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 September 30, 2001
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1937
For the transition period from 07-01-01 to 9-30-01
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.)
15662 COMMERCE LANE
HUNTINGTON BEACH, CALIFORNIA 92649
----------------------------------
(Address of Principal Executive Offices)
(714) 895-0944
--------------
(Issuer's Telephone Number, including Area Code)
NOT APPLICABLE
--------------
(Former Name, Former Address and Former fiscal Year,
if Changed Since Last Report)
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 September 30, 2001, the Issuer had 18,583,936 shares of Common Stock, no
par value, outstanding.
SONIC JET PERFORMANCE, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED September 30, 2001
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at September 30, 2001 (unaudited)
Statement of operations for the Nine months ended September
30, 2001 and 2000 (unaudited)
Statements of Cash Flows for the Nine months ending
September 30, 2001 and 2000 (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 SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, 2001 (UNAUDITED)
------------------------------------------------------------------------
September 30, 2001 December 31, 2000
ASSETS
CURRENT ASSETS
Cash $ 2,436 $40,129
Accounts receivable 97,153 45,760
Inventories 386,917 574,903
Due from related party 277,650 393,291
Other current assets 22,777 3,450
Restricted Cash 200,510 203,120
------------- ------------
Total current assets 987,443 1,260,653
PROPERTY AND EQUIPMENT, net 1,272,862 1,359,910
Licensing rights 267,500 267,500
-------------- ------------
TOTAL ASSETS $ 2,527,805 $2,888,063
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 306,472 $ 192,206
Accrued Payroll Taxes 62,886 68,486
Accrued interest and other accrued liabilities 80,426 687,049
Current portion of capitalized lease obligation 708 1,432
Convertible debt - related party --- 2,801,301
------------- ------------
Total current liabilities 450,492 3,750,474
Capitalized lease obligations, net of
Current portion 11,454 12,236
NOTE PAYABLE - STOCKHOLDER ---- 600,000
------------ ------------
Total liabilities 461,946 4,362,710
------------ ------------
Total liabilities
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value
10,000,000 shares authorized
Series A convertible preferred stock
1,600 shares issued and outstanding ----- 1,500,000
Common stock, no par value
100,000,000 shares authorized
18,583,936 shares issued and outstanding 11,993,216 4,328,777
Additional paid-in capital - Stock warrant outstanding 1,024,627
Additional paid-in capital 1,098,000
Shares committed to be issued 143,872
Accumulated comprehensive income 20,332 20,330
Accumulated deficit (9,947,689) (9,590,253)
------------- -----------
Total stockholders' equity 2,065,859 (1,474,647)
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 2,527,805 $2,888,063
============= ============
The accompanying notes are an integral part of these financial statements.
F-1
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------
3 Months Ended September 30, 9 Months Ended September 30,
2001 2000 2001 2000
(unaudited) (unaudited) (unaudited)(unaudited)
----------- ----------- ---------- ----------
SALES $142,429 $135,876 $1,186,501 $1,102,315
COST OF SALES 99,027 117,538 927,663 937,340
------------ ----------- ----------- ----------
GROSS PROFIT 43,402 18,338 258,838 164,975
GENERAL AND ADMINISTRATIVE 192,726 411,010 776,571 1,468,803
------------ ----------- ------------ ----------
INCOME (LOSS) FROM OPERATIONS (149,324) (392,672) (517,733) (1,303,828)
------------ ----------- ------------ ----------
OTHER INCOME 412 3,801 172,257 13,471
OTHER EXPENSE --- --- --- ---
INTEREST INCOME 1,672 834 5,812 1,090
INTEREST EXPENSE (3,972) (471,770) (17,772) (1,888,003)
Inventory Write off 1,700 (384,383)
------------ ----------- ------------ -----------
TOTAL OTHER INCOME (EXPENSE) (1,888) (465,435) 160,297 (2,256,825)
------------ ----------- ------------- -----------
