SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1937
Commission file number: 000-22273
SONIC JET PERFORMANCE, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
COLORADO 84-1383888
------------------- -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
11782 Western Ave. Unit 18
Stanton, CALIFORNIA 92649
----------------------------------
(Address of Principal Executive Offices)
(714) 895-0944
-----------------------------------
(Issuer's Telephone Number, including Area Code)
Check whether the issuer: (1) has 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 registrant was required to file such reports), and
(2)has been subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
As of June 30, 2002 the Issuer had 32,829,397 shares of Common Stock, no par
value, outstanding.
SONIC JET PERFORMANCE, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED June 30, 2002
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at June 30, 2002 (unaudited)
Statement of operations for the Three months ended June
30, 2002 and 2001 (unaudited).
Statements of Cash Flows for the Three months ended June
30, 2002 and 2001 (unaudited).
Notes to Consolidated Financial Statements (unaudited).
Item 2. Management's Discussion and Analysis or Plan of operations
General
Results of operations
Liquidity and Capital Resources
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and reports on Form 8-K
SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
June 30, 2002
(Unaudited)
CONTENTS:
FINANCIAL STATEMENTS Page
Report on Review by Independent
Certified Public Accountant F-1
Consolidated Balance Sheets F-2 - F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-9
Michael Johnson
9175 Kenyon Ave., #100
Denver, CO 80237
Phone: 303 796-0099
Fax: 303 796-0137
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Sonic Jet Performance, Inc and Subsidiary
We have reviewed the accompanying consolidated balance sheet of Sonic Jet
Performance, Inc. and Subsidiary as of June 30, 2002 and the related
consolidated statements of operations and cash flows for the six months ended
June 30, 2002 and 2001 included in the accompanying Securities and Exchange
Commission Form 10-QSB for the period ended June 30, 2002. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States, the
objective of which is the expression of an opinion regarding the financial
statements as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet as of December 31, 2001, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended (not presented herein). In our report dated March
4, 2002, we expressed an unqualified opinion on those financial statements. In
our opinion, the information set forth in the accompanying balance sheet as of
June 30, 2002 is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
/s/ Michael Johnson & Co., LLC.
Denver, Colorado
August 17, 2002
F-1
SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2002 2001
-------------- ---------------
ASSETS:
Current Assets:
Cash $ 90,711 $ 42,760
Restricted cash 166,457 201,004
Accounts receivable 86,582 9,500
Investment 50,000
Inventories 182,970 363,971
Other current assets 2,506 7,731
-------------- ---------------
Total Current Assets 579,226 624,966
-------------- ---------------
Property and Equipment, net 1,109,217 1,221,313
-------------- ---------------
Other Assets:
Licensing rights 267,500 267,500
-------------- ---------------
Total Other Assets 267,500 267,500
-------------- ---------------
TOTAL ASSETS $1,955,943 $ 2,113,779
============== ===============
See accountant's review report and notes to the financial statements.
F-2
SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2002 2001
---------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts payable $ 421,416 $ 458,416
Accrued payroll taxes 50,575 70,936
Accrued interest and other expenses 255,254 397,276
Short Term Loan 55,000
Current portion of capitalized lease obligations - 12,236
---------------- -----------------
Total Current Liabilities 782,245 938,864
---------------- -----------------
Long-term Liabilities;
Capitalized lease obligations - net of current portion - -
---------------- -----------------
Total Long-term Liabilities - -
---------------- -----------------
TOTAL LIABILITIES 782,245 938,864
---------------- -----------------
Stockholders' Equity:
Preferred stock, no par value, 10,000,000 shares
authorized, none issued and outstanding - -
Series A Convertible Preferred Stock: 1,600 shares issued
and outstanding - -
Series B Convertible Preferred Stock: 10 shares issued
and outstanding 25,000 25,000
Series C Convertible Preferred Stock: 37 shares issued
and outstanding 340,000 50,000
Common stock, no par value, 100,000,000 shares
27,891,644 and 19,333,936, issued and outstanding
respectively 12,497,997 12,015,715
Shares committed-to-be-issued 150,238 93,205
Accumulated comprehensive income - -
Accumulated deficit (11,839,537) (11,009,005)
---------------- -----------------
Total Stockholders' Equity 1,173,698 1,174,915
---------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,955,943 $2,113,779
================ =================
See accountant's review report and notes to financial statements.
