U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-SB/A
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
TRIAD INNOVATIONS, INC.
(Name of Small Business Issuer in its charter)
CIK:0001107384
NEVADA 93-0863198
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State or other jurisdiction of IRS Employer ID Number
Incorporation or organization
800 North Rainbow Boulevard, Suite #208, Las Vegas, NV 89107
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(Address of principal executive offices) (Zip Code)
702-948-5007
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of
the Act:
Common Stock, $0.001 par value.
(Title of class)
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TABLE OF CONTENTS
PART I
<S> <C> <C>
PAGE
Item 1. Business..................................................... 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 19
Item 3. Properties.................................................. 21
Item 4. Security Ownership of Certain Beneficial Owners
and Management........................................ 21
Item 5. Directors and Executive Officers of the Registrant.......... 23
Item 6. Executive Compensation...................................... 27
Item 7. Certain Relationships and Related Transactions.............. 28
Item 8. Description of Securities................................... 29
PART II
Item 1. Market for Registrant's Common Stock and
Security Holder Matters............................... 30
Item 2. Legal Proceedings........................................... 31
Item 3. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................ 31
Item 4. Recent Sales of Unregistered Securities..................... 31
Item 5. Indemnification of Directors and Officers.................. 47
PART F/S
Signature Page................................................................ 48
Financial Statements and Supplementary Data.................................. F-1-F-17
Index to Exhibits....................................................................... 49
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Triad Innovations, Inc. (formerly Saker One Corporation)("Triad" or
"Company") was created on December 23, 1981 in the State of Utah as Cavalier
Resources Corporation. The name was later changed to Saker One Corporation.
Saker One and Triad entered into a Plan and Agreement of Reorganization in 1998
whereby Triad merged into a wholly owned subsidiary of Saker and subsequently
Saker changed its name to Triad Innovations, Inc. after redomiciling to Nevada.
Over the years, the Company has engaged in various enterprises, none of which
have been successful. The Company owns all of the outstanding stock of Triad, a
Texas corporation, which owns 100% of the outstanding stock of Fuge Systems,
Inc., a Texas corporation. In 1998, Michael Bloom, James LaPorte, Natural
Resources Limited Company, and the Kaden Gordon Group I, Ltd. entered into
Contribution Agreements under which they contributed technology and licenses to
Saker One. Michael Bloom received 2,500,000 shares, James LaPorte received
1,350,000 shares, Kaden Gordon Group I, Ltd. received 800,000 shares and Natural
Resources Limited Company received 1,200,000 shares.
The Company has two wholly owned subsidiaries, Triad Compressor, Inc.
and Fuge Systems, Inc.
Triad Compressor ("Compressor") was organized on February 20, 1996 as a
wholly owned subsidiary of Intelligent Design Systems, Inc. (IDS). Compressor
became a separately owned company when IDS declared a dividend and distributed
Compressor stock to IDS stockholders. Triad then acquired all the outstanding
stock from IDS stockholders at a special stockholders meeting on December 21,
1998.
Fuge Systems, Inc. was created on October 4, 1995 as a wholly owned
subsidiary of IDS, which as a wholly owned subsidiary of Compressor, was spun
off from IDS, in November 1998. It is now a separate subsidiary of Triad.
The primary asset of Compressor is for compressing industrial gases,
natural gases or air. The size and simplicity of Triad's prototype compressor
provides opportunities involving compact service requirements. While compact
size and low fabrication costs offer marketing advantages for Triad's design,
the compressor industry is very competitive and design advantages are less
valuable without name recognition and strong marketing infrastructure.
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Triad views the economic potential for the compressor technology to be of value,
but less significant than Triad's centrifuge technology.
The primary asset of Fuge is fluid centrifuge technology under
development for multiple applications in industry. Some of the industrial
applications under investigation include industrial gas production of oxygen and
nitrogen, natural gas processing, and ethanol (solvent) de-hydration. Fuge owns
several prototype centrifuge models along with miscellaneous tools and test
equipment all located in rented shop facilities in Mankato, Minnesota.
Both products are still in the development stage and all expenses
related to the research and development are expensed as incurred. Neither
product has reached the commercially viable state and while all activities are
directed to that end, the Company is considered to be a development stage
company and all financial activity of that stage is reported since inception as
defined by SFAS #7.
Fuge is the owner of U.S. Patent 5,902,224 titled Mass-Mass Cell Gas
Centrifuge issued May 11, 1999. Fuge intends to seek additional patents as
warranted from further research and development activities.
The intellectual property assets are encumbered by certain royalty and
security agreements retained upon the transfer of license rights held by others
including certain Officers and Directors of the Company. (See "Royalty
Agreements").
Triad has retained Stancil & Co. ("Stancil") to assist with the
marketing and development of Triad's technologies and to provide independent
verification of performance tests. Stancil is a professional consulting firm
specializing in the technical and economic issues of the energy and chemical
industries. Following these verification tests, Triad will pursue joint
development agreements or other funding arrangements for the specific
applications presented in this report. Plans are to develop four to five
projects concurrently in the next year with commercial applications in place by
2001. Development work in 2001 would focus on broadening the testing to include
projects with more diverse applications.
A distribution method of products or services has not been established
as the Company is still in development stage for its products. The Company is
considering nonexclusive license arrangements to industry as a means of
marketing. The Company may acquire, own, and/or operate properties where the
technology can be deployed. The Company has issued press releases announcing
plans to focus on development of the centrifuge for ethanol de-hydration.
Research and development activities are being directed to this end. Funding for
these activities is being derived from certain shareholder loans.
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BACKGROUND OF GAS CENTRIFUGE TECHNOLOGY
In the 1930s, Jesse W. Beams of the University of Virginia first proved
the ability to separate molecules using a gas centrifuge based upon slight
differences in molecular weights. Mr. Beams demonstrated that a high-speed
centrifuge could separate isotopes of chlorine into depleted and enriched
fractions. Several high-speed gas centrifuges have been developed and operated
successfully since Mr. Beams' initial discoveries.
The use of gas centrifuge technology has primarily focused on
enrichment of fissionable isotopes. Mr. Beams successfully separated uranium
isotopes in 1940. Lacking the fully developed technology of high-speed rotating
machinery, the gas centrifuge method for enriching uranium for the war effort
was abandoned in 1943 in favor of the gaseous-diffusion process. In the years
after World War II, W.E. Groth of Germany made improvements in size, efficiency,
and speed of gas centrifuges for such separations. Gernot Zippe made further
advances, developing a light and durable ultracentrifuge for such separations.
Building upon Mr. Zippe's work at the University of Virginia, the U.S. Atomic
Energy Commission ("AEC") implemented a development program in 1960 aimed at
achieving large-scale, economically competitive uranium enrichment with gas
centrifuge technology. The Zippe rotor design is currently used for uranium
enrichment by the European corporation, Urenco, and in Russia.
Further commercialization of gas centrifuge technology has been slow,
largely due to the U.S. Government's efforts toward national security. Most of
the U.S. Government's gas centrifuge technology, including the design of its
enrichment facility at Oakridge, Tennessee, has been kept classified. Moreover,
private U.S. companies were not originally allowed to develop gas centrifuge
technology. As an example, Electronucleonics was a fledgling start-up company,
which contacted the AEC in 1967 seeking to collaborate on gas centrifuge
research. Following their meeting with the AEC, the Government sealed the
premises and confiscated their records. While its shareholders were compensated,
Electronucleonics was not allowed to continue its efforts.
PRODUCT DESCRIPTION
BACKGROUND OF TRIAD CENTRIFUGE TECHNOLOGY
Inventor Michael R. Bloom initiated the development of Triad's
centrifuge technology in 1989 to expand commercial applications.
Mr. Bloom's initial design effort lead to a narrow centrifuge, known as
the MMC, which operates in a batch-processing mode and provides the basis for
Triad's first gas centrifuge patent. Triad corresponding patent (U.S. Patent
Number 5,902,224) was issued on May 11, 1999.
This patent provides up to 16 patent rights, including the use of
multiple plates with "bow shock" openings in the plates; use of a liquid
solvent; the selective placement of inlet and outlet ports; and other mechanical
specifications.
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Using one MMC centrifuge, Mr. Bloom separated oxygen from air,
achieving oxygen purity as high as 95 to 99 percent using one centrifuge. Mr.
Bloom further conducted separations using natural gas, demonstrating the removal
of such components as carbon dioxide and hydrogen sulfide.
More recent developments have led to new designs, which Triad refers to
as continuous centrifuge designs. These continuous designs exclude some of the
features of the MMC centrifuge while including other improvements. Triad is
currently preparing a patent application that includes in excess of 60
additional claims based on these new developments. In all, Triad's technology is
founded on the testing of approximately 120 different rotors developed by Mr.
Bloom.
A tornado hit St. Peter, Minnesota, on March 26, 1998, and destroyed
much of the centrifuge equipment in Mr. Bloom's test laboratory. A centrifuge
test facility was temporarily established in San Antonio, Texas. Centrifuge
development in San Antonio continued toward air separation, natural gas
conditioning, and ethanol purification. In July 1999, Triad's test facilities
were moved to Mankato, Minnesota. The internal parts of the San Antonio Rotor
were fabricated using polyethylene and carbon seals. In the past few months,
Triad has fabricated three larger centrifuges with alloy rotors and industrial
seals ("1999 Rotor Designs"). Triad intends to use these 1999 Rotor Designs to
conduct verification work as well as to begin on-site pilot testing.
Triad's centrifuge technology lays the groundwork for commercialization
of high- capacity, continuous flow gas centrifuges for molecular separations.
While only 14 inches tall and 12 inches in diameter, the San Antonio Rotor was
capable of separating up to three gallons of ethanol per minute with a speed of
8,000 RPM. The 1999 Rotor Designs are 23 inches in height and 13 inches in
diameter. Triad estimates a separation capacity for these 1999 Rotor Designs to
be in excess of 20 liquid gallons per minute with rotor speeds of less than
15,000 RPM.
In addition to successful separations involving air, natural gas, and
ethanol mixtures, additional work has been conducted to purify sulfuric acid
from a spent cleaning solution.
Additional performance tests are planned for separation of suspended
and dissolved solids in liquids, separation of benzene from a heart-cut gasoline
stream, and gaseous mixture separations, which include continuous air
separation. Further tests are also planned in both of these areas. A number of
these project applications are discussed separately in the following market
assessment. Triad is currently completing a pilot centrifuge design for Gulf Tex
for the purification of agriculture wastewater.
Triad will emphasize high on-stream reliability and low capital
requirements by operating the centrifuges at RPM ranges of 10,000 to 15,000.
Mechanical reliability of rotating equipment has advanced significantly since
original gas centrifuge designs. Triad intends to further bolster the
centrifuge's mechanical integrity and capital requirements by working with
established mechanical engineering firms specializing in rotating equipment
design and fabrication.
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Triad has retained Stancil & Co. as independent consultants to verify
performance testing and to assist with further market development. The
intellectual property law firm of Merchant and Gould is assisting Triad to
obtain its additional patent rights.
MARKET ASSESSMENT
COMPETING SEPARATION METHODS
Component separation is one of the fundamental processes in
manufacturing. Simple equipment such as filters, centrifuges, cyclones, and
settlers are used to separate solid-liquid mixtures, multi-phase liquids, and
gas-liquid mixtures. Separations on a molecular level are more difficult with
numerous processes developed for various applications. Following are
conventional processes commonly used for molecular separations in the chemicals
and energy industries:
o Distillation--Separating vapor and liquid phases by varying temperature
and pressure.
o Gas Absorption-- Separating by dissolving certain components of a gas
mixture in a liquid.
o Extraction -- Dissolving of certain components of a liquid mixture or a
solid (leaching) in another liquid.
o Adsorption -- Separating components in liquid or gas mixtures by
selective attraction and storage.
Additional separation processes include chromatography,
crystallization, sublimation, membrane processes, diffusional separation
processes (including gas centrifuges), and separation processes using laser and
electrical or magnetic fields.
Process selections for given applications are based on feasibility and
cost. Although the capabilities and costs of the conventional technologies are
well established, many separations are either still not feasible or remain very
expensive. Where conventional processes are not feasible, combinations of
processes or more expensive processes are applied. For example, expensive
molecular separations using zero gravity have claimed significant notice for
enabling the pharmaceuticals industry to manufacture and purify numerous new
products.
Proven to separate molecules based upon differences in molecular
weights, gas centrifuge technology remains commercially under-developed
specifically because of previous governmental restraints on private development.
Triad has significantly advanced this gas centrifuge technology through its
developments. As a result, market opportunity for Triad's centrifuge technology
is prevalent in a wide range of difficult and expensive separation applications.
Given confirmation of Triad's reported performance, Stancil calculates the
ongoing operating and capital recovery costs of Triad's centrifuge technology to
be markedly lower than many competing separation processes. Triad believes
future volume capacity test results area critical factor in assessing potential
markets. Low volume results will severly restrict market potential. The market
potential discussion is prefaced upon the assumption that volume capacity test
results perform up to Company expectations.
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POTENTIAL MARKETS
Potential applications include markets in petroleum and petrochemicals,
acids, industrial gases, natural gas, pharmaceuticals, and isotopes. While the
most expensive separations provide an obvious target, the most attractive areas
are those markets having high- cost separations involved with high-volume
products.