NET INCOME (LOSS) $(151,212) $(858,107) $ (357,436) $(3,560,653)
BASIC & DILUTED EARNINGS(LOSS) (0.01) (0.06) (0.02) (0.27)
PER SHARE
WEIGHTED-AVERAGE COMMON SHARE
USED IN COMPUTATION OF BASIC
AND DILUTED LOSS PER SHARE 17,591,230 13,026,679 17,591,230 13,026,679
The accompanying notes are an integral part of these financial statements
F-2
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (UNAUDITED)
------------------------------------------------------------------------
Additional
Paid in Accumulated
Capital- Shares Comprehensive
Preferred Stock Common Stock Stock Additional Committed Committed Accumu
---------------- ------------ Warrant paid-In to be Income lated
Shares Amount Shares Amounts Outstanding Capital issued (loss) deficit Total
--------------- -------------- ----------- --------- --------- ---------- -------- --------
BALANCE
DEC 31, 2000 1,600 $1,500,000 13,024,767 $4,328,777 $1,024,627 $1,098,000 $143,872 $20,330 $(9,590,253) $(1,474,647)
Capital changes 1,500 4,250 5,750
due to debt
financing (unaudited)
Net income (unaudited) (334,594) (334,594)
-------- ---------- ---------- ---------- --------- ----------- --------- ------- ----------- -----------
BALANCE
March 31, 2001 1,600 $1,500,000 13,024,767 $4,328,777 $1,026,127 $1,102,250 $143,872 20,330 $(9,924,847) $(1,803,491)
Issuance of
common (1,600) (1,500,000) 5,543,169 7,644,438 (1,026,127) (1,102,250) (143,872) 3,872,189
Stock (unaudited)
Cumulative Translation (20,330) 20,330
Net income (unaudited) 128,372 128,372
-------- ---------- ---------- ---------- --------- ----------- --------- -------- --------- ------------
Balance
June 30, 2001 -- -- 18,567,936 11,973,215 -- -- -- -- (9,776,145) 2,197,070
Issuance of
common -- -- 16,000 20,000 -- -- -- -- -- 20,000
Stock (unaudited)
Net income (unaudited) (151,212) (151,212)
-------- ---------- ---------- ---------- --------- ----------- --------- -------- ---------- ----------
-- -- 18,583,936 11,993,215 -- -- -- -- (9,927,357) 2,065,858
-------- ---------- ---------- ---------- --------- ----------- --------- -------- ----------- ----------
The accompanying notes are an integral part of these financial statements.
F-3
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------
9 Months Ended September 30,
2001 2000
------------ ------------
(unaudited) (unaudited)
CASH FLOWS FPOM OPERATING ACTIVITIES
Net Income (Loss) ($357,436) ($3,560,654)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 90,000 156,787
Interest related to beneficial conversion and warrants 1,368,844
(Increase) decrease in
Inventories 187,984 325,304
Due from related parties 99,206 75,684
Accounts Receivables (51,394) (419,371)
Other Receivables (4,876)
(105,686)
Other current assets (11,839) (5,080)
Restricted cash (200,000)
Prepaid Inventory 163,757
Accounts Payable 36,914 (230,391)
Accrued Payroll taxes (5,600) (26,551)
Other accrued liabilities (20,922) 8,587
Accrued Interest 163,191
------------- -----------
Net, cash provided by (used in) operating activities (37,963) (2,285,579)
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment 1,046
Purchase of other assets
Cost of re-organization (58,504)
------------- -----------
Net cash used in investing activities 1,046 (58,504)
------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loan
Proceeds from convertible debt-related parties 2,302,945
Proceeds from capitalized lease obligation (776)
------------- -----------
Net Cash provided by financing activities (776) 2,302,945
------------- -----------
Effects of exchange rate on cash flow information 0 (11,530)
Net (decrease) in cash (37,693) (52,668)
CASH BEGINNING OF PERIOD 40,129 80,557
------------- ------------
CASH END OF PERIOD 2,436 27,889
------------- ------------
Supplement disclosure of cash flow information
Interest paid 17,772 7,452
Income tax paid 800 800
SUPPLEMENT SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the nine months ended September 30, 2001, the Company issued 4,975,169
restricted shares of common stock valued at $5,922,461 under a settlement
agreement between the Company and lenders and employee of the Company.