F-3
SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
------------ ------------- ----------- -----------
REVENUES: $ 303,837 $ 460,613 362,632 1,044,072
COST OF SALES 181,984 356,449 209,614 828,636
GROSS PROFIT 121,853 104,164 153,018 215,436
------------ ------------- ----------- -----------
OPERATING EXPENSES:
Sales and Marketing
General and Administrative 684,864 242,229 1,019,454 583,845
------------ ------------- ----------- -----------
Total Operating Expenses 684,864 242,229 1,019,454 583,845
------------ ------------- ----------- -----------
Net Loss from Operations (563,011) (138,065) (866,436) (368,409)
------------ ------------- ----------- -----------
OTHER INCOME/EXPENSES
Other income 27,677 167,846 31,426 171846
Other expenses
Interest income 3,213 4,127 3,213 4140
Interest expenses 1,592 94,462 -13801
------------ ------------- ----------- -----------
32,482 266,435 34,639 162,185
------------ ------------- ----------- -----------
NET (LOSS) $(530,529) $ 128,370 $ (831,797) $ (206,224)
============ ============= =========== ===========
Weighted average number of
shares outstanding
============ ============= =========== ===========
Net Loss Per Share
See accountant's review report and notes to the financial statements.
F-4
SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
Statement of Changes in Stockholders' Equity
(Unaudited)
Accumulated
Additional Additional Shares Other
Preferred Stock Common Stock Paid-In Paid-In Committed Comprehensive Accumulated
Shares Amount Shares Amount Capitial Warrants to be issued Income Deficit Totals
------- ----------- ---------- --------- ---------- ---------- ---------- --------- ------------- --------
Balance -
December
31, 1999 1,600 $ 1,500,000 12,676,000 $3,618,194 $ 272,000 $ 316,026 $ 799,455 $ (4,943) $(2,132,207) $ 4,368,525
Issuance of
common
stock - - 348,767 710,583 - - (655,583) - - 55,000
Capital
changes
due to debt
financing - - - - 826,000 708,601 - - - 1,534,601
Cumulative
translation
adjustment - - - - - - - 25,273 - 25,273
Net loss for
year - - - - - - - - (7,458,046) (7,458,046)
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
Balance -
December
31, 2000 1,600 1,500,000 13,024,767 4,328,777 1,098,000 1,024,627 143,872 20,330 (9,590,253) (1,474,647)
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
Issuance of
common
stock for
services (1,585) (1,425,000) 6,309,169 7,686,938 (1,098,000) (1,024,627) (50,667) (20,330) 20,332 4,088,646
Cumulative
translation
adjust-
ments - - - - - - - - (1,266) (1,266)
Net loss for
year - - - - - - - - (1,437,818) (1,437,818)
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
Balance -
December
31, 2001 15 75,000 19,333,936 12,015,715 - - 93,205 - (11,009,005) 1,174,915
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
Issuance of
common
stock for 32 320,000 8,557,708 253,295 - - - - - 573,295
Shares commit-
ted - - - 73,205 - - (73,205) - - -
Cumulative
translation
adjustments - - - - - - - 1,266 1,266
Net loss for
period - - - - - - - - (302,474) (302,474)
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
Balance -
March 31,
2002 47 $ 395,000 27,891,644 $12,342,215 $ - $ - $ 20,000 $ - $(11,310,213) $ 1,447,002
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
See accountant's review report and notes to the financial statements.
