UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File No. 0-18344
SOONER HOLDINGS, INC.
---------------------
(Name of small business issuer in its charter)
Oklahoma 73-1275261
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2680 W. Interstate 40, Oklahoma City, OK 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
-------------
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 l0-KSB. [ ]
Revenues for the year ending December 31, 1997 were $432,449.
The aggregate market value of the voting stock held by non-affiliates
of the Company on April 30, 1998 was approximately $590,000. As of April 30,
1998, the Company had 7,471,350 shares of common stock issued and outstanding.
Transitional Small Business Issuer Disclosure Format Yes No X
--- ---
This document consists of 31 pages. The exhibit index is on page 28.
<PAGE>
SOONER HOLDINGS, INC.
FORM 10-KSB
For the fiscal year ended December 31, 1997
Table of Contents
-----------------
PART I Page
- ------ ----
Item 1. Description of Business 3
Item 2. Description of Property 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
Part II
- -------
Item 5. Market for Common Equity and Related Stockholder Matters 5
Item 6. Management's Discussion and Analysis or Plan of Operation 5
Item 7. Financial Statements 8
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures 22
Part III
- --------
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act 22
Item 10. Executive Compensation 24
Item 11. Security Ownership of Certain Beneficial Owners and Management 26
Item 12. Certain Relationships and Related Transactions 27
Part IV
Item 13. Exhibits and Reports on Form 8-K 28
Signatures 29
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
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 primarily through one of its
subsidiaries, Charlie O Business Park Incorporated ("Business Park"). Business
Park operates a multi-unit rental property for business and industrial tenants
located in Oklahoma City, Oklahoma. Business Park became an operating subsidiary
upon its formation in March 1991 and is 100% owned by the Company.
The Company also owns 100% of SD Properties, Inc. ("SDPI"). SDPI
operated as a marketing representative for construction contractors and had
revenues during fiscal 1996 and early 1997 attributable to this business.
Although SDPI continues to evaluate opportunities, additional revenues related
to this business are unlikely. Until April 1997, SDPI also held an interest in a
beneficial trust that owned real estate lots in an Arizona subdivision. SDPI's
net book value in the beneficial trust was negative due to offsetting
liabilities related to the trust and the underlying lots. In April 1997, SDPI
sold the interest in the beneficial trust to a related party for $1.00 and the
assumption of all liabilities plus an agreement to share future profits, if any,
with the Company.
The Company also owns 100% of Charlie O Beverages, Inc. ("Beverages"),
which operates the original in-home soda fountain business. The Company has been
trying to sell Beverages as a going concern or liquidate the assets of this
business, although at this time the Company has no formal plan of disposal.
Therefore, the remaining assets of Beverages consisting of inventory and
equipment have been written down to their estimated realizable value. The
Company hopes to sells Beverages as a going concern and therefore, realize
additional value for the extensive tooling and other assets related to Beverages
business. These latter assets were written off in their entirety during 1996.
During fiscal 1997 the Company formed a new subsidiary, New Directions
Acquisition Corp ("NDAC"), and has a letter of intent to acquire certain assets
of a community correction business in Oklahoma City.
Business Description
Business Park operates as a real estate lessor and property manager and
currently leases to 21 non-related lessees. Business Park's property includes
five separate buildings, covering approximately 126,900 square feet, located at
the intersection of I-40 and Agnew Street in Oklahoma City, Oklahoma. The
Company and its Beverages subsidiary currently operate out of approximately
9,000 square feet in this business park. Business 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 88% during both
1997 and 1996.
General
Seasonality. None of the Company's subsidiaries are subject to
significant seasonality in its businesses.
3
<PAGE>
Government Regulation. None of the Company's subsidiaries are subject
to significant regulation in its businesses.
Warranties. None of the Company's subsidiaries are subject to
significant warranty exposure in its businesses. The Company maintains product
liability insurance coverage with respect to its Beverages business.
Employees. As of April 30, 1998, the Company had one full-time
employee, Mr. R.C. Cunningham II, the Company's president and chairman
("Cunningham"). 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 use
temporary employees or subcontractors to fill its orders, ship product or
perform administrative services.
ITEM 2. DESCRIPTION OF PROPERTY
Business 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
Interstate 40 and Agnew Street in Oklahoma City, Oklahoma. The Company and its
subsidiaries occupy approximately 9,000 square feet and the remainder of the
business park is leased to 21 unrelated lessees. The lessees generally use the
property for retail, manufacturing and light industrial operations. Business
Park's leases are generally for three to five years. As of April 30, 1998,
excluding the square footage leased to the Company and its affiliates, the
facility is 76% 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. Beverages has no real property.
