UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF A FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES ACT OF 1934
For the month of June 30, 2004
Commission File Number 000-17729
FORUM ENERGY CORPORATION
(Address of principal executive office)
700 2 nd st s.w. suite 1400 Calgary, AB, TZP4VS CANADA
(Translation of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F |_|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1) |_|
Indicate by check mark the registrant urnishing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes |_| No |X|
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-____________
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FORUM ENERGY CORPORATION
(Registrant)
By:/s/ David M. Thompson
----------------------------------
Date: August 18, 2004 Name: David M. Thompson
Title: CFO
BC FORM 51 - 901F
QUARTERLY AND YEAR END REPORT
Incorporated as part of: |X| Schedule A
|_| Schedules B & C
=======================================================================================================
ISSUER DETAILS
DATE OF REPORT
NAME OF ISSUER FOR THE SIX MONTHS ENDED YY/MM/DD
Forum Energy Corporation June 30, 2004 2004/08/16
- -------------------------------------------------------------------------------------------------------
ISSUER ADDRESS
700-2nd St. S. W., Suite 1400
- -------------------------------------------------------------------------------------------------------
CITY PROVINCE POSTAL CODE ISSUERS FAX NO. ISSUER TELEPHONE NO.
Calgary Alberta T2P 4V5 403-398-1382 403-290-1676
- -------------------------------------------------------------------------------------------------------
CONTACT NAME CONTACT POSITION CONTACT TELEPHONE NO.
David Thompson Chief Financial Officer 403-290-1676
CONTACT EMAIL ADDRESS WEB SITE ADDRESS
dmt@forumenergy.com www.forumenergy.com
=======================================================================================================
CERTIFICATE
THE SCHEDULE(S) REQUIRED TO COMPLETE THIS REPORT ARE ATTACHED AND THE DISCLOSURE
CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A COPY OF THIS
REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT. PLEASE NOTE THIS
FORM IS INCORPORATED AS PART OF BOTH THE REQUIRED FILING OF SCHEDULE A AND
SCHEDULES B & C.
================================================================================
DIRECTOR'S SIGNATURE PRINT FULL NAME DATE SIGNED
"David R. Robinson" David Russell Robinson August 16, 2004
- --------------------------------------------------------------------------------
DIRECTOR'S SIGNATURE PRINT FULL NAME DATE SIGNED
"David Thompson" David Michael Thompson August 16, 2004
================================================================================
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
Management Discussion and Analysis of Financial Condition
and Results of Operations
(all funds in Cdn. $ unless otherwise stated)
Dated: August 16, 2004
Overall Performance
During the six months ended June 30, 2004, Forum Energy Corporation ("Forum" or
the "Company") continued to focus its efforts on creating shareholder value
through the acquisition of, or participation in the development of, proven
petroleum and coal reserves as well as evaluating other energy project
opportunities internationally. Our primary focus at this time is on the
Company's assets and projects in the Philippines.
The Company drilled three onshore wells on the island of Cebu in the Philippines
in the third and fourth quarters of 2003 and is preparing to have these wells
tested and certified. In addition to evaluating other farm-in energy-related
opportunities in Southeast Asia, the Company is in the process of acquiring four
coal concessions located on the Island of Cebu.
The Company has now utilized the funding raised on the last private offering of
August 2003 in successful pursuance of its planned activities for the period
January 1, 2003 until present. It has also been pursuing additional short-term
financing until longer-term funding can be put in place as described below.
In order to have adequate resources for future funding for the business, the
Company has entered into a Heads of Agreement with a Malaysian/Swiss group, AIAK
Swiss ("AIAK"), to raise up to US$20 Million to fund the forward development
programme. It is proposed that these funds will be contributed into a Special
Purposes Vehicle ("SPV"); the Company will also contribute its assets into the
SPV, which assets will be independently valued. In the meantime, the Company has
raised working capital in the form of short-term non-interest bearing advances
from certain directors and shareholders of the Company.
On July 29, 2004 the Corporation announced that it was in the process of
submitting a formal application to the Philippine Department of Energy for a new
Coal Operating Contract (COC). Exploration drilling is planned by the
Corporation to identify the readily mineable coal reserves, which are
conservatively estimated to be between 2 to 10 million metric tons proven with
upside potential, and are located in South Cebu. The COC is for four of the most
prospective coal blocks in the area and potentially provides the Corporation
with an opportunity to become a key producer of high quality steam coal.
Additional applications for more coal blocks are anticipated as the licenses
become available.
The Corporation has entered into negotiations with Langley Park Investments plc
to exchange 27,000,000 of its restricted stock in exchange for shares of a U.K.
company, which will be publicly traded in the near future, for total gross
proceeds of $5,481,000.
As part of its short-term financing efforts, the Corporation is also negotiating
to sell five-year convertible debentures to an institutional investor with the
expectation of raising up to $1 million for working capital purposes.
Selected Annual Information
Selected Financial Data
(in '000, except Earnings per Share)
Quarter Six Months Year Year Year
Ended Ended Ended Ended Ended
06/30/04 06/30/04 12/31/03 12/31/02 12/31/01
--------- --------- --------- --------- ---------
Revenue $ -- $ -- $ -- $ -- $ 1
Income (Loss) $ (357) $ (645) $ (1,356) $ (1,058) $ (1,514)
Earnings (Loss) per share $ (0.01) $ (0.01) $ (0.01) $ (0.10) $ (0.17)
Diluted Earnings (Loss) per share $ -- $ -- $ -- $ -- $ --
Dividends per share $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
Weighted Avg. Shares O/S ('000) 137,700 137,700 113,700 10,404 8,734
Working Capital $ (360) $ (843) $ (283) $ (587) $ (574)
Resource Properties (1) $ -- $ -- $ -- $ -- $ --
Long-Term Debt $ (14) $ 6,964 $ 6,881 $ -- $ --
Shareholders' Equity $ (153) $ 1,468 $ 1,809 $ (576) $ 242
Total Assets $ 288 $ 9,499 $ 9,109 $ 71 $ 852
During the fiscal year ended December 31, 2003 the Company assets, weighted
average shares and long-term debt reflected the business acquisition of Forum
Exploration, Inc as described in the accounts. The Company was still focused on
development activities and, therefore, no revenues were generated during these
periods.
Results of Operations
The consolidated accounts show a loss for the six months ended June 30, 2004 of
($644,984) or ($0.01) per share versus ($1,356, 130) for 2003 or ($0.10) per
share. The results for the six months ended June 30, 2004 as well as the year
ended December 31, 2003 incorporate the activities of the Philippine subsidiary,
Forum Exploration, Inc.