F-5
SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
Statement of Changes in Stockholders' Equity
(Unaudited)
Accumulated
Additional Additional Shares Other
Preferred Stock Common Stock Paid-In Paid-In Committed Comprehensive Accumulated
Shares Amount Shares Amount Capitial Warrants to be issued Income Deficit Totals
------- ----------- ---------- --------- ---------- ---------- ---------- --------- ------------- --------
Issuance of
common
stock for (3) (30,000) 4,937,753 155,782 - - 130,238 - - 256,020
Shares commit-
ted - - - - - - -
Cumulative
translation
adjustments - - - - - - - -
Net loss for
period - - - - - - - - (529,324) (529,324)
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
Balance -
June 30,
2002 44 $ 365,000 32,829,397 $12,497,997 $ - $ - $ 150,238 $ - $(11,839,537) $ 1,173,698
------- ----------- ---------- ----------- ---------- ---------- ---------- --------- ------------- ------------
- $ (0)
See accountant's review report and notes to the financial statements.
F-6
SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
--------------- --------------
2002 2001
--------------- --------------
Cash Flows From Operating Activities:
Net Loss $(831,797) $(206,224)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 66,396 60,000
Provision for China Inventory 235,992
Provision for China assets 61,555
Common stock issued for services 135,266 -
Changes in assets and liabilities:
(Increase) in accounts receivable (77,082) (134,948)
(Increase) in inventories (54,991) 258,821
(Increase) Decrease in related parties - 142,502
(Increase) Decrease in other assets 51,387 (13,368)
(Decrease) Increase in accounts payable (37,000) 17,297
(Decrease) Increase in payroll liabilities (20,361) (1,703)
(Decrease) Increase in accrued expenses (142,022) (84,954)
--------------- --------------
Total adjustments 219,140 243,647
--------------- --------------
Net Cash Used in Operating Activities (612,657) 37,423
--------------- --------------
Cash Flow From Investing Activities:
Purchase of equipment (27,471) 1,046
Proceeds from sale of property and equipment -
(Increase) Investment in Technical Solution Group (50,000)
--------------- --------------
Net Cash Provided By Investing Activities (77,471) 1,046
--------------- --------------
Cash Flow From Financing Activities:
Proceeds from issuance of common stock 347,016 -
Proceeds from convertible debt 57,033
Proceeds from issuance of preferred stock 290,000
Payments from capitalized lease obligations (10,970) (776)
Proceeds from loans 55,000 -
--------------- --------------
Net Cash Provided By Financing Activities 738,079 (776)
--------------- --------------
Effect of exchange rate on cash - -
--------------- --------------
Increase in Cash 47,951 37,693
Cash and Cash Equivalents - Beginning of period 42,760 40,129
--------------- --------------
Cash and Cash Equivalents - End of period $ 90,711 $ 77,822
=============== ==============
Supplemental Cash Flow Information:
Interest paid $ 2,957
=============== ==============
Taxes paid $ -
=============== ==============
See accountant's review report and notes to financial statements.
F-7
Note 1. Presentation of Interim Information
In the opinion of the management of Sonic Jet Performance, Inc. and Subsidiary
(SJPI), the accompanying unaudited consolidated financial statements include all
normal adjustments considered necessary to present fairly the financial position
as of June 30, 2002, and the results of operations and cash flows for the three
months ended June 30, 2002 and 2001. Interim results are not necessarily
indicative of results for a full year.
The consolidated financial statements and notes are presented as permitted by
Form 10-QSB, and do not contain certain information included in the SJPI's
audited consolidated financial statements and notes for the fiscal year ended
December 31, 2001.
Note 2. Financial Statements
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. All significant inter-company balances,
transactions, and stockholdings have been eliminated.
