UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1999
|_| 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
incorporation or organization) Identification No.)
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)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |_| No |X|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
State issuer's revenues for its most recent fiscal year. $0.00
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) As of December 31,1999, approximately
$_________.
As of December 31, 1999, there were 20,037,141 shares of the issuer's $.001 par
value common stock issued and outstanding.
Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.
Transitional Small Business Disclosure format (check one):
|_| Yes |X| No
<PAGE>
PART I
Item 1. 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 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.
<PAGE>
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
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
1
<PAGE>
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 06/00-08/00 06/00-08/00
ground testing programs
- --------------------------------------------------------------------------------
Obtain financing 07/00 07/00
- --------------------------------------------------------------------------------
Complete land acquisitions for plant sites; 09/00-10/00 09/00-10/00
begin development of port site
- --------------------------------------------------------------------------------
Complete engineering 09/00-09/01 09/00-09/01
- --------------------------------------------------------------------------------
Begin plant construction 12/00 12/00
- --------------------------------------------------------------------------------
Negotiate and execute sales contracts 12/00-12/01 01/02-01/03
- --------------------------------------------------------------------------------
Complete plant construction and begin 03/03 12/03
cement production
- --------------------------------------------------------------------------------
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
2
<PAGE>
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.
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
3
<PAGE>
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.
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
4
<PAGE>
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 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.
5
<PAGE>
Item 2. Description of Property.
Property held by the Company. As of the date specified in the following table,
we held the following property:
- --------------------------------------------------------------------------------
Property December 31, 1999
- --------------------------------------------------------------------------------
Cash and equivalents $ 21,926.00
- --------------------------------------------------------------------------------
Advance Royalty Payments $ 160,813.00
- --------------------------------------------------------------------------------
Project Investments $2,685,687.00
- --------------------------------------------------------------------------------
Property and Equipment (consists of office equipment $ 4,791.00
and 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 $ 6,758
-------
Total property and equipment $ 4,791
-------
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, 1999, was $24,744. An escalation clause provides for future minimum
yearly lease payments, which are:
December 31, 2000 24,744
December 31, 2001 23,204
December 31, 2002 7,538
-------
$55,486
Item 3. Legal Proceedings.
The Company is not aware of any pending litigation nor does it have any reason
to believe that any such litigation exists.
6
<PAGE>
Item 4. Submission of Matters to Vote of Security Holders
Not applicable.
PART II
Item 5. Market Price for Common Equity and Related Stockholder Matters.
Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission ("SEC"). The public may read and copy any materials filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street N.W.,
Washington, D.C. 20549. The public may also obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov. We currently
maintain our own Internet address at www.fenwayintl.com.
Prices of Common Stock. Our common stock is quoted on the OTC Bulletin Board
(trading symbol: FWIN). Prior to our participation on the OTC Bulletin Board,
there was no public market for our common stock. Our common stock has closed at
a low of $0.75 and a high of $3.875 for the 52-week period ended April 10, 2000.
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 following table specifies the reported high and low sales or closing prices
of the Company's common stock on the OTCBB for the periods indicated.
- --------------------------------------------------------------------------------
Period High Low
- --------------------------------------------------------------------------------
October 1, 1999 - December 31, 1999 2.50 1.375
- --------------------------------------------------------------------------------
July 1, 1999 - September 30, 1999 3.75 2.00
- --------------------------------------------------------------------------------
April 1, 1999 - June 30, 1999 3.875 2.375
- --------------------------------------------------------------------------------
January 1, 1999 - March 31, 1999 5.125 2.125
- --------------------------------------------------------------------------------
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 31, 1999, 20,037,141 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. We have never declared or paid a cash dividend on our capital
stock and do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain our earnings, if any, for use
in our 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
our lenders.
7
<PAGE>
Stock Options. As of December 31, 1999, there were 4,016,926 incentive stock
options to purchase common stock at $3.00 per share, of which 3,416,926 expire
by their own terms on July 4, 2004 and 600,000 expire by their own terms on July
31, 2004.