Balance Sheet
There has been little significant change in the current assets of the Company,
which now include the assets of Forum Exploration, Inc. The inclusion of the
$313,443 short-term demand loans from the shareholders of the Company (the
"Shareholders") has reduced the working capital of the Company as detailed in
the summary of quarterly results.
Property, Plant and Equipment
Additions / Accumulated
June 30, 2004 Cost Disposals Depreciation Net book value
-----------------------------------------------------------
Philippine Based Assets:
Oil and gas exploration and other costs:
Drilling equipment $ 919,309 $ 240,814 $ 678,495
Well logging equipment and other costs 122,908 49,776 73,132
Deferred exploration costs 8,065,449 $430,911 -- 8,496,360
-----------------------------------------------------------
9,107,666 430,911 290,590 9,247,987
Office furniture and fixtures 108,435 2,193 87,184 23,444
Transportation equipment 5,532 1,612 3,920
-----------------------------------------------------------
$9,221,633 $433,104 $ 379,386 $9,275,351
===========================================================
December 31, 2003
Philippine Based Assets:
Oil and gas exploration and other costs:
Drilling equipment $ 919,309 $ 119,684 $ 799,625
Well logging equipment and other costs 122,908 36,873 86,035
Deferred exploration costs 8,065,449 -- 8,065,449
-----------------------------------------------------------
9,107,666 156,557 8,951,109
Office furniture and fixtures 108,435 81,508 26,927
Transportation equipment 5,532 779 4,753
-----------------------------------------------------------
$9,221,633 $ 238,844 $8,982,789
===========================================================
Summary of Quarterly Results
Selected Financial Data
(in '000, except EPS)
-------------------------------------------------------------------------------------------------------------------
2nd Qtr, 04 1st Qtr, 04 4th Qtr, 03 3rd Qtr, 03 2nd Qtr, 03 1st Qtr, 03 4th Qtr, 02 3rd Qtr, 02 2nd Qtr, 02
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue (0) (0) (0) (0) (0) (0) (0) (0) (0)
- ------------------------------------------------------------------------------------------------------------------------------------
Income (Loss) (357) (288) (292) (56) (741) (267) (491) (176) (94)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) (0.01) (0.01) (0.01) (0.01) (0.07) (0.03) (0.04) (0.02) (0.01)
per share -----
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted Earnings -- -- -- -- -- -- -- -- --
(Loss) per share
- ------------------------------------------------------------------------------------------------------------------------------------
Liquidity
The working capital deficit at June 30, 2004 was $842,501 (2003 - deficit
$283,714) and shareholders' surplus was $1,468,414 (2003- $1,808,953). The
Company will need to raise additional capital through debt, equity or other
offerings to fund its ongoing operations and development. The Company has
announced plans to raise up to US$20 million to fund its long-term objectives,
as discussed above. In the short-term, management is in discussions with a
number of financial institutions, who have expressed interest in subscribing for
convertible debt instruments or equity placements, to provide interim funding
for approximately US$1 million.
In the meantime, the directors and Shareholders have provided short-term
financing in order for the Company to meet its working capital requirements to
continue its operations. Such financings have been on a non-interest,
non-recourse basis. Since January 1, 2004 to date, directors have contributed
US$158,805 through the exercise of options at the request of the Company and
shareholders and directors have advanced a further US$235,000 through short-term
loans repayable on demand.
The Company had entered into interim arrangements with Manguerra Mining and
Development Company as a bridging arrangement and had agreed to acquire the
share capital of Manguerra, subject to a due diligence review and Department of
Energy approval. To that end it loaned Manguerra US$50,000 as a secured demand
loan pending the completion of the transaction, at which time the balance of
US$150,000 would be due (total consideration is US$200,000). As a result of the
due diligence, the Company decided not to proceed with the deal and the loans
have been fully repaid.
Capital Resources
The Company is responsible for meeting the entire working capital requirements
for the current year of the oil and gas properties of Forum Exploration, Inc. of
which the Company now owns 66 2/3%. The working capital requirements for the oil
and gas operations are based on the work programme agreed to between Forum
Exploration, Inc. and the Department of Energy of the Philippines. The general
and administration costs run approximately US$25,000 per month and the work
programme exploration requirements have been met for 2003 and 2004.
An additional work programme has been prepared and approved to complete the
testing and appraisal of the onshore wells as well as an appraisal of the
Libertad gas field, which has been budgeted to cost approximately US$892,616
over the coming year. In addition, the Company has committed to undertake
exploration activities in Manila Bay pursuant to which a seismic programme has
been budgeted for US$979,900 over the coming year. These will be funded from the
long-term financing mentioned above. In addition, the Company will look to
farm-in to a producing field in Indonesia or elsewhere.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements in existence as of this date.
Transactions with Related Parties
Related party transactions occurred with the following persons for the six
months ended June 30, 2004:
AMS Limited provides the Company with accounting, consulting, and corporate
secretarial services as well as director services. David Thompson, director and
CFO of the Company, is a major shareholder of AMS Limited. As at June 30, 2004
the Company owed AMS Limited a total of $100,590 for these services. The fees
payable to AMS Limited, which are charged at a rate of US$9,000 per month, will
continue to accrue as ongoing services are being provided to the Company.
Included in this monthly charge is David Thompson's director's fee in the amount
of US$1,000 per month. Mr. Thompson advanced during the period a total of
US$5,000 to assist with short-term financing for the Manguerra project.
Barry Stansfield, a director of the Company, is entitled to a director's fee in
the amount of US$1,000 per month. As at June 30, 2004, the Company owed Mr.
Stansfield a total of $42,754 in connection with this fee and other prior year
consulting charges. Mr. Stansfield's total director's fee for the six months
ended June 30, 2004 was US$6,000 (total compensation for the year ended December
31, 2003 was US$20,000). The fee payable to Mr. Stansfield will continue to
accrue as ongoing services are provided to the Company. Barry also advanced
during the period a total of US$5,000 to assist with short-term financing for
the Manguerra project.
David Robinson, who is President, CEO and a director of the Company, is entitled
to compensation for his services as an officer and a director. The fees payable
to Mr. Robinson, which are charged at a rate of US$6,000 per month including a
director's fee of US$1,000 per month, will continue to accrue as ongoing
services are provided to the Company. For the six months ended June 30, 2004 his
total compensation was US$36,000 (total compensation for the year ended December
31, 2003 was US$6,000). Also during this period Mr. Robinson advanced a total of
US$159,050 to the Company to assist with its short-term financing needs. Of this
total, US$50,000 was allocated to the Manguerra project, US$20,000 was used to
finance FEI operations, and the balance of US$89,050 was for general financing
of incurred operating costs of the Company.