ITEM 3. LEGAL PROCEEDINGS
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. There are no other 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.
The Company is involved in certain other administrative proceedings
arising in the normal course of business, pertaining to the operations of
Business Park. 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
No matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise. The Company's last meeting of shareholders
was in 1996.
4
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Market information
The Company's common stock trades on the OTC Bulletin Board under the
symbol "SOON". 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 OTC
Bulletin Board.
Low High
--- ----
Fiscal 1997:
First quarter .031 .031
Second quarter .031 .031
Third quarter .031 .031
Fourth quarter .031 .175
Fiscal 1998:
First quarter .250 .875
Second quarter (to April 30, 1998) .375 .375
Shareholders
As of April 30, 1998, the Company had 555 shareholders of record, not
including shares held in "street name." As of April 30, 1998, 865,906 shares (or
approximately 12%) of the issued and outstanding stock was held by The
Depository Trust Company 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
Plan of Operation
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 while seeking new business opportunities.
Liquidity and Capital Resources - December 31, 1997 compared to December 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
comparative deficiencies in working capital at December 31, 1997 and 1996:
5
<PAGE>
1997 1996
---- ----
Deficiency in working capital $ (863,925) $ (1,118,850)
================== ==================
Although the Company's working capital is 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
president and chairman ("Cunningham"), or by Aztore Holdings, Inc., a Phoenix,
Arizona-based investment company ("Aztore"). Aztore holds various notes and
liabilities against the Company and has agreed to forebear and restructure a
majority of these liabilities as part of a future merger or acquisition.
Approximately $468,000 of the Company's current liabilities relate to
the acceleration of a long-term note due to a technical default of approximately
$15,000. The Company expects this default to be cured before the end of the
Company's third fiscal quarter.
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.
Results of Operations - The year ended December 31, 1997 compared to the year
ended December 31, 1996
The following table illustrates the Company's revenue mix. Due to the
lack of new contracts in SDPI's business, the results in 1997 are not indicative
of future results.
1997 1996
Amount % Amount %
------ - ------ -
Business Park revenues $ 325,328 75 $ 322,376 52
SDPI revenues 104,997 24 288,031 47
Beverages revenue 2,124 1 4,514 1
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Total revenues $ 432,449 $ 614,921
============= =============
Business Park revenues remained stable due to the rehabilitation of its
facilities. During 1997, Business Park successfully renegotiated eleven leases
(or 32% of the total square footage) from one year leases to three to five year
leases at an average increase of $.39 per square foot. In November 1997, the
Company lost one tenant that accounted for 21% of total revenues for Business
Park, and has been aggressively seeking new tenants for this space. At December
31, 1997, the business park was 76% occupied.
This change in the Company's occupancy rate will have a negative impact
on the Company's profitability in 1998. However, the Company believes its
long-term prospects have improved with longer leases and higher lease rates.
Losses of tenants in the future could affect future operations and financial
position because of the cost of new leasehold improvements and lower revenues
due to any prolonged vacancy. There is no assurance the Company will return to
its historically high occupancy rate.
6
<PAGE>
SDPI revenues came from the recognition of approximately $100,000 of
deferred revenue related to the expiration of warranty service provided by SDPI
for one year from completion of its 1996 contracts. SDPI, a marketing
representative for construction contractors, had revenue growth during fiscal
1996 and early 1997 attributable to this business. Although SDPI continues to
evaluate opportunities, additional revenues related to this business are
unlikely.
Total operating expenses for the year ended December 31, 1997 were
$468,167 as compared to total expenses for the comparable 1996 period of
$726,725. In the 1996 periods the Company incurred one-time costs associated
with the loss of SDPI's lots due to tax foreclosure sales and the write-down of
Beverages assets to their estimated net realizable value. In addition, in 1996
the write-down of the Beverages assets resulted in a decrease in depreciation
expense in 1997. General and administrative expenses, consisting primarily of
professional and management fees, also decreased due to Aztore's and
Cunningham's incentive-based compensation agreements.
Other income primarily represents the sale of certain securities held
by the Company in payment of $39,000 in fees to Aztore. The Company's basis in
these shares was nominal.
Going Concern and Management Plans
The Company has suffered recurring losses from operations, has a
shareholders' deficit of $129,589, and has a working capital deficiency of
$863,925. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Realization of a major portion of the Company's
assets is dependent upon the Company's ability to meet its financing
requirements and the success of its future operations.
During the period, Business Park initiated a program of bringing its
lease rates up to the prevailing market rates. As part of this activity, it
generally extended its lease terms from one year to three to five years.
