FORM 10-QSB
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________to____________
Commission File Number: 0-18344
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SOONER HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Oklahoma 73-1275261
- ----------------------------------------- ----------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2680 W. I-40, Oklahoma City, OK 73108
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(Address of principal executive offices)
Issuer's telephone number, including area code: (405) 236-8332
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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 NO X
--------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by court.
YES NO
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 6,412,528 shares of
common stock as of May 15, 1996.
<PAGE>
SOONER HOLDINGS, INC.
Form 10-QSB for the quarter ended March 31, 1996
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TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
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Part 1. Financial information
Page
----
Item 1. Financial Statements (unaudited):
Consolidated Balance Sheet as of March 31, 1996 3
Consolidated Statements of Operations for the quarters
ended March 31, 1996 and March 31, 1995 4
Consolidated Statements of Cash Flows for the quarters
ended March 31, 1996 and March 31, 1995 5
Notes to the Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 9
Part II. Other information
Page
----
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES: 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SOONER HOLDINGS, INC.
Consolidated Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
March 31,
1996
--------------
<S> <C>
ASSETS
Current assets:
Cash $ 10,131
Accounts receivable 2,716
Inventories, net 44,442
Prepaid expenses and deposits 1,518
----------------
Total current assets 58,807
Land held by trust 522,630
Other receivables 58,000
Property and equipment, net (Note 2) 2,447,488
Other assets, net 32,774
----------------
$3,119,699
================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 29,469
Real estate taxes payable 190,174
Accrued liabilities to related parties (Note 3) 271,146
Accrued liabilities 30,130
Notes payable 847,886
Net current liabilities of discontinued operations 81,803
----------------
Total current liabilities 1,450,608
----------------
Long-term debt 1,324,575
Road trust improvements payable 350,000
Commitments, contingencies and subsequent events (Note 5) -
Shareholders' deficit:
Common stock; $.001 par value, authorized 100,000,000 shares,
6,412,528 shares issued and outstanding 6,413
Additional paid-in-capital 5,456,612
Accumulated deficit (5,468,509)
----------------
Total shareholders' deficit (5,484)
----------------
$3,119,699
================
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
3
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
---------------- ----------------
<S> <C> <C>
Revenues $ 267,114 $ 84,904
---------------- ----------------
Expenses:
Cost of products sold 585 2,565
General and administrative 100,842 54,141
Marketing and advertising 500 300
Depreciation and amortization 18,904 20,762
Interest expense 58,862 55,622
---------------- ----------------
Total expenses 179,693 133,390
---------------- ----------------
Income (loss) from continuing operations 87,421 (48,486)
---------------- ----------------
Loss from discontinued operations - (33,784)
---------------- ----------------
Net income (loss) $ 87,421 $ (82,270)
================ ================
Net income (loss) per common share:
Income (loss) from continuing operations $ .01 $ (.01)
Loss from discontinued operations $ - $ (.01)
---------------- ----------------
Net income (loss) per common share $ .01 $ (.02)
================ ================
Weighted average common shares outstanding 6,412,528 4,999,083
================ ================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1996 1995
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 87,421 $ (82,270)
---------------- ----------------
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 19,319 20,762
Changes in assets and liabilities:
Accounts receivable (269) (1,148)
Inventories 195 4,645
Prepaid expenses and deposits (2,641) (516)
Bank overdraft (5,500) -
Accounts payable (3,545) 2,398
Real estate taxes payable 4,533 4,249
Accrued liabilities to related parties 66,205 14,261
Accrued liabilities 7,001 (512)
Net liabilities of discontinued operations (289) 35,320
---------------- ----------------
Total adjustments 85,009 79,459
---------------- ----------------
Net cash used in operating activities 172,430 (2,811)
---------------- ----------------
Cash flows from investing activities:
Advances to Dynamicorp (30,000) -
---------------- ----------------
Net cash used in investing activities (30,000) -
---------------- ----------------
Cash flows from financing activities:
Repayments of notes payable (152,939) (11,124)
Borrowings on notes payable to related parties 17,150 17,609
---------------- ----------------
Net cash provided by financing activities (135,789) 6,485
---------------- ----------------
Net increase in cash 6,641 3,674
Cash at beginning of year 3,490 1,729
---------------- ----------------
Cash at end of period $ 10,131 $ 5,403
================ ================
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 49,839 $ 48,549
================ ================
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
SOONER HOLDINGS, INC.
