U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                                ----------------

          [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2002
                                       or
        [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

             For the transition period from 01-01-2002 to 12-31-2002

                         Commission File Number 0-22273

                           SONIC JET PERFORMANCE, INC.
                 (Name of small business issuer in its charter)

                                ----------------

                               Colorado 84-1383888
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)


                 11782 Western Avenue, Unit 18 Stanton, CA 90680

               (Address of principal executive offices) (Zip Code)
                                 (714) 895-0944
                           (Issuer's telephone number)
        Securities registered pursuant to Section 12(b) of the Act: None

Securities  registered  pursuant to Section 12(g) of the Act: Common Stock,  par
value $.0001 per share

Check  whether the issuer (1) 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 [ ]

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

Issuer's revenues for fiscal year ending December 31, 2002 - $2,606,634.

The aggregate market value of the voting Common Stock held by  non-affiliates of
the issuer was  approximately  $7,597,139.  (computed  using the  63,309,492 non
affiliate shares outstanding at closing price of $0.12 per share of Common Stock
on December 31, 2002 as reported by the Over the Counter Bulletin Board).

As  of  March  31,  2003,  the  issuer  had  94,997,037shares  of  Common  Stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the issuer's Proxy Statement  prepared in connection with the Annual
Meeting of Stockholders to be held in 2003are  incorporated by reference in Part
III of this Form 10-KSB.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]



                                       1
<PAGE>

                           SONIC JET PERFORMANCE, INC.

                                   FORM 10-KSB

                                TABLE OF CONTENTS

                                                                            Page
                                     Part I

 Item 1.  Description of Business ............................................3
 Item 2.  Description of                                                     12
          Property...........................................................
 Item 3.  Legal Proceedings..................................................13
 Item 4.  Submission of Matters to a Vote of Security Holders................13

                                     Part II

 Item 5.  Market for Common Equity and Related Stockholder Matters...........14
 Item 6.  Management's Discussion and Analysis or Plan of  Operation.........16
 Item 7.  Financial Statements.................................................
 Item 8.  Changes In and Disagreements With Accountants on                   31
              Accounting and Financial Disclosure..............................


                                    Part III

 Item 9.  Directors, Executive Officers, Promoters  and Control              32
              Persons; Compliance With Section 16(a) of the Exchange Act.......

 Item 10. Executive Compensation.............................................33
 Item 11. Security Ownership of Certain Beneficial Owners and Management.....34
 Item 12. Certain Relationships and Related Transactions.....................36
 Item 13. Exhibits and Reports on Form 8-K...................................37
 Item 14. Controls and Procedures ...........................................37
 Signatures..................................................................37



                                       2
<PAGE>




                                     PART I

Item 1   DESCRIPTION OF BUSINESS


Sonic Jet Performance, Inc. (the "Company) designs, manufactures and markets
high performance commercial boats and mine protected vehicles. The products
combine innovative designs with power, safety, handling and stability to create
boats and vehicles designed to protect and save lives. Sonic Jet Performance,
Inc. is a publicly traded company, which trades on the Over-the-Counter Bulletin
Board, ( National Quotation Service under the ticker symbol "SJET").

The Company is headquartered in Stanton, California and is comprised of two
business divisions. The first, is the Commercial Boats division ("Sonic Jet")
in Stanton, California, with additional facilities in Riverside, California and
Nanning, China. The second is the Mine Protected Vehicles division, ("TSG"),
which is located in Charleston, South Carolina.

o    Sonic Jet designs,  manufactures,  and markets high-performance  commercial
     boats  (collectively,  the "Boats") used by fire,  police, and the military
     personnel for fire, rescue, and patrol.

o    TSG   designs,    manufactures   and   markets   mine-protected    vehicles
     (collectively,  the  "MPVs" or  "Vehicles")  used by police,  and  military
     organizations  domestically and abroad for transportation,  de-mining,  and
     special applications.

While the company is still dedicated to producing commercial boasts, the Company
has shifted its primary focus to producing mine clearing and protection vehicles
with its Acquisition of Technical Solutions Group Inc.

Sonic Jet and TSG (collectively the "Company") conducts operations through
facilities almost exclusively in the United States, with a dormant facility in
China available for use.

The Company has dedicated its efforts to producing the finest mission-specific
boats and vehicles for fire, rescue, law enforcement, military, and government
agencies. The Company is a complete design-to-manufacturing organization,
creating or licensing designs, and creating tooling, molds, and parts necessary
to assemble the products in-house. The Company plans to become the leading
proprietary designer and manufacturer of mission-specific boats and specialty
vehicles - delivered at a superior cost-versus-performance ratio to competitive
products.

History
-------

Sonic Jet Performance, Inc., is a corporation organized and existing under the
laws of the State of Colorado, having been originally incorporated in November
1996, as Boulder Capital Opportunities III ("BCO"). Effective June 30, 1998, BCO
acquired all assets and assumed all liabilities of Sonic Jet Performance, LLC, a
California limited liability company that was in the business of producing and
marketing recreational boats, jet boats, trailers, and related accessories. On
November 4, 1998, the name was changed to Sonic Jet Performance, Inc. In 2000,
and 2001 the Company emphasized recreational boats, and generated gross revenues
of approximately one million dollars ($1,000,000) while sustaining operating
losses. As part of the shift in 2002 to focus primarily on Commercial Boats, the
Company relocated its corporate headquarters, assembly, and prototyping facility
to Stanton, California and a storage facility in Riverside, California.

In July of 2002 the Company acquired the shares of Technical Solutions Group
(TSG), a development stage manufacturer of Mine Protected Vehicles based in
Charleston, South Carolina. The shares are held in a subsidiary, TSG
International, a Nevada Corporation established in 2002 and controlled by the
Company. TSG was originally formed 1997 to supply specialty vehicles to military
and law enforcement agencies worldwide. The vehicles are used to transport
personnel in hostile areas that may include landmines, and to locate and remove
landmines. The Company's primary products are Mine Protected and Armored Land


                                       3
<PAGE>


Vehicles produced in 85,000 square feet of office and heavy manufacturing space
on the grounds of the former Navy Shipyard in Charleston, South Carolina.

 The address of our principal executive office is 11782 Western Avenue, Unit 18
Stanton, CA 98680. Our telephone number is (714) 895-0944. Our website address
is www.sonicjet.com. Information contained on our website does not constitute
part of this report and our address should not be used as a hyperlink to our
website.

Business Overview
-----------------

Mine Protected Vehicles Division:

The Vehicle or MPV contracts typically are fixed-price. The Company also
anticipates contracts for research, engineering, and prototypes that are
typically cost-plus arrangements, under which we are reimbursed for approved
costs and also receive a fee. Our production contracts are typically fixed-price
arrangements under which we assume the risk of cost overruns and receive the
benefit of cost savings. All of our contracts, whether we are the prime
contractor or a subcontractor, are subject to audit and cost controls. As a
result, the customer typically has the right to object to our costs as not
allowable or as unreasonable, which can increase the costs we bear rather than
allow recovery as costs.

Commercial Boats Division:

Sonic Jet designs, manufactures, and distributes high-performance commercial and
recreational boats, and through our subsidiary TSG International, Inc., designs,
develops and produces mine protected vehicles used by used by police, and
military organizations domestically and abroad for transportation, de-mining,
and special applications. Our results of operations, particularly revenue, gross
profits and cash flows, vary significantly from period to period, depending
largely upon the timing of our delivery of finished products, the terms of our
contracts and our level of export sales. As a result, period-to-period
comparisons may show substantial changes disproportionate to our underlying
business activity.

The Boats combine innovative designs with power, safety, handling, and
stability. The Company markets and sells low cost high value rapid response
commercial boats directly to municipalities and other government entities such
as fire departments, police departments, and the military. The Company sells
recreational boats directly to consumers, and through selected distributors in
both the United States and abroad. Of the 3,536 counties in the United States,
88 are located in coastal regions. Because of the high cost of competitor's
boats, few municipalities have adequate search and recovery, patrol, or fire
fighting boats. The Company's marketing strategy includes displaying and
demonstrating the boats at regional, national and international boat shows, and
at local waterways throughout the United States, and advertising its boats in
boating magazines and on the Internet.


Industry Overview
-----------------

Mine Protected Vehicles

The basic concept of Mine Protected Vehicles (MPVs) was developed in Rhodesia
and South Africa in response to the landmine problems arising from the wars in
Southern Africa. The vehicles were designed to protect personnel during
transport, removal of Unexploded Ordnance (UXO) or Land Mine, route clearance,
humanitarian de-mining, and other missions that require protection from
landmines and hostile fire. The technology has been developed and tested in
several parts of the world, principally Africa, over the last 20 years in
response to the intense use of landmines.

The world market for mine-protected vehicles is growing rapidly. Landmines
remain a weapon of choice for terrorists and insurgent groups because they are


                                       4
<PAGE>

highly effective yet relatively low cost. Rising populations in regions that
have been heavily mined and the need to utilize and develop such areas means
that the problem can no longer be ignored. With increasing world tensions, there
is a demonstrated need for vehicles that can provide a protection against these
threats during a variety of missions. Such missions include troop transport in
UXO or mine threat areas as well as route clearance and humanitarian de-mining -
which require entrance into known mine fields.

Despite the fact that Mine Protected Vehicles are very special, the market is
substantial. More than 15,000 MPVs have been purchased worldwide and the company
estimates the number of MPVs to be purchased over the next five years at between
3,000 and 10,000. Troop movements in overseas operations face a continuous
threat because of the use of land mines or the possibility of ambush and enemy
fire. Vehicles that move troops or ordnance economically and are protected
against ballistic, incendiary, and landmine hazards are in high demand.

Personnel transport missions create the greatest portion of demand for Mine
Protected Vehicles.  Various types of landmine and UXO clearance missions also
generate demand.

o    Embassies,  consulates, and other U.S. government agencies require vehicles
     to safely transport  personnel at low cost. The modified Chevrolet Suburban
     or HMMWVs do not provide adequate protection against high-powered automatic
     rifles or explosives.

o    U.S. Law enforcement agencies have a pressing need to move personnel safely
     in dangerous  situations,  such as riots or standoffs  with armed  militant
     groups.

MPVs are used around the world in mine problem areas by most military
organizations. The current "hot spots" in which the U.S. and other allied
countries operate, and the likely areas for the future in the "War on
Terrorism", are often heavily mined. Afghanistan alone has an estimated
8,000,000 mines. The total number of Landmines in place in countries such as
Iraq, Iran or other areas of Hostility is unknown, but believed to be quite
high. The need for MPV's continues long after military conflicts have ceased.
Currently there are no current technologies available to detect mines
effectively enough to avoid them, so MPVs are absolutely essential for the U.S.
to protect its troops.

Commercial Boats

In the boating industry, the next great opportunity for business expansion and
profits is in Homeland Security fulfillment, defense, surveillance, and
emergency response boats for municipalities and governments. According to White
House documents, after September 11, the United States government took a wide
range of urgent steps to protect the Nation's highest risk targets and critical
infrastructure systems such as nuclear power plants, hydroelectric dams,
telecommunication nodes, border crossings, chemical facilities, sea and water
ports, water and sewer plants, electric power plants, gas pipelines, dams and
bridges -- all national assets that are critical to economic and national
security. This includes protecting the open coastline, waterways, and private
industrial sites such as nuclear power plants and oil refineries.

Speaking in Portland, Maine, on January 25th, 2002, President Bush said, the new
budget for Homeland Defense will be doubled to $38 billion annually to make sure
that federal, state and local governments, police and firefighters have the best
equipment to protect the American people. The President pledged funds to patrol
the approaches to our ports and protect them from internal or external threats.
The government will also spend $11 billion to prevent illegal drugs, terrorists
and arms from flowing across America's borders. The 2003 Federal Budget funding
increases for these homeland security-related missions, should allow State and
local agencies to purchase a wide range of equipment needed to respond effective
-ly to a terrorist attack, including the purchase of new technology-based patrol
and surveillance boats. Internationally, with kidnappings and piracy on the rise
throughout the Pacific Rim, the Philippines and Indonesia, governments are
expanding purchase of patrol equipment to protect citizens and tourists.


                                       5
<PAGE>

The target markets for the Company's rapid response commercial boats include
municipalities, state and federal agencies, fire, rescue, police and military
units. The approximately 181,518 miles of waterways in the United States offer
numerous opportunities for the Company to sell its commercial boats,
particularly those used for rescue, patrol and fire fighting operations. The
Company's products offer a cost effective solution for its target customers.
There is no other value/cost equivalent boat in this market.


Products
--------

The Company is a complete design-to-manufacturing organization, creating or
licensing designs, and creating tooling, molds, and parts necessary to assemble
the products in-house. The Company is dedicated to producing the finest,
technologically superior, commercial, and military vehicles and boats to protect
and save lives.

This unique design capability, combined with extensive field experience in
vehicles and watercraft have allowed us to position ourselves as an innovative
pioneer in the creation of specialty vehicles and watercraft.

Mine Protected Vehicles

The specialty vehicle business requires many years of experience with blast
protection and vehicle design, substantial heavy manufacturing equipment and
facilities, and knowledge of and relationships with the target customers. The
cycle for product entrance into this market is long and complex. The Company has
attained credibility with our products, and is beginning the secondary stage of
product testing by having our products move into the initial or "limited
deployment" stage of the market.

                        The most advanced anti-tank and anti-personnel Mine
Buffalo                 Resistant Vehicle in the world, with multiple mission
                        configurations and field reparability. This design mates
                        a monocoque capsule protection with the latest in
                        American automotive technology (Peterbilt) to produce
                        the best visibility, load capacity, interior of any
                        vehicle in its class.

                        The Buffalo offers 45-pound wheel and 30-pound center-
                        line protection, along with standard ballistic protec-
                        tion of 7.62mm NATO ball, upgradeable to Dragunov AP.
                        The roof is identical to the sides, providing equal over
                        -head ballistic and splinter protection, creating the
                        only vehicle in its class with full 360-degree occupant
                        protection. Self Forming Fragmentation Plates are avail-
                        able as an option.

                        A versatile, multi-purpose vehicle configured to satisfy
Cougar                  a wide variety of mission requirements. The purpose-
                        built monocoque capsule is designed to protect both the
                        driver and crew from both ballistic and mine/blast
                        threats, and is mated with the latest in American
                        commercial automotive technology (Peterbilt and Marmon-
                        Herrington) to produce the most user-friendly and adapt-
                        able vehicle in its class.

                        The Cougar can be configured to serve as a mine protect-
                        ed 10 - 16 seat troop transport vehicle, a weapons
                        platform, a law enforcement special response vehicle, an
                        EOD / Range Clearance vehicle, or a VIP Protection
                        vehicle. Available in 4x2, 4x4, and 6x6 configurations.



                                       6
<PAGE>

                        Designed to seat six passengers comfortably and upgrade-
Lion                    able with a plush interior based upon customer require-
                        ments. The vehicle can withstand a single anti-tank land
                        mine explosion on any wheel. The Lion has ballistic
                        protection to 7.62 x 52mm (NATO) ball, which can be
                        increased to Dragunov Armor Piercing (AP).

                        The Lion is powered by a GM V8 gas or diesel engine and
                        is aimed at VIP transport and law enforcement markets.
                        It may have specific military applications in high-risk
                        environments.

Additional Products under Development

Iguana                                                    Gator

The Company's Buffalo soundly beat the former Mine Protected Vehicle standard,
the Casspir, in an exhaustive testing program conducted by the US Army. This
testing has determined that the future Mine Protected Control Vehicle for
de-mining and route clearance missions for the Army will be the Buffalo. Two
Buffalo MPVs have been delivered to the U.S. Army and the Company has recently
been awarded a contract for 10 additional Buffalos to be delivered during in
2003.

The Company has also delivered the first eight Cougar (Tempest) vehicles for the
British Ministry of Defense (MOD). These vehicles are part of an Urgent
Operational Requirement, and the Cougar beat out seven competitors for this
important contract, including vehicles from Vickers, Australian Defense
Industries, and KMW.

The Company's mine protected vehicles have significant performance advantages
over their foreign counterparts. In tests at the U.S. Army proving grounds, the
Buffalo blast capsule protected both the occupants and the critical automotive
components from the effects of a mine blast. The vehicles integrate a blast
resistant capsule with a truck engine and drive train, but have an updated
design that uses American-made trucks. The Company has an exclusive license to
manufacture the five current designs from Mechem Consultants, the governmental
agency that designed and produced over 33 of South Africa's original countermine
vehicles.

Competitive Positioning

Sonic Jet is competing against large international companies that have greater
financial, technical and marketing resources, customer bases, longer operating
histories and greater name recognition. These include Alvis, Vickers, and others
that have made Mine Protected Vehicles. However, the Company has some key
advantages including:

o    Exclusive rights to South African blast protection  technology,  considered
     the best in the world.

o    American commercial drive train technology, universally considered the best
     in the world and which has the best after market support system in the
     world.

o    The only American producer of mine protected vehicles and many countries
     wish to purchase from America rather from the third world.

o    During  exhaustive  testing  conducted by the US Army the vehicles  handily
     outperformed all seven competitors.

o    Low  cost   manufacturing   facilities   and  low  cost   access  to  heavy
     manufacturing capability.

o    The right to build additional models designed in South Africa to extend the
     product line with only modest additional investment.



                                       7
<PAGE>


Commercial Boats

The Company's boats combine power, safety, handling and stability in rough water
along with high-speed performance. Boats already in use are getting
international praise and recognition for the powerful rescue tool they have
become to America's municipalities. The innovative patents, and patents-pending
licensed by the company, give the boats eye-catching visual market recognition,
and a competitive advantage in the boating industry, home defense and world
markets.

The following table sets forth the basic characteristics of the 12-foot model:

Current Product Offerings



Patrol Rescue Jet 1200                        Fire Rescue Jet 1250

The Patrol Rescue Jet is designed to          The Fire Rescue Jet is designed to
provide security in inland waterways          fight fires on the water and in
and in harbors.                               near shore areas. The Fire Rescue
                                              Jet comes equipped with a patented
                                              water pump that can supply up to
                                              750 gallons of water per minute.
                                              The Fire Rescue Jet is uniquely
                                              designed so one person can control
                                              the boat and the fire apparatus.

