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

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

                                   FORM 10Q-SB

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

              Quarterly Report Pursuant to Section 13 or 15 (D) of
                  the Securities Act of 1934 for the quarterly
                        period ended: September 30, 2004

                        Commission File number: 000-49950

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

                         American Petroleum Group, Inc.
        (Exact name of small business issuer as specified in its charter)

                                     Nevada
         (State or other jurisdiction of Incorporation or organization)

                                   98-0232018
                        (IRS Employee Identification No.)

                              1400 N. Gannon Drive
                                    2nd Floor
                            Hoffman Estates, IL 60194
                           (847) 805-0125 (Address of
                          principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

Common Stock, $0.001 par value                        3,740,000
    (Class)                              (Outstanding as of November 19, 2004)



                         American Capital Alliance, Inc.
                                   Form 10Q-SB

                                      Index

Part I - FINANCIAL INFORMATION                                          Page

Item 1.  Financial Statements (Unaudited)                               3

         Condensed Balance Sheets                                       3

         Condensed Statements of Operation                              4

         Condensed Statements of Cash Flows                             5

         Condensed Statements of Stockholder's Equity                   6

         Notes on Condensed Financial Information                       7

Item 2 Management's Discussion and Analysis or Plan of Operation        18

Item 3 Control and Procedures                                           27

Part II. OTHER INFORMATION

Item 1.  Legal Proceedings                                              27

Item 2.  Changes in Securities                                          28

Item 3.  Defaults Upon Senior Securities                                29

Item 4.  Submission Of Matters To A Vote of Security Holders            29

Item 5.  Other Information                                              29

Item 6.  Exhibits and Reports on Form 8 -K                              29

Signatures                                                              30

Certifications                                                          31

                                       2


                          Part I: Financial Information

Item 1.           Financial Statements

AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY
Interim Consolidated Balance Sheets
September 30, 2004 and December 31, 2003


------------------------------------------------------------------------------------------------------------------------
                                                                                       
                                                                                      (Unaudited)         Audited
                                                                                      September 30,      December 31,    
                                                                                                               
                                                                                               2004              2003
                                                                                 ---------------------------------------
                                                                                                            
ASSETS
Current Assets
  Cash and cash equivalents                                                        $          8,995    $       35,432
  Accounts receivable                                                                       220,291                 -
  Inventory                                                                                 267,033                 -
  Acquisition deposits                                                                                        200,200
  Other current assets                                                                        3,400                 -
                                                                                 ---------------------------------------
    Total current assets                                                                    499,719           235,632
                                                                                 ---------------------------------------
Property and Equipment, net of accumulated depreciation                                       3,068                 -
                                                                                 ---------------------------------------
Other Assets
  Goodwill                                                                                  758,124                 -
                                                                                 ---------------------------------------
TOTAL ASSETS                                                                       $      1,260,911    $      235,632
                                                                                 ---------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
  Current portion of long-term debt                                                $        808,716               $ -
  Accounts payable                                                                          416,676            67,792
  Accrued liabilities                                                                        10,154                 -
                                                                                 ---------------------------------------
    Total current liabilities                                                             1,235,546            67,792
                                                                                 ---------------------------------------
Long-term debt, net of current portion                                                            -                 -
                                                                                 ---------------------------------------
Stockholders' Equity
  Common stock; $0.001 par value; 100,000,000 shares authorized; 3,740,000 and
    750,000 shares issued and outstanding,
    respectively                                                                             72,650            28,300
  Preferred stock; Series A; 5,000,000 shares authorized                                     25,275                 -
    2,527,500 issued and outstanding
  Additional paid-in-capital                                                             11,423,525         9,801,700
  Deficit accumulated                                                                   (11,496,085)       (9,662,160)
                                                                                 ---------------------------------------
    Total Stockholders' Equity                                                               25,365           167,840
                                                                                 ---------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                         $      1,260,911    $      235,632
                                                                                 ---------------------------------------


                                      


 AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY
 Interim Consolidated Statements of Operations
Three and Nine Month Periods Ended September 30, 2004 and 2003 -Unaudited



-----------------------------------------------------------------------------------------------------------------------------
                                                                 Three Months Ended                     Nine Months Ended
                                                   September 30,  September 30,          September 30,   September 30,
                                                            2004               2003               2004               2003
                                              -------------------------------------------------------------------------------
                                                                                                          
Net Sales                                       $        345,515     $            -    $       345,515      $           -
Cost of Goods Sold                                       216,808                  -            216,808                  -
                                              -------------------------------------------------------------------------------
  Gross Profit                                           128,707                  -            128,707                  -
                                              -------------------------------------------------------------------------------
Operating Expenses
  Advertising and marketing expense                        5,000                  -             55,250                  -
  Bad debts                                               44,417                  -             44,417                  -
  Bank charges                                                 -                 51                                   126
  Failed acquisition expense                                   -                  -             10,000                  -
  Interest expense                                         2,500                  -              3,475                  -
  Licenses and insurance                                   9,545                  -              9,545                  -
  Management fees                                              -             61,890                  -            136,890
  Office expense                                          11,430                  -             14,388                231
  Other operating expenses                                26,589                  -             33,945                  -
  Outside sales                                           28,009                  -             28,009                  -
  Payroll                                                102,630                  -            102,630                  -
  Payroll taxes                                            9,180                  -              9,180                  -
  Plant equipment                                          3,342                  -              3,342                  -
  Professional fees                                       18,300             26,477             85,927             62,322
  Rents and taxes                                          1,140                  -              1,140                  -
  Repairs and maintenance                                  1,320                  -              1,320                  -
  Stock compensation expense                           1,516,500                  -          1,523,200                  -
  Telephone                                                5,196                  -              5,196                  -
  Termination expenses                                         -            355,000                               355,000
  Transfer agent fees                                          -                486                                 2,247
  Travel and entertainment                                16,976                  -             23,282                  -
  Utilities                                                6,152                  -              6,152                  -
  Vehicle expense                                          2,234                  -              2,234                  -
                                              -------------------------------------------------------------------------------
          Total Operatin g Expenses                    1,810,460            443,904          1,962,632            556,816
                                              -------------------------------------------------------------------------------
         Net loss before income taxes                 (1,681,753)          (443,904)        (1,833,925)          (556,816)
Income Tax Expense (Benefit)                                   -                  -                  -                  -
                                              -------------------------------------------------------------------------------
           NET LOSS FOR THE PERIOD              $     (1,681,753)    $     (443,904)   $    (1,833,925)     $    (556,816)
                                              -------------------------------------------------------------------------------
Loss Per Share                                  $          (0.59)    $        (0.59)   $         (1.02)     $       (0.74)
                                              -------------------------------------------------------------------------------
Wei ghted Average Number
  of Shares Outstandin g                               2,846,111            750,000          1,797,593            750,000
                                              -------------------------------------------------------------------------------


                                      



 AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY
 Interim Consolidated Statements of Cash Flows
Three and Nine Month Periods Ended September 30, 2004 and 2003 -Unaudited



----------------------------------------------------------------------------------------------------------------------
                                                                                   September 30,      September 30,
                                                                                            2004               2003
                                                                       -----------------------------------------------
                                                                                                           
