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FORM 7
MONTHLY PROGRESS REPORT
Name of CNQ Issuer: Interquest Incorporated (the “Issuer”).
Trading Symbol: IQIT
Number of Outstanding Listed Securities: 42,737,116
Date: October 5, 2006
This Monthly Progress Report must be posted before the opening of trading on the fifth
trading day of each month. This report is not intended to replace the Issuer’s obligation to
separately report material information forthwith upon the information becoming known to
management or to post the forms required by the CNQ Policies. If material information
became known and was reported during the preceding month to which this report relates,
this report should refer to the material information, the news release date and the posting
date on the CNQ.ca website.
This report is intended to keep investors and the market informed of the Issuer’s ongoing
business and management activities that occurred during the preceding month. Do not
discuss goals or future plans unless they have crystallized to the point that they are
"material information" as defined in the CNQ Policies. The discussion in this report must be
factual, balanced and non-promotional.
General Instructions
(a) Prepare this Monthly Progress Report using the format set out below. The
sequence of questions must not be altered nor should questions be omitted or left
unanswered. The answers to the items must be in narrative form. State when the
answer to any item is negative or not applicable to the Issuer. The title to each item
must precede the answer.
(b) The term “Issuer” includes the Issuer and any of its subsidiaries.
(c) Terms used and not defined in this form are defined or interpreted in Policy 1 –
Interpretation and General Provisions.
Report on Business
3. Provide a general overview and discussion of the development of the Issuer’s
business and operations over the previous month. Where the Issuer was inactive
disclose this fact.
On February 22, 2005 the Issuer announced approval by the Canadian
Trading and Quotation Systems Inc. (“CNQ”) for listing and trading of its
common shares on the CNQ under the symbol “IQIT”. Trading on the CNQ
commenced on February 24, 2005. Concurrently, the Issuer voluntarily
delisted its shares from the Toronto Venture Exchange (“TSX-V”).
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 1
On February 24, 2005 the Issuer reported the completion of the acquisition of
100% of the issued and outstanding shares of 1636879 Ontario Inc.,
operating as Transient Media. The purchase price of $1,553,585 was settled
by the issuance of 31,071,714 common shares of Interquest to the
shareholders of Transient Media. Out of this number of shares, 27,964,545
common shares (90%) were subject to an Escrow Agreement made between
Interquest and the former shareholders of 1636879 Ontario Inc. The Escrow
Agent is Equity Transfer Services Inc. Pursuant to an Amendment
Agreement executed by all but one of the Vendors, 27,874,545 of the
escrowed shares have been surrendered back to the Treasury of the
Company for cancellation. The Company continues to pursue appropriate
options against the one remaining Vendor shareholder, who has 90,000
shares in the escrow agreement (see below).
During July, 2006, Management was able to conclude negotiations for the
acquisition of all the issued and outstanding share capital of Warburg
Resources Inc., an Alberta based oil & gas production and exploration
company. There are a number of conditions precedent to closing of the
acquisition, including obtaining all relevant regulatory consents and
approvals and raising capital funding (principally a “flow-through” equity
issue) which is to be used in funding planned drilling on Warburg properties
in the Virgo Zama area of Northwestern Alberta. As at the end of September,
2006, the Issuer has closed on $130,000 of funding towards its required goal,
and anticipates reaching the goal in October, 2006, so as to be able to close
the acquisition. At the date of this Report the funds raised are still restricted
until the minimum funding of $1 million has been raised.
The Corporation has reached a critically low level of liquidity. Without
additional funds, it will not be capable of meeting future obligations as they
come due. At this time the Company has been able to fund its ongoing
corporate obligations by way of short term loans from its Management and
from Warburg Resources Inc. (pending closing of the acquisition).
2. Provide a general overview and discussion of the activities of management.
At this time the operations of Transient Media have been closed down, and
the investment has been written off.
Consequent upon the close-down of the Transient Media business, the
Company’s remaining operations are in natural resource explorations,
represented by its 2% NSR interest in the Follansbee Red Lake property
which had been sold in 2003, and its pending acquisition of Warburg
Resources Inc.
The Follansbee Red Lake property is now owned by Wolfden Resources
Inc., who have carried out and are continuing to carry out extensive and
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 2
highly encouraging diamond drilling work over the past two years. Under the
terms attached to the NSR Agreement, Wolfden (and its previous partner in
the exploration of the property) have the right to buy out the first 1% for
$1,000,000, and have a right of first refusal to acquire the remaining 1%.
Warburg Resources Inc. is presently in production on four of its properties,
with daily production at this time (September 2006) of 215 boed – amounting
to a cash flow of approximately $400,000 per month. Additional drilling is
planned on properties in the Virgo Zama area already owned by Warburg;
the timing of commencement of the next round of drilling is scheduled to
follow closing of the acquisition of Warburg. As stated above, one of the
preconditions to the closing of the acquisition is that the Company must raise
funding; arrangements to raise that funding by way of private placement are
presently under way and Management hopes to be able to complete the
funding shortly.
