SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark one)
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
--------------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ___________________
Commission File No. 0-18344
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SOONER HOLDINGS, INC.
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(Name of small business issuer in its charter)
Oklahoma 73-1275261
- -------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2680 W. I-40 Oklahoma City, Oklahoma 73108
- --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (405) 236-8332
Securities registered under Section 12(b) of the Exchange Act: None
----
Securities registered under Section 12(g) of the
Exchange Act: Common stock, no par
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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 _X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B 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. [ ]
Revenues for the year ending December 31, 1996 were $614,921.
The aggregate market value of the voting stock held by non-affiliates
of the Company on May 15, 1997 was approximately $38,733. As of May 15, 1997,
the Company had 7,471,350 shares of common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Company's 1996 Annual Meeting
of Shareholders are incorporated by reference to Part III, Items 10, 11, 12 and
13 of this Form 10-KSB report.
This document consists of 30 pages. The exhibit index is on page 15.
<PAGE>
SOONER HOLDINGS, INC.
FORM 10-KSB
for the fiscal year ended December 31, 1996
Table of Contents
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PART I Page
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Item 1. Description of Business 3
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Part II
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Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis or Plan of Operation 8
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 12
Part III
- --------
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 12
Item 10. Executive Compensation 13
Item 11. Security Ownership of Certain Beneficial Owners and
Management 13
Item 12. Certain Relationships and Related Transactions 13
Part IV
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Item 13. Exhibits and Reports on Form 8-K 13
Signatures 14
2
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Summary and Development of the Company
Sooner Holdings, Inc., an Oklahoma corporation (hereinafter referred to
as the "Company") was formed in 1986 to enter the in-home soda fountain
business. Subsequently, the Company evolved into a multi-subsidiary holding
company in diverse businesses. The Company has been aggressively seeking
acquisitions since it was restructured in 1993. The Company currently operates
through three subsidiaries, Charlie O Business Park Incorporated ("CO Park"), SD
Properties, Inc. ("SDPI") and Charlie O Beverages, Inc. ("CO Beverages"). These
subsidiaries and a brief summary are as follows:
o CO Park. CO Park operates a multi-unit rental property (the "Business
Park") for business and industrial tenants located in Oklahoma City,
Oklahoma. CO Park became an operating subsidiary upon its formation in
March 1991 and is 100% owned by the Company.
o SDPI. SDPI is the sole beneficiary of a trust that owns real estate lots
in an Arizona subdivision. SDPI had failed to sell any lots since its
acquisition in 1993. In October 1995, SDPI commenced a business that
markets and services construction contracts. In April 1997, SDPI sold its
trust interest for an agreement to assume liabilities related to the trust
and the underlying lots as well as an agreement to share future profits, if
any, with the Company. The buyer of the trust was affiliated with a
director of the Company. The Company owns 100% of SDPI.
o CO Beverages. CO Beverages operates a business that manufactures an
in-home soda fountain appliance that carbonates water and associated syrups
and flavors (the "Soda Shaker"). CO Beverages was formed in June 1989 as
Charlie O Marketing Co. and was dormant until December 1993 when it
purchased the soda fountain business from the parent company. The Company
expects to sell CO Beverages during fiscal 1997. Therefore, as of December
31, 1996, the remaining assets of CO Beverages were written down to their
estimated net realizable value. The Company hopes to sells CO Beverages as
a going concern and therefore, realize additional value for the extensive
tooling and other assets related to CO Beverages business. The Company owns
100% of CO Beverages.
During fiscal 1996 the Company consummated the sale of two of its prior
investments. The Company sold a majority of the stock of one subsidiary, On TV
Incorporated, and all the stock and assets related to Dynamicorp, Inc., an
investment which never led to an acquisition. The Company realized a net gain of
$24,686 on these two transactions. Both buyers were directly or indirectly
affiliated with the Company.
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Business Descriptions
The Real Estate Business
CO Park operates as a real estate lessor and property manager and
currently leases to 25 non-related lessees. CO Park's property includes five
separate buildings, totaling approximately 126,900 square feet, located at the
intersection of I-40 and Agnew Street in Oklahoma City, Oklahoma. The Company
and its CO Beverages subsidiary currently operate out of approximately 9,000
square feet in this business park. CO Park competes with other commercial
lessors in the Oklahoma City market. Its occupancy, excluding that leased to the
Company and its subsidiaries, has averaged over 90% during both 1996 and 1995
and was 100% occupied at December 31, 1996.
In October 1995 SDPI entered a new real estate oriented business acting
as a sales agent and representative for various contractors. Although this
business met with initial success, the Company is currently seeking additional
contractor clients and is meeting with only very modest success.
The "Soda Shaker" Business
The Company entered the Soda Shaker business in 1986 by purchasing
various patents, copyrights, tooling and equipment from the estate of a bankrupt
company. The Company subsequently invested in further design changes, tooling,
molds and marketing in order to promote, market and sell this product. The
Company has developed the capacity to manufacture and bottle fountain-type syrup
in volume. In December 1993 the Company sold, transferred and assigned all its
rights, title and interests in all the assets used in its Soda Shaker business
to CO Beverages, its wholly owned subsidiary.