Warrants. As of December 31, 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; 65,000 warrants to purchase common stock at $4.00 per share
outstanding which expire on June 10, 2001; 32,000 warrants to purchase common
stock at $4.00 per share outstanding which expire on February 11, 2001; 25,000
warrants to purchase common stock at $3.00 per share outstanding which expire on
September 11, 2001; 3,000 warrants to purchase common stock at $3.00 per share
outstanding which expire on September 11, 2001; 7,000 warrants to purchase
common stock at $3.00 per share outstanding which expire on March 12, 2001; and
11,112 warrants to purchase common stock at $3.00 per share outstanding which
expire on December 13, 2001.
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 4 to the Company's financial statements attached as
exhibits hereto). As of December 31, 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 December 31, 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 4 to the Company's financial
statements attached as exhibits hereto). Finally, as of December 31, 1999, there
were 1,000,000 warrants to purchase common stock at CDN$5.00 per share
outstanding which are exercisable at any time.
Item 6. Management's Discussion and Analysis of Financial Condition 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 ARE 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
8
<PAGE>
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.
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 December 31, 1999, we had cash resources of
$21,926 and a loan receivable of $90,811. 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.
Our Plan of Operation For Next 12 Months. We presently anticipate that initial
construction on the Palawan Project will begin in the fourth quarter of year
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 success is materially dependent upon our ability to satisfy additional
financing requirements. We are reviewing our options to raise substantial equity
capital. We cannot personally estimate when we will begin to realize positive
gross revenue. In order to satisfy our requisite budget, management has held and
continues to conduct negotiations with various investors. We anticipate that
these negotiations will result in additional investment income for us. To
achieve and maintain competitiveness, we may be required to raise additional
substantial funds. We anticipate that we will need to raise significant capital
to develop, promote and conduct its operations. Such capital may be raised
through public or private financing as well as borrowing and other sources.
There can be no assurance that funding for our operations will be available
under favorable terms, if at all. If adequate funds are not available, we may be
required to curtail operations significantly or to obtain funds by entering into
arrangements with collaborative partners or others that may require us to
relinquish rights to certain products and services that we would not otherwise
relinquish.
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.
9
<PAGE>
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.
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. Although companies and governments
in the United States spent an estimated $150 billion to $225 billion repairing
the problem, countries like Russia and China, which spent relatively minor
amounts, seemed to clear the New Year's Day hurdle with equal success. Major
news media in the United States are reporting that, after years of work and
billions of dollars spent repairing the Year 2000 computer glitch, the
technological tranquility of New Year's Day has raised a new concern that the
United States overreacted to this problem. Although it is still too soon to
conclude positively that the Y2K transition has passed without mishap, we
believe that Y2K issues will not have a material adverse affect on our business.
Changes in Number of Employees. During the next 12 months, depending on the
success of our market expansion plan, we may be required to hire additional
employees; however, we are not able to provide a reasonable estimate of the
number of such additional employees which may be required at this time.
Item 7. Financial Statements
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Annual Report on Form 10-KSB.
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
TABLE OF CONTENTS
Page No.
INDEPENDENT AUDITORS' REPORT ........................................ 1
FINANCIAL STATEMENTS
Balance Sheet................................................. 2
Statement of Comprehensive (Loss)............................. 3
Statements of Operations...................................... 4
Statement of Changes in Stockholders' Equity.................. 5 - 6
Statements of Cash Flows...................................... 7 - 8
Notes to Financial Statements................................. 9 - 24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Fenway International Inc.
Newport Beach, California
We have audited the accompanying balance sheet of Fenway International Inc. (A
Nevada Corporation) as of December 31, 1999, and the related statements of
comprehensive (loss), 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.
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 provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects the financial position of Fenway International Inc. as of
December 31, 1999 and the results of its operations and its cash flows for the
year then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred $1,030,580 of development costs
and is still developing its cement operations. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding this matter also are described in Note 18. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Moffitt & Company, P.C.