Cash flows from operating activities:
  Net loss                                                                    $       (1,833,925)   $      (556,816)
         Adjustments to reconcile net loss to net cash used in
    operating activities:
         Accounts receivable                                                            (220,291)                 -
         Acquisition deposits                                                            200,200                  -
         Inventory                                                                      (267,033)                 -
         Prepaid expense                                                                                        400
          Other current assets                                                            (3,400)                 -
         Accounts payable and accrued liabilities                                        359,038            154,632
         Management and termination expense payable                                            -            355,000
         Proceeds for additional paid-in capital
           and stock shares issued                                                     1,691,450                  -
                                                                       -----------------------------------------------
         Net cash used in operating activities                                           (73,961)           (46,784)
                                                                       -----------------------------------------------
Cash flows from investing activities
         Acquisition of subsidiary net of assets acquired and
    liabilities assumed                                                                 (758,124)                 -
  Purchase of equipment                                                                   (3,068)                 -
                                                                       -----------------------------------------------
          Net cash used in investing activities                                         (761,192)                 -
                                                                       -----------------------------------------------
Cash flows from financing activities:
  Loans payable                                                                          808,716             22,442
                                                                       -----------------------------------------------
         Net cash provided by financing activities                                       808,716             22,442
                                                                       -----------------------------------------------
         DECREASE IN CASH AND CASH
           EQUIVALENTS                                                                   (26,437)           (24,342)
Cash and cash equivalents, beginning of period                                            35,432             24,397
                                                                       -----------------------------------------------
Cash and cash equivalents, end of period                                      $            8,995    $            55
                                                                       -----------------------------------------------


                                       

AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) -
September 30, 2004
--------------------------------------------------------------------------------

Note A -   Basis of Presentation

           The accompanying unaudited interim condensed financial statements
           included herein have been prepared in accordance with the
           instructions to Form 10-QSB and Item 310 of Regulation SB of the
           Securities and Exchange Commission. Certain information and footnote
           disclosures normally included in financial statements prepared in
           accordance with generally accepted accounting principles have been
           condensed or omitted pursuant to such rules and regulations, although
           American Petroleum Group, Inc. and Subsidiary believes that the
           disclosures are adequate to make the information presented not
           misleading. For further information, refer to the consolidated
           financial statements and footnotes thereto included in the Company's
           Form 10-KSB for the fiscal year ended December 31, 2003 filed with
           the Security and Exchange Commission on April 29, 2004.

Note B -   Reorganization and Name Change

           The Board of Directors (the "Board") by unanimous written consent
           dated as of November 18, 2003, and certain stockholders (the
           "Majority Stockholders") owning a majority of issued and outstanding
           capital stock of the Company entitled to vote, by written consent
           dated as of November 18, 2003, approved and adopted resolutions to
           amend the Company's Certificate of Incorporation. The Certificate of
           Amendment to the Company's Certificate of Incorporation, already
           filed with the Secretary of State of Nevada, changed the Company's
           name to "American Capital Alliance, Inc." from Prelude Ventures, Inc.
           The name of the Company was changed again on November 1, 2004 to
           American Petroleum Group, Inc. by a vote of the security holders.

Note C -   Business Combination and Operations

           Business Combinations

              "TSG" Acquisition

              On October 9, 2003, the Company acquired an option for $500,000 to
              purchase the assets and certain liabilities of Tri-State Stores,
              Inc., an Illinois Corporation ("Tri-State"), GMG Partners LLC, an
              Illinois Limited Liability Company ("GMG"), and SASCO Springfield
              Auto Supply Company, a Delaware Corporation ("SASCO"). Tri-State,
              GMG and SASCO are collectively referred to herein as "TSG." Upon
              exercise of the option, the Company was to pay $3,000,000 and
              assume certain liabilities, not exceeding $700,000. TSG is
              involved in the automotive after market. During the first quarter
              of 2004, the Company elected not to continue to pursue this
              acquisition. The contractual amount of the option was never fully
              paid, however, amounts advanced for the option purchase and
              associated acquisition expenses resulted in an $185,000 charge to
              operations for the year ended December 31, 2003 and $10,000 for
              the nine month period ended September 30, 2004.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note C -   Business Combination and Operations (Continued)

              Motor Parts Waterhouse, Inc.

              The Company issued 5,000,000 shares of common stock for an option
              to acquire all the outstanding stock of Motor Parts Warehouse,
              Inc. ("MPW"), of St. Louis, Missouri. In order to exercise the
              option, the Company must issue an additional 5,000,000 shares of
              common stock to the shareholders of MPW and pay $2,200,000. This
              MPW option cannot be exercised until after the refinancing of the
              TSG debt of approximately $3,000,000. MPW is also an auto parts
              distributor. As a result of the financing not being completed, the
              Company elected not to continue to pursue this acquisition.

              Alliance Petroleum Products Company

              On October 9, 2003, the Company also entered into a Stock Purchase
              Agreement ("Alliance Agreement") with Alliance Petroleum Products
              Company ("Alliance"), an Illinois Corporation, and a Rider to the
              Alliance Agreement ("Rider"). Alliance is in the business of
              blending and bottling motor oil and anti-freeze. Under the
              Alliance Agreement, the Company issued 5,000,000 shares of common
              stock for 100% of the issued and outstanding shares of the common
              stock of Alliance (757,864 common shares). An additional 5,000,000
              shares of common stock of the Company is to be issued to Worldlink
              International Network, Inc. upon 24 months from the date hereof.
              Under the terms of the Rider, the Company is required to provide
              funding of at least $3,500,000 to pay Harris Bank, a secured
              creditor of Alliance. The shareholders of Alliance have the option
              to have the 757,864 issued and outstanding shares of common stock
              of Alliance returned and the Alliance Agreement rescinded if they
              choose, if the Company did not arrange the funding within 150 days
              from the date of the execution of the Alliance Agreement. Since
              the expiration of the option period has expired, the principals of
              the transactions have verbally agreed to extend the option period
              pending completion of the financing. This was a material
              contingency to the transactions and as a result had to be resolved
              prior to recognition of a business combination. On June 24, 2004
              (effective date July 1, 2004) the Company ("Prelude") then known
              as American Capital Alliance, Inc., ("AMAI") and Alliance
              Petroleum Products Company ("Alliance"), entered into an Amendment
              to the original Alliance Agreement, dated October 9. 2003 whereby
              all previous conditions and contingencies were deemed to have been
              completed or waived and the agreement amended as follows:



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note C -   Business Combination and Operations (Continued)

              Alliance Petroleum Products Company (Continued)

                  o     5,000,000 shares of AMAI voting capital stock are to be
                        issued to the shareholders of Alliance in the same
                        proportions as the first 5,000,000 shares were issued to
                        them pursuant to the exchange of securities contemplated
                        in the Agreement and Plan of Reorganization upon the
                        execution of this Amendment. The exchange of securities
                        also includes, 1,000,000 shares of preferred shares,
                        with the necessary Certificate of Designation, to allow
                        conversion at the rate of 1 share of preferred to ten
                        (10) shares of common, and to permit the preferred
                        shareholders to vote their shares, at any time after
                        issuance, and after they have been converted, the shares
                        be issued to the shareholders of American in the same
                        proportions as the first 5,000,000 shares were issued to
                        them pursuant to the Agreement and Plan of
                        Reorganization.

                  o     All the shares to the Alliance shareholders are no
                        longer subject to a two year restriction prior to sale
                        or transfer, but are now only subject to those transfer
                        restrictions under Rule 144 of the Securities Laws.

                  o     AMAI assumes all payment obligations and all other
                        agreements of Alliance as set forth in the including
                        four "Promissory Notes"; and AMAI assumes all payment
                        obligations and all other agreements of Alliance to the
                        Harris Bank (See Note I).

