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, 1997
[ ] 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
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: (405) 236-8332
--------------
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
--------- ----------
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
--------- ----------
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: 7,471,350 shares of
common stock as of May 15, 1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SOONER HOLDINGS, INC.
Consolidated Balance Sheet
(unaudited)
March 31,
1997
-----------
ASSETS
Current assets:
Cash $ 14,670
Accounts receivable 1,910
Inventories, net 5,354
Prepaid expenses and deposits 580
-----------
Total current assets 22,514
Land held by trust 493,260
Property and equipment, net 2,319,851
Other assets, net 30,565
===========
$ 2,866,190
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 25,540
Real estate taxes payable 172,389
Accrued liabilities to related parties 37,574
Accrued liabilities 33,140
Current portion of notes payable 336,570
Deferred revenue 28,000
-----------
Total current liabilities 633,213
-----------
Notes payable, less current portion 1,986,859
Road trust improvements payable 335,970
Commitments and contingencies --
Shareholders' deficit:
Common stock; $.001 par value, 100,000,000 shares authorized,
7,471,350 shares issued and outstanding 7,471
Additional paid-in-capital 5,497,907
Accumulated deficit (5,595,230)
-----------
Total shareholders' deficit (89,852)
-----------
$ 2,866,190
===========
The accompanying notes are an integral part of this
consolidated balance sheet.
2
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Operations
(unaudited)
For the three months ended
March 31,
1997 1996
----------- -----------
Revenues $ 165,002 $ 106,734
----------- -----------
Operating Expenses:
Cost of products sold 273 585
General and administrative 44,035 43,993
Depreciation and amortization 14,939 18,879
Interest expense 57,936 58,789
----------- -----------
Total operating expenses 117,183 122,246
----------- -----------
Income (loss) from continuing operations 47,819 (15,512)
----------- -----------
Loss from discontinued operations -- 41,409
----------- -----------
Net income (loss) $ 47,819 $ (56,921)
=========== ===========
Net Income (Loss) Per Common Share:
Income (loss) from continuing operations $ .01 $ --
Loss from discontinued operations -- (.01)
----------- -----------
Net income (loss) per common share $ .01 $ (.01)
=========== ===========
Weighted average common shares outstanding 7,471,350 6,412,528
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1997 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 47,819 $ (56,921)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 14,939 19,319
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 826 (269)
Decrease in inventories 101 195
Increase in prepaid expenses and deposits - (2,641)
Decrease in bank overdraft - (5,500)
Increase (decrease) in accounts payable 3,933 (3,545)
Increase in real estate taxes payable 8,200 4,533
Increase in accrued liabilities to related parties 26,317 50,167
Increase in accrued liabilities 5,003 7,001
Increase (decrease) in deferred revenue (71,830) 160,380
Decrease in net liabilities of discontinued operations - (289)
--------------- --------------
Net cash provided by operating activities 35,308 172,430
--------------- --------------
Cash flows from investing activities:
Advances to Dynamicorp - (30,000)
Purchases of property and equipment (3,645) -
--------------- --------------
Net cash used in investing activities (3,645) (30,000)
--------------- --------------
Cash flows from financing activities:
Repayments of notes payable (28,642) (152,939)
Borrowings on notes payable to related parties 9,000 17,150
--------------- --------------
Net cash used in financing activities (19,642) (135,789)
--------------- --------------
Net increase in cash 12,021 6,641
Cash at beginning of year 2,649 3,490
--------------- --------------
Cash at end of period $ 14,670 $ 10,131
=============== ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 44,164 $ 49,839
=============== ==============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
SOONER HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and operations
- ---------------------------
Sooner Holdings, Inc., an Oklahoma corporation (the "Company"), through
its subsidiaries, conducts business in several industries. 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. In
October 1995, SDPI entered into a new business line whereby it acts as a
marketing representative for construction contractors to develop business
opportunities for those contractors for a fee, which may include warranty
services. Charlie O Beverages, Inc. (Beverages) is engaged in the distribution
of an in-home soda fountain appliance and supplies for the preparation of
carbonated beverages. During 1996, the Company sold both Dynamicorp
Restructuring Corp. (DRC) which had acquired an ownership interest in
Dynamicorp, Inc. and On TV Incorporated (OnTV) which was engaged in the business
of marketing consumer products. In April 1997, the Company sold its interest in
the beneficial trust held by SDPI (see Note 5).
