................    (104,257,000)         (151,167,000)

Future development costs .................................     (14,595,000)          (18,556,000)

Future income tax expense ................................     (15,567,000)          (16,365,000)
                                                             -------------         -------------
Future net cash flows (undiscounted) .....................      41,212,000            44,493,000
Annual  discount  of 10% for  estimated  timing  of cash
 flows ...................................................     (17,560,000)          (19,069,000)
                                                             -------------         -------------


Standardized measure of future net discounted cash flows     $  23,652,000         $  25,424,000
                                                             =============         =============





Changes in Standardized Measure (Unaudited)
-------------------------------------------

The following are the principal  sources of change in the  standardized  measure of
discounted future net cash flows:

                                                                For the Years Ended
                                                                   December 31,
                                                          ------------------------------
                                                              2003               2002
                                                          -------------    -------------
Standardized measure, beginning of period, December 31,
 2002 and 2001 ........................................   $  25,424,000       40,362,000
Net changes in prices and production costs ............      50,949,000      189,975,000
Future development costs ..............................      (3,098,000)      22,344,000
Revisions of previous quantity estimates ..............     (52,623,000)    (274,605,000)
Extension of reservoir ................................            --         19,867,000
Accretion of discount .................................       2,542,000        4,036,000
Changes in income taxes, net ..........................         458,000       23,445,000
                                                          -------------    -------------

Standardized measure, end of period, 2003 and 2002 ....   $  23,652,000    $  25,424,000
                                                          =============    =============



Note 12 - Fourth Quarter Adjustments

The following significant adjustments were recorded by the Company during the
fourth quarter of 2003:


Depletion, amortization and amortization .............   $  919,744
Exploration expenses .................................      275,416
Imputed preferred stock dividends for
 inducements and beneficial conversion charges .......    2,762,137
                                                         ----------
Total impact on loss applicable to common stockholders   $3,957,297
                                                         ==========














As described in Note 10 to these financial statements, the operations of Goloil
have had some significant management changes that have affected the operating
results of Goloil during the fourth quarter.  The effects of these changes cah be
seen in the accompanying table reflecting the fourth quarter results of
operations.

                                     Fourth Quarter
                                          2003
                                    ------------------
                                    ------------------
Sales, Barrels                                150,938
Average Daily Sales, Barrels                    1,654
Average Selling Price, $/barrel                $15.45
Revenues                                   $2,332,464

Costs of Sales and Expenses, excl.
DD&A
 Production Costs                             563,590
 Transportation & Marketing                     6,061
 Taxes other than Income taxes              1,700,920
 Export Duties                                     -
                                                   -


Results from Goloil Operations,
before DD&A                                    61,889
 Less General & Administrative
Expense, Goloil                               188,229
                                              -------
Goloil operating (loss) income
before DD&A                                 (126,340)


Depreciation, Depletion &                     919,744
                                              -------
Amortization, Goloil

Operating loss, Goloil                    (1,046,084)

General & Administrative Expense,
Teton                                       1,244,063
                                            ---------

Operating Loss, Teton                    $(2,290,147)
                                         ============











Item  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

None.


ITEM 8A. CONTROLS AND PROCEDURES

As of December 31, 2003,  an  evaluation  was  performed by our Chief  Executive
Officer and Chief  Financial  Officer,  of the  effectiveness  of the design and
operation of our disclosure  controls and procedures.  Based on that evaluation,
Our Chief  Executive  Officer and Chief  Financial  Officer  concluded  that our
disclosure controls and procedures were not completely  effective as of December
31, 2003.

In connection with the audit of the year ended December 31, 2003,  there were no
"reportable   events"  except  that  the  Company's  auditors  reported  to  the
Registrant's Audit Committee that the auditors' considered two matters involving
internal controls and their operation to be material  weaknesses.  Specifically,
in  connection  with  its  audit of the  consolidated  financial  statements  of
Registrant and its subsidiary for the year ended December 31, 2003, the auditors
reported  that a material  weakness  existed  related to the lack of  formalized
policies and  procedures to permit timely  recording and processing of financial
information  to permit  the  timely  preparation  of  financial  statements  and
recommended  implementation  of formal policies and procedures and significantly
enhancing the  accounting  staff.  The  Registrant  has since  December 31, 2003
addressed  this  concern  and  has  hired a  controller  and  added a new  chief
financial  officer,  and added formalized  procedures to permit timely recording
and processing of financial information.  The second matter related to oversight
of its Russian  subsidiary  and reporting of its  financial  results on a timely
basis which impact and represents the bulk of the company's  operating  results.
The  Registrant  continues  to work with  management  and its new partner OAO NK
RussNeft in an effort to improve financial reporting in this area.


