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

                                    FORM 20-F

|_|   REGISTRATION STATEMENT PURSUANT TO SECTION 12 (b) OR (g) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                                       OR

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                     For Fiscal Year ended December 31, 2001

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

        For the transition period from _____________ to _______________

                         Commission file number 0-17729

                          TRACER PETROLEUM CORPORATION
             (Exact name of Registrant as specified in its charter)

                                 Not Applicable
                 (Translation of Registrant's Name into English)

                            British Columbia, Canada
                 (Jurisdiction of incorporation or organization)

                1113 Laval Avenue S.W. Calgary, Alberta, T2T 1L2
                    (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12 (b) of the Act:
None

Securities registered or to be registered pursuant to Section 12 (g) of the Act:

                         Common Stock, without par value
                                (Title of Class)

                    Redeemable Common Stock Purchase Warrants
                                (Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

                                                                            None

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:

                                                                       9,529,749

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 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 by check mark which financial statement item the registrant has elected
to follow:
                                                         Item 17 |X| Item 18 |_|

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS) Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court.

                                                                  Not Applicable

<PAGE>

                          TRACER PETROLEUM CORPORATION
           FORM 20-F ANNUAL REPORT FISCAL 2001 ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS
                                     PART I                                 Page

Item 1.  Identity of Directors, Senior Management and Advisers ...........     3

Item 2.  Offer Statistics and Expected Timetable .........................     3

Item 3.  Key Information .................................................     3

Item 4.  Information on the Company ......................................     8

Item 5.  Operating and Financial Review and Prospects ....................    14

Item 6.  Directors, Senior Management and Employees ......................    16

Item 7.  Major Shareholders and Related Party Transactions ...............    20

Item 8.  Financial Information ...........................................    21

Item 9.  The Listing .....................................................    22

Item 10. Additional Information ..........................................    23

Item 11. Quantitative and Qualitative Disclosure About Market Risk .......    24

Item 12. Description of Securities other than Equity Securities ..........    25

                                     PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies .................    25

Item 14. Material Modifications to the rights of Security Holders
         and Use of Proceeds .............................................    25

                                    PART III

Item 17. Financial Statements ............................................    25

Item 18. Financial Statements ............................................    30

Item 19. Exhibits ........................................................    39

Signatures ...............................................................    40

Exhibit Index ............................................................    41


                                       2
<PAGE>

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus contains forward-looking statements.
Forward-looking statements give our current expectations or forecasts of future
events and are based on our management's beliefs, as well as assumptions made by
and information currently available to them. You can identify these statements
by the fact that they do not relate strictly to historical or current facts.
These statements may include the words "anticipate," "believe," "budget,"
"estimate," "expect," "intend," "objective," "plan," "probable" "possible,"
"potential," "project" and other words and terms of similar meaning in
connection with any discussion of future operating or financial performances.

Any or all of our forward-looking statements in this Form 20-F may turn out to
be wrong. They can be affected by inaccurate assumptions or by known or unknown
risks and uncertainties. Many of these factors, including the risks outlined
under "Risk Factors," will be important in determining our actual future
results, which may differ materially from those contemplated in any
forward-looking statements. These factors include, among others, the following:

      -     oil and natural gas price volatility;

      -     uncertainties in the estimates of proved reserves and in the
            projection of future rates of production and timing of development
            expenditures;

      -     our ability to find and acquire additional reserves;

      -     risks associated with acquisitions, exploration, development and
            production;

      -     operating hazards attendant to the oil and natural gas business;

      -     potential constraints on our ability to market reserves due to
            limited transportation space;

      -     risks associated with the financing, construction and operation of
            the methanol plant in which we expect to acquire an interest;

      -     climatic conditions;

      -     availability and cost of labor, material, equipment and capital;

      -     ability to employ and retain key managerial and technical personnel;

      -     international, national, regional or local political and economic
            uncertainties, including changes in energy policies, foreign
            exchange restrictions and currency fluctuations;

      -     adverse regulatory or legal decisions, including those under
            environmental laws and regulations;

      -     the strength and financial resources of our competitors;

      -     general economic conditions; and

      -     our ability to continue as a going concern.

When you consider these forward-looking statements, you should keep in mind
these risk factors and other cautionary statements in this prospectus. Our
forward-looking statements speak only as of the date made.

Although we believe that the expectations reflected in the forward-looking
statement are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as otherwise required by United
States securities laws, we are under no duty to update any of the forward
looking statements after the date of this Form 20-F to conform them to actual
results or to changes in our expectations. All forward-looking statements
attributable to us are expressly qualified in their entirety by the foregoing
cautionary statement.

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS.

Not applicable to Form 20-F filings as annual report.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE.

Not applicable to Form 20-F filings as annual report.

ITEM 3. KEY INFORMATION.

The following is a summary of key information about our financial condition,
capitalization and the risk factors pertaining to our business.


                                       3
<PAGE>

A. Selected Financial Data

The tables below present selected financial information. Our financial
statements are stated in Canadian Dollars and are prepared in accordance with
Canadian Generally Accepted Accounting Principles ("GAAP"). Table 3(A)(1)
presents selected financial information under Canadian GAAP and Table 3(A)(2)
presents the same information assuming we had reported under US GAAP (see note
11 to the consolidated financial statements) These tables should be read in
conjunction with the financial statements and notes thereto and Management
Discussion and Analysis included elsewhere in this annual report. All dollar
amounts in this report are expressed in Canadian dollars unless otherwise
stated.

                                Table No. 3(A)(1)
                        Selected Financial Data CDN GAAP
                           (CDN $ in '000, except EPS)

<TABLE>
<CAPTION>
                                             ------------------------------------------------------------------
                                             Year Ended   Year Ended    Year Ended     Year Ended    Year Ended
                                             12/31/01      12/31/00      12/31/99       12/31/98      12/31/97
       --------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>           <C>           <C>            <C>
       Revenue                                $     1       $     1       $ 1,080       $  1,966       $ 3,302
       Income/(Loss)                          $(1,514)      $(2,028)      $(3,225)      $(12,846)      $   497
       Earnings (Loss) per share              $ (0.17)      $ (0.28)      $ (0.74)      $  (3.46)      $  0.13
       Diluted Earnings (Loss) per share           --            --            --             --       $  0.10
       Dividends per share                    $  0.00       $  0.00       $  0.00       $   0.00       $  0.00
       Weighted  Avg. Shares O/S ('000)         8,734         7,338         4,351          3,717         3,717
       --------------------------------------------------------------------------------------------------------
       Working Capital                        $  (259)      $  (281)      $   592       $    262       $ 2,408
       Resource Properties (1)                $    --       $   149       $    --       $  1,432       $12,252
       Long-Term Debt                         $   315         $ Nil         $ Nil          $ Nil         $ Nil
       Shareholders' Equity                   $   242       $   838       $   986       $  3,404       $15,990
       Total Assets                           $   852       $ 1,164       $ 1,379       $  3,669       $16,373
       --------------------------------------------------------------------------------------------------------
</TABLE>

(1)   Resource properties comprise all costs of acquisition of, exploration for,
      and development of petroleum and natural gas reserves (net of government
      incentives) less depletion and write downs.

                                Table No. 3(A)(2)
                         Selected Financial Data US GAAP
                           (CDN $ in '000, except EPS)

<TABLE>
<CAPTION>
                                                        ------------------------------------------------------------------
                                                        Year Ended     Year Ended   Year Ended     Year Ended   Year Ended
                                                          12/31/01      12/31/00     12/31/99       12/31/98     12/31/97
       -------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>           <C>           <C>            <C>
       Revenue                                            $     1       $     1       $ 1,080       $  1,966       $ 3,302
       Income/(Loss)                                      $(1,453)      $(2,028)      $(2,873)      $(12,228)      $   497
       Earnings (Loss) per share                          $ (0.17)      $ (0.28)      $ (0.66)      $  (3.29)      $  0.13
       Fully Diluted Earnings (Loss) per share            $ (0.17)      $ (0.28)      $ (0.66)      $  (3.29)      $  0.10

       Dividends per share                                $  0.00       $  0.00       $  0.00       $   0.00       $  0.00
       Wgt. Avg. Shares O/S ('000)                          8,734         7,338         4,351          3,717         3,717
       -------------------------------------------------------------------------------------------------------------------
       Working Capital                                    $  (259)      $  (281)      $   592       $    216       $ 3,054
       Resource Properties                                $    --       $   149       $    --       $  1,080       $11,282
       Long-Term Debt                                     $   291         $ Nil         $ Nil          $ Nil         $ Nil
       Shareholders' Equity                               $   327       $   838       $   986       $  3,007       $15,667
       Total Assets                                       $   852       $ 1,164       $ 1,379       $  3,272       $16,050
       -------------------------------------------------------------------------------------------------------------------
</TABLE>

Currency Exchange Rates

Table No. 3(A)(3) sets forth the rate of exchange for the Canadian Dollar at the
end of each of the five most recent fiscal years ended December 31, the average
rates for each year, and the range of high and low rates for each year. Table
3(A)(4) sets forth the high and low exchange rates for each month during the
previous six months. For purposes of these tables, the rate of exchange means
the noon


                                       4
<PAGE>

buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York. The
table sets forth the number of Canadian Dollars required under that formula to
buy one US Dollar. The average rate means the average of the exchange rates on
the last day of each month during the year.

                                Table No. 3(A)(3)
                           U.S. Dollar/Canadian Dollar

        -----------------------------------------------------------------
                                          Average    High    Low    Close
        -----------------------------------------------------------------
        Fiscal Year Ended 12/31/01          1.55     1.60    1.49    1.59
        Fiscal Year Ended 12/31/00          1.49     1.56    1.44    1.50
        Fiscal Year Ended 12/31/99          1.49     1.51    1.46    1.44
        Fiscal Year Ended 12/31/98          1.48     1.58    1.41    1.54
        Fiscal Year Ended 12/31/97          1.38     1.44    1.34    1.43
        -----------------------------------------------------------------

           The current rate of exchange was $1.5190 on June 28, 2002.

                                Table No. 3(A)(4)
                           U.S. Dollar/Canadian Dollar

        -----------------------------------------------------------------
                 01/02     02/02     03/02     04/02     05/02     06/02
        -----------------------------------------------------------------
        High    $1.6128   $1.6084   $1.5958   $1.5995   $1.5708   $1.5499
        -----------------------------------------------------------------
        Low     $1.5899   $1.5885   $1.5767   $1.5632   $1.5275   $1.5282
        -----------------------------------------------------------------

B. Risk Factors

Our business operations are subject to a number of risks, of which our
shareholders should be aware. We have separated the risks into two broad
categories:

            o     risks relating to our business, properties and industry

            o     risks relating to the ownership of our common stock

Risks Related to Our Business, Properties and Industry

Exploring for and producing oil and natural gas are high-risk activities with
many uncertainties that could harm our business, financial condition or results
of operations.

Our future existence and financial stability will depend on the success of our
exploration and production activities. Our activities are subject to numerous
risks beyond our control, including the risk that drilling for oil and gas will
not result in commercially viable oil or natural gas production. Our decisions
to purchase, explore, develop or otherwise exploit prospects or properties will
depend in part on the evaluation of data obtained through geophysical and
geological analyses, production data and engineering studies, the results of
which are often inconclusive or subject to varying interpretations.

Our cost of drilling, completing and operating wells is often uncertain before
operations begin. Cost overruns in budgeted expenditures are common risks that
can make a particular project uneconomical. Further, many factors may curtail,
delay or cancel drilling and production operations, including but not limited to
the following:

o     pressure or irregularities in geological formations;

o     shortages or delays in obtaining equipment and qualified personnel;

o     equipment failures or accidents;

o     adverse weather conditions, such as winter snow storms;

o     labor unrest and strikes which prevent transportation of product or the
      importation of equipment;

o     title or licensing problems;

o     compliance with governmental requirements and permits;

o     limitations in the market for oil and natural gas;

o     difficulty in enforcing contracts;

o     capital market conditions and availability of financing;

o     technical problems; and

o     political and economic stability of the countries in which we operate

Our oil and natural gas exploration and production activities are subject to all
the operating risks associated with drilling for and producing oil and natural
gas, including the possibility of:


                                       5
<PAGE>

o     environmental hazard, such as uncontrollable flows of oil, natural gas,
      brine, well fluids, toxic gas or other pollution into the environment,
      including groundwater and shoreline contamination;

o     abnormally pressured formations;

o     mechanical difficulties, stuck oilfield drilling and service tools and
      casing collapse;

o     fires and explosions;

o     personal injuries and death; and

o     natural disasters.

We do not currently own properties with oil or gas reserves.

We do not own any properties with oil or gas reserves. Our future oil and
natural gas reserves and production and therefore, cash flow and income, and our
success, are highly dependent on success in finding or acquiring recoverable
reserves. We cannot assure shareholders that we will be able to develop,
exploit, find or acquire reserves to replace future production, if any.

Since we are seeking to acquire properties in less developed countries, our
operations may be adversely affected by risks associated with the political,
economic and social climate of the countries in which we will operate..

We are seeking to acquire properties in less developed countries in which there
is significant potential for social, political, economic and legal instability.
Our operations in these countries could be adversely affected by, among other
things:

o     local currency fluctuations or devaluation;

o     civil disturbances;

o     exchange controls or restrictions on availability of hard currency;

o     changes in crude oil and gas price and transportation regulations;

o     changes with respect to taxes, royalty rates, import and export tariffs
      and withholding taxes on distribution to foreign investors;
      nationalization or expropriation of property; and

o     interruption or blockage of oil exports.

Oil and gas prices historically have fluctuated over the years. A substantial or
extended decline in oil and natural gas prices may adversely affect our business
and financial prospects.

The price of oil may affect our ability to raise capital necessary for property
acquisition, exploration and development. Moreover, if our properties were
producing, the price we receive for our oil and natural gas production will
heavily influence our revenue, profitability, access to capital and future rate
of growth. Oil and natural gas are commodities and, therefore, their prices are
subject to wide fluctuations in response to relatively minor changes in supply
and demand. Historically, the markets for oil and natural gas have been
volatile. These markets will likely continue to be volatile in the future. The
prices received for production, and the levels of production, depend on numerous
factors beyond our control. These factors include:

o     changes in global supply of and demand for oil and natural gas;

o     the actions of the Organization of Petroleum Exporting Countries, or OPEC;

o     worldwide economic conditions, which affect worldwide demand for energy;

o     the price and quantity of foreign imports;

o     political conditions, including embargoes on Iran, or others affecting
      other oil-production countries;

o     the level of worldwide exploration and production activity;

o     weather conditions;

o     Interest rates and the cost of capital;

o     technological advances affecting energy consumption;

o     domestic and foreign government regulation, legislation and policies; and

o     the price and availability of alternative fuels.

We may face competition from larger and better-financed companies seeking to
acquire properties in our sphere of operation.

The oil and gas industry is highly competitive, and our business could be harmed
by competition with other larger and better-financed companies. Because oil and
gas are fungible commodities, the principal form of competition is price
competition. We will strive to maintain the lowest finding and production costs
possible to maximize results from operations. In addition, as an independent oil
and gas company, we frequently compete for reserve acquisitions, exploration
leases, licenses, concessions and marketing agreements against


                                       6
<PAGE>

companies with financial and other resources substantially larger than ours.
Many of our competitors have established strategic long-term positions and
maintain strong governmental relationships in countries in which we may seek
entry.

We do not currently maintain insurance against potential losses and unexpected
liabilities.

Losses and liabilities arising from uninsured and underinsured events could
materially and adversely affect our business, financial condition or results of
operations by requiring us to use our capital for purposes other than the
continued development of our properties. Although we intend to maintain
insurance against many potential losses or liabilities arising from our
operations in accordance with customary industry practices and in amounts that
we believe to be prudent, we do not presently have such insurance coverage and
even if we were to obtain such insurance coverage, there is no assurance that it
will be adequate protect us against all operational risks.

Risks Related to The Ownership of Our Stock.

Since inception we have generated only limited cash flow from operations.

