<PAGE>
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, 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 September 30, 2000, the Issuer had 13,024,767 shares of Common Stock, no
par value, outstanding.
<PAGE>
SONIC JET PERFORMANCE, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at September 30, 2000 (unaudited)
Statement of operations for the Nine months ended September 30,
2000 and 1999 (unaudited)
Statements of Cash Flows for the Nine months ending September 30,
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
<PAGE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash $ 27,889
Accounts receivable 431,215
Inventories 905,160
Due from related party 354,584
Other current assets 9,230
------------
Total current assets 1,728,078
Restricted cash 200,000
PROPERTY AND EQUIPMENT, net 3,594,920
OTHER ASSETS
Licensing rights 535,000
Other assets 81,079
------------
TOTAL ASSETS $ 6,139,077
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 306,674
Accrued Payroll Taxes 41,852
Accrued interest and other accrued liabilities 498,867
Convertible debt - related party 2,471,499
------------
Total current liabilities 3,318,891
NOTE PAYABLE - STOCKHOLDER 600,000
------------
Total liabilities 3,918,891
------------
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
13,024,767 shares issued and outstanding 4,328,777
Additional paid-in capital - Stock warrant outstanding 985,870
Additional paid-in capital 971,000
Shares committed to be issued 143,872
Accumulated comprehensive income (16,473)
Accumulated deficit (5,692,860)
------------
Total stockholders' equity 2,220,185
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,139,077
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
<CAPTION>
3 Months Ended September 30, 9 Months Ended September 30,
2000 1999 2000 1999
(unaudited) (unaudited) (unaudited) (unaudited)
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
SALES $ 135,876 $ 120,830 $ 1,102,315 $ 886,851
COST OF SALES 117,538 76,013 937,340 396,905
-------------- -------------- -------------- --------------
GROSS PROFIT 18,338 44,817 164,976 489,946
GENERAL AND ADMINISTRATIVE 411,010 301,024 1,468,803 860,657
-------------- -------------- -------------- --------------
INCOME (LOSS) FROM OPERATIONS (392,672) (256,207) (1,303,828) (370,711)
-------------- -------------- -------------- --------------
OTHER (EXPENSE) --- --- --- ---
OTHER INCOME 3801 25,283 13,471 27,287
OTHER EXPENSE --- --- --- ---
INTEREST INCOME 835 34 1090 4559
INTEREST EXPENSE (471,770) (26,205) (1,888,003) (56,205)
INVENTORY WRITE OFF (1,700) --- --- (383,382)
-------------- -------------- -------------- --------------
TOTAL OTHER INCOME (EXPENSE) (465435) (888) (2256825) (24359)
-------------- -------------- -------------- --------------
INCOME (LOSS) (858,107) (257,095) (3,560,653) (395,070)
BEFORE MINORITY INTEREST
MINORITY INTEREST --- (1190) --- (3016)
-------------- -------------- -------------- --------------
NET INCOME (LOSS) $ (858,107) $ (258,285) $ (3,560,653) $ (398,086)
BASIC & DILUTED EARNINGS(LOSS) (0.07) (0.02) (0.27) (0.03)
PER SHARE
WEIGHTED-AVERAGE COMMON SHARE
USED IN COMPUTATION OF BASIC
AND DILUTED LOSS PER SHARE 12,853,03 412,676,000 13,026,679 12,676,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Additional
Paid in Accumulated
Capital- Shares Comprehensive
Preferred Stock Common Stock Stock Additional Committed Committed
------------------------ ------------------------ Warrant Paid-In to be Income
Shares Amount Shares Amounts Outstanding Capital Issued (loss)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 1,600 1,500,000 12,676,000 3,618,194 316,026 272,000 799,455 (4,943)
31, 1999
CAPITAL CHANGES DUE - - - - - 654,974 713,870 -
TO DEBT FINANCING
(UNAUDITED)
ISSUANCE OF COMMON - - - 348,767 710,583 - (655,583) -
STOCK (UNAUDITED)
CUMULATIVE TRANSLATION - - - - - - (11,530) -
ADJUSTMENT (UNAUDITED)
NET LOSS (UNAUDITED) - - - - - - - -
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE SEPTEMBER
30, 2000 (unaudited) 1,600 1,500,000 13,024,767 4,388,771 971,000 985,870 143,872 (16,473)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(CONTINUED BELOW)
Accumu
lated
Deficit Total
----------- -----------
<S> <C> <C>
BALANCE DECEMBER (2,132,207) 4,368,525
31, 1999
CAPITAL CHANGES DUE - 1,368,844
TO DEBT FINANCING
(UNAUDITED)
ISSUANCE OF COMMON - 55,000
STOCK (UNAUDITED)
CUMULATIVE TRANSLATION -
ADJUSTMENT (UNAUDITED)
NET LOSS (UNAUDITED) (3,508,588) (3,508,588)
----------- -----------
BALANCE SEPTEMBER
30, 2000 (unaudited) (5,692,861) 2,220,186
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------
<CAPTION>
Months Ended September 30,
