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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q

                                   (Mark One)
  [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
                                   ACT OF 1934
                  For the Quarterly Period Ended June 30, 2004

 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
                                     OF 1934
       For the transition period from _____________ to ___________________

                        Commission file number: 001-31679

                             TETON PETROLEUM COMPANY

             (Exact Name of Registrant as Specified in its Charter)


           Delaware                                     84-1482290
           --------                                     ----------
(State or Other Jurisdiction of                      (I.R.S. Employer
 Incorporation or Organization)                      Identification No.)

                                (303)-542-1878
               (Registrant's Telephone Number including area code)


                            1600 Broadway, Suite 2400
                           Denver, Colorado 80202-4921
                     (Address of Principal Executive Office)

Check  whether  the  registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act during  the  preceding  12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days.

Yes X   No __
    ----

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-3 of the Exchange Act).

Yes __No   X
          --

APPLICABLE  ONLY TO  ISSUERS  INVOLVED  IN  BANKRUPTCY  PROCEEDINGS  DURING  THE
PRECEDING FIVE YEARS:

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

Yes __ No ___

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

As of August 12, 2004, 9,121,806 shares of the issuer's common stock were
outstanding.



                             TETON PETROLEUM COMPANY

                               Table of Contents
                          PART I. FINANCIAL INFORMATION


Item 1 Financial Statements

Unaudited Consolidated Financial Statements

       Consolidated Balance Sheets June 30, 2004 (Unaudited)
       and December 31, 2003

       Unaudited Consolidated Statements of Operations and Comprehensive Loss
       Three months ended June 30, 2004 and 2003

       Unaudited Consolidated Statements of Operation and Comprehensive Loss
       Six months ended June 30, 2004 and 2003

       Unaudited Consolidated Statements of Cash Flows
       Three months ended June 30, 2004 and 2003

Notes to Unaudited Consolidated Financial Statements

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

Item 3.       Quantitative and Qualitative Disclosures about Market Risk

Item 4.       Controls and Procedures

PART II.    OTHER INFORMATION

Item 1.       Legal Proceedings

Item 2.       Changes in Securities Use of Proceeds and Issuer Purchases
              of Equity Securities

Item 3.       Defaults Upon Senior Securities

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

Item 5.       Other Information

Item 6.       Exhibits and Reports on Form 8-K

SIGNATURES




                             TETON PETROLEUM COMPANY

                          PART I. FINANCIAL INFORMATION

                           Consolidated Balance Sheets



                                                                      June 30,       December 31,
                                                                        2004             2003
                                                                     (Unaudited)       (Audited)
                                                                     -----------     ------------
                                     Assets
Current assets
   Cash ..........................................................   $  8,577,869    $  7,588,439
   Proportionate share of Goloil accounts receivable .............         10,971          15,739
   Proportionate share of Goloil VAT and other accounts
    receivable ...................................................      1,765,612       1,078,369
   Proportionate share of Goloil inventory .......................        529,556         448,812
   Prepaid expenses and other assets .............................        157,705          95,693
                                                                     ------------    ------------
        Total current assets .....................................     11,041,713       9,227,052
                                                                     ------------    ------------

Non-current assets
   Oil and gas properties, net (successful efforts) ..............      7,375,761       9,339,786
   Cogeneration plant construction in progress ...................      1,725,301       1,700,696
   Fixed assets, net .............................................        522,280         450,841
                                                                     ------------    ------------
         Total non-current assets ................................      9,623,342     11,491,323
                                                                     ------------    ------------

Total assets .....................................................   $ 20,665,055    $ 20,718,375
                                                                     ============    ============

                      Liabilities and Stockholders' Equity

Current liabilities
   Accounts payable and accrued liabilities ......................   $    439,218    $    376,429
   Proportionate share of Goloil accounts payable and
    accrued liabilities ..........................................      3,274,658       2,590,901
   Current portion of proportionate share of notes payable
    owed to affiliate (Note 2) ...................................     10,677,787       7,419,409
                                                                     ------------    ------------
         Total current liabilities ...............................     14,391,663      10,386,739
                                                                     ------------    ------------

Non-current liabilities
   Asset retirement obligation....................................        131,000         126,500
                                                                     ------------    ------------
         Total non-current liabilities ...........................        131,000         126,500
                                                                     ------------    ------------
         Total liabilities .......................................     14,522,663      10,513,239
                                                                     ------------    ------------

Commitments and contingencies

Stockholders' equity
   Series A convertible preferred stock, $.001 par value,
    25,000,000 shares authorized, 281,460 and 618,231 issued
    and outstanding at June 30, 2004 and December 31, 2003.
    Liquidation preference at June 30, 2004 and
    December 31, 2003 of $1,249,838 and $2,689,305, respectively..            281             618
   Common stock, $0.001 par value, 250,000,000 shares
    authorized, 9,114,663 and 8,584,068 shares issued and
    outstanding at June 30, 2004 and December 31, 2003,
    respectively .................................................          9,115           8,584
   Additional paid-in capital ....................................     37,677,175      37,073,366
   Unamortized preferred stock dividends..........................            --         (118,610)
   Accumulated deficit ...........................................    (32,160,079)    (27,657,578)
   Foreign currency translation adjustment .......................        615,900         898,756
                                                                     ------------    ------------
         Total stockholders' equity ..............................      6,142,392      10,205,136
                                                                     ------------    ------------

Total liabilities and stockholders' equity .......................   $ 20,665,055    $ 20,718,375
                                                                     ============    ============


See notes to unaudited consolidated financial statements




                             TETON PETROLEUM COMPANY

     Unaudited Consolidated Statements of Operations and Comprehensive Loss



                                                               For the Three Months Ended
                                                                       June 30,
                                                               --------------------------
                                                                  2004            2003
                                                               -----------    -----------

Sales ......................................................   $ 3,589,638    $ 2,978,554

Cost of sales and expenses
   Oil and gas production ..................................       708,996        513,011
   Transportation and marketing ............................          - -         320,234
   Taxes other than income taxes ...........................     2,312,750      1,250,134
   Export duties............................................         - -          598,970
   Exploration .............................................       172,988        103,665
   General and administrative - Goloil .....................       195,643        167,928
   General and administrative - Teton Petroleum ............     1,726,816        981,023
   Depreciation, depletion and amortization ................       341,645        423,860
                                                               -----------    -----------
         Total cost of sales and expenses ..................    5,458,838       4,358,825
                                                               -----------    -----------

Loss from operations .......................................    (1,869,200)    (1,380,271)
                                                               -----------    -----------

Other income (expense)
  Other income .............................................        16,325            291
  Interest expense ........................................       (110,685)       (49,684)
                                                               -----------    -----------
         Total other income (expense) ......................       (94,360)       (49,393)
                                                               -----------    -----------

Net loss before taxes ......................................    (1,963,560)    (1,429,664)
                                                               -----------    -----------

Foreign income tax .........................................       (16,829)       (17,576)

Net loss ...................................................    (1,980,389)    (1,447,240)

Imputed preferred stock dividends for inducements
and beneficial conversion charges                                      --             --

Preferred stock dividends ...................................      (25,487)           --

Net loss applicable to common stock ........................    (2,005,876)    (1,447,240)

Other comprehensive (loss) income, net of tax
   Effect of exchange rates ................................         2,300        369,500
                                                               -----------    -----------
         Other comprehensive (loss) income .................         2,300        369,500
                                                               -----------    -----------

Comprehensive loss .........................................   $(2,003,576)   $(1,077,740)
                                                               ===========    ===========

Basic and diluted weighted average common shares outstanding     9,112,009      6,674,988
                                                               ===========    ===========

Basic and diluted (loss) income per common share ...........   $      (.22)   $      (.22)
                                                               ===========    ===========


See notes to unaudited consolidated financial statements.




