U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: June 30, 2000
Commission File Number: 0-29011
THE STORM HIGH PERFORMANCE SOUND CORPORATION
(Exact name of small business issuer as specified in its charter)
Florida
(State or other jurisdiction of incorporation or organization)
52-2048394
(IRS Employer Identification No.)
8756 122nd Avenue NE
Kirkland, Washington
(Address of principal executive offices)
98033
(Zip Code)
(425) 827-7817
(Issuer's Telephone Number)
--------------------------------------------------
(Former name, former address and former fiscal year,
if changed last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes X No .
--- ---
The number of shares of the registrant's only class of common stock issued and
outstanding, as of June 30, 2000, was 41,322,719 shares.
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PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three month and six month periods
ended June 30, 2000, are attached hereto.
The unaudited financial statements presented herein are those of North Coast
Productions Inc., ("North Coast") successor to The Storm High Performance Sound
Corporation ("Storm"). North Coast was incorporated December 29, 1999 and had
no business activity prior to that date. Therefore, there are no comparative
financial statements for the three Months or six months ended June 30, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
- Plan of Operations
The following discussion should be read in conjunction with the Financial
Statements and notes thereto included herein.
North Coast became a successor to Storm under a Stock Purchase Agreement between
Storm and North Coast dated January 28, 2000 and effective March 31, 2000 and a
related Share Exchange Agreement and Plan of Merger between Storm and North
Coast dated as of April 4, 2000 and effective as of April 5, 2000. The Stock
Purchase Agreement and the Share Exchange Agreement ("the Agreements") were
disclosed previously in the Company's Form 8-K filed on April 3, 2000 and Form
8-K filed on April 24, 2000, and amended on July 12, 2000.
The Company intends to hold a special meeting of its shareholders to consider
and vote upon the following matters:
The reincorporation of Storm from Florida to Nevada to be accomplished by an
Agreement of Merger and Plan of Merger and Reorganization with Magellan Filmed
Entertainment, Inc. , a Nevada corporation, The affirmative vote of a majority
of the outstanding shares will approve the Plan of Merger and Reorganization
including approval of the name change to Magellan Filmed Entertainment, Inc.,
the Articles of Incorporation, and the Bylaws of Magellan. The Articles of
Incorporation of Magellan include a capital structure consisting of 200,000,000
shares of common stock, par value $0.001 authorized and 50,000,000 shares of
preferred stock, par value $0.001 authorized.
Until the name change is approved by the stockholders, Storm will carry on its
business as The Storm High Performance Sound Corporation dba North Coast
Productions Inc.
The Company generated no revenues during the three month period ended June 30,
2000. The Company's current plan is to concentrate its business development
efforts on opportunities available in the film production business, including
made for TV projects.
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The Company plans to hire a team of industry professionals. Contact has been
made with several industry experienced individuals who have expressed an
interest in joining the Company. Day to day operations, the selection of
projects and the marketing of the Company's productions and services will be by
industry professionals.
The Company's plan is to become operational during the second half of 2000. The
development of two motion picture projects will receive the bulk of the
Company's management time and financial resources, if and when the financial
resources become available.
The Company is in the process of establishing itself as producer and distributor
of filmed entertainment products. Foreign or world wide distribution of USA
produced entertainment projects is one of the fastest growing segments of the
industry. It is the intention of management to exploit that market as the
foundation of the Company's future.
The Company's major marketing strategy is based on selling "within budget"
productions to the marketplace at competitive prices. This includes video and
cable distribution outlets in addition to the foreign markets. The growing
availability for viewers in countries outside the USA to receive USA cable
network productions from HBO, Show Time and others, has increased demand for the
type of programming that the Company is planning to produce.
The Company plans to establish distribution outlets, through strategic
alliances, throughout its market place. A strong company representative
network, coupled with well-chosen, competently produced projects is designed to
provide a basis for success.
Under its marketing plan management is also developing relationships with
writers and independent producers to assure that the Company has a constant flow
of projects under review. Included in this stream of projects are feature length
films, made for TV films, mini series for TV and TV feature series. While each
has a different market place, they all, as in any business, want the most for
the least cost. The Company has as one of its missions, the cost efficient
production of its projects. A strategy of cost efficiency is to become a
hallmark of the Company and the source of our internal growth.
