SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Sonic Jet Performance, Inc.
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Sonic Jet Performance, Inc.
15662 Commerce Lane
Huntington Beach, California 92649
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
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We cordially invite you to attend our 2002 Special Meeting of Shareholders,
which is being held in lieu of our Annual Meeting. This Special Meeting will be
held at 10:00 A.M., California time, on Monday, May 6, 2002, at the Company's
corporate headquarters located at 15662 Commerce Lane, Huntington Beach,
California 92626, for the following purposes:
1. To elect three (3) directors to the Board of Directors to hold office
for a term of one (1) year and until their respective successors are elected
and qualified.
2. To approve an amendment to the Company's Articles of Incorporation to
increase the authorized number of shares of common stock from 100,000,000 to
300,000,000.
3. To approve an amendment to the Company's Bylaws to increase the
maximum number of directors from three (3) to five (5).
4. To consider a proposal to ratify the Company's appointment of Michael
Johnson & Co., LLC as the Company's independent auditors.
5. To transact such other business as may properly come before this
Special Meeting or any adjournment thereof.
The Board of Directors has nominated Madhava Rao Mankal, George Moseman and
Scott R. Ervin as the nominees for election to the Board of Directors.
The Board of Directors has fixed the close of business on March 25, 2002, as
the record date for the determination of shareholders entitled to notice of, and
to vote at, this Special Meeting.
You are cordially invited to be present and to vote at this Special Meeting
in person. However, you are also requested to sign, date and return the enclosed
proxy, whether or not you expect to attend. In the event you have returned a
signed proxy, but elect to attend this Special Meeting and vote in person, you
will be entitled to vote.
By Order of the Board of Directors,
/s/ MADHAVA RAO MANKAL
------------------------------
Madhava Rao Mankal,
President, CFO and Secretary
Huntington Beach, California
March 14, 2002
SONIC JET PERFORMANCE, INC.
15662 Commerce Lane
Huntington Beach, California 92649
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PROXY STATEMENT
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The Board of Directors of Sonic Jet Performance, Inc. (the "Company") is
soliciting proxies to be voted at the Special Meeting of Shareholders of the
Company to be held on Monday, May 6, 2002, at the Company's corporate
headquarters located at 15662 Commerce Lane, Huntington Beach, California, at
10:00 A.M., California time, and at any adjournments thereof (the "Special
Meeting" or the "Meeting"), for the purposes set forth in the accompanying
Notice of Special Meeting of Shareholders and described herein. This Proxy
Statement describes issues on which we would like you, as a shareholder, to
vote. It also gives you information on these issues so that you can make an
informed decision. The approximate date on which this Proxy Statement and the
enclosed form of proxy are first being sent or given to shareholders is April
15, 2002.
VOTING INFORMATION
Who May Vote
The Board of Directors of the Company (the "Board of Directors" or the
"Board") has fixed the close of business on March 25, 2002, as the record date
for the determination of shareholders entitled to receive notice of, and to vote
at, the Special Meeting (the "Record Date"). The outstanding stock of the
Company consists of its common stock ("Common Stock"), its Series B Convertible
Preferred Stock (the "Series B Preferred Stock") and its Series C Convertible
Preferred Stock (the "Series C Preferred Stock", and sometimes together with the
Series B Preferred Stock, the "Preferred Stock"). At the Record Date, __________
shares of Common Stock, ten shares of Series B Preferred Stock and 34 shares of
Series C Preferred Stock were outstanding.
The Preferred Stock will vote together with the Common Stock at the Special
Meeting. Each holder of Common Stock will be entitled to one vote for each share
of Common Stock held by such shareholder. Each holder of Preferred Stock shall
be entitled to the number of votes equal to the number of whole shares of Common
Stock into which such Preferred Stock is convertible upon the close of business
on the Record Date.
With respect to the election of directors only (Proposal 1), shareholders
may vote in favor of all nominees or withhold their votes as to all nominees or
withhold their votes as to specific nominees.
Revocability of Proxy
You may revoke your proxy prior to its exercise. You may do this by (a)
delivering to the Secretary of the Company, Madhava Rao Mankal, at or prior to
the Special Meeting, an instrument of revocation or another proxy bearing a date
or time later than the date or time of the proxy being revoked or (b) voting in
person at the Special Meeting. Mere attendance at the Special Meeting will not
serve to revoke your proxy.
How Your Shares Will Be Voted
All proxies received and not revoked will be voted as directed. If no
directions are specified, such proxies will be voted "FOR": (a) election of each
of the Board's nominees for Directors; (b) approval of an amendment to the
Articles of Incorporation of the Company to increase the authorized number of
shares of the Company's common stock from 100,000,000 to 300,000,000 shares; (c)
approval of an amendment to the Company's Bylaws to increase the maximum number
of directors from three to five; and (d) ratification of the appointment of
Michael Johnson & Co., LLC as the Company's independent auditors. As to any
other business that may properly come before the Special Meeting, the persons
named in such proxies will vote in accordance with their best judgment, although
the Company does not presently know of any other such business.
Voting, Quorum and Broker Non-Votes
Shares of Common Stock and Preferred Stock will be counted as present at the
Special Meeting if the shareholder is present and votes in person at the Meeting
or has properly submitted a proxy card. Shareholders holding at least one-third
of the Company's outstanding shares entitled to vote as of the Record Date must
be present at the Special Meeting in order to hold the Meeting and conduct
business. This is called a quorum. Abstentions and non-votes will be counted for
purposes of determining the existence of a quorum at the Special Meeting. The
three nominees receiving the highest number of votes "FOR" a director will be
elected as directors. This number is called a plurality.
