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 June 30, 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
--------------
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 August 15, 1997.
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SOONER HOLDINGS, INC.
Consolidated Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30,
1997
-----------
ASSETS
<S> <C>
Current assets:
Cash $ 2,131
Accounts receivable 1,904
Inventories, net 5,245
Prepaid expenses and deposits 2,380
-----------
Total current assets 11,660
Property and equipment, net 2,305,313
Other assets, net 30,190
-----------
$ 2,347,163
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 32,610
Real estate taxes payable 13,699
Accrued liabilities to related parties 59,366
Accrued liabilities 38,141
Current portion of notes payable 348,905
Deferred revenue 7,000
-----------
Total current liabilities 499,721
-----------
Notes payable, less current portion 1,950,052
Commitments and contingencies --
-----------
Stockholders' deficit:
Preferred stock; undesignated, authorized 10,000,000 shares, no shares issued and
outstanding --
Common stock; $.001 par value, authorized 100,000,000 shares,
7,471,350 shares issued and outstanding 7,471
Additional paid-in-capital 5,497,907
Accumulated deficit (5,607,988)
-----------
Total stockholders' deficit (102,610)
-----------
$ 2,347,163
===========
</TABLE>
The accompanying notes are an integral part of this consolidated
balance sheet.
2
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the quarter ended For the six months ended
June 30, June 30,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------------- --------------- ---------------- ---------------
Revenues $ 107,248 $ 158,755 $ 272,250 $ 265,489
---------------- --------------- ---------------- ---------------
Operating expenses:
Cost of products sold 347 1,063 620 1,648
General and administrative 42,381 46,687 86,416 90,680
Depreciation and amortization 14,913 19,630 29,852 38,509
Interest expense 67,167 55,379 125,103 114,168
---------------- --------------- ---------------- ---------------
Total operating expenses 124,808 122,759 241,991 245,005
---------------- --------------- ---------------- ---------------
Income (loss) from operations (17,560) 35,996 30,259 20,484
Gain on sale of land 4,801 - 4,801 -
---------------- --------------- ---------------- ---------------
Income (loss) from continuing
operations (12,759) 35,996 35,060 20,484
Loss from discontinued operations - (5,787) - (47,196)
---------------- --------------- ---------------- ---------------
Net income (loss) $ (12,759) $ 30,209 $ 35,060 $ (26,712)
================ =============== ================ ===============
Net income (loss) per common
share:
Income (loss) from continuing
operations $ (*) $ * $ * $ *
Loss from discontinued operations - (*) - (*)
---------------- --------------- ---------------- ---------------
Net income (loss) per common
share $ (*) $ * $ * $ (*)
================ =============== ================ ===============
Weighted average common shares
outstanding 7,471,350 6,412,528 7,471,350 6,412,528
================ =============== ================ ===============
</TABLE>
- --------------------------------
*less than $.01 per share
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 six months ended
June 30,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 35,060 $ (26,712)
--------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 29,852 38,641
Changes in assets and liabilities:
Accounts receivable 832 (1,012)
Advances -- (9,800)
Inventories 210 791
Prepaid expenses and deposits (1,800) 1,118
Bank overdraft -- (5,500)
Accounts payable 11,003 30,932
Real estate taxes payable 6,800 7,658
Accrued liabilities to related parties 48,110 72,761
Accrued liabilities 10,004 3,257
Deferred revenue (92,830) 195,228
Net liabilities of discontinued operations -- (545)
--------- ---------
Net cash provided by operating activities 47,241 306,817
--------- ---------
Cash flows from investing activities:
Sale of land 1 --
Advances to Dynamicorp -- (30,000)
Purchases of property and equipment (3,645) (36,011)
--------- ---------
Net cash used in investing activities (3,644) (66,011)
--------- ---------
Cash flows from financing activities:
Repayments of notes payable (57,115) (259,046)
Borrowings on notes payable to related parties 13,000 21,750
--------- ---------
Net cash used in financing activities (44,115) (237,296)
--------- ---------
Net increase (decrease) in cash (518) 3,510
Cash at beginning of year 2,649 3,490
--------- ---------
Cash at end of period $ 2,131 $ 7,000
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 100,263 $ 95,210
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
SOONER HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 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. 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. SD Properties, Inc. (SDPI)
solicits and manages construction activities.
