SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Soliciting Material
Pursuant to (S)240.14a-11(c)
or 240.14a-12
[_] Definitive Proxy Statement
[_] Definitive Additional [_] Confidential, for Use of
Materials the Commission Only (as
Permitted by Rule
14a-6(e)(2))
TRIDON ENTERPRISES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
- -----------------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
- -----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
TRIDON ENTERPRISES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on March 10, 2000 at 10:00 A.M.
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders
of Tridon Enterprises, Inc., a Colorado corporation (the
"Company"), will be held on March 10, 2000 at 10:00 a.m., local
time, at 11601 Wilshire Blvd., Suite 2040, Los Angeles,
California, for the following purposes:
1. To elect three directors to serve for the ensuing one
year and until their successors are duly elected;
2. To approve the acquisition of Satellite Link
Communications, Inc. by the Company pursuant to a reorganization
under Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended;
3. To approve The Incentive Plan (the "Stock Incentive
Plan") for the Company;
4. To approve Caldwell, Becker, Petrick & Dervin as the
independent certified accountants for the Company; and
5. To transact such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this Notice.
The Board of Directors has fixed the close of business on
February 15, 2000 as the record date for the determination of
stockholders entitled to vote at this meeting. Only stockholders
of record at the close of business on February 15, 2000 are
entitled to notice of and to vote at the meeting.
DATE THAT PROXY STATEMENT AND FORM OF PROXY MAILED TO SECURITY
HOLDERS: February 20, 2000
<PAGE>
All stockholders are cordially invited to attend the meeting in
person. However, to assure your representation at the meeting,
you are urged to mark, sign, date and return the enclosed proxy
card as promptly as possible in the postage-prepaid envelope
enclosed for that purpose. Any stockholder attending the meeting
may vote in person even if the stockholder has previously
returned
a proxy.
By Order of the Board of Directors
/s/ Kevin Welch
KEVIN WELCH, ACTING CHIEF
EXECUTIVE OFFICER
TRIDON ENTERPRISES, INC.
<PAGE>
PROXY STATEMENT FOR 2000
ANNUAL MEETING OF STOCKHOLDERS
TRIDON ENTERPRISES, INC.
PROCEDURAL MATTERS
General
The enclosed Proxy is solicited on behalf of Tridon
Enterprises, Inc., a Colorado corporation (the "Company"), for
use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on March 10, 2000 at 10:00 a.m., local time, and at
any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at 11601 Wilshire Boulevard, Suite
2040, Los Angeles, CA. The Company's telephone number at its
principal business offices is (310) 726-3559.
These proxy solicitation materials will be mailed on or
about February 20, 2000 to all stockholders entitled to vote at
the Annual Meeting.
Record Date and Principal Share Ownership
Only stockholders of record at the close of business on
February 15, 2000 (the "Record Date") are entitled to notice of
and to vote at the Annual Meeting. The Company has one class of
Common Stock, $0.001 par value. As of the Record Date, 66,951,877
shares of the Company's Common Stock were issued and outstanding
and held of record by seven hundred and thirty-nine stockholders.
See "Security Ownership of Certain Beneficial Owners and
Management" below for information regarding beneficial owners of
more than five percent of the Company's Common Stock.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked
by the person giving it at any time prior to its use by
delivering to the Secretary of the Company a written instrument
revoking the proxy or a duly executed proxy bearing a later date
or by attending the Annual Meeting and voting in person.
Voting and Solicitation
Each holder of Common Stock is entitled to one vote for each
share held. This solicitation of proxies is made by the Company,
and all related costs will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners.
Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional
compensation, personally or by telephone.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the
Annual Meeting is a majority of the votes eligible to be cast by
holders of shares of Common Stock issued and outstanding on the
Record Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD
FROM" a matter are treated as being present at the meeting for
purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with
respect to such matter.
While there is no definitive statutory or case law authority in
Colorado as to the proper treatment of abstentions, the Company
believes that abstentions should be counted for purposes of
determining both (i) the presence or absence of a quorum for the
transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of
directors). In the absence of a controlling precedent to the
contrary, the Company intends to treat abstentions in this
manner. Accordingly, abstentions will have the same effect
as a vote against the proposal.
All shares entitled to vote and represented by properly
executed, unrevoked proxies received prior to the Annual Meeting
will be voted at the Annual Meeting in accordance with the
instructions indicated on those proxies. If no instructions are
indicated on a properly executed proxy, the shares represented by
that proxy will be voted as recommended by the Board of
Directors. If any other matters are properly presented for
consideration at the Annual Meeting, including, among other
things, consideration of a motion to adjourn the Annual Meeting
to another time or place (including, without limitation, for the
purpose of soliciting additional proxies), the persons named in
the enclosed proxy and acting thereunder will have discretion to
vote on those matters in accordance with their best judgment. The
Company does not currently anticipate that any other matters will
be raised at the Annual Meeting.
Deadline for Receipt of Stockholder Proposals
Stockholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the
proxy rules promulgated by the Securities and Exchange Commission
(the "SEC"). Proposals of stockholders of the Company intended to
be presented for consideration at the Company's 2001 Annual
Meeting of Stockholders must be received by the Company no later
than October 15, 2000 in order that they may be considered for
inclusion in the proxy statement and form of proxy relating to
that meeting.
In addition, the Company's Bylaws establish an advance notice
procedure with regard to certain matters, including stockholder
proposals not included in the Company's proxy statement, to be
brought before an annual meeting of stockholders. In general,
nominations for the election of directors may be made by: (i) the
Board of Directors or (ii) any stockholder entitled to vote
who has delivered written notice to the Secretary of the Company
not fewer than 10 days nor more than 60 days in advance of the
annual meeting (or, with respect to an election of directors to
be held at a special meeting, the close of business on the
seventh day following the date on which notice of such meeting is
first given to stockholders), which notice must contain specified
information concerning the nominees and concerning the
stockholder proposing such nominations. In the event that less
than 60 days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by the
stockholders must be received not later than the close of
business on the tenth day following the earlier of the day on
which such notice of the date of the annual meeting was mailed or
such public disclosure was made. The Company's Bylaws also
provide that the only business that shall be conducted at an
annual meeting is business that is brought before such meeting:
(i) by or at the direction of the Board of Directors, or (ii) by
any stockholder entitled to vote who has delivered written notice
to the Secretary of the Company not less than 60 days nor more
than 90 days in advance of the annual meeting, which notice must
contain specified information concerning the matters to be
brought before such meeting and concerning the stockholder
proposing such matters. In the event that less than 60 days
notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders, notice by the
stockholder must be received not later than the close of business
on the tenth day following the earlier of the day on which such
notice of the date of the annual meeting was mailed or such
public disclosure was made. If a stockholder who has notified the
Company of his or her intention to present a proposal at an
annual meeting does not appear or send a qualified representative
to present his or her proposal at such meeting, the Company need
not present the proposal for a vote at such meeting. A copy of
the full text of the Bylaw provisions discussed above may be
obtained by writing to the Secretary of the Company. All notices
of proposals by stockholders, whether or not included in the
Company's proxy materials, should be sent to Tridon Enterprises,
Inc., 11601 Wilshire Boulevard, Suite 2040, Los Angeles, CA
90025, Attention: Secretary.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding
the beneficial ownership of Common Stock of the Company as of
December 31, 1999 as to (i) each person who is known by the
Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director and each nominee for
director of the Company, (iii) each of the executive officers
named in the Summary Compensation Table in "Executive
Compensation and Other Matters" below and (iv) all directors and
executive officers as a group.
Percentage Five Percent Stockholders, Number of
Of Shares Directors and Executive Shares
Officers Beneficially
Owned
25.42% The Tridon Trust................. 17,017,712
23.08% The Antebi Children's Trust...... 15,452,444
All directors and executive officers as a group
6.72% (2 persons).......................... 4,500,000
* Less than 1%
(1) Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission. In computing the
number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock
subject to options or warrants held by that person that are
currently exercisable or will become exercisable within 60 days
are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing the percentage ownership of
any other person. The persons and entities named in the table
have sole voting and investment power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
Interests of Certain Persons In Matters to Be Acted Upon
Other than the election of directors, no director or
executive officer will have a substantial interest, direct or
indirect, by securities holdings or otherwise in any matter to be
acted upon.
Other than the election of directors, no nominee for a
director will have a substantial interest, direct or indirect, by
securities holdings or otherwise in any matter to be acted upon
except as set forth below:
Nancy Ruffing, a proposed nominee for a director, is a
shareholder in Satellite Link Communications, Inc., ("SLC") the
entity which the Company seeks to acquire. Ms. Ruffing owns
2,000,000 shares of SLC. Ms. Ruffing will be exchanging her
shares of SLC for shares of the Company immediately after the
approval of the reorganization set forth in this Proxy.
Nabil Bader, a proposed nominee for a director, is a
shareholder in Satellite Link Communications, Inc., ("SLC") the
entity which the Company seeks to acquire. Mr. Bader owns
2,000,000 shares of SLC. Mr. Bader will be exchanging his shares
of SLC for shares of the Company immediately after the approval
of the reorganization set forth in this Proxy.
Emilio Francisco, an associate of Nancy Ruffing, is a
shareholder in Satellite Link Communications, Inc., ("SLC") the
entity which the Company seeks to acquire. Mr. Francisco owns
2,000,000 shares of SLC. Mr. Francisco will be exchanging his
shares of SLC for shares of the Company immediately after the
approval of the reorganization set forth in this Proxy.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
General
The Company's Board of Directors is currently comprised of
two members. A director serves in office until his or her
respective successor is duly elected and qualified unless the
director resigns or by reason of death or other cause is unable
to serve in the capacity of director.
Nominees For Directors
Five directors are to be elected at the Annual Meeting for
the year term ending in 2001. The Board of Directors has
nominated:
KEVIN WELCH
NANCI RUFFING
NABIL BADER
EMILIO FRANCISCO
MELVIN WEISS
Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's nominees named below.
In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting
of Stockholders, the proxies will be voted for any nominee who
shall be designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or
will decline to serve as a director. In the event that additional
persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a
manner as will assure the election of as many of the nominees
listed below as possible, and in such event, the specific
nominees to be voted for will be determined by the proxy holders.
Vote Required; Election of Directors
If a quorum is present and voting, the three (3) nominees
receiving the highest number of votes will be elected to the
Board of Directors. Votes withheld from any nominee, abstentions
and broker non-votes will be counted for purposes of determining
the presence or absence of a quorum.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES LISTED BELOW.
Nominees
The names of the nominees and certain information about them
as of December 31, 1999 are set forth below:
Director Name of Nominee Age Positions with the
Company
KEVIN WELCH......... 38 Chief Executive
Officer and
Chairman of the Board
NANCY RUFFING........ 34 NONE
NABIL BADER......... 36 NONE
EMILIO FRANCISCO.... 51 NONE
Mr MELVIN WEISS..... 62 NONE
Kevin Welch has served as the Company's Chief Executive
Officer since April 30, 1999 and its President since April 21
1999. Mr. Welch has been a director of Tridon Enterprises
Incorporated since May, 1995. Mr. Welch's industry experience
envelopes all aspects of corporate finance specializing in
emerging growth companies, focusing on mergers and acquisitions,
private placements, initial public offerings, public offerings
and market strategy since 1989. Most recently Mr. Welch served as
an Officer and Director of Sutana Corporation and Novante
Communications Corporation. Sutana Corporation is engaged in
merchant banking and venture capital for emerging growth
companies. Novante Communications is a financial consulting firm
that advises corporations in the areas business and financing
goals and plans, strategic issues, including alliance
partnerships and joint ventures, and existing or alternative
financial structures. Mr. Welch will assist SLC with the
responsibilities of managing a publicly held company.
Nanci Ruffing has served as the Chief Executive Officer of
SLC since July 6, 1999. Ms. Ruffing is a ten year veteran of the
telecommunications industry. She holds a degree in Business
Administration from National University in Los Angeles. In 1995
Ms. Ruffing became the founder and President of Universal
Communications Network Inc. (UCN). Under the leadership of Ms.
Ruffing, it took little time for UCN to become one of the
telecommunication industry's fastest growing international
wholesale carriers. Within three years, Ms. Ruffing took UCN
from a two-person operation to $35,000,000 a year in sales with a
staff of over 30 people.
In May, 1998, Ms. Ruffing started a new company called
Clarion GlobalCom, an international wholesale carrier. The
company was 60% owned by Clarion Resources, a subsidiary of
Telenor, the Norwegian PTT. Six months later it merged with
Clarion Global Networks. As Senior Vice President of Sales and
Marketing, Ms. Ruffing lead the company from $500,000 per month
in revenue to over $6,000,000 per month in less than a year.
Ms. Ruffing's extensive experience has included the
development and implementation of sales strategies in the areas
of international wholesale, call back, domestic and international
prepaid and wireless. She has been covered by the
telecommunications industry's top magazine for her success and
leadership role.