Larry Youell, Chairman of the Board and a director of the Company, is entitled
to compensation for his services as Chairman and a director. The fees payable to
Mr. Youell, which are charged at a rate of US$2,000 per month including a
director's fee of US$1,000 per month, will continue to accrue as ongoing
services are provided to the Company. For the six months ended June 30, 2004 his
total compensation was US$12,000 (total compensation for the year ended December
31, 2003 was $93,803). Mr. Youell advanced during the period a total of US$5,000
to assist with short-term financing for the Manguerra project.
Merckwood Resources provides director services to the Company. David Wilson, who
is a director of the Company, controls Merckwood. The director's fee payable to
Merckwood, which is charged at a rate of US$1,000 per month, will continue to
accrue as ongoing services are provided to the Company. For the six months ended
June 30, 2004 the total compensation due Merckwood was US$6,000 (total
compensation for the year ended December 31, 2003 was US$8,000).
Directors exercised 1,258,510 options at values ranging from $0.08 to $0.32 as
detailed in the summary of quarterly results.
Fourth Quarter
[see 1.10]
Proposed Transactions
Other than what has already been described above there are no further proposed
transactions. The Company has already discussed the proposed financing
transaction with AIAK of Malaysia/Switzerland. The proposed transaction will
require that the Company obtain independent valuations of its assets, which will
then be contributed to an SPV into which AIAK will raise and invest up to US$20
million. The Company will receive equity in the SPV in consideration of its
contribution. It is the intention of AIAK to list the SPV on a stock exchange in
order to permit the shares to become tradable.
Critical Accounting Estimates
In the share purchase agreement dated March 23, 2003, as amended to acquire a 66
2/3% interest in Forum Exploration, Inc., the Company acquired an interest in
Deferred Exploration Costs in the amount of $14,539,921 (as at June 30, 2003 the
date for acquisition accounting purposes). These costs are capitalized
development costs prior to the start of commercial operations and can be
recovered from the Department of Energy of the Philippines' share of the
production. At that time, management determined the
fair market value of this debt to be $7,042,487. The initial basis for this
evaluation was at 10% for five years. Subsequently, management determined the
amount should be further written down.
The Company also acquired a long-term debt to a related party, Forum Pacific
Inc, in respect to their advance to Forum Exploration, Inc, the repayment of
which is limited to the related party share of cost recovery and revenues from
profit oil when commercial production commences from the Company's oil and gas
properties in Cebu and Manila Bay. This loan was incurred when Forum Pacific
funded the development costs of Forum Exploration, Inc. At the date of
acquisition the loan balance was $13,081,909, which was discounted to a fair
market value of $9,446,483. This note is being accreted during the estimated
term to repay, being seven years in management's opinion, based on a discount
rate of 10% per annum.
Financial Instruments and Other Instruments
[NTD: see 1.14 of the form]
Other MD&A Requirements
General and administrative:
Six Months
ended
June 30, 2004
$
-----------------------------------------------------------
Accounting services 44,175
Audit fees 38,743
Communications 2,821
Consulting expenses 188,603
Listing and filing fees 18,536
Legal fees 85,621
Management fees 80,317
Office and miscellaneous 8,445
Shareholder information 5,780
Travel 8,158
-----------------------------------------------------------
481,199
===========================================================
The majority of the engineering and geological work was performed by Forum
Exploration, Inc in the Philippines who are permitted to capitalize these costs
and recover them against future production. Interest charges relate to the
convertible debt, which was converted in December, 2003, and accretion of the
long-term debt. The Company relies on outside consulting support as required.
Compensation expenses recognize the cost element of issuing options to
directors. Other fees and expenses reflect the changes to the business to
accommodate the new development in the Philippines.
Disclosure of Outstanding Share Data
AS AT AND FOR THE SIX MONTHS ENDED JUNE 30, 2004
a) Authorized and issued share capital:
Class Par Authorized Number Issued and Outstanding Number Issued and Outstanding
Value as at December 31, 2003 as at June 30, 2004
- ---------------------------------------------------------------------------------------------------------------------------------
Common Shares N.P.V. Unlimited 135,821,037 137,683,646
Preferred Shares N.P.V. Unlimited None None
(convertible redeemable voting)
Disclosure of Outstanding Share Data
AS AT AND FOR THE SIX MONTHS ENDED JUNE 30, 2004 (Continued)
b) Summary of convertible securities outstanding as at June 30, 2004
Security Number of Number of Exercise Price Expiry Date
Options Common Shares (per option or
issuable upon warrant)
Exercise or US$
Conversion
- ----------------------------------------------------------------------------------------------------------------
Incentive Stock Options
5,000 5,000 $ 0.11 19-Nov-04
50,000 50,000 $ 0.15 15-Mar-05
4,862,500 4,862,500 $ 0.08 26-Apr-08
750,000 750,000 $ 0.31 26-Apr-08
1,000,000 1,000,000 $ 0.43 26-Apr-08
------------------------------
6,667,500 6,667,500
==============================
Warrants
150,000 150,000 $ 0.90 2-Sept-2004
849,000 849,000 $ 0.25 2-Sept-2004
1,540,000 1,540,000 $ 0.25 2-Sept-2004
5,700,000 5,700,000 $ 0.08 26-Apr-2008
------------------------------
8,239,000 8,239,000
==============================
Looking Forward
This discussion contains "forward looking statements" as per Section 21E of the
US Securities and Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in such forward looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Management is currently reviewing many options and there is no
assurance that they will not make decisions other than those now contemplated.
The Company is subject to political risks and operational risks identified in
documents filed with the Securities and Exchange Commission, including changing
and depressed oil prices, unsuccessful drilling results, change of government
and political unrest in its main area of operations.