                             TETON PETROLEUM COMPANY

     Unaudited Consolidated Statements of Operations and Comprehensive Loss



                                                                For the Six Months Ended
                                                                       June 30,
                                                               --------------------------
                                                                  2004            2003
                                                               -----------    -----------

Sales ......................................................   $ 6,552,138    $ 6,387,272

Cost of sales and expenses
   Oil and gas production ..................................     1,331,273        839,316
   Transportation and marketing ............................         - -          601,199
   Taxes other than income taxes ...........................     4,286,025      2,677,706
   Export duties............................................         - -        1,158,210
   Exploration .............................................       327,764        196,813
   General and administrative - Goloil .....................       379,729        387,485
   General and administrative - Teton Petroleum ............     3,829,454      1,753,922
   Depreciation, depletion and amortization ................       751,315        756,598
                                                               -----------    -----------
         Total cost of sales and expenses ..................   10,905,560       8,371,249
                                                               -----------    -----------

Loss from operations .......................................    (4,353,422)    (1,983,977)
                                                               -----------    -----------

Other income (expense)
  Other income .............................................        33,965          1,869
  Interest expense ........................................       (166,216)      (123,799)
                                                               -----------    -----------
         Total other income (expense) ......................      (132,251)      (121,930)
                                                               -----------    -----------

Net loss before taxes ......................................    (4,485,673)    (2,105,907)
                                                               -----------    -----------

Foreign income tax .........................................       (16,829)      (122,418)

Net loss ...................................................    (4,502,502)    (2,228,325)

Imputed preferred stock dividends for inducements
and beneficial conversion charges                                 (521,482)           --


Preferred stock dividends...................................       (56,975)           --


Net loss applicable to common stock ........................    (5,080,959)    (2,228,325)

Other comprehensive (loss) income, net of tax
   Effect of exchange rates ................................      (282,856)       455,500
                                                               -----------    -----------
         Other comprehensive (loss) income .................      (282,856)       455,500
                                                               -----------    -----------

Comprehensive loss .........................................   $(5,363,815)   $(1,772,825)
                                                               ===========    ===========

Basic and diluted weighted average common shares outstanding     8,927,699      6,518,278
                                                               ===========    ===========

Basic and diluted (loss) income per common share ...........   $      (.57)   $      (.34)
                                                               ===========    ===========


            See notes to unaudited consolidated financial statements.



                             TETON PETROLEUM COMPANY

                 Unaudited Consolidated Statements of Cash Flows



                                                                For the Six Months Ended
                                                                        June 30,
                                                               ---------------------------
                                                                  2004            2003
                                                               -----------     -----------
Cash flows from operating activities

   Net loss ...............................................    $(4,502,502)    $(2,228,325)
                                                               -----------     -----------
   Adjustments to reconcile net (loss) income to net
    cash used in operating activities
     Depreciation, depletion, and amortization ............        751,315         756,598
     Stock and warrants issued for services and interest ..        150,594          97,901
   Amortization of note payable discount...................            --              347
   Changes in assets and liabilities
       Accounts receivable ................................       (682,475)       (638,806)
       Prepaid expenses and other assets ..................        (62,012)        (32,426)
       Inventory ..........................................        (80,744)       (141,300)
       Accounts payable and accrued liabilities ...........      1,317,601        (625,326)
                                                               -----------     -----------
                                                                 1,394,279        (583,012)
                                                               -----------     -----------
         Net cash (used in) operating activities ..........     (3,108,223)     (2,811,337)
                                                               -----------     -----------
Cash flows from investing activities
   Repayment of loans from Goloil..........................      3,658,252             --
   Oil and gas properties and equipment expenditures ......     (3,004,632)     (2,889,820)
                                                               -----------     -----------
        Net cash provided by (used in)investing activities..       653,620      (2,889,820)
                                                               -----------     -----------

Cash flows from financing activities
   Net (repayments) proceeds from advances under notes
    payable from affiliate..................................     3,258,378       1,399,028
   Proceeds from stock subscriptions........................           --        1,939,610
   Proceeds from issuance of stock, net of issue costs
    of $50,000 and $98,100..................................        499,999      1,091,900
   Proceeds from notes payable..............................           --          478,750
   Payment of dividends.....................................       (31,488)            --
                                                               -----------     -----------
         Net cash provided by financing activities .........     3,726,889       4,909,288
                                                               -----------     -----------

Effect of exchange rates ...................................      (282,856)        455,500
                                                               -----------     -----------

Net increase (decrease) in cash ............................       989,430        (336,369)

Cash - beginning of year ...................................     7,588,439         712,013
                                                               -----------     -----------

Cash - end of period .......................................   $ 8,577,869     $   375,644
                                                               ===========     ===========


Supplemental disclosure of non-cash activity:

During the six  months  ended  June 30,  2004,  the  Company  had the  following
transactions:

     100,000  warrants  were  issued  to a  consultant  for  services  valued at
     $102,094.

     13,750  shares of common  stock were issued for the  settlement  of accrued
     liabilities at December 31, 2003 valued at $58,700.

     The Company  issued (i)  1,306,669  non-qualified  options to officers  and
     directors  valued at $3,243,406;  and (ii) 108,331  incentive stock options
     valued at $268,899 with no expense being recorded for accounting purposes.

     The Company  issued 5,000  shares of common  stock for  services  valued at
     $20,000.

     The Company has (i) issued warrants valued at $48,697 to consultants;  (ii)
     issued 5,626 share of common stock  valued at $23,329 to  consultants;  and
     (iii)  issued  5,955  shares of common stock valued at $28,500 for services
     rendered by the outside directors.

     Approximately $1,317,000 of capital expenditures for oil and gas properties
     were  included  in  accounts  payable  at June 30,  2004 and  approximately
     $1,786,000 of capital expenditures were in accounts payable at December 31,
     2003 for a decrease during the six months ended June 30, 2004 of $469,000.

     Conversion of 463,207 shares of preferred  stock,  plus dividends of 37,057
     shares converted into 500,264 shares of common stock.

     We issued  50,000  warrants  valued at  $22,863  in  settlement  of accrued
     liabilities at December 31, 2003.

     We accrued dividends to preferred stockholders of $25,487 at June 30, 2004.

