Yea, I just watched the video on YouTube and Sephiroth does show him beforehand. Zack (shown as Cloud in the Kalm flashback) asks Sephiroth what is in the tanks? He explains that normal members of SOLDIER are introduced to mako, like he was. But these creatures are no longer human because they've been exposed to much higher levels of Mako. He never says what they are though. And I'm pretty sure the Sephiroth clones you see in the game are in fact the burnt citizens of Nibelheim.
So pre freak-out, those tubes create monsters from some unknown originals. Post freak-out he uses them to create Sephiroth clones by introducing Jenova cells.
So pre freak-out, those tubes create monsters from some unknown originals. Post freak-out he uses them to create Sephiroth clones by introducing Jenova cells.