UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                                   (Mark One)

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

                   For the fiscal year ended December 31, 2004

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

              For the transition period from __________ to _______

                           Commission File No. 0-31547

                            AMERICAN OIL & GAS, INC.
                  -------------------------------------------
                 (Name of small business issuer in its charter)

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

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

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

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

                                      None
                                      ----
                               Title of each class

           Securities registered pursuant to Section 12(g) of the Act:
                          $.001 Par Value 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 past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of the 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 revenues for its most recent fiscal year were $746,242.

At April 14, 2005, 29,963,702 common shares (the registrant's only class of
voting stock) were outstanding. The aggregate market value of the 22,623,226
common shares of the registrant held by nonaffiliates* on that date (based upon
the mean of the closing bid and asked price on the OTC Bulletin Board) was
$72,394,000.

---------------------
*    Without assuming that any of the issuer's directors or executive officers
     or the entities that own 1,500,000 and 3,000,000 shares of common stock are
     affiliates, the shares of which they are beneficial owners have been deemed
     to be owned by affiliates solely for this calculation.

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                                TABLE OF CONTENTS

                                                                        Page No.

PART I..................................................................... 2

ITEM 1.    DESCRIPTION OF BUSINESS......................................... 2

ITEM 2.    DESCRIPTION OF PROPERTY.........................................12

ITEM 3.    LEGAL PROCEEDINGS...............................................19

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............19

PART II....................................................................20

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........20

ITEM 6.    MANAGEMENT'S  DISCUSSION  AND ANALYSIS OR PLAN OF OPERATION.....21

ITEM 7.    FINANCIAL STATEMENTS............................................24

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
           ON ACCOUNTING AND FINANCIAL DISCLOSURE..........................25

ITEM 8A.   CONTROLS AND PROCEDURES.........................................25

ITEM 8B.   OTHER INFORMATION...............................................25

PART III...................................................................26

ITEM 9.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..............26

ITEM 10.   EXECUTIVE COMPENSATION .........................................29

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT AND RELATED STOCKHOLDER MATTERS......................30

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..................32

ITEM 13.   EXHIBITS........................................................33

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES..........................33

Signatures ................................................................34

                                       1

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PART I

ITEM 1.  DESCRIPTION OF BUSINESS

General Overview

     We are an independent oil and gas exploration and production company,
engaged in the exploration, development and acquisition of crude oil and natural
gas reserves and production in the western United States. During 2003, we
acquired undeveloped oil and gas prospects and participated in initial drilling
operations in certain of our projects in Montana and Wyoming. Prior to these
acquisitions, we had not had operations for some time.

Developments Since December 31, 2003

     o    On March 23, 2005, we signed a letter of intent that provides the
          mutual intent of the parties is that we will acquire 100% of the
          outstanding common stock of Tower Colombia Corporation in exchange for
          5.8 million shares of our restricted common stock. We expect that this
          merger will close before April 30, 2005. Effective January 17, 2005,
          we have agreed with Tower that the three principals of Tower will
          provide geological and other management services, and we will pay
          Tower a management fee of $30,000 per month through the date of
          closing the merger or May 31, 2005, whichever occurs first. After the
          merger closes, we expect to have a total of eight employees.

     o    We continue to participate in an active oil and gas development
          project that we refer to as the Big Sky project. This project is a
          horizontal drilling program in Richland County, Montana targeting the
          Mississippian Bakken Formation. During 2004, we participated in the
          drilling of a total of seven gross (.44 net) oil wells and at December
          31, 2004, we owned working interests in a total of eight gross (.45
          net) oil wells in this project. Total production from these wells for
          2004, net to our ownership interests, totaled 12,012 barrels of oil
          and 3,562 mcf of natural gas.

     o    On December 17, 2004, we acquired an 87.5% working interest in the
          approximate 10,000 gross acre South Glenburn oil prospect, located in
          McHenry County, North Dakota. This is an exploration project targeting
          the Mission Canyon formation at a depth of approximately 4,500 feet.
          We expect to drill an initial test well in April 2005.

     o    On September 30, 2004, we sold 90% of our interests in our Powder
          River Basin coal bed methane acreage we refer to as our West Recluse,
          Glasgow and Bill acreage. Included in this sale was 90% of our
          interest in the existing seven producing West Recluse wells. As part
          of the agreement, we retained a 5% carried working interest in all
          additional wells drilled on this acreage. We received sales proceeds
          of approximately $1.255 million.

     o    On June 3, 2004, we entered into an agreement for a private company to
          drill either two horizontal or four vertical wells to test the Mowry
          formation at our Krejci acreage area in Niobrara County, Wyoming, and
          thereby earn the right to continuously drill up to 10 additional wells
          and continue to earn 100% working interest (subject to our right to
          participate) in three of the eight offsets surrounding each well
          drilled. The private company has drilled the first well and is in the
          process of determining the appropriate completion and or stimulation
          method in order to attempt to establish production. We have the right
          to participate up to an 18.75% working interest in each of the wells
          to be drilled by the private company although we have not yet opted to
          do so. We also own working interests ranging from 18.75% to 50% in the
          eight direct offset locations surrounding each drill site.

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     o    On June 1, 2004, we entered into an option agreement which will allow
          us to earn a 50% interest in approximately 103,000 gross
          (approximately 98,000 net) undeveloped leasehold acres in Converse and
          Niobrara counties, Wyoming. We call this project our Douglas project.
          We have identified multiple exploration opportunities within the
          identified acreage block and have focused our initial efforts on the
          Fetter Field, which is a Niobrara/Frontier natural gas field
          originally discovered in the 1960's. In February 2005, we entered into
          an agreement with an Oklahoma based E&P company with expertise in
          under-balanced horizontal drilling technologies, in order to
          participate in the drilling of initial wells in this prospect.

     For more information relating to our operational activities, please see
"Item 2. Description of Property".)

     During fiscal year ended December 31, 2004 we completed the following
financing transactions:

     o    In September 2004, we completed the private placement sale of
          3,000,000 shares of our common stock at a price of $1.50 per
          share.

     o    In March 2004, we completed the private placement sale of 1,525,000
          units at a price of $1.00 per unit. Each unit consisted of one share
          of our common stock and one warrant to purchase one share of our
          common stock at $1.00 per share until August 31, 2004. 25,000 of the
          warrants were exercised prior to August 31, 2004, and 1,500,000 of the
          warrants expired unexercised. In conjunction with this sale, we sold
          one-third of our interests in the Big Sky project for cash of $326,247
          to an entity related to the investor that purchased 1.5 million of the
          units.

     For more information on our financing transactions, please see "Item 5.
Market for Common Equity and Related Stockholder Matters".

Competition

     We operate in the highly competitive oil and gas areas of acquisition and
exploration, areas in which other competing companies have substantially larger
financial resources, operations, staffs and facilities. Such companies may be
able to pay more for prospective oil and gas properties or prospects and to
evaluate, bid for and purchase a greater number of properties and prospects than
our financial or human resources permit.

Proved Reserves

     As of December 31, 2004, our future cash flows from oil and gas operations
have been estimated by Ryder Scott Company Petroleum Consultants, an independent
petroleum engineering firm, to be $10,750,547. Ryder Scott has estimated the
present value of these future cash flows, discounted at ten percent to be
$5,656,119, and our proved oil and gas reserves are estimated to be 321,710
barrels of oil and 346,270 mcf of gas. At December 31, 2003, our future cash
flows from oil and gas operations were estimated by Ryder Scott to be
$4,113,335. Ryder Scott had estimated the present value of these future cash
flows, discounted at ten percent to be $2,839,143, and our proved oil and gas
reserves were estimated to be 70,923 barrels of oil and 1,527,000 mcf of gas.
The increase in 2004 is attributable to reserve extensions and discoveries,
primarily associated with development activity at our Big Sky project. The
increase was partially offset by the sale of minerals in place associated with
our sale of a portion of our ownership in the Glasgow, West Recluse and Bill
acreage and the sale of a portion of our ownership in producing wells at West
Recluse.

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     Reserve engineering is a subjective process of estimating underground
accumulations of oil and gas that cannot be measured in an exact way, and the
accuracy of any reserve estimate is a function of the quality of available data
and of engineering and geological interpretation and judgment and the existence
of development plans. In addition, results of drilling, testing and production
subsequent to the date of an estimate may justify revision of such estimates.
Accordingly, reserve estimates are often different from the quantities of oil
and gas that are ultimately recovered. Further, the estimated future net
revenues from proved reserves and the present value thereof are based upon
certain assumptions, including geologic success, prices, future production
levels and cost that may not prove correct over time. Predictions about prices
and future production levels are subject to great uncertainty, and the
meaningfulness of such estimates is highly dependent upon the accuracy of the
assumptions upon which they are based.

Customers

     During fiscal year 2004, we had two major customers: Eighty Eight Oil LLC
and Enserco Energy, Inc. Sales to these customers accounted for 70% and 17%,
respectively, of oil and gas sales in 2004. Because there are other purchasers
that are capable of and willing to purchase our oil and gas and because we have
the option to change purchasers on our properties if conditions so warrant, we
believe that our oil and gas production can be sold in the market in the event
that it is not sold to our existing customers.

Certain Definitions

     Unless otherwise indicated in this document, oil equivalents are determined
using the ratio of six Mcf of natural gas to one barrel of crude oil, condensate
or natural gas liquids so that six Mcf of natural gas are referred to as one
barrel of oil equivalent.

     AMI. Area of Mutual Interest

     Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in
reference to oil or other liquid hydrocarbons.

     Bbl/d. One Bbl per day

     Bc/d. Barrels of condensate daily

     Bcf. One Billion cubic feet of natural gas at standard atmospheric
conditions.

     Bcfe. One billion cubic feet equivalent of natural gas, calculated by
converting oil to equivalent Mcf at a ratio of 6 Mcf to 1 Bbl of oil.

     Boe. Barrels of oil equivalent, with six thousand cubic feet of natural gas
being equivalent to one barrel of oil.

     Btu or British thermal unit. The quantity of heat required to raise the
temperature of one pound of water by one degree Fahrenheit.

                                       4

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     Capital Expenditures. Costs associated with exploratory and development
drilling (including exploratory dry holes); leasehold acquisitions; seismic data
acquisitions; geological, geophysical and land related overhead expenditures;
delay rentals; producing property acquisitions; other miscellaneous capital
expenditures; compression equipment and pipeline costs.

     Carried Working interest. The owner of this type of working interest in the
drilling of a well incurs no liability for drilling costs associated with a well
until the well is drilled.

     Completion. The installation of permanent equipment for the production of
oil or natural gas.

     Condensate. Liquid hydrocarbons associated with the production of a
primarily natural gas reserve.

     Developed Acreage. The number of acres that are allocated or assignable to
producing wells or wells capable of production.

     Development Well. A well drilled within the proved area of an oil or
natural gas reservoir to the depth of a stratigraphic horizon known to be
productive.

     Exploitation. The continuing development of a known producing formation in
a previously discovered field. To make complete or maximize the ultimate
recovery of oil or natural gas from the field by work including development
wells, secondary recovery equipment or other suitable processes and technology.

     Exploration. The search for natural accumulations of oil and natural gas by
any geological, geophysical or other suitable means.

     Exploratory Well. A well drilled to find and produce oil or natural gas in
an unproved area, to find a new reservoir in a field previously found to be
productive of oil or natural gas in another reservoir, or to extend a known
reservoir.

     Field. An area consisting of either a single reservoir or multiple
reservoirs, all grouped on or related to the same individual geological
structural feature and/or stratigraphic condition.

     Finding and Development Costs. The total capital expenditures, including
acquisition costs, and exploration and abandonment costs, for oil and gas
activities divided by the amount of proved reserves added in the specified
period.

     Gross Acres or Gross Wells. The total acres or wells, as the case may be,
in which we have a working interest.

     Lease. An instrument which grants to another (the lessee) the exclusive
right to enter to explore for, drill for, produce, store and remove oil and
natural gas on the mineral interest, in consideration for which the lessor is
entitled to certain rents and royalties payable under the terms of the lease.
Typically, the duration of the lessee's authorization is for a stated term of
years and "for so long thereafter" as minerals are producing.

     Mcf. One thousand cubic feet of natural gas at standard atmospheric
conditions.

     Mcf/d. One Mcf per day.

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     Mcfe. One thousand cubic feet equivalent of natural gas, calculated by
converting oil to equivalent Mcf at a ratio of 6 Mcf to 1 Bbl of oil.

     MMcf. One million cubic feet of natural gas.

     Net Acres or Net Wells. A net acre or well is deemed to exist when the sum
of our fractional ownership working interests in gross acres or wells, as the
case may be, equals one. The number of net acres or wells is the sum of the
fractional working interests owned in gross acres or wells, as the case may be,
expressed as whole numbers and fractions thereof.

     Operator. The individual or company responsible to the working interest
owners for the exploration, development and production of an oil or natural gas
well or lease.

     Participant Group. The individuals and/or companies that, together,
comprise the ownership of 100% of the working interest in a specific well or
project.

     PV-10 value. The present value of estimated future revenues to be generated
from the production of proved reserves calculated in accordance with SEC
guidelines, net of estimated lease operating expense, production taxes and
future development costs, using prices and costs as of the date of estimation
without future escalation, without giving effect to non-property related
expenses such as general and administrative expenses, debt service and
depreciation, depletion and amortization or federal income taxes, and discounted
using an annual discount rate of 10%.

     Productive well. A well that is found to be capable of producing
hydrocarbons in sufficient quantities such that proceeds from the sale of the
production exceed production expenses and taxes.

     Prospect. A specific geographic area which, based on supporting geological,
geophysical or other data and also preliminary economic analysis using
reasonably anticipated prices and costs, is deemed to have potential for the
discovery of commercial hydrocarbons.

     Proved developed reserves. Reserves that can be expected to be recovered
through existing wells with existing equipment and operating methods.

     Proved reserves. The estimated quantities of oil, natural gas and natural
gas liquids which geological and engineering data demonstrate with reasonable
certainty to be commercially recoverable in future years from known reservoirs
under existing economic and operating conditions.

     Proved undeveloped reserves (PUD). Proved reserves that are expected to be
recovered from new wells on undrilled acreage or from existing wells where a
relatively major expenditure is required for recompletion.

     Re-entry. Entering an existing well bore to redrill or repair.

     Reserves. Natural gas and crude oil, condensate and natural gas liquids
on a net revenue interest basis, found to be commercially recoverable.

     Reservoir. A porous and permeable underground formation containing a
natural accumulation of producible natural gas and/ or oil that is confined by
impermeable rock or water barriers and is separate from other reservoirs.

                                       6

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     Royalty. An interest in an oil and natural gas lease that gives the owner
of the interest the right to receive a portion of the production from the leased
acreage, or of the proceeds of the sale thereof, but generally does not require
the owner to pay any portion of the costs of drilling or operating the wells on
the leased acreage. Royalties may be either landowner's royalties, which are
reserved by the owner of the leased acreage at the time the lease is granted, or
overriding royalties, which are usually reserved by an owner of the leasehold in
connection with a transfer to a subsequent owner.

     Undeveloped Acreage. Lease acres on which wells have not been drilled or
completed to a point that would permit the production of commercial quantities
of oil and gas regardless of whether or not such acreage contains proved
reserves.

     Working Interest. An interest in an oil and gas lease that gives the owner
of the interest the right to drill and produce oil and gas on the leased acreage
and requires the owner to pay a share of the costs of drilling and production
operations. The share of production to which a working interest owner is
entitled will always be smaller than the share of costs that the working
interest owner is required to bear, with the balance of the production accruing
to the owners of royalties.

Title to Properties

     As is customary in the oil and gas industry, only a preliminary title
examination is conducted at the time we acquire leases or enter into other
agreements to obtain control over interests in acreage believed to be suitable
for drilling operations. In many instances, our partners have acquired rights to
the prospective acreage and we have a contractual right to have our interests in
that acreage assigned to us. In some cases, we are in the process of having
those interests so assigned. Prior to the commencement of drilling operations, a
thorough title examination of the drill site tract is conducted by independent
attorneys. Once production from a given well is established, the operator will
prepare a division order title report indicating the proper parties and
percentages for payment of production proceeds, including royalties. We believe
that titles to our leasehold properties are good and defensible in accordance
with standards generally acceptable in the oil and gas industry.