Supplemental disclosure of non-cash activity:

During the six  months  ended  June 30,  2003,  the  Company  had the  following
transactions:

     7,408  shares of stock were issued to a consultant  for services  valued at
     $20,000 provided in 2001 and accrued in accounts payable.

     73,422 shares of stock and 66,667 warrants exercisable at $6.00 were issued
     to a  consultant  for  services  provided in 2002  valued at  $200,000  and
     accrued in accounts payable.

     3,700  warrants  issued  with debt and  valued at  $10,592  were  initially
     recorded as a discount on the note payable.  At June 30, 2003,  $347 of the
     discount had been amortized and recorded as financing costs.

     87,500  warrants  issued  with debt and  valued at $69,072  were  initially
     recorded as a discount on the  debentures.  At June 30,  2003,  none of the
     discount had been amortized and recorded as financing costs.

     Approximately $1,818,000 of capital expenditures for oil and gas properties
     was included in accounts payable at June 30, 2003.

See notes to unaudited consolidated financial statements.



 Notes to Unaudited Consolidated Financial Statements

Note 1 - Basis of Presentation and Significant Accounting Policies

The June 30, 2004 financial statements are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments),  which are, in the opinion of
management,  necessary for a fair  presentation  of the  financial  position and
operating results for the interim periods. The unaudited financial statements as
of June  30,  2004,  as is  customary  in the oil and gas  industry,  reflect  a
pro-rata  consolidation  of the Company's 50% interest in ZAO Goloil,  a Russian
closed joint-stock  company.  However,  see note 5 regarding the sale of Goloil.
The  unaudited  financial   statements   contained  herein  should  be  read  in
conjunction  with the financial  statements  and notes thereto  contained in the
Company's financial statements for the year ended December 31, 2003, as reported
in the Company's Form  10-KSB/A.  The results of operations for the period ended
June 30,  2004 are not  necessarily  indicative  of the  results  for the entire
fiscal year.

Certain  amounts for June 30, 2003 have been adjusted to include  adjustments to
exploration  expenses and  depreciation,  depletion and amortization made during
the fourth quarter of 2003.

Foreign Currency Exchange Rates

The  conversion  of the  functional  currency  of Goloil (a Russian  Company) in
rubles to the  reporting  currency  of U.S.  dollars is based upon the  exchange
rates in effect.  The  exchange  rates in effect at June 30,  2004 and 2003 were
29.03 and 30.38 rubles to the U.S.  dollar,  respectively.  The average rates in
effect  during the six months  ended June 30, 2004 and 2003 were 28.76 and 30.89
rubles to the U.S. dollar, respectively.

Earnings Per Share

At the March 19, 2003 shareholders' meeting, the Company's shareholders approved
a reverse 1 for 12 stock  split.  All share  amounts and earnings per share have
been adjusted to reflect the split.

All potential dilutive securities have an antidilutive effect on earnings (loss)
per share and  accordingly,  basic and dilutive  weighted average shares are the
same.

Note 2 - Proportionate Share of Liabilities

The  proportionate   share  of  accounts  payable  and  accrued  liabilities  of
$3,274,658 at June 30, 2004,  are  obligations of Goloil and not the Company nor
have they been guaranteed by the Company.

The  Company's  50%  pro-rata  share of notes  payable  advances  made which are
advances to Goloil by an affiliate  are also  obligations  of Goloil at June 30,
2004 and not the Company nor have they been guaranteed by the Company.  However,
see note 5 regarding the sale of Goloil.

The  Company's  pro-rata  share of Goloil  notes  payable  owed to an  affiliate
totaled  $10,677,787  at June 30, 2004.  The  proceeds  were used to pay certain
operating expenses and capital  expenditures of Goloil.  These notes provide for
interest  rates  of 8%,  with  quarterly  interest  payments,  maturing  through
December 2004. These notes are secured by substantially  all Goloil assets.  The
notes  payable  will be repaid from cash flow from ZAO Goloil as  available,  or
extended to future periods. However, see note 5 regarding the sale of Goloil.

Note 3 - Stockholder's Equity

Private Placements of Common Stock

During the six months  ended  June 30,  2004,  30,331  common  shares  valued at
$130,529 were issued for (i) the  settlement of accrued  liabilities of $82,029;
and (ii) services provided by consultants of $20,000 and (iii) services provided
by the advisory board of $28,500.

50,000 warrants were issued to settle a liability at December 31, 2003 valued at
$46,967.  We also issued 100,000 warrants to a consultant valued at $102,094 for
services.

Private Placements of Series A Convertible Preferred Stock

During the  six-month  period  ending  June 30, 2004 the  Company  received  the
following  proceeds from the issuance of privately  placed  preferred stock at a
price of $4.35 per share.

Proceeds of $499,999 (net of cash costs of $50,000) from the issuance of 126,436
shares of 8% convertible preferred stock.

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

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

In order to induce  convertible  preferred  shareholders  to  convert  to common
shares,  the Company agreed to issue  dividends of 8% for a full year,  totaling
$140,815,  payable  in common  shares,  and agreed to issue,  402,990  warrants,
valued at  $262,057,  resulting in a total  inducement  charge of $402,872 to be
recognized  as a  preferred  dividend in the first  quarter for those  investors
which accepted the inducement offer. As a result, shareholders converted 463,207
of 8% convertible preferred shares to common stock at a price of $4.35 per share
during the first  quarter of 2004.  The  warrants  issued were valued  using the
Black-Scholes option pricing model using the following  assumptions:  volatility
of 55.2%, a risk-free rate of 1.59%, zero dividend  payments,  and a life of two
years.

Note 4 - Stock Options

At the annual meeting on March 19, 2003, the Company's  shareholders approved an
employee stock option plan and authorized  2,083,333  shares of Common Stock for
issuance thereunder.  Under the plan, incentive and non-qualified options may be
granted.

During the first quarter of 2004,  the Company  issued  1,306,669  non-qualified
options to  employees,  officers and directors  valued at  $3,243,406  using the
Black-Scholes option-pricing model with the following assumptions: volatility of
55.2%, a risk-free rate of 4%, zero dividend payments,  and a life of ten years.
The Company also issued  108,331  incentive  options to employees,  officers and
directors valued at $268,899 using the Black-Scholes  option-pricing model under
the same assumptions described above.

At the annual  meeting on July 16, 2004 the  Company's  shareholders  approved a
stock  compensation  plan for  non-employees.  The  maximum  number of shares of
Common Stock with respect to which awards can be granted is 1,000,000 shares. As
of August 12, 2004 no grants have been authorized.

