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

                                   FORM 10-QSB

(Mark  One)
x  QUARTERLY  REPORT  UNDER  SECTION  13 OR 15(d)  OF THE  SECURITES
EXCHANGE ACT OF 1934
                     For the quarterly period ended March 31, 2001
                                                    --------------

TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

                     For the transition period from_______________to____________
                     Commission file number  0-29915
                                             --------

                                   FREFAX INC.
        (Exact name of small business issuer as specified in its charter)

FLORIDA                                                         65-0786722
_______________________________________________________________________________
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

                   8680 LE CREUSOT, ST-LEONARD, QUEBEC H1P 2A7

                    (Address of principal executive offices)

                                 (514) 324-8666

                           (Issuer's telephone number)

                   644 DE COURCELLE, MONTREAL, QUEBEC, H4C 3C5

(FORMER  NAME,  FORMER  ADDRESS AND FORMER  FISCAL YEAR,  IF CHANGES  SINCE LAST
REPORT)

Check whether the issuer (1) filed all reports required to filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECECING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the  distribution of
securities under a plan confirmed by a court. Yes _ No_

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  practicable
date: 19,446,000
      ----------

Transitional Small Business Disclosure Format (Check one):  Yes __ No X

SEC 2334 (5-00)

Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number.




<PAGE>

                        PART 1 --- FINANCIAL INFORMATION



ITEM 1. Financial Statements

Attached unaudited financial statements for Frefax, Inc. (FC) and subsidiary for
the period ending March 31, 2001 are submitted in compliance with item 310 (b)
of regulation SB.

ITEM  2.  Plan of Operation

The Plan of Operation from the corporations' point of view is summarized as
follows:

1.       FC has not received or generated revenues as of the end of this quarter
         ending March 31, 2001.

2.       FC has not purchased or sold any significant equipment or assets.

3.       FC has no significant change of employees.

4.       FC is in the process of diversifying its core business from
         developing communication technology to a real estate development
         company, which would also acquire and develop technologies to be used
         in environmental applications.

5.       Based upon the above mentioned corporate strategy to diversify
         from its core business the corporation anticipates raising
         approximately three million dollars in additional funds within the next
         12 months by means of private placements.

6.       In connections with diversifying its core business, on August
         30, 2000, the company entered into memorandum of agreements with four
         Canadian individuals whereby the company intends on buying their
         ownership interest (by issuance of its common stock) in Zaveco
         Development Corporation a newly formed Canadian corporation ("Zaveco").

7.       Zaveco has acquired land in Montreal, Canada for $4,000,000.
         Zaveco plans to develop approximately 265,000 square feet of retail
         space. The company is awaiting building permits to be issued to Zaveco
         by the City of Montreal in order to complete the acquisition of Zaveco.

8.       The company and Nanoworld Projects Corporation no longer plan
         to go forward with the letter of intent. The Company has not yet
         received its' reimbursement of $172,000.00 deposit from Nanoworld but
         is pursuing this matter.



<PAGE>



                           PART II - OTHER INFORMATION

Item 1. - 5.  Not Required

Item 6.  Exhibits

Exhibits (3i) and (ii) are incorporated into this filing by reference to
Exhibits 2(i) and 2(iii) as filed in part 3 of form 10 S-B as filed with the
Securities and Exchange Commissions on March 8th, 2000.


                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



Date 05/18/2001                                         Frefax Inc.

---------------------------                 --------------------------
                                                        (Registrant)




Date 05/18/2001                                         Anthony Papa

---------------------------                 --------------------------
                                                        (Chairman)






<PAGE>









                           FREFAX, INC. AND SUBSIDIARY

                          (A DEVELOPMENT STAGE COMPANY)

                        CONSOLIDATED FINANCIAL STATEMENTS

           FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000
                                       AND

                                 CUMULATIVE FROM

            SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO MARCH 31, 2001

                                   (UNAUDITED)







<PAGE>






                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


<TABLE>
<CAPTION>



                                                                                              Page
                                                                                             number
---------------------------------------------------------------------------------------------------------