                                    PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

DIRECTORS AND EXECUTIVE OFFICERS

Directors,  executive  officers,  and  significant  employees  of  Teton,  their
respective ages and positions with Teton are as follows:



Name                          Age        Position
----                          ---        --------

H. Howard Cooper              47         Chairman and Founder
Karl F. Arleth                55         President, CEO, Secretary and Director
Igor Effimoff                 58         Executive VP and COO
John Mahar                    50         Executive VP of Finance
James J. Woodcock             66         Director
Thomas F. Conroy              65         Director
John T. Connor, Jr.           63         Director
Patrick A. Quinn              50         Chief Financial Officer
Ilia Gurevich                 40         Controller



H. HOWARD  COOPER,  has been our chairman and founder since 1996. Mr. Cooper was
our president  and CEO from 1996 until May 2003.  Mr.  Cooper  founded  American
Tyumen in  November  1996.  He served as a director  and  president  of American
Tyumen  until the  merger  with EQ.  Since the  merger,  he has held  these same
positions with Teton. From 1992 to 1994 Mr. Cooper served with AIG, an insurance
group. In 1994, he was a principal with Central Asian Petroleum,  an oil and gas
company with its primary operations in Kazakhstan,  located in Denver, Colorado.
Mr. Cooper has a bachelor's  degree from the  University of Colorado in business
and a master's degree from Columbia University, NYC in international affairs.

KARL F. ARLETH,  has been our  president and CEO since May 2003 and our director
since 2002.  Mr.  Arleth is the Chief  Operating  Officer and a Board  member of
S9efton Resources, Inc. Ending in 1999, Mr. Arleth spent 21 years with Amoco and
BP-Amoco. In 1998 he chaired the Board of the Azerbaijan International Operating
Company (AIOC) for BP-Amoco in Baku, Azerbaijan. Concurrently in 1997-98, he was
also President of Amoco Caspian Sea Petroleum Ltd. in Azerbaijan and Director of
Strategic Planning for Amoco Corporations  Worldwide  Exploration and Production
Sector in Chicago.  From 1992 to 1996 Mr.  Arleth was  President of Amoco Poland
Ltd. in Warsaw, Poland.

IGOR  EFFIMOFF.  Mr.  Effimoff was most recently  President of Pennzoil  Caspian
Corporation,  managing  the  company's  interests  in the Caspian  Region.  This
included the Azerbaijan  International Oil Consortium (AIOC),  formed to develop
the 4.5 BBO Azeri-Chirag-Guneshli (ACG) Fields. He started his career in 1972 as
a geologist  with Shell and since 1981 has worked with  several US domestic  and
international oil and gas companies in a senior management capacity

THOMAS F.  CONROY,  has been our  chief  financial  officer  since  March  2002,
secretary  since April 2002,  and director since 2002. Mr. Conroy is a Certified
Public  Accountant  with an MBA from the University of Chicago.  Since 2002, Mr.
Conroy has been a principal member of Mann-Conroy-Eisenberg & Assoc. LLC, a life
insurance and  reinsurance  consulting  firm.  Since 2001, Mr. Conroy has been a
managing  principal of Strategic  Reinsurance  Consultants  International LLC, a
life  reinsurance  consulting  and brokerage  firm.  Ending in 2001, Mr. Conroy,
spent 27 years with ING and its  predecessor  organizations,  serving in various
financial  positions  and  leading  two  of  its  strategic  business  units  as
President.  As President of ING Reinsurance,  he established their international
presence, setting up facilities in The Netherlands,  Bermuda, Ireland and Japan.
He also  served as an  Officer  and  Board  Member  of  Security  Life of Denver
Insurance Company and its subsidiaries.

JAMES J. WOODCOCK has been a director since 2002.  Since 1981, Mr.  Woodcock has
been the owner and CEO of Hy-Bon Engineering Company,  based in Midland,  Texas.
Hy-Bon is an engineering firm and manufacturer of vapor recovery,  gas boosters,
and casing  pressure  reduction  systems for the oil industry.  Since 1996,  Mr.
Woodcock  has been a board member of Renovar  Energy,  a private firm located in
Midland Texas. From 1997 to 2002, Mr. Woodcock was the chairman of Transrepublic
Resources, a private firm located in Midland Texas.

JOHN T.  CONNOR,  Jr.  became a director  in 2003 and chairs the  Board's  audit
committee.  He is the  Founder  and  Portfolio  Manager of the Third  Millennium
Russia  Fund,  a US based  mutual fund  specializing  in the equities of Russian
public companies. A former attorney at Cravath, Swaine & Moore in New York City,
he has been a partner  in  leading  law firms in New  York,  Washington  and New
Jersey.  Mr.  Connor is a member of the  Council  on Foreign  Relations  and the
American Law Institute.

JOHN MAHAR.  Since 1995,  Mr.  Mahar has been a Managing  Director of  Gladstone
Capital,  LLC,  an  oil-and-gas  financial  advisory  firm  based in New York he
co-founded. Prior to forming Gladstone Capital, Mr. Mahar worked in the New York
office  of  Schroder  Capital  Management  International,   Inc.  where  he  was
responsible for the firm's domestic U.S. investment  operations.  He started his
career at the Federal  Reserve  Bank of New York,  where he served as an analyst
and foreign exchange  trader.  He has a B.A. from Union College ('76) and an MBA
from the Simon School of Business at the University of Rochester ('78)

ILIA GUREVICH.  Mr. Gurevich  attended both University of Saratov and University
Colorado  graduating  with  Masters  in  Science  and  Economy  of  the  Machine
Construction  Industry  and a Masters of Science  in Finance  respectively.  His
US-Russia business relations date back to his work at Technoforce  Saratov where
he was responsible for database of oil fields,  budgeting, and financial support
for the projects.  Most recently,  Mr. Gurevich  performed security analysis for
mid and large-cap publicly traded companies until he became full time Controller
of Teton.