We have an accumulated deficit of $3,541,917 through to the year ended December
31, 2001. We expect to incur losses in the fiscal year ending December 31, 2002.
Our ability to continue as a going concern is dependent upon our achieving
profitable operations and upon obtaining additional financing. The outcome of
these matters cannot be determined at this time.

We will not pay dividends in the foreseeable future.

We have not paid cash dividends or made any other distributions on our common
stock since inception and have no current plans to pay cash dividends on our
common stock in the foreseeable future. We currently intend to retain our cash
for the continued expansion of our business, including exploration, development
and acquisition activities.

Our long-term liquidity and capital resources are uncertain.

We have incurred losses for start-up efforts, expect to incur losses in 2002,
and may continue to incur losses in the future. There can be no assurance that
revenue will increase or that costs will be lower going forward. To the extent
that this possibility seriously depletes our cash reserves, we may need to seek
additional capital. If we do, there can be no assurance that we will be
successful in raising a sufficient amount of additional capital or in internally
generating a sufficient amount of capital to meet our long-term requirements. If
we are unable to generate the required amount of additional capital, our ability
to meet our obligations and to continue our operations may be adversely
affected. Although we have no long-term debt other than a convertible debenture
held by Roc Oil Limited at December 31, 2001, we have a working capital
deficiency of $259,221.

Although collectively owning only approximately 30.70 % of our issued and
outstanding shares at December 31, 2001, our activities are effectively
controlled and influenced by our officers and directors.

Our officers and directors collectively own directly and beneficially
approximately 2,925,295 shares and will be able to significantly influence our
activities as well as matters requiring approval by our shareholders, including
the election of directors and the approval of mergers or other business
combination transactions.

Our future performance is dependent on our ability to retain key personnel.

Our performance is substantially dependent on the performance of our senior
management and key technical personnel. In particular, our success depends on
the continued efforts of our senior management team, especially Mr. Larry Youell
and Mr. David Robinson. The loss of the services of any of our executive
officers or other key employees could have a material adverse effect on our
business, results of operations and financial condition. Although several senior
management personnel have substantial stock interests, we do not have employment
agreements in place with any of our senior management or key employees.

Our future success also depends on our continuing ability to retain and attract
highly qualified technical and managerial personnel. Wages for managerial and
technical employees are increasing and are expected to continue to increase in
the foreseeable future due to the competitive nature of the job market. We may
experience difficulty from time to time in attracting the personnel necessary to
support the growth of our business, and there can be no assurance that we will
not experience similar difficulty in the future. The inability to attract and
retain the technical and managerial personnel necessary to support the growth of
our business could have a material adverse effect upon our business, results of
operations and financial condition.


                                       7
<PAGE>

As we expand operations, we may not be able to effectively manage our growth.

Although certain members of our current management have had previous experience
managing in a public company or a large operating company, there can be no
assurance that we will be able to effectively manage the expansion of our
operations, that our systems, procedures or controls will be adequate to support
our operations or that our management will be able to achieve the rapid
execution necessary to fully exploit the market opportunity for our products and
services. Any inability to manage growth effectively could have a material
adverse effect on our business, results of operations and financial condition.

ITEM 4. INFORMATION ON THE COMPANY

A. Corporate History and Development of the Company.

We are engaged in the acquisition, exploration and, when warranted, development
of natural resource properties. In the years ending December 31, 1999, 2000 and
2001, our focus was on the disposition of certain of our property interests. We
successfully completed these dispositions in 2002. We are now in the process of
reviewing a number of international oil and gas prospects for possible
acquisition and development.

We were incorporated on February 8, 1982 in British Columbia, Canada under the
name Tylox Corporation. Our continuance under the Canada Business Corporation
Act, in December 1991, resulted in, among other things, our name being changed
to Tracer Petroleum Corporation.

Our head office is located at 1113 Laval Avenue S.W., Calgary, Alberta. Our
phone number is (403) 290-1676.

Our wholly owned subsidiaries include Tracer Trading Ltd. ("TTL"), Tracer
Petroleum Iran Ltd ("TPIL")., and TEPCO Ltd. ("TEPCO"). We also owns 33.34% of
Tracer Petroleum International Ltd. ("TPI"), a company incorporated in Bermuda
to pursue oil and gas ventures in the Islamic Republic of Iran.

The following describes the major corporate actions (other than property
dispositions, which are discussed separately) affecting our financial condition
which occurred during the years ending December 31, 1999, 2000 and 2001;

      o     On September 30, 1999, we closed a private placement of 849,000
            units at US$0.50 per unit. Each unit consisted of one common share
            and one common share purchase warrant which entitled the holder to
            purchase an additional common share at an exercise price of US$0.75
            if exercised in the first year and US$0.90 if exercised in the
            second year. Share issuance costs for the private placement totaled
            $4,714 and were charged to share capital. A total of 150,000
            warrants at US$0.70 per share and 25,000 stock options at US$1.00
            per share were exercised during the year.

      o     On March 20, 2000 we completed a non-brokered private placement of
            1,540,000 units at US$0.50 per unit. Each unit was comprised of one
            common share and one common share purchase warrant which entitled
            the holder to purchase an additional common share at US$1.00 if
            exercised on or before March 2, 2001 and US$1.25 if exercised
            thereafter up to and including March 2, 2002 at which time the
            warrants expire. A total of $1,119,657 relating to the private
            placement was included in share capital. In addition share issuance
            costs for the private placement of $97,708 were also charged to
            share capital. A total of 70,000 warrants from a previous private
            placement were exercised during the year and net proceeds from the
            exercise of $91,520 were included in share capital.

      o     On June 29, 2000 at our annual general meeting, the shareholders
            passed a special resolution authorizing the reduction of our stated
            capital account by $35,009,518 which represented the amount of our
            accumulated deficit as recorded on our balance sheet as at December
            31, 1999. At that time this amount was applied against our
            accumulated deficit.

      o     On May 31, 2001, we completed a private placement of 460,144 Units
            at US$0.40 per Unit. Each Unit consists of one common share and one
            common share purchase warrant exercisable for a period of two years
            at an exercise price of US$0.50 in the first year and US$0.65 in the
            second year.

On December 31, 2001, we had 9,529,749 shares issued and outstanding.

B. Business Overview


                                       8
<PAGE>

At this present time, we do not have any revenue generating assets, and as a
result rely on equity and/or debt financing to fund ongoing operations. We have
experienced large operating losses and cash outflows and as such, our ability to
continue as a going concern is dependant upon achieving profitable operations
and upon obtaining additional financing. The outcome of these matters cannot be
predicted at this time.

We are currently pursuing exploration and development opportunities for oil and
natural gas in Turkmenistan.

On February 5, 2002, we announced that we had entered into a Joint Venture
Agreement ("JVA") with privately-held Canneft Inc. ("Canneft") of Houston, TX,
whereby we will participate with Canneft in the development of the Adzhiyap
project (the "Project") in southwestern Turkmenistan, bordering Iran to the
south and the Caspian Sea to the west. Although the project is primarily focused
towards gas production, gas condensate reserves are also present since tests
have shown a concentration of 1 bbl/100 mcf in gas producing zones. There is
also potential for deeper oil reserves.

C. "Current Exploration/Development"

None.

D. "Disposition of Properties"

Indonesia

As part of our property disposition program, we have since 1999 through the
second quarter of 2002, systematically sold or abandoned all of the properties
in what which we had an interest as follows:

Indonesia

In February 1993, our then wholly-owned subsidiary, PerminTracer Petroleum Ltd.,
entered into a Production Sharing Contract ("PSC") with Pertamina, the State oil
company of the Republic of Indonesia, covering an area of approximately 1.6
million acres onshore the island of Borneo known as the North Tanjung Block ("NT
Block PSC").

Pursuant to a Share Sale Agreement dated as of September 1, 1999 between us and
Tradewinds Oil and Gas International, Ltd., as amended by a Share Sale Amending
Agreement dated February 11, 2000, we sold all of the shares of PerminTracer
Petroleum Ltd. to Tradewinds Oil and Gas International, Ltd. in consideration of
U.S.$10.00, the assumption of all related liabilities by Tradewinds Oil and Gas
International, Ltd., and the granting of the five percent (5%) carried interest
in the NT Block PSC pursuant to the Carried Interest Agreement.

Pursuant to a Carried Interest Agreement dated February 11, 2000 amongst
ourselves, PerminTracer Petroleum Ltd. and Tradewinds (the "Carried Interest
Agreement"), we own a five percent (5%) carried interest in the NT Block PSC.

We also owned directly certain assets in the Republic of Indonesia, including a
4.25% carried working interest in a Production Sharing Contract in the South
Sumatra Area of Indonesia known as the Ogan Komering Block (the "OK Block PSC"),
an Option Agreement relating to a Technical Assistance Contract in the Sungai
Gelam A, B and D Contract Areas (the "Sungai Gelam Option") and a certain
drilling rig and related equipment (the "Drilling Rig"). Pursuant to an Asset
Sale Agreement dated as of September 1, 1999 between us and Tradewinds, we sold
all of its rights and interest in the OK Block PSC and the Sungai Gelam Option
to Tradewinds in consideration of U.S.$350,000 and the assumption of all related
liabilities by Tradewinds. We granted Tradewinds an Option to Purchase the
Drilling Rig in consideration of U.S.$350,000 and the assumption of all related
liabilities by Tradewinds, and the said Option to Purchase the Drilling Rig was
exercised and completed by way of Drilling Rig Conveyance Agreement dated as of
December 14, 1999.

Iran

We entered into an Association Agreement dated December 11, 1998 with the
Mullins Group ("Mullins") in respect of petroleum projects in the Islamic
Republic of Iran.

On May 15th, 2002 we announced that we were abandoning our pursuit of oil and
gas opportunities in Iran based upon the lack of progress towards obtaining a
petroleum project over the past three years. As such, we decided not to renew
the agreement with the Mullins Group. We informed our representative in Tehran
to cease all operations in Iran.


                                       9
<PAGE>

Kazakhstan

We entered into a Purchase and Sale Agreement dated March 24, 2000, with
Transmeridian Exploration of Houston, TX, pursuant to which it was agreed to
acquire a net ninety percent (90%) interest in the License and the Project, as
defined below. In consideration of the sum of US$614,158 paid by us to
Transmeridian, Transmeridian granted to us the option to acquire up to fifty
percent (50%) of Transmeridian's net ninety percent (90%) interest in the
License and the Project. The Option was originally for a period of thirty (30)
days, expiring on April 30, 2000.

In addition to the sum of US$614,158 paid by us as consideration for the Option,
which amount would be credited upon exercise of the Option, we were obligated to
pay the additional amount of US$3,385,842 upon purchase of the interest. With
the payment completed, Transmeridian would assign and transfer to us
thirty-three percent (33%) of Transmeridian's net ninety percent (90%) interest
in the License and the Project.

We, having exercised the right of first refusal, would have then been obligated
to pay US$2,000,000, as directed by Transmeridian, towards the first cash calls
of the joint venture for the development of the Project, subject to
Transmeridian and we mutually agreeing to budgets and development plans for the
Project through the formal documentation. With the additional payment of
US$2,000,000 by us, Transmeridian would have assigned and transferred an
additional seventeen percent (17%) of its net ninety percent (90%) interest in
the License and the Project, thus bringing our interest up to fifty percent
(50%) of Transmeridian's net ninety percent (90%) interest in the License and
the Project. We would have been entitled to be paid out on a preferential basis
by receiving seventy percent (70%) of all distributable cash flow (net of all
applicable host country taxes and royalties) from the Project until payout of
the first US$6,000,000. After payout, the parties would receive distributable
cash flow in proportion to their respective interests.

Our interests, along with those of Transmeridian were held by a resident
Kazakhstan company, of which Transmeridian owned 90% of the outstanding shares
and we owned 4.5%. On March 16, 2001 we sold our interest in the South Alibek
Field to Transmeridian, for 100,000 US$15 convertible preferred shares of
Transmeridian. The shares were convertible into 1.5 million common shares of
Transmeridian at a price of US$1.00 per share for a period of 5 years. We also
received 1,000,000 common share purchase warrants in Transmeridian entitling us
to purchase an additional 1,000,000 common shares at US$1.00 for a period of two
years. Pursuant to an Option Agreement dated March 31, 2000 between ourselves
and Transmeridian, we had a right of first refusal to acquire a net forty-five
percent (45%) working interest in Licence No. 1557 dated April 29, 2000 issued
by the Government of the Republic of Kazakhstan (the "Licence"), covering South
Alibek Field located in the Aktyubinsk Region of Kazakhstan (the "Project").

The OK Block

In 1991, we purchased a 2.5% fully carried interest in the OK Block in
consideration of the issuance of 1,500,000 shares of common stock and in 1992
purchased a further 1.75%, in consideration of the issuance of an additional
625,000 shares of common stock bringing its total interest to 4.25%. We sold our
interest in the OK Block to Tradewinds in December 1999.

Interest in Oil and Gas Reserves

A summary of our former interests in oil and gas reserves after royalties is
contained in the following tables:


                                       10
<PAGE>

                                   Table No. 1
          Supplemental Information on Oil and Gas Producing Activities
                         Schedule of Changes in Reserves
       For the Years Ended December 31, 2001, 2000, 1999, 1998, and 1997
                                   (Unaudited)

<TABLE>
<CAPTION>
                                   -------------------------------------------------------------------------------------------------
                                    Oil        Gas       NGL       Oil        Gas        NGL        Oil           Gas         NGL
                                    MSTB      MMScf     Mbbls      MSTB      MMScf      Mbbls       MSTB         MMScf       Mbbls
                                              Other                        Indonesia                             Total
                                   -------------------------------------------------------------------------------------------------
<S>                                <C>       <C>        <C>       <C>         <C>        <C>       <C>         <C>           <C>
Proven Reserves 12/31/96            91.2     1,493.0     46.2      333.4      0.0        0.0        424.6       1,493.0       46.2
Discoveries/Extensions                --          --       --      128.6       --         --        128.6            --         --
Revisions to previous estimates       --          --       --         --       --         --           --            --         --
Production                          (6.2)        (15)    (0.3)    (128.9)      --         --       (135.1)          (15)      (0.3)
Reduction due to sale of
properties                         (85.0)   (1,478.0)   (45.9)        --       --         --        (85.0)     (1,478.0)     (45.9)

Proven Reserves 12/31/97             0.0         0.0      0.0      333.1      0.0        0.0        333.1           0.0        0.0
Discoveries/Extensions                --          --       --       78.8       --         --         78.8            --         --
Revisions to previous estimates       --          --       --      (67.8)      --         --        (67.8)           --         --
Production                            --          --       --     (121.2)      --         --       (121.2)           --         --
Reduction due to sale of
properties                            --          --       --         --       --         --           --            --         --

Proven Reserves 12/31/98             0.0         0.0      0.0      222.9      0.0        0.0        222.9           0.0        0.0
Discoveries/Extensions                --          --       --         --       --         --           --            --         --
Revisions to previous estimates       --          --       --         --       --         --           --            --         --
Production                            --          --       --      (64.5)      --         --        (64.5)           --         --
Reduction due to sale of
properties                            --          --       --     (158.4)      --         --       (158.4)           --         --

Proven Reserves 12/31/99             0.0         0.0      0.0        0.0      0.0        0.0          0.0           0.0        0.0
Discoveries/Extensions                --          --       --         --       --         --           --            --         --
Revisions to previous estimates       --          --       --         --       --         --           --            --         --
Production                            --          --       --      (64.5)      --         --        (64.5)           --         --
Reduction due to sale of
properties                            --          --       --     (158.4)      --         --       (158.4)           --         --

Proven Reserves 12/31/00             0.0         0.0      0.0        0.0      0.0        0.0          0.0           0.0        0.0
Discoveries/Extensions                --          --       --         --       --         --           --            --         --
Revisions to previous estimates       --          --       --         --       --         --           --            --         --
Production                            --          --       --         --       --         --           --            --         --
Reduction due to sale of
properties                            --          --       --         --       --         --           --            --         --
                                   -------------------------------------------------------------------------------------------------
Proven Reserves 12/31/01             0.0         0.0      0.0        0.0      0.0        0.0          0.0           0.0        0.0
                                   =================================================================================================
</TABLE>

                                   Table No. 2
                               Drilling Activities
                                  Wells Drilled
                                   (Unaudited)

<TABLE>
<CAPTION>
                                 --------------------------------------------------------------------------------------
                                        2001              2000             1999(1)           1998(1)         1997(1)
                                 --------------------------------------------------------------------------------------
                                   Gross      Net    Gross      Net   Gross      Net    Gross      Net   Gross      Net
<S>                                   <C>      <C>      <C>      <C>     <C>    <C>        <C>    <C>       <C>    <C>
           Crude Oil                  --       --       --       --       7     0.12       11     0.18      15     0.26
           Natural Gas                --       --       --       --      --       --        0     0.00       0     0.00
           Dry                        --       --       --       --       3     0.05        3     1.04       3     0.05
           Service                    --       --       --       --      --       --        0     0.00       0     0.00
                                 --------------------------------------------------------------------------------------
           Total                       0        0        0        0      10     0.17       14     1.22      18     0.31
                                 --------------------------------------------------------------------------------------
</TABLE>

(1)   Drilling was carried out exclusively on the Ogan Komering (the "OK Block")
      in Indonesia where we had a 4.25% carried interest.


