U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
FENWAY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
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NEVADA 327310 98-0203850
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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308-409 Granville Street, Vancouver, British Columbia, Canada V6C 1T2
(Address of registrant's principal executive offices) (Zip Code)
604.844.2265
(Registrant's Telephone Number, Including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after this
Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be offering price aggregate registration
to be registered registered per share(1) offering price(1) fee
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Common Stock, $.001 par value 12,374,962 $1.80 $22,274,931.60 $5,880.58
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(1) Calculated pursuant to Rule 457(c) of Regulation C using the average of the
bid and ask prices per share of the Registrant's common stock, as reported on
the OTC Bulletin Board for December 13, 1999.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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Preliminary Prospectus
FENWAY INTERNATIONAL, INC.,
a Nevada corporation
12,374,962 Shares of $.001 Par Value Common Stock
This prospectus ("Prospectus") relates to 12,374,962 shares (the "Shares") of
common stock, $.001 par value (the "Common Stock"), of Fenway International,
Inc., a Nevada corporation (the "Company"). The Shares are outstanding shares of
Common Stock, or will be outstanding shares of Common Stock acquired upon
exercise of options, warrants or the exchange of certain securities, owned by
the persons named in this Prospectus under the caption "Selling Security
Holders." The Shares were acquired by the Selling Security Holders in various
transactions, all of which were exempt from the registration provisions of the
Securities Act of 1933, as amended (the "1933 Act"), including sales of the
Shares in private placements by the Company, issuance of the Shares as
compensation, the exercise of warrants by certain of the Selling Security
Holders and the exchange of certain shares of common stock of the Company for
certain assets pursuant to the Asset Purchase and Sale Agreement dated August
10, 1998.
The Selling Security Holders may from time to time sell the Shares on the OTC
Bulletin Board, on any other national securities exchange or automated quotation
system on which the Common Stock may be listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The Shares may be sold directly or
through brokers or dealers. See "Plan of Distribution."
The Company will receive no part of the proceeds of any sales made hereunder.
See "Use of Proceeds." All expenses of registration incurred in connection with
this offering are being borne by the Company, but all selling and other expenses
incurred by the Selling Security Holders will be borne by the Selling Security
Holders. See "Selling Security Holders."
The Selling Security Holders and any broker-dealers participating in the
distribution of the Shares may be deemed to be "underwriters" within the meaning
of the 1933 Act, and any commissions or discounts given to any such
broker-dealer may be regarded as underwriting commissions or discounts under the
1933 Act.
The Shares have not been registered for sale by the Selling Security Holders
under the securities laws of any state as of the date of this Prospectus.
Brokers or dealers effecting transactions in the Shares should confirm the
registration thereof under the securities laws of the States in which
transactions occur or the existence of any exemption from registration.
The Company participates in the OTC Bulletin Board, an electronic quotation
medium for securities traded outside the Nasdaq Stock Market. The Company's
common stock trades on the OTC Bulletin Board under the trading symbol "FWIN."
On December 10, 1999, the closing bid and asked prices of the Common Stock as
reported on the OTC Bulletin Board were approximately $1.625 and $1.968,
respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is December 10, 1999
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TABLE OF CONTENTS
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Item
Number Caption Page
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3. Summary Information and Risk Factors.......................................................5
Risk Factors...............................................................................6
Limited Operating History................................................................6
Competition..............................................................................6
Third Party Reliance ....................................................................7
Business Interruption ...............................................................7
Uninsured Losses; Acts of God............................................................7
Regulatory and Related Influences........................................................7
Growth of Business.......................................................................8
Future Capital Needs and Uncertainty of Additional Funding...............................8
Key Personnel............................................................................8
Conflicts of Interest....................................................................8
Dependence on Management.................................................................9
Limitation of Liability of Officers and Directors of the Company.........................9
Penny Stock Regulation...................................................................9
Control by Existing Security Holders.....................................................9
Securities Market Factors...............................................................10
No Foreseeable Dividends................................................................10
No Assurances of Revenue or Operating Profits...........................................10
Federal Income Tax Consequences.........................................................10
Impact of the Year 2000.................................................................10
Third Party Y2K Risks to the Company....................................................11
4. Use of Proceeds...........................................................................11
5. Determination of Offering Price...........................................................11
6. Dilution..................................................................................11
7. Selling Security Holders..................................................................11
8. Plan of Distribution......................................................................13
9. Legal Proceedings.........................................................................14
10. Directors, Executive Officers, Promoters and Control Persons..............................14
11. Security Ownership of Certain Beneficial Owners and Management............................17
12. Description of Securities.................................................................18
13. Interest of Named Experts and Counsel.....................................................18
14. Disclosure of Commission Position on Indemnification for Securities Act Liabilities.......19
15. Organization Within Last Five Years.......................................................19
16. Description of Business...................................................................19
17. Management's Discussion and Analysis of Financial Condition
and Results of Operations...............................................................25
18. Description of Property...................................................................27
19. Certain Relationships and Related Transactions............................................27
20. Market for Common Equity and Related Stockholder Matters..................................29
21. Executive Compensation - Remuneration of Directors and Officers.........................30
22. Financial Statements......................................................................32
23. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..............................................................32
Legal Matters...........................................................................32
Experts.................................................................................32
Additional Information..................................................................32
24. Indemnification of Directors and Officers.................................................33
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25. Other Expenses of Issuance and Distribution...............................................33
26. Recent Sales of Unregistered Securities...................................................33
27. Exhibits 35
28. Undertakings..............................................................................37
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Item 3. Summary Information and Risk Factors.
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS, WHICH CONTAINS MORE DETAILED INFORMATION WITH RESPECT TO EACH OF THE
MATTERS SUMMARIZED IN THIS PROSPECTUS AS WELL AS OTHER MATTERS NOT COVERED IN
THE SUMMARY. ALL PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE ENTIRE
CONTENTS OF THE PROSPECTUS AND THE EXHIBITS ATTACHED HERETO, INDIVIDUALLY AND
WITH THEIR OWN TAX, LEGAL AND BUSINESS ADVISORS.
The Company: The principal business address of the Company is
Suite 308, 409 Granville Street, Vancouver,
British Columbia, Canada V6C 1T2; telephone number
(604) 844-2265.
Business of the
Company: We are a Nevada corporation which was originally
incorporated to engage in any lawful act or
activity for which corporations may be organized
under the Nevada Revised Statutes. We initially
were involved in the development of mining
properties. After the consummation of a corporate
acquisition specified more completely under the
caption "Development of the Company" at Item 16 of
this Prospectus, the nature of our business
changed from development of mining properties to
the business of developing commercial grade cement
production facilities in the Philippines.
State of organization
of the Company: The Company was incorporated pursuant to the
provisions of the Nevada Revised Statutes on May
7, 1984.
Risk Factors: A purchase of the Common Stock involves various
risks that must be considered carefully by any
potential purchaser. Those risks include, but are
not necessarily limited to, (i) there can be no
assurance that our products and services will
achieve a significant degree of market acceptance,
and that acceptance, if achieved, will be
sustained for any significant period or that
product and service life cycles will be sufficient
(or substitute products and services developed) to
permit us to recover associated costs; (ii) we
have a limited operating history upon which an
evaluation of our prospects can be made; (iii) our
officers and directors may be subject to various
conflicts of interest; (iv) we may not be able to
adequately protect our trade secrets and
proprietary information; (v) we may be required to
raise substantial funds in order to implement our
business plans and objectives; (vi) we are subject
to significant competition from other developers
of commercial grade cement; (vii) our results of
operations may vary from period to period as a
result of a variety of factors; (viii) the market
for our products and services is characterized by
continuous development and introduction of new
products and services; (ix) the Philippines is
subject to changing political, economic and
regulatory influences that may affect the business
practices and operations of the Company; (x) we
are dependent on our key personnel and management;
(xi) we do not anticipate paying dividends on our
Common Stock in the foreseeable future; (xii)
there can be no assurance that our operations will
become profitable; (xiii) we may fail to become
compliant with Year 2000 computer programming
issues; and (xiv) our communications providers,
customers, or other third parties may fail to
become compliant with Year 2000 computer
programming issues. See "RISK FACTORS."
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The Shares: The Shares offered hereby are outstanding shares
of Common Stock, or will be outstanding shares of
Common Stock acquired upon exercise of options and
warrants or the exchange of certain shares of
common stock of the Company for Shares now owned
by the persons named in this Prospectus under the
caption "Selling Security Holders." The Shares
were acquired by the Selling Security Holders in
various transactions, all of which were exempt
from the registration provisions of the 1933 Act.
Estimated use of
proceeds: All of the Shares offered hereby are being offered
by the Selling Security Holders. The Company will
not receive any of the proceeds from the sale of
the Shares. See "Selling Security Holders."
RISK FACTORS
In addition to the other information specified in this Prospectus, the following
risk factors should be considered carefully in evaluating the Company and its
business before purchasing any of the Shares offered hereby. A purchase of the
Shares offered hereby is speculative in nature and involves a high degree of
risk. No purchase of the Shares should be made by any person who is not in a
position to lose the entire amount of such investment.
THIS PROSPECTUS SPECIFIES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SPECIFIED IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS. PROSPECTIVE PURCHASERS OF SHARES MUST BE PREPARED FOR THE
POSSIBLE LOSS OF THEIR ENTIRE INVESTMENTS IN THE COMPANY. THE ORDER IN WHICH THE
FOLLOWING RISK FACTORS ARE PRESENTED IS ARBITRARY, AND PROSPECTIVE PURCHASERS OF
SHARES SHOULD NOT CONCLUDE, BECAUSE OF THE ORDER OF PRESENTATION OF THE
FOLLOWING RISK FACTORS, THAT ONE RISK FACTOR IS MORE SIGNIFICANT THAN THE OTHER
RISK FACTORS.
Information specified in this Prospectus contains "forward looking statements"
which can be identified by the use of forward-looking terminology such as
"believes", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by the forward looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Among the key factors that have a direct bearing on the Company's results of
operations are the effects of various governmental regulations, the fluctuation
of the Company's direct costs and the costs and effectiveness of the Company's
operating strategy. Other factors could also cause actual results to vary
materially from the future results covered in such forward-looking statements.
Limited Operating History. We have a very limited operating history upon which
an evaluation of our prospects can be made. Our prospects must be considered
speculative considering the risks, expenses and difficulties frequently
encountered in the establishment of a new business, specifically the risk
inherent in the development of commercial grade cement production facilities in
the Philippines. There can be no assurance that unanticipated technical or other
problems will not occur which would result in material delays in future product
and service commercialization or that our efforts will result in successful
product and service commercialization. There can be no assurance that we will be
able to achieve profitable operations.
Competition. Competition to produce commercial grade cement is intense and we
expect the competition to increase. We will compete directly with other
companies and businesses that have developed and are in the process of
developing technologies and products which will be competitive with the
technologies and products developed and offered by us. There can be no assurance
that other cement production facilities which are equivalent or similar to our
cement production facilities have not been developed or are not in development.
We expect that there are companies or businesses which may
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have developed or are developing such facilities and products as well as other
companies and businesses which have the expertise which would encourage them to
develop and market products directly competitive with those developed and
marketed by us. To the extent that customers exhibit loyalty to the supplier
that first supplies them with a particular product, our competitors may have an
advantage over us with respect to products first developed by such competitors.
As a result of the size and breadth of their product offerings, certain of these
competitors have been and will be able to establish managed accounts by which
they seek to gain a disproportionate share of users for their products. It is
anticipated that we will benefit from our participation in niche markets which,
as they expand, may attract the attention of our competitors.
We believe that our ability to compete successfully depends on a number of
factors, including the price and, to a lesser extent, quality and service of our
products relative to those of our competitors. There can be no assurance that
competitors have not or will not succeed in developing products that are less
expensive than any which have been or are being developed by us or which would
render our products obsolete and noncompetitive.
Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical and marketing
resources. Such competitors may be able to adopt more aggressive pricing
policies and make more attractive offers to potential employees and distribution
partners. As a result, they may be able to respond more quickly to changes in
customer requirements. There can be no assurance that our current competitors
will not develop cement products that offer significant price or other
advantages over our products. There can be no assurance that we will be able to
compete successfully against current or future competitors which could have a
material adverse effect on our business, operating results, and financial
condition.
Third-Party Reliance. We may become dependent upon various third parties for one
or more significant products or services required for our business, which
products or services will be provided to us pursuant to agreements with such
providers. Inasmuch as the capacity for certain products or services by certain
third parties may be limited, our inability, for economic or other reasons, to
continue to receive products or services from existing providers, or to obtain
similar products or services from additional providers, could have a material
adverse effect on us.
Business Interruption. Our success will be dependent in large part on our
continued investment in sophisticated cement production equipment. We anticipate
making significant investments in the acquisition, development, and maintenance
of such cement production equipment in an effort to remain competitive and
anticipate that such expenditures will be necessary on an on-going basis. There
can be no assurance that we will be successful in anticipating, managing or
adopting production equipment changes on a timely basis or that we will have the
capital resources available to invest in new cement production equipment. In
addition, our business is highly dependent on our cement production equipment,
the temporary or permanent loss of which, through physical damage or operating
malfunction, could have a material adverse effect on our business.
Uninsured Loss; Acts of God. We may, but are not required to, maintain a
comprehensive general liability insurance policy, or other business insurance of
the types customarily carried by businesses similar to ours. However, there are
certain types of extraordinary occurrences which may be either uninsurable or
not economically insurable. For example, in the event of a major earthquake, our
cement production equipment could be rendered inoperable for protracted periods
of time, which would adversely affect our financial condition. In the event of a
major civil disturbance, our operations could be adversely affected. Should such
an uninsured loss occur, we could lose significant revenues and financial
opportunities in amounts which would not be partially or fully compensated by
insurance proceeds.
Regulatory and Related Influences. Cement production in the Philippines is
subject to changing political, economic and regulatory influences that will
affect the practices and operation of cement manufacturing organizations. Any of
these influences could have a material adverse effect on our business, financial
condition and results of operations. The Company cannot predict what impact, if
any, such factors might have on its business, financial condition and results of
operations.
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As with any relatively new business enterprise operating in a specialized and
intensely competitive market, the Company is subject to many business risks
which include, but are not limited to, unforeseen marketing and promotional
expenses, unforeseen negative publicity, competition, and lack of operating
experience. Many of the risks may be unforeseeable or beyond the control of the
Company. There can be no assurance that the Company will successfully implement
its business plan in a timely or effective manner, or that management of the
Company will be able to market its services and sell enough products to generate
sufficient revenues and continue as a going concern. The strategy of the Company
for growth is substantially dependent upon its ability to market its services
successfully. There can be no assurance that the Company will be able to market
its services on acceptable terms, or at all. Failure of the Company to market
its services successfully could have a material adverse effect on the Company's
business, financial condition or results of operations.
Growth of Business. We expect to experience significant growth and expect such
growth to continue for the foreseeable future. Our growth may place a
significant strain on our management, financial, operating and technical
resources. Our ability to manage future growth will depend upon a significant
expansion of our accounting and other internal management systems and the
implementation and subsequent improvement of a variety of systems, procedures,
and controls. Moreover, we will need to continue to train, motivate, and manage
our employees and attract and retain qualified senior managers and technical
professionals. If our management is unable to manage growth effectively, there
could be a material adverse effect on our business, financial condition, and
operating results.
Future Capital Needs and Uncertainty of Additional Funding. To achieve and
maintain competitiveness of our products and services and to conduct costly and
time-consuming construction of cement production facilities, we will be required
to raise additional funds. We believe that we may be able to acquire additional
financing at commercially reasonable rates; however, there can be no assurance
that we will be able to obtain additional financing at commercially reasonable
rates, or at all. We have expended, and will continue to expend in the future,
substantial funds on maintaining our mineral claims in the Philippines in
addition to the procurement of the proper licenses and permits for our proposed
facilities. Our failure to obtain additional financing would significantly limit
or eliminate our ability to fund our activities, which would have a material
adverse effect on our ability to continue to compete with other cement
manufacturing organizations.
Based on our current staffing level and facility construction schedule, we
anticipate that our working capital and funds anticipated to be derived from
additional funding sources should be adequate to satisfy our capital and
operating requirements through the end of our current fiscal year. This estimate
is based upon certain assumptions; however, there can be no assurance that we
will have sufficient working capital to satisfy our capital needs beyond our
current fiscal year. We anticipate that we may seek additional funding through
public or private sales of our securities, including equity securities, or
through commercial or private financing arrangements. However, adequate funds,
whether through financial markets or collaborative or other arrangements with
corporate partners or from other sources, may not be available when needed or on
terms acceptable to us. In the event that we are not able to obtain additional
funding on a timely basis, we may be required to scale back or eliminate certain
or all of our facility construction or to license third parties to commercialize
products that we would otherwise seek to develop, manufacture or market
ourselves, any of which could have a material adverse effect on our results of
operations.
Key Personnel. Our future success will depend in part on the service of our key
personnel and, additionally, our ability to identify, hire and retain additional
qualified personnel. There is intense competition for qualified personnel in the
areas of our activities, and there can be no assurance that we will be able to
continue to attract and retain such personnel necessary for the development of
our business. Because of the intense competition, there can be no assurance that
we will be successful in adding personnel as needed to satisfy our staffing
requirements. Failure to attract and retain key personnel could have a material
adverse effect on us.
Conflicts of Interest. The persons serving as our officers and directors may
have existing responsibilities and, in the future, may have additional
responsibilities, to provide management and services to other entities in
addition to us. As a result, conflicts of interest between our Company and the
other activities of those persons may occur from time to time, in that those
persons shall have conflicts of interest in allocating time, services, and
functions between our Company and the other business ventures in which those
persons may be or become involved.
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Dependence on Management. We are dependent on the efforts and abilities of our
senior management. The loss of various members of that management could have a
material adverse effect on our business and prospects. The members of the Board
of Directors believe that all commercially reasonable efforts have been made to
minimize the risks attendant with the departure by key personnel from the
service of the Company. There is no assurance, however, that upon the departure
of key personnel from the service of the Company that replacement personnel will
cause us to operate profitably. We do not maintain key person life insurance for
any of our management.
Although we intend to pursue a strategy of aggressive marketing and development
of our primary product, implementation of this strategy will depend in large
part on our ability to (i) establish a significant customer base and maintain
favorable relationships with those customers; (ii) obtain adequate financing on
favorable terms to fund our Philippine cement production facilities; (iii)
maintain appropriate procedures, policies, and systems; (iv) hire, train, and
retain skilled employees; and (vi) continue to operate in the face of increasing
competition. Our inability to obtain or maintain any or all of these factors
could impair our ability to successfully implement our business strategy, which
could have a material adverse effect on our results of operations and financial
condition.
Limitation on Liability of Officers and Directors of the Company. Our Articles
of Incorporation include a provision eliminating or limiting the personal
liability of our officers and directors to the Company and our shareholders for
damages for breach of fiduciary duty as a director or officer. Accordingly, our
officers and directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act or omission, unless such act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
DISCLOSURE OF OPINION OF COMMISSION REGARDING INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES:
INSOFAR AS INDEMNIFICATION FOR LIABILITIES RESULTING FROM VIOLATIONS OF THE
SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS
BEEN INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT
SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT
OF 1933 AND IS, THEREFORE, UNENFORCEABLE.
Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, to deliver a
standardized risk disclosure document prepared by the Commission, which
specifies information about penny stocks and the nature and significance of
risks of the penny stock market. The broker-dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules the broker-dealer must
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the trading activity in the secondary market for a stock that becomes subject to
the penny stock rules. If our common stock becomes subject to the penny stock
rules, purchasers of Shares may find it more difficult to sell their Shares.
Control by Existing Security Holders. Our directors, officers and principal
(greater than 5%) Security Holders, taken as a group, together with their
affiliates, beneficially own, in the aggregate, approximately 57.5% of our
outstanding Common Stock. Certain principal Security Holders are directors or
executive officers of the Company. As a result of such ownership, these Security
Holders may be able to exert significant influence, or even control, matters
requiring approval by our Security Holders, including the election of directors.
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Securities Market Factors. There is no public market for our securities
including, but not limited to, our common stock. Should there develop a
significant market for our securities, the market price for those securities may
be significantly affected by such factors as our financial results and
introduction of new products and services. No assurance can be given that an
active public market will develop or be sustained. Factors such as announcements
of our progress in constructing cement manufacturing facilities in the
Philippines and quarter-to-quarter variations in our results of operations, as
well as market conditions in the cement manufacturing sector, may have a
significant impact on the market price of our shares. Further, the stock market
has experienced extreme volatility that has particularly affected the market
prices of equity securities of many companies and that often has been unrelated
or disproportionate to the operating performance of such companies. These market
fluctuations may adversely affect the price of the Common Stock.
No Foreseeable Dividends. We do not anticipate paying dividends on the Common
Stock in the foreseeable future; but, rather, we plan to retain earnings, if
any, for the operation and expansion of our business.
No Assurances of Revenue or Operating Profits. There can be no assurance that we
will be able to develop revenue sources or that our operations will become
profitable.
Federal Income Tax Consequences. We have obtained no ruling from the Internal
Revenue Service and no opinion of counsel with respect to the federal income tax
consequences of the purchase or sale of Common Stock by the Selling Security
Holders. Consequently, investors must evaluate for themselves the income tax
implications which attach to their purchase, and any subsequent sale, of the
Shares.
Impact of the Year 2000. The Year 2000 (commonly referred to as "Y2K") issue
results from the fact that many computer programs were written using two, rather
than four, digits to identify the applicable year. As a result, computer
programs with time-sensitive software may recognize a two digit code for any
year in the next century as related to this century. For example, "00", entered
in a date-field for the year 2000, may be interpreted as the year 1900,
resulting in system failures or miscalculations and disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in other normal business activities.
