UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the quarterly period ended March 31, 2002
[ ] 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: 000-30174
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)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of March 31, 2002, there were
20,871,122 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
The consolidated condensed interim financial statements included herein have
been prepared by Fenway International, Inc., without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although we believe
that the disclosures are adequate to make the information presented not
misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments which, in the opinion of the management, are necessary for fair
presentation of the information contained herein. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
financial statements and notes thereto included in our Annual Report on Form
10-KSB for the year ended December 31, 2001. We follow the same accounting
policies in preparation of the interim report.
The financial statements required by Item 1 are presented in the following
order:
2
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 2002
(UNAUDITED)
3
TABLE OF CONTENTS
Page No.
---------
INDEPENDENT ACCOUNTANTS' REVIEW REPORT ......................... 5
FINANCIAL STATEMENTS
Balance Sheets............................................ 6
Statements of Comprehensive (Loss)........................ 7
Statements of Operations.................................. 8
Statement of Stockholders' Equity......................... 10 -15
Statements of Cash Flows.................................. 16 - 17
Notes to Financial Statements............................. 18 - 42
4
MOFFITT & COMPANY, P.C.
- ------------------------------------------------------------------------------
Certified Public Accountants 5040 East Shea Blvd., Suite 270
Scottsdale, Arizona 85254
(480) 951-1416
Fax (480) 948-3510
moffittcpas@eschelon.com
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Stockholders
Fenway International Inc.
We have reviewed the accompanying balance sheets of Fenway International Inc. (a
Nevada corporation) as of March 31, 2002 and the related statements of
comprehensive (loss), operations, and cash flows for the three months ended
March 31, 2002 and 2001, and the statement of stockholders' equity from May 7,
1984 (date of inception) to March 31, 2002, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Fenway International Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continued as a going concern. As discussed in Note 17 to the
financial statements, the Company has a deficit working capital, has incurred
development losses of $2,380,691 from inception and needs financing to develop
the cement operations. These conditions raise uncertainty about its ability to
continue as a going concern. Management's plans regarding these matters also are
described in Note 17. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
We have audited in accordance with auditing standards generally accepted in the
United States of America, the balance sheet of Fenway International Inc. as of
December 31, 2001 and the related statements of comprehensive (loss),
operations, stockholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated April 4, 2002, we expressed an
unqualified opinion on these financial statements, with an additional comment
that there were conditions which raised substantial doubts about the Company's
ability to continue as a going concern. In our opinion, the information set
forth in the accompanying balance sheet as of December 31, 2001 is fairly stated
in all material respects in relation to the balance sheet from which it has been
derived.
Moffitt & Company, P.C.
Scottsdale, Arizona
June 14, 2002
5
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
MARCH 31, 2002 AND DECEMBER 31, 2001
ASSETS
March 31, December 31,
2002 2001
(Unaudited) (Audited)
CURRENT ASSETS ------------------ ------------------
Cash and cash equivalents $ 7,203 $ 814
G.S.T. refund 953 189
------------------ ------------------
TOTAL CURRENT ASSETS 8,156 1,003
------------------ ------------------
PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION 2,704 2,876
------------------ ------------------
OTHER ASSETS
Investments in projects in the Republic of the Philippines 2,952,600 2,950,800
Rent security deposit 676 676
------------------ -----------------
TOTAL OTHER ASSETS 2,953,276 2,951,476
------------------ -----------------
TOTAL ASSETS $ 2,964,136 $ 2,955,355
================== =================
6
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
2002 2001
(Unaudited) (Audited)
------------------ ------------------
CURRENT LIABILITIES
Accounts payable $ 341,896 $ 454,584
Accrued interest 89,553 78,252
Notes and loans payable
Related parties 280,148 287,221
Unrelated parties 71,110 77,494
------------------ ------------------
TOTAL CURRENT LIABILITIES 782,707 897,551
------------------ ------------------
STOCKHOLDERS' EQUITY
Common stock, par value $0.001 per share
Authorized 100,000,000 shares
Issued and outstanding
March 31, 2002 - 20,871,122 shares 20,871 0
December 31, 2001 - 20,541,122 shares 0 20,541
Paid in capital 4,362,290 4,293,620
Deficit accumulated during the development stage (2,201,050) (2,253,665)
Accumulated other comprehensive (loss)
(Primary cumulative translation adjustment) (682) (2,692)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 2,181,429 2,057,804
------------------ -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,964,136 $ 2,955,355
================== =================
See Accompanying Notes and Independent Accountants' Review Report.
7
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF COMPREHENSIVE (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
Three Months Ended May 7, 1984 (Date
March 31, of Inception) to
2002 2001 March 31, 2002
---------------- ----------------- ------------------
NET INCOME (LOSS) $ 52,615 $ (104,542) $ (2,201,050)
OTHER COMPREHENSIVE
INCOME (LOSS)
Foreign currency translation adjustments 2,010 24,785 (682)
---------------- ----------------- ------------------
NET COMPREHENSIVE INCOME (LOSS) $ 54,625 $ (79,757) $ (2,201,732)
================ ================= ==================
See Accompanying Notes and Independent Accountants' Review Report.
8
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
Three Months Ended May 7, 1984 (Date
March 31, of Inception) to
2002 2001 March 31, 2002
---------------- ----------------- ----------------------
REVENUE
CANCELLATION OF DEBT $ 169,247 $ 0 $ 169,247
INTEREST INCOME 3 21 10,394
---------------- ----------------- ----------------------
TOTAL REVENUE 169,250 21 179,641
DEVELOPMENT COSTS 116,635 104,563 2,380,691
---------------- ----------------- ----------------------
NET INCOME (LOSS) $ 52,615 $ (104,542) $ (2,201,050)
================ ================= ======================
NET INCOME (LOSS) PER
COMMON SHARE
BASIC AND DILUTED $ .00 $ (.01)
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC AND DILUTED 20,730,971 20,371,808
================ =================
See Accompanying Notes and Independent Accountants' Review Report.
9
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
Common Stock
--------------------------------------- Paid In
Shares Amount Capital
------------------ ------------------- ---------------------
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
------------------ ------------------- ---------------------
BALANCE, DECEMBER 31, 1984 608,610 609 4,687
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
10
Deficit
Accumulated Accuulated
Advances During the Other
On Stock Development Comprehensive
Subscriptions Stage (Loss)
--------------------- ---------------------- ----------------------
$ 0 $ 0 $ 0
0 0 0
0 0 0
0 (5,296) 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 0
See Accompanying Notes and Independent Accountants' Review Report.
11
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY( CONTINUED)
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
Common Stock
--------------------------------------- Paid In
Shares Amount Capital
------------------ ------------------- ---------------------
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
12
Deficit
Accumulated Accuulated
Advances During the Other
On Stock Development Comprehensive
Subscriptions Stage (Loss)
--------------------- ---------------------- ----------------------
$ 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
0 0 0
24,221 0 0
0
(24,221)
0 0 (17,019)
0 (623,196) 0
--------------------- ---------------------- ----------------------
0 (1,030,580) (17,019)
See Accompanying Notes and Independent Accountants' Review Report.