Liquid-Liquid Separations -- The most notable market opportunity lies
in separation of azeotropes and other liquid mixtures. Azeotropes such as
ethanol-water mixtures are mixtures inseparable by distillation alone. To
address this problem, more elaborate and expensive processes are used, such as
solvent extraction or molecular sieve processes. In some cases, an azeotropic
distillation process is used, which is a more elaborate distillation using
another solvent. Other azeotropic separations remain unattainable via more
elaborate methods. In addition to being more expensive to separate, azeotropes
are prevalent in the petroleum refining and petrochemicals industries. Triad's
centrifuge technology is proven to separate azeotropes and other liquid
mixtures. If Triad is successful in achieving the capacities that it
anticipates, Stancil projects this combined market potential for gas centrifuge
technology to be $40 billion.
Gas Markets -- Separations of gases include two primary markets: (1)
the industrial gases market and (2) the natural gas processing market. These are
large markets with worldwide revenues of $30 billion per year in industrial gas
sales and roughly $25 billion per year in natural gas processing.
The industrial gas market growth reflects industrial production growth
and usually corresponds to 1 .5 to 2 times the Gross National Product ("GNP")
growth. Industrial gases are used in practically all industries and in most
manufacturing processes. Medical gases are consumed in hospitals and clinics.
Specialty gases are used in laboratories, semiconductor manufacturing, process
control, and for calibration of measuring instruments. The largest volumes are
consumed in production of steel and other metals, and in the chemical and
refining industry. The food industry, electronics industry, and health care
industry each account for about 1/10th of the market.
The industrial air markets pose significantly high entry barriers due
to several factors. The market is dominated by a handful of large multinational
companies. The nine major industrial gas companies account for approximately
78.6 percent of the market with $23.6 billion of 1997 sales. These markets are
extremely capital intensive.
Clean-burning, abundant natural gas is providing an increasing
proportion of world energy needs - it currently provides 20 percent of the
world's energy and is forecast to grow at 3.5 percent per year (exceeding oil's
2.2 percent growth). Natural gas requires processing to meet specifications for
water, sulfur compounds, inerts (nitrogen and carbon dioxide), and oxygen.
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The Gas Research Institute estimates that 36% of the U.S. nonassociated
gas reserves are subquality. Some of the gas is in fact not economically
marketable. Currently, $4 billion/yr is spent in the U.S. to clean-up gas and
recover valuable by-products such as natural gas liquids (NGLs), helium, and
sulfur. As of January 1, 1997 there were 1568 natural gas processing plants
worldwide with total throughput of 48 tcf/vr. The United States and Canada
represent 61% of this throughput volume.
The availability of natural gas to process is limited in many instances
by the contractual nature of some processing agreements where the raw gas
reserves are dedicated by time or volume to a particular processor, pipeline, or
plant. Similarly, customers for specialty gases like helium commonly contract
under long term supply agreements thereby limiting the customer base available
to the Company in which to market its products when and if commercially
developed.
The Company has in the past spent resources toward developing gas
centrifuge technology in hopes of entering these markets. However, the Company
has deferred plans to pursue further development in these markets until and if
the necessary capital resources are secured.
Pharmaceuticals Market - Pharmaceutical sales are a $90 billion market
in the U.S. with worldwide sales of $134 billion. While synthesis and extraction
accounts for only a fraction of the pharmaceuticals market, expensive separation
processes are justified in the manufacturing of pharmaceuticals due to the high
value of the drugs being manufactured. Approximately $2 billion per year is
spent solely on research and development in the area of synthesis and
extraction. Opportunity exists for Triad's gas centrifuge technology to recover
expensive products that remain in waste extraction streams as well as to replace
extraction and other elaborate separation processes.
SPECIFIC MARKET APPLICATION
The markets for which the Company intends to develop its products
contains numerous competitive barriers.
GASOLINE BENZENE REMOVAL
The U.S. EPA regulated the content of benzene in gasoline in the early
1990s. Proposed regulations for 2003 will require further reductions in gasoline
benzene levels. Many nations around the world are also implementing stringent
regulations for benzene content in gasoline (Canada, European Union, Asia,
etc.).
Traditional distillation technology is used to remove the benzene
boiling range material ("benzene heart cut") from gasoline. The benzene cannot
be completely separated from other gasoline components through distillation
alone because of the azeotropic nature of the benzene and other components.
Thus, the maximum benzene content in the resulting benzene heart cut is
approximately 50 percent. The heart cut stream can be sold at fuel value, which
is significantly below gasoline value or can be further extracted to produce
chemical grade benzene. The costs for extracting the benzene are in the range of
$50 to $100 per metric ton of feedstock.
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Preliminary estimates on the centrifuge process for benzene extraction
indicates that capital and operating costs could be up to 50 percent less than
conventional techniques. Stancil has entered into a preliminary engineering
study for a refiner to calculate the savings generated by the centrifuge
process. Centrifuge test runs are currently scheduled for the fourth quarter of
2000.
SOLVENTS SEPARATION
Triad and Archer Daniels Midland ("ADM") have entered into a
non-disclosure agreement for the use of centrifuge technology for the enhanced
recovery of solvents in proprietary ADM processes. A copy of the October 6,1999,
press release is included as Appendix C. Triad and ADM project substantial
capital and operating costs savings using the centrifuge process.
Triad has also entered into discussion with other entities in the
solvents businesses to review potential capital and operating costs savings.
SULFURIC ACID PURIFICATION
Triad has recently exchanged secrecy agreements with another technology
developer with regard to the purification of spent sulfuric acid. Demonstration
test runs using the 1999 Rotor Design to concentrate sulfuric acid on a
continuous basis are anticipated following agreement on licensing rights and
royalties. If the demonstration test is successful, a full-scale pilot plant
operation could be in place in one or more petroleum refineries by next summer.
The cost to regenerate sulfuric acid is in the range of $30 to $120 per
metric ton using a combustion-based process. A competing process being marketed
by the other developer could halve this regeneration cost. The developer would
benefit from a process such as Triad's to further concentrate the sulfuric acid
to higher purity. Mr. Bloom has previously separated other spent sulfuric acid
solutions using an earlier continuous centrifuge design to achieve sulfuric acid
concentrations meeting the requirements.
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ETHANOL PURIFICATION AND DEHYDRATION
Triad has performed tests based on raw production mix from various
ethanol refineries, and has made modifications to the rotor to specifically meet
the finished product specifications. Full scale testing for product quality and
utility requirements is currently scheduled for 2001.
Current costs to produce fuel grade ethanol are approximately $145 per
metric ton. A significant portion of this operating cost is related to the
fractionation and dehydration of the ethanol product. The centrifuge process
will replace two steps in the ethanol process, offering a reduction in both
capital and operating costs.
The ethanol industry is greatly influenced by substantial government
subsidy, transportation and delivery infrastructure limitations, alternate fuel
regulations, price competition with other fuels, and commodity price
fluctuations of fermentable grain supplies. The current processing economics
require subsidy to effectively compete with other fuels. The long-term survival
of this industry may be greatly impacted for the better or the worse by
governmental policy decisions at federal, state and local levels.
The Company's research and development efforts are directly focused
upon processing methods to purify ethanol produced from fermented grains. Water
is the primary component that must be extracted from the fermented mixture for
ethanol to be used as a motor fuel additive. The Company is attempting to
develop its centrifugation process for the primary purpose of removing this
water.
ACETIC ACID DEHYDRATION
Acetic acid, the distinctive component in vinegar, forms an azeotrope
with many other liquids including water. The acetic acid-water azeotrope
contains 50 to 60 percent acetic acid and 40 to 50 percent water. Nearly
one-half of all acetic acid produced is used to make VAM. The VAM is then used
to make polymers such as polyvinyl acetate. The global demand for VAM is
approximately 4 million metric tons with annual growth of 3.5 percent. The water
contained with acetic acid used in VAM production significantly increases the
VAM production costs.
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Use of Triad's centrifuge technology for separating the acetic
acid-water azeotrope could dramatically affect VAM production economics. Based
on an estimated VAM production cost (net of feedstock costs) of $100 per metric
ton, increasing the VAM production efficiency by only 20 percent is worth $80
million per year.
GAS SEPARATIONS
Triad has demonstrated the ability to separate high-purity oxygen from
air through its patented MMC batch centrifuge processing design. Triad believes
a continuous method will prove beneficial in a number of market applications
where an enriched oxygen stream in the 30 percent to 50 percent range will add
efficiency to industrial processes at a low cost. Specific market applications
include oxygen use in synfuel reactors employed in gas-to-liquids technology. A
major worldwide trend is underway to develop a means to access stranded natural
gas reserves. Syngas technologies are among the leading candidates to develop
these reserves. Oxygen enriched streams are also useful in steel production and
a variety of chemical processes.
TRIAD COMPRESSOR
DESCRIPTION OF TRIAD COMPRESSOR TECHNOLOGY
Triad, through its subsidiary Triad Compressor, Inc., owns the design
of a rotary cam, reciprocating compressor. The compressor's unique design is one
of the most compact reciprocating compressor designs offered on the market
today. Based on the simple and compact design, Triad believes that, once
commercialized, the compressor will have significant advantages in both size and
fabrication costs. Mr. Michael R. Bloom is also the inventor of Triad's
compressor design.
COMPRESSOR TECHNOLOGY
Triad will not emphasize further development toward the linear actuator
prototype while its main focus is on gas centrifuge development. Triad does
intend to make minor modifications to its existing prototype and then work
toward a joint marketing arrangement with an established compressor manufacturer
or distributor to market the modified version of the compressor. The costs for
modifications, further testing, and negotiations leading to a joint venture
arrangement are estimated to be less than $100,000.
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MARKET ASSESSMENT
POTENTIAL APPLICATIONS
The initial intent of the rotary-cam design was toward the fruition of
an internally driven compressor or pump using a novel linear actuator. However,
the size and simplicity of the current design alone provides opportunities
involving compact service requirements such as for oil drilling platforms or for
everyday applications such as a shop or household air compressor. Additional
services may apply as a vacuum pump or to pump liquids.
DEVELOPMENT PLANS
Triad plans to modify the latest prototype and complete additional
performance testing and patent application. With development and marketing funds
competing with Triad's centrifuge technology, Triad will consider various
options to market its compressor design while predominantly emphasizing
centrifuge technology development.
Acknowledging its organization and funding constraints, Triad will
pursue a joint venture or marketing arrangement with an established compressor
manufacturer or distributor to market the modified version of the compressor.
Triad also continues with the vision of further development toward the linear
actuator.
THE STANCIL CONTRACT
Stancil & Co. was engaged by Triad to provide consulting services in
the areas of engineering and marketing, and to seek industry equity or joint
venture investors. In the Agreement Triad agreed to:
* Continue to develop the Technology and complete corresponding patent
applications
* Fund engineering required for Technology development
* Provide legal assistance necessary to structure and complete any agreements
* Participate in the negotiations with the selected equity investors
* Compensate Stancil in accordance with the terms of Section 6 of the
Agreement
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In the Agreement Stancil agreed to:
1) Provide verification of the Technology and technical
services for development of the Technology
2) Develop an Information Memorandum
3) Assist Triad with marketing of the Technology to
petroleum and chemical companies as designated by
Triad management and assist in negotiating contracts
for marketing the Technology
4) Establish contacts with investors according to
procedures specified in Section 5 of the Agreement
and exclusively assist Triad in negotiations with
Stancil Investors ("Investor Contacting").
Stancil will be paid:
Professional fees and expenses related to "Base
Services" (items 1, 2 and 3) shall total $100,000 in
the form of 300,000 shares of common stock of Triad
to be issued to:
Steven D. Graybill 75,000 shares
W. Ray Stancil 75,000 shares
Ralph A. Schmidt 75,000 shares
C. Alan Stevens 75,000 shares
The professional fees shall be determined based on modified hourly
rates of $225 for all consultants and $110 for analysts. Expenses such as
travel, lodging, document reproduction, and telephone will be included at cost.
Stancil will provide Triad with an accounting of fees and expenses related to
Base Services on a monthly basis.
Each of the four Stancil consultants shall also receive in conjunction
with the shares issued in 1) above an option to purchase 75,000 additional
shares of common stock (300,000 additional combined shares) at a price of $2.00
per share with such option expiring on June 10, 2002. The option price per share
shall be adjusted for any stock splits.
For services related to Investor Contacting, Stancil shall earn a
Success Fee in an amount equal to 5.0 percent of the respective investment in
Triad received from any Stancil Investor. Any Success Fee is contingent upon and
will be payable at closing of the investment transaction. If there is a deferred
payment element to the investment, Stancil shall be paid on the same deferred
basis.
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PATENTS
The Company owns the following patent:
U.S. Patent Number 5,902,224 issued May 11, 1999. Mass-Mass Cell Gas
Centrifuge European Patent Office # 97949585.0.
This is an apparatus patent with eight claims covering Mass-Mass
Centrifuge for high purity 02 and N2 separately. An amendment to the patent made
seven claims to address the method of gas separation.