Nabil Bader has served as the Secretary of SLC since July 6,
1999. Mr. Bader's experience in the telecommunications industry
spans over 6 years. One of Mr. Bader's most successful
management positions was as a General Manager of Universal
Communications Network (UCN), an international wholesale carrier.
During its three at UCN, Mr. Bader played a significant role in
the growth of the company from $1,000,000 in annual sales to well
over $35,000,000. While at UCN, Mr. Bader recognized the need
for competition in the telecommunications industry in foreign
countries. Mr. Bader immediately began to build foreign
relations in the hopes of expanding the company's opportunities
for revenue. Shortly thereafter, Mr. Bader became the Vice
President of International Affairs for Clarion Global Networks, a
company co-owned by Telenor, the Norwegian owned PTT. While at
Clarion, Mr. Bader worked on the procurement and implementation
of private lines in various foreign countries. Private lines
gave the company the ability to compete and expand its business
on a global level.
Emilio Francisco has served as a director of SLC since July
6, 1999. Mr. Francisco is an attorney practicing in Newport
Beach, California with over 20 years experience in the legal
aspects of financial matters, with an emphasis in federal issues.
His clients have included the Ministry of Higher Education of
Saudi Arabia. Mr. Francisco is also CEO of Airomax
International, a supplier of Boeing and Douglas aircraft parts
for commercial airliners. Clients of Airomax include Mexicana,
Saudi Arabia Airlines, JAL, Varig and Lanchile Airlines. Mr.
Francisco speaks English, Arabic and French fluently, and is
conversant in Portuguese. Mr. Francisco has recently been active
in developing private telephone lines in the Middle East and
Latin America.
Melvin Weiss has served as Director of SLC since July 6,
1999. Mr. Weiss spent twenty years in the United states Navy, in
the department of finance and administration, where he was
responsible for budgets in excess of $135,000,000. After
retiring from the Navy, he held senior management positions in
the United States Civil Service in the United States, Japan and
Europe. Most recently, Mr. Weiss founded Management Consultants
Ltd.. Some of Mr. Weiss' clients include Columbia University,
Southern Methodist University, the Olympic Committee, and others.
Mr. Weiss has received numerous awards and commendations
throughout his career.
Board Meetings and Committees
The Board of Directors of the Company held a total of five
(5) meetings during fiscal 1999. The Board of Directors has no
Compensation Committee, Audit Committee, nominating committee or
any committee performing such functions.
No director attended fewer than 75% of the aggregate of the
meetings of the Board of Directors, if any, upon which such
director served during the period for which he has been a
director or committee member.
Compensation of Directors
Each director is paid $0.00 for each Board of Directors meeting
attended in person and $0.00 for each Board of Directors meeting
attended by telephone. Each Director is reimbursed for travel
expenses incurred to attend meetings of the Board of Directors.
<PAGE>
PROPOSAL TWO
APPROVE THE ACQUISITION OF SLC BY THE COMPANY
Names, Addresses and Telephone Numbers of Parties to
Reorganization
SATELLITE LINK COMMUNICATIONS, INC.
9841 Airport Blvd.
Suite 1524
Los Angeles, California 91602
(310) 348-0930
TRIDON ENTERPRISES, INC.
11601 Wilshire Blvd.
Suite 2040
Los Angeles, California 90025
(310) 726-3559
Description of Business of Satellite Link Communications, Inc.
Satellite Link Communications, Inc., is a California
corporation that was formed in July, 1999 ("SLC"). SLC was
formed for the express purpose of engaging in the
telecommunications industry. The business of SLC revolves around
its successful negotiation and creation of extremely valuable
termination contracts allowing it to sell telephone, voice data
and other telephonic transmissions to the public for transmission
into certain foreign countries.
The business operation of SLC involves the sale of
telecommunications time to the public, to businesses and to other
retailers. SLC is required to pay a certain per minute fee per
transmission and resells the time at a slightly higher rate.
Background of the Offer
In December of 1998, the Company entered into discussions
with the principals of SLC pursuant to which the Company would
acquire certain valuable contract rights held by the principals
of SLC in exchange for shares of common stock of the Company.
The Company and its advisors identified SLC as a potentially
suitable acquisition candidate based on the ability to obtain
contracts which would immediately place the Company in a position
to operate as a telecommunications company; a goal which the
Company has pursued since the Fall of 1998.
The discussions continued throughout the months of January
and February, and in February, 1999, the Company entered into a
preliminary written agreement with the principals of SLC.
Following early meetings between the principals of SLC and the
Company, the parties executed a customary confidentiality
agreement and, commencing in February, 1999, SLC began providing
the Company with certain non-public financial and operating
information. This preliminary agreement expired by its own terms.
Nevertheless, the Company had a great interest in pursuing a
relationship with SLC and, after expiration of the initial
preliminary agreement, SLC and the Company continued to discuss
various economic formats for a business combination.
In April, 1999, the Company's Board of Directors were
invited by the principals of SLC to submit a formal written offer
to acquire the assets of SLC. This letter was accompanied by an
initial draft of the Reorganization Agreement. In May, 1999, the
Company reiterated its interest in acquiring SLC and proposed a
transaction structure that included an exchange of the stock of
SLC for the stock of the Company. Specifically, SLC's principal
shareholders would receive ninety five percent (95%) of all of
the issued and outstanding stock of the Company at the closing.
However, prior to the closing, the Company would cause to take
effect a reverse stock split and cancellation of the Series A
Preferred Stock such that prior to the Closing, the total issued
and outstanding common stock of the Company shall have equaled
two million (2,000,000) shares. As such, SLC would become a
wholly owned subsidiary of the Company. This proposal was
explicitly made subject to the satisfaction of several
conditions, including completion of a satisfactory due diligence
review of the Company by SLC, Board of Director approval of each
entity, completion of the reverse stock split by the Company,
shareholder approval of the Company and SLC to the proposed
transaction and certain other matters.
The Company, after receipt of the proposal from SLC provided
its initial comments to the draft Reorganization Agreement and
discussed several open issues with respect to the transaction.
Thereafter, SLC delivered additional clarifying comments to the
draft Reorganization Agreement.
In June, 1999, SLC together with its legal and financial
advisors, conducted a preliminary financial and legal due
diligence review of the Company. This process included a
management presentation at which SLC and its representatives were
provided with certain non-public information, including budget
information, concerning the business of the Company.
In June, 1999, SLC sent to the Company a written indication
of its continued interest in consummating the reorganization and
merger with the Company pursuant to the transaction structure
proposed in its draft agreement and prior discussions.
The parties and their respective legal and financial
advisors engaged in substantially continuous discussions
regarding the Reorganization Agreement and other matters with
respect to the transaction through June, 1999.
In June of 1999, the principals of SLC prepared in articles
of incorporation for incorporation in the State of California.
On August 2, 1999, the parties entered into the
Reorganization Agreement. On August 2, 1999, the Board of
Directors of the Company approved the Reorganization Agreement.
On August 2, 1999, the Board of Directors of SLC approved the
Reorganization Agreement.
Following these approvals and the execution of
Reorganization Agreement, the transaction was publicly announced
on August 6, 1999.
The Reorganization Agreement; Acquisition
Purpose. The purpose of the transaction is to allow the
Company to acquire control of SLC. Following the Closing, the
Company intends to directly acquire all of the issued and
outstanding common stock of SLC. The Reorganization and the
other transactions effecting the acquisition of such common stock
are being made pursuant to the Reorganization Agreement.
The Reorganization Agreement.
The following is a summary of the material terms and
conditions of the Reorganization Agreement, a copy of which was
filed as Exhibit to the Form 8-K. The Reorganization Agreement
shall be available for inspection and copies may be obtained from
the Company. The following summary is qualified in its entirety
by reference to the Reorganization Agreement.
Satellite Link Communications is a California Corporation
("SLC"). The shareholders of SLC are Emilio Francisco, Nancy
Ruffing, Nabil Bader, the Tridon General Partnership and Terry A.
Ickowicz (the "Shareholders"). The Shareholders own all of the
outstanding stock of the SLC. Pursuant to the reorganization
agreement dated August 2, 1999 (the "Reorganization Agreement"),
the Company shall acquire from the Shareholders, and the
Shareholders shall transfer to the Company, all of the issued and
outstanding stock of the SLC solely in exchange for whole shares
of the Company's voting Common Stock on the terms and conditions
hereinafter set forth in the Reorganization Agreement. The
Company, the Shareholders and the SLC believe that it would be in
their mutual best interests and in the best interest of the
shareholders of the Company for the Company so to acquire all of
the issued and outstanding stock of the SLC. The Company, the
Shareholders and the SLC have adopted a Plan of Reorganization in
accordance with the provisions of section 354 and section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as more fully set forth in the
Reorganization Agreement.
Reorganization of SLC and the Company. At the Closing Date
as defined by the Reorganization Agreement, SLC shall be become a
subsidiary of the Company (the "Reorganization"). The Company
shall be the parent corporation and the SLC shall be a wholly
owned subsidiary of the Company. The corporate existence of the
Company shall continue to operate for the purposes set forth in
the Company's Articles of Incorporation and continue to be
governed by the laws of the State of Colorado. The corporate
existence of SLC shall continue to operate for the purposes set
forth in SLC's Articles of Incorporation and continue to be
governed by the laws of the State of California.
Effective Time of Reorganization. The Reorganization shall
become effective on the Closing Date. The Reorganization
Agreement shall be filed with the Secretary of State of the
States of California and Colorado, respectively, as soon as
practicable.
Exchange and Payment of Shares of SLC. Each share of the
SLC stock outstanding on the Closing Date shall be transferred to
the Company and the Company shall concurrently issue its common
stock to the Shareholders.
Conversion of Preferred Stock of the Company. Prior to the
Closing Date, the Company shall cause all of its Series A
Preferred Stock to either be canceled or to be exchanged for its
pre-reorganizational voting stock such that the Company shall
have no issued and outstanding Series A Preferred Stock at
Closing Date.
Reverse Stock Split of the Company Stock. Prior to the
Closing Date, the Company shall cause a reverse stock split to be
effectuated at a rate to be determined by the Company and the SLC
such that at the Closing Date the Series A Preferred Stock and
common stock shareholders of the Company shall receive that
number of shares following the merger that will result in all of
the Company's existing shareholders (including those persons
whose preferred stock has been converted) owning five percent
(5%) of the issued and outstanding shares of the Company
following the reorganization. Immediately following the Closing
Date the issued and outstanding capital of the Company will
consist of 40,000,000 shares of issued and outstanding common
stock to be owned as follows:
a. Shareholders: 38,000,000
b. the Company Insiders(1) and
the Company Shareholders: 2,000,000
Total 40,000,000
----------
(1) The number of shares to be provided to all existing
shareholders, option holders, insiders and persons holding
convertible securities will be four million (4,000,000)
shares of voting common stock. The shares will be
distributed pro rata based upon the number of shares held by
a particular bears to the total number of shares issued and
outstanding after taking into consideration the exercise of
all options, warrants and convertible preferred shares.
Transfer of Stock of SLC. The Shareholders agree to
transfer to the Company certificates, duly endorsed to the
Company or with Assignments of Stock attached thereto duly
endorsed to the Company by the Shareholders, representing the
shares of Common Stock, without par value, of the SLC presently
issued and outstanding and owned of record by the Shareholders.
The certificates representing the shares of Common Stock of the
SLC to be delivered to the Company hereunder shall not contain
any restrictive legends on their face other than a legend stating
that the securities have not been registered under the Securities
Act of 1933, as amended (the "Act"), or under any relevant state
securities laws. For convenience, the shares of stock to be
transferred to the Company at the Closing are sometimes referred
to hereafter as the "SLC Common Stock." The Company hereby
acknowledges that the certificates have been reissued to
eliminate prior restrictions against transfer which restrictions
the Company understands to have been eliminated in accordance
with applicable law.
Delivery of the Company Stock. In exchange for the SLC
Common Stock delivered to the Company at the Closing, the Company
agrees to deliver to the Shareholders, pro rata according to
their ownership of SLC Common Stock, certificates representing
that number of shares which, after taking into consideration all
of the issued and outstanding shares of the Company stock at the
Closing will result in the Shareholders owning ninety five
percent (95%) of the issued and outstanding shares of the
authorized and issued shares of the Company Common Stock, $.01
par value. Such shares of the Company Common Stock will evidence
ownership in the Company after taking into account the Company
reverse stock split and conversion of Series A Preferred Stock
referred to in Section 2.1 of the Reorganization Agreement and
will contain a legend stating that the securities have not been
registered under the Securities Act of 1933, as amended.