              The operations of Alliance have been consolidated with the results
              of AMAI since July 1, 2004.

              The aggregate acquisition price was $856,200, which consisted of
              1,107,500 of the Company's common stock valued at $0.54 and cash
              advances outstanding to Company at the time of consummation of the
              transactions. The value of the stock was determined based on the
              approximate average market price of the shares on August 11, 2004
              (change in control date) and discounted for factors such a limited
              market for the stock.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note C -   Business Combination and Operations (Continued)

              Alliance Petroleum Products Company (Continued)

              Following is a condensed balance sheet showing the fair values of
              the assets acquired and the liabilities assumed as of the date of
              acquisition:

                Current assets                                  $  542,504
                Property and equipment                               3,068
                Intangible assets                                  -
                Goodwill arising in the acquisition                758,124
                                                                ----------
                                                                $1,303,696

                Current liabilities                             $  321,921
                Current maturities of long-term debt               125,575
                Net assets acquired                                856,200
                                                                ----------
                                                                $1,303,696

           The Company acquired only minimal property, plant and equipment in
           the transaction; Alliance does not have title to these production
           assets. Additionally, no expense has been recognized during the three
           months ended September 30, 2004 for compensation for the use of the
           machinery and equipment to a corporation representing the processor
           operation to Alliance and to an entity that owned the real estate.
           The processor company was owned by the current officers of APPC who
           are also stockholders and directors of the Company; the real estate
           company is owed by the former president and a major stockholder of
           the Company; The assets of these entities secure obligations to
           Harris Bank as a result of certain transactions entered into by the
           predecessor company, the real estate company or their owners. A
           security interest had been entered into to as a result of these prior
           lending activities with appropriate lien filed and personal guarantee
           of the principals, some who are currently officers of the Company or
           Alliance. Harris Bank has threaten foreclosure if the prior borrowers
           can not reach terms allowing the bank to forebear the defaults (See
           Note I)

           The Company is still in the process of obtaining third-party
           valuations of certain intangible assets; accordingly, allocation of
           the purchase price is subject to modification in the future. Any such
           modification is not expected to be significant.

           Goodwill of $758,124 arising in the acquisition has been recognized.
           All the goodwill is expected to be deductible for income tax
           purposes.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note C -   Business Combination and Operations (Continued)

            Interim Pro Forma Information
 
            On July 1, 2004, the company purchased 100% of the voting stock of
            APPC. Results of operations for APPC are included in the
            consolidated financial statements since that date. The acquisition
            was made for the purpose of the reasons as stated above. Following
            are pro forma amounts assuming that the acquisition was made on
            January 1, 2004:

                Net sales                                      $    975,368
                Net income (loss)                                (2,209,688)
                Loss per share:
                  Basic                                        $       2.92

 
            Operations 

            American Petroleum Group, Inc. FKA American Capital Alliance, Inc.
            (the "Company") is a Chicago based holding company with an agenda to
            acquire, merge, and manage various business opportunities. The
            Company's current direction is in the manufacturing and distribution
            of petroleum and related products for the automotive industry. After
            the above acquisition, the Company is no longer considered a
            "development state entity"

            Going Concern

            The financial statements have been prepared using accounting
            principles generally accepted in the United States of America
            applicable for a going concern which assumes that the Company will
            realize its assets and discharge its liabilities in the ordinary
            course of business. At September 30, 2004, the Company has
            accumulated losses of $11,496,085, since its inception. In addition,
            for each of the three and nine months ended September 30, 2004, the
            Company lost $1,681,753 and $1,833,925, respectively. Its ability to
            continue as a going concern is dependent upon the ability of the
            Company to obtain the necessary financing to meet its obligations
            and pay its liabilities arising from normal business operations when
            they come due; however, there can be no assurance that financing can
            and will be obtained. The Company is currently pursuing new debt and
            equity financing in conjunction with additional proposed
            acquisitions.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note D -Significant Accounting Policies

           Consolidation Policy

           The accompanying consolidated financial statements include the
           accounts of the company and all of its wholly owned and
           majority-owned subsidiaries. Intercompany transactions and balances
           have been eliminated in consolidation

           Use of Estimates in Financial Statement Preparation 

           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 vary from the estimates
           that were used.

           Cash and Cash Equivalents 

           For purposes of reporting cash flows, the Company considers all
           highly liquid debt instruments purchased with a maturity of three
           months or less to be cash equivalents.

           Inventory

           Inventories are stated at the lower of cost, determined by the first
           in, first out method, or market.

           Fair Value of Financial Instruments 

           The carrying value of cash, accounts payable and loans payable
           approximates fair value because of the short maturity of these
           instruments. Unless otherwise noted, it is management's opinion that
           the Company is not exposed to significant interest, currency or
           credit risks arising from these financial instruments.

           New Accounting Standards 

           Management does not believe that any recently issued, but not yet
           effective, accounting standards if currently adopted could have a
           material effect on the accompanying financial statements.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note D -   Significant Accounting Policies (Continued)

           Impairment of Long Lived Assets 

           The Company evaluates whether events and circumstances have occurred
           that indicate the remaining estimated useful life of long lived
           assets may warrant revision or that the remaining balance of an asset
           may not be recoverable. The measurement of possible impairment is
           based on the ability to recover the balance of assets from expected
           future operating cash flows on an undiscounted basis. In the opinion
           of management, no such impairment existed at September 30, 2004.

           Goodwill is assigned to specific reporting units and is reviewed for
           possible impairment at lest annually or more frequently upon the
           occurrence of an event or when circumstances indicate that a
           reporting unit's carrying amount is greater than its fair value.

           Income Taxes 

           The Company uses the liability method of accounting for income taxes
           pursuant to Statement of Financial Accounting Standards, No. 109,
           "Accounting for Income Taxes." Any benefit from net loss
           carryforwards have been fully reserved for, due to the future
           uncertainty of the generation of earnings by the Company.

           Basic Loss Per Share 

           The Company reports basic loss per share in accordance with the
           Statement of Financial Accounting Standards No. 128, "Earnings per
           Share". Basic loss per share is computed using the weighted average
           number of shares outstanding during the period. On August 25, 2004,
           the Company approved a one-for-twenty reverse stock split; all per
           share amounts have been retroactively adjusted.

