SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT OR [ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1998
Commission File No. 33-18461
JET SET LIFE USA, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 75-2195575
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21935 Van Buren, Suite 4, Grand Terrace, California 92313
(Address of principal executive offices) (Zip Code)
(909) 783-1800
(Registrant's telephone number, including area code)
2060 Chicago Avenue, Suite B-3
Riverside, California 92507
(Former Address)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 October 6, 1998, there were 66,126,792 shares of common stock
outstanding.
PART I
ITEM 1. FINANCIAL STATEMENTS:
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, June 30,
1998 1997
--------- ---------
Total Current Assets
Cash $ 589 $ 10,322
Accounts receivable 75,176 25,858
Inventory 151,320 140,837
--------- ---------
Total Current Assets 227,085 177,017
--------- ---------
Property and Equipment
Machinery and equipment 56,657 58,803
Computer equipment and software 75,754 77,822
Furniture and fixtures 4,776 4,776
Leasehold improvements 12,528 12,528
--------- ---------
Total Property and Equipment 149,715 153,929
Less: Accumulated Depreciation (88,094) (71,116)
--------- ---------
Net Property and Equipment 61,621 82,813
--------- ---------
Other Assets
Deposits 1,000 1,000
Organization costs net of accumulated
amortization of $4,363 and $2,578 7,537 9,322
--------- ---------
Total Other Assets 8,537 10,322
--------- ---------
Total Assets $ 297,243 $ 270,152
--------- ---------
See the accompanying notes to the condensed consolidated financial
statements.
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, June 30,
1998 1997
---------- ---------
Current Liabilities
Accounts payable $ 209,282 $ 181,975
Accrued liabilities 141,367 133,305
Note payable - related party 523,718 344,186
Notes payable - current portion 112,195 20,702
---------- ---------
Total Current Liabilities 986,562 680,168
---------- ---------
Contingent Liabilities
Stockholders' Deficit
Common stock - $0.0001 par value; 100,000,000
shares authorized; 66,126,792 shares issued
and outstanding 6,613 6,613
Additional paid-in capital 500,740 500,740
Accumulated deficit
(1,196,672) (917,122)
Foreign currency translation adjustment - (247)
---------- ---------
Total Stockholders' Deficit (689,319) (410,016)
---------- ---------
Total Liabilities and Stockholders' Deficit $ 297,243 $ 270,152
========== =========
See the accompanying notes to the condensed consolidated financial
statements.
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
---------------------- ---------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $ 54,601 $ 277,853 $ 298,488 $1,005,976
Cost of Goods Sold 51,506 73,243 268,121 283,082
---------- ---------- ---------- ---------
Gross Profit 3,095 204,610 30,367 722,894
---------- ---------- ---------- ---------
Operating Expenses
General and administrative
expense 42,068 185,495 164,686 551,205
Sales and marketing 21,572 91,049 101,098 354,771
Depreciation and amortization 6,895 6,140 20,685 18,402
---------- ---------- ---------- ---------
Total Operating Expenses 70,535 282,684 286,469 924,378
---------- ---------- ---------- ---------
Loss from Operations (67,440) (78,074) (256,102) (201,484)
Interest Expense 7,816 - 23,447 1,014
---------- ---------- ---------- ---------
Net Loss $ (75,256) $ (78,074) $ (279,549) $ (202,498)
========== ========== ========== ==========
Basic and Diluted Loss
Per Share $ (0.00) $ (0.00) $ (0.00) $ (0.00)
========== ========== ========== ==========
Weighted Average Common Shares
Used in Per Share
Calculation 66,126,792 58,317,664 66,126,792 58,317,664
========== ========== ========== ==========
</TABLE>
See the accompanying notes to the condensed consolidated financial
statements.