Scottsdale, Arizona
March 1, 2000
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Cash and cash equivalents $ 21,926
Advance royalty payments 160,813
Prepaid expenses 3,633
Investment in Palcan Mining and Cement Corporations 18,589
Investments in projects in The Republic of the Philippines 2,685,687
Loan receivable 90,811
G.S.T. refund 1,711
Property and equipment, net of accumulated depreciation 4,791
------------
TOTAL ASSETS $ 2,987,961
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable
Trade $ 67,159
Related parties 73,307
Accrued liabilities 24,778
Short term notes payable 137,656
-----------
TOTAL LIABILITIES $ 302,900
STOCKHOLDERS' EQUITY
Common stock, par value $0.001 per share
Authorized 100,000,000 shares
Issued and outstanding - 20,037,141 shares 20,037
Paid in capital in excess of par value of stock 3,712,623
Cumulative currency translation adjustment ( 17,019)
Deficit accumulated during development stage (1,030,580)
-----------
TOTAL STOCKHOLDERS' EQUITY 2,685,061
------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 2,987,961
============
See Accompanying Notes and Independent Auditors' Report.
2
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF COMPREHENSIVE (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1999
May 7, 1984
Year (Date of
Ended Inception) to
December 31, December 31,
1999 1999
------------- ---------------
NET (LOSS) $ ( 623,196) $ ( 1,030,580)
OTHER COMPREHENSIVE (LOSS)
Foreign currency translation
adjustments ( 17,019) ( 17,019)
------------- ---------------
NET COMPREHENSIVE (LOSS) $ ( 640,215) $ ( 1,047,599)
============= ===============
NET (LOSS) PER COMMON SHARE
Basic and diluted $ ( .03)
=============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic and diluted 19,884,488
=============
See Accompanying Notes and Independent Auditors' Report.
3
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1999
May 7, 1984
Year (Date of
Ended Inception) to
December 31, December 31,
1999 1999
------------- ---------------
REVENUE $ 0 $ 0
DEVELOPMENT COSTS 623,196 1,030,580
------------- ---------------
NET (LOSS) $ ( 623,196) $ ( 1,030,580)
============= ===============
See Accompanying Notes and Independent Auditors' Report.
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
DECEMBER 31, 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
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
</TABLE>
<PAGE>
Deficit
Cumulative Accumulated
Currency Advances During the
Translation On Stock Development
Adjustment Subscriptions Stage
$ 0 $ 0 $ 0
0 0 0
0 0 0
0 0 (5,296)
0 0 0
0 0 0
0 0 (28,128)
-------- -------- --------
0 0 (33,424)
-------- -------- --------
0 0 (33,424)
0 0 0
0 0 (3,600)
-------- -------- --------
0 0 (37,024)
0 0 0
0 0 0
0 0 0
See Accompanying Notes and Independent Auditors' Report.
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
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Paid In
Capital in
Excess of
Common Stock Par Value
Shares Amount of Stock
<S> <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
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
$ 3.00 - November 3, 1999 32,000 32 95,968
$ 2.25 - November 12, 1999 25,000 25 56,225
$ 2.25 - November 16, 1999 3,000 3 6,747
$ 2.00 - December 7, 1999 7,000 7 13,993
$ 2.25 - December 14, 1999 11,112 11 24,988
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)
Cumulative currency translation adjustment 0 0 0
Net (loss) for the year
ended December 31, 1999 0 0 0
------------------------ ------------ --------------
BALANCE, DECEMBER 31, 1999 20,037,141 $ 20,037 $ 3,712,623
======================== ============ ==============
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
5
<PAGE>
<TABLE>
<CAPTION>
Deficit
Cumulative Accumulated
Currency Advances During the
Translation On Stock Development
Adjustment Subscriptions Stage
<S> <C> <C> <C>
$ 0 $ 0 $ 0
0 0 0
0 0 0
0 0 ( 370,360)
------------------------------ ------------------------------ ------------------------------
0 0 ( 407,384)
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 0 0
0 24,221 0
0 0 0
0 ( 24,221) 0
( 17,019) 0 0
0 0 ( 623,196)
------------------------------ ------------------------------ ------------------------------
$ ( 17,019) $ 0 $ ( 1,030,580)
============================== ============================== ==============================
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
6
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
May 7, 1984
Year (Date of
Ended Inception) to
December 31, December 31,
1999 1999
------------------------------ ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ ( 623,196) $ ( 1,030,580)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities
Depreciation 1,608 2,195
Contributions to capital and stock issued for
expenses and services 0 9,000
Changes in operating assets and liabilities
Cash-held in lawyer's trust account 0 118,578
Interest receivable ( 1,867)
Accounts receivable 12,234 14,678
G.S.T. tax refund ( 1,711) ( 1,711)
Accounts payable 17,827 81,812
Accrued liabilities 18,063 24,778
-------------------- ----------------------