Note E -   Stock Borrowing Liability

           In conjunction with the purchase of the afore mentioned "options",
           the Company entered into a stock borrowing arrangement whereby
           several stockholder/officers of the Company transferred approximately
           1,000,000 shares pre-split or 50,000 shares on a post split basis of
           common stock into an escrow account. The shares were subsequently
           sold with the proceeds of $500,000 being transferred to the company.
           The Company is obligated to return the shares to the original holders
           by April 2005. If the Company had to repurchase its stock at
           September 30, 2004, it would be required to pay $29,000 to acquire
           the aggregate shares using a $0.029 approximate share price in order
           to replace such shares for the original contributors of the stock.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note F -   Related Party Transactions

           Payroll services

           The Company has its payroll processed though a "professional employer
           organization" owned by a publicly traded corporation that has common
           shareholders, directors and officers. This company processed $90,577
           of payroll, taxes and benefits, along with an administration fee of
           $4,259. Included in accounts payable at September 30, 2004 is a
           balance due for these services of $25,522.

           Expense reimbursements

           The Company reimburses Company officer/directors for travel, office
           and other expenses. In addition, certain officers make temporary
           advances. Accounts Payable includes $36,215 of advances of these
           types.

           Due Alpha Advisors

           A professional services agreement dated October 9, 2003 was entered
           into with Alpha Advisors, LLC for a term of one year and renewable
           for an additional year. Alpha Advisors LLC is an entity owned by
           stockholders/directors/officers of the Company. The fee for these
           services was the issuance of 1,000,000 shares of common stock of the
           Company upon execution of the agreements, $25,000 due at signing of
           the Tri-State Stores and Alliance Petroleum, Inc. agreements and
           $6,000 payable on the first of each month thereafter. In addition, a
           finder's fee of 10% of any new financing was to be paid on funds
           being committed. Accounts Payable includes $31,000 of such amounts
           due as of September 30, 2004. The Company and Alpha are currently in
           the process of converting the debt into equity based upon a discount
           of 80% from the market price.

Note G -   Related Party Notes and Loans Payable                      Amount
                                                                    -----------
           New Century Capital Consultants, Inc.-Note Payable       $    50,000
           Keystone Nittany Ventures-Loan Payable                        65,800
           Warren Field-Loan Payable                                     50,000
           Former President-Loan Payable                                 42,916
                                                                    -----------
              Total                                                 $   308,716
                                                                    ===========



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note G -   Related Party Notes and Loans Payable (Continued)

           New Century Capital Consultants, Inc.-Note Payable
           The Company on March 16, 2004 entered into a convertible unsecured
           revolving promissory note agreement with New Century Capital
           Consultants, Inc. The lender is a stock holder in the company via
           compensation it received (see Note H). The agreement allows for
           borrowings up to $500,000 of which $50,000 has been advanced
           currently. Interest accrues at the rate of 9% per annum payable along
           with the any outstanding principle balance on March 16, 2005, unless
           the note is in default. The lender may convert the principal amount
           and any accrued interest into common stock of the Company based upon
           a formula equal to 40% below the closing bid price of the stock
           starting after six months from execution of this agreement.
           Additionally, on a one time basis the lender upon written demand
           after the six month can require the Company to prepare and file a
           registration statement under the Securities and Exchange Act of 1933
           for an offering of up to 1,000,000 shares. Also, the agreement allows
           for "piggyback registration" rights in that the Company must notify
           the lender and allow the lender to register its shares if the
           companies file such a registration statement. The agreement contains
           events of default such as bankruptcy, insolvency, defaults or
           rendering of judgments on indebtedness in excess of $75,000 on from
           any other lender. Additionally, the agreement contains certain
           covenants as prohibition of payment of dividends, retirements or
           redemptions of capital stock, or the transfer of material assets of
           the Company. Upon these acts of defaults, the entire amount of
           principle and interest is immediately due, and interest accrues at a
           rate of 15% per annum. As of September 30, the Company has not
           recognized interest on this obligation.

           On October 18, 2004, the company received notice from the lender
           that, in its opinion, the Company was in default on the arrangement
           as a result of distributions of to classes of equity holders and
           possibly transfer of material assets. The lender has made assertions
           about misappropriation of corporate funds. Management of the Company
           finds these assertions as unfounded and feel the Company is in
           compliance with the terms of the agreement.

           Keystone Nittany Ventures-Loan  Payable

           Keystone Nittany Ventures, Inc. (Keystone) is a corporation owned by
           the President of the Company who is also a director and a major
           shareholder. Keystone has from time-to-time made advances to the
           Company. The loan is unsecured and on a demand basis and calls for
           interest of 8% per annum. At September 30, 2004 the Company has not
           recognized interest on this obligation.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note G -   Related Party Notes and Loans Payable (Continued)

           Warren Field-Loan Payable

           Warren Field is related to the company by virtue of being a
           stockholder. His unsecured loan is on a demand repayment basis and
           accrues interest of 7% per annum. At September 30, 2004, the Company
           has no interest recognized on this obligation.

           Former President-Loan Payable

           The amount recorded by the Company represents the estimated fair
           value of the liability of the amount assumed at the time of purchase
           of APPC. It appears that the liability represents funds advance for
           the working capital. The obligation is unsecured, as no terms for
           repayment and non-interest bearing. As a result of other
           contingencies that of the purchase of AAPC the final settled amount
           of this liability could be significantly different from the present
           recorded amount.

Note H -   Stockholders' Equity

           A consulting services agreement was entered into on October 9, 2003,
           with National Securities Corporation, Inc. for a term of six months
           renewable on a monthly basis. The fee for this service is the
           issuance of 1,000,000 shares of common stock of the Company (issued).

           A consulting services agreement was entered into on October 9, 2003,
           with New Century Consultants, Inc. for a term of six months renewable
           on a monthly basis. The fee for this service is the issuance of
           1,000,000 shares of common stock of the Company (issued). New Century
           Consultants, Inc. will become a related party to the Company as it
           has agreed to purchase a significant portion of the Company's issued
           and outstanding shares.

           A consulting agreement was entered into on October 10, 2003, with
           Commonwealth Partners NY, LLC for a term of three years. The fee for
           this service is the issue of 200,000 free trading shares and 300,000
           restricted shares (issued) of common stock of the Company.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note H -   Stockholders' Equity (Continued)

           On January 27, 2004, the Company entered into a manufacturing
           agreement with the shareholders of International Pit Crew Express,
           Inc. ("IPC"), a Texas corporation, to acquire the exclusive right to
           manufacture petroleum products for IPC's customers within the United
           States, including the United States convenience store industry. As
           consideration for these rights, the Company issued 1,500,000 shares
           of common stock on April 2, 2004 to the shareholders of IPC.
           Additionally, the Company is to provide one half of the funds
           necessary for the purchase of machinery, and all related parts,
           supplies, and installation costs.

           In junction with change of control of the Company on August 11, 2004,
           1,298,750 shares of common and 2,527,500 of preferred stock were
           issued to newly elected officers of the corporation. The Company
           recognized the issuance as compensation expense of $1,516,500 for the
           period ended September 30, 2004. The value was based upon the closing
           price of the stock as quoted on the "electronic bulletin board
           market" on August 11, 2004. The Corporation also issued Series A
           Preferred Stock in the amount of 1,527,500 convertible at a ratio of
           one share of Series A Preferred Stock to 10 shares of common stock.