<TABLE>
<CAPTION>

       Model        Load Capacity      Fuel Capacity      Towing Capacity          Passengers
---------------- -------------------- ----------------- -------------------- -----------------------
<S>                      <C>                  <C>               <C>                   <C>
12 foot model            2,200 lbs.           32 gal.           7,000 lbs.            5
</TABLE>


The Company's intellectual property is important to its business. The Company
relies on a combination of license rights, trade secret laws, confidentiality
procedures and contractual provisions to protect its intellectual property. The
patents and patents-pending protect and enhance the construction of the sleek,
progressive "V" and double pad-bottomed "V-hull" boat. The hull is designed so
that as water hits the hull, it flows to the next convenient degree, creating a
lift and literally raising the boat to the top of the water. The progressive "V"
hull gives Sonic Jet boats excellent stability, unmatched handling at low and
high speeds, extraordinary tracking for precision handling, and a competitive
edge when utilized in emergency and natural disaster situations.

The unique convergence of design and technology give Sonic Jet boats the ability
to be highly maneuverable in as little as ten (10) inches of water, essential in
areas where submerged objects such as street signs, vehicles or rocks will
interfere with other craft. Even with a full crew and injured passengers, the
boat stays high on the water, affording a speedy, safe access and egress.

The commercial boats are quick-response craft that can be easily transported to
emergency areas. The hulls incorporate patented "V" shaped hull designs, and are
built using hand laid "S" glass which produces a fiberglass hull that is
stronger yet lighter than conventional fiberglass hulls, and provides
extraordinary stability and handling in rough waters, and at high speeds. The
hulls are a closed cavity, self bailing design unique in the industry.


                                       8
<PAGE>

The products include:

Commercial Rapid Response Boats

The Company offers a 12-foot version of each model that comes equipped with
Mercury Marine Sport Jet two stroke engines and Mercury Marine single stage
axial flow jet pumps. The Company is currently developing new models for
California, and international markets that no longer allow 2 stroke motors. The
company must redesign the boat to accept power systems to meet the strict
emissions standards in California and the year 2006 emissions requirements
mandated by the United States Environmental Protection Agency. Similar
requirements are also in place in the international market.

The commercial boats come with a two-year warranty on the engine, the fuel
system, and the electrical system, and a five-year warranty on the hull.

Recreational Boats

Historically the company sold the Vortex, a model tailored for recreational
boating. It is 22 feet long and can carry up to seven passengers. It comes
equipped with, a single Mercury Marine/Mercruiser V-8 engine, two 33-gallon fuel
tanks, marine grade stainless steel hardware, a ski tow, navigation lights,
state-of-the art instrumentation, and a small cabin that sleeps two. The company
has suspended the manufacturing to focus on the market for Commercial Rapid
Response Boats.

Competitive Positioning

Commercial Boats

Sonic Jet is competing against large international companies that have greater
financial, technical and marketing resources, customer bases, longer operating
histories and greater name recognition. However, management believes its
products offer the following advantages over competitive products:

o    Durability - The hulls are constructed using hand laid "S" glass. This
     produces a fiberglass hull that is stronger yet lighter than conventional
     fiberglass hulls.

o    High Performance and Stability - Most boats capable of exceeding 50 miles
     per hour are inherently unstable at those speeds. Management believes the
     patented "V" shape hull design makes the boats safe and stable at high
     speeds, thereby eliminating this problem.

o    The  company  commands a  price/performance  advantage.  Over  larger  more
     expensive fire or rescue boats.

o    From a product development standpoint, Sonic Jet's boats can maneuver in
     shallow water, as in towns submerged after a hurricane or flood, are
     specifically designed to meet today's surveillance and rescue craft
     specifications, have the stability required in government specifications,
     and can respond quicker to emergencies and disaster relief situations.

o   The hull & Deck design of the boat is a closed  cavity/self  bailing design
     unique in the industry.

Sales and Marketing
-------------------

Mine Protected Vehicles
The Company markets its products worldwide through agents and extensive military
and governmental relationships.

The specialty vehicle business requires many years of experience with blast
protection and vehicle design, substantial heavy manufacturing equipment and
facilities, and knowledge of and relationships with the target customers. The
cycle for product entrance into this market is long and complex. The vehicles
are big-ticket items with healthy margins in a niche market that has few
competitors and high barriers to entry. As the only U.S. manufacturer of MPVs,


                                       9
<PAGE>

the Company offers the latest vehicle technology mated with the latest
protection technology, all from the design team that created the original
concepts of vehicle mine protection. It has the facilities, personnel,
relationships, and experience to become the leader in a growing industry with
substantial barriers to entry.


The company intends to participate in the growth of the Security and Defense
Market's increased demand for protection by focusing on sales to the Government
and Military markets. Management and advisors are active participants in all the
major shows involving countermine operations and technology, military vehicle,
law enforcement technology, and military force protection. This includes the
UXO/Countermine conference, FPED (Force Protection Equipment Demonstration), and
Trexpo East.

Commercial Boats

Market acceptance of the Company's boats has been enthusiastic but slow, due to
long sales lead times and budget considerations of municipalities and government
institutions. Boats have been sold domestically in the United States, and in
Asia, Europe, and the Middle East. The Company's commercial boat marketing
strategy includes displaying and demonstrating at regional, national and
international shows throughout the United States, and advertising its products
in industry magazines and on the Internet. The Company is developing a network
of independent sales representatives that sell to its' target markets. Sonic Jet
plans to augment its current design capabilities to capture, manage, and expand
global market opportunities.

County purchases alone present a large market for the company's commercial
boats. Of the 3,536 counties in the United States, 88 are located in coastal
regions. Few municipalities have adequate search and recovery, patrol, or fire
fighting boats because of the high cost and heretofore small budgets. The
Company's commercial boats offer a cost effective solution for municipalities
with limited funds. In addition, the new Federal Budget should give a boost to
municipal and government spending to fund technologically advanced equipment
that will assist in homeland protection and saving lives.

Operations Summary

Corporate headquarters, final boat assembly, and quality control are located in
Stanton, California, strategically positioned near the Los Angeles, and Long
Beach Harbors. The Company's specialty vehicle manufacturing facilities are
located in Charleston, South Carolina in the former Navy Shipyard Repair
Facility. The Company's has facility to manufacture fiberglass hulls in Nanning,
China.

Mine Protected Vehicles

The Company's Mine Protected Vehicle unit has manufacturing and integration
space totaling 85,000 square feet, enough to produce 20 vehicles per month.
Additional space is available if further expansion becomes necessary. As a
tenant-team member of the Charleston Marine and Manufacturing Corporation (CMMC)
family of companies on the shipyard, the Company receives preferential pricing
and delivery from other member companies like Metal Trades and CMMC Machine, who
offer close access to heavy equipment such as 1,000-ton presses and precise,
computer controlled cutting and welding machines. CMMC has a long-term lease (30
remaining years) on the base, giving us a stable base for future planning.

Commercial Boats
The Commercial Boat business unit does prototyping and boat assembly in Stanton,
California. The corporate offices, and final assembly are located in a 2,500
square foot facility, with an additional 5,000 square feet in Riverside,
California for storage. The hulls for the Company's Boats are manufactured at a
wholly owned subsidiary, Nanning Sonic Jet Co., Ltd., (organized under the laws


                                       10
<PAGE>

of the People's Republic of China). The facility is located in Nanning, China
and is comprised of offices and a 5,000 square foot manufacturing area and yard.
Currently the company maintains a minimum staff to keep the facilities available
as there has been no manufacturing activity in 2002.

Personnel
---------

The Company presently employs 27 employees and contractors in the United States,
including factory workers, sales, and administrative and management personnel as
of March 31, 2003. The Company also employs 3 full-time and a varying number of
seasonal contract employees when required in China. The Company is not a party
to any collective bargaining agreement. See Management.

Environmental Matters
---------------------

We are subject to federal, state, local and foreign laws and regulations
regarding protection of the environment, including air, water, and soil. Our
manufacturing business involves the use, handling, storage, and contracting for
recycling or disposal of hazardous or toxic substances or wastes, including
environmentally sensitive materials, such as batteries, solvents, lubricants,
degreasing agents, gasoline and resin. We must comply with certain requirements
for the use, management, handling, and disposal of these materials. We, however,
do not maintain insurance for pollutant cleanup and removal. If we are found
responsible for any hazardous contamination, any fines or penalties we may be
required to pay, or any clean up we are required to perform, could be very
costly. Even if we are charged, and later found not responsible, for such
contamination or clean up, the cost of defending the charges could be high. If
either of the foregoing occurs, our business, results from operations and
financial condition could be materially adversely affected. We do not believe we
have any material environmental liabilities or that compliance with
environmental laws, ordinances, and regulations will, individually or in the
aggregate, have a material adverse effect on our business, financial condition,
or results of operations.

Other Regulatory Matters
------------------------

Our operations and products are subject to extensive government regulation,
supervision, and licensing under various federal, state, local and foreign
statutes, ordinances and regulations. Certain governmental agencies such as the
EPA and the Occupational Safety and Health Administration, or OSHA, monitor our
compliance with their regulations, require us to file periodic reports, inspect
our facilities and products, and may impose substantial penalties for violations
of the regulations. For example, we are subject to federal regulation under the
Boat Safety Act of 1971 that requires boat manufacturers to recall products for
replacement of parts or components that have demonstrated defects affecting
safety. Although manufacturers of certain equipment we use in our boats have
instituted recalls, there has never been a recall resulting from our design or
manufacturing process.

While we believe that we maintain all requisite licenses and permits and are in
compliance with all applicable federal, state, local and foreign regulations,
there can be no assurance that we will be able to maintain all requisite
licenses and permits. The failure to satisfy those and other regulatory
requirements could have a material adverse effect on our business, financial
condition, and results of operations.


Item 2.  DESCRIPTION OF PROPERTY

Commercial Boats Dision
The corporate offices, and final assembly are located in a 2,500 square foot
facility in Stanton, California at a monthly rental of $1,500, with an
additional 5,000 square feet in Riverside, California for storage at a monthly
rental of $1,320. The hulls for the Company's Boats are manufactured at a wholly
owned subsidiary, Nanning Sonic Jet Co., Ltd., (organized under the laws of the
People's Republic of China). The facility is located in Nanning, China and is
comprised of offices and a 5,000 square foot manufacturing area and yard, leased
on a month-to-month basis at $800/month.



                                       11
<PAGE>

Mine Protected Vehicles Division

The Company's Mine Protected Vehicle unit has manufacturing and integration
space totaling 85,000 square feet in Charleston, South Carolina, enough to
produce 20 vehicles per month. Additional space is available if further
expansion becomes necessary. As a tenant-team member of the Charleston Marine
and Manufacturing Corporation (CMMC) family of companies on the shipyard, the
Company receives preferential pricing and delivery from other member companies,
like Metal Trades and CMMC Machine, who offer close access to heavy equipment
such as 1,000-ton presses and precise, computer controlled cutting and welding
machines. CMMC has a long-term lease (30 remaining years) on the base, giving us
a stable base for future planning.

We believe our facilities are adequate for our current operations and that we
can obtain additional leased space if needed.


Item 3.  LEGAL PROCEEDING

In February 2002, we settled a lawsuit filed against us by our former chief
executive officer and chairman, and our former vice president of operations, in
which they alleged, among other things, that we breached their employment
agreements. We settled both claims in exchange for issuing the former employees
an aggregate of 70,000 shares of our common stock.

On January 22, 2002 we settled a breach of contract action filed against the
Company by Whalen Engineering Company, Inc., in which the plaintiff sought to
recover approximately $11,300. The Company agreed to pay the plaintiff $9,000 in
three equal monthly installment payments, in exchange for dismissal of the
lawsuit with prejudice.



Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    The following matters were submitted and approved during the year 2002 to a
vote of security holders, through solicitation of proxies or otherwise.

    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.


                                       12
<PAGE>


                                    PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information
Our common stock is traded on the OTC Bulletin Board under the symbol "SJET.OB."
Our common stock began trading on the OTC Bulletin Board on December 29, 1998.
Before our listing on the OTC Bulletin Board none of our securities were traded
in the public market. The following table shows, for the periods indicated, the
high and low closing sales prices per share of our common stock.


                                                       High            Low
2001
First Quarter                                          $0.22          $0.05
Second Quarter                                         $0.17          $0.05
Third Quarter                                          $0.20          $0.04
Fourth Quarter                                         $0.07          $0.02

2002
First Quarter                                          $0.22          $0.08
Second Quarter                                         $0.42          $0.06
Third Quarter                                          $0.29          $0.07
Fourth Quarter                                         $0.25          $0.10


As of March 31, 2003, the last sale price of the Common Stock was $0.20

Holders
-------
As of December 31, 2002, there were approximately 724 shareholders of record of
the Company's common stock.

Dividends
---------
We have never declared or paid a cash dividend on our common stock. We currently
intend to retain all of our future earnings, if any, for use in our business and
therefore we do not anticipate paying any cash dividends on our common stock in
the foreseeable future. Any future determination to pay cash dividends will be
at the discretion of our board of directors and will depend upon our financial
condition, operating results, capital requirements, restrictions contained in
our agreements and other factors which our board of directors deems relevant.

<TABLE>
<CAPTION>

Securities Authorized for Issuance Under Equity Compensation Plan
-----------------------------------------------------------------

<S>                                      <C>                       <C>                       <C>
---------------------------------------- ------------------------- ------------------------- ----------------------------
Plan Category                            Number of securities to   Weighted average          Number of Securities
                                         be issued upon exercise   exercise price of         remaining available for
                                         of outstanding options    outstanding options,      future issuance
                                         warrants and rights       warrants and rights
---------------------------------------- ------------------------- ------------------------- ----------------------------
Equity Compensation plans approved       (a)t1,612,829             (b)$142,971               (c)387,171
by security holders
---------------------------------------- ------------------------- ------------------------- ----------------------------
Equity Compensation plans not approved
by security holders
---------------------------------------- ------------------------- ------------------------- ----------------------------
                                         (a)1,612,829              (b)$142,971               (c)387,171
Total
---------------------------------------- ------------------------- ------------------------- ----------------------------
</TABLE>



                                       13
<PAGE>


Recent Sales of Unregistered Securities
---------------------------------------
During the twelve-month period ended December 31, 2002, the Company sold
20,303,500 shares of common stock units to investors pursuant to its Private
Placement Memorandum, generating net proceeds of $1,453,295. Each common stock
unit consisted of (a) fifty shares of common stock of the Company, (b) one
warrant to purchase twenty-five shares of common stock of the Company at an
exercise price of $.20 per share, and (c) one warrant to purchase twenty-five
shares of common stock, at an exercise price of $0.30 per share which has been
reduced to $0.01 per share. The Company believes the issuance of the shares and
warrants was exempt from registration under the private placement exemption
available under Section 4(2) of the 1933 Securities Act ("Act").

During the twelve-month period ended December 31, 2002, the Company issued an
aggregate of 1,612,829 shares of its common stock pursuant to the Company's 2001
Compensation Plan, which included (a) 400,000 shares issued to an employee of
the Company in consideration for the cancellation of $44,000 of compensation
obligations of the Company and (b) 362,829 shares of its common stock to
employees and consultants in consideration for the cancellation of $64,471 of
existing indebtedness of the Company and (c) 850,000 shares issued to various
consultants related to services in lieu of $34,500. The Company believes the
issuance of the shares and warrants was exempt from registration under the
private placement exemption available under Section 4(2) of the Act.

The following is a summary of equity transactions in the twelve-month period
ended December 31, 2002 that involved the issuance of common stock.



       Common Stock                                              Shares issued
                                                                 -------------
       Sale of common stock and common stock units               20,303,500
       Common stock issued to satisfy debts                       9,972,020
       Common stock issued to consultants and employees           5,531,290
       Common stock issued for investment                         6,000,000
       Convertible Preferred Stock                                4,800,000
       Common Stock issued in lieu of Debt conversion             5,617,672
                                                                 ----------
           Total for Twelve months ended December 31, 2002       52,224,482


12/20/02 placement memorandum
-----------------------------
As of December 20, 2002, the Company has updated its Regulation D Section 506
Private Placement Memorandum dated April 10, 2002 (the "April PPM") in
connection with its offering of 2,400,000 Units consisting of shares of Common
Stock and Class A and Class B Warrants (the "Offering").

We took this action due to the fact that several developments have taken place
since the release of the April PPM. Although we have kept the public and
investment community updated through press releases, our Form 10-QSB and/or
other public filings, we felt it was appropriate and in the best interests of
you, the investor, as well as the Company, to modify the April PPM by providing
information regarding recent developments and reflecting certain other changes.



                                       14
<PAGE>

While we recommend that you review the modified Private Placement Memorandum
dated December 20, 2002 (the "December PPM"), we call your attention to certain
modifications.

The amendment July 15, 2002 to the April PPM whereby the exercise price of the
Class B Warrants was reduced from $0.20 per share to $0.01.

In addition, the December PPM also contains updates regarding the Company's
business plan with specific information relating to our new subsidiary,
Technical Solutions Group, Inc. (`TSG"), which was purchased after the April PPM
was released. The purchase of TSG was not a shift away from our initial focus on
rescue craft but, in fact, has opened new opportunities for the Company in the
homeland security market and has enabled the Company to diversify its product
base. We feel that the addition of TSG will increase the prospect of a strong
revenue stream for the Company.

Other developments include certain management changes, modification as to use of
proceeds, and general update of business operations. Also, after the April PPM
was released, the Company entered into a consulting agreement with Deveraux,
Inc. to assist in expanding direct sales opportunities, expanding company global
awareness, and introducing institutional investors to the Company for capital
infusions. The Company is pleased to announce that the results of this
relationship have led to very promising opportunities in all of these areas. As
an example, Deveraux, Inc. and one of its sub-contractors was able to introduce
the Company's story to the world-recognized Investment News Program, CNBC. As of
February 5, 2003, a crew from CNBC had visited and recorded for airing,
activities at our TSG headquarters in South Carolina.