ROYALTIES TO INVENTOR AND CERTAIN DIRECTORS AND SHAREHOLDERS
Under the "Contribution Agreements" the Company agreed to make certain
Royalty Payments. The Company has agreed to pay Michael Bloom, the inventor of
the patented apparatus, and an officer, director, and major shareholder of the
corporation, a royalty of .444 per cent of gross receipts derived from the use,
benefit, licensing, transfer and sale of the Company's separation and compressor
technologies for the life of such technology. The Company has similar royalty
agreements with Natural Resources Limited Company, Kaden Gordon Group I, LTD and
James B. LaPorte. Such royalty amounts are also for .666, .444 and .444 per cent
of gross receipts, respectively. No units have been sold and no payments are due
because the product is still in development.
ADMINISTRATIVE OFFICES
The Company's current business address is 800 North Rainbow Boulevard,
Suite 208, Las Vegas, NV 89107. The Company's telephone number is 702-948-5007.
EMPLOYEES
The Company also believes that the success of the business is also
dependent upon the availability of outside consultants and advisors. The Company
has no long-term agreements with its consultants. The Company has entered into a
contractual arrangement with Stancil and Company to provide assistance with
prototype test verification, marketing analysis, and equity private placements.
The terms of compensation for these services include payment in the Company's
common stock, stock options, and finders fees.
The Company currently employs four full-time and one part-time employee.
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RISK FACTORS
1.CONFLICTS OF INTEREST. Certain conflicts of interest may exist
between the Company and its officers and directors. They have other business
interests to which they devote their attention, and may be expected to continue
to do so although they currently devote the majority of their time to the
company. As a result, conflicts of interest may arise that can be resolved only
through exercise of such judgment as is consistent with fiduciary duties to the
Company. See "Management," and "Conflicts of Interest."
2. NEED FOR ADDITIONAL FINANCING. Before the Company can exploit its
development of products, the Company must seek additional financing, which may
or may not be available. The Company intends to seek additional financing from
private placement and/or industry joint- venture development arrangements. The
Company has contracted with Stancil and Company to assist in such endeavors. The
Company has not determined the availability, source, or terms that might govern
the acquisition of such additional financing. If not available, the Company's
operations will be limited to those that can be financed with its available
capital. During 1999, the Company has financed its activities through stock
sales and certain shareholder loans. There is no assurance that these funds will
be available from any source or, if available, that they can be obtained on
terms acceptable to the Company.
3. REGULATION OF PENNY STOCKS. The Company's securities are subject to
a Securities and Exchange Commission rule that imposes special sales practice
requirements upon broker-dealers who sell such securities to persons other than
established customers or accredited investors. For purposes of the rule, the
phrase "accredited investors" means, in general terms, institutions with assets
in excess of $5,000,000, or individuals having a net worth in excess of
$1,000,000 or having an annual income that exceeds $200,000 (or that, when
combined with a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell the Company's securities and also may affect the ability
of purchasers in this offering to sell their securities in any market that might
develop therefore.
In addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks." Such rules include Rules 3a51-1,
15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities
Exchange Act of 1934, as amended. Because the securities of the Company may
constitute "penny stocks" within the meaning of the rules, the rules would apply
to the Company and to its securities. The rules may further affect the ability
of owners of Shares to sell the securities of the Company in any market that
might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
16
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practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker- dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
4. LACK OF OPERATING HISTORY. The Company's predecessor was organized
in 1981. Since inception the Company has engaged in organizational and product
development activities. The Company is not profitable. The Company has no
successful operating history. The Company faces all of the risks of a new
business and the special risks inherent in the involvement in a new unproven
business. The Company must be regarded as a new or "start-up" venture with all
of the unforeseen costs, expenses, problems, and difficulties to which such
ventures are subject.
5. NO ASSURANCE OF SUCCESS OR PROFITABILITY. There is no-assurance that
the Company will ever generate revenues or profits, or that the market price of
the Company's common stock will be increased thereby.
6. BUSINESS - HIGHLY RISKY. The Company is dependent upon receipt of
additional capital to finance its future growth and operations, technology
development, marketing expenses, and to provide working capital for its
continued operations as an ongoing business. See "Description of Business."
7. FINANCIAL RESOURCES. If the Company at any time is not able to
obtain the then necessary capital resources, the Company's financial condition
could be materially adversely impacted. If, however, additional funds are
secured through the issuance of equity securities, the percentage ownership of
the Company's stockholders at that time could be diluted and, in addition, such
equity securities may have rights, preferences or privileges senior to those of
the common stock.
8. DEPENDENCE UPON RESEARCH AND DEVELOPMENT ACTIVITIES. The Company is
almost exclusively dependent upon the success of its research and development
activities to develop a commercially viable product There can be no assurances
given by the Company that such efforts will produce a commercially viable
product. Research and development of the Company's technologies is subject to
numerous risks. The cost of such development is extremely uncertain. The
availability of qualified personnel, shortages or delay in delivery of equipment
and supplies, compliance with governmental requirements, and availability of
proprietary protection through patenting or other means are some of the inherent
risks associated with a research and development program.
17
<PAGE>
9. LACK OF DIVERSIFICATION. Because of the limited financial-resources
that the Company has, it is unlikely that the Company will be able to diversify
its acquisitions or operations. The Company's probable inability to diversify
its activities into more than one area will subject the Company to economic
fluctuations within its business or industry and therefore increase the risks
associated with the Company's operations.
10. DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT.
The Company currently has only four individuals who are serving as its officers
and directors. The Company will be heavily dependent upon their skills, talents,
and abilities to implement its business plan, and may, from time to time, find
that the inability of the officers and directors to devote their full time
attention to the business of the Company results in a delay in progress toward
implementing its business plan. See "Management." Because investors will not be
able to evaluate the merits of the business of the Company based on historical
operations, they should critically assess the information concerning the
Company's officers and directors.
11. LACK OF CONTINUITY IN MANAGEMENT. The Company does have an
employment agreement with its officers and directors, but there is no assurance
they will continue to manage the Company in the future. If any officer leaves it
may adversely effect the Company operations for a period of time until an
experienced replacement can be found.
12. INDEMNIFICATION OF OFFICERS AND DIRECTORS. Nevada Revised Statutes
provide for the indemnification of its directors, officers, employees, and
agents, under certain circumstances, against attorney's fees and other expenses
incurred by them in any litigation to which they become a party arising from
their association with or activities on behalf of the Company. The Company will
also bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company therefor
if it is ultimately determined that any such person shall not have been entitled
to indemnification. This indemnification policy could result in substantial
expenditures by the Company, which it will be unable to recoup.
13. DIRECTOR'S LIABILITY LIMITED. Nevada Revised Statutes exclude
personal liability of its directors to the Company and its stockholders for
monetary damages for breach of fiduciary duty except in certain specified
circumstances. Accordingly, the Company will have a much more limited right of
action against its directors than otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state
securities laws.
14. DEPENDENCE UPON OUTSIDE ADVISORS. To supplement the business
experience of its officers and directors, the Company may be required to employ
accountants, technical experts, appraisers, attorneys, or other consultants or
advisors. The Company's CEO, without any input from stockholders, will make the
selection of any such advisors. Furthermore, it is anticipated that such persons
may be engaged on an "as needed" basis without a continuing fiduciary or other
obligation to the Company. In the event the CEO of the Company considers it
necessary to hire outside advisors, he may elect to hire persons who are
affiliates, if they are able to provide the required services.
18
<PAGE>
15. COMPETITION. The industries in which the Company hopes to engage in
business are intensely competitive. The Company expects to be at a disadvantage
when competing with many firms that have substantially greater financial and
management resources and capabilities than the Company.
16. NO FORESEEABLE DIVIDENDS. The Company has not paid dividends on its
common stock and does not anticipate paying such dividends in the foreseeable
future.
17. VOLATILITY OF STOCK PRICE. Recent history relating to the market
price of the Company's stock, indicates the market price is highly volatile.
Factors such as those discussed in this "Risk Factors" section may have a
significant impact upon the market price of the securities. Owing to the low
price of the securities, many brokerage firms may not be willing to effect
transactions in the securities. Further, many lending institutions will not
permit the use of such securities as collateral for any loans.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS OR PLAN OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company remains in the development stage, and its technology and
products are all in the development stage.
The Company will carry out its plan of business as discussed above. The
Company cannot predict to what extent its liquidity and capital resources will
be diminished prior to the consummation of a joint venture industry funding
arrangement or private equity placement. At March 31, 2000 the Company had cash
of $359 and prepaid services in the amount of $22,511 for current assets of
$22,870. The Company had other assets in the amount of $29,864, for total assets
of $52,734. It had current liabilities of $518,759.
RESULTS OF OPERATIONS
During the period from December 1981 (inception) through March 31,
2000, the Company has engaged in no significant operations other than
organizational activities, and research and development of products.
COMPARISON OF OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998.
The Company had no revenues in either 1999 or 1998. The Company had
research and development costs of $0 in 1999 and $162,899 in 1998 for its
product development.
The Company had $552,571 in general and administrative expenses in 1999
and $13,975 in 1998. The net operating loss in 1999 was ($555,004) as compared
to ($180,995) in 1998. The net loss per share each year was less than ($.04) in
1999 and less than ($.01) in 1998.
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The Company expects to continue to generate losses due to general and
administrative costs for development of potential products at a similar rate to
1999. It is unknown when it might have any products ready to market.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2000.
The Company had no revenues in the period in 2000 or for all of 1999.
The Company incurred general and administrative expenses of $171,479 for the
period. The net operating loss for the three month period in 2000 was ($171,707)
as compared to $555,004 in all of 1999. The net loss per share each period was
less than ($.01).
The losses are expected to continue at the current rate, as a result of
legal and accounting expenses, expenses associated with registration under the
Securities Exchange Act of 1934, and expenses associated with research and
development activities. The Company anticipates that until the products under
development reach a commercially viable state, if ever, it will not generate
revenues, and may continue to operate at a loss after developing a commercially
viable product, depending upon the performance of the business.
NEED FOR ADDITIONAL FINANCING
The Company does not have capital sufficient to meet the Company's cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. The Company will have to
seek loans or equity placements to cover such cash needs. There is no assurance,
however, that the available funds will ultimately prove to be adequate to allow
it to commercially develop its products. And once commercial development is
completed, the Company's needs for additional financing is likely to increase
substantially.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might seek to
compensate providers of services by issuances of stock in lieu of cash.
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ITEM 3. DESCRIPTION OF PROPERTY
The Company's primary assets consist of certain intellectual property
rights associated with proprietary centrifuge and compressor designs. The
Company currently maintains an office at 800 North Rainbow Boulevard, Suite 208,
Las Vegas, NV 89107. The Company reimburses the accounting firm of J. Scott
Brosier, P.C. for services including receptionist, clerical and technical
support, office supplies, telephone, computer, etc. The Company also leases
facilities for research and development activities in Mankato, Minnesota at a
rate of $721 per month.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this Registration
Statement, the number of shares of common stock owned of record and beneficially
by executive officers, directors and persons who hold 5.0% or more of the
outstanding common stock of the Company. Also included are the shares held by
all executive officers and directors as a group.
Shareholders Number of
Beneficial Owners Shares Percentage
--------------------------------------------------------------------------------
Janis R. Monroe 1,009,000 6.4%
CEO and Director
2313 Sierra Heights
Las Vegas, NV 89134
James B. & Laura A. LaPorte 502,218 3.2%
President & Director (James B. LaPorte)
284 Enclaves Court
Coppell, Texas 75019
Michael R. Bloom 511,904 3.2%
Sr. Vice President & Director
1110 Clifford Drive
Kasota, MN 56050
Dr. Alan Propp 80,000 .52%
Vice President & Director
5341 Ellsworth Ave.
Dallas, TX 75206
J. Scott Brosier (1) 1,200,000 7.6%
CFO & Director
620 South Taylor
Amarillo, Texas 79101
Houston G. Wood 25,000 .16%
Director
Thorton Hall
University of Virginia
Charlottesville, Virginia 22903
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Chris Micklatcher 107,200 .6%
Director
OO Box 535
Limerick, ME 04048
Anthony R. Grindl 15,000 .09%
Director
6808 Cornelia Lane
Dallas, TX 75214
Rob Schleider 328,000 2.1%
Director
8620 Rosewood Dr.
College Station, TX 77845
Lawrence K. Sather & 768,750 4.9%
Deborah J. Sather
4516 Hitching Post Lane
Plano, Texas 75024
Kaden Gordon Group I 800,000 5.1%
c/o NRL
620 South Taylor
Amarillo, Texas 79101
Natural Resources Limited Company(1) 1,200,000 7.6%
620 South Taylor
Amarillo, Texas 79101
Larson Family Investors, LLC 1,250,000 8%
1110 Clifford Dr.
Kasota, MN 56050
All directors and executive
officers as a group (9 persons) 3,769,322 24%
(1)Mr. Brosier is a principal and beneficial owner of Natural Resources Limited
Company
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<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers currently serving the Company are
as follows:
NAME POSITION TERM
---- -------- ----
Janis Monroe Chief Executive Officer & Director Annual
James B. LaPorte President and Director Annual
Michael R. Bloom Sr. Vice President & Director Annual
Dr. Alan Propp Vice President, Secretary Annual
and Director
J. Scott Brosier Chief Financial Officer & Director Annual
Dr. Houston G. Wood Director and Consultant Annual
Chris Micklatcher Director Annual
Anthony R. Grindl Director Annual
Rob Schleider Director Annual
The directors named above will serve until the next annual meeting of
the Company's stockholders. Thereafter, directors will be elected for one-year
terms at the annual stockholders' meeting. Officers will hold their positions
under employment agreements which exist. There is no arrangement or
understanding between the directors and officers of the Company and any other
person pursuant to which any director or officer was or is to be selected as a
director or officer.