In order to improve operating performance, we have undertaken a number of
significant systems initiatives. All hardware, software and communication
systems owned by or supplied to us have been analyzed by reviewing all relevant
product and service manuals, contacting vendors, and on-line research of
relevant vendor websites. We telephoned our phone systems provider, our alarm
monitoring company, and our website hosting provider to ensure Y2K compliance.
We also conducted on-line vendor reviews of our desktop computers and our
Windows and Microsoft Office software. For other software, we contacted the
providers, reviewed the relevant manuals, and reviewed vendor websites to ensure
Y2K compliance.
An ancillary benefit of our systems initiatives specified above is that the
resulting systems are Year 2000 compliant. We (i) have completed an assessment
of each of our operations and their Year 2000 readiness, (ii) have determined
that appropriate actions have been and are being taken, and (iii) believe that
we have completed our overall Year 2000 remediation prior to any anticipated
impact on our operations. We have determined that the Year 2000 issue will not
pose significant operational problems for our computer systems. However,
although we have initiated formal communications with a number of our
significant suppliers to determine the extent to which our interface systems are
vulnerable to those third parties' failure to remediate their own Year 2000
issues, there is no guarantee that the systems of other companies on which our
systems rely will be timely converted and would not have an adverse effect on
our systems.
For non-information technology systems ("non-IT"), systems that depend on
computer clocks or date calculation and operations including fire detection,
heating, venting and air conditioning systems and other electronic control
systems, we have reviewed the relevant manuals and/or contacted the various
suppliers of such systems to ascertain the Year 2000 readiness of these non-IT
systems.
9
<PAGE>
The ultimate impact of the Y2K issue cannot be reasonably estimated at this
time. Many Y2K problems might not be readily apparent when they first occur, but
instead could imperceptibly degrade technology systems and corrupt information
stored in computerized databases, in some cases before January 1, 2000.
Third-Party Y2K Risks to the Company. We believe that the most significant Y2K
risks to our continued operations are our dependence on (i) electrical power and
(ii) phone and data lines. Power failures or shortages resulting from our
electrical power provider's failure to become Y2K compliant would hinder our
operations. Moreover, system-wide failures in our telecommunications provider
resulting from that provider's failure to become Y2K compliant, would likewise
hinder our operations.
Item 4. Use of Proceeds
All of the Shares offered hereby are being offered by the Selling Security
Holders. We will not receive any of the proceeds from the sale of the Shares.
See "Selling Security Holders."
Item 5. Determination of Offering Price
Price Range of Common Stock. Our common stock is quoted on the OTC Bulletin
Board (trading symbol: FWIN). Our common stock has closed at a low of $1.75 and
a high of $5.125 for the 52-week period ending December 10, 1999. On December
10, 1999, the closing bid and asked prices of the Common Stock as reported on
the OTC Bulletin Board were approximately $1.625 and $1.968, respectively. This
market is extremely limited and the prices for our common stock quoted by
brokers is not necessarily a reliable indication of the value of our common
stock.
The offering price of the Shares was calculated pursuant to Rule 457(c) of
Regulation C using the average of the bid and asked price of the Company's
common stock, as reported on the OTC Bulletin Board as of a specified date
within 5 business days prior to the date of the filing of this Registration
Statement, specifically, as of December 13, 1999.
Item 6. Dilution
We have been a reporting company since May 7, 1999, the effective date of the
Registration Statement on Form 10-SB which the Company filed with the Commission
on March 8, 1999. We are not selling any of the Shares being registered hereby.
The Shares are outstanding shares of Common Stock, or will be outstanding shares
of Common Stock acquired upon exercise of options, warrants or the conversion of
certain securities, owned by the persons named in this Prospectus under the
caption "Selling Security Holders." The Selling Security Holders may from time
to time sell the Shares on the OTC Bulletin Board, on any other national
securities exchange or automated quotation system on which the Common Stock may
be listed or traded, in negotiated transactions or otherwise, at prices then
prevailing or related to the then current market price or at negotiated prices.
The Shares may be sold directly or through brokers or dealers. The purchase
prices paid by officers, directors, promoters and affiliated persons for common
equity purchased by them, or which they have rights to purchase, or which they
acquired by means of related party transactions, are specified in this
Prospectus under the captions "Security Ownership of Certain Beneficial Owners
and Management", "Organization Within Last Five Years", and "Certain
Relationships and Related Transactions."
Item 7. Selling Security Holders
The following table sets forth the number of Shares which may be offered for
sale from time to time by the Selling Security Holders. The Shares offered for
sale constitute all of the Shares known to the Company to be beneficially owned
by the Selling Security Holders. None of the Selling Security Holders has held
any position or office with the Company, except as specified in the following
table. Other than the relationships described below, none of the Selling
Security Holders had or have any material relationship with the Company.
10
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
Name Shares of $.001 Par Value Common Stock
- -------------------------------------------------------------------------------------------
<S> <C>
Brad & Rodney Clements 32,000
- -------------------------------------------------------------------------------------------
Boulevard Properties #2 25,000
- -------------------------------------------------------------------------------------------
Kenneth D. Weller 3,000
- -------------------------------------------------------------------------------------------
Avalon Enterprises Inc. 450,000
- -------------------------------------------------------------------------------------------
Bond Mercantile Limited 430,000
- -------------------------------------------------------------------------------------------
Kurt Brause 670
- -------------------------------------------------------------------------------------------
Eric D. Camuel 350
- -------------------------------------------------------------------------------------------
Cede & Co. (5) 7,129,568
- -------------------------------------------------------------------------------------------
Douglas Inc. 450,000
- -------------------------------------------------------------------------------------------
Donald B. Gain 2,000
- -------------------------------------------------------------------------------------------
GI Joe Ltd.
A United Kingdom Corporation 500,000
- -------------------------------------------------------------------------------------------
Shalise Hancey 1,590
- -------------------------------------------------------------------------------------------
Raghbir Kahbra (3) 2,000,000
- -------------------------------------------------------------------------------------------
David E. King 100
- -------------------------------------------------------------------------------------------
Annisa Larsen 120
- -------------------------------------------------------------------------------------------
Arthur Magill 200,000
- -------------------------------------------------------------------------------------------
Geoffrey P. Mason 1,911
- -------------------------------------------------------------------------------------------
Larry McNeil 510
- -------------------------------------------------------------------------------------------
Dennis Milne (4) 642,681
- -------------------------------------------------------------------------------------------
Peregrine Corporation 420,000
- -------------------------------------------------------------------------------------------
Robert Richards and/or Jean Richards JT Wrds 200
- -------------------------------------------------------------------------------------------
Samuel Lucas GMBM Germany 65,000
- -------------------------------------------------------------------------------------------
Hugh Scott 2,128
- -------------------------------------------------------------------------------------------
Rob Stone 360
- -------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------
A. Leonard Taylor (2) 4,037
- -------------------------------------------------------------------------------------------
John J. Trepanowski 3,000
- -------------------------------------------------------------------------------------------
Frank Warman 6,700
- -------------------------------------------------------------------------------------------
H. John Wilson (1) 4,037
===========================================================================================
</TABLE>
Footnotes
(1) Mr. Wilson is the President and a director of the Company.
(2) Mr. Taylor is the Secretary, Vice President and a director of the Company.
(3) Mr. Kahbra is a director of the Company.
(4) Mr. Milne is a former officer and former director of the Company.
(5) The Company is informed that approximately 7,129,568 shares of the
Company's Common Stock are presently held by Cede & Company, which is the
nominee name for the Depository Trust Company ("DTC"), a division of the
Bank of New York formed to facilitate securities transactions for major
brokers. Generally, only unrestricted securities may be deposited by
brokers into the DTC, and Cede & Company is not a beneficial owner of any
securities which it holds.
Pursuant to the agreements by which certain of the Selling Security Holders
acquired their Shares, we agreed to use our best efforts to file a registration
statement for the resale of such Shares and to use our best efforts to cause
such registration statement to be declared effective. Pursuant to those
agreements, we will pay all expenses in connection with the registration and
sale of the Shares, except any selling commissions or discounts allocable to
sales of the Shares, fees and disbursements of counsel and other representatives
of the Security Holders, and any stock transfer taxes payable by reason of any
such sale.
Item 8. Plan of Distribution
The Selling Security Holders may from time to time sell all or a portion of the
Shares in the over-the-counter market, or on any other national securities
exchange on which the Common Stock is or becomes listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The Shares will not be sold in an
underwritten public offering. The Shares may be sold directly or through brokers
or dealers. The methods by which the Shares may be sold include: (a) a block
trade (which may involve crosses) in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account; (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; and (d) privately negotiated transactions. In effecting sales,
brokers and dealers engaged by Selling Security Holders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from Selling Security Holders (or, if any such broker-dealer acts as
agent for the purchaser of such shares, from such purchaser) in amounts to be
negotiated which are not expected to exceed those customary in the types of
transactions involved. Broker-dealers may agree with the Selling Security
Holders to sell a specified number of such shares at a stipulated price per
share, and, to the extent such broker-dealer is unable to do so acting as agent
for a Selling Security Holder, to purchase as principal any unsold shares at the
price required to fulfill the broker-dealer commitment to such Selling Security
Holder. Broker-dealers who acquire shares as principal may thereafter resell
such shares from time to time in transactions (which may involve crosses and
block transactions and sales to and through other broker-dealers, including
transactions of the nature described above) in the over-the-counter market or
otherwise at prices and on terms then prevailing at the time of sale, at prices
then related to the then-current market price or in negotiated transactions and,
in connection with such resales, may pay to or receive from the purchasers of
such shares commissions as described above.
In connection with the distribution of the Shares, the Selling Security Holders
may enter into hedging transactions with broker-dealers. In connection with such
transactions, broker-dealers may engage in short sales of the Shares in the
course of hedging the positions they assume with the Selling Security Holders
provided, however, that no officer, director or
12
<PAGE>
principal shareholder of the Company shall engage in short sales of the shares.
The Selling Security Holders may also sell the Shares short and redeliver the
Shares to close out the short positions. The Selling Security Holders may also
enter into option or other transactions with broker-dealers which require the
delivery to the broker-dealer of the Shares. The Selling Security Holders may
also loan or pledge the Shares to a broker-dealer and the broker-dealer may sell
the Shares so loaned or, upon a default, the broker-dealer may effect sales of
the pledged shares. In addition to the foregoing, the Selling Security Holders
may enter into, from time to time, other types of hedging transactions.
The Selling Security Holders and any broker-dealers participating in the
distributions of the Shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the 1933 Act and any profit on the sale of Shares by
the Selling Security Holders and any commissions or discounts given to any such
broker-dealer may be deemed to be underwriting commissions or discounts pursuant
to the Act.
The Shares may also be sold pursuant to Rule 144 under the 1933 Act beginning
two years after the Shares were issued, provided such date is at least 90 days
after the date of this Prospectus.
We have filed the Registration Statement, of which this Prospectus forms a part,
with respect to the sale of the Shares. There can be no assurance that the
Selling Security Holders will sell any or all of the Shares offered hereunder.
Under the Securities Exchange Act of 1934 ("Exchange Act") and the regulations
thereunder, any person engaged in a distribution of the Shares offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Security Holders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of Common Stock by the
Selling Security Holders.
We will pay all of the expenses incident to the offering and sale of the Shares,
other than commissions, discounts and fees of underwriters, dealers or agents.
Item 9. Legal Proceedings
There are no legal actions pending against us nor are any such legal actions
contemplated.
Item 10. Directors, Executive Officers, Promoters and Control Persons.
The directors and principal executive officers of the Company are as specified
on the following table:
================================================================================
Name Age Position
- --------------------------------------------------------------------------------
Herbert John Wilson 58 President, Director
- --------------------------------------------------------------------------------
Arthur Leonard Taylor 69 Secretary, Vice President, Director
- --------------------------------------------------------------------------------
Robert George Muscroft 70 Vice President, Director
- --------------------------------------------------------------------------------
Rene Cristobel 58 Director
- --------------------------------------------------------------------------------
Carlos A. Fernandez 63 Director
- --------------------------------------------------------------------------------
Raghbir Kahbra 54 Director
================================================================================
Biographical Information on Company's Officers and Directors:
Herbert John Wilson is the President and a director of the Company. Mr. Wilson
graduated from the University of British Columbia in 1962 with a Bachelor of
Science degree in Chemistry. Beginning in 1962, Mr. Wilson worked for the
Government of Canada Soil Survey Division as an assistant Soil Surveyor and
Chemist. In 1963, Mr. Wilson accepted a position with MacMillan Bloedel Ltd.,
Port Alberni Pulp and Paper Division, as an Industrial Chemist. In 1964, Mr.
Wilson enrolled in the graduate studies program at the University of British
Columbia, where he studied soil science and
13
<PAGE>
plant physiology. From 1965 to 1973, Mr. Wilson was employed by Placer
Development Ltd., as the Chief Geochemist. In 1973, Mr. Wilson began working for
Hallmark Resources Ltd. and Ramm Venture Corporation as Chairperson and Managing
Director, respectively. He was also the mine manager for Hallmark's quarry and
gold prospect at Bullhead City, Arizona and Cronin Mine at Smithers in British
Columbia. Mr. Wilson became President and a director of Ramm Venture Corporation
in 1987 and was responsible for acquisition and development of silver, zinc and
copper prospects in Houston and British Columbia. Mr. Wilson was the Chief
Executive Officer and a director of Fenway Resources Ltd., a British Columbia
corporation, from June 1, 1990, until June 10, 1998 when Fenway Resources Ltd.,
a British Columbia corporation, was domesticated in the State of Delaware as a
Delaware corporation. Mr. Wilson was the Chief Executive Officer and a director
of Fenway Resources Ltd., a Delaware corporation, until the assets of that
corporation were acquired by the Company in August 1998.
Arthur Leonard Taylor is the Secretary, a Vice President and a director of the
Company. In 1952, Mr. Taylor became a Chartered Accountant in the Province of
British Columbia with Price Waterhouse. In 1954, he enrolled in the Executive
Development Program at the University of British Columbia. From 1952 to 1957,
Mr. Taylor worked as a Staff Accountant with Scott Paper Inc. in Philadelphia.
He then became the Senior Financial Analyst for MacMillan Bloedel. In 1960, Mr.
Taylor became the Vice President of Operations for McDonald's Drive-In
Restaurants. From 1963 to 1971, Mr. Taylor was the Executive Vice President and
General Manager of Burke's World-Wide Travel Ltd. From 1973 to 1981, he worked
for Global Travel Computer Ltd., as Vice President. In 1981, Mr. Taylor accepted
a position as a Consultant for Ramm Venture Corporation and Hallmark Resources
Inc. In 1983, he became Vice President and Director of Franchising for Marlin
Travel in Vancouver, British Columbia. Mr. Taylor was the President of Alliance
of Canadian Travel Associations from 1991 to 1992, then became President of the
Universal Federation of Travel Agents Association. Mr. Taylor was the Secretary,
a Vice President and a director of Fenway Resources Ltd., a British Columbia
corporation, from February 10, 1992 until June 10, 1998 when Fenway Resources
Ltd., a British Columbia corporation, was domesticated in the State of Delaware
as a Delaware corporation. Mr. Taylor was the Secretary and a director of Fenway
Resources Ltd., a Delaware corporation, until the assets of that corporation
were acquired by the Company in August 1998. Mr. Taylor is currently the
President of Ramm Venture Corporation.
Robert George Muscroft is a Vice President and a director of the Company. Mr.
Muscroft holds a Bachelor of Science degree in Mining Engineering from the
University of Toronto. Mr. Muscroft currently holds professional affiliations
with the Association of Professional Engineers in British Columbia, the
Association of Professional Engineers in Ontario and the Canadian Institute of
Mining and Metallurgy. Mr. Muscroft worked for Steep Rock Iron Mines in 1953 as
a Junior Engineer. In 1954, he became the Shift Boss for United Keno Hill Mines
in the Yukon Territory. In 1968, he accepted a position as Project Manager of
Cerro's Pine Bay Mine in Flin Flon, Manitoba. From there, he became the General
Superintendent of Patino's Copper Rand Mine in 1969. From 1970 to 1975, he
managed the Manitou Barvue Mines and from 1975 to 1977 he managed Kerr Addison's
Agnew Lake Mine. From 1978 to 1979, Mr. Muscroft worked as Project Engineer for
Ontario Hydro. From 1979 to 1982, he was the Senior Project Engineer for Placer
Development Corporation. In 1982, he accepted a position as the Senior Mining
Engineer for the Government of the Northwest Territories. From 1984 to 1995, Mr.
Muscroft worked as an Independent Consulting Engineer for Fenway Resources Ltd.,
a British Columbia corporation. He also later assumed a position as a director
of that corporation on September 6, 1991.
Rene E. Cristobel is a director of the Company. Mr. Cristobel graduated from the
University of the East with a Bachelor of Science in Business Administration. He
later earned a Master of Arts in Economics at the University of the East
Graduate School in 1957. Mr. Cristobel is the current President of Trans-Orient
Overseas Contractors, Inc. as well as current President of Manpower Resources of
Asia, Inc., and Sealanes Marine Services, Inc. He is the vice president and
founder of the Philippine Association of Manpower Agencies. He is also a
director of Overseas Contractors Association of the Philippines and a member of
the Philippine Association of Service Exporters, Inc. Mr. Cristobel is the
Chairman of the Manpower Services Committee of the Philippine Chamber of
Commerce and Industry. Mr. Cristobel currently serves as Governor of the
Employers' Confederation of the Philippines and vice president of the Employment
and Sustainable Development Division. He is the current vice chairman of the
Bagong Bayani Foundation, Inc. Mr. Cristobel was honored by the POEA as the "Top
Performance Awardee" for 1984, 1985, and 1986 and his name currently resides in
that organization's Hall of Fame. Moreover, he was honored by Central Bank as
the "Top Foreign Exchange Earner Awardee"
14
<PAGE>
in 1984. Mr. Cristobel is also active in the International Labor Organization
("ILO") and non-government organizations in labor migration. As such, he has
been not only a participant but also a consultant in the following symposiums
sponsored by the ILO: Intercountry Programme on Overseas Employment
Administration Training in Manila; Standardization of Job Classification for
Overseas Employment; Labour Migration in Bangkok; Return Migration in Pakistan;
Employers' Confederation of the Philippines in Geneva; Rehabilitation of Sri
Lankan Returnees of the Kuwait War in Sri Lanka; and Association of General
Contractors of Finland. He became a director of Fenway Resources Ltd., a British
Columbia corporation, on October 8, 1997.
Carlos A. Fernandez is a director of the Company. Mr. Fernandez earned a
Bachelor of Political Science, History and Government from the Philippine Normal
College in 1960 and a Master of Arts in Anthropology and Sociology from Ateneo
de Manila in 1967. In 1969, he enrolled in the University of California and
graduated in 1969 with a Master of Arts in Social Anthropology. Dr. Fernandez
completed his doctoral studies in 1974 in Social Anthropology. He then received
a Master of Science in Rural Policy and Regional Planning from the Institute of
Social Studies, The Hague, Netherlands. His fellowships for post graduate work
include: Small Holder Agriculture and Food Security, University of Paris,
Sorbonne, 1996; Rural Policy of the Year 2000, Land Reform Training Institute,
Taiwan 1993; Highland Agricultural Policy and Plans, International Center for
Mountain Development, Nepal 1990; Managing Farming Systems Research, University
of Florida 1989; Museology, City Museum of Venice (1978); and Mexico Museum of
Anthropology, 1986. In addition to the above, Dr. Fernandez has chaired numerous
committees on agricultural and development programs including: 1996 Planning
Adviser for the Livelihood Components Banati Say Conservation and Rehabilitation
Joint Project of 3 Municipalities of Iloilo; 1996 Chairman of the Oversight
Committee for the Mt. Apo National Park And Interagency Technical Study and
Policy Team of Mt. Apo National Park, organized by the Southern Mindanao
Regional Agriculture Program, Davao City (1991-1996); 1996 Planning Adviser to
the Sarangani Provincial government Regional Museum for Culture and Natural
Heritage, Alabel, Sarangani Province; 1996 Planning and Social Development
Specialist Advisor for the Mangrove and Coastal Marine Ecosystem: The Case of
Bohol Small Island Ecosystem Project, European Union, Pitogo, Tagbilaran, Bohol;
and 1996 Planning Specialist/Advisor to the Mangrove Project Small Islands
Ecosystems Project-European Union, Guirnaras. Dr. Fernandez has written papers
on Anthropology and Sociology and on Rural and Regional Planning. He has
participated in and conducted numerous training and educational programs, mostly
in his specialties of agriculture, anthropology and rural planning. Dr.
Fernandez has been previously associated with various regional centers and
government departments (including an eight year tenure as Undersecretary to the
Department of Agriculture). He served in government for 25 years and represented
the Philippines as Chief of Mission in the ASEAN, UN-FAO and the Non-Aligned
Movement. Over the past year, Dr. Fernandez has taken an active role in
assisting both the Company and governmental agencies to provide food, seed,
fertilizer and hand tools to the tribes-people in the region of Southern
Palawan, particularly in the area where the Palawan Cement Project proponents
operate. He became a director of Fenway Resources Ltd., a British Columbia
corporation, on January 22, 1998.
Raghbir Kahbra is a director of the Company. Mr. Kahbra graduated from Panjab
University in Chandigarh, India with a Bachelor of Science in Combined Sciences.