The affirmative vote of a majority of the voting power of the shares of
Common Stock and Preferred Stock present in person or by proxy at the Special
Meeting and entitled to vote on each proposal (other than the election of
directors) is required for the adoption of each such proposal.
Abstentions will be counted as votes against any of the proposals as to
which a shareholder abstains, but non-votes will have no effect on the voting
with respect to any proposal as to which there is a non-vote. A non-vote may
occur when a nominee holding shares of Common Stock or Preferred Stock for a
beneficial owner does not vote on a proposal because such nominee does not have
discretionary voting power and has not received instructions from the beneficial
owner.
Expenses and Method of Solicitation
The expenses of soliciting proxies for the Special Meeting are to be paid by
the Company. Solicitation of proxies may be made by means of personal calls
upon, or telephonic or telegraphic communications with, shareholders or their
personal representatives by directors, officers and employees of the Company who
will not be specially compensated for such services. Although there is no formal
agreement to do so, the Company may reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in forwarding
this Proxy Statement to shareholders whose Common Stock is held of record by
such entities.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial Ownership Table
The following table contains certain information as of the March 4, 2002
regarding all persons who were the beneficial owners of more than 5% of the
outstanding shares of Common Stock, Series B Preferred Stock or Series C
Preferred Stock, each of the directors of the Company, each nominee for election
to become a director, each of the executive officers named in the Summary
Compensation Table set forth herein under the caption "Compensation of Executive
Officers" (we refer to all these officers as the "Named Executive Officers") and
all directors and executive officers as a group. The persons named hold sole
voting and investment power with respect to the shares shown opposite their
respective names, unless otherwise indicated. The information with respect to
each person specified is as supplied or confirmed by such person, based upon
statements filed with the SEC, or based upon the actual knowledge of the
Company.
Amount and Nature
of Beneficial Ownership(1)
Number of
Shares Right to Percent of
Name and Address Owned(2) Acquire Class(1)(2)
Common Stock
Principal Shareholders:
Sheikh Mohammed Al Rashid (3) ......................................... 4,318,774 -- 15.40%
Encore Capital Management, LLC (4) .................................... 5,963,841 -- 21.27%
Albert Mardikian (5) .................................................. 7,498,171 -- 26.74%
Ashford Capital, LLC (6) .............................................. 564,706 5,614,096 18.36%
e-Fund Capital Partners, LLC (7) ...................................... 1,129,412 913,495 7.06%
Officers
Rao Mankal (8) ........................................................ -- -- --
Albert Mardikian (5) .................................................. 7,498,171 -- 26.74%
Alan Weaver (9) ....................................................... -- -- --
Directors
Rao Mankal (8) ........................................................ -- -- --
George Moseman (10) ................................................... 250,000 -- *
Scott R. Ervin (11) ................................................... 15,000 -- *
All directors and executive officers as a group (5 persons) ........... 7,763,171 -- 27.68%
Series B Convertible Preferred Stock
Ashford Capital, LLC (6)............................................... 10 -- 100%
Series C Convertible Preferred Stock
e-Fund Capital Partners, LLC (7) ...................................... 11 -- 32.35%
Noriaki Sasaki (12) ................................................... 16 -- 47.06%
Ashford Capital, KK (13) .............................................. 5 -- 14.71%
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* Less than one percent.
(1) Subject to applicable community property and similar statutes.
(2) Includes shares beneficially owned, whether directly or indirectly,
individually or together with associates.
(3) Includes 3,297,097 shares held by Sheikh Rashid, and 1,021,677 shares we
are obligated to issue to Sheikh Rashid upon his release of certain liens
he has on our assets. The business address of Sheikh Mohammed Al Rashid is
P.O. Box 5490, Jeddah, 2422, Kingdom of Saudi Arabia.
(4) Shares of common stock beneficially owned by Encore Capital Management,
LLC, represent 2,471,759 shares owned by JNC Strategic Fund, LLC and
1,731,449 shares owned by JNC Opportunity Fund, LLC, and an aggregate of
1,776,633 shares we are obligated to issue to those funds upon their
release of certain liens they have on our assets. The business address of
Encore Capital Management, LLC is 12007 Sunrise Valley Drive, Suite 460,
Reston, Virginia 20191.
(5)Shares of common stock beneficially owned by Mr. Mardikian include
7,147,040 shares held by Sonic Jet Performance, LLC, of which Mr.
Mardikian is the sole shareholder, 334,831 shares held by Mr. Mardikian,
and 16,300 shares held by MGS Grand Sports, Inc., of which Mr. Mardikian
is a majority shareholder. The business address of Mr. Mardikian is
15662 Commerce Lane, Huntington Beach, California 92649.
(6)Shares owned include 564,706 shares owned by Ashford Capital, KK, a
Japanese company of which Ashford Capital, LLC, owns a minority interest,
(2) 5,613,456 shares issuable upon conversion of Series B Preferred Stock
held by Ashford Capital, LLC, and (3) 415,225 shares issuable upon
conversion of Series C Preferred Stock held by Ashford Capital, KK. The
conversion shares referenced above are calculated assuming conversion
dates of March 4, 2002. Ashford Capital, LLC, disclaims beneficial
ownership of the shares attributable to Ashford Capital, KK. The business
address of Ashford Capital, LLC is 1301 Dove Street, Suite 800, Newport
Beach, CA. 92660.
(7)Shares of common stock beneficially owned includes 1,129,412 shares owned
by e-Fund Capital Partners, Inc, and 913,495 shares issuable upon
conversion of Series C Preferred Stock held by e-Fund Capital Partners.
