UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from ____________ to
____________
Commission File Number: ____________
FENWAY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 98-0203850
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
308-409 Granville Street, Vancouver, British Columbia, Canada V6C 1T2
(Address of principal executive offices) (Zip Code)
604.844.2265
(Registrant's Telephone Number, Including Area Code)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of November 13, 2000, there were
20,365,141 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
<PAGE>
PART I - FINANCIAL INFORMATION
The consolidated condensed interim financial statements included herein have
been prepared by Fenway International, Inc., without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although we believe
that the disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of the management, are necessary for fair
presentation of the information contained herein. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
financial statements and notes thereto included in our Annual Report on Form
10-KSB for the year ended December 31, 1999. We follow the same accounting
policies in preparation of interim report.
Item 1. Financial Statements
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
2000 1999
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 2,869 $ 21,926
Advance royalty payments 160,813 160,813
Prepaid expenses 3,633 3,633
G.S.T. refund 608 1,711
Investment in Palcan Mining and Cement Corporations 10,225 18,589
Investments in projects in The Republic of the Philippines 2,685,687 2,685,687
Loans receivable 99,356 90,811
Property and equipment, net of accumulated depreciation 3,582 4,791
----------- -----------
TOTAL ASSETS $ 2,966,773 $ 2,987,961
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable
Trade $ 62,987 $ 67,159
Related parties 76,260 73,307
Accrued liabilities 35,978 24,778
Short-term notes payable 133,253 137,656
----------- -----------
TOTAL LIABILITIES 308,478 302,900
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, par value $0.001 per share
Authorized 100,000,000 shares
Issued and outstanding - 20,365,141 shares 20,365 20,037
Paid in capital in excess of par value of stock 4,202,295 3,712,623
Cumulative currency translation adjustment (24,302) (17,019)
Deficit accumulated during development stage (1,540,063) (1,030,580)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,658,295 2,685,061
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,966,773 $ 2,987,961
=========== ===========
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
2
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF COMPREHENSIVE INCOME(LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, May 7, 1984 (Date of
------------- ------------- Inception) to
2000 1999 2000 1999 September 30, 2000
---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
NET (LOSS) $(120,132) $(275,631) $ (509,483) $ (398,503) $(1,540,063)
OTHER COMPREHENSIVE INCOME
(LOSS)
Foreign currency translation
adjustments 180 0 (7,283) 0 (24,302)
--------- --------- ----------- ----------- -----------
NET COMPREHENSIVE
(LOSS) $(119,952) $(275,631) $ (516,766) $ (398,503) $(1,564,365)
========= ========= =========== =========== ===========
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
3
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, May 7, 1984 (Date of
------------- ------------- Inception) to
2000 1999 2000 1999 September 30, 2000
---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0 $ 0 $ 0
DEVELOPMENT COSTS 120,132 275,631 509,483 398,503 1,540,063
------------ ------------ ------------ ------------ ------------
NET (LOSS) $ (120,132) $ (275,631) $ (509,483) $ (398,503) $ (1,540,063)
============ ============ ============ ============ ============
NET (LOSS) PER COMMON
SHARE
Basic and diluted $ (.01) $ (.01) $ (.03) $ (.02)
============ ============ ============ ============
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING
Basic and diluted 20,227,141 19,901,729 20,285,474 19,901,729
============ ============ ============ ============
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
4
<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, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Paid In Deficit
Capital in Cumulative Accumulated
Common Stock Excess of Currency Advances During the
------------ Par Value Translation On Stock Development
Shares Amount of Stock Adjustment Subscriptions Stage
------ ------ -------- ---------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MAY 7, 1984 $ 0 $ 0 $ 0
(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 0 0 0
Issuance of common stock for
cash at $.267 - May 7, 1984 8,610 9 2,287 0 0 0
Net (loss) for the period ended
December 31, 1984 0 0 0 0 0 (5,296)
--------- --------- --------- -------- -------- --------
BALANCE, DECEMBER 31, 1984 608,610 609 4,687 0 0 (5,296)
Issuance of common stock for
services at $.267 -
February 3, 1985 9,000 9 2,391 0 0 0
Issuance of common stock for
cash at $.267 - February 3, 1985 96,480 96 25,632 0 0 0
Net (loss) for the year ended
December 31, 1985 0 0 0 0 0 (28,128)
--------- --------- --------- -------- -------- --------
BALANCE, DECEMBER 31, 1985 714,090 714 32,710 0 0 (33,424)
--------- --------- --------- -------- -------- --------