CO Beverages operated under a strategy of emphasizing continuation
syrup sales. Because the beverage market is highly competitive and dominated by
national brands, the Company has had difficulty obtaining significant market
penetration. In addition, the Soda Shaker has a marketing challenge related to
the cost of its carbonator assembly. The self-regulating pressure valve that is
part of this assembly must be precision manufactured and hand assembled. These
requirements make the overall Soda Shaker unit cost relatively high. The Company
believes that the market is not valuing the unit's quality, reusability and very
long life but rather is comparing it to mass merchandised carbonated drinks in
containers. The Company expects to sell this business segment in 1997.
Discontinued Operations
Dynamicorp Restructuring Corp. ("DRC")
- --------------------------------------
In September 1995, the Company formed a subsidiary named DRC. DRC was
originally formed to acquire an investment in Dynamicorp, Inc. ("DYNA") a
Texas-based public company. In November 1995, DRC acquired approximately 43% of
DYNA in a private stock transaction
4
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from the largest shareholder of DYNA in exchange for approximately 8.5% of DRC's
common stock.
At that time DYNA was operating under Chapter 11 bankruptcy protection
as the debtor-in-possession. The Company, via DRC, was originally seeking
additional stock interest in DYNA which would give it at least 51% control of
DYNA. In the event that DRC was to gain 51% control, it had agreed to lend DYNA
funding to assist it in its restructuring under Chapter 11. Any such funding
arrangement to DYNA would, however, be subject to Bankruptcy Court approval as
post-petition funding.
On February 29, 1996, the Bankruptcy Court appointed a trustee for DYNA
and DYNA was no longer a debtor-in-possession. Through December 31, 1996, the
Company or DRC had advanced a total of $58,000 to DYNA which DYNA had originally
agreed to convert into additional shares of common stock which would give DRC
the necessary control pursuant to the funding agreement. Although DRC assisted
DYNA in filing a Reorganization Plan, the Trustee had objected to this plan. Mr.
R.C. Cunningham, II, president and chairman ("Cunningham"), lent the money to
the Company to fund DRC and due to the highly uncertain nature of the value and
timing of realizing on its investment, effective on December 31, 1996, the
Company sold all its DRC shares and related DYNA assets to Cunningham in
exchange for his debt.
On TV Incorporated ("ONTV")
- ---------------------------
In its 1995 10-KSB, the Company expressed its intent to sell its
subsidiary, ONTV. During 1996, it arranged for the sale of a majority of its
common stock to an unrelated third party for $10,000 plus the assumption of
certain liabilities. This buyer put down a deposit then failed to fully perform.
The Company ultimately sold its ONTV interest to Vinculum Incorporated, a
Company controlled by Bulldog Investment Company, L.L.C. ("Bulldog"), a
shareholder in the Company. The Company received substantially the same sale
price as under the prior sale agreement and retained approximately 4% of ONTV's
common stock.
General
Seasonality. Due to its sale or planned sale of assets or entities, the
Company will not be subject to significant seasonality.
Government Regulation. Due to its sale or planned sale of assets or
entities, the Company will not be subject to significant regulation.
Warranties. Due to the planned sale of CO Beverages' assets, the
Company will not be subject to significant warranty exposure related to this
business segment. The Company maintains product liability insurance coverage. In
some instances, SDPI provides a one-year labor warranty.
Employees. As of May 15, 1997, Cunningham was the Company's only
full-time employee. The other officers of the Company do not spend full time on
the Company's or its subsidiaries' businesses and are not compensated directly
for their services. When the need exists, the Company and/or its subsidiaries
will use temporary employees or subcontractors to fill its orders, ship product
or perform administrative services.
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ITEM 2. DESCRIPTION OF PROPERTY
CO Park's industrial business park property consists of five buildings
totaling approximately 126,900 square feet on five acres of real estate. This
property is located at the Company's address at the intersection of I-40 and
Agnew Street in Oklahoma City, Oklahoma. The Company and its subsidiaries occupy
approximately 9,000 square feet and the remainder of the industrial park is
leased to 25 unrelated lessees. The lessees generally use the property for
retail, manufacturing and light industrial operations. CO Park's leases are
generally for three years or less. As of May 15, 1997, excluding the square
footage leased to the Company and its affiliates, the facility is 100% occupied.
This property is subject to first, second and third mortgages, each of which are
personally guaranteed by Cunningham.
SDPI has no remaining real property, directly or indirectly, after the
sale of the trust interest in April 1997.
CO Beverages has no real property.
ITEM 3. LEGAL PROCEEDINGS
There are no pending or threatened legal proceedings 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.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company submitted matters to a vote of its security holders at its
1995 Annual meeting of Shareholders held on Wednesday, October 16, 1996. A total
of 5,501,596 votes were cast, which represent 86% of the common shares held of
record on September 4, 1996. At this annual meeting, the shareholders voted in
favor of each of the matters submitted to the shareholders for ratification.
These matters were the election of three directors to serve for the ensuing year
and the approval of the selection of Arthur Andersen LLP as the Company's
independent accountants. The matters were ratified by the following votes:
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Favor Against Abstain
Election of Directors:
R.C. Cunningham II 5,501,594 0 2
David B. Talbot, Jr. 5,501,595 0 1
Michael S. Williams 5,501,595 0 1
Approve the selection of Arthur
Andersen LLP as the Company's
independent accountants 5,501,546 0 50
The Company's 1996 Annual Meeting of Shareholders is scheduled for
Wednesday, July 16, 1997. At such time the shareholders will elect the new board
of directors as well as vote on any other items that may be properly brought
before such a meeting. The Company is expected to ask the shareholders to ratify
the selection of Arthur Andersen LLP as the Company's auditors for 1997.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market Information
The Company's common stock commenced trading in December 1995 on the
National Association of Securities Dealers (the "NASD's") OTC Bulletin Board
System under the symbol "SOON". Prior to this date, the Company's shares of
common stock last traded in September 1991, at that time on the Vancouver Stock
Exchange under the symbol "CJV.V". The following table sets forth the range of
the high and low bid price for the shares of the Company's common stock as
reported by the NASD.