The business address of e-Fund Capital Partners, LLC is 301 East Ocean
Blvd., Suite 640, Long Beach, CA. 90802.
(8)The business address of Mr. Mankal is 15662 Commerce Lane, Huntington
Beach, California 92649.
(9)The business address of Mr. Weaver 8 Nicosia, Laguna Niguel, California
92677.
(10)The business address of Mr. Moseman is 23 Loma Avenue, Long Beach,
California 90803.
(11)The business address of Mr. Ervin is 4606 Horseshoe Bend, Austin, Texas
78731.
(12)The business address of Noriaki Sasaki is 3-9-1-201 Koishikawa Bunkyo-ku,
Tokyo, Japan 112-0002.
(13)The business address of Ashford Capital, KK is 2-5-15 Minami-Azabu,
Minato-Ku, Tokyo, Japan.
ELECTION OF DIRECTORS
(Proposal 1)
Under the Company's Articles of Incorporation and Bylaws, three persons,
Madhava Rao Mankal, Scott R. Ervin, and George Moseman have been nominated by
the Board of Directors for election at the Special Meeting to serve a one year
term expiring at the annual meeting in 2003, and until their respective
successors are elected and qualified. Directors shall be elected by a plurality
of the votes of shares of Common Stock present in person or represented by proxy
at the Special Meeting and entitled to vote on such election.
We currently have three directors, all of whose terms expire at the Special
Meeting. Each of the nominees presently serves as a director and has served
continuously as a director of the Company since the date indicated in his
biography below. In the event any nominee is unable to or declines to serve as a
director at the time of the Special Meeting (which is not anticipated), the
persons named in the proxy will vote for the election of such person or persons
as may be designated by the present Board of Directors.
Unless otherwise directed in the accompanying proxy, the persons named
therein will vote for the election of the three nominees listed below. The Board
of Directors unanimously recommends a vote for the election of Madhava Rao
Mankal, Scott R. Ervin, and George Moseman as directors.
Appointment of Directors
Pursuant to the Series B Convertible Preferred Stock Purchase Agreement we
entered into with Ashford Capital, LLC, we agreed to maintain at least five
directors, and that Ashford Capital, LLC, or its assignee, shall have the right
to nominate three of the five directors, so long as Ashford or its assignee
holds the Series B Convertible Preferred Stock or any shares underlying the
same.
Information About the Director Nominees
The following table sets forth information regarding the nominees, including
age on the date of the Special Meeting and business experience during the past
five years.
Director
Name Age Since Principal Occupation and Other Information
Madhava Rao Mankal.............. 50 2001 Mr. Mankal has served as our Chief Financial Officer since May
1999, as our Secretary since February 2001, and as our President
since January 2002. Mr. Mankal has also served as a director
since December 2001. Between September 1994 and May 1999, he
served in various positions with American Power Products,
including, controller and manager of accounting.
Scott R. Ervin.................. 47 2002 Mr. Ervin has served as a director since February 2002. Mr.
Ervin also served on our board between June and October 2001.
Between 1999 and the present, he has been an attorney in private
practice in Austin, Texas. Between 1991 and 1999, Mr. Ervin
practiced law with the law offices of Dr. A. Abbar, in Jeddah,
Saudi Arabia.
George Moseman.................. 55 2001 Mr. Moseman has served as a director since December 2001. Since
1999 he has worked as a private investment banker and a
financial consultant specializing in foreign companies
attempting to establish a presence in the United States.
Between 1998 and 1999, Mr. Moseman served as national marketing
director of Lamborghini of North America. Between 1997 and
1998, he served as our Marketing Director, and between 1996 and
1997 he was a partner with Tradeway Securities.
Information with Respect to Our Executive Officers
Madhava Rao Mankal is the sole executive officer of the Company, serving as
President, Chief Financial Officer and Secretary. Mr. Mankal is also a director
of the Company, and his business biography is referenced above. Our executive
officers are elected by, and serve at the pleasure of, the Board of Directors.
INFORMATION ABOUT THE BOARD OF DIRECTORS
The Board of Directors manages our business. It establishes overall policies
and standards for the Company and reviews the performance of management. The
directors are kept informed of our operations at meetings of the Board through
reports and analyses from, and discussions with, management. The Board of
Directors has not established any committees.
During the fiscal year ended December 31, 2001 (the "Fiscal Year" or "Fiscal
2001"), the Board of Directors met on two (2) occasions.
None of the incumbent directors served as a director at the time of any
board meeting held during the Fiscal Year.
Directors are not paid any fees or remuneration, as such, for their service
on the Board.
APPROVAL OF INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Proposal 2)
Introduction
The Company's Board of Directors has approved a proposal to amend our
Articles of Incorporation to increase the authorized number of shares of common
stock from 100,000,000 to 300,000,000. We are submitting the proposal to you,
the shareholders, for approval. The proposed increase in the authorized number
of shares of common stock will take effect, if at all, after it is approved by
you and after we file an Articles of Amendment, in the form attached hereto as
Appendix A, with the Secretary of State of the State of Colorado. We expect
that, if the proposal is approved by you, the Articles of Amendment will be
filed promptly following the Special Meeting.
Purpose of Share Increase
The proposed increase in the authorized number of shares of common stock has
been approved by the Board of Directors to make additional shares of common
stock available for issuance. The Board took this action because it intends to
raise additional capital for the Company through the issuance of Common Stock,
or other securities convertible into Common Stock.