13
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY( CONTINUED)
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
Common Stock
----------------------------------------- Paid In
Shares Amount Capital
-------------------- ------------------- ---------------------
Issuance of common stock for cash
$1.50 - March 6, 2000, net of cost 228,000 $ 228 $ 339,772
$1.50 - May 29, 2000 100,000 100 149,900
Issuance of common stock for finder's fee
$.75 - November 13, 2000 6,667 7 4,994
Cumulative currency translation adjustment 0 0 0
Net (loss) for the year ended
December 31, 2000 0 0 0
-------------------- ------------------- ---------------------
BALANCE, DECEMBER 31, 2000 20,371,808 20,372 4,207,289
Issuance of common stock for cash
$.50 - July 27, 2001 7,000 7 3,493
$.50 - August 2, 2001 20,000 20 9,980
$.75 - August 2, 2001 3,980 4 2,996
$.50 - August 19, 2001 100,000 100 49,900
$.50 - August 21, 2001 10,000 10 4,990
$.50 - August 21, 2001 20,000 20 9,980
$.75 - September 24, 2001 3,334 3 2,497
Issuance of common stock for interest
$.50 - August 14, 2001 5,000 5 2,495
Cumulative currency translation adjustment 0 0 0
Net (loss) for the year ended
December 31, 2001 0 0 0
-------------------- ------------------- ---------------------
BALANCE, DECEMBER 31, 2001 20,541,122 20,541 4,293,620
Issuance of common stock for cash
$.20 - January 11, 2002 300,000 300 59,700
$.30 - March 28, 2002 30,000 30 8,970
Cumulative currency translation adjustment
for the three months ended March 31, 2002 0 0 0
Net income for the three months ended
March 31, 2002 0 0 0
-------------------- ------------------- ---------------------
BALANCE, MARCH 31, 2002 20,871,122 $ 20,871 $ 4,362,290
==================== =================== =====================
14
Deficit
Accumulated Accuulated
Advances During the Other
On Stock Development Comprehensive
Subscriptions Stage (Loss)
--------------------- ---------------------- ----------------------
$ 0 $ 0 $ 0
0 0 0
0 0 0
0 0 (5,452)
0 (661,610) 0
--------------------- ---------------------- ----------------------
0 (1,692,190) (22,471)
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 19,779
0 (561,475) 0
--------------------- ---------------------- ----------------------
0 (2,253,665) (2,692)
0 0 0
0 0 0
0 0 2,010
0 52,615 0
--------------------- ---------------------- ----------------------
$ 0 $ (2,201,050) $ (682)
===================== ====================== ======================
See Accompanying Notes and Independent Accountants' Review Report.
15
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
Three Months Ended May 7, 1984 (Date
March 31, of Inception to
2002 2001 March 31, 2002
---------------- ----------------- -------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 52,615 $ (104,542) $ (2,201,050)
Adjustments to reconcile net income (loss)
to net cash (used) by operating activities:
Depreciation 172 190 4,521
Issuance of common stock for interest
and services 0 0 11,500
Common stock issued for finder's fees 0 0 5,001
Cancellation of debt (169,247) 0 (169,247)
Changes in operating assets and liabilities:
Cash-held in lawyer's trust account 0 0 118,578
Interest receivable 0 0 (1,867)
Accounts receivable 0 0 14,677
G.S.T. tax refund (764) 737 (953)
Accounts payable 56,559 57,310 452,489
Accrued liabilities 11,301 1,799 89,553
Security deposits 0 3,668 2,957
---------------- ----------------- -------------------
NET CASH (USED) BY OPERATING
ACTIVITIES (49,364) (40,838) (1,673,841)
---------------- ----------------- -------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Investment in projects in the Phillipines (1,800) 162 (20,889)
Purchases of property and equipment 0 0 (238)
---------------- ----------------- -------------------
NET CASH (USED) PROVIDED BY
INVESTING ACTIVITIES (1,800) 162 (21,127)
---------------- ----------------- -------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common stock 69,000 0 1,447,145
Proceeds from short term notes (13,457) 8,934 255,708
---------------- ----------------- -------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 55,543 8,934 1,702,853
---------------- ----------------- -------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS 2,010 24,785 (682)
---------------- ----------------- -------------------
See Accompanying Notes and Independent Accountants' Review Report.
16
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 AND
FOR THE PERIOD FROM MAY 7, 1984 (DATE OF INCEPTION) TO
MARCH 31, 2002
(UNAUDITED)
Three Months Ended May 7, 1984 (Date
March 31, of Inception to
2002 2001 March 31, 2002
---------------- ----------------- -------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 6,389 $ (6,957) $ 7,203
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 814 12,257 0
---------------- ----------------- -------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 7,203 $ 5,300 $ 7,203
================ ================= ===================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid $ 0 $ 0 $ 3,372
================ ================= ===================
Taxes paid $ 0 $ 0 $ 0
================ ================= ===================
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 $ 0 $ 3,000
================ ================= ===================
Issuance of common stock for finder's fees $ 0 $ 0 $ 5,001
================ ================= ===================
Issuance of common stock and capital
contributions for interest and services $ 0 $ 0 $ 11,500
================ ================= ===================
Issuance of 7,644,067 shares of stock for
Fenway Resources Ltd.- August 31, 1998 $ 0 $ 0 $ 2,918,215
================ ================= ===================
See Accompanying Notes and Independent Accountants' Review Report.
17
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
-----------------------------------
The Company was incorporated under the laws of the State of
Nevada on May 7, 1984 for the primary purpose of developing
mineral properties. During 1985, the Company abandoned its
remaining assets and settled its liabilities and was inactive
until 1998. In 1998, the Company became active again by acquiring
mineral properties in the Republic of the Philippines and is
currently engaged in the development of these properties.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with an
original 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.
See Accompanying Notes and Independent Accountants' Review Report.
18
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
------------
Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes on temporary
differences between the amount of taxable income and pretax
financial income and between the tax basis of assets and
liabilities and their reported amounts in the financial
statements. Deferred tax assets and liabilities are included in
the financial statements at currently enacted income tax rates
applicable to the period in which the deferred tax assets and
liabilities are expected to be realized or settled as prescribed
in FASB Statement No. 109, Accounting for Income Taxes. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Net (Loss) Per Share
--------------------
The Company adopted Statement of Financial Accounting Standards
No. 128 that requires the reporting of both basic and diluted
earnings (loss) per share. Basic earnings (loss) per share is
computed by dividing net income (loss) available to common
stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock. In accordance with FASB 128, any anti-dilutive
effects on net income (loss) per share are excluded.
Disclosure About Fair Value of Financial Instruments
----------------------------------------------------
The Company estimates that the fair value of all financial
instruments at March 31, 2002 and 2001 as defined in FASB 107
does not differ materially from the aggregate carrying values of
its financial instruments recorded in the accompanying balance
sheet. The estimated fair value amounts have been determined by
the Company using available market information and appropriate
valuation methodologies. Considerable judgement is required in
interpreting market data to develop the estimates of fair value,
and accordingly, the estimates are not necessarily indicative of
the amounts that the Company could realize in a current market
exchange.