The Closing. The Closing hereunder shall take place at the
offices of the Company on March 20, 2000, at 10:00 a.m., or such
other date as the parties hereto may specify (the "Closing
Date"). In no event shall the Closing occur until such time as
the Company shall have received approval from its existing
shareholders to the terms and conditions of this reorganization
pursuant to proper shareholder solicitation and duly held meeting
in accordance with the requirements of the Colorado corporation
law and the statutes, rules and regulations of the Securities and
Exchange Commission.
Agreements to Purchase Acquired Interests; The Acquisition.
On the terms and subject to the conditions of the
Reorganization Agreement, the Company has agreed to acquire,
directly or indirectly as more fully described below, (i) 100% of
the outstanding shares of SLC.
Accounting Treatment of Transaction
The Company, the Shareholders and the SLC have adopted a
Plan of Reorganization pursuant to which the Company shall
acquire one hundred percent (100%) of the issued and outstanding
stock of SLC in exchange for shares of its common stock. After
the reorganization, SLC shall report its earnings, assets and
liabilities on a consolidated basis with the Company.
Tax Consequences of Transaction
The Company, the Shareholders and the SLC have adopted a
Plan of Reorganization in accordance with the provisions of section
354 and section 368(a)(1)(B) of the Internal Revenue Code of 1986
(the "IRC"), as more fully set forth in the Reorganization Agreement.
The shareholders of SLC shall exchange one hundred percent or ten
million shares of SLC stock for 95% or 38,000,000 million shares
of the common stock of the Company. The transaction is intended
to qualify as a tax-free reorganization under section
368(a)(1)(b) of the IRC. As such, neither the shareholders of
the Company nor the shareholders of SLC should have any federal
income tax consequences associated with the reorganization.
Vote Required to Approve Acquisition.
The Reorganization will require the approval of the holders
of a majority of the outstanding Common Stock of the Company.
<PAGE>
PROPOSAL THREE
APPROVAL OF STOCK INCENTIVE PLAN
Proposed Plan
The Stock Incentive Plan is to be adopted by the Board of
Directors in 1999 and to be approved by the stockholders in 1999.
The Board approved a Stock Incentive Plan to attract employees
subject to completion of the acquisition of SLC.
Reasons for the Plan
The Company will rely upon the Stock Incentive Plan as one
of the benefits necessary to attract and retain skilled
employees. The Board of Directors believes it is in the Company's
best interests to adopt the Stock Incentive Plan so that the
Company may continue to attract and retain the services of
qualified employees by providing employees an opportunity to
purchase the Company's Common Stock through option grants.
Activity Under the Stock Incentive Plan
The Company believes that its Stock Incentive Plan is an
important factor in attracting and retaining skilled personnel.
Vote Required for Approval
The affirmative vote of a majority of the Votes Cast will be
required to approve the Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT
OF THE STOCK INCENTIVE PLAN.
Summary of the Stock Incentive Plan
The essential features of the Stock Incentive Plan are
outlined below.
Purpose.
The purpose of the Stock Incentive Plan is to provide a
means whereby eligible employees, officers, directors,
consultants and independent contractors of the Company can
acquire the Company's Common Stock.
Number of Shares.
The Board of Directors, following the approval by the
shareholders of the acquisition of SLC, will set aside two
million (2,000,000) shares of its common stock for issuance under
the Stock Incentive Plan.
Administration.
The Stock Incentive Plan may be administered by the Board or
a committee of the Board (the "Plan Administrator"). Subject to
the other provisions of the Stock Incentive Plan, the Plan
Administrator has the power to determine the terms and conditions
of any options and stock purchase rights granted, including but
not limited to the exercise price, the number of shares subject
to the option or stock purchase right and the exercisability
thereof.
Eligibility, Terms of Options and Limitations.
The Stock Incentive Plan provides that nonstatutory stock
options and stock purchase and bonus rights may be granted only
to employees, officers, directors, independent contractors and
consultants of the Company. Incentive stock options may be
granted only to employees. The Stock Incentive Plan also provides
that stock or stock appreciation rights ("SARs") may be granted.
With respect to any optionee who owns stock possessing more than
10% of the voting power of all classes of stock of the Company (a
"10% Stockholder"), the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value
on the grant date and the maximum term of the option must not
exceed five years. The term of all other incentive stock options
under the Stock Incentive Plan may not exceed ten years. The Plan
Administrator selects the optionees and determines the number of
shares to be subject to each option. In making such
determination, the duties and responsibilities of the employee,
director or consultant, the value of his or her services, his or
her present and potential contribution to the success of the
Company, the anticipated number of years of future service and
other relevant factors are taken into account.
Conditions of Options.
Each option granted under the Stock Incentive Plan is
evidenced by a written stock option agreement between the
optionee and the Company and is subject to the following
conditions:
(a) Exercise Price. The Plan Administrator determines the
exercise price of options to purchase shares of Common Stock.
However, the exercise price of an incentive stock option must not
be less than 100% (110%, if issued to a 10% Stockholder) of the
fair market value of the Common Stock on the date the option is
granted. The exercise price of a nonstatutory stock option shall
be determined by the Plan Administrator. For so long as the
Company's Common Stock is traded on the Nasdaq National Market,
the fair market value of a share of Common Stock shall be the
closing sale price for such stock as quoted on the Nasdaq
National Market for the day of determination.
(b) Value Limitation. The aggregate fair market value of all
shares of Common Stock subject to an optionee's incentive stock
option which are exercisable for the first time during any
calendar year shall not exceed $100,000. In the event the
optionee holds two or more such options that become exercisable
for the first time in the same calendar year, such limitation
shall be applied on the basis of the order in which such options
are granted.
(c) Form of Consideration. The consideration to be paid for
the shares of Common Stock issued upon exercise of an option
shall be cash, certified check, bank draft, or postal or express
money order payable to the Company. However, the Plan
Administrator, in its sole discretion, may permit an optionee to
pay the option price in whole or in part by tendering other
shares of the Company's Common Stock meeting certain criteria, a
promissory note, or any combination thereof. The Plan
Administrator, in its sole discretion, may authorize the
surrender by an optionee of all or part of an unexercised option
and authorize a payment in consideration thereof of an amount
equal to the difference between the aggregate fair market value
of the stock subject to the option and the aggregate option price
of such stock.
(d) Exercise of the Option. Each stock option agreement will
specify the term of the option and the date when the option is to
become exercisable. The terms of such vesting are determined by
the Plan Administrator. Options granted under the Stock Incentive
Plan generally have a ten-year term (five years, if issued to a
10% Stockholder) and to date generally become exercisable over
four years at a rate of one-fourth of the shares subject to the
options at the end of twelve months from the date of grant and
one-forty-eighth of the shares every month thereafter, subject to
the optionee's continuation as a service provider. An option is
exercised by giving written notice of exercise to the Company and
by tendering full payment of the purchase price to the Company.
(e) Termination of Employment. The Plan Administrator shall
establish and set forth in each instrument that evidence an
option whether the option will continue to be exercisable, and
the terms and conditions of such exercise, if an optionee ceases
to be employed by, or to provide services to, the Company or an
affiliate of the Company, which provisions may be waived or
modified by the Plan Administrator at any time.
(f) Assignability. Each option granted pursuant to this
Stock Incentive Plan shall, during optionee's lifetime, be
exercisable only by him or her, and the option shall not be
transferable by the optionee by operation of law or otherwise
other than by will or the laws of descent and distribution.
Notwithstanding the foregoing, and to the extent permitted by
Section 422 of the Internal Revenue Code of 1986, as amended,
(the"Code"), the Plan Administrator, in its sole discretion, may
permit such transfer, assignment and exercisability and may
permit an optionee to designate a beneficiary who may exercise
the option after the optionee's death; provided, however, that
any option so transferred or assigned shall be subject to all the
same terms and conditions contained in the instrument evidencing
the option. Stock subject to a Restricted Stock Purchase
Agreement or a Restricted Stock Bonus Agreement shall be
transferable only as provided in such Agreement.
(g) Termination of Options. Excluding incentive stock
options issued to 10% Stockholders, options granted under the
Stock Incentive Plan expire on the date set forth in the option
agreement (not to exceed ten years from the date of grant in the
case of incentive stock options). Incentive stock options
granted to 10% Stockholders expire five years from the date of
grant (or such shorter period set forth in the option agreement).
No option may be exercised by any person after the expiration of
its term.
(h) Terms and Conditions of Stock Purchase Rights. Each sale
or grant of stock under the Stock Incentive Plan will be
evidenced by a written restricted stock purchase agreement or
restricted stock bonus agreement executed by the Company and the
person to whom such stock is sold or granted. The restricted
stock purchase agreement or restricted stock bonus agreement may
contain such other terms, provisions and conditions consistent
with the Stock Incentive Plan as may be determined by the Plan
Administrator, including not by way of limitation, restrictions
on transfer, forfeiture provisions, repurchase provisions and
vesting provisions. To the extent required by applicable law, any
right of the Company to repurchase stock granted pursuant to a
restricted stock purchase or restricted stock bonus at the
original purchase price, if the right is assignable, the assignee
must pay the Company upon assignment of the right cash equal to
the difference between the original price and fair value if the
original purchase price is less than fair value. Furthermore, the
purchase price of stock sold pursuant to a restricted stock
purchase agreement shall be the price determined by the Plan
Administrator on the date the right to purchase stock is granted;
provided, however that (i) such price shall not be less than 85%
of the price per share fair market value of such stock on the day
the right to purchase stock is granted and (ii) to the extent
required by applicable law, in the case of any 10% Stockholder
such price shall be 100% of the per share fair market value of
such stock at the time the right to purchase stock is granted, or
at the time the purchase is consummated.
Stock Appreciation Rights. The Plan Administrator may, under
such terms and conditions as it deems appropriate, authorize the
issuance of SARs evidenced by a written SAR agreement (which, in
the case of tandem options, may be part of the option agreement
to which the SAR relates) executed by the Company and the person
to whom such SAR is granted. The SAR agreement may contain such
terms, provisions and conditions consistent with the Stock
Incentive Plan as may be determined by the Plan Administrator.
Adjustment Upon Changes in Capitalization. If there is any
change in the stock subject to the Stock Incentive Plan, an
option agreement, a restricted stock purchase agreement, a
restricted stock bonus agreement or an SAR agreement through
merger, consolidation, reorganization, reincorporation, stock
split, stock dividend, or other change in the capital structure
of the Company, appropriate adjustments shall be made by the Plan
Administrator in order to preserve, but not to increase the
benefits to the individual, including adjustments to the
aggregate number, kind and price per share of shares subject to
the Stock Incentive Plan, an option agreement, a restricted stock
purchase agreement, a restricted stock bonus agreement or an SAR
agreement.
Dissolution or Liquidation. In the event of any "Corporate
Transaction" (as defined in the Plan), any option or outstanding
Stock Appreciation Rights shall terminate and any restricted
stock shall be reconveyed to or repurchased by the Company
immediately prior to the specified effective date of the
Corporate Transaction; provided, however, that to the extent
permitted by applicable law, any unvested option, SARs or any
restricted stock shall vest and become exercisable as to the
unvested shares or become nonforfeitable as to the forfeitable
shares, as the case may be, immediately prior to the specified
effective date of the Corporate Transaction. Notwithstanding the
foregoing, options, SARs or restricted stock shall not terminate
if, in connection with the Corporate Transaction, they are to be
assumed or substituted for by the successor corporation or its
parent company, pursuant to options, SARs or restricted stock
agreements providing substantially equal value and having
substantially equivalent provisions as the options, SARs or
restricted stock granted pursuant to the Stock Incentive Plan. If
options, SARs or restricted stock purchase rights are not assumed
or substituted for by the successor corporation or its parent
company, such options, SARs or restricted stock purchase rights
shall become exercisable immediately prior to the effective date
of the Corporate Transaction.
For the purpose of the Stock Incentive Plan, a "Corporate
Transaction" shall include any of the following stockholder-
approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not
the surviving entity, except for (1) a transaction the principal
purpose of which is to change the state of the Company's
incorporation, or (2) a transaction in which the Company's
stockholders immediately prior to such merger or consolidation
hold (by virtue of securities received in exchange for their
shares in the Company) securities of the surviving entity
representing more than fifty percent (50%) of the total voting
power of such entity immediately after such transaction;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company unless the
Company's stockholders immediately prior to such sale, transfer
or other disposition hold (by virtue of securities received in
exchange for their shares in the Company) securities of the
purchaser or other transferee representing more than fifty
percent (50%) of the total voting power of such entity
immediately after such transaction; or
(iii) any reverse merger in which the Company is the
surviving entity but in which the Company's stockholders
immediately prior to such merger do not hold (by virtue of their
shares in the Company held immediately prior to such transaction)
securities of the Company representing more than fifty percent
(50%) of the total voting power of the Company immediately after
such transaction.