Accordingly, the Board of Directors is asking that the shareholders approve
the proposed amendment to the Company's Articles of Incorporation to effectuate
the increase in the authorized number of shares of Common Stock. A vote in favor
of Proposal Two (the "Share Increase Proposal") will be a vote for approval of
the proposed increase in the authorized number of shares of Common Stock from
100,000,000 to 300,000,000, and for granting authority to the Board of Directors
to effectuate the share increase.
The Board of Directors unanimously recommends a vote in favor of the Share
Increase Proposal.
Implementation of Share Increase
If the shareholders approve the Share Increase Proposal, the Board would
direct management of the Company, as soon thereafter as is practicable, to file
an Amendment to the Company's Articles of Incorporation, substantially in the
form attached hereto as Appendix A, with the Secretary of State of the State of
Colorado (the "Share Increase Amendment").
Reasons for Share Increase -- Advantages
The Board of Directors is in the process of raising additional capital for
the Company to help fund operating expenses and achieve the Company's business
plan. As of March 4, 2002, we had 36,479,046 shares of common stock outstanding,
on a fully diluted basis, which included 25,234,751 shares of common stock
issued and outstanding, 1,021,677 and 1,776,633 shares of common stock we are
obligated to issue respectively, to Sheikh Mohammed Al Rashid and Encore Capital
Management, LLC, upon their satisfaction of certain conditions, 5,613,456 shares
of common stock issuable upon conversion of the outstanding shares of Series B
Convertible Preferred Stock, and 2,823,529 shares of common stock issuable upon
conversion of the shares of Series C Convertible Preferred Stock outstanding as
of that date. Therefore, as of March 4, 2002, 63,520,954 shares of common stock
were available for issuance. The Board of Directors believes that an increase in
the authorized number of shares of common stock is desirable so additional
shares of common stock are available for issuance in connection with the
Company's capital raising efforts.
Reasons Against Share Increase -- Disadvantages
Even though the Board of Directors believes that the potential advantages of
the share increase outweigh any disadvantages that might result, there are
possible disadvantages of a share increase.
The Board intends to issue a portion of the additional authorized but
unissued shares of Common Stock, without further shareholder approval. This
could substantially dilute the holders of the Common Stock. In addition, an
increased number of authorized but unissued shares of the Common Stock, may be
construed as having an anti-takeover effect, although neither the Board of
Directors nor our management views this proposal in that perspective. However,
the Board of Directors could use the increased number of authorized but unissued
shares to frustrate persons seeking to take over or otherwise gain control of
the Company by, for example, privately placing shares with purchasers who might
side with the Board of Directors in opposing a hostile takeover bid. Shares of
the Common Stock could also be issued to a holder that would thereafter have
sufficient voting power to assure than any proposal to amend or repeal the
Company's by-laws or certain provisions of the Company's Articles of
Incorporation would not receive the requisite vote. Such uses of the Common
Stock could render more difficult, or discourage, an attempt to acquire control
of the Company if such transaction were opposed by the Board of Directors.
Form of Articles of Amendment to Articles of Incorporation
The form of the Share Increase Amendment to the Articles of Incorporation is
included as Appendix A to this Proxy Statement.
No Dissenters' Rights
The holders of shares of the Common Stock have no dissenters' rights of
appraisal under Colorado law, our Articles of Incorporation or our by-laws with
respect to the proposed Amendment to the Company's Articles of Incorporation or
the increase in the authorized number of shares of Common Stock.
APPROVAL OF INCREASE IN MAXIMUM NUMBER OF DIRECTORS
(Proposal 3)
Introduction
The Company's Board of Directors has approved a proposal to amend Articles
III, Section 2, of our Bylaws to increase the maximum number of directors that
may serve on our board from three (3) to five (5). The proposed amendment would
amend Article III, Section 2 of the Bylaws to read as follows:
"Section 2. Number, Qualifications and Tenure. The number of
directors of the corporation shall be fixed from time to time
by the board of directors, within a range of no less than one
or more than five. A director shall be a natural person who is
eighteen years of age or older. A director need not be a
resident of Colorado or a shareholder of the corporation.
Directors shall be elected at each annual meeting of
shareholders. Each director shall hold office until the next
annual meeting of shareholders following his election and
thereafter until his successor shall have been elected and
qualified. Directors shall be removed in the manner provided
by the Colorado Business Corporation Act."
We are submitting the proposal to you, the shareholders, for approval. The
proposed increase in the maximum number of directors will take effect, if at
all, after it is approved by you.
Purpose of Increase in Maximum Number of Directors
The Bylaws currently allow us to have no less than one and up to three
directors. The proposed increase in the maximum number of directors has been
approved by the Board of Directors primarily to enable us to meet our obligation
under the Series B Convertible Preferred Stock Purchase Agreement we entered
into on December 27, 2001, under which we agreed to maintain at least five
directors on our board, three of which the holder of the Series B Preferred
Stock may nominate.
The Board of Directors unanimously recommends a vote in favor of the
Increase in the maximum number of directors permitted to serve on the board.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(Proposal 4)
Selection of Independent Auditors
The Board has selected Michael Johnson & Co., LLC as the Company's
independent auditors for the fiscal year ending December 31, 2002 and has
further directed that management submit the selection of independent auditors
for ratification by the shareholders at the Special Meeting.
Shareholder ratification of the selection of Michael Johnson & Co., LLC as
the Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Michael Johnson &
Co., LLC to the shareholders for ratification as a matter of good corporate
practice. If the shareholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board may, in its discretion, direct the appointment of different
independent auditors at any time during the year if it determines that such a
change would be in the best interests of the Company and its shareholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Special Meeting will
be required to ratify the selection of Michael Johnson & Co., LLC as the
Company's independent auditors.