NET CASH (USED) BY OPERATING
ACTIVITIES ( 575,175) ( 783,117)
-------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Palcan Mining and Cement Corporations 4,969 ( 18,589)
Change in Loans receivable ( 5,600) ( 5,600)
-------------------- ----------------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES ( 631) ( 24,189)
-------------------- ----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 593,320 804,145
Proceeds from issuance of short term notes 9,848 42,106
-------------------- ----------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 603,168 846,251
-------------------- ----------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS ( 17,019) ( 17,019)
-------------------- ----------------------
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
7
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
DECEMBER 31, 1999
<TABLE>
<CAPTION>
May 7, 1984
Year (Date of
Ended Inception) to
December 31, December 31,
1999 1999
------------------------------ ----------------
<S> <C> <C>
NET INCREASE IN CASH AND CASH EQUIVALENTS $ 10,343 $ 21,926
CASH AT BEGINNING OF PERIOD 11,583 0
---------------- ------------------
CASH AT END OF PERIOD $ 21,926 $ 21,926
================ ==================
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
================ ==================
Taxes paid $ 0 $ 0
================ ==================
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
8
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
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
The Company accounts for income taxes on an asset and liability approach to
financial accounting. Deferred income tax assets and liabilities are
computed annually for the difference between the financial statements and
tax basis of assets and liabilities that will result in taxable or
deductible amounts in the future, based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income.
See Accompanying Notes and Independent Auditors' Report.
9
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes (Continued)
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period, plus or minus the change during the
period in deferred tax assets and liabilities.
The Company intends to reinvest its undistributed international earnings to
expand its international operations; therefore, no tax will be provided to
cover the repatriation of such future undistributed earnings.
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. In
accordance with FASB 128, potentially dilutive warrants and options that
would have an anti-dilutive effect 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 December 31, 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.
See Accompanying Notes and Independent Auditors' Report.
10
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of December 31, 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 $623,196 of development costs for
the year ended December 31, 1999 and $1,030,580 from May 7, 1984 (date of
inception) to December 31, 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:
See Accompanying Notes and Independent Auditors' Report.
11
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
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.
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.
See Accompanying Notes and Independent Auditors' Report.
12
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 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.
13
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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% 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 Independent Auditors' Report.
14
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 Independent Auditors' Report.
15
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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:
<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.
See Accompanying Notes and Independent Auditors' Report.
16
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 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.
See Accompanying Notes and Independent Auditors' Report.
17
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT - NEGOR RR
CEMENT PROJECT (CONTINUED)
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
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:
Office equipment $ 6,189
Computers 5,360
-------------------------
Total cost 11,549
Less accumulated depreciation 6,758
-------------------------
Total property and equipment $ 4,791
=========================
Depreciation expense for the year ended December 31, 1999 amounted to $1,608.
See Accompanying Notes and Independent Auditors' Report.
18
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 8 INCOME TAXES
<TABLE>
<CAPTION>
<S> <C>
(Loss) before income taxes $ ( 640,215)
------------------------------
The provision for income taxes is estimated as
follows:
Currently payable $ 0
------------------------------
Deferred $ 0
------------------------------
A reconciliation of the provision for income
taxes compared with the amounts at the U.S.
