ITEM 1. BUSINESS
General Development of Business
On October 10, 1989, a special meeting of the shareholders of Hammer Computer Systems, Inc. (HCSI), a Colorado Corporation incorporated in 1983, was held to consider and vote to ratify an Agreement and Plan of Merger, signed on February 22, 1989, to merge HCSI with Tridon Development Corporation, a Missouri Corporation, organized in 1988. Under the Agreement and Plan of Merger, Tridon Development Corporation was merged into HCSI, HCSI being the surviving Corporation. HCSI amended the Articles of Incorporation, changed the name of HCSI to Tridon Corporation. These propositions were passed by the shareholders on October 10, 1989.
Pursuant to the Plan of Merger, HCSI exchanged 600 shares of common stock in HCSI for each of 30,000 shares of common stock of Tridon Development Corporation outstanding. This increased the outstanding shares of common stock in Tridon Corporation from 17,270,433 to 35,270,433. Authorized shares of common stock remained at 100,000,000.
Hammer Computer Systems, Inc. a Colorado Corporation had been inoperative since August, 1986, at which time it suspended all operations and ceased doing business due to low sales levels and continuing losses, the Company was unable to remain in business.
In 1991 Paul Ebeling, the Company's CEO, identified a market for a non-surgical hair replacement prosthesis to be used by medical doctors to correct unsuccessful scalp reduction surgery, unsuccessful hair transplant surgery and the unsuccessful application of prescription drugs. The Company embarked on developing a process for manufacturing the prosthesis. The management of the Company estimates that it will require approximately $500,000 in working capital to successfully start the manufacturing process.
Toward this end, the Board Of Directors on February 10, 1992, authorized the issuance of convertible promissory notes. The proceeds of the notes were used to develop suitable reliable marketable product and for operating capital to fund development and various corporate expenses. The interest is 6% per annum to be paid only if called by the Company or redeemed by the holder three years subsequent to issue. Accrued interest on any portion of the loan converted to anew issue of preferred stock shall be forfeited at the time of conversion.
The principle of the notes is convertible into preferred stock at the rate of one share of preferred for each $1.00 note purchased. Notes totaling $48,000 in principle have been issued as of April 30, 1994.
The Company announced on September 21, 1993, the appointment of Harold A. Lancer, M.D. as Medical Director of its Vertex Hair System. Dr Lancer is a Fellow of the American Academy of Dermatology. A native of Montreal, Quebec, Canada, he was educated at Brandeis University, the University of California at San Diego Medical School, Harvard University Medical School, Tel Hashomen Hospital, Israel and St. Johns Hospital for Diseases of the Skin, London, England. Dr. Lancer has international experience in the specialties of dermatology and cosmetic surgery. Dr. Lancer authored and presented a paper on the Vertex Hair System to the Pacific Dermatology Society in Monterey, California on September 10, 1993. Dr. Lancer is a member of the medical and scientific team developing Vertex(R) products.
The Company formalized its relationship with California Cybernetics Corporation for the implementation of its design, engineering, manufacturing and software applications for its computer-aided flexible manufacturing processes. All patentable aspects, including software and programming, of California Cybernetics' work for the Company's Vertex(R) system are the sole property of Tridon Enterprises Incorporated.
Management, Dr. Lancer and California Cybernetics Corporation are confident that they can successfully develop Vertex(R).
On January 20, 1994 the stockholders of the Company in a special meeting approved a $1,000,000 offering of 7% cumulative convertible preferred stock. On June 7,1994, the Company issued a private placement memorandum for the offering. Subsequent to July 31, 1995 the Company received $188,000 for the purchase of the preferred stock. The Company plans to use the proceeds of this placement for the development of the first flexible manufacturing devise for Vertex(R).
The Vertex does not have a base as used in normal hairpieces, but the hair appears to be growing directly from the scalp and there is no feeling of an object on one's head. Vertex(R) has 100% adhesion and can remain on for approximately one month with no special maintenance, after which it is replaced. Through Vertex's(R) unique locking system, human hair fibers are attached directly to synthetic skin. The substrate is virtually invisible. The synthetic skin is also moisture vapor permeable. It also may reduce the effect of the sun's damaging ultraviolet rays. Using advancements in computer-aided flexible manufacturing, Vertex(R) can be made consistently and less expensively than competitive products. With programmed information about a person's skin, natural hair, age and body chemistry, robotics manufacturing allows an individual to obtain the Vertex(R) on short notice, from anywhere in the world.