He also attended the Control Data Institute in Frankfurt, Germany studying
Computer Technology, and the West Midland School of Business Studies in
Wolverhampton, England, where he studied business. From 1972 to 1974, he worked
for A.G. Frankfurt Airport in Frankfurt, Germany as a computer technician. From
1974 to 1978, Mr. Kahbra worked for the National Chemsearch U.K. Ltd., in West
Bromwich, England as an analyst and programmer. From 1978 to 1981, he worked for
Birmid Qualcast Foundries Ltd., in Smethwick, England as a senior systems
analyst. Mr. Kahbra worked for First Interstate Bank of Oregon in Portland,
Oregon from 1981 to 1989 as a project manager. In 1989, Mr. Kahbra became a
technical consultant for Security Pacific Automation Company in Seattle,
Washington, where he managed and facilitated the design, development and
utilization of state-of-the-art business focused software. In 1992 Mr. Kahbra
became senior project analyst for Seafirst Bank in Seattle, Washington, where he
researched and re-engineered existing business processes and managed new
software implementation. Currently, Mr. Kahbra is employed by Standard Insurance
Company in Portland, Oregon as a senior project leader. His areas of expertise
include Project Management; Analysis and Design, Enterprise Modeling;
Methodology Development; and Business Process Re-engineering.
15
<PAGE>
None of the above listed individuals share any familial relationship. Other than
the persons specified above, there are no significant employees expected by us
to make a significant contribution to our business. All our directors serve
until the next annual meeting of stockholders. Our executive officers are
appointed by our Board of Directors and serve at the discretion of the Board of
Directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners. The following table
specifies individuals or entities, other than directors and officers, who are
beneficial owners of 5% or more of our issued and outstanding common stock:
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount of Beneficial Owner Percent of Class
- -------------- ------------------------ -------------------------- ----------------
<S> <C> <C> <C>
Common Stock Fenway Resources Ltd., a Delaware 7,644,867 Shares 38.2%
corporation
</TABLE>
(b) Security Ownership by Management. The following table specifies the amount
of our shares of $.001 par value common stock and the amount of options to
purchase our shares of $.001 par value common stock that each executive officer
and director hold, rounded to the nearest 1/10 of 1%.
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount of Beneficial Owner Percent of Class
- -------------- ------------------------ -------------------------- ----------------
<S> <C> <C> <C>
Common Stock H. John Wilson, President 4,037 Shares *2.5%
Options to *** and a Director 495,963 Options
Purchase Common 574 Clearwater Way
Stock at $3.00 Coquitlam, B.C., V3C 5W3
Common Stock A. Leonard Taylor 4,037 Shares *2.5%
Options to *** Chief Financial Officer, 495,963 Options
Purchase Common Secretary and a Director
Stock at $3.00 63 Chadwick Road
R.R.#6, Site 19, C27
Gibsons, B.C. V0N 1V0
Options to *** R. George Muscroft, 300,000 Options *1.5%
Purchase Common Vice President and Director
Stock at $3.00 13339 14A Avenue
Surrey, B.C. V4A 6H6
Options to *** Rene Cristobel, Director 200,000 Options *1.0%
Purchase Common 15 Sto. Domingo St.
Stock at $3.00 Urdaneta Village
Makati City, Philippines
Options to *** Dr. Carlos A. Fernandez, 200,000 Options *1.0%
Purchase Common Director
Stock at $3.00 59 Caimito Road
Mapayapa Village
Quezon City, Philippines
</TABLE>
16
<PAGE>
<TABLE>
<S> <C> <C> <C>
Common Stock Raghbir Kahbra, Director 2,000,000** 10.0%
13911 N.W. 21st Avenue
Vancouver, Washington 98685
Common Stock All officers and directors as a group 3,700,000 *18.5%
</TABLE>
* Percent of common stock held if all options are exercised.
** Issued May 29, 1998, for a total consideration of $20,000.
*** All Options expire July 4, 2004, and are exercisable at any time at the
discretion of the holder.
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of our common stock
which may be acquired upon exercise of stock options or warrants which are
currently exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the optionees. Subject to community
property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of our
common stock indicated as beneficially owned by them.
Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.
Item 12. Description of Securities
The Company is authorized to issue 100,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. As of December 10, 1999, 20,019,029 shares of the Company's
common stock were issued and outstanding.
The shares of $.001 par value common stock of the Company constitute equity
interests in the Company entitling each shareholder to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
the Company's common stock are entitled to one vote for each share of record on
all matters to be voted on by shareholders. There is no cumulative voting with
respect to the election of directors of the Company or any other matter, with
the result that the holders of more than 50% of the shares voted for the
election of those directors can elect all of the Directors. The holders of the
Company's common stock are entitled to receive dividends when, as and if
declared by the Company's Board of Directors from funds legally available
therefor; provided, however, that cash dividends are at the sole discretion of
the Company's Board of Directors. In the event of liquidation, dissolution or
winding up of the Company, the holders of common stock are entitled to share
ratably in all assets remaining available for distribution to them after payment
of liabilities of the Company and after provision has been made for each class
of stock, if any, having preference in relation to the Company's common stock.
Holders of the shares of Company's common stock have no conversion, preemptive
or other subscription rights, and there are no redemption provisions applicable
to the Company's common stock.
Dividend Policy. The Company has never declared or paid a cash dividend on its
capital stock and does not expect to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business. Any dividends declared in the future will be at
the discretion of the Board of Directors and subject to any restrictions that
may be imposed by the Company's lenders.
Item 13. Interest of Named Experts and Counsel.
No "expert", as that term is defined pursuant to Regulation Section 228.509(a)
of Regulation S-B, or the Company's "counsel", as that term is defined pursuant
to Regulation Section 228.509(b) of Regulation S-B, was hired on a contingent
17
<PAGE>
basis, or will receive a direct or indirect interest in the Company, or was a
promoter, underwriter, voting trustee, director, officer, or employee of the
Company, at any time prior to the filing of this Registration Statement.
Item 14. Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
Item 15. Organization Within Last Five Years.
Not applicable.
Item 16. Description of Business.
Development of the Company. Fenway International, Inc., a Nevada corporation
("Company") was incorporated in the State of Nevada on May 7, 1984 using the
name Nevada-Utah Gold, Inc. for the primary purpose of developing mining
properties. During 1985, we settled our liabilities and were inactive until
1998, when we began acquiring property and mineral interests in anticipation of
developing commercial grade cement production facilities in the Philippines.
Specifically, on or about August 10, 1998, we acquired the assets of Fenway
Resources, Ltd., a Delaware corporation, which assets included property and
mineral interests in the Philippines. We issued 7,644,067 shares of our $.001
par value common stock for the assets acquired. On or about September 4, 1998,
we filed a Certificate of Amendment to our Articles of Incorporation changing
our name to Fenway International, Inc. Our executive offices are located at
308-409 Granville Street, Vancouver, British Columbia, Canada V6C 1T2. Our
telephone number is 604.844.2265.
Business of the Company. We plan to develop and construct two large commercial
grade cement production facilities in the Philippines. Our
predecessor-in-interest, Fenway Resources, Ltd., spent more than five years
obtaining the necessary licensing, permits and environmental approvals necessary
to support construction of such facilities on the island of Negros Oriental (the
"Negros Project") and we are continuing our efforts to obtain the necessary
licensing, permits and environmental approvals for a proposed facility on the
island of Palawan (the "Palawan Project"). We are required to participate with
local corporations in the Philippines in order to commercially exploit
Philippine mineral claims and, therefore, we have acquired significant ownership
interest in various Philippine corporations. The organizational chart attached
as Exhibit 21 to our Registration Statement on Form 10-SB filed with the
Commission on March 8, 1999 provides a diagram of our relationships with these
entities, which are specified in detail below.
The Negros Project. On or about July 16, 1998, we entered into an option
agreement ("Option Agreement") with Negor RR Cement Corporation, an independent
Philippine corporation, for the purpose of forming and operating a Negros mining
company ("NMC") and a Negros cement manufacturing company ("NCC"). Pursuant to
the Option Agreement, we purchased a 90% equity interest in the Negor RR Cement
Corporation, a Philippine corporation ("Negor Corporation").
The details of the Option Agreement are as follows:
A. For a period of four (4) years following the date of acceptance by us of a
commercial feasibility study and report for the Negros Project, which study
and report are sufficient to enable us to obtain any and all funds
necessary or appropriate to finance the development and operation of the
Negros Project, Negor Corporation has the option to acquire that number of
shares of our $.001 par value common stock equal to the lesser of (a) two
million (2,000,000), or (b) ten percent (10%) of the then issued and
outstanding shares of our common stock, at a purchase price of Five Dollars
($5.00) per share.
B. NMC shall prepare, sign and deliver to Negor Corporation any and all
documents and other instruments necessary or appropriate to vest in Negor
Corporation an ownership interest in NMC equal to ten percent (10%) of the
total issued
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and outstanding capital stock of NMC. As a result of such ownership
interest, Negor Corporation shall be entitled to have allocated to it ten
percent (10%) of the net profits, losses and credits of NMC.
C. NMC shall prepare, sign and deliver to us any and all documents and other
instruments necessary or appropriate to vest in us an ownership interest in
NMC equal to ninety percent (90%) of the total issued and outstanding
capital stock of NMC. As a result of such ownership interest, we shall be
entitled to have allocated to it ninety percent (90%) of the net profits,
losses and credits of NMC.
D. NCC shall prepare, sign and deliver to Negor Corporation any and all
documents and other instruments necessary or appropriate to vest in Negor
Corporation an ownership interest in NCC equal to forty percent (40%) of
the total issued and outstanding capital stock of NMC. As a result of such
ownership interest, Negor shall be entitled to have allocated to it forty
percent (40%) of the net profits, losses and credits of NCC.
1. NCC shall prepare, sign and deliver to us any and all documents and
other instruments necessary or appropriate to vest in us an ownership
interest in NCC equal to forty percent (40%) of the total issued and
outstanding capital stock of NMC. As a result of such ownership
interest, we shall be entitled to have allocated to it forty percent
(40%) of the net profits, losses and credits of NCC.
2. NCC shall prepare, sign and deliver to one or more third party
investors any and all documents and other instruments necessary or
appropriate to vest collectively in those third party investors an
ownership interest in NCC equal to twenty percent (20%) of the total
issued and outstanding capital stock of NMC. As a result of such
ownership interest, those third party investors shall be entitled to
have allocated to them, in the aggregate, twenty percent (20%) of the
net profits, losses and credits of NCC.
3. We paid Negor Corporation Fifty Thousand Dollars ($50,000) at the date
of signing of the Option Agreement and Fifty Thousand Dollars
($50,000) on or prior to September 30, 1998, as specified in the
Option Agreement.
At such time as all feasibility studies and similar studies and
reports which are necessary or appropriate for the construction
and operation of the manufacturing facilities (and which will be
required prior to the receipt of the funds to finance
construction of the manufacturing facilities) are completed, NMC
has agreed to pay to Negor One Million Dollars ($1,000,000.00)
which funds may be contributions to capital and proceeds from one
or more borrowing transactions, or either of them. In connection
with any and all such borrowing transactions, the acquired claims
may be utilized as collateral or otherwise be pledged to enhance
the credit of the borrower.
The Palawan Project. Fenway Resources, Ltd., as a British Columbia corporation,
acquired mineral rights to 10,296 hectares in 1992 and mineral rights to 3,200
hectares in 1995 in three (3) contiguous claims on the west central portion of
Palawan Island near Scott Point, Municipality of Sofronio Espanola, Palawan, the
Philippines. We believe Scott Point is a good location because it is a seaward
site providing immediate access to marine transport which will allow us to
transport our products at a low cost to various regional markets in the
Philippines and to other regions in Asia.
We believe that these claims have significant reserves of limestone and shale,
the two main ingredients for the manufacture of Type 1 (heavy construction
quality) Portland cement. We retained Kilborn Engineering Pacific Ltd., now
known as Kilborn-SNC Lavolin Inc., to prepare a project feasibility study, which
was completed in 1995. Our management believes that the study supports the
proposed Palawan Project.
The Palawan Project has been under development for more than five years by us,
in association with local mining and development interests in Palawan.
Explorations by the Philippine Government in 1994 first confirmed the existence
of limestone deposits in the central part of the main island of Palawan. The
professional feasibility study by Kilborn-SNC Lavolin, Inc. completed for us in
1995 concluded that the plant and quarries can be developed in full compliance
with environmental regulations in the Philippines and should not have any
adverse effect on local communities. Local communities have expressed strong
support for the Palawan Project, which we believe will stimulate local economic
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<PAGE>
development and employment. Formal application for certification of the Palawan
Project has been submitted to the Philippine Department of Environment and
Natural Resources. Although the application has not yet been approved,
departmental review has been completed.
In addition to the license application procedures and environmental review
process mandated by the Philippine government, we have conducted discussions
with provincial government officials, with indigenous leaders (specifically,
leaders of the Barangay people), and with local landowners who might be affected
by the Palawan Project. We believe there is local support for the Palawan
Project.
Commercial law in effect on Palawan Island requires the participation of local
entities to exploit the island's mineral resources. Two local corporations have
been created and formally registered in compliance with local commercial law and
securities regulation. We own approximately 40% of Palcan Mining Company ("PMC")
which will be responsible for the quarry properties and the production of
crushed stone, both graded and blended, for cement plant processing operations.
PMC will also be responsible for payments of royalties and fees based on the
volumes of quarried stone extracted for cement production. PMC was incorporated
in the Republic of the Philippines on August 13, 1998, and has several common
directors with us. Specifically, Herbert John Wilson, President of the Company,
is an incorporator and director of PMC. Arthur Leonard Taylor, Chief Financial
Officer, Secretary and a director of the Company, is an incorporator and
director of PMC. Rene E. Cristobel and Carlos A. Fernandez, directors of the
Company, are also incorporators and directors of PMC. Rene E. Cristobel and
Carlos Fernandez each hold 10% or more of the issued and outstanding capital
stock of PMC. We own approximately 90% of a second Philippine corporation,
Palcan Cement Company ("PCC"), which will own and operate the Palawan cement
plant and will be responsible for the marketing and distribution of our
products.
We have also continued to assess the market acceptance for products of the
proposed Palawan plant within the Philippines and in export markets. The ability
to produce cement of high quality and reliable uniformity from local materials
is essential to our success and this ability is currently unproven.
Discussions are currently in progress with several design-build groups to
construct and equip the Palawan plant. We are negotiating with Krupps-Polysius
to provide the cement plant equipment and with Bilfinger & Berger to engineer
and construct the Palawan Project. These negotiations have not been concluded
and there can be no assurance that either Krupps-Polysius or Bilfinger & Berger
will provide equipment or services to us.
We have prepared the following schedule for completion of the Negros Project and
Palawan Project which includes forward looking statements which estimate the
happenings of future events. The actual occurrence of these events may differ
materially from those contemplated by this schedule.
================================================================================
Activity Palawan Negros
- --------------------------------------------------------------------------------
Complete permit application process and 01/99-02/00 06/99-02/00
ground testing programs
- --------------------------------------------------------------------------------
Obtain financing 01/00 01/00
- --------------------------------------------------------------------------------
Complete land acquisitions for plant sites; 01/00-02/00 01/00-02/00
begin development of port site
- --------------------------------------------------------------------------------
Complete engineering 02/00-09/00 03/00-03/01
- --------------------------------------------------------------------------------
Begin plant construction 02/00 11/00
- --------------------------------------------------------------------------------
Negotiate and execute sales contracts 03/00-03/01 01/01-01/02
- --------------------------------------------------------------------------------
Complete plant construction and begin cement 03/02 12/02
production
================================================================================
20
<PAGE>
The capital costs of the plants, including the construction of all facilities
such as power and ports, are estimated by our engineering consultants to be
approximately $260 million for the Negros Project and approximately $380 million
for the Palawan Project. To conform to investment guidelines promulgated by the
Philippine government, 70% of those capital costs must be financed by loans,
including export credits, and 30% must be financed by equity investments. The
approximately $450 million required in loans may be provided by a consortium of
German banks. Krupp-Polysius, one of the world's largest corporations,
anticipates supplying the cement plant equipment to both the Negros Project and
the Palawan Project and has offered to assist us in its loan negotiations with
these German banks. We anticipate that approximately $190 million may be
received from a registered offering of our common or preferred stock, probably
through brokerage firms located in New York.
On August 3, 1999, we announced the signing of a Financial Agency Agreement with
First Access Financial Group, Inc., international investment bankers ("First
Access"). First Access has represented to us that it has clients interested in
providing funding to our Philippine cement projects. The Financial Agency
Agreement between us and First Access is not exclusive and we are currently
negotiating with other parties to finance our proposed commercial grade cement
production facilities in the Philippines.
On August 5, 1999, we announced the appointment of Friedhelm Menzel as resident
general manager for our Philippine cement projects. Mr. Menzel was educated in
Germany, specializing in the study of export marketing and linguistics. Mr.
Menzel was export marketing manager for a leading German garment manufacturer
from 1962 to 1967, at which time he joined the German-based multinational
corporation Krupp-Polysius AG, Germany, as Far East Sales Manager. From 1968 to
1994, Mr. Menzel was employed by Krupp-Polysius in various capacities relating
to the manufacture and supply of heavy industrial equipment to clients in India,
the middle east and the far east by Krupp-Polysius from its various plants. From
1995 to July 1999, Mr. Menzel was General Manager of Krupp-Polysius's Philippine
agent, Marsson Industrial Inc., which specialized in the development and
manufacture of cement producing equipment and other heavy industrial equipment
and applications.
Products. We are not currently producing any products or supplying any services
to any third parties. When, and if, we develop and construct our cement
manufacturing facilities, we anticipate producing commercial quantities of
Portland cement. Portland cement is a finely ground processed material that,
when mixed with sand, gravel, water and other minerals, forms concrete. The raw
materials, limestone and shale, are mined, crushed, and burned in
high-temperature rotary kilns, producing a substance commonly referred to as
"clinker". The resulting clinker is then finely ground with small amounts of
gypsum to produce Portland cement. From the Palawan Project, we anticipate
producing 2.5 million metric tonnes of Portland cement per year.
Our products may be subject to numerous foreign government standards and
regulations that are continually being amended. Although we will endeavor to
satisfy foreign technical and regulatory standards, there can be no assurance
that our products will comply with foreign government standards and regulations,
or changes thereto, or that it will be cost effective for us to redesign our
products to comply with such standards or regulations. Our inability to design
or redesign products to comply with foreign standards could have a material
adverse effect on our business, financial condition and results of operations.
Marketing and Sales. We anticipate that all revenues from the sale of our
products will be derived from customers located outside the United States. To
support our overseas customers, we anticipate operating offices outside the
continental United States. There can be no assurance that we will be able to
manage these operations effectively or that we will be able to compete
successfully in international markets or satisfy the service and support
requirements of its customers. In addition, a significant portion of our sales
and operations are subject to significant risks, including tariffs and other
trade barriers, difficulties in staffing and managing foreign subsidiary and
branch operations, currency exchange risks and exchange controls, potentially
adverse tax consequences, and the possibility of difficulty in accounts
receivable collection. There can be no assurance that any of these factors will
not have a material adverse effect on our business, financial condition and
results of operations.
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<PAGE>
We anticipate that initially the Portland cement produced by the Negros and
Palawan Projects will be marketed exclusively in the Philippines, with expanded
capacity providing cement to foreign markets, such as Japan, South Korea,
Thailand, Malaysia, Singapore, Taiwan, Vietnam and Indonesia (collectively, the
"Target Countries"). Nearby Asian export markets for cement products have a
current volume exceeding 90 million tonnes per year moving in trade. Entities
that have previously taken most Philippine cement exports have been countries
bordering the South China Sea, those close to the Malacca Straits and other
countries in the South Asia Sub-Continent.
Our strategy for growth is substantially dependent upon our ability to market
and distribute products successfully. Other companies, including those with
substantially greater financial, marketing and sales resources, compete with us,
and have the advantage of marketing existing products with existing production
and distribution facilities. There can be no assurance that we will be able to
market and distribute products on acceptable terms, or at all. Our failure to
market our products successfully could have a material adverse effect on our
business, financial conditions or results of operations.
We anticipate that the construction industries in the Target Countries will
experience positive growth, ranging from modest growth expected for Japan, to
more significant growth anticipated in the lesser developed countries, such as
Vietnam, Thailand, the Philippines and Indonesia. The location of the Palawan
and the Negros Projects provides easy access to the Target Countries.
Raw Materials. For the Palawan Project, we have acquired mineral rights to
13,496 hectares in three contiguous claims on the west central portion of the
Palawan Island near Scott Point. The claims are underlain by significant
reserves of limestone and shale, the two main ingredients for the manufacture of
Type I Portland cement. Chemical analysis by the Philippine Bureau of Mines and
Geosciences, Technical Services Division, indicates that the site of the Palawan
Project contains commercial quantities of these raw materials.
The Negor Corporation (in which we hold a 90% equity interest) has mineral
claims on the island of Negros Oriental in the Philippines, which include
significant reserves of limestone and shale suitable for the manufacture of
Portland cement. Limestone mineral claims lie near the coastal towns of
Guihulngan and La Libertad on the island of Negros Oriental. Geological studies
suggest that the raw resources on those claims could sustain significant cement
manufacturing operations. We have received an Environmental Compliance
Certificate and has entered into the Mineral Production Sharing Agreement
required by the Philippine government for all mining projects in the Philippines
before mining operations can proceed.
Distribution and Transportation. Distribution in the cement industry is
typically conducted using agency contracts. The agent accepts product in bulk or
bagged from the plant at a specified price. The agent then takes responsibility
for marketing within the region(s) served; for transport and delivery to
customers; and for selling to large-volume customers, retailers or intermediate
wholesalers. The agent marks up the price to cover all costs of distribution.
The final price to consumers at retail accommodates markups as appropriate in
the distribution process. An allowance is included in the markup applied at each
step as profit for product handling and sale.
The Palawan plant will adopt the customary methods typically used in the
Philippines for distribution of cement products, with the following variations:
1. As the Palawan plant will ship to markets in different countries, not
one but several distribution agencies probably will be utilized;
2. Shipments of bagged or bulk product by truck will be for the emerging
market on Palawan;
3. Most products will be shipped from the Palawan plant in bulk by sea to
reach the Target Countries;
4. Transfer of Palawan product from vessels, bulk storage, bagging (as
needed) and distribution by truck will occur within regional markets
in the Target Countries; and,
5. Intra-regional transportation to customers will be minimized by the
locations of regional facilities for the receipt and handling of
Palawan plant products.