Amendment and Termination of the Stock Incentive Plan. The
Board of Directors may at any time amend, suspend or terminate
this Stock Incentive Plan as it deems advisable; provided that
such amendment, suspension or termination complies with all
applicable requirements of state and federal law, including any
applicable requirement that the Stock Incentive Plan or an
amendment to the Stock Incentive Plan be approved by the
Company's stockholders, and provided further that, except in the
case of an adjustment to the capitalization of the Company as
described above, the Board of Directors shall in no event amend
the Stock Incentive Plan in the following respects without the
consent of stockholders then sufficient to approve the Stock
Incentive Plan in the first instance:
(i) To increase the maximum number of shares subject to
incentive stock options issued under the Stock Incentive Plan; or
(ii) To change the designation or class of persons eligible
to receive incentive stock options under the Stock Incentive
Plan.
No option may be granted nor any stock issued under the
Stock Incentive Plan during any suspension or after the
termination of the Stock Incentive Plan, and no amendment,
suspension or termination of the Stock Incentive Plan shall,
without the affected individual's consent, alter or impair any
rights or obligations under any option previously granted under
the Stock Incentive Plan. The Stock Incentive Plan shall
terminate with respect to the grant of incentive stock options on
October 15, 2009, unless previously terminated by the Board.
Federal Tax Information
Options granted under the Stock Incentive Plan may be either
incentive stock options, as defined in Section 422 of the Code,
or nonstatutory options. An optionee who is granted an incentive
stock option will not recognize taxable income either at the time
the option is granted or upon its exercise, although the exercise
may subject the optionee to the alternative minimum tax. Upon
the sale or exchange of the shares more than two years after
grant of the option and one year after exercise of the option,
any gain or loss will be treated as long-term capital gain or
loss. If these holding periods are not satisfied, the optionee
will recognize ordinary income at the time of sale or exchange
equal to the difference between the exercise price and the lower
of (i) the fair market value of the shares at the date of the
option exercise or (ii) the sale price of the shares. Any gain or
loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be
characterized as long-term, or short-term capital gain or loss,
depending on the holding period. A different rule for measuring
ordinary income upon such a premature disposition may apply if
the optionee is also an officer, director, or 10% Stockholder of
the Company. The Company will be entitled to a deduction in the
same amount as the ordinary income recognized by the optionee.
All of the options which do not qualify as incentive stock
options are referred to as nonstatutory options. An optionee will
not recognize any taxable income at the time he is granted a
nonstatutory option. However, upon its exercise, the optionee
will recognize taxable income generally measured as the excess of
the then fair market value of the shares purchased over the
purchase price. Any taxable income recognized in connection with
an option exercise by an optionee who is also an employee of the
Company will be subject to tax withholding by the Company. The
Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the optionee. Upon disposition
of such shares by the optionee, any difference between the sales
price and the optionee's purchase price, to the extent not
recognized as taxable income as described above, will be treated
as long-term or short-term capital gain or loss, depending on the
holding period.
Stock purchase rights will generally be taxed in the same
manner as nonstatutory stock options. However, restricted stock
is generally purchased upon the exercise of a stock purchase
right. At the time of purchase, restricted stock is subject to a
"substantial risk of forfeiture" within the meaning of Section 83
of the Code. As a result, the purchaser will not recognize
ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when such restricted
stock ceases to be subject to a substantial risk of forfeiture.
The restricted stock will generally cease to be subject to a
substantial risk when it is no longer subject to the Company's
right to repurchase such stock upon the purchaser's termination
of employment with the Company or upon vesting. At such times,
the purchaser will recognize ordinary income measured as the
difference between the purchase price and the fair market value
of such stock on the date the stock is no longer subject to a
substantial risk of forfeiture.
The purchaser may accelerate to the date of purchase his or
her recognition of ordinary income, if any, and the beginning of
any capital gain holding period by timely filing an election
pursuant to Section 83(b) of the Code. In such event, the
ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock
on the date of purchase, and the capital gain holding period
commences on such date. The ordinary income recognized by a
purchaser who is an employee will be subject to tax withholding
by the Company. Different rules may apply if the purchaser is
also an officer, director, or 10% Stockholder of the Company.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL
INCOME TAXATION UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS,
AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER THE
STOCK INCENTIVE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND
REFERENCE SHOULD BE MADE TO THE APPLICABLE PROVISIONS OF THE TAX
CODE. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN
WHICH THE EMPLOYEE OR CONSULTANT RESIDE.
<PAGE>
PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Caldwell, Becker,
Petrick & Dervin, independent auditors, to audit the financial
statements of the Company for the fiscal year ending October 15,
2000, and recommends that stockholders vote for ratification of
such appointment. In the event of a negative vote on
ratification, the Board of Directors will reconsider its
selection.
Caldwell, Becker, Petrick & Dervin has audited the Company's
financial statements annually since 1996. Representatives of
Caldwell, Becker, Petrick & Dervin are expected to be present at
the meeting with the opportunity to make a statement if they
desire to do so and are expected to be available to respond to
appropriate questions.
Required Vote; Ratification of Appointment of Independent
Auditors
The affirmative vote of the holders of a majority of the
Votes Cast is required to approve the appointment of the
independent auditors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THIS PROPOSAL.
ADDITIONAL INFORMATION RELATING TO
DIRECTORS AND OFFICERS OF THE COMPANY
Compensation of Executive Officers
The following table sets forth the compensation earned by
the Company's Chief Executive Officer in the fiscal year ended
December 31, 1998. No executive officer earned more than $100,000
in salary and bonus from the Company in the fiscal year ended
April 30, 1999. Paul Ebeling, the Company's Chief Executive
Officer through April 21 received no salary or compensation for
his services in 1999. Kevin Welch the Company's Chief Executive
Officer since April 21 received no salary or compensation for his
services in 1999.
Employment Agreements
NONE.
Benefit Plans
The following is a brief summary of plans in effect during
the fiscal year ended April 30, 1999 under which executive
officers and directors of the Company received benefits:
NONE.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") requires the Company's executive
officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities to file
reports of ownership on Form 3 and changes in ownership on Form 4
and Form 5 with the SEC. Executive officers, directors and
greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely in its review of the copies
of such forms received by it, or written representations from
certain reporting persons, the Company believes that, during
fiscal 1998, it has complied with all filing requirements
applicable to its executive officers and directors, and persons
who own more than ten percent of a registered class of the
Company's equity securities.
Compensation Committee Report on Executive Compensation
No Committee.
Compensation
The Compensation Committee establishes the salaries of the
executive officers by considering (i) the salaries of executive
officers in similar positions at comparably-sized peer companies,
(ii) the Company's financial performance over the past year based
upon revenues and operating results and (iii) the achievement of
individual performance goals related to each executive officer's
duties and area of responsibility.
Summary
The Directors believe that the Company's compensation
policies have been successful in attracting and retaining
qualified employees and in linking compensation directly to
corporate performance relative to the Company's goals. The
Company's compensation policies will evolve over time as the
Company moves to attain the near-term goals it has set for itself
while maintaining its focus on building long-term stockholder
value.
Certain Relationships and Related Transactions
The Company believes that all the transactions set forth
above were made on terms no less favorable to the Company than
could have been obtained from unaffiliated third parties. Any
future transactions, including loans, between the Company and its
officers, directors and principal stockholders and their
affiliates will be approved by a majority of the Board of
Directors, including a majority of the independent and
disinterested directors, and will be on terms no less favorable
to the Company than could be obtained from unaffiliated third
parties.
The Company has entered into indemnification agreements with
each of its executive officers and directors.
Performance Chart
Set forth below is a chart illustrating the quarterly
comparative results of the Company's stock performance from the
fiscal 1st quarter 1998 through the fiscal 3rd quarter 1999. The
information contained in the chart below shall not be deemed to
be "soliciting material" or to be "filed" with the SEC, and such
information shall not be incorporated by reference into any
future filing under the Securities Act or Exchange Act, except to
the extent that the Company specifically incorporates it by
reference into such filing.
HIGH LOW
1st Quarter 1998 .09 .03
2nd Quarter 1998 .065 .02
3rd Quarter 1998 .74 .03
4th Quarter 1998 .72 .10
1st Quarter 1999 .20 .05
2nd Quarter 1999 .20 .05
3rd Quarter 1999 .08 .03
<PAGE>
PROPOSAL FIVE
TRANSACTION OF OTHER BUSINESS
The Board of Directors of the Company knows of no other
matters to be submitted at the meeting. If any other matters come
before the meeting, it is the intention of the persons named in
the accompanying form of proxy to vote the shares they represent
as the Board of Directors may recommend.
By Order of the Board of Directors
/s/ Kevin Welch
Kevin Welch
Chief Executive Officer
Los Angeles, California
January 7, 2000
<PAGE>
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Tridon Enterprises, Inc.
Proxy for 2000 Annual Meeting of Stockholders
March 10, 2000
The undersigned stockholder of Tridon Enterprises, Inc. (the
"Company") hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement for the 1999 Annual
Meeting of Stockholders of the Company to be held on Monday,
March 10, 2000 at 10:00 a.m., local time, at 11601 Wilshire
Blvd., suite 2040, Los Angeles, California and hereby revokes all
previous proxies and appoints Kevin Welch, with full power of
substitution, Proxies and Attorneys-in-Fact, on behalf and in the
name of the undersigned, to vote and otherwise represent all of
the shares registered in the name of the undersigned at said
Annual Meeting, or any adjournment thereof, with the same effect
as if the undersigned were present and voting such shares, on the
following matters and in the following manner:
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE
MARK, SIGN AND DATE THIS PROXY AND RETURN IT AS PROMPTLY AS
POSSIBLE.
(Continued and to be signed on reverse side)
Please mark your [X] votes as indicated in this example
1. PROPOSAL ONE: ELECTION OF DIRECTORS
If you wish to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list
below:
FOR WITHHOLD AUTHORITY
all of the nominees listed to vote for all
below (except as indicated) of the nominees listed
below
Nominees:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I plan to attend the meeting:
- ----------------------------------------------
In their discretion, the Proxies are entitled to vote upon
such other matters as may property come before the Annual Meeting
or any adjournments thereof.
2. PROPOSAL NUMBER TWO: MERGER OF SLC WITH COMPANY
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL NUMBER THREE: APPROVE INCENTIVE STOCK OPTION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. PROPOSAL NUMBER FOUR: APPROVE CALDWELL, BECKER, PETRICK
& DERVIN AS INDEPENDENT ACCOUNTANTS FOR THE COMPANY
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO SPECIFICATION IS
MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH
OF THE ABOVE PERSONS AND PROPOSALS, AND FOR SUCH OTHER MATTERS AS
PROPERLY COME BEFORE THE MEETING AS THE PROXY HOLDERS DEEM
ADVISABLE.
Signature(s) Date
_____________________________ __________, 2000
(This proxy should be marked, dated and signed by each
stockholder exactly as such stockholder's name appears hereon,
and returned promptly in the enclosed envelope. Persons signing
in a fiduciary capacity should so indicate. A corporation is
requested to sign its name by its President or other authorized
officer, with the office held designated. If shares are held by
joint tenants or as community property, both holders should
sign.)
<PAGE>
APPENDIX A
SATELLITE LINK COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999
<PAGE>
SATELLITE LINK COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 - INDEPENDENT AUDITORS' REPORT
PAGE 2 - BALANCE SHEET AS OF SEPTEMBER 30, 1999
PAGE 3 - STATEMENT OF OPERATIONS FOR THE PERIOD FROM
JULY 2, 1999(INCEPTION) TO SEPTEMBER 30, 1999
PAGE 4 - STATEMENT OF CHANGES IN STOCKHOLDERS'
DEFICIENCY FOR THE PERIOD FROM JULY 2, 1999
(INCEPTION) TO SEPTEMBER 30, 1999
PAGE 5 - STATEMENT OF CASH FLOWS FOR THE PERIOD FROM
JULY 2, 1999(INCEPTION) TO SEPTEMBER 30, 1999
PAGES 6 12 - NOTES TO FINANCIAL STATEMENTS AS OF
SEPTEMBER 30, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Satellite Link Communications, Inc.
