SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
Date of report (Date of earliest event reported): December 31, 2001
Commission File No. 0-22273
Sonic Jet Performance, Inc..
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(Exact Name of Registrant as Specified in Its Charter)
Colorado 84-1383888
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
15662 Commerce Lane, Huntington Beach, CA. 92649
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(Address of principal executive offices) (ZIP Code)
(714) 895-0944
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(Registrant's Telephone Number, Including Area Code)
Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 1. CHANGE IN CONTROL
On December 27, 2001, Ashford Capital, LLC ("Ashford") purchased shares
of our Series B Convertible Preferred Stock (the "Series B Stock"), which are,
in the aggregate, convertible into 20% of the outstanding shares of our common
stock (the "Common Stock"). Ashford, as the holder of the Series B Stock, has
the right to vote, with the holders of Common Stock, on any matter to which the
Common Stock holders are entitled to vote, the number of shares of Common Stock
into which the Series B Stock is convertible. In connection with the purchase,
Ashford obtained the right to appoint three of five of our directors. We also
granted Ashford piggyback registration rights.
The Series B Stock was purchased pursuant to a Series B Convertible
Preferred Stock Purchase Agreement ("Series B Agreement") we entered into with
Ashford Capital, LLC ("Ashford") on December 27, 2001. Ashford purchased 10
shares of our Series B Stock, for a price of $2,500 per share, or an aggregate
of $25,000. In connection with the Series B Agreement, we amended our Articles
of Incorporation by filing a Certificate of Designation with the Secretary of
State of Colorado (the "Series B Designation"). Under the Series B Designation,
each share of Series B Stock is convertible into 2% of the outstanding shares of
our Common Stock, on a fully diluted basis, measured at the time of the
conversion. The holder may convert the Series B Stock into shares of Common
Stock, at any time, however, shares not voluntarily converted by the one-year
anniversary date of the Agreement shall automatically convert. If we are
liquidated, distribute our assets, dissolve or wind-up (a "Liquidation"), the
holders of Series B Stock shall receive the greater of (i) $2,500 per share of
Series B Stock they hold at the time of such Liquidation, or (ii) their pro rata
share of the total value of our assets and funds to be distributed, assuming the
Series B Stock is converted to Common Stock.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
None.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None.
ITEM 5. OTHER EVENTS
Series C Preferred Stock Financing
On December 27, 2001, we completed a sale of shares of our Series C
Convertible Preferred Stock (the "Series C Stock") pursuant to a Series C
Convertible Preferred Stock Purchase Agreement ("Series C Agreement") dated
December 27, 2001. We issued the purchaser five shares of our Series C Stock,
for a price of $10,000 per share, or an aggregate of $50,000.
In connection with the Series C Agreement, we amended our Articles of
Incorporation, by filing a Certificate of Designation with the Secretary of
State of Colorado (the "Series C Designation"). Each share of Series C Stock is
convertible into a number of shares of Common Stock that equals the sum of (1)
the quotient obtained by dividing $10,000 by eighty-five percent (85%) of the
average of the lowest three (3) intra-day bids of the Common Stock on the
primary exchange, quotation system or market on which it is listed, over the 10
trading days immediately preceding the date of the conversion (the "Base
Conversion Shares"), and (2) twenty percent (20%) of the Base Conversion Shares.
We agreed to file by February 25, 2002, a registration statement with
the Securities and Exchange Commission to register the Base Conversion Shares.
We also agreed that if the registration statement has not been declared
effective by March 27, 2002, because we have failed to respond to SEC comments,
we must pay the purchaser a penalty equal to five percent of the purchase price
of the Series C Stock, (i) on March 28, 2002, and (ii) on each subsequent
monthly anniversary of such date until the registration statement is effective.
In the event of a Liquidation, the holders of Series C Stock shall be
entitled to receive one hundred and fifty percent (150%) of the amount of
consideration paid for the Series C Stock, after which time the holders of
Series B Stock and Series C Stock shall participate in the Liquidation, on a pro
rata basis, based on the number of shares of the Common Stock into which the
Series B Stock and the Series C Stock are convertible at the time of the
Liquidation. The holders of Series C Stock have no voting rights.