Federal Statutory and Foreign rates is as
follows:
Tax at U.S. Federal Statutory
income tax rates $ 0
------------------------------
Tax at foreign rates $ 0
------------------------------
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
------------------------------
The net deferred tax liability is $ 0
------------------------------
Temporary differences and carry forwards that
give rise to deferred tax assets and
liabilities include the following:
Deferred Tax
Assets Liabilities
Net operating losses $ 261,900 $ 0
Valuation allowance 261,900 0
------------------ -----------------
Total deferred taxes $ 0 $ 0
================== =================
A reconciliation of the valuation allowance is as follows:
Balance, January 1, 1999 $ 102,000
Addition for the year ended December 31, 1999 159,900
-----------------
Balance, December 31, 1999 $ 261,900
=================
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
19
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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:
<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. $ 103,242
B. Unsecured, 12% note dated September 28,
1998 for $50,000 Canadian dollars. There is no
due date on the note. 34,414
-------------------------
$ 137,656
=========================
</TABLE>
NOTE 11 STOCK OPTIONS
The Company has stock options outstanding at December 31, 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
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
20
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 11 STOCK OPTIONS (CONTINUED)
<TABLE>
<CAPTION>
Number of Exercise Expiration
Name of Optionee Shares Price Date
--------------------------------------- ------------------------ ------------------------ --------------
<S> <C> <C> <C>
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
J. Roderick Ainsworth 200,000 US $3.00 July 31, 2004
------------------------
4,016,926
</TABLE>
At December 31, 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 (loss) and (loss) per share would have been
increased 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 50%; risk-free interest rate 6.75%; 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) $ ( 623,196) $ ( 1,490,442)
Primary (loss) per share $ ( 0.03) $ ( 0.08)
A summary of the all options is as follows:
Balance at January 1, 1999 3,450,000
Options issued 900,000
Options exercised ( 33,074)
Options canceled ( 300,000)
------------------------
Balance at December 31, 1999 4,016,926
==========================
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
21
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 11 STOCK OPTIONS (CONTINUED)
Information regarding employee stock options outstanding as of December 31,
1999 is as follows:
<TABLE>
<CAPTION>
Options Outstanding
Weighted
Weighted Average
Average Remaining
Price Exercise Contractual
Range Shares Price Life
<S> <C> <C> <C> <C>
$ 3.00 4,016,926 $ 3.00 4 years, 6 months
Options Exercisable
Weighted
Average
Price Exercise
Range Shares Price
$ 3.00 0 N/A
</TABLE>
NOTE 12 STOCK WARRANTS
The following warrants are outstanding and applicable to investment in
projects in Palawan, Philippine.
Warrants outstanding as of December 31, 1999.
<TABLE>
<CAPTION>
<S> <C>
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 or
before October 29, 2000
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
</TABLE>
See Accompanying Notes and Independent Auditors' Report.
22
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 12 STOCK WARRANTS (CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
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
-------------------
297,811
</TABLE>
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 $18,066 of interest expense for the year ended
December 31, 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:
December 31, 2000 $ 24,744
December 31, 2001 24,744
December 31, 2002 7,538
------------------------
$ 57,026
========================
Rent expense for the year ended December 31, 1999 is $40,233.
See Accompanying Notes and Independent Auditors' Report.
23
<PAGE>
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 16 CONTINGENT EMPLOYMENT CONTRACTS
The Company has the following contingent employment contracts that only
become effective in the event of an unfriendly or hostile take over:
<TABLE>
<CAPTION>
Annual Expiration
Title Date Salary Date Renewable
<S> <C> <C> <C> <C>
President and
Chief Executive
Officer September 1, 1995$ 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 FINANCIAL CONSULTING AGREEMENTS
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.
NOTE 18 GOING CONCERN
The company is developing its cement operations in the Philippines and
needs substantial funds to complete the project. Management is proceeding
with its development plans and seeking new investors to finance the
project.
NOTE 19 SUBSEQUENT EVENT
Stock Options
In January 24, 2000, the Company issued options for 200,000 common shares
at United States $2.50. The options expire on January 24, 2001.
See Accompanying Notes and Independent Auditors' Report.
24
<PAGE>
Item 8. Changes in and Disagreements with Accountants.
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.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could have a material adverse effect on our operations, profits and
future development, if suitable replacements are not promptly obtained. We
anticipate that we will enter into employment agreements with each of our key
executives; however, no assurance can be given that each executive will remain
with us during or after the term of his or her employment agreement. In
addition, our success depends, in part, upon our ability to attract and retain
other talented personnel. Although we believe that our relations with our
personnel are good and that we will continue to be successful in attracting and
retaining qualified personnel, there can be no
10
<PAGE>
assurance that we will be able to continue to do so. All officers and directors
of the Company will hold office until their resignation or removal.