                                       11
<PAGE>

                                   Table No. 3
                        Drilling Activities Expenditures2
                                   (Unaudited)

<TABLE>
<CAPTION>
                                          ------------------------------------------------------------------
                                             2001           2000           1999          1998           1997
                                          ------------------------------------------------------------------
<S>                                       <C>            <C>            <C>         <C>               <C>
       Exploration Drilling               $    --        $    --        $    --     $ 901,179         $   --
       Development Drilling                    --             --             --            --             --
                                          ------------------------------------------------------------------
                                               --             --             --            --             --
       Tangible Production Equipment           --             --             --            --             --
                                          ------------------------------------------------------------------
       Total                              $    --        $    --        $    --     $ 901,179         $   --
                                          ------------------------------------------------------------------
</TABLE>

(2)   Expenditures relate exclusively to our activities on its 100% owned North
      Tanjung Block.

                                   Table No. 4
                                 Producing Wells
                                   (Unaudited)

<TABLE>
<CAPTION>
                          --------------        -------------        ------------         ------------         -------------
                               2001                  2000                1999                1998                  1997
                          Gross      Net        Gross     Net        Gross    Net         Gross    Net         Gross     Net
                          --------------        -------------        ------------         ------------         -------------
<S>                        <C>       <C>         <C>      <C>         <C>     <C>          <C>     <C>          <C>      <C>
       Other -- Oil        --        --          --       --          --      --           --      --           --       --
       Other -- Gas        --        --          --       --          --      --           --      --           --       --
                          --------------        -------------        ------------         ------------         -------------
       Total               --        --          --       --          --      --           --      --           --       --
                          --------------        -------------        ------------         ------------         -------------

<CAPTION>
                          --------------        -------------        ------------         ------------         -------------
                               2001                  2000                1999                1998                  1997
                          Gross     Net         Gross    Net         Gross    Net         Gross    Net         Gross     Net
                          --------------        -------------        ------------         ------------         -------------
<S>                        <C>       <C>         <C>      <C>         <C>     <C>          <C>    <C>           <C>     <C>
       Indonesia -- Oil    --       --           --      --           --      --           33     0.59          29      0.51
       Indonesia -- Gas    --       --           --      --           --      --            0     0.00           0      0.00
                          --------------        -------------        ------------         ------------         -------------
       Total               --       --           --      --           --      --           33     0.59          29      0.51
                          --------------        -------------        ------------         ------------         -------------
</TABLE>

                                   Table No. 5
            Standardized Measure of Discounted Future Net Cash Flows
                         (Canadian Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                     ------------------------------------------------------------
                                                       2001        2000         1999         1998          1997
                                                     ------------------------------------------------------------
<S>                                                  <C>        <C>           <C>         <C>          <C>
            Future cash inflows                      $    --    $       --    $     --    $  3,401.7   $  8,227.1

            Future production/development costs           --            --          --      (1,124.2)    (2,718.9)
                                                     ------------------------------------------------------------
                                                          --            --          --       2,277.5      5,508.2
            Future income tax recoveries (expense)        --            --          --        (638.2)    (1,543.6)
                                                     ------------------------------------------------------------
            Future net cash flows                         --            --          --       1,693.3      3,964.6
            10% Annual discount for estimated
              timing of cash flows                        --            --          --        (559.2)    (1,352.4)
                                                     ------------------------------------------------------------
            Standardized measure of discounted
              future net cash flows                  $    --    $       --    $     --    $  1,080.1   $  2,612.2
                                                     ------------------------------------------------------------
</TABLE>

            *     Crude oil price for the OK Block at December 31, 1998 was US$
                  9.93

E. Current Exploration/Development Activities

Turkmenistan

On February 5, 2002, we announced that we had entered into a Joint Venture
Agreement ("JVA") with privately-held Canneft Inc. ("Canneft") of Houston, TX,
whereby we will participate with Canneft in the development of the Adzhiyap
project (the "Project") in southwestern Turkmenistan, bordering Iran to the
south and the Caspian Sea to the west. Although the project is primarily focused
towards gas production, gas condensate reserves are also present since tests
have shown a concentration of 1 bbl/100 mcf in gas producing zones. There is
also potential for deeper oil reserves.


                                       12
<PAGE>

The Adzhiyap block is approximately 2,000 square km in area. There is excellent
potential for near-term cash flow because the existing Korpedzhe gas pipeline to
Iran is only 4 km from proven gas wells #6 and #1. The Korpedzhe line is a
1022mm gas pipeline built for a capacity of 1.18 billion cubic feet per day but
it is presently carrying 500 million cubic feet per day, or 42% of capacity.
Iran currently buys gas from the Korpedzhe pipeline at US$40 per cubic metre
(US$1.13/mcf). An alternate route for a gas pipeline to the north is also being
considered. This line would connect to an existing Gazprom line currently
selling gas to the Ukraine and which is 100 km to the north of the Adzhiyap
block. Additionally, a study for the feasibility of using gas-to-liquids ("GTL")
technology is to be conducted in the Spring 2002.

The Adzhiyap structure well #1 logged approx. 216' of gas, and well #6 (a twin
to well #1) logged 25m of gas on March 15, 2001, at the top of the Red Beds
productive sands. So far, 12 structures have been identified within the block on
2-D seismic. Canneft is in the process of negotiating the formal Production
Sharing Agreement ("PSA") for the Project. A protocol was signed March 26, 2001,
between Canneft and the local partner, Turkmengeological, to form a Joint
Operating Company to be owned 75/25 respectively, and apply for a PSA for the
Adzhiyap block. A Commercial Offer was presented to the government in June 2001
proposing an initial investment of up to US$25 million for a 4-year work
commitment which would include drilling 40 wells and tying into the pipeline.

Under the terms of the JVA between us and Canneft, we will advance US$150,000 to
the Joint Venture over a 5 month period beginning in May 2002 to cover the
remaining estimated costs to secure the PSA. We will work together with Canneft
during this period to secure a technically-competent operator to join the
Project, since this will be a requirement of the PSA. The operator is not
required to be a working interest holder in the Project, but can simply be a
qualified contract operator.

If the operator chooses to act solely as a contract operator and not invest in
the Project as a working interest holder, then we will have the option to earn a
60% interest in the Joint Venture between us and Canneft by investing 100% of
the capital required to develop the Project. For providing 100% of the capital,
we would receive 90% of the distributable cash flow for the Joint Venture until
achievement of invested fund payout, and 60% after payout. A 60% share of the
Joint Venture would equate to a Net Present Value, discounted at 15%, of US$93.9
million to Tracer.

If the operator chooses to invest in the Project as a partner in the Joint
Venture, we will have the right to a minimum 20% interest in the Joint Venture
by providing our prorata share of the required capital for the Project, and will
earn its prorata share of distributable cash flow.

North Tanjung Block Production Sharing Contract

As discussed above, as a result of the sale of PerminTracer to Tradewinds in
February 1999, we own a 5% carried working interest in the NT Block PSC, subject
to Tradewinds pursuing exploration activities on the NT Block.

Competition

The oil and gas industry is highly competitive. We compete with major integrated
and independent oil and gas respect to marketing, particularly in the natural
gas industry. In addition, the oil and gas industry competes with other
industries to supply the energy and fuel needs of customers. Due to our
financial position, many competitors have resources substantially exceeding our
resources and may, therefore, be better able to define, evaluate and bid for
contracts.

Foreign Sales/Assets.

As of December 31, 2001, all of our assets were located in Canada. During fiscal
2001 all revenue was generated in Canada.

As of December 31, 2000, CDN $51,426 of our assets were located in Iran, and CDN
$1,112,299 were located elsewhere. During fiscal 2000 all revenue was generated
in Canada.

As of December 31, 1999, CDN $71,151 of our assets were located in Indonesia,
and CDN $1,308,323 were located elsewhere. During fiscal 1999, CDN $1,079,204
revenue was generated in Indonesia and CDN $169,813 revenue was generated
elsewhere. See also "Disposition of Properties."

F. Organizational Structure

We have a number of wholly owned subsidiaries, which are Tracer Petroleum Iran
Ltd. ("TPIL"), a company which is incorporated in Tehran, Iran, Tracer Trading
Ltd. ("TTL"), a company incorporated in Bermuda and Tepco Ltd. ("TEPCO"), a
company incorporated in Bermuda. We also own 33.34% of Tracer Petroleum
International Ltd. ("TPI"), a company incorporated in Bermuda to pursue oil and


                                       13
<PAGE>

gas ventures in Iran. We sold our wholly-owned subsidiary; PerminTracer
Petroleum Ltd. in early 2000. PerminTracer was incorporated on May 5, 1992 in
the British Virgin Islands.

G. Property, plant and equipment.

We acquired interests in properties and participated with others in the drilling
of oil and gas wells in various parts of Canada prior to 1993. From 1993 to 1999
we participated indirectly in the exploration and development activity that took
place on our Canadian properties and our 4.25% carried working interest in an
oil/gas property on the island of Sumatra Indonesia. The Indonesian interest was
acquired in October 1991, and the sale of the interest was closed in December
1999. The sale was made effective September 1, 1999. There is no book value for
the 5% carried interest that we hold in the NT Block in Indonesia.

During 1997 we divested ourselves of all material Canadian oil and gas interests
and in 2000 we divested ourselves of all of our Indonesian assets. Our focus is
now on opportunities, which are being pursued in Turkmenistan.

Natural resource properties in which the Company is currently involved are
described more fully in "Item 4B. D. Corporate Exploration/Development
Activities."

ITEM 5. OPERATING AND FINANCIAL OVERVIEW AND PROSPECTS.

We have experienced significant operating losses and cash outflows from
operations over the last few years and as a result, our ability to continue as a
going concern is dependent on achieving profitable operations and/or upon
obtaining additional financing.

The financial statements were prepared in accordance with accounting principles
and practices generally accepted in Canada ("Canadian GAAP"), which are
different from those in the United States (refer to Note 11 of the financial
statements for a detailed description of differences between Canadian GAAP and
US GAAP and how those differences would affect the financial statements).

A. Fiscal Year Ended December 31, 2001 versus Fiscal Year Ended December 31,
2000

Results of Operations

During 2001, we continued to focus our efforts on property disposition; we also
sought to continue to enhance shareholder value by continuing to seek
international oil and gas projects with proven petroleum reserves which we could
acquire or participate in.

We received a total of US$240,762 in loans from Roc Oil Company Limited of
Sydney, Australia, during 2001 under our funding and strategic partnership
arrangement with Roc. These funds were for the pursuit of projects in Iran. Roc
has the option to convert this loan amount into shares and warrants of our
company. ROC has the option to convert any and all amounts of the funding it
provided to us, along with accrued interest into shares of Tracer at a
conversion price which is the lesser of US$0.20 per share or 80% of the weighted
average closing price for the previous 20 trading days, subject to a floor price
of US$0.05 per share. ROC will also receive up to 5,000,000 share purchase
warrants exercisable at US$0.20 per share on or before May 1, 2003. The final
number of warrants issued to ROC will depend upon the value of the dollar figure
loaned to us.

The loss for the year was $1,513,911, or $0.17 per share (2000 - $2,028,006 or
$0.28). This was primarily a result of administrative expenditures of $1,196,014
(2000 - $1,609,501) which are mainly associated with the ongoing pursuit of
international petroleum development opportunities. In addition, in 2000 we
recorded a writedown of $367,365 related to our eZuz.com Inc. investment.

Liquidity and Capital Resources

We had a working capital deficiency at December 31, 2001 of $259,221 (2000 -
$281,483). During the year, we raised $848,600 of new equity capital through
private placements and the exercise of share purchase warrants and stock
options. In 2002, Our management expects that we will have to raise additional
funds through equity and/or debt in order to finance acquisitions and
operations. We currently hold 1,000,000 shares of Transmeridian Exploration
Inc., which is a Houston-based oil & gas company which is quoted on the OTC
Bulletin Board.

B. Fiscal Year Ended December 31, 2000 versus Fiscal Year Ended December 31,
1999


                                       14
<PAGE>

Results of Operations

During 2000, we continued to focus our efforts on property disposition; we also
sought to continue to enhance shareholder value by continuing to seek
international oil and gas projects with proven petroleum reserves which we could
acquire or participate in.

In December of 2000, we entered into a Letter of Intent with a subsidiary of a
major Iranian company to form a joint venture for the development of a
significant offshore natural gas and gas condensate field in Iran. We were
awaiting clarification from the Iranian partner as to the acceptable options for
the development of the field, towards the preparation of a Master Development
Plan to be submitted to the National Iranian Oil Company ("NIOC") for approval.
However, NIOC approval for the Letter of Intent was not granted and we
subsequently abandoned the pursuit of this field.

In April 2000, we purchased a 4.5% equity interest in Open Joint Stock Company
Caspi Neft ("OJSCCN") from Transmeridian Exploration Inc. ("TMEI") for
US$614,158. OJSCCN owns the exploration and production rights for the South
Alibek field in the Aktyubinsk region of the Republic of Kazakhstan. On March
16, 2001 we sold our interest in the South Alibek Field, Transmeridian, for
100,000 US$15 convertible preferred shares of Transmeridian. The shares were
convertible into 1.5 million common shares of Transmeridian at a price of
US$1.00 per share for a period of 5 years. We also received 1,000,000 common
share purchase warrants in Transmeridian entitling us to purchase an additional
1,000,000 common shares at US$1.00 for a period of two years. Subsequently, on
March 6, 2002 we converted our preferred shareholdings into 1,500,000 common
shares of Transmeridian.

Revenue from oil and gas operations was negligible at $943 for the year ended
December 31, 2000 (1999 - $1,079,948) because of the completion in December 1999
of the sale of all of the Company's producing oil and gas assets in Indonesia.
Furthermore, as a result of the sale, oil and gas operating expenses were nil
(1999 - $835,840) and depletion expense was reduced to $55,846 (1999 -
$1,891,040).

The loss for the year ended December 31, 2000 was $2,028,006, or $0.28 per share
(1999 - $3,224,653; $0.74 per share). This was primarily a result of
administrative expenditures of $1,609,501 (1999 - $1,243,641) which are mainly
associated with the ongoing pursuit of international petroleum development
opportunities, (the oil and gas operating and depletion expenses refer to above)
and a write-down of $367,375 to nil for the carrying value of the Company's
investment in eZuz.com Inc.

Liquidity and Capital Resources

We had a working capital deficiency at December 31, 2000 of $281,483 (1999 -
working capital of $592,197). During the year ended December 31, 2000, we raised
$1,879,692 of new equity capital through private placements and the exercise of
share purchase warrants and stock options.