The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards  No.  123,  "Accounting  for  Stock-Based   Compensation."
Accordingly,  no compensation  cost has been recognized for stock options issued
to  employees,   officers  and  directors  under  the  stock  option  plan.  Had
compensation  cost for the Company's  options issued to employees,  officers and
directors been  determined  based on the fair value at the grant date for awards
consistent  with the provisions of SFAS No. 123, as amended by SFAS No. 148, the
Company's  net loss and basic loss per common  share would have been  changed to
the pro forma amounts indicated below:

                                                             For the Six Months Ended
                                                                     June 30,
                                                           ---------------------------
                                                                2004          2003
                                                           ------------   ------------
Net loss - as reported                                     $(5,080,959)   $(2,228,325)
Add fair value of employee compensation expense             (3,512,305)    (4,571,026)
                                                           -----------    -----------
Net loss per common share - pro forma                      $(8,593,264)   $(6,799,351)
Basic loss per common share - as reported                  $     (0.57)   $     (0.34)
                                                           ===========    ===========
Basic loss per common share - pro forma                    $     (0.96)   $     (1.04)
                                                           ===========    ===========



                                                        For the Three Months Ended
                                                                June 30,
                                                        -------------------------
                                                           2004           2003
                                                       ------------   ------------

Net loss - as reported                                 $(2,005,876)   $(1,447,240)

Add fair value of employee compensation expense                 --    $(4,571,026)
                                                       -----------    -----------
Net loss per common share - pro forma                  $(2,005,876)   $(6,018,266)
                                                       ===========    ===========
Basic loss per common share - as reported              $     (0.22)   $     (0.22)
                                                       ===========    ===========
Basic loss per common share - pro forma                $     (0.22)   $     (0.90)
                                                       ===========    ===========


Note 5-Proposed Sale of Goloil Shares

On August 3, 2004 the Company finalized its sale of Goloil to RussNeft,  an Open
Joint-Stock Company organized under the laws of the Russian Federation. Pursuant
to the terms of the Sale and Purchase Agreement (the "Agreement"), RussNeft paid
$8,960,000  for all of the Company's  shares of Goloil.  In connection  with the
Agreement,  the  Company  entered  into a  separate  agreement  with  Goloil for
repayment of all of the  outstanding  advances owed to the Company.  At the date
the parties  reached  agreement  in April,  the Company  had  advances  totaling
$6,040,000,  of which  $3,658,000 had been received as of June 30, 2004.  During
August  2004 the  Company  paid the  remaining  amounts  owed for an  investment
banking fee totaling $750,000 in connection with the Agreement and estimates its
expenses, incurred after June 30, 2004 in connection with the negotiation of the
Agreement to be $135,000.

The Company had recorded the advances as investments  in Goloil and  accordingly
such amounts have been included in the carrying value of oil and gas properties.

The effective date of the transaction will be July 1, 2004 and accordingly,  the
Company  will  record  a gain of  approximately  $13,000,000  during  the  third
quarter.

The following  unaudited pro forma  condensed  balance sheet gives effect to the
sale of Goloil shares  assuming the sale of Goloil  shares  occurred on June 30,
2004:

Current assets                   $ 19,012,000
Non-current assets                     30,000
                                 ------------
Total assets                     $ 19,042,000
                                 ============

Current liabilities              $    439,000
Stockholders' equity               18,603,000
                                 ------------
Total liabilities and
  stockholders' equity           $ 19,042,000
                                 ============

The  condensed pro forma balance  sheet  reflects the  historical  balance sheet
included in this Form 10-Q adjusted for the following:

a.   The  proceeds  of  $8,960,000  from  the  sale of  Goloil  shares  plus the
     remaining $2,382,000 advances to be received,  subsequent to June 30, 2004,
     less  estimated  expenses  of $885,000  and  alternative  minimum  taxes of
     $181,000.

b.   Elimination   of  Goloil's   assets  and   liabilities,   which  have  been
     historically consolidated on a pro rata basis.

c.   Recording a gain from the disposition of a discontinued  operation,  net of
     tax, of approximately $13,000,000.

Assuming the sale occurred on June 30, 2004 Teton would have had, on a pro forma
basis,  an estimated net loss from  continuing  operations  applicable to common
shares for the six months ended June 30, 2004 of  $4,380,000  and as a result of
the sale, net income of approximately $7,995,000. On a pro forma basis, the loss
per share from  continuing  operations  would be $.49 per  common  share and net
income per common share would be $.90.


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

FORWARD LOOKING STATEMENTS

With the  exception of  historical  matters,  the matters  discussed  herein are
forward looking statements that involve risks and uncertainties. Forward looking
statements include,  but are not limited to, statements  concerning  anticipated
trends in  revenues,  and may  include  words or  phrases  such as "will  likely
result," "are  expected  to," "will  continue,"  "is  anticipated,"  "estimate,"
"projected,"  "intends  to," or  similar  expressions,  which  are  intended  to
identify  "forward  looking  statements"  within  the  meaning  of  the  Private
Securities  Litigation  Reform Act of 1995.  Our  actual  results  could  differ
materially from the results discussed in such forward-looking statements.  There
is absolutely no assurance that we will achieve the results expressed or implied
in forward-looking  statements.  Among other factors discussed elsewhere in this
Report, our ability to successfully implement our strategy to acquire additional
oil and gas  properties and our ability to  successfully  manage and operate any
oil and gas properties acquired by us will affect our future results.

                        Management Discussion & Analysis

Overview

Teton Petroleum Company is an independent oil and gas exploration and production
company whose primary focus,  until July 1, 2004 was the Russian  Federation and
former Commonwealth of Independent States ("CIS").  However, see "Sale of Goloil
Interest"  below.  The Company,  through its wholly owned  subsidiary,  Goltech,
owned a 35.30% equity interest in Goloil.  RussNeft  owned,  until the sale, the
remaining 64.70% of Goloil through two  subsidiaries,  McGrady and InvestPetrol.
McGrady  held 35.29% and  InvestPetrol  held 29.41% of the equity  interests  in
Goloil.  However, until Goltech and McGrady received the return of 100% of their
capital  investment  in Goloil,  they were each  entitled to a 50% net profit in
Goloil. Goloil is managed by a seven-person management board on which we had two
representatives.   Pursuant   to  the   existing   agreements   among   Goloil's
shareholders,  Goltech and McGrady shared equally in capital expenditures, gross
revenues,  costs  and  expenses,  until  they  received  100%  return  of  their
investments in Goloil. Limited Liability Company Energosoyuz-A ("EUA"), a wholly
owned  subsidiary of RussNeft,  is the lessor of certain oil field facilities to
Goloil  pursuant  to a Lease  Agreement  No.  EST  160/000630  (the  "EUA  Lease
Agreement") among EUA as lessor and Goloil as lessee dated as June 2000. EUA was
also the recipient of a production payment ("Production  Payment") consisting of
50%  of  Goloil's  production  (or  at  EUA's  option,  cash  in  lieu  of  such
production).  Since October 2003 through the effective date of the sale EUA took
cash instead of oil under the Production  Payment in the amount of approximately
$650,000  per month.  In  addition,  Goloil has been  selling its oil at a fixed
price of 2,400 rubles per ton or $11.50 per barrel and starting May 2004,  2,700
rubles per ton or $12.74 per barrel.  It is possible that a significant  portion
of such sales have been made to or through one or more affiliates of RussNeft.