Long-Lived Assets
-----------------
Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances
indicate that
See Accompanying Notes and Independent Accountants' Review Report.
19
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets (Continued)
-----------------------------
the historical cost-carrying value of an asset may no longer be
appropriate. The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows
expected to result from the asset, including eventual
disposition. If the future net cash flows are less than the
carrying value of the asset, an impairment loss is recorded equal
to the difference between the asset's carrying value and fair
value. This standard did not have a material effect on the
Company's results of operations, cash flows or financial
position.
Foreign Currency Translation
----------------------------
The financial statements are measured using the local currency as
the functional currency. Assets, liabilities and equity accounts
of the Company are translated at exchange rates as of the balance
sheet date or historical acquisition date, depending on the
nature of the account. Revenues and expenses are translated at
average rates of exchange in effect during the year. The
resulting cumulative translation adjustments have been recorded
as a separate component of stockholders' equity. Foreign currency
transaction gains and losses are included in net income.
Transaction gains/losses were not material. The financial
statements are presented in United States of America dollars.
Recent Accounting Pronouncements
--------------------------------
In June 2001, August 2001 and April 2002, the FASB issued the
following statements:
FASB 141 - Business combinations
FASB 142 - Goodwill and other intangible assets
FASB 143 - Accounting for asset retirement obligations
FASB 144 - Accounting for the impairment or disposal of
long-lived assets
FASB 478 - Recision of FASB statements 4, 44, 64 and
amendment of FASB 13 These FASB statements did not
have a material impact on the Company's financial
position or results of operations.
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of March 31, 2002, the Company was in the development stage of
operations. According to the Financial Accounting Standards Board
of the Financial Accounting Foundation, a
See Accompanying Notes and Independent Accountants' Review Report.
20
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 2 DEVELOPMENT STAGE OPERATIONS (CONTINUED)
development stage Company is defined as a company that devotes
most of its activities to establishing a new business activity.
In addition, planned principal activities have not commenced, or
have commenced and have not yet produced significant revenue.
The Company expensed $116,635 and $104,563 of development costs
for the three months ended March 31, 2002 and 2001, respectively,
and $2,380,691 from May 7, 1984 (date of inception) to March 31,
2002.
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
Palcan Mining Corporation
-------------------------
D. 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.
D. 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
D. Authorized capital
The authorized capital stock of the corporation is one million
pesos in lawful money of the Republic of the Philippines, divided
into one thousand shares with the par value of one thousand pesos
per share.
See Accompanying Notes and Independent Accountants' Review Report.
21
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
(CONTINUED)
Palcan Mining Corporation (Continued)
-------------------------------------
D. Subscribers and issued capital
25% of the authorized capital stock has been subscribed and at
least 25% of the total subscription has been paid as follows:
Number of
Shares Amount Amount
Name Subscribed Subscribed Paid
---------------------------- ------------------ ------------------ ---------------
Rene E. Cristobal 200 p 200,000 p 50,000
Carlos A. Fernandez 150 150,000 37,500
Dativa C. Dimaano-
Sangalang 250 250,000 62,500
Arthur Leonard Taylor 1 1,000 1,000
Herbert John Wilson 1 1,000 1,000
Fenway International Inc. 398 398,000 398,000
------------------ ------------------ ---------------
1,000 p 1,000,000 p 550,000
================== ================== ===============
D. The primary purpose of this corporation is to hold the mineral
claims of Central Palawan Mining and Ind. Corp. ("CPMIC"),
Palawan Star Mining Ventures, Inc. ("PSMVI") and Pyramid Hill
Mining & Ind. Corp. ("PHMIC"), their respective MPSA's, ECC's and
quarry shale and limestone and any other commercial minerals
found on the property and to buy, sell, on whole basis only,
exchange or otherwise produce and deal in all kinds of minerals
and in their products and by-products of every kind and
description and by whatsoever process; to purchase, lease,
option, locate or otherwise acquire, own, exchange, sell, assign
or contract out the property and the operation of the property,
or otherwise dispose of, pledge, mortgage, deed in trust,
hypothecate and deal in mining claims, land related to production
from the mining claims, timber lands, water, and water rights and
other property, both real and personal.
See Accompanying Notes and Independent Accountants' Review Report.
22
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
(CONTINUED)
Palcan Cement Corporation
-------------------------
D. 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.
D. 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
D. 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:
See Accompanying Notes and Independent Accountants' Review Report.
23
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
(CONTINUED)
Palcan Cement Corporation (Continued)
-------------------------------------
Number of
Shares Amount Amount
Name Subscribed Subscribed Paid
--------------------------- -------------------- ------------------ ----------------
Rene E. Cristobal 170 p 170,000 p 42,500
Carlos A. Fernandez 150 150,000 37,500
Dativa C. Dimaano-
Sangalang 180 180,000 45,000
Laurie G. Maranda 1 1,000 1,000
Robert George Muscroft 1 1,000 1,000
Arthur Leonard Taylor 1 1,000 1,000
Herbert John Wilson 1 1,000 1,000
Fenway International Inc. 4,496 4,496,000 4,496,000
-------------------- ------------------ ----------------
5,000 p 5,000,000 p 4,625,000
==================== ================== ================
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.
F. Lease with Palcan Cement Corporation
1. The term of the lease is for five years commencing on April
1, 2001 and expiring on March 31, 2006. As of March 31, 2002,
they have not moved into the building or commenced the lease.
They will move into the premises once they obtain their
bridge loan financing.
2. Gross monthly rentals are $1,918 USD net of a 10% VAT with a
5% increase in the third year until the expiration of the
term of the lease.
See Accompanying Notes and Independent Accountants' Review Report.
24
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 3 INVESTMENT IN PALCAN MINING AND CEMENT CORPORATIONS
(CONTINUED)
Palcan Cement Corporation (Continued)
3. A security deposit of $6,330 USD payable upon signing the
lease contract.
4. A deposit of three months rentals $6,330 USD, which will be
adjusted yearly based on the value of the money of the
rental.
Future minimum lease rentals in USD are as follows:
March 31, 2002 $ 23,016
March 31, 2003 23,016
March 31, 2004 23,016
March 31, 2005 23,016
March 31, 2006 7,672
-----------------
$ 99,736
=================
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES-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.
See Accompanying Notes and Independent Accountants' Review Report.
25
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES-CONSORTIUM
AGREEMENT (CONTINUED)
III. 10% equity interest in the JVMC.
IV. Royalty payments applicable to raw material quarried or mined
from property belonging individually to CPMIC, Palawan Star
and Pyramid Hill will be waived and surrendered by each
member of the Consortium in favor of the Consortium.
V. The properties, consisting of mining claims, the MPSA, and
the ECC and all rights, title and interest thereto shall be
transferred by each member of the Consortium to the JVMC.
C. Advances in Relation to the Joint Venture Mining Company
I. In consideration of the amendments in the letter amendment
agreement, Fenway shall, upon signing, pay the Consortium US
$100,000 as an advance maintenance payment which shall be
deducted from the royalties payable to the Consortium.