We believe that this type and quality of exposure is priceless for a developing
company and its shareholders. In order to maintain this relationship and
possibly attract and maintain additional consultants, the Company has increased
allowable cost of capital from 20% to 34%. In our opinion, the benefits far
outweigh the cost.

Change In Securities
--------------------
On September 30, 2002 the Series C shareholders and the Company agreed to amend
and restate the Certificate of Designation of Series C Convertible Preferred for
Sonic Jet Performance. Pursuant to the agreement and upon finalization of the
amendment of the Series C documents, the stock shall be voted equally with the
shares of the Common Stock of the Corporation and not as a separate class, at
any annual or special meeting of shareholders of the Corporation, and may act by
written consent in the same manner as the Common Stock, in either case upon the
following basis: the holder of the shares of Series C Stock shall be entitled to
such number of votes as shall be equal to the aggregate number of shares of
Common Stock into which such holder's shares of Series C Stock are convertible
immediately after the close of business on the record date fixed for such
meeting or the effective date of such written consent. Furthermore, the parties
also agreed that each 10 shares of Series C stock shall be convertible into two
percent (2%) of the Company's common stock outstanding at the time of
conversion. Also, amended was the Company's power to redeem the Series C Stock.
On or after February 14, 2003, the Company may, at its sole discretion, with 5
days notice, redeem some or all of the outstanding shares of Series C Stock at a
"Redemption Price" equal to $12,000 per share, during this period the Series C
shareholders may elect to convert their shares under the conversion formula.

On July 17, 2002 the Series B shareholder of Sonic Jet Performance, Inc.,
Ashford Capital, and the Company agreed to amend the Series B Preferred. The
parties agreed that no shares could be sold prior to January 1, 2003, and the
conversion date of Series B Preferred Stock to common stock would be changed
from December 27, 2002 to June 27, 2003. Furthermore, on July 17th, 2002 the
parties agreed that the Series B shareholder would have the right to exchange 5
shares of Sonic Jet Series B Preferred (equal to 10% of Sonic Jet common stock)
for 10 shares of TSG International (equal to 20% of TSG International common
stock), the holding Company for Technical Solutions Group. Ashford Capital must
notify Sonic Jet and surrender the shares by June 27th, 2003 at which time it
would receive the shares of TSG International. As of March 31, 2003 no action
has been taken either by Series B Shareholder or Sonic Jet Performance, Inc.


                                       15
<PAGE>

Other
-----

On January 17, 2002 Sonic Jet Performance, Inc. entered into a Consulting
Agreement with Kevin Ryan pursuant to Consultant shall provide ongoing advisory
services to the Company and for which Sonic Jet shall pay Consultant 1,250,000
shares of common stock of Sonic Jet in lieu of cash payment.

On January 17, 2002 Sonic Jet Performance, Inc. entered into a Consulting
Agreement with eFund Capital Partners, LLC pursuant to which Consultant shall
provide ongoing advisory services to the Company and for which Sonic Jet shall
pay Consultant 5000,000 shares of common stock of Sonic Jet in lieu of cash
payment.

Pursuant to a finder's fee agreement entered into between Ashford Capital, LLC
and Sonic Jet Performance, Inc on February 1, 2002, Sonic Jet granted Ashford
Capital ten percent (10%) of the equity ownership of any referred party acquired
by Sonic Jet. In case of Partial acquisition Sonic Jet will pay Ashford ten per
cent (10%) of the transaction price and/or other consideration of any kind paid
by or to Sonic Jet or any of its subsidiaries or affiliates in connection with
any transaction for a referred party.

In conjunction with the purchase of TSG, the Company purchased notes from
Flexxtech Corporation, which Flexxtech held in TSG by issuing 1,461,880 shares
on August 30, 2002. In addition the Company has issued a warrant for 730,940 at
$.20 per share, and has issued shares in exchange for warrant for 730,940 at
$.01 per share.

In conjunction with the purchase of TSG, the Company purchased notes from
Atlantis Aggressive Growth Co., which Atlantis held in TSG by issuing 3,346,580
shares on December 20, 2002. In addition the Company has issued a warrant for
1,673,290 at $.20 per share, and has issued a warrant for 1,673,290 at $.01 per
share.

Sonic Jet Performance, Inc. entered into agreement with Mission Capital
Investment Group to raise capital through the Company's Private Placement
Memorandum. The agreement has a term through April 10, 2003 with a 120 day
cancellation notice. This agreement has expired.

Sonic Jet Performance,  Inc. entered into agreement with Harrison Douglas,  Inc.
to raise  capital  through  the  Company's  Private  Placement  Memorandum.  The
agreement  has a term  through  December  31,  2003 with a 120 day  cancellation
notice.

Sonic Jet Performance, Inc. entered into a consulting agreement on July 1, 2002
with Mike Watts as its General Manager for TSG. Under the agreement Mr. Watts
will receive a consulting fee $180,000 and options to purchase 4,000,000 shares
of Sonic Jet and options to purchase a 5% equity stake in TSG. Under the
agreement beginning January 1, 2003, Mr. Watts was to become an employee of TSG,
however, the formal employment agreement is still being negotiated between the
parties.

Sonic Jet  Performance,  Inc.  entered into a purchase  agreement  for TSG under
which it was obligated to grant options to Garth  Barrett,  the president of TSG
in the amount of 2,000,000 shares in addition to the shares Mr. Barrett received
as a shareholder.

On December 10, 2002, the Company entered into a Consulting Agreement with
Gordon McGilton pursuant to which the Consultant shall provide advisory services
to the Company's commercial boats division and the Company will pay Consultant
$12,000 per month and will grant Consultant 500,000 shares of Sonic Jet Common
Stock.

On March 31, 2003, the Company entered a Settlement Agreement with Jeff Conrad
pursuant to which the Company is to issue Mr. Conrad 375,000 shares of Sonic Jet
Common stock in lieu of cash payment for legal services he performed for the
Company.


                                       16
<PAGE>

On March 31, 2003, the Company entered a Settlement Agreement with Catherine
Basinger pursuant to which the Company is to issue Ms. Basinger 375,000 shares
of Sonic Jet Common stock in lieu of cash payment for legal services he
performed for the Company

Item 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Overview

Sonic Jet Performance, Inc. designs, manufactures and markets high performance
commercial boats and mine protected vehicles. The products combine innovative
designs with power, safety, handling and stability to create boats and vehicles
designed to protect and save lives and property. We operate both in the United
States and internationally.


Results of Operations


COMPARISON OF THE TWELVE MONTHS ended December 31, 2002, and 2001


The following table sets forth the Company's consolidated statements of
operations:

                                                      year Ending
                                                       31 - Dec
                                              2002                     2001
Sales                                         $ 2,606,634          $ 1,199,047
Cost of Sales                                 $ 1,877,495          $   896,084
  Gross profit (loss)                         $   729,139          $   302,963

Selling and Administrative                    $ 4,704,249          $ 1,501,864
Impairment Loss                               $ 1,400,000
Income/(Loss) from operations                 $(5,375,110)         $(1,198,901)

Interest expenses                             $   (42,929)         $   (24,938)
Interest income                               $     3,227          $     7,056
Other income                                  $    41,435          $   172,258

  Total other income (expense)                $     1,733          $  (238,917)

Net Income/(Loss)                             $(5,373,377)         $(1,437,818)

Basic loss per share                          $     (0.13)         $     (0.08)
Diluted loss per share                        $     (0.09)         $     (0.05)

2002 was a year of restructuring and refocusing the business, raising money, and
writing off impaired assets to direct the company towards products that save
lives.

Sales: Net sales for 2002 increased by $ 1.4 million or 116% compared to 2001.
During 2002, the Company acquired TSG, whose sales for 2002 were $2.2 million.
Therefore the entire increase in sales is attributable to the acquisition. Sales
of boats actually declined $712 thousand, or 59%. The reduction in boat sales
can primarily be attributed to reduction in the effort to sell recreational


                                       17
<PAGE>

boats, the move to Stanton headquarters and manufacturing facility during the
3rd Quarter, and a revamping of the sales force in the 1st and 4th quarters.

COST OF  SALES:  Cost of  sales  for 2002 was  $1.9  million,  or 72% of  sales,
compared to 75 % in 2001. This decrease is attributable  decreasing boat cost of
sales 59%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses for 2002, increased by $3.2 million to $ 4.7 million
compared to $ 1.5 million for 2001. The increase is partially the result of
additional TSG SG&A ($733 thousand). The remaining increase can be attributed
to: costs associated with acquisition of TSG, fund raising expenses, business
consultants ($628 thousand), brochures and demo expenses, debt forgiveness, and
the write-off of tools, molds, design rights, and obsolete boat inventory ($1.4
million) verses a write-off of $400 thousand excess inventory in 2001. In
addition, primarily as a result of fund raising, the company charged $692
thousand to loss on conversion of warrants to reflect the conversion of warrants
to purchase shares of the company's common stock at $.01 per share verses a
market value of $.10.

NET LOSS: Net Loss for 2002 was $5.37 million as compared to $1.43 million for
2001. The increase is attributed to costs associated with acquisition of TSG,
fund raising, business consultants, brochures and demo expenses, debt
forgiveness, and the write-off of tools, molds, design rights, and obsolete
inventory, and the loss on conversion of warrants, all described above.

10K Business Segment Analysis of 2002

              Sonic Jet Performance - 2002 10K Segment Information
              (000's)
                                     TSG
                      Boats          MPV          Corp           Total
--------------- ----- -------------- ------------ ----------- -----------------

Sales                           434         2172                          2606
Cost of Sales                   254         1623                          1877
                      -------------- ------------ ----------- -----------------

Gross Profit                    180          549                           729
G.P. %                          41%          25%               34.5%

SG&A                           2251          733        3118              6102
--------------- ----- -------------- ------------ ----------- -----------------
Other
Income(Expense)

Segment P&L                   -2071         -184       -3118             -5373

------------- ------- -------------- ------------ ----------- -----------------

Mine protected vehicles provided 83% of the sales, 86% of the cost of goods
sold, and 75% of the gross profit. The following explains the relatively large
SG&A of the boat business and corporate overhead:


                                       18
<PAGE>

Boats:
                                                      $
   Inventory write-off                               328
   Impaired assets                                      1088  molds and designs
                                                     --------
                                        TOTAL         $
                                                     1,416
                                                     --------

Corporate:
   Loss on conversion of warrants                        692
   Consultants                                           628
   Debt forgiveness                                     (37)
   Indirect cost of raising money                        196
   Stock to employees                                    150
                                                     --------
                                         TOTAL          1629

Year Ended December 31, 2001 Compared to the Year Ended December 31, 2000

Revenue
Revenue for the twelve months ended December 31, 2001 of $1.2 million was
consistent with revenue for the twelve months ended December 31, 2000 of $1.0
million, as was Cost of Goods Sold of $0.9 million for 2001 and 2000.

Selling, General and Administrative Expenses
Selling, general and administrative expenses for the twelve months ended
December 31, 2001, decreased $1.5 million to $1.6 million, from $3.1 million in
the comparable period in 2000. SG&A decreased primarily because of a cut back of
administrative wages that resulted from a reduction in force ($413k), a decrease
in insurance expense that resulted from the cancellation of director's and
officer's liability insurance, a reduction in advertising expense, and a
write-off of slow and non moving inventories ($400k).

Interest Expense
For the twelve months ended December 31, 2001, Interest expense was $24,938
verses $2.19 million for the twelve months ended December 31, 2000. The year
ended 2000 included $189,010 paid to JNC Opportunity Fund, Ltd., $60,000 to
Sheikh Mohammad Al Rashid, and $730,070 charged for the difference between the
market value and the discounted rate on warrants issued to JNC Opportunity Fund,
Ltd., in connection with funds they advanced us during 2000. The sharp decrease
in interest expense during 2001 also resulted from the satisfaction of
outstanding loans to JNC Opportunity Fund, Ltd., and Sheikh Rashid.

Material Changes in Financial Condition, Liquidity and Capital Resources

As of December 31, 2002, cash and cash equivalents were $144K compared to $43K
as of December 31, 2001. The Company has raised $ 1,453K during the twelve-month
period ending December 31, 2002 by private placement. Also, the company raised
$510K from Preferred Shares `C' Class allotment, of which $170K has been
converted to Common Stock at December31, 2002. The Company has delivered $505K
in cash to Technical Solution Group, Inc. as part of the purchase agreement to
fund working capital, and negotiated to settle existing debts through the
purchase or conversion of debt from TSG creditors.

At the present time, the company is not generating sufficient revenue to cover
expenses. Accordingly, the company's future liquidity will depend on its ability
to obtain necessary financing from outside sources and its ability to
restructure operations to reduce operating losses.

As of March 31, 2003, cash and cash equivalents were $484K. Based on its current
operating plan, the Company anticipates that additional financing will be
required to finance its operations and capital expenditures in 2003. The amount
of funds required by the Company will depend upon many factors, including
without limitation, the growth and timing of sales of the Company's products,
product costs, the timing and costs associated with establishment and/or
expansion, as appropriate, of the Company's manufacturing, development,
engineering and customer support capabilities, the timing and cost of the


                                       19
<PAGE>

Company's product development and enhancement activities and the Company's
operating results. Until the Company generates cash flow from operations that
will be sufficient to satisfy its cash requirements, the Company will need to
seek alternative means for financing its operations and capital expenditures
and/or postpone or eliminate certain investments or expenditures. Potential
alternative means for financing may include obtaining additional debt or equity
financing and obtaining a line of credit. There can be no assurance that
additional financing will be available, or available on acceptable terms. The
inability to obtain additional financing or generate sufficient cash from
operations would 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 will be
further diluted.

Operating Activities.
The cash used by operating activities for the year ended December 31, 2002 was
$1,871,189 attributable primarily to funding ongoing operations.

Investing Activities.

Our capital expenditures for the year ended December 31, 2001 were $31,384,
related to investments in office and manufacturing equipment. We anticipate that
our capital expenditures during 2003 will increase because we intend to improve
operating efficiencies, and may relocate our principle facility.

Financing Activities.

During the twelve-month period ended December 31, 2002, the Company sold
20,303,500 shares of common stock units to investors pursuant to its Private
Placement Memorandum, generating net proceeds of $1,453,295 (check with
"material changes in financial condition). Each common stock unit consisted of
(a) fifty shares of common stock of the Company, (b) one warrant to purchase
twenty-five shares of common stock of the Company at an exercise price of $.20
per share, and (c) one warrant to purchase twenty-five shares of common stock,
at an exercise price of $0.30 per share which has been reduced to $0.01 per
share. The Company believes the issuance of the shares and warrants was exempt
from registration under the private placement exemption available under Section
4(2) of the 1933 Securities Act ("Act").

During the twelve-month period ended December 31, 2002, the Company issued an
aggregate of 1,612,829 shares of its common stock pursuant to the Company's 2001
Compensation Plan, which included (a) 400,000 shares issued to an employee of
the Company in consideration for the cancellation of $44,000 of compensation
obligations of the Company and (b) 362,829 shares of its common stock to
employees and consultants in consideration for the cancellation of $64,471 of
existing indebtedness of the Company and (c) 850,000 shares issued to various
consultants related to services in lieu of $34,500.

In January 2002, we entered into a $1 million equity credit facility with eFund
Capital Partners, LLC. As of today, we have no outstanding amount on this credit
facility. We did not had any bank facilities during fiscal 2002

A promissory note entered into as of the July 2nd, 2002 by and between Atlantis
Partners, Inc. and Sonic Jet Performance, Inc. and its subsidiaries to lend
Sonic Jet Performance, Inc. Fifty Thousand Dollars ($50,000) at an interest rate
of 10% simple interest per annum.

On March 31, 2003 the Company began securing capital commitments through the
issuance of Promissory Notes to investors. The Company hopes to secure
$1,500,000 for working capital. Under the terms of the Promissory Notes the
loans are payable in six months with 8% interest, however, at the end of the
term the loan is convertible into Series C Preferred Stock. As of March 31, 2003
the Company had obtained $400,000 in capital from investors.


                                       20
<PAGE>


Change In Securities
--------------------

Between January and March 31, 2003, we raised an aggregate of $1,132K in
connection with the Private Placement Memorandum. We also raised $400K as loan.
We used the proceeds to fund ongoing operations of Sonic Jet Performance, Inc.
and Technical Solution Group, Inc.

On September 30, 2002 the Series C shareholders and the Company agreed to amend
and restate the Certificate of Designation of Series C Convertible Preferred for
Sonic Jet Performance. Pursuant to the agreement and upon finalization of the
amendment of the Series C documents, the stock shall be voted equally with the
shares of the Common Stock of the Corporation and not as a separate class, at
any annual or special meeting of shareholders of the Corporation, and may act by
written consent in the same manner as the Common Stock, in either case upon the
following basis: the holder of the shares of Series C Stock shall be entitled to
such number of votes as shall be equal to the aggregate number of shares of
Common Stock into which such holder's shares of Series C Stock are convertible
immediately after the close of business on the record date fixed for such
meeting or the effective date of such written consent. Furthermore, the parties
also agreed that each 10 shares of Series C stock shall be convertible into two
percent (2%) of the Company's common stock outstanding at the time of
conversion. Also, amended was the Company's power to redeem the Series C Stock.
On or after February 14, 2003, the Company may, at its sole discretion, with 5
days notice, redeem some or all of the outstanding shares of Series C Stock at a
"Redemption Price" equal to $12,000 per share, during this period the Series C
shareholders may elect to convert their shares under the conversion formula.

On July 17, 2002 the Series B shareholder of Sonic Jet Performance, Inc.,
Ashford Capital, and the Company agreed to amend the Series B Preferred. The
parties agreed that no shares could be sold prior to January 1, 2003, and the
conversion date of Series B Preferred Stock to common stock would be changed
from December 27, 2002 to June 27, 2003. Furthermore, on July 17th, 2002 the
parties agreed that the Series B shareholder would have the right to exchange 5
shares of Sonic Jet Series B Preferred (equal to 10% of Sonic Jet common stock)
for 10 shares of TSG International (equal to 20% of TSG International common
stock), the holding Company for Technical Solutions Group. Ashford Capital must
notify Sonic Jet and surrender the shares by June 27th, 2003 at which time it
would receive the shares of TSG International. As of March 31, 2003 no action
has been taken either by Series B Shareholder or Sonic Jet Performance, Inc.