Low High
--- ----
Fiscal 1996:
First quarter .048 .375
Second quarter .187 .250
Third quarter .062 .187
Fourth quarter .062 .281
Fiscal 1997:
First quarter .031 .031
Shareholders
As of May 15, 1997, the Company had 477 shareholders of record. This
does not include the holders whose shares are held in a depository trust in
"street" name. As of May 15, 1997, at
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least 509,752 shares (or 8%) of the issued and outstanding stock was held in a
depository trust in "street" name.
Dividend Information
The Company has not paid or declared any dividends upon its common
stock since its inception and, by reason of its present financial status and its
contemplated financial requirements, does not anticipate paying any dividends in
the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Background and Introduction
Sooner Holdings, Inc., an Oklahoma corporation (hereinafter referred to
as the "Company") was formed in 1986 to enter the in-home soda fountain
business. Subsequently, the Company evolved into a multi-subsidiary holding
company in diverse businesses (see Item 1. "Description of Business" for further
discussion). During 1996 and early 1997 the Company narrowed its focus to
Oklahoma real estate and construction oriented operations by selling a majority
of its interest in ONTV, discontinuing the operations of CO Beverages and
putting these assets up for sale, and by selling its interest in the beneficial
trust held by SDPI.
Liquidity and Capital Resources - December 31, 1996 compared to December 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 deficiencies in working capital at December 31:
1996 1995
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Deficiency in working capital $(686,011) $(819,258)
============ ============
Although the Company's working capital remains negative, the Company
has been able to meet its obligations as a result of the financial support
received from certain of the Company's related parties. The Company's current
working capital, which has been provided in the form of short and long-term
debt, has been primarily supplied either by Mr. R. C. Cunningham II, the
Company's Chairman of the Board and President ("Cunningham"), or by Bulldog
Investment Company, L.L.C., a Phoenix, Arizona-based merchant banking and
private investment company ("Bulldog") or by Bulldog's other affiliated
companies.
During 1997, the Company expects to sell CO 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
Beverages' inventory and assets to their estimated net realizable values as of
December 31, 1996. During the period of the expected sale, CO
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Beverages has more than sufficient inventory to allow it to maintain its modest
sales with a minimum of additional cash.
The only operational cash requirements not expected to be funded by
revenues were the real estate taxes payable, both current and those in arrears,
on SDPI's lots. Since these lots were sold in April 1997, the potential cash
flow drain was eliminated. Exclusive of funds required for debt repayment, the
Company believes that it can borrow any additional funds from Bulldog or
Cunningham 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 $100,537 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 due to the delinquent real estate taxes, is now no longer in default
and is recorded as notes payable. In addition, the OIFA has waived principal
payments on the note for one year. Cunningham and Bulldog also formally recast
their liabilities as long-term liabilities during the year, also improving the
Company's reported working capital position.
Results of Operations - The year ended December 31, 1996 compared to the year
ended December 31, 1995
The following table illustrates the dramatic change in revenue mix. Due
to the start-up nature of SDPI's new business and the lack of a diversified
customer base, the results in 1996 may not be indicative of future results.
1996* 1995*
Amount % Amount %
------ --- ------ ---
CO Park revenue $ 322,376 52 $ 283,053 89
SDPI revenue 288,031 47 20,000 6
CO Beverages revenue 4,514 1 13,674 5
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Total revenue $ 614,921 $ 316,727
============= ==========
*Revenues of ONTV and DRC are excluded.
As a result of increases in occupancy related to rehabilitation of its
facilities, CO Park's revenues rose approximately 14%. However, a large majority
of the Company's revenue increase was related to the Company's SDPI subsidiary.
Approximately $100,000 of SDPI's revenues were deferred until fiscal 1997 due to
the warranty service provided by SDPI for one year from
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completion of the contract. ONTV, which generated $15,821 in revenues in 1995,
was presented as a discontinued operation for 1995 and was essentially dormant
during 1996. Prior to its sale, DRC was accounted for as an investment, but it
did have related expenses which are included in discontinued operations.
Total operating expenses for the year ended December 31, 1996 were
$726,725 as compared to total expenses for the comparable 1995 period of
$590,504. During 1995 the Company had redeemed all the lots held by SDPI which
came up for tax foreclosure. This compares to 1996 when the Company recorded a
$15,340 loss on its interest in land trust due to the loss of lots in tax
foreclosure sales. In addition, in 1996 the Company recorded a $115,374 write
down of the CO Beverages assets to their estimated net realizable value. The
Company also recorded a one time expense of $35,701 in cost of products sold
related to establishing an allowance for its CO Beverages inventory related to
the expected sale. Expenses related to these items will not reoccur in 1997.
General and administrative expenses were stable during the year reflecting
ongoing costs of restructuring and seeking additional revenues through internal
growth or acquisition.
Gains and losses from discontinued operations relate to the formal
divestiture of two of the Company's expansion related subsidiaries where the
expansion plan failed.
Going Concern and Management Plans
The Company has suffered recurring losses from operations, has a
shareholders' deficit of $137,671, and has negative working capital of $686,011.