II. JVMC is to advance US $100,000 to each member of the
Consortium per year payable prorata in quarterly payments as
advance royalty payments to be deducted from the royalties of
$0.35 per ton of raw material used in the manufacture of
cement from the properties. Advance royalty payments shall
cease upon commencement of commercial production of any one
of the properties of the Consortium.
D. Joint Venture Cement Manufacturing Company ("JVCC")
A joint venture cement manufacturing company will be formed for
the development of the Palawan Cement Project for the
manufacturing of cement and related cement products.
E. Equity Interest
10% equity interest in the JVCC.
See Accompanying Notes and Independent Accountants' Review Report.
26
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES-CONSORTIUM
AGREEMENT (CONTINUED)
F. Conditions Precedent to this Agreement
Receipt of an Environmental Compliance Certificate ("ECC") and a
Mineral Production Sharing Agreement ("MPSA") shall be conditions
precedent to the establishment of JVMC and JVCC, and accordingly
the production funding deadline of June 30, 1997 will be extended
and the right to purchase 10% of Fenway's interest is waived.
G. Share Options and Warrants
I. The Consortium members will have options to purchase Fenway
shares, subject to regulatory approvals, as follows:
CPMIC PALAWAN STAR PYRAMID HILL
---------------------------- ------------ ----------------
Nine hundred thousand shares 1 million shares 4 million shares
@ CDN $2.00/sh @ CDN $4.00/sh @ CDN $2.00/sh
with 1:1 warrant 1million shares
@ CDN $3.00/sh @ CDN $5.00/sh
exercisable at any time exercisable at any time
II. The common conditions governing both Stock Options and
Warrants in G(I), above, are as follows:
a. The timing of the release of the shares is subject to the
release of the senior financing or funding.
b. They are exercisable only upon receipt of the Production
Funds.
c. The terms and payment are to be determined in a separate
agreement to be entered into between and among Fenway and
the individual members of the Consortium.
See Accompanying Notes and Independent Accountants' Review Report.
27
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 4 INVESTMENT IN THE REPUBLIC OF PHILIPPINES-CONSORTIUM AGREEMENT
(CONTINUED)
III. Subject to the approval by the relevant Securities
Regulatory Authorities, it is expressly understood that the
stock options and warrants referred to above may not be
exercised by the Consortium until such time as Fenway has
received the Acceptable Funding Commitment, provided however,
that Fenway may issue at any time all or a portion of the
warrants and Consortium may exercise at any time the warrants
in the event the issued and outstanding share capital of
Fenway is increased in order to facilitate and/or meet the
financing requirements to undertake the Palawan Cement
Project.
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT -
NEGOR RR CEMENT PROJECT
On July 16, 1998, the Company entered into an option agreement
with Negor RR Cement Corporation, a Philippines 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 RR any and all documents and other instruments necessary or
appropriate to vest in Negor RR a free, carried ownership
interest in the manufacturing company equal to ten percent (10%).
As a result of such ownership interest, Negor RR shall be
entitled to have allocated to it ten percent (10%) of the net
profits, losses and credits of the manufacturing company.
See Accompanying Notes and Independent Accountants' Review Report.
28
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT -
NEGOR RR CEMENT PROJECT (CONTINUED)
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 RR
any and all documents and other instruments necessary or
appropriate to vest in Negor RR an ownership interest in the
mining company equal to forty percent (40%). As a result of such
ownership interest, Negor RR shall be entitled to have allocated
to it forty percent (40%) of the net profits, losses and credits
of the mining company.
E. The mining company shall prepare, sign and deliver to the Company
any and all documents and other instruments necessary or
appropriate to vest in the Company an ownership interest in the
mining company equal to forty percent (40%). As a result of such
ownership interest, the Company shall be entitled to have
allocated to it forty percent (40%) of the net profits, losses
and credits of the mining company.
F. The mining company shall prepare, sign and deliver to one or more
third party investors any and all documents and other instruments
necessary or appropriate to vest collectively in those third
party investors an ownership interest in the mining company equal
to twenty percent (20%). As a result of such ownership interest,
those third party investors shall be entitled to have allocated
to it twenty percent (20%) of the net profits, losses and credits
of the mining company.
G. Payment obligations $50,000 at date of signing of the agreement
$50,000 no later than September 30, 1998 (Both payments were
made)
See Accompanying Notes and Independent Accountants' Review Report.
29
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 5 INVESTMENT IN THE REPUBLIC OF PHILIPPINES - OPTION AGREEMENT -
NEGOR RR CEMENT PROJECT (CONTINUED)
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 RR 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 PROPERTY AND EQUIPMENT
The components of the property and equipment are as follows:
March 31, December 31,
2002 2001
------------------ -----------------
Office equipment $ 6,427 $ 6,427
Computers 5,360 5,360
----------------- -----------------
Total cost 11,787 11,787
Less accumulated depreciation 9,083 8,911
----------------- -----------------
Total property and equipment $ 2,704 $ 2,876
================= =================
Depreciation expense for the three months ended March 31, 2002
and 2001 amounted to $172 and $190, respectively.
NOTE 7 INCOME TAXES
March 31, December 31,
2002 2001
------------------ -----------------
Income (Loss) before income taxes $ 52,615 $ (104,542)
------------------ -----------------
See Accompanying Notes and Independent Accountants' Review Report.
30
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 7 INCOME TAXES (CONTINUED)
March 31, December 31,
2002 2001
------------------ -----------------
The provision for income taxes is estimated as follows:
Currently payable $ 0 $ 0
------------------ -----------------
Deferred $ 0 $ 0
------------------ -----------------
A reconciliation of the provision for income taxes
compared with the amounts at the Federal Statutory and
Foreign Income Tax Rates is as follows:
Tax at Federal Statutory
Income Tax Rates $ 0 $ 0
------------------ -----------------
Tax at Foreign Income Tax Rates $ 0 $ 0
------------------ -----------------
Deferred income tax assets and liabilities reflect the
impact of temporary differences between amounts of
assets and liabilities for financial reporting
purposes and the basis of such assets and liabilities
as measured by tax laws.
The net deferred tax asset is: $ 0 $ 0
------------------ -----------------
The net deferred tax liability is: $ 0 $ 0
------------------ -----------------
Temporary differences and carry forwards that give rise
to deferred tax assets and liabilities include the
following:
Deferred Tax at
March 31, 2002
--------------------------------------------
Assets Liabilities
-------------------- ----------------------
Net operating losses $ 546,160 $ 0
Valuation allowance 546,160 0
-------------------- ----------------------
Total deferred taxes $ 0 $ 0
==================== ======================
See Accompanying Notes and Independent Accountants' Review Report.
