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 March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1937
For the transition period from to
---------------- ----------------
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 March 31, 2000, the Issuer had 12,730,000 shares of Common Stock, no par
value, outstanding.
1
<PAGE>
SONIC JET PERFORMANCE, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED March 31, 2000
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at March 31, 2000 (unaudited)
Statement of operations for the Three months ended March 31, 2000
and 1999 (unaudited)
Statements of Cash Flows for the Three months ending March 31, 2000
and 1999 (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
2
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 108,520
Accounts receivable - trade 297,965
Inventories 1,105,892
Due from related parties 536,479
Other 7,779
--------------
Total current assets 2,056,635
PROPERTY AND EQUIPMENT, net 3,695,013
OTHER ASSETS
Licensing rights 535,000
Other 50,787
--------------
TOTAL ASSETS $ 6,337,435
==============
3
</TABLE>
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 240,465
Accrued payroll taxes 72,175
Accrued interest and other accrued liabilities 348,222
Current portion of capitalized lease obligations 1,303
Convertible debt - related party 931,358
--------------
Total current liabilities 1,593,523
CAPITALIZED LEASE OBLIGATIONS, net of current portion 13,356
SUBORDINATED NOTE PAYABLE - RELATED PARTY 600,000
--------------
Total liabilities 2,206,879
--------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value
10,000,000 shares authorized
Series A Convertible Preferred stock
1,600 and 1,600 shares issued and outstanding 1,500,000
Common stock, no par value
100,000,000 shares authorized
12,730,000 and 12,676,000 shares issued and outstanding,
including 432,500 held in treasury 3,672,194
Additional paid-in capital - stock warrant outstanding 692,903
Additional paid-in capital 607,000
Shares committed to be issued 799,455
Accumulated comprehensive loss (2,500)
Accumulated deficit (3,138,496)
--------------
Total stockholders' equity 4,130,556
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,337,435
==============
4
</TABLE>
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Three Months Ended
March 31,
------------------------------
2000 1999
-------------- --------------
(unaudited) (unaudited)
<S> <C> <C>
SALES $ 579,374 $ 569,700
COST OF SALES 445,961 272,114
-------------- --------------
GROSS PROFIT 133,413 297,586
GENERAL AND ADMINISTRATIVE EXPENSES 394,780 180,942
-------------- --------------
INCOME (LOSS) FROM OPERATIONS (261,367) 116,644
-------------- --------------
OTHER INCOME (EXPENSE)
Other income 5,083 0
Other expense (817) 0
Interest income 135 893
Interest expense (749,323) (15,000)
-------------- --------------
Total other income (expense) (744,922) (14,107)
-------------- --------------
INCOME (LOSS) BEFORE MINORITY INTEREST (1,006,289) 102,537
MINORITY INTEREST - 760
-------------- --------------
NET INCOME (LOSS) $ (1,006,289) $ 103,297
============== ==============
BASIC EARNINGS (LOSS) PER SHARE $ (0.08) $ 0.01
============== ==============
DILUTED EARNINGS (LOSS) PER SHARE $ (0.07) $ 0.01
============== ==============
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
BASIC 13,730,000 12,620,000
============== ==============
DILUTED 14,330,000 13,420,000
============== ==============
5
</TABLE>
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Additional
Paid-In
Capital -
Preferred Stock Common Stock Stock
------------------------------ ------------------------------ Warrant
Shares Amount Shares Amount Outstanding
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999 1,600 $ 1,500,000 12,676,000 $ 3,618,194 $ 316,026
ISSUANCE OF COMMON STOCK (unaudited) 54,000 54,000
CAPITAL CHANGES DUE TO DEBT FINANCING
(unaudited) 376,877
CUMULATIVE TRANSLATION ADJUSTMENT
(unaudited)
NET LOSS (unaudited)
-------------- -------------- -------------- -------------- --------------
BALANCE, MARCH 31, 2000 (UNAUDITED) 1,600 $ 1,500,000 12,730,000 $ 3,672,194 $ 692,903
============== ============== ============== ============== ==============
</TABLE>
(CONTINUED)
<TABLE>
<CAPTION>
Accumulated
Shares Compre-
Additional Committed hensive
Paid-In to be Income Accumulated
Capital Issued (Loss) Deficit Total
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999 $ 272,000 $ 799,455 $ (4,943) $ (2,132,207) $ 4,368,525
ISSUANCE OF COMMON STOCK (unaudited) 54,000