NOTE 3 - INVENTORIES
Inventories at June 30, 2002 consisted of the following:
Raw materials and supplies $ 89,983
Work in process 28,279
Finished goods 64,708
---------
Total $ 182.970
=========
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 2002 consisted of the following:
Building and improvements $ 32,933
Furniture and fixtures 13,613
Machinery and equipment 230,235
Tooling and molds 24,991
Tooling - new products 1,210,290
1,512,062
----------
Less accumulated depreciation and amortization (402,845)
Total $1,109,217
==========
F-8
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Lease
The Company leases its principal executive offices and facility from Corning
Garden Grove LLC. The Company currently leases this premise on a month-to-month
basis at a monthly rental charge of $1,550.
The Company rents a storage facility from Dennis McGee. The Company currently
rents this premise on a month-to-month basis at a monthly rental charge of
$1,320.
The Company's wholly owned subsidiary rents a 5,000 square foot facility at
Nanning, China on a month-to-month basis on a monthly rent of $800.
Employment Agreement
On January 2, 2002, the Company entered into an at-will employment agreement
with Mr. Mankal. The agreement provides for an annual base salary of $48,000
until the Company is profitable or shares will be issued in compensation, and an
annual bonus of up to 25% of Mr. Mankal's annual base salary based on the
Company's achievement of certain earnings and positive cash flow targets, to be
established by the board. The Company also granted him options to purchase
250,000 shares of common stock that vest in two equal yearly installments.
Royalty/Licensing Agreements
On December 27, 2001, the Company entered into a new license agreement covering
the design and other rights, with Mardikian Marine Design, LLC, an entity owned
by other Company's largest shareholder, and by a principal of the holder of the
Company's series B preferred Stock. Under the new licensing agreement, the
Company is obligated to pay the licensor, as royalties (1) 4% of the first $3
Million Dollars in gross revenues resulting from the sale of products using the
designs, (2) 3% of gross revenue between $3 Million Dollars and $5 Million
Dollars (3) 2% of gross revenue between $5 Million Dollars and $10 Million
Dollars (4) 1% of gross revenue in excess of $10 Million Dollars.
NOTE 6 - STOCK COMPENSATION PLAN
The Company's 1998 Employee Consultant Stock Compensation Plan provides for the
granting of stock options to employees and certain consultants of the Company
and was amended in July 2000. A total of 2,000,000 shares of common stock have
been reserved for issuance upon exercise of options granted under the plan, as
amended. During the quarter ended June 30, 2002, the Company issued the
following option shares.
1. Walter Wright 100,000 Consultant
2. Danny Medina 56,695 Settlement of Outstanding amounts
3. Barrett Evans 500,000 Consultants agreement
4. George Moseman 250,000 Finders Fees
5. Astor & Philips 118,014 Settlement of Legal fees
6. Tim Spooner 37,500 Payment of sales Commission
7. Hratch Khedesian 50,620 Settlement of outstanding dues
8. Jeff Marks 100,000 Settlement of outstanding amount
9. Robert West 400,000 Settlement agreement
F-9
NOTE 7 Other Transactions
Capital Stock Transactions
In January 2002, Ashford Capital, KK purchased 7 shares of our Series C
Convertible Preferred Stock for an aggregate purchase price of $70,000. It
converted two of the preferred shares into 564,706 shares of our common stock.
Ashford Capital, LLC, the holder of our Series B Preferred Stock, owns a
minority interest in Ashford Capital, KK.
Series C Convertible Preferred Stock
During the period from December 6, 2001 to June 30, 2002, Fifty Two shares of
Series C Convertible Preferred Stock were issued to various investors for
$520,000 of which eighteen preferred shares have been converted to common stock.
Subsequent Event:
----------------
1. On February 1, 2002 a Finders Fee agreement was entered into between
Ashford Capital, LLC and Sonic Jet Performance, Inc. ("Sonic"). Sonic
agreed to pay Ashford Capital ten percent (10%) of the equity of any
referred party acquired by Sonic Jet. In case of Partial acquisition Sonic
Jet will pay Ashford ten per cent (10%) of the transaction price and/or
other consideration of any kind paid by or to Sonic Jet or any of its
subsidiaries or affiliates in connection with any transaction for a
referred party.