Amendment of Certain Agreements
On December 20, 2001, we entered into an agreement with Encore
Capital Management, LLC ("Encore Capital"), JNC Opportunity Fund, Ltd. (the
"Opportunity Fund") and JNC Strategic Fund, Ltd. (the "Strategic Fund", and
together with "Encore Capital" and the "Opportunity Fund", "Encore"). Encore
released us from all prior known and unknown claims, including, those relating
to certain loan and other transactions we entered into with Encore in November
1999, and modified in June 2001. In exchange for the release, we agreed that if
at the time we have received an aggregate of $500,000 in capital infusions (the
"Equity Infusion"), Encore's percentage ownership interest in our equity
securities (as adjusted for any stock splits, combinations, etc) constitutes
less than 18% of our then issued and outstanding shares of common stock, we will
issue Encore a number of shares of common stock which when added to Encore's
then current holding, equals 18% of our outstanding common stock. At the present
time, Encore holds 22% of our outstanding common stock.
On December 21, 2001, we entered into a similar agreement (the
"Rashid Release Agreement") with Sheikh Mohammed Al Rashid. Mr. Rashid released
us from all prior known and unknown claims, including, those relating to certain
loan and other transactions we entered into with Mr. Rashid in November 1999,
and modified in June 2001. In exchange for the release, we agreed that if at the
time we have received the Equity Infusion, Mr. Rashid's percentage ownership
interest in our equity securities (as adjusted for any stock splits,
combinations, etc) constitutes less than 13% of our then issued and outstanding
shares of common stock, we will issue Mr. Rashid a number of shares of common
stock which when added to Mr. Rashid's then current holding, equals 13% of our
outstanding common stock. At the present time, Mr. Rashid holds 18% of our
outstanding common stock, and serves as one of our directors.
ITEM 6. RESIGNATION OF DIRECTORS AND APPOINTMENT OF NEW DIRECTORS
Appointment of Directors
On December 21, 2001, we appointed Madhava Rao Mankal, our chief
financial officer, and George Moseman, to serve as directors along with our
current director, Sheikh Mohammed Al Rashid.
MADHAVA RAO MANKAL, age 50, has served as Chief Financial Officer of SJPI
since May 1999. Prior to that, he served as Controller of American Power
Products, Inc. from July 1997 to May 1999, and Manager at American Power
Products, Inc., from September 1994 to July 1997. He has international
experience in various manufacturing industries as Controller for over 20 years
including Financial Advisor, New Halfa Agricultural Corporation, Government of
Sudan (Rehabilitation Project Management Unit, World Bank). He has Bachelors
degree in Commerce, Certificate from Institute of Chartered Accountants of
India, Certificate from Institute of Cost Accountants of India.
GEORGE MOSEMAN IV, age 54, has previously worked in New York City for
Lehman Brothers and Smith Barney/Shearson in the early to mid-nineties. Mr.
Moseman returned to the Los Angeles area and worked for Tradeway Securities,
becoming a partner in the Irvine, CA office in 1996. In 1997, Mr. Moseman
resigned from Tradeway to become marketing director of Sonic Jet Performance,
Inc. In 1998, Mr. Moseman accepted the position of national marketing director
of Lamborghini of North America, who, at the time, was closely affiliated with
Sonic Jet Performance on a number of special projects. For the past three years,
Mr. Moseman has worked as an investment banker as well as a consultant
specializing in foreign companies wishing to establish a presence in the U.S.
through mergers or strategic alliances. Mr. Moseman attended the University of
Michigan.
SHEIKH MOHAMMED AL RASHID, age 56, For more than five years, Sheikh
Mohammed has been an independent businessman, with investments and operations in
a wide range of industries, including the real estate, commercial trading,
cement and light industries. Sheikh Mohammed is a member of the Board of
Directors of Bin Sulaiman Company. He was educated in Saudi Arabia, Egypt, and
England.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Exhibits:
3.1. Certificate of Designation for Series B Convertible Preferred Stock
3.2. Certificate of Designation for Series C Convertible Preferred Stock
10.1 Series B Convertible Preferred Stock Purchase between Ashford Capital,
LLC and Sonic Jet Performance, Inc.
10.2 Series C Convertible Preferred Stock Purchase between Ashford Capital,
LLC and Sonic Jet Performance, Inc.
10.3 Letter Agreement between Sonic Jet Performance, Inc., and Encore
Capital Management, LLC, JNC Opportunity Fund, Ltd. and JNC Strategic
Fund, Ltd.
10.4 Letter Agreement between Sonic Jet Performance, Inc. and Sheikh
Mohammad Al Rashid.
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.
SONIC JET PERFORMANCE, INC.
By: /s/ Madhava Rao Mankal
-------------------------------- Date: January 4, 2001
Madhava Rao Mankal, Secretary