A representative of Michael Johnson & Co., LLC is not expected to be present
at the Meeting.
The board of directors unanimously recommends a vote in favor of the
ratification of the appointment of Michael Johnson & Co., LLC as the Company's
independent auditors.
Relationship of the Company with Independent Public Accountants
Fees billed by Michael Johnson & Co., LLC for the audit of the Company's
consolidated financial statements as of and for the year ended December 31, 2001
totaled $10,000 plus $1,030 in travel expenses. No other fees were billed to the
Company by Michael Johnson & Co., LLC.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation earned by or paid to Albert
Mardikian and Alan Weaver, each of whom served as our chief executive officer
during 2001, and Madhava Rao Mankal, who served as our Chief Financial Officer
and Secretary during 2001. No other persons served as executive officers during
2001. We refer to these individuals as our named executive officers in other
parts of this proxy.
Summary Compensation Table
Long-term
Compensation
Awards
Annual Compensation Other Annual Shares Underlying
Name and Principal Position Fiscal Year Salary($) Bonus($) Compensation Options(#)
--------------------------- ------------------------- ------------ ------------------------------
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
Madhava Rau Mankal 2001 $35,208 -- $29,792(2) __
(1).................
President, Chief Financial Officer
and Secretary
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
2000 $65,000 -- -- 10,000 (3)
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
1999 $41,410 -- -- --
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
Albert Mardikian (4)................... 2001 $65,153 -- $3,495(2) --
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
Design Director, President and Chief 2000 $112,372 -- ----- --
Executive Officer of International
Operations, and former interim Chief
Executive Office
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
(5) 1999 $120,000 -- --
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
--
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
Alan Weaver (6) CEO ................... 2001 $9,711 -- -- --
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
Former President and Chief Executive 2000 $127,586 -- -- --
Officer
------------------------------------------- ------------ ------------- ------------- -------------- ------------------
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(1) Mr. Mankal was appointed President on January 2, 2002.
(2) Represents payments in exchange for services reported pursuant to IRS Form
1099.
(3) Represents stock options issued on May 1, 2001, all of which Mr. Mankal
voluntarily cancelled in December 2001.
(4) Mr. Mardikian served as our Interim Chief Executive Officer from February
2001 to October 2001.
(5) Represents salary in cash and 26,667 shares in lieu of $60,000 salary for
1999.
(6) Mr. Weaver served as our Chief Executive Officer from July 2000 to January
2001.
Stock Options
No stock options were granted or exercised during the fiscal year ended
December 31, 2001. The only options held by an executive officer or director,
included 10,000 options granted to Mr. Mankal on May 1, 2000. Mr. Mankal
voluntarily cancelled those options on December 31, 2001, as of which date they
were out-of-the-money.
Employment Contracts
On January 2, 2002, we entered into an at-will employment agreement
with Mr. Mankal. The agreement provides for an annual base salary of $64,800,
and an annual bonus of up to 25% of Mr. Mankal's annual base salary based on the
Company's achievement of certain earnings and positive cash flow targets, to be
established by the board. We also granted him 250,000 shares of common stock
that vest in two equal yearly installments. The shares were issued at fair
market value of the common stock on the date issued.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Transactions Related to Albert Mardikian
Huntington Beach Lease
On February 1, 1999, we entered into a three-year lease agreement with MGS
Grand Sport, Inc., for our facility in Huntington Beach, California. Our lease
expired in February 2002, and converted to a month-to-month term. When we
entered into the lease, Albert Mardikian, the majority shareholder, a director
and officer of MGS Grand Sport, Inc., beneficially owned over 20% of our common
stock through his ownership of Sonic Jet Performance, LLC. Throughout the lease
term, Mr. Mardikian has served as our director of design, and chairman and chief
executive officer of our international operations. In addition, between January
and November 2001, Mr. Mardikian was our interim chief executive officer, and
between March and October 2001, he was a director. Mr. Mardikian's son, Alex
Mardikian served as our Chief Executive Officer from November 1998 through
October 1999, and as a director between July 1998 and July 2000. In addition,
Mr. Mardikian's brother, wife and brother-in-law, are minority shareholders and
directors of, and his brother and wife are officers of, MGS Grand Sport, Inc.
To satisfy our obligation to pay $97,500 for rent due during fiscal 2000, we
paid MGS Grand Sport, Inc., $97,500 in cash, and issued no shares of common
stock.
To satisfy our obligation to pay $81,700 for rent due during fiscal 2001, we
paid MGS Grand Sport, Inc., $51,375 in cash and $6,750 in cash during 2002, and
the balance amount $23,625 was settled by delivering a Red Vortex for the value
of $16,000 and issuing 38,125 shares of S-8 common stock. We also issued MGS
Grand Sport, Inc., 14,310 shares of S-8 common stock to compensate it for fiscal
2001 property tax coverage it paid on our behalf.
Between January 1, 2002 and February 20, 2002, we paid MGS Grand Sport,
Inc., $13,500 in rent.
License Agreements
Patents awarded to Mr. Mardikian protect the designs and certain components
of our boats. On November 24, 1999, Mr. Mardikian granted us exclusive licenses,
until November 18, 2003, to use those patents and related rights. We owed Mr.
Mardikian $24,000 in royalties for 2000, none of which we paid in cash, and
$24,000 of which we satisfied by issuing Mr. Mardikian 10,765 shares of common
stock. We owed him $46,138 in royalties for 2001, none of which we paid in cash,
and was satisfied by issuing him 36,910 shares of common stock.