These factors raise substantial doubt about the Company's ability to continue as
a going concern.
In October 1995, SDPI entered into a new business whereby SDPI acts as
a marketing representative for construction contractors to develop business
opportunities for those contractors for a fee, which may include warranty
services. This new business line resulted in additional revenue of $288,031 for
the year ended December 31, 1996.
The Company's CO Beverages segment has experienced declining levels
of sales and margins over the last several years. As a result, the Company wrote
down property and equipment held by CO Beverages during 1996 to its estimated
net realizable value of $50,000. The Company also wrote down its inventory to
its estimated net realizable value of $5,455 during 1996. Management is in the
process of developing a formal plan to sell CO Beverages, is contacting
potential buyers and believes that a sale will occur during 1997.
The Company disposed of its ONTV and DRC subsidiaries during 1996,
which had not generated positive cash flow since their inception. Management
believes that the disposal of ONTV, DRC and the anticipated disposal of CO
Beverages will result in positive cash flows from operations and allow it to
focus on improving the profitability of the operations of CO Park and SDPI.
Although the Company's recent acquisition and expansion activities have met with
mixed success, the Company expects to continue seeking additional acquisitions.
Management is also in the process of negotiating extensions of notes payable to
banks which mature during 1997.
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Management believes that such extensions will provide adequate cash flow to
implement the plans discussed above.
Management believes that these plans will provide the Company the
opportunity to continue as a going concern, However, there can be no assurance
that these plans will be successful.
Capital Expenditures and Commitments
During the year ended December 31, 1996, the Company made limited
capital expenditures related almost entirely to its Business Park operations.
Other than very modest computer and office equipment needed if it expands its
businesses, the Company has no current commitments for material capital
expenditures in the next 12 months. However, the Company believes it needs
additional capital to develop and expand its businesses. Although the amount of
such additional capital required is uncertain, it is no doubt beyond that which
would be expected to be generated from its current operations. There can be no
assurance that the Company will be able to obtain any such additional capital on
satisfactory terms if at all. In such case, the Company's expansion will be
limited and Cunningham's and Bulldog's interest in continuing to lend money to
the Company would likely cease. This lack of support could lead to foreclosure
or bankruptcy.
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 Bulldog and Cunningham, the ability of the Company to
refinance its short and long-term liabilities 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 at reasonable prices
or rates, if at all. The Company and all its subsidiaries have had unsuccessful
operating histories and have been consistently unprofitable. 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 under the
headings "Description of Business" and "Management's Discussion and Analysis or
Plan of Operation" 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 markets 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.
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ITEM 7. FINANCIAL STATEMENTS
The following financial statements listed in the table below have been
prepared in accordance with the requirements of Item 310(a) of Regulation SB.
Page
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Report of Independent Public Accountants F-1
Consolidated Balance Sheet at December 31, 1996 F-2
Consolidated Statements of Operations for the fiscal years ended
December 31, 1996 and December 31, 1995 F-3
Consolidated Statements of Shareholders' Deficit for the fiscal
years ended December 31, 1996 and December 31, 1995 F-4
Consolidated Statements of Cash Flows for the fiscal years ended
December 31, 1996 and December 31, 1995 F-5
Notes to Consolidated Financial Statements F-6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
Information respecting the continuing directors and nominees of the
Company is set forth under the caption "Information Concerning Directors and
Nominees" and the disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is set forth under the caption "Compliance with Section 16(a)
under the Exchange Act," in the Company's Proxy Statement relating to its 1996
Annual Meeting of Stockholders incorporated by reference into this Form 10-KSB
report, which will be filed with the Securities and Exchange Commission in
accordance with Rule 14a-6(c) promulgated under the Securities Exchange Act of
1934 (the "1934 Act"). With the exception of the foregoing information and other
information specifically incorporated by reference into this Form 10-KSB report,
the Company's 1996 Proxy Statement is not being filed as a part hereof.
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ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
the section entitled "Executive Compensation" in the 1996 Proxy Statement, which
information is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
the section entitled "Principal Shareholders" in the 1996 Proxy Statement, which
information is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
the section entitled "Certain Transactions" in the 1996 Proxy Statement, which
information is incorporated herein by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Page
----
Reference is made to the Exhibit Index contained in this Annual
Report on Form 10-KSB. 15
A copy of any of the exhibits listed or referred to above will be
furnished at a reasonable cost to any person who was a shareholder of the
Company on May 15, 1997, upon receipt from any such person of a written request
for any such exhibit. Such request should be sent to the Company with the
attention directed to the Corporate Secretary.
Reports of Form 8-K
The Company has filed no current Reports on Form 8-K during the year
ended December 31, 1996 and subsequently through the date of this report.
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: May 15, 1997
SOONER HOLDINGS, INC.
---------------------
(Registrant)
By: /s/ R. C. Cunningham II
-------------------------------------
R.C. Cunningham II
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Chairman of the Board, Chief Executive
/s/ R. C. Cunningham II Officer and President 5/15/97
- ----------------------------------------- ----------------
R. C. Cunningham II
/s/ David B. Talbot, Jr. Secretary and Director 5/15/97
- ----------------------------------------- ----------------
David B. Talbot, Jr.
/s/ Michael S. Williams Director 5/15/97
- ----------------------------------------- ----------------
Michael S. Williams
/s/ Lanny R. Lang Treasurer (Principal Accounting 5/15/97
- ----------------------------------------- Officer) ----------------
Lanny R. Lang
</TABLE>
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FORM 10-KSB
For the fiscal year ended December 31, 1996
Exhibit Index
- -------------
<TABLE>
<CAPTION>
Page no.