Pursuant to a finder's fee agreement entered into between Ashford Capital, LLC
and Sonic Jet Performance, Inc on February 1, 2002, Sonic Jet granted Ashford
Capital ten percent (10%) of the equity ownership of any referred party acquired
by Sonic Jet. In case of Partial acquisition Sonic Jet will pay Ashford ten per
cent (10%) of the transaction price and/or other consideration of any kind paid
by or to Sonic Jet or any of its subsidiaries or affiliates in connection with
any transaction for a referred party.

In conjunction with the purchase of TSG, the Company purchased notes from
Flexxtech Corporation, which Flexxtech held in TSG by issuing 1,461,880 shares
on August 30, 2002. In addition the Company has issued a warrant for 730,940 at
$.20 per share, and has issued shares in exchange for warrant for 730,940 at
$.01 per share.

In conjunction with the purchase of TSG, the Company purchased notes from
Atlantis Aggressive Growth Co., which Atlantis held in TSG by issuing 3,346,580
shares on December 20, 2002. In addition the Company has issued a warrant for
1,673,290 at $.20 per share, and has issued a warrant for 1,673,290 at $.01 per
share.

Sonic Jet Performance, Inc. entered into a consulting agreement on July 1, 2002
with Mike Watts as its General Manager for TSG. Under the agreement Mr. Watts
will receive a consulting fee and options to purchase 4,000,000 shares of Sonic


                                       21
<PAGE>

Jet and options to purchase a 5% equity stake in TSG. Under the agreement
beginning January 1, 2003, Mr. Watts was to become an employee of TSG, however,
the formal employment agreement is still being negotiated between the parties.

Sonic Jet Performance, Inc. entered into a purchase agreement for TSG under
which it was obligated to grant options to Garth Barrett, the president of TSG
in the amount of 2,000,000 shares in addition to the shares Mr. Barrett received
as a shareholder.

Contractual obligations
-----------------------

In July 2001, the company ceased operations at the Nanning, China manufacturing
facility because we did not have sufficient cash to pay rent, and to otherwise
fund operations. In January 2002, we used a portion of the proceeds from a
private placements to resume operations in China. Although we have brought rent
payments current, the landlord has converted the lease term, originally set to
expire in July 2003, to a month-to-month term.

Technical Solution Group has a long-term lease of five (5) years ( 4 years
remaining ) with five (5) years option with CMMC on the Naval base, giving us a
stable base for future planning.

Foreign Currency Translation and Hedging
----------------------------------------
No  exposure.



              FACTORS THAT MAY AFFECT FUTURE RESULTS (Risk Factors)

A number of the matters and subject areas discussed in this Form 10-KSB are
forward-looking in nature. The discussion of such matters and subject areas is
qualified by the inherent risks and uncertainties surrounding future
expectations generally, and also may differ materially from our actual future
experience involving any one or more of such matters and subject areas. We wish
to caution readers that all statements other than statements of historical facts
included in this Annual Report on Form 10-KSB regarding our financial position
and business strategy, may constitute forward-looking statements. All of these
forward-looking statements are based on estimates and assumptions made by our
management, which although believed to be reasonable, are inherently uncertain.
Therefore, undue reliance should not be placed on such estimates and statements.
No assurance can be given that any of such estimates or statements will be
realized and it is likely that actual results will differ materially from those
contemplated by such forward-looking statements. We have attempted to identify,
in context, certain of the factors that we currently believe may cause actual
future experience and results to differ from our current expectations regarding
the relevant matter or subject area. In addition to the items specifically
discussed in the foregoing, our business and results of operations are subject
to the rules and uncertainties described under the heading "Factors That May
Affect Future Results" contained herein, however, the operations and results of
our business also may be subject to the effect of other risks and uncertainties.
Such risks and uncertainties include, but are not limited to, items described
from time to time in our reports filed with the Securities and Exchange
Commission.


FACTORS THAT MAY AFFECT FUTURE RESULTS

Operating results highly uncertain. Before deciding to invest in Sonic Jet
Performance, Inc. or to maintain or increase your investment, you should
carefully consider the risks described below, in addition to the other
information contained in this report on Form 10-K, our Quarterly Reports on Form
10-Q, as amended, and in our other filings with the Commission, including any


                                       22
<PAGE>

subsequent reports filed on Forms 10-K, 10-Q and 8-K. The risks and
uncertainties described below are not the only ones that we face. Additional
risks and uncertainties not presently known to us or that we currently deem
immaterial may also affect our business and results of operations. If any of
these risks actually occur, our business, financial condition or results of
operations could be seriously harmed. In that event, the market price for our
common stock could decline and you may lose all or part of your investment.

Limited Operating History. The Company is an early stage production company
originally incorporated in 1996. The Company has generated limited revenues from
its current products and a substantial portion of the historical revenue of
approximately $1,000,000 in years 2001 and 2000 (INPUT 2002), was derived from
the sale of recreational boats, the sale of which has been suspended while the
Company focuses on developing and selling Commercial Boats and Mine Protected
Vehicles. The Company's ability to successfully commercialize its products will
depend on, among other things, successful completion of its ongoing development
activities, ability to manufacture and distribute the products, the relative
cost to the customer of the Company's system as compared to alternative
competitive products, and the ability to finance operations.

By focusing on markets that are emerging in nature, market reaction can be
difficult to predict. Many of our planned products incorporate technologies or
approaches that have not yet achieved broad market acceptance. In addition, we
have a limited history of competing in the intensely competitive Fire & Rescue
defense and marine industries. There can be no assurance that the Company's
technology will be successfully commercialized, will be successfully marketed or
will achieve market acceptance. Thus, there can be no assurance that the Company
will achieve or sustain profitable operations.

We have historically generated substantial losses, which, if continued, could
make it difficult to fund our operations or successfully execute our business
plan, and could adversely affect our stock price. We experienced net losses of
$1,437,818 for the year ended December 31, 2001, and approximately $3,974,643
for the year ended December 31, 2002. In recent years, much of our losses were
incurred as a result of significant investments in new product development and
marketing costs. While we have significantly reduced our investments, we
anticipate that we will continue to generate net losses in the short term and
cannot assure you that we will be able to achieve or sustain profitability on a
quarterly or annual basis in the future. In addition, because large portions of
our expenses are fixed, we generally are unable to reduce expenses significantly
in the short-term to compensate for any unexpected delay or decrease in
anticipated revenues. As a result, we may find it difficult to fund our
operations and achieve our business plan, which could cause the market price of
our common stock to decline.

We will need to raise additional capital, and funds may not be available on
terms that are acceptable to us, or at all. We experienced negative cash flows
from operations in the amount of $120,408 for the year ended December 31, 2001
and $1,871,189 for year ended December 31, 2002. We will need to fund our
aggregate requirements although the nature, timing and amount of that need are
not immediately determinable. In order to meet these financial needs, the
Company will be required to raise significant additional capital primarily
through one or more of the following sources: the sale of Common Stock,
preferred stock, convertible debentures or other forms of debt and/or equity
financing, and possibly the divestiture of business units or select assets.

In view of the significant decline in our market capitalization, if adequate
funds are not available on acceptable terms, or at all, the Company may not be
able to finance operations, develop or enhance products, expand sales and
marketing programs, take advantage of future opportunities or respond to
competitive pressures. The company may be forced to scale back or delay business
plans or to discontinue operations entirely.

If additional funds are raised through the issuance of equity or convertible
debt securities, the percentage ownership of our stockholders will be reduced
and such securities may have rights, preferences and privileges senior to common
stock. Financing could result in significant costs to us, even if not
consummated. In certain circumstances, it is possible that our subsidiaries or
we could experience very substantial transaction costs or break-up fees in


                                       23
<PAGE>

connection with efforts to obtain financing. Financings, in general, also
require a significant amount of management's time and can distract us from
executing our business plan. Furthermore, the costs and expenses of such
financings, including legal fees, can significantly increase our operating
expenses.

No  Dividends.  The Company has never paid a cash dividend on shares of its
Common Stock and it does not anticipate paying a cash dividend on its Common
Stock in the foreseeable future. The Company intends to retain substantially all
future earnings, if any, for use in its business. See "Dividend Policy."

Capital requirements will depend on many factors, for the Company and its
subsidiaries including:

o    Ability to control costs;
o    Ability to  commercialize  our products and technologies and achieve market
     acceptance for such products and technologies;
o    Ability to procure additional government contracts;
o    The timing of payments and reimbursements from government and other
     contracts;
o    Research and development funding requirements and required investments in
     our product development;
o    Increased sales and marketing expenses;
o    Technological advancements and competitors' response to our products;
o    Capital improvements to new and existing facilities;
o    Our relationships with customers and suppliers; and
o    General economic conditions including the effects of the current economic
     slowdown and international conflicts.

Stock Price Volatility. The Company's stock price has been subject to
significant volatility, and investors may not be able to sell shares of common
stock at or above the price paid for them. The trading price of the Company's
common stock has been subject to wide fluctuations in the past. Since January
2002, the common stock has traded at prices as low as $0.06 per share and as
high as $0.42 per share. The Company may implement a reverse share split at a
ratio that would be determined in the future. The ultimate determination of
appropriate action, and timing, is subject to a vote of the shareholders.

The Company may not be able to increase or sustain the current market price of
our common stock in the future. As such, you may not be able to resell your
shares of common stock at or above the price you paid for them. The market price
of the common stock could continue to fluctuate in the future in response to
various factors, including, but not limited to:

o       our ability to raise capital
o       quarterly variations in operating results;
o       our ability to control costs and improve cash flow;
o       announcements of technological innovations or new products by us or our
        competitors;
o       changes in investor perceptions;
o       new products or product enhancements by us or our competitors; and
o       changes in earnings estimates or investment recommendations by
        securities analysts.

Penny Stock Reform Act. In October 1990, Congress enacted the "Penny Stock
Reform Act of 1990" (the "90 Act") to counter fraudulent practices common in
penny stock transactions. Rule 3a51-1 of the Exchange Act defines "penny stock"
as an equity security that is not among other things; a) a reported security
(i.e., listed on certain national securities exchanges): b) a security
registered or approved for registration and traded on a national securities


                                       24
<PAGE>

exchange that meets certain guidelines, where the trade is effected through the
facilities of that national exchange; c) a security listed on NASDAQ; d) a
security of an issuer that meets certain minimum financial requirements ("net
tangible assets" in excess of $2,000,000 if the issuer has been continuously
operating for less than three (3) years), or "average return" of at least
$6,000,000 for the last three years; or e) a security with a price of at least
$5.00 per share for the transaction in question or that has a bid quotation (as
defined in the Rule) of at least $5.00 per share. Under Rule 3a51-1, the
Company's Common Stock falls within the definition of "penny stock." Pursuant to
the "90 Act", broker-dealers, prior to effecting a transaction in a penny stock,
are required to provide investors with written disclosure documents containing
information concerning various aspects of the market for penny stocks as well as
specific information about the penny stock and the transaction involving the
purchase and sale of that stock (e.g., price quotes and broker-dealer and
associated person compensation). Subsequent to the transaction, the broker is
required to deliver monthly or quarterly statements containing specific
information about the penny stock.

The market for an investor's shares may be limited, and it may be difficult to
sell shares at an acceptable price, if at all. The Company's shares come within
the definition of "penny stock" as defined in the Securities Exchange Act of
1934, as amended, and covered by Rule 15g-9 (different than above) of that Act.
That Rule imposes additional sales practice requirements on broker-dealers who
sell securities to persons other than established customers and accredited
investors. For transactions covered by Rule 15g-9, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, Rule
15g-9, affects the ability or willingness of broker-dealers to sell the
Company's securities and accordingly affects the ability of stockholders to sell
their securities in the public market. These additional procedures could also
limit the Company's ability to raise additional capital in the future.

Rule 15c2-6, under the Securities Exchange Act of 1934 (the "34 Act"), imposes
additional sales practice requirements on broker-dealers who sell securities
subject to that rule to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse). Where the market value of the
Company's Common Stock is below $5.00 per share, sales of the shares in
brokerage transactions are subject to the Rule. For transactions covered by the
Rule, broker-dealers must make a special suitability determination for each
purchaser and receive the purchaser's written agreement to the transaction prior
to the sale. Consequently, the ability of purchasers in this Offering to sell
their Shares in the secondary market may be affected.

Possible Volatility in Trading Price of Common Stock. The Company's Common Stock
is traded over-the-counter in the National Quotation Bureau, under the symbol
"SJET". In the past, the trading price of the Company's Common Stock has
experienced substantial volatility. Sales of substantial amounts of Common Stock
in the public market could adversely affect prevailing market prices. A
substantial number of shares of Rule 144, Restricted Common Stock were issued by
the Company pursuant to its 2002 offering of units of common stock and warrents
(see Item5). This Offering, and the exercise of the warrants which would result
in substantial dilution to a stockholder's percentage ownership interest in the
Company, could adversely affect the market price of the common stock.
Significant sales of our common stock in the public market will cause our stock
price to fall. As of December 31, 2002, we had 71,558,418 shares of common stock
outstanding, of which most are or will be freely tradable, other than
restrictions imposed upon our affiliates.

An additional group of shares are subject to restrictions on trading, but become
freely tradable between December 2002 and July 2003 when the restrictions begin
being removed. The average daily trading volume of shares from January 2002 to
present was approximately 62,360 shares. The freely tradable shares, along with
the contractually restricted shares, are significantly greater in number than
the daily average trading volume of our shares. If the selling stockholders, or
the holders of the freely tradable shares, were to sell a significant amount of
our common stock in the public market, the market price of our common stock
would likely be significantly adversely affected.

The market price of shares of Common Stock is likely to be highly volatile and
may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's operating results, announcements of technological
innovations, new products or new contracts by the Company or its competitors,
sales of significant amounts of common stock into the market, general market


                                       25
<PAGE>

conditions, and other factors that may be unrelated to the Company or its
performance. In addition, the stock market has from time-to time experienced
significant price and volume fluctuations that have particularly affected the
market prices for the common stock of similar companies. These broad market
fluctuations may adversely affect the market price of the Company's Common
Stock. In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has been
instituted. There can be no assurance that such litigation will not occur in the
future with respect to the Company. Such litigation, regardless of its outcome,
would result in substantial costs and a diversion of management's attention and
resources, which could have a material adverse effect upon the Company's
business, results of operations, and financial condition.

 Capital requirements. Additional funds raised through borrowings, other debt or
equity financings, or the divestiture of business units or select assets will
reduce the percentage ownership of stockholders and such securities may have
rights, preferences and privileges senior to common stock.

From time to time, the Company may elect to retire obligations of the Company or
its subsidiaries with cash payments or through the issuance of shares of common
stock, resulting in dilution to existing stockholders and a decrease in stock
price. In 2002, the Company issued shares of common stock to retire debt
incurred through operations and by the TSG subsidiary. Although the Company is
not required to retire the obligations of subsidiaries, it may make such
business decisions again, which could have a dilutive impact to existing
stockholders or could negatively impact available capital. Furthermore, when and
if the recipients of any such shares elect to sell them in the public market,
the market price of common stock could likely be materially and adversely
affected.

Impact of Financing on Subsidiaries. The Company's equity and voting interests
in subsidiaries could be significantly diluted as a result of private
placements, and further financings could cause us to lose control of
subsidiaries. We have historically funded the operations of business with equity
financings. In order to continue the activities of subsidiaries, the company is
seeking direct equity investments to finance at least some portion of business
plans. Such additional financings may not be available on acceptable terms, it
at all.

Even if financing becomes available, the Company's ability to enjoy the benefits
of any potential increase in value on the part of subsidiaries can be greatly
reduced by third-party investments. Additional financings in subsidiaries will
result in a reduction in equity interests in the subsidiaries and reduced
control of subsidiaries. Significant third-party investment in subsidiaries will
likely result in third-party investors receiving subsidiary board representation
and/or protective covenants that could further reduce control over the
day-to-day operations and strategic direction of subsidiaries. Third-party
financings of subsidiaries will also inherently complicate fiduciary and
contractual obligations and could leave the Company more vulnerable to costly
and uncertain litigation in the future, which could have a material adverse
effect on the Company's business, financial condition and results of operations.

Dependence on Limited Customer Base. The Company's government business depends
on a limited number of customers, and if any of these customers terminate or
reduce their contracts, or if the Company cannot obtain additional government
contracts in the future, revenues will decline and results of operations will be
adversely affected. Because over 80% of consolidated revenues were derived
directly or indirectly from government contractors, these risks can
significantly affect the Company's business, results of operations and financial
condition. In 2002, a substantial portion of the revenues from government
agencies were derived directly or indirectly from two governmental agencies, the
U.S. Army and through a private contractor, the British Ministry of Defence.
Although the Company ultimately plans to broaden its focus to include other
government agencies, it expects to continue to be dependent upon contracts with
US federal agencies and their contractors for a substantial portion of revenue
for the foreseeable future.

The Company currently depends on government contracts and subcontracts and faces
risks related to contracting with a government, including budget issues and
fixed price contracts. General political and economic conditions, which cannot
be accurately predicted, directly and indirectly affect the quantity and
allocation of expenditures by government agencies. Even the timing of
incremental funding commitments to existing, but partially funded, contracts can
be affected by these factors. Therefore, cutbacks or re-allocations in the U.S.
or other government budget could have a material adverse impact on results of
operations as long as research and development contracts remain an important
element of the business.


                                       26
<PAGE>

Obtaining government contracts may also involve long purchase and payment
cycles, competitive bidding, qualification requirements, delays or changes in
funding, budgetary constraints, political agendas, extensive specification
development and price negotiations and milestone requirements. Each government
agency also maintains its own rules and regulations with which the Company must
comply and which can vary significantly among agencies. Governmental agencies
also often retain some portion of fees payable upon completion of a project and
collection of these fees may be delayed for several months or even years, in
some instances.