CAPITAL CHANGES DUE TO DEBT FINANCING
(unaudited) 335,000 711,877
CUMULATIVE TRANSLATION ADJUSTMENT
(unaudited) 2,443 2,443
NET LOSS (unaudited) (1,006,289) (1,006,289)
-------------- -------------- -------------- -------------- --------------
BALANCE, MARCH 31, 2000 (UNAUDITED) $ 607,000 $ 799,455 $ (2,500) $ (3,138,496) $ 4,130,556
============== ============== ============== ============== ==============
6
</TABLE>
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the
Three Months Ended
March 31,
------------------------------
2000 1999
-------------- --------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,006,289) $ 103,297
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 63,392 13,699
Loss on sale of property and equipment 3,071 -
Interest relating to beneficial conversion and warrants 696,001 -
Minority interest 8,910 (1,396)
Common stock issued for services 54,000 -
(Increase) decrease in
Inventories 26,007 (280,848)
Due from related parties (106,210) 73,614
Accounts receivable (286,121) (47,344)
Prepaid inventories 20,000 -
Other receivables (7,779) (14,714)
Other current assets 4,150 8,607
Increase (decrease) in
Accounts payable (207,232) 142,168
Accrued payroll taxes 3,772 (9,627)
Other accrued liabilities 10,986 19,543
Due to related parties - (20,589)
Accrued interest 47,041 15,000
-------------- --------------
Net cash provided by (used in) operating activities (676,301) 1,410
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (14,817) (502,277)
Proceeds from the sale of property and equipment 1,000 -
Sale of other assets (28,212) -
Proceeds from the sale of other assets - 12,917
-------------- --------------
Net cash used in investing activities (42,029) (489,360)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loan - 500,000
Proceeds from convertible debt - related party 741,785 -
Proceeds from capitalized lease obligation (312) -
-------------- --------------
Net cash provided by financing activities 741,473 500,000
-------------- --------------
7
</TABLE>
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the
Three Months Ended
March 31,
------------------------------
2000 1999
-------------- --------------
(unaudited) (unaudited)
<S> <C> <C>
EFFECT OF EXCHANGE RATE ON CASH $ 4,820 $ -
-------------- --------------
Net increase (decrease) in cash 27,963 12,050
CASH, BEGINNING OF PERIOD 80,557 133,135
-------------- --------------
CASH, END OF PERIOD $ 108,520 $ 145,185
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
INTEREST PAID $ 749,323 $ -
============== ==============
INCOME TAXES PAID $ 800 $ -
============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the three months ended March 31, 2000, the Company recorded the
retirement of $731,700 (unaudited) in building and improvements and a reduction
of $74,397 (unaudited) in accounts payable pursuant to the dissolution of a
joint venture agreement with China Guangxi Nanning Shipyard of Nanning, Guangxi,
China (see Note 12).
8
</TABLE>
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Sonic Jet Performance, Inc. ("SJPI"), a Colorado corporation, and
subsidiaries (collectively, the "Company") are engaged in the design
and production of watercrafts, 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 subsidiaries, Nanning Sonic Jet, LLC and Sonic Jet Performance, Inc
- Florida ("SJPF"), a wholly owned subsidiary of SJPI. All intercompany
balances and transactions are eliminated in consolidation and 30% of
the results of its Nanning operations. SJPI manages the day-to-day
operations of the subsidiary and is represented by three of the five
directors of the subsidiary.
Interim Unaudited Financial Information
---------------------------------------
The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments, which in
the opinion of management, are necessary to fairly state the Company's
financial position, the results of operations, and cash flows for the
periods presented. The results of operations for the three months ended
March 31, 2000 are not necessarily indicative of results for the entire
fiscal year ending December 31, 2000.
Going Concern
The company has received a report from its independent auditors on its
financial statements for the year ending December 31, 1999 that
includes explanatory paragraph describing the companies uncertainties
to continue as a going concern. This consolidated financial statement
contemplate the ability to continue as such and do not include any
adjustments that might result from this uncertainties.