The accompanying notes are an integral part of these financial statements
F-4
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (UNAUDITED)
------------------------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
Sonic Jet Performance, Inc. ("SJPI"), a Colorado corporation, and
subsidiary (collectively, the "Company") are engaged in the design and
production of boats and accessories. The principal executive office is
located in Huntington Beach, California.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of SJPI and
its wholly owned subsidiary, Nanning Sonic Jet, LLC. All inter-company
balances and transactions are eliminated in consolidation.
Basis of Presentation
---------------------
The accompanying unaudited, condensed financial statements have been
prepared in conformity with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-QSB and Article 10 of Regulation S-B. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (which comprise only normal
recurring accruals) necessary for a fair presentation have been
included. Operating results for the nine months ended September 30,
2001 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2001. For further information, refer to
the financial statements and notes thereto for the year ended December
31, 2000.
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, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Going Concern
-------------
The Company has received a report from its independent auditors that
includes an explanatory paragraph concerning the Company's uncertainty
to continue as a going concern. These consolidated financial statements
contemplate the ability to continue as such and do not include any
adjustments that might result from this uncertainty.
Loss per Share
--------------
The Company utilizes SFAS No. 128, "Earnings per Share" Basic and
diluted loss per share is computed by dividing loss available to common
stockholders by the weighted-average number of common shares
outstanding. Because the Company has incurred net losses, basic and
diluted loss per share are the same.
F-5
NOTE 2 - INVENTORIES
Inventories at September 30, 2001 consisted of the following:
(un-audited)
------------
Raw materials and supplies $ 16,068
Work in process 297,895
Finished goods 72,952
----------------
Total $ 386,917
NOTE 3 - CASH
The Company maintains its cash balances at banks located in California.
Deposits at the banks are insured by the Federal Deposit Insurance
Corporation up to $100,000. At times, the Company holds cash with these
banks in excess of amounts insured by federal agencies. As of September
30, 2001, the uninsured portions of the balances held at the bank
aggregated to $100,510 (un-audited).
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at September 30, 2001 consisted of the following:
(un-audited)
------------
Furniture and fixtures $ 13,613
Machinery and equipment 250,903
Molds 1,528,359
Vehicles 52,792
Leasehold improvements 32,933
--------
1,878,600
Less accumulated depreciation and amortization (605,738)
---------
Total $1,272,862
NOTE 5 - Other Assets
Other assets included $200,510 in restricted cash maintained in a time
certificate deposit account.
NOTE 6 - CONVERSION OF DEBTS: PREFERRED STOCK AND NOTES TO STOCKHOLDER
1. 1,600 Preferred Stock issued & outstanding since 1998 in the name
of JNC Strategic Fund, Ltd. has been converted to restrocted
Common Stock on June 29, 2001 at the rate of 917 shares to 1
preferred stock. Interest on Preferred Stock was converted to
restricted Common Stock at the rate of $1.25 per Share.
2. Lawsuit filed by Michael Attias for the amount of $1,300,000 was
settled by issuing 600,000 restricted Common Stock.
3. Promissory Notes for the amount of $600,000 payable to Sheikh
Mohammed AL Rashid has been paid off by issue of restricted
Common stock on June 9, 2001 at the rate of $1.25 per share.
Interest on the above debt was settled by issue of restricted
Common stock at $1.25 per share.
4. Promissory Notes issued to JNC Opportunity Fund, Ltd. on loans
borrowed from time to time was converted to restricted Common
Stock on June 29, 2001. Interest on the above debts has been
converted at restricted Common stock on June 29, 2001.
F-6
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Lease
-----
The Company leases its facility under an operating lease agreement. Future
minimum lease payments are as follows:
Year Ending
December 31, (unaudited)
------------ ------------
2001 81,000
2002 16,500
-----------
TOTAL $97,500
NOTE 8 - SUBSEQUENT EVENTS
Subsequent to September 30, 2001, Mr. Albert Mardikian resigned as Interim
CEO and Director of the board on October 31, 2001. Also Mr. Scott Ervin
resigned as Director of the Board on November 7, 2001. Resignations have
been accepted by Director Mr. Sheikh Mohammed AL Rashid.