Forward-Looking and Cautionary Statements

     References in this report to "the Company," "we," "us" or "our" are
intended to refer to American Oil & Gas, Inc. This report contains numerous
"forward-looking statements" that involve substantial risks and uncertainties.
These include, without limitation, statements relating to future drilling and
completion of wells, well operations, production, prices, costs and expenses,
cash flow, investments, business strategies and other plans and objectives of
our management for future operations and activities and other such matters
including, but not limited to:

     o    Failure to obtain, or a decline in, oil or gas production, or a
          decline in oil or gas prices,
     o    Inaccurate estimates of required capital expenditures,
     o    Increase in the cost of drilling, completion and gas collection or
          other costs of production and operations,
     o    An inability to meet growth projections, and
     o    Other risk factors set forth under "Risk Factors" in this annual
          report. In addition, the words "believe", "may", "could", "when",
          "estimate", "continue", "anticipate", "intend", "expect", and similar
          expressions, as they relate to the Company, our business or our
          management, are intended to identify forward-looking statements.

     These statements are based on our beliefs and the assurances we made using
information currently available to us. Because these statements reflect our
current views concerning future events, these statements involve risks,

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uncertainties and assumptions. Our actual results could differ materially from
the results discussed in the forward-looking statements. Some, but not all, of
the factors that may cause these differences include those discussed below under
the section entitled "Risk Factors" in this annual report. You should not place
undue reliance on these forward-looking statements. You should also remember
that these statements are made only as of the date of this report and future
events may cause them to be less likely to prove to be true.

RISK FACTORS

     In evaluating our Company, careful consideration should be given to the
following risk factors, in addition to the other information included or
incorporated by reference in this annual report. In addition, the
"Forward-Looking and Cautionary Statements" located in this Form 10-KSB describe
additional uncertainties associated with our business and the forward-looking
statements included or incorporated by reference. Each of these risk factors
could adversely affect our business, operating results and financial condition,
as well as adversely affect the value of an investment in our common stock.

We depend on strategic relationships.

     We are highly dependent on the personnel at Tower Colombia Corporation,
based in Denver, Colorado, and the personnel at North Finn LLC, based in Casper,
Wyoming, for our oil and gas operational and technical expertise. We do not
employ any personnel with oil and gas operational or technical expertise. The
loss of the relationships with Tower or with North Finn could have a material
adverse effect on us.

We cannot predict the future prices of oil and natural gas.

     Our revenues, profitability and liquidity are substantially dependent upon
prevailing prices for oil and natural gas, which can be extremely volatile and
in recent years have been depressed by excess total domestic and imported
supplies. Prices also are affected by actions of state and local agencies, the
United States and foreign governments, and international cartels. In addition,
sales of oil and natural gas historically have been seasonal in nature, leading
to substantial differences in cash flow at various times throughout the year.
These external factors and the volatile nature of the energy markets make it
difficult to estimate future prices of oil and natural gas. Any substantial or
extended decline in the price of oil and/or natural gas would have a material
adverse effect on our financial condition and results of operations, including
reduced cash flow and borrowing capacity. All of these factors are beyond our
control.

We could be adversely impacted by changes in the oil and gas market.

     The marketability of our oil and gas production depends in part upon the
availability, proximity and capacity of gas gathering systems, pipelines and
processing facilities. Federal and state regulation of oil and gas production
and transportation, general economic conditions, changes in supply and changes
in demand all could adversely affect our ability to produce and market its oil
and natural gas. If market factors were to change dramatically, the financial
impact could be substantial because we would incur expenses without receiving
revenues from the sale of production. The availability of markets is beyond our
control.

We may be unable to find additional reserves.

     Our revenues depend on whether we acquire or find additional reserves.
Unless we acquire properties containing proved reserves or conduct successful
exploration and development activities, or both, our proved reserves will

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decline as reserves are produced. Our planned exploration and development
projects may not result in significant additional reserves. We may be unable to
drill productive wells at low reserve replacement costs.

Oil and gas operations are inherently risky.

     The nature of the oil and gas business involves a variety of risks,
including the risks of operating hazards such as fires, explosions, cratering,
blow-outs, and encountering formations with abnormal pressures. The occurrence
of any of these risks could result in losses. The occurrence of any one of these
significant events, if it is not fully insured against, could have a material
adverse effect on our financial position and results of operations.

We are subject to extensive government regulations.

     Our business is affected by numerous federal, state and local laws and
regulations, including energy, environmental, conservation, tax and other laws
and regulations relating to the oil and gas industry. These include, but are not
limited to:

     o    the prevention of waste,

     o    the discharge of materials into the environment,

     o    the conservation of oil and natural gas, pollution, permits for
          drilling operations, drilling bonds, reports concerning operations,

     o    the spacing of wells, and

     o    the unitization and pooling of properties.

     Failure to comply with any laws and regulations may result in the
     assessment of administrative, civil and criminal penalties, the imposition
     of injunctive relief or both. Moreover, changes in any of these laws and
     regulations could have a material adverse effect on our business. In view
     of the many uncertainties with respect to current and future laws and
     regulations, including their applicability to us, we cannot predict the
     overall effect of such laws and regulations on our future operations.

New government regulation and environmental risks could increase our costs.

     Many jurisdictions have at various times imposed limitations on the
production of oil and gas by restricting the rate of flow for oil and gas wells
below their actual capacity to produce. Because current regulations covering our
operations are subject to change at any time, we may incur significant costs for
compliance in the future.

Our prices may be impacted adversely by new taxes.

     The federal, state and local governments in which we operate impose taxes
on the oil and gas products we sell. In the past, there has been a significant
amount of discussion by legislators and presidential administrations concerning
a variety of energy tax proposals. In addition, many states have raised state
taxes on energy sources and additional increases may occur. We cannot predict
whether any of these measures would have an adverse impact on oil and natural
gas prices.

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We may have substantial funding requirements.

     In order to continue to fully fund our oil and gas exploration and
development plans, we anticipate that we will need additional funding. We
anticipate that a portion of the additional capital may be received from future
production from our oil and gas properties, although there is no assurance that
we will continue to produce gas and oil in quantities sufficient to pay our
expenses or that we will discover or acquire additional oil and gas in
productive quantities. We may need to raise additional funds through the sale of
equity or debt, although there is no assurance that we will be able to obtain
any additional funding through these means.

Our common stock is classified as penny stock and is extremely illiquid, so
investors may not be able to sell as much stock as they want at prevailing
market prices.

     Our common stock is classified as penny stock. Penny stocks generally are
equity securities with a price of less than $5.00 and trade on the
over-the-counter market. As a result, an investor may find it more difficult to
dispose of or obtain accurate quotations as to the price of the shares of the
common stock being registered in this registration statement. In addition, the
"penny stock" rules adopted by the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934 subject the sale of the shares
of the common stock to regulations which impose sales practice requirements on
broker-dealers, causing many broker-dealers to not trade penny stocks or to only
offer the stocks to sophisticated investors that meet specified net worth or net
income criteria identified by the SEC. These regulations contribute to the lack
of liquidity of penny stocks.

ENVIRONMENTAL MATTERS

     Operations on properties in which we have an interest are subject to
extensive federal, state and local environmental laws that regulate the
discharge or disposal of materials or substances into the environment and
otherwise are intended to protect the environment. Numerous governmental
agencies issue rules and regulations to implement and enforce such laws, which
are often difficult and costly to comply with and which carry substantial
administrative, civil and criminal penalties and in some cases injunctive relief
for failure to comply.

     Some laws, rules and regulations relating to the protection of the
environment may, in certain circumstances, impose "strict liability" for
environmental contamination. These laws render a person or company liable for
environmental and natural resource damages, cleanup costs and, in the case of
oil spills in certain states, consequential damages without regard to negligence
or fault. Other laws, rules and regulations may require the rate of oil and gas
production to be below the economically optimal rate or may even prohibit
exploration or production activities in environmentally sensitive areas. In
addition, state laws often require some form of remedial action, such as closure
of inactive pits and plugging of abandoned wells, to prevent pollution from
former or suspended operations.

     Legislation has been proposed in the past and continues to be evaluated in
Congress from time to time that would reclassify certain oil and gas exploration
and production wastes as "hazardous wastes." This reclassification would make
these wastes subject to much more stringent storage, treatment, disposal and
clean-up requirements, which could have a significant adverse impact on
operating costs. Initiatives to further regulate the disposal of oil and gas
wastes are also proposed in certain states from time to time and may include
initiatives at the county, municipal and local government levels. These various
initiatives could have a similar adverse impact on operating costs.

     The regulatory burden of environmental laws and regulations increases our
cost and risk of doing business and consequently affects our profitability. The
federal Comprehensive Environmental Response, Compensation and Liability Act, or

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CERCLA, also known as the "Superfund" law, imposes liability, without regard to
fault, on certain classes of persons with respect to the release of a "hazardous
substance" into the environment. These persons include the current or prior
owner or operator of the disposal site or sites where the release occurred and
companies that transported, disposed or arranged for the transport or disposal
of the hazardous substances found at the site. Persons who are or were
responsible for releases of hazardous substances under CERCLA may be subject to
joint and several liability for the costs of cleaning up the hazardous
substances that have been released into the environment and for damages to
natural resources, and it is not uncommon for the federal or state government to
pursue such claims.

     It is also not uncommon for neighboring landowners and other third parties
to file claims for personal injury or property or natural resource damages
allegedly caused by the hazardous substances released into the environment.
Under CERCLA, certain oil and gas materials and products are, by definition,
excluded from the term "hazardous substances." At least two federal courts have
held that certain wastes associated with the production of crude oil may be
classified as hazardous substances under CERCLA. Similarly, under the federal
Resource, Conservation and Recovery Act, or RCRA, which governs the generation,
treatment, storage and disposal of "solid wastes" and "hazardous wastes,"
certain oil and gas materials and wastes are exempt from the definition of
"hazardous wastes." This exemption continues to be subject to judicial
interpretation and increasingly stringent state interpretation. During the
normal course of operations on properties in which we have an interest, exempt
and non-exempt wastes, including hazardous wastes, that are subject to RCRA and
comparable state statutes and implementing regulations are generated or have
been generated in the past. The federal Environmental Protection Agency and
various state agencies continue to promulgate regulations that limit the
disposal and permitting options for certain hazardous and non-hazardous wastes.

     We believe that the operator of the properties in which we have an interest
is in substantial compliance with applicable laws, rules and regulations
relating to the control of air emissions at all facilities on those properties.
Although we maintain insurance against some, but not all, of the risks described
above, including insuring the costs of clean-up operations, public liability and
physical damage, there is no assurance that our insurance will be adequate to
cover all such costs, that the insurance will continue to be available in the
future or that the insurance will be available at premium levels that justify
our purchase. The occurrence of a significant event not fully insured or
indemnified against could have a material adverse effect on our financial
condition and operations. Compliance with environmental requirements, including
financial assurance requirements and the costs associated with the cleanup of
any spill, could have a material adverse effect on our capital expenditures,
earnings or competitive position. We do believe, however, that our operators are
in substantial compliance with current applicable environmental laws and
regulations. Nevertheless, changes in environmental laws have the potential to
adversely affect operations. At this time, we have no plans to make any material
capital expenditures for environmental control facilities.

EMPLOYEES

     In addition to our management arrangement with Tower (see "Certain
Relationships and Related Transactions"), we currently have three employees,
including Andrew P. Calerich, our President and CFO. One of our other employees
is involved in clerical/administrative matters, and our third employee is
involved in lease analysis and land administration. Our operations are directed
by Mr. Calerich and by Patrick D. O'Brien, our CEO and Chairman of the Board.
Mr. O'Brien continues to serve as President of Tower Colombia Corporation as
well as CEO and Chairman of the Company, spending approximately equal amounts of
time on each entity.

                                       11

<PAGE>


     Prior to the management arrangement described above, we have had a
strategic alliance with privately held Tower and North Finn, whereby principals
of Tower (including Mr. O'Brien) and North Finn provide us continuing oil and
gas operational and technical expertise. No compensation was paid during 2004
for these services.

Corporate History

     We were incorporated on February 15, 2000, as DrGoodTeeth.com, to engage in
the business of operating an online dental resource website. After attempting to
operate the business for over two years, our founders were unsuccessful in
generating a going concern. They had approached all the dental supply companies
in Thailand but were unsuccessful in securing any sponsors or advertisers and
were unable to generate adequate traffic to the DrGoodTeeth.com website. As a
result of a continued lack of profitability in operating the online dental
resource website and because the previous officers and directors no longer had
the time to devote full effort to the business of the Company, we changed our
operational focus in January 2003 to oil and gas exploration and production.

     On January 17, 2003, in anticipation of acquiring oil and gas interests and
in an effort to more accurately reflect the expected change in our operational
focus, we changed our name from DrGoodTeeth.com to American Oil & Gas, Inc.
Accordingly, our stock symbol was changed from "DRGT" to the current symbol
"AOGI."

ITEM 2.  DESCRIPTION OF PROPERTY

OIL AND GAS ASSETS

     We have built a portfolio of exploration and exploitation projects
targeting both oil and natural gas. Because our expertise in the oil and gas
industry is primarily engineering related, we tend to focus in areas where we
have some historical evidence that hydrocarbons exist. We believe that there is
potential for commercial development in areas where historical drilling attempts
resulted in indications of oil and gas but ultimate development was not pursued.
We believe that the application of advanced drilling, completion and stimulation
technologies combined with a strong commodity pricing environment could make
development of our project areas economically viable.

     The following is a description and current status of our specific oil and
gas projects:

Big Sky Project, Richland County, Montana

     In August 2003, we purchased a 20% share of approximately 12,000 net
leasehold acres in the Big Sky Project in Richland County, Montana. In March
2004, we sold one-third of our interest for approximately $336,000 in cash. The
project is a horizontal drilling program targeting the Mississippian Bakken
Formation. The Bakken Formation underlies most of the deeper portion of the
Williston Basin in Montana and North Dakota. While the Bakken is recognized as
the primary source of oil produced from overlying conventional Mississippian
reservoirs, it is also known as an oil reservoir in its own right. Specifically,
the Bakken has yielded 30 million barrels of oil from the old upper shale play
in Billings, McKenzie and Golden Valley Counties, North Dakota, and already, an
additional 3.5 million barrels of oil from the current middle siltstone play in
Richland County, Montana. The North Dakota play succeeded or failed on the
presence or lack of natural fractures in a poor matrix reservoir. The Richland
County play has a significant advantage in that it has a primary dolomitic
siltstone reservoir with modest porosity and permeability.

                                       12

<PAGE>


     At December 31, 2004, we owned interests in eight gross (.45 net) producing
wells at our Big Sky project. During 2004, these wells produced a total of
12,606 barrels of oil equivalent net to our interest. Subsequent to December 31,
2004, we have participated in the drilling and completion of three additional
wells and, at March 31, 2005, we owned interests in 11 gross (.629 net)
producing wells. We expect to participate in 15 additional wells through 2005
and expect that we will own interests in 26 gross wells (approximately 1.37 net
wells) in our Big Sky project at year-end 2005. Including the wells drilled
through 2005, we anticipate we will ultimately own interests in a total of 52
gross (approximately 2.5 net wells) in this project over the next three years.

Douglas Project (Powder River Basin, Wyoming)

     During June 2004, we entered into an option agreement which will allow us
to earn a 50% interest in approximately 103,000 gross (approximately 98,000 net)
undeveloped leasehold acres in Converse and Niobrara counties, Wyoming, in the
area we call our Douglas project. Our current acreage position, including the
acreage controlled pursuant to the option agreement is approximately 120,300
gross and 55,400 net acres. We have identified multiple exploration
opportunities within the identified acreage block.

     Our initial focus in the Douglas project will be on the Fetter Field, which
is a Niobrara/Frontier natural gas field originally discovered in the 1960's.
The Niobrara/Frontier here is in an over-pressured area of the Powder River
Basin, and occurs at about 11,500 feet. There have been a number of wells
drilled at various times over the past 40 years and there is current production
in the field from four 1990's wells that are owned by others. We believe that
the potential economics from new wells drilled here could be enhanced by: 1)
advances in drilling equipment that could significantly reduce drilling times,
thereby reducing drilling costs, 2) advances in drilling techniques, such as
under-balanced and horizontal drilling that could enable us to reduce or
eliminate reservoir damage and increase reservoir contact, resulting in enhanced
flow rates, and 3) advances in stimulation technologies, primarily fracturing
techniques that have been used successfully in other areas to increase
production profiles and lengthen productive lives of wells. As an additional
advantage, there is a natural gas processing facility with excess capacity
located within our acreage that, if we are successful with initial drilling,
should enable us to immediately connect wells to sales lines.