Consolidated balance sheet at March 31, 2001 (unaudited)
<S>                                                                                           <C>
and June 30, 2000                                                                              F-1

Consolidated statements of operations and comprehensive income (loss)
(unaudited) for the nine months ended March 31, 2001 and 2000 and cumulative
from September 26, 1997
(date of inception) to March 31, 2001                                                          F-2

Consolidated statements of operations and comprehensive income (loss)
(unaudited) for the three months ended March 31,
2001 and 2000                                                                                  F-3

Consolidated statement of stockholders' deficiency (unaudited) for the period
from September 26, 1997 (date of inception)
to March 31, 2001                                                                           F-4 - F-5

Consolidated statements of cash flows (unaudited) for the nine months ended
March 31, 2001 and 2000 and cumulative from
September 26, 1997 (date of inception) to March 31, 2001                                      F-6

Notes to consolidated financial statements                                                 F-7 - F-10

</TABLE>

<PAGE>




                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                   March 31, 2001
                                                                                     (unaudited)                June 30, 2000
                                                                                ----------------------       -------------------

Current assets:

<S>                                                                                             <C>                      <C>
    Cash $                                                                      -                 $                      280
     Recoverable use tax                                                                      4,382                    4,656
                                                                                -------------------          ---------------
         Total current assets                                                                 4,382                    4,936

Furniture, fixtures and equipment, net                                                       78,611                   80,611
Loan receivable - unsecured                                                                 172,000                        -
                                                                                -------------------          ---------------
         Total assets                                                           $           254,993         $         85,547
                                                                                ===================      ===================

                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                    ----------------------------------------
Current liabilities:
    Accrued expenses - related party                                            $             4,000                   28,500
    Loans from related party                                                                352,693                  148,689
                                                                                -------------------          ---------------
         Total current liabilities                                                          356,693                  177,189
                                                                                -------------------          ---------------

Commitments and contingencies (Note 4)                                                            -                        -
                                                                                -------------------          ---------------

Stockholders' deficiency:
    Common stock - $.001 par value, 50,000,000 shares authorized,
    19,446,000 shares issued and outstanding                                                 19,446                   19,446
    Additional paid-in capital                                                              180,864                  180,864
    Accumulated deficit during the development stage                                        (97,344)                 (87,973)
Accumulated other comprehensive income (loss)                                                (9,252)                 (11,372)
    Stock subscriptions receivable                                                         (195,414)                (192,607)
                                                                                ------------------------     ----------------
       Total stockholders' deficiency                                                      (101,700)                 (91,642)
                                                                                ------------------------     ----------------

Total liabilities and stockholders' deficiency                                  $           254,993         $         85,547
                                                                                =======================      ================


</TABLE>




     See accompanying notes to consolidated financial statements (unaudited)

                                     F - 1
<PAGE>


                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                              Cumulative
                                                                                                 from
                                                     For the nine       For the nine       September 26, 1997
                                                     months ended       months ended      (date of inception)
                                                     March 31, 2001     March 31,2000       to March 31, 2001
                                                    --------------      ------------      -------------------

<S>                                               <C>                 <C>                  <C>
Income .........................................  $        --         $           --       $               --
    Selling, general and administrative expenses         12,178           8,052                   95,775
    Research and development ...................           --             4,422                   17,864
                                                  ----------------    ---------------      -------------------

Total expenses .................................         12,178          12,474                  113,639
                                                  ----------------    ---------------      -------------------

Loss before other income
(expense) and provision for income taxes .......        (12,178)        (12,474)                (113,639)
                                                  ----------------    ---------------      -------------------
Other income (expense):
   Gain on foreign currency transactions .......                          4,833                    8,638
   Interest income .............................          2,807           2,199                    8,387
   Interest expense ............................           --             (218)                     (464)
                                                  ----------------    ---------------      -------------------
   Total other income (expense) ................          2,807           6,814                   16,561
                                                  ----------------    ---------------      -------------------

Loss before provision for income taxes .........         (9,371)         (5,660)                 (97,078)

Provision for income taxes .....................          --              --                    --
                                                  ----------------    ---------------      -------------------

Net loss .......................................         (9,371)         (5,660)                 (97,078)