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.
Treasury Stock
--------------
On June 12, 1998, the Company acquired 432,500 shares of common stock
from its former President for no consideration. These shares are held
in treasury and will be reissued.
Cash Equivalents
----------------
For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. Cash equivalents consist primarily of
United States government securities.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Work in process and finished goods include materials
and labor.
Property and Equipment
----------------------
Property and equipment are stated at cost or at the value of the
operating agreement. Depreciation and amortization are computed using
the straight-line method over the following estimated useful lives:
Furniture and fixtures 7 years
Machinery and equipment 7 years
Tooling and molds 7 years
Vehicles 7 years
Leasehold improvements 15 years
The Company capitalizes costs incurred on tooling and molds once the
design of the product is completed and marketability of the product is
established by independent marketing channels.
Income Taxes
------------
The Company was a limited liability company until June 18, 1998 and was
taxed as a partnership, whereby the members were liable for federal and
state income taxes on their respective shares of the Company's taxable
income.
The Company became a "C" corporation effective June 19, 1998. The
Company uses the asset and liability method of accounting for income
taxes. The asset and liability method accounts for deferred income
taxes by applying enacted statutory rates in effect for periods in
which the difference between the book value and the tax bases of assets
and liabilities are scheduled to reverse. The resulting deferred tax
asset or liability is adjusted to reflect changes in tax laws or rates.
Because the Company has incurred a loss from operations, no benefit is
realized for the tax effect of the net operating loss carry forward due
to the uncertainty of its realization.
Foreign Currency Transaction
----------------------------
Assets and liabilities in foreign currencies are translated at the
exchange rate prevailing at the balance sheet date. Revenues and
expenses are translated at the exchange rate prevailing at the
transaction date, and the resulting gains and losses are reflected in
the statements of operations. Gains and losses arising from translation
of a subsidiary's foreign currency financial statements are shown as a
component of stockholders' equity as accumulated comprehensive income
(loss).
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived Assets
-------------------------------
The Company reviews long-lived assets to be held and used for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. If the sum of
the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the asset, the Company
would recognize an impairment loss based on the estimated fair value of
the asset.
Loss per Share
--------------
The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per
share is computed by dividing loss available to common stockholders by
the weighted-average number of common shares outstanding. Diluted loss
per share is computed similar to basic loss per share except that the
denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive.
Because the Company has incurred net losses, basic and diluted loss per
share are the same.
Comprehensive Income (Loss)
---------------------------
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting comprehensive income
(loss) and its components in a financial statement. Comprehensive
income (loss) as defined includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be
included in comprehensive income (loss), which are excluded from net
loss, include foreign currency translation adjustments and unrealized
gains and losses on available-for-sale securities. Comprehensive income
(loss) consists of foreign currency translation adjustments and is
presented in the consolidated statements of stockholders' equity.
NOTE 2 - INVENTORIES
Inventories at March 31, 2000 consisted of the following:
(unaudited)
-----------
Raw materials and supplies $ 923,983
Work in process 85,240
Finished goods 37,578
Inventory in transit 59,091
--------------
TOTAL $ 1,105,892
==============
<PAGE>
NOTE 3 - CASH
The Company maintains its cash balances at a bank located in
California. Deposits at the bank 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 March 31, 2000, the uninsured portions of the balances held at the
bank aggregated to $52,745 (unaudited).
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 consisted of the following:
(unaudited)
-----------
Furniture and fixtures $ 19,795
Machinery and equipment 461,817
Tooling and molds 348,451
Tooling - new products 3,216,033
Vehicles $ 53,302
Leasehold improvements 32,740
--------------
4,132,138
Less accumulated depreciation and amortization 437,125
--------------
TOTAL $ 3,695,013
==============
A total of $2,242,148 (unaudited) of the tooling for new product has
not been depreciated during the three months ended March 31, 2000 as
these items will be used in production in the following year.
NOTE 5 - CONVERTIBLE DEBT - RELATED PARTY
Convertible debt - related party consists of two loan agreements with
the preferred stockholder to borrow up to $1,500,000 at 12% per annum,
payable quarterly. The loans mature in August 2000 and are secured by
all of the Company's assets. The outstanding principal and unpaid
interest are convertible at any time from the date of the note at 70%
of the average of the five lowest per share prices during the 15
trading days prior to conversion.