F-7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL AND RESULTS OF OPERATIONS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2001
RESULTS OF OPERATIONS
COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 VS. THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2000
The following table sets forth the Company's consolidated statements
of operations and the percentages that such items bear to net sales:
THREE MONTHS ENDED, NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 % 2000 % 2001 % 2000 %
Sales $142,429 100.0 $135,876 100.0 $1,186,501 100.0 $1,102,315 100.0
Cost of sales 99,027 69.5 117,538 86.5 927,663 78.2 937,340 85.0
Gross profit (loss) 43,402 30.5 18,338 13.5 258,838 21.8 164,975 14.9
Selling, general & 192,726 135.3 411,010 302.5 776,571 65.4 1,468,803 133.2
administrative expense
Income/(Loss)from (149,324) (104.8) (392,672) (289.0) (517,733) (43.6)(1,303,828)(118.3)
Operations
Interest Income 1,672 1.2 834 0.6 5,812 0.5 1,090 0.1
Interest expenses (3,972) (2.8) (471,770) (347.2) (17,772) (1.5)(1,888,003)(171.3)
Inventory Write off 1,700 1.2 (384,383) (34.8)
Other Income 412 .3 3,801 2.8 172,257 14.5 13,471 1.2
Other expenses --- --- --- --- --- --- --- ---
Net Income/(Loss) (151,212) (106.1) (858,107) (631.5) (357,436) (30.1)(3,560,653)(323.0)
NET SALES
Net sales for the 3 months ended September 30, 2001 increased by $6,553 or 4.8%
to $142,429 from $135,876 for 3 the months ended September 30, 2000 and for the
9 month ended September 30, 2000 increased by $84,186 or 7.6% to $1,186,501from
$1,102,315 for the 9 months ended September 30, 2000. Management attributes the
increase of sale of Vortex boats.
Sales of parts amounted to Dalian Sonic Jet, a joint venture partner of Sonic
Jet Performance, Inc. ("the Company") amounted to $zero in the 9 months ended
September 30, 2001 as compared to $106,000 in the 9 months ended September 30,
2000.
COST OF SALES Cost of Sales for the 3 months ended September 30, 2001 decreased
by $18,511 or 15.7% to $99,027 from $117,538 for the 3 months ended September
30, 2000 and for the 9 months ended September 30, 2001 increased by $9,677 or
1.0% to $927,663 from $937,340 for the 9 months ended September 30, 2000.
Improvement in the utilization of labor and sale of Fire Rescue Jets during the
third quarter.
GROSS PROFIT
Gross profit for the 3 months ended September 30, 2001 increased by $25,064 or
136.7% to $43,402 from $18,338 for the 3 months ended September 30, 2000 and for
the 9 months ended September 30, 2001 increased by $93,862 or 56.9% to $258,838
from $164,976 for the 9 months ended September 30, 2000. Sales for the 9 months
ended September 30, 2001 includes the sale of fire rescue jets on which profit
margin is high.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the 3 months ended September
30, 2001 decreased by $218,284 or 53.1% to $192,726 from $411,010 for the 3
months ended June 30, 2000 and for the 9 months ended September 30, 2001
decreased by $692,232 or 47.1% to $776,571 from $1,468,803 for the 9 months
ended September 30, 2000.
Insurance expenses for the 3 months ended September 30, 2001 decreased by $5,851
or 37.7% to $9,639 from $15,490 for the 3 months period ended September 30, 2000
and for the 9 months ended September 30, 2001 expenses decreased by $20,626 or
46.5% to $23,778 from $44,404 for the 9 months ended September 30, 2000. This is
due to discontinuance of some insurance coverage.