Note I -   Commitments and Contingencies

           Harris Bank
           In conjunction with the Bank attempting to collect their debt against
           certain parties as indicated above in Note C, the bank is requesting
           that the Company become a party to any forbearance as to collection
           of the debt, such as becoming a guarantor or buying life insurance
           for the original makers of the debt. The basis of their claims is
           that the company is using facilities that secure the original
           borrowings. It is the opinion of management and counsel of the
           company that there is no basis and claims or commitments since
           Alliance or the Company was not a borrower or a guarantor on the debt
           (management of Alliance are guarantors of the original debt). The
           Company has offered to enter into negotiations with the bank and is
           attempting to secure financing to purchase the operating assets being
           utilized in the operations at fair value. To date the Company has
           attempted to obtain a listing of the assets; none has been provided.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note I -   Commitments and Contingencies (Continued)

           Compensation for Utilizing Operation Assets
           As indicated in Note C, no rent or compensation of any type has been
           paid to the entities that claim to have legal title to the operating
           assets of Alliance. Management has taken the position that since
           there was no contract or agreement to purchase or for the payment of
           rentals for these assets, therefore nothing is owed. The consolidated
           operations for the period since Alliance was acquired do not contain
           any provision for compensation for use of the facilities. The owner
           (and former resident of the Company and major shareholder) of the
           entity that owns the real estate had previously had Alliance recorded
           $15,000 in rent a month with a corresponding increase to an amount
           payable to this entity; This is a contingency relating to the
           business combination that could potentially result in an adjustment
           of the purchase price of Alliance or additional charges to the
           Company's operations.

           Amendment of Alliance Petroleum Products Company Agreement
           On June 24, 2004 the Company amended the original agreement removing
           the contingencies contained in the original document, the most
           significant being of refinancing certain debt owed Harris Bank (see
           Note C and above). As part of this amendment the document stated
           Alliance assumed assumes all payment obligations and all other
           agreements of Alliance to the Harris Bank,; and all payment
           obligations and all other agreements of Alliance as set forth in the
           following four "Promissory Notes":

                  o     Alliance is to pay $200,000 to Richard Stiefel after all
                        amounts have been paid to Jesse Fuller and American
                        Group Financial (owned by Jesse Fuller) and funding has
                        been received from Cornell Capital Corporation. The note
                        is non-interest bearing. Jesse Fuller was the former
                        president and a director of the Company and a major
                        shareholder. Richard Stiefel is an officer in Alliance
                        and former shareholder, and currently is an
                        officer/director/ shareholder of the Company. ----It is
                        the position of the Company that since there was no
                        consideration received and the funding from Cornell
                        Capital Corporation was not completed and it is unlikely
                        to be completed that there is no basis for this
                        liability.

                  o     Alliance promises to pay American Group Financial, Inc.
                        and/or Jesse Fuller $407,368.09 and any additional sums
                        that AGF or Jesse Fuller owes to Harris Bank. Jesse
                        Fuller is the owner of AGF, the former president of the
                        Company, former director and still a major shareholder.
                        The note accrues interest at 5% per annum. The note due
                        December 1, 2004. Management of the Company's position
                        is that there was not consideration for the note and
                        that Alliance was never a party on any debt obligations
                        to Harris Bank.



AMERICAN PETROLEUM GROUP, INC. AND SUBSIDIARY

Notes to the Condensed Consolidated Financial Statements -
(Unaudited) - Continued
September 30, 2004
--------------------------------------------------------------------------------

Note I -   Commitments and Contingencies (Continued)

                  o     Alliance is to pay $200,000 to Virginia Gefvert after
                        all amounts have been paid to Jesse Fuller and American
                        Group Financial (owned by Jesse Fuller) and funding has
                        been received from Cornell Capital Corporation. The note
                        is non-interest bearing. Jesse Fuller was the former
                        president and a director of the Company, and a major
                        shareholder. Virginia Gefvert was a former shareholder
                        of Alliance----It is the position of the Company that
                        since the funding from Cornell Capital Corporation was
                        not completed and it is unlikely to be completed that
                        there is no basis for this liability.

                  |X|   Alliance is to pay $200,000 to American Group Financial,
                        Inc. after all amounts have been paid to Jesse Fuller
                        and American Group Financial (owned by Jesse Fuller) and
                        funding has been received from Cornell Capital
                        Corporation. The note is non-interest bearing. Jesse
                        Fuller was the former president and a director of the
                        Company, and a major shareholder. Virgina Gefvert was a
                        former shareholder of Alliance. It is the position of
                        the Company that since there was no consideration
                        received and the funding from Cornell Capital
                        Corporation was not completed, it is unlikely to be
                        completed that there is no basis for this liability.

Note J -   Non-Cash Transactions

           Investing and financing activities that do not have a direct impact
           on current cash flows are excluded from the cash flow statement.

                                       3


 
Item 2.           Management's Discussion and Analysis and Plan of Operations.

FORWARD LOOKING STATEMENTS
 

The following discussion should be read in conjunction with our audited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward looking statements.

OVERVIEW

 
History and Organization

         American Petroleum Group, Inc., formerly American Capital Alliance,
Inc., formerly Prelude Ventures, Inc. (the "Company") was incorporated under the
laws of the State of Nevada on May 24, 2000. Prior to its acquisition of
Alliance Petroleum Products, Inc., he Company had limited business operations
and was considered a development stage enterprise. The activities during that
period principally have been limited to organizational matters, and examining
business and financing opportunities for the Company.
 

Prior Business Matters
 
         On March 9, 2001, we acquired a 20 year mining lease from Steve
Sutherland, the owner of 24 unpatented lode mining claims, sometimes referred to
as the Medicine Project, located in Elko County, Nevada.
 
         During the nine months ended September 30, 2003, management of the
Company terminated the mining lease. As the Company terminated the lease, it is
required to pay all federal and state mining claim maintenance fees for the
current year. The Company is required to perform reclamation work on the
property as required by federal state and local law for disturbances resulting
from the Company's activities on the property. In the opinion of management,
there will be no continuing liability. Please see the Company's Schedule 14C
Information Statement as filed with the Securities and Exchange Commission on
February 13, 2004 and mailed or furnished to Shareholders on February 17, 2004,
and incorporated herein by reference, for additional details on this matter.

                                       4

 
Business Acquisitions
 
"TSG" Acquisition
On October 9, 2003, the Company acquired an option for $500,000 to purchase the
assets and certain liabilities of Tri-State Stores, Inc., an Illinois
Corporation ("Tri-State"), GMG Partners LLC, an Illinois Limited Liability
Company ("GMG"), and SASCO Springfield Auto Supply Company, a Delaware
Corporation ("SASCO"). Tri-State, GMG and SASCO are collectively referred to
herein as "TSG." Upon exercise of the option, the Company was to pay $3,000,000
and assume certain liabilities, not exceeding $700,000. TSG is involved in the
automotive after market. During the first quarter of 2004, the Company elected
not to continue to pursue this acquisition.