BALANCE, DECEMBER 31, 1996 714,090 714 32,710 0 0 (33,424)
Contribution to capital -
expenses - 1997 0 0 3,600 0 0 0
Net (loss) for the year ended
December 31, 1997 0 0 0 0 0 (3,600)
--------- --------- --------- -------- -------- --------
BALANCE, DECEMBER 31, 1997 714,090 714 36,310 0 0 (37,024)
Contribution to capital -
expenses - 1998 0 0 1,300 0 0 0
Issuance of common stock
for cash
$.01 - May 29, 1998 2,000,000 2,000 18,000 0 0 0
$.01 - June 9, 1998 9,000,000 9,000 81,000 0 0 0
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
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, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Paid In Deficit
Capital in Cumulative Accumulated
Common Stock Excess of Currency Advances During the
------------ Par Value Translation On Stock Development
Shares Amount of Stock Adjustment Subscriptions Stage
------ ------ -------- ---------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for
net assets of Fenway
Resources Ltd - $.387 -
August 31, 1998 7,644,067 $ 7,644 $2,950,988 $ 0 $ 0 $ 0
Issuance of common stock
for cash
$3.00 - October 29, 1998 2,128 2 6,450 0 0 0
$3.00 - October 29, 1998 670 1 2,031 0 0 0
Net (loss) for the year
ended December 31, 1998 0 0 0 0 0 (370,360)
---------- ---------- ---------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 19,360,955 19,361 3,096,079 0 0 (407,384)
Issuance of common stock for cash
$ .25 - February 4, 1999 500,000 500 124,500 0 0 0
$ 3.00 - February 24, 1999 2,000 2 5,998 0 0 0
$ 3.00 - March 16, 1999 5,000 5 14,995 0 0 0
$ 3.00 - March 17, 1999 4,000 4 11,996 0 0 0
$ 3.00 - March 30, 1999 9,000 9 26,991 0 0 0
$ 3.00 - April 12, 1999 5,000 5 14,995 0 0 0
$ 3.00 - November 3, 1999 32,000 32 95,968 0 0 0
$ 2.25 - November 12, 1999 25,000 25 56,225 0 0 0
$ 2.25 - November 16, 1999 3,000 3 6,747 0 0 0
$ 2.00 - December 7, 1999 7,000 7 13,993 0 0 0
$ 2.25 - December 14, 1999 11,112 11 24,988 0 0 0
Advances on stock subscriptions 0 0 0 0 24,221 0
$3.00 - July 2, 1999 65,000 65 194,935 0 0 0
$3.00 - September 9, 1999 8,074 8 24,213 0 (24,221) 0
(Transferred from advances on
stock subscriptions)
Cumulative currency translation
adjustment 0 0 0 (17,019) 0 0
Net (loss) for the year
ended December 31, 1999 0 0 0 0 0 (623,196)
---------- ---------- ---------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1999 20,037,141 20,037 3,712,623 (17,019) 0 (1,030,580)
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
6
<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, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Paid In Deficit
Capital in Cumulative Accumulated
Common Stock Excess of Currency Advances During the
------------ Par Value Translation On Stock Development
Shares Amount of Stock Adjustment Subscriptions Stage
------ ------ -------- ---------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock for cash
$1.50 - March 6, 2000, net of cost 228,000 $ 228 $ 339,772 $ 0 $ 0 $ 0
$1.50 - May 29, 2000 100,000 100 149,900 0 0 0
Cumulative currency translation
adjustment 0 0 0 (7,283) 0 0
Net (loss) for the nine months
ended September 30, 2000 0 0 0 0 0 (509,483)
---------- ---------- ---------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 2000 20,365,141 $ 20,365 $4,202,295 $ (24,302) $ 0 $(1,540,063)
========== ========== ========== =========== =========== ===========
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
7
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
May 7, 1984
Nine Months Ended (Date of
September 30, Inception) to
------------- September 30,
2000 1999 2000
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (509,483) $ (398,503) $(1,540,063)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities
Depreciation 1,447 1,206 3,642
Contributions to capital and stock issued for
expenses and services 0 0 9,000
Changes in operating assets and liabilities
Cash-held in lawyer's trust account 0 0 118,578
Interest receivable 0 (4,200) (1,867)
Accounts receivable 0 (3,239) 14,678
G.S.T. tax refund 1,103 0 (608)
Accounts payable (1,219) (12,438) 81,069
Accrued liabilities 11,200 9,326 35,978
----------- ----------- -----------
NET CASH (USED) BY OPERATING
ACTIVITIES (496,952) (407,848) (1,279,593)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Palcan Mining and Cement
Corporations 8,364 12,851 (10,463)
Change in loans receivable (8,545) 0 (14,383)
Purchase of property and equipment (238) 0 (238)
----------- ----------- -----------
NET CASH (USED) BY INVESTING
ACTIVITIES (419) 12,851 (25,084)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 490,000 395,000 1,294,145
Changes in short term notes (4,403) 7,648 37,703
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 485,597 402,648 1,331,848
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (7,283) 0 (24,302)
----------- ----------- -----------
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
8
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
May 7, 1984
Nine Months Ended (Date of
September 30, Inception) to
------------- September 30,
2000 1999 2000
---- ---- ----
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (19,057) $ 7,651 $ 2,869
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 21,926 11,583 0
---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 2,869 $ 19,234 $ 2,869
========== ==========
SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of 400,000 shares of common stock for
mineral lease (unknown value) and expenses - 1984 $ 0 $ -- $ 3,000
---------- ---------- ----------
Issuance of 9,000 shares of common stock for
services - 1985 $ 0 $ -- $ 2,400
---------- ---------- ----------
Contribution to capital - expenses - 1997 $ 0 $ -- $ 3,600
---------- ---------- ----------
Contribution to capital - expenses - 1998 $ 0 $ -- $ 1,300
---------- ---------- ----------
Issuance of 7,644,067 shares of stock for
Fenway Resources Ltd.- August 31, 1998 $ 0 $ -- $2,918,215
---------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid $ 0 $ 0 $ 0
========== ========== ==========
Taxes paid $ 0 $ 0 $ 0
========== ========== ==========
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
9
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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
and is currently engaged in the development of these properties.
Cash and 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.
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 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.
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.
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
basis 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.
See Accompanying Notes and Independent Accountants' Reports.
10
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 (loss) per
share. Basic earnings (loss) per share is computed by dividing net income
(loss) available to common shareowners by the weighted average number of
common shares outstanding for the period. Diluted earnings (loss) 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. In accordance with FASB 128, any anti-dilutive effects on net loss
per share are excluded.
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, 2000 and 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.
Long-Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
asset in question may not be recoverable. This standard did not have a
material effect on the Company's results of operations, cash flows or
financial position.
See Accompanying Notes and Independent Accountants' Reports.
11
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. The assets and liabilities of the company's foreign
operations are generally translated into U.S. dollars at current exchange
rates, and revenues and expenses are translated at the date the revenue or
expense is incurred.
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of September 30, 2000, 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.
The Company expensed $509,483 and $398,503 of development costs for the
nine months ended September 30, 2000 and 1999, respectively, and $1,540,063
from May 7, 1984 (date of inception) to September 30, 2000.
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
See Accompanying Notes and Independent Accountants' Reports.
12
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 3 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:
<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 International Inc. 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.
See Accompanying Notes and Independent Accountants' Reports.
13
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 3 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 International Inc. 4,496 4,496,000 4,496,000
--------- --------- ---------
5,000 p 5,000,000 p 4,625,000
========= = ========= = =========
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
14
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 3 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 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% equity interest in the JVMC.
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 Independent Accountants' Reports.
15
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
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. Equity Interest
10% equity interest 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.
G. Share Options and Warrants
I. The Consortium members will have options to purchase Fenway
shares, subject to regulatory approvals, as follows:
See Accompanying Notes and Independent Accountants' Reports.
16
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - CONSORTIUM AGREEMENT
(CONTINUED)
<TABLE>
<CAPTION>
CPMIC PALAWAN STAR PYRAMID HILL
----- ------------ ------------
<S> <C> <C>
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
</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.
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
See Accompanying Notes and Independent Accountants' Reports.
17
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES- OPTION AGREEMENT- NEGOR RR
CEMENT PROJECT (CONTINUED)
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 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.
See Accompanying Notes and Independent Accountants' Reports.
18
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT - NEGOR RR
CEMENT PROJECT (CONTINUED)
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
On September 6, 1995, the Company loaned $80,000 to Central Palawan Mining
& Industrial Corp., Palawan Star Mining Ventures Inc. and Pyramid Hill
Mining & Industrial Corp. This loan bears interest at 7% per annum from
date of signing until repaid in full.