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<PAGE>
Costs of the first water crossing from Palawan to Philippine markets will be
less than typical costs associated with the transport of equivalent tonnage in
bulk by truck from competing plants. Overall, we believe that the costs of
product distribution to Philippine regional markets from the new plant in
Palawan pursuant to agency contracts will be equivalent to similar costs for
competing plants serving the same markets. If necessary to assure entry to
Philippine regional markets, all or part of the costs of the initial water
crossing can be absorbed at the Palawan plant by adjusting the price for product
placed to agents for distribution. Given the cost advantages of marine
transport, this will not be necessary as a general condition, but can be done
where and as needed in special situations.
The Palawan plant is ideally located for export of cement products to regional
markets in the Target Countries. Export sales will be developed and sustained
from the Palawan plant, as a means of broadening market presence, preserving
high utilization of plant assets and pursuing the best combination of available
customer relationships and opportunities for product sales and profits. Direct
relationships with large-volume customers and distribution relationships with
importers will be established in receptive countries, to assure that export
options remain available for the Palawan plant at all times.
We believe that we can provide our products to markets in the Target Countries,
subject to import barriers. Overt barriers have not been present in the
countries where Philippine cement has been accepted in the past, and import
duties in these and other locations continue to decline. Additional
liberalization of trade in East and South Asia may expand opportunities for
general acceptance of products from the Palawan plant. If necessary in
particular situations, entry may be eased by adjusting prices to absorb some of
the costs of marine transport and import costs. Although not necessary as a
general condition, some absorption of transport costs has been assumed to apply,
for purposes of project valuation, to all products shipped from Palawan.
Employees. We currently have eight full-time employees, three of whom are
salaried. Our management anticipates using consultants for business, accounting,
engineering, and legal services on an as-needed basis. Management has senior
company experience in mine management, mineral processing, engineering,
construction, administration, and marketing. All members of management have held
senior positions in international companies or organizations.
Competition. As a result of the lack of product differentiation and the
commodity nature of cement, the cement industry is quite competitive.
Competition is based generally on price and, to a lesser extent, quality and
service. We may compete with national, international and regional cement
producers in its target markets. Many of our competitors are larger and have
significantly greater resources than us. The prices that we charge our customers
probably won't be materially different from the prices charged by other cement
producers in the same markets. Accordingly, profitability in the cement industry
is generally dependent on the level of cement demand and on a cement producer's
ability to contain operating costs. Prices are subject to material changes in
response to relatively minor fluctuations in supply and demand, general economic
conditions and other market conditions beyond our control. There can be no
assurance that prices will not decline in the future or that such declines will
not have a material adverse effect on our financial condition or results of
operations.
Our anticipated cost per tonne of production will be directly related to the
number of tonnes of cement manufactured; and decreases in production will
increase our fixed cost per tonne. Equipment utilization percentages can vary
from year to year based upon demand for our products or as a result of equipment
failure. Much of our anticipated manufacturing equipment requires significant
time to replace and is very costly to replace or repair. Although we will
attempt to maintain sufficient spare parts to avoid long periods of shutdown in
the event of equipment failure, there can be no assurance such shutdowns can be
avoided.
Compliance with Environmental Laws. The proposed site for the Palawan Project is
near the ancestral lands of a Filipino indigenous people. These lands may
contain a portion of our mineral claims. The risk of accidental contamination or
injury to indigenous peoples from hazardous materials cannot be completely
eliminated. In the event of such an accident, we, or any successor-in-interest,
could be held liable for any damages that result and any such liability could
exceed our financial resources. In addition, there can be no assurance that in
the future we will not be required to incur significant costs to comply with
environmental laws and regulations relating to hazardous materials. There can be
no assurance that we will
23
<PAGE>
not be required to incur significant costs to comply with current or future
environmental laws and regulations nor that our operations, business or assets
will not be materially or adversely affected by current or future environmental
laws or regulations; provided, however, that we have retained SNC Lavalin, a
Canadian firm, and GAIA, Inc., a Philippine firm, to prepare and file the
requisite environmental impact statements necessary for us to receive our
Environmental Compliance Certificate for the Palawan Project (an Environmental
Compliance Certificate has already been issued for the Negros Project).
Our management believes that both the Palawan Project and the Negros Project can
operate cleanly and without significant pollution in an environmentally safe
manner. However, certain environmental consequences associated with mining are
unavoidable. The primary environmental damage from the mineral industry occurs
during the extraction of raw materials, which requires large amounts of water
and energy. We believe that with the utilization of modern technology and
careful planning we can significantly reduce the environmental impact of the
manufacturing of cement. As we are not presently manufacturing any products, our
management believes we will not have any significant material expenditures in
the next fiscal year related to the cost of compliance with applicable
environmental laws, rules and regulations. However, at some time in the future,
our operations may involve the controlled use of hazardous materials. As a
result, we may be subject to various laws and regulations governing the use,
manufacture, storage, handling, and disposal of such materials and certain waste
products. We cannot presently estimate the potential costs of complying with the
applicable foreign environmental laws.
Item 17. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following information specifies forward-looking statements of our
management. Forward-looking statements are statements that estimate the
happening of future events and are not based on historical fact. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may", "will", "could", "expect", "estimate", "anticipate", "probable",
"possible", "should", "continue", or similar terms, variations of those terms or
the negative of those terms. Actual results may differ materially from those
contemplated by the forward-looking statements.
We presently anticipate that initial construction on the Palawan Project will
begin in 2000, with production of cement beginning in 2002. The Palawan Project,
if completed pursuant to our current schedule, will be the only cement
manufacturing facility on Palawan Island. We anticipate that the Negros Project
will consist of a cement producing facility capable of producing 1.5 million
tonnes per year of Portland cement with expansion capacity to 3 million tonnes
per year. We have solicited and received bids for an exploratory drilling
program, pursuant to which we hope to confirm the extent of limestone reserves
on Negor Corporation's Negros Oriental Province mineral claims in the central
islands of the Philippines. On June 9, 1999, we announced that we had signed a
contract with Roctest Machinery and Drilling Corporation to core drill 2,000
meters for test sampling of the limestone deposits at the Negros Project. The
core drilling will commence as soon as we obtain the necessary regional work
licenses and permits.
Our business will expose us to potential product liability risks that are
inherent in the development, mining, manufacturing and marketing of cement
products. We do not currently require product liability insurance, and, when and
if we begin operations which make such insurance necessary, there can be no
assurance that we will be able to obtain or maintain such insurance on
acceptable terms or, if obtained, that such insurance will provide adequate
coverage against potential liabilities. We have an inherent business risk of
exposure to product liability and other claims in the event that the development
or use of our product is alleged to have resulted in adverse consequences. Such
risk exists even with respect to those products that are manufactured in
licensed and regulated facilities or that otherwise possess regulatory approval
for commercial sale. There can be no assurance that we will avoid significant
product liability exposure. There can be no assurance that insurance will be
available in the future on commercially reasonable terms, or at all, or that
such insurance will be adequate to pay potential product liability claims or
that a loss of insurance coverage or the assertion of product liability claims
would not materially adversely affect our business, financial condition and
results of operations. Although we have taken, and will continue to take, what
we believe are appropriate precautions, there can be no assurance that we will
avoid significant liability exposure. An inability to obtain product liability
insurance at an acceptable cost or to otherwise protect against potential
liability claims could prevent or inhibit the commercialization of products
developed by
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<PAGE>
us. A product liability claim could have a material adverse effect on our
business, financial condition and results of operations. We believe, however,
that such insurance will be available at commercially reasonable rates.
Foreign Currencies. Currency risks and fluctuations in exchange rates are an
important consideration for lenders and investors. We anticipate that many of
our transactions will involve the use of the Philippine Peso, the official
currency of the Philippines. In 1998, the Philippine Peso was volatile, as were
the currencies of the Target Countries. From January to October 1999, the
Philippine Peso and the currencies of the Target Countries strengthened
considerably in comparison to a similar period in 1998. Even if we are able to
obtain all funds necessary to finance the development and operation of the
Palawan Project and the Negros Project, and a commercially viable amount of
Portland cement can be produced, there can be no assurance that foreign
currencies and exchange rates will remain stable and that we will be profitable.
The exchange rates of the Philippine Peso and the currencies of the Target
Countries could have a material adverse effect on our business, financial
position and results of operation.
Liquidity and Capital Resources. At September 30, 1999, we had cash resources of
$19,234; accounts receivable of $13,762; and a loan receivable of $89,411.
Employment agreements with H. John Wilson and A. Leonard Taylor obligate us to
payments totaling $5,850 per month: $3,250 to Mr. Wilson and $2,600 to Mr.
Taylor. An Employment agreement with R. George Muscroft obligates us to payment
of $3,250 per quarter to Mr. Muscroft. The cash and equivalents constitute our
present internal sources of liquidity. Because we are not generating any
revenues at this time from our operations, our only external source of liquidity
is the sale of our capital stock. We are attempting to acquire funding for both
the Palawan Project and the Negros Project from German financial institutions
with assistance from Marsson Industrial Corporation, which is the Philippine
affiliate of Krupp-Polysius, a German machinery manufacturing, engineering,
trading and financial services company. Krupp-Polysius has agreed to help us
arrange the export credits and the required loan guaranties for the loans
required for both projects.
Results of Operations. We have not yet realized any revenue from operations, as
our cement manufacturing facilities are presently in the development stage.
Manufacturing Our Products. Our present business plan, which is subject to the
availability of financing, weather conditions, the political climate in the
Philippines, and other factors beyond our control, anticipates the completion of
construction of both the Palawan Project and the Negros Project in or before the
year 2002. Assuming completion of the two facilities, we may be the largest
manufacturer of cement in the Philippines.
State of Readiness for Y2K. We have performed an assessment of our information
technology ("IT") systems as well as our non-IT systems (such as embedded
technology in manufacturing or process control equipment containing
microprocessors or other similar circuitry) relating to the Y2K problems
previously referenced herein. We evaluated all hardware and software for Y2K
compliance by using sources from the Internet, by contacting manufacturers, and
by contacting third party suppliers of phone systems and security systems.
Additionally, we reviewed product documentation for Y2K compliance where such
was available.
The in-house workstations of our employees are Pentium Personal Computers which
utilize Microsoft Windows and Office software. We believe that all critical
applications of that software are Y2K compliant.
Cost to Address the Company's Y2K Issues. We do not anticipate any additional
upgrade, replacement, or equipment servicing charges to become Y2K compliant.
Therefore, based on current estimates, the costs of addressing this issue are
not expected to have a material adverse effect on our financial position,
results of operations or cash flows. The potential impact of the Y2K issue on
our significant customers, vendors and suppliers cannot be reasonably estimated
at this time.
Our Contingency Plans. To prevent electrical failures from adversely affecting
our operations, we perform regularly scheduled data backups and connect our
computer system to backup power systems. Through the Year 2000, we will continue
to communicate with our electrical and telecommunications providers to remain
informed about (i) the status of
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such suppliers' Y2K compliance, and (ii) the potential impact that the failure
of these suppliers to become Y2K compliant will have on us.
Item 18. Description of Property
Property held by the Company. As of the date specified in the following table,
we held the following property:
================================================================================
Property September 30, 1999
- --------------------------------------------------------------------------------
Cash and equivalents $ 19, 234.00
- --------------------------------------------------------------------------------
Advance Royalty Payments $ 160,813.00
- --------------------------------------------------------------------------------
Project Investments $2,685,687.00
- --------------------------------------------------------------------------------
Property and Equipment (consists of office equipment and $ 5,193.00
computers, less accumulated depreciation)
================================================================================
We define cash equivalents as all highly liquid investments with a maturity of 3
months or less when purchased.
Property and equipment are specified at cost. Major renewals and improvements
are charged to the asset accounts, while replacements, maintenance and repairs,
which do not improve or extend the lives of respective assets, are expensed. At
the time property and equipment are retired or otherwise disposed of, the assets
and related depreciation accounts are relieved of the applicable amounts. Gains
or losses from retirements or sales are credited or charged to income.
We depreciate our property and equipment for financial reporting purposes using
the accelerated method based upon an estimated useful life of 5 years.
The components of the property and equipment are as follows:
Office equipment $ 6,189
Computers $ 5,360
-------
Total cost $11,549
Less accumulated depreciation $ 6,356
-------
Total property and equipment $ 5,193
-------
We are leasing office facilities in Vancouver, British Columbia, Canada and
Manila, Philippines. Our Vancouver office has a 5 year lease which expires on
February 28, 2001, with a monthly rental of $308 plus occupancy costs. Our
Manila office has a 5 year lease which expires on April 30, 2002, with a monthly
rental of $1,754 plus occupancy costs. The rent expense for the year ended
December 31, 1998, was $11,085. An escalation clause provides for future minimum
yearly lease payments, which are:
December 31, 1999 $ 24,744
December 31, 2000 24,744
December 31, 2001 23,204
December 31, 2002 7,538
--------
$ 80,230
--------
Item 19. Certain Relationships and Related Transactions
Related Party Transactions. On or about August 10, 1998, we purchased the assets
of Fenway Resources, Ltd., a British
26
<PAGE>
Columbia corporation, which had redomiciled to Delaware. Thereafter, we issued
7,644,067 shares of our common stock for the assets acquired. It is anticipated
that Fenway Resources, Ltd. will wind up and dissolve and those shares of our
common stock will be distributed, pro rata, to the shareholders of Fenway
Resources, Ltd. at such time as the appropriate registration statement is
effective with the Securities and Exchange Commission.
Rene Cristobel, Carlos Fernandez, Laurie Maranda, R. George Muscroft, Milton
Schlesinger, A. Leonard Taylor, and H. John Wilson were directors of Fenway
Resources, Ltd. at the time of the acquisition, with A. Leonard Taylor serving
as the Secretary and Chief Financial Officer and H. John Wilson serving as the
President and Chief Executive Officer of Fenway Resources, Ltd.
The Option Agreement which we entered into with Negor Corporation, a Philippine
corporation, in which we hold a 90% equity interest, provides for, among other
things, payment of $50,000 at the date of signing that agreement and an
additional $50,000 payment no later than September 30, 1998, both of which
payments were made. Additional terms and conditions of the Option Agreement are
specified at Page 19 of this Registration Statement under the caption entitled
The Negros Project. Negor Corporation had no prior affiliations with us and does
not share any common management with us.
On February 1, 1996, we entered into employment agreements with R. George
Muscroft, a former director of Fenway Resources, Ltd. and a present officer and
director of the Company. Fenway Resources, Ltd.'s employment agreement with Mr.
Muscroft was assumed by us and provides for, among other things, a payment to
Mr. Muscroft of $3,250, payable quarterly. The employment agreement supersedes a
previous consulting agreement and is attached to our Amendment No.1 to Form
10-SB as exhibit 10.5.
Palcan Mining Corporation ("PMC"), was incorporated in the Republic of the
Philippines on August 13, 1998, and has several common directors with the
Company. Specifically, Herbert John Wilson, President of the Company, is an
incorporator and director of PMC. Arthur Leonard Taylor, Chief Financial
Officer, Secretary and a director of the Company, is an incorporator and
director of PMC. Rene E. Cristobel and Carlos A. Fernandez, directors of the
Company, are also incorporators and directors of PMC. Rene E. Cristobel is also
the President of PMC and owns 20% of the issued and outstanding shares of common
stock of PMC which will be voted in favor of the Company. Fenway Resources Ltd.
paid 398,000 Philippine Pesos for 398 shares of PMC which equals 39.8% of the
issued and outstanding shares of common stock of PMC.
The primary purpose of PMC is to hold the mineral claims of Central Palawan
Mining & Industrial Corp. ("CPMIC"), Palawan Star Mining Ventures Inc. ("PSMVI")
and Pyramid Hill Mining & Industrial Corp. ("PHMIC"), their respective Mineral
Production Sharing Agreements, Environmental Compliance Certificates, quarry
shale and limestone, and any other commercial minerals found on these claims.
Moreover, PMC shall buy, sell, exchange or otherwise produce and deal in all
kinds of minerals, as well as purchase, lease, option, locate or otherwise
acquire, own, exchange, sell, assign or contract out the property and the
operation of the property; or otherwise dispose of, pledge, mortgage, deed in
trust, hypothecate and deal in mining claims, land related to production from
the mining claims, timber lands, water, and water rights and other property,
both real and personal.
We lent $80,000 to CPMIC, PSMVI and PHMIC on September 6, 1995. This loan
accrues interest at 7% per annum from the date of signing until repaid in full.
The loan is repayable out of future royalty payments due to CPMIC after the
start-up of operations. The balance of the loan presently totals $89,411.
By a letter amendment agreement dated March 21, 1997, all prior agreements
between successors-in-interests to the Company and CPMIC, PSMVI, and PHMIC were
amended to provide, among other things, that (i) a Joint Venture Mining Company
("JVMC") would be established; (ii) CPMIC, PSMVI and PHMIC (collectively, the
"Consortium") would not have any equity interest in the JVMC, and each member
would sign and waive all right to own and subscribe to the shares of the JVMC;
(iii) 10% of the net profits of the JVMC would be paid to the Consortium as
consideration for the transfer of their respective interests in each of the
properties, including the mining claims; (iv) royalty payments applicable to raw
materials quarried or mined from property belonging individually to CPMIC, PSMVI
and PHMIC would be waived and
27
<PAGE>
surrendered by each member of the Consortium in favor of the Consortium; and (v)
the properties, consisting of mining claims, the Mineral Production Sharing
Agreement, the Environmental Compliance Certificate, and all rights, title and
interest thereto, would be transferred by each member of the Consortium to the
JVMC. We have also agreed to pay the Consortium $100,000 as an advance payment
which will be deducted from the royalties payable to the Consortium. The
agreement also specifies that JVMC is to advance $100,000 to each member of the
Consortium each year, payable pro rata in quarterly payments, as advance royalty
payments to be deducted from the royalties of $0.35 per tonne of raw material
used in the manufacture of cement from the properties. Advance royalty payments
shall cease upon commencement of commercial production of any one of the
properties of the Consortium.
The agreement also specifies that a joint venture cement manufacturing company
("JVCC") will be formed for the development of the Palawan Cement Project to
manufacture cement and related cement products and that 10% interest in the net
profits of the JVCC shall be allocated to the Consortium from the interest of
the Company in the JVCC.
The agreement also specifies that the Consortium members will have options to
purchase shares of our common stock, subject to regulatory approvals and other
conditions, as follows:
<TABLE>
<CAPTION>
=================================================================================================================
CPMIC PSMVI PHMIC
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Nine hundred thousand shares @ CDN 1 million shares 4 million shares
$2.00/share (Approximately US$1.36)* @ CDN $4.00/share (Approximately @ CDN $2.00/share (Approximately
US$2.72)* US$1.36)*
With 1:1 warrant
@ CDN $3.00/share (Approximately 1 million shares
US$2.04)* @ CDN $5.00/share (Approximately
exercisable at any time US$3.40)*
exercisable at any time
=================================================================================================================
</TABLE>
* Based on exchange rate of 1.47 Canadian dollars to US dollars, as of
December 10, 1999.
On or about May 27, 1998, we issued 2,000,000 shares of our $.001 par value
common stock to Raghbir Kahbra, a director of the Company, for a total
consideration of $20,000.
Other than the transactions and proposed transactions between the Company and
PMC, PCC, CPMIC, PSMV, PHMI, Negor Corporation, NMC, NCC, JVMC and JVCC
disclosed herein, no significant future related party transactions are
contemplated at this time.
Item 20. Market for Common Equity and Related Stockholder Matters
We participate in the OTC Bulletin Board, an electronic quotation medium for
securities traded outside the Nasdaq Stock Market. Our common stock trades on
the OTC Bulletin Board under the trading symbol "FWIN". Our common stock has
closed at a low of $1.75 and a high of $5.125 for the 52-week period ending
December 10, 1999. This market is extremely limited and the prices for our
common stock quoted by brokers is not necessarily a reliable indication of the
value of our common stock.
As of September 30, 1999, there were 3,816,926 incentive stock options to
purchase common stock at $3.00 per share which expire by their own terms on July
4, 2004. As of September 30, 1999, there were 151,901 warrants to purchase
common stock at CDN$5.50 per share outstanding, 45,750 of which expire on
December 5, 2000; 25,250 of which expire on February 25, 2001; 28,901 of which
expire on May 29, 2001; 25,000 of which expire on June 2, 2001; and 27,000 of
which expire on June 6, 2001. There were also 2,128 warrants to purchase common
stock at $4.00 per share outstanding which expire on October 29, 2000; 670
warrants to purchase common stock at $4.00 per share outstanding which expire on
October 29, 2000; and 65,000 warrants to purchase common stock at $4.00 per
share outstanding which expire on June 10, 2001.
28
<PAGE>
As of September 30, 1999, the Company had approximately 26 shareholders. There
were additional warrants to purchase common stock at CDN$4.00 per share
outstanding, 1,000,000 of which are exercisable upon receipt of certain
production funds (see Note 5 to the Company's financial statements attached as
exhibits hereto). As of September 30, 1999, there were 900,000 warrants to
purchase common stock at CDN$2.00 per share outstanding (exercisable upon
receipt of certain production funds as specified in Note 5 to the Company's
financial statements attached as exhibits hereto) and an additional 900,000
warrants to purchase common stock at CDN$3.00 per share which are exercisable at
any time. As of September 30, 1999, there were an additional 4,000,000 warrants
to purchase common stock at CDN$2.00 per share outstanding which are exercisable
upon receipt of certain production funds (see Note 5 to the Company's financial
statements attached as exhibits hereto). Finally, as of September 30, 1999,
there were 1,000,000 warrants to purchase common stock at CDN$5.00 per share
outstanding which are exercisable at any time.