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, 1996 (the "1996 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.
Management plans
- ----------------
For the fiscal year ending December 31, 1996, 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, 1997,
5
<PAGE>
the Company has a shareholders' deficit of $89,852 and has a working capital
deficiency of $610,699. 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 its plans to
revise the Company's operating and financial requirements, as described more
fully in the 1996 Form 10-KSB, provide the Company the opportunity to continue
as a going concern. However, there can be no assurance that these plans will be
successful.
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 all majority owned subsidiaries. All
significant intercompany transactions have been eliminated.
Reclassifications
- -----------------
Certain reclassifications have been made in the 1996 financial
statements to conform with the 1997 presentation. These reclassifications do not
have a material effect on the consolidated financial statements.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1997 is comprised of the following:
Land $ 1,191,400
Buildings and improvements 1,465,322
Machinery 103,366
-----------------
2,760,088
Less accumulated depreciation (440,237)
-----------------
Property and equipment, net $ 2,319,851
=================
NOTE 3 - RELATED PARTIES
The Company's related parties are more fully described in the 1996 Form
10-KSB. The following table reflects amounts owed to related parties at March
31, 1997:
<TABLE>
<CAPTION>
Notes Accounts Accrued
Payable Payable Liabilities
------- ------- -----------
<S> <C> <C> <C>
President and chairman $ 141,004 $ - $ 15,651
Bulldog and affiliates 317,688 1,431 21,923
---------------- ---------------- ----------------
Total related party liabilities $ 458,692 $ 1,431 $ 37,574
================ ================ ================
</TABLE>
6
<PAGE>
In addition, the president and chairman has personally guaranteed
$1,713,972 of the Company's notes payable.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
During 1996, the Company was named as a defendant in a lawsuit. The
plaintiff alleges damages of approximately $100,000. The Company believes it has
no liability under this claim due to various defenses which it intends to
vigorously assert.
The Company is involved in certain other administrative proceedings
arising in the normal course of business. In the opinion of management, such
matters, including the lawsuit described above, will be resolved without
material effect on the Company's results of operations or financial condition.
NOTE 5 - SUBSEQUENT EVENT
In April 1997, SDPI consummated a Lot Sale Agreement and sold its
interest in the land trust to Aztore Holdings, Inc., an affiliate of Bulldog,
for $1 and the assumption of all liabilities related to the land. The Company
shall receive 10% of net cash flow, as defined, from any sales of the lots.
Item 2. Management's Discussion and Analysis or Plan of Operation
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 1996 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, 1997 compared to March 31, 1996
The Company has had severe liquidity problems for the last several
years. The Company's liquidity is reflected in the table below, which shows
reported deficiencies in working capital for the periods presented.
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996 1996
-------------------- -------------------- -------------------
<S> <C> <C> <C>
Deficiency in working capital $ (610,699) $ (1,391,801) $ (686,011)
</TABLE>
Although the Company's working capital remains negative, the Company is
able to meet its obligations due to the financial support from the Company's
related parties. Current working capital, which has been provided in the form of
notes payable, has been primarily supplied by the
7
<PAGE>
Company's chairman and president or by Bulldog Advisors, a Phoenix,
Arizona-based merchant banking and private investment company ("Bulldog") or by
Bulldog's other affiliated companies.
The improvement in working capital from March 31, 1996 is due to the
classification of the Company's Oklahoma Industrial Finance Authority (OIFA)
loan as short term at March 31, 1996, due to a default on one of the terms of
the OIFA loan. For the periods December 31, 1996 and March 31, 1997, the OIFA
loan is not in default and is classified as long-term debt. In addition, certain
related parties also formally recast their liabilities from short-term at March
31, 1996 to long-term liabilities, also improving the Company's reported capital
position for the December 31, 1996 and March 31, 1997, periods.
Future Working capital requirements
- -----------------------------------
During 1997, the Company expects to sell Beverages as a going concern
and therefore yield a return on the Company's investment in tooling and
intellectual property. In anticipation of this sale, the Company wrote down
Beverage's inventory and assets to their estimated net realizable values as of
December 31, 1996. During the period of the expected sale, Beverages has
sufficient inventory to allow it to maintain its modest sales with a minimum of
additional cash.