2000 1999
------------ ------------
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FPOM OPERATING ACTIVITIES
Net Income (Loss) ($3,560,654) ($ 398,086)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities
Depreciation and amortization 156,787 19,935
Loss on sale of property and equipment - 3,071
Interest related to beneficial conversion and warrants 1,368,844 -
Common shares issued for services - 55,000
Minority interest - 12,498
(Increase) decrease in
Inventories 325,304 574,616
Due from related parties 75,684 332,409
Accounts Receivables (419,371) (81,913)
Other Receivables - 11,767
Other current assets (5,080) 13,927
Restricted cash (200,000) -
Prepaid Inventory 163,757 -
Accounts Payable (230,391) 455,516
Accrued Payroll taxes (26,551) 54,965
Other accrued liabilities 8,587 71,120
Accrued Interest 163,191 45,000
------------ ------------
Net, cash provided by (used in)
operating activities (2,285,579) 1,275,511
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment - (188,748)
Purchase of other assets - (1,752,633)
Cost of re-organization - (58,504)
Investment - Dalian Sonic Jet Performance - (349,223)
------------ ------------
Net cash used in investing activities (58,504) (2,290,604)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank loan - 500,000
Proceeds from convertible debt-related parties 2,302,945
Long Term Loans - 407,658
------------ ------------
Net Cash provided by financing activities 2,302,945 907,658
------------ ------------
Effects of exchange rate on cash flow information (11,530) 10,158
Net (decrease) in cash (52,668) (122,273)
CASH BEGINNING OF PERIOD 80,557 133,135
------------ ------------
CASH END OF PERIOD 27,889 10,862
------------ ------------
Supplement disclosure of cash flow information
Interest paid - 7,452
Income tax paid - 800
</TABLE>
SUPPLEMENT SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the nine months ended September 30, 2000, the Company recorded the
retirement of $731,700 (un-audited) in building and improvements and a reduction
of $74,397 (un-audited) in accounts payable pursuant to the dissolution of a
joint venture agreement with China Guangxi Nanning Shipyard of Nanning, Guangxi,
China.
During the nine months ended September 30, 2000, the Company issued 292,267
restricted shares of common stock valued at $655,583 under a settlement
agreement between the Company and an officer of the Company.
During the 9 months ended 9/30/00, the Company issued 2,500 restricted shares
(unaudited) of common stock valued at $1,000 to an outside consultant for
services rendered.
The accompanying notes are an integral part of these financial statements.
<PAGE>
SONIC JET PERFORMANCE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (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,
2000 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2000. For further information, refer to
the financial statements and notes thereto for the year ended December
31, 1999.
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 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 diluted.
Because the Company has incurred net losses, basic and diluted loss per
share are the same.
NOTE 2 - INVENTORIES
Inventories at September 30, 2000 consisted of the following:
(un-audited)
------------
Raw materials and supplies $ 617,027
Work in process 217,297
Finished goods 70,836
---------------
TOTAL $ 905,160
===============
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, 2000, the uninsured portions of the balances held at the bank
aggregated to $148,656 (un-audited).
<PAGE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at September 30, 2000 consisted of the
following:
(un-audited)
-----------------------------------------------------------
Furniture and fixtures $ 12,602
Machinery and equipment 467,693
Tooling and molds 375,821
Tooling - new products 3,149,038
Vehicles 52,793
Leasehold improvements 32,933
---------------
4,090,880
Less accumulated depreciation
and amortization (495,960)
---------------
TOTAL $ 3,594,920
===============
A total of $2,236,148 of the tooling for new product has not been
depreciated during the nine months ended September 30, 2000 as these
items will be used in production in the following year.
NOTE 5 - OTHER ASSETS
Other assets included $200,000 in restricted cash maintained in a time
certificate deposit account.
NOTE 6 - CONVERTIBLE DEBT - RELATED PARTY
Convertible debt - related party consists of four loan agreements with
the preferred stockholder to borrow up to $2,500,000 at 12% per annum,
payable quarterly. The loans mature in October 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.