In addition, an increasing number of government contracts are fixed price
contracts which may prevent the Company from recovering costs incurred in excess
of its budgeted costs. Fixed price contracts require the Company to estimate the
total project cost based on preliminary projections of the project's
requirements. The financial viability of any given project depends in large part
on the Company's ability to estimate such costs accurately and complete the
project on a timely basis. In the event actual costs exceed the fixed
contractual cost, the Company may not be able to recover the excess costs.

Some of the government contracts are also subject to termination or
renegotiation at the convenience of the government, which could result in a
large decline in revenue in any given quarter. Although government contracts
have provisions providing for the reimbursement of costs associated with
termination, the termination of a material contract at a time when the Company's
funded backlog does not permit redeployment of staff could result in reductions
of employees. In addition, the timing of payments from government contracts is
also subject to significant fluctuation and potential delay, depending on the
government agency involved. Any such delay could result in a temporary shortage
in working capital.

Limited Manufacturing Experience. The Company has limited experience operating a
manufacturing and assembly operation. The Company's Product consists of
components that are produced by various vendors. The Company currently assembles
boats and vehicles from hulls and components from outside vendors, and then
assembles the final product. No assurance can be given that any of these
companies will continue to agree to manufacture and assemble components on terms
that are acceptable to the Company.

Dependence upon Suppliers. The Company depends upon a number of suppliers for
components of its products. We do not have guaranteed long-term supply
relationships with any of our sub-contractors that could make it difficult to
fulfill our backlog in any given quarter and could reduce our revenues in future
periods. We rely on sub-contractors but do not have the financial resources to
maintain long-term supply agreements with contract manufacturers or other
suppliers. Accordingly, because our sub-contractors allocate their manufacturing
resources in periods of high demand, we face several significant risks,
including a lack of adequate supply, potential product shortages and higher
prices and limited control over delivery schedules, quality assurance and
control, manufacturing yields and production costs. We cannot assure you that we
will be able to satisfy our manufacturing needs in the future. Failure to do so
will have a material adverse impact on our operations and the amount of products
we can ship in any period. There is an inherent risk that certain components of
the Company's products will be unavailable for prompt delivery or, in some
cases, discontinued. The Company will have only limited control over any
third-party manufacturer as to quality controls, timeliness of production and
deliveries and various other factors. Should the availability of certain
components be compromised, it could force the Company to develop alternative
designs using other components, which could add to the cost of goods sold and
compromise delivery commitments.

Commercial Boat hulls are molded to fit engines and pumps manufactured by
Mercury Marine. If the Company is unable to obtain Mercury Marine engines and
pumps in a timely manner, at an acceptable cost, or at all, the Company may need
to redesign and reconstruct the molds it uses to build the hulls of the boats,
which management believes would take a minimum of six-months. If the Company
does not have a sufficient inventory of Mercury Marine engines or pumps, or is
are unable to find a suitable replacement, the Company may not be able to
manufacture any boats for a period of time, which could materially adversely
affect the business, results from operations, and financial condition of the
Company.

For Mine Protected Vehicles, the hulls are manufactured in South Africa, which
presents political and financial risks, and are designed to fit engines and
drive-trains manufactured by Peterbilt, Mack, and GM depending on model and
confiuration. If the Company is unable to obtain components in a timely manner,
at an acceptable cost, or at all, the Company may need to select new suppliers,
redesign or reconstruct process it uses to build the hulls and/or the vehicles,


                                       27
<PAGE>

which management believes would take a minimum of one-year. The Company may not
be able to manufacture any vehicles for a period of time, which could materially
adversely affect the business, results from operations, and financial condition
of the Company.

Doing business in China. The hulls for the boats are manufactured in China. The
World Trade Organization has accepted China as a member nation, which has
resulted in low tariffs on imports into the United States from China. If import
tariffs or taxes increase for any reason, cost of goods would substantially
increase. The Company's financial performance may be affected by changes in
China's political, social and economic environment. The role of the Chinese
central and local governments in the Chinese economy is significant. Chinese
policies toward economic liberalization, and laws and policies affecting foreign
companies, foreign investment, currency exchange rates and other matters could
change, resulting in greater restrictions on the Company's ability to do
business and operate manufacturing facilities in China. The Chinese government
could impose surcharges, increase tax rates, or revoke, terminate or suspend
operating licenses without compensating the Company. Also, China has, from time
to time, experienced instances of civil unrest and hostilities. Confrontations
have occurred between the military and civilians. If for these or any other
reason, the Company loses its ability to sub-contract or manufacture its
products in China, or the cost of doing business increases, the Company's
business, financial condition, and results of operations would be materially and
adversely affected.

Doing business in South Africa. The designs, components, and mine protected
vehicle hulls are manufactured in South Africa. If import tariffs or taxes
increase for any reason, cost of goods would substantially increase. The
Company's financial performance may be affected by changes in South Africa's
political, social and economic environment. The role of the South African
central and local governments in the economy is significant. South African
policies toward economic liberalization, and laws and policies affecting foreign
companies, foreign investment, currency exchange rates and other matters could
change, resulting in greater restrictions on the Company's ability to do
business with suppliers based in South Africa. The government could impose
surcharges, increase tax rates, or revoke, terminate or suspend operating
licenses without compensating the Company. Also, South Africa has, from time to
time, experienced instances of civil unrest and hostilities. Confrontations have
occurred between the military, insurgent forces, and civilians. If for these or
any other reason, the Company loses its ability to sub-contract or manufacture
the compenents to its products, or the cost of doing business increases, the
Company's business, financial condition, and results of operations would be
materially and adversely affected.

No Assurance of Successful and Timely Product Development. Although the Company
designs and sells vehicles and boats, the Company's emphasis is the sales of
development stage mine protected vehicle and commercial boats and the Company's
future is significantly reliant upon the success of the products. The Company's
vehicles and boats and proposed enhancements are at various stages of
development and additional development and testing will be required in order to
determine the technical feasibility and commercial viability of the products.
There can be no assurance that the Company's product development efforts will be
successfully completed. The Company's proposed development schedule may be
affected by a variety of factors, many of which will not be within the control
of the Company, including technological difficulties, access to proprietary
technology of others, delays in regulatory approvals, international operating
licenses, and the availability of necessary funding. In light of the foregoing
factors, there can be no assurance that the Company will be able to complete or
successfully commercialize its products. The inability of the Company to
successfully complete the development of its new vehicles designs and commercial
boats or to do so in a timely manner, could force the Company to scale back
operations, or cease operations entirely.

Success dependent on market acceptance. The Company's success is dependent on
the market acceptance of its products. Despite the increasing demand for mine
protected vehicles and commercial boats, the Company's products represents an
advanced approach to the industry, and market acceptance of the Company's
products will be dependent, among other things, upon its quality, ease of use,
speed, reliability, and cost effectiveness. Even if the advantages of the
Company's products are established, the Company is unable to predict how
quickly, if at all, the products will be accepted by the marketplace.

Uninsured claims or losses. The Company may obtain comprehensive insurance,
including liability, fire and extended coverage, as is customarily obtained for


                                       28
<PAGE>

businesses similar to the Company. Certain types of losses of a catastrophic
nature, such as losses resulting from floods, tornadoes, thunderstorms, and
earthquakes, are uninsurable or not economically insurable to the full extent of
potential loss. Such Acts of God, work stoppages, regulatory actions or other
causes, could interrupt production and adversely affect the Company's business,
expansion and results of operations.

The Company may be exposed to liability for personal injury or property damage
claims relating to the use of the products. A wrongful death action was filed
against the Company in September 2000. Although the Company settled the lawsuit
and it did not materially affect business, any future claim against the Company
for personal injury or property damage could materially adversely affect the
business, financial condition, and results of operations and result in negative
publicity. There can be no assurance that the Company will maintain insurance,
experience legal claims outside of its insurance coverage, or in excess of its
insurance coverage, or that insurance will not cover.

The Company does not have in effect any form of Directors and /Or Officers
Insurance.

Competition. The Company is subject to significant competition that could harm
its ability to win business and could increase the price pressure on products.
The Company faces strong competition from a wide variety of firms, including
large, multinational marine, defense and aerospace firms. Most of our
competitors have considerably greater financial, marketing and technological
resources than the Company or its' subsidiaries do, which may make it difficult
to win new contracts and the management cannot assure you that the Company will
be able to compete successfully. Certain competitors operate fabrication
facilities and have longer operating histories and presence in key markets,
greater name recognition, larger customer bases and significantly greater
financial, sales and marketing, manufacturing, distribution, technical and other
resources, as a result, these competitors may be able to adapt more quickly to
new or emerging technologies and changes in customer requirements. They may also
be able to devote greater resources to the promotion and sale of their products.

Moreover, there can be no assurance that the Company will have sufficient
resources to undertake the continuing research and development necessary to
remain competitive. Competitors may attempt to independently develop similar
designs or duplicate the Company's products or designs. The Company or its
competitors may intentionally or unintentionally infringe upon or misappropriate
products or proprietary information. In the future, litigation may be necessary
to enforce intellectual property rights or to determine the validity and scope
of the proprietary rights of others. Any such litigation could be time consuming
and costly. There can be no assurance that any patent or patents sub-licensed to
Company relating to the Company's products will not be challenged, invalidated,
or circumvented or that the rights granted thereunder will give the Company a
competitive advantage. In addition, the Company cannot assure investors that any
of the patents sublicensed to us will be held valid if subsequently challenged.

Environmental Matters. The Company is subject to federal, state, local and
foreign laws, and regulations regarding protection of the environment, including
air, water, and soil. The Company's manufacturing business involves the use,
handling, storage, and contracting for recycling or disposal of, hazardous or
toxic substances or wastes, including environmentally sensitive materials, such
as batteries, solvents, lubricants, degreasing agents, gasoline and resin. The
Company must comply with certain requirements for the use, management, handling,
and disposal of these materials. The Company, however, does not maintain
insurance for pollutant cleanup and removal. If the Company is found responsible
for any hazardous contamination, any fines or penalties, the Company may be
required to pay, or any clean up the Company is required to perform, could be
very costly. Even if the Company is charged, and later found not responsible,
for such contamination or clean up, the cost of defending the charges could be
high. If either of the foregoing occurs, the Company's business, results from
operations and financial condition could be materially adversely affected.

Government Regulation. The Company may be subject to regulation by county, state
and federal governments, governmental agencies, and regulatory authorities from
several different countries. For example, the Company is subject to federal
regulation under the Boat Safety Act of 1971 that requires boat manufacturers to
recall products for replacement of parts or components that have demonstrated
defects affecting safety. Failure to obtain regulatory approvals or delays in
obtaining regulatory approvals by the Company would adversely affect the
marketing of products and services developed by the Company, and the Company's


                                       29
<PAGE>

ability to generate product and service revenues. Further, there can be no
assurance that the Company will be able to obtain necessary regulatory
approvals. Although the Company does not anticipate problems satisfying any of
the regulations involved, the Company cannot foresee the possibility of new
regulations, which could adversely affect the business of the Company.
Violations by the Company of, non-compliance with such regulations and approvals
may adversely affect the Company.

In addition, the EPA has passed various air emissions regulations for outboard
marine engines that impose stricter emissions standards for two-cycle, gasoline
outboard marine engines. Emissions from such engines must be reduced by
approximately 75% over a nine-year period that began in 1998. The California
legislature has enacted similar regulations that are already effective, and with
which the engines installed in most commercial boats do not comply, including
the Company's current products. The Company expects other states will pass
similar laws. If future emissions standards or other regulations materially
increase the cost of engines, or if manufacturers are unable to comply with such
standards or regulations, business, results from operations and financial
condition could be materially adversely affected, and you could lose your
investment. There can be no assurance that such regulations do not exist and/or
that Federal and State regulations will be enacted that will have a material
adverse impact on the Company and/or its operations.

International Operations. The Company manufactures products in China, and South
Africa, and these international operations are subject to many inherent risks,
any of which may adversely affect our business, financial condition and results
of operations. Approximately 83% of our consolidated total revenues in fiscal
2002 was derived from sales outside the United States. In the future, we intend
to continue to expand our international business activities. International
operations are subject to many inherent risks that may adversely affect our
business, financial condition and operating results, including:
o       political, social and economic instability;
o       trade restrictions;
o       the imposition of governmental controls;
o       exposure to different legal standards, particularly with respect to
        intellectual property;
o       burdens of complying with a variety of foreign laws;
o       import and export license requirements and restrictions of the United
        States and each other country in which we operate;
o       unexpected changes in regulatory requirements;
o       foreign technical standards;
o       fluctuations in currency exchange rates;
o       difficulties in managing foreign operations and collecting receivables
        from foreign entities; and
o       potentially adverse tax consequences.

Reliance on Patent and other Proprietary Rights. The Company's success and
ability to compete depend, in part, on the protection of its proprietary
technology. The unique designs and other components of the Commercial Boat
products are protected by United States patents issued to Albert Mardikian, the
beneficial owner of over 10% of the outstanding shares of Common Stock of the
Company. In addition, there can be no assurance that any application of the
Company's technology or licensed technology will not infringe patents or
proprietary rights of others.

The Company has not undertaken or conducted any comprehensive patent
infringement searches or studies. If any third parties hold any conflicting
rights, the Company may be required to stop making, using or selling its
products or to obtain licenses from and pay royalties to others. Further, in
such event, there can be no assurance that the Company would be able to obtain
or maintain any such licenses on acceptable terms, if at all. The Company may
need to engage in future litigation to enforce intellectual property rights or
the rights of customers, to protect trade secrets or to determine the validity
and scope of proprietary rights of others, including customers. This litigation
could result in substantial costs and diversion of resources and could
materially and adversely affect the Company's business, financial condition and
results of operations.


                                       30
<PAGE>

Technological obsolescence. The industry is subject to technological innovation.
Consequently, the life cycles of products introduced in this industry can be
relatively short in some instances. The Company's success depends significantly
on its ability to establish and maintain a competitive position in this field.
There can be no assurance that the Company's products will remain competitive in
light of technological developments by others. There can be no assurance that
the Company's competitors will not succeed in discovering and developing
technology in advance of the Company that would render the Company's technology,
and hence its products, obsolete and noncompetitive.

Conflicts of Interest. The Board of Directors of Sonic Jet Performance, Inc. is
subject to various conflicts of interest arising out of their relationship with
the Company. The officers and directors of the Company will devote such time, as
they deem necessary to the business and affairs of the Company. Officers and
directors of the Company are required by law to deal fairly and in good faith
with the Company and they intend to do so. However, in any company, there are
certain inherent conflicts between the officers and directors and the investors,
which cannot be fully mitigated. Because the officers and directors will engage
in operations independent of the Company, some of these activities may conflict
with those of the Company. Thus, the officers and directors may be placed in the
position where their decisions could favor their own operations or other
operations with which they are associated over those of the Company. Officers
and directors of the Company may engage in business separately from activities
on behalf of the Company or client entities for which the Company also provides
services.

Control by Shareholders, Directors and Officers. The Company's significant
shareholders, Directors and Executive Officers will, in the aggregate,
beneficially own approximately 40% of the Company's outstanding Common Stock,
excluding the warrants. These shareholders, if acting together, will be able to
exert substantial influence over all matters requiring approval of the Company's
shareholders, including amendments to the Company's Articles of Incorporation,
fundamental corporate transactions such as mergers, acquisitions, the sale of
the Company, and other matters involving the direction of the Company's business
and affairs and specifically the ability of certain holders of preferred stock
to appoint 3 of the 5 members of the Company's Board of Directors. See
"Principal Stockholders" and "Description of Securities." Dependence on
Management and Other Key Personnel. The success of the Company and its business
strategy is dependent in large part on its ability to attract and retain key
management and operating personnel. Such individuals are in high demand and are
often subject to competing employment offers. We do not have any long-term
employment agreements with any of our key personnel. If we are not able to
retain our key personnel, we may not be able to implement our business plan and
our results of operations could be materially and adversely affected. The
Company is negotiating employment agreements with its executive officers and
anticipates consummating said agreements in the future. The Company depends to a
large extent on the abilities and continued participation of our executive
officers and other key employees, particularly Garth Barrett, president of our
TSG subsidiary, Mike Watts, general manager of our TSG subsidiary, Rao Mankal,
our president and chief financial officer, Bill Morse, our sales manager for
boat sales, and Hratch Khedisian, our director of operations for boats. The
Company does not presently maintain "key man" insurance on any employees. We
believe that, as our activities increase and change in character, additional,
experienced personnel will be required to implement our business plan.
Competition for such personnel is intense and we cannot assure you that they
will be available when required, or that we will have the ability to attract and
retain them.

Limitations on Directors' and Officers' Liability. The Company's Articles of
Incorporation provide, as permitted by governing Colorado law, that a director
or officer of the Company shall not be personally liable to the Company, or its
shareholders, for monetary damages for breach of his or her fiduciary duty of
care as a director or officer, with certain exceptions. In addition, the Company
has agreed to indemnify its officers and directors to the fullest extent
permitted by Colorado law. Such provisions may discourage stockholders from
bringing a lawsuit against directors for breaches of fiduciary duty and may also
have the effect of reducing the likelihood of derivative litigation against
directors and officers even though such action, if successful, might otherwise
have benefited the Company's stockholders. In addition, a stockholder's
investment in the Company may be adversely affected to the extent that the
Company, pursuant to such provisions, pays costs of settlement and damage awards
against the Company's officers or directors.


                                       31
<PAGE>

Additional Risks. The Company is subject to many additional risks. The risks and
uncertainties described outlined above are not a comprehensive list. Additional
risks and uncertainties not presently known or those the managemetn does not
currently deem material may also affect business operations.

Item 7.  FINANCIAL STATEMENTS

   The information required by this item is included in pages F-1 through F-16
attached hereto and incorporated herein by reference. The index to the
consolidated financial statements can be found at F-1.


Item 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

              None.




