<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from April 1, 1998 to June 30, 1998
Commission file number 2-93477-D
I-STORM, INC.
(FORMERLY DIGITAL POWER HOLDING COMPANY)
(Exact name of small business issuer as specified in its charter)
NEVADA 87-040127
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
480 COWPER STREET, PALO ALTO, CALIFORNIA 94301
(Address of principal executive offices)
(650) 463-4388
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
CLASS OUTSTANDING AT JUNE 30, 1998
- ----------------------------- ----------------------------
Common Stock, par value $0.01 970,872
Traditional Small Business Disclosure Format (Check One): Yes No X
--- ---
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, 1998 MARCH 31, 1998
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 0 $ 0
----------- -----------
Total Current Assets 0 0
----------- -----------
TOTAL ASSETS $ 0 $ 0
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 0 $ 5,913
----------- -----------
Total Current Liabilities $ 0 $ 5,913
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, 2,000,000 shares
authorized of $0.01 par value,
no shares issued and outstanding.
Common Stock, 25,000,000 shares
authorized of $0.01 par value, 970,872
issued and outstanding at June 30, 19998
and March 31, 1998, respectively 10,761 10,761
Additional Paid-in Capital 1,255,265 1,244,830
Deficit accumulated during the development stage (1,266,026) (1,261,504)
----------- -----------
Total Stockholders' Equity (Deficit) 0 (5,913)
----------- -----------
Total Liabilities and Shareholders' Equity (Deficit) $ 0 $ 0
----------- -----------
</TABLE>
1
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
FROM INCEPTION ON
1998 1997 FEBRUARY 24, 1984
THROUGH JUNE 30, 1998
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
Loss from Discontinued Operations (4,522) (1,093) (1,266,026)
---------- ---------- -----------
Net Loss (4,522) (1,093) (1,266,026)
========== ========== ===========
Loss per share $ (0.00) $ (0.00)
Weighted average number of
shares outstanding 970,872 1,076,134
</TABLE>
2
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CASH FLOW
(UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JUNE 30,
FROM INCEPTION ON
FEBRUARY 24, 1984
1998 1997 THROUGH JUNE 30, 1998
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss from discontinued operations $ (4,522) $( 1,093) $(1,266,026)
Adjustments to reconcile net loss to net cash
used by operating activities
Stock issued for acquisition of subsidiary
assets 8,400
Increase (decrease) in accounts payable (5,913) 0
Contributed capital for expenses 10,435 1,093 36,022
Stock issued for services 281,512
-------- -------- -----------
Net cash used by operating activities 0 0 (940,092)
-------- -------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from the sale of common stock 940,092
-------- --------
Net Cash Provided by Financing Activities 0 0 940,092
-------- -------- -----------
NET INCREASE (DECREASE IN CASH) 0 0 0
CASH AT BEGINNING OF PERIOD
-------- -------- -----------
CASH AT END OF PERIOD $ $ $
-------- -------- -----------
SUPPLEMENTAL CASH FLOW
DISCLOSURES
Interest $ - $ - $ -
Income Taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Contributed capital for expenses $ 10,435 $ 1,093 $ 36,022
Common stock issued for services $ 281,512
Common stock issued for acquisition of
subsidiary $ 8,400
-------- -------- -----------
</TABLE>
3
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of I-Storm,
Inc., formerly Digital Power Holding Company ("I-Storm" or the "Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information on a basis consistent with the audited financial
statements for the year ended March 31, 1998 and in accordance with the
instructions to Form 10-QSB. The consolidated financial statements include the
accounts of all wholly owned subsidiaries which are immaterial. The statements
include all adjustments (consisting of normal recurring accruals) which in the
opinion of the Company's management are necessary for a fair presentation of the
results for the periods presented. The accompanying financial statements should
be read in conjunction with the Company's audited financial statements for the
year ended March 31, 1998.
NOTE 2. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
The Company was incorporated in the State of Nevada on February 24, 1984
and was organized to engage in the acquisition of assets and properties and to
make investments in enterprises with business potential. The Company ceased all
material business operations in December 1989. Its only business operations
since that time have been maintaining the Company's good standing status in the
State of Nevada and seeking prospective businesses or assets to acquire. On
June 6, 1989, the Company changed its name to Digital Power Holding Company.