2. Sonic Jet Performance, Inc. entered into agreement with Donner Corp.
International to raise capital for Sonic Jet, to correspond with
shareholders, potential investors and the investment community for the
purpose of introducing and raising capital for Sonic Jet, to introduce
candidates for strategic alliance, joint venture or other beneficial
business relationships, based upon subsequent agreement between the parties
and introduce investors to Sonic Jet and/or schedule events within the
financial community in an effort to develop institutional investment in
Sonic Jet. Sonic Jet will compensate Donner Corp International at Ten
percent (10%) commission on any and all capital raised for Sonic Jet, Two
percent (2%) expense commission on any and all capital raised for Sonic Jet
and 5% in Sonic Jet warrants with the exercise price at $0.10 on any and
all capital raised for Sonic jet.
3. On May 21, 2002 Atlantis Partners, Inc. entered into an a stock purchase
agreement with Sonic Jet Performance, Inc. ("Sonic") wherein Atlantis would
purchase 5,000,000 shares of Sonic common stock for $600,000 on a
convertible promissory Note and a Warrant to purchase 5,000,000 shares at
$0.125 per share. On August 15, 2002 the Company and Sonic Jet agreed to
rescind the transaction because it was determined that it is unlikely that
the parties will be able to fulfil their respective commitments pursuant to
the terms and conditions of the Agreement. No shares of Sonic Jet were
issued to the Company and the Convertible Note was returned.
4. On June 13, 2002 Sonic Jet Performance, Inc. ("Buyer") entered into stock
purchase agreement with the "Sellers": (a) Garth J. M. Barrett, an
individual, and (b) TS Group, LLC, a Texas Limited Liability Company
F-10
whereby Sonic Jet purchased 100% of the issued and outstanding common stock
of Technical Solutions Group, Inc, a Nevada Corporation ("TSG") in exchange
for the common stock of Buyer.
Sonic Jet agreed to deliver Four Hundred Thousand Dollars ($400,000) of
working capital and exchange Six (6) million shares of Sonic Jet
Performance, Inc. common stock. The Shares will be distributed as follows:
i) Garth Barrett will receive 2,000,000 share of Sonic Jet Common Stock
in exchange for 8,000 shares of TSG Common Stock. ii) TS Group, LLC to
will receive 4,000,000 shares of Sonic Jet Common Stock for 16,000
shares of TSG common stock. The shares received by TS Group, LLC are
subject to a security interest from a note due to Technical Solutions
Group, Inc. from TS Group, LLC.
As a result of the transaction TSG will become a wholly owned subsidiary of
Sonic Jet Performance, Inc.
Technical Solution Group, (TSG) is a Charleston, South Carolina based
manufacturer of a line of specialty Mine Resistant and Ballistically
Protected and clearance vehicles for the military and law enforcement
markets. TSG operates from an 85,000 square foot facility the former Navy
Shipyard in Charleston. TSG has just begun deployment of its products and
initial orders have been received from the US Military and the UK Ministry
of Defense. Additional information on TSG can be viewed at its web site at:
www.forceprotection.net.
5. Atlantis Partners, Inc. has provided $50,000.00 to Sonic Jet Performance,
Inc. as reflected in a promissory note dated 2nd July 2002 by and between
Atlantis Partners, Inc. and Sonic Jet Performance, Inc. at 10% simple
interest per annum.
6. On July 15, 2002, the Company entered into a consulting agreement with
Frank Kavanaugh as interim General Manager of Sonic Jet Performance, Inc.
for a minimum of 90 days. The agreement provides for initial fees of $8,000
for each 30 days and at the end of the period 1,000,000 shares of Sonic Jet
Performance, Inc. stock.