In connection with the acquisition of Warburg, the Company will be obtaining
a Reserves Report on the reserves on Warburg’s properties which complies
with NI 51-101; that report will not be available until about November, 2006.
Management is presently preparing a revised Listing Statement for the
Company to be filed with CNQ upon closing of the acquisition of Warburg. At
this time, and pending acceptance of the transaction, trading of the
Company’s shares on the CNQ is subject to a halt at the Company’s request.
As stated above, closing of the acquisition of Warburg is subject to
preconditions, including (but not limited to) raising financing; if the
preconditions cannot be met, and if the acquisition terms cannot in those
circumstances be amended, then the transaction may not close. During the
month of August, 2006, an amendment to the terms of the Acquisition
Agreement for Warburg was agreed, whereby the minimum funding
requirement was reduced from $2 million to $1 million. Also during the
month of August a number of prospective investors were identified so that
the Company is able to anticipate closing of a private placement to meet the
minimum funding requirement to enable closing of the acquisition to take
place.
3. Describe and provide details of any new products or services developed or offered.
For resource companies, provide details of new drilling, exploration or production
programs and acquisitions of any new properties and attach any mineral or oil and
gas or other reports required under Ontario securities law.
See 2 above.
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 3
4. Describe and provide details of any products or services that were discontinued. For
resource companies, provide details of any drilling, exploration or production
programs that have been amended or abandoned.
The pursuit of sales of products and services by the Transient Media division
has now ceased, and the transaction pursuant to which the business was
acquired has been amended so that 27,874,585 shares which had been
placed in escrow (representing approximately 90% of the original
consideration paid on acquisition) have been cancelled and returned to the
treasury of the Company, which transaction was completed during March
2006.
5. Describe any new business relationships entered into between the Issuer, the
Issuer’s affiliates or third parties including contracts to supply products or services,
joint venture agreements and licensing agreements etc. State whether the
relationship is with a Related Person of the Issuer and provide details of the
relationship.
As stated above, the Company has negotiated for the acquisition of the
issued and outstanding share capital of Warburg Resources Inc., an Alberta
based oil & gas production and exploration company; these negotiations are
at arm’s length and no Related Person is involved.
6. Describe the expiry or termination of any contracts or agreements between the
Issuer, the Issuer’s affiliates or third parties or cancellation of any financing
arrangements that have been previously announced.
Negotiations in respect of the closedown of Transient Media have resulted in
the original Vendors agreeing to surrender 27,874,585 shares which had
been placed in escrow (representing approximately 90% of the consideration
paid on the acquisition).
7. Describe any acquisitions by the Issuer or dispositions of the Issuer’s assets that
occurred during the preceding month. Provide details of the nature of the assets
acquired or disposed of and provide details of the consideration paid or payable
together with a schedule of payments if applicable, and of any valuation. State how
the consideration was determined and whether the acquisition was from, or the
disposition was to, a Related Person of the Issuer, and provide details of the
relationship.
During July, 2006, the Company entered into an agreement to acquire the
issued and outstanding capital of Warburg Resources Inc. The closing of this
acquisition is subject to certain terms and conditions, including (but not
limited to) the obtaining of all relevant regulatory and other consents and
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 4
approvals, and to raising equity to finance new drilling on properties owned
by Warburg. During August 2006 an amendment to the original Acquisition
Agreement was agreed to whereby the minimum amount of new funding was
reduced from $2 million to $1 million, and a number of prospective investors
were identified so that the Company anticipates being able to close the
financing and thus the Acquisition during October, 2006. The consideration
for the acquisition will be the issuance of such a number of ordinary common
shares of the Company as are equal to 45% of the issued common shares
following closing (which shares would be laced in escrow for release over a
36 month period), closing having taken place following a debt settlement and
the private placement which will have resulted in the issuance of a minimum
of 24,500,000 common shares. Following closing of the debt settlement, the
private placement (at the revised minimum level) and the acquisition there
will be approximately 101,000,000 common shares outstanding. Additionally
the Company will issue preference shares (which will be non-interest
bearing, non voting, and redeemable) to a value equal to the value of the
reserves of Warburg as certified by the Reserves Report prepared by an
independent consultant, the value presently being estimated as likely being
between $6 million and $12 million.
8. Describe the acquisition of new customers or loss of customers.
The Company has neither lost nor acquired any customers during August,
2006.
9. Describe any new developments or effects on intangible products such as brand
names, circulation lists, copyrights, franchises, licenses, patents, software,
subscription lists and trademarks.