Item No. Description (footnote)
-------- ----------- ----------
<S> <C> <C>
3.1 thru 3.3 Articles of Incorporation, By-Laws and Amendments thereto (1)
10.1 thru 10.11 Material contracts (1)
16.1 Letter re: change in certifying accountant (1)
19.1 thru 19.6 Other agreements (1)
22.1 Subsidiaries of the registrant EX-1
</TABLE>
Footnote:
- ---------
(1) Incorporated by reference to the Company's Form 10-KSB for the year ended
December 31, 1995 (file no. 0-18344).
15
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Sooner Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of SOONER HOLDINGS,
INC. AND SUBSIDIARIES (the Company) as of December 31, 1996, and the related
consolidated statements of operations, shareholders' deficit and cash flows for
each of the two years in the period then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 financial position of Sooner Holdings,
Inc. and subsidiaries, as of December 31, 1996, and the results of its
operations and its cash flows for each of the two years in the period then
ended, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has a shareholders' deficit of $137,671, and has a working
capital deficiency of $686,011. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are described in Note 1. The consolidated financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
April 9, 1997.
F-1
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 2,649
Accounts receivable 2,736
Inventories 5,455
Prepaid expenses and deposits 580
------------
Total current assets 11,420
LAND HELD BY TRUST 495,790
PROPERTY AND EQUIPMENT, net 2,330,770
OTHER ASSETS, net 30,940
------------
$ 2,868,920
============
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 21,607
Real estate taxes payable 164,189
Accrued liabilities to related parties 21,256
Accrued liabilities 28,137
Current portion of notes payable 362,412
Deferred revenue 99,830
------------
Total current liabilities 697,431
------------
NOTES PAYABLE, less current portion 1,970,660
ROAD TRUST IMPROVEMENTS PAYABLE 338,500
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, $.001 par value, 100,000,000 shares authorized,
6,412,528 shares issued and outstanding 6,413
Common stock to be issued; 1,058,822 shares 42,353
Additional paid-in capital 5,456,612
Accumulated deficit (5,643,049)
------------
Total shareholders' deficit (137,671)
------------
$ 2,868,920
============
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-2
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
REVENUES (Note 11):
Rental revenue $ 322,376 $ 283,053
Service revenue 288,031 20,000
Product revenue 4,514 13,674
------------ ------------
614,921 316,727
OPERATING EXPENSES:
Cost of products sold 41,156 12,234
General and administrative 231,392 241,234
Depreciation and amortization 83,083 70,876
Interest expense 240,380 245,980
Loss on repossession of land 15,340 -
Loss on writedown of assets 115,374 20,180
------------ ------------
726,725 590,504
LOSS FROM CONTINUING OPERATIONS (111,804) (273,777)
------------ ------------
DISCONTINUED OPERATIONS:
Loss from operations of discontinued segments (49,260) (61,262)
Gain on disposal of segments 73,946 -
------------ -----------
GAIN (LOSS) FROM DISCONTINUED OPERATIONS 24,686 (61,262)
------------ ------------
NET LOSS $ (87,118) $ (335,039)
============ ============
NET LOSS PER COMMON SHARE:
Loss from continuing operations $ (.01) $ (.05)
Gain (loss) from discontinued operations - (.01)
------------ ------------
NET LOSS PER COMMON SHARE $ (.01) $ (.06)
=========== ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,412,528 5,277,886
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
SOONER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Common Stock Additional Common
-------------------- Paid-in Stock to Accumulated Shareholders'
Shares Amount Capital be Issued Deficit Deficit
------ ------ ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 4,999,153 $ 4,999 $ 5,104,194 $ 353,832 $(5,220,892) 242,133
Net loss -- -- -- -- (335,039) (335,039)
Issuance of common stock 1,413,375 1,414 352,418 (353,832) -- --
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 6,412,528 6,413 5,456,612 -- (5,555,931) (92,906)
Net loss -- -- -- -- (87,118) (87,118)
Exchange of notes payables
for common stock (Note 7) -- -- -- 42,353 -- 42,353
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 6,412,528 $ 6,413 $ 5,456,612 $ 42,353 $(5,643,049) $ (137,671)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (87,118) $ (335,039)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities-
Depreciation 83,082 70,877
Amortization of intangible assets 1,500 10,535
Loss on repossession of land 15,340 -
Writedown of assets 115,374 -
Changes in assets and liabilities-
Increase in accounts receivable (287) (357)
Decrease in inventories 39,182 48,552
Decrease (increase) in prepaid expenses and deposits and other 2,071 (706)
Increase (decrease) in bank overdraft (5,500) 5,500
Decrease in accounts payable (409) (22,673)
Increase (decrease) in real estate taxes payable (21,452) 52,229
Increase in accrued liabilities to related parties 74,318 129,884
Increase in accrued liabilities 5,009 12,706
Increase in deferred revenues 99,830 -
---------- -----------
Net cash provided by (used in) operating activities 320,940 (28,492)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (62,860) -
Advances to Dynamicorp (30,000) (28,000)
---------- -----------
Net cash used in investing activities (92,860) (28,000)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable (322,211) (385,217)
Borrowings on notes payable 93,290 443,470
---------- -----------
Net cash provided by (used in) financing activities (228,921) 58,253
---------- -----------
NET INCREASE (DECREASE) IN CASH (841) 1,761
CASH, beginning of year 3,490 1,729
---------- -----------
CASH, end of year $ 2,649 $ 3,490
========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 195,006 $ 204,058
========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of accounts payable to notes payable $ 14,000 $ -
========== ==========
Conversion of accrued liabilities to notes payable $ 340,096 $ -
========== ==========
Sale of interest in DRC for reduction in notes payable $ 58,000 $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND OPERATIONS:
Sooner Holdings, Inc. (Sooner or the Company; an Oklahoma Corporation), 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
coverage for mechanical contracting services performed on apartment buildings.