PATRICK A. QUINN, CPA, CVA. Mr. Quinn joined Teton in February, 2004 to serve as
the Company's Chief Financial Officer on a part-time basis. For the past fifteen
years Mr. Quinn has been the CEO of Quinn & Associates, P.C. (Q&A). Q&A provides
accounting, tax and auditing services primarily to the oil and gas industry. Q&A
has provided accounting and tax services to Teton since its inception. Mr. Quinn
has  extensive  experience in  international  oil and gas  operations  including
serving as the  Controller  of  Hamilton  Oil  Corporation,  which was the first
company to produce oil in the U.K. sector of the North Sea.

All  directors  serve as directors for a term of one year or until his successor
is elected and  qualified.  All officers  hold office until the first meeting of
the board of directors after the annual meeting of  stockholders  next following
his  election or until his  successor  is elected and  qualified.  A director or
officer may also resign at any time.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has a Compensation Committee and an Audit Committee.  The
Compensation  Committee and Audit Committee  currently consists of two directors
John Connor and James J. Woodcock.  Mr Woodcock is an independent director based
on Rule 4200(a)(15) of the NASD's listing standards. The Nominating Committee is
made up of Mr. Woodcock and Mr. Conroy.

The  purpose  of  the   Compensation   Committee  is  to  review  the  Company's
compensation of its executives,  to make determinations  relative thereto and to
submit  recommendations  to the Board of Directors with respect thereto in order
to  ensure  that  such  officers  and  directors   receive   adequate  and  fair
compensation.  The Compensation  Committee met more than once by  teleconference
during the last fiscal year.

During the fiscal year ending 2003, the Audit  Committee will be responsible for
the general  oversight of audit,  legal  compliance  and  potential  conflict of
interest  matters,  including (a) recommending the engagement and termination of
the  independent  public  accountants  to audit the financial  statements of the
Company, (b) overseeing the scope of the external audit services,  (c) reviewing
adjustments  recommended  by the  independent  public  accountant and addressing
disagreements  between the independent  public  accountants and management,  (d)
reviewing  the  adequacy  of  internal  controls  and  management's  handling of
identified  material  inadequacies  and  reportable  conditions  in the internal
controls over financial reporting and compliance with laws and regulations,  and
(e)  supervising the internal audit  function,  which may include  approving the
selection, compensation and termination of internal auditors.

The Audit Committee met more than once by teleconference during 2003

For the fiscal year ended 2003,  the Board of  Directors  conducted  discussions
with management and the independent  auditor regarding the acceptability and the
quality of the  accounting  principles  used in the reports in  accordance  with
Statements on Accounting Standards (SAS) No. 61,. These discussions included the
clarity  of  the  disclosures  made  therein,   the  underlying   estimates  and
assumptions  used  in the  financial  reporting  and the  reasonableness  of the
significant  judgments and management decisions made in developing the financial
statements.  In addition,  the board of directors discussed with the independent
auditor  the  matters  in  the  written  disclosures  required  by  Independence
Standards Board Standard No. 1.

For the fiscal year ended 2003,  the Board of Directors have also discussed with
management and its independent  auditors issues related to the overall scope and
objectives of the audits  conducted,  the internal controls used by the Company,
and the selection of the Company's independent auditor. Additional meetings were
held with the independent auditor, with financial management present, to discuss
the specific results of audit  investigations and examinations and the auditor's
judgments regarding any and all of the above issues.

Pursuant to the reviews and discussions  described above, the Board of Directors
recommended  that the  audited  financial  statements  be included in the Annual
Report on Form 10-KSB for the fiscal year ended  December  31, 2003 and 2002 for
filing with the Securities and Exchange Commission.

Code of Ethics

The Company has adopted its Code of Ethics and  Business  Conduct for  Officers,
Directors  and  Employees  that applies to all of the  officers,  directors  and
employees of the Company. Please see the appendices for a copy.


Compliance with Section 16(b) of the Exchange Act

Based solely on our review of Forms 3, 4, and 5, and  amendments  thereto  which
have been  furnished to us, we believe  that during the year ended  December 31,
2002 all of our officers,  directors,  and beneficial owners of more than 10% of
any class of equity securities,  timely filed, reports required by Section 16(a)
of the Exchange Act of 1934, as amended.


Item 10.  EXECUTIVE COMPENSATION. [to be updated by Teton]

The following table sets forth information  concerning the compensation received
by Mr. Howard Cooper,  the Chairman of Teton,  and Mr. Karl Arleth who served as
its president and chief executive officer during 2003:

                            Summary Compensation Table

                                        Other
                                        Annual
    Name &                             Compen-  Restricted  Options   LTIP
  Principal           Salary   Bonus   sation     Stock      SARs   Payouts  All Other
   Position    Year    ($)      ($)      ($)     awards     (#)(1)    ($)    Compensation
-------------------------------------------------------------------------------------

H. Howard      2003  160,000     0        0         0       603,289    0         0
Cooper,        2002  160,000   50,000     0         0       375,000    0         0
President      2001  210,000     0        0         0          0       0         0
Karl F.        2003    85,000    0        0         0       410,338    0         0
Arleth CEO


1.   In consideration of services rendered, Mr. Cooper received 603,289 warrants
     during 2003 to purchase  shares of our common stock at an exercise price of
     $3.48  which was the market  price of our  common  stock on the date of the
     grant.

