SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 5, 2000
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Storm High Performance Sound Corp.
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Exact Name of Registrant as Specified in Charter)
Florida 0-29011 52-2048394
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(State or other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
8756 122nd Avenue NE Kirkland, WA 98033
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (425) 827-7817
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(Former Name or Former Address, if Changed Since Last Report)
1
This report describes the terms and conditions of a Share Exchange
Agreement and Plan of Merger between the Storm High Performance Sound
Corporation ("Storm") and North Coast Productions, Inc. ("North
Coast") dated as of April 4, 2000, and effective as of April 5, 2000.
ITEM 7. FINANCIAL STATEMENTS
(1) The financial statements of North Coast Productions, Inc. for the
fiscal year ending December 31, 1999 are included herein in reliance on the
report of W. Alan Jorgensen, C.P.A. our independent public accountant.
2
INDEPENDENT ACCOUNTANT'S REPORT
The Board of Directors
North Coast Productions, Inc.
(a development stage company)
Kirkland, Washington
I have audited the accompanying balance sheet of North Coast
Productions, Inc. (a development stage company) as of December 31, 1999 and the
related statement of operations, stockholders' equity, and cash flows from the
date of inception (December 29, 1999) to December 31, 1999. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audit provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of North Coast
Productions, Inc. as of December 31, 1999 and the results of its operations and
its cash flows from the date of inception to December 31, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
North Coast Productions, Inc. (a development stage company) will continue as a
going concern. The Company's lack of substantial financing and its nominal
operations raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 1 to the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
W. Alan Jorgensen
Certified Public Accountant
May 8, 2000
Seattle, Washington
F-1
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NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 1999
NORTH COAST PRODUCTIONS, INC.
Independent Accountant's Opinion 1
Balance Sheet 2
Statement of Operations 3
Statement of Cash Flows 4
Statement of Stockholders' Equity (Deficit) 5
Notes to the financial statements 6
4
NORTH COAST PRODUCTIONS, INC.
(a development stage company)
BALANCE SHEET
December 31, 1999
ASSETS $ -
========
LIABILITIES $ -
Commitments and Contingencies -
STOCKHOLDERS' EQUITY
Common shares: 50,000,000, $0.0001 par value, shares authorized
Issued and outstanding: 30,317,623 shares 5,000
-
Retained deficit (5,000)
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Total liabilities and stockholders' equity $ -
========
F-2
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NORTH COAST PRODUCTIONS, INC.
(a development stage company)
STATEMENT OF OPERATIONS
From Inception (December 29, 1999) to December 31, 1999
Revenues $ -
Organization costs 195
General and administrative 4,805
------------
Total Expense 5,000
------------
Loss from operation (5,000)
Provision for income taxes -
------------
Net loss $ (5,000)
============
Earnings per share nil
============
Weighted average shares outstanding: 30,317,623
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F-3
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NORTH COAST PRODUCTIONS, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
From Inception (December 29, 1999) to December 31, 1999
1999
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OPERATING ACTIVITIES
Net Income $(5,000)
Adjustments to reconcile net income to
net cash provided by operations
Stock issued for general and administrative expenses 5,000
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-
Cash from operating activities $ -
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INVESTING ACTIVITIES -
FINANCING ACTIVITIES -
Increase in cash and cash equivalents -
Beginning of year -
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END OF YEAR $ -
========
Supplemental cash flows disclosures
Interest paid during $ -
Taxes were paid $ -
F-4
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NORTH COAST PRODUCTIONS, INC.
(a development stage company)
STATEMENT OF STOCKHOLDERS' EQUITY
From Inception (December 29, 1999) to December 31, 1999
Add'l Paid Retained
Common Stock in Capital Deficit
Shares $Amount Total
------------ ------- ----------- --------- --------
December 29, 1999, Beginning balances - $ - - $ -
Service contributed for shares 30,317,623 3,032 1,968 5,000
Net loss for 1999 $ (5,000) (5,000)
----------- ------ ---------- --------
December 31, 1999, balance 30,317,623 $ 3,032 1,968 $ (5,000) $ -
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F-5
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NORTH COAST PRODUCTIONS, INC.
(A development stage company)
Notes to the Financial Statements
December 31, 1999
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
North Coast Productions, Inc. (Company) was formed as a privately owned company
and incorporated in the State of Washington on December 29, 1999. The Company's
business plan adopted in December of 1999 is to produce and distribute films for
the entertainment industry. In December 1999, the Company adopted a business
plan to actively pursue production and distribution of film properties and
scripts. Also, management intends to merge with a publicly held company and
become the successor SEC reporting entity. See Note 6, Subsequent Events.