Charlie O Beverages, Inc. (Beverage) 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. during fiscal
1995 and On TV Incorporated (On TV), which was engaged in the business of
marketing consumer products (see Note 13).
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has suffered
recurring losses from operations, has a shareholders' deficit of $137,671, and
has a working capital deficiency of $686,011 as of December 31, 1996. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans with regard to these matters are described
below. The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
Management Plans
In October 1995, SDPI entered into a new business whereby it acts as a marketing
representative for construction contractors to develop business opportunities
for those contractors for a fee, which may include extended warranty coverage
for mechanical contracting services performed on apartment buildings. This new
business line resulted in additional revenue of $288,031 for the year ended
December 31, 1996.
As discussed in Note 13, the Company disposed of its On TV and DRC subsidiaries
during 1996, which had not generated positive cash flow since their inception.
F-6
<PAGE>
The Company's Beverage segment has experienced declining levels of sales and
margins over the last several years. As a result, the Company wrote down
property and equipment held by Beverage during 1996 to its estimated net
realizable value of $50,000 (see Note 2). The Company also wrote down its
inventory to its estimated net realizable value of $5,455 during 1996.
Management is in the process of developing a formal plan to sell Beverage, is
contacting potential buyers and believes that a sale will occur during 1997.
Management believes that the disposal of On TV, DRC and the anticipated disposal
of Beverage will result in positive cash flows from operations and allow it to
focus on improving the profitability of the operations of Business Park and
SDPI. Management is also in the process of negotiating renewals or extensions of
notes payable to banks which mature during 1997. Management believes that such
renewals or extensions will provide adequate cash flow to implement the plans
discussed above.
Management believes that these plans will provide the Company the opportunity to
continue as a going concern. However, there can be no assurance that these plans
will be successful.
(2) SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Sooner Holdings, Inc. and all majority owned subsidiaries. All significant
intercompany transactions have been eliminated. At December 31, 1996, all
subsidiaries of the Company are wholly owned. Accordingly, no minority interest
is presented in the accompanying balance sheet. For the years ended December 31,
1996 and 1995, the Company's majority owned subsidiaries, On TV and DRC, had
stockholders' deficits. Accordingly, no minority interest was recorded due to
the uncertainty of the recoverability of the resulting balance.
Revenue Recognition
The Company records rental revenue on a straight-line basis over the term of the
underlying rental agreements.
In instances where the Company provides warranty services, the Company records
revenue on these contracts under the full deferral method, whereby all revenues
are deferred and recognized on a straight-line basis over the contract term.
Costs associated with performance under these contracts are charged to expense
as incurred.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and all highly liquid investments
with a maturity of three months or less when purchased.
F-7
<PAGE>
Inventories
The Company records its inventory at the lower of cost (first-in, first-out)
method or market. Reserves are established against Company owned inventories for
excess, slow-moving and obsolete items and for items where the net realizable
value is less than cost.
Property and Equipment
Property and equipment is stated at cost. Depreciation is being provided using
the straight-line method over the estimated useful lives of 5 to 40 years.
Maintenance, repairs and renewals, which do not materially add to the value of
an asset or appreciably prolong its life, are charged to expense as incurred.
Other Assets
Other assets consist of unamortized loan commitment fees as of December 31,
1996, which are amortized using the straight-line method over the life of the
loan.
Net Loss Per Common Share
Net loss per common share is based upon the weighted average number of shares
outstanding during the respective periods. Common stock equivalents, which
consist of common stock to be issued, are not included in the net loss per share
calculation as their inclusion is anti-dilutive.
Use of 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 and disclosures of contingent items in these
financial statements. Actual results could differ from those estimates.
Recently Issued Accounting Standards
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, was
adopted by the Company in fiscal 1996. The adoption of SFAS No. 121 resulted in
the write-down of approximately $115,000 of Beverage's equipment. The loss was
determined by estimating the liquidation value of Beverage's equipment based on
quotes from used equipment appraisers.
(3) INTEREST IN LAND TRUST:
SDPI is the sole beneficiary of a trust which owns land held for resale (Trust).
As of December 31, 1996, this land consisted of 358 residential lots located in
Coconino County, Arizona adjacent to the Kaibab National Forest. The Trust is
administered by an independent trustee. The basis of the land held by the Trust
has been reduced to approximately $496,000, which is the estimated net
realizable value of the land pursuant to an independent appraisal. The lots are
subject to nonrecourse liabilities for road improvements totaling $338,500 which
are payable as the
F-8
<PAGE>
lots are sold. The lots are also subject to property tax liabilities, almost all
of which are delinquent. These liabilities are also only recourse to the lots.