In April 1997, the Company sold its interest in the land trust held by
SDPI to Aztore Holdings, Inc. ("Aztore"), a related party, 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.
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 principles 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 past four fiscal years, 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 June 30, 1997, the
Company has a shareholders' deficit of $102,610 and has a working capital
deficiency of $488,061. In view of
5
<PAGE>
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. In addition to
these plans, during the quarter the Company sold its interest in the land trust
held by SDPI, thus limiting future losses related to the land trust and related
property taxes.
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 June 30, 1997 is comprised of the following:
Land $ 1,191,400
Buildings and improvements 1,468,967
Machinery 103,366
-----------
2,763,733
Less accumulated depreciation 458,420
-----------
Property and equipment, net $ 2,305,313
===========
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 June 30,
1997:
L.T. Notes Accounts Accrued
Payable Payable Liabilities
------- ------- -----------
President and chairman $144,004 $ 1,031 $ 24,538
Aztore and affiliates 318,689 -- 34,828
-------- -------- --------
Total related party liabilities $462,693 $ 1,031 $ 59,366
======== ======== ========
6
<PAGE>
In addition, the president and chairman has personally guaranteed
$1,686,626 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 EVENTS
On July 7, 1997, the Company refinanced the note due American Bank &
Trust of Edmond in the original principal amount of $100,500. The new note in
the remaining principal amount of $40,000 bears interest at 9%, requires
quarterly interest only payments beginning September 1997 and is due in full on
June 1, 1998.
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 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 - June 30, 1997 (unaudited) compared to June 30,
1996 (unaudited)
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 deficiencies in working capital.
June 30, Dec. 31, 1996
1997 1996 (audited)
---- ---- -------
Deficiency in working capital $ (488,061) $ (801,094) $ (686,011)
============ ============ ===========
7
<PAGE>
Although the Company's working capital is negative, the Company is able
to meet its obligations due to the financial support from certain of the
Company's related parties. Current working capital, which has been provided in
the form of notes payable, has been primarily supplied by the Company's chairman
and president, or by Aztore Holdings, Inc., a Phoenix, Arizona merchant banking
company ("Aztore") or by Aztore's other affiliated companies.
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 its estimated net realizable value 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 October 1996, the Company borrowed approximately $100,500 from
American Bank & Trust of Edmond, Oklahoma under a note bearing interest at 8.75%
per annum due on June 1, 1997. Proceeds of the borrowing were used to pay
accounts payable and to cure the default on the real estate taxes payable on the
Business Park. Accordingly, the Oklahoma Industrial Finance Authority (OIFA)
loan, which was in default as of June 30, 1996, due to the delinquent real
estates taxes, is not in default as of June 30, 1997, and is recorded as notes
payable. In addition, the OIFA has waived principal payments on the note for one
year. Certain related parties also formally recast their liabilities as
long-term liabilities, also improving the Company's reported working capital
position.
In April 1997, the Company sold its interest in the land trust held by
SDPI to Aztore, a related party, for $1 and the assumption of all liabilities
related to the land. This reduced the Company's real estate taxes payable by
approximately $162,000, thus eliminating future cash flow drain related to the
real estate taxes on the land trust as well as losses resulting from lots lost
due to tax foreclosure sales.