USE OF 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.
BASIS OF PRESENTATION
The Company's financial statements are presented on a going concern basis. The
Company's lack of substantial capitalization and lack of operating history
raises substantial doubt about the ability of the Company to continue as a going
concern. Management's plans to address these issues include formation of a new
business venture in the entertainment industry and funding this business
enterprise through the issue of convertible debt and other public and private
financing.
CASH
The Company has no bank account, nor cash activity, other than issuing some
shares of stock to an officer for reimbursement for incorporation fees.
INCOME TAXES
The Company has only had nominal business activity, and has had no material
income tax events.
NET INCOME OR LOSS PER SHARE
As of the date of presentation, the Company has had only nominal operations and
therefore no loss or income per share is presented. The Company has a simple
capital structure, having only common shares outstanding. However, for
information purposes the number of shares in calculating the loss per share is
30,317,623 shares, the number of shares issued upon incorporation.
COMMON STOCK
The Company has one class of securities authorized, consisting of 100,000,000
shares of common stock with a par value of $0.001 per share. The holders of
common stock are entitled to one vote per share on all matters to be voted on by
shareholders and do not have cumulative voting rights. The shares of common
stock have no pre-emptive, subscription, conversion or redemption rights and may
be issued only as fully paid and non-assessable shares.
NOTE 2 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include common shares outstanding. It is not
practicable to estimate the fair value of the common shares, due primarily to
the uncertainty surrounding the timing of cash flows.
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NOTE 3 RELATED PARTY TRANSACTIONS
Coast Northwest, Inc., a company controlled by the Company's majority
shareholders, provided substantially all of the Company's administrative
services since inception in December, 1999. No payments have been made to Coast
Northwest for such services nor is any amount owed at December 31, 1999 for
unpaid services. Any future payment to Coast Northwest for past or future
services provided will be subject to the Company's success at raising the
necessary funds to finance operations.
NOTE 4 COMMITMENTS AND CONTINGENCIES
North Coast does not own any real property. The Company's executive offices are
located in Kirkland, WA in 1300 square feet of office space. Administrative
support services are provided for $5,000 per month under a verbal month to month
agreement between the Company and Coast Northwest, Inc., a company controlled by
the majority shareholders of the Company.
NOTE 5 SUBSEQUENT EVENTS
Effective March 31, 2000, in a series of transactions, the Company acquired the
controlling interest in The Storm High Performance Sound Corporation ("Storm").
Also, as part of this transaction effective March 31, 2000, Storm acquired Hi
Liner Group, Inc. a public shell. The effect of these transactions on the number
of shares outstanding of the Company's common stock is to increase the shares
outstanding to 30,317,623 shares with par value of $0.0001 per share. This
increase in the number of shares outstanding is reflected in the financial
statements as of December 31, 1999.
At the time of the merger with Storm, the Company contributed $300,000 cash to
Storm, which was used to pay all of the then existing obligations of Storm. All
of the assets of Storm, prior to the acquisition, have been distributed to the
former controlling shareholders of Storm, and Storm had no assets or liabilities
at the time of the merger.
Storm was organized and incorporated under the laws of the State of Florida on
June 12, 1997. Prior to the time of the merger, Storm had ceased its operations
and began a search for new business opportunities. The Company plans to complete
the transaction by merging into Storm, and becoming the successor SEC reporting
entity.
Storm has one class of securities authorized, consisting of 50,000,000 shares of
common stock with a par value of $0.0001 per share. The holders of common stock
are entitled to one vote per share on all matters to be voted on by shareholders
and do not have cumulative voting rights. The shares of common stock have no
pre-emptive, subscription, conversion or redemption rights and may be issued
only as fully paid and non-assessable shares.
Effective March 31, 2000 and as part of the recapitalization transaction, Storm
gained control of The Hi Liner Group, Inc. a Delaware corporation ("Hi Liner").
Hi Liner was a public shell, an SEC reporting company but without assets,
liabilities or operations. Storm acquired all of the Hi Liner outstanding common
stock in exchanged for 1,500,000 shares of Storm common stock valued at the
$0.0001 par value.
In connection with the acquisition of Hi Liner, Inc., Storm entered into a
consulting agreement, wherein Storm agreed to issue 2,000,000 shares of Storm's
common stock to five consultants in return for consulting services.