31
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 7 INCOME TAXES (CONTINUED)
A reconciliation of the valuation allowance is as follows: March
31, 2002
Balance, beginning of year $ 559,300
Reduction for the quarter (13,140)
-----------------
Balance, end of quarter $ 546,160
=================
NOTE 8 NET OPERATING LOSS CARRYFORWARDS
The Company has the following net operating loss carryforwards:
Tax Year Amount Expiration date
----------------------- --------------------- --------------------
December 31, 1988 $ 3,600 December 31, 2001
December 31, 1998 370,360 December 31, 2018
December 31, 1999 640,216 December 31, 2019
December 31, 2000 661,611 December 31, 2020
December 31, 2001 561,475 December 31, 2021
March 31, 2002 ( 52,615) December 31, 2022
---------------------
$ 2,184,647
=====================
NOTE 9 ACCOUNTS PAYABLE
The components of accounts payable are as follows:
March 31, December 31,
2002 2001
------------------ -----------------
Unrelated $ 152,324 $ 164,027
Related 189,572 290,557
------------------ -----------------
Total $ 341,896 $ 454,584
================= =================
See Accompanying Notes and Independent Accountants' Review Report.
32
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 10 SHORT-TERM NOTES AND LOANS PAYABLE
Related parties
March 31, December 31,
2002 2001
------------------ -----------------
Unsecured, 12% note dated June 3, 1998
for $150,000 Canadian dollars. There is
no due date on the note. $ 94,026 $ 94,275
Unsecured, 12% note dated September 28,
1998 for $50,000 Canadian dollars. There
is no due date on the note. 31,342 31,425
Eight unsecured loans dated between July 2000 and
March 31, 2002 for $120, $1,000, $4,000, $2,000,
$400, $500, $340, and $100 Canadian dollars and
$12,000 United States dollars. The loans earn
interest at 10% and there are no due
dates on these loans. 17,303 30,868
Four unsecured loans dated between September 14,
2000 and March 31, 2002 for $6,000 Canadian
dollars, which earn interest at 12% and $5,000,
$4,000, $2,000, $6,000 and $500 Canadian dollars,
which earn interest at 10%.
There are no due dates on these loans. 17,552 10,684
Two unsecured notes dated October 18, 2000 and
December 19, 2000 for $25,000 and $50,000 United
States dollars. The loans bear interest at 10% and
are due on April 18, 2001. The lender received
3,334 shares of common stock of the Company plus
two year warrants to acquire
25,000 shares of the Company stock at $1.75. 75,000 75,000
Unsecured, 10% loan dated December 12, 2000
for $2,000 Canadian dollars. There is no due
date on the loan. 1,254 1,257
See Accompanying Notes and Independent Accountants' Review Report.
33
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 10 SHORT-TERM NOTES AND LOANS PAYABLE (CONTINUED)
March 31, December 31,
2002 2001
------------------ -----------------
Unsecured, 10% loan dated December 22,
2000 for $25,000 Canadian dollars. There
is no due date on the loan. $ 15,671 $ 15,712
Unsecured, 12% loan dated March 12, 2001
for $25,000 United States dollars. There is
no due date on the loan. 25,000 25,000
Unsecured, 20% loan dated October 30, 2001 for
$2,000 United States dollars. Unsecured 20% loan
dated December 13, 2001 for $1,000 United States
dollars. The loans are due in 90 days from the loan
date. Further terms extended for three month with
interest at 40% and maturing in six months. If the
Company fails to pay the obligation the Company
must deliver shares valued at $.15 United States
dollars per share for the total amount of principal
and interest. 3,000 3,000
Unrelated parties
Unsecured, 12% loan dated November 19, 1999
for $25,000 United States dollars. The note
does not have a due date. 25,000 25,000
Unsecured 8.51% note dated July 4, 2000 for
$10,000 Canadian dollars. There is a transaction
fee of 10% ($1,000 Canadian dollars). The loan
does not have a due date. 0 6,913
See Accompanying Notes and Independent Accountants' Review Report.
34
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 10 SHORT-TERM NOTES AND LOANS PAYABLE (CONTINUED)
March 31, December 31,
2002 2001
------------------ -----------------
Unsecured, 15% loan dated April 27, 2001
for $45,000 Canadian dollars. The loan
does not have a due date. $ 33,849 $ 33,939
Unsecured, 10% loan dated August 1, 2001
for $5,000 United States dollars. A share
bonus of 10% ($500 United States dollars) is
included in the loan balance. The lender
received 2,500 warrants for two years exer-
cisable at $.75 United States dollars per share. 5,500 5,500
Unsecured 10% loan dated November 15,
2001 for $3,000 United States dollars. The
loan does not have a due date. 3,000 3,000
Unsecured 20% loan dated December 20, 2001 for
$5,000 Canadian dollars. If the loan is repaid on
or before March 20, 2002, a cash bonus of 20% of
the principal ($1,000 Canadian dollars) is due. If
the loan is repaid after March 20, 2002, a bonus of
20% of the principal amount to be taken in cash or
Fenway shares at $.15 Canadian dollars per
share at lender's option. 3,761 3,142
------------------ -----------------
$ 351,258 $ 364,715
================== =================
NOTE 11 CANCELLATION OF DEBT
Two officers of the corporation forgave their 2001 salaries in
the amount of $169,242.
See Accompanying Notes and Independent Accountants' Review Report.
35
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 12 STOCK OPTIONS
The Company has stock options outstanding at March 31, 2002 as
follows:
Number of Exercise Expiration
Shares Price Date
-------------------- ------------------ --------------------
3,416,926 US $3.00 July 4, 2004
400,000 US $3.00 July 31, 2004
350,000 US $1.75 September 28, 2002
25,000 US $1.75 October 20, 2002
200,000 US $3.00 December 1, 2004
25,000 US $1.75 January 8, 2003
200,000 US $3.00 August 1, 2004
--------------------
4,616,926
====================
At March 31, 2002, the Company had a stock-based compensation
plan under which options were granted to employees and outside
directors. The Company measures the compensation cost for these
plans using the intrinsic value method of accounting prescribed
by APB Opinion No. 25 (Accounting for Stock Issued to Employees).
Given the terms of the Company's plans, no compensation cost has
been recognized for its stock option plan.
The Company's reported net income (loss) and (loss) per share
would have been increased had compensation costs 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 of between 6.288% and 5.966%: and
expected lives of five to seven 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 (loss) and
(loss) per share at March 31, 2002 would have been as indicated
below:
See Accompanying Notes and Independent Accountants' Review Report.
36
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 12 STOCK OPTIONS (CONTINUED)
March 31, 2002 March 31, 2001
---------------------------------- -----------------------------------
As Reported Pro Forma As Reported Pro Forma
----------------- ---------------- --------------- ----------------
Net income (loss) $ 52,615 $ 16,331 $ (104,542) $ (147,907)
(Loss) per share attribute-
able to common stock $ (.00) (.00) (.01) (.01)
A summary of the options is as follows:
Balance at beginning of year 4,616,926 4,341,926
Options issued 0 12,500
Options exercised 0 0
Options canceled 0 0
---------------- ---------------
Balance at end of year 4,616,926 4,354,426
================ ===============
Information regarding stock options outstanding as of March 31 is
as follows:
2002 2001
------------------------ ------------------------
Price range $1.75- $3.00 $1.75 - $3.00
Weighted average exercise price $3.00 $2.91
Weighted average remaining
contractual life 2 years, 4 months 3 years, 6 months
NOTE 13 STOCK WARRANTS
The following warrants are outstanding and applicable to
investment in projects in the Republic of the Philippines:
Warrants outstanding as of March 31, 2002.