Results of Operations - The quarter and six months ended June 30, 1997
(unaudited) compared to the quarter and six months ended June 30, 1996
(unaudited)
8
<PAGE>
The following table illustrates the Company's revenue mix:
Quarter ended Six months ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
Business Park revenue $ 85,737 $ 78,236 $173,581 $156,712
SDPI revenue 21,000 79,263 97,830 106,633
Beverages revenue 511 1,256 839 2,144
-------- -------- -------- --------
Total revenue $107,248 $158,755 $272,250 $265,489
======== ======== ======== ========
As a result of increases in occupancy related to rehabilitation of its
facilities, Business Park's revenues rose $7,501 (10%) and $16,869 (11%) for the
quarter and six months ended June 30, 1997, compared to the same quarter and six
month periods in 1996. At the end of the quarter the Business Park was 100%
occupied. However, 60% of the Business Park's leases expire during the next
twelve months. The Company believes it may have to seek at least one major new
tenant. Any change in the Company's current tenants may have negative impacts on
the Company's financial condition including, but not limited to, the cost of new
leasehold improvements to attract new tenants, increased leasing fees or lower
rent revenue due to vacancy. There is no assurance the Company's historically
high occupancy rate will continue.
SDPI revenues decreased by $58,263 (73%) and $8,803 (8%) for the
quarter and six months ended June 30, 1997, compared to the same quarter and six
month periods in 1996. 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. Approximately $100,000 of SDPI's
revenues were deferred until fiscal 1997 due to the warranty service provided by
SDPI for one year from completion of the contract. Substantially all the
deferred revenue was recognized in the first six months of 1997. SDPI continues
to evaluate additional business opportunities related to this new business, but
the likelihood of continued revenues and profitability related to this business
are uncertain.
Total operating expenses for the quarter and six months ended June 30,
1997, were virtually unchanged as compared to total operating expenses for the
comparable 1996 periods. In 1996 the Company wrote down the Beverages assets to
their estimated net realizable value, which resulted in a decrease in
depreciation expense in 1997. This decrease in depreciation expense was offset
by an increase in interest expense due to increased borrowings. General and
administrative expenses were stable for the quarter and six months periods
reflecting ongoing costs of restructuring and seeking additional revenues
through internal growth or acquisition.
Gain on sale of land for the 1997 periods relates to the sale of the
Company's interest in the land trust held by SDPI. Loss from discontinued
operations for the 1996 periods relate to the divestiture of two of the
Company's subsidiaries in 1996.
9
<PAGE>
The Company recorded net loss for the quarter of $12,759 as compared to
net income of $30,209 for the comparable 1996 period. Since operating expenses
were unchanged, the net loss in 1997 was due solely to the decrease in revenues
primarily from the SDPI subsidiary. The Company is currently evaluating
additional business opportunities related to the SDPI business.
Capital Expenditures and Commitments
During the quarter and six months ending June 30, 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.
10
<PAGE>
The Company's Business Park operation occasionally has disputes with
tenants regarding its lease agreements. In the opinion of management, such
matters 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
On July 3, 1997, Mr. David B. Talbot, Jr. resigned as a member of the
board of directors and as secretary of the Company. Mr. R.C. Cunningham, III,
was appointed to succeed Mr. Talbot on the board and was elected by the board to
serve as secretary of the Company. Mr. Talbot's resignation was not the result
of any disagreement on accounting principles or corporate policies.
Item 6. Exhibits and Reports on 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.
SOONER HOLDINGS, INC.
----------------------------------
(Registrant)
Dated: August 15, 1997
--------------------
By: /s/ R.C. Cunningham
----------------------------------
R. C. Cunningham, II, Chairman and
President
By: /s/ Lanny R. Lang
----------------------------------
Lanny R. Lang, Treasurer
(Chief Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 2,131
<SECURITIES> 0
<RECEIVABLES> 1,904
<ALLOWANCES> 0
<INVENTORY> 5,245
<CURRENT-ASSETS> 11,660
<PP&E> 2,763,733
<DEPRECIATION> 458,420
<TOTAL-ASSETS> 2,347,163
<CURRENT-LIABILITIES> 499,721
<BONDS> 0
0
0
<COMMON> 5,505,378
<OTHER-SE> (5,607,988)
<TOTAL-LIABILITY-AND-EQUITY> 2,347,163
<SALES> 272,250
<TOTAL-REVENUES> 272,250
<CGS> 620
<TOTAL-COSTS> 116,888
<OTHER-EXPENSES> (4,801)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125,103
<INCOME-PRETAX> 35,060
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,060
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,060
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