There have been no cash dividends declared on the Company's common stock in the
last two fiscal years. Dividends are declared at the sole discretion of the
Company's Board of Directors.
The Company has been approved for listing with Standard & Poor's Market Access
Service, which includes having certain information relating to the Company
published in Standard & Poor's Corporation Records and inclusion in the Standard
& Poor's Marketscope program, Stock Guide Database and on the Standard & Poor's
website.
Item 21. Executive Compensation - Remuneration of Directors and Officers.
Any compensation received by officers, directors, and management personnel of
the Company will be determined from time to time by the Board of Directors of
the Company. Officers, directors, and management personnel of the Company will
be reimbursed for any out-of-pocket expenses incurred on behalf of the Company.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
the President of the Company and the other executive officers of the Company
whose total annual salary and bonus is anticipated to exceed $50,000 during the
year ending December 31, 1999. The Board of Directors of the Company may adopt
an incentive stock option plan for its executive officers which would result in
additional compensation.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
=====================================================================================================================
Other Annual All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. John Wilson, President 1999 400,000.00 None None None
- ---------------------------------------------------------------------------------------------------------------------
A. Leonard Taylor, Secretary, 1999 300,000.00 None None None
- ---------------------------------------------------------------------------------------------------------------------
Robert George Muscroft, Vice President 1999 200,000.00 None None None
=====================================================================================================================
</TABLE>
Other than as set forth under the heading "Employment Agreements" below, there
is no arrangement for compensation of the named Executive officers or directors
of the Company in the event of termination of employment, changes in
responsibilities and/or employment contracts, or in the event of change of
control of the Company.
Employment Agreements. On September 1, 1995, Fenway Resources Ltd., a British
Columbia corporation, entered into an employment agreement, with a term expiring
August 31, 2000, with H. John Wilson (the "Wilson Agreement"), pursuant to which
Mr. Wilson agreed to act as the President and Chief Executive Officer of that
corporation. The Wilson Agreement was assumed by the Company and is renewable by
mutual consent of the parties for successive five (5) year periods.
29
<PAGE>
Pursuant to the terms of the Wilson Agreement, Mr. Wilson is entitled to
compensation in the amount of $400,000 per year, commencing September 1, 1995.
Despite the terms of the Wilson Agreement, Mr. Wilson has only received $3,250
per month from the Company and has agreed to defer all other compensation
payable to him until the Company's board of directors deems it appropriate to
pay Mr. Wilson the full amount of the compensation and benefits required
pursuant to the Wilson Agreement. The unpaid compensation to Mr. Wilson is
accruing.
Mr. Wilson is also entitled to reimbursement for out-of-pocket expenses and
rights and benefits pursuant to any profit sharing, deferred compensation, stock
appreciation rights, stock option or other plans or programs adopted by the
Company, if any, comparable to rights and benefits pursuant to such plans and
programs as are customarily granted to persons holding similar positions as that
held by Mr. Wilson or performing duties similar to those performed by him in
corporations of similar size that carry on a similar type of business as that
carried on by the Company.
On September 1, 1995, Fenway Resources Ltd., a British Columbia corporation,
entered into an employment agreement with A. Leonard Taylor (the "Taylor
Agreement"), pursuant to which Mr. Taylor agreed to act as that corporation's
Secretary and Chief Financial Officer. The Taylor Agreement was assumed by the
Company and has terms and conditions similar to those in the Wilson Agreement,
with a significant difference in compensation.
Specifically, pursuant to the terms of the Taylor Agreement, Mr. Taylor is
entitled to compensation in the amount of $300,000 per year, commencing
September 1, 1995. Despite the terms of the Taylor Agreement, Mr. Taylor has
only received $2,600 per month from the Company and has agreed to defer all
other compensation payable to him until the Company's board of directors deems
it appropriate to pay Mr. Taylor the full amount of the compensation and
benefits required pursuant to the Taylor Agreement. The unpaid compensation to
Mr. Taylor is accruing.
On February 1, 1996, Fenway Resources Ltd., a British Columbia corporation,
entered into an employment agreement with R. George Muscroft (the "Muscroft
Agreement"), pursuant to which Mr. Muscroft agreed to act as that corporation's
Project Manager, Port and Power. The Muscroft Agreement was assumed by the
Company and is substantially the same as the Wilson agreement, except for
compensation.
Pursuant to the terms of the Muscroft Agreement, Mr. Muscroft is entitled to
compensation in the amount of $200,000 per year, commencing September 1, 1995.
Despite the terms of the Muscroft Agreement, Mr. Muscroft has only received
$3,250 per month from the Company and has agreed to defer all other compensation
payable to him until the Company's board of directors deems it appropriate to
pay Mr. Muscroft the full amount of the compensation and benefits required
pursuant to the Muscroft Agreement. The unpaid compensation to Mr. Muscroft is
accruing.
Compensation of Directors. For the Company's most recently completed fiscal
year:
(a) no compensation of any kind was accrued, owing or paid to any of the
Company's directors for acting in their capacity as such; and
(b) no arrangements of any kind existed with respect to the payment of
compensation of any kind to any of the Company's directors for acting
in their capacity as such.
Specified below, in tabular form, is the aggregate annual remuneration of the
Company's President and the four (4) most highly compensated executive officers
other than the Chief Executive Officer who were serving as executive officers at
the end of the Company's last completed fiscal year.
<TABLE>
<CAPTION>
========================================================================================================================
Name of Individual or Identity of Group Capacities in which Remuneration was received Aggregate Remuneration
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Herbert John Wilson President $39,000
- ------------------------------------------------------------------------------------------------------------------------
Arthur Leonard Taylor Secretary, Vice President $31,000
- ------------------------------------------------------------------------------------------------------------------------
Laurie Maranda Vice President $13,000
- ------------------------------------------------------------------------------------------------------------------------
Robert George Muscroft Vice President $13,000
========================================================================================================================
</TABLE>
30
<PAGE>
Item 22. Financial Statements
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
Page No.
--------
ACCOUNTANTS' REPORT ............................................. F-1
FINANCIAL STATEMENTS
Balance Sheet............................................. F-2
Statements of Operations.................................. F-3
Statement of Changes in Stockholders' Equity.............. F-4 - F-6
Statements of Cash Flows.................................. F-7 - F-9
Notes to Financial Statements............................. F-10 - F-26
<PAGE>
ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders
Fenway International Inc.
Newport Beach, California
We have reviewed the accompanying balance sheet of Fenway International Inc. (A
Development Stage Company) as of September 30, 1999, and the related statements
of operations, changes in stockholders' equity and cash flows for the nine
months then ended and for the period May 7, 1984 (Date of inception) to
September 30, 1999, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Fenway International Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Moffitt & Company, P.C.
Scottsdale, Arizona
November 15. 1999
F-1
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Cash $ 19,234
Accounts receivable 6,785
Accounts receivable, related party 6,977
Advance royalty payments 160,813
Prepaid expenses 3,633
Investment in Palcan Mining and Cement Corporations 10,707
Investments in projects in The Republic of the Philippines 2,685,687
Loan receivable 89,411
G.S.T. refund 1,711
Property and equipment 5,193
-----------
TOTAL ASSETS $ 2,990,151
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable
Trade $ 45,534
Related parties 64,667
Accrued liabilities 16,041
Short term notes payable 135,135
-----------
TOTAL LIABILITIES $ 261,377
STOCKHOLDERS' EQUITY
Common stock, par value $0.001 per share
Authorized 100,000,000 shares
Issued and outstanding - 19,885,955 shares 19,959
Paid in capital in excess of par value of stock 3,514,702
Deficit accumulated during development stage (805,887)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,728,774
-----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,990,151
===========
</TABLE>
See Accompanying Notes and Accountants' Review Report.
F-2
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999
Nine May 7, 1984
Months (Date of
Ended Inception)
September to September
30, 1999 30, 1999
---------- ------------
REVENUE $ 0 $ 0
DEVELOPMENT COSTS 398,503 805,887
---------- -----------
NET (LOSS) $ (398,503) $ (805,887)
========== ===========
NET (LOSS) PER COMMON SHARE
Basic and diluted $ ( 0.02) --
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic and diluted 19,901,729 --
See Accompanying Notes and Accountants' Review Report.
F-3
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Paid In
Capital in
Common Stock Excess of
------------ Par Value
Shares Amount of Stock
------ ------ --------
<S> <C> <C> <C>
BALANCE, MAY 7, 1984
(DATE OF INCEPTION) 0 $ 0 $ 0
Issuance of common stock for
mineral lease (unknown value)
and expenses at $.005 -
May 7, 1984 600,000 600 2,400
Issuance of common stock for
cash at $.267 - May 7, 1984 8,610 9 2,287
Net loss for the period ended
December 31, 1984 0 0 0
Issuance of common stock for
services at $.267 -
February 3, 1985 9,000 9 2,391
Issuance of common stock for
cash at $.267 - February 3, 1985 96,480 96 25,632
Net loss for the year ended
December 31, 1985 0 0 0
------- ------- -------
BALANCE, DECEMBER 31, 1985 714,090 714 32,710
------- ------- -------
BALANCE, DECEMBER 31, 1996 714,090 714 32,710
Contribution to capital -
expenses - 1997 0 0 3,600
Net loss for the year ended
December 31, 1997 0 0 0
------- ------- -------
BALANCE, DECEMBER 31, 1997 714,090 $ 714 $36,310
</TABLE>
F-4
<PAGE>
Deficit
Accumulated
Advances During the
On Stock Development
Subscriptions Stage
------------- -----------
$ 0 $ 0
0 0
0 0
0 (5,296)
0 0
0 0
0 (28,128)
------------- -----------
0 (33,424)
------------- -----------
0 (33,424)
0 0
0 (3,600)
------------- -----------
$ 0 $ (37,024)
See Accompanying Notes and Accountants' Review Report
F-5
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY( CONTINUED)
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Paid In
Capital in
Common Stock Excess of
------------ Par Value
Shares Amount of Stock
------ ------ ----------
<S> <C> <C> <C>
Contribution to capital -
expenses - 1998 0 $ 0 $ 1,300
Issuance of common stock
for cash
$.01 - May 29, 1998 2,000,000 2,000 18,000
$.01 - June 9, 1998 9,000,000 9,000 81,000
Issuance of common stock for
net assets of Fenway
Resources Ltd - $.387 -
August 31, 1998 7,644,067 7,644 2,950,988
Issuance of common stock
for cash
$3.00 - October 29, 1998 2,128 2 6,450
$3.00 - October 29, 1998 670 1 2,031
Net loss for the year
ended December 31, 1998 0 0 0
---------- ---------- ----------
BALANCE, DECEMBER 31, 1998 19,360,955 19,361 3,096,079
Issuance of common stock for cash
$ .25 - February 4, 1999 500,000 500 124,500
$ 3.00 - February 24, 1999 2,000 2 5,998
$ 3.00 - March 16, 1999 5,000 5 14,995
$ 3.00 - March 17, 1999 4,000 4 11,996
$ 3.00 - March 30, 1999 9,000 9 26,991
$ 3.00 - April 12, 1999 5,000 5 14,995
Advances on stock subscriptions 0 0 0
$3.00 - July 2, 1999 65,000 65 194,935
$3.00 - September 9, 1999 8,074 8 24,213
(Transferred from advances on
stock subscriptions)
Net loss for the nine months
ended September 30, 1999 0 0 0
---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1999 19,959,029 $ 19,959 $3,514,702
========== ========== ==========
</TABLE>
F-6
<PAGE>
Deficit
Accumulated
Advances During the
on Stock Development
Subscriptions Stage
------------- -----------
$ 0 $ 0
0 0
0 0
0 0
0 0
0 0
0 (370,360)
------------- -----------
0 (407,384)
0 0
0 0
0 0
0 0
0 0
0 0
24,221 0
0 0
(24,221) 0
0 (398,503)
------------- -----------
$ 0 $ (805,887)
============= ===========
See Accompanying Notes and Accountants' Review Report.
F-7
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
May 7, 1984
Nine Months (Date of
Ended Inception) to
September September
30, 1999 30, 1999
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (398,503) $ (805,887)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities
Depreciation 1,206 1,793
Contributions to capital and stock issued for
expenses and services 0 9,000
Increases (decreases) in:
Cash-held in lawyer's trust account 0 118,578
Interest receivable (4,200) (6,067)
Accounts receivable and prepaid expenses 3,738 6,182
Accounts receivable, related party (6,977) (6,977)
Accounts payable (12,438) 51,547
Accrued liabilities 9,326 16,041
----------- -------------
NET CASH (USED) BY OPERATING
ACTIVITIES (407,848) (615,790)
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Palcan Mining and Cement Corporations 12,851 (10,707)
----------- -------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES 12,851 (10,707)
----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 395,000 606,146
Proceeds from issuance of short term notes 7,327 39,585
Advances on stock subscriptions 321 0
----------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 402,648 645,731
----------- -------------
NET INCREASE (DECREASE) IN CASH 7,651 19,234
CASH AT BEGINNING OF PERIOD 11,583 0
----------- -------------
CASH AT END OF PERIOD $ 19,234 $ 19,234
=========== =============
</TABLE>
See Accompanying Notes and Accountants' Review Report.
F-8
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
May 7, 1984
Nine Months (Date of
Ended Inception) to
September September
30, 1999 30, 1999
------------ -------------
<S> <C> <C>
SCHEDULE OF NON CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of 400,000 shares of common stock for mineral
lease (unknown value) and expenses - 1984 $ 3,000
-------------
Issuance of 9,000 shares of common stock for
services - 1985 $ 2,400
-------------
Contribution to capital - expenses - 1997 $ 3,600
-------------
Contribution to capital - expenses - 1998 $ 1,300
-------------
Issuance of 7,644,067 shares of stock - August 31, 1998 $ 2,918,215
-------------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid $ 0 $ 0
============= =============
Taxes paid $ 0 $ 0
============= =============
</TABLE>
See Accompanying Notes and Accountants' Review Report.
F-9
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization and Nature of Business
The Company was incorporated under the laws of the State of Nevada on May
7, 1984 for the primary purpose of developing mineral properties. During
1985, the Company abandoned its remaining assets and settled its
liabilities and was inactive until 1998. In 1998, the Company became
active again by acquiring mineral properties in the Republic of the
Philippines.
Name Change
On September 2, 1998, the Company changed its name from Nevada-Utah Gold,
Inc. to Fenway International Inc.
Authorized Common Stock
On May 7, 1984, the Company was incorporated with authorized common stock
of 25,000 shares with a par value of $1.00. On July 10, 1997, the
authorized common stock was increased to 100,000,000 shares with a change
in par value to $0.001.
On July 26, 1997, the Company completed a forward stock split of its
outstanding common stock of one share for thirty shares. The financial
statements have been prepared showing after stock split shares with a par
value of $0.001 from its inception.
Accounting Estimates
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were used.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of six months or
less to be cash equivalents.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for
the current year and deferred taxes on temporary differences between the
amount of taxable income and pretax financial income and between the tax
bases of assets and liabilities and their reported amounts
See Accompanying Notes and Accountants' Review Report.
F-10
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Income Taxes (Continued)
in the financial statements. Deferred tax assets and liabilities are
included in the financial statements at currently enacted income tax
rates applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled as prescribed in FASB
Statement No. 109, Accounting for Income Taxes. As changes in tax laws or
rate are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
Compensated Absences
Employees of the corporation are entitled to paid vacations, sick days
and other time off depending on job classification, length of service and
other factors. It is impractical to estimate the amount of compensation
for future absences, and accordingly, no liability has been recorded in
the accompanying financial statements. The corporation's policy is to
recognize the costs of compensated absences when paid to employees.
Net Loss Per Share
The Company adopted Statement of Financial Accounting Standards No. 128
that requires the reporting of both basic and diluted earnings per share.
Basic earnings per share is computed by dividing net income available to
common shareowners by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock.
Disclosure About Fair Value of Financial Instruments
The Company has financial instruments, none of which are held for trading
purposes. The Company estimates that the fair value of all financial
instruments at September 30, 1999 as defined in FASB 107, does not differ
materially from the aggregate carrying values of its financial
instruments recorded in the accompanying balance sheet. The estimated
fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgement is required in interpreting market data to develop the
estimates of fair value, and accordingly, the estimates are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
International Currency Translation
For translation of its international currencies, the Company has
determined that the local currencies of its international subsidiaries
are the functional currencies.
See Accompanying Notes and Accountants' Review Report.
F-11
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of September 30, 1999, the Company was in the development stage of
operations. According to the Financial Accounting Standards Board of the
Financial Accounting Foundation, a development stage Company is defined
as a company that devotes most of its activities to establishing a new
business activity. In addition, planned principle activities have not
commenced, or have commenced and have not yet produced significant
revenue.
FAS-7 requires that all development costs be expensed during the
development period. The Company expensed $398,503 of development costs
for the nine months ended September 30, 1999 and $805,887 from May 7,
1984 (date of inception) to September 30, 1999.
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
Palcan Mining Corporation
A. Incorporation
Palcan Mining Corporation was incorporated in the Republic of the
Philippines on August 13, 1998 under Republic of the Philippines
Sec Reg No. A199811014. The term for which the corporation is to
exist is fifty years from and after the date of issuance of the
certificate of incorporation.
B. Incorporators and directors
Names and nationalities of the incorporators and directors are as
follows:
Name Nationality
--------------------------- -----------------
Rene E. Cristobal Filipino
Carlos A. Fernandez Filipino
Dativa C. Dimaano-Sangalang Filipino
Arthur Leonard Taylor Canadian
Herbert John Wilson Canadian
C. Authorized capital
The authorized capital stock of the corporation is one million
pesos in lawful money of the Republic of the Philippines, divided
into one thousand shares with the par value of one thousand pesos
per share.
See Accompanying Notes and Accountants' Review Report.
F-12
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS (CONTINUED)
D. Subscribers and issued capital
25% of the authorized capital stock has been subscribed and at
least 25% of the total subscription has been paid as follows:
<TABLE>
<CAPTION>
Number of
Shares Amount Amount
Name Subscribed Subscribed Paid
--------------------- ---------- ----------- ----------
<S> <C> <C> <C>
Rene E. Cristobal 200 p 200,000 p 50,000
Carlos A. Fernandez 150 150,000 37,500
Dativa C. Dimaano-
Sangalang 250 250,000 62,500
Arthur Leonard Taylor 1 1,000 1,000
Herbert John Wilson 1 1,000 1,000
Fenway Resources Ltd. 398 398,000 398,000
---------- ----------- ----------
1,000 p 1,000,000 p 550,000
========== =========== ==========
</TABLE>
E. The primary purpose of this corporation is to hold the mineral
claims of Central Palawan Mining and Ind. Corp. ("CPMIC"), Palawan
Star Mining Ventures, Inc. ("PSMVI") and Pyramid Hill Mining &
Ind. Corp. ("PHMIC"), their respective MPSA's, ECC's and quarry
shale and limestone and any other commercial minerals found on the
property and to buy, sell, on whole basis only, exchange or
otherwise produce and deal in all kinds of minerals and in their
products and by-products of every kind and description and by
whatsoever process; to purchase, lease, option, locate or
otherwise acquire, own, exchange, sell, assign or contract out the
property and the operation of the property, or otherwise dispose
of, pledge, mortgage, deed in trust, hypothecate and deal in
mining claims, land related to production from the mining claims,
timber lands, water, and water rights and other property, both
real and personal.
Palcan Cement Corporation
A. Palcan Cement Corporation was incorporated in the Republic of the
Philippines on August 12, 1998 under Philippines Sec Reg No.
A199811013. The Company has a fiscal year end of December 31.
See Accompanying Notes and Accountants' Review Report.
F-13
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS (CONTINUED)
B. Incorporators and directors
Names and nationalities of the incorporators and directors are as
follows:
Name Nationality
--------------------------- -----------------
Rene E. Cristobal Filipino
Carlos A. Fernandez Filipino
Dativa C. Dimaano-Sangalang Filipino
Arthur Leonard Taylor Canadian
Herbert John Wilson Canadian
C. Authorized capital
The authorized capital stock of the corporation is five million
pesos in lawful money of the Republic of the Philippines, divided
into five thousand shares with the par value of one thousand pesos
per share.
D. Subscribers and issued capital
The subscribers to the capital stock and the amounts paid-in to
their subscriptions are as follows:
<TABLE>
<CAPTION>
Number of
Shares Amount Amount
Name Subscribed Subscribed Paid
---------------------- ---------- ----------- ----------
<S> <C> <C> <C>
Rene E. Cristobal 170 p 170,000 p 42,500
Carlos A. Fernandez 150 150,000 37,500
Dativa C. Dimaano-
Sangalang 180 180,000 45,000
Laurie G. Maranda 1 1,000 1,000
Robert George Muscroft 1 1,000 1,000
Arthur Leonard Taylor 1 1,000 1,000
Herbert John Wilson 1 1,000 1,000
Fenway Resources Ltd. 4,496 4,496,000 4,496,000
---------- ----------- -----------
5,000 p 5,000,000 p 4,625,000
========== =========== ===========
</TABLE>
E. Foreign Investments Act of 1991
The Company has applied to do business under the Foreign
Investments Act of 1991, as amended by RA8179, with 90% foreign
equity, with the intention to operate an export enterprise with
the primary purpose of cement manufacturing.
See Accompanying Notes and Accountants' Review Report.
F-14
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - CONSORTIUM AGREEMENT
Consortium Agreement
By letter amendment agreement dated April 30, 1997, all prior agreements
between Fenway and Central Palawan Mining and Industrial Corporation
("CPMIC"), Palawan Star Mining Ventures Inc. ("Palawan Star") and Pyramid
Hill Mining and Industrial Corp. ("Pyramid Hill"), were amended in
accordance with the terms and amendments below:
A. Reference and Interpretation
CPMIC, Palawan Star and Pyramid Hill shall be collectively
referred to as the "Consortium".