Travel expenses for the 3 months ended September 30, 2001 decreased by $4,531 to
Zero from $4,531 for the 3 months ended September 30, 2000 and for the 9 months
ended September 30, 2001 decreased by $33,973 or 95.7% to $1,500 from $35,473
for the 9 months ended September 30, 2000.
Salary expenses for the 3 months ended September 30, 2001 decreased by $53,518
or 38.5% to $85,553 from $139,071 for the 3 months period ended September 30,
2000 and for the 9 months ended September 30, 2001 expenses decreased by
$194,173 or 41.4% to $274,451 from $468,624 for the 9 months ended September 30,
2000.
Legal and Professional expenses for the 3 months ended September 30, 2001
increased by $12,550 or 143.1% to $21,320 from $8,770 for the 3 months period
ended September 30, 2000 and for the 9 months ended September 30, 2000 expenses
increased by $10,845 or 29.6% to $47,446 from $36,601 for the 9 months ended
September 30, 2000.
Commission on sales expenses for the 3 months ended September 30, 2001 decreased
by $9,684 to zero from $9,684 for the 3 months period ended September 30, 2000
and for the 9 months ended September 30, 2001 expenses decreased by $3,159 or
5.6% to $52,807 from $ 55,966 for the 9 months ended June 30, 2000.
Receivable from a related party and Sonic Marketing International, LLC were
written off during the 6 months ended June 30, 2000. Sonic Jet Nanning Jet ski
inventory which came back from China amounting to $385,082 were written off
during second quarter ending June 30, 2000. Florida operations were closed down
during the second quarter ending June 30, 2000. Loss incurred in the closing
down operation amounted to $93,555 was written off during the 9 months ended
September 30, 2000.
The majority of above cost increases during year 2000 were the direct result of
elimination of the Sonic Jet International, Inc. Company as the sales and
marketing agent. In addition, the company's closure of the Florida Manufacturing
Plant was also a large cost impact.
NET INCOME (LOSS)
Net Income(Loss) for the 3 month ended September 30, 2001 decreased by $706,895
or 82.37 to ($151,212) as compared to a Income (Loss) of ($858,107) for the 3
months ended September 30, 2000 and net (loss) for the 9 months ended September
30, 2001 decreased by $3,203,217 or 89.9% to ($357,436) as compared to
($3,560,653) for the 9 the months ended September 30, 2000. This decrease in
loss is mainly attributable to decreased costs associated with assuming the
selling, general and administration expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital have been cash flow from its
operations, the sale of Series A Convertible Preferred Stock and loans on an
as-needed basis.
The Company has entered into an agreement with Bombardier Capital for financing
the Accounts Receivable of Sonic Jet Performance, Inc. Bombardier Capital has
agreed to finance Sonic Jet Performance, Inc. up to a maximum sum of $1,000,000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
1. The Company is a defendant in a case brought in Orange County,
California for alleged breach of Company's contract by Mr. Alan
Weaver and Mr. Harry Yamada. The Company is vigorously defending
the case.
2. The Company is a Co-defendant in a wrongful death case in Orange
County, California resulting in an accident involving a boat
manufactured by the Company. The outcome of the verdict is
uncertain and that the amount of loss cannot be estimated. In the
event of a verdict or attachment in excess of any applicable
insurance, the Company could be materially and adversely impacted.
The Company is vigorously defending the case.
Item 2. Changes in Securities.
The following were issued 144D stock on 6- 29-2001:
Amount Common Stock
1. JNC Opportunity Fund Ltd. $3,089,699 2,471,759
2. JNC Strategic Fund Ltd. 1,930,311 1,731,449
3. Sheikh Mohammed AL Rashid 808,871 697,097
4. MGS Grand Sport Inc. 20,375 16,300
5. Albert Mardikian 53,205 42,564
6. Michael Attias 600,000
Settlement of Lawsuit
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits: None.
(b) Reports on Form 8-K. None.
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: November 28, 2001 SONIC JET PERFORMANCE, INC.
By: /s/ Madhava Rao Mankal
------------------------------
Name: Madhava Rao Mankal
Title: Chief Finance Officer