2.   In consideration of services rendered, Mr. Arleth received 410,338 warrants
     during 2003 to purchase  shares of our common stock at an exercise price of
     $3.48  which was the market  price of our  common  stock on the date of the
     grant.




Stock Options

Options/SARs Grants During Last Fiscal Year

     The following table provides  information related to options granted to our
named executive officers during the fiscal year ended December 31, 2003.

                               % of
                               Total
               Number of      Options
               Securities     Granted
              Underlying        in          Exercise
                Options       Fiscal       Price Per       Expiration
Name            Granted      2003 (1)        Share           Date
-------------- ----------   -------------  ------------   --------------

Howard Cooper   603,289        38.2%         $3.48           04/08/13
Karl F. Arleth  410,338        26%           $3.48           04/08/13
Jim Woodcock    210,148        13.3%         $3.48           04/08/13
John Connor     100,000         6.3%         $3.71           08/03/13
Igor Effimoff   89,815          5.7%         $3.48           04/08/13
John Mahar      83,333          5.3%         $3.48           04/08/13
Tom Conroy      28,658          1.8%         $3.48           04/08/13


(1)1.The exercise  price of the stock options was based on the fair market value
     of the stock on the day of the grant.


Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value

There were no options exercised during 2003.

Employee Pension, Profit Sharing or Other Retirement Plans.

The Company does not have a defined benefit, pension plan, profit sharing, or
other retirement plan.

Compensation of Directors

The Company pays it's outside Director's an annual retainer of $26,000,  payable
quarterly. In addition, at the Company's sole discretion,  the Company may issue
stock options or warrants to its directors.

Employment Contracts.

Teton and Mr. Cooper entered into a new employment  agreement,  effective May 1,
2002. The employment  agreement is for a three year term. Mr.  Cooper's  initial
salary under the agreement is $13,333 per month. In the board's  discretion,  he
may receive additional bonus compensation. Mr. Cooper's employment is terminated
immediately upon his death or permanent disability. Teton may also terminate Mr.
Cooper's  employment  immediately  for cause,  as defined in the agreement.  Mr.
Cooper may terminate his employment  immediately for good reason,  as defined in
the  agreement.  Additionally,  either  Teton or Mr.  Cooper may  terminate  Mr.
Cooper's  employment  upon 60 days  prior  written  notice  to the  other.  Upon
termination of Mr. Cooper's employment without cause by Teton or for good reason
by Mr.  Cooper,  Mr.  Cooper is entitled to severance  pay. The severance pay is
equal to Mr. Cooper's salary for the preceding 24 months.  Such severance may be
paid in monthly installments over 24 months from the date of termination.  Teton
may   discontinue   the   severance   payments  if  Mr.   Cooper   violates  the
confidentiality, noncompetition, or nonsolicitation provisions of his employment
agreement.  After the third year,  the agreement is  automatically  renewed from
year to year, unless it is terminated as provided above.

Mr. Cooper's new agreement will replace the employment agreement dated effective
December  1,  2000  (the  "2000  Employment  Agreement").  The  2000  Employment
Agreement  provided  for an initial  term of two years and an initial  salary of
$17,500 per month.  The 2000  Employment  Agreement  also provided that upon the
termination of Mr. Cooper without his consent,  except for terminations  related
to a criminal conviction, death, disability, incapacity, bankruptcy, insolvency,
gross  negligence,  gross  dereliction  of duty, or gross  misconduct,  that Mr.
Cooper was entitled to a lump sum payment equal to three months salary, based on
the salary being paid to Mr. Cooper at the date of termination.

Item 11. SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND MANAGEMENT.  The
following  tables sets forth,  as of January 23, 2004, the number of and percent
of our common stock beneficially owned by (a) all directors and nominees, naming
them, (b) our executive officers,  (c) our directors and executive officers as a
group,  without  naming  them,  and (d)  persons  or  groups  known by us to own
beneficially 5% or more of our common stock:



         Name and Address                        Amount and Nature of               Percent
         of Beneficial Owner                     Beneficial Ownership               of Class

         H. Howard Cooper                          1,214,667 (1)                     12.6%
         1600 Broadway, Suite 2400
         Denver, Colorado 80202-4921

         Karl Arleth                                 608,334 (3)                      7.3%
         P.O. Box 23507
         0467 Lariat Loop
         Silverthorne, CO 80498

         James J. Woodcock                           608,334 (2)                      6.7%
         2404 Commerce Drive
         Midland, TX 79702

         John Connor                                 467,108 (8)                      5.3%
         1600 Broadway, Suite 2400
         Denver, Colorado 80202-4921


         Igor Effimoff                                92,101 (4)                      1.1%
         13134 Hermitage Lane
         Houston, TX 77079

         John Mahar                                   83,334 (5)                      1.0%
         7 West 73rd St.
         New York, NY 10023

         Thomas F. Conroy                             83,334 (6)                      1.0%
         3825 S. Colorado Blvd.
         Denver, CO 80110

         Ilia Gurevich                                34,770 (7)                      0.4%
         1804 South Ironton Street
         Aurora, CO 80012

         All executive officers and
         Directors as a group (7 persons)          3,193,982                        28.19%



(1)  Includes (i) 145,857 shares of common stock, (ii) 465,521 shares underlying
     warrants and (iii) 603,289 shares underlying warrants  exercisable at $3.48
     per share.