The Company plans to formulate an aggressive joint venture acquisition plan for
stimulating growth. As in most industries, the consolidation movement is
growing. Management believes that growth by strategic acquisition is necessary
for the Company to reach its full potential.
To date the Company's current business activities have consisted primarily of
developing a business plan, assembling a management team, and pursuing film
production opportunities and financing. Options to purchase Magellin
Entertainment of Malibu, CA and Nickel Palace, Inc. of Hollywood, CA have been
signed. Definitive agreements are in preparation.
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Magellin Entertainment owns the rights to Tuesday's Letters, a movie script that
is scheduled to commence production this summer. The budget for this project is
$4.5 million. A division of Magellin, that will become the distribution arm of
the Company is currently marketing Tuesday's Letters to the foreign market
place. During the quarter ended June 30, 2000, the Company advanced Magellin
$74,588, and in July, 2000, advanced an additional $24,042.
Magellin's management team brings 20 plus years of industry experience to the
Company. Their experience includes acting, distribution and most importantly,
producing. They have first hand knowledge of industry cost controls which will
assist management in reaching its goal of being cost efficient.
Nickel Palace owns the rights to Rennie's Landing, a movie script that is
currently in production and scheduled for release in the fourth quarter of 2000.
The director and producers of this film have previously worked on bigger budget
films for major studios. They are experienced, bright and have the vision
necessary to recognize what the viewing public, the 18 to 34 year old wants to
see. The addition of the Nickel executives to our management team brings the X
& Y Generation vision to the Company. In the quarter ended June 30, 2000, the
Company loaned to Nickel Palace $225,000 and an additional $108,000 in July,
2000 for operating capital to commence film production activities.
During the quarter ended June 30, 2000, the Company received $830,500 of
proceeds it received under the subscription agreement relating to the
convertible debentures issued by the Company on March 28, 2000. The funds were
used to pay down approximately $260,000of the Company's debt obligation to its
officers, and $125,000 due for the reverse merger consulting fee. $299,588 was
used for the advances to Magellin and Nickel Palace, and the balance used for
operating capital. The Company is in its early stages of business development
and funding of future operations is dependent on management's ability to
continue to raise additional capital.
The Company estimates that it will have sufficient capital to enable it to meet
its financial needs to continue with its business development activity at a
minimal level through the end of the current year. In order to proceed with its
Plan of Operations as described herein, the Company will have to raise
additional funds over the next 12 months.
The Company has no plans for any product research and development and no
expected purchase or sale of plant and significant equipment over the next 12
months.
The Company expects a significant increase in the number of its employees in
order to produce the film opportunities it is pursuing under its plan of
operations. The hiring of additional employees is dependent upon and subject to
the Company's ability to raise additional financing.
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FORWARD LOOKING STATEMENTS
In connection with, and because it desires to take advantage of, the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995,
the Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this report and in any other statement
made by, or on the behalf of the Company, whether or not in future filings with
the Securities and Exchange Commission. Forward looking statements are
statements not based on historical information and which relate to future
operations, strategies, financial results or other developments. Forward
looking statements are necessarily based upon estimates and assumptions that are
inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond the Company's control
and many of which, with respect to future business decisions, are subject to
change. These uncertainties and contingencies can affect actual results and
could cause actual results to differ materially from those expressed in any
forward looking statements made by, or on behalf of, the Company. The Company
disclaims any obligation to update forward looking statements.