Other items of comprehensive income (loss) .....          2,120          (5,436)                  (9,252)


Comprehensive net loss .........................    $    (7,251)     $   (11,096)           $   (106,330)
                                                   ============     ============             ============
Basic:
    Net loss ...................................   $        NIL     $        NIL            $       (.01)
                                                   ============     ============             ============

Weighted average number of
 common shares outstanding .....................     19,446,000      19,446,000                14,038,527
                                                    ============    ============             ============

</TABLE>



     See accompanying notes to consolidated financial statements (unaudited)
                                     F - 2

<PAGE>



                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
         CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                                 For the three    For the three
                                                 months ended     months ended
                                                 March 31, 2001   March 31, 2000
                                                  -------------   --------------
<S>                                                <C>           <C>
Income                                             $        --   $           --
                                                   ------------   --------------
Expenses:
    Selling, general and administrative expenses          2,305           2,979
    Research and development ...................           --              --
                                                   ------------    ------------

Total expenses .................................          2,035           2,979
                                                   ------------    ------------
Loss before other income
(expense) and provision for income taxes .......         (2,305)         (2,979)
                                                   ------------    ------------

Other income (expense):
   Gain on foreign currency transactions .......            --               --
   Interest income .............................            936             936
   Interest expense ............................            --               --
                                                   ------------    ------------
   Total other income (expense) ................            936             936
                                                   ------------    ------------
Loss before provision for income taxes .........         (1,369)         (2,043)

Provision for income taxes .....................           --              --
                                                   ------------    ------------

Net loss .......................................         (1,369)         (2,043)

Other items of comprehensive income ............          1,864             473
                                                   ------------    ------------

Comprehensive net income (loss) ................   $        495    $     (1,570)
                                                   ============    ============
Basic:
    Net loss ...................................  $       NIL               NIL
                                                   ------------    ------------
Weighted average number of
 common shares outstanding .....................     19,446,000      19,446,000
                                                   ============    ============


</TABLE>




     See accompanying notes to consolidated financial statements (unaudited)

                                      F-3
<PAGE>


                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
 FOR THE PERIOD FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO MARCH 31, 2001
                                  (UNAUDITED)


<TABLE>
<CAPTION>

                                                                             Accumulated   Accumulated
                                             Common Stock       Additional   Deficit       Other
                                            ------------        Paid-in      During the    Comprehensive Stock          Total
                                        Shares       Amount     Capital      Development   Income       Subscriptions  Stockholders'
                                                                             Stage         (Loss)        Receivable     Deficiency
                                      ----------    --------   ---------   -------------- ---------      ------------  -------------


Issuance of common stock upon
<S>                                      <C>             <C>         <C>      <C>          <C>            <C>             <C>
capitalization of company ...........    500,000    $     500   $  2,000      --            --           $  --           $ 2,500

Issuance of common stock in
connection with limited offerings ...    403,000          403        297      --            --              --               700

Net loss from date of inception
(September 26, 1997) to June 30, 1998       --             --         --   (2,954)          --              --           (2,954)

Balances at June 30, 1998 ...........    903,000          903      2,297   (2,954)          --              --               246
Issuance of common stock in
  connection with acquisition
  of subsidiary ..................... 10,000,000       10,000       --        --            --              --            10,000

Issuance of common
stock in connection with
limited offering
(November 1998) .....................  6,001,000        6,001     54,009      --            --             (60,010)          --

Issuance of common
stock in connection with
limited offering
(February 1999) .....................  2,542,000        2,542    124,558      --            --             (127,100)         --

Accrued interest on
   subscriptions receivable .........       --           --         --        --            --               (1,755)     (1,755)
Foreign currency
    translation adjustment ..........       --           --         --        --          (6,436)             --         (6,436)
Net loss for the year ended
  June 30, 1999 .....................       --           --         --      (49,719)          --              --        (49,719)
Balances at June 30, 1999 (forwarded) 19,446,000       19,446    180,864    (52,673)      (6,436)          (188,865)    (47,664)
                                      ------------   ---------- ---------   -------       -------          --------     --------