(2)  Includes (i) 100,963 shares of common stock, (ii) 297,223 shares underlying
     warrants and (iii) 210,148 shares underlying warrants  exercisable at $3.48
     per share.

(3)  Includes (i) 75,772 shares of common stock,  (ii) 197,995 shares underlying
     warrants and (iii) 410,339 shares underlying warrants  exercisable at $3.48
     per share.

(4)  Includes (i) 89,815 shares  underlying  warrants  exercisable  at $3.48 per
     share, (ii) 1,905 shares  underlying Series A Convertible  Preferred Stock,
     and (iii) 381 shares underlying Class B Common Stock Purchase Warrants.

(5)  Represents  83,334 shares of underlying  warrants  exercisable at $3.48 per
     share.

(6)  Includes (i) 15,972 shares of common stock,  (ii) 38,704 shares  underlying
     warrants and (iii) 28,658 shares underlying  warrants  exercisable at $3.48
     per share.

(7)  Represents 24,456 shares of underlying warrants exercisable at $3.48 per

(8)  Includes (i) 183,554 shares of common stock owned indirectly,  (ii) 183,554
     shares shares of common stock underlying warrants,  which owned indirectly,
     and (iii)100,000  shares of common stock underlying options  exercisable at
     $3.40 per share share.



Item 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Transactions Involving Mr. Howard Cooper and Ms. Anna Cooper.
------------------------------------------------------------

Mr. Cooper and Teton have entered into an  employment  agreement.  Mr.  Cooper's
employment  agreement  with Teton is  discussed  at  "EXECUTIVE  COMPENSATION  -
Employment Contracts."

Ms.  Anna R.  Cooper,  Mr.  Cooper's  wife,  is in the second year of a two year
employment  agreement  with Teton.  The employment  agreement  provides that Ms.
Cooper's  initial  salary is $6,500  per  month.  After the  initial  term,  the
agreement is  automatically  renewed from year to year, with such changes agreed
by the parties, unless terminated by either party upon 90 days prior notice. The
agreement provides that upon the termination of Ms. Cooper's  employment without
her consent,  except for terminations related to a criminal  conviction,  death,
disability,   incapacity,   bankruptcy,   insolvency,  gross  negligence,  gross
dereliction of duty, or gross misconduct,  that Ms. Cooper is entitled to a lump
sum payment equal to three months salary,  based on the salary being paid to Ms.
Cooper at the date of termination.

Prior to  December  1, 2000,  Teton had a  consulting  arrangement  with  Taimen
Corporation,  to provide Teton with  consulting  and  management  services.  Mr.
Cooper was the director and president of Taimen Corporation.  Mr. Cooper and Ms.
Cooper were the sole employees of Taimen.  Teton paid Taimen a total of $247,000
during the fiscal year ended  December  31, 2000 and a total of $128,560 for the
fiscal year ended December 31, 1999.

In 2001, Mr. Cooper loaned $137,000 to Teton. Such loan,  together with interest
at 8.28% per annum was due on  February  1,  2002.  The due date was  subsequent
extended to April 15, 2002, and was paid in full in April 2002.

Management  believes that the terms of these  transactions  with its  management
were at least as favorable to the Company as those terms which the Company could
have obtained from unrelated third parties through arms-length negotiations.


ITEM 13.  PRINCIPAL ACCOUNTANT FEES AND  SERVICES.

Audit and Non-Audit Fees

Aggregate fees for  professional  services  rendered for the Company by Ehrhardt
Keefe  Steiner & Hottman P.C. as of or for the two fiscal  years ended  December
31, 2003 are set forth below:

                                                    iscal       iscal
                                                      Year        Year
                                                   F  2003     F  2002
                                                   ----------- -----------

   Audit Fees                                      $  141,917  $  142,296
   Audit-Related Fees                                  51,047      33,778
   Tax Fees                                             6,500      12,805
                                                    ----------  ----------
   Total                                           $  199,464  $  188,879
                                                   =========== ===========

Audit Fees Aggregate fees for professional  services  rendered by Ehrhardt Keefe
Steiner  &  Hottmen  P.C.  in  connection  with its  audit  of our  consolidated
financial  statements  for the  fiscal  years  2003 and  2002 and the  quarterly
reviews of our financial statements included in Forms 10-QSB.

Audit-Related  Fees These were primarily  related to SB-2 and SB-2/A filings for
the registration of our stock, assistance with the AMEX application process, and
reviews  and  discussions  regarding  accounting  treatment  of debt and  equity
transactions.

Tax Fees These were related to tax compliance and related tax services.

Ehrhardt Keefe Steiner & Hottman P.C. rendered no professional services to us in
connection with the design and implementation of financial  information  systems
in fiscal year 2003 or 2002.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors

     The Audit Committee  pre-approves all audit and non-audit services provided
by the independent  auditors prior to the engagement of the independent auditors
with  respect to such  services.  The Chairman of the Audit  Committee  has been
delegated the authority by the Committee to pre-approve  interim services by the
independent  auditors  other than the annual exam.  The Chairman must report all
such pre-approvals to the entire Audit Committee at the next committee meeting.





ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.



Exhibits.
--------

Exhibit No.       Description
-----------       -----------

3.1.1             Certificate  of  Incorporation  of EQ Resources Ltd  incorporated
                  by reference to Exhibit  2.1.1 of Teton's Form 10-SB,  filed July
                  3, 2001.

3.1.2             Certificate  of  Domestication  of EQ Resources Ltd  incorporated
                  by reference to Exhibit  2.1.2 of Teton's Form 10-SB,  filed July
                  3, 2001.

3.1.3             Articles  of  Merger of EQ  Resources  Ltd.  and  American-Tyumen
                  Exploration  Company  incorporated  by reference to Exhibit 2.1.3
                  of Teton's Form 10-SB, filed July 3, 2001.

3.1.4             Certificate   of   Amendment   of   Teton    Petroleum    Company
                  incorporated  by  reference  to  Exhibit  2.1.4 of  Teton's  Form
                  10-SB, filed July 3, 2001.

3.1.5             Certificate   of   Amendment   of   Teton    Petroleum    Company
                  incorporated  by  reference  to  Exhibit  2.1.5 of  Teton's  Form
                  10-SB, filed July 3, 2001.

3.1.6             Certificate of Amendment of Teton  Petroleum  Company  increasing
                  the authorized capital stock

3.2               Bylaws,  as amended,  of Teton Petroleum  Company  incorporated by reference
                  to our From 10KSB for the year ended December 31, 2001.

10.1              Employment   Agreement,   dated  May  1,  2002,   between   Teton
                  Petroleum   Company  and  H.  Howard   Cooper   incorporated   by
                  reference  to our Form  10KSB  for the year  ended  December  31,
                  2001.

10.2              Memorandum of Understanding dated November 26, 2002

21.1              List of Subsidiaries.


31.1              Certification  by  Chief  Executive  Officer  and  Chief  Financial  Officer
                  pursuant to Sarbanes -Oxley Section 302.

32.1              Certification  by  Chief  Executive  Officer  and  Chief  Financial  Officer
                  pursuant to 18 U.S. C. Section 1350

99.3              Code of Ethics and Business Conduct of Officers, Directors and
                  Employees of Teton Petroleum Company

99.4              Audit Committee Charter

Reports on Form 8-K.
-------------------

We did not file any reports on Form 8-K during our fourth quarter of 2003.



                                    SIGNATURES

In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the  Registrant  duly  caused  this  report to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                           TETON PETROLEUM COMPANY, INC.






           Signature                        Title                    Date


/s/ H. Howard Cooper              Chairman and Founder       March 30, 2004
---------------------------------
H. Howard Cooper


/s/ Karl Arleth                   President and CEO          March 30, 2004
---------------------------------
Karl Arleth


/s/ Thomas F. Conroy              Director                   March 30, 2004
---------------------------------
Thomas F. Conroy


/s/ James J. Woodcock             Director                   March 30, 2004
---------------------------------
James J. Woodcock


/s/ John Connor                   Director                   March 30, 2004
---------------------------------
John Connor


/s/ Patrick A. Quinn               Chief Financial Officer   March 30, 2004
---------------------------------
Patrick A. Quinn





   CODE OF ETHICS AND BUSINESS CONDUCT FOR OFFICERS, DIRECTORS AND EMPLOYEES OF
                              TETON PETROLEUM COMPANY

1.    TREAT IN AN ETHICAL  MANNER  THOSE TO WHOM  TETON  PETROLEUM  COMPANY  HAS AN
      OBLIGATION

The officers,  directors and employees of Teton  Petroleum  Company (the "Company")
are committed to honesty, just management,  fairness,  providing a safe and healthy
environment  free from the fear of  retribution,  and  respecting  the  dignity due
everyone.  For the  communities  in  which we live  and  work we are  committed  to
observe  sound  environmental  business  practices  and  to act  as  concerned  and
responsible neighbors, reflecting all aspects of good citizenship.

For our  shareholders  we are  committed  to  pursuing  sound  growth and  earnings
objectives and to exercising prudence in the use of our assets and resources.

For our suppliers and partners we are committed to fair  competition  and the sense
of responsibility required of a good customer and teammate.

2.    PROMOTE A POSITIVE WORK ENVIRONMENT

All employees want and deserve a workplace  where they feel  respected,  satisfied,
and  appreciated.  We respect cultural  diversity and will not tolerate  harassment
or  discrimination  of any kind --  especially  involving  race,  color,  religion,
gender, age, national origin, disability, and veteran or marital status.

Providing  an  environment  that  supports  honesty,  integrity,   respect,  trust,
responsibility,  and citizenship  permits us the opportunity to achieve  excellence
in our workplace.  While everyone who works for the Company must  contribute to the
creation and  maintenance  of such an  environment,  our  executives and management
personnel  assume special  responsibility  for fostering a work environment that is
free  from  the  fear of  retribution  and  will  bring  out the best in all of us.
Supervisors  must be careful in words and conduct to avoid  placing,  or seeming to
place,  pressure on  subordinates  that could cause them to deviate from acceptable
ethical behavior.