     In February 2005 we entered into an agreement with an Oklahoma based E&P
company with expertise in the application of under-balanced horizontal drilling
("UBHD") technologies to participate in the evaluation of our Fetter Field
prospect. Under the terms of the agreement, the joint venture participant will
utilize its UBHD technology and experience, and will bring specialized equipment
in order to participate in the drilling of two initial wells. The Oklahoma
company will pay 60% of the costs to earn a 50% interest in the first well, and
will pay 30% of the costs to earn a 25% interest in the second well. By paying
for these two wells in this fashion and by paying a disproportionate share of
land related costs, they will earn a 25% interest in the approximate 51,000
gross acre prospect area AMI. Under this agreement, we would retain a 37.5%
working interest in the Fetter Field prospect area AMI. A drilling rig has been
secured that is currently scheduled to commence drilling the new wells in spring
2005.

Krejci Oil Project (Powder River Basin, Wyoming)

     We own a 50% working interest in a Mowry Oil Shale project located in and
around the Krejci Field. Currently, our acreage position consists of
approximately 40,700 gross (approximately 16,900 net) leasehold acres.

     Our acreage position is located on the Southeastern edge of the Powder
River Basin near the Lance Creek (basin-bounding) thrust fault. This fault
shifts in strike from north-south to east-west in the prospect area, causing the

                                       13

<PAGE>


area to be greatly stressed and potentially fractured. In addition, a brittle
and clean siliceous sandstone lies stratigraphically in the center of the Mowry
Shale. We believe that the fracturing mechanism (out of basin faulting) and
sandstone, which are both present in the Krejci area, make this an excellent
choice for seeking to establish commercial production from the Mowry Shale.
Nevertheless, it is possible for reservoirs to be fractured only in isolated
areas, and we are not assured that wells we drill in this area will be
productive.

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

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

     On June 3, 2004 we signed an agreement for a private company to drill
either two horizontal or four vertical wells to test the Mowry formation at our
Krejci oil project. The private company will retain 100% working interest in
each well drilled and in three of the eight offset locations surrounding that
well. We expect to benefit not only from the information received from drilling,
but also from the addition of one or more proved undeveloped locations for each
successful well drilled. The agreement covers approximately 20,000 gross
(approximately 10,000 net) leasehold acres out of our total acreage position in
this project. Under a continuous drilling obligation, the private company has
the right to drill up to 10 additional wells and earn three more offset
locations for each well drilled. We have retained the right to participate in
any or all drilling and could own working interests of up to 18.75% in the each
of the private company initial and offset wells, 31.25% to 50% in the other
offset locations and 50% in all other acreage. The private company has commenced
the evaluation process by drilling an initial well in order to attempt various
completion techniques. Several wells are planned and various drilling and
completion techniques are expected to be employed.

South Glenburn Prospect, McHenry County, North Dakota

     In December 2004, we purchased an 87.5% working interest in the South
Glenburn prospect in the Williston Basin of North Dakota. We expect to commence
drilling an initial test well in April 2005 to test the Mission Canyon formation
at approximately 4,500 feet. The estimated cost to drill this well to casing
point is expected to be approximately $350,000. The South Glenburn prospect is
located approximately 19 miles southeast of the Glenburn field and approximately
35 miles southeast of the Wiley field. Each of those fields has produced in
excess of 17 million barrels of oil from the Mission Canyon formation. Although
these fields are analogous to our target at South Glenburn, there is no
assurance that our initial test well will result in the discovery of
hydrocarbons. We currently control approximately 11,100 gross (8,400 net) acres
in this prospect.

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

     We own a 50% working interest in this approximately 18,200 leasehold acres
(approximately 8,300 leasehold acres net to our interest) coalbed methane
prospect in Carbon County Montana (Northern Big Horn Basin). We estimate the
prospect contains nine different coalbeds with total net thickness estimated to

                                       14

<PAGE>


range from 30 to 130 feet. Other highlights of this prospect are high quality
gas composition, water quality that may allow surface discharge, and market
potential for the gas.

     The pioneering attempt to develop the resource by another company in the
early 1990s ended prematurely due to a contentious legal battle in 1992 when a
district county court in Montana ruled that the company that drilled initial
wells here did not own rights to the methane in the coals. That company saw this
lower court decision overturned by the Supreme Court of Montana three years
later.

     Despite the 1995 reversal, that company, having already spent several
hundred thousand dollars on legal expenses, was reluctant to risk additional
funds until a similar case (Amoco Production Co. v. Southern Ute Indian Tribe)
was settled in the US Supreme Court. By the time the US Supreme Court issued its
June 1999 decision in favor of Amoco (and that company), the original oil and
gas lease had expired. We believe the Bear Creek prospect area was incompletely
and inadequately evaluated because of these legal problems.

     We do not intend to pursue oil and gas operations without the benefit of
outside industry participation. We are currently presenting this project to
potential industry participants in order to sell down our interests for cash
and/or a carried working interest, or to farm-out our acreage.

West Rozel, Box Elder County, Utah

     We own a 50% working interest in approximately 6,400 gross (approximately
3,200 net to our interest) leasehold acres in Box Elder County, Utah. This
acreage position completely covers the West Rozel oil field, which is a large
accumulation of heavy oil at a depth of about 2,250 feet.

     The West Rozel field was discovered by Amoco as a result of an extensive
exploration program conducted over the Great Salt Lake from mid-1978 to early
1981. The seismically defined structure at West Rozel is a complexly faulted
anticline about three miles long and over a mile wide. The reservoir is Pliocene
basalt with an oil column up to 290 feet in thickness. All three test wells
drilled by Amoco on the structure encountered oil pay, and two of the three
wells were put on hydraulic pump and produced a total of approximately 30,000
barrels of oil over a 62 day test period.

     West Rozel was not put on production in 1981 due to high costs associated
with offshore development and heavy oil. We believe that new drilling and
production technologies developed over the last twenty years and improved
economic incentives could combine to make development of this resource possible.
In addition, we have evaluated potential markets for the oil and feel there
could be a very strong market for use of the oil in making asphalt.

     We do not intend to undertake activity on this project without significant
outside industry participation and continue to research the optimum
developmental procedure for this project. Because the target area is beneath the
Great Salt Lake, we may encounter greater resistance from environmental groups
and permitting authorities then in other areas, which could result in higher
costs.

Coalbed Methane Projects (Powder River Basin, Wyoming)

     During 2004, we evaluated our ownership in the approximately 4,400 gross
(2,200 net to our interest) leasehold acres in the Powder River Basin of
Wyoming, in areas we refer to as West Recluse, Glasgow and Bill and in the seven
currently producing wells that we own at West Recluse. Because this is not a
core area of development and because we feel our other projects offer greater
opportunity for larger development potential, we sold a major portion of our
ownership in this area on September 30, 2004. We sold 90% of our interest in

                                       15

<PAGE>


this acreage position and 90% of our interest in the existing seven producing
West Recluse wells. As part of the agreement, we retained a 5% carried working
interest in all additional wells drilled on this acreage. We received sales
proceeds of approximately $1.255 million.

OIL AND GAS DRILLING ACTIVITIES

     During 2004, we participated in the successful drilling of seven gross (.44
net) wells at our Big Sky Project. On September 30, 2004, we sold 90% of our
interest in our Powder River Basin Coal Bed Methane acreage and 90% of our
interest in the existing seven producing West Recluse wells. As part of the
agreement, we retained a 5% carried working interest in all additional wells
drilled on this acreage. During 2004, the new operator of this project drilled a
total of 21 gross successful wells (1.05 wells, net to our interest).

     During 2003, we participated in drilling one successful gross well (.0125
net well) at our Big Sky Project in Richland County, Montana. We also
participated in two unsuccessful (.70 net) wells at our West Salt Creek Project
in Natrona County, Wyoming. We also purchased a 100% working interest in seven
completed and producing coalbed methane wells from North Finn.

OIL AND GAS WELLS

     The following table sets forth the number of oil and natural gas wells in
which we had a working interest at December 31, 2004. All of these wells are
located in the United States.

                    Productive Wells As of December 31, 2004
--------------------------------------------------------------------------------
                             Gross(a)                        Net(b)
 Location            Oil       Gas      Total       Oil       Gas       Total
 --------            ---       ---      -----       ---       ---       -----

Wyoming               --       22.0      22.0       --        1.38      1.38
Montana              8.0        --       8.0        .45        --        .45
                     ---       ----      ----       ---       ----      ----
    Total            8.0       22.0      30.0       .45       1.38      1.83

----------

(a)  The number of gross wells is the total number of wells in which a working
     interest is owned.

(b)  The number of net wells is the sum of fractional working interests owned in
     gross wells expressed as whole numbers and fractions thereof.

OIL AND GAS INTERESTS

     We currently own interest in the following developed and undeveloped
acreage positions. Undeveloped acreage refers to acreage that has not been
placed in producing units.

                                  Developed               Undeveloped
                       -------------------------   ------------------------
  State                Gross Acres     Net Acres   Gross Acres    Net Acres
  -----                -----------     ---------   -----------    ---------

Montana                   5,120           288        31,006         9,970
North Dakota               --            --          11,122         8,375
Wyoming                      80            11       160,964        72,364
Utah                       --            --           6,400         3,200
                          -----          ----       -------        ------
    TOTAL                 5,200           299       209,492        93,909

                                       16

<PAGE>


     The following table presents the net undeveloped acres that we control, the
type of lease and the year the leases are scheduled to expire in each of our
current projects. The Carbon County, Montana acreage reflected is attributable
to our Bear Creek coalbed methane project in the southern Big Horn Basin. The
Richland County, Montana acreage refers to our Big Sky Project in the Williston
Basin. The Niobrara County Wyoming acreage reflected is attributable to our
Krejci oil project, and the Converse County, Wyoming acreage is attributable to
our Douglas Project.

     The Douglas Project acreage (Converse County, Wyoming) is controlled
through an exploration agreement that allows us the right to pursue exploration
and developmental activities within this acreage block. We must pay our 50%
share of the remaining balance of $2 million in order to acquire these leases.
We can elect to pay our 50% share of $500,000 by June 1, 2005, and our 50% share
of the remaining $1.5 million by June 1, 2006. In addition, we are obligated to
pay delay rentals associated with this acreage during the option period.

     The Utah acreage reflected is attributable to our West Rozel oil project
and the North Dakota acreage is attributable to our South Glenburn Prospect.
<TABLE>
<CAPTION>

                                  Year of              Fee         State      Federal
                                Expiration            Leases      Leases      Leases      TOTALS
                                ----------            ------      ------      ------      ------

<S>                                <C>                  <C>                                   <C>
   MT - Carbon County              2005                 132                                   132
                                   2007               2,485        1,585                    4,070
                                   2009                                        2,288        2,288
                                   2010                                        1,788        1,788

   MT - Richland County            2005                 583                                   583
                                   2006                 411                                   411
                                   2007                 442                                   442
                                   2011                              256                      256

   WY - Niobrara County            2005                 328                                   328
                                   2006                 847          320                    1,167
                                   2007                 463           64                      527
                                   2008                  58          560                      618
                                   2011                                        9,295        9,295
                                   2012                                        1,703        1,703
                                   2014                                        3,286        3,286

   WY-Converse County              2005               5,790          400                    6,190
                                   2006               9,476          740         120       10,336
                                   2007               1,343          740       3,583        5,666
                                   2008               2,077                                 2,077
                                   2009               3,684                                 3,684
                                   2010                  20                      660          680
                                   2011                                       25,162       25,162
                                   2012                                          420          420
                                   2013                                          745          745
                                   2014                                          480          480

                                                        17

<PAGE>


                                  Year of              Fee         State      Federal
                                Expiration            Leases      Leases      Leases      TOTALS
                                ----------            ------      ------      ------      ------

   ND - McHenry County             2006                  74                                    74
                                   2007               1,409                                 1,409
                                   2009               5,982                                 5,982
                                   2010                              665                      665
                                   2015                 245                                   245

   UT - Box Elder County           2013                                        3,200        3,200
                                   -----             ------        -----      ------       ------
       TOTALS                                        35,849        5,330      52,730       93,909
</TABLE>

     The types of leases represented in this table are comprised of
approximately 560 separate lease agreements and no one single lease is
considered a material component of our acreage position. Fee leases consist of
acreage leased from other individuals or companies that own the mineral rights
underlying that acreage position. State leases consist of mineral rights
underlying acreage controlled by the particular state where the acreage position
is located, while federal leases consist of mineral rights underlying acreage
controlled by the federal government and managed by the Bureau of Land
Management.

     Generally, the lease agreements provide that we pay an annual fee, called a
delay rental, to retain these leases until such time that a well has been
drilled and is producing from the leased lands. At that time, the leased lands
are considered to be "held by production" and the lease continues for as long as
oil and/or gas production continues. During the period that there is production,
we will pay the lessor a royalty based on the revenues received from production.
Generally, fee leases provide for royalties of 12.5% to 25%, and state and
federal leases provide for royalties of 12.5 %. If the leases do not become held
by production within the period set forth in the lease, or if we fail to pay the
required delay rental obligations, the lease terminates. Generally, fee leases
have terms of three to five years, state leases have terms of five to ten years
and federal leases have terms of ten years. We can elect not to pay the yearly
delay rental fee, but the lease would terminate. We could elect not to pay the
delay rental fee if we did not believe an area was promising after completing
preliminary work or if we did not have sufficient funds.

     Our annual aggregate delay rental obligations, if we desire to continue to
keep all our leases in effect, are as follows:

                         Year            Rental Obligation
                         ----            -----------------

                         2005                 $92,700
                         2006                 $82,431
                         2007                 $71,123
                         2008                 $70,383
                         2009                 $64,906
                         2010                 $59,248
                         2011                 $10,254
                         2012                  $6,994
                         2013                  $5,852

                                       18

<PAGE>


OFFICE FACILITIES

     Our office is located at 1050 17th Street, Suite 1850, Denver, Colorado,
where we sublease a portion of a larger office space from Tower Energy
Corporation. In December 2003, we signed a sublease agreement to provide
aggregate monthly rental payments to Tower as follows:

                         Year              Annual Rental Amount
                         ----              --------------------
                         2005                    $22,985
                         2006                    $23,542
                         2007                    $22,051

ITEM 3.  LEGAL PROCEEDINGS

     There are no legal proceedings filed, or to our knowledge, threatened
against or involving the Company.

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

     None.

                                       19

<PAGE>


PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock has traded on the OTC Bulletin Board under the symbol
"AOGI" since January 17, 2003, when our stockholders effected a forward stock
split and name change. Prior to that time, our common stock traded on the OTC-BB
beginning on December 14, 2000 under the symbol "DRGT." The table below sets
forth the high and low sales prices for our common stock in each quarter of the
last two fiscal years. All figures reflect an 8.25-for-1 forward stock split
which became effective on January 17, 2003.

         Quarter                  High              Low
         -------                  ----              ---
      2003 - First               $1.75            $0.03
         Second                   1.65             0.75
          Third                   1.21             0.85
         Fourth                   0.98             0.55
      2004 - First                1.12             0.61
         Second                   1.30             0.76
          Third                   1.80             1.18
         Fourth                   2.90             1.40

On April 14, 2005, the last reported sales price of our common stock was $3.20
per share.

Stockholders

     We are authorized to issue 100,000,000 shares of common stock. As of April
14, 2005, there were approximately 50 stockholders of record of our common
stock.

Dividends on the Common Stock

     We have not declared a cash dividend on our common stock, and we do not
anticipate the payment of future dividends. There are no restrictions that
currently limit our ability to pay dividends on our common stock other than
those generally imposed by applicable state law.

Recent Sales of Unregistered Securities

     In September 2004, we received $4,500,000 in gross proceeds in a private
placement from six accredited investors. We sold 3,000,000 shares of our common
stock at $1.50 per share. We paid a placement fee of $45,000 in cash and issued
30,000 shares of common stock, valued at $56,400 (which was the market price of
the stock on the date of closing) to an individual who assisted in securing the
placement. We also paid approximately $32,000 in additional placement and
registration related expenses. This private placement was made pursuant to
exemptions from registration under the Securities Act of 1933, including but not
limited to, Section 4(2) of the Securities Act of 1933.

     In March 2004, we received $1,525,000 in gross proceeds in a private
placement from two accredited investors. We sold 1,525,000 shares of our common
stock at $1.00 per share and issued 1,525,000 warrants to purchase 1,525,000
shares at an exercise price of $1.00 per share until August 31, 2004. We did not
pay a placement commission or agent fee associated with this funding and
provided only for piggyback registration rights. In conjunction with this sale,
we sold one-third of our interests in the Big Sky project for cash of $326,247
to an entity related to the investor that purchased 1.5 million of the units.
This private placement was made pursuant to exemptions from registration under

                                       20

<PAGE>


the Securities Act of 1933, including but not limited to, Sections 3(b) and
4(2), as well as Rule 506 of Regulation D under the Securities Act of 1933. The
shares were sold without a general solicitation pursuant to Blue Sky limited
offering exemptions and were issued with a legend restricting resale. Prior to
August 31, 2004, 25,000 of the warrants were exercised and 1,500,000 of the
warrants expired unexercised.