Prototypes were completed in the summer of 1994. Initial clinical tests were completed and the professional paper written by Dr. Lancer later in the year. Development is continuing. In February 1997 the Company began an 18-month testing project in preparation for a market roll out of Vertex Hair for Men. On February 25, 1997 the company incorporated Vertex Corporation, a Nevada corporation, as a wholly-owned subsidiary.
On June 6, 1993, Tridon issued 2,000,000 shares of its common stock in exchange for 100% of the common shares (10,000,000) of Polaris Pictures Corporation (Polaris), a California Corporation, pursuant to a Memorandum of Agreement dated June 1, 1992. The assets of Polaris included six screen plays which suitable for television or motion pictures and an interest in a pleasure yacht. On April 29, 1995 Tridon irrevocably transferred to a trust 100% of its shares of Polaris.
In February 1997 the Company began a 18 month testing project in preparation for a market roll out of Vertex Hair for Men. On February 25, 1997 the company incorporated Vertex Corporation, a Nevada corporation, as a wholly owned subsidiary.
In September 1997 management recognized the need for a separate hair enhancement prosthesis for women and began development of the products and a marketing plan around the direct response method. During the year the product was designed, prototyped and tested samples. Manufacturing arrangements are being negotiated with suppliers in Asia. A trademark was applied for Hollywood Hair and it's various products. A thirty-minute infomercial show was produced. Test marketing is being planned in selected markets in the 4th quarter of 1998 for a Spring 1999 roll-out.
From June 1998 through January 31, 1999, the Company engaged in discussions with various telecommunications firms in efforts to reorganize itself as a provider of long distance telecommunications voice and data services. The change in the focus of business development was believed by management to be the best strategy to enhance shareholder value. To that end, the Company incorporated a new wholly owned subsidiary known as Tridon Communications Corporation and announced the spin-off of Vertex Corporation, another wholly owned subsidiary, to its shareholders. The spin-off will only occur if the Company is able to transact a merger or consolidation with another entity that can further the interests of the Company and its shareholders.
On April 21, 1999, Mr. Paul Ebeling, the Chief Executive Officer and Chairman of the Board of Directors of the Company tendered his resignation from all positions with the Company. The resignations were accepted by the remaining Board of Directors when tendered and the resignations became effective immediately. Kevin Welch was nominated as interim Chief Executive Officer and Chairman of the Board pending the election of directors at the next annual meeting of shareholders. The resignation of Mr. Ebeling stems from personal matters involving Mr. Ebeling that are unrelated to the Company. However, in light of the nature of the personal issues confronting Mr. Ebeling, the remaining Board of Directors believed it to be in the best interests of the Company that Mr. Ebeling forthwith resign. As of April 21, 1999, Mr. Ebeling will have no further involvement with the Company.
ITEM 2.
ITEM 2. PROPERTIES
On August 15, 1993, the registrant leased office space from Palm Plaza Associates, for space located 136 South Palm Drive, Beverly Hills, California for $1600 per month. The aforementioned lease expired on August 14, 1994 and continued on a month to month basis at the rate of $1,550 per month through April 30, 1996. The Company now rents office space from Paul Ebeling at the same location for $600.00 per month on a month-to-month basis. On April 21, 1999, new management collected the files and records from the office of the Company. The Company has since moved its official address to 11601 Wilshire Blvd., suite 2040, Los Angeles, California, at the offices of its accounting firm London & Co.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The following sets forth legal proceedings involving the Company:
Coldwater Capital, LLC v Tridon Enterprises, Inc.
The Company was recently served with a complaint filed by Coldwater Capital, LLC ("CCL") in the Superior Court for the State of California, bearing case number SC057089, in which the CCL is seeking both compensatory and punitive damages in excess of ten million dollars ($10,000,000.00). The complaint alleges that the Company offered to sell two million (2,000,000) shares of its common stock to CCL in exchange for consideration of ten thousand dollars ($10,000.00). The Company believes that the complaint filed by CCL is without merit and the Company is prepared to defend the action. At this point, the Company has filed an answer to the Complaint and the case is proceeding forward. The Company, will attempt to negotiate a settlement with the plaintiff, if a settlement is possible.
Lucas Plaza Associates v Tridon Enterprises, Inc.