45,750 Shares at a price of Canadian $5.50 per share if
exercised on or before December 5, 2002
See Accompanying Notes and Independent Accountants' Review Report.
37
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 13 STOCK WARRANTS (CONTINUED)
25,250 Shares at a price of Canadian $5.50 per share if exercised
on or before February 25, 2002
28,901 Shares at a price of Canadian $5.50 per share if exercised
on or before May 29, 2002
25,000 Shares at a price of Canadian $5.50 per share if exercised
on or before June 2, 2002
27,000 Shares at a price of Canadian $5.50 per share if exercised
on or before June 6, 2002
2,128 Shares at a price of United States $4.00 per share if
exercised on or before October 26, 2002
670 Shares at a price of United States $4.00 per share if
exercised on or before October 26, 2002
65,000 Shares at a price of United States $4.00 per share if
exercised on or before June 10, 2002
32,000 Shares at a price of United States $4.00 per share if
exercised on or before November 2, 2002
25,000 Shares at a price of United States $3.00 per share if
exercised on or before November 9, 2002
3,000 Shares at a price of United States $3.00 per share if
exercised on or before November 9, 2002
7,000 Shares at a price of United States $3.00 per share if
exercised on or before December 3, 2002
11,112 Shares at a price of United States $3.00 per share if
exercised on or before December 13, 2002
228,000 Shares at a price of United States $3.00 per share if
exercised on or before March 6, 2002
100,000 Shares at a price of United States $3.00 per share if
exercised on or before May 29, 2002
10,000 Shares at a price of Canadian $5.50 per share if exercised
on or before December 5, 2002
2,500 Shares at a price of United States $0.75 per share if
exercised on or before September 30, 2003
40,000 Shares at a price of United States $0.50 per share if
exercised on or before July 26, 2003
7,000 Shares at a price of United States $0.50 per share if
exercised on or before July 27, 2003
See Accompanying Notes and Independent Accountants' Review Report.
38
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 13 STOCK WARRANTS (CONTINUED)
3,980 Shares at a price of United States $0.50 per share if
exercised on or before July 31, 2003
5,000 Shares at a price of United States $0.50 per share if
exercised on or before August 8, 2003
10,000 Shares at a price of United States $0.75 per share if
exercised on or before August 14, 2003
100,000 Shares at a price of United States $0.75 per share if
exercised on or before August 22, 2003
300,000 Shares at a price of United States $0.35 per share if
exercised on or before January 29, 2003
30,000 Shares at a price of United States $0.50 per share if
----------- exercised on or before March 24, 2004
1,134,291
==========
NOTE 14 INTEREST EXPENSE
The Company incurred interest expense of $9,501 and $271 for the
three months ended March 31, 2002 and 2001, respectively.
NOTE 15 OPERATING LEASES
The Company is leasing office facilities in Vancouver, British
Columbia, Canada and Manila, Philippines as follows:
Manila - See Note 3, investment in Palcan Mining and Cement
Corporation
Vancouver
3 year lease commencing March 1, 2001
Monthly rental of $1,173 (Canadian dollars) plus occupancy
costs
Future minimum lease payments, in Canadian dollars, are as
follows:
March 31, 2002 $ 14,079
March 31, 2003 14,079
----------------
$ 28,158
================
See Accompanying Notes and Independent Accountant's Review Report.
39
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 15 OPERATING LEASES (CONTINUED)
Rent expense for the three months ended March 31, 2002 and 2001
was $4,382 and $11,000, respectively.
NOTE 16 CONTINGENT EMPLOYMENT CONTRACTS
The Company is in the process of renegotiating certain employment
contracts that expired on August 31, 2000 and became effective
only in the event of an unfriendly or hostile take over.
40
NOTE 17 GOING CONCERN
These financial statements are presented on the basis that the
Company is a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business over a reasonable length of time. The
Company has a deficit working capital, has incurred development
losses of $2,380,691 from inception and needs financing to
develop the cement operations. These factors raise uncertainty as
to the Company's ability to continue as a going concern.
Management of the Company has received a commitment for bridge
financing (see Note 18) for the initial development of the cement
operations. The ability of the Company to continue as a going
concern is dependent upon the receipt of the bridge financing and
future long range development financing. The financial statements
do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
NOTE 18 BRIDGE LOAN AGREEMENT
On October 26, 2000, the Company received a commitment for a
bridge loan from Heathrow Financial Holdings, Ltd. Heathrow
agreed to advance the Company up to $6,000,000 for a period of
547 days (or 18 months) at an interest rate of 7.25%.
Upon the receipt of funds, the Company will pay a fee to Heathrow
of 15% of the amount of the loan.
The Company will secure the loan with 1,000,000 shares of its
capital stock. The loan has not been funded as of the date of
this report.
See Accompanying Notes and Independent Accountants' Review Report.
41
FENWAY INTERNATIONAL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2002 AND 2001
(UNAUDITED)
NOTE 19 UNAUDITED FINANCIAL INFORMATION
The accompanying financial information as of March 31, 2002 and
2001 is unaudited. In management's opinion, such information
includes all normal recurring entries necessary to make the
financial information not misleading.
See Accompanying Notes and Independent Accountants' Review Report.
42
Item 2. Management's Discussion and Analysis or Plan of Operation
- ------------------------------------------------------------------
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. No assurance can be
given that any of the assumptions relating to the forward-looking statements
specified in the following information are accurate, and we assume no obligation
to update any such forward-looking statements.
The financial projections in this report have been prepared by us and are based
on certain assumptions regarding future operations. The projections are an
estimate only, based on certain assumptions which may prove to be inaccurate and
which are subject to future conditions over which we may have no control. We
cannot guaranty that we will experience the operating results depicted in the
financial projections.
The financial projections were prepared by our management and have not been
examined or compiled by independent certified public accountants or our legal
counsel. The accountants and legal counsel have not participated in the
preparation or review of the financial projections. Accordingly, our legal
counsel and accountants cannot provide any level of assurance on them.
Our Business. We plan to develop and construct two large commercial grade cement
production facilities in the Philippines. Our predecessor-in-interest, Fenway
Resources, Ltd., spent more than five years preparing the information and
submissions for the necessary licensing, permits and environmental approvals
43
necessary to support construction of such facilities on the island of Palawan
(the "Palawan Project"). The necessary permits and environmental approvals for a
proposed facility on the island of Negros Oriental (the "Negros Project") have
already been received. We are required to participate with local corporations in
the Philippines in order to commercially exploit Philippine mineral claims and,
therefore, we have incorporated two Philippine corporations. The organizational
chart attached as Exhibit 21 to our Registration Statement on Form 10-SB filed
with the Commission on March 8, 1999 provides a diagram of our relationships
with these entities, which are specified in detail below.
The Negros Project. On or about July 16, 1998, we entered into an option
agreement ("Option Agreement") with Negor RR Cement Corporation, an independent
Philippine corporation, for the purpose of forming and operating a Negros mining
company ("NMC") and a Negros cement manufacturing company ("NCC"). Pursuant to
the Option Agreement, we purchased a 90% equity interest in the Negor RR Cement
Corporation, a Philippine corporation ("Negor Corporation").