ITEM 6.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OR PLAN OF OPERATION

PLAN OF OPERATION

     During calendar year 2005, we expect to continue to pursue oil and gas
operations on our identified projects, including the acquisition of additional
acreage through leasing, farmout or option and participation in the drilling of
oil and gas wells. We do not intend to operate the drilling of oil and gas
wells, but expect to participate as an outside working interest owner. We intend
to continue to evaluate additional opportunities in areas where we believe there
is potential for oil and gas reserves and production and may participate in
areas other than those already identified, although there is no assurance
additional opportunities will be available, or if we participate in additional
opportunities, that those opportunities will be successful.

     We expect that our pending merger with Tower Colombia Corporation and our
strategic alliance with North Finn, LLC will provide us with continuing
opportunities to participate in oil and gas projects. We do not expect to expend
significant capital in the initial drilling phases of exploration opportunities
and will attempt to exchange a portion of our ownership interests in projects
for initial drilling activity. We expect to retain a level of ownership in
projects so that in the event initial drilling is successful, the value of the
project would be meaningful to us.

     We expect to build our oil and gas reserves and cash flow by continuing to
participate in drilling horizontal Bakken wells at our Big Sky Project in
Richland County, Montana. From January 1, 2005 through December 2005, we expect
to participate in drilling up to 16 additional gross wells at Big Sky
(approximately one net well), which would provide ownership of approximately
1.45 net wells to our interests. Including wells already owned and including the
drilling schedule for 2005, we expect our acreage position would provide
participation in a total of 52 gross wells, which would result in our ownership
of approximately 2.5 net wells. We anticipate that our share of capital
expenditures related to drilling activities at our Big Sky Project for 2005 will
be approximately $2.3 million. We currently have adequate capital to fund our
drilling obligations in this project.

     We also expect to participate in initial drilling at our South Glenburn oil
prospect, our Fetter Field natural gas prospect and our Krejci oil prospect. We
have entered into exploration agreements with outside industry participants at
our Krejci oil prospect and our Fetter Field. We expect to be able to limit our
capital exposure during the initial exploratory drilling phase in these
projects. In the event initial drilling is successful, we currently have limited
capital in order to participate in additional drilling and may need to raise
additional funds. These funds could come from the sale of debt and/or equity
instruments.

     We expect that our current cash position will be sufficient to fund our
known cash requirements during calendar year 2005, although we intend to
continue financing efforts to support our current and proposed oil and gas
operations. We expect our total cash requirements for 2005 to be approximately
$6.2 million to fund drilling operations at our Big Sky Project, to fund our
general and administrative expenses and to fund other oil and gas related costs
such as land and lease costs, geological costs and drilling costs. We expect to
be able to fund these requirements with existing capital and expected cash flow
from oil and gas operations.

                                       21

<PAGE>


     We have not entered into any commodity swap arrangements or hedging
transactions. Although we have no current plans to do so, we may enter into
commodity swap and/or hedging transactions in the future in conjunction with oil
and gas production. We have no off-balance sheet arrangements.

RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the financial
statements included in this report.

     We recorded losses of $438,011 ($0.02 cents per common share) and $800,982
(three cents per common share) for the fiscal years ended December 31, 2004 and
2003, respectively.

     During the fiscal year ended December 31, 2004 ("2004"), we recorded
$746,242 in oil and gas revenues, compared to $97,892 recorded during our fiscal
year ended December 31, 2003 ("2003"). Our lease operating expenses and
production taxes were $80,461 ($3.83 per barrel of oil equivalent produced
("boe")) in 2004 and $37,842 ($8.89 per boe) in 2003, and we had $665,781 and
$60,050 in net cash flow from oil and gas operations in 2004 and 2003,
respectively.

     In 2004, we sold 12,849 barrels of oil at an average price of $41.58,
resulting in oil revenues of $534,288, and we sold 48,965 mcf of natural gas at
an average price of $4.33 per mcf resulting in gas revenues of $211,954. In
2003, we sold 687 barrels of oil at an average price of $28.33, resulting in oil
revenues of $19,469, and we sold 21,430 mcf of natural gas at an average price
of $3.66 per mcf, resulting in gas revenues of $78,423.

     We recorded $188,189 ($8.95 per boe), and $30,997 ($7.28 per boe) in
depreciation, depletion and amortization expense related to our oil and gas
production in 2004 and 2003, respectively. We recorded nominal depreciation
expense associated with our fixed assets for both 2004 and 2003.

     During 2004, we recorded general and administrative expenses in the amount
of $945,114. Included in this amount is a non-cash charge of $282,500 for
compensation expense to reflect the value attributable in 2004 of 250,000 shares
of restricted common stock to be paid to our President and CFO as a component of
his employment agreement from July 2003 through July 2005. Also included is a
non-cash charge of $85,126 to Directors' expense to reflect the value of 50,000
shares of restricted common stock that was paid to another director for serving
as Director, designated audit committee financial expert and as Chairman of the
Audit Committee. We are obligated to pay 12,500 shares of restricted common
stock for each quarter he serves in these capacities through the third quarter
2005.

     During 2003, we spent a total of $824,767 for general and administrative
expenses. During the first six months of the year, our primary efforts were to
secure financing and to transition into the business of oil and gas exploration
and production. During this time, we spent a total of $377,305 for general and
administrative expenses. During the second six months of 2003, our efforts were
focused on our oil and gas operations and we incurred $447,642 for general and
administrative expenses. Included in the amount incurred during the second half
of 2003 is a non-cash charge of $141,250 to compensation expense to reflect the
six month pro-rata value of 125,000 shares of restricted common stock to be paid
to our President and CFO as a component of his employment agreement from July
2003 through July 2005, and a non-cash one-time charge of $84,200 to directors'
expense for 100,238 shares of restricted common stock paid to a director for his
past and future service. Also included is a non-cash charge of $8,750 to
directors' expense to reflect the value of 12,500 shares of restricted common
stock that was paid to another director for serving as Director, designated
audit committee financial expert and as Chairman of the Audit Committee.

                                       22

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

     During the fiscal year ended December 31, 2004, we received approximately
$6.0 million from two separate equity transactions. We received $1,525,000 from
the sale of 1,525,000 shares of common stock at $1.00 per share, and we received
a total of $4,500,000 from the sale of 3,000,000 shares of common stock at $1.50
per share. These private placements were made pursuant to exemptions from
registration under the Securities Act of 1933, including but not limited to,
Sections 3(b) and 4(2), as well as Rule 506 of Regulation D under the Securities
Act of 1933.

     At December 31, 2004, we had a working capital amount of approximately
$5,439,000. We expect our total cash requirements for 2005 to be approximately
$6.2 million to fund drilling operations at our Big Sky Project, to fund our
general and administrative expenses and to fund other oil and gas related costs.
We expect to be able to fund our capital requirements for the remainder of 2005
with existing capital and expected cash flow from oil and gas operations.

     We had no outstanding long-term debt at December 31, 2004 and had not
entered into any commodity swap arrangements or hedging transactions. Although
we have no current plans to do so, we may enter into commodity swap and/or
hedging transactions in the future in conjunction with oil and gas production.
We paid approximately $2,895,000 during the fiscal year ended December 31, 2004
for drilling and completion costs, leasehold costs, acquisition of acreage and
delay rentals with respect to our identified oil and gas projects.

     Our future financial results continue to depend primarily on:

     o    our ability to discover commercial quantities of hydrocarbons;

     o    the market price for oil and gas;

     o    our ability to continue to source and screen potential projects; and

     o    our ability to fully implement our exploration and development program
          with respect to these and other matters.

     There can be no assurance that we will be successful in any of these
respects or that the prices of oil and gas prevailing at the time of production
will be at a level allowing for profitable production.

Critical Accounting Estimates

     Our discussion and analysis of our financial condition and results of
operations are based upon our condensed financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets
liabilities, revenues and expenses and related disclosures of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of long-lived assets. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions; however, we believe that
our estimates are reasonable.

                                       23

<PAGE>


Recent Accounting Pronouncements

     In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment," which
is a revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS
123(R) is effective for public companies for interim or annual periods beginning
after June 15, 2005, supersedes APB Opinion 25, Accounting for Stock Issued to
Employees, and amends SFAS 95, Statement of Cash Flows.

     SFAS 123(R) requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the income statement based
on their fair values. Pro-forma disclosure is no longer an alternative.

     The new standard will be effective for us, beginning August 1, 2005. Based
on the share-based agreements in place at this time, we do not expect the
adoption will have an effect on the financial statements that is materially
different than already reported.

     In December 2004, the FASB issued SFAS 153, Exchanges of Non-monetary
Assets, which changes the guidance in APB 29, Accounting for Non-monetary
Transactions. This Statement amends APB 29 to eliminate the exception for
non-monetary exchanges of similar productive assets and replaces it with general
exception for exchanges of non-monetary assets that do not have commercial
substance. A non-monetary exchange has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the
exchange. SFAS 153 is effective during fiscal years beginning after June 15,
2005. We do not believe the adoption of SFAS 153 will have a material impact on
our financial statements.

     The Securities and Exchange Commission has issued Staff Accounting Bulletin
(SAB) No. 106 regarding the application of SFAS 143, "Accounting for Asset
Retirement Obligations," on oil and gas producing entities that use the full
cost accounting method. It states that after adoption of SFAS 143, the future
cash outflows associated with settling asset retirement obligations that have
been accrued on the balance sheet should be excluded from the present value of
estimated future net cash flows used for the full cost ceiling test calculation.
The Company has complied with SAB No. 106.

     In March 2004, the FASB issued consensus on EITF 03-6, "Participating
Securities and the Two-Class Method Under FASB Statement No. 128, Earnings Per
Share," related to calculating earnings per share with respect to using the
two-class method for participating securities. This pronouncement is effective
for all periods after March 31, 2004, and requires prior periods to be restated.
As, the Company has incurred net losses in the current and prior periods, and as
the Company's preferred stock does not have a contractual obligation to share in
the losses of the Company, the adoption of EITF 03-6 had no impact on the
Company's financial condition, or its results of operations.

ITEM 7.  FINANCIAL STATEMENTS

     Our financial statements for the fiscal years ended December 31, 2004 and
2003 are attached hereto beginning on page F-1.

                                       24

<PAGE>


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

     There have been no disagreements between us and our independent accountants
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure since our inception in February 2000.

ITEM 8A. CONTROLS AND PROCEDURES

     As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as
amended, we carried out an evaluation as of the end of the period covered by
this report, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-15(e)). Based upon the evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls were effective as of
the end of the period covered by this report. As required by Rule 13a-15(d), we
also carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of our internal control over financial reporting to determine whether
any changes occurred during the quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting. Based on that evaluation, there has been no such change during the
quarter.

ITEM 8B. OTHER INFORMATION

     None.

                                       25

<PAGE>


PART III


ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers
<TABLE>
<CAPTION>

      Name                 Age       Position(s) and Office(s)         Director Since
      ----                 ---       -------------------------         --------------

<S>                        <C>                                                  <C>
Patrick O'Brien            55      CEO and Chairman                    February 2003
Andrew P. Calerich         40      President, CFO and Director         October 2003
Alan Gelfand               44      Director                            December 2002
Kendell Tholstrom          58      Secretary and Director              February 2003
M.S. ("Moni") Minhas       49      Director                            February 2003
Nick DeMare                50      Director                            October 2003
Jon R. Whitney             60      Director                            February 2005
</TABLE>


     Patrick D. O'Brien has served as our CEO and as a director of the Company
since February 19, 2003. Mr. O'Brien served as our President from February 19,
2003 until July 16, 2003. Mr. O'Brien is also chief executive officer,
president, co-founder and a director of Tower Colombia Corporation and splits
his time equally between the two entities. Prior to co-founding Tower Colombia
Corporation in 1995, Mr. O'Brien co-founded Tower Energy in 1984 and co-founded
Tower Drilling Company in 1980. Mr. O'Brien began his career in the oil and gas
industry with the Dowell Division of Dow Chemical Company where he engineered
and supervised all phases of well stimulation and cementing. He joined the
Colorado Interstate Gas Company in 1974 where he was responsible for the design,
acquisition and development of company-owned gas storage fields. In 1980, Mr.
O'Brien joined Montana Power Company as Senior Petroleum Engineer with the
responsibility for design, long-range planning and performance economics for its
exploration and development programs. Mr. O'Brien has spent over 25 years
working in the Powder River Basin. Mr. O'Brien received his B.S. in Petroleum
Engineering from the Montana College of Mineral and Science and Technology.

     Andrew P. Calerich has served as our President and CFO since July 17, 2003,
and as a director since October 30, 2003. Mr. Calerich has over 14 years of
public company oil and gas finance experience in a variety of capacities for
various companies. Most recently, Mr. Calerich served as Vice President and
Chief Financial Officer for PYR Energy Corporation. During his six years at PYR,
he assisted in raising in excess of $40 million in capital through various
financings and in moving the listing and trading of PYR's common stock from the
OTC to the American Stock Exchange. From 1993 to 1997, Mr. Calerich was a
business consultant specializing in accounting and finance for public and
private oil and gas producers in Denver. From 1990 to 1993, Mr. Calerich was
employed as corporate Controller at Tipperary Corporation, a public oil and gas
exploration and production company. Mr. Calerich began his professional career
in public accounting with an international accounting firm. Mr. Calerich is a
Certified Public Accountant and earned B.S. degrees in both Accounting and
Business Administration at Regis College, in Denver.

     Alan Gelfand has served as a director of the Company since December 13,
2002. Prior to becoming a director of the Company, Mr. Gelfand was a stockbroker
from 1987 until December 2002. Between May 1991 and January 1993, Mr. Gelfand
founded and operated the first on-hill photography company in Whistler, B.C.,
Canada. Prior to 1987, he had worked as an entrepreneur by co-owning and
operating a 15,000 sq. ft. flea market and operating a small corporate incentive
gift company. He graduated from Simon Fraser University with a Bachelor of
Business Administration in 1982.

                                       26

<PAGE>


     Kendell V. Tholstrom has served as a director of the Company since February
19, 2003. Mr. Tholstrom is on the board of directors and manages operations for
Tower Colombia Corporation. Prior to joining Tower Colombia Corporation in 1995,
he served as Vice President/General Manager for Presidio Oil Company from 1986
to 1995. His responsibilities included the day-to-day management of 35 office
employees and 40 field employees. Mr. Tholstrom worked at Sabine Corporation, an
oil and gas exploration and production company, from 1982 to 1986 as Division
Operations Manager. He worked at Terra Resources 1977 to 1986 in various
engineering and management positions and at ARCO Oil & Gas from 1970 to 1972.
Mr. Tholstrom is a Registered Professional Engineer in Colorado and has 30 years
of petroleum industry experience. Mr. Tholstrom received a B.S. in Petroleum
Engineering in 1968 and an M.S. in Petroleum Engineering in 1970 from the
Montana College of Mineral Science and Technology.

     M.S. (Moni) Minhas has served as a director of the Company since February
19, 2003. Mr. Minhas is a private businessman and consultant who has, over the
last eight years, served as a consultant to Quantel Engineering, PanCanadian
Petroleum Limited, Talisman Energy, Abu Dhabi National Oil Company (ADNOC),
Petronas National Oil Company (Malaysia), Pertamina National Oil Company
(Indonesia), ARCO and Wascana, assisting in the optimization of their reserve
production and the development of their properties. From 1980 to 1995, he was
employed by PanCanadian Petroleum Ltd. (now EnCana Corporation) eventually
serving in senior supervisory, administrative and management positions. Mr.
Minhas was responsible for the development of major oil and gas properties in
partnership with multinational corporations, and also served as Supervisor for
Production Revenue Department in the Reservoir/Exploitation Department, as
Leader of the Reserves Task Force and as a Project Engineer/Manager. Mr. Minhas
received a B.S. in Petroleum Engineering from University of Calgary, Alberta.