In 2000, we were committed to our share of costs for the South Alibek field. In
2001 we sold our interest in the field to the operator, Transmeridian, thereby
relieving ourselves of any further commitments to ongoing costs.

C. Fiscal Year Ended December 31, 1999 versus Fiscal Year Ended December 31,
1998

Results of Operations

We experienced considerable change during 1999. In order to better create
shareholder value, management realized that we needed to re-focus our efforts to
areas outside of Indonesia and formulated a strategic plan to help us move
forward and grow. The year was highlighted by changes to the Board, the creation
of Tracer Petroleum International for the pursuit of oil and gas ventures in
Iran, the closing of two private placements, and was capped off by the
successful sale of our Indonesian assets.

In early 1999, Mr. David R. Robinson joined the Board of Directors, Mr. David W.
Harrison was appointed Executive Vice President and Corporate Secretary, and Mr.
Ed Mowatt resigned as our CFO, Corporate Secretary and a Director. Soon after
his appointment to the Board, Mr. Robinson became our President and Chief
Executive Officer replacing Mr. Stephen Jacobs, our Chief Executive Officer from
August 1996 and President from November 1996 until Mr. Robinson's appointment.
Mr. Jacobs remains a valued member of our Board of Directors. Subsequent to the
end of 1999, a respected Singapore-based businessman, Mr. Tan Ching Khoon,
joined the Board of Directors. Mr. Tan Ching Khoon resigned from the Board of
Directors in November 2000.

We succeeded in completing two private placements in the year. The first in
early 1999, raised US$185,000 and the second in September 1999 raised an
additional US$424,500. Members of our Board of Directors purchased a significant
portion of both of these private placements.

In October 1999, we announced that it had agreed to sell our oil and gas assets
in Indonesia to Tradewinds. The assets included in the sale were the shares of
PerminTracer Petroleum Ltd., the option on the Sungai Gelam Technical Assistance
Contract; the 4.25% carried


                                       15
<PAGE>

interest in the Ogan Komering Block, the Indonesian database, and the Kremco 600
drilling rig and ancillary equipment. As per the terms of the agreement,
Tradewinds paid total cash consideration of US$700,010 plus additional
consideration as follows:

      o     We retained a 5% carried interest in the North Tanjung Block (NT
            Block) PSC and will receive preferential recovery of US$2,000,000 to
            be paid out of production from 30% of the cost recovery cash flow,
            net of operating costs. After the preferential recovery of
            US$2,000,000 the carried interest will be converted into a working
            interest. This is contingent upon Pertamina approving a further
            extension on the NT Block PSC and renegotiation of the work
            commitment for the NT Block PSC.

      o     We will receive a 5% carried working interest in the Sungai Gelam
            Technical Assistance Contract, which will be converted to a 5%
            working interest upon commerciality being obtained. This is
            contingent upon Tradewinds election to pursue the project.

Revenue from oil and gas operations decreased by 45% to $1,079,598 (1998 -
$1,965,778), reflecting lower oil prices during the first part of 1999. In
addition, since the effective date of the sale of the OK Block was September 1,
1999 only eight months revenues are reflected in this period, as compared to a
twelve month period for the year ended December 31, 1998. Oil and gas expenses,
net of write downs, were reduced by 50% to $835,840, versus $1,678,611 for the
same period in 1998. This is mainly due to the reduction in the carried interest
past cost allocation for our interest in the OK Block in Indonesia as well as
the effective date of the sale of the OK Block.

In 1999 all of the capitalized costs relating to the exploration of the NT Block
were written off as a result of the impending sale of PerminTracer Petroleum
Ltd. for US$10.00. PerminTracer, the Company's wholly-owned subsidiary, held a
100% working interest in the NT Block PSC. Net loss for the year after depletion
and write downs was $3,224,653 or $0.74 per share (1998-net loss $12,845,716 or
$3.46 per share). The main reason for the reduction of 75% is that in 1998 a
significant portion of the capitalized costs relating to the exploration of the
NT Block were required to be written off due to a ceiling test write-down of
$9,106,729. In addition, a depletion allowance of $3,151,268 was determined
based on the production of the OK Block after the decision was made to allocate
all capitalized costs to the amortization pool subject to depletion
calculations.

Administrative expenditures increased by 150% and ended the year at $1,243,641
(1998-$497,676) for a number of reasons. Professional fees related to ongoing
operations increased by 178% to $207,757 (1998-$74,650), mainly due to fees
related to the eZuz.com Inc. reverse takeover that did not close and fees
associated with the sale of the Indonesian assets. Travel expenses increased by
170% to $200,694 (1998-$74,215) as a result of fund raising activities and
meetings in Iran. Consulting fees increased by 381% to $373,521 (1998-$77,595)
mainly as a result of expenses related to Tracer Petroleum International as well
as the review of other new acquisition opportunities.

Amortization increased to $502,996 in the year ended December 31, 1999
(1998-$15,464) due to the write down of the oil rig and related drilling
equipment to market value.

Liquidity and Capital Resources

Working capital at December 31, 1999 was $592,197 (1998-$261,687). During the
year, the Company liquidated its remaining holdings in Eurogas shares at a loss
of $38,012 compared to a gain in 1998 of 29,753. Successful private placements
that raised a total of US$609,000 before expenses contributed to the increase in
working capital.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES.

A. Directors and Senior Management

The following table lists as of June 30, 2002 the names, ages, functions and
areas of experience in our operations of all the Directors and Senior
Management. Each Director will serve until the next annual general meeting or
until his successor is duly elected, unless his office is vacated in accordance
with our charter documents. The Executive Officers serve at the pleasure of the
Board of Directors.

<TABLE>
<CAPTION>
       ------------------------------------------------------------------------------------------------------
       Name                            Age       Position/Area of Experience/Function
       ------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>
       Larry W. Youell (1)(2)          61        Director since 6/1998, President, CEO since 6/2002
       Stephen Jacobs                  49        Director since 9/1996
       David R. Robinson               39        Director, since 1/1999, Past President & CEO 1/1999 - 6/2002
       David G. Wilson(1)(2)           57        Director since 6/1998
       David W. Harrison               39        Secretary since 1/1999
       Sameer Hirji (1)(2)             43        Director since 2/2002
       ------------------------------------------------------------------------------------------------------
</TABLE>

      (1)   Member of Audit Committee.

      (2)   Member of Compensation Committee


                                       16
<PAGE>

David R. Robinson - Based in Calgary, Mr. Robinson has spent the past 16 years
working in both the investment business and petroleum industry. Mr. Robinson is
Director, President and Chief Executive Officer of Canadian based Aurado
Exploration, Ltd. Mr. Robinson was previously the President and Chief Executive
Officer of Tracer Petroleum from January 1999 until June 2002, the President and
Chief Executive Officer Odyssey Petroleum Corporation, and prior to that
Executive Vice President of Arakis Energy Corporation, both of which were
Calgary-based and NASDAQ-listed, Mr. Robinson was responsible for raising over
US$200 million in equity capital for these companies.

Larry W. Youell - Mr. Youell spent 21 years with Consumers Gas Company Limited
and its subsidiaries, ("Consumers") in a variety of increasingly responsible
roles including Senior Vice President Operations, and Senior Vice President
Business Support. He was also President of Rose Technology, and General Manager
of Consumers' largest division. Prior to joining Consumers, Mr. Youell was a
Management Consultant with an international base of clients.

Stephen T. Jacobs - Mr. Jacobs has held numerous senior level positions with
Tracer Petroleum including his former position as President and Chief Executive
Officer. Mr. Jacobs specializes in international resource management, reservoir
and production engineering, and development and acquisitions planning and
evaluations.

During his 25 years in the international oil and gas industry, Mr. Jacobs has
held numerous senior level positions with Talisman Energy (Asia), Oryx Indonesia
Energy Co., Mainline Resources, (O.S.) Ltd., Indonesia, Gulf Indonesia Ltd.,
Pertamina E&P, Indonesia and Texaco USA.

David G. Wilson - Mr. Wilson spent over twelve years with a major Canadian oil
and gas company, and has held positions with several other well-known petroleum
companies, including Texaco Exploration, Union Oil of Canada, Petro Canada Inc.
and OMV (Canada). Most recently he was the Senior Director, Strategic
Exploration Group for a junior international exploration company. He currently
is providing consulting services on restructuring and refinancing a major
international oil and gas venture. Mr. Wilson is a Director of Nations Energy, a
private oil and gas company, and serves as an advisor to Transmeridian.

David W. Harrison - A resident of Calgary, Mr. Harrison has over the past nine
years been Executive Vice President and Chief Administrative Officer of Odyssey
Petroleum Corporation, responsible for all corporate governance, and Vice
President Corporate Communications for Arakis Energy Corporation where he
oversaw the shareholder relations for its approximately 21,000 shareholders.

Sameer Hirji - A resident of Calgary, Mr. Hirji is a corporate attorney by
background with 15-years experience in private practice, Mr. Hirji is the
founder and Chief Executive Officer of Magellan Merchant Capital Inc., a private
investment banking firm based in Calgary. Magellan serves as our financial
advisor.

None of our directors and/or executive officers has been the subject of any
order, judgment, or decree of any governmental agency or administrator or of any
court of competent jurisdiction, revoking or suspending for cause any license,
permit or other authority of such person or of any corporation of which he is a
director and/or executive officer, to engage in the securities business or in
the sale of a particular security or temporarily or permanently restraining or
enjoining any such person or any corporation of which he is an officer or
director from engaging in or continuing any conduct, practice, or employment in
connection with the purchase or sale of securities, or convicting such person of
any felony or misdemeanor involving a security or any aspect of the securities
business or of theft or of any felony.

There are no other arrangements or understandings between any two or more
directors or executive officers, pursuant to which he was selected as a director
or executive officer. There are no family relationships between any two or more
directors or executive officers.

B. Compensation.

Directors who are our employees receive no compensation for their service in
their capacity as Directors.

The Board of Directors may award special remuneration to any Director
undertaking any special services on our behalf other than services ordinarily
required of a Director. Other than indicated below no Director received any
compensation for his services as a Director, including committee participation
and/or special assignments.

We grant stock options to Directors, Executive Officers and employees; as
described below under, "Options to Purchase Securities from Company or
Subsidiaries".

The following table details the compensation paid during Fiscal Year Ended
December 31, 2001 to our Directors and members of our administrative,
supervisory or management bodies:


                                       17
<PAGE>

                     Director/Executive Officer Compensation
                       Fiscal Year Ended December 31, 2001

      ------------------------------------------------------------------------
                                            Option Exercise Net        Total
      Directors/Officers      Salary          Market Value(1)     Compensation
      ------------------------------------------------------------------------
      David R. Robinson     US$  96,000         US$ 174,805        US$ 270,805
      Larry W. Youell                --         US$  19,530        US$  19,530
      Stephen T. Jacobs              --         US$      --        US$      --
      David G. Wilson       $    22,917         US$  31,500        US$  31,500
                                                                     $  22,917
      David W. Harrison     $    83,646         US$  14,850        US$  14,850
                                                                     $  83,646
      Sameer Hirji                   --                  --                 --
      ------------------------------------------------------------------------
      Total                 US$  96,000         US$ 240,685        US$ 336,685
                            Cdn$106,563                            Cdn$106,563
      ------------------------------------------------------------------------

      (1). "Option Exercise Net Market Value" is defined as the aggregate
      difference between the exercise price and the market value of the common
      stock on the date of exercise.

We are committed to a monthly retainer of US$3,000 per month to Mr. Larry
Youell, the Corporation's, President and Chief Executive Officer. In addition we
are committed to a monthly retainer of US$2,000 to Mr. David Robinson, the
Chairman and a per diem charge of $800 to Mr. David Wilson, a Director, for
services rendered on our behalf and at the request of the Board.

No funds were set aside or accrued by us during the year ending December 31,
2001 to provide pension, retirement or similar benefits for Directors or
Executive Officers.

None of our executive officers/directors received other compensation in excess
of the lesser of US $25,000 or 10% of such officer's cash compensation as
reported in the compensation table above and all executive officers/directors as
a group did not receive other compensation which exceeded US $25,000 times the
number of persons in the group or 10% of the compensation reported in the
compensation table above.

Except for the stock option program discussed below, we have no bonus or profit
sharing plans pursuant to which cash or non-cash compensation is or may be paid
to the our directors or executive officers.

Options to Purchase Securities From Company or Subsidiaries.

Options to purchase securities from us are granted to directors/officers and
employees on terms and conditions acceptable to the relevant regulatory
authorities. We adopted a formal stock option plan on June 19, 2000. All of the
options granted to report date were granted prior to the adoption of the stock
option plan.

Prior to our voluntarily delisting of our shares from the Vancouver Stock
Exchange ("VSE"), the exercise prices for the stock options were determined in
accordance with VSE guidelines which required the exercise price to be equal to
or greater than the average closing price of our common stock for the ten
trading days on the VSE immediately preceding the day on which the directors
granted and publicly announced the options. We delisted from the Vancouver Stock
Exchange on August 6, 1999. All options granted during the year were set at
prices in excess of those permitted under the stated guidelines.

The names of the directors and executive officers to whom outstanding stock
options have been granted and the number of common shares subject to such
options are set forth in the following table as of June 30, 2002, as well as the
number of options granted to directors and all employees as a group. The
exercise price of the options is stated in U.S. Dollars.

                            Stock Options Outstanding

<TABLE>
<CAPTION>
        ------------------------------------------------------------------------------------------------------------------
        Name                                          Number of Common Shares        Exercise Price        Expiration Date
        ------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                            <C>                <C>
        Larry W. Youell                                       64,981                      $0.10               06/29/03
                                                             142,659                      $0.10               11/16/03
                                                              34,060                      $0.14               01/18/04
        ------------------------------------------------------------------------------------------------------------------
        Stephen T. Jacobs                                      5,000                      $0.10               11/14/02
                                                             147,500                      $0.11               04/22/04
        ------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       18
<PAGE>

<TABLE>
<S>                                                        <C>                            <C>                 <C>
        David R. Robinson                                      7,341                      $0.10               10/25/03
                                                             200,000                      $0.10               11/16/03
                                                             200,000                      $0.14               01/17/04
                                                             200,000                      $0.32               02/04/04
        ------------------------------------------------------------------------------------------------------------------
        David G. Wilson                                        5,000                      $0.10               11/14/02
                                                              18,200                      $0.11               04/22/04
                                                              77,000                      $0.10               05/15/03
                                                              65,000                      $0.10               06/29/03
        ------------------------------------------------------------------------------------------------------------------
        David W. Harrison                                     17,850                      $0.10               05/15/03
                                                             100,000                      $0.14               01/17/04
        ------------------------------------------------------------------------------------------------------------------
        Sameer Hirji                                         290,000                      $0.14               01/18/04
        ------------------------------------------------------------------------------------------------------------------
        Total Officers/Directors (6 people)                1,574,591
        ------------------------------------------------------------------------------------------------------------------
        Total  Employees/Consultants (6 includes             447,530                                          11/15/02 -
        1 Company which holds 90,000)                                                                         04/22/04
        ------------------------------------------------------------------------------------------------------------------
        Total Officers/Directors/Employees                 2,022,121
        ------------------------------------------------------------------------------------------------------------------
</TABLE>

In addition, the following table lists the directors, executive officers and
employees to whom warrants to purchase our shares have been granted and the
number of share purchase warrants so granted as of June 30, 2002, as well as the
number of share purchase warrants granted to Directors and all employees as a
group.

                     Warrants Held by Directors and Officers

<TABLE>
<CAPTION>
      ------------------------------------------------------------------------------------------------
                                              Number of share                               Expiration
      Name                                   Purchase Warrants         Exercise Price          Date
      ------------------------------------------------------------------------------------------------
<S>                                              <C>                      <C>               <C>
      Larry Youell                               100,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      Steve Jacobs                                40,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      David Robinson                              10,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      David Robinson                              50,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      D.R.R. Capital Corp (1)                    190,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      D.R.R. Capital Corp (1)                     90,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      Kachina Resources Ltd. (2)                  50,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      David G. Wilson                             90,000                  US$0.25           09/02/2002
      ------------------------------------------------------------------------------------------------
      Total Officers/Directors/Employees         620,000
      ------------------------------------------------------------------------------------------------
</TABLE>

      (1)   Beneficial owner is David R. Robinson

      (2)   Beneficial owner is David W. Harrison

      (3)   Beneficial owner is Tan Ching Khoon

C. Board Practices

We have an audit committee and a compensation committee.