Exclusive of funds required for debt repayment, the Company believes
that it can borrow any additional funds from its related parties to maintain its
operations, 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 addition, at the time the Company cured the default on the OIFA
loan, the OIFA agreed to waive principal payments on the note for one year.
Results of Operations - The quarter ended March 31, 1997 compared to the quarter
ended March 31, 1996
Revenues increased $58,268, or 55% during the first quarter of 1997
compared to the same quarter in 1996. This was due to an increase in SDPI
revenues in the first quarter of 1997 in the amount of $49,460. In October 1995,
SDPI entered into a new business whereby it acts as marketing representative for
construction contractors to develop business opportunities for those contractors
for a fee, which may include warranty services. The Company experienced
significant revenue growth during fiscal 1996 attributable to this new business.
The Company is currently evaluating additional business opportunities to
maintain and potentially expand the SDPI business. Without such additional
business opportunities, the likelihood of continued expanded revenue and
continued profitability are uncertain.
Loss from discontinued operations for the March 1996 period relates to
the formal divestiture of two of the Company's subsidiaries, OnTV and DRC.
8
<PAGE>
The Company recorded net income in the first quarter 1997 of
approximately $47,819 or $.01 per share, compared to a net loss in the first
quarter 1996 of $(56,921), or $(.01) per share. This increase in profits was due
to the increase in SDPI revenues.
Capital Expenditures and Commitments
- ------------------------------------
During the first quarter ending March 31, 1997, the Company had modest
capital expenditures, primarily for leasehold improvements at the Business Park.
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, the
ongoing support of the related parties, the ability of the Company to refinance
its notes payable on satisfactory terms, and the Company's ability to acquire
sufficient funding to sustain its operations and develop new businesses. A
majority of these issues directly or indirectly relate to the Company's ability
to sell additional equity or debt. The Company and all its subsidiaries have had
unsuccessful operating histories and have been consistently unprofitable and if
this trend continues the Company, or any subsidiary, may have to seek formal
court protection from creditors.
Forward-Looking Statements
- --------------------------
Certain statements and information contained in this Report concerning
future, proposed, and anticipated activities of the Company, certain trends with
respect to the Company's revenue, operating results, capital resources, and
liquidity or with respect to the market in which the Company competes and other
statements contained in this Report regarding matters that are not historical
facts are forward-looking statements, as such term is defined in the Securities
Act. Forward-looking statements, by their very nature include risks and
uncertainties, many of which are beyond the Company's control. Accordingly,
actual results may differ, perhaps materially, from those expressed in or
implied by such forward-looking statements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not aware of any litigation either pending, asserted,
unasserted or threatened to which the Company or any of its subsidiaries is a
party or of which any of their property is the subject, except as follows:
During 1996, the Company was named as a defendant in a lawsuit. The
plaintiff alleges damages of approximately $100,000. The Company believes it has
no liability under this claim due to various defenses which it intends to
vigorously assert.
9
<PAGE>
The Company's Business Park operation occasionally has disputes with
tenants regarding its lease agreements. In the opinion of management, such
matters, including the lawsuit described above, will be resolved without
material effect on the Company's results of operations or financial condition.
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
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 15, 1997 SOONER HOLDINGS, INC.
-------------------------------------------
(Registrant)
By: /s/ Lanny R. Lang
-------------------------------------------
Lanny R. Lang, Treasurer
(Chief Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 14,670
<SECURITIES> 0
<RECEIVABLES> 1,910
<ALLOWANCES> 0
<INVENTORY> 5,354
<CURRENT-ASSETS> 22,514
<PP&E> 2,760,088
<DEPRECIATION> 440,237
<TOTAL-ASSETS> 2,866,190
<CURRENT-LIABILITIES> 633,213
<BONDS> 0
0
0
<COMMON> 5,505,378
<OTHER-SE> (5,595,230)
<TOTAL-LIABILITY-AND-EQUITY> 2,866,190
<SALES> 165,002
<TOTAL-REVENUES> 165,002
<CGS> 273
<TOTAL-COSTS> 59,247
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,936
<INCOME-PRETAX> 47,819
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,819
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,819
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