Signed "David Russell Robinson"
- -------------------------------
David Russell Robinson
President and Chief Executive Officer
Consolidated Financial Statements of
FORUM ENERGY CORPORATION
(Unaudited)
As at June 30, 2004
and for the Six Months ended June 30, 2004
FORUM ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Canadian Funds
As at June 30, 2004 and December 31, 2003
- --------------------------------------------------------------------------------------------
June 30 December 31
2004 2003
- --------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 21,749 $ 27,077
Accounts receivable 138,892 76,220
Prepaid expenses 63,114 22,927
------------------------------
223,755 126,224
------------------------------
Property, plant and equipment [note 4] 9,275,352 8,982,789
------------------------------
$ 9,499,107 $ 9,109,013
==============================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities [note 7] $ 752,813 $ 409,938
Short-Term Loans [note 7] 313,443 --
------------------------------
1,066,256 409,938
------------------------------
Long-term debt [note 5] 6,964,437 6,881,989
Non-controlling interest -- 8,533
------------------------------
6,964,437 6,890,522
------------------------------
8,030,693 7,300,060
------------------------------
Shareholders' Equity (Deficiency)
Share capital [note 6] $ 7,551,780 $ 7,239,109
Contributed surplus 517,941 526,167
Deficit (6,601,307) (5,956,323)
------------------------------
1,468,414 1,808,953
------------------------------
$ 9,499,107 $ 9,109,013
==============================
Going concern [note 1]
Commitments and contingencies [note 9]
Subsequent events [note 12]
See Accompanying Notes to the Consolidated Financial Statements
ON BEHALF OF THE BOARD:
_____"David Robinson"_____ _____"David Thompson"_____
Director Director,
FORUM ENERGY CORPORATION
CONSOLIDATED Statements of loss and deficit
Canadian Funds
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
(Unaudited) (Unaudited)
- -------------------------------------------------------------------------------------------------------------------
2004 2003 2004 2003
===================================================================================================================
EXPENSES
General and administration [note 7] 346,236 $ 739,677 $ 481,199 $ 1,007,123
Depreciation 71,437 -- 140,518 --
Accretion on long-term debt [note 5] 80,707 -- 162,490 --
Interest expense (income) 877 (181) 1,826 (181)
Foreign exchange losses (gains) (14,461) -- (4,903)
--------------------------------------------------------------------
(484,796) (739,496) (781,130) (1,006,942)
OTHER EXPENSES
Write down of investments [note 8] (1,003) (1,799)
--------------------------------------------------------------------
(1,008,741)
LOSS BEFORE NON-CONTROLLING INTEREST (484,796) (740,499) (781,130) (1,008,741)
Non-controlling interest 127,613 136,146 --
--------------------------------------------------------------------
NET LOSS FOR THE SIX MONTHS (357,183) (740,499) (644,984) (1,008,741)
Deficit, beginning of the year (6,244,124) (4,868,435) (5,956,323) (4,600,193)
--------------------------------------------------------------------
Deficit, end of the six months $(6,601,307) $(5,608,934) $(6,601,307) $(5,608,934)
====================================================================
Net loss per common share
Basic and diluted [note 6] ($0.01) ($0.07) ($0.01) ($0.10)
====================================================================
See Accompanying Notes to the Consolidated Financial Statements
FORUM ENERGY CORPORATION
CONSOLIDATED Statements of cash flows
Canadian Funds
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
2004 2003 2004 2003
==================================================================================================================
Cash provided by (used in)
OPERATING ACTIVITIES
Net loss for the Quarter $ (357,183) $ (740,499) $ (644,984) $(1,008,741)
Non-cash items included in loss
Depreciation 71,461 1,003 140,542 1,799
Non-controlling interest -- -- (8,533) --
Options issued to non- 443,317 449,246
employees
Stock issued for services 88,953 -- 92,940 --
Accretion on long-term debt 80,707 -- 162,490 --
Fair Value of ROC Oil warrants 3,354 13,414
charged to interest expense
Exchange gain on ROC Oil loan (26,345) (57,384)
and short-term loans
--------------------------------------------------------------------
(116,062) (319,170) (257,545) (601,667)
Changes in working capital related
to operating activities
Accounts receivable (75,493) (57,810) (62,672) (59,503)
Prepaid expenses (48,999) (13,919) (40,188) (14,993)
Accounts payable and accrued 338,347 48,736 343,274 300,152
liabilities
--------------------------------------------------------------------
97,793 (342,163) (17,131) 225,656
--------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to properties; plant and (264,363) (1,381) (433,104) (1,381)
equipment, net
Loan Receivable (809,646) (809,646)
Proceeds on sale of investments -- 27,776
[note 8]
--------------------------------------------------------------------
(264,363) (811,027) (433,104) (783,251)
--------------------------------------------------------------------
FINANCING ACTIVITIES
Short-term loans 116,748 (13,729) 313,443 (13,729)
Shares Subscribed (94,103) 2,313,787 (80,042) 2,313,787
Issuance of share capital, net of 114,914 46,446 211,505 46,446
costs [note 6]
--------------------------------------------------------------------
137,559 2,346,504 444,906 2,346,504
--------------------------------------------------------------------
Net increase in cash (29,011) 1,193,314 (5,329) 1,187,243
Cash - beginning of the year -- 18,305 27,077 24,376
--------------------------------------------------------------------
Cash - end of the year $ 29,011 $ 1,211,619 21,748 $ 1,211,619
====================================================================
Interest paid $ $ $ $
==================================================================================================================
Taxes paid $ -- $ -- $ $
==================================================================================================================
See Accompanying Notes to the Consolidated Financial Statements
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
1. GOING CONCERN
Forum Energy Corporation (the "Corporation") is incorporated under the
laws of Alberta and is engaged primarily in the business of exploration
and development of oil and gas reserves and the pursuit of other energy
related opportunities. The exploration and development of oil and gas
reserves involves significant financial risks. The success of the
Corporation is dependent upon its ability to discover economically
recoverable reserves and to bring such reserves into profitable
production, and is subject to a number of risks, including environmental
risks, contractual risks, legal and political risks, fluctuations in the
price of oil and gas and other factors beyond the Corporation's control.
These consolidated financial statements have been prepared by management
on the basis of accounting principles applicable to a going concern.
Management believes the going concern basis, which presumes the
realization of assets and discharge of liabilities in the normal course of
business for the foreseeable future, is appropriate. The Corporation has
experienced significant operating losses and cash outflows from operations
in the six months ended June 30, 2004, has a $842,501 working capital
deficiency at June 30, 2004 and has no producing properties. The
Corporation's ability to continue as a going concern is dependent on
achieving profitable operations and upon obtaining additional financing.
The outcome of these matters cannot be predicted at this time.
If the going concern assumption were not appropriate for these
consolidated financial statements adjustments might be necessary to the
carrying values of assets and liabilities and the balance sheet
classifications used.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared by management
in accordance with Canadian generally accepted accounting principles
("Canadian GAAP"). The preparation of financial statements in conformity
with Canadian GAAP requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. The most significant of these estimates
relate to determining the recoverability of the Corporation's property,
plant and equipment. While it is the opinion of management that these
consolidated financial statements have been properly prepared within
reasonable limits of materiality and within the framework of the
significant accounting policies summarized below, actual results could
differ from the estimates made. The interim consolidated financial
statements should be read in conjunction with the audited consolidated
financial Statements and the notes thereto for the year ended December 31,
2003.