3.    PROTECT YOURSELF, YOUR FELLOW EMPLOYEES, AND THE WORLD WE LIVE IN

We are committed to providing a drug-free,  safe and healthy work environment,  and
to  observing  environmentally  sound  business  practices.  We will  strive,  at a
minimum,  to do no harm and where  possible,  to make the  communities  in which we
work a  better  place  to  live.  Each of us is  responsible  for  compliance  with
environmental, health and safety laws and regulations.


4.    KEEP ACCURATE AND COMPLETE RECORDS

We must maintain  accurate and complete Company records.  Transactions  between the
Company and outside  individuals and organizations  must be promptly and accurately
entered in our books in accordance  with generally  accepted  accounting  practices
and principles.  No one should rationalize or even consider  misrepresenting  facts
or falsifying  records.  It will not be tolerated  and will result in  disciplinary
action.

5.    OBEY THE LAW

We  will  conduct  our  business  in  accordance   with  all  applicable  laws  and
regulations.  Compliance  with  the  law  does  not  comprise  our  entire  ethical
responsibility.  Rather,  it  is a  minimum,  absolutely  essential  condition  for
performance of our duties. In conducting business, we shall:

      A.    STRICTLY ADHERE TO ALL ANTITRUST LAWS

      Officer,  directors  and  employees  must  strictly  adhere to all  antitrust
      laws.  Such laws  exist in the  United  States  and in many  other  countries
      where the Company may conduct  business.  These laws  prohibit  practices  in
      restraint  of  trade  such  as  price  fixing  and  boycotting  suppliers  or
      customers.  They  also  bar  pricing  intended  to  run a  competitor  out of
      business; disparaging,  misrepresenting,  or harassing a competitor; stealing
      trade secrets; bribery; and kickbacks.

      B.    STRICTLY COMPLY WITH ALL SECURITIES LAWS

      In our role as a  publicly  owned  company,  we must  always  be alert to and
      comply  with the  security  laws and  regulations  of the  United  States and
      other countries.

            I.    DO NOT ENGAGE IN SPECULATIVE OR INSIDER TRADING

            Federal  law and  Company  policy  prohibits  officers,  directors  and
            employees,  directly or indirectly  through  their  families or others,
            from  purchasing or selling  company  stock while in the  possession of
            material,  non-public  information  concerning  the Company.  This same
            prohibition  applies  to trading  in the stock of other  publicly  held
            companies on the basis of material,  non-public  information.  To avoid
            even the  appearance  of  impropriety,  Company  policy also  prohibits
            officers,  directors  and  employees  from trading  options on the open
            market in Company stock under any circumstances.

            Material,   non-public   information  is  any  information  that  could
            reasonably  be expected to affect the price of a stock.  If an officer,
            director or employee is  considering  buying or selling a stock because
            of inside  information  they  possess,  they  should  assume  that such
            information  is  material.  It  is  also  important  for  the  officer,
            director  or  employee  to keep in mind  that if any  trade  they  make
            becomes the subject of an  investigation  by the government,  the trade
            will  be  viewed   after-the-fact   with  the  benefit  of   hindsight.
            Consequently,   officers,   directors  and   employees   should  always
            carefully consider how their trades would look from this perspective.

            Two simple  rules can help  protect  you in this  area:  (1) Do not use
            non-public  information  for personal  gain. (2) Do not pass along such
            information to someone else who has no need to know.

            This  guidance also applies to the  securities  of other  companies for
            which you receive  information in the course of your  employment at The
            Company.

            II.   BE TIMELY AND ACCURATE IN ALL PUBLIC REPORTS

            As a public  company,  the  Company  must be fair and  accurate  in all
            reports   filed  with  the  United  States   Securities   and  Exchange
            Commission.  Officers,  directors  and  management  of The  Company are
            responsible  for  ensuring  that  all  reports  are  filed  in a timely
            manner  and that  they  fairly  present  the  financial  condition  and
            operating results of the Company.

            Securities  laws are  vigorously  enforced.  Violations  may  result in
            severe  penalties  including  forced sales of parts of the business and
            significant  fines  against the  Company.  There may also be  sanctions
            against  individual  employees  including  substantial fines and prison
            sentences.

            The principal  executive  officer and principal  financial Officer will
            certify to the  accuracy  of reports  filed with the SEC in  accordance
            with  the  Sarbanes-Oxley  Act of  2002.  Officers  and  Directors  who
            knowingly  or  willingly  make false  certifications  may be subject to
            criminal penalties or sanctions including fines and imprisonment.



6.    AVOID CONFLICTS OF INTEREST

Our officers,  directors and  employees  have an obligation to give their  complete
loyalty to the best  interests  of the  Company.  They should avoid any action that
may  involve,  or may appear to involve,  a conflict of interest  with the Company.
Officers,  directors and employees  should not have any financial or other business
relationships  with suppliers,  customers or competitors that might impair, or even
appear  to  impair,  the  independence  of any  judgment  they  may need to make on
behalf of the Company.

HERE ARE SOME WAYS A CONFLICT OF INTEREST COULD ARISE:

o     Employment  by a  competitor,  or  potential  competitor,  regardless  of the
         nature of the employment, while  employed by the Company .
o     Acceptance of gifts,  payment,  or services from those seeking to do business
        with the Company .
o     Placement  of  business  with a  firm  owned  or  controlled  by an  officer,
        director or employee or his/her family.
o     Ownership  of, or  substantial  interest in, a company that is a  competitor,
        client or supplier.
o     Acting as a consultant to the Company, customer, client or supplier.
o     Seeking  the  services  or  advice  of an  accountant  or  attorney  who  has
        provided services to the Company .