NOTE 7 PROPERTY AND EQUIPMENT
The components of the property and equipment are as follows:
2000 1999
---- ----
Office equipment $ 6,427 $ 6,189
Computers 5,360 5,360
------- -------
Total cost 11,787 11,549
Less accumulated depreciation 8,205 6,356
------- -------
Total property and equipment $ 3,582 $ 5,193
======= =======
Depreciation expense for the nine months ended September 30, 2000 and 1999
amounted to $1,447 and $1,206, respectively.
See Accompanying Notes and Independent Accountants' Reports.
19
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 8 INCOME TAXES
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
(Loss) before income taxes $(509,483) $ 398,503
--------- ---------
The provision for income taxes is estimated as
follows:
Currently payable $ 0 $ 0
--------- ---------
Deferred $ 0 $ 0
--------- ---------
A reconciliation of the provision for income
taxes compared with the amounts at the
Federal Statutory and Foreign income tax rates
is as follows:
Tax at Federal Statutory
income tax rates $ 0 $ 0
--------- ---------
Tax at Foreign income tax rates $ 0 $ 0
--------- ---------
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Deferred income tax assets and liabilities
reflect the impact of temporary differences
between amounts of assets and liabilities for
financial reporting purposes and the basis of
such assets and liabilities as measured by tax
laws
The net deferred tax asset is: $ 0 $ 0
--------- ---------
The net deferred tax liability is: $ 0 $ 0
--------- ---------
Temporary differences and carry forwards that
give rise to deferred tax assets and
liabilities include the following:
<CAPTION>
Deferred Tax
------------
Assets Liabilities
------ -----------
<S> <C> <C>
Net operating losses $ 397,000 $ 0
Valuation allowance 397,000 0
--------- ---------
Total deferred taxes $ 0 $ 0
========= =========
</TABLE>
See Accompanying Notes and Independent Accountants' Reports.
20
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 8 INCOME TAXES (CONTINUED)
A reconciliation of the valuation allowance is as follows:
2000 1999
---- ----
Balance, beginning of period $261,900 $163,000
Addition for the nine months 135,100 42,000
-------- --------
Balance, end of period $397,000 $205,000
======== ========
NOTE 9 NET OPERATING LOSS CARRYFORWARDS
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
December 31, 1999 623,196 December 31, 2019
-----------
$ 1,030,580
===========
NOTE 10 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. $ 99,940
B. Unsecured, 12% note dated September 28, 1998
for $50,000 Canadian dollars. There is no due
date on the note. 33,313
---------
$ 133,253
=========
See Accompanying Notes and Independent Accountants' Reports.
21
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 11 STOCK OPTIONS
The Company has stock options outstanding at September 30, 2000 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 4, 2004
William Anderson 200,000 US $3.00 July 31, 2004
J. Roderick Ainsworth 200,000 US $3.00 July 31, 2004
Setphen C. Bauer 300,000 US $1.75 September 28, 2001
---------
4,316,926
</TABLE>
A summary of the all options is as follows:
Balance at January 1, 2000 4,016,926
Options issued 600,000
Options exercised 0
Options canceled (300,000)
----------
Balance at September 30, 2000 4,316,926
==========
NOTE 12 STOCK WARRANTS
The following warrants are outstanding and applicable to investment in
projects in Palawan, Philippine.
Warrants outstanding as of September 30, 2000.
See Accompanying Notes and Independent Accountants' Reports.
22
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 12 STOCK WARRANTS (CONTINUED)
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 26, 2001
670 Shares at a price of United States $4.00 per share if
exercised on or before October 26, 2001
65,000 Shares at a price of United States $4.00 per share if
exercised on or before June 10, 2001
32,000 Shares at a price of United States $4.00 per share if
exercised on or before February 11, 2001
25,000 Shares at a price of United States $3.00 per share if
exercised on or before September 11, 2001
3,000 Shares at a price of United States $3.00 per share if
exercised on or before September 11, 2001
7,000 Shares at a price of United States $3.00 per share if
exercised on or before March 12, 2001
11,112 Shares at a price of United States $3.00 per share if
exercised on or before December 13, 2001
228,000 Shares at a price of United States $3.00 per share if
exercised on or before March 6, 2002
100,000 Shares at a price of United States $3.00 per share if
exercised on or before May 29, 2002
625,811
=======
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 $14,500 of interest expense for the nine months ended
September 30, 2000.