In March 2000, funding began of a convertible debentures agreement with a face
value of $1,000,000. The debenture agreement calls for conversion into common
shares at a discount of 30% of the market value of the common shares based on
their market price at the time of conversion.
10
(2) Pro Forma Financial Information. The Pro Forma Financial Information of
Storm and North Coast required by this Item 7(b) are included herein.
F-7
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THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba / NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Condensed Combined Financial Information of
The Storm High Performance Sound Corporation ('Storm") dba/ North Coast
Productions, Inc. ("North Coast")
The following unaudited pro forma condensed combined financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the combined results of operations for future periods or the results of
operations that actually would have been realized had Storm and North Coast been
a combined company during the specified periods. The unaudited pro forma
condensed combined financial statements, including related notes, are qualified
in their entirety by reference to, and should be read in conjunction with, the
historical financial statements and related notes thereto of Storm included in
Form 8-k filed on April 3, 2000 and of North Coast, included elsewhere in this
filing.
The following unaudited pro forma condensed combined financial statements give
effect to the acquisition of Storm as a reverse acquisition by North Coast. The
pro forma condensed combined financial statements are based on the respective
historical audited and unaudited financial statements and related notes of Storm
and North Coast.
The pro forma condensed combined statement of operations for the year ended
December 31,1999 assumes the acquisition took place January 1, 1999 and combines
Storm's audited statement of operations for the year ended December 31, 1999
with North Coast's audited statement of operations for the year ended December
31, 1999. The unaudited pro forma condensed combined statement of operations for
the three months ended March 31, 2000 assumes the acquisition took place January
1, 1999 and combines Storm's unaudited statement of operations for the three
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months ended March 31, 2000 with North Coast's unaudited statement of operations
for the three months ended March 31, 2000.
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THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba / NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31, 1999
Historical Historical Pro Forma
North Coast Storm Adjustments Pro Forma
------------- ------------ ------------- ------------
Revenue
Sales $ - $ 3,634 $ - $ 3,634
Cost of Merchandise sold 3,339 3,339
----------- ------------ --------------- ------------
Gross Margin 295 295
----------- ------------ --------------- ------------
Expenses
Interest 2,130 428,571 (2)
85,600 (3) 516,301
Depreciation and Amortization 7,808 7,808
Selling and Administration 5,000 26,582 31,582
Reverse merger consulting fees 125,200 (4) 125,200
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5,000 36,520 639,371 680,891
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Loss from Operations (5,000) (36,225) (639,371) (680,596)
Other income and Expense
Other income 2,376 2,376
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Net loss $ (5,000) $ (33,849) $ (639,371) $ (678,220)
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Earnings (loss) per common share nil $ (0.01)
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Weighted average shares outstanding 8,521,600 41,478,400 (1) 50,000,000
============= ============ ============= ============
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THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba / NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
THREE MONTHS ENDED MARCH 31, 2000
Historical Historical Pro Forma
North Coast Storm Adjustments Pro Forma
------------ ----------- ------------ -----------
Expenses
General and administrative $ 101,979 $ - $ - $ 101,979
------------ ----------- ------------ -----------
Net loss from operations 101,979 - - 101,979
Interest and loan fees 39,000 - 39,000
Reverse merger consulting fees 125,200 - 125,200
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Net loss from continuing operations 266,179 - - 266,179
Loss from discontinued operations - 297,832 297,832
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Net loss $ 266,179 $ 297,832 $ - $ 564,011
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Earnings (loss) per common share $ 0.01 $ 0.01
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Earnings (loss) per common share
discontinued operations $ 0.01 $ 0.01
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Weighted average shares outstanding 25,000,000 25,000,000 (1) 50,000,000
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THE STORM HIGH PERFORMANCE SOUND CORPORATION
dba / NORTH COAST PRODUCTIONS, INC.
(A Development Stage Company)
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
A. Basis of Presentation
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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 April 4, 2000 and effective as of April 5, 2000. These Agreements
were disclosed previously in Storm's Form 8-K filed on April 3, 2000 and Storm's
Form 10-QSB for the quarter ended March 31, 2000 filed on May 18, 2000.
Under the Agreements, North Coast shareholders became the holders of the
majority of the issued and outstanding common stock of Storm and the plan of
operations of North Coast became that of Storm. Under the Agreements Storm
cancelled 7,030,377 shares previously owned by its former major shareholders and
issued net new shares of 17,969,623 to the former shareholders of North Coast.