</TABLE>

     See accompanying notes to consolidated financial statements (unaudited)
                                      F-4

<PAGE>

                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
               CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
          FOR THE PERIOD FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO
                      MARCH 31, 2001 (UNAUDITED) (cont'd)

<TABLE>
<CAPTION>


                                                                          Accumulated   Accumulated
                                          Common Stock       Additional   Deficit       Other
                                          ------------       Paid-in      During the    Comprehensive   Stock             Total
                                     Shares       Amount     Capital      Development   Income        Subscriptions   Stockholders'
                                                                          Stage         (Loss)        Receivable        Deficiency
                                   ----------    --------   ---------   -------------- ---------     ------------     -------------

Balances at June 30, 1999
<S>                               <C>           <C>          <C>        <C>             <C>              <C>            <C>
(from previous page) ........     19,446,000    $  19,446    $ 180,864  $    (52,673)   $   (6,436)      $(188,865)     $ (47,664)

Accrued interest on
   subscriptions receivable .           --           --          --            --            --             (3,742)       (3,742)
Foreign currency
   translation adjustment ...           --           --          --            --           (4,936)           --          (4,936)
Net loss for the year
   ended June 30, 2000 ......           --           --          --         (35,300)                                     (35,300)
                                      -------    -----------   ----------   ------------   -------         --------       -------
 Balances at June 30, 2000 ..     19,446,000       19,446      180,864      (87,973)       (11,372)       (192,607)      (91,642)
Accrued interest on
   subscriptions receivable .           --           --          --            --              --           (2,807)       (2,807)
Foreign currency
   translation adjustment ...           --           --          --            --            2,120           --            2,120
Net loss for the nine months
    ended March 31, 2001 ....           --           --          --          (9,371)           --            --           (9,371)
                                   ----------   ---------    ------------   -----------   -----------   -----------    -------------

Balances at March 31, 2001 ..     19,446,000    $  19,446  $    180,864    $(97,344)      $ (9,252)       (195,414)    $(101,700)
                                  =========     =========   ============   ===========    ============   =========      =========


</TABLE>



     See accompanying notes to consolidated financial statements (unaudited)

                                      F-5
<PAGE>





                                                 FREFAX, INC. AND SUBSIDIARY
                                                (A DEVELOPMENT STAGE COMPANY)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                                                Cumulative from
                                                                               For the nine    For  the nine    September 26, 1997
                                                                               months ended    months ended     (date of inception)
                                                                               March 31, 2001  March  31, 2000  to March 31, 2001
                                                                                 ---------     ---------------   ------------------


Cash flows from operating activities:
<S>                                                                             <C>             <C>                <C>
   Net loss ................................................................... $   (9,371)     $    (5,660)       $ (97,344)
   Adjustments to reconcile net (loss) to net cash used for operating
    activities:
       Foreign currency translation ...........................................      2,120           (5,436)          (9,252)
       Depreciation ...........................................................      --               3,972            7,891
       Interest income on subscriptions receivable ............................     (2,807)          (2,199)          (8,304)
(Increase) decrease in:
          Recoverable use tax .................................................        274             (431)          (4,382)
          Security deposits ...................................................      --                (115)             --
          Loans receivable - unsecured .........................................  (172,000)              --         (172,000)
Increase (decrease) in:
          Accounts payable - related party .....................................   (24,500)         (10,774)           4,000
                                                                                 ---------         ---------       ----------
Net cash used for operating activities ........................................   (206,284)         (20,643)        (279,391)

Cash flows from investing activities:
   Purchase of furniture, fixtures and equipment ..............................      2,000             (676)         (86,502)
                                                                                  ---------         ---------      ----------
Net cash used for investing activities ........................................      2,000             (676)         (86,502)
                                                                                  ---------          ---------     ----------

Cash flows from financing activities:
   Proceeds from initial capitalization of
   company and from sale of common
   stock in connection with private placements ................................      --                   --          3,200
   Loans from related party ...................................................    204,004           18,786         362,693
                                                                                  ---------          ---------    ----------
Net cash provided by financing activities .....................................    204,004           18,786         365,893
                                                                                   ---------         ---------    ---------