In December 2001, to induce Ashford Capital, LLC to purchase our Series B
Convertible Preferred Stock, Mr. Mardikian offered to assign his watercraft
related patents to Mardikian Marine Design, LLC, an entity owned by Mr.
Mardikian and a principal of Ashford Capital, LLC. To facilitate the assignment,
on December 27, 2001, we terminated our license agreements with Mr. Mardikian
and entered into an exclusive license with Mardikian Marine Design, LLC, to use
the patent rights through December 30, 2011. Each year of the term of the
license, we must pay Mardikian Marine Design as royalties, a percentage of our
gross revenue that results from the sale of our products that incorporate or
include any of Mr. Mardikian's designs. We are obligated to pay (1) four percent
of the first $3 million is gross revenues, (2) three percent of gross revenues
over $3 million but below $5 million, (3) two percent of gross revenue over $5
million and under $10 million, and (4) one percent of any gross revenue in
excess of $10 million. We can pay the royalties to Mardikian Marine Design in
cash or stock, at our discretion. In addition we have agreed to a minimum
payment of $60,000 per year.
Other Transactions
As a condition to the issuance to Mr. Mardikian of 42,564 shares of common
stock on June 29, 2001, in exchange for his cancellation of our obligation to
pay him $46,138 for past due royalties and $7,067 for business expenses, we
agreed that if we were unable to obtain $500,000 in capital infusions by August
22, 2002, Mr. Mardikian could convert those shares back into debt. On December
20, 2001, in exchange for a general release of claims from Mr. Mardikian,
including his right to covert those shares into debt, we agreed that when we
receive a total of $500,000 in capital infusions, we would issue Mr. Mardikian a
number of shares of common stock which when added to his holdings as of December
20, 2001, would equal 20% of our outstanding common stock. As of February 15,
2002, the time we met that condition, Mr. Mardikian still owned more than 20% of
our common stock and therefore we will not issue him any additional shares.
On June 29, 2001, we issued Mr. Mardikian 5,654 shares of our common stock
in exchange for $7,067 in business-related expenses we owed him.
In 2001, the plaintiffs in a wrongful termination lawsuit filed against us,
named MGS Grand Sport, Inc., as a defendant. We agreed to reimburse MGS Grand
Sport, Inc., for $2,950 in legal fees it paid for its defense. In lieu of paying
cash, we issued MGS Grand Sport, Inc., 2,360 shares of common stock.
Between September and November 2001, MBZ West, Inc., an entity owned by Mr.
Mardikian's nephew, loaned us approximately $110,926 at an interest rate of 4%
per month, or 48% per annum. Between September and November 2001, we paid an
aggregate of $115,863 for the principal and interest that had accrued on the
loan.
We own 45% of Dalian Sonic Jet Co., Ltd., a joint venture company that
Sonic Jet Performance, LLC, our predecessor in interest, and two partners,
formed in May 1998, under the laws of the People's Republic of China. We formed
the joint venture to manufacture boat shells in China. The joint venture
agreement provided for the payment to Mr. Mardikian of 2% of the profit
resulting from the joint venture's sales. Because of disagreements between the
partners, Dalian Sonic Jet Co., Ltd., discontinued operations in June 2000, and
Mr. Mardikian has not received any royalty payments since 1999.
All of the June 29, 2001, issuances of common stock described above, had an
effective issue price of $1.25 per share. The market price of our common stock
on that day was $0.17.
Transactions with JNC Opportunity Fund, Ltd. and JNC Strategic Fund, Ltd.
In November 1999, we issued a promissory note in the principle amount
of $1.25 million to JNC Opportunity Fund, Ltd., in exchange for a $1.25 million
loan and 1.25 Million warrants. . In connection with a loan, we also issued in
March, May, September, October and November of 2000, an additional promissory
note and warrants to JNC Opportunity Fund, Ltd., in exchange for five advances
of an aggregate of $1.45 million and 1.45 Million warrants. At the time we made
each additional advance, Neil Chau, a principle of Encore Capital Management,
LLC, which controls JNC Opportunity Fund, Ltd., served on our board of
directors. Encore Capital Management, LLC also controls JNC Strategic Fund,
Ltd., which owned all outstanding shares of our Series A Preferred Stock.
On June 29, 2001, we converted $3,069,699 in principal and interest due
under the promissory notes into 2,455,759 shares of our common stock. We also
issued the fund 16,000 shares to compensate it for certain legal expenses
related to the transaction that we had agreed to pay. On the same day, we
converted 1,600 shares of Series A Preferred Stock held by JNC Strategic Fund,
Ltd., into 1,731,449 shares of common stock. Encore Capital Management, LLC,
also controls that fund. We issued all of these shares at an effective issue
price of $1.25 per share. The issuances resulted in the JNC funds collectively
holding approximately 22% of our outstanding common stock. The conversions were
effected on the condition that if we were unable to raise $500,000 in capital
infusions by August 22, 2002, JNC Opportunity Fund, LLC and JNC Strategic Fund,
LLC, could reconvert the shares back into debt and Series A Preferred Stock,
respectively.
On December 20, 2001, in exchange for a general release of claims from
Encore Capital Management, LLC and the JNC funds, we agreed that when we receive
a total of $500,000 in capital infusions, we would issue the JNC funds a number
of shares of common stock which when added to their holdings as of December 20,
2001, would equal 18% of our outstanding common stock. As of February 15, 2002,
we had raised the $500,000. To satisfy our obligation, we intend to issue the
JNC funds 1,776,633 shares of our common stock.