(a) Basis of preparation
These financial statements include the accounts of the Corporation
and its subsidiaries, Tracer Petroleum International ("TPI"); TEPCO
Ltd. ("TEPCO") and Forum Exploration Inc. ("FEI").
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Properties, plant and equipment
The Corporation follows the full cost method of accounting for oil
and natural gas operations, whereby all costs of exploring for and
developing oil and natural gas reserves are capitalized and
accumulated in country-by-country cost centres. Such costs include
land acquisition costs, geological and geophysical costs, costs of
drilling both productive and non-productive wells, interest costs on
major development projects and overhead charges directly related to
acquisition, exploration and development activities.
The costs (including exploratory dry holes) in costs centres from
which there has been no commercial production are not subject to
depletion until commercial production commences. The capitalized
costs are periodically assessed to determine whether it is likely
such costs will be recovered in the future. To the extent there are
costs, which are not likely to be recovered in the future, they are
written-off.
The costs in cost centres from which there will be production will
be depleted and depreciated on the unit of production method based
on the estimated proved reserves after royalties. Oil and natural
gas reserves and production will be converted into equivalent units
based upon their estimated relative energy content. Costs of
acquiring and evaluating significant unproved properties are
excluded from the depletion calculations. These unproved properties
are assessed periodically to ascertain whether impairment in value
has occurred. When proved reserves are assigned or the value of the
property is considered to be impaired, the cost of the property or
the amount of the impairment is added to costs subject to depletion.
Oil and natural gas properties are subject to a ceiling test for
each cost centre and in each reporting period to determine that the
costs of each cost centre are recoverable and do not exceed their
estimated future net revenues. Future net revenues are estimated
based upon the production of proved reserves at period end prices
plus the costs of unproved properties net of impairment allowances,
future capital costs, administrative, financing, future removal and
site restoration costs and income taxes. If the carrying value of
the oil and natural gas properties exceed the estimated future net
revenues, a write down is recorded.
Proceeds from the sale of oil and natural gas properties are applied
against capitalized costs, with no gain or loss recognized unless
such a sale would alter the depletion rate by more than 20%.
Substantially all of the Corporation's exploration, development and
production activities are conducted jointly with others and
accordingly these financial statements reflect only the
Corporation's proportionate interest in such activities.
The Corporation's drilling equipment and well logging equipment are
recorded at cost upon acquisition and depreciated on a straight-line
basis over five years.
The Corporation depreciates its office furniture and fixtures, and
transportation equipment at the rate of 30% per annum utilizing the
declining balance method. It provides for a full year's amortization
of these assets in the year of acquisition.
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Future removal and site restoration costs - oil and gas properties
Estimated future removal and site restoration costs are provided for
using the unit-of-production method based upon estimated gross
proven reserves.
(d) Foreign currency translation
The accounts of the Corporation's integrated subsidiary have been
translated into Canadian dollars on the following basis:
Monetary assets and liabilities at the exchange rate at year-end.
Non-monetary assets and liabilities at historical exchange rates.
Exchange gains and losses are credited or charged to income in the
year incurred.
(e) Stock option plan
The Corporation has a fixed price stock option plan. No compensation
expense is recognized when stock options are issued to or exercised
by employees, officers, or directors. Any consideration paid on
exercise of stock options by employees, officers, or directors is
credited to share capital. Effective January 1, 2002 the Corporation
adopted the new Canadian accounting standard for stock-based
compensation and other stock-based payments. The standard requires
that the Corporation provide pro-forma earnings and pro-forma
earnings per share for employee stock option granted, as if the fair
value method of accounting for stock-based compensation had been
used. The fair value of any stock option grants to non-employees is
charged to income during the year.
(f) Income taxes
The Corporation follows the liability method to account for income
taxes. Under this method, future tax assets and liabilities are
determined based on the differences between the carrying value and
the tax bases of assets and liabilities, and measured using the
substantively enacted tax rates and laws expected to be in effect
when the differences are expected to reverse.
(g) Investments
Investments consist of equity securities held for sale and are
accounted for using the cost method of accounting. The securities
are recorded at cost unless there has been a loss in value that is
other than a temporary decline, at which time the investment is
written down to market value.
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
3. BUSINESS COMBINATION
On March 11, 2003, the Corporation entered into an agreement to acquire a
right to purchase 66?% of the issued and outstanding shares of FEI, a
Philippine Corporation that has rights to develop two properties located
in the Philippines. The Corporation completed this transaction on July 18,
2003 and co-terminously the Corporation exercised its right to acquire
66?% of FEI. The consideration rendered was the issuance of 100,000,000
common shares of the Corporation at an adjusted price of $0.001 per share.
The adjusted price per share was determined by management based upon the
vendors' cost of the right to purchase, which approximated $100,000, as
management believes there was not a sufficiently active and liquid market
for the Corporation's shares to support their use. In addition, the
Corporation undertook to procure funding in the form of an on-demand
bridge loan to fund the working capital needs of FEI from November 1, 2002
until the completion of the acquisition, which amounted to approximately
US$500,000. The Corporation also agreed to fund FEI's required property
work commitments and overhead for 2003 and 2004 [see Note 9].