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<TABLE>
<CAPTION>
THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba/ NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
BALANCE SHEET
JUNE 30, 2000
(Unaudited)
ASSETS
<S> <C>
Cash $ 71,332
------------
71,332
OTHER ASSETS
Notes Recivable
Nickel Palce 225,000
Magellen Entertainment 74,588
------------
Total Other Assets 299,588
------------
$ 370,920
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ -
Payable to officers 74,000
------------
Total current liabilities 74,000
------------
OTHER LIABILITIES
Debentures payable 490,000
Contingencies -
------------
Total other liabilities 490,000
------------
564,000
------------
STOCKHOLDERS' (DEFICIT)
Common stock $.0001 par value; 50,000,000 shares
authorized; 41,322,719 shares issued and outstanding 4,133
Additional Paid-in Capital 937,470
Retained deficit (1,134,683)
------------
(193,080)
------------
$ 370,920
============
The Accompanying notes are an integral part of these financial statements
</TABLE>
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<TABLE>
<CAPTION>
THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba/ NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
Cumulative
Through the
Development
Three Months Six Months Stage
Ended Ended (December 29, 1999
June 30, 2000 June 30, 2000 to June 30, 2000)
-------------- -------------- --------------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
EXPENSES
General and administrative $ 132,812 $ 234,791 $ 239,791
-------------- -------------- --------------------
Net loss from operations 132,812 234,791 239,791
Interest and loan fees 432,860 471,860 471,860
Reverse merger consulting fees - 125,200 125,200
-------------- -------------- --------------------
Net loss from continuing operations 565,672 831,851 836,851
Loss from discontinued operations - 297,832 297,832
-------------- -------------- --------------------
Net loss $ 565,672 $ 1,129,683 $ 1,134,683
============== ============== ====================
LOSS PER COMMON SHARE $ 0.02 $ 0.04 $ 0.04
============== ============== ====================
LOSS PER COMMON SHARE, DISCONTINUED OPERATIONS $ - $ 0.01 $ 0.01
============== ============== ====================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 33,259,253 29,129,627 29,062,660
============== ============== ====================
The Accompanying notes are an integral part of these financial statements
</TABLE>
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<TABLE>
<CAPTION>
THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba/ NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
Cumulative
Through the
Development
Six Months Stage
Ended (December 29, 1999
June 30, 2000 to June 30, 2000)
--------------- --------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (1,129,683) $ (1,134,683)
Adjustments to reconcile Net Loss to Cash
provided (used) by operating activities:
Non-cash expenses paid by debentures to officers 84,000 84,000
Non-cash expenses paid by debentures for services 54,500 54,500
Interest charged for benificial conversion feature of debentures payable 428,571 428,571
Stock issued for services 223 5,223
Change in payable to officers 45,000 45,000
--------------- --------------------
NET CASH USED IN OPERATING ACTIVITIES (517,389) (562,389)
--------------- --------------------
CASH FLOW FROM INVESTING ACTIVITIES
Advance to Nickel Palace (225,000) (225,000)
Advance to Magellen Entertainment (74,588) (74,588)
Investment by North Coast into Storm (2,201) (2,201)
--------------- --------------------
CASH USED IN INVESTING ACTIVITY (301,789) (301,789)
--------------- --------------------
CASH FLOW FROM FINANCING ACTIVITIES
Debentures sold for cash 861,500 861,500
Cash loans form Officers - Net 29,000 29,000
--------------- --------------------
CASH PROVIDED FROM FINANCING ACTIVITIES 890,500 890,500
--------------- --------------------
NET INCREASE IN CASH 71,322 26,322
CASH AT BEGINNING OF PERIOD - -
--------------- --------------------
CASH AT END OF PERIOD $ 71,322 $ 26,322
=============== ====================
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest $ - $ -
=============== ====================
Income taxes $ - $ -
=============== ====================
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Issuance of common stock related to reverse acquisition $ 2,180 $ 2,180
=============== ====================
Conversion of debentures to Common Stock $ 510,000 $ 510,000
=============== ====================
Conversion of loans payable to debentures payable $ 120,000 $ 120,000
=============== ====================
The Accompanying notes are an integral part of these financial statements
</TABLE>
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THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba/ NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
Note 1 - BASIS OF PRESENTATION
The unaudited financial statements presented herein are those of North Coast
Productions Inc., ("North Coast") successor to The Storm High Performance Sound
Corporation ("Storm"). North Coast was incorporated December 29, 1999 and had
no business activity prior to that date. Therefore, there are no comparative
financial statements for the three Months or six months ended June 30, 1999.
The accompanying balance sheet at June 30, 2000 and the statements of operations
and cash flow for the three and six months ended June 30, 2000, have been
prepared by management and they do not include all information and notes to the
financial statements necessary for a complete presentation of the financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included.
Operating results for the six months ended June 30, 2000, are not necessarily
indicative of the results that can be expected for the year ending December 31,
2000.