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Nine Months
Ended March 31,
---------------------
1998 1997
---------- ---------
Cash Flows From Operating Activities
Net loss $ (279,549) $(202,498)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 20,685 18,402
Gain on sale of equipment 2,292 -
Changes in certain current assets and liabilities:
Accounts receivable (49,318) (5,284)
Inventory (10,483) (9,129)
Accounts payable 27,306 2,756
Accrued liabilities 8,062 33,049
---------- --------
Net Cash Provided By (Used In)
Operating Activities (281,005) (162,704)
---------- ---------
Cash Flows From Investing Activities
Purchase of equipment - (19,406)
---------- ---------
Net Cash Used In Investing Activities - (19,406)
---------- ---------
Cash Flows From Financing Activities
Proceeds from notes payable to
related parties 179,532 7,700
Proceeds from notes payable 91,493 121,596
Payments on notes payable - (6,163)
---------- ---------
Net Cash Provided By Financing Activities 271,025 123,133
---------- ---------
Effect of Exchange Rate Changes on Cash 247 -
---------- ---------
Net Decrease in Cash (9,733) (58,977)
---------- ---------
Cash and Cash Equivalents At Beginning of
Period 10,322 10,483
Cash and Cash Equivalents (Cash Overdraft)
At End of Period $ 589 $ (48,498)
========== =========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ - $ 1,014
========== =========
See the accompanying notes to the condensed consolidated financial
statements.
JET SET LIFE USA, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--INTERIM CONDENSED FINANCIAL STATEMENTS
The interim accompanying condensed financial statements have
been prepared by the Company, and are not audited. All
adjustments necessary for fair presentation have been
included, and consist only of normal recurring adjustments.
These financial statements are condensed and, therefore, do
not include all disclosures normally required by generally
accepted accounting principles. These statements should be
read in conjunction with the Company's annual financial
statements included in the Company's Annual Report on Form
10-KSB. The financial position and results of operations
presented in the accompanying financial statements are not
necessarily indicative of the results to be generated for
the remainder of the year.
NOTE 2--BASIC AND DILUTED LOSS PER SHARE
The Company adopted SFAS No. 128, "Earnings per Share', during the quarter
ended December 31, 1997. The new standard revises the manner in which
earnings per share is calculated, but did not have any impact on the
Company's previously reported loss per share. Net loss is divided by
the weighted average number of common shares outstanding during the
period to calculate basic loss per share. Diluted loss per share is
calculated to give effect to stock warrants; however, during periods
when the Company has losses, the effect of 7,200,000 stock warrants were
excluded from the calculation as they would have decreased diluted loss
per share.
NOTE 3--CONTINGENCIES AND COMMITMENTS
A third party has made a claim against the Company and its president alleging
to have made payments to Visioneering International, a trust controlled by
the Company's president ("Visioneering"), in exchange for 700,000 shares of
free-trading common stock of the Company, but that the common stock was not
received in full by the third party. The president of the Company made an
effort to settle the claim by offering to transfer 750,000 shares of
restricted common stock of the Company to the third party; however, the
third party rejected the offer and has demanded the transaction from the
Company and/or its president in the amount of $95,000. The Company asserts
that the transaction was between the third party and the Company's President
or Visioneering and not the Company. The Company's ultimate liability in
the matter cannot now be determined because of the considerable uncertainties
that exist as to how the liability, if one materializes, will be allocated
between the parties. Therefore, it is possible that a loss within the range
of $70,000 and $100,000 may exist; however, based on facts currently
available, management believes that the disposition of the matter will not
have a materially adverse effect on the future results of operations or the
financial position of the Company.
Legal counsel has advised the Company that there are various judgments entered
against the Company for failure to make payment which total approximately
$24,000 and which have been included as liabilities in the accompanying
financial statements. The Company is in the process of negotiating settlement
of these claims.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company sells an oil additive and a fuel saving device named the
Triple Charger through its subsidiaries.