Net (decrease) increase in cash ...............................................       (280)          (2,533)        --

Cash, beginning of period .....................................................        280            3,813
                                                                                  ---------         ---------    ----------

Cash, end of period ...........................................................   $                 $ 1,280      $  --
                                                                                  =========         =========    ==========

Supplemental disclosure of non-cash flow information: Cash paid during the year
for:
         Interest .............................................................   $  --             $    --      $  --
                                                                                  =========          =========   ==========
         Income taxes .........................................................   $  --             $    --      $  --
                                                                                  =========         =========    ==========

Schedule of non-cash investing activities:
   Issuance of 8,543,000 shares of common stock
     in exchange for subscription receivables .................................   $  --             $    --      $ 187,110
                                                                                  =========         =========    ==========

</TABLE>


     See accompanying notes to consolidated financial statements (unaudited)

                                      F - 6
<PAGE>


                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2001 AND 2000
                                       AND
    CUMULATIVE FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO MARCH 31, 2001
                                   (UNAUDITED)



NOTE 1 - ORGANIZATION

         Frefax,  Inc. (the "Company") was  incorporated in the State of Florida
         on September  26, 1997 as Central  Group,  Inc. The name of the Company
         was changed on September 15, 1998 to its current name.

         Pursuant to the stock  purchase  agreement  dated July 30, 1998 between
         the Company and the  shareholders of Frefax,  Inc.  (Canada),  ("Frefax
         Canada"),  a company  incorporated in the province of Ontario,  Canada,
         the Company  issued an aggregate of 10,000,000  shares of its $.001 par
         value common stock to the shareholders of Frefax Canada in exchange for
         100%  of  Frefax  Canada's   issued  and   outstanding   common  stock.
         Accordingly,  Frefax  Canada  became a wholly owned  subsidiary  of the
         Company.  Such transaction is considered a capital  transaction whereby
         Frefax  Canada  contributed  its  stock  for the net book  value of the
         Company.

         Frefax Canada was  incorporated on September 5, 1996 for the purpose of
         developing  software to be utilized in reducing long distance telephone
         fax charges.

         As of March 31, 2001,  the Company and Frefax Canada are  considered to
         be development stage companies.

         The Company is in the process of  diversifying  its core  business from
         developing  communication  technology  into a real  estate  development
         company,  which would acquire environmental  technologies to be used in
         numerous applications.  Accordingly for the nine months ended March 31,
         2001, the Company had no operations.  In connection  with  diversifying
         its core  business,  on August  30,  2000,  the  Company  entered  into
         memorandum of agreements  with four  Canadian  individuals  whereby the
         Company intends on buying their ownership  interest (by issuance of its
         common  stock)  in  Zaveco  Development  Corporation,  a  newly  formed
         Canadian corporation ("Zaveco").  Zaveco is in the process of acquiring
         land in Quebec, Canada for approximately  $4,000,000 with the intent of
         developing it into approximately 265,000 square feet of retail space.

                                      F-8
<PAGE>




                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
                                   (UNAUDITED)



 NOTE 2       -       INTERIM RESULTS AND BASIS OF PRESENTATION

              The unaudited consolidated financial statements as of March 31,
              2001 and for the three and nine month periods ended March 31, 2001
              and 2000 have been prepared in accordance with generally accepted
              accounting principles for interim financial information and with
              the instructions to Form 10-QSB and items 303 and 301(B)
              Regulation S-B.

              In the opinion of management, the unaudited consolidated financial
              statements have been prepared on the same basis as the annual
              consolidated financial statements and reflect all adjustments,
              which include only normal recurring adjustments, necessary to
              present fairly the financial position as of March 31, 2001 and the
              results of our operations and cash flows for the three and nine
              month periods ended March 31, 2001 and 2000. The results for the
              three and nine month periods ended March 31, 2001 are not
              necessarily indicative of the results to be expected for any
              subsequent quarter or the entire fiscal year ending June 30, 2001.
              The balance sheet at June 30, 2000 has been derived from the
              audited consolidated financial statements at that date.