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. For the nine months ended September 30, 2000, the Company
recognized the beneficial conversion feature by recording interest
expense of $839,000. For the three months ended September 30, 2000, the
Company recognized the beneficial conversion feature by recording
interest expense of $107,000. As of September 30, 2000, the Company had
borrowed $2,508,395 (unaudited).
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 are exercisable
immediately and expire five years from the date of the loan. The fair
value of the warrants were 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 September 30, 2000, the
warrants were valued at $0.99 and $1.269 per share and were still
outstanding.
In addition, the Company issued one warrant to purchase a total of
750,000 shares of common stock at an exercise price of $1 per share.
The warrant is exercisable immediately and expires in May 2005. 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 September 30, 2000, the warrant
was valued at $0.54 per share and was still outstanding.
<PAGE>
In addition, the Company issued one warrant to purchase a total of
250,000 shares of common stock at an exercise price of $0.49 per share.
The warrant is exercisable immediately and expires in September 2005.
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 September 30, 2000,
the warrant was valued at $0.47 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 un-amortized debt discount.
NOTE 6 - SUBSEQUENT EVENTS
Subsequent to September 30, 2000, the Company incurred additional debt
under a loan agreement with the preferred stockholder. To recognize the
beneficial conversion feature relating to the additional debt, the
Company will record interest expense of approximately $34,000.
<PAGE>
SONIC JET PERFORMANCE, INC.
FORM 10-QSB
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 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, NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 % 1999 % 2000 % 1999 %
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 135,876 100.0 $ 120,830 100.0 $ 1,102,315 100.0 $ 886,851 100.0
Cost of sales 117,538 86.5 76,013 62.9 937,340 85.0 396,905 44.7
Gross profit (loss) 18,338 13.5 44,817 37.1 164,976 14.9 489,946 55.3
Selling, general & 411,010 302.5 301,024 249.1 1,468,803 133.2 (860,657) 7.0
administrative expense
Income/(Loss)from (392,672) (289.0) (256,207) (212.0) (1,303,828) (118.3) (370,711) (41.7)
Operations
Interest Income 835 .6 34 0.0 1,090 0.1 4,559 .5
Interest expenses 471,770 347.2 (26,205) (21.9) 1,888,003 171.3 (56,205) 6.3
Other Income 3,801 2.8 25,283 20.9 13,471 1.2 27,287 3.0
Other expenses --- --- --- --- --- --- --- ---
Minority interest --- --- (1,190) (1.0) --- --- (3,016) (0.3)
Net Income/(Loss) (858,107) (631.5) (258,285) (213.7) (3,560,653) (323.0) (398,086) (44.8)
</TABLE>
<PAGE>
NET SALES
Net sales for the 3 months ended September 30, 2000 increased by $15,046 or
12.45% to $135,876 from $120,830 for 3 the months ended September 30, 1999 and
for the 9 month ended September 30, 1999 increased by $215,464 or 24.30% to
$1,102,315 from $886,851 for the 9 months ended September 30, 1999. Management
attributes the increase of sale of Vortex and Delta boats.
Sales of parts amounted to Dalian Sonic Jet, a joint venture partner of Sonic
Jet Performance, Inc. ("the Company") amounted to $106,000 in the 9 months ended
September 30, 2000 as compared to $103,000 in the 9 months ended September 30,
1999.
COST OF SALES
Cost of Sales for the 3 months ended September 30, 2000 increased by $41,538 or
54.62% to $117,538 from $76,013 for the 3 months ended September 30, 1999 and
for the 9 months ended September 30, 2000 increased by $540,435 or 136.16% to
$937,340 from $396,905 for the 9 months ended September 30, 1999. With the
introduction of the Vortex model the company incurred higher cost parts and
increased labor cost during 9 months ended September 30, 2000.
GROSS PROFIT
Gross profit for the 3 months ended September 30, 2000 decreased by $26,479 or
59.08% to $18,338 from $44,817 for the 3 months ended September 30, 1999 and for
the 9 months ended September 30, 2000 decreased by $324,970 or 66.33% to
$164,976 from $489,946 for the 9 months ended September 30, 1999. Sales for the
9 months ended September 30, 2000 includes the sales of parts to Dalian Sonic
Jet Ltd. The profit margin on sale of parts to Dalian were higher during the 9
months period ending September 30, 1999. With the introduction of the Vortex
model the company incurred higher cost parts and increased labor cost during 9
months ended September 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the 3 months ended September
30, 2000 increased by $109,986 or 36.53% to $411,010 from $301,024 for the 3
months ended June 30, 1999 and for the 9 months ended September 30, 2000
increased by $608,146 or 70.66% to $1,468,803 from $860,657 for the 9 months
ended September 30, 1999.