Audit Committee. The audit committee oversees the retention, performance and
compensation of our independent auditors, and the establishment and oversight of
our systems of internal accounting and auditing control. Members of the audit
committee are Mr. Larry Youell, Mr. David Wilson and Mr. Sameer Hirji.

Compensation Committee. The compensation committee reviews and makes
recommendations to our board concerning the terms of the compensation packages
provided to our senior executive officers, including salary, bonus and awards
under our stock option plan and any other compensation plans that we may adopt
in the future. Members of the compensation committee are Mr. Larry Youell, Mr.
David Wilson and Mr. Sameer Hirji.


                                       19
<PAGE>

D. Employees

As of December 31, 2001, we had no employees and 3 consultants, located in
Calgary, Alberta Canada. As of June 30, 2002, we had no employees, and four
consultants. Of the consultants, three are members of our Senior Management and
one is administrative personnel.

E. Share Ownership

The following table lists as of June 30, 2002, the share ownership of our
directors and executive officers.

              Shareholdings of Our Directors and Executive Officers

<TABLE>
<CAPTION>
      -----------------------------------------------------------------------------------------------
                                                                 Amount and Nature of     Percentage
      Title of Class                Name of Beneficial Owner     Beneficial Ownership    of Class (1)
      -----------------------------------------------------------------------------------------------
<S>                                 <C>                                     <C>               <C>
      Common                        Larry W. Youell                                --           0.0%
      Common                        Stephen T. Jacobs                         109,700           1.1%
      Common                        David R. Robinson                         877,944           8.4%
      Common                        David G. Wilson                            62,000           0.6%
      Common                        David Harrison                             86,000           0.8%
      Common                        Sameer Hirji                                   --            --
      -----------------------------------------------------------------------------------------------
      Total Directors/Officers                                              1,135,644         10.83%
      -----------------------------------------------------------------------------------------------
</TABLE>

      (1)   The percentage ownership is based on 10,486,339 shares outstanding
            as of June 30, 2002.

      (2)   Less than 1% of class.

In addition, we have has established a stock option plan whereby options may be
granted to directors, officers, consultants, and employees. The exercise price
of each option equals the market price of our stock on the date of the grant and
an option's maximum term is two years.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

The following table provides the names and share ownership of those parties that
have ownership of 5% or more of each class of the Company's voting securities as
of June 30, 2002:

                 Name               Number of Shares Owned   Percentage of Class
                 ----               ----------------------   -------------------
          Ergon Power Pte, Ltd            1,000,000 (1)               9.5%
          David Robinson                    877,944                   8.4%

      (1)   Includes warrants to purchase up to 1,000,000 shares.

We are a publicly-owned corporation, the shares of which are owned by Canadian
residents, US residents, and residents of other countries. We are not controlled
directly or indirectly by another corporation or any foreign government.

Under the terms of the Convertible Loan Agreement with Roc Oil Company Limited,
dated May 22, 2001, ROC has the option to convert any and all amounts of the
funding it provided to us, along with accrued interest into shares of Tracer at
a conversion price which is the lesser of US$0.20 per share or 80% of the
weighted average closing price for the previous 20 trading days, subject to a
floor price of US$0.05 per share. ROC will also receive up to 5,000,000 share
purchase warrants exercisable at US$0.20 per share on or before May 1, 2003. The
final number of warrants issued to ROC will depend upon the value of the dollar
figure loaned to us.

There are no arrangements, known to the Company, the operation of which may at a
subsequent date result in a change of in control the Company other than as noted
above.


                                       20
<PAGE>

As at May 15, 2002, management is not aware of any person holding a greater than
5% beneficial interest in any class of the Registrant's voting securities other
than Mr. Tan Ching Khoon, a former director of the company, who owns 1,000,000
shares through Ergon Power Pte Ltd., a BVI Company and Mr. David Robinson, a
Director who owns 877,944 shares.

The above listed organizations and individuals have no special or separate
voting rights than those rights held by our shareholders.

On June 30, 2002, the shareholder's list showed 448 registered shareholders and
10,486,339 shares outstanding. 416 of these shareholders were US residents,
owning 3,841,919 shares representing 36.64% of the issued and outstanding
shares. Based upon research in the indirect holdings of depository agencies and
financial institutions and other research, we believe that there are in excess
of 5,800 beneficial shareholders.

B. Related Party Transactions

Messrs. Larry Youell, David Robinson, Stephen Jacobs, David Wilson, and David
Harrison, directors and executive officers, participated in a private placement
of 849,000 units at US$0.50 per unit that closed on September 30, 1999. Each
unit was comprised of one common share and one common share purchase warrant
exercisable into one additional common share up to and including October 7,
2001, at the price of US$0.75 up to October 6, 2000 and US$0.90 thereafter. The
number of units purchased by each individual were 100,000; 240,000; 40,000;
100,000; 74,000; and 50,000 respectively.

Messrs. David Robinson, Director, President and CEO, and Tan Ching Khoon, a
former director participated in a private placement of 1,540,000 units at
US$0.50 per unit that closed on March 20, 2000. Each unit was comprised of one
common share and one common share purchase warrant exercisable into one
additional common share up to and including March 2, 2002, at the price of
US$1.00 up to March 2, 2001 and US$1.25 thereafter. The number of units
purchased by each individual were 100,000 and 1,000,000 respectively.

Mr. David Wilson, an executive officer, serves as an advisor to Transmeridian on
mergers and potential acquisitions. Mr. Wilson owns shares in Transmeridian.

We sold our interest in the South Alibek Field to Transmeridian for 100,000
US$15 convertible preferred shares of Transmeridian. The shares are convertible
into 1.5 million common shares of Transmeridian at a deemed price of US$1.00 per
share for a period of 5 years. Tracer also received 1,000,000 common share
purchase warrants in Transmeridian entitling the Company to purchase an
additional 1,000,000 common shares at US$1.00 for a period of two years. See
"Disposition of Properties." Subsequent to year end we exchanged our preferred
shares for 1,500,000 common shares of Transmeridian.

On May 31, 2001, Mr. David Robinson, Mr. David Wilson and Mr. David Harrison
each participated in a private placement of 460,144 units at US $0.40 per unit.
Each unit consists of one share plus one two year share-purchase warrant
("Warrant"), with each Warrant being exercisable into one additional common
share at US$0.50 up to May 31, 2002, and US$0.65 up to May 31, 2003. The number
of units purchased by each individual were 261,944, 25,000, and 10,000
respectively.

The transactions discussed above with management were on terms as favorable us
as would have been obtained from unaffiliated parties. Other than the above
referenced situations, no Director or Executive Officer and no associate or
affiliate of the foregoing persons has or has had any material interest, direct
or indirect, in any transaction since the beginning of fiscal 2001 or in any
proposed transaction, which in either such case has materially affected or will
materially affect the Company.

At December 31, 2001 the Company owed D.R.R. Capital Corporation US$85,000
($127,458) for a non-interest bearing short-term loan. D.R.R. Capital
Corporation is wholly-owned by David R. Robinson, a Director. This amount was
repaid in 2002.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Financial Statements and Other Financial Information

See "Item 17. Financial Statements".

We know of no pending legal or arbitration proceedings including those relating
to bankruptcy, governmental receivership or similar proceeding and those
involving any third party against it, nor are we involved as a plaintiff in any
material pending litigation.

We know of no pending proceedings to which any director, member of senior
management, or affiliate is either a party adverse to us or our subsidiaries or
has a material interest adverse to us or our subsidiaries.


                                       21
<PAGE>

We have not declared any dividends for the last five years, nor do we intend to
declare any dividends for the foreseeable future.

B. Significant Changes

On May 24, 2001 we announced that we had entered into an agreement with Roc Oil
Company Limited ("ROC") by which ROC agreed to provide us with staged financing
over 15 months up to a discretionary maximum of US$4 million. The financing is
by way of a series of convertible loans. ROC is initially loaning funds to us
during a due diligence period ending February 28, 2002 and will have the option
to lend further funds to the Corporation beyond that date, subject to us meeting
certain project milestones. Under the agreement we have granted ROC the right of
first refusal to participate, up to a 25% equity level, in upstream development
opportunities in Iran. ROC has the option of appointing up to 3 members of our
Board of Directors depending upon the level of funding provided. Under the terms
of the agreement, ROC was also provided an the option of providing further
funding to us directly or converting the loan and accrued interest into either a
50% interest in TEPCO Ltd., our wholly owned subsidiary that was to hold the
Iranian projects or into a direct 50% interest in the projects. ROC will then be
required to provide further funding to TEPCO, via either loans or direct
investment in the projects for a total of US$3,765,000.

If ROC elects not to convert its loan amounts and accrued interest into a direct
interest in TEPCO Ltd. or into a direct interest in the projects, it has the
option to provide funding of up to US$4 million directly to us. Until the
maturity date of May 1, 2003, ROC will also have the option of converting any
and all amounts of this funding and accrued interest into shares of Tracer at a
conversion price which is the lesser of US$0.20 per share or 80% of the weighted
average closing price for the previous 20 trading days, subject to a floor price
of US$0.05 per share. ROC will also receive up to 5,000,000 share purchase
warrants exercisable at US$0.20 per share on or before May 1, 2003. The final
number of warrants issued to ROC will depend upon how much of the US$4 million
is loaned to us.

The loan agreement contains certain non-financial covenants restricting us from
certain activities such as paying dividends, adopting any shareholders' rights
plan where the rights of ROC would be adversely affected, sale of assets other
than in the normal course of business, restricting the use of proceeds received
under the loan agreement and prohibiting our amalgamation, consolidation or
merger with another entity. To be in compliance with these covenants we must
provide ROC with advance notification of any such anticipated activity. Failure
to meet the covenants would result in the loan becoming immediately repayable.
As at December 31, 2001 we satisfied all covenants.

To date ROC has advanced US$255,944.

On May 15th, 2002 we announced that we were abandoning its pursuit of oil and
gas opportunities in the Islamic Republic of Iran based upon the lack of
progress towards obtaining a petroleum project over the past three years. As
such, the Company decided not to renew the agreement with the Mullins Group. We
informed our representative in Tehran to cease all operations in Iran on our
behalf.

ITEM 9. THE LISTING

A. Listing Details and Markets

Our common shares traded on the Vancouver Stock Exchange ("VSE") in British
Columbia, Canada under the symbol "TPC". Trading on the VSE commenced on May 25,
1983. We voluntarily delisted from the VSE on August 6, 1999. Our common shares
traded on the NASDAQ SMALL CAP BOARD under the symbol "TCXXF". Trading commenced
on NASDAQ on October 30, 1989. Our shares were delisted from the NASDAQ SMALL
CAP Board on September 22, 1999. Our shares now trade on the OTC - Bulletin
Board under the symbol "TCXXF".

The table below lists the volume of trading and high/low bid/ask prices on
NASDAQ/OTC-Bulletin Board for our shares for each full quarterly period within
the two most recent fiscal years.

   NASDAQ Small Cap/OTC Bulletin Board Stock Trading Activity - Common Shares
                                  (US Dollars)

          -----------------------------------------------------
          Quarter Ended         Volume          High       Low
          -----------------------------------------------------
             06/30/02         1,373,400        $0.25     $0.10
             03/31/02         2,447,800        $0.61     $0.13
          -----------------------------------------------------
             12/31/00         1,817,800        $0.20     $0.09
              9/30/01         1,184,700        $0.51     $0.14
             06/30/01         3,377,300       $2.062    $0.562
             03/31/01         1,459,600        $0.75     $0.45
          -----------------------------------------------------
             12/31/00         2,033,600       $1.343     $0.38
              9/30/00         1,249,200       $1.875    $1.062
              6/30/00         2,274,700        $2.75    $1.062
              3/31/00         4,877,400        $3.00    $0.406
          -----------------------------------------------------


                                       22
<PAGE>

The following table lists the volume of trading and high/low bid/ask prices on
NASDAQ for the Redeemable Warrants during the last five fiscal years. These
warrants expired unexercised on September 19, 1999.

               NASDAQ Stock Trading Activity -Redeemable Warrants
                                  (US Dollars)

          ------------------------------------------------------
             Year Ended         High       Low        Volume
          ------------------------------------------------------
              12/31/01           N/A       N/A          N/A
              12/31/00           N/A       N/A          N/A
              12/31/99           N/A       N/A          N/A
              12/31/98          $0.16     $0.03        2,062,400
              12/31/97          $0.17     $0.03        4,419,600
          ------------------------------------------------------

Our shares are issued in registered form and the following information is taken
from the records of Computershare Investor Services (located in Vancouver,
British Columbia), the lead registrar and transfer agent for the common shares.
Continental Stock Trust and Transfer Company New York, New York, our co-transfer
agent provides Computershare Investor Services with information pertaining to
transfers effected by their office.

On June 30, 2002, the shareholder's list showed 448 registered shareholders and
10,486,339 shares outstanding. 416 of these shareholders were US residents,
owning 3,841,919 shares representing 36.64% of the issued and outstanding
shares. Based upon research in the indirect holdings of depository agencies and
financial institutions and other research, we believe that we have in excess of
5,800 beneficial shareholders.

Our shares are not registered to trade in the US in the form of American
Depository Receipts (ADR's) or similar certificates.

The table below highlights the historical trading activity of our shares, on
NASDAQ Small Cap and OTC Bulletin Board exchanges.

 NASDAQ Small Cap/OTC Bulletin Board Stock Annual Price History - Common Shares
                                  (US Dollars)

     ---------------------------------------------------------------------------
        Year Ended              High              Low                Volume
     ---------------------------------------------------------------------------
         12/31/01              $2.063            $0.09              7,839,300
         12/31/00              $3.00             $0.38             10,434,900
         12/31/99              $2.75             $0.312             6,869,300
         12/31/98              $2.50             $0.113             9,435,900
         12/31/97              $0.369            $0.113            25,235,600
     ---------------------------------------------------------------------------

The table below highlights our historical trading activity on the Vancouver
Stock Exchange.

                   VSE Stock Trading Activity - Common Shares
                               (Canadian Dollars)

     ---------------------------------------------------------------------------
        Year Ended              High              Low              Volume
     ---------------------------------------------------------------------------
         12/31/01               N/A               N/A               N/A
         12/31/00               N/A               N/A               N/A
         12/31/99               N/A               N/A               N/A
         12/31/98              $3.60             $0.50             59,997
         12/31/97              $0.51             $0.20           1,084,010
     ---------------------------------------------------------------------------

The table below highlights for the most recent six months, the high and low
market prices for each month of our common shares on the OTC Bulletin Board.


                                       23
<PAGE>

         OTC Bulletin Board Stock Monthly Price History - Common Shares
                                  (US Dollars)

     ---------------------------------------------------------------------------
        Month Ended            High                Low                Volume
     ---------------------------------------------------------------------------
         06/30/02             $0.22               $0.15              214,100
         05/31/02             $0.22               $0.14              292,100
         04/30/02             $0.25               $0.10              867,200
         03/31/02             $0.32               $0.23              753,400
         02/28/02             $0.61               $0.20            1,025,300
         01/31/02             $0.38               $0.13              669,100
     ---------------------------------------------------------------------------

ITEM 10. ADDITIONAL INFORMATION.

A. Memorandum and Articles of Association

Reference is hereby made to our Certificate of Continuance, and to our Bylaws,
each of which is incorporated herein by reference to, respectively, exhibit 3.1
and 3.2 to our Registration Statement on Form F-1, file number 33-81290.