The details of the Option Agreement are as follows:
A. For a period of four (4) years following the date of acceptance by us
of a commercial feasibility study and report for the Negros Project,
which study and report are sufficient to enable us to obtain any and
all funds necessary or appropriate to finance the development and
operation of the Negros Project, Negor Corporation has the option to
acquire that number of shares of our $.001 par value common stock equal
to the lesser of (a) two million (2,000,000), or (b) ten percent (10%)
of the then issued and outstanding shares of our common stock, at a
purchase price of Five Dollars ($5.00) per share.
B. NMC shall prepare, sign and deliver to Negor Corporation any and all
documents and other instruments necessary or appropriate to vest in
Negor Corporation an ownership interest in NMC equal to forty percent
(40%) of the total issued and outstanding capital stock of NMC. As a
result of such ownership interest, Negor Corporation shall be entitled
to have allocated to it forty percent (40%) of the net profits, losses
and credits of NMC.
C. NMC shall prepare, sign and deliver to us any and all documents and
other instruments necessary or appropriate to vest in us an ownership
interest in NMC equal to forty percent (40%) of the total issued and
outstanding capital stock of NMC. As a result of such ownership
interest, we shall be entitled to have allocated to us forty percent
(40%) of the net profits, losses and credits of NMC.
D. NCC shall prepare, sign and deliver to Negor Corporation any and all
documents and other instruments necessary or appropriate to vest in
Negor Corporation an ownership interest in NCC equal to ten percent
(10%) of the total issued and outstanding capital stock of NMC. As a
result of such ownership interest, Negor shall be entitled to have
allocated to it ten percent (10%) of the net profits, losses and
credits of NCC. NCC shall prepare, sign and deliver to us any and all
documents and other instruments necessary or appropriate to vest in us
an ownership interest in NCC equal to ninety percent (90%) of the total
issued and outstanding capital stock of NMC. As a result of such
ownership interest, we shall be entitled to have allocated to it ninety
percent (90%) of the net profits, losses and credits of NCC.
E. NMC shall prepare, sign and deliver to one or more third party
investors any and all documents and other instruments necessary or
appropriate to vest collectively in those third party investors an
ownership interest in NCC equal to twenty percent (20%) of the total
issued and outstanding capital stock of NMC. As a result of such
ownership interest, those third party investors shall be entitled to
have allocated to them, in the aggregate, twenty percent (20%) of the
net profits, losses and credits of NCC.
F. We paid Negor Corporation Fifty Thousand Dollars ($50,000) at the date
of signing of the Option Agreement and Fifty Thousand Dollars ($50,000)
on or prior to September 30, 1998, as specified in the Option
Agreement.
44
At such time as all feasibility studies and similar studies and reports which
are necessary or appropriate for the construction and operation of the
manufacturing facilities (and which will be required prior to the receipt of the
funds to finance construction of the manufacturing facilities) are completed,
NMC has agreed to pay to Negor One Million Dollars ($1,000,000.00) which funds
may be contributions to capital and proceeds from one or more borrowing
transactions, or either of them. In connection with any and all such borrowing
transactions, the acquired claims may be utilized as collateral or otherwise be
pledged to enhance the credit of the borrower.
The development program for the Negros Oriental Project will be similar to that
for Palawan, except for the power plant. As there is already a source of power
supply available in Negros Oriental, the cement plant will only require an
electrical distribution system, which, we believe, will reduce capital costs by
$40 million.
We believe that the development of the Negros Oriental cement plant will be
approximately one year after the start of the Palawan cement project. During
this one year period, work will be undertaken to upgrade the original
environmental studies, bring the engineering reports to bankable standards, to
drill and test the limestone deposits, and to obtain land for the plant site.
The Palawan Project. The Palawan Project has been under development by us for
more than five years in association with local Philippine mining and development
interests. Our predecessor company, Fenway Resources Ltd., a British Columbia
corporation, acquired mineral rights to 10,296 hectares in 1992 and 3,200
hectares in 1995 in three (3) contiguous claim blocks on the west central
portion of Palawan Island near Scott Point, Municipality of Sofronio Espanola,
Palawan, Philippines. Explorations by the Philippine government first confirmed
the existence of limestone deposits in the central part of Palawan. We retained
Kilborn Engineering Pacific Ltd., now known as Kilborn-SNC Lavalin Inc., to
prepare a project feasibility study which was completed in 1995. This study
concluded our claims have significant resources of limestone and shale, the two
main ingredients for the manufacture of Portland Cement, and that a cement plant
and quarries can be developed in full compliance with environmental regulations
in the Philippines and should not have any adverse effect on local communities
or indigenous people.
As required by the Philippine Government, formal application for the final
environmental certification of the Palawan Project will be submitted to the
Philippine Department of Environment and Natural Resources after receipt of the
Mineral Production Sharing Agreement, which is currently under departmental
review.
In addition, we have conducted professional hearings and discussions with all
levels of government, with indigenous leaders, and with local landowners who
might be affected by the Palawan Project. The project in production will
stimulate local economic development and employment and we have received strong
local support for the Palawan Project as evidenced by the Palawan Council for
Sustainable Development endorsement of the environmental compliance certificate
and letters of recommendation from local government units and endorsement of the
project from indigenous people as evidenced by the National Commission on
Indigenous Peoples' Certificate.
Commercial law in effect on Palawan Island requires the participation of local
entities to exploit the island's mineral resources. Two local corporations have
been created and formally registered in compliance with local commercial law and
securities regulation. We own approximately 40% of Palcan Mining Company ("PMC")
which will be responsible for the quarry properties and the production of
crushed stone, both graded and blended, for cement plant processing operations.
PMC will also be responsible for payments of royalties and fees based on the
volumes of quarried stone extracted for cement production. PMC was incorporated
in the Republic of the Philippines on August 13, 1998, and has several common
directors with us.
We have also continued to assess the market acceptance for products of the
proposed Palawan plant within the Philippines and in export markets. The ability
to produce cement of high quality and reliable uniformity from local materials
is essential to our success and this ability is currently unproven.
Discussions are currently in progress with several design-build groups to
construct and equip the Palawan plant. We are negotiating with Krupp Polysius to
provide the cement plant equipment and with Bilfinger + Berger to engineer and
construct the Palawan Project. These negotiations have not been concluded and
there can be no assurance that either Krupp Polysius or Bilfinger + Berger will
provide equipment or services to us.
45
The capital costs of the plants, including the construction of all facilities
such as power and ports, are estimated by our engineering consultants to be
approximately $340 million for the Negros Project and approximately $380 million
for the Palawan Project. To conform to investment guidelines promulgated by the
Philippine government, 70% of those capital costs must be financed by loans,
including export credits, and 30% can be financed by equity investments.