The directors and officers of the Company will devote such time to the
Company's affairs on an "as needed" basis. As a result, the actual amount of
time, which they will devote to the Company's affairs, is unknown and is likely
to vary substantially from month to month.
BIOGRAPHICAL INFORMATION
Janis Monroe shall serve as Chief Executive Officer, James B. LaPorte
will serve as President and Michael R. Bloom as Vice President of Research and
Development of Triad Innovations, Inc. Dr. Alan Propp will serve as President of
Triad Compressor and Secretary of Triad Innovations, Inc. J. Scott Brosier will
serve as treasurer of Triad Innovations, Inc. and as President of Fuge Inc.
JANIS R. MONROE, age 60, graduated with a BBA and MBA from the
University of Arizona, Phoenix, Arizona. Ms. Monroe is a CPA, and has served in
various capacities during her career, including college professor at Sam Houston
State University from 1980 to 1984, CEO/President of MicroMash, a CPA review
software company, from 1984 to 1995, and Executive Vice President of ICS
Learning Systems from 1995 to 1997. She is currently a self-employed consultant
and serves on various Boards of Directors in varying capacities. Most recently,
Ms. Monroe received the covenanted AICPA Information Technology Outstanding
Service Award in 1999. She is also a member of the MicroMash Editorial Board,
serves on the AICPA New Committee of 100, and serves as chairperson of the AICPA
Task Force for Top Technologies.
JAMES B. LAPORTE, age 36, received his BA in Business Administration
and Economics from Augsburg College in 1987 and his MBA in Finance from the
University of Saint Thomas, Saint Paul, Minnesota in 1992. From 1984 to 1986 Mr.
LaPorte was employed by Larson Enterprises of Central Florida, Inc., a Perkins
Restaurants franchisee. His final position there was as Regional Operations
Manager. From 1986 until 1993 Mr. LaPorte served as Vice President of Operations
for J.C. Oil & Gas Corporation. Since 1993 he has held management positions and
a seat on the Board of Directors within Dominion Energy PLC, an internationally
based public company, most recently serving as Managing Director.
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<PAGE>
MICHAEL R. BLOOM, age 47, has been the primary researcher and developer
of the technologies described herein. Mr. Bloom received his BS in Distributive
Sciences in 1973 and his BA in Environmental Sciences from the University of
Minnesota in 1983. From 1975 to 1988 he owned and operated Dick's Sports Center,
a successful marine business. From 1989 to 1993 he was the Environmental Section
Manager for Watershed Protection for south central Minnesota. In addition, since
1989 he has been developing the technologies described herein.
DR. ALAN D. PROPP, age 38, received his BS in Mechanical Engineering
from the University of Iowa in 1985, an MS in Mechanical Engineering, with an
Energy Management emphasis from Texas A&M University in 1986, and a Ph.D. in
Mechanical Engineering with a fluid/thermal emphasis in 1991. He also obtained
his license as a Registered Professional Engineer in 1994. Dr. Propp served as a
project engineer with the Superconducting Super Collider from 1991 to 1994.
Since 1994 Dr. Propp has performed consulting engineering and has also been a
principal of two Texas Corporations, serving as President of Spectrum Seasonings
Inc. and Vice President of Wireless Resources International, Inc.
J. SCOTT BROSIER, age 45, received his BS in Accounting from Texas
Christian University in 1977. After spending two years as an associate at Arthur
Young & Co. in Fort Worth, Texas Mr. Brosier obtained Certified Public
Accounting license. In 1981 he began private practice as a CPA and in 1990
formed J. Scott Brosier PC, of which he has been owner and president since. His
specialty is in oil/gas and agricultural taxation and he has also been involved
in the oil and gas exploration and production business.
DR. HOUSTON G. WOOD, age 55, received his BA and MS in mathematics from
Mississippi State University in 1965 and 1967, respectively. Dr. Wood worked the
next six years at the Oak Ridge Gaseous Diffusion Plant (ORGDP) in Oak Ridge,
Tennessee, where he was a development engineer working on gas centrifuges for
isotope separation. He then moved to the University of Virginia where he was a
Research Engineer for the Gas Centrifuge Project and a graduate student from
1973-1977. He received his Ph.D. in Applied Mathematics in 1978 and served as
Manager of the Centrifuge Physics Department at ORGDP until 1981. Since then, he
has been a member of the faculty of the Department of Mechanical and Aerospace
Engineering at the University of Virginia. Dr. Wood has continued to be actively
involved in gas centrifuge research and is an international leader in the field.
Dr. Wood is a recognized expert in modeling the internal flows in rotating
machinery and has extensive experience in design and manufacturing of such
equipment.
CHRIS MICKLATCHER, age 42, received his B.B.A. degree from University
of Michigan, Ann Arbor, Michigan in 1980, and his Juris Doctorate degree from
Wayne State University Law School in Detroit, Michigan 1n 1984. Mr. Micklatcher
is licensed to practice as an attorney and certified public accountant in
multiple jurisdictions. He worked for the regional office of Ernst & Whinney
(now Ernst & Young) in Boston, Massachusetts until 1988, when he then accepted a
position with Blue Cross & Blue Shield. In 1992, Mr. Micklatcher began a tax,
legal and accounting firm under the name of Alternative Tax Solutions, which he
continues to operate to this day. He has sat on various boards and held officer
positions, held both elected and appointed positions in government.
ANTHONY R. GRINDL, age 58, received his BS degree in Geology from San
Diego State in 1965 and an MS degree in International Business from University
of Dallas in 1975. Prior to attending these Universities Tony was an Advanced
Instructor Pilot for 6 years with the United States Air Force stationed in Texas
and Oklahoma. He has owned several corporations and for a period from 1975 to
1985 was responsible for recruiting senior research scientist for major energy
companies. He has also been involved in importing and developing private label
programs for upscale retailers and imported products. Tony also holds a patent
on a Multi-stage Zonal Air Purification System.
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<PAGE>
ROB SCHLEIDER, age 49, After high school, Mr. Schleider played
profession baseball for 3 1/2 years in Montreal Expo organization when a
shoulder ended his career in baseball. In 1974, Mr. Schleider graduated from
Texas A&M University with a BBA. From 1974 to 1989, Mr. Schleider was the owner
and operated fifteen restaurants. Mr. Schleider is has served or is currently
serving on various Boards, including the Republic Bank A&M Board, College
Station I.S.D. School Board, and the Brazos Valley Rehabilitation Center Board.
ADDITIONAL OPERATIONS AND PERSONNEL
Mr. Brosier's accounting firm will provide Triad with necessary office
space, secretarial, telephone, etc. and will also conduct accounting for the
firm. These services as provided during 1999 were without charge to the Company.
Beginning January 1, 2000 a fee of $2,000 per month will be charged and may be
payable in common stock based upon the average monthly market trading price of
such stock. Triad's set up will allow the officers to concentrate on the core
business functions of the company rather than on administrative tasks. It will
also minimize overhead expense.
Management will devote necessary time to the operations of the Company,
and any time spent will be devoted to screening and assessing and, if warranted,
negotiating to acquire business opportunities.
None of the Company's directors received any compensation for their
respective services rendered to the Company in 1999, nor have they received such
compensation in the past. Shareholders approved an award of 10,000 shares of
stock per year to each director beginning in the year 2000. Triad's three
employees performed services for the Company during 1999 without pay. Mr. Bloom
and Mr. LaPorte and Mr. Brosier have contracts dated January of 1999 which
allows them to take stock in the Company at a conversion rate of $.25 per share,
based on their respective annual incomes detailed below. Beginning in 2000, all
Mr. Bloom and Mr. LaPorte will be paid or accrue annual salaries of $100,000
each and Mr. Brosier $50,000 for half-time employment, subject to successful
private placement funding and/or joint venture financing. The employees have
agreed to receive compensation in the form of common stock based upon the
average monthly market trading price beginning January 1, 2000 until and if such
time as adequate capital resources are available to pay such compensation. No
retirement, pension, profit sharing, stock option or insurance programs or other
similar programs have been adopted by the Company for the benefit of its
employees.
It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event the
Company consummates a transaction with any entity referred by associates of
management, it is possible that such an associate will be compensated for their
referral in the form of a finder's fee. It is anticipated that this fee will be
either in the form of restricted common stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. The amount of such finder's fee cannot be determined as of the
date of filing this report, but is expected to be comparable to consideration
normally paid in like transactions. No employees will be entitled to finders
fees.
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INDEMNIFICATION OF OFFICERS AND DIRECTORS
As permitted by Nevada Revised Statutes, the Company may indemnify its
directors and officers against expenses and liabilities they incur to defend,
settle, or satisfy any civil or criminal action brought against them on account
of their being or having been Company directors or officers unless, in any such
action, they are adjudged to have acted with gross negligence or willful
misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable.
EXCLUSION OF LIABILITY
The Nevada Business Corporation Act excludes personal liability for its
directors for monetary damages based upon any violation of their fiduciary
duties as directors, except as to liability for any breach of the duty of
loyalty, acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, acts in violation of the Nevada
Business Corporation Act, or any transaction from which a director receives an
improper personal benefit. This exclusion of liability does not limit any right,
which a director may have to be indemnified, and does not affect any director's
liability under federal or applicable state securities laws.
CONFLICTS OF INTEREST
The officers and directors of the Company will not devote more than a
portion of their time to the affairs of the Company. There will be occasions
when the time requirements of the Company's business conflict with the demands
of their other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
Conflicts of Interest - General. Officers and directors of the Company
may participate in business ventures, which could be deemed to compete directly
with the Company. Additional conflicts of interest and non-arms length
transactions may also arise in the future in the event the Company's officers or
directors are involved in the management of any firm with which the Company
transacts business. The Company's Board of Directors has adopted a policy that
the Company will not seek a merger with, or acquisition of, any entity in which
management serve as officers or directors, or in which they or their family
members own or hold a controlling ownership interest. Although the Board of
Directors could elect to change this policy, the Board of Directors has no
present intention to do so.
26
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<TABLE>
<CAPTION>
ITEM 6. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE OF EXECUTIVES & DIRECTORS
Annual Compensation Awards
<S> <C> <C> <C> <C> <C> <C>
Name & Principal Year Salary Bonus Other Restricted Securities
Position ($) ($) Annual Stock Underlying
Comp- Award(s) Options/
ensation ($) ($) SARS (#)
---------------------------------------------------------------------------------------------------------------------
Janis Monroe, 2000 0 0 0 0 0
CEO & Director
James B. LaPorte, 1997 0 0 0 0 0
President 1998 0 0 0 0 0
& Director 1999 $100,000* 0 0 0 0
2000 $100,000* 0 0 0 0
Michael R. Bloom, 1997 0 0 0 0 0
Vice President 1998 0 0 0 0 0
& Director 1999 $100,000* 0 0 0 0
2000 $100,000* 0 0 0 0
Dr. Alan D. Propp, 1997 0 0 0 0 0
Vice President 1998 0 0 0 0 0
& Director 1999 0 0 0 0 0
2000 0 0 0 0 0
J. Scott Brosier, 1997 0 0 0 0 0
Chief Financial Officer 1998 0 0 0 0 0
& Director 1999 $50,000* 0 0 0 0
2000 $50,000* 0 0 0 0
Dr. Houston G. Wood, 1997 0 0 0 0 0
Director 1998 0 0 0 0 0
1999 0 0 0 0 0
2000 0 0 0 0 0
Chris Micklatcher 2000 0 0 0 0 0
Director
Anthony R. Grindl 2000 0 0 0 0 0
Director
Rob Schleider 2000 0 0 0 0 0
Director
*Accrued Compensation is currently not being paid to any executive, however,
contracts between executives and the Company state income may be taken when
Company is properly capitalized. Under the employment contracts, Executives also
have the option to take accrued income in the form of common stock in the
Company.
Messrs. Bloom, Brosier and LaPorte have each entered into a three year
employment contract which commenced January 25, 1999. Messrs. Bloom and LaPorte
under such contracts earn $100,000 per year and Mr. Brosier earns $50,000 per
year.
Janis Monroe was issued 1,000,000 shares of common stock for her Agreement to
serve as CEO and Director of the Company. In the event she voluntarily
terminates within two years, the Company may repurchase certain of the shares @
$.01 if certain performance goals have not been met by Ms. Monroe prior to her
voluntary termination.
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</TABLE>
<PAGE>
Option/SAR Grants Table (None)
Aggregated Option/SAR Exercises in Last Fiscal Year an FY-End Option/SAR value
(None)
Long Term Incentive Plans - Awards in Last Fiscal Year (None)
See "Certain Relationships and Related Transactions." The Company has
no stock option, retirement, pension, or profit-sharing programs for the benefit
of directors, officers or other employees, but the Board of Directors may
recommend adoption of one or more such programs in the future.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Triad Innovations, Inc. (formerly Saker One Corporation)(Triad) was
created on December 23, 1981 in the State of Utah. Over the years, Triad has
engaged in various enterprises, none of which have been successful. In 1998, in
a share exchange, Triad acquired all of the outstanding stock of Triad
Compressor, Inc. a Texas corporation, which owned 100% of the outstanding stock
of Fuge Systems, Inc., a Texas corporation. In 1998, Triad created, and later
merged with, a Nevada subsidiary, with the surviving company being Triad
Innovations, Inc., a Nevada corporation.