For the three months ended March 31, 1998, the Company had sales of
$54,601 and a net loss of $75,256 compared to sales of $277,853 and a
net loss of $78,074 for the three months ended December 31, 1996
net loss of $49,733 for the three months ended December 31, 1996. For
the nine months ended March 31, 1997, the Company had sales of
$298,488 and a net loss of $279,549 compared to sales of $1,005,976 and
a net loss of $202,498 for the nine months ended December 31, 1996 due
to a change in the Company's product line.
Commencing in the 1st quarter of 1997, sales took a sharp drop and have
continued to decline after the introduction of our new oil additive,
"Oil Extreme". This revolutionary new oil technology uses calcium
carbonate to form a tribochemical film which fills the asperities or
microscopic hills and valleys found in all metal surfaces.
Oil Extreme replaced a former product, Oil Charger, which used
chlorinated paraffins to form the tribochemical film. Although Oil
Charger produced better mileage, acceleration, and horsepower, there
were harmful side effects caused by the chlorinated paraffins.
Chlorinated paraffins produce hydrochloric acid when heated in an
engine, and when they react with ZDDP, which is found in all motor oil
additive packages, sludge is formed. The result is a corrosive and
environmentally unfriendly combination.
Chlorinated paraffins are not used in legitimate motor or racing oils.
However, they are used by many additive companies because they produce
immediate results with a low cost. Almost all additive companies use
chlorinated paraffins, however, this fact is generally not addressed in
promotional material.
Our direct sales force is made up of mostly part-time independent sales
people, and given their dedication to the former product, some initial
difficulties were experienced with the introduction of Oil Extreme
which ultimately affected sales. In an effort to compensate for this
drop in sales, we have produced presentation books, slides, videos,
brochures, and have further introduced a program where we give each
distributor $10,000.00 in free Oil Extreme if they attend a training
school and pass a written test. Some distributors have now had the
opportunity of testing Oil Extreme for themselves and are convinced
that the product is as good as Oil Charger if not better. Other
distributers have not yet become convinced that this change is for the
better. As a result, sales have continued to decrease.
With the introduction of Oil Extreme, the Company feels that it will
eventually be in a much stronger position than before. It is
anticipated that because of the unique way in which the tribochemical
film reduces friction and wear, Oil Extreme will ultimately be the
biggest seller in our product line, especially in light of the fact
that dynamometer readings indicate that any vehicle will achieve an
increase in horsepower after using Oil Extreme.
We are undertaking the following actions to increase awareness and sales:
1. JSLT is embarking on a program of dynamometer testing which
will prove Oil Extreme produces horsepower.
2. JSLT is introducing a synthetic racing oil with the calcium
carbonate technology already in the oil. This makes us a
legitimate oil company and not just an additive producer.
3. We are starting a concentrated push to reach the automotive
performance market. This includes; auto racing, motorcycle
racing, snowmobile racing, truck racing, drag racing, hot rods,
and custom cars. It is not uncommon for even very small engine
shops, and race car and motorcycle builders to have a dynamometer
in their shops. These are the individuals who can prove in a few
minutes that Oil Extreme produces horsepower. This can shorten
the test time drastically, and prove Oil Extreme does everything
we say it does.
4. We plan to introduce Grease Extreme, which also uses the
calcium carbonate technology. This extreme pressure grease
out-performs greases costing several times the cost of Grease
Extreme.
5. JSLT plans to attend performance racing industry trade shows,
to introduce Oil Extreme to the performance market, and to give
samples to anyone willing to test the product on their
dynamometers. We also plan to attend performance industry shows
internationally as funds permit.
6. JSLT plans a limited advertising campaign in conjunction with
articles showing that both Oil Extreme concentrate and Oil Extreme
Synthetic Racing oil out-performs every "top" synthetic racing oil
in the world.
7. JSLT plans to supply Oil Extreme to a variety of top race teams.
8. JSLT plans to start press release campaign introducing Oil
Extreme to the approximately 140 motorcycle and automotive
magazines in the US.
All of the above programs should give us the reputation as being a
legitimate oil company, with legitimate new oil technology.