None
10. Report on any employee hirings, terminations or lay-offs with details of anticipated
length of lay-offs.
None
11. Report on any labour disputes and resolutions of those disputes if applicable.
Not applicable.
12. Describe and provide details of legal proceedings to which the Issuer became a
party, including the name of the court or agency, the date instituted, the principal
parties to the proceedings, the nature of the claim, the amount claimed, if any, if the
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 5
proceedings are being contested, and the present status of the proceedings.
Not applicable.
13. Provide details of any indebtedness incurred or repaid by the Issuer together with
the terms of such indebtedness.
During the months of August and September 2005, the Chairman & CEO
provided a non-interest bearing Demand Loan of $20,000 to the Company.
During the month of October, 2005 this amount was increased by $10,000 to
a total of $30,000. A further amount of $15,000 was advanced in December
2005, a further $10,000 was advanced in January 2006, a further $5,000 was
advanced in February 2006, a further amount of $5,000 was advanced in
April, 2006, a further $5,000 was advanced in May, 2006, a further $9,120
was advanced in July, 2006, a further $2,000 was advanced in August, 2006,
and a further $5,000 was advanced in September, 2006, bringing the total to
$86,120. The loan is secured by a General Security Agreement registered
against the assets of the Company. Additionally, in May, 2006, the Company
has borrowed $41,377.01 from the Vendor of the Oil & Gas business which
the Company proposes to acquire, which sum was utilized to pay all
outstanding fees to the Company’s Auditors, and the Company borrowed
$600 from a director in July, 2006.
14. Provide details of any securities issued and options or warrants granted.
During September, 2006 the following issuances of securities were
completed:
(a) 4,500,000 common shares in settlement of $225,000 of debt;
(b) 200,000 upon conversion of an Unsecured Convertible Loan Note with
a face value of $10,000.
(c) 1,300,000 Units ** in connection with the financing of the Company for
the closing of the acquisition of Warburg Resources Inc. These units
comprise a total of
(i) 1,300,000 common shares, of which 800,000 were “flow-
through shares;
(ii) 800,000 share purchase warrants exercisable for a period of 18
months, expiring on March 29, 2008, to purchase 800,000
common shares at $0.16 per share; and
(iii) 500,000 share purchase warrants exercisable for a period of 18
months, expiring on March 29, 2008, to purchase 800,000
common shares at $0.12 per share .
** NOTE: Use of the funds from these issuances ($130,000) is restricted pending
closing of the acquisition of Warburg Resources Inc.
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 6
15. Provide details of any loans to or by Related Persons.
See Item 13 above in relation to advances, totalling $86,120 and $600 as at
September 30, 2006, made to the Company by the Chairman & CEO and a
director respectively.
16. Provide details of any changes in directors, officers or committee members.
Not applicable.
17. Discuss any trends that are likely to impact the Issuer including trends in the
Issuer’s market(s) or political/regulatory trends.
As a result of the proposed acquisition of Warburg Resources Inc. the CNQ
has determined that the Company is undergoing a fundamental change. As
a result of that determination trading of the Company’s shares on the CNQ
has been suspended pending acceptance and filing of a revised Listing
Statement which will provide full and complete detailed information in relation
to Warburg Resources Inc., its operations and properties. Management
cannot provide any assurance that the CNQ will accept the documentation at
this time, and accordingly cannot give any assurance as to when the
Company’s shares may begin trading on the CNQ again.
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 7
Certificate Of Compliance
The undersigned hereby certifies that:
1. The undersigned is a director and/or senior officer of the Issuer and has been duly
authorized by a resolution of the board of directors of the Issuer to sign this
Certificate of Compliance.
2. As of the date hereof there were is no material information concerning the Issuer
that has not been publicly disclosed.
3. The undersigned hereby certifies to CNQ that the Issuer is in compliance with the
requirements of applicable securities legislation (as such term is defined in National
Instrument 14-101) and all CNQ Requirements (as defined in CNQ Policy 1).
4. All of the information in this Form 7 Monthly Progress Report is true.
Dated: October 5, 2006.
William L. Koyle
Name of Director or Senior Officer
Signed “William. L. Koyle”
Signature
Chairman, CEO
Official Capacity
Issuer Details For Month End Date of Report
Name of Issuer YY/MM/D
September 30, 06/10/05
Interquest Incorporated 2006
Issuer Address
c/o W. L. Koyle, R.R. # 1
City/Province/Postal Code Issuer Fax No. Issuer Telephone No.
Orangeville, ON L9W 2Y8 (519) 942-2057 (519) 941-5606
Contact Name Contact Position Contact Telephone No.
William L. Koyle Chairman/CEO (519) 941-5606
Contact Email Address Web Site Address
Interquest@on.aibn.com
FORM 7 – MONTHLY PROGRESS REPORT
September 11, 2006
Page 8