     Nick DeMare has served as a director, designated audit committee financial
expert and as Chairman of the Audit Committee since October 30, 2003. Mr. DeMare
holds a Bachelor of Commerce degree from the University of British Columbia and
is a member in good standing of the Institute of Chartered Accountants of
British Columbia. Since May 1991, Mr. DeMare has been the President of Chase
Management Ltd., a private company which provides a broad range of
administrative, management and financial services to private and public
companies engaged in mineral exploration and development, gold and silver
production, oil and gas exploration and production and venture capital. Mr.
DeMare indirectly owns 100% of Chase. Mr. DeMare currently serves as an officer
and director of the following other public reporting companies:
<TABLE>
<CAPTION>


     Names of Reporting Issuers                 Positions Held                     Market
     --------------------------                 --------------                     ------

<S>                                   <C>                                          <C>
Aguila American Resources, Ltd.       Director                                      TSXV
Andean American Mining Corp.          Director & Secretary                          TSXV
Baradero Resources Limited            Director, President & CEO                     TSXV & OTCBB
GGL Diamond Corp.                     Director                                      TSXV
Gold Point Exploration Ltd            Director & President                          TSXV
Golden Peaks Resources Ltd.           Director                                      TSXV
Goldmarca Limited                     Director & Secretary                          TSXV
Halo Resources Ltd.                   Director & CEO                                TSXV & OTCBB
Hilton Resources Ltd.                 Director, President & CEO                     TSXV & OTCBB
Kookaburra Resources Ltd.             Director                                      TSXV
Lariat Resources Ltd.                 Director                                      TSXV
Medina International Corp.            Director, Secretary, Treasurer & CFO          OTCBB
Tinka Resources Limited               Director                                      TSXV
Tumi Resources Limited                Director                                      TSXV & OTCBB
</TABLE>

                                       27

<PAGE>


     Jon R. Whitney has served as a director since February 2005. Mr. Whitney
began his employment with Colorado Interstate Gas Company, a natural gas
transmission company, on October 1, 1968 as an accountant and in 1970 was
promoted to accounting supervisor. Mr. Whitney joined the regulatory area in
1971 and in 1973 was promoted to Vice President, Regulatory Affairs and
Controller. He was subsequently promoted to Senior Vice President and then
Executive Vice President, with the additional responsibilities of
Administration, Marketing, Engineering and Operations. In 1990, He was promoted
to President and Chief Executive Officer and ultimately held various officer
positions with 15 different companies within the corporate family. He also has
held committee positions with the Interstate Natural Gas Association of America
and the American Gas Association and has held directorships with several outside
companies and community organizations. Prior to his employment with Colorado
Interstate Gas Company, he was a Certified Public Accountant in private
practice. Mr. Whitney is currently a member of Peak Energy Ventures, a natural
gas consulting company.

2003 Meetings and Committees of the Board of Directors

     Our Board of Directors held five meetings during the year ended December
31, 2004. Except for one meeting where one director was not present, each
director attended each of the Board and committee meetings he was eligible to
attend. The standing committees of the board include the Audit, Compensation and
Nominating Committees. Each of the Audit and Compensation Committees consists
entirely of non-employee directors.

     The Audit Committee reviews the adequacy of systems and procedures for
preparing the financial statements and the suitability of internal financial
controls. The Audit Committee also reviews and approves the scope and
performance of the independent auditors' work. M.S. Minhas and Alan Gelfand
serve as members of the Audit Committee, and Nick DeMare serves as chairman of
the Audit Committee. The Audit Committee met four times during the fiscal year
ended December 31, 2004. All of the members of our Audit Committee are
independent as defined by the applicable listing standards of the Nasdaq Stock
Market.

Audit Committee Financial Expert

     Nick DeMare is our audit committee financial expert, as defined by the
rules and regulations of Regulation S-B of the Securities Exchange Act.

Audit Committee Charter

     Our Board of Directors has adopted a written charter for the Audit
Committee. The Committee will review and assess the adequacy of the Audit
Committee charter annually.

Code of Ethics

     We have adopted a code of ethics that applies to our executive officers,
including Mr. O'Brien, our Chief Executive Officer, and Mr. Calerich, our
President and Chief Financial Officer.

Compliance with Section 16(a) of the Exchange Act

     Based solely upon a review of Forms 3, 4 and 5 furnished to us, we are not
aware of any person who at any time during the fiscal year ended December 31,
2004, was a director, officer, or beneficial owner of more than ten percent of
our common stock, who failed to file, on a timely basis, reports required by
Section 16(a) of the Securities Exchange Act of 1934 during such fiscal year,
except Patrick O'Brien our CEO was late filing a Form 4 with respect to his
receipt of stock options on July 15, 2004.

                                       28

<PAGE>


ITEM 10. EXECUTIVE COMPENSATION

     The following table provides summary information for the years 2004, 2003
and 2002 concerning cash and noncash compensation paid or accrued by the Company
to or on behalf of the Company's chief executive officer. In addition the
following table provides summary information for any other executive officers
who received total salary and bonus exceeding $100,000 for the years 2004, 2003
and 2002.
<TABLE>
<CAPTION>

                                             SUMMARY COMPENSATION TABLES

                                                  Annual Compensation
-------------------------------------------------------------------------------------------------------------------
                                                                                                     Other Annual
        Name and Principal Position             Year         Salary ($)          Bonus ($)         Compensation ($)
        ---------------------------             ----         ----------          ---------         ----------------

<S>                                             <C>
Patrick O'Brien, CEO(1)                         2004                 -               -                     -
                                                2003                 -               -                     -
                                                2002                 -               -                     -

Andrew Calerich, President and CFO              2004            99,021               -                322,500(2)
                                                2003            48,000               -                     -
                                                2002                 -               -                     -


                                                  Long -Term Compensation
--------------------------------------------------------------------------------------------------------------------------
                                                Restricted     Securities Underlying     LTIP Payouts         All Other
    Name and Principal Position       Year     Stock Awards       Options/SARs(#)            ($)          Compensation ($)
    ---------------------------       ----     ------------       ---------------            ---          ----------------

Patrick O'Brien, CEO                 2004           -                    -                    -                   -
                                     2003           -                    -                    -                   -
                                     2002           -                    -                    -                   -

Andrew Calerich, President and CFO   2004           -                    -                    -                   -
                                     2003        500,000                 -                    -                   -
                                     2002           -                    -                    -                   -
</TABLE>

----------

(1)  Mr. O'Brien became CEO of the Company in February 2003 and was not paid a
     salary or any other form of compensation during 2003 or 2004. None of the
     persons who served as CEO or acted in a similar capacity to that of a CEO
     received salary or any other form of compensation during 2004, 2003 or
     2002.

(2)  This amount represents the market value of 250,000 shares of stock that
     vested on July 1, 2004 in accordance with an employment agreement with
     Andrew Calerich, our President and CFO.

Employment Agreements

     In July 2003, the Company entered into an employment agreement with Andrew
Calerich, its President and Chief Financial Officer. The three-year employment
agreement calls for a base salary of $8,000 per month, family health and medical
benefits and payment of 500,000 shares of the Company's Common Stock upon
continued employment as follows: 250,000 shares shall vest on July 1, 2004 and

                                       29

<PAGE>


250,000 shares shall vest on July 1, 2005. As part of the employment agreement,
only that portion of the shares of Common Stock that has a market value equal to
the income tax liability realized upon vesting of the shares may be sold before
July 1, 2005.

Equity Compensation and Other Plans

     On July 12, 2004, our stockholders approved the American Oil & Gas, Inc
2004 Stock Option Plan. We do not have any other equity compensation plans or
long-term incentive plans. During 2004, we adopted an employee retirement plan.

Director Compensation

     Our directors are not compensated for any meeting of the board of directors
that they attend, but they are entitled to reimbursement for travel expenses. We
are obligated to pay Nick DeMare 12,500 shares of restricted common stock for
each quarter he serves as a director, designated audit committee financial
expert and as Chairman of the Audit Committee through September 30, 2005.
Subsequent to 2004, we granted options to purchase 100,000 shares of the
Company's common stock to Jon Whitney, a new Director of the Company, in
consideration for serving on the Company's Board of Directors. These options
have an exercise price of $2.38 per share, which was the closing price of the
Company's common stock on February 15, 2005, the date on which Mr. Whitney
accepted our offer to become a member of our board of directors. These options
expire five years from the date of grant and one-eighth (1/8) of the options
vest on the first day of each quarter during which Mr. Whitney continues to
serve on the Company's Board of Directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

     The following table sets forth certain information concerning the ownership
of our common stock as of April 14, 2005, with respect to: (i) each person known
to us to be the beneficial owner of more than five percent of our common stock;
(ii) all directors; and (iii) directors and executive officers of the Company as
a group. The number of shares listed as beneficially owned in the following
table reflect the forward stock split of 8.25-for-1 of our issued and
outstanding common stock which became effective on January 17, 2003. As of April
14, 2005, there were 29,963,702 shares of common stock issued and outstanding.
<TABLE>
<CAPTION>

                                     Name and Address             Amount and Nature of        Percent of
      Title of Class               of Beneficial Owner          Beneficial Ownership(1)        Class(2)
      --------------               -------------------          -----------------------        --------
<
<S>          <C>                            <C>                          <C>                         <C>
Common Stock ($0.001 par     Patrick O'Brien(3)                          733,025                     2.5%
value)                       1050 17th St., Suite 1850
                             Denver, CO  80265

Common Stock ($0.001 par     Andrew P. Calerich(4)                       999,950                     3.3%
value)                       1050 17th St., Suite 1850
                             Denver, CO  80265

Common Stock ($0.001 par     Alan Gelfand                                100,238           Less than 1%
value)                       1050 17th St, Suite 1850
                             Denver, CO 80265

                                                      30

<PAGE>


                                    Name and Address             Amount and Nature of        Percent of
      Title of Class               of Beneficial Owner          Beneficial Ownership(1)        Class(2)
      --------------               -------------------          -----------------------        --------

Common Stock ($0.001 par     Kendell Tholstrom                           608,025                     2.0%
value)                       1050 17th St., Suite 1850
                             Denver, CO 80265

Common Stock ($0.001 par     Nick DeMare(5)                              299,000             Less than 1%
value)                       1050 17th St., Suite 1850
                             Denver, CO  80265

Common Stock ($0.001 par     M.S. ("Moni") Minhas                        100,238              Less than 1%
value)                       1050 17th St., Suite 1850
                             Denver, CO  80265

Common Stock ($0.001 par     Directors and Executive                   2,840,476                     9.5%
value)                       Officers as a Group
                             (6 individuals)

Common Stock ($0.001 par     LMA Hughes LLLP                           1,500,000                     5.0%
value)                       6307 Hawthorne Lane
                             Lakewood, CO  80227
</TABLE>

------------
(1)  The number of shares and the percentage of the class beneficially owned by
     the entities above is determined under rules promulgated by the SEC and the
     information is not necessarily indicative of beneficial ownership for any
     other purpose. Under such rules, beneficial ownership includes any shares
     as to which the individual has sole or shared voting power or investment
     power and also any shares which the individual has the right to acquire
     within 60 days through the exercise of any stock option or other right. The
     inclusion herein of such shares, however, does not constitute an admission
     that the named stockholder is a direct or indirect beneficial owner of such
     shares. Unless otherwise indicated, each person or entity named in the
     table has sole voting power and investment power (or shares such power with
     his spouse) with respect to all shares of capital stock listed as
     beneficially owned by such person or entity.

(2)  Percentages are based upon the total 29,963,702 outstanding shares of
     common stock combined with the number of shares of Common Stock
     beneficially owned by the person or entity with respect to whom the
     calculation is being made.

(3)  Includes options to purchase 125,000 shares at $1.25 per share that are
     currently exercisable.

(4)  Includes 250,000 shares paid to Mr. Calerich for continued employment
     through July 1, 2004 and 250,000 shares to be paid to Mr. Calerich for
     continued employment through July 1, 2005.

(5)  Includes 62,500 shares owned by DNG Capital Corp, which is a company wholly
     owned by Nick DeMare.

Equity Compensation Plan Information

     The following table provides aggregate information presented as of December
31, 2004 with respect to our 2004 Stock Option Plan. We do not have any other
equity compensation plans or long-term incentive plans.

                                       31

<PAGE>

<TABLE>
<CAPTION>

                                                                (a) (b) (c)
                                                       Number of Securities
                                                       Weighted Averaged Number
                                                       of Securities
                                                         to Be Issued Upon          Exercise Price of          Remaining Available
                                                            Exercise of                Outstanding             for Future Issuance
                                                       Outstanding Options,         Options, Warrants         (Excluding Securities
Plan Category                                           Warrants and Rights            and Rights           Reflected in Column (a))
                                                       --------------------        ------------------       ------------------------
<S>                                                                  <C>                     <C>                  <C>
Equity compensation plans approved by shareholders........    403,000                       $1.25                 2,097,000
Equity compensation plans not approved by
shareholders..............................................        --                          --                         --
                                                              -------                       -----                 ---------
  Total...................................................    403,000                       $1.25                 2,097,000
                                                              =======                       =====                 =========
</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On January 17, 2003, we executed a Purchase and Sale Agreement that was
negotiated at arms-length, with Tower Colombia Corporation, a Colorado
corporation ("Tower"), and North Finn, LLC, a Wyoming limited liability company
("North Finn"), to acquire an undivided 50% working interest in the Wyoming
Krejci Project, the Montana Bear Creek Project and in and to certain coalbed oil
and gas leases in the Powder River Basin of Wyoming and the Big Horn Basin of
Montana. See "Item 2. Description of Property--Oil and Gas Assets". We believe
that the terms of the transaction were fair to the Company.

     Subsequent to the acquisition of the oil and gas leases, Mr. Patrick D.
O'Brien, President of Tower, was appointed Chief Executive Officer, President
and Chairman of the Board of Directors of the Company. Mr. O'Brien continues to
serve as President of Tower and currently serves as CEO and a Chairman of the
Company, spending approximately equal amounts of time on each entity. Tower and
North Finn actively pursue exploration and development independent of the
Company. However, Tower, North Finn and the principals of each entity entered
into a Participation Agreement with the Company on January 17, 2003, in which
they agreed to provide the Company the right to participate, on an equal basis,
in any financing transaction regarding an oil and/or gas exploration and/or
production asset, or acquisition or disposition of oil and/or gas exploration
and/or production assets that becomes available to them.

     We have a strategic alliance with privately held Tower Colombia Corporation
and North Finn LLC, pursuant to which principals of Tower and North Finn provide
continuing oil and gas operational and technical expertise to the Company. No
compensation was paid during 2003 or 2004 for these services and there is no
agreement for specific future compensation. The principals of Tower and North
Finn provided similar services to the Company during 2002, and during December
2002, were compensated for services rendered through payment of restricted
common stock. Each of the six principals of Tower and North Finn received
608,025 shares (adjusted for the January 17, 2003, 8.25 for 1 forward stock
split) valued at $18,425, based on the market price of the stock on the date of
payment.

     On March 23, 2005, we signed a letter of intent that provides the mutual
intent of the parties is that we will acquire through a merger 100% of the
outstanding common stock of Tower Colombia Corporation in exchange for 5.8
million shares of our restricted common stock. We expect that this transaction
will close before April 30, 2005. Effective January 17, 2005, we have agreed
with Tower that the three principals of Tower will provide geological and other
management services to us, and we will pay Tower a management fee of $30,000 per
month through the date of closing the merger or May 31, 2005, whichever occurs
first.

                                       32

<PAGE>


ITEM 13. EXHIBITS

     Exhibits required to be attached by Item 601 of Regulation S-B are listed
in the Index to Exhibits beginning on page 35 of this Form 10-KSB, which is
incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

     Wheeler Wasoff, P.C. the Company's certified independent accountant, billed
the Company $31,544 for the year ended December 31, 2003, for the audit of the
Company's annual financial statements and review of financial statements
included in the Company's Forms 10-QSB, as well as for services normally
provided by Wheeler Wasoff , P.C. in connection with statutory and regulatory
filings or engagements for fiscal 2004. It is estimated that Wheeler Wasoff,
P.C. will bill approximately $40,000 for these services for the year ending
December 31, 2004.

Audit-Related Fees

     Wheeler Wasoff, P.C. did not provide the Company with any services for
assurance and related services that were not reasonably related to the
performance of the audit or review of the Company's financial statements and are
not reported above under "Audit Fees.

Tax Fees

     For the year ended December 31, 2003, Wheeler Wasoff, P.C. billed the
Company $2,021 for professional services for tax compliance, tax advice and tax
planning. It is anticipated Wheeler Wasoff P.C. will bill approximately $3,000
for the same services for 2004.

All Other Fees

     For the year ended December 31, 2003, Wheeler Wasoff, P.C. did not bill the
Company for products and services other than those described above.