<PAGE>
NOTE 5 - CONVERTIBLE DEBT - RELATED PARTY (Continued)
In accordance with FASB's Emerging Issues Task Force Topic No. D-60,
the Company accounts for the beneficial conversion feature of
convertible debt securities based on the difference between the
conversion price and the fair value of the common stock into which the
security is convertible, multiplied by the number of shares into which
the security is convertible. The amount attributable to the beneficial
conversion feature is recognized as additional interest expense over
the most beneficial conversion period using the effective interest
method. The Company has recognized the beneficial conversion feature by
recording interest expense of $492,000, offset by $335,000 of
additional paid-in capital and $157,000 of Unamortized interest. As of
March 31, 2000, the Company has borrowed $1,377,029.
In connection with the execution of these loans, the Company issued two
warrants to purchase a total of 1,500,000 shares of common stock at an
exercise price of $2.49 per share. The warrants were effective
immediately and expires on November 24, 2004. The fair value of the
warrant was calculated using the Black-Scholes option valuation model
with the following assumptions: dividend yield of 0%, risk-free
interest rate of 7%, expected volatility of 70%, and expected life of
approximately five years. As of March 31, 2000, the warrants were
valued at $0.99 and $1.269 per share and was still outstanding. The
Company allocates the proceeds received from debt or convertible debt
with detachable warrants using the relative fair value of the
individual elements at the time of issuance. The amount allocated to
the warrants is accounted for as a debt discount and is amortized to
interest expense over the expected term of the debt using the effective
interest method.
The carrying amount of the convertible debt has been reduced by any
related unamortized debt discount.
NOTE 6 - SUBORDINATED NOTE PAYABLE - RELATED PARTY
The Company has a note payable to one of its stockholders, bearing
interest at 10%, which is subordinated to the convertible debt holders'
interest. In an agreement dated November 24, 1999 between the Company,
the holder of the subordinated promissory note, and the convertible
note holder, the parties agreed to the following:
a) All accrued interest as of November 24, 1999 shall be
converted into common stock at a conversion price of 120% of
the average stock price for the five days prior to November 1,
1999. Interest shall continue to accrue thereafter. This
agreement to convert accrued interest into common stock has
been recorded as 53,905 shares of common stock to be issued at
$143,872, which represents 120% of the average stock price for
the five days prior to November 1, 1999.
<PAGE>
NOTE 6 - SUBORDINATED NOTE PAYABLE - RELATED PARTY (Continued)
b) As of March 1, 2000, the principal amount of the loan,
together with any further accrued interest, are, under certain
conditions, convertible into shares of common stock at 120% of
the average stock price for the five days prior to November 1,
1999.
The outstanding balance at March 31, 2000 was $600,000 (unaudited).
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Lease
The Company leases its facility from its majority stockholder under an
operating lease agreement. On November 24, 1999, under an agreement
between several parties, including the Company and the lessor, part of
the rent payment between November 24, 1999 and March 31, 2000 was
deferred to November 18, 2003. Future minimum lease payments are as
follows:
Year Ending
December 31,
------------
2000 (9 months remaining) $ 67,500
2001 97,500
2002 16,500
2003 6,000
--------------
TOTAL $ 187,500
==============
Rent expense was $21,588 (unaudited) and $18,350 for the three months ended
March 31, 2000 and 1999, respectively.
<PAGE>
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
Lease (Continued)
Future minimum lease payments under a non-cancelable capital lease are
as follows:
Year Ending
December 31,
------------
2000 (9 month remaining) $ 2,000
2001 2,666
2002 12,615
--------------
17,281
Less amount representing interest 2,622
--------------
14,659
Less current portion 1,303
--------------
LONG-TERM PORTION $ 13,356
==============
Capitalized leased assets included in property and equipment consisted
of the following:
Vehicle $ 20,899
Less accumulated amortization 2,787
--------------
TOTAL $ 18,112
==============
Investment in Joint Venture - Dalian
------------------------------------
The Company has entered into an agreement to invest in a joint venture
in Dalian, China for the design, manufacture, and selling of watercraft
jet products. The Company is committed to invest $1,000,000 in the form
of molds, tooling, and technology. The Company will share 45% of the
profits or loss from this venture.