Insurance expenses for the 3 months ended September 30, 2000 increased by
$15,490 to $15,490 from zero for the 3 months period ended September 30, 1999
and for the 9 months ended September 30, 2000 expenses increased by $17,385 or
64.34% to $44,404 from $27,019 for the 9 months ended September 30, 1999.
Royalty expenses for the 3 months ended September 30, 2000 decreased by $4,475
or 42.72% to $6000 from $10,475 for the 3 months period ending September 30,
1999 and for the 9 months ended September 30, 2000 decreased by $19,500 or
52.00% to $18,000 from $37,500 for the 9 months period ending September 30,
1999.
Travel expenses for the 3 months ended September 30, 2000 decreased by $11,323
or 71.42% to $4,531 from 15,854 for the 3 months ended September 30, 1999 and
for the 9 months ended September 30, 2000 decreased by $8,710 or 19.71% to
$35,473 from $44,183 for the 9 months ended September 30, 1999.
Salary expenses for the 3 months ended September 30, 2000 increased by $57,791
or 71.108% to $139,071 from $81,280 for the 3 months period ended September 30,
1999 and for the 9 months ended September 30, 2000 expenses increased by
$264,608 or 129.69% to $468,624 from $204,016 for the 9 months ended September
30, 1999.
<PAGE>
Rent expenses for the 3 months ended September 30, 2000 increased by $2,500 or
12.34% to $22,500 from $20,250 for the 3 months period ended September 30, 1999
and for the 9 months ended September 30, 2000 expenses increased by $7,498 or
12.24% to $68,748 from $61,250 for the 9 months ended September 30, 1999.
Legal and Professional expenses for the 3 months ended September 30, 2000
increased by $1,597 or 22.26% to $8,770 from $7,173 for the 3 months period
ended September 30, 1999 and for the 9 months ended September 30, 2000 expenses
increased by $1,706 or 4.88% to $36,601 from $34,895 for the 9 months ended
September 30, 1999.
Commission on sales expenses for the 3 months ended September 30, 2000 increased
by $6,955 or 254.85% to $9,684 from $2,729 for the 3 months period ended
September 30, 1999 and for the 9 months ended September 30, 2000 expenses
increased by $53,237 to $55,966 from $ 2,729 for the 9 months ended June 30,
1999.
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 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 3 the month ended September 30, 2000 was ($858,107) as
compared to a Income (Loss) of ($258,285) for the 3 months ended September 30,
1999 and net (loss) for the 9 months ended September 30, 2000 was ($3,560,653)
as compared to ($398,086) for the 9 the months ended September 30, 1999. This
increase in loss is mainly attributable to increased costs associated with
assuming the selling, general and administration expenses which were previously
the expense of Sonic Jet International, Inc. Also the financial impact of the
closure of the Florida operations contributed to the increased loss.
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.
>From time to time Company is borrowing from its principal lender Encore Capital
Management for the working capital needs.
On June 17, 1998, the Company issued 1,600 shares of Series A Convertible
Preferred Stock ("Series A Preferred Stock") for $1,500,000, net of a discount
of $100,000. The holders of Series A Preferred Stock are not entitled to receive
dividends. The Series A Preferred Stock is convertible to common stock at the
option of the holders, subject to certain limitations, and is limited to a
formula of either a fixed conversion price of $4.00 per share or a variable
conversion price, as defined, not to exceed the fixed conversion price or at a
price that includes an unpaid premium if said premium is not paid in cash prior
to conversion. For conversion purposes, the holders of Series A Preferred Stock
stockholders are entitled to an 8% premium from the day following the day of
issuance to the conversion date. If said premium is not paid in cash, the
premium is added to the face amount of $1,000 per share to determine the number
of common shares to be received on conversion. A total of 800,000 shares of
common stock have been reserved for the conversion of the Series A Preferred
Stock.
<PAGE>
The Series A Preferred Stock is automatically convertible into common stock on
the fifth anniversary of the issuance date. If such conversion does not take
place at maturity, then the holders of the Series A Preferred Stock can require
the Company to purchase the shares for cash at a redemption amount as defined.
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
a line 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. The company has been named as a plaintiff
in a wrongful death litigation. The company
insurance carriers have been notified and
are proceeding with the defense of this
action.
Item 2. Changes in Securities. 292,267 shares were issued to
Albert Mardikian in exchange for
the debts due by the Company.
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.
<PAGE>
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: September 30, 2000 SONIC JET PERFORMANCE, INC.
By: /s/ Madhava Rao Mankal
------------------------------
Name: Madhava Rao Mankal
Title: Chief Finance Officer