THE TRIPLE CHARGER
JSLT is currently in negotiations with the Engineering and
Thermodynamics Department of Strathclyde University in Glasgow,
Scotland, to undertake a two to three year study on fuel ionization
using the Triple Charger as the ionizing device. They are very
interested in the Triple Charger technology and have stated that it is
the most advanced fuel saving device they know of.
Very little has ever been published by scientific journals about fuel
ionization. It is their intention to first assign a graduate student
working on a masters degree to set up the engine test procedures for
this study. They also intend to submit applications for funding the
multi-year study to several United Kingdom organizations interested in
technology designed to reduce pollution and use of fossil fuels. It is
proposed that JSLT provide products, technical guidance, and 10% of the
funding. All information from these studies will be the property of
JSLT, and will allow JSLT to further refine the Triple Charger and
other fuel saving and emission reducing technologies.
THE MINI CHARGER
The Mini Charger is one of our products that has largely gone
unnoticed. The Mini Charger is basically the same catalytic cartridge
technology that makes up one part of the Triple Charger.
This catalytic technology is sealed in a metal housing with a wire mesh
that allows fuel to pass over and around the catalytic metal particles.
The device is simply dropped into the fuel tank of any small motor.
Motorcycles, lawnmowers, weed eaters, outboard motors, water craft, jet
skis, snowmobiles, and stationary engines all have small capacity fuel
tanks of 2 to 5 gallons. One or two Mini Chargers can be dropped into
the tank and just roll around loose as they ionize the fuel.
More horsepower, fuel mileage, smoother running engines, and less
emissions are the results of treating the fuel with the Mini Charger.
Because the Mini Charger has been largely ignored by our distributors,
JSLT plans new brochures, promotions to our distributors, and some
dynamometer testing to prove that the technology works.
TIRE CHARGER
The Tire Charger tire sealant, introduced at the Las Vegas convention
was received with mixed feelings. JSLT president, George W. French,
suffered a fall a few days before the opening of the convention and had
to be lifted to the stage at Harrah's Hotel due to a broken ankle. His
obvious pain put somewhat of a damper on the presentation he made
introducing the Tire Charger. Like many new products introduced to
independent sales, they must try the product for themselves before they
sell it to their friends or business accounts.
Tire Charger has not resulted in the volume of sales that was
anticipated due to the Australian manufacturer advising the wrong
amount of fluid that should be put in each tire. Some customers are
having problems with out-of-balance tires because of this over filling.
OUTLOOK
With the introduction of Oil Extreme and its use in conjunction with
our other products, we expect our sales to start gaining momentum. Oil
Extreme and the Triple Charger are two products that truly have
legitimate commercial potential. Many commercial customers spend
several million dollars a year on gasoline, diesel fuel, lubricating
oil, and grease. Some of our distributors are reporting potential
orders of a million dollars or more for a single order.
Some network marketing companies need 100,000 to 1,000,000 people who
sell or purchase consumer products such as vitamins or soap for their
own use in order to achieve total company sales in the three to five
hundred million dollars a year range. JSLT has the potential to reach
these sales volumes with far fewer sales people because of the
potential to acquire large commercial customers.
Unlike most industries, it appears we have no competitors that have
products that perform like Oil Extreme and the Triple Charger. Our
products are unique & revolutionary.
PART II
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On June 30, 1996, the Company acquired Jet Set Life Technologies, Inc.,
a privately held Nevada corporation, ("JSLT") in a business combination
accounted for as a pooling of interests.
JSLT became a wholly owned subsidiary of the Company through the
exchange of 13,369,124 shares of the Company's common stock for all of
the outstanding stock of JSLT. After the transaction the shareholders
of JSLT owned the majority of stock in the Company and management of
JSLT became management of the Company. JSLT was founded and wholly
owned by George French, who was president, a director and controlling
shareholder of Company prior to the acquisition and remained so after
the acquisition.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized:
JET SET LIFE USA, INC.
Date: October 7, 1998 By: /s/ George French
George French, President