In 1989, the Company was sued by Lucas Plaza Associates ("LPA") in the Circuit Court for the State of Missouri, bearing case number 902-2217. LPA has alleged that the Company is in breach of contract for lease obligations on property located in St. Louis, Missouri. While the case lay dormant for many years, LPA has recently begun the prosecution of the case and the Company is defending the action. The complaint filed by LPA is seeking both compensatory and punitive damages of one hundred ninety six thousand six hundred dollars ($196,600). The Company was informed that LPA obtained a judgment against the Company in the amount of $196,600 by way of a motion for summary judgment filed by LPA. The Company, in order to conserve resources, will attempt to negotiate a settlement with the plaintiff, if a settlement is possible.
J. Kujawa v Tridon Enterprises, Inc.
In 1989, the Company was sued by James Kujawa ("JK") in the Circuit Court for the State of Missouri, bearing case number 902- 02138. JK has alleged that the Company is indebted to JK for performance of labor and materials supplied for buildout of leased property space located in St. Louis, Missouri. While the case lay dormant for many years, JK has recently begun the prosecution of the case and the Company is defending the action. The complaint filed by JK is seeking both compensatory and punitive damages of one hundred sixty two thousand nine hundred twenty-two dollars ($162,922). The Company was informed that JK obtained a judgment against the Company in the amount of $162,922 by way of a motion for summary judgment filed by JK. The Company, in order to conserve resources, will attempt to negotiate a settlement with the plaintiff, if a settlement is possible.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As explained in ITEM 1, on October 10, 1989 the shareholders approved a merger of Tridon Development Corporation into HCSI with HCSI changing its name to Tridon Corporation.
On January 20, 1994 the shareholders approved an amendment to the Articles of Incorporation to permit the Company to divide and issue 20,000,000 shares of preferred shares in series.
On February 22, 1996 the stockholders of the Company approved an amendment to its Articles of Incorporation: that officers and directors of the Company liability be limited to the full extent as provided for in the Colorado Corporations Code, Section 7, Article 9, as amended. The stockholders also voted to amend the Articles of Incorporation to change the name of the Corporation to Tridon Enterprises Incorporated and to split the shares of the company one for ten. The stockholders also voted to authorize the Board of Directors to place its Vertex(R) technology in a wholly-owned subsidiary Corporation. On February 25, 1997, the Company incorporated Vertex Corporation, a Nevada corporation, as a wholly-owned subsidiary.
Subsequent to the year end the Company entered into a "Plan of Reorganization" with Satellite Link Communications Corporation (SLC). The agreement calls for the Company to do a reverse stock split and exchange its stock for the stock of SLC. SLC will become a subsidiary of Tridon Enterprises. The Company has prepared a proxy statement and will file for approval with the Securities and Exchange Commission. As of the date of this report the agreement has not been finalized.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Registrant's common stock is traded in the over-the counter market. The symbol for this stock is TEIM. The stock had a high bid of $.74 and a low bid of $.015 per share during the past fiscal year. Such over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.
The Registrant has not in the past, nor does it currently intend to pay cash dividends on its common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7.
ITEM 7. MANAGEMENTS'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company discontinued its operations in August of 1986 because of significant operation losses. The Company is developing its Vertex hair replacement prosthesis for introduction to the market. It identified the market and believes its products are viable for that market. The Company management believes that with the appointment of Dr. Harold Lancer as Medical Director and with the establishment of a working relationship with California Cybernetics Corporation, that the Vertex(R) development project will be successful.
Up until April 30, 1994, the Company issued $48,000 in principle of convertible notes payable. The Company's management estimates that it will require approximately $500,000 to develop Vertex(R).
Liquidity and Capital Resources
On June 7, 1994, the Company offered $1,000,000 of 7% cumulative preferred stock in a private placement memorandum. The Company has received $188,000 from the offering. The offering is closed.
As a result of the discontinued operations, the Company has no revenues and expenses related only to administration and product development. In the opinion of management the Company's continued existence is dependent upon the completion of a successful merger with and/or acquisition by an operating company or be successful in raising sufficient capital to develop and market Vertex(R).
The Company's auditors has expressed uncertainty to continue as a going concern. The Company and its subsidiaries, have suffered substantial losses since inception. In order to continue as a going concern, the Company is dependent upon management's ability to raise capital from various sources, including loans from shareholders, advances from officers and the development of an ongoing source of revenue.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES
(COMPANIES IN THE DEVELOPMENT STAGE)
FINANCIAL STATEMENTS
APRIL 30, 1999 AND 1998
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
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
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) BALANCE SHEETS
ASSETS
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) STATEMENTS OF OPERATIONS
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
TRIDON ENTERPRISES INCORPORATED AND SUBSIDIARIES (COMPANIES IN THE DEVELOPMENT STAGE) STATEMENTS OF CASH FLOWS
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.