Officers,  directors and  employees  are under a continuing  obligation to disclose
any  situation  that  presents  the  possibility  of a  conflict  or  disparity  of
interest between the officer,  director or employee and the Company.  Disclosure of
any  potential  conflict  is the key to  remaining  in full  compliance  with  this
policy.

7.    COMPETE ETHICALLY AND FAIRLY FOR BUSINESS OPPORTUNITIES

We must comply with the laws and  regulations  that pertain to the  acquisition  of
goods  and  services.  We will  compete  fairly  and  ethically  for  all  business
opportunities.  In circumstances  where there is reason to believe that the release
or receipt of  non-public  information  is  unauthorized,  do not attempt to obtain
and do not accept such information from any source.

If you are  involved  in  Company  transactions,  you  must  be  certain  that  all
statements, communications, and representations are accurate and truthful.

8.    AVOID ILLEGAL AND QUESTIONABLE GIFTS OR FAVORS

The sale and  marketing of our products  and  services  should  always be free from
even the perception  that  favorable  treatment was sought,  received,  or given in
exchange  for  the  furnishing  or  receipt  of  business   courtesies.   Officers,
directors  and  employees  of the Company  will  neither  give nor accept  business
courtesies  that  constitute,  or could be  reasonably  perceived as  constituting,
unfair  business  inducements or that would violate law,  regulation or policies of
the  Company,  or  could  cause  embarrassment  to or  reflect  negatively  on  the
Company's reputation.

9.    MAINTAIN THE INTEGRITY OF CONSULTANTS, AGENTS, AND REPRESENTATIVES

Business  integrity is a key standard for the  selection and retention of those who
represent the Company.  Agents,  representatives and consultants must certify their
willingness  to comply with the Company's  policies and  procedures  and must never
be retained to circumvent  our values and  principles.  Paying bribes or kickbacks,
engaging in industrial  espionage,  obtaining the proprietary data of a third party
without  authority,  or gaining  inside  information  or  influence  are just a few
examples of what could give us an unfair  competitive  advantage  and could  result
in violations of law.

10.   PROTECT PROPRIETARY INFORMATION

Proprietary  Company  information  may not be  disclosed to anyone  without  proper
authorization.  Keep proprietary  documents  protected and secure. In the course of
normal  business  activities,  suppliers,  customers and  competitors may sometimes
divulge to you  information  that is proprietary to their  business.  Respect these
confidences.

11.   OBTAIN AND USE COMPANY ASSETS WISELY

Personal  use of Company  property  must  always be in  accordance  with  corporate
policy.  Proper  use  of  Company  property,   information   resources,   material,
facilities  and  equipment is your  responsibility.  Use and maintain  these assets
with the utmost  care and  respect,  guarding  against  waste and abuse,  and never
borrow or remove Company property without management's permission.

12.   FOLLOW  THE  LAW  AND  USE  COMMON  SENSE  IN  POLITICAL   CONTRIBUTIONS  AND
      ACTIVITIES

The Company  encourages  its  employees to become  involved in civic affairs and to
participate in the political  process.  Employees must  understand,  however,  that
their  involvement and  participation  must be on an individual basis, on their own
time  and at their  own  expense.  In the  United  States,  federal  law  prohibits
corporations  from  donating  corporate  funds,  goods,  or  services,  directly or
indirectly,  to candidates  for federal  offices -- this includes  employees'  work
time.  Local and state laws also govern political  contributions  and activities as
they apply to their respective jurisdictions.

13.   BOARD COMMITTEES.

The Company shall  establish an Audit  Committee  empowered to enforce this Code of
Ethics.  The Audit  Committee  will report to the Board of  Directors at least once
each year  regarding the general  effectiveness  of the  Company's  Code of Ethics,
the  Company's  controls  and  reporting  procedures  and  the  Company's  business
conduct.

14.   DISCIPLINARY MEASURES.

The Company  shall  consistently  enforce its Code of Ethics and  Business  Conduct
through  appropriate means of discipline.  Violations of the Code shall be promptly
reported to the Audit  Committee.  Pursuant to procedures  adopted by it, the Audit
Committee  shall  determine  whether  violations  of the Code have occurred and, if
so, shall determine the  disciplinary  measures to be taken against any employee or
agent of the Company who has so violated the Code.

The  disciplinary  measures,  which may be invoked at the  discretion  of the Audit
Committee,   include,  but  are  not  limited  to,  counseling,   oral  or  written
reprimands,  warnings,  probation or suspension without pay, demotions,  reductions
in salary, termination of employment and restitution.

Persons  subject  to  disciplinary  measures  shall  include,  in  addition  to the
violator,  others  involved in the  wrongdoing  such as (i) persons who fail to use
reasonable  care to detect a  violation,  (ii)  persons who if requested to divulge
information  withhold  material  information  regarding  a  violation,   and  (iii)
supervisors  who approve or condone the violations or attempt to retaliate  against
employees or agents for reporting violations or violators.`