SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 26, 2000
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Magellan Filmed Entertainment, Inc.
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Exact Name of Registrant as Specified in Charter)
Nevada 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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The Storm High Performance Sound Corp.
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(Former Name or Former Address, if Changed Since Last Report)
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This report describes the terms and conditions of a Stock Exchange Agreement
dated as of September 26, 2000, and effective as of September 26, 2000.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 26, 2000, Magellan acquired all of the outstanding stock of The
Nickel Palace, Inc. ("Nickel") under a Stock Exchange Agreement in exchange for
3,000,000 shares of Magellan common stock and the issuance of warrants to
selling shareholders entitling the holders to purchase up to 1,500,000 shares of
Magellan's common stock exercisable at $0.18 per share. Under the Stock
Exchange Agreement, Nickel is to be merged into Magellan under provisions of the
Nevada Revised Statutes, and Magellan shall continue as the surviving
corporation and the separate corporate existence of Nickel shall cease.
The selling shareholders of Nickel consisted of Michael Garrity, Michael Gabrawy
and Marc Fusco. Mr. Fusco is the Director of the Movie Rennie's Landing, and
Mr. Garrity and Mr. Gabrawy are producers of the Movie Rennie's Landing. Mr.
Patrick Charles, President of Magellan is also an associate producer of Rennie's
Landing.
Nickel was formed on March 24, 2000 as a Nevada corporation to produce the movie
Rennie's Landing. Thereafter, Rennie's Landing, LLC was formed with Nickel
holding a 50% interest in the LLC. The movie began production in June, 2000 with
completion of filming in July, 2000. Post production editing is currently
underway with release of the film projected for the second quarter of 2001.
The 3,000,000 shares of common stock were valued at $180,810 based on the
average Closing price for Magellan stock for three days before and after the
effective date of the Agreement, which was September 26, 2000. In addition
Magellan assumed Nickel's 8% convertible debenture obligation for $1,000,000
On September 22, 2000, Nickel issued 8% series A subordinated convertible
redeemable debentures for $1,000,000 due September, 2002. The series A
debentures are convertible into Magellan stock as a result of Magellan's
assumption of the debt. The debentures are convertible into Magellan common
stock at 62% of the average closing bid price of the common stock for the five
trading days immediately preceding the date of notice of conversion by the
holder. As of October 4, 2000, none of the debt has been converted into common
stock.
The 38% discount from the market price of the stock equates to a beneficial
conversion feature, which 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 is valued at approximately
$613,000, will be accounted for as additional interest expense at the issue
date, which is the date the debentures first become convertible.
2
The warrants expire within five years of the date granted. The warrants were
granted to the shareholders of Nickel and vest 33 1/3% annually over a three
year period contingent upon and subject to the continued employment by Magellan
of the former shareholders of Nickel
The acquisition will be recorded using the purchase method of accounting on the
effective date. The estimated amounts have been summarized in the following
table:
Purchase price $180,810
Liabilities assumed 1,000,000
Less: fair market value of assets acquired (1,000,000)
Goodwill $180,810
The assets acquired are primarily represented by Nickel's interest in Rennie's
Landing, LLC, and Nickel's advances to Rennie's Landing, LLC of $1,000,000
which funds were advanced to pay for the production costs of the movie Rennie's
Landing. Nickel holds a 50% interest in Rennie's Landing, LLC.
A copy of the Stock Exchange Agreement is filed herewith as Exhibit 2.1
Item 7 Financial Statements, Pro Forma Financial Information and Exhibits.
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(1) Nickel was formed on March 24, 2000 and did not commence operations
until June, 2000. Nickel has adopted a fiscal year ending on December
31, and has not yet completed its first fiscal year. Therefore, no
annual financial statements, audited or otherwise, as required by this
Item 7(a) are available. Audited interim financial statements for the
period from inception (March 24, 2000) through June 30, 2000 will be
completed and filed by amendment to this Form 8-K under cover of Form
8-K/A within 60 days after the date of this Form 8-K.
(2) Pro Forma Financial Information. The pro forma financial information
of Magellan and Nickel required by this Item 7(b) are not yet
available. Magellan expects that the pro forma financial statements
will be completed and filed by amendment to this 8-K under cover of
Form 8-K/A within 60 days after the date of this Form 8-K.
3) Exhibit 2.1 Stock Exchange Agreement dated as of September 26, 2000
by and between Magellan Filmed Entertainment, Inc. and The Nickel
Palace, Inc.
The Exhibit to the Stock Exchange Agreement as listed in the index of Exhibits
to the Stock Exchange Agreement is omitted pursuant to Rule 601(b)(2) of
Regulation S-B. The Company agrees to furnish such documents supplementally
to the Securities and Exchange Commission upon request.
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EXHIBIT INDEX
Exhibit Description
2.1 Stock Exchange Agreement dated as of September 26, 2000 by and between
Magellan Filmed Entertainment, Inc. and The Nickel Palace, Inc.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Dated October 11, 2000 Magellan Filmed Entertainment, Inc.
By: /s/ Patrick F. Charles
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Patrick F. Charles, President
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