B. Material Contracts.

None

C. Exchange Controls

Investment Canada Act

The Investment Canada Act (the "ICA") prohibits the acquisition of control of a
Canadian business enterprise in Canada by non-Canadians without the prior
consent of Investment Canada, the agency that administers the ICA, unless such
acquisition is exempt under the provisions of the ICA. Investment Canada must be
notified of such exempt acquisitions. The ICA covers acquisitions of control of
corporate enterprises, whether by purchase of assets, shares or "voting
interests" of an entity that controls, directly or indirectly, another entity
carrying on a Canadian business.

Apart from the ICA, there are no other limitations on the right of non-resident
or foreign owners to hold or vote securities imposed by Canadian law or our
Certificate of Continuance. There are no other decrees or regulations in Canada
which restrict the export or import of capital, including foreign exchange
controls, or that affect the remittance of dividends, interest or other payments
to non-resident holders of our securities except as discussed in "Taxation",
below.

D. Taxation

The following is a summary of the principal Canadian federal income tax
considerations generally applicable in respect of our common stock. The tax
consequences to any particular holder of common stock will vary according to the
status of that holder as an individual, trust, corporation or member of a
partnership, the jurisdiction in which that holder is subject to taxation, the
place where that holder is resident and, generally, according to that holder's
particular circumstances. This summary is applicable only to holders who are
resident in the United States, have never been resident in Canada, deal at arm's
length with us, hold their common stock as capital property and who will not use
or hold the common stock in carrying on a business in Canada.

This summary does not take into account provincial income tax consequences. The
summary assumes that the publicly announced proposals will be enacted as
proposed with the effective dates set out therein; otherwise, the summary
assumes that there will be no other changes in law whether by judicial or
legislative action.

If a non-resident were to dispose of common stock to another Canadian
corporation which deals or is deemed to deal on a non-arm's length basis with
the non-resident and which, immediately after the disposition, is connected with
the Company (i.e. which holds shares representing more than 10% of the voting
power and more than 10% of the market value of all of our issued and outstanding
shares), the excess of the proceeds over the paid-up capital of the common stock
sold will be deemed to be taxable as a dividend either immediately or eventually
by means of a deduction in computing the paid-up capital of the purchasing
corporation.

Under the Canadian Tax Act, a gain from the sale of common stock by a
non-resident will not be subject to Canadian tax, provided the stockholder
(and/or persons who do not deal at arm's length with the stockholder) has not
held a "substantial interest" in our shares (25% or more of the shares of any
class of our equity securities) at any time in the five years preceding the
disposition. Generally, the Canadian-United States Tax Convention (the "Tax
Convention") will exempt from Canadian taxation any capital gain realized by a
resident of the United States, provided that the value of the common stock is
not derived principally from real property situated in Canada.


                                       24
<PAGE>

In the case of any dividends paid to non-residents, the Canadian tax is withheld
by us, which remits only the net amount to the stockholder. By virtue of Article
X of the Tax Convention, the rate of tax on dividends paid to residents of the
United States is generally limited to 15% of the gross dividend (or 10% in the
case of certain corporate stockholders owning at least 10% of the Company's
voting shares). In the absence of the treaty provisions, the rate of Canadian
withholding tax imposed on non-residents is 25% of the gross dividend. Stock
dividends received by non-residents from us are taxable by Canada as ordinary
dividends.

This summary is of a general nature only and is not exhaustive of all possible
income tax consequences. It is not intended as legal or tax advice to any
particular holder of common stock and should not be so construed. Each holder
should consult his/her own tax advisor with respect to the income tax
consequences applicable to him/her in his/her own particular circumstances.

E. Documents on Display

The documents concerning us which are referred to in this Report are either
annexed hereto at exhibits (see Item 19) or may be inspected at our principal
executive offices in Calgary.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Currency Exchange Rate Sensitivity

The results of our operations are subject to currency translational risk and
currency transaction risk. Regarding currency translational risk, the operating
results and financial position of our subsidiaries are reported in US dollars
and then translated into Canadian dollars at the applicable exchange rate for
preparation of our consolidated financial statements. The fluctuation of the US
dollar in relation to Canadian dollar will therefore have an impact upon
profitability of our and may also affect the value of our assets and the amount
of shareholders' equity.

In regards to transaction risk, our functional currency is the US dollar and its
activities are predominantly executed using the US dollar. We incur a relatively
small amount of expenses in Canadian and Iranian currencies. However, due to the
fact that the majority of our financings are completed in US dollars, we are not
subject to significant operational exposures due to fluctuations in these
currencies. Our common shares are listed on the OTC-BB and are bought and sold
in US dollars (see tables in Item 8.) We have not entered into any agreements or
purchased any instruments to hedge any possible currency risks at this time.

Interest Rate Sensitivity

We currently have no significant short term or long term debt requiring interest
payments, accept as discussed in the provisions of the ROC loan agreement (see
Exhibit 4.14, herewith attached). However, this does not require us to consider
entering into any agreements, or purchasing any instruments to hedge against
possible interest rate risks at this time. Our interest earning investments are
short term. Thus any reductions in future income or carrying values due to
future interest rate declines are believed to be immaterial.

Commodity Price Sensitivity

Our future revenue and profitability will be dependant, to a significant extent,
upon prevailing spot market prices for oil and gas. In the past oil and gas
prices have been volatile. Prices are subject to wide fluctuations in response
to changes in supply of and demand for oil and gas, market uncertainty and a
variety of additional factors that are beyond the control of the Company. We
currently have no significant operating revenue.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.

Not Applicable

                                     PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS.

None.


                                       25
<PAGE>

                                    PART III

ITEM 17.  FINANCIAL STATEMENTS.

   Audited Consolidated Financial Statements
    for Fiscal 2001/2000/1999.

The auditors' report, financial statements and notes thereto, schedules thereto
as required under Item 17 are found immediately below.

   Financial Statements:

         Report of Auditors, dated May 11, 2002

         Consolidated Balance Sheets at December 31, 2001 and December 31, 2000

         Consolidated Statements of Loss and Deficit for the Years ended
         December 31, 2001, December 31, 2000, and December 31, 1999

         Consolidated Statements of Cash Flows for the Years ended December 31,
         2001, December 31, 2000, and December 31, 1999

         Notes to the Consolidated Financial Statements


                                       26
<PAGE>

AUDITORS' REPORT

TO THE SHAREHOLDERS OF TRACER PETROLEUM CORPORATION

      We have audited the consolidated balance sheets of Tracer Petroleum
Corporation as at December 31, 2001 and 2000 and the consolidated statements of
loss and deficit and cash flows for each of the years in the three-year period
ended December 31, 2001. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

      We conducted our audits in accordance with Canadian and United States
generally accepted auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

        In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Corporation as at
December 31, 2001 and 2000 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31,2001 in
accordance with Canadian generally accepted accounting principles.

                                                         /s/ Ernst & Young LLP
Calgary, Canada
May 11, 2002                                             Chartered Accountants

Comments by Auditor for U.S. Readers on Canada-U.S. Reporting Difference

      In the United States, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by conditions and events that cast substantial
doubt on the Corporation's ability to continue as a going concern, such as those
described in Note 1 to these financial statements. The above opinion is
expressed in accordance with Canadian reporting standards which do not permit a
reference to such events and conditions in the auditors' report when these are
adequately disclosed in the financial statements.


                                                         /s/ Ernst & Young LLP
Calgary, Canada
May 11, 2002                                             Chartered Accountants

MANAGEMENT'S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

      The accompanying consolidated financial statements and all information in
the annual report are the responsibility of management. The consolidated
financial statements have been prepared by management in accordance with the
accounting policies outlined in the notes to the consolidated financial
statements. When alternative accounting methods exist, management has chosen
those that seem most appropriate in the circumstances. Where necessary,
management has made informed judgments and estimates in accounting for
transactions which were not complete at the balance sheet date. In the opinion
of management, the consolidated financial statements have been prepared within
acceptable limits of materiality and are in accordance with accounting
principles and practices generally accepted in Canada.

      Management maintains appropriate systems of internal accounting and
administrative controls. Policies and procedures are designed to provide
reasonable assurance that transactions are appropriately authorized, assets are
safeguarded and financial records are properly maintained to provide reasonable
assurance that the financial information is relevant, reliable and accurate.

      Ernst & Young LLP, an independent firm of chartered accountants, has been
engaged, as approved by a vote of the shareholders at the Corporation's most
recent annual general meeting, to examine the consolidated financial statements
in accordance with auditing standards generally accepted in Canada and the
United States and provide an independent audit opinion.

      The Board of Directors annually appoints an audit committee consisting of
a majority of non-management directors. The committee meets with the
Corporation's independent auditors to review any significant accounting and
auditing matters and to discuss the results of the annual audit examination.
Ernst and Young LLP has full and free access to the audit committee. The audit
committee also reviews the consolidated financial statements and auditors'
report and submits its findings to the Board of Directors. The audit committee
has reported its findings to the Board of Directors who have approved the
consolidated financial statements.


          "David R. Robinson"                        "Larry W. Youell"
        -------------------------------------      -----------------------------
        David R. Robinson                          Larry W. Youell
        President and Chief Executive Officer      Chairman


                                       27
<PAGE>

Tracer Petroleum Corporation

(See Basis of Presentation Note 1)

Consolidated Balance Sheets

As at December 31
Canadian Funds

<TABLE>
<CAPTION>
ASSETS                                                                2001             2000
                                                               ----------------------------
<S>                                                            <C>              <C>
     Current
         Cash and cash equivalents                             $     9,371      $    12,184
         Accounts receivable                                        27,660           14,167
         Prepaid expenses                                               --           17,806
                                                               ----------------------------
                                                                    37,031           44,157
                                                               ----------------------------

     Investments  (Note 6)                                         761,474          895,152

     Properties and equipment (Notes 3 and 6)                       53,934          224,416
                                                               ----------------------------

     Total Assets                                              $   852,439      $ 1,163,725
                                                               ============================

LIABILITIES
    Current
         Accounts payable and accrued liabilities (Note 5)     $   296,252      $   198,182
         Short term loans (Note 5)                                      --          127,458
                                                               ----------------------------
                                                                   296,252          325,640
                                                               ----------------------------

    Convertible loan (Note 10)                                     314,650               --

    Commitments and contingencies (Note 7)

SHAREHOLDERS' EQUITY
    Share capital (Note 4)                                       3,762,591        2,866,091
    Equity component of convertible loan (Note 10)                  20,863               --
    Deficit                                                     (3,541,917)      (2,028,006)
                                                               ----------------------------
                                                                   241,537          838,085
                                                               ----------------------------

    Total Liabilities and Shareholders' Equity                 $   852,439      $ 1,163,725
                                                               ============================
</TABLE>

See Accompanying Notes

ON BEHALF OF THE BOARD:


        "David R. Robinson"                    "Larry W. Youell"
        -------------------------              --------------------------
        Director                               Director


                                       28
<PAGE>

Tracer Petroleum Corporation

                   Consolidated Statements of Loss and Deficit

For the year ended December 31
Canadian Funds

<TABLE>
<CAPTION>
                                                                             2001              2000              1999
                                                                      -----------------------------------------------
<S>                                                                   <C>              <C>               <C>
Oil and Gas Revenue                                                   $     1,494      $        943      $  1,079,948
                                                                      -----------------------------------------------

Oil and Gas Expenses
      Operating expenses                                                       --                --           835,840
      Depletion, amortization, ceiling test and other write-downs              --            55,846         1,891,040
      Administrative (Notes 5 and 8)                                    1,196,014         1,609,501         1,243,641
      Other                                                                    --               142               153
                                                                      -----------------------------------------------
                                                                        1,196,014         1,665,489         3,970,674
                                                                      -----------------------------------------------
Oil and gas, net                                                       (1,194,520)       (1,664,546)       (2,890,726)

Other Revenue and Expenses
      Loss on sale of investments                                              --                --           (38,012)
      Gain on sale of oil and gas properties                                   --            28,075           195,075
      Interest and miscellaneous income                                       679            25,400            12,006
      Write down of investments (Note 6)                                 (283,050)         (367,375)               --
      Amortization and other write downs                                  (37,020)          (49,560)         (502,996)
                                                                      -----------------------------------------------
                                                                         (319,391)         (363,460)         (333,927)
                                                                      -----------------------------------------------
Loss for the year                                                      (1,513,911)       (2,028,006)       (3,224,653)
      Deficit - beginning of year                                      (2,028,006)      (35,009,518)      (31,784,865)
      Deficit elimination (Note 4)                                             --        35,009,518                --
                                                                      -----------------------------------------------
Deficit - end of year                                                 $(3,541,917)     $ (2,028,006)     $(35,009,518)
                                                                      ===============================================

Loss per common share - basic and diluted (Note 4)                    $     (0.17)     $      (0.28)     $      (0.74)
                                                                      -----------------------------------------------
</TABLE>

See Accompanying Notes


                                       29
<PAGE>

Tracer Petroleum Corporation

Consolidated Statements of Cash Flows

For the year ended December 31
Canadian Funds

<TABLE>
<CAPTION>
                                                                                2001             2000            1999
                                                                        ----------------------------------------------
<S>                                                                     <C>              <C>               <C>
Operating Activities
     Loss for the year                                                  $(1,513,911)     $(2,028,006)      (3,224,653)
         Non cash items included in loss
             Depletion, amortization, abandonments and write downs           37,020          472,781        2,394,036
             Loss on sale of investments                                    283,050               --           38,012
             Gain on sale of oil and gas properties                              --          (28,075)        (195,075)
                                                                        ----------------------------------------------
                                                                         (1,193,841)      (1,583,300)        (987,680)
         Changes in working capital related to operating activities
             Accounts receivable                                            (13,493)           7,594           58,226
             Prepaid expenses                                                17,806           35,504          118,618
             Accounts payable and accrued liabilities                        98,070         (194,893)         187,777
                                                                        ----------------------------------------------
    Cash used in operating activities                                    (1,091,458)      (1,735,095)        (623,059)
                                                                        ----------------------------------------------

Financing Activities
         Short-term loans                                                  (127,458)         127,458               --
         Convertible loan                                                   383,413               --               --
         Issuance of share capital, net of costs                            848,600        1,879,692          806,840
                                                                        ----------------------------------------------
    Cash provided by financing activities                                 1,104,555        2,007,150          806,840
                                                                        ----------------------------------------------

Investing Activities
         Additions to properties and equipment, net                          (3,084)        (302,995)        (643,040)
         Proceeds on sale of investments                                         --               --           85,206
         Proceeds on disposal of resource properties and other                   --           28,075        1,500,170
         Investments                                                        (12,826)        (895,152)        (367,375)
                                                                        ----------------------------------------------
    Cash provided by (used in) investing activities                         (15,910)      (1,170,072)         574,961
                                                                        ----------------------------------------------
Net increase (decrease) in cash and cash equivalents                         (2,813)        (898,017)         758,742
Cash and cash equivalents - beginning of year                                12,184          910,201          151,459
                                                                        ----------------------------------------------
Cash and cash equivalents - end of year                                 $     9,371      $    12,184      $   910,201
                                                                        ==============================================

Cash interest paid                                                               --               --               --
Cash taxes paid                                                                  --               --               --
</TABLE>

See Accompanying Notes


                                       30
<PAGE>

Tracer Petroleum Corporation
Notes to Consolidated Financial Statements
Canadian funds (unless otherwise noted)

1. BASIS OF PRESENTATION
--------------------------------------------------------------------------------

Tracer Petroleum Corporation (the "Corporation" or "Tracer") is engaged
primarily in the business of exploration and development of oil and gas
reserves. 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.

The recoverability of the Corporation's net investment in resource properties is
dependent upon the discovery of economically recoverable reserves, the ability
of the Corporation to obtain necessary financing to complete the exploration and
development, future profitable production or proceeds from the disposition
thereof, and the Corporation's ability to obtain requisite government and
regulatory approvals at each stage of the exploration and development of its
properties.

These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles on a going concern basis which
presumes the realization of assets and discharge of liabilities in the normal
course of business for the foreseeable future. The Corporation has experienced
significant operating losses and cash outflows from operations in the years
ended December 31, 2001, 2000, and 1999 and currently has no producing
properties. Management intends to seek additional funding through future private
or public offerings of stock or issuances of debt as required, and pursue its
plan to invest in oil and gas properties and operations.