                                       32
<PAGE>



PART III

Item 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTES AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT


Item 10. EXECUTIVE COMPENSATION

Executive Officers, Management, and Directors

The following table sets forth certain information about the Company's directors
and executive officers.

Name                       Age       Position

Madhava Rao Mankal         51        Sonic Jet, President, CFO, Director

Hratch Khedesian           32        Sonic Jet, Director of Operations

Frank Kavanaugh            42        Sonic Jet, Director of Business Development

Walter Wright              32        Sonic Jet, Investor Relations Coordinator

Garth J. M. Barrett,       58        TSG, President

Michael Watts              55        TSG, General Manager

Scott R. Ervin             47        Director

George Moseman             55        Director


Madhava Rao Mankal - President/CFO/ Director
Mr. Mankal has served as Chief Financial Officer since May 1999, and as
President since January 2002. Mr. Mankal has also served as a Director since
December 2001. He is Qualified Chartered Accountant and Cost Accountant and a
member of the Institute of Chartered Accountant, Institute of Cost and Works
Accountants, and Institute of Management Accounting. His prior experience
includes Controller and Manager of Finance for American Power Products, and as
the Financial Advisor for Agricultural Corporation, Sudan, East Africa, under
the Rehabilitation Project Management Unit program of the World Bank. He also
managed the finance department of Gamatex in the Sudan, financed by
International Finance Corporation. He has completed statutory financial audits
of several manufacturing companies, banks, hospitality businesses, and led cost
analysis teams for textile, consumer equipment, and paper companies. He has
traveled widely in Asia, Africa and the Middle East. He has served as management
nominee on the board of directors of Transport Society of NGEF, Ltd. India, and
was appointed the Joint secretary of Bangalore Chapter of Cost Accountants. He
holds a Bachelors degree from Bangalore University, India.

Hratch Khedesian - Director of Operations
Mr. Khedesian has served as Director of Operations since July of 2000. His
background includes studies in finance, business and human resources at
Goldenwest College and University of California at Los Angeles. His skills
include production engineering, new product development, purchasing, CAD-CAM,
CNC Programming and a broad range of computer knowledge. His international
business experience includes the set up of two manufacturing facilities in China
including implementation of training programs for the employees. Mr Khedesian
also plays an active role in the United States Coast Guard Auxillary,


                                       33
<PAGE>

volunteering his time heading educational safety courses, navigation, harbor
patrol and continuing his accumulation of certificates in Communications, Search
and Rescue, Vessel Examination and Crew.

Frank Kavanaugh, Director of Business Development
Mr. Kavanaugh brings 20 years of experience in developing, financing,
structuring, and turnarounds of technology and business service companies. Mr.
Kavanaugh has provided management, strategic consulting, and financial direction
to several business-to-business technology companies. His experience includes
leading a computer services firm, restructuring a troubled manufacturer losing
$3 million per year to create a profitable company with $24 million in revenue
and profits of $2 million year, purchasing and repositioning a computer storage
distributor to a systems integrator, improving margins and profitability and
increasing the business from $9 million in revenue to $28.5 million in 3 years,
and repositioning and re-launching an insolvent technology company, and raising
$11 million in equity capital over 9 months. In addition, his experience
includes co-founding and serving as President of QuickStart Technologies, a
leading national training company and Microsoft Solution Provider. Additionally,
Mr. Kavanaugh has held technical and sales positions at Microsoft and
Hewlett-Packard. He serves on the Board of Chapman University Entrepreneur
Center, and University of California, Irvine's Student Foundation. Mr. Kavanaugh
earned a Bachelor of Science degree in Information Computer Science from
University of California, Irvine.

Walter Wright, Investor Relations Coordinator
Mr. Wright brings more than a decade of experience in business development and
corporate communications. Mr. Wright has provided frontline sales, sales
management, operations management, and communications management to companies
ranging from technical training to capital investment. His experience includes
working with several publicly-traded companies, participating in the
repositioning, re-launching, and re-capitalization of an insolvent technology
company, and implementing business process documentation. He studied Speech
Communications at the California State University at Fullerton.

Garth Barrett - TSG President
Mr. Barrett is a military Staff College graduate and retired Special Air Service
(SAS) colonel with extensive special warfare experience in numerous special
operations. In addition to his counter-terrorism expertise, Mr. Barrett is a
recognized authority worldwide in the fields of explosives, intelligence, and
security. Mr. Barrett has been engaged as a consultant in these fields by
numerous organizations, both government and private. He is the inventor of the
revolutionary Barrett Bomb Bag, a patented bomb suppression device, and ran a
company that manufactured the bag with over $1 million per month in revenues. He
has an established reputation as an authority in the field of mine
countermeasures and has been contracted by the United Nations and several
individual countries for mine detection and clearing operations. Mr. Barrett
graduated from the Royal Military Academy in Sandhurst, England in 1965. He
commanded the 1st Special Air Service Regiment (SAS) in Rhodesia until 1980, and
was commander of the South African 6th Reconnaissance Commando unit.

Michael Watts - TSG General Manager
Mr. Watts has more than 30 years of experience as an executive and investor. He
has served as CEO of four companies that produced computer hardware, computer
software, consumer electronics, and semiconductors. He has successfully founded,
grown, and sold two companies. In addition, he has served as a management
consultant to companies in a variety of industries and to Wells Fargo Bank and
BNP Paribas Bank. Mr. Watts received a Bachelor of Science degree in Electrical
Engineering with high honors from Colorado State University and majored in
Finance in the MBA program at the University of Colorado. He holds five patents
for the UPC bar code scanner and interactive software.

Scott R. Ervin - Director
Mr. Ervin has served as a director since February 2002. Mr. Ervin also served on
the Company's 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.

                                       34


George Moseman - Director
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.
Previously, Mr. Moseman has served as national marketing director of Lamborghini
of North America and has been a partner of Tradeway Securities, a regional
retail broker-dealer.

Executive Compensation
The Company's executive officers are currently conducting negotiations with the
Company regarding terms of employment contracts. The Company anticipates
entering into employment agreements with each of the key executive officers
shortly. The current compensation for the Company's executive officers is as
follows: Mr. Mankal - $64,800, , Mr. Khedesian - $48,000, Mr. Watts $180,000,
plus an expense allowance, Mr. Barrett - $120,000. Furthermore, Frank Kavanaugh
was employed by TSG as its Business Development Associate from October 2002 to
December 2002 and was paid $5,000 per month, and Mr. Kavanaugh has since left
TSG and is working for Sonic Jet. However, due to the lack of revenues and
availability of cash, executive officers have received some of their
compensation in the form of shares of Common Stock of the Company, and/or have
accrued their compensation to be paid when cash is available. Executive officer
compensation is subject to review on a periodic basis by the Board of Directors.

Sonic Jet Performance, Inc, entered into an employment agreement with Frank
Kavanaugh on April 1, 2003. Mr. Kavanaugh will be the Company's Director of
Business Development and will be paid an annual salary of $120,000 and will be
issued 500,000 shares of the Company's stock.

Sonic Jet Performance, Inc, entered into an employment agreement with Walter
Wright on April 1, 2003. Mr. Wright will be the Company's Investor Relations
Coordinator and will be paid an annual salary of $60,000.

Sonic Jet Performance, Inc. entered into a consulting agreement on July 1, 2002
with Mike Watts as its General Manager for TSG. Under the agreement Mr. Watts
will receive a consulting fee and options to purchase 4,000,000 shares of Sonic
Jet and options to purchase a 5% equity stake in TSG. Under the agreement
beginning January 1, 2003, Mr. Watts was to become an employee of TSG, however,
the formal employment agreement is still being negotiated between the parties.
It is anticipated that Mr. Watts will be paid an annual salary of $180,000 plus
an expense allowance.

The Company anticipates that each employment agreement into which the Company
will enter will provide for warrants and/or options to purchase shares of the
Company's Common Stock that vest upon the achievement of certain performance
objectives. In addition, the Board of Directors may, at its discretion, award
these officers cash bonuses, options to purchase shares of Common Stock under
the Company's Stock Option Plan, and such other compensation, including
equity-based compensation, as the Board of Directors, or a committee thereof,
shall approve from time to time.

Stock Option Plan
In 2000, the Board of Directors and Shareholders of the Company adopted the
Sonic Jet Performance, Inc. Stock Option Plan (the "Option Plan"). The Option
Plan provided for the granting of options to purchase up to an aggregate of
2,000,000 shares of Common Stock to certain key employees, officers, directors
and consultants of the Company. The Board of Directors or a committee of the
Board, which determines the persons who are to receive options and the terms and
the number of shares subject to each option, administers the Option Plan.

Indemnification of Directors, Officers and Employees
The Company's Articles of Incorporation limit the liability of its directors to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director except, for (i) liability based on a breach of the duty of
loyalty to the Company or its shareholders; (ii) liability for acts or omissions



                                       35
<PAGE>

not in good faith or that involved intentional misconduct or a knowing violation
of the law; (iii) liability based on the payment of an improper dividend or an
improper repurchase of the Company's stock under California law, or violations
of federal or state securities laws; (iv) liability for transactions from which
the director derived an improper personal benefit; or (v) liability for any act
or omissions occurring prior to the effective date of the Articles of
Incorporation.

The Company's Bylaws provide that the Company shall indemnify a person made or
threatened to be made a party to a threatened, pending or completed civil,
criminal, administrative, arbitration or investigative proceeding by reason of
such person's present or former capacity as a director, officer, employee or
agent of the Company if such person: (a) has not been indemnified by another
organization or employee benefit plan for the same judgment, penalty or fine;
(b) acted in good faith; (c) received no improper personal benefit and, if a
director, had no improper conflict of interest; (d) in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and (e)
reasonably believed that the conduct complained of was in the best interests of
the Company or was not opposed to the best interests of the Company.

The Colorado Business Corporation Act requires that unless prohibited or limited
by the Company's Articles of Incorporation or Bylaws, the Company must indemnify
its current and former directors, officers and employees who are made or
threatened to be made a party to certain proceedings by reason of their present
or former official capacity with the Company, against judgments, penalties,
fines, settlements, and reasonable expenses (including attorney's fees) incurred
in connection with such proceedings. "Proceeding," means a threatened, pending
or completed civil, criminal, administrative or investigative action, including
a derivative action in the name of the Company. Reference is made to the
detailed terms of the Oklahoma statute for a complete statement of such
indemnification right. Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act"), may be permitted
to directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.


Security Ownership Of Certain Beneficial Owners And Management

Certain Transactions with Affiliates
Patents awarded to Mr. Mardikian protect the designs and certain components of
the Company's boats. On November 24, 1999, Mr. Mardikian granted the Company
exclusive licenses, until November 18, 2003, to use those patents and related
rights. To induce Ashford Capital, LLC to purchase the Company's Series B
Convertible Preferred Stock, Mr. Mardikian assigned his watercraft related
patents to Mardikian Marine Design, an entity owned 80% by Mr. Mardikian and 20%
by a principal of Ashford Capital, LLC. The Company is obligated to pay the
greater of $60,000 per year or (1) four percent of the first $3 million in 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. The Company
can pay the royalties in cash or stock, at its discretion for 2002 and cash in
the following years.

In January 2002, Ashford Capital, KK, purchased 7 shares of the Company's 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 Common Stock.
Ashford Capital, LLC, the holder of the Series B Preferred Stock, owns a
minority interest in Ashford Capital, KK.

On September 30, 2002 the Series C shareholders and the Company agreed to amend
and restate the Certificate of Designation of Series C Convertible Preferred for
Sonic Jet Performance. Pursuant to the agreement and upon finalization of the
amendment of the Series C documents, the stock shall be voted equally with the
shares of the Common Stock of the Corporation and not as a separate class, at
any annual or special meeting of shareholders of the Corporation, and may act by


                                       36


<PAGE>

written consent in the same manner as the Common Stock, in either case upon the
following basis: the holder of the shares of Series C Stock shall be entitled to
such number of votes as shall be equal to the aggregate number of shares of
Common Stock into which such holder's shares of Series C Stock are convertible
immediately after the close of business on the record date fixed for such
meeting or the effective date of such written consent. Furthermore, the parties
also agreed that each 10 shares of Series C stock shall be convertible into two
percent (2%) of the Company's common stock outstanding at the time of
conversion. Also, amended was the Company's power to redeem the Series C Stock.
On or after February 14, 2003, the Company may, at its sole discretion, with 5
days notice, redeem some or all of the outstanding shares of Series C Stock at a
"Redemption Price" equal to $12,000 per share, during this period the Series C
shareholders may elect to convert their shares under the conversion formula.

Pursuant to a finder's fee agreement entered into between Ashford Capital, LLC
and Sonic Jet Performance, Inc on February 1, 2002, Sonic Jet granted Ashford
Capital ten percent (10%) of the equity ownership of any referred party acquired
by Sonic Jet. In case of Partial acquisition Sonic Jet will pay Ashford ten per
cent (10%) of the transaction price and/or other consideration of any kind paid
by or to Sonic Jet or any of its subsidiaries or affiliates in connection with
any transaction for a referred party.


                                       37

<PAGE>



Principal Shareholders

The following table sets forth, as of the date hereof, certain information with
respect to beneficial ownership of the Company's Common Stock by: (i) each
shareholder known by the Company to own beneficially more than 10% of the
Company's Common Stock; (ii) each director and executive officer of the Company;
and (iii) all executive officers and directors of the Company as a group. Unless
otherwise indicated by footnote, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.

<TABLE>
<CAPTION>

            Name of                   Number of Shares                                           Percentage
       Beneficial Owner            Beneficially Owned (1)                                       Ownership (2)
-------------------------------- ---------------------------- -------------------------- ----------------------------
<S>                              <C>                          <C>                        <C>
Albert Mardikian (3)                               8,248,926                                                   6.50%
-------------------------------- ---------------------------- -------------------------- ----------------------------
Rao Mankal                                           625,000                                                   0.49%
-------------------------------- ---------------------------- -------------------------- ----------------------------
George Moseman                                       450,000                                                   0.35%
-------------------------------- ---------------------------- -------------------------- ----------------------------
Scott Ervin                                          615,000                                                   0.49%
-------------------------------- ---------------------------- -------------------------- ----------------------------
Ashford Capital, LLC(4)                           26,878,885                                                  21.20%
-------------------------------- ---------------------------- -------------------------- ----------------------------
Garth J. M Barrett                                 2,250,000                                                   1.77%
-------------------------------- ---------------------------- -------------------------- ----------------------------
Michael Watts                                        814,706                                                   0.64%
-------------------------------- ---------------------------- -------------------------- ----------------------------
  All directors and executive                     39,882,517                                                  31.44%
 officers as a group (persons)
-------------------------------- ---------------------------- -------------------------- ----------------------------
</TABLE>

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to shares beneficially owned. Shares of Common Stock subject to options
or warrants currently exercisable are deemed outstanding for computing the
percentage ownership of the person holding such options or warrants, but are not
deemed outstanding for computing percentage ownership of any other person.

 (2) Based on 126,821,045 common shares, fully diluted as of March 31, 2003,
excluding the exercise of the Warrants.

 (3) Shares of common stock beneficially owned by Mr. Mardikian on March 31,
2003 include 6,429,206 shares held by Visionary Investment, LLC, of which Mr.
Mardikian is the sole shareholder, 1,761,926 shares held by Mr. Mardikian, and
57,794 shares held by MGS Grand Sports, Inc., of which Mr. Mardikian is a
majority shareholder. The business address of Mr. Mardikian is 887 West 16th
Street, Newport Beach, CA 92663..

(4) (a) Shares of Common Stock owned include 564,706 shares owned by Ashford
Capital, KK, a Japanese company of which Ashford Capital, LLC, owns a minority
interest, (b) 25,364,209 shares of Common Stock issuable upon conversion of
Series B Preferred Stock held by Ashford Capital, LLC, and (c) 949,970 shares of
Common Stock 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 31, 2003. Ashford Capital, LLC, disclaims
beneficial ownership of the shares attributable to Ashford Capital, KK. The
business address of Ashford Capital, LLC is 65 Enterprise, Aliso Viejo, CA
92656.


                                       38
<PAGE>


Item 11. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.
   The exhibits listed below are hereby filed with the Commission as part of
this Annual Report on Form 10-KSB. Certain of the following exhibits have been
previously filed with the Commission pursuant to the requirements of the
Securities Act or the Exchange Act. Such exhibits are identified by the
parenthetical references following the listing of each such exhibit and are
incorporated herein by reference. We will furnish a copy of any exhibit upon
request, but a reasonable fee will be charged to cover our expense in furnishing
such exhibit.