Presently, the Company does not engage in any business operations. The Company
has selected March 31 as its fiscal year end. On June 18, , Articles of
Incorporation were filed with the State of California for the Company's wholly
owned subsidiary, Digital Acquisition Corporation.
B. ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method
of accounting.
C. CASH AND CASH EQUIVALENTS
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
D. LOSS PER SHARE
The computations of loss per share of Common Stock are based on the
weighted average number of shares outstanding during the period of the financial
statements.
E. INCOME TAXES
The Company accounts for income taxes using an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events which have been recognized in
the Company's financial statements. Deferred tax assets and liabilities are
determined using the current applicable enacted tax rate.
The Company had no net deferred tax asset at June 30, and March 31, 1998
as the Company had established a valuation allowance equal to any deferred tax
assets, which consisted of federal and state net operating loss carryforwards,
temporary differences and tax credits. The Company believes that, based on a
4
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
number of factors, there is sufficient uncertainty regarding the realizability
of carryforwards and credits to justify the valuation allowance.
F. ADDITIONAL ACCOUNTING POLICIES
Additional accounting policies will be established once planned
principal operations commence.
G. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the 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. Actual results could differ from those estimates.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, nor does it have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern. It is the
intent of the Company to acquire, or to be acquired by, an existing, operating
company. Until an acquisition or merger occurs, certain shareholders of the
Company have committed to meeting the Company's operating expenses.
NOTE 4. DISCONTINUED OPERATIONS
The Company discontinued its operations in December 1989. Therefore,
all revenues generated by the Company have been netted against the expenses and
are grouped into the discontinued operations line on the statements of
operations.
NOTE 5. STOCK TRANSACTIONS
During February 1996, the Company issued 180,000 shares of Common Stock
for services valued at $180,000. The Company approved a 100 for 1 reverse stock
split on April 12, 1996 and issued 870,872 shares of post split Common Stock
later on for services rendered value at $8,708. The reverse stock split has
been applied to the Company's financial statements on a retroactive basis.
On May 6, 1998, David Merrill d/b/a Chiricahua Company and Melinda
Johnson, two shareholders of the Company, each entered into a Stock Purchase
Agreement to sell 300,000 shares, respectively, to I-Storm Acquisition Corp. for
the sale of a total of 600,000 shares of Common Stock of the Company, in
consideration of a total payment of $150,000 by I-Storm Acquisition Corp. I-
Storm Acquisition Corp. also acquired purchase options exercisable at any time
until May 6, 1999 at $2.00 per share to purchase Common Stock in the amount of:
40,000 shares from Chiricahua Company; 40,000 shares from Melinda Johnson; and
20,000 shares from Leonard W. Burningham. On May 6, 1998, Chiricahua Company
and Melinda Johnson each transferred 38,067 shares of Common Stock to the
Company for cancellation of a total of 76,134 shares of Common Stock.
The 600,000 shares of Common Stock purchased by I-Storm Acquisition
Corp. are held in a Voting Trust, and are subject to a Voting Trust Agreement,
dated May 6, 1998. Under the terms of the Voting Trust Agreement, the Voting
Trustee must vote or take consent action with respect to such 600,000 shares
only in
5
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
accordance with the vote or consent action of a majority of the remaining
outstanding shares of Common Stock of the Company, all in accordance with Nevada
law.
NOTE 6. SUBSEQUENT EVENTS
On July 17, 1998, the Company's wholly-owned subsidiary, Digital
Acquisition Corporation, was merged into LVL Communications Corporation ("LVL"),
a California corporation, and Digital Acquisition Corporation then ceased to
exist. The merger resulted in the Company's acquiring 100% of the outstanding
Common Stock of LVL and LVL's becoming the Company's wholly-owned subsidiary.
The transaction was made pursuant to an April 16, 1998 Order confirming a Plan
of Reorganization ("Plan of Reorganization") for LVL, issued by the United
States Bankruptcy Court for the Northern District of California. LVL is a
marketing, communications and technology advertising company located in Palo
Alto, California.