See Accompanying Notes and Independent Accountants' Reports.
23
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
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 - month to month rental
Future minimum lease payments are as follows:
September 30, 2000 $ 1,540
========
Rent expense for the nine months ended September 30, 2000 and 1999 was
$33,200 and $25,620, respectively.
NOTE 16 CONTINGENT EMPLOYMENT CONTRACTS
The Company has the following contingent employment contracts that only
become effective in the event of an unfriendly or hostile take over:
<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
</TABLE>
NOTE 17 GOING CONCERN
The company is developing its cement operations in the Philippines and
needs substantial funds to complete the project. Management is in the
process of completing loans and export credits sufficient to develop the
project. As of the date of this report, the financial negotiations have not
been completed and the company is awaiting a commitment letter from the
investor.
NOTE 18 UNAUDITED FINANCIAL INFORMATION
The accompanying financial information as of September 30, 2000 and 1999 is
unaudited. In managements opinion, such information includes all normal
recurring entries necessary to make the financial information not
misleading.
See Accompanying Notes and Independent Accountants' Reports.
24
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. No assurance can be
given that any of the assumptions relating to the forward-looking statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.
The financial projections in this report have been prepared to us and are based
on certain assumptions regarding future operations. The projections are an
estimate only, based on certain assumptions which may prove to be inaccurate and
which are subject to future conditions over which we may have no control. There
is absolutely no assurance that we will experience the operating results
depicted in the financial projections.
The financial projections were prepared by our management and have not been
examined or complied by independent certified public accountants or our legal
counsel. The accountants and legal counsel have not participated in the
preparation or review of the financial projections. Accordingly, our legal
counsel and accountants cannot provide any level of assurance on them.
Our Business. 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 Palawan (the "Palawan Project"). The necessary
permits and environmental approvals for a proposed facility on the island of
Negros Oriental (the "Negros Project") have already been received. We are
required to participate with local corporations in the Philippines in order to
commercially exploit Philippine mineral claims and, therefore, we have
incorporated two 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.
25
<PAGE>
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 forty percent
(40%) of the total issued and outstanding capital stock of NMC. As a
result of such ownership interest, Negor Corporation shall be entitled
to have allocated to it forty percent (40%) 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 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 us forty percent
(40%) 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 ten percent
(10%) 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 ten percent (10%) of the net profits, losses and
credits of NCC. 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 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 NCC.
E. NMC 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.
F. 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 development program for the Negros Oriental Project will be similar to that
for Palawan, except for the power plant. As there is already a source of power
supply available in Negros Oriental, the cement plant will only require an
electrical distribution system, which, we believe, will reduce capital costs by
$40 million.
We believe that the development of the Negros Oriental cement plant will be
approximately one year after the start of the Palawan cement project. During
this one year period, work will be undertaken to upgrade the original
environmental studies, bring the engineering reports to bankable standards, to
drill and test the limestone deposits, and to obtain land for the plant site.
The Palawan Project. The Palawan Project has been under development by us for
more than five years in association with local Philippine mining and development
interests. Our predecessor company, Fenway Resources Ltd., a British Columbia
corporation, acquired mineral rights to 10,296 hectares in 1992 and 3,200
hectares in 1995 in three (3) contiguous claim blocks on the west central
portion of Palawan Island near Scott Point, Municipality of Sofronio Espanola,
Palawan, Philippines. Explorations by the Philippine government first confirmed
the existence of limestone deposits in the central part of Palawan. We retained
Kilborn Engineering Pacific Ltd., now known as Kilborn-SNC Lavalin Inc., to
prepare a project feasibility study which was completed in 1995. This study
concluded our claims have
26
<PAGE>
significant resources of limestone and shale, the two main ingredients for the
manufacture of Portland Cement, and that a cement 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 or indigenous
people.
As required by the Philippine Government, formal application for the final
environmental certification of the Palawan Project will be submitted to the
Philippine Department of Environment and Natural Resources after receipt of the
Mineral Production Sharing Agreement, which is currently under departmental
review.
In addition, we have conducted professional hearings and discussions with all
levels of government, with indigenous leaders, and with local landowners who
might be affected by the Palawan Project. The project in production will
stimulate local economic development and employment and we have received strong
local support for the Palawan Project as evidenced by the Palawan Council for
Sustainable Development endorsement of the environmental compliance certificate
and letters of recommendation from local government units and endorsement of the
project from indigenous people as evidenced by the National Commission on
Indigenous Peoples' Certificate.