Motor Parts Waterhouse, Inc.
The Company issued 5,000,000 shares of common stock for an option to acquire all
the outstanding stock of Motor Parts Warehouse, Inc. ("MPW"), of St. Louis,
Missouri. In order to exercise the option, the Company must issue an additional
5,000,000 shares of common stock to the shareholders of MPW and pay $2,200,000.
This MPW option cannot be exercised until after the refinancing of the TSG debt
of approximately $3,000,000. MPW is also an auto parts distributor. As a result
of the financing not being completed, the Company elected not to continue to
pursue this acquisition.

Alliance Petroleum Products Company
On October 9, 2003, the Company also entered into a Stock Purchase Agreement
("Alliance Agreement") with Alliance Petroleum Products Company ("Alliance"), an
Illinois Corporation, and a Rider to the Alliance Agreement ("Rider"). Alliance
is in the business of blending and bottling motor oil and anti-freeze. Under the
Alliance Agreement, the Company issued 5,000,000 shares of common stock for 100%
of the issued and outstanding shares of the common stock of Alliance (757,864
common shares). An additional 5,000,000 shares of common stock of the Company is
to be issued to Worldlink International Network, Inc. upon 24 months from the
date hereof. Under the terms of the Rider, the Company is required to provide
funding of at least $3,500,000 to pay Harris Bank, a secured creditor of
Alliance. The shareholders of Alliance have the option to have the 757,864
issued and outstanding shares of common stock of Alliance returned and the
Alliance Agreement rescinded if they choose, if the Company did not arrange the
funding within 150 days from the date of the execution of the Alliance
Agreement. Since the expiration of the option period has expired, the principals
of the transactions have verbally agreed to extend the option period pending
completion of the financing. This was a material contingency to the transactions
and as a result has to be resolved prior to recognition of a business
combination. On June 24, 2004(effective date July 1, 2004) the Company
("Prelude") now known as American Capital Alliance, Inc., ("AMAI") and Alliance
Petroleum Products Company ("Alliance"), entered into an Amendment to the
original Alliance Agreement, dated October 9, 2003 whereby all previous
conditions and contingencies were deemed to have been completed or waived and
the agreement amended as follows;

                                       5


      o     5,000,000 shares of AMAI voting capital stock are to be issued to
            the shareholders of Alliance in the same proportions as the first
            5,000,000 shares were issued to them pursuant to the exchange of
            securities contemplated in the Agreement and Plan of Reorganization
            upon the execution of this Amendment. The exchange of securities
            also includes, 1,000,000 shares of preferred shares, with the
            necessary Certificate of Designation, to allow conversion at the
            rate of 1 share of preferred to ten (10) shares of common, and to
            permit the preferred shareholders to vote their shares, at any time
            after issuance, and after they have been converted, the shares be
            issued to the shareholders of American in the same proportions as
            the first 5,000,000 shares were issued to them pursuant to the
            Agreement and Plan of Reorganization.

      o     All the shares to the Alliance shareholders are no longer subject to
            a two year restriction prior to sale or transfer, but are now only
            subject to those transfer restrictions under Rule 144 of the
            Securities Laws.

      o     AMAI assumes all payment obligations and all other agreements of
            Alliance as set forth in the including four "Promissory Notes"; and
            AMAI assumes all payment obligations and all other agreements of
            Alliance to the Harris Bank.

The operations of Alliance have been consolidated with the results of AMAI since
July 1, 2004. American Petroleum Group, Inc. formerly American Capital Alliance,
Inc. (the "Company") is a Chicago based holding company with an agenda to
acquire, merge, and manage various business opportunities. The Company's current
direction is in the manufacturing and distribution of petroleum and related
products for the automotive industry. After the above acquisition, the Company
is no longer considered a "development state entity"

PLAN OF OPERATIONS

         We were a startup, development stage Company prior to the acquisition
of Alliance Petroleum Products Company (AAPC) and did not realized any revenues
from our business operations until that time. However at time of acquiring APPC
its sales volume was at a point below its break even point and there fore was
losing money. Management of the Company feels that APPC is operating at a small
percentage of its capacity with its major constraint on increasing volume being
that of financing raw materials for manufacturing and some other limited
variable manufacturing costs. Accordingly, we must raise money from sources
other than the operations of this business. Our only other source of cash at
this time is investments by others in our Company. We must raise cash to
complete the acquisitions and stay in business.

                                       6


We must also obtain additional financing to either purchase our operating assets
or obtain working capital for leasing arrangements

To meet our need for cash, we are attempting to raise debt and equity financing
to complete the acquisitions described in this document and fund the Company's
on-going operations. There is no assurance that we will be able to raise these
funds and stay in business. If we do not raise the funds required to complete
any of the acquisitions, we will have to find alternate sources such as a
secondary public offering, private placement of securities, or loans from
officers or others. If we need additional cash and can not raise it, we will
either have to suspend operations until we do raise the cash or cease operations
entirely
 

Limited Operating History.

 
         The only historical financial information about our Company on which to
base an evaluation of our performance is the last three months after the
acquisition of APPC which was generating losses at the time of acquisition . We
can not guarantee we will be successful in our business operations. Our business
is subject to the risks inherent in the establishment of a new business
enterprise, including limited capital resources and the ability to find and
finance suitable acquisition candidates. We are seeking equity and debt
financing to provide the capital required to fund additional proposed
acquisitions and our on-going operations.
 
         We have no assurance that future financing will be available to the
Company on acceptable terms. If financing is not available on satisfactory
terms, we may be unable to continue, develop or expand our operations. Equity
financing could result in additional dilution to shareholders.

 
Liquidity, Capital Resources and Operations

         Since the Company's inception, the Company has raised funds from
officer/stockholder advances, from private sales of its common shares and
approximately $500,000 from sale of borrowed stock contributed by the Company's
promoters. This money has been utilized for start-up costs and operating
capital. For each of the three and nine months ending September 30, 2004, the
Company has sustained operating losses of $1,681,753 and $1,833.925,
respectively, of which for each of the three month and nine months ended
September 30, 2004, were $1,516,500 and $1,523,200, respectively, for the
payment for professional services rendered to the Company and compensation to
certain officers.

         In this regard, the Company's plan of operations for the next 12 months
is to pursue profitable business acquisitions, and obtain financing to increase
the sale volume of APPC.. Product research and development is expected is
expected to be minimal during the period. Additionally, the Company does not
expect any change in number of employees other than through acquisitions.

                                       7

 

RISK FACTORS

 
Contingencies
Harris Bank
         In conjunction with the Bank attempting to collect their debt against
certain parties, the bank is requesting that the Company become a party to any
forbearance as to collection of the debt, such as becoming a guarantor or buying
life insurance for the original makers of the debt. The basis of their claims is
that the company is using facilities that secure the original borrowings. It is
the opinion of management and counsel of the company that there is no basis and
claims or commitments since Alliance or the Company was not a borrower or a
guarantor on the debt (management of Alliance are guarantors of the original
debt). The Company has offered to enter into negotiations with the bank and is
attempting to secure financing to purchase the operating assets being utilized
in the operations at fair value. To date the Company has attempted to obtain a
listing of the assets; none has been provided.