The table below reflects the details of the Company's net interest in the Trust:
Land held by trust $ 495,790
Road trust improvements payable (338,500)
Real estate taxes payable (157,290)
-----------
Net interest in land trust $ -
===========
The Company recorded a loss of $15,340 during the year ended December 31, 1996,
representing the cost basis of lots that were repossessed by Coconino County and
transferred to third parties who paid back taxes on the related lots. During the
year ended December 31, 1995, no lots were repossessed. In April 1997, the
Company sold its interest in the land trust (see Note 14).
(4) PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1996, is comprised of the following:
Useful Life
-----------
Land - $ 1,191,400
Buildings and improvements 5-40 1,465,322
Machinery 5-12 103,366
-----------
2,760,088
Less: accumulated depreciation (429,318)
-----------
$ 2,330,770
===========
(5) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company estimates the fair value of its monetary assets and liabilities
based upon existing interest rates related to such assets and liabilities
compared to current rates of interest for instruments with a similar nature and
degree of risk. The Company believes that the carrying value of all of its
monetary assets and liabilities approximates fair value as of December 31, 1996.
(6) NOTES PAYABLE:
Notes payable as of December 31, 1996, consists of the following:
Note payable to bank, payments of interest only due monthly,
interest at prime (8.75% at December 31, 1996) plus .5%,
guaranteed by a shareholder, officer and director, due
June 1, 1997. Unsecured. $ 98,800
Note payable to bank, payments of interest only due quarterly,
interest at prime plus .5%, guaranteed by a shareholder, officer
and director, due June 1, 1997. Unsecured. 83,290
<PAGE>
Note payable to bank, payable in monthly installments of $500,
interest at prime plus 1% per annum, due June 24, 1997. Secured
by inventory. 16,868
Note payable to individual, no stated interest rate, due on
demand. Secured by real estate. 135,000
Installment note payable to bank, interest at prime plus 3%,
due June 20, 1998, guaranteed by a shareholder, officer and
director. Secured by real estate. 939,590
Installment note payable to bank, interest at prime plus 3%,
per annum, due June 20, 1998, guaranteed by a shareholder,
officer and director. Secured by real estate. 186,992
Oklahoma Industrial Finance Authority loan, variable interest
and payments due monthly, maturing August 1, 2004, with
interest at 3% over the Oklahoma Industrial Finance Authority's
cost of capital, not to fall below 10% or exceed 14% (cost of
capital was 10% on December 31, 1996), guaranteed by a
shareholder, officer and director. Secured by real estate and
equipment. 432,839
Notes payable to related parties, interest ranging from 10%
to 15% per annum, due January 1, 1998. 439,693
----------
2,033,072
Less: Current portion (362,412)
----------
$1,970,660
==========
(7) SHAREHOLDERS' DEFICIT:
Employee Stock Option Plan
The Company has a stock option plan (1995 Plan) for directors, officers, key
employees and consultants covering 2,000,000 shares of Company common stock.
Options granted under the 1995 Plan may be either "incentive stock options," as
defined in Section 422A of the Internal Revenue Code or "nonqualified stock
options," subject to Section 83 of the Internal Revenue Code, at the discretion
of the Board of Directors and as reflected in the terms of the written option
agreement. The option price shall not be less than 100% (110% if the option is
granted to a stockholder who at the time the option is granted owns stock
representing more than 10% of the total combined voting power of all classes of
stock of the Company) of the fair market value of the optioned common stock on
the date the options are granted. The "fair market value" will not be less than
the average of the closing bid and asked price of the common stock, as reported
by NASDAQ on the date granted. Options become exercisable based on the
discretion of the Board of Directors but must be exercised within ten years of
the date of grant. No options have been granted under the 1995 Plan as of
December 31, 1996.
F-10
<PAGE>
Common Stock to be Issued
During the year, Phoenix Financial Reporting Group, Inc. (PFRG), a related
party, and the Company's chairman and president agreed to accept 358,822 and
700,000 shares of the Company's common stock, respectively, as consideration for
payment in full of a $14,000 note payable plus accrued interest and a $28,000
note payable, respectively. The number of shares was based on the estimated fair
value of the stock of $.04 per share on December 31, 1996, the date of the
agreements. Accordingly, the Company recorded this transaction as common stock
to be issued in the accompanying consolidated financial statements.
(8) INCOME TAXES:
The Company accounts for income taxes under the provisions of SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 requires the use of an asset and
liability approach in accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the differences between the financial
statement and tax bases of assets and liabilities and the tax rates in effect
when these differences are expected to reverse. SFAS No. 109 requires the
reduction of deferred tax assets by a valuation allowance, if, based on the
weight of available evidence, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
The Company has various timing differences resulting from the establishment of
reserves for financial statement purposes and other transactions. The Company
has a net deferred tax asset resulting primarily from net operating loss
carryforwards. The net deferred tax asset has been reduced in its entirety by a
valuation allowance. No provision for income taxes has been reported in the
accompanying consolidated statement of operations as any current income tax
liability would be offset by net operating loss carryforwards.
(9) RELATED PARTY TRANSACTIONS:
Bulldog Investment Company, L.L.C.
The Company has an Advisory Agreement with Bulldog Investment Company L.L.C.
(Bulldog), wherein Bulldog acts as the Company's financial advisor. Bulldog
receives an annual fee equal to 5% of the Company's gross revenues, as defined
in the Advisory Agreement. Fees of $30,704 and $17,226 have been recorded
pursuant to this agreement for the years ended December 31, 1996 and 1995,
respectively. Bulldog owns approximately 4% of the Company's common stock.