7. On July 17, 2002 an Addendum to the Stock Purchase Agreement dated December
19, 2001 by and between Sonic Jet Performance, Inc. and Ashford Capital,
LLC reads as under:
(i) Ashford Capital, LLC agrees not to sell any of its Series B Shares
(or underlying common shares) prior to January 1, 2003. (ii) Sonic Jet
Performance, Inc., agrees to modify the conversion date for Ashford
Capital, LLC Series B Preferred Stock to convert into common stock at
the earlier of 1) the discretion of Ashford Capital. LLc or 2) June 27,
2003. (iii) Sonic Jet Performance, Inc. agrees to provide Ashford
Capital, LLC with the right to exchange a portion of its holdings in
Sonic Jet Performance, Inc. for equity in TSG, International Inc. the
holding Company for technical Solutions Group. Ashford Capital, LLC
F-11
will have Six months from the date of this agreement to exchange five
shares of Sonic Jet Performance, Inc. Series B Preferred Stock for 10
shares of TSG, International that converts into 20% of the fully
diluted shares of TSG, International. Ashford Capital must notify Sonic
Jet within the period and surrender the shares at which time it will
receive the series A Preferred Shares of TSG International.
8. Following the agreement to purchase Technical Solutions Group, Inc. ("TSG")
an agreement was reached with certain secured creditors of TSG. The
agreements dated July 2, 2002 provided Sonic Jet Performance, Inc.
("Sonic") with an option to purchase the notes for shares of common stock
of Sonic. The parties involved include:
(i) Notes representing One Hundred and Forty Four Thousand and Thirty Three
Dollars ($144,033) to Flexxtech Corporation ("Flexxtech") wherein Flexxtech
has agreed that Sonic has an exclusive right to purchase the Notes any time
within 90 days of this agreement in exchange for Twenty eight Thousand
Eight Hundred and Seven (28,807) units consisting of common stock and
warrants of Sonic as outlined in memorandum dated, April 10, 2002. (ii)
Notes representing Four Hundred and Three Thousand and Eight Ninety Six
Dollars ($403,896) to Atlantis Aggressive Growth Co. ("Atlantis") where in
Atlantis has agreed that Sonic has an exclusive right to purchase the Notes
any time within 90 days of this agreement in exchange for Eighty Thousand
Seven Hundred Eighty (80,780) units consisting of common stock and warrants
of Sonic as outlined in memorandum dated, April 10, 2002.
9. An agreement has been entered between Sonic Jet Performance, Inc. and RJE
International, Inc. as Distributor for Australia, Brunei, China, Cyprus,
India, Indonesia, Israel, Malaysia, New Zealand, Singapore, Taiwan,
Thailand, Vietnam. The agreement is effective till December 31, 2003.
10. Consulting Agreement was entered between Regent Capital West and Sonic Jet
performance, Inc. to raise funds through the offering of a Private
Placement under Regulation D, Rule 506. Compensation was 8% of the capital
raised through offering and from warrant exercise, and a 5% credit for all
capital raised (including warrants) convertible to 144 common stock at
$0.17 per share for the first $500,000 and $0.15 per share for all credits
over $500,000. Regent Capital West assigned 4% of its cash compensation to
R. James Consulting on funds raised by R. James Consulting.
F-12
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED June 30, 2002, and 2001
The following table sets forth the Company's consolidated statements of
operations:
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
2002 2001 2002 2001
----- ---- ----- ----
Sales $ 303,837 $460,613 362,632 1,044,072
Cost of Sales 181,984 356,449 209,614 828,636
------- ------- ------- -------
Gross profit (loss) 121,853 104,164 153,018 215,436
Selling, and Administrative 684,866 242,229 1,019,456 583,845
Income/(Loss) from operations (563,013) (138,065) (866,438) (368,409)
-------- --------- ---------- ---------
Interest expenses (1,592) (94,462) ---- (1,592)
Interest Income 3,213 4,127 3,213 4,140
Other Income 27,677 167,846 31,426 171,846
Total other income (expense) 32,482 266,435 34,639 162,185
------ ------- ------ -------
Net Income/(Loss) $(530,531) $(128,370) $(831,799) $(206,224)
========= ========= ========== ==========
Basic & Diluted loss per share $(0.02) $0.01 $(.03) $(0.01)
====== ======== ====== ======
Weighted-average common shares
outstanding Basic and Diluted 27,928,115 12,894,631 27,928,115 12,894,631
NET SALES: Net sales for the second quarter of Fiscal 2002 decreased by $156,776
or 34.03% compared to the second quarter of Fiscal 2001. During this period
sales of 2 Vortexes, 2 Fire Rescue Jets, and 1 Rescue Jet were sold.