Transactions with Sheikh Mohammed Al Rashid
On June 29, 2001, we issued 697,097 shares of our common stock to Sheikh
Mohammed Al Rashid, in lieu of paying $808,871 in principle and interest due
under a promissory note we issued to him in May 1999. On June 29, 2001, we also
issued Sheikh Rashid 50,000 shares in satisfaction of a $250,000 debt a third
party owed him. We agreed to pay the debt as part of our settlement of a lawsuit
filed against us by the third party, and issued the shares at an effective issue
price of $1.25 per share. At the time of these transactions, Sheikh Rashid was a
director, and beneficially owned over 20% of our outstanding common stock.
On December 21, 2001, in exchange for a general release of claims, we
agreed that when we receive a total of $500,000 in capital infusions, we would
issue Sheikh Rashid a number of shares of common stock which when added to his
holdings as of December 20, 2001, would equal 13% of our outstanding common
stock. As of February 15, 2002, we had raised the $500,000. To satisfy our
obligation, we intend to issue Sheikh Mohammed Al Rashid 1,021,677 shares.
Sheikh Mohammed Al Rashid served as a director between April 1999 and
February 2002.
Other Transactions
In January 2002, Ashford Capital, KK purchased 7 shares of our Series C
Convertible Preferred Stock for an aggregate purchase price of $70,000. It
converted two of the preferred shares into 564,706 shares of our common stock.
Ashford Capital, LLC, the holder of our Series B Preferred Stock, owns a
minority interest in Ashford Capital, KK.
In 1998, Sonic Jet Performance, LLC, our predecessor-in-interest, loaned
$75,683 to Sonic Marketing International, LLC. On June 30, 2000, we wrote off
the debt as uncollectable. Alex Mardikian, the son of Albert Mardikian, and
Majid Al Rashid, the son of Sheikh Mohammed Al Rashid, were the sole
shareholders, directors and officers of Sonic Marketing International, LLC.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who own more than ten percent of a registered class of our
equity securities to file with the SEC initial reports of ownership and reports
of changes in ownership of common stock and other equity securities. Officers,
directors and greater-than-ten-percent shareholders are required by SEC
regulations to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on review of the copies of such reports
furnished to us, our officers, directors and greater-than-ten-percent beneficial
owners complied with all Section 16(a) filing requirements except as set forth
below:
Neither Scott R. Ervin nor George Moseman filed a Form 3 upon their
appointment as directors of the Company.
Albert Mardikian did not file a Form 4 or 5 reporting the issuance in July
2001, of shares of common stock to Sonic Jet Performance, LLC, an entity that he
controls and which owns over 20% of our outstanding common stock.
Sheikh Mohammed Al Rashid, Albert Mardikian, Alan Weaver, James Chau and
Neil Chau (deceased) did not file a Form 4 or 5 reporting they are no longer
subject to Section 16 reporting requirements.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the next Annual Meeting must be received by the Company at the
address set forth on the first page of this Proxy Statement no later than
_________, 2003, to be included in the proxy material for the 2003 Annual
Meeting. It is recommended that shareholders submitting proposals direct them to
the Secretary of the Company and utilize certified mail, return-receipt
requested in order to ensure timely delivery.
ANNUAL REPORT
You may obtain, without charge, a copy of our Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2001, including the financial statements
and the financial statement schedules required to be filed with the SEC pursuant
to rule 13a-1 of the Exchange Act. You may also obtain copies of exhibits to the
Form 10-KSB, but we will charge a reasonable fee to shareholders requesting such
exhibits. You should direct your request in writing to us at the address of the
Company set forth on the first page of this Proxy Statement, attention: Madhava
Rao Mankal, Secretary.
OTHER MATTERS
The Board of Directors does not intend to present any items of business
other than those stated in the Notice of Special Meeting of Shareholders. If
other matters are properly brought before the meeting, the persons named in the
accompanying proxy will vote the shares represented by it in accordance with
their best judgment. Discretionary authority to vote on other matters is
included in the proxy.
By Order of the Board of Directors,
/s/ MADHAVA RAO MANKAL
---------------------------------
Madhava Rao Mankal
President, Chief Financial Officer,
Secretary and Director (Principal
Executive Officer and Principal
Financial and Accounting Officer)
Huntington Beach, California
March 14, 2002
APPENDIX A
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
SONIC JET PERFORMANCE, INC.
The undersigned, Madhava Rao Mankal, hereby certifies as follows:
1. He is the duly elected, qualified and acting President, Chief Financial
Officer and Secretary of Sonic Jet Performance, Inc., a corporation
organized and existing under the Corporations and Associations Code of the
State of Colorado (the "Corporation ").
2. The name of the corporation is Sonic Jet Performance, Inc.
3. Article Third of the Articles of Incorporation is hereby amended to read as
follows:
THIRD: The aggregate number of shares which the
corporation shall have authority to issue is three hundred ten
million (310,000,000) shares of which a portion shall be
common stock and a portion shall be preferred stock, all as
described below.
A. Common Stock. The aggregate number of
common shares which the corporation shall have the authority
to issue is three hundred million (300,000,000), which shares
shall be designated "Common Stock." Subject to all the rights
of the Preferred Stock as expressly provided herein, by law or
by the Board of Directors pursuant to this Article, the Common
Stock of the corporation shall possess all such rights and
privileges as are afforded to capital stock by applicable law
in the absence of any express grant of rights or privileges in
these Articles of Incorporation, including, but not limited
to, the following rights and privileges:
(a) dividends may be declared and
paid or set apart for payment on the Common Stock out of any
assets or funds of the corporation legally available for the
payment of dividends;
(b) the holders of Common Stock
shall have unlimited voting rights, including the right to
vote for the election of directors and on all other matters
requiring stockholder action. Each holder of Common Stock
shall have one vote for each share of Common Stock standing in
his name on the books of the corporation and entitled to vote,
except that in the election of directors each holder of Common
Stock shall have as many votes for each share of Common Stock
held by him as there are directors to be elected and for whose
election the holder of Common Stock has a right to vote.