Triad Compressor (Compressor) was organized on February 20, 1996 as a
wholly owned subsidiary of Intelligent Design Systems, Inc. (IDS). Compressor
became a separately owned company when IDS declared a dividend and distributed
Compressor stock to IDS stockholders. Triad then acquired all the outstanding
stock from IDS stockholders at a special stockholders meeting on December 21,
1998.
Fuge Systems, Inc. was created on October 4, 1995 as a wholly owned
subsidiary of IDS, which was then spun off as a wholly owned subsidiary of
Compressor in November 1998.
Together, all three corporations, Triad, Compressor and Fuge,
constitute a consolidated group of corporations known as the Company. All
intercompany accounts and financial transactions have been eliminated.
Michael Bloom and James LaPorte, Officers and Directors, received
2,063,500 and 949,573 shares, respectively, in the Reorganization. Dr. Alan
Propp and Houston Wood received 80,000 and 25,000 shares, respectively.
In 1998 and 1999, several shareholders and an officer of the Company
advanced funds to the Company for working capital. Total loans contributed was
$4,900 in 1998 and $39,334 in 1999. Terms of the debt are demand notes accruing
interest at 5%.
In February 1999, the Company acquired all of the outstanding stock of
Prentice Oil & Gas, Inc. which held some non-producing mineral leases in Kimball
County, Texas for 580,000 shares of common stock. Prentice Oil & Gas, Inc. was
not an operating company. After the acquisition, the Company determined that the
mineral leases were not economically viable to drill and attempt production, and
have abandoned the leases and written off the stock of Prentice Oil & Gas, Inc.
28
<PAGE>
Janis Monroe was issued 1,000,000 shares of common stock for her
Agreement to serve as CEO and Director of the Company. In the event she
voluntarily terminates within two years, the Company may repurchase certain of
the shares @ $.01 if certain performance goals have not been met by Ms. Monroe
prior to her voluntary termination.
No officer, director, or affiliate of the Company has any direct or
indirect material interest in any asset proposed to be acquired by the Company
through security holdings, contracts, options, or otherwise except those
specific assignments and transfers further described herein.
Under the "Contribution Agreements" the Company agreed to make
certain royalty payments. The Company has agreed to pay Michael Bloom, the
inventor of the patented apparatus, and an officer, director, and major
shareholder of the corporation, a royalty of .444 per cent of gross receipts
derived from the use, benefit, licensing, transfer and sale of the Company's
separation and compressor technologies for the life of such technology. The
Company has similar royalty agreements with Natural Resources Limited Company,
Kaden Gordon Group I, LTD and James B. LaPorte. Such royalty amounts are also
for .666, .444 and .444 per cent of gross receipts, respectively. No units have
been sold and no payments are due because the product is still in development.
The Company has adopted a policy under which any consulting or finder's
fee that may be paid to a third party or affiliate for consulting services to
assist management in evaluating a prospective business opportunity would be paid
in stock or in cash. Any such issuance of stock would be made on an ad hoc
basis. Accordingly, the Company is unable to predict whether or in what amount
such a stock issuance might be made. No finders fees will be paid to employees
of the Company.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of
25,000,000 shares of common stock $0.001 par value. Each record holder of common
stock is entitled to one vote for each share held on all matters properly
submitted to the stockholders for their vote. The Articles of Incorporation do
not permit cumulative voting for the election of directors. As of March 31, 2000
a total of 14,842,306 common shares are issued and outstanding.
Holders of outstanding shares of common stock are entitled to such
dividends as may be declared from time to time by the Board of Directors out of
legally available funds; and, in the event of liquidation, dissolution or
winding up of the affairs of the Company, holders are entitled to receive,
ratably, the net assets of the Company available to stockholders after
distribution is made to the preferred stockholders, if any, who are given
preferred rights upon liquidation. Holders of outstanding shares of common stock
have no preemptive, conversion or redemptive rights. All of the issued and
outstanding shares of common stock are, and all unissued shares when offered and
sold will be, duly authorized, validly issued, fully paid, and nonassessable. To
the extent that additional shares of the Company's common stock are issued, the
relative interests of then existing stockholders may be diluted.
29
<PAGE>
SHAREHOLDERS
Each shareholder has sole investment power and sole voting power over
the shares owned by such shareholder.
No shareholder has entered into or delivered any lock up agreement or
letter agreement regarding their shares or options thereon.
TRANSFER AGENT
The Company's transfer agent is National Stock Transfer, Inc., 3098 S.
Highland Drive, #485, Salt Lake City, Utah 84106.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders with an annual report for
each fiscal year containing financial statements audited by its independent
certified public accountants. In the event the Company enters into a business
combination with another company, it is the present intention of management to
continue furnishing annual reports to stockholders. Additionally, the Company
may, in its sole discretion, issue unaudited quarterly or other interim reports
to its stockholders when it deems appropriate. The Company intends to comply
with the periodic reporting requirements of the Securities Exchange Act of 1934
for so long as it is subject to those requirements.
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANTS COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS
The Company's shares of common stock began trading on the
Over-the-Counter Bulletin Board in late 1998. The prices set forth below
represent closing prices.
HIGH LOW
------ ------
1998
Fourth Quarter $1.50 $.26
1999
First Quarter $3.50 $.50
Second Quarter $.92 $.40
Third Quarter $2.00 $.75
Fourth Quarter $1.75 $.26
2000
First Quarter $2 1/8 $1 1/16
Second Quarter $1.25 $.25
At February 15, 2000, there were approximately 1,200 holders of record
of the Company's stock. No dividends have been paid to date and the Company's
Board of Directors does not anticipate paying dividends in the foreseeable
future.
30
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
There are no pending legal proceedings involving the Registrant.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Crouch, Bierwolf & Chisholm completed the audit of the balance sheets
as of December 31, 1999, and 1998 and the related statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1999, and
1998. The Independent Audit Report contained an opinion which included a
paragraph discussing uncertainties related to continuation of the Company as a
going concern. Due to the Share Purchase Agreement, that changed the principal
shareholder of the Company, the Company changed Accountants and retained Crouch,
Bierwolf & Chisholm in 1999. In connection with these prior audits, no
disagreement exists with any former Accountant on any matter of accounting
principles or practices, financial statements disclosure, or auditing scope of
procedure, which disagreement if not resolved to the satisfaction of the former
Accountant would have caused the Accountant to make reference in connection with
his report to the subject matter of the disagreement(s).
<TABLE>
<CAPTION>
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In the prior three years the Company has sold its common stock to the
persons listed in the table below in transactions summarized as follows:
<S> <C> <C> <C>
Name & Address Purchase Amount of Consideration
Date Shares Per Share
---------------------------------------------------------------------------------------------------------------
Marland Albert 12/19/98 4,600 *
197 Lake Ridge Dr.
Seguin, TX 78155
Barry Amrich 12/19/98 80,000 *
12536 Trenton Drive
Dallas, TX 75243
James Amrich 12/19/98 800 *
1786 Eden Lane
Youngstown, OH 44509-2106
Jan Ashbaugh 12/19/98 13,600 *
9073 Waverly Ct.
Eden Prairie, MN 55747
31
<PAGE>
Tom Ashbaugh 12/19/98 15,289 *
c/o Commercial Bank
210 N. Lawler Box 1366
Mitchell, SD 57301-7366
F.E. Barker 12/19/98 800 *
5236 6TH Ave.
Delta, BC V4M 1L5
Beth Baumgardner 12/19/98 1,200 *
7275 N. Mercer Way
Mercer Island, WA 98040
Gary Bemiss 12/19/98 30,000 *
302 Hall Street
West Union, IA 52175
Paul Bemiss 12/19/98 30,800 *
612 Hiway 150 N
P.O. Box 493
West Union, IA 52175
Jeffrey Bishop 12/19/98 4,000 *
690 Porter Road
Bartonville, TX 76226
Blackjack Racing 12/19/98 6,400 *
P.O. Box 493
West Union, IA 52175
Randall Blair 12/19/98 8,000 *
29608 SD HWY 34
Pierre, SD 57501
Missy Blevins 12/19/98 800 *
7101 N. Mesa, Box 320
El Paso, TX 79912
Robert Blome, Jr. 12/19/98 9,200 *
1100 Hilton
Richardson, TX 75081-5636
Michael Bloom 12/19/98 2,500,000 *
1110 Clifford Dr.
Kasota, MN 56050
32
<PAGE>
Bobbitt Constr. 12/19/98 4,000 *
Route #1, Box 468
Hawkins, TX 75765
Elaine Buchanan 12/19/98 8,000 *
c/o Commercial Bank
210 N. Lawlor, Box 1366
Mitchell, SD 57301
Sylvia Burnett 12/19/98 16,000 *
2917 Linkview Dr.
Las Vegas, NV 89134
Mark Caffary 12/19/98 800 *
1589 Spyglass Cres
Tswassen, Canada V4M 4E6
William Carlisle 12/19/98 9,200 *
4320 Willow Bend Dr.
Arlington, TX 76017
Dennis Carmen 12/19/98 5,200 *
230 Prestien Dr.
P.O. Box 216
Denver, IA 50622
Thomas Carroll 12/19/98 172,000 *
1414 S. Negley Ave.
Pittsburgh, PA 15217
Ginette Carter 12/19/98 4,000 *
304 W. 15TH St.
N. Vancouver, BC Canada V7M 1S5
Cerisse Capital Corp. 12/19/98 81,520 *
1489 Marine Dr., #709
W. Vancouver, BC Canada V7T 1B8
Patrick Cherry 12/19/98 12,000 *
8640 W. 130TH St.
Palos Park, IL 60464
John Cleary 12/19/98 800 *
13925 209TH Ave. NE
Woodinville, WA 98072
33
<PAGE>
Gregory Coffey 12/19/98 7,760 *
8615 Calviton Court
Granbury, TX 76049
Karen Cole 12/19/98 6,000 *
8006 NW 128TH Cir.
Oklahoma City, OK 73142
Juanita Corfman 12/19/98 600 *
8990 N. Davis HWY #90
Pensacola, FL 32514
Corporate Finance 12/19/98 4,000 *
15301 Dallas Pkwy, Ste. #200
Dallas, TX 75001
Crouse & Hess 12/19/98 6,400 *
P.O. Box 386
Tazewell, VA 24651
James Damesworth 12/19/98 8,000 *
Route #2, Box 309
Leonard, TX 75252
Tom Davies 12/19/98 240,000 *
7227 Valley View Pl.
Dallas, TX 75240
Robert Dent 12/19/98 4,000 *
4986 Wycliffe Road
Vancouver, BC Canada V7S 1N5
Karen DeVito 12/19/98 6,800 *
4986 Wycliffe Road
Vancouver, BC Canada V7S 1N5
Ruth Diercks 12/19/98 600 *
1257 W. Minnehaha Pkwy
Minneapolis, MN 55419
Rowland Dixon 12/19/98 3,000 *
2120 Winchester Ct.
Arlington, TX 76013
34
<PAGE>
William H. Driscoll 12/19/98 313,200 *
720 Forest Bend
Plana, TX 75025
Daniel Dufford 12/19/98 16,000 *
2613 Chariot Lane
Garland, TX 75044
Stephen Dwyer 12/19/98 1,600 *
6944 Clearhaven Dr.
Dallas, TX 75248
Emerald Star 12/19/98 14,000 *
c/o Francis Peet
119-255 West First St.
N. Vancouver, BC Canada V7M 3G3
Harold Ericson 12/19/98 10,000 *
16051 Northwood Rd NW
Prior Lake, MN
Ken Ewald 12/19/98 40,000 *
c/o Targa Realty
1100 Melville St., #1160
Vancouver, BC Canada V6E 4A6
Paul Fehlig 12/19/98 4,720 *
1353 Green Treet Lane
St. Louis, MO 63122-4744
Dave Foran 12/19/98 14,000 *
119-255 West First St.