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS
Included in due from related parties at March 31, 2000 are amounts due
from the following related parties:
(unaudited)
-----------
Dalian Sonic Jet, Ltd. $ 460,795
Sonic Marketing International, LLC 35,172
Majed Al Rashid 40,512
--------------
TOTAL $ 536,479
==============
<PAGE>
NOTE 8 - OTHER RELATED PARTY TRANSACTIONS (Continued)
Dalian Sonic Jet, Ltd. is a joint venture partner with SJPI, in which
SJPI shares 45% of the profit or loss of the joint venture. Sonic
Marketing International, LLC is owned by a stockholder of the Company.
In the past it marketed the Company's products and has since ceased
doing business with SJPI.
NOTE 9 - INCOME TAXES
The Company has incurred no income tax expenses since inception. The
actual tax benefit differs from the expected tax benefit computed by
applying the United States federal corporate tax rate of 34% to loss
before income taxes for the three months ended March 31, 2000 and 1999
as follows:
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
(unaudited) (audited)
<S> <C> <C>
Expected tax (benefit) $ (350,000) $ 35,000
State income taxes, net of federal benefit (58,000) 6,000
Changes in valuation allowance 408,000 -
Benefit of net operating loss carryforward - (41,000)
-------------- --------------
TOTAL $ - $ -
============== ==============
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets for the three months ended March 31, 2000 and 1999 were as
follows:
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
(unaudited) (audited)
<S> <C> <C>
Net operating loss carry forwards $ 1,060,000 $ 16,000
Less valuation allowance 1,060,000 16,000
-------------- --------------
TOTAL $ - $ -
============== ==============
</TABLE>
NOTE 10 - STOCK COMPENSATION PLAN
In February 2000, the Company issued 20,000 shares of common stock to a
consultant. The fair value of the consultant's services was estimated
at $20,000. The Company also issued 4,000 shares of common stock to
various officers as bonuses. The monetary value of the bonuses was
estimated at $4,000. Another 30,000 shares were issued to a former
officer of the Company as consideration for the transfer of the domain
name to the Company.
<PAGE>
NOTE 11 - NANNING FACILITY
On January 30, 2000, the joint venture agreement with China Guangxi
Nanning Shipyard of Nanning, Guangxi, China was dissolved, and Nanning
Sonic Jet, LLC became a wholly owned subsidiary of SJPI. As a result,
minority interest is eliminated, and the Company recorded the
retirement of $731,700 (unaudited) in building and improvements and a
reduction of $74,397 (unaudited) in accounts payable.
SONIC JET PERFORMANCE, INC.
FORM 10-QSB
FOR THE THREE MONTHS ENDED MARCH 31, 2000
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARISON OF THE THREE AND THREE MONTHS ENDED MARCH 31, 2000 VS. THE THREE
MONTHS ENDED MARCH 31, 1999
The following table sets forth the Company's consolidated statements of
operations and the percentages that such items bear to net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED, Three MONTHS ENDED
MARCH 31, MARCH 31
2000 % 1999 %
<S> <C> <C> <C> <C>
Sales $ 579,374 100.0 569,700 100.0%
Cost of Sales 445,961 76.9% 272,114 47.8%
-------------- -------------- -------------- --------------
Gross profit(loss) 133,413 23.1% 297,586 52.2%
Selling, General and Administrative 394,780 68.1% 180,942 31.8%
-------------- -------------- -------------- --------------
Income/(Loss) from operations (261,367) (45.0)% 116,644 20.4%
Interest Income 135 0.0% 893 0.2%
Interest expenses (749,323) 129.2% 15,000 2.6%
Other Income 5,083 .9% 0 0%
Other expense (817) .1% 0 0%
Minority Interest 0 0 760 .1%
-------------- -------------- -------------- --------------
Net Income/(Loss) $ (1,006,289) (173.7)% 103,297 18.1%
-------------- -------------- -------------- --------------
</TABLE>
<PAGE>
NET SALES
Net sales for the first quarter 2000 increased by $9,674 or 1.7% to $579,374
compared to $569,700 for the first quarter of 1999. The sales for the quarter
2000 includes 6 Delta, 6 Vortex and 3 Fire Rescue boats. Sales of parts amounted
to $106,212 in the first quarter of 2000 as compared to $238,000 in the first
quarter of 1999. Sale of Fire Rescue Jets amounted to $120,906 in the first
quarter of 2000, as compared to $329,309 in the first quarter of 1999. Sales of
Delta Jets amounted to $97,634 compared to $15,300 in the first quarter of 1999.