The acquisition has been accounted for using the purchase method whereby
the assets and liabilities were recorded at their fair market values as at
the effective date and the operating results have been included in these
consolidated financial statements from the date of acquisition as tabled
below:
Net Assets Acquired:
Current assets (including cash $20,203) $ 102,938
Property, plant and equipment 7,042,487
Current liabilities (107,708)
Long-term debt (6,772,955)
Non-controlling interest (50,000)
-----------
$ 214,762
===========
Consideration Rendered:
Issuance of 100,000,000 common shares $ 100,000
Transaction costs 114,762
-----------
$ 214,762
===========
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
4. PROPERTY, PLANT AND EQUIPMENT
June 30, 2004 Additions / Accumulated Net
Cost Disposals Depreciation book value
-----------------------------------------------------------
Philippine Based Assets:
Oil and gas exploration and other costs:
Drilling equipment $ 919,309 $ 240,814 $ 678,495
Well logging equipment and other costs 122,908 49,776 73,132
Deferred exploration costs 8,065,449 430,911 -- 8,496,360
-----------------------------------------------------------
9,107,666 430,911 290,590 9,247,987
Office furniture and fixtures 108,435 2,193 87,184 23,444
Transportation equipment 5,532 1,612 3,920
-----------------------------------------------------------
$9,221,633 $433,104 $ 379,386 $9,275,351
===========================================================
December 31, 2003
Philippine Based Assets:
Oil and gas exploration and other costs:
Drilling equipment $ 919,309 $ 119,684 $ 799,625
Well logging equipment and other costs 122,908 36,873 86,035
Deferred exploration costs 8,065,449 -- 8,065,449
-----------------------------------------------------------
9,107,666 156,557 8,951,109
Office furniture and fixtures 108,435 81,508 26,927
Transportation equipment 5,532 779 4,753
-----------------------------------------------------------
$9,221,633 $ 238,844 $8,982,789
===========================================================
Deferred exploration costs incurred prior to the start of commercial
operations, net of incidental income. These costs include acquisition
costs, direct exploration and development costs and an appropriate portion
of related overhead expenditures, and exclude general overhead or
administrative expenditures not specifically identified with a particular
area of interest.
5. LONG-TERM DEBT
Long-term debt is non-interest bearing, non-recourse, unsecured and
relates to previous funding of the deferred exploration costs by its
former parent company (Forum Pacific Inc.). The recovery of these advances
is deferred until the Corporation commences to earn revenue out of
production from its exploration of the SC40 Cebu and Manila Bay
properties, and then repayment shall be at a rate of 50% of the income
generated by FEI until fully repaid. The debt has been discounted to a
fair market value and the face amount of the debt is P370,818,568
($9,417,213). The note is subject to accretion and an amount of $162,490
has been recognized at June 30, 2004. Total overhead costs capitalized
during the period ended June 30, 2004 totalled $120,226.
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
6. SHARE CAPITAL
(a) Authorized
Unlimited number of Common shares without par value; and Unlimited
number of Class A and Class B preferred convertible redeemable
voting shares without par value
(b) Issued Common Shares
Number Amount
---------------------------
Balance - December 31, 2003 135,821,037 $ 6,771,207
Issued for Cash pursuant to exercise of stock options 1,491,040 211,505
Issued for services 371,569 101,166
---------------------------
Balance - June 30, 2004 137,683,646 $ 7,083,878
===========================
(c) Warrants
$
Balance - December 31, 2003 8,239,000 $467,902
-- --
--------------------------
Balance - June 30, 2004 8,239,000 $467,902
==========================
(i) Warrants previously issued totaling 2,539,000 at an exercise
price between $0.25 and $0.90 due to expire on March 2, 2004
were further extended to expire on September 2, 2004.
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
6. SHARE CAPITAL (Continued)
(d) Options
The Corporation has established a stock option plan whereby options
may be granted to its directors, officers, consultants, and
employees. The exercise price of each option equals the market price
of the Corporation's stock on the date of the grant and an option's
maximum term is three years. The options vest immediately. At June
30, 2004 there were 6,667,500 stock options outstanding to purchase
common shares at US$0.08 - US$0.43 per share. These options expire
on various dates between November 19, 2004 and April 26, 2008.
Weighted
Number of Average
Options Exercise
Exercisable Price/Share
------------------------------
------------------------------
Outstanding and exercisable December 31, 2003 7,639,790 $0.18
Granted 750,000 $0.41
Exercised (1,491,040) $0.14
Cancelled/Expired (231,250) $0.32
------------------------------
Outstanding and exercisable June 30, 2004 6,667,500 $0.21
==============================
The following table summarizes stock options outstanding and
exercisable at June 30, 2004:
Weighted Average Remaining
Exercise Price Number of Options Life (in years)
--------------------------------------------------------------------
$0.10 4,862,500 4
$0.11 5,000 .4
$0.15 50,000 1
$0.31 750,000 4
$0.43 1,000,000 4
-------------------------------------------------
6,667,500 3
=================================================
The following table provides pro forma measures of loss and loss per
common share had stock options granted to employees, officers and
directors in 2004 been recognized as compensation expense based on
the estimated fair value of the options on the grant date.
2004 Year 2003
--------------------------
Loss for the six months as reported $ 644,984 $1,356,130
Compensation expense -- 765,897
--------------------------
Pro-forma loss for the six months $ 644,984 $2,122,027
==========================
Loss per common share as reported $ 0.01 $ 0.01
--------------------------
Pro-forma loss per common share $ 0.01 $ 0.02
==========================
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
6. SHARE CAPITAL (Continued)
(d) Options (Continued)
The fair value of all options including those disclosed as pro forma
compensation expense and warrants were estimated using a Black
Scholes option-pricing model and based on the following assumptions:
2004
----
Dividend yield (%) 0.0
Expected stock price volatility (%) 185
Risk free interest rate (%) 4.9
Expected life of options (years) 1
----
At June 30, 2004, 15,212,200 shares of common stock were reserved
including 6,667,500 shares reserved for issuance under stock option
agreements and 8,239,000 reserved for issuance in conjunction with
outstanding warrants.
(e) Per share amounts
The loss per common share computations is based on the weighted
average number of shares outstanding, which was 137.7 million (Year
2003 - 113.7million). Diluted earnings per share amounts are not
recorded, as these amounts would be anti- dilutive.
7. RELATED PARTY TRANSACTIONS, SHORT-TERM LOANS & BALANCES
(a) Management and consulting fees:
During the six months ended June 30, 2004 general and administrative
expenses included fees charged by directors, officers and/or
companies controlled by them at what management believes are market
rates under commercial terms totaling $172,683 (2003 - $261,117).
Included in accounts payable and accrued liabilities at June 30,
2004, is $412,756 (2003 - $69,673) owed to directors, officers
and/or companies controlled by them.
(b) During the six months ended June 30th two shareholders of the
Corporation advanced US$235,000 to FEI to assist with its working
capital requirements. The advance is an interest-free on-demand note
to be issued and guaranteed by the Corporation under its commitment
to fund the working capital needs of FEI. The loans are short-term
and expect to be repaid out of proceeds from the new funding as well
as awarding the shareholders bonus shares equivalent to 20% of the
amounts advanced.
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
8. INVESTMENTS
Investment in Transmeridian Exploration Inc.
During the year ended December 31, 2002 the Corporation recorded a write
down totaling $48,372 with respect to its investment in 1,500,000 common
shares of Transmeridian Exploration Inc. as management had determined that
the carrying value of this investment has become permanently impaired.