Notes to the Consolidated Financial Statements
(Unaudited)
March 31, 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and operations
- ---------------------------
Sooner Holdings, Inc., an Oklahoma corporation (the "Company"),
operates through its subsidiaries which conducts business in several industries.
Charlie O Beverages, Inc. (Beverages) is engaged in the manufacture and
distribution of an in-home soda fountain appliance and supplies for the
preparation of carbonated beverages. Charlie O Business Park Incorporated
(Business Park) is engaged in the ownership and rental of a business park in
Oklahoma City, Oklahoma. SD Properties, Inc. (SDPI) holds an interest in a trust
that owns land for resale in Coconino County, Arizona. During 1995, the Company
formed Dynamicorp Restructuring Corp. (DRC) which acquired an ownership interest
in Dynamicorp, Inc. (see Note 4). On TV Incorporated (ONTV) was engaged in the
business of marketing consumer products until its operations were discontinued
during 1995.
Basis of presentation
- ---------------------
The unaudited consolidated financial statements presented herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations for interim financial information and the instructions to Form
10-QSB and Regulation S-B. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principals have been omitted. These unaudited
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1995 (The "1995 Form
10-KSB"). In the opinion of management, the unaudited consolidated financial
statements reflect all adjustments (consisting of normal recurring accruals
only) which are, necessary to present fairly the consolidated financial
position, results of operations, and changes in cash flow of the Company.
Operating results for interim periods are not necessarily indicative of the
results which may be expected for the entire year.
Principles of consolidation
- ---------------------------
The accompanying consolidated financial statements have been prepared
on the basis of generally accepted accounting principles and include the
accounts of Sooner Holdings, Inc. and its subsidiaries. All significant
intercompany transactions have been eliminated. All of the Company's
consolidated subsidiaries are wholly owned, except for ONTV. The minority
shareholders' interest in the accounts of ONTV have not been presented in the
accompanying consolidated financial statements as the amounts are not material.
6
<PAGE>
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1996 is comprised of the following:
Land $ 1,191,400
Buildings and improvements 1,403,962
Machinery 375,677
Furniture and fixtures 13,787
Tooling 172,820
-----------------
3,157,646
Less accumulated depreciation (710,158)
-----------------
Property and equipment, net $ 2,447,488
=================
A total of $1,717,015 in liabilities are secured by first, second and
third liens against the Company's property.
NOTE 3 - RELATED PARTIES
As more fully described in the 1995 Form 10-KSB, the following are
related parties:
R.C. Cunningham II ("Cunningham"), the Chairman and President of the
Company and its subsidiaries. Cunningham is also the majority shareholder of the
Company and has an incentive compensation agreement which will pay him 5% of the
Company's gross revenues.
Bulldog Investment Company, L.L.C. ("Bulldog"), a Phoenix,
Arizona-based financial and management advisory services Company. The Company
has contracted with Bulldog for consulting services and Bulldog is a shareholder
of the Company. Messrs. Michael S. Williams and Lanny R. Lang, who are officers
and/or directors of the Company and its subsidiaries are principals of Bulldog.
ShareData Inc., a Phoenix, Arizona-based holding company, owns
approximately 14% of the Company. Messrs. Lang and Williams are officers of
ShareData. ShareData emerged from bankruptcy in December 1995 (Case No.
93-13311) and its Plan of Reorganization calls for the distribution of all of
ShareData's holdings of common stock of the Company to its creditors, which
distribution is expected during the second fiscal quarter.
Wheel of Bargains, Inc. (formerly Bulldog Leasing and Financing Corp.)
("WOB"), is a Phoenix, Arizona-based Company specializing in leasing and
financing to higher risk companies. WOB is a subsidiary of ShareData and Messrs.
Williams and Lang are officers and directors of WOB.
7
<PAGE>
Phoenix Financial Reporting Group, Inc. ("PFRG") is a Phoenix,
Arizona-based company specializing in financial annual report design and
publishing for public companies. PFRG is a subsidiary of ShareData. Messrs.Lang
and Williams are officers and directors of PFRG.
Talbot Investment Co. ("Talbot") is an Oklahoma City, Oklahoma-based
commercial real estate brokerage firm. Mr. David Talbot, an officer and a
director of the Company and Business Park, a subsidiary, is also the principal
agent for Talbot. Talbot handles all the property management services for
Business Park and receives normal and customary commissions and fees for
providing these services.