RussNeft,  which was  founded in the fall of 2002,  is one of  Russia's  largest
independent oil producers.  In September 2003, RussNeft acquired a 64.70% equity
interest in Goloil in a private  transaction  in which it  purchased  all of the
ownership  interests  in McGrady and  InvestPetrol,  the other  shareholders  of
Goloil.  At that time,  RussNeft  also acquired EUA, the lessor of various wells
and  facilities  to Goloil  under the EUA Lease  Agreement.  In  acquiring  such
interests,  RussNeft  became  entitled to appoint a majority  of the  management
board of Goloil and acceded to EUA's interest in the Production Payment.

Goloil holds a twenty-five  year  renewable  license to produce oil and gas in a
portion of Western Siberia. The license was issued by the Russian Federation and
expires in 2022, but may be extended if Goloil  complies with certain  specified
conditions  and undertakes  additional  operations at the end of the term of the
license.  The Goloil license encompasses 187 square kilometers (78 square miles)
in the south  central  portion of the west Siberian  basin.  The license area is
located approximately 50 miles north of Nizhnevartovsk in western Siberia. Three
oil producing fields are located within the license area: Golevaya, Eguryak, and
South Eguryak.

Financial highlights from the quarter ended June 30, 2004 include the following:

o    Teton's  share of  production  from  Goloil  increased  by 8.4% to  178,022
     barrels year over year in the second quarter.

o    Second  quarter  production  revenues  increased year over year by 20.5% to
     $3,589,638 primarily as a consequence of the higher oil prices.

o    Teton's net loss applicable to shareholders  for the second quarter widened
     from $1,447,240 to $2,005,876 from the same period in 2003.

During 2004 Teton's activities have been focused in three areas:

1)   Discussions  with its partner  RussNeft  over the  management of its Goloil
     subsidiary;

2)   Negotiating and finalizing the sale of Goloil to RussNeft; and

3)   Evaluating  potential  acquisitions  of other  producing oil  properties in
     Russia, the CIS and the United States.

Sale of Goloil Interest to RussNeft

In September  2003,  RussNeft,  a newly formed Russian  independent oil producer
acquired  the 64.70% of Goloil  shares  held by  McGrady  and  InvestPetrol  and
assumed responsibility for operating Goloil's Eguryak License.

Commencing  October 1 2003,  RussNeft  began selling  Goloil's  production to an
entity  believed by the Company to be an affiliate of RussNeft for a fixed price
of 2,400 rubles per ton ($11.50 per  barrel),  a price  substantially  below the
blended market price Goloil  formerly  received  selling its production into the
export,  near abroad and domestic markets and significantly below current market
prices. As a consequence, the Company estimates its revenues after taxes for the
quarter were reduced by  approximately  $1.44 million in fourth  quarter of 2003
and by $2.02  million  in the first  quarter  of 2004  from  what it would  have
received  under  its  previous  arrangements.   Moreover,   since  this  pricing
arrangement  prevailed  through the end of the fourth  quarter  and beyond,  the
Company had to significantly  reduce the present value of its reserves effective
January 1, 2004,  as detailed in its Form  10-KSB/A for the year ended  December
31, 2003.

Efforts to resolve these and other issues with  RussNeft  culminated in a series
of meetings in Russia starting in November 2003 between  Company  executives and
representatives  of RussNeft,  which failed to yield an  acceptable  resolution.
Shortly  thereafter,  the Company and RussNeft  began to discuss the terms of an
exit via a sale of the Company's interest in Goloil to RussNeft.

The sale of the Company's interest in Goloil,  pending shareholder approval, was
announced on April 12, 2004 and on May 12, 2004 the Company provided  additional
detail concerning the sale, including, among other things, the sales price, in a
press  release.  The  purchase  price  for our  35.30%  interest  in  Goloil  is
$8,960,229  in cash.  Goloil also repaid  advances made by the Company to Goloil
totaling  $6,039,771,  of which  $3,569,051 of the principal and $131,452 of the
accrued  interest had been repaid as of June 30, 2004. The advances were made to
Goloil by the Company to finance our 50% share of Goloil's capital  expenditures
and currently  bear interest at the rate of 8% per annum.  The gross proceeds of
the two transactions to the Company total $15,000,000.  The Company shareholders
approved the sale at our annual  meeting held July 16, 2004, and the sale closed
during August 2004. See note 5 to financial statements,  which include pro forma
information assuming the sale had occurred as of June 30, 2004.

2004 Operational and Financial Objectives - Update

As described in the Company's 2003 10-KSB/A, the Company's original plans called
for it to focus its efforts in two areas:  1) the continued  development  of the
Goloil License and 2) the  acquisition,  development and exploitation of similar
projects in Russia,  FSU and North America.  With the sale of Goloil,  the first
objective is no longer operative and the second objective will become paramount.
In addition,  as the Company no longer has an operating  asset, the Company will
be significantly reducing its general and administrative costs.

The  Company  has  been  actively  seeking  to make  acquisitions  of  producing
properties in Russia, FSU and North America,  where the Company itself will have
the  opportunity  to jointly or fully  operate the  property.  Specifically  the
Company has  determined to target  properties  with  existing  production in the
range of  4,000 to 6,000  barrels  of oil per day  with  upside  potential  from
developmental drilling and other exploitation opportunities. Among the financial
criteria for such  acquisitions is that they generate  positive cash flow and be
accretive to the Company  earnings in a reasonable  period of time. To date, the
Company has evaluated 300 projects, rejected 291 projects, submitted 4 offers (2
of which are  outstanding),  with 5 projects  remaining  open,  pending  further
review.

The  Company's  plans to pursue such  acquisitions  means that it will incur due
diligence  and  legal  expenses,  that  will be  reflected  in its  general  and
administrative  expenses.  The  company  is now  devoting  significant  internal
resources  to  evaluating  acquisitions  while also  utilizing  the  services of
outside technical, legal and accounting consultants.

Results of Operations

The  table  below  summarizes  some  of the  most  important  components  of our
revenues,  operating  costs and net loss.  Please note that since Teton has been
absorbing 50% of the cost of producing the oil paid under the Goloil  production
payment  (included in the cost  amounts),  the Company's  per barrel  production
costs are effectively doubled.