Exhibit
Number                                  Description
------                                  -----------

3.1       Articles of Incorporation for Boulder Capital  Opportunities III, Inc.
          (Previously  filed with the  Commission  on March 24, 1997, as Exhibit
          3.(i) to the Company's  General Form for Registration of Securities of
          Small Business Issuer on Form 10-SB.)
3.2       Articles of  Amendment  to the  Articles of  Incorporation  of Boulder
          Capital  Opportunities  III, Inc.,  filed January 15, 1997 (Previously
          Filed  previously  filed with the  Commission  on March 15,  2002,  as
          exhibit to the Company's Report on Form 10KSB.).
3.3       Articles of  Amendment to the  Articles of  Incorporation  for Boulder
          Capital  Opportunities  III, Inc.,  filed November 5, 1998 (Previously
          filed with the  Commission on April 15, 1998, as Exhibit 3.(iv) to the
          Company's Current Report on Form 8-K.)
3.4       Certificate  of  Designations,  Preferences  and  Rights  of  Series A
          Convertible Preferred Stock of Boulder Capital Opportunities III, Inc.
          (Previously  filed with the Commission on July 6, 1998, as Exhibit 7.4
          to the Company's Current Report on Form 8-K.)
3.5       Bylaws for Boulder Capital  Opportunities III, Inc.  (Previously filed
          with the  Commission  on March  24,  1997,  as  Exhibit  3.(ii) to the
          Company's  General  Form  for  Registration  of  Securities  of  Small
          Business Issuer on Form 10-SB.)
3.6       Certificate of Designation  for Series B Convertible  Preferred  Stock
          (Previously  filed with the  Commission on January 7, 2002, as Exhibit
          3.1 to the Company's Current Report on Form 8-K.)
3.7       Certificate of Designation  for Series C Convertible  Preferred  Stock
          (Previously  filed with the  Commission on January 7, 2002, as Exhibit
          3.2 to the Company's Current Report on Form 8-K.)
10.1      2000 Stock Plan of Sonic Jet Performance,  Inc. (Previously filed with
          the  Commission  on June  30,  2000  as  Appendix  A to the  Company's
          Information  Statement  pursuant  to Section  14(c) of the  Securities
          Exchange Act of 1934.)
10.2      Consulting  Agreement  between  Kevin Ryan and Sonic Jet  Performance,
          Inc. (filed herewith).
10.3      Consulting Agreement between eFund Capital Partners, LLC and Sonic Jet
          Performance, Inc. (filed herewith).
10.4      Series  B  Convertible  Preferred  Stock  Purchase  Agreement  between
          Ashford Capital, LLC and Sonic Jet Performance, Inc. (Previously filed
          with the  Commission  on  January  7,  2002,  as  Exhibit  10.1 to the
          Company's Current Report on Form 8-K.)
10.5      Series C Convertible  Preferred Stock Purchase Agreement between eFund
          Capital  Partners,  LLC, and Sonic Jet Performance,  Inc.  (Previously
          filed with the  Commission  on January 7, 2002, as Exhibit 10.2 to the
          Company's Current Report on Form 8-K.)
10.6      Amendment to the Series C Preferred Stock  Certificate of Designation.
          (previously  filed with the  Commission  on  September  30,  2002,  as
          exhibit to the Company's Report on Form 10 QSB).
10.7      Amendment to the Series B Preferred Stock  Certificate of Designation.
          (filed herewith).
10.8      Settlement  Agreement  between Jeff Conrad and Sonic Jet  Performance,
          Inc. (filed herewith).
10.9      Settlement   Agreement  between  Catherine   Basinger  and  Sonic  Jet
          Performance, Inc. (filed herewith).


                                       39
<PAGE>

10.10     Consulting   Agreement   between   Gordon   McGilton   and  Sonic  Jet
          Performance, Inc. (filed herewith)
10.11     Agreement  between  Mission  Capital and Sonic Jet  Performance,  Inc.
          (previously  filed with the  Commission  on  September  30,  2002,  as
          exhibit to the Company's Report on Form 10 QSB).
10.12     Stock  Purchase  Agreement  between  Sonic Jet  Performance,  Inc. and
          Technical  Solutions Group.  (previously  filed with the Commission on
          June 28,  2002,  as exhibit to the  Company's  Current  Report on Form
          8-K).
10.13     Letter dated February 5, 2002,  between Regents Capital West and Sonic
          Jet Performance,  Inc.  (previously filed with the Commission on March
          15, 2002, as exhibit to the Company's Report on Form 10 KSB).
10.14     Letter  between  Sonic  Jet  Performance,   Inc.  and  encore  Capital
          Management,  LLC, JNC  Opportunity  Fund, Ltd. And JNC Strategic Fund,
          Ltd.  (previously  filed with the  Commission  on January 7, 2002,  as
          exhibit 10.3 to the Company's Current Report on Form 8-K).
10.15     Modified  Employment Offer Letter dated March 17, 2003 between Madhava
          Rao Mankal and Sonic Jet Performance, Inc. (filed herewith).
10.16     Employment  Offer Letter dated March 31, 2003 between Frank  Kavanaugh
          and Sonic Jet Performance, Inc. (filed herewith).
10.17     Employment  Offer Letter dated April 1, 2003 between Walter Wright and
          Sonic Jet Performance, Inc. (filed herewith).
10.18     Consulting  Agreement  between  Mike  Watts and Sonic Jet  Performance
          (filed herewith).
10.19     Consulting  Agreement  between  Harrison  Douglas,  Inc. and Sonic Jet
          Performance (filed herewith).
21.0      List of Subsidiaries (previously filed.)
23.1      Consent  of  Michael   Johnson  &  Co.  Llc.   Independent   Auditors.
          (Previously filed.)
24.1      Power of Attorney (included in signature page).

99.14     Sarbanes Oxley Certificate

-------------------
(b)      Reports on Form 8-K.
   On October 16, 2001, we filed an amendment to the Current Report on Form 8-K
we filed on October 8, 2001. The amendment included as an Exhibit, a letter from
Michael Johnson & Co., LLC, acknowledging its engagement as our certifying
accountant.

Item 14 - Procedures and Controls
---------------------------------

The management of the Company has evaluated the effectiveness of the issuer's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of the report (evaluation date) and have concluded that the
disclosure controls and procedures are adequate and effective based upon their
evaluation as of the evaluation date.

There were no significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of the most
recent evaluation of such, including any corrective actions with regard to
significant deficiencies and material weaknesses.








                                       40
<PAGE>



                                   SIGNATURES

   In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      SONIC JET PERFORMANCE, INC.

Date:  April 14, 2003                 By: /s/ Madhava Rao Mankal
                                         -----------------------------------
                                      Madhava Rao Mankal
                                      President/Chief Financial Officer/Director


                                POWER OF ATTORNEY

   KNOW ALL MEN BY THESE PRESENTS, that such person whose signature appears
below constitutes and appoints Mandhava Rao Mankal, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this Form 10-KSB and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the U.S. Securities
and Exchange Commission, granting unto said attorney-in-fact and agent, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.

   In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>

               Name                                            Capacity                             Date
<S>                                          <C>                                                <C>
/s/ MADHAVA RAO MANKAL                       President, Chief Financial Officer,                April 14, 2003
---------------------------------            Secretary, and Director (Principal
Madhava Rao Mankal                           Executive Officer & Principal
                                             Financial & Accounting Officer)


/s/ GEORGE MOSEMAN                           Director                                           April 14, 2003
---------------------------------
George Moseman


/s/ SCOTT ERVIN                              Director                                           April 14, 2003
---------------------------------
Scott Ervin

</TABLE>





                                       41
<PAGE>

                          Michael Johnson & Co., LLC.
                             9175 Kenyon Ave., #100
                                Denver, CO 80237
                              Phone: 303-796-0099
                               Fax: 303-796-0137



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders
Sonic Jet Performance, Inc. and subsidiary

We have audited the accompanying consolidated balance sheet of Sonic Jet
Performance, Inc. and subsidiary as of December 31, 2002,and 2001 and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Sonic
Jet Performance, Inc. and subsidiary as of December 31, 2002,and 2001 and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with accounting principles generally
accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. During the year ended December 31,
2002, the Company incurred net loss of $5,373,377. As discussed in Note 2,
conditions exist which raise substantial doubt about the Company's ability to
continue unless it is able to generate sufficient cash flows to meet its
obligations and sustain its operations. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustment that might result from the outcome of this uncertainty.


/s/ Michael Johnson & Co, LLC
Michael Johnson & Co, LLC
Denver, Colorado
April 6, 2003

                                      F-1


<PAGE>
<TABLE>
<CAPTION>


                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31 2002 AND 2001



                                                         2002                         2001
                                                   -----------------            -----------------
<S>                                                <C>                          <C>
ASSETS

Current Assets:
Cash                                                      $ 144,476                     $ 42,760
Restricted cash                                                   -                      201,004
Accounts receivable                                         166,242                        9,500
Inventories                                                 186,463                      363,971
Other current assets                                        146,874                        7,731
                                                   -----------------            -----------------
  Total Current Assets                                      644,055                      624,966
                                                   -----------------            -----------------

Property and equipment, net                                 336,523                    1,221,313
                                                   -----------------            -----------------

Other Assets:
Licensing rights                                            200,000                      267,500
Goodwill                                                  1,434,873
                                                   -----------------            -----------------
  Total Other Assets                                      1,634,873                      267,500
                                                   -----------------            -----------------

TOTAL ASSETS                                             $2,615,451                   $2,113,779
                                                   =================            =================

</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-2

<PAGE>

<TABLE>
<CAPTION>


                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31 2002 AND 2001



                                                                           2002                        2001
                                                                      ----------------            ----------------
<S>                                                                   <C>                         <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
Account payable                                                             $ 873,544                   $ 458,416
Accrued payroll taxes                                                          38,690                      70,936
Other accrued liabilities                                                     122,867                     172,329
Current portion of captialized lease obligations                                    -                      12,236
Loans payable                                                                  56,807                           -
General reserve                                                               424,947                     224,947
                                                                      ----------------            ----------------
 Total Current Liabilities                                                  1,516,855                     938,864
                                                                      ----------------            ----------------

Long-term debt:
Long-term accrued liabilities                                                 227,414                           -
Note payable - long-term                                                       67,732                           -
                                                                      ----------------            ----------------
  Total long-term                                                             295,146                           -
                                                                      ----------------            ----------------

TOTAL LIABILITIES                                                           1,812,001                     938,864
                                                                      ----------------            ----------------

Shareholders' equity:
Preferred stock: no par value, 10,000,000
  shares authorized, issued and outstanding
   Series A convertible preferred stock
   no share issued and outstanding                                                  -                           -
   Series B convertible preferred stock,
    1 share issued and outstanding                                             25,000                      25,000
   Series C convertible preferred stock,
  issued and outstanding, 34 and 5 shares respectively                        340,000                      50,000
Common stock, no par value, 300,000,000
  shares authorized, issued and outstanding
  71,558,418 and 19,333,936 respectively                                   15,985,256                  12,015,715
Warrants                                                                      692,226                           -
Shares committed to be issued                                                 143,350                      93,205
Accumulated deficit                                                       (16,382,382)                (11,009,005)
                                                                      ----------------            ----------------
  Total stockholders' deficit                                                 803,450                   1,174,915
                                                                      ----------------            ----------------

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                $ 2,615,451                 $ 2,113,779
                                                                      ================            ================
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-3

<PAGE>

<TABLE>
<CAPTION>


                       SONIC JET PERFORMANCE, INC. AND SUBSIDIARY

                         CONSOLIDATED STATEMENTS OF OPERATIONS
                         YEAR ENDED DECEMBER 31, 2002 AND 2001

                                                                                2002                         2001
                                                                          ------------------            ----------------
<S>                                                                       <C>                           <C>
NET SALES                                                                       $ 2,606,634                 $ 1,199,047

COST OF SALES                                                                     1,877,495                     896,084
                                                                          ------------------            ----------------

GROSS PROFIT                                                                        729,139                     302,963
                                                                          ------------------            ----------------

OPERATING EXPENSES:
General and administrative                                                        4,704,249                   1,501,864
Impairment losses                                                                 1,400,000                           -
                                                                          ------------------            ----------------
  Total Operating Expenses                                                        6,104,249                   1,501,864
                                                                          ------------------            ----------------

Loss from operations                                                             (5,375,110)                 (1,198,901)
                                                                          ------------------            ----------------
OTHER INCOME (EXPENSE):
Interest income                                                                       3,227                       7,056
Other income                                                                         41,435                     172,258
Interest expense                                                                    (42,929)                    (24,938)
Extraordinary loss                                                                        -                    (393,293)
                                                                          ------------------            ----------------
  Total Other Income (Expenses)                                                       1,733                    (238,917)
                                                                          ------------------            ----------------

NET LOSS                                                                        $(5,373,377)                $(1,437,818)
                                                                          ==================            ================


Basic loss per common share                                                         $ (0.13)                    $ (0.08)
                                                                          ------------------            ----------------
Diluted loss per common share                                                       $ (0.09)                    $ (0.07)
                                                                          ------------------            ----------------

Weighted-average shares used to compute:
Basic loss per share                                                             40,697,802                  15,847,263
                                                                          ------------------            ----------------
Diluted loss per share                                                           61,421,885                  23,816,716
                                                                          ------------------            ----------------
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-4

<PAGE>

<TABLE>
<CAPTION>


                           SONIC JET PERFORMANCE, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Accumulated
                                                                                               Additional
                                         Preferred Stock               Common Stock             Paid-In
                                      Shares        Amount         Shares         Amount        Capital        Warrants
                                     ----------  -------------  -------------  -------------  -------------  -------------
<S>                                  <C>         <C>            <C>            <C>            <C>            <C>
Balance, December 31, 1999               1,600    $ 1,500,000     12,676,000      3,618,194      $ 272,000      $ 316,026

Issuance of common stock for
 cash                                        -              -        348,767        710,583              -              -
Capital changes due to debt
 financing                                   -              -              -              -        826,000        708,601
Cumulative translation adjustment            -              -              -              -              -              -
Net loss                                     -              -              -              -              -              -
                                     ----------  -------------  -------------  -------------  -------------  -------------
Balance, December 31, 2000               1,600      1,500,000     13,024,767      4,328,777      1,098,000      1,024,627
                                     ----------  -------------  -------------  -------------  -------------  -------------
Issuance of common stock for
 services                                    -              -      4,841,969      6,186,938     (1,098,000)    (1,024,627)
Conversion of preferred stock
  into common stock                     (1,600)    (1,500,000)     1,467,200      1,500,000
Issuance of preferred stock                  6         75,000              -              -              -              -
Cumulative translation adjustments           -              -              -              -              -              -
Net loss                                     -              -              -              -              -              -
                                     ----------  -------------  -------------  -------------  -------------  -------------
Balance, December 31, 2001                   6         75,000     19,333,936     12,015,715              -              -
                                     ----------  -------------  -------------  -------------  -------------  -------------
Issuance of common stock for
 services                                    -              -     47,086,879      3,858,083              -              -
Issuance of preferred stock                 31        310,000              -              -              -              -
Conversion of preferred stock
 into common stock                          (2)       (20,000)       564,706         20,000              -              -
Beneficial conversion feature                -              -              -              -              -        692,226
Stock issued in lieu of debt                 -              -      4,572,897         91,458              -              -
Net loss                                     -              -              -              -              -              -
                                     ----------  -------------  -------------  -------------  -------------  -------------
Balance, December 31, 2002                  35      $ 365,000     71,558,418    $15,985,256            $ -      $ 692,226
                                     ==========  =============  =============  =============  =============  =============
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      F-5

<PAGE>


<TABLE>
<CAPTION>


                           SONIC JET PERFORMANCE, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Accumulated        Continued


                                            Shares       Other
                                           Committed   Comprehensive  Accumulated
                                          to be issued   Income        Deficit          Total
                                          -----------  -----------  ---------------  ------------
<S>                                       <C>          <C>          <C>              <C>
Balance, December 31, 1999                  $799,455     $ (4,943)     $(2,132,207)   $4,368,525
                                                                                               -
Issuance of common stock for                                                                   -
 cash                                       (655,583)           -                -        55,000
Capital changes due to debt
 financing                                         -            -                -     1,534,601
Cumulative translation adjustment                  -       25,273                -        25,273
Net loss                                           -            -       (7,458,046)   (7,458,046)
                                          -----------  -----------  ---------------  ------------
Balance, December 31, 2000                   143,872       20,330       (9,590,253)   (1,474,647)
                                          -----------  -----------  ---------------  ------------
Issuance of common stock for
 services                                    (50,667)     (20,330)          20,332     4,013,646
Conversion of preferred stock
  into common stock                                                                            -
Issuance of preferred stock                        -            -                -        75,000
Cumulative translation adjustments                 -            -           (1,266)       (1,266)
Net loss                                           -            -       (1,437,818)   (1,437,818)
                                          -----------  -----------  ---------------  ------------
Balance, December 31, 2001                    93,205            -      (11,009,005)    1,174,915
                                          -----------  -----------  ---------------  ------------
Issuance of common stock for
 services                                     50,145            -                -     3,908,228
Issuance of preferred stock                        -            -                -       310,000
Conversion of preferred stock
 into common stock                                 -            -                -             -
Beneficial conversion feature                      -            -                -       692,226
Stock issued in lieu of debt                       -            -                -        91,458
Net loss                                           -            -       (5,373,377)   (5,373,377)
                                          -----------  -----------  ---------------  ------------
Balance, December 31, 2002                  $143,350          $ -     $(16,382,382)    $ 803,450
                                          ===========  ===========  ===============  ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-6

<PAGE>

<TABLE>
<CAPTION>


                           SONIC JET PERFORMANCE, INC. AND SUBSIDIARY

                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                             YEAR ENDED DECEMBER 31, 2002 AND 2001


                                                                           2002                         2001
                                                                     ------------------            ----------------
<S>                                                                  <C>                           <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                                                  $(5,373,377)                $(1,437,818)
 Adjustments to reconcile net loss to net cash (used in)
  provided by operating activities:    Depreciation and amortization           245,807                     141,314
    Royalty                                                                     60,000                           -
    Write off of molds and tools on discontinued product                     1,020,000                           -
    Write off Dalian Sonic Jet Co, Ltd inventory                                     -                       5,863
    Write off investment in Dalian Sonic Jet Co., Ltd                                -                     393,292
    Provision for China inventory and assets                                   368,492                           -
    Common stock issued for services                                           528,834                      96,080
    Common stock committed for services                                              -                      93,205
    Stock issued in lieu of debt                                               (74,311)                   (164,335)
    Write down of assets                                                     1,400,000
    Bad debts                                                                   36,500                     152,970
    Beneficial conversion feature - warrants                                   692,226                     100,000
   Change in assets and liabilities:
     Decrease (increase) in accounts receivable                               (206,650)                     36,261
     Decrease (increase) in other receivable                                         -                      (4,281)
     Decrease (increase) in inventories                                       (150,411)                    205,069
     Decrease (increase) in due from related parties                                 -                     (32,084)
     Decrease (increase) in other current assets                              (139,143)
     Increase (decrease) in accounts payable                                   125,557                     430,546
     Increase (decrease) in accrued payroll taxes                              (32,246)                      2,450
     Increase (decrease) from customers                                         50,000                           -
     Increase (decrease) in other accrued liabilities                          (49,462)                   (138,940)
     Increase (decrease) in due to related parties                                   -                           -
                                                                     ------------------            ----------------
NET CASH USED IN OPERATING ACTIVITIES                                       (1,498,184)                   (120,408)
                                                                     ------------------            ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Restriced cash                                                              201,004                       2,116
   Purchase of property and equipment                                                -                      (2,645)
   Investment in Technical Solutions Group                                    (505,000)                          -
                                                                     ------------------            ----------------
NET CASH USED IN INVESTING ACTIVITIES                                         (303,996)                       (529)
                                                                     ------------------            ----------------
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-7