B. Joint Venture Mining Company ("JVMC")
I. A Joint Venture Mining Company shall be established.
II. Neither the Consortium nor each member of the Consortium
shall have any equity interest in the JVMC and each member
assigns and waives all right to own and subscribe to the
shares of the JVMC.
III. 10% of net profits of the JVMC shall be paid to the
Consortium as consideration for the transfer of their
respective interests in each of the properties, including
the mining claims, the MPSA and the ECC.
IV. Royalty payments applicable to raw material quarried or
mined from property belonging individually to CPMIC,
Palawan Star and Pyramid Hill will be waived and
surrendered by each member of the Consortium in favor of
the Consortium.
V. The properties, consisting of mining claims, the MPSA, and
the ECC and all rights, title and interest thereto shall be
transferred by each member of the Consortium to the JVMC.
See Accompanying Notes and Accountants' Review Report.
F-15
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - CONSORTIUM AGREEMENT
(CONTINUED)
C. Advances in Relation to the Joint Venture Mining Company
I. In consideration of the amendments in the letter amendment
agreement, Fenway shall, upon signing, pay the Consortium
US$100,000 as an advance maintenance payment which shall be
deducted from the royalties payable to the Consortium.
II. JVMC is to advance US$100,000 to each member of the
Consortium per year payable prorata in quarterly payments
as advance royalty payments to be deducted from the
royalties of $0.35 per ton of raw material used in the
manufacture of cement from the properties. Advance royalty
payments shall cease upon commencement of commercial
production of any one of the properties of the Consortium.
D. Joint Venture Cement Manufacturing Company ("JVCC")
A joint venture cement manufacturing company will be formed for
the development of the Palawan Cement Project for the
manufacturing of cement and related cement products.
E. Interest in Net Profit of JVCC
10% interest in the net profit of the JVCC are to go to the
Consortium out of the interest of Fenway in the JVCC.
F. Conditions Precedent to this Agreement
Receipt of an Environmental Compliance Certificate ("ECC") and a
Mineral Production Sharing Agreement ("MPSA") shall be conditions
precedent to the establishment of JVMC and JVCC, and accordingly
the production funding deadline of June 30, 1997 will be extended
and the right to purchase 10% of Fenway's interest is waived.
See Accompanying Notes and Accountants' Review Report.
F-16
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - CONSORTIUM AGREEMENT
(CONTINUED)
G. Share Options and Warrants
I. The Consortium members will have options to purchase Fenway
shares, subject to regulatory approvals, as follows:
CPMIC PALAWAN STAR PYRAMID HILL
---------------------------- ------------ ----------------
Nine hundred Thousand Shares 1 million shares 4 million shares
@ CDN $2.00/sh @ CDN $4.00/sh @ CDN $2.00/sh
With 1:1 warrant 1million shares
@ CDN $3.00/sh @ CDN $5.00/sh
exercisable at any time exercisable at any time
II. The common conditions governing both Stock Options and
Warrants in G(I), above, are as follows:
a. The timing of the release of the shares is subject
to the release of the senior financing or funding.
b. They are exercisable only upon receipt of the
Production Funds.
c. The terms and payment are to be determined in a
separate agreement to be entered into between and
among Fenway and the individual members of the
Consortium.
III. Subject to the approval by the relevant Securities
Regulatory Authorities, it is expressly understood that the
stock options and warrants referred to above may not be
exercised by the Consortium until such time as Fenway has
received the Acceptable Funding Commitment, provided
however, that Fenway may issue at any time all or a portion
of the warrants and Consortium may exercise at any time the
warrants in the event the issued and outstanding share
capital of Fenway is increased in order to facilitate
and/or meet the financing requirements to undertake the
Palawan Cement Project.
See Accompanying Notes and Accountants' Review Report.
F-17
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT - NEGOR RR
CEMENT PROJECT
On July 16, 1998, the Company entered into an option agreement with Negor
RR Cement Corporation, a Philippine corporation, for the purpose of
forming and operating a mining and cement manufacturing company.
The following are the details of the option agreement:
A. For a period of four (4) years following the date of acceptance by
the Company of a commercial feasibility study and report for the
project, which study and report are sufficient to enable the
Company to obtain any and all funds necessary or appropriate to
finance the development and operation of the project, that number
of shares of the Company's $.001 par value common stock equal to
the lesser of (a) two million (2,000,000) such shares, or (b)
equal to ten percent (10%) of the then issued and outstanding
shares of that common stock, at a purchase price of Five United
States Dollars ($5.00) per share.
B. The manufacturing company shall prepare, sign and deliver to Negor
any and all documents and other instruments necessary or
appropriate to vest in Negor a free, carried ownership interest in
the manufacturing company equal to ten percent (10%). As a result
of such ownership interest, Negor shall be entitled to have
allocated to it ten percent (10%) of the net profits, losses and
credits of the manufacturing company.
C. The manufacturing company shall prepare, sign and deliver, to the
Company any and all documents and other instruments necessary or
appropriate to vest in the Company an ownership interest in the
manufacturing company equal to ninety percent (90%). As a result
of such ownership interest, the Company shall be entitled to have
allocated to it ninety percent (90%) of the net profits, losses
and credits of the manufacturing company.
D. The mining company shall prepare, sign and deliver to Negor any
and all documents and other instruments necessary or appropriate
to vest in Negor an ownership interest in the mining company equal
to forty percent (40%). As a result of such ownership interest,
Negor shall be entitled to have allocated to it forty percent
(40%) of the net profits, losses and credits of the mining
company.
E. The mining company shall prepare, sign and deliver to the Company
any and all documents and other instruments necessary or
appropriate to vest in the Company an ownership interest in the
mining company equal to forty percent (40%). As a result
See Accompanying Notes and Accountants' Review Report.
F-18
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT - NEGOR RR
CEMENT PROJECT (CONTINUED)
of such ownership interest, the Company shall be entitled to have
allocated to it forty percent (40%) of the net profits, losses and
credits of the mining company.
F. The mining company shall prepare, sign and deliver to one or more
third party investors any and all documents and other instruments
necessary or appropriate to vest collectively in those third party
investors an ownership interest in the mining company equal to
twenty percent (20%). As a result of such ownership interest,
those third party investors shall be entitled to have allocated to
it twenty percent (20%) of the net profits, losses and credits of
the mining company.
G. Payment obligations $50,000 at date of signing of the agreement
$50,000 no later than September 30, 1998 (Both payments were made)
At such time as all feasibility studies and similar studies and
reports are completed which are necessary or appropriate for the
construction and operation of the manufacturing facilities and
which will be required prior to the receipt of the funds required
to finance construction of the manufacturing facilities, which
funds may be contributions to capital and proceeds from one or
more borrowing transactions, or either of them, the manufacturing
company shall pay to Negor One Million United States Dollars
($1,000,000.00). In connection with any and all such borrowing
transactions, the acquired claims may be utilized as collateral or
otherwise be pledged to enhance the credit of the borrower.
NOTE 6 LOAN RECEIVABLE
The Company loaned $80,000 to Central Palawan Mining & Industrial Corp.,
Palawan Star Mining Ventures Inc. and Pyramid Hill Mining & Industrial
Corp. on September 6, 1995. This loan bears interest at 7% per annum from
date of signing until repaid in full.
NOTE 7 PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and
improvements are charged to the asset accounts while replacements,
maintenance and repairs, which do not improve or extend the lives of
respective assets, are expensed. At the time property and equipment are
See Accompanying Notes and Accountants' Review Report.
F-19
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 7 PROPERTY AND EQUIPMENT (CONTINUED)
retired or otherwise disposed of, the assets and related depreciation
accounts are relieved of the applicable amounts. Gains or losses from
retirements or sales are credited or charged to income.
The Company depreciates its property and equipment for financial
reporting purposes using the accelerated methods based upon an estimated
useful life of five years.
The components of the property and equipment are as follows:
Office equipment $ 6,189
Computers 5,360
------------
Total cost 11,549
Less accumulated depreciation 6,356
------------
Total property and equipment $ 5,193
============
Depreciation expense for the nine months ended September 30, 1999
amounted to $1,206.
NOTE 8 DEFERRED TAX ASSETS
Deferred tax assets arise from the net operating loss carryforwards.
Total deferred tax asset $ 205,000
Less valuation allowance 205,000
------------
Net deferred tax asset $ 0
============
NOTE 9 NET OPERATING LOSS CARRYFORWARD
The Company has the following net operating loss carryforwards:
Tax Year Amount Expiration date
----------------- -------- ---------------
December 31, 1984 $ 5,296 December 31, 1999
December 31, 1985 28,128 December 31, 2000
December 31, 1987 3,600 December 31, 2001
December 31, 1998 370,360 December 31, 2018
--------
$407,384
========
See Accompanying Notes and Accountants' Review Report.
F-20
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 10 SHORT TERM NOTES PAYABLE
The Company has two short term loans as follows:
<TABLE>
<CAPTION>
<S> <C>
A. Unsecured, 12% note dated June 3, 1998 for $150,000
Canadian dollars. There is no due date on the note. $ 101,351
B. Unsecured, no interest note dated September 28, 1998 for
$50,000 Canadian dollars. There is no due date on the
note. 33,784
---------
$ 135,135
=========
</TABLE>
NOTE 11 STOCK OPTIONS
A. The Company has stock options outstanding at September 30, 1999
as follows:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Name of Optionee Shares Price Date
--------------------- --------- --------- ------------
<S> <C> <C> <C>
Milton M. Schlesinger 200,000 US $3.00 July 4, 2004
Steven Sobolewski 250,000 US $3.00 July 4, 2004
H. John Wilson 495,963 US $3.00 July 4, 2004
A. Leonard Taylor 495,963 US $3.00 July 4, 2004
Laurie G. Maranda 300,000 US $3.00 July 4, 2004
R. George Muscroft 300,000 US $3.00 July 4, 2004
Willi Magill 200,000 US $3.00 July 4, 2004
Detty Sangalang 200,000 US $3.00 July 4, 2004
Rene E. Cristobal 200,000 US $3.00 July 4, 2004
Carlos Fernandez 200,000 US $3.00 July 4, 2004
Robert Shoofey 180,000 US $3.00 July 4, 2004
Daniel Maarsman 195,000 US $3.00 July 4, 2004
Edward Cardozo 200,000 US $3.00 July 4, 2004
Friedhelm Menzel 200,000 US $3.00 July 31, 2004
William Anderson 200,000 US $3.00 July 31, 2004
3,816,926
=========
</TABLE>
See Accompanying Notes and Accountants' Review Report.
F-21
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 11 STOCK OPTIONS (CONTINUED)
At September 30, 1999 the Company had a stock-based compensation plan
under which options were granted to employees and outside directors. The
Company measures the compensation cost for these plans using the
intrinsic value method of accounting prescribed by APB Opinion No. 25
(Accounting for Stock Issued to Employees). Given the terms of the
Company's plans, no compensation cost has been recognized for its stock
option plan.
The Company's reported net income and earnings per share would have been
reduced had compensation cost for the Company's stock-based compensation
plan been determined using the fair value method of accounting as set
forth in SFAS No. 123 (Accounting for Stock-Based Compensation). For
purposes of estimating the fair value disclosures below, the fair value
of each stock option has been estimated on the grant date using the
Black-Scholes option-pricing model with the following assumptions:
dividend yield of 0%; expected volatility of 30%; risk-free interest
rate 5.8%; and expected lives of five years.
Had compensation costs for the Company's plan been determined based on
the fair value at the grant date consistent with the method of FASB
Statement 123, the Company's net income and earnings per share would
have been as indicated below:
<TABLE>
<CAPTION>
As Reported Pro Forma
----------- ---------
<S> <C> <C>
Net (loss) $ ( 398,503) $ ( 398,503)
Primary (loss) per share $ ( 0.02) $ ( 0.02)
A summary of the all options is as follows:
Balance at January 1, 1999 3,450,000
Options issued 700,000
Options exercised ( 33,074)
Options canceled 300,000)
------------
Balance at September 30, 1999 3,816,926
============
</TABLE>
See Accompanying Notes and Accountants' Review Report.
F-22
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 11 STOCK OPTIONS (CONTINUED)
Information regarding employee stock options outstanding as of September
30, 1999 is as follows:
Options Outstanding
--------------------------------------------------
Weighted
Weighted Average
Average Remaining
Price Exercise Contractual
Range Shares Price Life
----------- --------- ---------- -----------------
$ 3.00 3,816,926 $ 3.00 4 years, 9months
Options Exercisable
-------------------------
Weighted
Average
Price Exercise
Range Shares Price
----------- --------- ---------
$ 3.00 0 N/A
NOTE 12 STOCK WARRANTS
The following warrants are outstanding and applicable to investment in
projects in Palawan, Philippine.
B. Warrants outstanding as of September 30, 1999.
45,750 Shares at a price of Canadian $5.50 per share if
exercised on or before December 5, 2000
25,250 Shares at a price of Canadian $5.50 per share if
exercised on or before February 25, 2001
28,901 Shares at a price of Canadian $5.50 per share if
exercised on or before May 29, 2001
25,000 Shares at a price of Canadian $5.50 per share if
exercised on or before June 2, 2001
27,000 Shares at a price of Canadian $5.50 per share if
exercised on or before June 6, 2001
2,128 Shares at a price of United States $4.00 per share if
exercised on or before October 29, 2000
670 Shares at a price of United States $4.00 per share if
exercised on orbefore October 29, 2000
65,000 Shares at a price of United States $4.00 per share if
exercised on or before June 10, 2001
------
219,699
=======
See Accompanying Notes and Accountants' Review Report.
F-23
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 13 CONSULTING AGREEMENT WITH RELATED PARTIES
The Company assumed a consulting agreement with a former director of
Fenway Resources Ltd. which requires quarterly payments of $5,000
(Canadian dollars).
NOTE 14 INTEREST EXPENSE
The Company incurred $9,329 of interest expense for the nine months
ended September 30, 1999.
NOTE 15 OPERATING LEASES
The Company is leasing office facilities in Vancouver, British Columbia,
Canada and Manila, Philippines as follows:
Vancouver
5 year lease expiring February 28, 2001
Monthly rental of $308 plus occupancy costs
Manila
5 year lease expiring April 30, 2002
Monthly rental of $1,754 plus occupancy costs
Future minimum lease payments are as follows:
September 30, 2000 $ 24,744
September 30, 2001 24,744
September 30, 2002 13,962
------------
$ 63,450
============
Rent expense for the nine months ended September 30, 1999 was $25,620.
NOTE 16 INVESTMENT BANKER AGREEMENT
The corporation signed a non financial agency agreement for the future
capitalization of the Company. The banker shall be entitled to receive a
fee equal to a cumulative percentage of the funds raised on behalf of the
corporation, plus stock warrants as authorized below, which shall be
payable upon funding.
The warrants will have a term of two years from the date of closing the
transaction and are exercisable at the specified price for the first year
and at one hundred and ten percent (110%) of the specified price for the
second year. The warrants shall have ultimate piggy back registration
rights and one time demand registration rights. The fee and the warrants
are cumulative and will be calculated as follows:
See Accompanying Notes and Accountants' Review Report.
F-24
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 16 INVESTMENT BANKER AGREEMENT (CONTINUED)
Funds Raised Fee Warrants
---------------- --------- -------------
0 - 10,000,000 7.0 % 200,000
10 - 20,000,000 2.0 150,000
20 - 40,000,000 1.5 100,000
40 - 80,000,000 1.2 75,000
80 - 100,000,000 0.95 50,000
The price for the warrants will be the price per share as specified by
the price per share in the transaction between the Corporation and the
Funder.
NOTE 17 EMPLOYMENT CONTRACTS
The Company assumed employment contracts from Fenway Resources Ltd. The
details of the contracts are as follows:
<TABLE>
<CAPTION> Annual Expiration
Title Date Salary Date Renewable
---------------- ----------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
President and
Chief Executive
Officer September 1, 1995 $ 400,000 (CND) August 31, 2000 5 year periods
Secretary and
Chief Financial
Officer September 1, 1995 $ 300,000 (CND) August 31, 2000
5 year periods
Project Manager February 1, 1996 $ 200,000 (CND) August 31, 2000 5 year periods
Project Manager February 1, 1996 $ 200,000 (CND) August 31, 2000 5 year periods
</TABLE>
Each of the officers have only received between $2,600 - $3,250 (CND)
per month and have agreed to forgive all other compensation payable to
them until the Board of Directors deem it appropriate to pay the
officers.
NOTE 18 SUBSEQUENT EVENT
Private Placement
In November 1999, the Company received $96,000 from a private placement
of 32,000 units of common stock at $3.00 per share. Each unit is
comprised of one common share of stock
See Accompanying Notes and Accountants' Review Report.
F-25
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 18 SUBSEQUENT EVENT (CONTINUED)
plus one warrant entitling the purchaser to purchase one additional
share of common stock at a price of United States $4.00 per share if
exercised by November 8, 2001.
Financial Consulting Agreement
On November 4, 1999, the Company entered into a financial consulting
agreement for the period from October 7, 1999 until April 30, 2000. The
Company is obligated to pay a monthly retainer of $10,000 from November
1, 1999 through April 1, 2000.
See Accompanying Notes and Accountants' Review Report.
F-26
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC.
IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 and 1996
<PAGE>
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT AUDITORS' REPORT ..................................... F-27
FINANCIAL STATEMENTS
Balance Sheets ............................................ F-28
Statements of Operations .................................. F-29
Statement of Changes in Stockholders' Equity .............. F-30 - F-31
Statements of Cash Flows .................................. F-32 - F-34
Notes to Financial Statements ............................. F-35 - F-49
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Fenway International Inc.
(Known as Nevada-Utah Gold, Inc. in 1997 and 1996)
Newport Beach, California
We have audited the accompanying balance sheet of Fenway International Inc. (a
Nevada Corporation) as of December 31, 1998, and the related statements of
operations, changes in stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on the financial
statements based on our audit.
The comparative financial statements of Nevada-Utah Gold, Inc. as of December
31, 1997 and 1996 and for the period from May 7, 1984 (date of incorporation) to
December 31, 1997, were audited by other auditors whose report dated April 8,
1998, expressed an unqualified opinion on those statements. In addition, the
auditors stated that in their opinion, the company had been in the development
stage since its inception and had suffered recurring losses from operations,
which raised substantial doubts about its ability to continue as a going
concern. The financial statements as of December 31, 1997 and 1996 and for the
period from May 7, 1984 to December 31, 1997 did not include any adjustments
that might result from the outcome of this uncertainty.
The information contained in footnotes 4, 5, 7, and 14 were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it
relates to the details of these footnotes is based solely on the reports of the
other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
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.
We believe that our audit and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors, the
financial statements referred to above present fairly, in all material respects
the financial position of Fenway International Inc. as of December 31, 1998 and
the results of its operations and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
The Company is developing mining properties in the Republic of the Philippines.
In is imperative that additional capital is received in order to develop the
projects.
/s/ Moffitt & Company, P.C.
Moffitt & Company, P.C.