              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 the Securities and Exchange Commission's rules and
              regulations. It is suggested that these unaudited financial
              statements be read in conjunction with our audited financial
              statements and notes thereto for the year ended June 30, 2000 as
              included in our report on Form 10-KSB filed on October 13, 2000.

NOTE 3 -      LOAN RECEIVABLE - UNSECURED

              On January 28, 2001 the Company entered into a letter of intent
              and had agreed to provide a $500,000 interim loan to Nanoworld
              Projects Corporation ("Nano") accruing at 15% interest for a
              period of three months. On January 31, 2001 the Chairman of the
              Company forwarded on behalf of the Company $172,000 to Nano
              related to this loan.

              The  Company  and Nano no longer  plan to go forward  with the
              letter  of  intent.  The  Company  has  not yet  received  its
              $172,000 deposit back from Nano but is pursuing this matter.

                                      F-8

<PAGE>



                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
                                   (UNAUDITED)



NOTE 4 - STOCKHOLDERS' DEFICIENCY

         Acquisition of Subsidiary

         Pursuant to a stock purchase  agreement dated July 30, 1998 between the
         Company and the  shareholders  of Frefax Canada,  the Company issued an
         aggregate of  10,000,000  shares of its $.001 par value common stock to
         the shareholders of Frefax Canada in exchange for 100% of Frefax Canada
         issued  and   outstanding   common  stock.   Accordingly,   after  such
         transaction,  Frefax  Canada  became a wholly owned  subsidiary  of the
         Company.  Such transaction is considered a capital  transaction whereby
         Frefax  Canada  contributed  its  stock  for the net book  value of the
         Company, and accordingly, no goodwill is recorded.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

        a)    Rent

         Frefax  Canada  leased  office space under a one-year  renewable  lease
         agreement,  which expired  November 30, 1999. Rent expense  amounted to
         $-0- and  $1,771 for the nine  months  ended  March 31,  2001 and 2000,
         respectively,  and $4,045  cumulative  from September 26, 1997 (date of
         inception) to March 31, 2001.  During January 2000, Frefax Canada moved
         its  operations to a space owned by a  shareholder  of the Company on a
         month to month basis, at no charge until a permanent location is found.

         The Company itself does not require any  significant  office space and,
         accordingly it utilizes the mailing address of its outside counsel on a
         month to month basis, at no charge.

         b)   Lack of Insurance

         The Company does not maintain any property, product liability,  general
         liability or any other form of  insurance.  Although the Company is not
         aware of any claims  resulting from product  malfunctions,  there is no
         assurance that none exists. In addition, as a result of not maintaining
         any  property  insurance,  the  Company's  equipment is deemed to be at
         risk.

                                      F-9
<PAGE>




                           FREFAX, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
                                   (UNAUDITED)



NOTE 6 -  RELATED PARTY TRANSACTIONS

          a)   Loans From Related Parties

         The  Companies  have been advanced  funds from a Canadian  corporation,
         which owns  approximately 1.1 % of the outstanding  common stock of the
         Company.  The loans are non-interest  bearing and are due on demand. As
         of March 31, 2001, such loans amounted to  approximately  $144,000.  In
         addition,  approximately  $36,000 of expenses was paid on behalf of the
         Companies by its Chairman.  Finally, $172,000 was loaned to the Company
         by its Chairman related to the deal with Nano.

          b)   Rent Expense

         During January 2000, Frefax Canada moved its equipment to a space owned
         by one of the Company's  shareholders on a month-to-month  basis, at no
         charge until a permanent location is found. The Company itself does not
         require any significant office space and, accordingly,  it utilizes the
         mailing  address of its outside counsel on a month to month basis at no
         charge.

         c)   Equipment Purchases

         Frefax   Canada   purchased   equipment   and  services   amounting  to
         approximately $86,000 from a corporation,  which is a 10.3% shareholder
         of  the  Company.  In  addition,  the  President  of  such  corporation
         beneficially owns an additional 20.6% of the Company.

         d)  Accrued Expenses - Related Party

         Accrued  expenses at March 31, 2001 of $4,000  consist of  professional
         fees which have been subsequently paid by the Company's Chairman.



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