               Operating Highlights for the Quarter ended June 30
                   (in U.S. Dollars, unless otherwise noted)

                                           2004      2003     Change    % Change

Sales, Barrels                          178,022     164,273     13,749        8.4%
Average Daily Sales, Barrels              1,956       1,805        151        8.4%
Average Selling Price, $/barrel           20.16       18.13       2.03       11.2%
Revenues
                                      3,589,638   2,978,554    611,084       20.5%

Costs of Sales and Expenses,
 excl. DD&A
  Production Costs                      708,996     513,011    195,985       38.2%
  Transportation & Marketing                  -     320,234  (320,234)       -100%
  Taxes other than Income taxes
                                      2,312,750   1,250,134  1,062,616         85%
  Exploration cost (Geology &
   Geophysics)                          172,988     103,665     69,323      -66.9%
  Export Duties                              -      598,970   (598,970)    -100.0%
                                      ---------   ---------  ---------     -------
                                      3,194,734   2,786,014    408,720       14.7%

Results from Goloil Operations,
 before DD&A                            394,904     192,540    202,364           -
  Less General & Administrative
   Expense, Goloil                      195,643     167,928     27,715       16.5%
                                      ---------   ---------  ---------      ------
                                        199,261      24,612    174,649           -

Depreciation, Depletion &
Amortization, Goloil                    341,645     423,860   (82,215)      -19.4%

Operating Income (Loss), Goloil        (142,384)   (399,248)   256,864           -

General & Administrative Expense,
 Teton                                1,726,816     981,023    745,793         76%

Operating Loss, Teton                (1,869,200) (1,380,271)  (488,929)          -


              Costs and Expenses during the Quarter ended June 30
                            (in U.S. $ per barrel)

                                           2004      2003      Change      % Change
Controllable Costs
  Production Costs                           3.72      3.12        .60        19.2%
  G&A - Goloil                               1.10      1.45      (0.35)      -24.1%
  G&A - Teton                               12.58      5.11       7.47       146.2%
                                         --------   -------    -------      ------
                                            17.40      9.68       7.72        79.8%

Non-Controllable Costs
  Transportation & Marketing                   -       1.95      (1.95)     -100.0%
  Taxes other than Income Taxes             11.80      9.44       2.36        25.1%
  Export Duties                               -        3.65      (3.65)     -100.0%
                                         --------  --------    -------      ------
                                            11.80     15.04      (3.24)      -21.5%

During the second quarter,  the Company's net loss,  applicable to common stock,
widened from  $1,447,240 in the second quarter of 2003 to $2,005,876 or $558,636
after taking into account preferred dividends of $25,487 in 2004. On a per share
basis,  the Company's loss remained $0.22. The increased loss was largely due to
an  increase  in the  Company's  domestic  general  and  administrative  ("G&A")
expenses from $981,023 to $1,726,816.

The Company's share of Goloil revenues  increased year over year from $2,978,554
to $3,589,638 in the second quarter.  The increase reflected a 11.2% increase in
average  selling  price from $18.13 to $20.16 per barrel and a 8.4%  increase in
production volume from 164,273 to 178,022 barrels. Please note that the $650,000
paid for the production  payment,  which is recorded as a reduction of revenues,
is less than one half of the  Company's  production  at the set price.  However,
sales quantities above assume that 50% of the volumes have been paid out for the
production payment.  Accordingly,  the average selling price received is greater
than the $12.74 per barrel discussed  previously.  Production costs increased by
$195,985,  or 38.2%, while taxes other than income taxes increased by $1,062,616
or 85%. The increase in production costs was tied to increased workover activity
and higher diesel fuel  expenditures.  Taxes other than income taxes include the
Russian  Minerals  Extraction  Tax and  Value  Added  Tax  (VAT)  and  represent
significant  expenses for all Russian oil producers.  The Mineral Extraction Tax
is a tax on revenues  tied to the price of Urals blend  crude,  a benchmark  for
exports.  Goloil no longer incurs export tariffs or transportation charges under
the marketing  arrangement  now in place;  all sales take place at the wellhead.
Teton's share of Goloil's  depreciation,  depletion,  and amortization  expenses
decreased by $82,215.

Second  quarter  domestic G&A expense at the Company  increased from $981,023 to
$1,726,816 year over year, an increase of 76.0%. The key factors contributing to
this increase  were an increase in  compensation  costs of $266,550,  as well as
increases in advertising  and public  relations  expenses of $51,677,  legal and
accounting  expenses  of  $279,121  and public  company  compliance  expenses of
$192,606.  In addition to the increase in  compensation  relating to  additional
staffing to meet Company goals and  objectives,  many of the other  increases in
G&A expenses were the result of its due diligence and financing  costs  incurred
in connection with  preliminary  negotiations to acquire and develop new oil and
gas properties in Russia.


             Operating Highlights for the Six months ended June 30
                  (in U.S. Dollars, unless otherwise noted)

                                         2004       2003        Change      % Change

Sales, Barrels                         345,183      315,577       29,606       9.4%
Average Daily Sales, Barrrels            3,793        3,468          325       9.4%
Average Selling Price, $/barrel          18.98        20.24        (1.26)     -6.2%
Revenues                             6,552,138    6,387,272      164,866       2.6%
Costs of Sales and Expenses, excl.
 DD&A
  Production Costs                   1,331,273      839,316      491,957      58.6%
  Transportation & Marketing                 -      601,199     (601,199)   -100.0%
  Taxes other than Income taxes      4,286,025    2,677,706    1,608,319      60.1%
  Exploration cost                     327,764      196,813      130,951
  Export Duties                              -    1,158,210   (1,158,210)   -100.0%
                                     ---------  -----------   ----------
                                     5,945,062    5,473,244      471,818       8.6%

Results from Goloil Operations,
 before DD&A                           607,076      914,028     (306,952)       -
  Less General & Administrative
  Expense, Goloil                      379,729      387,485        7,756      -2.0%
                                     ---------   ----------   ----------   -------
                                       227,347      526,543     (299,196)       -

Depreciation, Depletion &
Amortization, Goloil                   751,315      756,598       (5,283)      -.6%

Operating Loss, Goloil                (523,968)    (230,055)    (293,913)       -

General & Administrative Expense,
Teton                                3,829,454    1,753,922    2,075,532     118.3%

Operating Loss, Teton
                                    (4,353,422)  (1,983,977)  (2,369,445)       -


            Costs and Expenses during the Six months ended June 30
                           (in U.S. $ per barrel)

                                         2004       2003      Change% Change
Controllable Costs
  Production Costs                        3.86       2.66        1.20    45.1%
  G&A - Goloil                            1.10       1.23       (0.13)  -10.6%
  G&A - Teton                            11.09       5.57        5.52    99.1%
                                        ------      -----       -----   ------

                                         16.05       9.46        6.59    69.7%

Non-Controllable Costs
  Transportation & Marketing                 -       1.91       (1.91) -100.0%
  Taxes other than Income Taxes          12.42       8.49        3.93    46.3%
  Export Duties                             -        3.67       (3.67)  100.0%
                                        ------     ------       -----   ------
                                         12.42      14.07       (1.65)  -11.7%

During the six months ended June 30, 2004, the Company's net loss, applicable to
common stock, widened from $2,228,325 in 2003 to $4,502,502 or $2,274,177.  On a
per share basis,  the Company's loss widened from $0.34 per share to $0.57.  The
increased loss was largely due to an increase in the Company's  domestic general
and administrative ("G&A") expenses from $1,753,922 to $3,829,454 in addition to
an increased loss from Goloil activities.