Audit Committee Pre-Approval

     Our Audit Committee Charter provides that the Audit Committee shall
pre-approve all auditing and non-auditing services of the independent auditor,
subject to de minimus exceptions for other than audit, review or attest services
that are approved by the Audit Committee prior to completion of the audit.
Alternatively, our Audit Committee Charter provides that the engagement of the
independent auditor may be entered into pursuant to pre-approved policies and
procedures established by the Audit Committee, provided that the policies and
procedures are detailed as to the particular services and the Audit Committee is
informed of each service. Because of the pre-approved policies and procedures
established by the audit committee, the Audit Committee did not pre-approve
Wheeler Wasoff, P.C. fees for audit services for fiscal year 2004.

                                       33

<PAGE>



SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 15th day of April, 2005.


                                         American Oil & Gas, Inc.


                                         /s/ Andrew P. Calerich
                                         ---------------------------------------
                                         Andrew P. Calerich
                                         President and CFO


     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>

         Signature                         Title                                        Date
         ---------                         -----                                        ----
<S>                                                                                           <C>
/s/ Patrick D. O'Brien     Chief Executive Officer and Chairman                     April 15, 2005
-----------------------
Patrick D. O'Brien

/s/ Andrew P. Calerich     President, Chief Financial Officer and Director          April 15, 2005
----------------------
Andrew P. Calerich

/s/ Alan Gelfand           Director                                                 April 15, 2005
-----------------------
Alan Gelfand

/s/ Kendell Thomstrom      Secretary and Director                                   April 15, 2005
-----------------------
Kendell Tholstrom

/s/ M.S. ("Moni") Minha    Director                                                 April 15, 2005
-----------------------
M.S. ("Moni") Minhas

/s/ Nick DeMare            Director                                                 April 15, 2005
-----------------------
Nick DeMare

/s/ Jon R. Whitney         Director                                                April 15, 2005
-----------------------
/s/ Jon R. Whitney
</TABLE>

                                       34
<PAGE>


Exhibit Index

  Exhibit No.                                Description
  -----------         ----------------------------------------------------------
3(i)*                 Articles of Incorporation of the Company. (Incorporated by
                      reference from the Company's Form 10-SB, file number
                      000-31547, filed on September 18, 2000.)

3(ii)*                Bylaws of the Company (as revised on December 12, 2002).
                      (Incorporated by reference from the Company's Form
                      10-KSB/A, filed on November 18, 2003.)

10(i)*                January 17, 2003 Purchase and Sale Agreement by and
                      between the Company, Tower Colombia Corporation and North
                      Finn, LLC. (Incorporated by reference from the Company's
                      Form 8-K, filed on February 3, 2003.)

10(ii)*               January 17, 2003 Participation Agreement by and between
                      the Company, Tower, North Finn, and the principals of
                      Tower and North Finn. (Incorporated by reference from the
                      Company's Form 10-KSB for the calendar ending December 31,
                      2002, filed on March 31, 2003.)

10(iii)*              Model Form Operating Agreement dated February 18, 2003.
                     (Incorporated by reference from the Company's
                      Form 10-KSB/A, filed on November 18, 2003.)

10(iv)*               Employment Agreement between the Company and Andrew P.
                      Calerich. (Incorporated  by reference from the Company's
                      Company's Form 10-QSB, filed on November 19, 2003.)

10(v)*                The Company's 2004 Stock Option Plan (Incorporated by
                      reference from Appendix B to the Company's Definitive
                      Proxy Statement on Schedule 14A, filed on June 16, 2004.)

14(i)*                Code of Ethics. (Incorporated by reference from Exhibit
                      14(i) to the Company's Form 10-KSB for the fiscal year
                      ending December 31, 2003, filed on April 14, 2004.)

31.1                  Certification of Chief Executive Officer pursuant to
                      Section 302 of the Sarbanes-Oxley Act of 2002

31.2                  Certification of Chief Financial Officer pursuant to
                      Section 302 of the  Sarbanes-Oxley Act of 2002

32.1                  Certification of Chief Executive Officer pursuant to
                      Section 906 of the Sarbanes-Oxley Act of 2002

32.2                  Certification of Chief Financial Officer pursuant to
                      Section 906 of the  Sarbanes-Oxley Act of 2002

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

*    Previously filed as indicated and incorporated herein by reference from the
     referenced filings previously made by the Company.

                                       35

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          INDEX TO FINANCIAL STATEMENTS






 Report of Independent Registered Public Accounting Firm           F-2

 Balance Sheet
     December 31, 2004                                             F-3

 Statements of Operations
     Years Ended December 31, 2004 and 2003                        F-4

 Statements of Stockholders' Equity
     Years Ended December 31, 2004 and 2003                        F-5

 Statements of Cash Flows
     Years Ended December 31, 2004 and 2003                        F-6 - F-7

 Notes to Financial Statements                                     F-8 - F-23


                                      F-1


<PAGE>


              REPORT OF INDEPENDENT REGISTERED PUBLIC AUDITING FIRM


To The Board of Directors and Stockholders
American Oil & Gas, Inc.


We have audited the accompanying balance sheet of American Oil & Gas, Inc. as of
December 31, 2004, and the related statements of operations, stockholders'
equity and cash flows for each of the years in the two year period ended
December 31, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Oil & Gas, Inc. as of
December 31, 2004, and the results of its operations and its cash flows for each
of the years in the two year period ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of America.







                                         Wheeler Wasoff, P.C.


Denver, Colorado
April 8, 2005


                                      F-2

<PAGE>


                            AMERICAN OIL & GAS, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

                                     ASSETS
CURRENT ASSETS
   Cash                                                            $  5,251,889
   Receivables                                                          258,848
   Advances and prepaids                                                 54,535
                                                                   ------------
      Total Current Assets                                            5,565,272
                                                                   ------------

PROPERTY AND EQUIPMENT, AT COST
   Oil and gas properties, full cost method (including
    unevaluated costs of $2,022,367)                                  3,700,892
   Other property and equipment                                           7,221
                                                                   ------------
       Total property and equipment                                   3,708,113
   Less-accumulated depreciation, depletion and amortization           (221,793)
                                                                   ------------
       Net property and equipment                                     3,486,320
                                                                   ------------
                                                                   $  9,051,592
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable and accrued liabilities                        $    108,611
   Dividends payable                                                     18,020
                                                                   ------------
       Total Current Liabilities                                        126,631
                                                                   ------------

LONG TERM LIABILITIES
    Asset Retirement Obligations                                         40,702
                                                                   ------------

COMMITMENTS AND CONTINGENCIES (Note 4)

STOCKHOLDERS' EQUITY
   Series A preferred stock, $.001 par value,
            authorized 175,000 shares
            Issued and outstanding - 67,000 shares
            (2004 and 2003)                                                  67
   Common stock, $.001 par value, authorized
            100,000,000 shares Issued
            and outstanding - 29,153,702 shares (2004)
            and 24,388,702 shares (2003)                                 29,154
   Additional paid-in capital                                        10,400,629
   Deferred compensation                                               (141,250)
   Accumulated Deficit                                               (1,404,341)
                                                                   ------------
                                                                      8,884,259
                                                                   ------------
                                                                   $  9,051,592
                                                                   ============

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


                                       F-3

<PAGE>


                            AMERICAN OIL & GAS, INC.
                            STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------
                                                       2004            2003
                                                   ------------    -------------

REVENUES
   Oil and gas sales                               $    746,242    $     97,892
                                                   ------------    ------------


OPERATING EXPENSES
   Lease operating                                       80,461          37,842
   General and administrative                           945,114         824,767
   Depletion, depreciation and amortization             192,838          36,265
                                                   ------------    ------------

Total operating expenses                              1,218,413         898,874
                                                   ------------    ------------
Loss from operations                                   (472,171)       (800,982)
                                                   ------------    ------------

OTHER INCOME (EXPENSE)
   Investment income                                     34,160            --
                                                   ------------    ------------
Total other income (expense)                             34,160            --

NET LOSS                                               (438,011)       (800,982)

    Less dividends on preferred stock                    61,640          18,020
                                                   ------------    ------------

NET (LOSS) TO COMMON STOCKHOLDERS                  $   (499,651)   $   (819,002)
                                                   ============    ============

NET (LOSS) PER COMMON
SHARE -BASIC AND DILUTED                           $      (0.02)   $      (0.03)
                                                   ============    ============

WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING -BASIC AND DILUTED         25,211,447      23,780,902
                                                   ============    ============


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


                                       F-4
<PAGE>

<TABLE>
<CAPTION>

                                                 AMERICAN OIL & GAS, INC.
                                            STATEMENTS OF STOCKHOLDERS' EQUITY
                                          YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                                            Additional
                                     Preferred    Stock---       -Common      Stock---       Paid-in     Accumulated     Deferred
                                       Shares     Amount         Shares       Amount         Capital       (Deficit)    Compensation
------------------------------------------------------------------------------------------------------------------------------------

<S>                                              <C>           <C>          <C>            <C>           <C>            <C>
   Balance January 1, 2003               --      $    --       37,747,464   $    37,747    $   211,117   $  (165,348)   $      --

Shares returned to the company                                (16,500,000)       (16,500)        16,500
Sale of common stock at
 $1.25 per share                                                1,864,000          1,864      2,328,136
Costs of offering                                                                              (146,021)
Shares issued to President
 for deferred compensation                                        500,000            500        564,500                    (565,000)
Sale of common stock at
 $.75 per share                                                   664,500            665        497,710
Costs of offering                                                                              (101,757)
Warrants issued to
 placement agents                                                                                45,101
Sale of preferred stock
 at $11.50 per                         67,000           67                                      770,433
Unit
Preferred stock proceeds
 allocated to net profits
 interests                                                                                     (160,800)
Costs of offering                                                                               (96,227)
Warrants issued to placement
 agent                                                                                           15,091
Deferred compensation
 recognized                                                                                                                 141,250
Shares issued to Director -
 $.84 per share                                                   100,238            100         84,100
Shares issued to Director -
 $.70 per share                                                    12,500             13          8,738
Dividends on preferred stock                                                                    (18,020)
Net (loss)                                                                                                  (800,982)
-----------------------------------------------------------------------------------------------------------------------------------
   Balance December 31, 2003           67,000           67     24,388,702         24,389      4,018,601     (966,330)      (423,750)

Sale of common stock at
 $1.00 per share                                                1,525,000          1,525      1,523,475
Costs of offering                                                                                (7,429)
Warrant exercise at
$1.00 per share                                                    25,000             25         24,975
Warrants issued for oil
 project consulting                                                                              31,611
Sale of common stock at
 $1.50 per share                                                3,000,000          3,000      4,497,000
Costs of offering                                                                              (133,957)
Stock issued for private
 placement costs                                                   30,000             30         56,370
Options issued for investor
 relations consulting                                                                            38,632
Shares issued for oil prospect,
 valued at $2.43 per share                                        135,000            135        327,915
Dividends on preferred stock                                                                    (61,640)
Deferred compensation
 recognized                                                                                                                 282,500
Shares issued to Director                                          50,000             50         85,076
Net (loss)                                                                                                   (438,011)
-----------------------------------------------------------------------------------------------------------------------------------
   Balance December 31, 2004           67,000    $      67     29,153,702    $    29,154    $10,400,629   $(1,404,341)   $ (141,250)
===================================================================================================================================


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

                                                           F-5
<PAGE>


                                    AMERICAN OIL & GAS, INC.
                                   STATEMENTS OF CASH FLOWS
                            YEARS ENDED DECEMBER 31, 2004 AND 2003

----------------------------------------------------------------------------------------------------
                                                                  2004                      2003
                                                              -----------                -----------

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)                                                    $  (438,011)               $  (800,982)
Adjustments to reconcile net (loss) to
   net cash (used) by operating activities:
     Stock issued for services                                     85,126                     92,950
     Options issued for services                                   38,632
     Deferred compensation                                        282,500                    141,250
     Accretion of asset retirement obligation                       4,520                      2,790
     Depletion, depreciation and amortization                     188,318                     33,475
Changes in assets and liabilities:
   (Increase) in receivables                                     (213,106)                   (45,742)
   Decrease (increase) in advances and prepaids                    12,252                    (66,787)
   (Decrease) increase in accounts payable and
      accrued liabilities                                        (365,785)                    44,894
                                                              -----------                -----------
Net cash (used) by operating activities                          (405,554)                  (598,152)
                                                              -----------                -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Cash paid for office equipment                                   --                       (7,221)
    Cash paid for oil and gas properties                       (2,894,560)                (1,726,748)
    Proceeds from sale of oil and gas properties                1,582,171                       --
    Proceeds for net profits interest                                --                      160,800
                                                              -----------                -----------
Net cash (used) in investing activities                        (1,312,389)                (1,573,169)
                                                              -----------                -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from sale of preferred stock                             --                      609,700
   Proceeds from sale of common stock                           6,025,000                  2,828,375
   Cash paid for offering costs                                   (84,986)                  (283,812)
   Proceeds from warrant exercise                                  25,000                       --
   Preferred dividends paid                                       (61,640)                      --
                                                              -----------                -----------
Net cash provided by financing activities                       5,903,374                  3,154,263
                                                              -----------                -----------

                                                              -----------                -----------
NET INCREASE IN CASH                                            4,185,431                    982,942
CASH, BEGINNING OF YEAR                                         1,066,458                     83,516
                                                              -----------                -----------
 CASH, END OF YEAR                                            $ 5,251,889                $ 1,066,458
                                                              ===========                ===========


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

                                                F-6

<PAGE>


                                       AMERICAN OIL & GAS, INC.
                                 STATEMENTS OF CASH FLOWS (con't)
                              YEARS ENDED DECEMBER 31, 2004 AND 2003
------------------------------------------------------------------------------------------------

                                                                   2004                  2003
                                                                  --------              --------

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
                                                                  --------              --------
  Cash paid for interest expense                                  $   --                $   --
                                                                  ========              ========

SUPPLEMENTAL DISCLUSURES OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
                                                                  --------              --------
  Stock issued for services                                       $ 85,126              $ 92,950
                                                                  ========              ========

                                                                  --------              --------
  Stock based deferred compensation                               $282,500              $141,250
                                                                  ========              ========

                                                                  --------              --------
  Stock issued for oil and gas property                           $328,050              $   --
                                                                  ========              ========

                                                                  --------              --------
  Warrants issued for oil and gas property consulting             $ 31,611              $   --
                                                                  ========              ========

                                                                  --------              --------
  Stock Issued for financing costs                                $ 56,400              $   --
                                                                  ========              ========

                                                                  --------              --------
  Warrants issued for financing costs                             $   --                $ 60,192
                                                                  ========              ========


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

                                              F-7
</TABLE>
<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 1 -  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

American Oil & Gas, Inc. ("the Company") was incorporated under the laws of the
State of Nevada in February 2000 as DrGoodteeth.com, for the purpose to promote
and carry on any lawful business for which a corporation may be incorporated
under the laws of the State of Nevada. On January 17, 2003, the Company entered
into a Purchase and Sale Agreement to acquire undeveloped oil and gas prospects
in Montana and Wyoming. With the purchase of the oil and gas prospects the
Company changed its name to American Oil & Gas, Inc. and became an independent
energy company engaged in the exploration, development and acquisition of crude
oil and natural gas reserves and production. The Company's resources and assets
are reported as one operating segment and the Company conducts its operations
primarily in the western United States with current properties in Wyoming,
Montana, North Dakota and Utah.

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, and disclosure 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.

The Company's financial statements are based on a number of significant
estimates, including oil and gas reserve quantities which are the basis for the
calculation of depreciation, depletion and impairment of oil and gas properties,
and timing and costs associated with its retirement obligations.

The oil and gas industry is subject, by its nature, to environmental hazards and
clean-up costs. At this time, management knows of no substantial costs from
environmental accidents or events for which the Company may be currently liable.
In addition, the Company's oil and gas business makes it vulnerable to changes
in wellhead prices of crude oil and natural gas. Such prices have been volatile
in the past and can be expected to be volatile in the future. By definition,
proved reserves are based on current oil and gas prices and estimated reserves.
Price declines reduce the estimated quantity of proved reserves and increase
annual amortization expense (which is based on proved reserves).

CASH AND CASH EQUIVALENTS

For purposes of reporting cash flows, the Company considers all highly liquid
investments with original maturities of three months or less to be cash
equivalents. On occasion, the Company may have cash in banks in excess of
federally insured amounts.

At December 31, 2004, $693,450 of the cash balance is specifically allocated to
the drilling, completion and connection of oil and gas wells in the Company's
Krejci oil project located in Niobrara County, Wyoming. (See "Preferred Stock"
in Note 4 - Stockholders' Equity.)