Note 2 - SERIES A CONVERTIBLE DEBENTURES
The Series A Debentures are convertible into common stock at a conversion price
equal to 70% of the average daily closing bid price of the common stock for the
five (5) trading days immediately preceding the date of receipt of the
conversion notice. The debentures are convertible at any time prior to their
payment due date of March 28, 2002. After June 26, 2000, upon 5 days notice to
holder, the Company shall have the option to pay to the holder 130% of the
principal amounts of the Debenture, in full, to the extent conversion has not
occurred, or pay upon maturity if the Debenture is not converted. In the
quarter ended June 30, 2000, the Company charged $428,571 to interest expense
representing the beneficial conversion feature of these Series A Convertible
Debentures.
During the period April 1, to June 30, 2000, $510,000 of the company's 8% Series
A Senior Subordinated Convertible Redeemable Debentures were converted to
11,005,097 shares of Common Stock of the Company, and in July, 2000, an
additional $266,750 of Debentures were converted into 7,006,790 shares of Common
Stock. All such shares were issued exempt from registration in reliance on Rule
504 of Regulation D of the Securities Act of 1933.
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Note 3. - CAPITAL STRUCTURE.
Storm intends to hold a special meeting of its shareholders to consider and vote
upon the following matters:
The reincorporation of Storm from Florida to Nevada is to be accomplished by an
Agreement of Merger and Plan of Merger and Reorganization with Magellan Filmed
Entertainment, Inc. , a Nevada corporation, The affirmative vote of a majority
of the outstanding shares will approve the Plan of Merger and Reorganization
including approval of the name change to Magellan Filmed Entertainment, Inc.,
and of the Articles of Incorporation, and the Bylaws of Magellan. The Articles
of Incorporation of Magellan include a capital structure consisting of
200,000,000 shares of common stock, par value $0.001 authorized and 50,000,000
shares of preferred stock, par value $0.001 authorized.
Note 4 - SUBSEQUENT EVENTS
The company has entered into a Share Exchange Agreement to purchase Nickel
Palace, Inc. Under the terms of the Agreement, the Company would issue
3,000,000 shares of its common stock and warrants to purchase 1,500,000 shares
of its common stock to the shareholders of Nickel Palace in exchange for all of
their shares. In addition, as part of this merger, the Company would assume the
obligation for $1,000,000 of Convertible Debentures of Nickel Palace which,
after the merger is completed would be convertible into common stock of the
Company at a discount of approximately 30% from the preceding five day average
closing bid price. The Nickel Palace assets would include $1,000,000 of
financing proceeds, less applicable fees, from the issuance of the Convertible
Debentures. The conclusion of this Share Exchange Agreement is subject to
certain conditions, including the quantification of assets and liabilities, that
have not yet been met and may not be met. The advance of $225,000 at June 30,
2000 is an unsecured demand loan carrying an interest rate of ten percent
The company has signed an option to purchase Magellin Entertainment, Inc.
Negotiations are in process and terms and conditions have not been determined at
this time. The advance of $74,588 to Magellin is an unsecured demand loan
carrying an interest rate of ten percent.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings.
ITEM 2 CHANGES IN SECURITIES
a) NONE
b) NONE
c) The following is a summary of the information required for all the sales of
unregistered securities by Registrant for the reporting period April 1, through
June 30, 2000.
During the period April 1, to June 30, 2000, $510,000 of the Series A Debentures
were converted to 11,005,097 shares of Common Stock of the Company, and in July,
2000, an additional $266,750 of Debentures were converted into 7,006,790 shares
of Common Stock. All such shares were issued exempt from registration in
reliance on Rule 504 of Regulation D of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K -
April 4, 2000 - Change in Control - merger of The Storm High
Performance Sound Corporation with The Hi Liner Group, Inc.
- Financial statements of The Storm High Performance Sound, Inc.
for the years ended December 31, 1998 and 1999.
April 24,2000 (Amended July 12, 2000) - Share Exchange Agreement
and Plan of Merger between North Coast Productions and The Storm
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High Performance Sound Corporation - Financial statements of North
Coast Productions, Inc. for the year ended December 31, 1999 and
proforma consolidated financial statements of Storm for the year
ended December 31, 1999, and the quarter ended March 31, 2000.
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 by the
undersigned thereunto duly authorized.
The Storm High Performance Sound Corporation
Date: August 14, 2000 By:/s/ Patrick F. Charles
Patrick F. Charles, President
and CEO
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