N. Vancouver, BC Canada V7M 3G8
Andrea Fox 12/19/98 800 *
2921 Washington St., #4
San Francisco, CA 94115
Gary Gallagher 12/19/98 4,000 *
434 Barnes Bridge Rd.
Sunnyvale, TX 75182
Linda Gallagher 12/19/98 4,000 *
212 Molina St.
Sunnyvale, TX 75182
35
<PAGE>
J. Curtis Garrett 12/19/98 40,000 *
2106 Bent Oak
College Station, TX 77840
Gene Garrett 12/19/98 3,200 *
9401 LBJ Freeway #250
Dallas, TX 75243
Dale Gibson 12/19/98 12,000 *
1010 Valley View Court
Huron, SD 57350
Dale Gibson, IRA 12/19/98 20,000 *
1010 Valley View Court
Huron, SD 57350
Steven Gonzalez 12/19/98 2,000 *
2508 Sumter
College Station, TX 778545
A.R. Grindl 12/19/98 12,000 *
6808 Cornelia Lane
Dallas, TX 75214
Richard Hammer 12/19/98 600 *
83198- 425 Street
Bird Island, MN 545310
Charles Hansen 12/19/98 8,000 *
3915 Storm Circle
Rapid City, SD 57702
Jeffrey Hanson 12/19/98 24,000 *
277 12TH St. SW
Huron, SD 57350
George Hartley 12/19/98 4,000 *
8235 Douglas Ave, #615
Dallas, TX 75225
Beth Harvey 12/19/98 1,400 *
930 Palm Ave., #123
West Hollywood, CA 90069
36
<PAGE>
Todd Harvey 12/19/98 240 *
2 W. Sequoia
Phoenix, AZ 85027
Ralph Hatfield 12/19/98 28,000 *
1803 B. Cheryl Dr.
Caldwell, TX 77836
Peter Heffron 12/19/98 8,000 *
6201 Magic Canyon Rd.
Rapid City, SD 57702
Douglas Hess 12/19/98 8,000 *
P.O. Box 386
Tazewell, VA 24651
Walter Holland 12/19/98 4,000 *
10951 Woodfair Rd.
Fairfax Station, VA 22039
Gary Hollaway 12/19/98 33,950 *
4455 Rushing Rd.
Dallas, TX 75287
Noris Hollaway 12/19/98 20,400 *
13310 McGregor Blvd.
Ft. Myers, FL 33919
Steven Hollaway 12/19/98 10,800 *
12693 New Brittany Blvd., #A
Ft. Myers, FL 33907
Beth Hulse 12/19/98 4,000 *
209 Dominik
College Station, TX 77840
Imperial Roof Systems Co 12/19/98 16,800 *
Attn: James Hauer
P.O. Box 522
West Union, IA 52175
Esther Jacobson 12/19/98 232,000 *
2924 Crown Ridge Dr.
Las Vegas, NV 89134
37
<PAGE>
Victor Jacobson 12/19/98 5,600 *
11626 Lebaron Terrace
Silver Springs, MD 20902
Kaden & Gordon 12/19/98 800,000 *
c/o NRL
620 South Taylor
Amarillo, TX 79101
Tony Koomt 12/19/98 2,400 *
2388 Triumph St., #304
Vancouver, BC Canada
Don Keeling 12/19/98 21,240 *
8008 NW 128TH Circle
Oklahoma City, OK 73142
David Keingersky 12/19/98 5,800 *
9851 Bolsa, #127
Westminster, CA 92683
Harold Kirby 12/19/98 160,000 *
4204 Pine Ridge Dr.
Garland, TX 75042-6143
Robert Kropf 11/98 12,000,000 $.001/$12,000
c/o 4505 S. Wasatch Blvd., Ste #3 In services
Salt Lake City, UT 84124 rendered
Clarence Lacy 12/19/98 4,016 *
P.O. Box 5639
Bryan, TX 77805
James Laird 12/19/98 32,000 *
261 22ND St., SW #3
Huron, SD 57350
Michael Laird 12/19/98 10,400 *
8004 Katrina Ct.
Rapid City, SD 57702
Steve Laird 12/19/98 10,000 *
303 N. Taylor
Pierre, SD 57501
38
<PAGE>
James LaPorte 12/19/98 1,325,000 *
284 Enclaves Ct.
Coppell, TX 75019
Alfred Leistkow 12/19/98 4,000 *
599 Garza Lane
Little Elm, TX 75068
Ester Lentz 12/19/98 200 *
c/o Chris Micklatcher
P.O. Box 535
Limerick, ME 04048
Edwin Lilley 12/19/98 8,000 *
720 Berry Creek
College Station, TX 77845
Brent Loseke 12/19/98 4,000 *
Route #2, Box 358
Gainsville, TX 76240
Thomas Lucas 12/19/98 32,000 *
6725 Colby Lane
Bloomfield Hills, MI 48301
Andres Lugo 12/19/98 8,000 *
950 Grace Drive
Carmel, IN 46032
Stephen Lugo 12/19/98 9,600 *
2706 Briarbrook Lane
Garland, TX 75040
Walter Majewski 12/19/98 4,000 *
52585 Base
New Baltimore, MI 48047
Linda Marcus 12/19/98 9,600 *
P.O. Box 944
Huron, SD 57350
Anthony Marini 12/19/98 200 *
222 London Ct.
Cardiff, NJ 08232
39
<PAGE>
Gerard Marroquin 12/19/98 12,000 *
1962 Hambleton
Lorena, TX 78655
Karen Maxwell 12/19/98 2,000 *
P.O. Box 412
Ogunquit, MI 03907
Robert G. Mayers 12/19/98 4,800 *
8740 Falls Chapel Way
Potomac, MD 20854
Jan McAlpin 12/19/98 13,760 *
12828 Broken Saddle Rd.
Knoxville, TN 37922
Jerry McAlpin 12/19/98 72,000 *
c/o Michael Bloom
1110 Clifford Dr.
Kasota, MN 56050
Michael McCurdy 12/19/98 2,400 *
533 Oak Hills Dr.
Hewark, TX 76071
Todd McDonough 12/19/98 16,000 *
411 Twin View Dr.
Decorah, IA 52101
William McMenamon 12/19/98 40,000 *
c/o Targa Realty
1110 Melville St., #1160
Vancouver, BC Canada V6E 4A6
Charles Menger, Jr. 12/19/98 4,000 *
131 W. Huron Cir.
Nocona, TX 76255
Verlene Menger 12/19/98 4,000 *
131 W. Huron Cir.
Nocona, TX 78255
Chris Micklatcher 12/19/98 23,200 *
P.O. Box 535
Limerick, ME 04048
40
<PAGE>
George Micklatcher 12/19/98 3,800 *
P.O. Box 535
Limerick, ME 04048
Gary Moore 12/19/98 6,000 *
219 S. Orange Ave.
Rialto, CA 92376-6403
David Mumford 12/19/98 111,200 *
7308 Moonlight View Ct.
Las Vegas, NV 89129
David Mumford, MD 12/19/98 8,800 *
7308 Moonlight View Ct.
Las Vegas, NV 89129
Kevin Murphy 12/19/98 28,760 *
25318 Lynbriar Ln.
Spring, TX 77373
Noella Murphy 12/19/98 3,200 *
25318 Lynbriar Ln.
Spring, TX 77388-6003
Paul R. Myhill 12/19/98 33,600 *
4257 Malone Ave.
The Colony, TX 75056
Natural Resources 12/19/98 1,200,000 *
620 South Taylor
Amarillo, TX 79101
Walter Naftzger 12/19/98 80,000 *
10 Glenkirk Ct.
Dallas, TX 75225
Edward Norman 12/19/98 4,000 *
10340 Round Hill Rd.
Ft. Worth, TX 76131
Bradley Nuccio 12/19/98 2,200 *
2848 NW 58TH St.
Seattle, WA 98017
41
<PAGE>
Patrick O'Neal 12/19/98 800 *
5846 Llano Ave.
Dallas, TX 75206
Sean O'Neill 12/19/98 400 *
4001 Briarhaven Ct.
Ft. Worth, TX 76109
John Patterson 12/19/98 12,800 *
1551 Black Road
Joliet, IL 60435
Lowell Peterson 12/19/98 24,000 *
16376 CO Rd. #35 West
Cokato, MN 55321
Ronald Peterson 12/19/98 600 *
13503 State Hwy 24 NW
South Haven, MN 55382
Pilares Oil & Gas 1 12/19/98 28,000 *
3241 S. First St.
Abilene, TX 79605
Pilares Oil & Gas 2 12/19/98 444,000 *
3241 S. First St.
Abilene, TX 79605
Richard Platt Roth IRA 12/19/98 9,200 *
2201 N. Davison St.
Mitchell, SD 57301
Lynn Price 12/19/98 8,000 *
12680 Hillcrest Road, #233
Dallas, TX 75230
Alan Propp 12/19/98 80,000 *
5341 Ellsworth Ave.
Dallas, TX 75206
Steven Raetz 12/19/98 1,600 *
4122 Hawthorne Ave.
Dallas, TX 75219
42
<PAGE>
Rubin Rabinowitz 12/19/98 9,600 *
5303 Wolf Ridge Rd.
Dayton, OH 45415
David Rasmussen 12/19/98 28,000 *
943 L Ave.
Jefferson, IA 50129-7044
James Rasmussen 12/19/98 14,000 *
1276- 190TH St.
Jefferson, IA 50129
David Rembert 12/19/98 9,000 *
8235 Douglas Ave., #625
Dallas, TX 75225
Anthony Remedios 12/19/98 160 *
c/o Cerisse Capital
1489 Marine Dr. W, #709
W. Vancouver, BC Canada V7T 1B8
Scott Ridge 12/19/98 12,000 *
301 Meadow Ct.
Glen Mills, PA 19342
Albert Santisteven 12/19/98 2,000 *
P.O. Box 187
Lincoln City, OR 97367
Kenneth Sather 12/19/98 12,000 *
4516 Hitching Post Lane
Plano, TX 75024
Larry Sather 12/19/98 1,150,000 *
4516 Hitching Post Lane
Plano, TX 75024
Marcia Savage 12/19/98 20,000 *
11 Skillman Lane
North Oaks, MN 55127-2155
Callie Schleider 12/19/98 4,800 *
8620 Rosewood Dr.
College Station, TX 77845
43
<PAGE>
Reg Schleider 12/19/98 86,400 *
3409 Alexander
Waco, TX 76708
Rob Schleider 12/19/98 244,000 *
8620 Rosewood Dr.
College Station, TX 77845
Robby Schleider 12/19/98 4,800 *
8620 Rosewood Dr.
College Station, TX 77845
Robert Schleider, Jr. 12/19/98 8,000 *
2001 Wenonah
Wichita Falls, TX 76309-2012
Robert Schleider/Nathan Shack 12/19/98 73,200 *
2001 Wenonah
Wichita Falls, TX 76309-2012
John Silva 12/19/98 3,600 *
c/o Gary Moor
219 S. Orange Ave.
Rialto, CA 92376-6403
William Smith 12/19/98 3,240 *
820 1/2N. Edinburgh Ave.
Los Angeles, CA 90046
Leanne Stables 12/19/98 800 *
8946 Lloyd Place
Los Angeles, CA 90046
LeRoy Stamer 12/19/98 4,000 *
Route 3, Box 97
Hector, MN 55342
Jerry Steeley 12/19/98 11,588 *
4455 Rushing Road
Dallas, TX 75287
Richard W. Stein IRA 12/19/98 6,080 *
c/o Commercial Bank
210 Lawler Box 1366
Mitchell, SD 57301-1366
44
<PAGE>
L. Jay Streetman 12/19/98 8,180 *
3366 Oak Creek Dr.
Denton, TX 76205
Mike Sweeney 12/19/98 10,400 *
203 N. Morada Ave.
W. Covina, CA 91790
Targa Capital 12/19/98 120,000 *
c/o Targa Realty
1100 Melville St., Ste #1160
Vancouver, BC Canada V6E 4A8
Kermit Teig 12/19/98 4,000 *
504 Russell Ave.
West Union, IA 52175
Julia Theune 12/19/98 14,000 *
10519 Redmond Rd.
Austin, TX 78739
Mark Tischler 12/19/98 5,760 *
8205 Santa Monica Blvd., #1-243
Los Angeles, CA 90046
Murray Tischler 12/19/98 800 *
20 Carlow Way
Hazlet, NH 07730
Hazel Tudor 12/19/98 36,000 *
9401 Slate Dr.
Las Vegas, NV 89134
Steve Vaughan 12/19/98 8,600 *
5717 Chelsea Circle
Bryan, TX 77802
Jack Weiss 12/19/98 16,000 *
3620 Pallos Verdes
Dallas, TX 75229
Chris Whitver 12/19/98 4,000 *
c/o Loren Whitver
118 Adams St.
West Union, IA 52175
45
<PAGE>
Loren Whitver 12/19/98 208,000 *
118 Adams
West Union, IA 52175
Mark L. Whitver 12/19/98 398,640 *
6932 Greenville Ave., #164
Dallas, TX 75231
Earl Wilbert 12/19/98 2,000 *
200 HWY 150 S.
West Union, IA 52175
James Williams 12/19/98 8,000 *
304 Memory Lane
Edmond, OK 89129
J. Matt Williams 12/19/98 800 *
5401 Overton Ridge Blvd., #1009
Ft. Worth, TX 78132
J. Mike Williams 12/19/98 3,000 *
5503 Timber Green Dr.
Arlington, TX 75231
Frank Wilson 12/19/98 8,800 *
3541 Sedwich
Las Vegas, NV 89129
Randy Wong 12/19/98 1,280 *
1583 Spyglass Cres.
Delta, BC Canada V4M 4E6
TOTAL 11,549,105
*The Share Exchange for Triad Compressor, Inc.
</TABLE>
The share exchange transactions listed above were made in the Plan and
Agreement of Reorganization. The issuances were made in reliance upon the
exemption from registration offered by Section 4(2) of the Securities Act of
1933, as amended.
A sale to Robert Kropf was made in reliance upon Section 4(2) as a
private sale to a person who was then an officer and a director of the Company.
46
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Revised Statutes provide that the Company may indemnify its
officers and directors for costs and expenses incurred in connection with the
defense of actions, suits, or proceedings where the officer or director acted in
good faith and in a manner he reasonably believed to be in the Company's best
interest and is a party by reason of his status as an officer or director,
absent a finding of negligence or misconduct in the performance of duty.