The Company's share of Goloil revenues  increased year over year from $6,387,272
to  $6,552,138  during the  six-month  period.  The  increase  reflected  a 6.2%
decrease  in average  selling  price from $20.24 to $18.98 per barrel and a 9.9%
increase in production volume from 316,957 to 348,404 barrels.  Production costs
increased by $491,957,  or 58.6%,  while taxes other than income taxes increased
by $1,608,320 or 60.1%.  The increase in production  costs was tied to increased
workover activity and higher diesel fuel  expenditures.  Taxes other than income
taxes include the Russian Minerals  Extraction Tax and Value Added Tax (VAT) and
represent  significant  expenses  for all  Russian  oil  producers.  The Mineral
Extraction  Tax is a tax on revenues  tied to the price of Urals blend crude,  a
benchmark for exports.  Goloil no longer incurs export tariffs or transportation
charges under the marketing  arrangement  now in place;  all sales take place at
the  wellhead.  the Company's  share of Goloil's  depreciation,  depletion,  and
amortization expenses decreased by $5,283.

Six months  domestic G&A expense at the Company  increased  from  $1,753,922  to
$3,829,454 year over year, an increase of 118.3%.  The key factors  contributing
to this increase were an increase in  compensation  costs of $742,775  including
addition of management and the increase in  compensation  relating to additional
staffing to meet Company goals and  objectives,  many of the other  increases in
G&A expenses were the result of the Company's due diligence and financing  costs
incurred in connection with preliminary  negotiations to acquire and develop new
oil and gas properties in Russia.

Liquidity and Capital Resources

The  Company  had a cash  balance of  $8,577,869  on June 30, 2004 and a working
capital deficit of $3,349,950.  Excluding the pro rata consolidation of Goloil's
working capital deficit, Teton has a working capital surplus of $8,147,458.

As of August 12, 2004 the Company has  approximately $18 million in cash, due to
the  closing of the sale of Goloil.  In  addition,  its $10.7  million  share of
Goloil's net liabilities will be extinguished  leaving it with a working capital
position essentially equal to its cash.

The Company  expects that it will invest in its  acquisition  program,  the cash
from the  sale of  Goloil  combined  with an  estimated  $10 to $20  million  in
additional financing. The additional $10 to $20 million will be a combination of
debt and equity.

Sources and Uses of Funds

Historically,  Teton's  primary  source of liquidity  has been cash  provided by
equity  offerings.  Such  offerings  will continue to play an important  role in
financing  Teton's  business.  On July 16, 2004 the  shareholders  approved  the
issuance  of common  stock,  which could  result in an  increase in  outstanding
shares of common stock of 20% or more.  In  addition,  the Company is working to
establish a borrowing facility with one or more international banks, most likely
in the form of a revolving  line of credit that will be used  primarily  for the
acquisition  of producing  properties and for  developmental  drilling and other
capital expenditures.

Cash Flows and Capital Expenditures

Cash used in  operating  activities  for the six months  ended June 30, 2004 was
$3,108,223  compared to  $2,811,337  for the six months ended June 30, 2003.  As
described  above the Company's net loss increased to $4,502,502  from $2,228,325
at June 30, 2003. This was partially offset by an increase in Goloil's  accounts
payable for the second quarter.

During  2004,  the Company  received  the  reimbursement  of  advances  totaling
$3,658,252 pursuant to its agreement with RussNeft.

During 2004, the Company received $499,999 from the sale of preferred stock. The
increase in proceeds from  advances from notes payable to affiliates  represents
amounts advanced by RussNeft to Goloil.  As discussed above,  such advances will
be eliminated now that the sale of Goloil has been completed.

Income Taxes, Net Operating Losses and Tax Credits

Currently,  Goloil pays a profits  tax in Russia  equal to 24% of net profits as
defined  by Russian  income tax law.  As  discussed  in our 10-KSB the  taxation
system in Russia is evolving as the central government  transforms itself from a
command to a  market-oriented  economy.  Based on  current  tax law and the U.S.
Russian  Income Tax Treaty the profits  tax paid to Russia will be a  creditable
tax when  determining the Company's U.S.  income taxes payable,  if any. At June
30,  2004 the  Company  has a U.S.  net  operating  loss tax  carry  forward  of
approximately  $24,000,000,  utilization  of which is limited  under IRC section
382.

While the Company  expects to realize a profit of  approximately  $13.0  million
from the sale of Goloil, Teton's tax advisors anticipate that it will incur only
a relatively small Alternative Minimum Tax liability of approximately  $180,000.
Based on the remaining net operating  loss,  the Company is unlikely to pay U.S.
income taxes in the near to medium term future.

Subsequent Events

On August 3, 2004 the Company  closed and  completed the sale of its interest in
Goloil pursuant to the terms discussed above.

At the annual  meeting on July 16, 2004 the  Company's  shareholders  approved a
stock  compensation  plan for  non-employees.  The  maximum  number of shares of
Common Stock with respect to which awards can be granted is 1,000,000 shares. As
of August 12, 2004 no grants have been authorized.

Critical Accounting Policies

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

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

Property, Equipment and Depreciation: The Company follows the successful efforts
method of accounting for oil and gas properties.  As of June 30, 2004 all of the
Company's  oil and gas assets are held in one cost  center  located in  Siberia,
Russia.  As the Company makes  additional  acquisitions  it will have additional
cost centers.  Under the  successful  efforts  method of accounting the costs of
development wells are capitalized, but exploratory wells are capitalized only if
they are  successful.  The Company plans to increase its oil and gas reserves by
acquisition and the development of reserves in place.  Accordingly,  acquisition
and drilling costs on successful  wells will be capitalized.  Capitalized  costs
will be depleted and depreciated  using the units of production  method based on
estimated proved oil reserves as determined by independent engineers,  currently
Gustavson and  Associates.  If the estimates of oil and gas reserves are changed
materially then the amount of depreciation and depletion recorded by the Company
could increase or decrease materially. In addition the carrying costs of the oil
and gas properties are subject to the requirements of SFAS No. 144,  "Accounting
for the Impairment or Disposal of Long-Lived Assets." The Company is required to
impair the net book value for a cost  center when such net book value is greater
than the estimated future cash flows for such cost center.

Pro Rata  Consolidation:  The Company  currently pro rata  consolidates  its 50%
interest in Goloil, because, as of June 30, 2004, Management believes that to be
the most meaningful  presentation.  When the Company completes the proposed sale
of its  interest  in Goloil  then the assets and  liabilities  of Goloil will be
eliminated  in  recording  the  gain on sale.  See the  note 5 to the  financial
statements.

Production Payment: During June 2000 the Company entered into a Master Agreement
that  requires,   among  other  things,  a  seven-year   production  payment  to
Energosoyuz  equal to 50% of the oil produced from new and existing Goloil wells
in exchange for wells and  facilities  constructed by  Energosoyuz.  Because the
production  payment was for a specified amount of production and not for a fixed
and determinable dollar amount, the Company did not record such transaction as a
loan. Currently, Goloil is paying Energosoyuz a flat amount of 19,000,000 rubles
per month (U.S. $650,000), which, at current prices, is less than 50% of the oil
produced.  Had the Company not been  successful in its efforts to sell Goloil to
RussNeft,  we would have continued our interest in Goloil reserves,  which would
have continued to be subject to a production payment through June 2007.