Cumulative voting shall not be permitted in the election of
directors or otherwise.
(c) on the voluntary or involuntary
liquidation, dissolution or winding up of the corporation, and
after paying or adequately providing for the payment of all of
its obligations and amounts payable in liquidation, dissolu-
tion or winding up, and subject to the rights of the holders
of Preferred Stock, if any, the net assets of the corporation
shall be distributed pro rata to the holders of the Common
Stock.
B. Preferred Stock. The aggregate number of
preferred shares which this corporation shall have the
authority to issue is ten million (10,000,000) shares, each
with no par value, which shares shall be designated "Preferred
Stock." Shares of Preferred Stock may be issued from time to
time in one or more series as determined by the Board of
Directors. The Board of Directors is hereby authorized, by
resolution or resolutions, to provide from time to time, out
of the unissued shares of Preferred Stock not then allocated
to any series of Preferred Stock, for a series of the
Preferred Stock. Each such series shall have distinctive
serial designations. Before any shares of any such series of
Preferred Stock are issued, the Board of Directors shall fix
and determine, and is hereby expressly empowered to fix and
determine, by resolution or resolutions, the voting powers,
full or limited, or no voting powers, and the designations,
preferences and relative, participating, optional or other
special rights, and the qualifications, limitations and
restrictions thereof as provided by Colorado law. Before
issuing any shares of a class or series, the corporation shall
deliver to the secretary of state for filing articles of
amendment to these articles of incorporation that set forth
information required by Colorado law, including but not
limited to, the designations, preferences, limitations, and
relative rights of the class or series of shares.
C. Voting. Unless otherwise ordered by a
court of competent jurisdiction, at all meetings of sharehold-
ers one-third of the shares of a voting group entitled to vote
at such meeting, represented in person or by proxy, shall
constitute a quorum of that voting group.
4. The amendment set forth herein was duly approved and adopted by the Board
of Directors of this Corporation on March 11, 2002.
5. The amendment set forth herein was duly approved by the shareholders of
this Corporation on May 6, 2002.
6. The number of votes cast for the amendment by each voting group entitled to
vote separately on the amendment was sufficient for approval by that voting
group.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be signed by Madhava Rao Mankal, its President , Chief Financial Officer and
Secretary, this 6th day of March, 2002.
-------------------------------
Madhava Rao Mankal, President
Chief Financial Officer and Secretary
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS OF
SONIC JET PERFORMANCE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned stockholder(s) of Sonic Jet Performance, Inc., a
Colorado corporation (the "Company"), hereby appoints Madhava Rao Mankal or
______________, either of them, proxies, each with full power of substitution,
for and in the name of the undersigned at the Special Meeting of Stockholders of
the Company to be held on May 6, 2002, and at any and all adjournments, to vote
all shares of the capital stock of said Company held of record by the
undersigned on _____________, 2002, as if the undersigned were present and
voting the shares.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED. IN
THE ABSENCE OF ANY DIRECTION, THE SHARES WILL BE VOTED FOR PROPOSALS 2, 3 AND 4,
FOR THE NOMINEES NAMED IN PROPOSAL 1 ON THE REVERSE SIDE AND IN ACCORDANCE WITH
THEIR DISCRETION ON SUCH OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING.
(CONTINUED AND TO BE VOTED, SIGNED AND DATED ON THE REVERSE SIDE)
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
SONIC JET PERFORMANCE, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
THE LISTED NOMINEES AND THE PROPOSAL HAVE BEEN PROPOSED BY THE COMPANY. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED AND "FOR" THE
LISTED PROPOSAL.
1. ELECTION OF DIRECTORS:
Nominees for election to the Board of Directors:
Madhava Rao Mankal, George Moseman and Scott R. Ervin
--------- ----------- ------------
For Withhold For All
All All except
as
indicated
to the
contrary
--------- ----------- ------------
[ ] [ ] [ ]
--------- ----------- ------------
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, WRITE THE
NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
--------------------------------------------------------------------------------
2. INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
Proposal to approve an amendment the Company's Certificate of Incorporation to
increase the authorized number of shares of common stock from 100,000,000 to
300,000,000.
--------- ----------- ------------
For Against Abstain
--------- ----------- ------------
[ ] [ ] [ ]
--------- ----------- ------------
3. INCREASE IN MAXIMUM NUMBER OF DIRECTORS
Proposal to approve an amendment the Company's Bylaws to increase the maximum
number of directors from three to five.
--------- ----------- ------------
For Against Abstain
--------- ----------- ------------
[ ] [ ] [ ]
--------- ----------- ------------
4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Proposal to ratify the Company's appointment of Michael Johnson & Co., LLC, as
the Company's independent auditors.
--------- ----------- ------------
For Against Abstain
--------- ----------- ------------
[ ] [ ] [ ]
--------- ----------- ------------
The proxies are authorized to vote in their discretion upon such other business
as may properly come before the meeting.
I PLAN TO ATTEND THE MEETING [ ]
Please date this Proxy and sign exactly as your name appears
hereon. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If there
is more than one trustee, all should sign. All joint owners
should sign.
------------------------------------
Signature
Dated: ______________________ , 2002
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FOLD AND DETACH HERE