The approximately $500 million required in loans may be provided by a consortium
of German banks. Krupp-Polysius, one of the world's largest corporations,
anticipates supplying the cement plant equipment to both the Negros Project and
the Palawan Project and has offered to assist us in its loan negotiations with
these German banks. We anticipate that approximately $215 million may be
received from a registered offering of our common or preferred stock, probably
through brokerage firms located in New York, complemented by one or more private
placements of our common stock. In addition, approximately $110 million may be
provided by contractors for the quarry and power plant which will reduce
Fenway's need for equity financing.
Products. We are not currently producing any products or supplying any services
to any third parties. However, we are currently negotiating contracts to supply
cement to our customers from other cement suppliers in order to create markets
for our production as well as cash flow prior to start up. When, and if, we
develop and construct our cement manufacturing facilities, we anticipate
producing commercial quantities of Portland cement. Portland cement is a finely
ground processed material that, when mixed with sand, gravel, water and other
minerals, forms concrete. The raw materials, limestone and shale, are mined,
crushed, and burned in high-temperature rotary kilns, producing a substance
commonly referred to as "clinker". The resulting clinker is then finely ground
with small amounts of gypsum to produce Portland cement. From the Palawan
Project, we anticipate producing 2.5 million metric tonnes of Portland cement
per year.
Our products may be subject to numerous foreign government standards and
regulations that are continually being amended. Although we will endeavor to
satisfy foreign technical and regulatory standards, there can be no assurance
that our products will comply with foreign government standards and regulations,
or changes thereto, or that it will be cost effective for us to redesign our
products to comply with such standards or regulations. Our inability to design
or redesign products to comply with foreign standards could have a material
adverse effect on our business, financial condition and results of operations.
Results of Operations. We have not yet realized any revenue from operations, as
our cement manufacturing facilities are presently in the development stage.
Liquidity and Capital Resources. At March 31, 2002, we had cash of $7,203. Our
total current assets at March 31, 2002 were $8,156 compared to total current
assets of $1,003 at December 31, 2001. Our total current liabilities at March
31, 2002 were $782,707 compared to total current liabilities of $897,551 at
December 31, 2001. Our net income for the three month period ended March 31,
2002, was $52,615 compared to a net loss of $104,542 during the three month
period ended March 31, 2001. We experienced net income during the three month
period ended March 31, 2002 because of the cancellation of a $169,247 debt, not
because we sold any products or services. The debt forgiveness was in the form
of two of our officers forgiving their 2001 salaries in the amount of $169,247.
From our inception on May 7, 1984 to March 31, 2002, we suffered a net loss of
$2,201,050. We expect to continue to suffer losses.
The cash and equivalents constitute our present internal sources of liquidity.
Because we are only generating minimal revenues at this time from interest, and
are not generating any revenues from operations, our only external source of
liquidity is the sale of our capital stock. We are attempting to acquire funding
for both the Palawan Project and the Negros Project from German financial
institutions with assistance from Krupp-Polysius, a German machinery
manufacturing, engineering, trading and financial services company.
Krupp-Polysius has agreed to help us arrange the export credits and the required
loan guaranties for the loans required for both projects.
46
Our Plan of Operation For Next 12 Months. Based on current discussions, we
presently anticipate that the necessary financing for the Palawan Project will
be secured during the third quarter of 2002, which will allow us to begin our
preliminary engineering programs during the fourth quarter and initiate
construction in the fourth quarter of 2002. Emphasis will be initially on
completing the port site which is necessary to enable supplies and materials to
be delivered for construction of the plant.
The Palawan Project will be the only cement manufacturing facility on the island
of Palawan. We anticipate that the facility will have an initial production
capacity of 2.5 million tonnes per year with expansion capability to ten to
twelve million tonnes per year. Negotiations with potential suppliers indicate
that the port site and power plants could be provided on a BOT basis which, we
believe, would reduce our financing costs by approximately $90 million. In
addition, as a result of our discussions with Krupp-Polysius, we would take
delivery of the manufacturing equipment earlier than expected, thus advancing
our start-up date by up to six months.
Our development schedule contemplates that cement plant construction will
commence in the fourth quarter of 2002 after completion of the initial design
engineering and construction of the port facilities. We anticipate that all
facilities will be constructed by the end of 2005 and full production should
begin in the first quarter of 2006. When direct project development and
construction is in progress, we anticipate that other activities will commence
including environmental requirements and community related initiatives. We
believe that the cement plant will provide economic growth for the southern part
of Palawan and we will be actively involved in developing beneficial programs to
assist the local and indigenous people.
The Negros Oriental Project will consist of a cement plant of 1.5 million tonnes
per year capacity with expansion capability to 3 million tonnes per year. We
anticipate that the Negros Oriental Project will basically duplicate the Palawan
development program and development will commence one year after construction
begins at Palawan.
We have solicited and received bids for an exploratory drilling program to
confirm the full extent of the limestone reserves on Negor Corporation's Negros
Oriental Province mineral claims. On June 9, 1999, we announced that we had
signed a contract with Roctest Machinery and Drilling Corporation to core drill
2,000 meters for test sampling of the limestone deposits for the Negros Project
and we anticipate that the drilling will commence as soon as the necessary
regional work permits are received.
Our success is dependent upon our ability to secure the necessary financing.
Through the efforts of Krupp-Polysius and Belfinger & Berger, we have received a
letter of interests from German banks to provide all of the export credit and
loan funding. We may also obtain financing from the individual contractors for
the port, power and quarry facilities which would reduce our overall financing
needs.
If we do not obtain adequate financing, we may need to delay the program or to
enter into arrangements with other companies interested in developing cement
plants in the Philippines.
In the opinion of management, available funds will satisfy our working capital
requirements through July 2002. Our forecast for the period for which our
financial resources will be adequate to support our operations involves risks
and uncertainties and actual results that could fail as a result of a number of
factors. We will need to raise additional capital to develop, promote and
conduct our operations. Such additional capital may be raised through public or
private financing as well as borrowings and other sources. We cannot guaranty
that additional funding will be available on favorable terms, if at all.
We are not currently conducting any research and development activities. We do
not anticipate conducting any such activities in the next twelve months. We do
not anticipate that we will purchase or sell any significant equipment in the
next six to twelve months unless we obtain significant additional capital.
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. We believe our future success depends in
large part upon the continued service of our key personnel.
47
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
- --------------------------
None.
Item 2. Changes in Securities.
- ------------------------------
During the three month period ended March 31, 2002, we issued stock for cash in
the following amounts:
o On January 11, 2002, we sold 300,000 shares of our common stock for $0.20
per share.
o On March 28, 2002, we sold 30,000 shares of our common stock for $0.30
per share.
As of March 31, 2002, there were 330,000 warrants to purchase our common stock.
Of these, there are 300,000 warrants to purchase our common stock at $.35 per
share, which expire January 29, 2003, and 30,000 warrants to purchase our common
stock at $.50 per share which expire March 28, 2004.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None.
Item 4. Submission of Matters to Vote of Security Holders
- ----------------------------------------------------------
None.
Item 5. Other Information
- --------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
None.
48
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, thereunto duly authorized.
Fenway International, Inc.,
a Nevada corporation
June 26, 2002 By: /s/ H. John Wilson, President
-----------------------------------
H. John Wilson, President