<PAGE>

<TABLE>
<CAPTION>


                           SONIC JET PERFORMANCE, INC. AND SUBSIDIARY

                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                             YEAR ENDED DECEMBER 31, 2002 AND 2001



                                                                           2002                       2001
                                                                      ---------------            ---------------
<S>                                                                   <C>                        <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from convertible debt - related party                                   -                    125,000
  Proceeds from (payments on) capitalized lease obilgation                   (12,236)                    (1,432)
  Issuance of common stock, net                                            1,425,825                          -
  Issuance of preferred stock, net                                           290,000                          -
  Proceeds from stock commitment                                             143,500                          -
  Proceeds from loans                                                         56,807                          -
                                                                      ---------------            ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                  1,903,896                    123,568
                                                                      ---------------            ---------------

NET (DECREASE) INCREASE IN CASH                                              101,716                      2,631

CASH - beginning of period                                                    42,760                     40,129
                                                                      ---------------            ---------------

CASH - end of period                                                       $ 144,476                   $ 42,760
                                                                      ===============            ===============

Supplemental disclosures of cash flow information:

 Interest paid                                                               $ 8,184                   $ 24,937
                                                                      ===============            ===============
 Income taxes paid                                                             $ 800                      $ 800
                                                                      ===============            ===============

Supplemental schedule of non-cash investing and financing
activities:

During the year ended December 31, 2002, the Company issued
9,972,020 restricted shares of common stock valued at $963,626
in connection with the settlement agreement of all outstanding
debts owed by the Company under various loan agreements.                   $ 963,626                        $ -
                                                                      ===============            ===============

During the year ended December 31, 2001, the Company issued
6,309,169 restricted  shares of common stock valued at $6,044,961
in connection with the settlement  agreement of all outstanding
debt owed by the Company under loan agreements, agreement
between the Company and Plaintiffs in "Wrongful death case" and
 outstanding amounts owed to employee and other expenses.                        $ -                 $6,044,961
                                                                      ===============            ===============

During the year ended December 31, 2001, the Company recorded
$93,205 for settlement with employees and consultants by
committing to issue shares, which represents the Company's
 committed-to-issue 1,656,695 shares of common stock.                            $ -                   $ 93,205
                                                                      ===============            ===============

During the year ended December 31, 2002, the Company issued
6,000,000 restricted shares of common stock valued at $1,200,000
in connection with the acquisition of Technical Solutions Group, Inc.

Cash from investing and financing activities exclude the effect of
the  acquisition of real property through the assumption of debt.

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                      F-8

<PAGE>

                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002


NOTE 1 - NATURE OF BUSINESS

         Sonic Jet Performance, Inc. (the "Company) designs, manufactures and
         markets high performance commercial boats and mine protected vehicles.
         The products combine innovative designs with power, safety, handling
         and stability to create boats and vehicles designed to protect and save
         lives. Sonic Jet Performance, Inc. is an Over-the-Counter, ("OTC")
         company, publicly traded on the National Quotation Bureau under the
         ticker symbol "SJET". The Company is headquartered in Stanton,
         California and is comprised of two business units, the first,
         Commercial Boats ("Sonic Jet") in Stanton, California, with additional
         facilities in Riverside, California and Nanning, China and TSG
         International, Inc. holding Company of Technical Solution Group, Inc.
         (Mine Protected Vehicles), in Charleston, South Carolina.
         Sonic Jet designs, manufactures, and markets high-performance
         commercial boats (collectively, the "Boats") used by fire, police, and
         the military personnel for fire, rescue, and patrol. TSG designs,
         manufactures and markets mine-protected vehicles (collectively, the
         "MPVs" or "Vehicles") used by police, and military organizations
         domestically and abroad for transportation, de-mining, and special
         applications. Sonic Jet and TSG (collectively the "Company") conducts
         operations through facilities almost exclusively in the United States,
         with a dormant facility in China available for use.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Consolidation
         ---------------------------
         The consolidated financial statements include the accounts of SJPI,
         Technical Solution Group, Inc. and its dormant wholly owned subsidiary,
         Nanning Sonic Jet, LLC. During the year ended December 31, 2002. All
         inter-company balances and transactions are eliminated in
         consolidation.

         Going Concern
         -------------
         The accompanying consolidated financial statements have been prepared
         on a going concern basis, which contemplates the realization of assets
         and the satisfaction of liabilities in the normal course of business.
         As shown in the financial statements, during the year ended December
         31, 2002 the Company incurred losses of $5,373,377 and its current
         liabilities exceed its current assets by $872,800.

         Realization of a major portion of the assets in the accompanying
         balance sheet is dependent upon continued operations of the Company,
         obtaining additional financing, and the success of its future
         operations.

         Since December 31, 2002, the Company has received $1,132,000 from the
         various subscribers for the period ending March 31, 2003 and has
         received $400,000 as loans from various parties.


                                      F-9

<PAGE>


                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Comprehensive Income (Loss)

         Comprehensive loss is equal to net loss for the years ended December
         31, 2000, and 2001.

         Cash Equivalents
         ----------------
         For purposes of reporting cash flows, the Company considers all highly
         liquid debt instruments purchased with maturity of three months or less
         to be cash equivalents. Cash equivalents consist primarily of United
         States government securities.

         Restricted Cash
         ---------------
         Restricted cash consisted of money deposited in a money market account
         to secure a letter of credit for approximately the same amount. The
         letter of credit was issued under a Floor Plan Repurchase Agreement
         with a financing company, which finances certain customers of the
         Company who are dealers and distributors.
         In 2002 this restricted cash has been realized.

         Inventories
         -----------
         Inventories are stated at the lower of cost or market. The cost is
         determined under the first-in-first-out method base (FIFO) valuation
         method.

         Property and Equipment
         ----------------------
         Property and equipment are stated at cost or at the value of the
         operating agreement. Depreciation and amortization are computed using
         the straight-line method over the following estimated useful lives:

                  Building and improvements                        20 years
                  Furniture and fixtures                            7 years
                  Machinery and equipment                           7 years
                  Tooling and molds                                 7 years
                  Vehicles                                          7 years

         The Company capitalizes costs incurred on tooling and molds once the
         design of the product is completed and independent marketing channels
         establish marketability of the product.

         Impairment of Long-Lived Assets
         -------------------------------
         The Company reviews long-lived assets to be held and used for
         impairment whenever events or changes in circumstances indicate that
         the carrying amount of an asset may not be recoverable. If the sum of
         the expected future cash flows (undiscounted and without interest
         charges) is less than the carrying amount of the asset, the Company
         would recognize an impairment loss based on the estimated fair value of
         the asset.


                                      F-10

<PAGE>


                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Goodwill
         --------
         Goodwill, which represents the excess of purchase price over fair value
         of net assets, acquired in the acquisition of Technical Solutions
         Group, Inc. in June 2002. The Company follows SFAS 142, Goodwill and
         Intangible Assets, which requires the Company to test goodwill for
         potential impairment annually. When the carrying value exceeds fair
         value, the impairment is the difference between the carrying value of
         goodwill and the implied value. The implied value of goodwill is the
         difference between the fair value for the unit as a whole and the value
         of individual assets and liabilities using as "as-if" purchase price.
         The impairment expense for 2002 was estimated at $1,400,000.

         Foreign Currency Transaction
         ----------------------------
         Assets and liabilities in foreign currencies are translated at the
         exchange rate prevailing at the balance sheet date. Revenues and
         expenses are translated at the exchange rate prevailing at the
         transaction date, and the resulting gains and losses are reflected in
         the statements of operations. Gains and losses arising from translation
         of a subsidiary's foreign currency financial statements are shown as a
         component of stockholders' equity (deficit) as accumulated
         comprehensive income (loss).

         Income Taxes
         ------------
         The Company uses the asset and liability method of accounting for
         income taxes. The asset and liability method accounts for deferred
         income taxes by applying enacted statutory rates in effect for periods
         in which the difference between the book value and the tax bases of
         assets and liabilities are scheduled to reverse. The resulting deferred
         tax asset or liability is adjusted to reflect changes in tax laws or
         rates. Because the Company has incurred losses from operations, no
         benefit is realized for the tax effect of the net operating loss
         carry-forward due to the uncertainty of its realization.

         Loss per Share
         --------------
         The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per
         share is computed by dividing loss available to common stockholders by
         the weighted-average number of common shares outstanding. Diluted loss
         per share is computed similar to basic loss per share except that the
         denominator is increased to include the number of additional common
         shares that would have been outstanding if the potential common shares
         had been issued and if the additional common shares were dilutive.
         Because the Company has incurred net losses, basic and diluted loss per
         share is the same.

         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.


                                      F-11

<PAGE>

                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002

         Revenue Recognition
         -------------------
         The Company's revenues are derived principally from the sale of boats
         and mine-protected vehicles. Revenue from products and services are
         recognized at the time goods are shipped or services are provided to
         the customer, with an appropriate provision for returns and allowances.
         The estimated sales value of performance under fixed-price and
         fixed-price incentive contracts in process is recognized under the
         percentage-of-completion method of accounting in which the estimated
         sales value is determined on the basis of physical completion to date
         (the total contract amount multiplied by percent of performance to date
         less sales value recognized in previous periods) and cost (including
         general and administrative) are expensed as incurred.


NOTE 3 - CONCENTRATION OF CREDIT RISK

         The Company maintains bank accounts at several banks. The Federal
         Deposit Insurance Corporation (FDIC) up to $100,000 insures deposits at
         the banks. At times, the Company holds cash with these banks in excess
         of amounts insured by federal agencies. As of December 31, 2002, the
         amount in excess of the FDIC limit totaled zero. Management believes
         the financial risk associated with these financial instruments is
         minimal.

NOTE 4 - INVENTORIES

         Inventories at December 31, 2002 consisted of the following:

               Raw materials and supplies                        $ 268,615
               Work in process                                     150,794
               Finished goods                                       80,084
               Provision                                          (313,030)
                                                                  ---------
                      Total                                       $186,463
                                                                  =========

NOTE 5 - PROPERTY AND EQUIPMENT

         Property and equipment at December 31, 2002 consisted of the following:

                  Furniture and fixtures                             $ 13,613
                  Machinery and equipment                             436,935
                  Tooling - new products                              218,880
                  Vehicles                                                500
                  Demo Vehicles                                       192,530
                                                                      -------
                                                                      862,458
                  Less accumulated depreciation and amortization     (525,935)
                                                                     --------
                      Total                                          $336,523
                                                                     ========

         Depreciation expense for the year ended was $245,807.



                                      F-12

<PAGE>


                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002

<TABLE>
<CAPTION>

NOTE 6 - NOTES PAYABLE

         Notes Payable at December 31, 2002 consisted of the following:
<S>                                                                             <C>
         Note payable to individual, collateralized by a military
         Vehicle - Cougar, with annual interest payments of $3,600,
         12% interest, matures January 2004                                     $31,500

         Note payable to individual, collateralized by a military Vehicle -
         Cougar, with annual interest payments of
         2.400, 12% interest, matures August 2004                                21,000

         Note payable to individual, collateralized by a military
         Vehicle - Cougar, with monthly payments of $1,892,
         5.6% interest, matures January 2004                                     15,232
                                                                                 ------
                                                                                $67,732
                                                                                 ======
</TABLE>

NOTE 7 - CONVERTIBLE DEBT - RELATED PARTY

         Convertible debt and accrued interest owed to JNC Opportunity Fund,
         Ltd. in the amount of $3,069,699 was converted to 2,455,759 shares of
         144D common stock on June 29, 2001. Further 1,044,775 shares were
         issued on March 18, 2002 per debt conversion agreement.

         Also 1,600 Convertible Preferred stock and negotiated dividend on
         preferred stock in the name of JNC Strategic Fund, Ltd. were converted
         to 1,731,449 shares of 144D common stock on June 29, 2001. Further
         731,858 shares were issued on March 18, 2002 per conversion agreement


NOTE 8 - SUBORDINATED NOTE PAYABLE - RELATED PARTY

         In 2001, a $600,000 Promissory Note and accrued interest payable to
         Sheikh Mohammed Al Rashid was converted to 1,668,774 of which 647,097
         shares of 144D common stock were issued on June 29, 2001. In 2002, the
         remaining 1,021,677 shares were issued as per the terms of debt
         conversion.

         In 2002, 2,819,362 shares were issued to Mr. Albert Mardikian to settle
         all debts incurred by him on behalf of the Company and any other dues
         for relating to his services to the Company.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

         Lease
         -----
         The Company leases its principal executive offices and a storage
         facility on month-to-month basis in Stanton, California. The Company's
         wholly owned subsidiary also leases a facility in Nanning, China on a
         month-to-month basis.


         In September 2001, Technical Solution Group, Inc. entered into a five-
         year rental operating agreement for the rental of office and warehouse
         space in Charleston, South Carolina. Minimum rentals, on an annual
         basis, are as follows:

                2003     $153,600
                2004      163,380
                2005      173,340


         Rent expense was $149,591 and $81,750 for the years ended December 31,
         2002 and 2001, respectively.


                                      F-13

<PAGE>

                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002

         Employment Agreement
         --------------------
         On January 2, 2002, the Company entered into an at-will employment
         agreement with Mr. Mankal. The agreement provides for an annual base
         salary of $64,800. The Company also granted him 1,200,000 shares of
         common stock that vest in three years.

         Royalty/Licensing Agreements
         ----------------------------
         In September 1999, the Company entered into two license agreements with
         the Company's Design Director and Chairman/Chief Executive Officer of
         International operations, pursuant to which, the Company acquired
         exclusive design and other rights related to the boats design and
         manufacture. On December 27, 2001, the Company terminated those
         agreements and entered into a new license agreement covering the design
         and other rights, with Mardikian Marine Design, LLC, an entity owned by
         other Company's largest shareholder, and by a principal of the holder
         of the Company's series B preferred Stock. Under the new licensing
         agreement, the Company is obligated to pay the licensor, as royalties
         (1) 4% of the first $3 Million Dollars in gross revenues resulting from
         the sale of products using the designs, (2) 3% of gross revenue between
         $3 Million Dollars and $5 Million Dollars (3) 2% of gross revenue
         between $5 Million Dollars and $10 Million Dollars (4) 1% of gross
         revenue in excess of $10 Million Dollars.

         Series B Convertible Preferred Stock
         ------------------------------------
         During fiscal 2001, One (1) share of Series B Convertible Preferred
         stock has been issued to Ashford Capital, LLC in exchange for $25,000.

         Series C Convertible Preferred Stock
         ------------------------------------
         During fiscal 2001 and 2002, (34) thirty-four shares of Series C
         Convertible Preferred Stock were issued to various parties.

         Stock Compensation Plan
         -----------------------
         The Company's 1998 Employee Consultant Stock Compensation Plan provides
         for the granting of stock options to employees and certain consultants
         of the Company and was amended in July 2000. A total of 2,000,000
         shares of common stock have been reserved for issuance upon exercise of
         options granted under the plan, as amended. During the year ended
         December 31, 2002, the Company issued 1,612,829 shares.


                                      F-14

<PAGE>

                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002

NOTE 10 - INCOME TAXES

         There has been no provision for U.S. federal, state, or foreign income
         taxes for any period because the Company has incurred losses in all
         periods and for all jurisdictions.

         Deferred income taxes reflect the net tax effects of temporary
         differences between the carrying amounts of assets and liabilities for
         financial reporting purposes and the amounts used for income tax
         purposes. Significant components of deferred tax assets are as follows:

            Deferred tax assets:
            Net operating loss carry forwards                     $11,954,500
            Future deduction for intangible assets                  1,612,013
            Future deduction for reserves & others                  1,880,682
            Less valuation allowance                              (15,447,195)
                                                                  ------------

                Net deferred tax assets                           $         -
                                                                  ============

         Realization of deferred tax assets is dependent upon future earnings,
         if any, the timing and amount of which are uncertain. Accordingly, the
         net deferred tax assets have been fully offset by a valuation
         allowance. As of December 31, 2002, the Company had net operating loss
         carry forwards of approximately $11,954,500 for federal and state
         income tax purposes. These carry forwards, if not utilized to offset
         taxable income begin to expire in 2007. Utilization of the net
         operating loss may be subject to substantial annual limitation due to
         the ownership change limitations provided by the Internal Revenue Code
         and similar stat provisions. The annual limitation could result in the
         expiration of the net loss before utilization.


NOTE 11 - OTHER RELATED PARTY TRANSACTIONS


         Huntington Beach Lease

         During fiscal 2002, the Company had an operating rental lease agreement
         with MGS Grand Sports, which expired on June 30, 2002. MGS Grand Sports
         of which Albert Mardikian was an officer owned this lease. Albert
         Mardikian is a shareholder of Sonic Jet Performance, Inc.

         License Agreements

         Patents awarded to Mr. Mardikian protect the designs and certain
         components of the Company's boats. On November 24, 1999, Mr. Mardikian
         granted the Company exclusive licenses, until November 18, 2003, to use
         those patents and related rights.

         In December 2001, to induce Ashford Capital, LLC to purchase the
         Company's 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, The
         Company terminated its 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, the Company must pay Mardikian Marine Design as
         royalties, a percentage of its gross revenue that results from the sale
         of its products that incorporate or include any of Mr. Mardikian's
         designs. The Company is 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. The Company can pay the royalties to
         Mardikian Marine Design in cash or stock, at its discretion.


                                      F-15

<PAGE>


                   SONIC JET PERFORMANCE, INC. AND SUBSIDIARY
                        Notes To The Financial Statements
                      For the Year Ended December 31, 2002


         Other Transactions
         ------------------
         In January 2002, Ashford Capital, KK purchased 7 shares of the
         Company's 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.





                                      F-16