We have audited the accompanying balance sheet of Satellite Link
Communications, Inc. as of September 30, 1999 and the related
statements of operations, changes in stockholders' deficiency and
cash flows for the period from July 2, 1999 (inception) to
September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. These 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 financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Satellite Link Communications, Inc. as of September 30, 1999
and the results of its operations and its cash flows for the
period from July 2, 1999 (inception) to September 30, 1999, 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 7 to the financial statements, the Company's operating
loss of $559,255 and working capital deficiency of $590,258 raise
substantial doubt about its ability to continue as a going
concern. Management's Plan in regards to these matters is also
described in Note 7. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
December 6, 1999
<PAGE>
SATELLITE LINK COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF SEPTEMBER 30, 1999
<TABLE>
ASSETS
<S> <C>
CURRENT ASSETS $ -
PROPERTY AND EQUIPMENT - NET 10,503
OTHER ASSETS
Deposit 25,000
---------
TOTAL ASSETS $ 35,503
=========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Cash overdraft $ 18,687
Accounts payable and accrued expense 63,351
Accrued payroll taxes 50,662
Obligation under capital lease -
current portion 3,980
Due to related parties 453,578
---------
Total Current Liabilities 590,258
OTHER LIABILITIES
Obligation under capital lease 4,500
---------
Total Liabilities 594,758
=========
STOCKHOLDERS' DEFICIENCY
Common stock, no par value, 10,000,000
shares authorized, 4,600,000 shares issued
and outstanding 4,600
Accumulated deficit during development stage (559,255)
---------
(554,655)
Less subscriptions receivable (4,600)
---------
Total Stockholders' Deficiency (559,255)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 35,503
=========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
SATELLITE LINK COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM
JULY 2, 1999 (INCEPTION) TO SEPTEMBER 30, 1999
<TABLE>
<S> <C>
Income $ -
---------
Expenses
Executive compensation 219,382
Salaries 111,741
Bank charges 149
Consulting fees and expense 57,500
Depreciation 878
Equipment lease 380
Health insurance 6,451
Office and other operational expenses 7,589
Payroll taxes 25,331
Professional fees 4,000
Rent 8,279
Repairs and maintenance 11,858
Telephone 5,884
Travel and entertainment 99,649
---------
Total Expenses 559,071
---------
OTHER EXPENSE
Interest expense 184
---------
NET LOSS DURING DEVELOPMENT STAGE $ (559,255)
=========
NET LOSS PER COMMON SHARE
- BASIC AND DILUTED $ (0.12)
=========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING BASIC AND DILUTED 4,600,000
=========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
SATELLITE LINK COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM JULY 2, 1999 (INCEPTION) TO SEPTEMBER 30, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
ACCUMULATED
DEFICIT DURING
COMMON STOCK DEVELOPMENT SUBSCRIPTIONS
SHARES AMOUNT STAGE RECEIVABLE TOTAL
---------- -------- ------------- ------------- ----------
Common stock issuance 4,600,000 $ 4,600 $ - $ (4,600) $ -
Net loss for the
Period from July 2,
1999 (Inception)
to September 30, 1999 - - (559,255) - (559,255)
---------- -------- ------------- ------------- ----------
Balance,
September 30, 1999 4,600,000 $ 4,600 $ (559,255) $ (4,600) $(559,255)
========== ======== ============= ============= ==========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
SATELLITE LINK COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM
JULY 2, 1999 (INCEPTION) to SEPTEMBER 30, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (559,255)
Adjustments to reconcile net loss to
Net cash used in operating activities:
Depreciation and amortization 878
Changes in assets and liabilities
Increase in:
Accounts payable 63,351
Accrued payroll taxes 50,662
----------
Net cash used in operating activities (444,364)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (2,284)
Deposit disbursements (25,000)
----------
Net cash used in investing activities (27,284)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft 18,687
Payments on capital lease obligation (617)
Proceeds from related parties loans 453,578
----------
Net cash provided by financing activities 471,648
----------
INCREASE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -
----------
CASH AND CASH EQUIVALENTS END OF PERIOD $ -
==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Equipment acquired under capital lease indebtedness $ 9,097
==========
Subscription receivable for 4,600,000 shares of
common stock $ 4,600
==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
SATELLITE LINK COMMUNICATIONS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND
ORGANIZATION
(A) Business Organization And Activity
Satellite Link Communications, Inc.(the "Company"), incorporated
under the laws of California on July 2, 1999, is a development
stage company whose mission is to provide telecommunications
services from the United States to foreign countries. The
activities of the Company through the date of the audit report
related primarily to organization costs, capital stock issuances,
contract negotiations and start-up expenses.
(B) Use of Estimates
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles. The
preparation of financial statements in accordance with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(C) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid investments with an original maturity
of three months or less at time of purchase to be cash
equivalents.
(D) Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are
charged to expense as incurred. Depreciation is provided using
the double declining balance method over the estimated useful
life of the assets of 5 to 7 years.
(E) Earnings Per Share
Earnings per share are computed using the weighted average of
common shares outstanding as defined by Financial Accounting
Standards No. 128, "Earnings Per Share". There were no common
stock equivalents outstanding as of September 30, 1999.
(F) Income Taxes
The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109. "Accounting for Income Taxes" ("Statement
No.109"). Under Statement No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
(G) Financial Instruments
The Company follows statement of Financial Accounting Standards
No. 107 "Disclosures About Fair Value of Financial Instruments".
Financial instruments which potentially expose the Company to
concentrations of credit risk consist principally of loans and a
capital lease obligation. At September 30, 1999, the loan and
capital lease obligation approximated fair market value.
(H) Segment Information
The Company follows statement of Financial Accounting Standards
No. 131 "Disclosures About Segments of an Enterprise and Related
Information". During 1999, the Company operations consisted of
start-up expenditures, therefore, segment disclosure has not been
presented.
(I) New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued
several new accounting pronouncements. Statement No 133,
"Accounting for Derivative Instruments and Hedging Activities",
as amended by statement No 137, establishes accounting and
reporting standards for derivative instruments and related
contracts and hedging activities. This statement is effective for
all fiscal quarters and fiscal years beginning after June 15,
2000. The Company believes that its adoption of these
pronouncements will not have a material effect on the Company's
financial position or results of operations.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1999 consisted of the
following:
Office equipment (see Note 5) $ 11,381
Less: Accumulated depreciation 878
----------
Total property and equipment $ 10,503
==========
Depreciation expense for the period ended September 30, 1999 was
$878.
NOTE 3 DUE TO RELATED PARTIES
The Company has received advances from several companies that are
controlled by a 13% stockholder. The Companies provided funding
for working capital requirements and paid start-up expenses
incurred by the Company. The amounts are non-interest bearing
and due on demand.
NOTE 4 JOINT VENTURE
On August 4, 1999 the Company entered into a joint venture
agreement with Fusion Telecommunication International, Inc. The
agreement calls for each party to own 50% of One Touch
International, LLC, a Delaware Limited Liability Corporation.
The Joint Venture will develop and market telecommunication
systems in foreign countries. The agreement calls for each of
the parties to sell 50% of the available minutes. Profits will be
split 70/30 for any minutes sold by the other member above the
50% commitment, but no greater than $.01 per minute. The Company
will also pay $.0075 per minute for all telecommunications
processed through Fusion switches on behalf of the joint venture.
As of September 30, 1999, the joint venture has not been formed.
The Company will account for the joint venture using the equity
method of accounting.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
(A) Year 2000 Issue
The Company is aware of the issues associated with the
programming code in existing computer systems as the millennium
(Year 2000) approaches. The "Year 2000" problem is pervasive and
complex as virtually every computer operation will be affected in
some way by the rollover of the two-digit year value to 00. The
issue is whether computer systems will properly recognize date-
sensitive information when the year changes to 2000. Systems
that do not properly recognize such information could generate
erroneous data or cause a system to fail.
The Company uses standard off the shelf accounting software
package for all of its accounting requirements. Management has
contacted the software vendor and determined that the accounting
software is Year 2000 compliant. Management has verified Year
2000 status with its primary vendors and has not identified any
Year 2000 issues with those vendors. Costs of investigating
internal and external Year 2000 compliance issues have not been
material to date. As a result, management believes that the
effect of investigating and resolving Year 2000 compliance issues
on the Company will not have a material effect on the Company's
future financial position or results of operations.
In addition to the effect of Year 2000 issues on the Company's
accounting and management systems, year 2000 issues may effect
the Company's equipment and programs, as they are primarily
computer related. The Company uses third party switching
equipment (See Notes 4 and 5(F)) and programs. The Company has
confirmed with the vendors the compliance of such equipment with
Year 2000 issues.
(B) Capital Lease Agreement
The Company leases office equipment under a non-cancelable
capital lease agreement dated September 22, 1998 and assigned to
the Company on August 1, 1999.
Future minimum lease payments under the capital lease are as
follows at September 30, 1999:
2000 $ 4,806
2001 4,806
--------
Total future minimum lease payments 9,612
Less: interest 1,132
--------
Present value of future minimum lease payments 8,480
Less: current portion 3,980
--------
Long-term obligation under capital lease $ 4,500
========
(C) Operating Leases
The Company leases corporate office space and office equipment
under operating leases. The leases have remaining terms varying
from the years 2000 through 2001.
Future minimum lease payments for the operating leases are as
follows at September 30, 1999:
2000 $ 48,750
2001 44,800
--------
$ 93,550
========
Rent expense under operating leases for the period ended
September 30, 1999 aggregated $8,279 for office rent and $380 for
equipment leases.
(D) Employment Agreement
The Company entered into an employment agreement with an
officer/stockholder effective on May 1, 1999. The agreement calls
for the individual to become the manager of the Company at an
annual salary of $250,000 expiring on April 30, 2002. Executive
compensation presented in the statement of operations includes
compensation under this employment agreement as well as
compensation to two other officers where no employment agreement
exists.
(E) Consulting Agreements
The Company entered into an agreement with a consultant to
provide contract negotiation service with an Australian
corporation that is doing business in China to provide telephone
and internet transmission services. The agreement calls for the
consultant to receive a commission based on the number of minutes
transmitted to and from China based on any agreement negotiated
by the consultant. The agreement will terminate on June 10, 2000
if no contract is executed. As of the date of this audit report,
no agreement has been negotiated by the consultant or signed, by
the Company.
On August 2, 1999, the Company entered into a consulting
agreement with an individual to provide finance, business
contacts, telecommunications contracts and other related
services. The agreement calls for a monthly fee of $20,000 per
month for 60 months upon completion of certain events. The
agreement also calls for the individual to receive an option for
2,000,000 shares of common stock exercisable at $.03 per share
upon successful completion of a reorganization with a certain
entity.
(F) License Agreement and Deposit
On July 7, 1999 the Company entered into a Licensing agreement
with GMS Enterprises to utilize switching equipment owned by GMS
Enterprises for up to 28 T-1 connections. The agreement calls
for a fixed per minute fee of $.007 with a minimum of 150,000
minutes per T-1 per week and a security deposit of $25,000. The
agreement expires on July 7, 2000. As of December 15, 1999 the
Company has not utilized any of the equipment and has received a
wavier of any amounts due under the agreement. The Company
assigned its rights under the agreement to another company on
December 22, 1999.
NOTE 6 - INCOME TAXES
The Company incurred no current or deferred income tax expense
for the period from July 2, 1999 (inception) through September
30, 1999 due to its net losses and valuation allowance against
the deferred tax asset.
The Company's tax expense differs from the "expected" tax expense
for the year ended September 30, 1999 (computed by applying the
Federal Corporate tax rate of 34 percent to income (loss) before
taxes), as follows:
1999
----
Computed "expected" tax expense (benefit) $ (190,146)
-----------
Change in valuation allowance 190,146
$ -
===========
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities at
September 30, 1999 are as follows:
Deferred tax assets:
Net operating loss carryforward $ 190,146
-----------
Total gross deferred tax assets 190,146
Less valuation allowance 190,146
-----------
Net deferred tax assets $ -
===========
At September 30, 1999, the Company had net operating loss
carryforwards of approximately $559,255 for income tax purposes,
available to offset future taxable income expiring in 2019.
The net change in the valuation allowance during the period ended
September 30, 1999 was an increase of approximately $190,146.
NOTE 7 - GOING CONCERN
As reflected in the accompanying financial statements, the
Company had a net loss of $559,255, a working capital deficiency
of $590,258 and has not generated any revenues. The ability of
the Company to continue as a going concern is dependent on the
Company's ability to raise additional capital and implement its
business plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
The Company intends to be acquired by a public company in a
transaction whereby the stockholders of the Company will become
majority stockholders of the public company. (See Note 8(A)).
The Company is also in the process of arranging for a line of
credit. (See Note 8(B)). Management believes that actions
presently being taken to obtain funding provide the opportunity
for the Company to continue as a going concern.
NOTE 8 - SUBSEQUENT EVENTS
(A) Acquisition Agreement
In August 1999, the Company entered into an agreement to be
acquired by Tridon Enterprises, Inc., a public company, whereby
the stockholders of the Company will become the majority
stockholders of Tridon Enterprises, Inc. The acquisition is
scheduled to close in March 2000. As of the date of this report,
the agreement has not been submitted to the Tridon stockholders
for approval.
(B) Line of Credit
In November 1999, the Company issued 3,400,000 shares of common
stock in consideration for the subsequent arranging and providing
of a credit facility of up to $4,000,000 to the Company. During
November 1999, the Company will record a credit guarantee expense
of $3,700 to operating expenses. The funds will be used for
acquisitions, leasing or other certain telephone and
communication equipment and for general operating capital. As of
the date of this report, no underlying credit facility has been
established that would require the utilization of the guarantee.
(C) Stock Issuance
The Company issued 1,400,000 shares of common stock to officers
and directors for $1,400.