47
<PAGE>
SIGNATURES:
Pursuant to the requirements of Section 12 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.
DATED: January 11, 2001
Janis R. Monroe, CEO & Director
By:/s/Janis R. Monroe
-----------------------
James B. LaPorte, President & Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
Michael R. Bloom, Vice President & Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
Dr. Alan Propp, Vice President & Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
J. Scott Brosier, CFO and Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
Dr. Houston G. Wood, Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
Rob Schleider, Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
Chris Micklatcher, Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
Anthony R. Grindl, Director
By:/s/Janis R. Monroe, by Power of Attorney
-------------------------------------------
48
<PAGE>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
Index to Financial Statements
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
<S> <C>
Cover Page F-1
Auditors Report for Consolidated Financial
Statements for December 31, 1999 and 1998 F-2
Balance Sheet F-3
Statement of Operations F-4
Statement of Cash Flows F-5
Statement of Stockholders' Equity F-6
Notes to Financial Statements F-7 - F-12
Interim Financial Statements dated March 31, 2000 F-13
Balance Sheet F-14
Statement of Operations F-15
Statement of Cash Flows F-16
Notes to Financial Statements F-17-F-18
</TABLE>
<PAGE>
TRIAD INNOVATIONS, INC.
(Formerly Saker One Corporation)
(A Development Stage Company)
Consolidated Financial Statements
December 31, 1999 and 1998
F-1
<PAGE>
CROUCH, BIERWOLF & CHISHOLM
SALT LAKE CITY, UTAH
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board
of Directors of Triad Innovations, Inc. and subsidiaries
Dallas, Texas
We have audited the accompanying consolidated balance sheets of Triad
Innovations, Inc. (a development stage company) (a Nevada corporation) and
subsidiaries as of December 31, 1999 and 1998 and the related consolidated
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1999 and 1998 and for the period October 4, 1995 (Inception)
to December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Triad Innovations,
Inc. and subsidiaries as of December 31,1999 and 1998 and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998 and
for the period October 4, 1995 (Inception) to December 31, 1999 then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
financial statements, the Company has little operating capital and has had only
startup operations. These factors raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are
also described in the Note 13. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
April 12, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
<S> <C> <C>
December 31,
1999 1998
------------------- -----------------
Current Assets
Cash (Note 12) $ 389 $ 177
------------------- -----------------
Total 389 177
Property, Plant & Equipment (Net)(Note 2) 1,372 2,305
Other Assets
Patents (Note 7) 28,720 23,342
------------------- -----------------
$ 30,481 $ 25,824
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 63,697 $ 69,206
Taxes payable (Note 5) - 1,657
Short term debt-related party (Note 4) 364,103 4,900
------------------- -----------------
Total 427,800 75,763
Commitments and Contingencies (Note 10)
Stockholders' Equity
Common stock, 25,000,000 authorized
$.001 par value, 14,536,306 and 14,125,320
shares outstanding, respectively (Note 11) 14,536 14,125
Additional paid in capital 7,438,859 7,231,646
Retained deficit accumulated during
development stage (7,850,714) (7,295,710)
------------------- -----------------
(397,319) (49,939)
------------------- -----------------
$ 30,481 $ 25,824
=================== =================
See Accountant's Report and Notes to the Financial Statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
Consolidated Statements of Operations
<S> <C> <C> <C>
From
Inception on
For the Year For the Year (October 4,
Ended Ended 1995) to
December 31, December 31, December 31,
1999 1998 1999
-------------- ------------- ------------
Revenue $ - $ - $ -
Expenses
General, selling & administrative 552,571 13,975 566,546
Research & development (Note 8) - 162,899 198,407
Depreciation (Note 2) 933 1,561 5,070
Oil & Gas leases (Note 6) 1,500 2,560 4,060
-------------- ------------- ------------
Total Expenses 555,004 180,995 774,083
-------------- ------------- ------------
Net (loss) from operations (555,004 ) (180,995) (774,083 )
-------------- ------------- ------------
Income Tax (Note 5) - - -
Net Loss $ (555,004 ) $ (180,995) $ (774,083 )
============== ============= ============
Net Loss Per Common Share (Note 16) $ (0.04 ) $ -
============== =============
Average Shares Outstanding (Note 16) 14,365,062 -
============== =============
See Accountant's Report and Notes to the Financial Statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<S> <C> <C> <C> <C>
Additional Retained
Common Stock Paid in Deficit
Shares Par Capital Accumulated
Balance, October 4, 1995 - $ - $ - $ -
Net Loss for the year 1996 - - - (3,494 )
Net Loss for the year 1997 - - - (34,590 )
Net Loss for the year 1998 - - - (180,995 )
Debt relief on part of parent
corporation before spinoff
(Note 7 & 8) - - 174,131 -
Issuance of shares of new parent
corporation for acquisition of
Fuge Systems, Inc. and Triad
Compressor, Inc. (Note 1) 14,125,320 14,125 7,057,515 (7,076,631 )
--------------- -------------- ------------- ----------
Balance, December 31, 1998 14,125,320 14,125 7,231,646 (7,295,710 )
Shares issued for option conversion,
June 1999 at $.50 per share (Note 15) 213,200 213 106,387 -
Shares issued for cash, June 1999
at $.50 per share 138,736 139 69,229 -
Shares issued for oil and gas property
acquisition at $.50 per share (Note 9) 35,000 35 17,465 -
Shares issued for services, June 1999
at $.50 per share (Note 4) 25,000 25 12,475 -
Adjustments due to reverse stock split (950 ) (1) - -
Expenses paid by shareholder - - 1,657 -
Net Loss, December 31, 1999 - - - (555,004 )
--------------- -------------- ------------- ------------
Balance, December 31, 1999 14,536,306 $ 14,536 $ 7,438,859 $(7,850,714 )
=============== ============== =========== ===========
See Accountant's Report and Notes to the Financial Statements
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
<S> <C> <C> <C>
From
Inception on
For the Year For the Year (October 4,
Ended Ended 1995) to
December 31, December 31, December 31,
1999 1998 1999
-------------- ------------- -------------
Cash Flow Provided (Used) by
Operations
Net (Loss) $ (555,004 ) $ (180,995) $ (774,083 )
Depreciation 933 1,561 5,070
Decrease/Increase in:
Accounts payable 281,583 65,871 393,991
Expenses paid by others 1,657 117,659 122,810
Expenses paid by stock 30,000 - 30,000
-------------- ------------- ------------
(240,831 ) 4,096 (222,212 )
Cash Flow Provided (Used) by
Investing Activities
Cash paid for patents (5,378 ) (8,819) (28,720 )
Cash Flow Provided (Used) by
Financing Activities
Related party loans 70,453 4,900 75,353
Stock sales 175,968 - 175,968
-------------- ------------- ------------
246,421 4,900 251,321
Overall Increase (Decrease) in cash 212 177 389
Beginning Cash Balance 177 - -
-------------- ------------- ------------
Ending Cash Balance $ 389 $ 177 $ 389
============= ============= ============
Supplementary Cash Flow Information:
Cash Paid For:
Interest $ - $ - $ -
Taxes $ 1,657 $ - $ 1,657
Stock Issued For:
Acquisition of Oil & Gas Properties $ 17,500 $ - $ 17,500
Services rendered $ 12,500 $ - $ 12,500
Conversion of debt $ 106,600 $ - $ 106,600
See Accountant's Report and Notes to the Financial Statements
F-6
</TABLE>
<PAGE>
Triad Innovations, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - Background and History
Triad Innovations, Inc. (formerly Saker One Corporation)(Triad) was
created on December 23, 1981 in the State of Utah. Over the years,
Triad has engaged in various enterprises, none of which have been
successful. In 1998, Triad acquired all of the outstanding stock of
Triad Compressor, Inc. a Texas corporation, which owned 100% of the
outstanding stock of Fuge Systems, Inc, a Texas corporation. In 1998,
Triad created, and later merged with, a Nevada subsidiary.
Triad Compressor (Compressor) was organized on February 20, 1996 as a
wholly owned subsidiary of Intelligent Design Systems, Inc. (IDS).
Compressor became a separately owned company when IDS declared a
dividend and distributed Compressor stock to IDS stockholders. Triad
then acquired all the outstanding stock from IDS stockholders at a
special stockholders meeting on December 21, 1998.
Fuge Systems, Inc. was created on October 4, 1995 as a wholly owned
subsidiary of IDS, which was then spun off as a wholly owned
subsidiary of Compressor in November 1998.
Together, all three corporations, Triad, Compressor and Fuge,
constitute a consolidated group of corporations known as the Company.
All intercompany accounts and financial transactions have been
eliminated.
The primary asset of Compressor is a compressor that is an engine
device that is intended to be operated using a mix of gaseous fuel
such as natural gas that can be used in the gas industry and other
applications. In 1999, the Company abandoned all research on the
compressor and all costs of acquiring a patent on the process has been
written off.
The primary asset of Fuge is a gas centrifuge for multiple
applications in the oil and gas industry.
Both products are still in the development stage and all expenses
related to the research and development are expensed as incurred.
Neither product has reached the commercially viable state and while
all activities are directed to that end, the Company is considered to
be a development stage company and all financial activity of that
stage is reported since inception as defined by SFAS #7.
NOTE 2 - Property, Plant and Equipment
In 1996, the parent company of Triad Compressor contributed various
office and computer equipment for its operations ($8,269 in
original cost).
F-7
<PAGE>
Triad Innovations, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - Property, Plant and Equipment (continued)
The Company capitalizes all purchases with an estimated useful life
beyond the year of purchase and capitalizes any expenditures which
extends the life of existing equipment. Office and Computer Equipment
is being depreciated over five years at a double declining balance
method. Office and computer equipment consists of the following:
December 31,
1998 1999
------------- -----------
Office and Computer Equipment $ 8,269 $ 8,269
Less: Accumulated Depreciation (5,964) (6,897)
------------- -----------
$ 2,305 $ 1,372
============= ===========
Depreciation expense for 1998 and 1999 was $1,561 and $933,
respectively.
NOTE 3 - Use of Estimates in Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. In these financial statements, assets, liabilities,
revenues and expenses involve reliance on management's estimates.
Actual results could differ from those estimates.
NOTE 4 - Short Term Debt - Related Party Transactions
During the current year ended December 31, 1999, certain officers
and/or directors of the Company made cash advances to the Company or
paid amounts to third parties on behalf of the Company. The amounts
owing to these individuals at December 31, 1999 were:
Jim La Porte - President & Board of Directors $ 40,487
Scott Brossier - CFO & Board of Directors $ 10,000
Mike Bloom - Exec. V.P. & Board of Directors $ 20,899
Houston Wood - Board of Directors $ -
Alan Propp - Secretary & Board of Directors $ 8,800
Natural Resources Limited Company $ 30,000
In addition, Houston Wood and Alan Propp were granted 50,000 options
each at $5.00 per share for services to the board of directors. Alan
Propp is also paid $400 per day for each day he performs services for
the Company. Houston Wood was issued 25,000 shares valued at $0.50 per
share for services to the board of directors.
F-8
<PAGE>
Triad Innovations, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 4 - Short Term Debt - Related Party Transactions (continued)
Messrs. La Porte, Bloom and Brosier are covered by 3 year employment
agreements which began in January 1999 and expire in December 2001.The
three agreements carry similar provisions except that Mr. Brosiers'
1st year compensation is set at $50,000 and increases during the
second and third years to $100,000 per year, or the amount of Messrs
LaPorte and Bloom compensation. All three officer have the right after
January 1, 2000 to convert any unpaid base compensation to common
stock at $.25 per share. These officers also receive a $750 per month
auto allowance and insurance benefits. At December 31, 1999, the three
officers had $229,167 due to them in accrued compensation and $24,750
in accrued auto allowances. Any unpaid base compensation in years 2
and 3 of the employment agreements is convertible at 50% of the
weighted monthly average trading value of the Company's common stock.
In the event of disability the officers are entitled to full
compensation under the agreement for a period of 12 months and 75% of
compensation for the remainder of the agreement term.
In the event of death of an officer during the term of the agreement,
the Company is obligated to pay, within 180 days, to the estate or
beneficiary of the officer an amount equal to the lesser of full
compensation for 12 months or the remaining term of the agreement.
The officers may terminate their agreements with 90 days notice to the
Company's Board of Directors.
The Company may terminate the agreements for a cause which is not
corrected by the officer within 30 days. Cause is deemed to be only 1)
absence from the Company for reasons other than illness or injury for
a period of more than 20 days, 2) Conviction of a crime punishable by
imprisonment, 3) Gross negligence or misconduct determined to the
Company.
NOTE 5 - Income Taxes
The Company adopted Statement of Financial Standards No. 109
"Accounting for Income taxes" in the fiscal year ended December 31,
1998 which was applied retroactively.
Statement of Financial Accounting Standards No. 109 " Accounting for
Income Taxes" requires an asset and liability approach for financial
accounting and reporting for income tax purposes. This statement
recognizes (a) the amount of taxes payable or refundable for the
current year and (b) deferred tax liabilities and assets for future
tax consequences of events that have been recognized in the financial
statements or tax returns.