Financial statements of the Company and pro forma financial information
relating to the acquisition of LVL will be filed as an amendment to the
Company's Form 8-K, filed August 14, 1998, but no later than October 17, 1998.
It was impracticable for the Company to file such financial and pro forma
statements at the time of the filing of the Form 8-K. See "Item 7" of the
Company's Form 8-K filed August 14, 1998.
On July 20, 1998, the Company filed a Fourth Restated and Amended
Articles of Incorporation to change its name to I-Storm, Inc., to indemnify its
officers and directors to the extent allowable under Nevada law, to increase the
number of directors to five as required by the Plan of Reorganization, and to
authorize the directors to fix and designate from time to time various classes
and series of Preferred Stock.
On July 23, 1998, the Board of Directors of the Company approved the
issuance of 2,640,000 shares of Common Stock to former stockholders, bridge
financiers and consultants of LVL and 350,000 warrants to service providers, all
pursuant to the Plan of Reorganization, exercisable at $0.50 per share.
On July 27, 1998, the Company filed a Certificate of Designation in the
State of Nevada for 600,000 shares of Series A Cumulative Convertible Preferred
Stock ("Series A Preferred Stock") which shall be issued to certain unsecured
creditors under the Plan of Reorganization. The Series A Preferred Stock shall
be convertible into Common Stock of the Company at any time on a one-for-one
basis and shall receive a dividend of $0.05 per share per annum in preference to
payment of dividends on any other equity security of the Company, including
Common Stock.
On August 1, 1998, the Board approved the issuance of 1,391,200 shares
of Common Stock and 120,000 warrants exercisable at $0.001 per share to certain
bridge financiers and consultants to the Company.
On August 1, 1998, the Board of Directors approved the Company's
entering into a consulting agreement with Benchmark Equity Group, Inc. for
financial management and investment services that have been provided to the
Company and LVL, its wholly-owned subsidiary, since March 1998, and that will
continue until March 1999, for a fee of $175,000 per annum, payable in twelve
equal monthly payments. Payment under this consulting agreement shall be
deferred until the earlier of December 31, 1998, or the occurrence of an equity
financing resulting in a minimum of $2 million in proceeds for the benefit of
the Company. Frank M. DeLape, a director of the Company, is the Chief Executive
Officer of Benchmark Equity Group, Inc.
On August 6, 1998, the Company entered into employment agreements with
Calbert Lai, Stephen Venuti and Timothy Cohrs, three executive officers of the
Company. Mr. Lai and Mr. Venuti will each receive $150,000 base salary per
annum, and Mr. Cohrs will receive $240,000 per annum. Each of these executive
officers will be eligible to receive a performance bonus of up to 50% of base
salary per annum.
6
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
The Company will also grant stock options to purchase Common Stock to
each of these executive employees exercisable at $0.50 per share of which one-
half of such options will vest ratably over a period of 36 months from his
respective employment date, and one-half will only vest upon the Company's sales
revenue exceeding twelve million dollars for any twelve month period from the
employment date and upon the Company's quarterly revenue exceeding operating
expenses for the same twelve month period as follows: 600,000 stock options to
Mr. Lai 300,000 stock options to Mr. Venuti; and 75,000 stock options to Mr.
Cohrs.
Under the Plan of Reorganization, LVL's creditors have filed secured
claims of approximately $621,000 as secured creditors. If the Bankruptcy Court
were to confirm these claims, the Company would be required to pay these claims
in equal quarterly installments over five years at 10% interest per annum. LVL
is also party to a factoring agreement which expires on March 25, 1999. As of
July 17, 1998, LVL had $700,124 outstanding in factoring liability under this
agreement.
7
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1998
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-
looking statements represent the Company's expectations or beliefs concerning
future events and include statements among other, regarding:
. The timing and progress of acquisitions of assets and business; and
. The estimated cash requirements of the Company.
Actual results could differ materially from those projected in the
forward-looking statements as a result of a variety of factors, including those
set forth in Management's Discussion and Analysis or Plan of Operation.