Net sales for the six months period during Fiscal 2002 decreased by $681,440 or
65.26% compared to the six months of Fiscal 2001. During this period 2 Vortexes,
3 Fire rescue Jets, and 1 Rescue Jet were sold. Decrease is mainly attributed to
reduction in the sale of recreational boats.
COST OF SALES: Cost of sales for the second quarter of Fiscal 2002 decreased by
$174,465 or 48.94% compared to the second quarter of Fiscal 2001. This decrease
is mainly attributed to a decrease in the production Recreation boats compared
to previous year.
Cost of sales for the six months period during Fiscal 2002 decreased by $619,024
or 74.70% compared to the six-month period during Fiscal 2001. This decrease is
mainly attributed to the decrease in the production of recreation boats compared
to previous year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses for the second quarter of 2002, increased by $442,637 or
182.73% to $684,866 compared to $242,229 for the second quarter of 2001.
Increase is mainly attributed to expenses incurred on consultants, marketing
materials, demonstration costs, legal expenses, provisions for inventory in
China, and commissions on fund raising.
Selling, general and administrative expenses for six months during Fiscal 2002,
increased by $435,611 or 74.61% to $1,019,456 compared to $242,229 for the six
months during 2001. Increase is mainly attributed to expenses incurred on
consultants, legal expenses for preparing the annual report, and proxy
statement, printing of brochures, demo expenses, provisions for inventory in
China and settlement of legal cases.
NET INCOME (LOSS): Net Income (Loss) for the six months ended June 30, 2002 was
($831,799) as compared to ($206,224) for the six months ended June 30, 2001.
This increase in loss is mainly attributable to expenses incurred on
consultants, legal expenses for preparing the annual report, and proxy
statement, printing of brochures, demo expenses, provision for inventory in
China and settlement of legal cases. Also the profit margin increased during the
Fiscal year 2002 due to higher profit margin on Fire and rescue boats.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital have been cash flow from its
operations, the sale of Series B and Series C Convertible Preferred Stock, and
funds raised through the sale of additional securities.
Based on its current operating plan, the Company anticipates that additional
financing will be required to finance its operations and capital expenditures.
The Company's currently anticipated levels of revenues and cash flow are subject
to many uncertainties and cannot be assured. Further, unforeseen events may
occur causing the Company to raise additional funds. The amount of funds
required by the Company will depend upon many factors, including without
limitation, the extent and timing of sales of the Company's products, future
product costs, the timing and costs associated with the establishment and/or
expansion, as appropriate, of the Company's manufacturing, development,
engineering and customer support capabilities, the timing and cost of the
Company's product development and enhancement activities and the Company's
operating results. Until the Company generates cash flow from operations, which
will be sufficient to satisfy its cash requirements, the Company will need to
seek alternative means for financing its operations and capital expenditures
and/or postpone or eliminate certain investments or expenditures. Potential
alternative means for financing may include leasing capital equipment, obtaining
lines of credit, or obtaining additional debt or equity financing. There can be
no assurance that, if and when needed, additional financing will be available,
or available on acceptable terms. The inability to obtain additional financing
or generate sufficient cash from operations could require the Company to reduce
or eliminate expenditures for capital equipment, research and development,
production or marketing of its products, or otherwise curtail or discontinue its
operations, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Furthermore, if the
Company raises funds through the sale of additional equity securities, the
Common Stock currently outstanding may be further diluted.