Asset  Retirement  Obligation:  During  the fourth  quarter of 2003 the  Company
applied the provisions of SFAS 143 "Accounting for Asset Retirement Obligations"
and recorded the estimated December 31, 2003 liability for the retirement of its
Russian oil and gas assets along with a  corresponding  increase in the carrying
value of the related oil and gas  properties.  The liability was estimated based
on the estimated,  discounted future cost to plug the oil and gas wells existing
at December 31, 2003 plus the costs of clean up based on the  Company's  current
understanding  of the standards  that will be applied at the time of retirement.
The Company recorded an increase in the asset retirement  obligation  during the
interim periods of 2004 solely due to the accretion of the discount.


ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss  resulting  from changes in interest  rates,
foreign  currency  exchange rates,  commodity  prices and equity prices.  To the
extent we borrow or finance our  activities  we will be exposed to interest rate
risk, which is sensitive to many factors,  including  governmental  monetary and
tax policies,  domestic and international economic and political  considerations
and other factors that are beyond the Company's control.

The Company is exposed to interest  rate risk  primarily  through any  borrowing
activities  it may  undertake.  The extent of this risk is not  quantifiable  or
predictable  because  of the  variability  of  future  interest  rates  and  the
Company's future financing requirements.

The Company has no current  borrowings other than its pro rata share of Goloil's
borrowings, which no longer exist at August 12, 2004.

The Company has not and does not plan to,  enter into any  derivative  financial
instruments for trading or speculative purposes.

Prior to August 12, 2004, the Company  conducted  business  primarily in Russia.
Therefore,  changes  in the value of  Russia's  currency  affect  the  Company's
financial position and cash flows when translated into U.S. Dollars. The Company
has generally  accepted the exposure to exchange rate movements  relative to its
investment in foreign operations.


ITEM 4. CONTROLS AND PROCEDURES

As of June 30, 2004, an evaluation was performed by our Chief Executive  Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure  controls and  procedures.  Based on that  evaluation,  Our Chief
Executive  Officer and Chief  Financial  Officer  concluded  that our disclosure
controls and procedures were not completely effective as of June 30, 2004.

In connection with the audit of the year ended December 31, 2003,  there were no
"reportable events" except that the Company's auditors reported to the Company's
Audit  Committee that the auditors'  considered two matters  involving  internal
controls  and  their  operation  to be  material  weaknesses.  Specifically,  in
connection  with  its  audit of the  consolidated  financial  statements  of the
Company and its  subsidiary  for the year ended  December 31, 2003, the auditors
reported  that a material  weakness  existed  related to the lack of  formalized
policies and  procedures to permit timely  recording and processing of financial
information  to permit  the  timely  preparation  of  financial  statements  and
recommended  implementation  of formal policies and procedures and significantly
enhancing  the  accounting  staff.  Since  December  31,  2003  the  Company  is
addressing  this  concern  and  has  hired   additional   accounting  staff  and
restructured  certain  accounting and reporting  responsibilities  and is in the
process of preparing formal procedures to permit timely recording and processing
of financial information.  The second matter related to oversight of its Russian
subsidiary and reporting of its financial results on a timely basis which impact
and  represents  substantially  all  of  the  Company's  operating  results.  As
discussed  above,  the Company  completed the sale of its Russian  subsidiary in
August 2004.  The Company is also in  preliminary  negotiations  with respect to
potential  acquisitions.  The Company intends to pursue  acquisitions  where the
Company  will  jointly or fully  operate  which will allow the Company to put in
place  those  procedures  and  controls  necessary  to ensure  proper and timely
reporting of financial results.



                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 2. CHANGES IN  SECURITIES,  USE OF PROCEEDS AND ISSUER  PURCHASES OF EQUITY
SECURITIES

The  securities  described  below  represent our  securities  sold by us for the
period  starting April 1, 2004 and ending June 30, 2004 that were not registered
under the  Securities  Act of 1933,  as amended,  all of which were issued by us
pursuant to exemptions under the Securities Act.  Underwriters  were involved in
none of these transactions.

PRIVATE PLACEMENTS OF STOCK FOR CASH

On June 30,  2004 the  Company  issued  11,494  shares of  Series A  Convertible
Preferred  Stock in exchange for $50,000.  The $50,000 had been received  during
the first quarter of 2004 and was recorded as a current liability at the time of
receipt.  The  Preferred  Stock is  convertible  into Common  Stock on a 1-for-1
basis.  Dividends  accrue quarterly on the Preferred Stock at the annual rate of
8%. The Company has certain  rights to redeem the Preferred  Stock and the stock
automatically converts into Common Stock upon the happening of certain specified
events.

The offer and sale of the Preferred Stock was made in reliance on the exemptions
under Rule 506 of  Regulation  D and  Section  4(2) of the  Securities  Act.  No
advertising or general solicitation was employed in offering the securities. The
offer and sale were made to an accredited investor and transfer of the stock was
restricted in accordance with the requirements of the Securities Act of 1933.

SALES OF DEBT AND WARRANTS FOR CASH

None.

OPTION GRANTS

None.

ISSUANCES OF STOCK FOR SERVICES OR IN SATISFACTION OF OBLIGATIONS

On April 6, 2004,  Teton issued 1,250 shares of Common Stock to a consultant  in
exchange for investor relations  services valued at $5,000.  This offer and sale
was deemed to be exempt under Section 4(2) of the Securities Act. No advertising
or general  solicitation  was employed in offering the securities.  The investor
due to the  investor's  relationship  with the Company had access to information
concerning  the  Company.  Transfer  of  the  Common  Stock  was  restricted  in
accordance with the requirements of the Securities Act of 1933.

On April 16, 2004 Teton issued a total of 5,955 shares of Common Stock valued at
$28,500 to three of its directors  for service on its Board of Directors.  These
offers and sales were made in reliance on the  exemption  under  Section 4(2) of
the  Securities  Act. No  advertising  or general  solicitation  was employed in
offering the securities.  As directors,  the investors had access to information
concerning the Company.  The offers and sales were made to accredited  investors
and  transfer  of the  Common  Stock  was  restricted  in  accordance  with  the
requirements of the Securities Act of 1933.

During  the  second  quarter,  Teton  issued  5,626  shares of  Common  Stock to
consultants in exchange for investor relation  services valued at $23,329.  This
offer and sale was deemed to be exempt under Section 4(2) of the Securities Act.
No advertising or general  solicitation was employed in offering the securities.
The  consultants  due to their  relationship  with the  Company  had  access  to
information concerning the Company.  Transfer of the Common Stock was restricted
in accordance with the requirements of the Securities Act of 1933.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON 8-K:

Exhibits

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

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

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

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

Reports on Form 8-K:  None



                                   SIGNATURES

Pursuant to the requirements of the Exchange Act of 1934, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.




Date: August 16, 2004                                   By: /s/ Karl F. Arleth
                                                   -----------------------------
                                                          Karl F. Arleth,
                                                          President and CEO


Date: August 16, 2004                                   By: /s/ Patrick A. Quinn
                                                   -----------------------------
                                                          Patrick A. Quinn,
                                                          CFO