PLAN OF OPERATION
The Company has not engaged in any material business operations since
December 1989. Its only activities since that time have consisted of restoring
and maintaining its good standing in the State of Nevada and seeking prospective
businesses and assets to acquire. The Company has no material tangible property
or assets.
The Company has been seeking the acquisition of assets, property or
businesses that may be beneficial to it and its stockholders, including assets,
property or businesses that may be undervalued and/or subject to bankruptcy
reorganization proceedings. In considering whether to complete any such
acquisition, the Board of Directors shall make the final determination, and the
approval of the stockholders will not be sought unless required by applicable
law, the Company's Articles of Incorporation, Bylaws, or by contract. The
Company can give no assurance that any such endeavor, venture or acquisition
will be successful or profitable.
On May 6, 1998, certain shareholders of the Company entered into a Stock
Purchase Agreement for the sale of 600,000 shares of Common Stock for a purchase
price of $150,000 to I-Storm Acquisition Corp. At this time, the Company was
contemplating the acquisition of LVL Communications Corporation ("LVL"), a Palo
Alto, California company in Chapter Eleven proceedings, pursuant to an April 16,
1998 Order confirming a Plan of Reorganization for LVL issued by the United
States Bankruptcy Court for the Northern District of California. The completion
of this acquisition will result in LVL's becoming a wholly-owned subsidiary of
the Company, and the Company becoming engaged, through this wholly-owned
subsidiary, in marketing, advertising and Internet commerce development. LVL
was founded in 1986 by its two executive officers, Calbert Lai and Stephen
Venuti.
Internet commerce is the direct retail sale of goods and services to
consumers and end-users over the Internet. Using LVL's expertise, the Company
plans to provide to major international manufacturing and technology companies
all the necessary resources to build and operate electronic commerce outlets
capable of selling technology and consumer products direct to consumers and
businesses. The Company also expects that LVL will continue to provide services
to brand name technology and consumer goods clients in its traditional
advertising and marketing businesses.
The Company will be required to obtain equity financing or additional
borrowing arrangements to sustain and expand the Company's and LVL's business.
The Company will be seeking approximately $7 million in new private placement
financing for this purpose. The Company anticipates, but there can be no
assurance, that the proceeds of any such private placement will be adequate to
fund operations for the next twelve months. There can further be no assurance
that the Company will be able to obtain such financing or that the terms of such
8
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1998
financing will be favorable to the Company. Further, there can be no assurance
that either the Company or LVL will remain a going concern, even if such
financing is obtained.
In addition to the need for additional financing, the Company is subject
to a number of risk factors including, but not limited to, a limited operating
history as a reorganized entity, significant concentration of revenue from a few
customers; highly competitive markets with limited chances to entry and
successful implementation of electronic store front and Internet advertising
strategy.
The Company does not plan to make any material purchases of plant and
equipment other than the aforementioned acquisition within the next twelve
months.
The Company's headquarters consists of 15,847 square feet of leased office
space and is located at 480 Cowper Street, Palo Alto, California. In April
1998, the Company agreed to sublet its headquarters space to SteelCase
Corporation ("SteelCase") beginning May 1, 1998, in return for a one-time
payment of $550,000 and assumption of the remainder of the Company's original
lease. SteelCase subsequently determined that it did not wish to occupy the
building. The Company has signed a sublet agreement with SteelCase to occupy
the building until November 1, 1998. The Company is currently negotiating with
SteelCase to rescind its original sublet contract, thereby permitting the
Company to remain in its current location for the remainder of the current lease
(approximately 14 years). There is no assurance that the Company will be able
to successfully renegotiate its agreement with SteelCase or that the Company
will be able to remain in its current headquarters building.
LVL currently employs 27 people. The Company does not plan any
significant increases or decreases to this current level of employment. The
acquisition will increase the total employment of the Company to 27. Out of
LVL's 26 full-time employees, 11 of them are paid salaries more than $60,000 per
year, and of those, 7 have annual salaries in excess of $100,000. The Company
is dependent on the efforts of its key personnel, including Calbert Lai, Stephen
Venuti and Timothy Cohrs. Further, if the Company is unable to obtain adequate
financing in the near future, it will not be able to retain its existing
personnel.