The Company recorded expenses of $727 and $47,542 for the years ended December
31, 1996 and 1995, respectively, related to assets leased from and services
provided by Wheel of Bargains, Inc. (WOBI) and PFRG, which are affiliates of
Bulldog.
Talbot Investment Co.
Talbot Investment Co. ("Talbot"), is an Oklahoma City, Oklahoma-based commercial
real estate brokerage firm. Mr. David Talbot, secretary and a director of the
Company and Business Park, 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
F-11
<PAGE>
services. Expenses of $36,362 and $22,597 related to services provided by Talbot
have been recorded as general and administrative expenses for the years ended
December 31, 1996 and 1995, respectively.
Employment Contract
The Company has an Incentive Compensation Agreement with its president and
chairman. Under the agreement, he receives no base compensation, however, he
earns a cash fee of five percent (5%) of the Company's gross revenues, payable
on a quarterly basis. Pursuant to this agreement, $30,704 and $17,226 have been
recorded as a general and administrative expense for the years ended December
31, 1996 and 1995, respectively.
Related Party Obligations
The following table reflects amounts owed to related parties at December 31,
1996:
Notes Accounts Accrued
Payable Payable Liabilities
--------- --------- -----------
President and Chairman $ 129,005 $ - $ 9,022
Bulldog and affiliate 272,781 1,289 11,284
WOBI 37,907 - -
Talbot - 51 950
--------- --------- ----------
Total related party liabilities $ 439,693 $ 1,340 $ 21,256
========= ========= ==========
In addition, the president and chairman has personally guaranteed $1,741,511 of
the Company's notes payable.
(10) 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.
(11) SEGMENT DATA:
The Company's business operations are conducted in three major segments which
are described in Note 1.
F-12
<PAGE>
Financial information by reportable business segment is as follows:
1996 1995
------------ ------------
Business Park:
Revenues $ 322,376 $ 283,053
============ ============
Net income (loss) $ (17,011) $ 38,114
============= ============
Identifiable assets $ 2,280,770 $ 2,296,735
============ ============
Beverage:
Revenues $ 4,514 $ 13,674
============ ============
Net loss $ (208,605) $ (173,439)
============ ============
Identifiable assets $ 50,000 $ 351,063
============ ============
SDPI:
Revenues $ 288,031 $ 20,000
============ ============
Net income (loss) $ 247,233 $ (21,077)
============ ============
Identifiable assets $ 495,790 $ 522,630
============ ============
(12) SIGNIFICANT CUSTOMERS:
Business Park generates revenue from tenants, all of which occupy the same
industrial complex in Oklahoma City, Oklahoma. At December 31, 1996 there were
approximately 25 tenants. Rental revenue recorded from one customer in Business
Park represented 12% and 22% of the Company's total revenues for the years ended
December 31, 1996 and 1995, respectively.
SDPI generates revenue from the provision of extended warranties, primarily to
owners of apartment buildings in Oklahoma. Service revenue recorded from one
customer represented 44% and 6% of the Company's total revenues for the years
ended December 31, 1996 and 1995, respectively.
(13) DISCONTINUED OPERATIONS:
On TV Segment
On December 31, 1996 the Company sold a majority of its common stock ownership
interest in On TV to Vinculum Incorporated, an affiliate of Bulldog. The sale
price was $64,439, paid for by a reduction of $5,000 of debt due from the
Company to Vinculum, plus the assumption of net liabilities totaling $59,439 on
the books of On TV. The gain on the sale of the On TV segment of $74,439,
including the $10,000 cash payment forfeited by an earlier prospective buyer, is
recorded separately as a component of discontinued operations in the
consolidated financial statements. The loss on the operations of On TV of $9,579
and $61,262 for the years ended December 31, 1996 and 1995, respectively, are
presented separately as a component of discontinued operations in the
accompanying consolidated statements of operations.
F-13
<PAGE>
DRC Segment
In December 1996, the Company sold its interest in DRC to its president and
chairman for $58,000, which was paid for by a reduction in notes payable due
him. The sale resulted in a loss on disposal of $493 which is recorded
separately as a component of discontinued operations in the consolidated
statements of operations. Prior to the sale, DRC recorded a loss of $39,681 for
the year ended December 31, 1996, which is presented separately as a component
of discontinued operations in the accompanying consolidated statements of
operations.
(14) 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.
F-14
SOONER HOLDINGS, INC.
FORM 10-KSB
For the fiscal year ended December 31, 1996
Exhibit 22.1
Subsidiaries of the Registrant
------------------------------
Charlie O Beverages, Inc.
Charlie O Business Park Incorporated
SD Properties, Inc.
EX-1
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,649
<SECURITIES> 0
<RECEIVABLES> 2,736
<ALLOWANCES> 0
<INVENTORY> 5,455
<CURRENT-ASSETS> 11,420
<PP&E> 2,760,088
<DEPRECIATION> 429,318
<TOTAL-ASSETS> 2,868,920
<CURRENT-LIABILITIES> 697,431
<BONDS> 0
0
0
<COMMON> 5,463,025
<OTHER-SE> (5,600,696)
<TOTAL-LIABILITY-AND-EQUITY> 2,868,920
<SALES> 614,921
<TOTAL-REVENUES> 614,921
<CGS> 41,156
<TOTAL-COSTS> 486,345
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240,380
<INCOME-PRETAX> (111,804)
<INCOME-TAX> 0
<INCOME-CONTINUING> (111,804)
<DISCONTINUED> 24,686
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (87,118)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