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. These financial
statements do not contain any adjustments to the amounts and classifications of
assets and liabilities that might be necessary should the Corporation be unable
to continue in business.

2. SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------------------

These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP"), which are
different from those in the United States ("US GAAP"), as explained in Note 11.

a)    Consolidation and Use of Estimates

      These financial statements include the accounts of the Corporation and its
      subsidiaries Tracer Petroleum International ("TPI"), Tracer Trading Ltd.
      ("TTL"), TEPCO Ltd. ("TEPCO"), and Tracer Petroleum Iran Limited ("TPIL").

      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. Actual results may differ from these estimates.

b)    Cash Equivalents

      Cash equivalents comprise term deposits which mature within three months
      of the date of purchase. At December 31, 2001 the Corporation had no term
      deposits, on hand.

c)    Properties and Equipment

      The Corporation follows the full cost method of accounting for its
      petroleum and natural gas properties whereby all costs of acquisition of,
      exploration for, and development of petroleum and natural gas reserves
      (net of related government incentives) are capitalized in separate cost
      centres on a country-by-country basis. Capitalized costs are generally
      limited under "ceiling tests." A ceiling test is applied to ensure that
      capitalized costs do not exceed the sum of estimated undiscounted future
      net revenues from estimated gross proven reserves less the cost incurred
      or estimated to develop those reserves, production costs, interest,
      general and administration costs, and an estimate for restoration costs
      and applicable taxes plus the lower of cost or estimated market value of
      unproved properties. Costs are depleted by cost centre using the composite
      unit-of-production method based upon gross proved developed reserves
      estimated by professional engineers. Reserves are converted to equivalent
      units on the basis of approximate relative energy content.

      Unproved properties consist primarily of expenditures for property
      acquisition, office and administrative expenses relating specifically to
      exploration activities, data processing, drilling and acquisition of
      seismic data. These properties are periodically reviewed for evidence of
      impairment and are carried at cost less write-down for impairment, if any.
      These costs are transferred to the amortization pool on an ongoing basis
      as the project is evaluated and/or proved reserves are established.


                                       31
<PAGE>

      Certain exploration and production activities related to petroleum and
      natural gas are conducted jointly with others. Only the Corporation's
      proportionate interest in such activities is reflected in the financial
      statements.

      The Corporation provides for amortization of its equipment, fixtures and
      automobile 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.

2.    SIGNIFICANT ACCOUNTING POLICIES-continued

d)    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.

e)    Foreign Currency Translation

      Thee accounts of the Corporation's integrated wholly owned 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 the Consolidated Statement of Loss and
      Deficit in the year incurred.

f)    Revenue Recognition

      Revenue is recognized in the period to which it relates. Indonesian
      revenue earned in 1999 included net funds from the sale of crude oil, and
      the recovery of ongoing costs. In addition, as Pertamina was a 50%
      non-paying partner in the Ogan Komering Block ("OK Block"), the operator
      was obligated to cover Pertamina's pro-rata portion of total expenditures
      on a monthly basis. As compensation, an amount equal to 50% of non-
      capital and capital costs advanced were paid to the operator monthly
      (uplift). The Corporation's pro-rata share of this amount was included in
      oil and gas revenue in 1999.

g)    Stock Option Plan

      The Corporation has a fixed price stock option plan. (See note 4). No
      compensation expense is recognized when stock options are issued or
      exercised. Any consideration paid on exercise of stock options is credited
      to share capital.

h)    Financial Instruments

      Financial instruments of the Corporation consist mainly of cash and cash
      equivalents, accounts receivable, accounts payable and accrued
      liabilities, short-term loans and convertible loans. As at December 31,
      2001 and 2000, there were no significant differences between the carrying
      amounts of these financial instruments reported on the balance sheet and
      their estimated fair values.

i)    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 basis 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.

j)    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.


                                       32
<PAGE>

3. PROPERTIES AND EQUIPMENT
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                2001                                                      2000
                                        Accumulated Amortization,                               Accumulated Amortization,
                                       Depletion, Ceiling Test and   Net book                Depletion, Ceiling Test and   Net book
                              Cost         Other Write Downs           value        Cost            Other Write Downs       value
                           --------------------------------------------------------------------------------------------------------
<S>                        <C>                <C>                    <C>         <C>                   <C>                <C>
Proved property            $     --           $     --               $     --    $149,372              $     --           $149,372
Equipment and fixtures      292,246            250,232                 42,014     289,162               231,568             57,594
Automobile                   25,026             13,106                 11,920      25,026                 7,576             17,450
                           --------------------------------------------------------------------------------------------------------
                           $317,272           $263,338               $ 53,934    $463,560              $239,144           $224,416
                           --------------------------------------------------------------------------------------------------------
</TABLE>

On December 3, 1999 the Corporation sold all of its oil and gas assets in
Indonesia to Tradewinds Oil and Gas International Inc. ("Tradewinds"). In
addition to initial cash consideration of US$350,000 on closing, the Corporation
is also entitled to the following:

a)    Tracer retained a 5% carried interest in the North Tanjung Block (NT
      Block) PSC and will receive preferential recovery of US$2,000,000 to be
      paid out of production from 30% of the cost recovery cash flow, net of
      operating costs. After the preferential recovery of US$2,000,000 the
      carried interest will be converted into a working interest. This is
      contingent upon Pertamina approving a further extension on the NT Block
      PSC, and renegotiation of the work commitment for the NT Block PSC.

b)    Tracer had a right to receive a 5% carried working interest in the Sungai
      Gelam Technical Assistance Contract which was to be converted to a 5%
      working interest upon commerciality being obtained. This was contingent
      upon Tradewinds election to pursue the project. However, during 2001,
      Tradewinds elected not to continue with the project.

4. SHARE CAPITAL
--------------------------------------------------------------------------------

a) Authorized: Unlimited Common shares without par value

               Unlimited Class A and Class B preferred convertible redeemable
               voting shares without par value

Issued

<TABLE>
<CAPTION>
      Common Shares                                           Number of Shares               Amount
                                                              -------------------------------------
<S>                                                                  <C>               <C>
      Balance December 31, 1998                                      4,087,205         $ 35,189,077
         Issued for cash pursuant to private placement (i)             999,000              769,340
         Issued pursuant to exercise of stock options                   25,000               37,500
                                                              -------------------------------------
      Balance December 31, 1999                                      5,111,205           35,995,917
         Stated capital reduction (ii)                                      --          (35,009,518)
                                                              -------------------------------------
                                                                     5,111,205              986,399
         Issued for cash pursuant to private placement (iii)         1,610,000            1,113,469
         Issued pursuant to exercise of stock options                1,123,500              766,223
                                                              -------------------------------------
      Balance December 31, 2000                                      7,844,705            2,866,091
         Issued for cash pursuant to private placement (iv)            460,144              280,995
         Issued pursuant to exercise of stock options                1,224,900              567,605
                                                              -------------------------------------
      Balance December 31, 2001                                      9,529,749         $  3,714,691
                                                              -------------------------------------
      Warrants  issuable (Note 10)                                     300,850         $     47,900
                                                              -------------------------------------
</TABLE>

      i) On September 30, 1999, the Corporation closed a private placement of
      849,000 units at US$0.50 per unit. Each unit consisted of one common share
      and one common share purchase warrant which entitled the holder to
      purchase an additional common share in the capital of Corporation at an
      exercise price of US$0.75 if exercised in the first year and US$0.90 if
      exercised in the second year. Share issuance costs for the private
      placement totaled $4,714 and were charged to share capital. A total of
      150,000 warrants were exercised during the year at US$0.70 per warrant.


                                       33
<PAGE>

4. SHARE CAPITAL - continued
--------------------------------------------------------------------------------

      ii)   On June 29, 2000 at the Corporation's annual general meeting, the
            shareholders passed a special resolution authorizing the reduction
            of the Corporation's stated capital account by $35,009,518 which
            represented the amount of the Corporation's accumulated deficit as
            recorded on the Corporations balance sheet as at December 31, 1999.
            At that time this amount was applied against the Corporation's
            accumulated deficit.

      iii)  On March 20, 2000 the Corporation completed a non-brokered private
            placement of 1,540,000 units at US$0.50 per unit. Each unit was
            comprised of one common share and one common share purchase warrant
            which entitled the holder to purchase an additional common share in
            the capital of the Corporation at US$1.00 if exercised on or before
            March 2, 2001 and US$1.25 if exercised thereafter up to and
            including March 2, 2002 at which time the warrants expire. A total
            of $1,119,657 relating to the private placement was included in
            share capital. In addition share issuance costs for the private
            placement of $97,708 were also charged to share capital. A total of
            70,000 warrants from a previous private placement were exercised
            during 2000 and net proceeds from the exercise of $91,520 were
            included in share capital.

      iv)   On December 19, 2000 the Corporation announced a private placement
            of 687,500 Units at US$0.40 per Unit. Each Unit consisted of one
            common share and one common share purchase warrant exercisable for a
            period of two years at an exercise price of US$0.50 in the first
            year and US$0.65 in the second year. The private placement closed
            with 460,144 Units being issued on May 31, 2001 for net proceeds of
            $280,995.

b)    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 December 31, 2001 there were
      1,387,121 (2000 - 1,317,321; 1999 - 488,000) stock options outstanding to
      directors, officers and employees to purchase common shares at US$0.10 per
      share. These options expire on various dates between January 13, 2002 and
      January 28, 2004.

<TABLE>
<CAPTION>
                                                                                      Weighted Average
                                                             Number of Options    Exercise Price/Share
       ---------------------------------------------------------------------------------------------------
<S>                                                                  <C>                         <C>
       Outstanding and exercisable January 1, 2000                     488,000                   $0.79
       Granted                                                       2,565,821                   $1.11
       Exercised                                                    (1,123,500)                  $0.68
       Canceled/Expired                                               (313,000)                  $2.00
       ---------------------------------------------------------------------------------------------------
       Outstanding and exercisable December 31, 2000 (1)             1,617,321                   $0.86
       Granted                                                       1,727,000                   $0.67
       Exercised                                                    (1,224,900)                  $0.46
       Canceled/Expired                                               (387,300)                  $1.28
       ---------------------------------------------------------------------------------------------------
       Outstanding and exercisable December 31, 2001 (2)             1,732,121                   $0.10
       ---------------------------------------------------------------------------------------------------
</TABLE>

      (1)   On November 15, 2000 the Corporation re-priced a total of 675,921
            outstanding stock options to US$0.68 per share.

      (2)   During 2001 the Corporation re-priced all of its outstanding stock
            options to US$0.10 per share.

      At December 31, 2001, 4,731,265 shares of common stock were reserved
      including 1,732,121 shares reserved for issuance under stock option
      agreements and 2,999,144 reserved for issuance in conjunction with
      outstanding warrants. These warrants expire on March 29, 2002 and April
      29, 2002 and are exercisable at a price of US$0.25 a unit. On March 2,
      2002, the Corporation extended the term of the warrants to September 2,
      2002.

c)    Subsequent to year end 1,276,590 incentive stock options were issued with
      982,560 being issued with an exercise price of US$0.14; 69,030 with an
      exercise price of US$0.16; 25,000 with an exercise price of US$0.19; and
      200,000 with an exercise price of $0.32. A total of 956,590 options were
      exercised in the period from January 1, 2002 to April 15, 2002 for
      proceeds of US$104,059.

d)    The loss per share computations are based on the weighted average number
      of shares outstanding which was 8,733,625 (2000 - 7,337,553; 1999 -
      4,351,104). Diluted earnings per share amounts are not recorded as these
      amounts would be anti-dilutive.


                                       34
<PAGE>

5. RELATED PARTY TRANSACTIONS
--------------------------------------------------------------------------------

Management fees, consulting fees, and benefits in the amount of $255,267 (2000 -
$286,364; 1999 - $406,098) were paid or credited to six (2000-seven; 1999-six)
directors or officers or companies controlled by them. During 2001, $none
(2000-$none; 1999-$181,180) of the above amount was included in capitalized
general and administrative expenses. Included in accounts payable at December
31, 2001, is $143,400 owed to directors, officers and companies controlled by
them. At December 31, 2000 the Corporation owed D.R.R Capital Corporation
US$85,000 ($127,458) for a short-term loan. D.R.R. Capital Corporation is wholly
owned by David Robinson, President and CEO. This amount was repaid during 2001.

6. INVESTMENTS
--------------------------------------------------------------------------------

In August 1999 the Corporation entered into an agreement to purchase all of the
issued and outstanding stock of eZuz.com Inc. ("eZuz"), a private internet based
retail shopping company. In accordance with the terms of the agreement, on
October 20, 1999 US$250,000 ($367,375) that was loaned to eZuz by Tracer was
converted to shares in eZuz. The Corporation wrote off its investment in eZuz in
2000 due to market conditions for internet based stocks and the fact that no
public market was established for the shares.

On April 3, 2000 the Corporation purchased a 4.5% equity interest in Open Joint
Stock Company Caspi Neft ("OJSCCN") from Transmeridian Exploration Inc. ("TMEI")
for US$614,158 ($895,152) cash. OJSCCN owns the exploration and production
rights for the South Alibek field in the Aktyubinsk region of the Republic of
Kazakhstan.

On March 16, 2001 the Corporation sold its interest in OJSCCN to TMEI for US$1.5
million of convertible preferred shares of TMEI plus 1 million warrants
exercisable at US$1.00 per share for a period of two years. The preferred shares
are convertible at the Corporation's option into 1.5 million common shares of
TMEI at a deemed value of US$1.00 per share at any time within 5 years. The sale
has been recorded at the carrying value of the assets given up being the shares
of OJSCCN which were carried at $895,152 plus the capitalized resource property
costs which were $149,372.The total carrying value of $1,044,524 has been
allocated to the preferred shares and included in investments. At December 31,
2001 the Corporation recorded a write down on its investment of $283,050. TMEI
commenced trading on the NASDAQ OTC-BB market on March 6, 2002. The Corporation
elected to convert its preferred shares into 1,500,000 shares of TMEI on the
commencement of trading. In the period subsequent to converting the preferred
shares Tracer has sold 440,500 shares of TMEI.

On January 19, 2001 the Corporation announced that it had entered into a joint
venture agreement with A. Brown Company Inc. ("ABC") in the Philippines. The
joint venture known as A. Brown Energy Inc. ("ABEI") was set up in order to
market and trade crude oil and petroleum products in the Philippines and other
countries in the Far East and Australia. To earn its full interest the
Corporation had to advance US$50,000 and issue 50,000 common shares to ABC. On
May 7, 2001 the joint venture agreement was terminated with the Corporation
having advanced a total of US$8,500 ($12,826). This amount was included in
amortization and write downs.

7.    COMMITMENTS AND CONTINGENCIES
--------------------------------------------------------------------------------

Subsequent events, commitments, and contingent liabilities not noted elsewhere
are:

a)    The Corporation is committed to an annual transportation allowance of
      $12,000 to Mr. Larry Youell, the Corporation's, Chairman, until February
      2002. In addition the Corporation is committed to a per diem charge of
      $800 to Mr. David Wilson, Director, for Corporation business completed at
      the request of the Board.

b)    The Corporation's approximate commitment for annual gross premises leases
      and office equipment costs is as follows:

Year           2002        2003        2004        2005        2006        Total
--------------------------------------------------------------------------------
Amount      $64,415     $67,545     $29,448     $    --     $    --     $161,408
--------------------------------------------------------------------------------

      The Corporation was released from its office lease on March 1, 2002. In
      order to induce new tenants to takeover the lease, the Corporation gave up
      all of its furniture and fixtures as part of the conditions of the release
      of space.

c)    On February 5, 2002 the Corporation reported that it had entered into a
      Joint Venture Agreement ("JVA") with privately-held Canneft Inc.
      ("Canneft") of Houston, TX, whereby the Corporation will participate with
      Canneft in the development of the Adzhiyap project (the "Project") in
      southwestern Turkmenistan. Under the terms of the JVA between the
      Corporation and Canneft, Tracer will advance US$150,000 to the joint
      venture during the 5 month period ended July 5, 2002 to cover the
      remaining estimated costs to secure the PSA. Canneft is in the process of
      negotiating the formal Production Sharing Agreement ("PSA") for the
      Project.