ITEM 9.
ITEM 9. Disagreements on Accounting and Financial Disclosures
During the 12 months ended April 30, 1999 the Company had no disagreement with accountants on any matter of accounting principles or practices of financial statement disclosure.
PART III
ITEM 10.
ITEM 10. Directors and Officers of the Registrant
Officers and Directors of the Company as of April 30, 1999 are as follows:
Name Age Position
Kevin Welch 38 CEO, Secretary/Treasurer and Director Nicolas Weider 40 Director
Each director holds office until the next annual meeting of shareholders and until their successor has been elected and qualified. Each officer holds office at the pleasure of the Board of Directors and until their successor has been elected and qualified.
Kevin Welch joined Tridon Enterprises Incorporated on February 22, 1996 and serves as Interim CEO, Secretary/Treasurer and a director of the company.
Nicolas Weider joined Tridon Enterprises Incorporated on June 1, 1997 and serves as director of the company.
ITEM 11.
ITEM 11. Executive Compensation
The following is a summary of executive compensation for the year ended April 30, 1999: (See Note 1)
Kevin Welch $ 0 Nicolas Weider, MD $ 0
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth in the beneficial ownership of the Company's common stock be each person known to he Company to be the beneficial owner of more than five percent of the outstanding common stock of the Company and by directors and executive officers of the Company, both individually and as a group.
Beneficial Owner Shares Beneficially Percentage of Owned Class
Antebi Children's Insurance Trust of 1995 345 North Maple Drive Beverly Hills, CA 90210 15,452,444 23.38%
Paul Ebeling PO Box 16244 Beverly Hills, CA 90209 16,917,712 25.60%
Kevin Welch PO Box 16244 Beverly Hills, CA 90209 3,500,000 5.30%
Nicolas Weider PO Box 16244 Beverly Hills, CA 90209 1,000,000 1.51%
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Vintage Group inc., as a condition set forth in the Agreement and Plan of Merger, canceled and forgave all indebtedness and any other obligations owed to Vintage by Hammer computer Systems, Inc. (HCSI). The Company advanced $5000 to Vintage Group, Inc. during the quarter ending October 31, 1994.
President, CEO and director Paul Ebeling has made cash advances to the Corporation for administrative expenses. The amount owed to Mr. Ebeling at April 30, 1997 and 1998 is $91,555 and $48,845 respectively (see Note 3).
The son of Paul A. Ebeling, Nicholas Ebeling, purchased $2,500 of convertible notes from the Company in March of 1992. In addition another family member bought $3,000 of convertible notes. During the year ending April 30, 1996 the notes were converted to 2,500 and 3,000 shares of cumulative convertible preferred shares respectively.
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, during the year ended April 30, 1999 Mr. Welch was issued 500,000 shares at par value. During the year ended April 30, 199 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 year ends 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.
Subsequent to the year end, on June 23, 1999, Mr. Ebeling entered into a definitive written agreement with an unrelated third party to sell all right, title and interest in and to the Series A Preferred Stock and Shares of Common Stock of the Company. The sale and purchase agreement will close on July 1, 1999 at which time Mr. Ebeling will own no further shares of stock in the Company.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
1. Financial Statements: included in Item 8, Part II of this report.
2. Exhibits required to be filed by this report:
3. Reports on Form 8K dated January 22, February 2, and April 13, 1999.
Exhibit Number Description
(3) Articles of Incorporation and Bylaws (a) Certificate of Amendment to Articles of Incorporation dated October 7, 1983 and Articles of Incorporation dated October 7, 1983. (b) Certificate of Amendment to Articles of Incorporation dated August 30, 1984 and Articles of Incorporation dated September 27, (c) Bylaws (d) Certificate of Amendment to Articles of Incorporation dated January 20, 1994. (e) Certificate of Amendment to Articles of Incorporation dated April 24, 1996.
(24) Consents of Experts and Counsel.
Incorporated by reference from Form S-18 filed with the Securities and Exchange Commission, Commission File No. 0-13628, filed for fiscal year ended April 30, 1985.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf and on the dates indicated by the undersigned thereunto duly authorized.
Date: January 16, 2000 By: /s/ Kevin Welch Kevin Welch, CEO, Secretary/Treasurer