<PAGE>
APPENDIX B
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
APRIL 30, 1999 AND 1998
<PAGE>
Table of Contents
Page
Independent Auditors' Report 1
Prior Independent Auditors' Report 2
Balance Sheets 3-4
Statements of Operations 5-6
Statements of Changes in Stockholders' Equity (Deficit) 7-10
Statements of Cash Flows 11-13
Notes to Financial Statements 14-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Tridon Enterprises Incorporated
We have audited the accompanying consolidated balance sheets of
Tridon Enterprises Incorporated and subsidiaries (companies in
the development stage) as of April 30, 1999 and 1998, and the
related statements of operations, changes in stockholders' equity
(deficit), and cash flows for the years ended April 30, 1999,
1998 and 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We
did not audit the financial statements of Vertex Corporation, a
wholly owned subsidiary, for the year ended April 30, 1998, which
statements reflect total assets of $121 as of April 30, 1998, and
total revenues of $0. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for Vertex
Corporation for the year ended April 30, 1998, is based solely on
the report of the other auditors. We did not audit the Tridon
Enterprises Incorporated statements of operations, changes in
stockholders' equity (deficit), and cash flows for the period
from the inception of the development stage to April 30, 1994.
Those financial statements were audited by another auditor, whose
report has been furnished to us, and our opinion, insofar as it
relates to the amounts from the inception of the development
stage to April 30, 1994, is based solely on the report of the
other auditor.
We conducted our audits 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 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 audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other
auditors, the financial statements referred to above present
fairly, in all material respects, the financial position of
Tridon Enterprises Incorporated and subsidiaries (companies in
the development stage) as of April 30, 1999 and 1998, and the
results of their operations and their cash flows for the years
ended April 30, 1999, 1998 and 1997 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company and its subsidiaries will continue as a going
concern. As discussed in Note 10 to the financial statements,
there is substantial doubt about the ability of the Company to
continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of
that uncertainty.
As discussed in Note 1 to the financial statements, the amounts
for April 30, 1999 and 1998 include Tridon Enterprises
Incorporated and its wholly owned subsidiary, Vertex Corporation.
The amounts shown for April 30, 1997 are for Tridon Enterprises
Incorporated only.
CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.
November 11, 1999
<PAGE>
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
(Consolidated) (Consolidated)
April 30,1999 April 30,1998
CURRENT ASSETS
Cash $ 1,031 $ 682
Advances to officers (Note 3) 0 30,000
Note receivable and interest
receivable (Note 5), 275,000 275,000
less allowances for uncollectible
amounts (275,000) (275,000)
Inventory (Note 1) 7,506 5,325
Prepaid advertising costs (Note 1) 36,000 29,253
Prepaid consulting fees (Note 13) 752,250 0
Prepaid expense (Note 1) 2,310 0
---------- ----------
Total Current Assets 799,097 65,260
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
(Notes 1 and 2) 25,462 17,993
Accumulated depreciation (9,502) (6,305)
---------- ----------
Net Property and Equipment 15,960 11,688
---------- ----------
OTHER ASSETS
Marketable equity securities (Note 4) 0 107,451
---------- ----------
Total Other Assets 0 107,451
---------- ----------
Total Assets $ 815,057 $ 184,399
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
expenses (Note 11) $ 342,794 $ 129,297
Advances from officers (Note 3) 130,578 48,845
Advances from shareholder (Note 3) 1,536 5,000
Advances to Vertex Marketing (Note 3) 39,400 0
---------- ----------
Total Current Liabilities 514,308 183,142
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 11) 0 0
---------- ----------
Total Liabilities $ 514,308 $ 183,142
---------- ----------
STOCKHOLDERS' EQUITY (Page 10)
Common stock, $.001 par value,
100,000,000 shares authorized,
67,994,734 and 42,275,734 shares
issued and outstanding, respectively $ 67,995 $ 42,276
Preferred stock, 7% cumulative
convertible, par value $.001,
20,000,000 shares authorized,
83,300 shares issued and
outstanding (Note 8) 83 83
Additional paid-in capital 12,030,854 9,270,566
Common stock subscribed (Note 12) 0 (225,000)
Common stock subscribed - unearned
compensation (Note 12) 0 (279,000)
Deficit accumulated during
development stage (11,798,183) (8,807,668)
---------- ----------
Total Stockholders' Equity 300,749 1,257
---------- ----------
Total Liabilities and
Stockholders' Equity $ 815,057 $ 184,399
========== ==========
See Accompanying Auditors' Report
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
(Consolidated) (Consolidated)
Twelve Twelve Twelve
Inception Months Months Months
To Ended Ended Ended
April 30, April 30, April 30, April 30,
1999 1999 1998 1997
------------ ------------ ------------ -----------
REVENUE
Net sales $ 151,729 $ 0 $ 0 $ 0
Cost of sales 182,581 0 0 0
------------ ------------ ------------ -----------
Gross (Loss) (30,852) 0 0 0
------------ ------------ ------------ -----------
OPERATING EXPENSES
General and administrative 5,757,482 1,644,267 841,314 375,065
Research and development 132,697 0 0 3,117
Computer software development
costs 630,066 0 0 0
Interest 869,166 0 0 0
------------ ------------ ------------ -----------
Total Operating Expenses 7,389,411 1,644,267 841,314 378,182
------------ ------------ ------------ -----------
Net (Loss)
from Operations (7,420,263) (1,644,267) (841,314) (378,182)
------------ ------------ ------------ -----------
OTHER INCOME (EXPENSES)
Loan fees related to
common stock issued (Note 1) (1,049,016) (239,016) 0 (810,000)
Officer's salary related to
common stock issued (Note 1) (1,157,328) (748,305) 0 (409,023)
Interest 94,099 0 8,333 16,695
Casualty loss - boat (3,000,000) 0 0 0
Gain on settlement 411,495 0 0 0
Forgiveness of interest 8,901 0 0 0
Forgiveness of debt 123,994 0 0 0
Realized gain (loss) on
disposition of marketable
securities (Note 4) 2,720 51,375 3,677 (47,585)
Loss on permanent impairment of
securities (Note 4) (1,120,050) 0 (1,027,500) (92,550)
Miscellaneous 4,396 976 0 0
Bad debt expense (351,422) 0 0 (351,422)
Litigation settlement (Note 11) (410,478) (410,478) - -
------------ ------------ ------------ -----------
Total Other Income (Loss) (6,442,689) (1,345,448) (1,015,490) (1,693,885)
(Loss) from Continuing
Operations Before Income
Tax (Provision) Benefit (13,862,952) (2,989,715) (1,856,804) (2,072,067)
(Provision) Benefit for
Income Taxes (Note 6)
Current $ 81,805 $ (800) $ (800) $ (800)
Deferred - - - -
------------ ------------ ------------ -----------
(Loss) from Continuing
Operations (13,781,147) (2,990,515) (1,857,604) (2,072,867)
Gain on Disposal of Segment 3,836,964 0 0 0
Loss on Discontinued Operations (1,854,000) 0 0 0
Net Income (Loss) $(11,798,183) $(2,990,515) $(1,857,604) $(2,072,867)
============ ============ ============ ===========
EARNINGS (LOSS) PER SHARE $ (.05) $ (.05) $ (.08)
============ ============ ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING DURING
THE PERIOD (Note 1) 54,796,395 35,115,734 25,941,648
============ ============ ===========
See Accompanying Auditors' Report
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED APRIL 30, 1988 TO 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Preferred (Deficit) Total
--------------------------- -------------------------- During the Common Stockholders'
Par Paid in Par Paid in Development Stock Equity
Shares Value Capital Shares Value Capital Stage Subscribed (Deficit)
-------- ------- -------- -------- ------- ------- ----------- --------- -----------
Balance at
inception $ $ $ 0 $
Common stock
issued 1,727,043 1,727 4,168,828 4,168,555
Net losses from
inception to
April 30, 1988
0 0 0 (4,267,549) (4,267,549)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1988
1,727,043 1,727 4,168,828 (4,267,549) (98,994)
Net income
for the year
April 30, 1989
0 0 0 0 0
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1989
1,727,043 1,727 4,168,828 (4,267,549) (98,994)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Merger on
October 10, 1989
with Tridon
Development
Corporation
1,800,000 1,800 (4,964) 0 (3,164)
Net income
for the year
April 30, 1990
0 0 0 127,339 127,339
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1990
3,527,043 3,527 4,161,864 (4,140,210) 25,181
Net loss
for the
year
April 30, 1991
0 0 0 (181) (181)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1991
3,527,043 3,527 4,161,864 (4,140,391) 25,000
Net loss
for the year
April 30, 1992
0 0 0 (14,546) (14,546)
Balances at
April 30, 1992
3,527,043 3,527 4,161,864 (4,154,937) 10,454
Net loss
for the year
April 30, 1993
0 0 $ 0 $(3,180,791) $(3,180,791)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1993
3,527,043 3,527 4,161,864 (7,335,728) (3,170,337)
Acquisition
of Polaris
Pictures
Corporation
on June 6, 1993
200,000 200 $ 39,800 40,000
Stock
bonuses 330,000 330 65,670 66,000
Net loss
for the year
April 30, 1994
0 0 0 (582,494) (582,494)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1994 -
consolidated
4,057,043 4,057 4,267,334 (7,918,222) (3,646,831)
Common stock
issued 160,000 160 242,840 243,000
Preferred stock
issued 33,000 33 163,288 163,321
Common stock
subscribed (Note 12) (225,000) (225,000)
Net loss
for the year
April 30, 1995
0 0 0 (625,399) (625,399)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1995 -
consolidated
4,217,043 4,217 4,510,174 33,000 33 163,288 (8,543,621) (225,000) (4,090,909)
Common stock
issued 5,782,991 5,783 122,876 128,659
Preferred stock
issued 50,300 50 210,450 210,500
Net income
for the year
April 30, 1996
0 0 0 3,666,424 3,666,424
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1996
10,000,034 10,000 $4,633,050 83,300 83 373,738 $ 4,877,197 (225,000) $ 85,326
Common stock
issued 4,641,333 4,641 438,809 443,450
Common stock
issued in
exchange for
Madera
International,
Inc. stock
2,000,000 2,000 375,200 377,200
Common stock
issued in
exchange for
services
rendered
1,436,667 1,437 156,597 158,034
Common stock
issued in
exchange for
services
rendered
(Note 1)
9,000,000 9,000 891,000 900,000
Common stock
issued for
increase in
advances to
officers
(Note 1)
4,547,700 4,548 449,922 454,470
Net loss
for the year
April 30, 1997
0 0 0 (2,072,867) (2,072,867)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Balances at
April 30, 1997
31,625,734 31,626 6,944,578 833,000 83 373,738 (6,950,064) (225,000) 174,961
Common stock
issued 983,333 983 64,250 65,233
Common stock
issued in
exchange for
services
rendered
6,566,667 6,567 584,600 591,167
Common stock
issued in
exchange for
future
compensation
(Note 12)
3,100,000 3,100 275,900 (279,000) 0
Paid in capital -
non-reciprocal
transfer (Note 4) 1,027,500 1,027,500
Consolidated net
(loss) for the year
April 30, 1998
0 $ 0 $ 0 $ $ $(1,857,604) $(1,857,604)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Consolidated
balances at
April 30, 1998
42,275,734 42,276 8,896,828 83,300 83 373,738 (8,807,668) (504,000) 1,257
Common stock
issued 5,210,000 5,210 79,412 84,622
Cancellation of
common stock
(Note 12)
(3,100,000) (3,100) (275,900) 279,000
Common stock
issued in
exchange for
services
rendered
5,100,000 5,100 1,649,400 1,654,500
Prior common
stock subscribed
reclassified
(Note 12) 0 0 0 225,000 225,000
Common stock
issued in
exchange for
debt reduction
and officer's
salary
(Note 1)
15,509,000 15,509 1,113,776 1,129,285
Common stock
issued in
settlement of
lawsuit
(Note 11)
3,000,000 3,000 193,600 196,600
Consolidated net
(loss) for the year
April 30, 1999
0 0 0 (2,990,515) (2,990,515)
-------- ------- ---------- -------- ------- ------- ----------- --------- -----------
Consolidated
balances at
April 30, 1999
67,994,734 $67,995 $11,657,116 83,300 $ 83 $373,738 $(11,798,183) 0 $ 300,749
======== ======= ========== ======== ======= ======= =========== ========= ===========
See Accompanying Auditors' Report
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C>
(Consolidated) (Consolidated)
Twelve Twelve Twelve
Inception Months Months Months
To Ended Ended Ended
April 30, April 30, April 30, April 30,
1999 1999 1998 1997
------------ ------------ ------------ -----------
CASH FLOWS PROVIDED (USED) BY
OPERATING ACTIVITIES:
Net income $(11,798,183) $ (2,990,515) $ (1,857,604) $(2,072,867)
Adjustments to reconcile
net (loss) to net cash
used by operations:
(Loss) on disposal of segment (3,836,964) 0 0 0
Loss on permanent impairment
of marketable securities (Note 4) 1,120,050 0 1,027,500 92,550
(Gain) loss on sale of
marketable securities (7,467) (51,375) (3,677) 47,585
Write down of investment 25,000 0 0 0
Depreciation 9,668 3,198 1,459 1,634
Increase in allowance for