                                       F-8

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


ACCOUNTS RECEIVABLE AND CREDIT POLICIES

The Company has certain trade receivables consisting of oil and gas sales
obligations due under normal trade terms. Management regularly reviews trade
receivables and reduces the carrying amount by a valuation allowance that
reflects management's best estimate of the amount that may not be collectible.
At December 31, 2004, the Company has determined no allowance for uncollectible
receivables is necessary.

OIL AND GAS PROPERTIES

The Company utilizes the full cost method of accounting for oil and gas
activities. Under this method, subject to a limitation based on estimated value,
all costs associated with property acquisition, exploration and development,
including costs of unsuccessful exploration, are capitalized within a cost
center. No gain or loss is recognized upon the sale or abandonment of
undeveloped or producing oil and gas properties unless the sale represents a
significant portion of oil and gas properties and the gain significantly alters
the relationship between capitalized costs and proved oil and gas reserves of
the cost center. Depreciation, depletion and amortization of oil and gas
properties is computed on the units of production method based on proved
reserves. Amortizable costs include estimates of future development costs of
proved undeveloped reserves. At December 31, 2004, all of the Company's oil and
gas properties and operations are located in one cost center, the United States.

Capitalized costs of oil and gas properties may not exceed an amount equal to
the present value, discounted at 10%, of the estimated future net cash flows
from proved oil and gas reserves plus the cost, or estimated fair market value,
if lower, of unproved properties. Should capitalized costs exceed this ceiling,
impairment is recognized. The present value of estimated future net cash flows
is computed by applying year end prices of oil and natural gas to estimated
future production of proved oil and gas reserves as of year end, less estimated
future expenditures to be incurred in developing and producing the proved
reserves and assuming continuation of existing economic conditions.

PROPERTY AND EQUIPMENT

Furniture and equipment is recorded at cost. Depreciation is recorded using the
straight-line method over the estimated useful lives of the related assets of
three to five years. Expenditures for replacements, renewals, and betterments
are capitalized. Maintenance and repairs are charged to operations as incurred.
Long-lived assets, other than oil and gas properties, are evaluated for
impairment to determine if current circumstances and market conditions indicate
the carrying amount may not be recoverable. The Company has not recognized any
impairment losses on non oil and gas long-lived assets.

IMPAIRMENT

The Company has adopted Statement of Financial Accounting Standards (SFAS) 144,
"Accounting for the Impairment and Disposal of Long-Lived Assets," which
requires that long-lived assets to be held and used be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Oil and gas properties accounted for using the
full cost method of accounting, a method utilized by the Company, are excluded
from this requirement, but will continue to be subject to the ceiling test
limitations.

                                      F-9

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


GAS BALANCING

The Company uses the sales method of accounting for gas balancing of gas
production and would recognize a liability if the existing proven reserves were
not adequate to cover the current imbalance situation. As of December 31, 2004,
the Company's gas production is in balance.

ASSET RETIREMENT OBLIGATION

In 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations." SFAS 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This statement requires companies to record
the present value of obligations associated with the retirement of tangible
long-lived assets in the period in which it is incurred. The liability is
capitalized as part of the related long-lived asset's carrying amount. Over
time, accretion of the liability is recognized as an operating expense and the
capitalized cost is depreciated over the expected useful life of the related
asset. The Company's asset retirement obligations ("ARO") relate primarily to
the plugging, dismantlement, removal, site reclamation and similar activities of
its oil and gas properties.

The Company adopted the provisions of SFAS 143 to record the ARO associated with
all wells in which the Company owns an interest on the date such obligation
arose. Depreciation of the related asset, and accretion of the ARO on wells from
which production has commenced, has been calculated using the estimate of the
life of the wells based on a reserve study prepared by an independent reserve
engineering firm. The amounts recognized upon adoption are based upon numerous
estimates and assumptions, including future retirement costs, future recoverable
quantities of oil and gas, future inflation rates and the credit-adjusted
risk-free interest rate. The information below reflects the change in the ARO
during the year ended December 31, 2004:

   Asset retirement obligation beginning of year            $ 30,688
       Liabilities incurred                                   33,102
       Sale of oil and gas assets                            (27,608)
       Accretion                                               4,520
                                                            --------

   Asset retirement obligation end of year                  $ 40,702
                                                            ========

INCOME TAXES

The Company accounts for income taxes under the provisions of SFAS No. 109,
Accounting for Income Taxes. Under the asset and liability method of SFAS 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted income tax rates expected to apply to
taxable income in the years in which those differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in income tax rates is recognized in the results of
operations in the period that includes the enactment date.

                                      F-10

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board (FASB) issued SFAS
123, Accounting for Stock-Based Compensation, effective for fiscal years
beginning after December 15, 1995. This statement defines a fair value method of
accounting for employee stock options and encourages entities to adopt that
method of accounting for its stock compensation plans. SFAS 123 allows an entity
to continue to measure compensation costs for these plans using the intrinsic
value based method of accounting as prescribed in Accounting Pronouncement
Bulletin Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). The
Company has elected to continue to account for its employee stock compensation
plans as prescribed under APB 25. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method prescribed
in SFAS 123, the Company's net (loss) and (loss) per share for the year ended
December 31, 2004 would have been adjusted to the pro-forma amounts indicated
below.

                                                        2004           2003
                                                        ----           ----

Net loss - as reported                               $(438,011)     $  (800,982)
Add stock based compensation included
 in reported net loss                                   38,632             --
Deduct stock based compensation expense
 determined under the fair
 value method                                         (133,321)            --
                                                     ---------      -----------
Pro forma net loss                                   $(532,700)     $  (800,982)
                                                     =========      ===========
Net loss per share:

As reported                                          $   (0.02)     $     (0.03)
                                                     =========      ===========

Pro forma                                            $   (0.02)     $     (0.03)
                                                     =========      ===========


The calculated value of stock options granted under these plans, following
calculation methods prescribed by SFAS 123, uses the Black-Scholes stock option
pricing model with the following assumptions used:

                                                           2004      2003
                                                           ----      ----

        Expected option life-years                             5        -
        Risk-free interest rate                           3.36 %        -
        Dividend yield                                         0        -
        Volatility                                           71%        -

There were no options granted during 2003.

(LOSS) PER SHARE

Basic (loss) per share is based on the weighted average number of common shares
outstanding during the period. Diluted (loss) per share is computed by adjusting
the weighted average number of common shares outstanding for the dilutive
effect, if any, of options, warrants and convertible preferred stock. At
December 31, 2004 and 2003, all outstanding options, warrants and convertible
preferred stock were excluded from the computation of diluted loss per share for
the years then ended, as the effect of the assumed exercises or conversions
would be antidilutive.

                                      F-11

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


REVENUE RECOGNITION

The Company recognizes oil and gas revenues from its interests in producing
wells as oil and gas is produced and sold from these wells. The Company has no
gas balancing arrangements in place. Natural gas sold is not significantly
different for the Company's product entitlement.

FAIR VALUE

The carrying amount reported in the balance sheet for cash, accounts receivable,
prepaids, accounts payable and accrued liabilities approximates fair value
because of the immediate or short-term maturity of these financial instruments.

CONCENTRATION OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist of cash. The Company maintains cash assets at two financial
institutions. The Company periodically evaluates the credit worthiness of
financial institutions, and maintains cash accounts only in large high quality
financial institutions. The Company believes that credit risk associated with
cash is remote. The Company is exposed to credit risk in the event of nonpayment
by counter parties, a significant portion of which are concentrated in energy
related industries. The creditworthiness of customers and other counter parties
is subject to continuing review.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment," which is a
revision of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS 123(R)
is effective for public companies for interim or annual periods beginning after
June 15, 2005, supersedes APB Opinion 25, Accounting for Stock Issued to
Employees, and amends SFAS 95, Statement of Cash Flows.

SFAS 123(R) requires all share-based payments to employees, including grants of
employee stock options, to be recognized in the income statement based on their
fair values. Pro-forma disclosure is no longer an alternative. The new standard
will be effective for the company, beginning August 1, 2005. The Company has not
yet completed their evaluation but expects the adoption to have an effect on the
financial statements similar to the pro-forma effects reported above.

In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets,
which changes the guidance in APB 29, Accounting for Nonmonetary Transactions.
This Statement amends APB 29 to eliminate the exception for nonmonetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
153 is effective during fiscal years beginning after June 15, 2005. The Company
does not believe the adoption of SFAS 153 will have a material impact on the
Company's financial statements.

The Securities and Exchange Commission has issued Staff Accounting Bulletin
(SAB) No. 106 regarding the application of SFAS 143, "Accounting for Asset
Retirement Obligations," on oil and gas producing entities that use the full
cost accounting method. It states that after adoption of SFAS 143, the future
cash outflows associated with settling asset retirement obligations that have

                                      F-12

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


been accrued on the balance sheet should be excluded from the present value of
estimated future net cash flows used for the full cost ceiling test calculation.
The Company has complied with the provisions of SAB 106.

SEGMENT REPORTING

The Company follows SFAS 131, "Disclosure about Segments of an Enterprise and
Related Information", which amended the requirements for a public enterprise to
report financial and descriptive information about its reportable operating
segments. Operating segments, as defined in the pronouncement, are components of
an enterprise about which separate financial information is available that is
evaluated regularly by the Company in deciding how to allocate resources and in
assessing performance. The financial information is required to be reported on
the basis that is used internally for evaluating segment performance and
deciding how to allocate resources to segments. The Company operates in one
segment, oil and gas producing activities.

COMPREHENSIVE INCOME

There are no adjustments necessary to the net (loss) as presented in the
accompanying statement of operations to derive comprehensive income in
accordance with SFAS 130, "Reporting Comprehensive Income."

RECLASSIFICATION

Certain amounts in the 2003 financial statements have been reclassified to
conform to the 2004 financial statement presentation.


NOTE 2 -  PROPERTY AND EQUIPMENT

On June 1, 2004, the Company entered into an option agreement which allows the
opportunity to earn a 50% interest in the Douglas project which is comprised of
undeveloped leasehold acres in Converse County, Wyoming.

On September 30, 2004, the Company sold 90% of its interests in the Powder River
Basin coal bed methane acreage referred to as West Recluse, Glasgow and Bill.
Included in this sale was 90% of the Company's interest in seven existing
producing West Recluse wells. As part of the agreement, the Company retained a
10% working interest in seven producing coal bed methane wells and retained a 5%
carried working interest in all additional wells drilled on this acreage. The
Company received sales proceeds of approximately $1.255 million.

During December 2004, the Company acquired a working interest in an oil prospect
oil prospect located in McHenry County, North Dakota. The Company calls this
prospect the South Glenburn Prospect.

                                      F-13

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


Property and equipment at December 31, 2004 consisted of the following:


Oil and gas properties, full cost method
   Unevaluated costs, not subject to amortization or ceiling test   $ 2,022,367
   Evaluated costs                                                    1,645,133
   Asset retirement costs                                                33,392
                                                                    -----------
                                                                      3,700,892
Furniture and equipment                                                   7,221
                                                                    -----------
                                                                      3,708,113
Less accumulated depreciation, depletion and amortization              (221,793)
                                                                    -----------
Property and equipment                                              $ 3,486,320
                                                                    ===========


Information relating to the Company's costs incurred in its oil and gas
operations during the year ended December 31, 2004 is summarized as follows:

Property acquisition costs, unproved properties                       $1,279,364
Exploration costs                                                        194,413
Asset retirement costs                                                     5,494
Development costs                                                      1,846,494
                                                                      ----------
                                                                      $3,325,765
                                                                      ==========

Property acquisition costs include costs incurred to purchase, lease, or
otherwise acquire a property. Exploration costs include the costs of geological
and geophysical activity, and drilling and equipping exploratory wells.
Development costs include drilling and other costs incurred within a proved area
of oil and gas. The Company reviews and determines the cost basis of drilling
prospects on a drilling location basis.

Furniture and equipment depreciation expense for the year ended December 31,
2004 and 2003 was $1,073 and $599, respectively.

During fiscal year 2004, the Company's two largest customers were Eighty Eight
Oil LLC and Enserco Energy, Inc. Sales to these customers accounted for 70% and
17%, respectively, of oil and gas sales in 2004. During fiscal year 2003, the
Company's two largest customers were Enserco Energy, Inc. and Link Energy
Limited Partnership. Sales to these customers accounted for 71% and 18%,
respectively, of oil and gas sales in 2003. Because there are other purchasers
that are capable of and willing to purchase the Company's oil and gas and
because the Company has the option to change purchasers on properties if
conditions so warrant, the Company believes that its oil and gas production can
be sold in the market in the event that it is not sold to its existing
customers.

                                      F-14
<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 3 - STOCKHOLDERS' EQUITY

PREFERRED STOCK

The Company is authorized to issue up to 25 million shares of $.001 par value
preferred stock, the rights and preferences of which are to be determined by the
Board of Directors at or prior to the time of issuance.

On August 18, 2003, the Board of Directors authorized and established a Series A
of the Company's preferred stock. In October 2003, a total of $770,500 in gross
proceeds was received from two accredited investors through the sale of 67,000
8% Series A preferred shares at a price of $11.50 per share. The preferred
shares would automatically convert at an equivalent rate of $1.15 per common
share into 670,000 common shares in October 2005, or earlier at the discretion
of the holders of the preferred shares. The Company paid fees and expenses
related to the offering of $81,136, including a cash finders' fee of 10%. The
Company also issued warrants to the placement agents to purchase a total of
30,000 shares of the Company's common stock at an exercise price of 1.15 cents
per share, for a period of five years. The warrants are valued at $15,091, using
the Black-Scholes option pricing model.

The net proceeds from the preferred stock sale are to be used for drilling costs
in the Company's Krejci oil project, located in the southern portion of the
Powder River Basin of Wyoming. The holders of the preferred shares will receive
a net profits interest of 20% in the actual wells drilled with these net
proceeds. While the preferred shares are outstanding, the Company will pay the
greater of the actual amount generated by the net profits interest or the amount
required to provide the holders of the preferred shares an annualized return of
eight percent for two years. During 2004, the Company paid $61,640 in cash
dividends to the holders of preferred shares. The Company allocated $160,800 as
the value attributable to the net profits interest, and has reduced the carrying
value of its leasehold costs and charged additional paid in capital by this
amount. The Company has not yet used any of these funds for drilling costs and
considers these funds as restricted.

The preferred shares automatically convert if the common stock trades at or
above $2.50 for a period of 15 calendar days. On January 5, 2005, the common
stock traded above $2.50 for the 15th calendar day and, accordingly, the
outstanding preferred shares converted into 670,000 shares of common stock.

COMMON STOCK

Effective January 17, 2003, the Company conducted a forward stock split of its
issued and outstanding common stock on an 8.25 new for 1 old basis. The stock
split did not vary the par value of the common stock or the number of shares
authorized for issuance. All stock figures have been restated to reflect the
stock split.

Effective January 17, 2003, 16,500,000 shares of common stock were returned to
the Company for cancellation. No consideration was paid for the return of the
shares to be cancelled.

In June 2003, the Company completed a private offering of shares of common stock
at $1.25 per share. A total of seven investors purchased 1,864,000 shares of
common stock for a total purchase price of $2,330,000. The Company paid costs
and fees related to the offering of $146,021.

                                      F-15

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


On June 16, 2003, the Company issued 500,000 shares of common stock to its
President and Chief Financial Officer, as part of his employment agreement.
Pursuant to the agreement, 250,000 shares vested on June 1, 2004 and 250,000
shares will vest on July 1, 2005. The 500,000 shares are reflected as issued and
outstanding at December 31, 2004 and 2003. The shares were valued at $565,000
($1.13 per share), based on the non-discounted trading price of the Company's
common stock as of the date of grant. At December 31, 2004 and 2003, $282,500
and $141,250, respectively, was charged to operations for the value of shares
earned.

In October 2003, the Company completed a private offering of shares of common
stock, $0.75 per share. A total of $498,375 was received from eleven (11)
investors from the sale of 664,500 shares of common stock. The Company paid fees
and expenses related to the offering of $56,656, including a cash finders' fee
of 10%. The Company issued warrants to the placement agents to purchase 49,838
shares of the Company's common stock at an exercise price of 75 cents per share,
for a period of five years. The warrants are valued at $45,101, using the
Black-Scholes option pricing model.


In October 2003, 100,238 shares of common stock were paid to a Director for his
past and future services as a Director. The shares were valued at $84,200 ($.84
per share), based on the non-discounted trading price of the Company's common
stock as of the date of grant.