Deferred income taxes result from temporary differences in the
recognition of accounting transactions for tax and financial reporting
purposes. There were no temporary differences at December 31, 1999 and
earlier years; accordingly, no deferred tax liabilities have been
recognized for all years.
F-9
<PAGE>
Triad Innovations, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 5 - Income Taxes (continued)
The Company has cumulative net operating loss carryforwards of over
$7,800,000 at December 31, 1999. No effect has been shown in the
financial statements for the net operating loss carryforwards as the
likelihood of future tax benefit from such net operating loss
carryforwards is highly improbable. Accordingly, the potential tax
benefits of the net operating loss carryforwards, estimated based upon
current tax rates at December 31, 1998 and 1999 have been offset by
valuation reserves of the same amount. Minimum state taxes were
accrued through 1997. No state taxes were owed in 1998 and 1999.
NOTE 6 - Leasehold Commitment
In late 1998, the Company acquired from various individuals, three
leaseholds on property for oil and gas exploration rites. One of the
leaseholds is for 1,920 acres, and two of the leaseholds are for 640
acres. The yearly leasehold commitments are $1,920 for the 1,920 acre
parcel and $640 for the two 640 acre parcels. The first lease expires
in September 2000, the other two leases expire in December 2000.
NOTE 7 - Patent
In 1996, 1997 and 1998, the former parent corporation of Triad
Compressor expended funds for the patent research, legal and filing
fees for the compressor and centrifuge and being developed by the
Company. Once the patent is issued, the costs will be amortized over
the estimated useful and commercial life of the products. All costs
incurred for the patent were contributed to the respective
subsidiaries before the spinoff to the shareholders of Triad
Compressor and subsequent acquisition by the new parent corporation.
In 1999, the Company abandoned the compressor development and all
patent costs attributed to the compressor were written off.
NOTE 8 - Research and Development Costs
In 1996, 1997 and 1998, the former parent corporation of Triad
Compressor expended funds for the research and development costs of
the compressor and centrifuge being developed by the Company. Research
and development costs incurred were $3,494, $32,014 and $162,899 for
1996, 1997 and 1998. No research and development costs have been
expended in 1999. All costs incurred for the research and development
costs were contributed to the respective subsidiaries before the
spinoff to the shareholders of Triad Compressor and subsequent
acquisition by the new parent.
NOTE 9 - Purchase of Subsidiary
In 1999, the Company acquired all of the outstanding stock of Prentice
Oil & Gas, Inc. The primary assets of Prentice is a series of oil and
gas fields (3,200 acres) in Kimball County, Texas. The Company
currently estimates that the value of the oil and gas fields of
Prentice are worthless and has written off the $17,500 acquisition
cost.
F-10
<PAGE>
Triad Innovations, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 10 - Commitments and Contingencies
In case #98-01892-G, filed in the 134th District Court of Dallas
County, Texas, PAC Technology, Inc. sued the Company in 1999,
potentially alleging breach of contract, denuding corporate assets,
fraud, conspiracy to defraud, fraudulent transfer of assets,
conspiracy to fraudulently transfer assets, violations of the Texas
Business Corporation Act and rights to attorneys fees arising out of a
debt allegedly owed to PAC Technology, Inc. by a former affiliate of
the Company, Intelligent Drive Systems, Inc. As part of the claim, PAC
Technology, Inc. claimed that shares in the Company were improperly
transferred to avoid the alleged debt. PAC Technology, Inc. non-suited
the Company with prejudice following the Company's filing of a motion
for summary judgement. The non-suit of Triad occurred on January 10,
2000 and was entered by the court on January 19, 2000.
NOTE 11 - Change in Authorized Capital Stock
In September 1999, the Triad filed amended articles of incorporation
to change the authorized capital stock to 25,000,000 authorized shares
from 15,000,000 authorized shares. The change is reflected in the
financial statements.
NOTE 12 - Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
NOTE 13 - Going Concern
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. Currently, the Company does not have
significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating costs
and to allow it to continue as a going concern. The Company is
currently seeking equity funding through private placements to raise
sufficient funds to continue operations and fund its ongoing research
and development activities.
NOTE 14 - Subsequent Event
PAC Technology, Inc. Non-suited Triad Innovations on January 10, 2000
which was entered by the court on January 19, 2000. The non-suit had
no negative effect on Triad.
F-11
<PAGE>
Triad Innovations, Inc.
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 15 - Options
STOCK OPTION PLANS - The Company has awarded options for the purchase
of common stock to the following individuals:
- 35,200 restricted shares to a director for $0.25 per share for
services rendered in 1999. The services were valued at $8,800. These
options are exercisable at the option of the director at any time.
- 50,000 restricted shares each to two directors for $5.00 per share.
The options expire on January 25, 2001 (provisions for cancellation
upon removal or resignation).
- 60,800 restricted shares to two board of directors for advances to
the Company in the amount of $30,400 at $.50 per share. The options
are exercisable at anytime and have no expiration date.
A summary of stock option are as follows:
OPTIONS: 1999
--------------------------
Weighted
Number Average
Of Exercise
Shares Price
--------------------------
Outstanding at beginning of year - $ -
Granted 196,000 2.75
Exercised - -
Canceled - -
------------ -------------
Outstanding at end of year 196,000 $ 2.75
============ =============
Exercisable at end of year 196,000 $ 2.75
============ =============
As permitted by SFAS #123 "Accounting for Stock-Based Compensation,"
the Company has elected to account for the stock option plans under
APB #25 "Accounting for Stock Issued to Employees." Accordingly, no
compensation cost has been recognized for these plans when options
were issued at equal to or more than fair market value.
In addition, after January 1, 2000, three officers have the option of
converting $229,167 in unpaid base compensation to common stock at
$0.25 per share.
NOTE 16 - Earnings Per Share / Average Outstanding Shares
The computation of earnings (loss) per share of common stock is based
on the weighted average number of shares outstanding at the date of
the financial statements. Basic and diluted earnings per share
calculations are the same since any calculation of additional
outstanding shares from exercisable stock options (135,200) would be
anti-dilutive.
F-12
<PAGE>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
F-13
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
BALANCE SHEET
March 31, 2000
(Unaudited)
<S> <C> <C>
31-Mar 31-Dec
2000 1999
--------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 359 $ 389
Prepaid services 22,511 -
--------------------------------------------
Total current assets 22,870 389
Property Plant & Equipment (Net) 1,144 1,372
Other Assets
Patents 28,720 28,720
--------------------------------------------
TOTAL ASSETS $ 52,734 $ 30,481
============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 67,658 $ 63,697
Short-Term Debt (related party) 451,101 364,103
--------------------------------------------
TOTAL CURRENT LIABILITIES $ 518,759 $ 427,800
STOCKHOLDERS' EQUITY
Common Stock, $0.001 par value; 25,000,000 shares
authorized; 14,536,306 shares issued and outstanding
at December 31, 1999; 14,842,306 shares issued and
outstanding at March 31, 2000 14,843 14,536
Additional paid-in capital 7,541,553 7,438,859
Deficit accumulated during the development stage (8,022,421) (7,850,714)
--------------------------------------------
(466,025) (397,319)
--------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 52,734 $ 30,481
============================================
The accompanying notes are an integral part of the financial statements
F-14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
Consolidated Statement of Operations
March 31, 2000
(Unaudited)
<S> <C> <C> <C>
For the three For the twelve For the period
months ended months ended from inception
March 31, 2000 December 31, (October 4,
1999 1995) to March
31, 2000
--------------------------------------------
Revenue $ - $ - $ -
Expenses
General, selling & administrative 171,479 552,571 738,025
Research & development - - 198,407
Depreciation 228 933 5,298
Oil & Gas leases - 1,500 4,060
--------------------------------------------
Total Expenses 171,707 555,004 945,790
Net (loss) from operations (171,707) (555,004) (945,790)
Income Tax - - -
Net Loss (171,707) (555,004) (945,790)
Net Loss Per Common Share (0.01)
Average Shares Outstanding 14,365,062
The accompanying notes are an integral part of the financial statements
F-15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOW
March 31, 2000
(Unaudited)
<S> <C> <C>
For the three For the twelve
months ended months ended
March 31, 2000 December 31, 1999
--------------------------------------------
Cash Flow Provided (Used) by
Operations
Net (Loss) (171,707) (555,004)
Depreciation 228 933
Decrease/Increase in:
Accounts Payable 3,962 281,583
Expenses paid by others - 1,657
Expenses paid by stock 100,000 30,000
--------------------------------------------
(67,517) (240,831)
Cash Flow Provided (Used) by
Investing Activities
Cash paid for patents (5,378)
Stock paid for prepaid services (22,511)
Cash Flow Provided (Used) by
Financing Activities
Related Party Loans 86,998 70,453
Stock sales 3,000 175,968
--------------------------------------------
89,998 246,421
Overall Increase (Decrease) in cash (30) 212
Beginning Cash Balance 389 177
--------------------------------------------
Ending Cash Balance $ 359 $ 389
============================================
Supplementary Cash Flow Information:
Cash Paid for:
Interest $ - $ -
Taxes $ - $ 1,657
Stock Issued for:
Acquisition of Oil & Gas Properties $ 17,500
Services rendered $ 100,000 $ 12,500
Conversion of debt $ 3,000 $ 106,600
The accompanying notes are an integral part of the financial statements
F-16
</TABLE>
<PAGE>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company is a new enterprise in the development stage as defined by Statement
No. 7 of the Financial Accounting Standards Board and has not engaged in any
business other than organizational efforts. It has no full-time employees and
owns no real property. The Company intends to operate as a capital market access
corporation by registering with the U.S. Securities and Exchange Commission
under the Securities Exchange Act of 1934. After this, the Company intends to
seek to acquire one or more existing businesses that have existing management,
through merger or acquisition. Management of the Company will have virtually
unlimited discretion in determining the business activities in which the Company
might engage.
ACCOUNTING METHOD
The Company records income and expenses on the accrual method.
FISCAL YEAR
The board of directors shall establish the fiscal year of the corporation.
LOSS PER SHARE
Loss per share was computed using the weighted average number of shares
outstanding during the period. Shares issued to insiders in anticipation of a
public offering have been accounted for as outstanding since inception.
FINANCIAL INSTRUMENTS
Unless otherwise indicated, the fair value of all reported assets and
liabilities that represent financial instruments (none of which are held for
trading purposes) approximate the carrying values of such amount.
ORGANIZATION COSTS
Costs to incorporate the Company were expenses as incurred.
STATEMENT OF CASH FLOWS
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.
F-17
<PAGE>
TRIAD INNOVATIONS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
USE OF ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that effect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates.
CONSIDERATION OF OTHER COMPREHENSIVE INCOME ITEMS
SFAF 130 - Reporting Comprehensive Income, requires companies to present
comprehensive income (consisting primarily of net income plus other direct
equity changes and credits) and its components as part of the basic financial
statements. For the year ended December 31, 1998, the Company's financial
statements do not contain any changes in equity that are required to be reported
separately in comprehensive income.
STOCK BASIS
Shares of common stock issued for other than cash have been assigned amounts
equivalent to the fair value of the service or assets received in exchange.
MANAGEMENT'S REPRESENTATION OF INTERIM FINANCIAL INFORMATION
The accompanying interim financial statements have been prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such rules and
regulations, and management believes that the disclosures are adequate to make
the information presented not misleading. These financial statements include all
of the adjustments which, in the opinion of managements, are necessary to a fair
presentation of financial position and results of operations. All such
adjustments are of a normal and recurring nature.
F-18
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INDEX TO EXHIBITS
SK#
3.1 Articles of Incorporation of Triad Compressor, Inc.
a Texas corporation
3.2 Articles of Incorporation of Saker One Corporation,
a Nevada corporation
3.3 Articles of Amendment of Triad Compressor, Inc.
Changing name to Triad Innovations, Inc.
3.4 Articles of Amendment of Triad Compressor, Inc.
Changing share amount
3.5 Articles of Incorporation of Gas Centrifuge Invention, Inc.
3.6 Articles of Amendment of Gas Centrifuge Invention, Inc.
Changing name to Fuge Systems, Inc.
3.7 Certificate of Amendment of Fuge Systems, Inc.
3.8 Articles of Amendment of Saker One Corporation
3.9 Articles of Merger of Saker One Corporation, a Utah corporation
and Saker One Corporation, a Nevada corporation
3.10 Bylaws of Saker One Corporation, a Nevada corporation
3.11 Bylaws of Triad Innovations, Inc., a Nevada corporation
3.12 Bylaws of Fuge Systems, Inc.
10.1 Stock Exchange Agreement
10.2 Agreement of Reorganization
10.3 United States Patent
10.4 Assignment - Michael R. Bloom
10.5 Shareholder Consent Agreement
10.6 Plan of Merger
10.7 Triad Innovations, Inc./Stancil & Co. Agreement
10.8 Triad Compressor, Inc./Houston Wood Agreement
10.9 Employment Agreements with James B. LaPorte, Michael Bloom and
Scott Brosier
10.10 Compensation Agreement for Alan Propp
10.11 Contribution Agreements with James B. LaPorte, Kaden Gordon
Group, Michael R. Bloom, and Natural Resources Limited
10.12 Conditional Stock Option Agreements with Janis R. Monroe and
Rosemary Albrecht
49