Sales of Vortexs amounted to $232,354 compared to zero in the first quarter of
1999. Sale of trailers amounted to $12,950 compared to $2,849 in the first
quarter of 1999.
COST OF SALES
Cost of Sales for the first quarter of 2000 increased by $173,847 or 63.89% to
$445,961 compared to $272,114 for the first quarter of 1999. This is mainly
attributed to the cost of production of boats sold during the 1 quarter 2000
compared to cost of parts sold during the first quarter 1999.
GROSS PROFIT
Gross profit for the first quarter of 2000 decreased by $164,173 or 55.17% to
$133,413 compared to $297,586 for the first quarter of 1999. Sales in the first
quarter of 2000 includes the sales of parts to Dalian Sonic Jet Ltd. At a lower
profit margin when compared to the sale of parts in 1999. The profit margin on
sale of parts is less than the profit margin on sales of the finished goods in
the first quarter 2000 as compared to the profit margin on sale of parts was
higher than the margin on sale of finished goods in the first quarter of 1999..
Further, the Company is mainly engaged in the production of watercraft and boats
in the year 2000 on which the gross profit margin is approximately 29%.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the first quarter of 2000
increased by $213,838 or 118.18% to $394,780 compared to $180,942 for the first
quarter of 1999.
Administration salary and payroll taxes increased by 76,625 or 270.5% to $76,625
for the first quarter Of 2000 compared to $20,680 for the first quarter 1999.
Royalty expenses decreased by $6,500 or 52% to $6,000 for the first quarter of
2000 compared to $12,500 for the first quarter of 2000. This decrease in royalty
is due to the reduction in the rate as revised in the royalty agreement. Travel
expenses for the first quarter of 2000 increased by $14,899 or 510% to $17,821
from $2,922 for the first quarter of 1999. Travel expenses were incurred for the
Miami and Sacramento boat shows in the first quarter of 2000 to promote the
companies products. Advertising expenses for the first quarter of 2000 increased
by $23,820 to $23,820 as compared to none in the first quarter of 1999. Trade
show expenses increased by $9,606 to $9,606 compared to none in the first
quarter of 1999. Commission expenses increased by $25,140 to $25,140 for the
first quarter of 2000, compared to none in the first quarter of 1999. Commission
was paid or provided to the salesmen for their efforts in the first quarter of
2000, compared to the sales and marketing functions were managed by an outside
marketing company in the first quarter of 1999.
NET INCOME (LOSS)
Net Income (Loss) for the first quarter of 2000 was ($261,367) as compared to a
profit of $116,644 for the first quarter of 1999. This increase in loss is
mainly due to the increase in the selling, general and administrative expenses.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital have been cash flow from its
operations and loans on an as-needed basis. Company has $108,520 as cash and
$297,965 trade receivables balance which may not be sufficient to carry business
during the remaining period ending December 2000. 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 obtaining additional debt or equity financing. Furthermore, if the
Company raises funds through the sale of additional equity securities, the
Common Stock currently outstanding may be further diluted.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. 54,000 Shares were issued to
employees and a consultant in
exchange for services.
Pursuant to employee stock award ,these shares were awarded to:
Alex Mardikian 1,000 Shares
Hratch Khedesian 1,000 Shares
Vatche Khedesian 1,000 Shares
George Tfaye 1,000 Shares
Pursuant to agreement with Alex Mardikian for the purchase of Domine name of
"sonicjet.com" Company 30,000 Shares were issued.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. None.
Item S. 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: May 19, 2000 SONIC JET PERFORMANCE, INC.
By: /s/ MADHAVA RAO MANKAL
---------------------------
Name: Madhava Rao Mankal
Title: CFO
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
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