Additionally 326,400 shares were issued as a finders fee to an unrelated third
party. All of the newly issued shares were issued at par of $0.0001 per share.
There was no market in Storm shares at the time of the Agreements.
Storm had no operations and little or no assets and liabilities immediately
prior to its merger with North Coast. The transaction is treated as a capital
transaction in substance rather than a business combination and has been
accounted for as a reverse merger.
Pursuant to a separate Stock Exchange Agreement dated March 31, 2000 between
Storm and MRC Legal Services LLC ("MRC"), a majority shareholder of the HiLiner
Group, Inc. ("HiLiner"), Storm issued 1,500,000 shares of its common stock to
MRC at $0.0001 per share in exchange for all of the issued and outstanding
common stock of HiLiner. Upon execution of the Stock Exchange Agreement and
delivery of the Storm shares to MRC as the sole shareholder of HiLiner, pursuant
to Rule 12g-3 of the General Rules and Regulations of the Securities and
Exchange Commission, Storm became the successor issuer to HiLiner for reporting
purposes under the Securities Exchange Act of 1934 and elected to report under
the Act effective March 31,2000.
Concurrent with and in connection with the Stock Exchange Agreement between
Storm and MRC, Storm also entered into a Consulting Agreement effective March
31, 2000 with several individuals ("the Consultants") whereby Storm agreed to
pay 125,000 cash and issue 2,000,000 shares of its common stock at $0.0001 per
share as consideration for services under the Consulting Agreement.
Hiliner had nil net assets at March 31, 2000 and no operating activity during
the pro forma periods. Financial statements of HiLiner are not included in the
pro forma statements of operations because they are not material.
On March 28, 2000, North Coast issued 9% series A subordinated convertible
redeemable debentures for $914,400, net of a debt discount of $85,600, due March
28, 2002. The series A debentures are convertible into common stock of Storm,
as a result of the assumption of the debt in the reverse merger. The debt is
convertible into common stock at 70.0% of the average closing bid price of the
common stock for the five days immediately preceding the date of notice of
conversion by the holder. The conversions to date have averaged about $0.05 per
share and the Company assumes for pro forma purposes that approximately
19,680,000 shares will be issued upon full conversion of the Series A
debentures. As of June 23, 2000, a portion of the debentures have been converted
into approximately 11,000,000 shares of Storm's common stock.
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The beneficial conversion feature related to the 30% conversion discount will be
accounted for in accordance with Emerging Issues Task Force No. 98-5,
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios." Therefore, the beneficial conversion
feature, which was valued at approximately $429,000, will be accounted for as
additional interest expense at the issue date, which is the date the debentures
first become convertible.
A pro forma balance sheet is not presented herein. The balance sheet of Storm
filed in the Form 10-QSB for the quarter ended March 31, 2000 gives effect to
the reverse merger as of March 31, 2000. The pro forma condensed combined
statement of operations for the year ended December 31,1999 assumes the
acquisition took place January 1, 1999 and combines Storm's audited statement of
operations for the year ended December 31, 1999 with North Coast's audited
statement of operations for the year ended December 31, 1999. The unaudited pro
forma condensed combined statement of operations for the three months ended
March 31, 2000 assumes the acquisition took place January 1, 1999 and combines
Storm's unaudited consolidated statement of operations for the three months
ended March 31, 2000 with North Coast's unaudited statement of operations for
the three months ended March 31, 2000.
B. Pro Forma Adjustments
(1) To assume the conversion as of January 1, 1999 of the Series A
convertible debentures into 19,682,377 shares of common stock of Storm. Also to
assume the issuance as of January 1, 1999 of 18,296,023 new shares in connection
with the reverse merger between North Coast and Storm and the issuance of
3,500,000 new shares in connection and the acquisition of HiLiner.
(2) To record the additional interest expense from the beneficial conversion
feature. The recording of the Series A convertible debentures includes the
accounting for the additional interest expense of $428,571 from the beneficial
conversion feature. The additional shares and the additional interest expense
are reflected as though the conversion was made at January 1, 1999.
(3) To record the amortization as of January 1, 1999 of the $85,600 debt
discount on the Series A convertible debentures.
(4) To record in the pro forma year ended December 31,1999, reverse merger
consulting fees as though the reverse merger occurred at January 1, 1999. These
fees are already reflected in the three months period ended March 31, 2000.
16