In December 2003, 12,500 shares of common stock were issued to a Director for
serving as Director, Designated Financial Expert and as Chairman of the Audit
Committee. The shares were paid to a company wholly owned by the Director, and
the shares were valued at $8,750 ($.70 per share), based on the non-discounted
trading price of the Company's common stock as of the date of issuance. The
Company is obligated to issue 12,500 shares of restricted common stock for each
quarter this Director serves in these capacities through the third quarter 2005.
During 2004, the Company issued 12,500 shares per quarter, for a total of 50,000
shares, to this Director and these shares were valued based on the
non-discounted trading price of the Company's common stock of $0.84, $1.26,
$1.91 and $2.80 for the first, second, third and fourth quarters, respectively.

In March 2004, the Company completed a private placement of 1,525,000 units at a
price of $1.00 per unit. Each unit consisted of one share of common stock and
one warrant to purchase one share of common stock at $1.00 per share until
August 31, 2004. The Company did not pay any fees or commissions associated with
this financing. Holders of 25,000 of the warrants exercised the warrants prior
to August 31, 2004, and 1,500,000 of the warrants expired unexercised. In
conjunction with this sale, the Company sold one-third of its interests in the
Big Sky project for cash of $326,247 to an entity related to the investor that
purchased 1.5 million of the units.

In July 2004, the Company granted options to purchase 153,000 shares of its
common stock at an exercise price equal to the market price on the date of grant
of $1.25 per share to a consulting firm hired to assist the Company in its
investor relations program. The options vest 8,500 per month from July 2004
through December 2005 and expire 5 years from the date of issuance. The options
were valued at $115,898 using the Black-Scholes option pricing model.


                                      F-16

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


In September 2004, the Company sold a total of 3,000,000 shares of common stock
at a price of $1.50 per share. The Company paid a placement fee of $45,000 in
cash and issued 30,000 shares (valued at the non-discounted trading price of the
Company's common stock of $1.88 per share) to an individual who assisted in
securing the private placement. Total costs of the offering were $133,957,
including cash of $77,557 and common stock valued at $56,400.

WARRANTS

In September 2003, the Company issued warrants to purchase 30,000 shares of its
common stock at an exercise price of $1.15 per share through September 2008 as
partial consideration for a finder's fee in conjunction with the private
placement of the Company's Series A preferred stock. These warrants are valued
at $15,091, using the Black-Scholes option pricing model.

Also, in September 2003, the Company issued warrants to purchase 66,450 shares
of common stock at an exercise price of $.75 per share through September 2008 as
partial consideration for a finder's fee in conjunction with the private
placement of the Company's common stock. These warrants are valued at $45,101,
using the Black-Scholes option pricing model.

In May 2004, the Company granted warrants to purchase 163,200 shares of common
stock at an exercise price equal to the market price on the date of grant of
$1.09 per share to an individual who is assisting the Company with evaluation
and marketing of its West Rozel project. These warrants vest 13,600 per month
starting April 2004, and expire one year from date of vesting. These warrants
were valued at $42,147 using the Black-Scholes option pricing model. As of
December 31, 2004, the Company has capitalized $31,611 as additional capitalized
costs with respect to its West Rozel project.

At December 31, 2004, the status of outstanding warrants is as follows:


        Issue                Shares         Exercise            Expiration
         Date             Exercisable         Price                Date
         ----             -----------         -----                ----

  September 15, 2003         30,000           $1.15         September 15, 2008
  September 24, 2003         66,450           $0.75         September 24, 2008
     May 26, 2004           122,400           $1.09         April 2005 through
                                                              December 2005

At December 31, 2004, the per share weighted average exercise price of
outstanding warrants was $1.01 per share and the weighted average remaining
contractual life was 2.15 years.

NOTE 4 - STOCK OPTION PLAN

The Company adopted the 2004 Stock Option Plan (the "Plan"). Under the Plan,
stock options may be granted at an exercise price not less than the fair market
value of the Company's common stock at the date of grant. Options may be granted
to key employees and other persons who contribute to the success of the Company.
The Company has reserved 2,500,000 shares of common stock for the plan. At
December 31, 2004, options to purchase 2,097,000 shares were available to be
granted pursuant to the stock option plan.

                                      F-17

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


The status of outstanding options granted pursuant to the plans are as follows:
<TABLE>
<CAPTION>

                                                    Number of        Weighted Avg.            Weighted Avg.
                                                     Shares          Exercise Price             Fair Value
                                                     ------          -------------            -------------

<S>                                                                     <C>                     <C>
Options Outstanding - December 31, 2003                     -            $   -                   $  -

Granted                                               403,000            $1.25                   $ 0.76
                                                      -------
Options Outstanding - December 31, 2004
     (176,000 exercisable)                            403,000            $1.25                   $ 0.76
                                                      =======

There have been no options exercised to date.

The following table presents additional information related to the options
outstanding at December 31, 2004:

                                                                                    Weighted average
         Exercise price         Number of shares         Number of shares         remaining contractual
            per share              outstanding             Exercisable                life (Years)

            $ 1.25                   403,000                  176,000                     4.5
            ------                   -------                  -------                     ---
</TABLE>


NOTE 5 - INCOME TAXES

A provision (benefit) for income taxes for the years ended December 31, 2004 and
2003 consists of the following:

                                                       2004             2003
                                                       ----             ----

Current taxes                                        $    --          $    --

Deferred taxes                                         617,000          327,000
   Less: valuation allowance                          (617,000)        (327,000)
                                                     ---------        ---------
Net income tax provision (benefit)                   $    --          $    --
                                                     =========        =========

The effective income tax rate for the years ended December 31, 2004 and 2003
differs from the U.S. Federal statutory income tax rate due to the following:

                                                        2004            2003
                                                        ----            ----

Federal statutory income tax rate                      (34.0%)        (34.0%)
State income taxes                                      (3.3%)         (3.3%)
Permanent differences                                     .5%           2.7%
Increase in valuation allowance                         36.8%          34.6%
                                                      -------         ------
Net income tax provision (benefit)                       --             --
                                                      =======         ======

                                      F-18
<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


The components of the deferred tax assets and liabilities as of December 31,
2004 and 2003 are as follows:

                                                        2004           2003
                                                        ----           ----
Deferred tax assets:
Federal and state net operating loss carryovers      $ 1,073,000    $   426,000
 Asset retirement obligation                              15,000           --
Oil and gas property                                    (468,000)      (151,000)
Deferred compensation                                     (3,000)        52,000
                                                     -----------    -----------
   Total deferred tax assets                             617,000        327,000
  Less: valuation adjustment                            (617,000)      (327,000)
                                                     -----------    -----------
Deferred tax asset                                   $      --      $      --
                                                     ===========    ===========


The Company has a $2,010,000 net operating loss carryover as of December 31,
2004. The net operating losses may offset against taxable income through the
year ended December 2024. A portion of the net operating loss carryovers begin
expiring in 2020. The Company provided a valuation allowance against its
deferred tax asset of $617,000 and $327,000 as of December 31, 2004 and 2003,
respectively, since it believes that it is more likely than not that it would be
able to utilize it in its future tax returns. Of the total tax benefit, $290,000
is attributable to 2004.


NOTE 6 - RELATED PARTIES

In February 2003, Patrick O'Brien and Kendell Tholstrom were appointed as
directors of the Company. Mr. O'Brien and Mr. Tholstrom also serve as executive
officers and/or directors of Tower Colombia Corporation ("Tower"). Tower
actively pursues exploration and development independent of the Company. Tower
entered into a two year Participation Agreement with the Company on January 17,
2003, whereby they agreed to provide American the right to participate, on an
equal basis, in any financing transaction regarding an oil and/or gas
exploration and/or production asset, or acquisition or disposition of oil and/or
gas exploration and/or production assets that becomes available to them. This
agreement expired on January 17, 2005.

During December 2002, Mr. O'Brien and Mr. Tholstrom became shareholders of the
Company when they each received 608,025 shares of the Company's common stock as
compensation for oil and gas technical and operational services, each of which
accounted for approximately 1.5% of the then outstanding shares. The Company
also shares common executive office space with Tower, under a sublease
agreement.

During 2004 and 2003, the Company reimbursed Tower for the Company's share of
oil and gas related expenditures and administrative related expenditures in the
amount of $232,088 and $89,380, respectively. In addition, the Company paid
Tower $24,504 and $1,838 for 2004 and 2003, respectively, for rent expense under
the sublease agreement.

In 2003, before becoming President and Chief Financial Officer of the Company,
Andrew Calerich was paid a consulting fee of $20,000.

During 2003, the Company paid consulting fees of $30,000 to Alan Gelfand, a
current Director and former President of the Company.

                                      F-19

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


During 2003, the Company paid $2,834 to Chase Management Ltd. for administrative
services. Nick DeMare serves as a Director of the Company and is President of
Chase. The Company also paid $5,130 to a company for which Mr. DeMare serves as
Director, for administrative services. These costs were incurred before Mr.
DeMare became a Director of the Company.

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


NOTE 7 - COMMITMENTS AND CONTINGENCIES

The Company may be subject to various possible contingencies, which are derived
primarily from interpretations of federal and state laws and regulations
affecting the oil and gas industry. Although management believes it has complied
with the various laws and regulations, new rulings and interpretations may
require the Company to make future adjustments.

The Company has a sublease agreement, and shares common office space with Tower,
a related entity, for rent of its general corporate office facilities. The
Company entered into this agreement effective in December 2003. Prior to
December 2003, the Company did not have lease commitments. Rental expense for
operating leases was $24,504 and $1,838 for the years ended December 31, 2004
and 2003, respectively.

The Company is obligated to pay Tower the following minimum future rental
commitments under the noncancelable operating lease as of December 31, 2004:

       Office Lease Obligations              Year              Amount
                                             ----              ------
                                             2005              $22,985
                                             2006               23,542
                                             2007               22,051

In conjunction with the Company's working interests in undeveloped oil and gas
prospects, the Company must pay approximately $93,000 in delay rentals during
the fiscal year ending December 31, 2005 to maintain the right to explore these
prospects. The Company continually evaluates its leasehold interests, therefore
certain leases may be abandoned by the Company in the normal course of business.

In addition to the delay rental payments, the Company's Douglas Project acreage
is controlled through an exploration agreement that provides for the right to
pursue exploration and developmental activities within this acreage block. The
Company must pay $1,000,000 in acquisition costs in order to acquire these
leases. The Company is obligated to make a payment of $250,000 by June 1, 2005,
and $750,000 by June 1, 2006.

NOTE 8 - SUBSEQUENT EVENTS

On January 5, 2005, the outstanding preferred shares automatically converted
into 670,000 shares of common stock pursuant to the placement agreement, based
upon the Company's common stock trading above $2.50 for 15 calendar days.

                                      F-20

<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


On January 13, 2005, warrants to purchase 90,000 shares of the Company's common
stock were exercised at an exercise price of $1.09 per share. The Company
received proceeds of $98,100 in conjunction with this exercise.

On March 1, 2005, warrants to purchase 50,000 shares of the Company's common
stock were exercised at an exercise price of $1.09 per share. The Company
received proceeds of $54,500 in conjunction with this exercise.

On March 23, 2005, the Company signed a letter of intent to acquire 100% of the
outstanding common stock of Tower Colombia Corporation in exchange for 5.8
million shares of restricted common stock. In conjunction with the merger, Pat
O'Brien will continue as Chief Executive Officer and as Chairman of American.
Mr. O'Brien also is the president of Tower. Bob Solomon, currently Vice
President of Tower, will become Vice President of American and will be
responsible for oil and gas economic and financial evaluations and the
acquisition and disposition of oil and gas assets. Kendell Tholstrom, currently
Vice President of Tower and a Director of American, will also become
Vice-President of American and will be responsible for oil and gas operations.
The Company will obtain a fairness opinion prior to closing.

On March 23, 2005, the Company approved and entered into an agreement with
Tower pursuant to which Tower provides, effective as of January 17, 2005,
certain management services, including, but not limited to, human resource
management, asset management services, and accounting and data management
services for a monthly management fee of $30,000. This management services
agreement will terminate on the earlier of May 31, 2005 or the closing date of
the merger between the Company and Tower.

NOTE 9 -  INFORMATION REGARDING PROVED OIL AND GAS RESERVES (UNAUDITED)

The information presented below regarding the Company's oil and gas reserves
were prepared by independent petroleum engineering consultants. All reserves are
located within the continental United States.

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 developed oil and gas reserves are those expected to be recovered through
existing wells with existing equipment and operating methods. The determination
of oil and gas reserves is highly complex and interpretive. The estimates are
subject to continuing change as additional information becomes available.

The complete definition of proved oil and gas reserves appears at Regulation S-X
4-10 (a) (2) (3) and (4). The complete definition of proved developed oil and
gas reserves appears at Regulation S-X 4-10 (a) (4), 17 CFR 210. 4-10 (a) (4).

                                      F-21
<PAGE>


                            AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


Estimated net quantities of proved developed and undeveloped reserves of oil and
gas for the year ended December 31, 2004 and 2003 are as follows:

December 31, 2004                                      Oil (BBLS)     Gas (MCF)
--------------------------------------------------------------------------------

Beginning of year                                          70,900     1,526,800
Revisions of Previous quantity estimates                  (33,513)      190,853
Extensions, discoveries and improved recoveries           320,577       149,248
Sales of reserves in place                                (23,405)   (1,471,666)
Production                                                (12,849)      (48,965)
                                                       ----------    ----------
End of year                                               321,710       346,270
                                                       ==========    ==========

Proved developed reserves-end of year                     147,205       216,867
                                                       ==========    ==========


December 31, 2003                                      Oil (BBLS)      Gas (MCF)
--------------------------------------------------------------------------------
Beginning of year                                            --            --
Revisions of Previous quantity estimates                     --            --
Extensions, discoveries and improved recoveries            71,590     1,548,230
Sales of reserves in place                                   --            --
Production                                                   (690)      (21,430)
                                                       ----------    ----------

End of year                                                70,900     1,526,800
                                                       ==========    ==========

Proved developed reserves-end of year                       4,300       525,600
                                                       ==========    ==========


            STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
                    RELATING TO PROVED OIL AND GAS RESERVES

Future net cash flows presented below are computed using year-end prices and
costs. Future corporate overhead expenses and interest expense have not been
included.

                                          December 31, 2004   December 31, 2003
                                          -----------------   -----------------
Future cash inflows                         $ 15,566,000        $  7,174,000
Future costs:
   Production                                 (2,843,000)         (1,801,000)
   Development                                (1,973,000)         (1,260,000)
                                            ------------        ------------
Future net cash flows                         10,750,000           4,113,000
10% discount factor                           (5,094,000)         (1,274,000)
                                            ------------       ------------
Standardized measure of discounted
 future net cash flows                      $  5,656,000        $  2,839,000
                                            ============        ============

                                      F-22

<PAGE>


                           AMERICAN OIL & GAS, INC.
                          NOTES TO FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


The principal sources of changes in the standardized measure of discounted
future net cash flows during the years ended December 31, 2004 and 2003 are as
follows:


                                                     December 31,   December 31,
                                                        2004           2003
                                                     ------------   ------------

Beginning balance                                    $ 2,839,000    $      --
Sales and transfers of oil and gas produced             (666,000)       (60,000)
Net (decrease) in prices and production costs            (13,000)          --
Sales of minerals in place                            (2,065,000)          --
Extensions and discoveries                             4,975,000      4,054,000
Changes in estimated future development costs            (94,000)    (1,155,000)
Revisions in previous quantity estimates                  (9,000)          --
Accretion of discount                                    284,000           --
Change in rates of production and other                  405,000           --
                                                     -----------    -----------
Ending balance                                       $ 5,656,000    $ 2,839,000
                                                     ===========    ===========


The standardized measure of discounted future net cash flows relating to proved
oil and gas reserves and the changes in standardized measure of discounted
future net cash flows relating to proved oil and gas reserves were prepared in
accordance with the provisions of SFAS 69. Future cash inflows were computed by
applying current prices at year-end to estimated future production. Future
production and development costs (including the estimated asset retirement
obligation) are computed by estimating the expenditures to be incurred in
developing and producing the proved oil and gas reserves at year-end, based on
year-end costs and assuming continuation of existing economic conditions. Future
income tax expenses are calculated by applying appropriate year-end tax rates to
future pretax cash flows relating to proved oil and gas reserves, less the tax
basis of properties involved and tax credits and loss carryforwards relating to
oil and gas producing activities. Future net cash flows are discounted at the
rate of 10% annually to derive the standardized measure of discounted future
cash flows. This calculation procedure does not necessarily result in an
estimate of the fair market value of the present value of the Company's oil and
gas properties.

                                      F-23