Scottsdale, Arizona
February 23, 1999
F-27
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1998, 1997 and 1996
ASSETS
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash $ 11,583 $ 0 $ 0
Accounts receivable 12,234 0 0
Advance royalty payments (Note 5) 160,813 0 0
Prepaid expenses 3,633 0 0
Investment in Palcan Mining and Cement Corporations (Note 4) 23,558 0 0
Investments in projects in The Republic of the Philippines
(Notes 4, 5 and 6) 2,685,687 0 0
Loan receivable (Note 7) 85,211 0 0
Property and equipment (Note 8) 6,399 0 0
Deferred tax assets (Notes 1 and 9) 0 0 0
----------- ----------- -----------
TOTAL ASSETS $ 2,989,118 $ 0 $ 0
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable
Trade $ 73,850 $ 0 $ 0
Related parties 48,789 0 0
Accrued liabilities 6,715 0 0
Short term notes payable (Note 11) 127,808 0 0
Advances on stock subscriptions (Note 12) 23,900 0 0
----------- ----------- -----------
TOTAL LIABILITIES 281,062 0 0
----------- ----------- -----------
STOCKHOLDERS' EQUITY (NOTES 1, 12 , 13, 14 and 15)
Common stock, par value $0.001 per share
Authorized 100,000,000 shares
Issued and outstanding
1998 - 19,360,955 shares 19,361
1997 and 1996 - 714,090 shares 714 714
Paid in capital in excess of par value of stock 3,096,079 36,310 32,710
Deficit accumulated during development stage (407,384) (37,024) (33,424)
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,708,056 0 0
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,989,118 $ 0 $ 0
=========== =========== ===========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
F-28
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
May 7, 1984
(Date of
Years ended December 31, Inception)
--------------------------------------------- to December
1998 1997 1996 31, 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0 $ 0
DEVELOPMENT COSTS (370,360) 1,300 3,600 407,384
----------- ----------- ----------- -----------
NET (LOSS) $ (370,360) $ (1,300) $ (3,600) $ (407,384)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE
(NOTE 1)
Basic $ 0.038 $ 0.002 $ 0.005 --
Diluted $ 0.038 0.002 0.005 --
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
Basic 9,679,246 714,090 714,090 --
Diluted 9,679,246 714,090 714,090 --
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
F-29
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Paid In Accumulated
Capital in Deficit
Common stock Excess of During the
----------------------- Par Value Development
Shares Amount of Stock Stage
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, MAY 7, 1984
(DATE OF INCEPTION) 0 $ 0 $ 0 $ 0
Issuance of common stock for
mineral lease (unknown value)
and expenses at $.005 -
May 7, 1984 600,000 600 2,400 0
Issuance of common stock for
cash at $.267 - May 7, 1984 8,610 9 2,287 0
Net loss for the period ended
December 31, 1984 0 0 0 (5,296)
Issuance of common stock for
services at $.267 -
February 3, 1985 9,000 9 2,391 0
Issuance of common stock for
cash at $.267 - February 3, 1985 96,480 96 25,632 0
Net loss for the year ended
December 31, 1985 0 0 0 (28,128)
-------- -------- -------- --------
BALANCE, DECEMBER 31, 1985 714,090 714 32,710 (33,424)
-------- -------- -------- --------
BALANCE, DECEMBER 31, 1996 714,090 714 32,710 (33,424)
Contribution to capital -
expenses - 1997 0 0 3,600 0
Net loss for the year ended
December 31, 1997 0 0 0 (3,600)
-------- -------- -------- --------
BALANCE, DECEMBER 31, 1997 714,090 $ 714 $ 36,310 $(37,024)
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
F-30
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY( CONTINUED)
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Paid In Accumulated
Capital in Deficit
Common stock Excess of During the
-------------------------- Par Value Development
Shares Amount of Stock Stage
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Contribution to capital -
expenses - 1998 0 $ 0 $ 1,300 $ 0
Issuance of common stock
for cash
$.01 - May 29, 1998 2,000,000 2,000 18,000 0
$.01 - June 9, 1998 9,000,000 9,000 81,000 0
Issuance of common stock for
net assets of Fenway
Resources Ltd - $.387 -
August 31, 1998 7,644,067 7,644 2,950,988 0
Issuance of common stock
for cash
$3.00 - October 29, 1998 2,128 2 6,450 0
$3.00 - October 29, 1998 670 1 2,031 0
Net loss for the year
ended December 31, 1998 0 0 0 (370,360)
---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1998 19,360,955 $ 19,361 $3,096,079 $ ( 407,384)
========== ========== ========== ===========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
F-31
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998, 1997 AND 1996 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
May 4, 1984
(Date of
Years Ended December 31, Year Ended Inception)
------------------------- December 31, to December 31,
1998 1997 1996 1998
--------- --------- -------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(370,360) $ (3,600) $ 0 $(407,384)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities
Depreciation 587 0 0 587
Contributions to capital and stock issued for
expenses and services 0 3,600 0 9,000
Increases (decreases) in:
Cash-held in lawyer's trust account 118,578 0 0 118,578
Interest receivable (1,867) 0 0 (1,867)
Accounts receivable and prepaid expenses 2,444 0 0 2,444
Accounts payable 63,985 0 0 63,985
Accrued liabilities 6,715 0 0 6,715
--------- --------- --------- ---------
NET CASH (USED) BY OPERATING
ACTIVITIES (179,918) 0 0 (207,942)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Palcan Mining and Cement Corporations (23,558) 0 0 (23,558)
--------- --------- --------- ---------
NET CASH (USED) BY INVESTING
ACTIVITIES (23,558) 0 0 (23,558)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 158,901 0 0 186,925
Proceeds from issuance of short term notes 32,258 0 0 32,258
Advances on stock subscriptions 23,900 0 0 23,900
--------- --------- --------- ---------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 215,059 0 0 243,083
--------- --------- --------- ---------
NET INCREASE IN CASH 11,583 0 0 11,583
CASH AT BEGINNING OF PERIOD 0 0 0 0
--------- --------- --------- ---------
CASH AT END OF PERIOD $ 11,583 $ 0 $ 0 $ 11,583
========= ========= ========= =========
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
F-32
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1998
<TABLE>
<CAPTION>
May 4, 1984
(Date of
Years Ended December 31, Year Ended Inception)
------------------------ December 31, to December 31,
1998 1997 1996 1998
---------- ----------- ------------- --------------
<S> <C> <C>
SCHEDULE OF NON CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of 400,000 shares of common stock for mineral lease
(unknown value) and expenses - 1984
Issuance of 9,000 shares of common stock for $ 3,000
services - 1985 -----------
Contribution to capital - expenses - 1997 $ 3,600 $ 2,400
---------- -----------
Contribution to capital - expenses - 1998 $ 1,300 $ 3,600
---------- -----------
Issuance of 7,644,067 shares of stock - August 31, 1998 $2,918,215 $ 1,300
---------- -----------
SUPPLEMENTAL DISCLOSURE OF $ 2,918,215
CASH FLOW INFORMATION -----------
Interest paid $ 0 $ 0 $ 0 $ 0
========== ========== =========== ===========
Taxes paid $ 0 $ 0 $ 0 $ 0
========== ========== =========== ===========
</TABLE>
F-33
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization and Nature of Business
The Company was incorporated under the laws of the State of Nevada on
May 7, 1984 for the primary purpose of developing mineral properties.
During 1985, the Company abandoned its remaining assets and settled
its liabilities and was inactive until 1998. In 1998, the Company
became active again by acquiring mineral properties in the Republic of
the Philippines. (See notes 4, 5 and 6).
Name Change
On September 2, 1998, the Company changed its name from Nevada-Utah
Gold, Inc. to Fenway International Inc.
Authorized Common Stock
On May 7, 1984, the Company was incorporated with authorized common
stock of 25,000 shares with a par value of $1.00. On July 10, 1997,
the authorized common stock was increased to 100,000,000 shares with a
change in par value to $0.001.
On July 26, 1997, the Company completed a forward stock split of its
outstanding common stock of one share for thirty shares. The financial
statements have been prepared showing after stock split shares with a
par value of $0.001 from its inception.
Accounting Estimates
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and the reported revenues and expenses. Actual
results could vary from the estimates that were used.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
See Accompanying Notes and Independent Auditors' Report.
F-34
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Income Taxes
Provisions for income taxes are based on taxes payable or refundable
for the current year and deferred taxes on temporary differences
between the amount of taxable income and pretax financial income and
between the tax bases of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the financial statements at currently
enacted income tax rates applicable to the period in which the
deferred tax assets and liabilities are expected to be realized or
settled as prescribed in FASB Statement No. 109, Accounting for Income
Taxes. As changes in tax laws or rate are enacted, deferred tax assets
and liabilities are adjusted through the provision for income taxes.
Compensated Absences
Employees of the corporation are entitled to paid vacations, sick days
and other time off depending on job classification, length of service
and other factors. It is impractical to estimate the amount of
compensation for future absences, and accordingly, no liability has
been recorded in the accompanying financial statements. The
corporation's policy is to recognize the costs of compensated absences
when paid to employees.
Net Loss Per Share
Net loss per common share is computed by dividing net loss by the
weighted average number of shares outstanding during the period.
Disclosure About Fair Value of Financial Instruments
The company has financial instruments, none of which are held for
trading purposes. The company estimates that the fair value of all
financial instruments at December 31, 1998 as defined in FASB 107,
does not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheet. The
estimated fair value amounts have been determined by the company using
available market information and appropriate valuation methodologies.
Considerable judgement is required in interpreting market data to
develop the estimates of fair value, and accordingly, the estimates
are not necessarily indicative of the amounts that the company could
realize in a current market exchange.
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of December 31, 1998, the Company was in the development stage of
operations. According to the Financial Accounting Standards Board of
the Financial Accounting Foundation, a development stage Company is
defined as a company that devotes most of its activities to
establishing a new business activity. In addition, planned principle
activities
See Accompanying Notes and Independent Auditors' Report.
F-35
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 2 DEVELOPMENT STAGE OPERATIONS (CONTINUED)
have not commenced, or have commenced and have not yet produced
significant revenue.
FAS-7 requires that all development costs be expensed during the
development period. The Company expensed $370,360 of development costs
for the year ended December 31, 1998 and $407,384 from May 7, 1984
(date of inception) to December 31, 1998.
NOTE 3 PURCHASE OF NET ASSETS OF FENWAY RESOURCES LTD.
On August 31, 1998, the Company purchased the business which includes
all of the assets, less liabilities of Fenway Resources Ltd. The
Company is accounting for this acquisition under the purchase method
of accounting.
Business combinations accounted for by the purchase method are
recorded at cost. Cost is determined as the fair value of the net
assets acquired or as the fair value of the consideration given,
whichever is more objectively determinable.
In accordance with generally accepted accounting principles,
management allocated the cost of the shares issued based upon the fair
market value of the assets acquired. The fair market value of the
assets was determined by obtaining an independent appraisal of the
assets.
Fenway International Inc. issued 7,644,067 shares of its common stock
for the net assets acquired and valued the stock at $2,958,632.
The following is a summary of the net assets purchased and the common
stock issued:
United
States Canadian
Dollars Dollars
----------- -----------
Cash $ 40,417 $ 63,449
Cash-held in lawyer's trust account 118,578 186,151
Accounts receivable 5,097 8,001
Advance royalty payments 160,813 252,453
Prepaid expenses 11,914 18,704
Investments in projects in Palawan,
Philippines 2,685,687 4,216,149
Loan receivable 83,344 130,838
Property and equipment 6,986 10,967
Accounts payable (58,654) (92,078)
Short term loan (95,550) (150,000)
----------- -----------
Cost of acquired net assets purchased $ 2,958,632 $ 4,644,634
=========== ===========
See Accompanying Notes and Independent Auditors' Report.
F-36
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 3 PURCHASE OF NET ASSETS OF FENWAY RESOURCES LTD. (CONTINUED)
In addition to the net assets acquired, the Company assumed the
following obligations which are detailed in the accompanying
footnotes:
Assumed Obligations Footnote Number
------------------- ---------------
Consulting agreements 16
Incentive stock options and
warrants 14
Stock options and warrants to
Consortium members 5
All liabilities of the company
whether known or unknown,
contingent or absolute 2
NOTE 4 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
Palcan Mining Corporation
A. Incorporation
Palcan Mining Corporation was incorporated in the Republic of the
Philippines on August 13, 1998 under Republic of the Philippines
Sec Reg No. A199811014. The term for which the corporation is to
exist is fifty years from and after the date of issuance of the
certificate of incorporation.
B. Incorporators and directors
Names and nationalities of the incorporators and directors are as
follows:
Name Nationality
---- -----------
Rene E. Cristobal Filipino
Carlos A. Fernandez Filipino
Dativa C. Dimaano-Sangalang Filipino
Arthur Leonard Taylor Canadian
Herbert John Wilson Canadian
See Accompanying Notes and Independent Auditors' Report.
F-37
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 4 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS (CONTINUED)
C. Authorized capital
The authorized capital stock of the corporation is one million
pesos in lawful money of the Republic of the Philippines, divided
into one thousand shares with the par value of one thousand pesos
per share.
D. Subscribers and issued capital
25% of the authorized capital stock has been subscribed and at
least 25% of the total subscription has been paid as follows:
Number of
Shares Amount Amount
Name Subscribed Subscribed Paid
------------ ------------ ------------- ------------
Rene E. Cristobal 200 p 200,000 p 50,000
Carlos A. Fernandez 150 150,000 37,500
Dativa C. Dimaano-
Sangalang 250 250,000 62,500
Arthur Leonard Taylor 1 1,000 1,000
Herbert John Wilson 1 1,000 1,000
Fenway Resources Ltd. 398 398,000 398,000
------------ ------------- ------------
1,000 p 1,000,000 p 550,000
============ ============= ============
E. The primary purpose of this corporation is to hold the mineral
claims of Central Palawan Mining and Ind. Corp. ("CPMIC"),
Palawan Star Mining Ventures, Inc. ("PSMVI") and Pyramid Hill
Mining & Ind. Corp. ("PHMIC"), their respective MPSA's, ECC's and
quarry shale and limestone and any other commercial minerals
found on the property and to buy, sell, on whole basis only,
exchange or otherwise produce and deal in all kinds of minerals
and in their products and by-products of every kind and
description and by whatsoever process; to purchase, lease,
option, locate or otherwise acquire, own, exchange, sell, assign
or contract out the property and the operation of the property,
or otherwise dispose of, pledge, mortgage, deed in trust,
hypothecate and deal in mining claims, land related to production
from the mining claims, timber lands, water, and water rights and
other property, both real and personal.
See Accompanying Notes and Independent Auditors' Report.
F-38
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 4 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS (CONTINUED)
Palcan Cement Corporation
A. Palcan Cement Corporation was incorporated in the Republic of the
Philippines on August 12, 1998 under Philippines Sec Reg No.
A199811013. The Company has a fiscal year end of December 31.
B. Incorporators and directors
Names and nationalities of the incorporators and directors are as
follows:
Name Nationality
--------------------------- -----------
Rene E. Cristobal Filipino
Carlos A. Fernandez Filipino
Dativa C. Dimaano-Sangalang Filipino
Arthur Leonard Taylor Canadian
Herbert John Wilson Canadian
C. Authorized capital
The authorized capital stock of the corporation is five million
pesos in lawful money of the Republic of the Philippines, divided
into five thousand shares with the par value of one thousand
pesos per share.
D. Subscribers and issued capital
The subscribers to the capital stock and the amounts paid-in to
their subscriptions are as follows
<TABLE>
<CAPTION>
Number of
Shares Amount Amount
Name Subscribed Subscribed Paid
--------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Rene E. Cristobal 170 p 170,000 p 42,500
Carlos A. Fernandez 150 150,000 37,500
Dativa C. Dimaano-
Sangalang 180 180,000 45,000
Laurie G. Maranda 1 1,000 1,000
Robert George Muscroft 1 1,000 1,000
Arthur Leonard Taylor 1 1,000 1,000
Herbert John Wilson 1 1,000 1,000
Fenway Resources Ltd. 4,496 4,496,000 4,496,000
-------------- ------------- ------------
5,000 p 5,000,000 p 4,625,000
============== ============= ============
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
F-39
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 4 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS (CONTINUED)
E. Foreign Investments Act of 1991
The Company has applied to do business under the Foreign
Investments Act of 1991, as amended by RA8179, with 90% foreign
equity, with the intention to operate an export enterprise with
the primary purpose of cement manufacturing.
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - CONSORTIUM AGREEMENT
Consortium Agreement
By letter amendment agreement dated April 30, 1997, all prior
agreements between Fenway and Central Palawan Mining and Industrial
Corporation ("CPMIC"), Palawan Star Mining Ventures Inc. ("Palawan
Star") and Pyramid Hill Mining and Industrial Corp. ("Pyramid Hill"),
were amended in accordance with the terms and amendments below:
A. Reference and Interpretation
CPMIC, Palawan Star and Pyramid Hill shall be collectively
referred to as the "Consortium".
B. Joint Venture Mining Company ("JVMC")
I. A Joint Venture Mining Company shall be established.
II. Neither the Consortium nor each member of the Consortium
shall have any equity interest in the JVMC and each member
assigns and waives all right to own and subscribe to the
shares of the JVMC.
III. 10% of net profits of the JVMC shall be paid to the
Consortium as consideration for the transfer of their
respective interests in each of the properties, including
the mining claims, the MPSA and the ECC.
IV. Royalty payments applicable to raw material quarried or
mined from property belonging individually to CPMIC, Palawan
Star and Pyramid Hill will be waived and surrendered by each
member of the Consortium in favor of the Consortium.
See Accompanying Notes and Independent Auditors' Report.
F-40
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - CONSORTIUM AGREEMENT
(CONTINUED)
V. The properties, consisting of mining claims, the MPSA, and
the ECC and all rights, title and interest thereto shall be
transferred by each member of the Consortium to the JVMC.
C. Advances in Relation to the Joint Venture Mining Company
I. In consideration of the amendments in the letter amendment
agreement, Fenway shall, upon signing, pay the Consortium
US$100,000 as an advance maintenance payment which shall be
deducted from the royalties payable to the Consortium.
II. JVMC is to advance US$100,000 to each member of the
Consortium per year payable prorata in quarterly payments as
advance royalty payments to be deducted from the royalties
of $0.35 per ton of raw material used in the manufacture of
cement from the properties. Advance royalty payments shall
cease upon commencement of commercial production of any one
of the properties of the Consortium.
D. Joint Venture Cement Manufacturing Company ("JVCC")
A joint venture cement manufacturing company will be formed for
the development of the Palawan Cement Project for the
manufacturing of cement and related cement products.
E. Interest in Net Profit of JVCC
10% interest in the net profit of the JVCC are to go to the
Consortium out of the interest of Fenway in the JVCC.
F. Conditions Precedent to this Agreement
Receipt of an Environmental Compliance Certificate ("ECC") and a
Mineral Production Sharing Agreement ("MPSA") shall be conditions
precedent to the establishment of JVMC and JVCC, and accordingly
the production funding deadline of June 30, 1997 will be extended
and the right to purchase 10% of Fenway's interest is waived.
See Accompanying Notes and Independent Auditors' Report.
F-41
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - CONSORTIUM AGREEMENT
(CONTINUED)
G. Share Options and Warrants
I. The Consortium members will have options to purchase Fenway
shares, subject to regulatory approvals, as follows:
<TABLE>
<CAPTION>
CPMIC PALAWAN STAR PYRAMID HILL
---------------------------- ------------ ------------
<S> <C> <C>
Nine hundred Thousand Shares 1 million shares 4 million shares
@ CAN $2.00/sh @ CAN $4.00/sh@ CAN $2.00/sh
With 1:1 warrant 1 million shares
@ CAN $3.00/sh @ CAN $5.00/sh
exercisable at any time exercisable at any time
</TABLE>
II. The common conditions governing both Stock Options and
Warrants in G(I), above, are as follows.
a. The timing of the release of the shares is subject to
the release of the senior financing or funding;
b. They are exercisable only upon receipt of the
Production Funds;
c. The terms and payment are to be determined in a
separate agreement to be entered into between and among
Fenway and the individual members of the Consortium.
III. Subject to the approval by the relevant Securities
Regulatory Authorities, it is expressly understood that the
stock options and warrants referred to above may not be
exercised by the Consortium until such time as Fenway has
received the Acceptable Funding Commitment, provided
however, that Fenway may issue at any time all or a portion
of the warrants and Consortium may exercise at any time the
warrants in the event the issued and outstanding share
capital of Fenway is increased in order to facilitate and/or
meet the financing requirements to undertake the Palawan
Cement Project.
See Accompanying Notes and Independent Auditors' Report.
F-42
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 6 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT - NEGOR
RR CEMENT PROJECT
On July 16, 1998, the Company entered into an option agreement with
Negor RR Cement Corporation, a Philippine corporation, for the purpose
of forming and operating a mining and cement manufacturing company.
The following are the details of the option agreement:
A. For a period of four (4) years following the date of acceptance
by the Company of a commercial feasibility study and report for
the Project, which study and report are sufficient to enable the
Company to obtain any and all funds necessary or appropriate to
finance the development and operation of the Project, that number
of shares of the Company's $.001 par value common stock equal to
the lesser of (a) two million (2,000,000) such shares, or (b)
equal to ten percent (10%) of the then issued and outstanding
shares of that common stock, at a purchase price of Five United
States Dollars ($5.00) per share.
B. The Manufacturing Company shall prepare, sign and deliver to
Negor any and all documents and other instruments necessary or
appropriate to vest in Negor a free, carried ownership interest
in the manufacturing Company equal to ten percent (10%). As a
result of such ownership interest, Negor shall be entitled to
have allocated to it ten percent (10%) of the net profits, losses
and credits of the manufacturing company.
C. The Manufacturing Company shall prepare, sign and deliver, to the
Company any and all documents and other instruments necessary or
appropriate to vest in the Company an ownership interest in the
manufacturing Company equal to ninety percent (90%). As a result
of such ownership interest, the Company shall be entitled to have
allocated to it ninety percent (90%) of the net profits, losses
and credits of the manufacturing company.
D. The Mining Company shall prepare, sign and deliver to Negor any
and all documents and other instruments necessary or appropriate
to vest in Negor an ownership interest in the mining Company
equal to forty percent (40%). As a result of such ownership
interest, Negor shall be entitled to have allocated to it forty
percent (40%) of the net profits, losses and credits of the
mining company.
E. The Mining Company shall prepare, sign and deliver to the Company
any and all documents and other instruments necessary or
appropriate to vest in the Company an ownership interest in the
mining company equal to forty percent (40%). As a result
See Accompanying Notes and Independent Auditors' Report.
F-43
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 6 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT - NEGOR
RR CEMENT PROJECT (CONTINUED)
of such ownership interest, the Company shall be entitled to have
allocated to it forty percent (40%) of the net profits, losses and
credits of the mining company.
F. The Mining Company shall prepare, sign and deliver to one or more
third party investors any and all documents and other instruments
necessary or appropriate to vest collectively in those third
party investors an ownership interest in the mining company equal
to twenty percent (20%). As a result of such ownership interest,
those third party investors shall be entitled to have allocated
to it twenty percent (20%) of the net profits, losses and credits
of the mining company.
G. Payment obligations $50,000 at date of signing of the agreement
$50,000 no later than September 30, 1998 (Both payments were
made)
At such time as all feasibility studies and similar studies and
reports are completed which are necessary or appropriate for the
construction and operation of the manufacturing facilities and
which will be required prior to the receipt of the funds required
to finance construction of the manufacturing facilities, which
funds may be contributions to capital and proceeds from one or
more borrowing transactions, or either of them, the manufacturing
company shall pay to Negor One Million United States Dollars
($1,000,000.00). In connection with any and all such borrowing
transactions, the acquired claims may be utilized as collateral
or otherwise be pledged to enhance the credit of the borrower.
NOTE 7 LOAN RECEIVABLE
The Company loaned $80,000 to Central Palawan Mining & Industrial
Corp., Palawan Star Mining Ventures Inc. and Pyramid Hill Mining &
Industrial Corp. on September 6, 1995. This loan bears interest at 7%
per annum from date of signing until repaid in full.
NOTE 8 PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major renewals and
improvements are charged to the asset accounts while replacements,
maintenance and repairs, which do not improve or extend the lives of
respective assets, are expensed. At the time property and equipment
are
See Accompanying Notes and Independent Auditors' Report.