PART II
ITEM 5. OTHER INFORMATION
The information and events reported in the Company's Form 8-K, filed on
August 14, 1998, are hereby incorporated by reference and should be read in
conjunction with this 10-QSB.
On July 17, 1998, the holders of a majority of the shares of the
outstanding Common Stock of the Company took action by consent under Nevada law
to approve the filing of Fourth Amended and Restated Articles of Incorporation
to change the name of the Company to I-Storm, Inc., to authorize the
indemnification of officers and directors of the Company as allowable by Nevada
law, and to authorize the Board of Directors of the Company, from time to time,
to fix the designation of certain series of Preferred Stock; and further, to
authorize the Board of Directors to take all steps necessary to effectuate the
acquisition of LVL and to carry out the requirements of the April 16, 1998 Order
of the Bankruptcy Court for the Northern District of California Confirming a
Plan of Reorganization for LVL.
On July 23, 1998, the Board of Directors approved the filing of a
Certificate of Designation for 600,000 shares of Series A Cumulative Convertible
Stock ("Series A Preferred Stock") to be issued to certain unsecured creditors
of LVL in exchange for the cancellation of approximately $6.5 million of
unsecured debt, pursuant to the Plan of Reorganization. The Series A Preferred
Stock will have dividend and liquidation rights senior to the Company's Common
Stock and to any other class of equity securities which the Board of Directors
9
<PAGE>
I-STORM, INC.
FORMERLY DIGITAL POWER HOLDING COMPANY
(A DEVELOPMENT STAGE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1998
may designate. The holders of Series A Preferred Stock shall also have the right
to vote as a class, one vote per share, on (i) the merger, sale liquidation or
dissolution of the Company or its subsidiaries; (ii) a sale of all or
substantially all of the Company's or its subsidiaries' assets; (iii) any
increase in the number of authorized shares of any class or series of the
Company's or its subsidiaries' equity securities; (iv) the creation of any new
class or series of equity securities in the Company or its subsidiaries; (v) any
increase in the number of members of the Board of Directors of the Company or
its subsidiaries, all until such time as more than 50% of the Series A Preferred
Stock has either converted to Common Stock, or been redeemed by the Company, or
until certain liquidation or preference events occur. The Series A Preferred
Stock shall also have the right to elect one member to the Board of Directors so
long as any shares of Series A Preferred Stock are outstanding. The Series A
Preferred Stock may be converted at any time into shares of Common Stock on a
one-for-one basis. The Series A Preferred Stock will be entitled to a dividend
of $0.05 per annum. The Company filed a Certificate of Designation for the
Series A Preferred Stock with the State of Nevada on July 27, 1998.
On July 23, 1998, the Board of Directors also approved the designation
of a Series B Cumulative Convertible Preferred Stock ("Series B Preferred
Stock") in connection with a contemplated private placement offering under
Section 506 of Regulation D as promulgated under the Securities Act of 1933.
The Board anticipates that such Series B Preferred Stock be sold at $12.25 per
share, and would have dividend and liquidation preferences which are senior to
the Common Stock of the Company, but are subordinate to those of the Class A
Preferred Stock. The Series B Preferred Stock will be entitled to a quarterly
cumulative dividend of $0.28 per share (9% per annum), payable, at the option of
the Company, in cash or Series B Preferred Stock. The Series B Preferred Stock
will be convertible at the option of the holder at any time after the final
closing of the offering, into such number of shares of Common Stock as shall
equal $12.25 divided by the lower of (i) $3.50 or (ii) the closing bid price for
any five consecutive trading days during the period commencing on the final
closing of the offering and ending twelve months thereafter, except that such
conversion price shall not be reduced below $2.80. There can be no assurance
that the Company will go forward with such a private placement offering or that
such a private placement offering, if commenced, will result in any proceeds for
the benefit of the Company or its wholly-owned subsidiary.
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 thereunder duly authorized.
Date: September 9, 1998 I-STORM, INC.
By: /s/ Thomas A. Schultz
------------------------------------------
Thomas A. Schultz, Chief Operating Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 10,761
<OTHER-SE> (10,761)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (4,522)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,522)
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