The Company has raised $331,750 during the six months period ending July 31,
2002 by private placement. Also, the Company raised $520,000 from Preferred
Shares `C' Class allotment, of which $180,000 has been converted as Common Stock
to date. The Company has delivered $380,000 dollars to Technical Solutions
Group, Inc. as part of the agreement with Technical Solutions Group, Inc to fund
working capital.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities.
The Following Shares were issued out of the stock option plan during six
months period ending June 30, 2002.
1. Walter Wright 100,000 Consultant
2. Danny Medina 56,695 Settlement of Outstanding amounts
3. Barrett Evans 500,000 Consultants agreement
4. George Moseman 250,000 Finders Fees
5. Astor & Philips 118,014 Settlement of Legal fees
6. Tim Spooner 37,500 Payment of sales Commission
7. Hratch Khedesian 50,620 Settlement of outstanding dues
8. Jeff Marks 100,000 Settlement of Outstanding amount
9. Robert West 400,000 settlement
The Following Shares were issued with restriction during six month period
ending June 30, 2002.
1. Scott Ervin 15,000 Settle outstanding amounts
2. Danny Medina 100,000 Non Competence Agreement
3. Astor & Phillips 118,014 Payment of Legal fees
4. Alan Weaver 14,700 Settlement of Legal case
5. Harry Yamada 34,300 Settlement of legal case
6. William Crosby 21,000 Settlement of Legal Case
7. JNC Opportunity Fund, Ltd. 1,044,775 Anti Dilution Agreement
8. JNC Strategic Fund, Ltd. 731,858 Anti Dilution Agreement
9. Mohammed Al Rashid 1,021,677 Anti Dilution Agreement
10. Federal and Commercial Contracts 50,000 Sales agreement
11. Mgs Grand Sports 41,494 Settle outstanding rent
12. Flexx Capital Partners, Inc. 250,000 Consultant agreement
13. Albert Mardikian 2,819,362 Settlement all dues
14. Donner Corporation International 250,000 Consultant agreement
15. Dennis W. Benner 300,000 Consultant
16. Bob Hicks 100,000 Consultant
17. Christopher Morgan 24,444 Tax consultant
18. Tim Spooner 37,500 Sales commission
19. Hratch Khedesian 50,620 Settlement of dues
20. Ken Hersh 25,000 Consultant
The Following Common shares were issued by converting Preferred stock
certificates for the six month period ending June 30, 2002 :
1. Denis Hickey 564,706
2. Hratch Khedesian 282,353
3. Michel Watts 564,706
4. Noriaki Sasaki 1,129,412
5. Krishna Mankal 282,353
6. Jeffrey Marks 282,353
7. Efund Capital Partners 1,129,411
8. Lisa Giocomini 121,008
9. Ashford Capital, KK 564,706
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matter to a vote of Security Holders:
a) The Company annual meeting of shareholders was held on May 6, 2002.
b) The directors elected at the meeting were:
For Against Withheld
1. Madhava Rao Mankal 20,868,880 12,850
2. Scott R. Ervin 20,868,880 12,850
3. George Moseman 20,868,880 12,850
c) Other matters voted upon at the meeting and the results of those votes were
as follows:
For Against Withheld
1. Increase of Authorized Capital 20,853,580 33,050 1,400
2. Increase in Number of Directors 20,845,430 21,950 1,700
3. Ratification of Auditors 20,844,430 25,250 3,400
The following matters are described in detail in the Company's Proxy statement
dated March 27, 2002.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: None during this quarter
(b) Reports on Form 8-K. During this quarter the following were filed
i) Acquisition of Technical Solution Group
ii) Withdrawal of SB-2 filing
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.
Date: August 20, 2002 SONIC JET PERFORMANCE, INC.
By: /s/ Madhava Rao Mankal
------------------------------------
Name: Madhava Rao Mankal
Title: Secretary/CFO