F-44
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 8 PROPERTY AND EQUIPMENT (CONTINUED)
retired or otherwise disposed of, the assets and related depreciation
accounts are relieved of the applicable amounts. Gains or losses from
retirements or sales are credited or charged to income.
The Company depreciates its property and equipment for financial
reporting purposes using the accelerated methods based upon an
estimated useful life of five years.
The components of the property and equipment are as follows:
Office equipment $ 6,189
Computers 5,360
--------------
Total cost 11,549
Less accumulated depreciation 5,150
Total property and equipment $ 6,399
==============
NOTE 9 DEFERRED TAX ASSETS
Deferred tax assets arise from the net operating loss carryforwards
Total deferred tax asset $ 102,000
Less valuation allowance 102,000
--------------
Net deferred tax asset $ 0
==============
NOTE 10 NET OPERATING LOSS CARRYFORWARD
The Company has the following net operating loss carryforwards:
Tax Year Amount Expiration date
----------------- ------------ -----------------
December 31, 1984 $ 5,296 December 31, 1999
December 31, 1985 28,128 December 31, 2000
December 31, 1987 3,600 December 31, 2001
December 31, 1998 370,360 December 31, 2018
------------
$ 407,384
============
See Accompanying Notes and Independent Auditors' Report.
F-45
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 11 SHORT TERM NOTES PAYABLE
The Company has two short term loans as follows:
A. Unsecured, 12% note dated June 3, 1998 for
$150,000 Canadian dollars. There is no due
date on the note. $ 95,856
B. Unsecured, no interest note dated September 28,
1998 for $50,000 Canadian dollars. There is no
due date on the note. 31,952
$ 127,808
==========
NOTE 12 ADVANCES ON STOCK SUBSCRIPTIONS
On September 2, 1998, the Company entered into an agreement to issue
500,000 shares of common stock to G.I. Joe Ltd., a United Kingdom
Corporation, for $0.25 per share or $125,000. As of December 31, 1998,
the Company received $23,900 on the stock subscription. The balance of
the funds were paid on January 15, 1999.
NOTE 13 PRIVATE PLACEMENT OF COMMON STOCK
On May 27, 1998, the Company sold 9,000,000 shares of its $0.001 par
value common stock for $0.01 per share. The shares were issued
pursuant to the provisions of Rule 504 of Regulation D promulgated by
the Securities and Exchange Commission.
The net proceeds to the Company were $90,000.
See Accompanying Notes and Independent Auditors' Report.
F-46
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 14 STOCK OPTIONS AND WARRANTS OUTSTANDING
A. The Company has incentive stock options outstanding at December
31, 1998 as follows:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Name of Optionee Shares Price Date
---------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
Milton M. Schlesinger 200,000 US $3.00 July 4, 2004
Steven Sobolewski 250,000 US $3.00 July 4, 2004
H. John Wilson 500,000 US $3.00 July 4, 2004
A. Leonard Taylor 500,000 US $3.00 July 4, 2004
Laurie G. Maranda 300,000 US $3.00 July 4, 2004
R. George Muscroft 300,000 US $3.00 July 4, 2004
Willi Magill 200,000 US $3.00 July 4, 2004
Detty Sangalang 200,000 US $3.00 July 4, 2004
Rene E. Cristobal 200,000 US $3.00 July 4, 2004
Carlos Fernandez 200,000 US $3.00 July 4, 2004
Robert Shoofey 200,000 US $3.00 July 4, 2004
Daniel Maarsman 200,000 US $3.00 July 4, 2004
Edward Cardozo 200,000 US $3.00 July 4, 2004
--------------
3,450,000
==============
</TABLE>
In addition there are options outstanding applicable to investment in
Projects in Palawan, Philippine (see note 5).
B. Warrants outstanding as of December 31, 1998
45,750 Shares at a price of Canadian $5.50 per share
if exercised on or before December 5, 1999
25,250 Shares at a price of Canadian $5.50 per share
if exercised on or before February 25, 2000
28,901 Shares at a price of Canadian $5.50 per share
if exercised on or before May 29, 2000
25,000 Shares at a price of Canadian $5.50 per share
if exercised on or before June 2, 2000
27,000 Shares at a price of Canadian $5.50 per share
if exercised on or before June 6, 2000
2,128 Shares at a price of United States $4.00 per
share if exercised on or before October 29, 2000
670 Shares at a price of United States $4.00 per
share if exercised on or before October 29, 2000
----------
154,699
==========
See Accompanying Notes and Independent Auditors' Report.
F-47
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 15 ISSUANCE OF 2,000,000 SHARES
On May 29, 1998, the Company issued 2,000,000 shares of common stock
to an officer and director of the Company for a total consideration of
$20,000.
NOTE 16 CONSULTING AGREEMENT WITH RELATED PARTIES
The Company assumed two consulting agreements with former directors of
Fenway Resources Ltd as follows:
R. George Muscroft - $5,000 Canadian dollars payable quarterly
Laurie Maranda - $5,000 Canadian dollars payable quarterly
NOTE 17 OPERATING LEASES
The Company is leasing office facilities in Vancouver, British
Columbia, Canada and Manila, Philippines as follows:
Vancouver
5 year lease expiring February 28, 2001 Monthly
rental of $308 plus occupancy costs
Manila
5 year lease expiring April 30, 2002 Monthly rental
of $1,754 plus occupancy costs
Future minimum lease payments are as follows:
December 31, 1999 $ 24,744
December 31, 2000 24,744
December 31, 2001 23,204
December 31, 2002 7,538
------------
$ 80,230
============
Rent expense for the year ended December 31, 1998 was $11,805.
NOTE 18 CONTINGENCIES
As explained in footnote number 3, the Company purchased all of the
assets of Fenway Resources Ltd. Fenway Resources Ltd. also had a
number of employment contracts with corporation officers. As of the
date of this report, it is not known if the employment contracts with
be transferred to and honored by Fenway International Inc.
See Accompanying Notes and Independent Auditors' Report.
F-48
<PAGE>
FENWAY INTERNATIONAL INC.
KNOWN AS NEVADA-UTAH GOLD, INC. IN 1997 AND 1996
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
NOTE 19 SUBSEQUENT EVENTS
The Company issued the following stock options in 1999:
Number of Exercise Expiration
Name of Optionee Shares Price Date
------------------- ------------ ---------- ------------
Patrick Hinds 100,000 US $4.00 February 18, 2000
Michael Laidlaw 200,000 US $4.00 February 15, 2000
------------
300,000
============
See Accompanying Notes and Independent Auditors' Report.
F-49
<PAGE>
Item 23. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B, except for the following:
In August 1998, the Company's former accountants, the firm of Anderson, Anderson
& Strong ("Anderson") were dismissed. Anderson's reports on the financial
statements for either of the past two (2) years did not contain an adverse
opinion or disclaimer of opinion and the reports were not modified as to
uncertainty, audit scope or accounting principals. The decision to change
accountants was recommended and approved by the Board of Directors and did not
result from any disagreement regarding the Company's policies or procedures.
There have been no disagreements with the Company's accountants since the
formation of the Company. In August 1998, a new accountant, Moffitt & Company,
PC was engaged as the principal accountant to audit the Company's financial
statements.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby has
been passed upon for the Company by Stepp & Beauchamp LLP, located in Newport
Beach, California.
EXPERTS
The financial statements of the Company for the years ended December 31, 1998,
1997 and 1996 and for the period ended September 30, 1999, appearing in this
Prospectus (which is part of a Registration Statement) have been audited by
Moffitt & Company, P.C., and are included in reliance upon such reports given
upon the authority of Moffitt & Company, P.C. as experts in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2 with the Commission pursuant
to the 1933 Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
on Form SB-2 and the exhibits and schedules to the Registration Statement on
Form SB-2. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement on Form
SB-2 and the exhibits and schedules filed as a part of the Registration
Statement on Form SB-2. Statements contained in this Prospectus concerning the
contents of any contract or any other document referred to are not necessarily
complete, and reference is made in each instance to the copy of such contract or
document filed as an exhibit to the Registration Statement on Form SB-2. Each
such statement is qualified in all respects by such reference to such exhibit.
On or about March 8, 1999, the Company filed a Registration Statement on Form
10-SB and four amendments thereto, which cleared comments by the Commission on
November 30, 1999. On May 7, 1999, the Company became a reporting company with
the Commission, and has filed quarterly reports with the Commission, which
include unaudited financial statements. The public may read and copy any
materials filed with the Commission, including our Registration Statement on
Form SB-2 and the Registration Statement on Form 10-SB, and all exhibits and
schedules thereto, at the Commission's Public Reference Room at 450 Fifth Street
N.W., Washington, D.C. 20549. Copies of all or any part thereof may be obtained
from such office after payment of fees prescribed by the Securities and Exchange
Commission. The public may also obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. The
Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Commission. The address of that site is
http://www.sec.gov. We currently maintain our own Internet address at
www.fenwayintl.com.
32
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article Tenth of the Company's Articles of Incorporation provides that no
director, officer or agent of the Company, including the Company's counsel,
shall be personally liable to the Company or any of its stockholders for
monetary damages for any breach or alleged breach of fiduciary or professional
duty by such person acting in such capacity. It shall be presumed that in
accepting the position as an officer, director, agent or counsel, said
individual relied upon and acted in reliance upon the terms and protections
provided for by this Article. Notwithstanding the foregoing sentences, a person
specifically covered by this Article, shall be liable to the extent provided by
applicable law, for acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or for the payment of dividends in
violation of Nevada Revised Statutes Section 78.300.
We will enter into indemnification agreements with each of our executive
officers pursuant to which we agree to indemnify each such person for all
expenses and liabilities, including criminal monetary judgments, penalties and
fines, incurred by such person in connection with any criminal or civil action
brought or threatened against such person by reason of such person being or
having been an officer or director or employee of the Company. In order to be
entitled to indemnification by us, such person must have acted in good faith and
in a manner such person believed to be in the best interests of the Company and,
with respect to criminal actions, such person must have had no reasonable cause
to believe his or her conduct was unlawful.
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION FOR
LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO PUBLIC
POLICY AND, THEREFORE, UNENFORCEABLE.
Item 25. Other Expenses of Issuance and Distribution
We will pay all expenses in connection with the registration and sale of the
Shares, except any selling commissions or discounts allocable to sales of the
Shares, fees and disbursements of counsel and other representatives of the
Selling Security Holders, and any stock transfer taxes payable by reason of any
such sale. The estimated expenses of issuance and distribution are set forth
below.
Registration Fees Approximately $ 5,880.58
Transfer Agent Fees Approximately $ 2,500.00
Costs of Printing and Engraving Approximately $ 300.00
Legal Fees Approximately $15,000.00
Accounting Fees Approximately $ 7,500.00
Item 26. Recent Sales of Unregistered Securities
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about May 27, 1998, we sold 11,000,000 shares of our $0.001 par value
common stock for $0.01 per share. The shares were issued in reliance upon the
exemption from the registration and prospectus delivery requirements of the
Securities Act of 1933 set forth in Section 3(b) of that act and Rule 504 of
Regulation D promulgated by the Securities and Exchange Commission. The offering
price for the shares was arbitrarily set by us and had no relationship to
assets, book value, revenues or other established criteria of value. There were
no commissions paid on the sale of shares. The net proceeds to us were $110,000.
The aggregate offering price was $110,000. We issued 9,000,000 shares of our
$.001 par value common stock to twenty (20) individuals, none of which are
affiliates of the Company. We issued 2,000,000 shares of our $.001 par value
common stock to Raghbir Kahbra, a director of the Company, as part of this
offering. Because Mr.
33
<PAGE>
Kahbra is a director of the Company, the shares of $.001 par value common stock
issued to Mr. Kahbra are subject to Rule 144 restrictions on resale or transfer.
We have issued stop transfer instructions to our Transfer Agent restricting
transfer of those 11,000,000 shares issued to these twenty individuals and Mr.
Kahbra until this registration statement for those 11,000,000 shares is
determined to be effective by the Securities and Exchange Commission.
On or about June 10, 1998, Fenway Resources Ltd., a British Columbia
corporation, pursuant to the provisions of Section 388 of the Delaware General
Corporation Law, was domesticated in the State of Delaware as a Delaware
corporation. As a result, the assets of Fenway Resources Ltd., a British
Columbia corporation, became the assets of Fenway Resources Ltd., a Delaware
corporation. On or about August 10, 1998, we entered into an Agreement of
Purchase and Sale of Assets with Fenway Resources Ltd., a Delaware corporation,
for the purpose of acquiring substantially all of the assets of Fenway Resources
Ltd., a Delaware corporation. We issued 7,644,067 shares of our $.001 par value
common stock to Fenway Resources Ltd., a Delaware corporation, in exchange for
the assets of Fenway Resources Ltd., a Delaware corporation, in reliance on the
exemption specified by the provisions of Section 4(2) of the Securities Act of
1933. Fenway Resources Ltd., a Delaware corporation, was the only party which
received shares of that common stock pursuant to that transaction. A copy of
that agreement was attached to Amendment No. 1 to Form 10-SB which was filed on
August 13, 1999 as Exhibit 10.2. The officers of Fenway Resources Ltd., a
British Columbia corporation, were H. John Wilson, Chief Executive Officer and
A. Leonard Taylor, Vice President and a Secretary. The directors of Fenway
Resources Ltd., a British Columbia corporation, were H. John Wilson, A. Leonard
Taylor, R. George Muscroft, Laurie Maranda, Rene E. Cristobel, Carlos A.
Fernandez and Milton Schlesinger. The officers of Fenway Resources Ltd., a
Delaware corporation are H. John Wilson, President and A. Leonard Taylor,
Secretary. At the time of the transaction pursuant to which the assets of Fenway
Resources Ltd., a Delaware corporation, were transferred to us, in exchange for
those 7,644,067 shares of our $.001 par value common stock, none of the officers
of Fenway Resources Ltd., a Delaware corporation, was an officer of the Company.
Additionally, at that time, no persons serving as a director of Fenway Resources
Ltd., a Delaware corporation, served as a member of our Board of Directors.
Fenway Resources Ltd., a Delaware corporation, is a sophisticated investor and
was provided complete access to all of our books, records and financial
statements.
In May 1998, our management, prior to our acquisition of the assets of Fenway
Resources Ltd., a British Columbia corporation, and also prior to our name
change from Nevada-Utah Gold, Inc., entered into an oral agreement with G.I. Joe
Limited, a United Kingdom corporation ("G.I. Joe"), affiliates of which include
Norhinder Singh and Karmit Kajr, whereby we agreed to sell to G.I. Joe 500,000
shares of our $.001 common stock at a purchase price of $.25 per share.
In August 1998, management of the Company changed. All of our officers and
directors, except Raghbir Kahbra, resigned at this time and the Board of
Directors of Fenway Resources Ltd., a British Columbia corporation, became our
new Board of Directors. Shortly thereafter, we changed our name to Fenway
International, Inc.
However, in July 1998, our former management had accepted $23,900 from G.I. Joe
as partial payment for the 500,00 shares which G.I. Joe had agreed to purchase
in May 1998. Because the shares had not been paid for in full, we did not issue
those shares, or any portion of those shares, to G.I. Joe.
In August 1998, our new management reviewed all our corporate books and records,
including financial statements, and questioned our former management regarding
this transaction. Our new management was informed that this agreement with G.I.
Joe was an oral agreement to purchase 500,000 shares of our common stock but
that only a partial payment had been made. On September 2, 1998, pursuant to a
directors' resolution, our new management, by and through our new board of
directors, approved, adopted, and ratified this oral agreement and agreed to
issue the shares upon our receipt of the remaining monies owed for the 500,000
shares.
On February 4, 1999, we received the remaining monies owed pursuant to this
transaction and those 500,000 shares were issued by us to G.I. Joe in July 1999.
Those 500,000 shares were issued in reliance upon an exemption from the
registration and prospectus delivery requirements of the Securities Act of 1933
("Act"), which exemption is specified in Section 3(b) of the Act and Rule 504 of
Regulation D promulgated by the Securities and Exchange Commission. We have
issued stop transfer instructions to our Transfer Agent restricting transfer of
those 500,000 shares issued to G.I. Joe until
34
<PAGE>
this registration statement for those 500,000 shares is determined to be
effective by the Securities and Exchange Commission.
On or about October 29, 1998, we sold 2,798 shares of our $0.001 par value
common stock for $3.00 per share to Mr. H. Scott (2,128 shares) and Mr. K.
Brause (670 shares). The shares were issued in reliance upon the exemption from
the registration requirements of the Securities Act of 1933 set forth in Section
3(b) of that Act and Rule 504 of Regulation D promulgated by the Securities and
Exchange Commission. The offering price for the shares was arbitrarily set by us
and had no relationship to assets, book value, revenues or other established
criteria of value. There were no commissions paid on the sale of shares. The net
proceeds to us were $8,394. We have issued stop transfer instructions to our
Transfer Agent restricting transfer of those 2,798 shares issued to Mr. Scott
and Mr. Brause until this registration statement for those 2,798 shares is
determined to be effective by the Securities and Exchange Commission.
During the period February 24, 1999 to April 12, 1999, we sold 29,000 shares of
our $0.001 par value common stock for $3.00 per share. The shares were issued in
reliance upon the exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933 set forth in Section 3(b) of that Act
and Rule 504 of Regulation D promulgated by the Securities and Exchange
Commission. The offering price for the shares was arbitrarily set by us and had
no relationship to assets, book value, revenues or other established criteria of
value. There were no commissions paid on the sale of shares. The aggregate
offering price was $87,000. The 29,000 shares of our $.001 par value common
stock were sold to five (5) individuals, none of which are affiliates of the
Company. 9,000 of these 29,000 shares of our $.001 par value common stock, which
were sold on April 12, 1999, are subject to the March 1999 Rule 504 Amendments.
We have issued stop transfer instructions to our Transfer Agent restricting
transfer of those 29,000 shares issued to these five individuals until this
registration statement for those 29,000 shares is determined to be effective by
the Securities and Exchange Commission.
Item 27. Exhibits.
Copies of the following documents are filed with this Registration Statement,
Form SB-2, as exhibits:
1. Underwriting Agreement (not applicable)
3.1 Corporate Charter of Nevada/Utah Gold Inc.
(Charter document)*
3.2 Bylaws of Nevada/Utah Gold Inc.
(Instrument defining the rights of
Security holders) *
3.3 Articles of Incorporation of
Nevada/Utah Gold Inc. (Charter document) *
3.4 Certificate of Amendment to the
Articles of Incorporation of
Nevada/Utah Gold Inc. authorizing
the name change (Charter document) *
3.5 Certificate of Amendment to the
Articles of Incorporation of
Fenway International Inc. authorizing
issuance of additional shares*
5. Opinion Re: Legality (not applicable)
35
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8. Opinion Re: Tax Matters (not applicable)
10.1 Option Agreement Regarding Negor RR Cement
Corporation Project*
10.2 Agreement of Purchase and Sale of Assets between
Fenway Resources Ltd. and Nevada/Utah Gold, Inc.
dated August 10, 1998*
10.3 Employment Agreement (H. John Wilson) *
10.4 Employment Agreement (A. Leonard Taylor) *
10.5 Employment Agreement (R. George Muscroft) *
10.6 Memorandum of Agreement (Dated August 29, 1996
by and between Central Palawan Mining & Industrial
Corporation and Fenway Resources Ltd.) *
10.7 Memorandum of Agreement (Dated November 11, 1996
by and between Palawan Star Mining Ventures, Inc. and
Fenway Resources Ltd.) *
10.8 Memorandum of Agreement (Dated November 11, 1996
by and between Pyramid Hill Mining & Industrial
Corporation and Fenway Resources Ltd.) *
10.9 Amendment to MOA and other Agreements dated
March 21, 1997 *
10.10 Agreement (Dated June 29, 1999) by and
between First Access Financial Group, Inc. and
Fenway International, Inc.***
11. Statement Re: Computation of Per Share Earnings****
15. Letter on Unaudited Interim Financial Information****
21 Corporate Chart*
23.1 Consent of Auditors
23.2 Consent of Counsel (not applicable)
24. Power of Attorney is included on the Signature Page of the
Registration Statement
27 Financial Data Schedule***
36
<PAGE>
* Previously filed as exhibits to Registration Statement on Form 10-SB filed
on March 8, 1999.
** Previously filed as exhibits to Amendment No. 1 to Form 10-SB filed on
August 13, 1999.
*** Previously filed as exhibits to Amendment No. 2 to Form 10-SB filed on
November 5, 1999.
**** Included in Financial Statements.
Item 28. Undertakings.
A. Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
B. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
1933 Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) (Section 230.424(b) of Regulation S-B)
if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement; and
(iii)To include any additional or changed material information with
respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
37
<PAGE>
SIGNATURES
In accordance with the requirements of the 1933 Act, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, in the City of Vancouver, British
Columbia, on December 10, 1999.
FENWAY INTERNATIONAL, INC.,
a Nevada corporation
By: /s/ H. John Wilson
---------------------------------
H. John Wilson
Its: President
38
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and hereby
authorizes H. John Wilson with the full power of substitution, as
attorney-in-fact, to sign in such person's behalf, individually and in each
capacity stated below, and to file any amendments, including post-effective
amendments to this Registration Statement.
In accordance with the requirements of the 1933 Act, this Registration Statement
was signed by the following persons in the capacities and on the dates stated.
FENWAY INTERNATIONAL, INC.,
/s/ H. John Wilson December 10, 1999
- --------------------------------
President and Director
/s/ A. Leonard Taylor December 10, 1999
- --------------------------------
Secretary, Vice President
and Director
39
23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 23, 1999 in the Registration Statement on Form
SB-2 and related Prospectus of Fenway International, Inc. for the registration
of 12,374,962 shares of its common stock.
/s/ Stan Moffitt
---------------------------
By: Stan Moffitt
For: Moffitt & Company, P.C.