During the year ended December 31, 2002 the Corporation had sold 1,350,000
common shares of Transmeridian Exploration Inc. for net proceeds totaling
$643,326 and recorded a loss on disposal totaling $42,000. During the year
ended December 31, 2003 the Corporation sold its remaining interest in
Transmeridian Exploration Inc. consisting of 150,000 common shares for net
proceeds totaling $27,776 resulting in no gain and no loss.
9. COMMITMENTS AND CONTINGENCIES
The Corporation must fulfill its commitment to fund 100% of the overheads
of FEI plus the implementation of the work program agreed between FEI and
the Department of Energy of the Philippines for calendar years 2003 and
2004. This work program for SC40 covers the drilling of another well in
the first year plus two additional wells in the second year. Furthermore
the Corporation has committed itself to commence development of the
Libertad Gas Field. The budget for this development for 2004 for SC40 is
approximately US$2 million.
On May 6, 2004 the Corporation announced that it entered into an agreement
with Energy Services Group (ESG) Dubai for the ongoing management and
oversight of the Corporation's exploration and development efforts. ESG
has prepared the 2004 Work Programme and Budget for the Corporation's
operating subsidiary, FEI. The budget is for a total of US$4.36 million,
and includes the further exploration and development of the Corporation's
Cebu Island contract (SC40) as well as Manila Bay (SC43), and specifically
includes the development of the newly discovered Maya Field and the
Libertad Gas Field. The majority of the 2004 Work Programme and Budget
will be covered through the US$20 million financing that is being arranged
through AIAK Capital in Kuala Lumpur, which was announced in a press
release of April 22nd 2004.
10. FINANCIAL INSTRUMENTS
(a) Foreign currency exchange risk:
The Corporation is exposed to foreign currency fluctuations as many
of the Corporations expenditures are in U.S. dollars and Philippine
pesos.
(b) Credit risk:
The Corporation's accounts receivable are primarily customers in the
oil and gas industry and government agencies and are subject to
normal industry credit risks.
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
10. FINANCIAL INSTRUMENTS (Continued)
(c) Fair value of financial instruments:
Financial instruments of the Corporation consist mainly of cash,
accounts receivable, accounts payable and accrued liabilities,
short-term loans, long-term debt and convertible loans. As at June
30, 2004, there were no significant differences between the carrying
amounts of these financial instruments reported on the balance sheet
and their estimated fair values.
11. COMPARATIVE INFORMATION
Certain amounts for prior years have been reclassified to conform to the
current year's presentation.
12. SUBSEQUENT EVENTS
(i) On April 7, 2004 the Corporation announced as part of its objective
of diversifying sources of energy from oil and gas production that
it had agreed the terms to acquire The Manguerra Mining and
Development Corporation of Cebu, Philippines (Manguerra), subject to
completion of formal due diligence and Department of Energy
approval. The expected cost of this acquisition was estimated at
US$200,000. The Corporation had made a secured loan in the amount of
US$50,000 to secure its right to this property. As a result of the
subsequent due diligence review, the Corporation decided not to
proceed with the acquisition.
(ii) In February 2004 we entered into a finders agreement with AIAK
Capital Ltd, pursuant to which AIAK, on an exclusive basis for a
period of 180 days, was retained to obtain equity and/or debt
financing for the Corporation in the capital markets of Asia. The
range of financing was between US$5 and US$50 million. Subsequently,
in April 2004, based on discussions with AIAK management, the
Corporation agreed that the appropriate amount of financing which
AIAK should attempt to secure was US$20 million. It has been
suggested by AIAK that such financing may be effected through a
combination including a potential transfer of certain of our assets
to a new `Special Purpose Vehicle' (SPV) through which the US$20
million would be raised. Our interest in the SPV would be based upon
a valuation of the transferred assets by an independent engineering
firm. If AIAK is successful, in addition to reimbursement of
out-of-pocket expenses, it will receive a finder's fee equal to 8%
of the aggregate amount raised.
(iii) On July 29, 2004 the Corporation announced that it was in the
process of submitting a formal application to the Philippine
Department of Energy for a new Coal Operating Contract (COC).
Exploration drilling is planned by the Corporation to identify the
readily mineable coal reserves, which are conservatively estimated
to be between 2 to 10 million metric tons recoverable with upside
potential, and are located in South Cebu. The COC is for four of the
most prospective coal blocks in the area and potentially provides
the Corporation with an opportunity to become a key producer of high
quality steam coal.
FORUM ENERGY CORPORATION
(Formerly Tracer Petroleum Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 2004
Unaudited
12. SUBSEQUENT EVENTS (Continued)
Additional applications for more coal blocks are anticipated as the
originals become available.
(iv) The Corporation has entered into negotiations with Langley Park
Investments plc to exchange 27,000,000 of its restricted stock in
exchange for shares of a U.K. company, which will be publicly traded
in the near future.
(v) As part of its short-term financing efforts, the Corporation is
negotiating to sell five-year convertible debentures to a financing
entity with the expectation of raising up to $1 million for working
capital purposes.
BC FORM 51 - 901F
QUARTERLY AND YEAR END REPORT
Incorporated as part of: |_| Schedule A
|X| Schedules B & C
=======================================================================================================
ISSUER DETAILS
DATE OF REPORT
NAME OF ISSUER FOR THE SIX MONTHS ENDED YY/MM/DD
Forum Energy Corporation June 30, 2004 2004/08/16
- -------------------------------------------------------------------------------------------------------
ISSUER ADDRESS
700-2nd St. S. W., Suite 1400
- -------------------------------------------------------------------------------------------------------
CITY PROVINCE POSTAL CODE ISSUERS FAX NO. ISSUER TELEPHONE NO.
Calgary Alberta T2P 4V5 403-398-1382 403-290-1676
- -------------------------------------------------------------------------------------------------------
CONTACT NAME CONTACT POSITION CONTACT TELEPHONE NO.
David Thompson Chief Financial Officer 403-290-1676
CONTACT EMAIL ADDRESS WEB SITE ADDRESS
dmt@forumenergy.com www.forumenergy.com
=======================================================================================================
CERTIFICATE
THE SCHEDULE (S) REQUIRED TO COMPLETE THIS REPORT ARE ATTACHED AND THE
DISCLOSURE CONTAINED THEREIN HAS BEEN APPROVED BY THE BOARD OF DIRECTORS. A COPY
OF THIS REPORT WILL BE PROVIDED TO ANY SHAREHOLDER WHO REQUESTS IT. PLEASE NOTE
THIS FORM IS INCORPORATED AS PART OF BOTH THE REQUIRED FILING OF SCHEDULE A AND
SCHEDULES B & C.