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.
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 Krupp 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 Krupp Polysius or Bilfinger + Berger will
provide equipment or services to us.
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 $340 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% can be financed by equity investments.
The approximately $500 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 $215 million may be
received from a registered offering of our common or preferred stock, probably
through brokerage firms located in New York, complemented by one or more private
placements of our common stock. In addition, approximately $110 million may be
provided by contractors for the quarry and power plant which will reduce
Fenway's need for equity financing.
Products. We are not currently producing any products or supplying any services
to any third parties. However, we are currently negotiating contracts to supply
cement to our customers from other cement suppliers in order to create markets
for our production as well as cash flow prior to start up. 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
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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.
Results of Operations. We have not yet realized any revenue from operations, as
our cement manufacturing facilities are presently in the development stage.
Liquidity and Capital Resources. At September 30, 2000, we had cash resources of
$2,869 and a loan receivable of $99,356. 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 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.
Our Plan of Operation For Next 12 Months. Based on current discussions, we
presently anticipate that the necessary financing for the Palawan Project will
be secured during the last quarter of 2000, which will allow us to begin our
preliminary engineering programs during the fourth quarter and initiate
construction in the first quarter of 2001. Emphasis will be initially on
completing the port site which is necessary to enable supplies and materials to
be delivered for construction of the plant.
The Palawan Project will be the only cement manufacturing facility on the island
of Palawan. We anticipate that the facility will have an initial production
capacity of 2.5 million tonnes per year with expansion capability to ten to
twelve million tonnes per year. Negotiations with potential suppliers indicate
that the port site and power plants could be provided on a BOT basis which, we
believe, would reduce our financing costs by approximately $90 million. In
addition, as a result of our discussions with Krupp-Polysius, we would take
delivery of the manufacturing equipment earlier than expected, thus advancing
our start-up date by up to six months.
Our development schedule contemplates that cement plant construction will
commence in the second quarter of 2001 after completion of the initial design
engineering and construction of the port facilities. We anticipate that all
facilities will be constructed by the end of 2002 and full production should
begin in the first quarter of 2003. When direct project development and
construction is in progress, we anticipate that other activities will commence
including environmental requirements and community related initiatives. We
believe that the cement plant will provide economic growth for the southern part
of Palawan and we will be actively involved in developing beneficial programs to
assist the local and indigenous people.
The Negros Oriental Project will consist of a cement plant of 1.5 million tonnes
per year capacity with expansion capability to 3 million tonnes per year. We
anticipate that the Negros Oriental Project will basically duplicate the Palawan
development program and development will commence one year after construction
begins at Palawan.
We have solicited and received bids for an exploratory drilling program to
confirm the full extent of the limestone reserves on Negor Corporation's Negros
Oriental Province mineral claims. 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 for the Negros Project
and we anticipate that the drilling will commence as soon as the necessary
regional work permits are received.
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Our success is dependent upon our ability to secure the necessary financing.
Through the efforts of Krupp-Polysius and Belfinger + Berger, we have received a
letter of interests from German banks to provide all of the export credit and
loan funding. We are currently conducting negotiations for all of the equity
requirements which we believe will be completed in the last quarter of 2000. We
may also obtain financing from the individual contractors for the port, power
and quarry facilities which would reduce our overall financing needs.
If we do not obtain adequate financing, we may need to delay the program or to
enter into arrangements with other companies interested in developing cement
plants in the Philippines.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned in the City of Vancouver, British Columbia, on November 20, 2000.
Fenway International, Inc.,
a Nevada corporation
By: /s/ H. John Wilson
-----------------------------------
H. John Wilson
Its: President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Fenway International, Inc.
By: /s/ Arthur Leonard Taylor November 20, 2000
------------------------------------------
Arthur Leonard Taylor
Its: Secretary, Vice President and Director
By: /s/ Robert George Muscroft November 20, 2000
-----------------------------------
Robert George Muscroft
Its: Vice President and Director
By: /s/ Rene Cristobel November 20, 2000
------------------------------------------
Rene Cristobel
Its: Director
By: /s/ Carlos A. Fernandez November 20, 2000
------------------------------------------
Carlos A. Fernandez
Its: Director
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