The following table reflects the approximate amounts of related party
obligations, which are due and payable by the Company to officers, directors,
shareholders and/or management consultants, included in their respective
captions on the balance sheet at March 31, 1996:
<TABLE>
<CAPTION>
L.T. Accounts Accrued
Debt Payable Liabilities
---- ------- -----------
<S> <C> <C> <C>
Cunningham $ 139,400 $ - $ 64,931
Bulldog 35,550 4,034 203,629
WOB 17,950 986 2,586
PFRG - 14,000 -
Talbot - 674 -
---------------- ---------------- ----------------
Total related party liabilities $ 192,900 $ 19,694 $ 271,146
================ ================ ================
</TABLE>
In addition, Cunningham has personally guaranteed $1,131,675 of the
long term debt and $693,340 of notes payable.
NOTE 4 - INVESTMENT IN DYNAMICORP, INC.
During 1995, the Company formed Dynamicorp Restructuring Corp. (DRC).
The Company subsequently exchanged 8.5% of DRC's common stock for 3,605,500
shares of the common stock of Dynamicorp, Inc. (Dyna), representing
approximately 43% of the outstanding shares of Dyna. Due to the circumstances
discussed in the 1995 Form 10-KSB, no value has been assigned to the stock
acquired by DRC.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
The Company was a defendant in a lawsuit filed in fiscal 1990 by a
vendor seeking to enforce payment of amounts due plus reasonable costs. In April
1991, a judgment was entered against the Company requiring it to pay the vendor
$57,945, plus accrued interest and costs. In June 1994, Bulldog acquired this
judgment directly from the vendor and the Company is now obligated to pay
Bulldog. The judgment continues to accrue interest as stipulated in the judgment
and the amount due Bulldog, which is recorded as accrued liabilities in the
accompanying
8
<PAGE>
consolidated financial statements was $88,658 and $83,909 as of March 31, 1996
and 1995, respectively.
NOTE 6 - LIQUIDITY
For the fiscal year ending December 31, 1995, the independent auditor's
report included an explanatory paragraph calling attention to a going concern
issue. The accompanying consolidated financial statements have been prepared
contemplating continuation of the Company as a going concern. The Company has
sustained recurring operating losses in recent years and is expected to need
additional amounts of working capital for its operations. At March 31, 1996,
current liabilities exceeded current assets by approximately $1,391,801 and
certain notes and trade accounts payable were in default. In view of these
matters, realization of a major portion of the assets is dependent upon
continued operations of the Company, which in turn is dependent upon the
Company's ability to meet its financing requirements and the success of its
future operations. Management believes that actions presently being taken to
revise the Company's operating and financial requirements provide the
opportunity for the Company to continue as a going concern. However, there can
be no assurance management will be successful in this endeavor.
Item 2. Management's Discussion and Analysis or Plan of Operation
Introduction
The following discussion should be read in conjunction with the
Company's financial statements and notes thereto included elsewhere in this Form
10-QSB report. In addition, the discussion of the Company's expected Plan of
Operation, included in the 1995 Form 10-KSB, is incorporated herein in its
entirety as the discussion of the Plan of Operation as required by Item 303(a)
of Regulation S-B.
Liquidity and Capital Resources - March 31, 1996 compared to March 31, 1995
The Company has had severe liquidity problems for the last several
years. The Company's liquidity is reflected in the table below, which shows
comparative working capital deficit. Working capital, or current assets less
current liabilities, is an important measure to the Company's ability to meet
its short term obligations.
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995 1995
-------------------- -------------------- -------------------
<S> <C> <C> <C>
Working capital (deficit) $ (1,391,801) $ (1,441,689) $ (1,482,980)
</TABLE>
Although the Company's working capital is negative, the Company's
ability to meet its obligations has remained stable due to the financial support
from certain of the Company's related parties. The Company's current working
capital continues to be provided by Mr. R.C. Cunningham II, the Company's
Chairman of the Board and President ("Cunningham"), or by
9
<PAGE>
Bulldog Investment Company, L.L.C., a Phoenix, Arizona-based merchant banking
and private investment company ("Bulldog") or by Bulldog's other affiliated
companies.