================================================================================
DIRECTOR'S SIGNATURE PRINT FULL NAME DATE SIGNED
"David R. Robinson" David Russell Robinson August 16, 2004
- --------------------------------------------------------------------------------
DIRECTOR'S SIGNATURE PRINT FULL NAME DATE SIGNED
"David Thompson" David Michael Thompson August 16, 2004
================================================================================
SCHEDULE B
1. a) General and administrative:
Refer to the MD&A for breakdown.
b) Expenditures to non-arms length parties:
Management and consulting fees
See consolidated financial statements for details.
2. FOR THE SIX MONTHS ENDED JUNE 30, 2004
a) Shares issued:
Total Type of
Date Security Type of Issue Number Price Proceeds US$ Consideration Commission
- ---- -------- ------------- ------ ----- ------------ ------------- ----------
01/26/04 Common Shares Exercise of Options 200,000 US$0.14 $28,000.00 Cash None
01/29/04 Common Shares Exercise of Options 34,060 US$0.16 $ 5,449.60 Cash None
01/30/04 Common Shares Exercise of Options 67,560 US$0.14 $ 9,458.40 Cash None
01/30/04 Common Shares Exercise of Options 34,970 US$0.16 $ 5,595.20 Cash None
02/04/04 Common Shares Exercise of Options 68,750 US$0.32 $22,000.00 Cash None
02/10/04 Common Shares Exercise of Options 30,000 US$0.11 $ 3,300.00 Cash None
02/20/04 Common Shares Issued for services 48,929 US$0.16 $ 7,800.00 Services Provided None
04/16/04 Common Shares Exercise of Options 937,500 US$0.08 $75,000.00 Cash None
05/07/04 Common Shares Exercise of Options 18,200 US$0.11 $ 2,002.00 Cash None
06/04/04 Common Shares Exercise of Options 100,000 US$0.08 $ 8,000.00 Cash None
06/04/04 Common Shares Issued for services 42,338 US$0.33 $14,179.63 Services Provided None
06/04/04 Common Shares Issued for services 30,302 US$0.20 $ 6,060.40 Services Provided None
06/04/04 Common Shares Issued for services 250,000 US$0.20 $50,000.00 Services Provided None
---------
TOTAL 1,862,609
=========
b) Warrants issued:
NIL
c) Shares in escrow or subject to pooling:
NIL
d) List of Directors:
Larry Youell David Thompson David Russell Robinson
David Wilson Barry Stansfield
SCHEDULE B (Continued)
2. FOR THE SIX MONTHS ENDED JUNE 30, 2004 (CONTINUED)
e) List of Officers
David Robinson President and CEO
David Thompson Chief Financial Officer and Corporate Secretary
3. AS AT JUNE 30, 2004
a) Authorized and issued share capital:
Issued
Authorized ------
Class Par Value Number Number Amount
----- --------- ------ ------ ------
Common N.P.V. Unlimited 137,683,646 CAN$7,083,878
Warrants N.P.V. Unlimited 8,239,000 CAN$467,902
Preferred convertible N.P.V. Unlimited None
redeemable voting
b) Summary of options, warrants, and convertible securities
outstanding:
Options
Security Number Exercise Price Expiry Date
-------- ------ -------------- -----------
Incentive Stock Options
5,000 $ 0.11 19-Nov-04
50,000 $ 0.15 15-Mar-05
4,862,500 $ 0.08 26-Apr-08
750,000 $ 0.31 26-Apr-08
1,000,000 $ 0.43 26-Apr-08
---------
6,667,500
=========
Warrants
Security Number Exercise Price Expiry Date
- -------- ------ -------------- -----------
Warrants 150,000 $0.90 US per warrant if 2 Sept 2004
exercised by Sept 3, 2004
Warrants 849,000 $0.25 US per warrant if 2 Sept 2004
exercised by Sept 3, 2004
Warrant 1,540,000 $0.25 US per warrant if 2 Sept 2004
exercised by Sept 3, 2004
Warrants 5,700,000 $0.08 US per warrant if
exercised by April 26, 2008 26 April, 2008
---------
TOTAL 8,239,000
=========
Convertibles
NIL
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, David Russell Robinson, President and Chief Executive Officer, certify that:
1. I have reviewed the interim filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim
Filings) of Forum Energy Corporation, (the issuer) for the interim period ending
June 30th 2004;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered by the
interim filings;
3. Based on my knowledge, the interim financial statements together with the
other financial information included in the interim filings fairly present in
all material respects the financial condition, results of operations and cash
flows of the issuer, as of the date and for the periods presented in the interim
filings;
4. The issuer's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures and internal control over
financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused them to be
designed under our supervision, to provide reasonable assurance that material
information relating to the issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or caused it to be
designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with the issuer's GAAP; and
5. I have caused the issuer to disclose in the interim MD&A any change in the
issuer's internal control over financial reporting that occurred during the
issuer's most recent interim period that has materially affected, or is
reasonably likely to materially affect, the issuer's internal control over
financial reporting.
Date: August 16, 2004
/s/ David Russell Robinson
- --------------------------
[Signature]
David Russell Robinson
Chief Executive Officer
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, David Michael Thompson, Chief Financial Officer, certify that:
1. I have reviewed the interim filings (as this term is defined in Multilateral
Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim
Filings) of Forum Energy Corporation, (the issuer) for the interim period ending
June 30th 2004;
2. Based on my knowledge, the interim filings do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated or that is necessary to make a statement not misleading in light of the
circumstances under which it was made, with respect to the period covered by the
interim filings;
3. Based on my knowledge, the interim financial statements together with the
other financial information included in the interim filings fairly present in
all material respects the financial condition, results of operations and cash
flows of the issuer, as of the date and for the periods presented in the interim
filings;
4. The issuer's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures and internal control over
financial reporting for the issuer, and we have:
(a) designed such disclosure controls and procedures, or caused them to be
designed under our supervision, to provide reasonable assurance that material
information relating to the issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which the interim filings are being prepared; and
(b) designed such internal control over financial reporting, or caused it to be
designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with the issuer's GAAP; and
5. I have caused the issuer to disclose in the interim MD&A any change in the
issuer's internal control over financial reporting that occurred during the
issuer's most recent interim period that has materially affected, or is
reasonably likely to materially affect, the issuer's internal control over
financial reporting.
Date: August 16, 2004
/s/ David Michael Thompson
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[Signature]
David Michael Thompson,
Chief Financial OFFICER