                                       35
<PAGE>

8. ADMINISTRATIVE EXPENSES
--------------------------------------------------------------------------------

Administrative expenses were comprised of the following:

<TABLE>
<CAPTION>
                                                   2001            2000             1999
                                                -------------------------------------------
<S>                                             <C>            <C>              <C>
      Engineering and geological consulting     $   21,453     $    65,264      $        --
      Foreign exchange loss (gain)                  17,290         (27,761)          26,080
      Interest and bank charges                     13,940           2,155            4,571
      Investor relations                           111,721          82,600           44,858
      Shareholder information                       40,339          51,860           44,954
      Management fees (Note 5)                     199,503         213,173          163,718
      Consulting fees                              203,355         354,355          373,521
      Office and miscellaneous                     250,904         239,697          131,340
      Personnel                                     83,184          70,293           65,840
      Professional fees                            127,149         204,494          207,757
      Travel                                       127,176         353,371          200,694
      Non controlling interest                          --              --          (19,692)
                                                -------------------------------------------
                                                $1,196,014     $ 1,609,501      $ 1,243,641
                                                -------------------------------------------
</TABLE>

9. SEGMENTED INFORMATION
--------------------------------------------------------------------------------

In 2001 and 2000, all revenues were derived from a gross overriding royalty
interest. As at December 31, 2001 all assets were located in Canada. In 2000 the
Corporation had spent $149,372 in connection with a work program in the Republic
of Kazakhstan.

10. CONVERTIBLE LOAN
--------------------------------------------------------------------------------

On May 24, 2001 the Corporation announced that it had entered into an agreement
with Roc Oil Company Limited ("ROC") by which ROC agreed to provide the
Corporation with staged financing over 15 months up to a discretionary maximum
of US$4 million. The financing is by way of a series of convertible loans. ROC
is initially loaning funds to the Corporation during a due diligence period
ending February 28, 2002 and will have the option to lend further funds to the
Corporation beyond that date, subject to the Corporation meeting certain project
milestones. Under the agreement the Corporation has granted ROC the right of
first refusal to participate, up to a 25% equity level, with the Corporation in
upstream development opportunities in Iran. ROC has the option of appointing up
to 3 members of the Board of Directors of Tracer depending upon the level of
funding provided. Under the terms of the agreement, ROC was also provided an the
option of providing further funding to the Corporation directly or converting
the loan and accrued interest into either a 50% interest in TEPCO Ltd., the
wholly owned subsidiary of Tracer that will hold the Iranian projects or into a
direct 50% interest in the projects. ROC will then be required to provide
further funding to TEPCO, via either loans or direct investment in the projects
for a total of US$3,765,000. (See note 14.)

If ROC elects not to convert its loan amounts and accrued interest into a direct
interest in TEPCO Ltd. or into a direct interest in the projects, it has the
option to provide funding of up to US$4 million directly to the Corporation.
Until the maturity date of May 1, 2003, ROC will also have the option of
converting any and all amounts of this funding and accrued interest into shares
of Tracer at a conversion price which is the lesser of US$0.20 per share or 80%
of the weighted average closing price for the previous 20 trading days, subject
to a floor price of US$0.05 per share. ROC will also receive up to 5,000,000
share purchase warrants exercisable at US$0.20 per share on or before May 1,
2003. The final number of warrants issued to ROC will depend upon the value of
the dollar figure loaned to Tracer.

The loan agreement contains certain non-financial covenants restricting the
Corporation from certain activities such as paying dividends, adopting any
shareholders' rights plan where the rights of ROC would be adversely affected,
sale of assets other than in the normal course of business, restricting the use
of proceeds received under the loan agreement and prohibiting the amalgamation,
consolidation or merger of the Corporation with another entity. To be in
compliance with these covenants Tracer must provide ROC with advance
notification of any such anticipated activity. Failure to meet the covenants
would result in the loan becoming immediately repayable. As at December 31, 2001
the Corporation had met all covenants.

To December 31, 2001 ROC had advanced US$240,762 ($383,413) on which $12,272 of
interest expense had been accrued at an effective interest rate of 8.4%. The
gross proceeds received as of December 31, 2001 were allocated to the
convertible loan and warrants based on the relative fair value of each security
at December 31, 2001. Accordingly, $335,513 was allocated to the notes and
$47,900 was allocated to the 300,850 issuable warrants. The fair value of the
warrants was estimated using the Black-Scholes option-pricing model. The $47,900
discount for the warrants will be accrued and recorded as interest expense over
the term of the loan. For the year ended December 31, 2001 $Nil had been
accrued.


                                       36
<PAGE>

10. CONVERTIBLE LOAN - continued
--------------------------------------------------------------------------------

The amount allocated to the convertible loan of $335,513 has been segregated
into debt and equity components based on their respective fair values at
December 31, 2001. The equity component represents the holder conversion right.
It will remain in shareholders' equity until the loan is either converted or
repaid at which time it will be transferred to share capital.

The difference between the recorded value of the debt component and the face
value of the loan is amortized to income over the term of the debenture on an
effective yield basis. During the year ended December 31, 2001 $nil was
amortized.

Subsequent to December 31, 2001, ROC advanced an additional US$15,142 to the
corporation upon which a further 18,928 warrants become issuable.

11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
    PRINCIPLES
--------------------------------------------------------------------------------

The Corporation's consolidated financial statements have been prepared in
accordance with Canadian GAAP, which differs in certain respects from US GAAP as
follows:

As described in note 4, the Corporation has granted stock options to selected
employees, directors and officers. For US GAAP purposes, Financial Accounting
Standard ("FAS") 123, "Accounting for Stock-Based Compensation," requires that
an enterprise recognize, or at its option, disclose the impact of the fair value
of stock option and other forms of stock-based compensation cost by the
intrinsic value method set out in Accounting Principles Board (APB) Opinion 25.
As options are granted at exercise prices based on the market value of the
Corporation's shares at the date of grant, there is no compensation expense
relating to ABP Opinion 25. Had the Corporation followed FAS 123, there would be
no material impact on the loss for the year or loss per common share.

Under APB25 the repricing of outstanding stock options under a fixed price stock
option plan results in these options being recognized as variable price options
from the date of the modification until they are exercised, fortified or expire.
Accordingly, changes in the intrinsic value of the stock options from the
modification date to the period end date would be recognized in the consolidated
statement of loss as additional general and administrative expense. For the year
ended December 31, 2001, $226,400 (2000 - $nil; 1999 - $nil) would be recorded
as the market value of the Corporation's common shares at December 31, 2001 was
higher than the revised exercise price.

Ceiling Test - Oil and Gas Properties

Under US GAAP, the ceiling test is calculated by discounting future net revenues
by 10%. Under Canadian GAAP, the ceiling test is calculated without application
of a discount factor. Also US GAAP, general and administration costs and
financing costs are excluded from ceiling test calculations whereas under
Canadian GAAP these costs are included.

Convertible Investments

Under US GAAP, the terms of the convertible notes provide the lenders with an
'in-the-money' variable conversion rate. A beneficial conversion feature on the
convertible loan is calculated at issuance based on the difference between the
effective conversion price of the allocated proceeds and the market price of the
common stock. The amount of the beneficial conversion feature at inception was
$45,143, however, because of the variability of the conversion ratio, it is
remeasured each reporting period until conversion, extinguishment or maturity.
The remeasurement of the beneficial conversion feature at December 31, 2001 has
not resulted in any change to the amount originally calculated.

FINANCIAL STATEMENT PRESENTATION:

<TABLE>
<CAPTION>
Statement of Loss                                                                     2001             2000             1999
                                                                                  ---------------------------------------------
<S>                                                                               <C>              <C>              <C>
   Loss for the year - Canadian basis                                             $(1,226,706)     $(2,028,006)     $(3,224,653)
      - Ceiling test and depletion - Adjustment to U.S. basis                              --               --          351,493
      - Stock based compensation                                                      226,400               --               --
                                                                                  ---------------------------------------------
      Loss and comprehensive loss for the year - U.S. basis                       $(1,453,106)     $(2,028,006)     $(2,873,160)
                                                                                  ---------------------------------------------
      Loss and comprehensive  loss per share (basic and diluted) - U.S. basis     $     (0.17)     $     (0.28)     $     (0.66)
                                                                                  ---------------------------------------------
</TABLE>


                                       37
<PAGE>

11. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
    PRINCIPLES - continued
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Balance Sheet                                                    2001             2000             1999
                                                             ------------------------------------------------
<S>                                                          <C>              <C>              <C>
Deficit - Canadian basis                                     $(3,254,712)     $(2,028,006)     $(35,009,518)
(Loss) Income for the year

       - U.S. basis                                           (1,453,106)      (2,028,006)       (2,873,160)
       - Canadian basis                                        1,226,706        2,028,006         3,224,653
     Resource property costs of prior years
       - Ceiling test and depletion -                                 --               --          (351,493)
                                                             ------------------------------------------------
Deficit - U.S. basis                                         $(3,481,112)     $(2,028,006)     $(35,009,518)
                                                             ------------------------------------------------

Equity component of convertible loan - Canadian basis        $    20,863      $        --      $         --

Beneficial conversion feature - Adjustment to U.S. basis     $    24,280      $        --      $         --
                                                             ------------------------------------------------
Equity component of convertible loan - U.S. basis            $    45,143      $        --      $         --
                                                             ------------------------------------------------
</TABLE>

In June 2001, the Financial Accounting Standards Board issued FAS 141
"Accounting for Business Combinations" and FAS 142, "Goodwill and Other
Intangible Assets." New Canadian standards have also been adopted which are
substantially the same as the US standards. Under FAS 141, all business
combinations initiated on or after July 1, 2001 must now be accounted for using
the purchase method. Under FAS 142, goodwill should not be amortized but
instead, tested annually for impairment. Similarly, an intangible asset with an
indefinite life should not be amortized until its life is determined to be
finite. Such assets must be tested for impairment annually, or more frequently
if events or circumstances warrant it.

In August 2001, the Financial Accounting Standards Board approved FAS 144,
"Impairment of Long-Lived Assets." FAS 144 requires that in cases where
undiscounted expected cash flows associated with long-lived assets are less than
their carrying value, an impairment provision is recognized in an amount by
which the carrying value exceeds the estimated fair value of such assets. FAS
144 will be applicable for fiscal years beginning after December 15, 2001.

The adoption of these standards will not have any impact on the Corporation's
current financial position or results of operations; however, the impact of
these standards in future years could be material.

12. INCOME TAX LOSSES CARRIED FORWARD
--------------------------------------------------------------------------------

The Corporation has incurred losses for Canadian income tax purposes in the
amount of approximately $4,290,748 which, together with accumulated resource and
equipment cost pools of approximately $813,481, may be carried forward to offset
future taxable income. The benefit, if any, of these income tax losses and
resource pool balances carried forward has not been reflected in the accounts.
The income tax losses carried forward expire as follows: 2006 - $1,958,105; 2007
- $1,113,394; 2008 - $1,219,249. The resource pool balances may be carried
forward indefinitely.

13.   COMPARATIVE INFORMATION
--------------------------------------------------------------------------------

Certain amounts for prior years have been reclassified to conform with the
current year's presentation.

14.  SUBSEQUENT EVENTS
--------------------------------------------------------------------------------

On May 9, 2002, the Corporation announced that it had arranged a private
placement of 5-year 10% convertible debentures for proceeds of up to US$100,000.
The debentures are convertible, at the option of the holders, into common shares
of the Corporation at the lesser of US$0.15 or 80% of the market price at the
time of conversion, subject to a floor price of US$0.10 per share. The debenture
holders will also receive 2-year share-purchase warrants for the same number of
common shares as the debentures are convertible into. The warrants will be
exercisable at US$0.20 per share.

On May 15, 2002, the Corporation announced that based on a lack of progress in
obtaining a petroleum project in Iran, it had made the decision to cease all
activity in that country.


                                       38
<PAGE>

ITEM 18.  FINANCIAL STATEMENTS.

The Company has elected to report under Item #17.

ITEM 19. EXHIBITS.

1.1   Certificate of Continuance of the Registrant (incorporated by reference to
      Exhibit 3.1 to the Registrant's Registration Statement on Form F-1, File
      No. 33-81290 (the "Registration Statement"); *

1.2   By-laws of the Registrant (incorporated by reference to Exhibit 3.2 to the
      Registration Statement); *

2.1   Form of Warrant Agreement between Tracer Petroleum Corporation and
      Continental Stock Transfer and Trust Company, as Transfer Agent and
      Warrant Agent (incorporated by reference to Exhibit 4.1 to Amendment No. 2
      ("Amendment No. 2") to the Registration Statement); *

4.1   Production Sharing Contract, dated February 27, 1993, between Pertamina
      and PerminTracer Ltd. (incorporated by reference to Exhibit 10.3 to the
      Registration Statement); *

4.2   Assignment and Novation Agreement, dated July 31, 1992, among Rainbow
      Energy Ltd., Tracer Petroleum Corporation, Canada Northwest Energy Limited
      and Canada Northwest Energy (South Sumatra) Ltd. (incorporated by
      reference to Exhibit 10.4 to the Registration Statement); *

4.3   Agreement, dated June 6, 1994, between Spring Energy Ltd. and PerminTracer
      Petroleum Ltd. (incorporated by reference to Amendment No. 1); *

4.4   Association Agreement between Mullins Group and Tracer Petroleum
      Corporation, dated December 3, 1998. *

4.5   Letter of Intent between eZuz.com, Inc and Tracer Petroleum Corporation,
      dated July 27, 1999; *

4.6   Asset Sale Agreement between Tradewinds Oil and Gas International, Ltd.
      and Tracer Petroleum Corporation, dated September 1, 1999; *

4.7   Option to Purchase Drilling Rig between Tracer Petroleum Corporation and
      Tradewinds Oil and Gas International, Ltd., dated December 3, 1999; *

4.8   Share Sale Agreement between Tracer Petroleum Corporation and Tradewinds
      Oil and Gas International, Ltd., dated September 1, 1999; *

4.9   Option Agreement between Tracer Petroleum Corporation and Transmeridian
      Exploration, Inc., dated March 31, 2000; *

4.10  Exchange and Release Agreement between Tracer Petroleum Corporation and
      Transmeridian Exploration, Inc., dated March 16, 2001; *

4.11  Convertible Loan Agreement with Roc Oil Company Limited, dated May 22,
      2001; *

4.12  Tracer Canneft Joint Venture Agreement, dated February 3, 2002 (filed
      herewith);

4.13  Tracer Canneft Joint Venture Agreement Amendment, dated June 1, 2002
      (filed herewith).

4.14  Amended Convertible Loan Agreement with Roc Oil Limited dated August 15,
      2001 (filed herewith);

7.0   List of subsidiaries; *

10.0  Consent of Ernst & Young LLP (filed herewith).

* Previously Filed.


                                       39
<PAGE>

                                   SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this Annual Report on its behalf.

Date: July 12, 2002

                                                    TRACER PETROLEUM CORPORATION
                                                             (Registrant)

                                                        /s/ Larry W. Youell
                                                    ----------------------------
                                                             President


                                       40
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                                                  Page
<S>      <C>                                                                                                       <C>
4.12     Tracer Canneft Joint Venture Agreement, dated February 3, 2002 (filed herewith);                          42

4.13     Tracer Canneft Joint Venture Agreement Amendment, dated June 1, 2002 (filed herewith);                    45

4.14     Amended Convertible Loan Agreement with Roc Oil Limited dated August 15, 2001 (filed herewith);           47

10.0     Consent of Ernst & Young LLP (filed herewith);                                                            52
</TABLE>


                                       41