Future Working capital requirements
- -----------------------------------
Beverages has sufficient inventory to allow it to increase its sales
with a minimum of additional cash. Business Park needs approximately $40,000 in
working capital to bring its real estate taxes current and cure the default on
the OIFA loan.
The only cash requirements that are not expected to be funded by
revenues are the real estate taxes payable, both current and those in arrears,
on SDPI's lots and some interest expense related to CO Park. These cash
requirements for the next 12 months are estimated to be less than $200,000.
Exclusive of funds required by debt repayment, the Company believes that it can
borrow these funds from Bulldog or Cunningham, although there can be no
assurance that such funds will be available when needed.
In the event that the Company cannot refinance, or obtain forbearance
on its current liabilities or on its long-term liabilities as they come due, the
Company will undoubtedly face further severe liquidity problems which may lead
to litigation, the inability to transact business, and/or foreclosure actions
being initiated against a majority of the Company's assets.
In November 1995, DRC, a newly formed subsidiary of the Company,
acquired an approximate 43% equity interest in Dyna and sought to obtain
permanent control of this company (see footnote 4 to the Consolidated Financial
Statements). In the event that the Company gained permanent control of Dyna, it
had agreed to lend Dyna funding to assist it in its restructuring under Chapter
11. Any funding arrangement to Dyna would be subject to Bankruptcy Court
approval as post-petition funding. At March 31, 1996, the Company had advanced
$58,000 to Dyna. On February 29, 1996, the court appointed trustee for Dyna and
Dyna was no longer a debtor-in-possession. Subsequently, due to the appointment
of a trustee, the Company withdrew its application to the Court to provide
additional post-petition lending. The appointment of a trustee has raised some
uncertainty as to whether the Company will provide any further funding to Dyna.
Results of Operations - The quarter ended March 31, 1996 compared to the quarter
ended March 31, 1995
Revenues increased $182,210, or 200% during the first quarter of 1996
compared to the same quarter in 1995. This was due to SDPI revenues in the first
quarter of 1996. SDPI entered into a new business in late 1995 whereby it acts
as marketing representative for construction contractors to develop business
opportunities for those contractors for a fee. General and administrative
expenses increased due to the operations of the DRC subsidiary (primarily
professional fees) and the recognition of fees due Bulldog and Cunningham
relating to their incentive based compensation agreements. If the Company is to
continue to grow it will have to invest additional money in marketing and
advertising expenses if such cash can be obtained from vendors, related parties
or the sale of debt or equity securities.
10
<PAGE>
The Company recorded a net profit in the first quarter 1996 of
approximately $87,421 or $.01 per share, compared to a net loss in the first
quarter 1995 of $82,270, or $.02 per share. This increase in profits was due to
the increase in revenues primarily from the SDPI subsidiary.
Capital Expenditures and Commitments
During the first quarter ending March 31, 1996, the Company had no
capital expenditures, and the Company has no current commitments for material
capital expenditures.
Factors that may affect future results
A number of uncertainties exist that may affect the Company's future
operating results. These include the uncertain general economic conditions,
uncertain market acceptance of the Company's products, the Company's ability to
manage its expenses at a very minimum level, the ongoing support of Bulldog and
Cunningham, the ability of the Company to refinance its long term liabilities on
satisfactory terms, if at all, and the Company's ability to acquire sufficient
funding to sustain its operations and develop new businesses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not aware of any litigation either pending, asserted,
unasserted or threatened.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
Exhibits
None
Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: May 17, 1996 SOONER HOLDINGS, INC.
------------------------------------------------
(Registrant)
By: /s/ Lanny R. Lang
------------------------------------------------
Lanny R. Lang, Treasurer
(Chief Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 10,131
<SECURITIES> 0
<RECEIVABLES> 2,716
<ALLOWANCES> 0
<INVENTORY> 44,442
<CURRENT-ASSETS> 58,807
<PP&E> 3,157,646
<DEPRECIATION> (710,158)
<TOTAL-ASSETS> 3,119,699
<CURRENT-LIABILITIES> 1,450,608
<BONDS> 0
0
0
<COMMON> 5,463,025
<OTHER-SE> (5,468,509)
<TOTAL-LIABILITY-AND-EQUITY> 3,119,699
<SALES> 267,114
<TOTAL-REVENUES> 267,114
<CGS> 585
<TOTAL-COSTS> 120,246
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,862
<INCOME-PRETAX> 87,421
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,421
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,421
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