Compensation for Utilizing Operation Assets
         No rent or compensation of any type has been paid to the entities that
claim to have legal title to the operating assets of Alliance. Management has
taken the position that since there was no contract or agreement to purchase or
for the payment of rentals for these assets, therefore nothing is owed. The
consolidated operations for the period since Alliance was acquired do not
contain any provision for compensation for use of the facilities; The owner (and
former president of the Company and major shareholder) of the entity that owns
the real estate had previously had Alliance recorded $15,000 in rent a month
with a corresponding increase to an amount payable to this entity; This is a
contingency relating to the business combination that could potentially result
in an adjustment of the purchase price of Alliance or additional charges to
operations.

Amendment of Alliance Petroleum Products Company Agreement
     On June 24, 2004 the Company amended the original agreement removing the
contingencies contained in the original document, the most significant being of
refinancing certain debt owed Harris Bank. As part of this amendment the
document stated Alliance assumed assumes all payment obligations and all other
agreements of Alliance to the Harris Bank,; and all payment obligations and all
other agreements of Alliance as set forth in the following four "Promissory
Notes".:

      o     Alliance is to pay $200,000 to Richard Stiefel after all amounts
            have been paid to Jesse Fuller and American Group Financial (owned
            by Jesse Fuller) and funding has been received from Cornell Capital
            Corporation. The note is non-interest bearing. Jesse Fuller was the
            former president and a director of the Company and a major
            shareholder. Richard Stiefel is an officer in Alliance and former
            shareholder, and currently is an officer/director/ shareholder of
            the Company. ----It is the position of the Company that since the
            funding from Cornell Capital Corporation was not completed and it is
            unlikely to be completed that there is no basis for this liability.

                                       8


      o     Alliance promises to pay American Group Financial, Inc. and/or Jesse
            Fuller $407,368.09 and any additional sums that AGF or Jessee Fuller
            owes to Harris Bank. Jessee Fuller is the owner of AGF, the former
            president of the Company, former director and still a major
            shareholder. The note accrues interest at 5% per annum. The note due
            December 1, 2004. Management of the Company's position is that there
            was not consideration for the note and that Alliance was never a
            party on any debt obligations to Harris Bank.

      o     Alliance is to pay $200,000 to Virginia Gefvert after all amounts
            have been paid to Jesse Fuller and American Group Financial (owned
            by Jesse Fuller) and funding has been received from Cornell Capital
            Corporation. The note is non-interest bearing. Jesse Fuller was the
            former president and a director of the Company, and a major
            shareholder. Virginia Gefvert was a former shareholder of Alliance.
            It is the position of the Company that since the funding from
            Cornell Capital Corporation was not completed and it is unlikely to
            be completed that there is no basis for this liability.

      o     Alliance is to pay $200,000 to American Group Financial, Inc. after
            all amounts have been paid to Jessee Fuller and American Group
            Financial (owned by Jesse Fuller) and funding has been received from
            Cornell Capital Corporation. The note is non-interest bearing. Jesse
            Fuller was the former president and a director of the Company, and a
            major shareholder. Virginia Gefvert was a former shareholder of
            Alliance. It is the position of the Company that since the funding
            from Cornell Capital Corporation was not completed and it is
            unlikely to be completed that there is no basis for this liability.

Much of the information included in filing includes or is based upon estimates,
projections or other "forward looking statements". Such forward-looking
statements include any projections or estimates made by us and our management in
connection with our business operations. While these forward-looking statements,
and any assumptions upon which they are based, are made in good faith and
reflect our current judgment regarding the direction of our business, actual
results will almost always vary, sometimes materially, from any estimates,
predictions, projections, assumptions or other future performance suggested
herein.

Such estimates, projections or other "forward-looking statements" involve
various risks and uncertainties as outlined above. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other
"forward-looking statements".
 

                                       9


Our common shares are considered speculative during our search for a new
business opportunity. Prospective investors should consider carefully the risk
factors set out below.

Government Regulation
         To the best of our knowledge, we are not currently subject to direct
federal, state or local regulation in the United States, other than regulations
applicable to businesses generally.

Key personnel
         All of our present officers or directors are key to our continuing
operations, we rely upon the continued service and performance of these officers
and directors, and our future success depends on the retention of these people,
whose knowledge of our business and whose technical expertise would be difficult
to replace. At this time, none of the officers or directors is bound by
employment agreements, and as a result, any of them could leave with little or
no prior notice.

         If we are unable to hire and retain technical, sales and marketing and
operations personnel, any business we acquire could be materially adversely
affected. It is likely that we will have to hire a significant number of
additional personnel in the future if we identify and complete the acquisition
of a business opportunity, or if we enter into a business combination.
Competition for qualified individuals is likely to be intense, and we may not be
able to attract, assimilate, or retain additional highly qualified personnel in
the future. The failure to attract, integrate, motivate and retain these
employees could harm our business.

Limited Operating History.  Need for Additional Capital
 
         There is limited financial information about our Company on which to
base an evaluation of our performance. We were a development stage Company prior
to the acquisition of APPC and have not generated any substantial revenues from
operations. We can not guarantee we will be successful in our business
operations. Our business is subject to the risks inherent in the establishment
of a new business enterprise, including limited capital resources and the
ability to find and finance suitable acquisition candidates. We are seeking
equity and debt financing to provide the capital required to fund the proposed
acquisitions and our on-going operations.
         We have no assurance that future financing will be available to the
Company on acceptable terms. If financing is not available on satisfactory
terms, we may be unable to continue, develop or expand our operations. Equity
financing could result in additional dilution to shareholders.
         We have not conducted or received results of market research indicating
that there is a demand for the acquisition of a business opportunity or business
combination as contemplated by our company. Even if there is demand for the
acquisition of a business opportunity or combination as contemplated, there is
no assurance we will successfully complete such an acquisition or combination.

                                       10


Regulation
         Although we will be subject to regulation under the Securities Exchange
Act of 1934, management believes that we will not be subject to regulation under
the Investment Company Act of 1940, insofar as we will not be engaged in the
business of investing or trading in securities. In the event that we engage in
business combinations which result in us holding passive investment interests in
a number of entities, we could be subject to regulation under the Investment
Company Act of 1940, meaning that we would be required to register as an
Investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission as to the status of our company under the Investment
Company Act of 1940 and, consequently, any violation of such act would subject
us to material adverse consequences.

Uncertain Ability to Manage Growth
         Our ability to achieve any planned growth upon the acquisition of a
suitable business opportunity or business combination will be dependent upon a
number of factors including, but not limited to, our ability to hire, train and
assimilate management and other employees and the adequacy of our financial
resources. In addition, there can be no assurance that we will be able to manage
successfully any business opportunity or business combination. Failure to manage
anticipated growth effectively and efficiently could have a materially adverse
effect on our business.

"Penny Stock" Rules May Restrict the Market for the Company's Shares
         Our common shares are subject to rules promulgated by the Securities
and Exchange Commission relating to "penny stocks," which apply to companies
whose shares are not traded on a national stock exchange or on the NASDAQ
system, trade at less than $5.00 per share, or who do not meet certain other
financial requirements specified by the Securities and Exchange Commission.
These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitabe inquiries of investors, and provide investors with
certain information concerning the risks of trading in the such penny stocks.
These rules may discourage or restrict the ability of brokers to sell our common
shares and may affect the secondary market for our common shares. These rules
could also hamper our ability to raise funds in the primary market for our
common shares.