uncollectible amounts 370,638 0 8,333 351,422
Professional fees 12,885 0 0 0
Outside services paid by issuance of
common stock 1,219,452 902,250 51,167 248,034
Reclassification of common stock
subscribed (Note 12) 225,000 225,000 0 0
Officer's salary related to common
stock issued (Note 1) 1,697,328 748,305 540,000 409,023
Operating expenses paid by officer 110,699 11,694 99,005 0
Loan fees related to common stock
issued (Note 1) 1,049,016 239,016 0 810,000
Write-down of screenplays 49,800 0 0 0
Loss of fixed asset disposal 1,253 0 0 0
Research and development 88,000 0 0 0
Interest expense 349,745 0 0 0
Forgiveness of interest (8,901) 0 0 0
Maritime loss 3,462,825 0 0 0
Forgiveness of debt (123,994) 0 0 0
Stock issued in litigation
settlement (Note 11) 410,478 410,478 0 0
(Increase) decrease in:
Inventory (7,506) (2,181) (5,325) 0
Prepaid expenses (28,310) (9,057) (19,253) 0
Notes receivable (3,000) 0 0 0
Interest receivable (25,000) 0 (8,333) (16,667)
Increase (decrease) in:
Accounts payable and accrued expenses 376,354 127,275 94,500 (49,902)
Preferred stock subscription 10,000 0 0 0
Estimated future cost of discounted
operations 3,125 0 0 0
Accounts payable-Vintage Group Inc. 45,574 0 0 0
------------ ------------ ------------ -----------
Net Cash Flows (Used) by
Operating Activities (5,202,435) (385,912) (72,228) (179,188)
------------ ------------ ------------ -----------
CASH FLOWS PROVIDED (USED) BY
INVESTING ACTIVITIES:
Loans made $ (340,757) $ 0 $ 0 $ (340,757)
Investment in marketable equity
securities (238,550) 0 0 (200,000)
Proceeds from sale of
securities (Note 4) 440,743 107,451 3,677 329,615
Sale of common stock 13,550 0 0 0
Investment in screenplays (40,000) 0 0 0
Purchase of property and equipment (26,881) (7,469) (10,417) 0
Advances to officers (91,627) 0 (10,519) (76,108)
Investment in production (1,925) 0 0 0
Repayments of notes receivable 6,000 0 6,000 0
------------ ------------ ------------ -----------
Net Cash Provided (Used) by
Investing Activities (279,447) 99,982 (11,259) (287,250)
------------ ------------ ------------ -----------
CASH FLOWS PROVIDED (USED) BY
FINANCING ACTIVITIES:
Proceeds from issuance of
common stock 4,870,325 84,622 65,233 443,450
Proceeds from issuance of
convertible preferred stock 135,003 0 0 0
Increase in paid-in capital 99,866 0 0 0
Proceeds from issuance of
convertible notes payable 59,025 0 0 0
Advances from officer 324,075 165,340 0 0
Repayments of advances from officer (44,785) (3,083) 0 (13,353)
Advances from Vertex Marketing 39,400 39,400 0 0
------------ ------------ ------------ -----------
Net Cash Provided by
Financing Activities 5,482,909 286,279 65,233 430,097
------------ ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH 1,027 349 (18,254) (36,341)
CASH AT BEGINNING OF PERIOD 4 682 18,936 55,277
------------ ------------ ------------ -----------
CASH AT END OF PERIOD $ 1,031 $ 1,031 $ 682 $ 18,936
------------ ------------ ------------ -----------
NON CASH INVESTING AND
FINANCING TRANSACTIONS:
Common stock issued for
advance to officers (Note 1) $ 45,447 $ 0 $ 0 $ 45,447
============ ============ ============ ===========
Common stock issued in exchange for
Madera International, Inc. stock $ 377,200 $ 0 $ 0 $ 377,200
============ ============ ============ ===========
Increase in additional paid in
capital - non-reciprocal
transfer (Note 4) $ 1,027,500 $ 0 $ 1,027,500 $ 0
============ ============ ============ ===========
Payments by officer on behalf
of Company reducing accounts
payable $ 41,914 $ 0 $ 41,914 $ 0
============ ============ ============ ===========
Payments by officer on behalf
of Company increasing prepaid
expense $ 10,000 $ 0 $ 10,000 $ 0
============ ============ ============ ===========
Issuance of common stock for
future services (Note 13) $ 1,031,250 $ 752,250 $ 279,000 $ 0
============ ============ ============ ===========
Cancellation of common
stock subscribed $ 279,000 $ 279,000 $ 0 $ 0
============ ============ ============ ===========
Issuance of common stock in
exchange for debt conversion $ 141,964 $ 141,964 $ 0 $ 0
============ ============ ============ ===========
CASH PAID FOR:
Income taxes $ 5,600 $ 800 $ 0 $ 800
============ ============ ============ ===========
Interest $ 0 $ 0 $ 0 $ 0
============ ============ ============ ===========
See Accompanying Auditors' Report
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Tridon Enterprises Incorporated (the Company) was incorporated in
the state of Colorado on October 7, 1983 as Turco Computer
Systems, Inc. The Company changed its name to Hammer Computer
Systems, Inc. September 27, 1984.
In October 1989, Hammer Computer Systems, Inc. (HCSI) and
Tridon Development Corporation merged, with HCSI being the
surviving corporation. The Company then changed its name to
Tridon Corporation.
In June 1993, the Company acquired 100% of the outstanding common
stock of Polaris Pictures Corporation in exchange for 2,000,000
shares of its common stock.
On April 29, 1995, the Company irrevocably transferred in trust
all shares of the stock of Polaris Pictures Corporation to a
trust (see Note 10).
On March 15, 1996, the Company changed its name from Tridon
Corporation to Tridon Enterprises Incorporated.
Vertex Corporation (a wholly-owned subsidiary) was incorporated
under the laws of the state of Nevada on February 25, 1997 with
an authorized capital of 25,000 shares of no par value common
stock. The Company is engaged in the research, development,
manufacture, and the sale and licensing for sale of non-surgical
hair replacement products and any and all products related to
such business, establishing international hair replacement
enterprises; and providing customers and/or licensees with all
services and support available with regard to the management of
said hair replacement enterprises.
On January 9, 1998, Tridon Enterprises Incorporated invested
$20,100 in exchange for 25,000 shares of no par value common
stock (100% of the stock) of Vertex Corporation. For the period
from February 25, 1997 to April 30, 1997, there was no activity
in Vertex Corporation, and for the period from May 1, 1997 to
January 8, 1998, the activity was immaterial. Therefore, the
amounts from Vertex Corporation for the entire year ended April
30, 1998 have been consolidated with Tridon Enterprise
Incorporated.
Tridon Communications Corporation (a wholly-owned subsidiary) was
incorporated under the laws of the State of Nevada on March 9,
1999. As of the date of this report the subsidiary has not
authorized or issued any shares of common or preferred stock.
The only transaction that took place prior to year end was a
payment of $2,310 made by the parent company on behalf of Tridon
Communication to the Federal Communication Commission for a
license to operate as a reseller of telecommunication services.
This amount is included in prepaid expenses.
Basis of Consolidation and Combination
For the year ended April 30, 1994, and all prior periods, the
statements of loss, changes in shareholders' equity, and cash
flows of Tridon Corporation and Polaris Pictures Corporation are
consolidated. All significant intercompany transactions have
been eliminated from the financial statements. See Note 10 for
disposition of wholly-owned subsidiary. The consolidated
financial statements for April 30, 1999 and 1998 include the
accounts of Tridon Enterprises Incorporated and its wholly-owned
subsidiary, Vertex Corporation. Significant intercompany
accounts and transactions have been eliminated in consolidation
(see Note 1 - Organization). The financial statements for April
30, 1997 are for Tridon Enterprises Incorporated only. Tridon
Communications Corporation was inactive for the period of
incorporation, March 9, 1999, to April 30, 1999.
Use of Estimates
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, and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Accordingly, actual results could differ from those
estimates.
Inventory
Inventory is valued at lower of cost (first-in, first-out) or
market. Inventory consists of samples of finished products.
Basis of Presentation
The Companies have not generated significant revenues since
inception. Consequently, the accompanying financial statements
have been prepared using the accounting formats prescribed for
development stage enterprises in accordance with Financial
Accounting Standards Board Statement 7.
Cash and Cash Equivalents
The Companies consider all highly liquid investments purchased
with a maturity of three months or less to be cash equivalents.
Statements of Cash Flows
For the current year ended April 30, 1999, the Company entered
into several non-monetary transactions as described below:
The Company issued 1,650,000 shares of common stock for future
services to be performed for the Company valued at $752,250 (see
Note 14).
The Company issued 15,509,000 shares of common stock in exchange
for $2,500 cash and conversion of outstanding debt and payables
in the amount of $141,964.
Revaluation of Common Stock
Common stock issued should be valued at an estimated fair market
value. A fair market value was determined based on what an
independent outside party would be willing to pay for a share of
the Company's common stock. For the year ended April 30,1997,
the stock issued in exchange for consulting services and as an
increase to advances to officers was valued based on an estimated
fair market value of $.10 per share. The 9,000,000 shares of
common stock issued in exchange for consulting services of
$90,000 was revalued to $900,000 by an increase of $810,000 to
additional paid in capital and an increase to loan fee expense.
The 4,547,700 shares of common stock issued for advances to
officers in exchange for $45,447, was revalued to $454,470 by an
increase of $409,023 to additional paid in capital and an
increase to officer's salary.
For the year ended April 30, 1999, common stock issued in
exchange for debt conversion, was valued at a fair market value
of $.07 per share. The 10,845,000 shares of common stock issued
to the former President of the Company in exchange for relief of
$10,845 of debt, was revalued to $759,150 by an increase of
$748,305 to additional paid capital and officer's salary.
The 3,464,000 shares of common stock issued in exchange for
$2,500 cash and $3,464 of debt conversion to a Company
shareholder, was revalued to $242,480, by an increase of $239,016
to additional paid in capital and loan fee expense. These
amounts are included in "common stock issued in exchange for debt
reduction" of $1,129,285.
Property and Equipment
Depreciation is provided on the straight line and double
declining methods over the lives of related assets as follows:
Period
-----------
Computers 5 Years
Furniture and Fixtures 5 - 7 Years
Office equipment 5 Years
Leasehold improvements 27 1/2 Years
Depreciation expense was $3,198, $1,459 and $1,634 for the years
ended April 30,1999, 1998 and 1997, respectively.
Deferred Income Tax Accounts
Deferred tax provisions/benefits are calculated for certain
transactions and events because of differing treatments under
generally accepted accounting principles and the currently
enacted tax laws of the federal government. The results of these
differences on a cumulative basis, known as temporary
differences, result in the recognition and measurement of
deferred tax assets and liabilities in the accompanying balance
sheets. The liability method (FASB 109) is used to account for
these temporary differences.
For tax purposes, Tridon Enterprises Incorporated and its
wholly-owned subsidiaries, Vertex Corporation and Tridon
Communication Corporation, have fiscal year ends of April 30.
Marketable Equity Securities
The Company has adopted the Financial Accounting Standards Board
Statement No. 115, Accounting for Certain Investments in Debt and
Equity Securities (FAS 115). Under the provisions of FAS 115,
marketable securities considered available for sale are recorded
at fair market value.
Long-Lived Assets
In 1998, the Company adopted SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of." In accordance with SFAS 121, long-lived assets
held and used by the Company are reviewed for impairment whenever
events or changes in circumstances indicated that the carrying
amount of an asset may not be fully recoverable. For purposes of
evaluating the recoverability of long-lived assets, the estimated
future cash flows associated with the assets would be compared to
the assets' carrying amount to determine if a write-down to
market value or discounted cash flow value is required.
Year 2000 Compliance
Management does not believe any material year 2000 problems with
the Company's vendors, service providers, or other third parties
will affect the Company's financial information.
Earnings per Common Share
Net loss per share is computed using the weighted average number
of common shares outstanding during the period. Stock options
have not been considered in the calculation of loss per share
because they are antidilutive.
Research and Development
Research and development costs are expensed as incurred.