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 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
11
<PAGE>
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" 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
12
<PAGE>
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.
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.
There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any officer or director of the Company from engaging in or
continuing any conduct, practice or employment in connection with the purchase
or sale of securities, or convicting such person of any felony or misdemeanor
involving a security, or any aspect of the securities business or of theft or of
any felony, nor are any of the officers or directors of any corporation or
entity affiliated with the Company so enjoined.
Section 16(a) Beneficial Ownership Reporting Compliance. We do not presently
have knowledge as to whether all of our officers, directors, and principal
shareholders have filed all reports required to be filed by those persons on,
respectively, Form 3 (Initial Statement of Beneficial Ownership of Securities),
a Form 4 (Statement of Changes of Beneficial Ownership of Securities), or a Form
5 (Annual Statement of Beneficial Ownership of Securities).
Item 10. Executive Compensation
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 $50,000 during the
year ending December 31, 2000. The Board of Directors of the Company may adopt
an incentive stock option plan for its executive officers which would result in
additional compensation.
13
<PAGE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Other Annual All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Compensation($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. John Wilson, President 2000 400,000.00 None None None
- ------------------------------------------------------------------------------------------------------------------
A. Leonard Taylor, Secretary, 2000 300,000.00 None None None
- ------------------------------------------------------------------------------------------------------------------
Robert George Muscroft, Vice President 2000 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.
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
14
<PAGE>
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.
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>
15
<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. Certain Relationships and Related Transactions.
Transactions with Promoters.
Not applicable.
Related Party Transactions. There have been no related party transactions which
would be required to be disclosed pursuant to Item 404 of Regulation S-B, except
for the following:
On or about August 10, 1998, we purchased the assets of Fenway Resources, Ltd.,
a British 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
16
<PAGE>
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 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.
17
<PAGE>
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 @ CDN $2.00/share
(Approximately US$2.72)* (Approximately US$1.36)*
- ------------------------------------------------------------------------------------------------
With 1:1 warrant 1 million shares
@ CDN $3.00/share (Approximately US$2.04)* @ CDN $5.00/share
exercisable at any time (Approximately US$3.40)*
exercisable at any time
- ------------------------------------------------------------------------------------------------
</TABLE>
* Based on exchange rate of 1.47 Canadian dollars to US dollars, as of December
31, 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 13. Exhibits and Reports on Form 8-K
Copies of the following documents are filed with this Registration Statement,
Form SB-2, as exhibits:
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)
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*
18
<PAGE>
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.***
21 Corporate Chart*
27 Financial Data Schedule
* 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.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned in the City of Vancouver, British Columbia, on April 14, 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 April 13, 2000
--------------------------------------
Arthur Leonard Taylor
Its: Secretary, Vice President and Director
By: /s/ Robert George Muscroft April 14, 2000
--------------------------------------
Robert George Muscroft
Its: Vice President and Director
By: /s/ Rene Cristobel April 14, 2000
--------------------------------------
Rene Cristobel
Its: Director
By: /s/ Carlos A. Fernandez April 14, 2000
--------------------------------------
Carlos A. Fernandez
Its: Director
By: /s/ Raghbir Kahbra April 14, 2000
--------------------------------------
Raghbir Kahbra
Its: Director
20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 21,926 11,583
<SECURITIES> 0 0
<RECEIVABLES> 253,335 97,445
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 25,559 15,216
<PP&E> 11,549 11,549
<DEPRECIATION> (6,758) (5,150)
<TOTAL-ASSETS> 2,987,961 2,989,118
<CURRENT-LIABILITIES> 302,900 73,850
<BONDS> 0 0
0 0
0 0
<COMMON> 20,037 19,361
<OTHER-SE> 2,665,024 2,688,695
<TOTAL-LIABILITY-AND-EQUITY> 2,987,961 2,989,118
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 640,215 370,360
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (640,215) (370,360)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (640,215) (370,360)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (640,215) (370,360)
<EPS-BASIC> (.030) (.038)
<EPS-DILUTED> (.030) (.038)
</TABLE>