Possible Volatility of Share Prices
         Our common shares are currently publicly traded on the Over-the-Counter
Bulletin Board service of the National Association of Securities Dealers, Inc.
The trading price of our common shares has been subject to wide fluctuations.
Trading prices of our common shares may fluctuate in response to a number of
factors, many of which will be beyond our control. The stock market has
generally experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of companies with no
current business operation. There can be no assurance that trading prices and
price earnings ratios previously experienced by our common shares will be
matched or maintained. These broad market and industry factors may adversely
affect the market price of our common shares, regardless of our operating
performance.


                                       11


         In the past, following periods of volatility in the market price of a
company's securities, securities class-action litigation has often been
instituted. Such litigation, if instituted, could result in substantial costs
for us and a diversion of management's attention and resources.

Indemnification of Directors, Officers and Others
         Our by-laws contain provisions with respect to the indemnification of
our officers and directors against all expenses (including, without limitation,
attorneys' fees, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that the person is one of our officers or directors) incurred by an officer
or director in defending any such proceeding to the maximum extent permitted by
Nevada law.
         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
our company under Nevada law or otherwise, we have been advised the opinion of
the Securities and Exchange Commission is that such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.

Anti-Takeover Provisions

We do not currently have a shareholder rights plan or any anti-takeover
provisions in our By-laws. Without any anti-takeover provisions, there is no
deterrent for a take-over of our company, which may result in a change in our
management and directors.

Reports to Security Holders

         Under the securities laws of Nevada, we are not required to deliver an
annual report to our shareholders but we intend to send an annual report to our
shareholders.

Item 3.           Controls And Procedures

         The registrant's new Principal executive financial officer, based on
his evaluation of the registrant's disclosure controls and procedures (as
defined in Rules 13a-14 (c) of the Securities Exchange Act of 1934) as of
September 30, 2004 has concluded that the registrants' disclosure controls and
procedures are adequate and effective to ensure that material information
relating to the registrants and their consolidated subsidiaries is recorded,
processed, summarized and reported within the time periods specified by the
SEC's rules and forms, particularly during the period in which this quarterly
report has been prepared.

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         The registrant's principal executive officers and principal financial
officer have concluded that there were no significant changes in the
registrant's internal controls or in other factors that could significantly
affect these controls subsequent to September 30, 2004 the date of their most
recent evaluation of such controls, and that there was no significant
deficiencies or material weaknesses in the registrant's internal controls.

                           Part II. Other Information

Item 1.           Legal Proceedings.

We know of no material, active or pending legal proceedings against us, nor are
we involved as a plaintiff in any material proceedings or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholders are an adverse party or have a
material interest adverse to us.

There is a threatened action by the Harris Bank of Chicago, Illinois with
respect to a defaulted loan agreement. Harris Bank claims to have a lien on the
equipment used by the Registrant in its operations. The Registrant has had
contact with Harris Bank and is attempting to resolve the matter. In the event
that a resolution is not resolved in a manner satisfactory to the Registrant, it
could result in the seizure of the equipment and have a material adverse effect
on the operations of the Registrant.

Item 2.           Changes In Securities

Effective August 25, 2004, the control of the Registrant changed. This was due
to appointment of the new Directors. In addition, the Registrant issued a
controlling block of shares to the persons identified. These shares consisted of
shares of common stock and shares of preferred stock Series A, convertible to
common stock at a ratio of one share of preferred to 10 shares of common, with
immediate voting rights as if they were converted to common stock. The shares
were issued as part of compensation packages for the services to be rendered to
the registrant.

In addition, shares of common stock were issued, in a total amount of 15,000,000
pre-reverse split, in exchange for any preferred stock that was to be issued
pursuant to the Amendment to Agreement and Plan of Reorganization, previously
filed by Form 8-K, as well as making the effective date of the Amendment August
1, 2004.

The shares issued are as follows:

                             No. of Common    No. of Preferred(1) % ownership(1)
                             --------------   ------------------  --------------
James W. Zimbler                  500,000         1,000,000            13.6 
Richard Carter                    535,000         1,000,000            14.3
George L. Riggs, III               75,000           150,000            *
Michael S. Krome, Esq              75,000           150,000            *
Alpha Advisors, LLC (2)           113,750           227,500            * (2)
Richard Steifel                   290,000                --            7.75
Chris Hansen                      222,500                --            5.9
Jesse Fuller                      575,000                --            23.7
Alfred Ciella                      20,000                --            *

                                       13

                                                                    
      (1)   Percentage of ownership does not include conversion ration of
            preferred stock at a rate of one share of preferred stock to ten
            shares of common stock.
      (2)   Alpha Advisors, LLC is controlled by James W. Zimbler, Richard
            Carter, George L. Riggs, and Michael S. Krome. When all of the
            ownership percentages are added, the control percentage for Alpha
            Advisors LLC is 34.7%, not counting the conversion of the preferred
            stock, if voted as a block.

Effective November 1, 2004, the Company completed the following actions:

      1.    Change of name of the Corporation to American Petroleum Group, Inc.,
            with an accompanying change of its trading symbol, to "AMPE", and
      2.    Completion of a reverse stock split of Twenty (20) old shares of
            common stock for each One (1) new share of common stock. This
            resulted in a reduction of the total issued and outstanding shares
            of the Company after to the completion of the reverse split of
            3,740,000.

Item 3. Defaults Upon Senior Securities

                  None

Item 4. Submission Of Matters To A Vote Of Security Holders

There were no items submitted to a vote of security holders during the quarter
ended September 30, 2004, other than a vote by the majority of shares entitled
to vote to approve a reverse split of the common stock of the Company twenty
(20) old shares for each one (1) new share of common stock, effective November
1, 2004

Item 5. Other Information

                  None

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Item 6.  Exhibits And Reports On Form 8-K

         a. Exhibits:
         3.1      Articles of Incorporation of the Registrant, as amended*
         3.2      By-laws of the Registrant, as amended*
         31.1     Section 302 Certification
         32.1     Section 906 Certification

         ------------
* Previously filed as an exhibit to the Company's Form 10-SB filed on June 26,
2001

         b. Reports on Form 8-K filed during the three months ended September
30, 2004.

On July 9, 2004, we filed an 8-K-A, with respect to Item 2, amending the Form
8-K filed on November 6, 2003. On September 20, 2004, we filed a Form 8-K with
respect to Item 5.01 Changes in Control of Registrant

Subsequent Events
On November 3, 2004, we filed a Form 8-K with respect to Item 5.03, Amendments
to Articles of Incorporation or By-laws; Change in Fiscal Year, with respect to
an amendment to the name of the Registrant; and Item 8.01, Other Events with
respect to a reverse split of the common stock and new trading symbol

Signatures

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

Date:    November 22, 2004                  American Petroleum Group, Inc.

                                           /s/ James W. Zimbler
                                           -----------------------------------
                                           James W. Zimbler, Interim President

                                           /s/ George L. Riggs
                                           -----------------------------------
                                           George L. Riggs, III, CFO


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