Advertising Costs
The Company classified $36,000 as prepaid advertising costs, per
SOP 93-7. The Company has produced an infomercial to be aired
sometime in the future. The Company has elected to expense the
cost when the infomercial is aired.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and consist of the
following:
April 30,
-----------------------------
1999 1998
---------- ----------
Computers $ 10,259 $ 10,259
Furniture and fixtures 4,821 4,821
Equipment 2,913 2,913
Leaseholds improvements 7,469 0
---------- ----------
25,462 17,993
Less: Accumulated Depreciation 9,502 6,305
---------- ----------
$ 15,960 $ 11,688
========== ==========
NOTE 3 - RELATED PARTY TRANSACTIONS
Advances to Kevin Welch, current President of the Company, as of
April 30,1998, were $30,000. During the year ended April
30,1999, these advances were exchanged for services rendered and
expensed as directors fees. In addition, Mr. Welch advanced
$12,500 to the Company in a non interest bearing loan, which is
included in the $130,578 advance from officers balance.
During the years ended April 30, 1999 and 1998, net non-interest
bearing funds were advanced from Paul Ebeling, a former officer
of the Company, to Tridon Enterprises Inc. and Subsidiaries.
Balances owed by the Companies to Mr. Ebeling were $118,078 and
$48,845 for the years ended April 30, 1999 and 1998,
respectively. These amounts are included in advances from
officers balance. During the year, Mr. Ebeling converted $10,845
of the amount owed to him into 10,845,000 shares of the Company's
common stock.
This transaction has been revalued to reflect the fair market
value of the common stock at the date of issuance at $.07 per
share, or $759,150. The additional value has increased paid in
capital and officer's salary. Non-interest bearing advances from
Steve Antebi, a shareholder of the Company, were $5,000 as of
April 30, 1998. During the year Mr. Antebi converted $3,464 of
the amount owed to him into 3,464,000 shares of the Company's
common stock. This transaction has been revalued to reflect to
fair market value of the common stock at the date of issuance at
$.07 per share, or $242,480. The additional value has increased
paid in capital and loan fee expense.
The Subsidiaries received $39,400 of advances from Vertex
Marketing for the April 30, 1999. Paul Ebeling owns Vertex
Marketing 100%.
There are no signed notes for any of these transactions. For
additional related party transactions, see Notes 1 (Revaluation
of Common Stock) and 4.
NOTE 4 - MARKETABLE EQUITY SECURITIES
The Company has adopted the Financial Accounting Standards Board
Statement No. 115, Accounting for Certain Investments in Debt and
Equity Securities (FAS 115). Under the provisions of FAS 115,
marketable securities considered available for sale are recorded
at fair market value if they have a readily determinable fair
value. The corresponding unrealized gain or loss in the fair
market value in relation to cost is accounted for as a separate
item in the shareholders' equity section of the balance sheet,
unless there is a permanent impairment to the marketable
security, in which case it is recorded as a loss in the income
statement. Management treated its investment in marketable
securities as an investment that was available for sale for the
year ended April 30, 1998.
During the year ended April 30, 1997, the Company purchased 1
million shares of International Forest Industries, Inc. stock
with an initial cost of $200,000. At April 30, 1997, the stock
was worth $531,250. Subsequent to the year end, International
Forest Industries changed its name to Fluor City International.
Subsequent to the balance sheet date, but prior to issuance of
the April 30, 1997 report, the stock had several reverse splits
and eventually was sold in May 1998 for $107,451. Due to this
permanent impairment, the net unrealized holding loss in the
amount of $92,550 has been shown as a loss in the statements of
operations for the year ended April 30, 1997.
In April 1998, Tridon Enterprises Incorporated received
20,550,000 shares of North American Exploration Corporation. The
shares were received from Paul Ebeling, president of Tridon
Enterprises Incorporated, in a non-reciprocal transfer. The
shares were valued at the date of the transfer at $.05 per share,
or $1,027,500. Subsequent to the year end, North American
Exploration Corporation issued a statement relating to the
cancellation of the 20,550,000 shares issued to Tridon
Enterprises Incorporated, as nominee for Paul Ebeling. Due to
this potential permanent impairment of this asset, the entire
amount of $1,027,500 was reserved for in the year ended April 30,
1998. During the year ended April 30, 1999 North American stock
underwent a reverse split of 1:100. Tridon Enterprises
Incorporated agreed to sell to Paul Ebeling the 205,500 shares
after the reverse split for $.25 per share (the fair market value
at the date of exchange). The Company recorded a $51,375 gain on
sale during the current year.
NOTE 5 - NOTE RECEIVABLE
The Company has a $250,000 note receivable from Madera
International, Inc. receivable interest only, quarterly,
beginning December 31, 1996 at 10% per annum. All unpaid
interest and principal were due September 3, 1997. At April 30,
1998 unpaid interest was $25,000. As of April 30, 1997, this
receivable and related interest was past due, and therefore, this
receivable and accrued interest was reserved for. As of the date
of this report, the condition of this receivable and accrued
interest is unchanged.
NOTE 6 - INCOME TAXES
The provision for income taxes consists of:
April 30,
----------------------------------------
1999 1998 1997
-------- -------- --------
Federal $ 0 $ 0 $ 0
State 800 800 800
-------- -------- --------
800 800 800
Deferred Taxes 0 0 0
-------- -------- --------
Provision for
Income Taxes $ 800 $ 800 $ 800
======== ======== ========
Loss Carryforwards
Tridon Enterprises Incorporated has net operating loss
carryforwards which are from HCSI prior to its merger with Tridon
Enterprises Incorporated. The amounts that the Company may
ultimately apply to future taxable income may be limited by
application of tax law. Tentative expiration dates of these
losses are as follows:
1999 $ 918,000
2000 475,000
2001 1,401,000
2002 1,001,000
----------
Totals $3,795,000
==========
As of the date of these financial statements, the Company has not
filed income tax returns for April 30, 1998 or April 30, 1999.
Subsequent to the merger of HCSI and Tridon Development
Corporation, the Company has accumulated a tax loss carryforward
of approximately $4,071,000 for federal tax purposes and a
$1,997,415 tax loss carryforward for California franchise tax
purposes. Federal net operating losses (NOL's) are carried
forward 15 - 20 years and expire between 1999 and 2019. State
NOL's are carried forward 5 years and expire between 1999 and
2004. In addition, Polaris Pictures Corporation (Polaris) had
accumulated a tax loss carryforward of approximately $265,000 for
federal tax purposes and a $132,000 loss carryforward for
California franchise tax purposes, whose net operating loss
carryforwards expire in 2009 and 1999, respectively.
Vertex Corporation has a net operating loss of approximately
$19,000 which expires in 2013, and a net operating loss of
approximately $126,000 which expires in 2019 if not utilized.
All loss carryforward amounts are subject to review and revision
by tax authorities.
NOTE 7 - DEFERRED INCOME TAXES
The net deferred tax amount included in the accompanying balance
sheets for the years ended April 30, include the following
amounts of deferred tax assets and liabilities:
1999 1998
----------- -----------
Deferred Tax Asset - Non-current $2,876,113 $2,174,811
Deferred Tax Liability - Non-current 0 0
Less Valuation Allowance (2,876,113) (2,174,811)
----------- -----------
$ 0 $ 0
The deferred tax asset also results from reserves for the note
receivable, and the issuance of Company stock for services and
compensation which are deductible for financial statement
purposes, but not for income tax purposes until the note is
actually written off and the services and compensation is
recognized as income by the recipients. The deferred tax asset
also results mainly from the net operating loss carryforward for
federal and state income tax purposes.
Due to the Company's going concern problem, a valuation for the
full amount of the asset has been recorded. The valuation
allowance increased by $701,302 for the year ended April 30,
1999.
NOTE 8 - OFFERING OF CUMULATIVE CONVERTIBLE PREFERRED STOCK
In June 1994, the Company offered $1,000,000 of 7% cumulative
convertible preferred stock at $10 per share in a private
placement memorandum. The preferred stock is convertible to
4,000,000 shares of common stock one year after issuance and may
be called by the Company two years after the issue date.
During the year ended April 30, 1996, $150,000 of advances from
an officer was converted to 15,000 cumulative convertible
preferred shares. As of April 30, 1999, 83,300 cumulative
convertible preferred shares were issued and outstanding.
Dividends in arrears on the cumulative preferred stock were
$112,273, $86,282 and $60,291 for the years ended April 30, 1999,
1998 and 1997, respectively.
For the years ended April 30, 1999, 1998 and 1997, no dividends
were declared or paid.
NOTE 9 - DISPOSITION OF WHOLLY-OWNED SUBSIDIARIES
On April 29, 1995, the Board of Directors of Tridon Enterprises
Incorporated irrevocably transferred in trust 100% of the stock
of Polaris Pictures Corporation to be held for the benefit of the
creditors of Polaris.
On April 29, 1996, Paul Ebeling resigned as an officer/director
of Polaris Pictures Corporation. Consequently, Tridon and
Polaris are not under common control.
The financial statements reflect the disposition of Polaris as a
discontinued operation in accordance with generally accepted
accounting principles. A gain of $3,836,964 is recognized in the
statement of operations.
NOTE 10 - UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
Tridon Enterprises Incorporated and its subsidiary, Vertex
Corporation have suffered substantial losses since inception. In
order for the Company to continue as a going concern, Tridon
Enterprises Incorporated and Subsidiaries are dependent upon
their ability to raise capital from various sources, including
loans from shareholders and others as well as the development of
an ongoing source of revenue.
The continuation of the Company as a going concern, is dependent
upon the Company's ability to establish itself as a profitable
business. It is the Company's belief that it will continue to
incur losses during the coming year and
possibly require additional funds. The additional funding will
be accomplished by seeking additional funds from private or
public equity investments, and possible future collaborative
agreements to meet such needs, in order that the Company will be
a viable entity. The Company's ability to achieve these
objectives cannot be determined at this time.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Currently the Company is sharing office space with their
subsidiary. Rent expense relative to this lease was charged to
operations, and for the years ended April 30, 1999, 1998 and 1997
was $5,715, $14,400, and $0, respectively. As of April 30, 1999,
the Company is not paying office rent. The subsidiary started
leasing space in Beverly Hills at $3,269 per month on October 1,
1998. The lease expires September 30, 2001. Rent expense for
the year ended April 30,1999 was $22,887. Future minimum rental
payments required under the lease are as follows:
September 30,
-------------
2000 $ 39,228
2001 $ 39,228
2002 $ 16,345
The Company previously leased a vehicle on a month-to month
basis. Rent expense relative to this lease was charged to
operations, and for the years ended April 30, 1998 and 1997 was
$5,400 and $0 respectively. Auto expense for the fiscal years
ended April 30, 1998 and 1997 of approximately $2,700 was paid
directly by the president of the Company. The Company plans to
repay this expense when funds are available. This expense has
been included in the amount due officer.
At the end of the fiscal year April 30, 1999, the Company was the
defendant in three lawsuits. Two of the three were settled in
exchange for the Company's stock. One judgement for $196,600
was settled for 3,000,000 shares of Tridon Enterprises stock. In
the second lawsuit a company paid Tridon Enterprises Inc. $10,000
cash during the year and was awarded 2,000,000 shares of stock
subsequent to year end. The $196,600 and $10,000 are shown in
the stockholders equity section and the $196,600 has also been
expensed as part of the litigation settlement expense. A third
lawsuit has not been settled as of the date of this report,
although a judgement in the amount of $213,878 has been entered
against Tridon Enterprises Inc. This amount has been accrued and
is included in accounts payable and litigation settlement
expense.
NOTE 12 - COMMON STOCK SUBSCRIBED
During the fiscal year ended April 30, 1995, the Company issued
100,000 shares of common stock in consideration for future
consulting services valued at $225,000. During the fiscal year
ending April 30, 1999, these services have been rendered. The
common stock subscribed has been reclassified to consulting
expense.
During the fiscal year ended April 30, 1998, 3,100,000 shares of
common stock were issued for future services to be rendered,
valued at $279,000. Subsequent to the balance sheet date, the
shares were to be canceled. As of the date of this report, these
shares have not been received, and the outcome of this
transaction cannot be determined, however, stop transfers have
been placed on the shares. The $279,000 and the related
3,100,000 shares have been reversed.
NOTE 13 - PREPAID CONSULTING FEES
During the fiscal year ended April 30, 1999, the Company entered
into five consulting agreements for future services. In exchange
for theses services 3,300,000 shares of common stock were issued,
valued at $1,504,500. The agreements are all for a one-year
period commencing November 2, 1998. As of April 30, 1999,
$752,250 of those consulting agreements have been earned and
$752,250 are unearned and are classified as a prepaid expense.
As of the date of this financial statement, all services have
been performed.
NOTE 14 - SUBSEQUENT EVENTS
Subsequent to the year end the Company entered into a "Plan of
Reorganization Agreement" with Satellite Link Communications
(SLC) and several individuals. The agreement calls for Tridon
Enterprises to do a reverse stock split and exchange its stock
for the stock of SLC. SLC will become a subsidiary of Tridon
Enterprises. As of the date for this report this agreement has
not been finalized.