Business Park closed eleven of these new leases (32% of the total square
footage) at an average increase of $.39 per square foot. New leases were
increased to approximately $3.22 per square foot to reflect demand in the market
as well as premiums for improvements made for lessees.
Business Park is actively seeking to rent its vacant space at these
higher rates. With its increased cash flow, the Company expects to pay
approximately $15,000 in real estate taxes, which will cure the technical
default on the OIFA loan. The Company is also seeking to refinance its entire
debt on the Business Park which will lower the Company's debt service payment,
thereby further increasing cash flow. The Company is also continuing to pursue
merger and/or acquisition opportunities. Management believes that these plans
will be effective in improving the Company's profitability and working capital
position and 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, 1997, the Company made limited
capital expenditures all of which were related to its Business Park operations.
The Company expects to spend approximately $150,000 for capital expenditures,
primarily for leasehold improvements, on its Business Park operations in the
next 12 months. In addition, the Company believes it needs additional capital to
develop and expand into new businesses. Although the amount of such additional
capital required is uncertain, management believes it is beyond that which would
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
financial support from Cunningham and Aztore would likely cease, which could
lead to foreclosure or bankruptcy.
7
<PAGE>
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 financial and administrative support of Aztore 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 obtain additional 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. The Company's competition would almost uniformly have
more resources and capital in general than the Company. If the Company expands,
it will have to attract satisfactory operating personnel. If the Company or any
subsidiary experiences any substantial reversal, including but not limited to
the areas discussed above, such entity 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.
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
----
Report of Independent Public Accountants 9
Consolidated Balance Sheet at December 31, 1997 10
Consolidated Statements of Operations for the fiscal years ended
December 31, 1997 and December 31, 1996 11
Consolidated Statements of Shareholders' Deficit for the fiscal years
ended December 31, 1997 and December 31, 1996 12
Consolidated Statements of Cash Flows for the fiscal years ended
December 31, 1997 and December 31, 1996 13
Notes to Consolidated Financial Statements 14
8
<PAGE>
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, 1997, 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, 1997, 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. The Company has suffered
recurring losses from operations, has a shareholders' deficit of $129,589, and
has a working capital deficiency of $863,925 as of December 31, 1997. 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,
March 5, 1998.
9
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
ASSETS
CURRENT ASSETS:
Cash $ 4,482
Accounts receivable, net of allowance of $2,362 1,667
Inventories 5,066
Prepaid expenses and deposits 1,180
-----------
Total current assets 12,395
PROPERTY AND EQUIPMENT, net 2,281,117
OTHER ASSETS, net 29,440
-----------
$ 2,322,952
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities to related parties $ 68,287
Accrued liabilities 37,993
Real estate taxes payable 21,649
Accounts payable 15,324
Current portion of notes payable 730,234
Deferred revenue 2,833
-----------
Total current liabilities 876,320
-----------
NOTES PAYABLE, less current portion 1,576,221
-----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Preferred stock, undesignated, 10,000,000 shares authorized,
no shares issued and outstanding --
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 (5,634,967)
-----------
Total shareholders' deficit (129,589)
-----------
$ 2,322,952
===========
The accompanying notes are an integral part of this consolidated balance sheet.
10
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
----------- -----------
REVENUES (Note 10): $ 432,449 $ 614,921
----------- -----------
EXPENSES:
Cost of products sold 1,460 41,156
General and administrative 181,945 231,392
Depreciation and amortization 60,028 83,083
Interest expense 224,734 240,380
Loss on repossession of land -- 15,340
Loss on writedown of assets -- 115,374
----------- -----------
Total expenses 468,167 726,725
----------- -----------
LOSS FROM OPERATIONS (35,718) (111,804)
OTHER INCOME (Note 7) 43,800 --
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 8,082 (111,804)
GAIN FROM DISCONTINUED OPERATIONS -- 24,686
----------- -----------
NET INCOME (LOSS) $ 8,082 $ (87,118)
=========== ===========
EARNINGS PER SHARE:
BASIC:
Income (loss) from continuing operations $ -- $ (.01)
Gain from discontinued operations -- --
----------- -----------
NET INCOME (LOSS) PER COMMON SHARE $ -- $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 7,471,350 6,412,528
=========== ===========
DILUTED:
Income (loss) from continuing operations $ -- $ (.01)
Gain from discontinued operations -- --
----------- -----------
NET INCOME (LOSS) PER COMMON SHARE $ -- $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 7,471,350 6,412,528
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
11
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<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, 1995 6,412,528 $ 6,413 $ 5,456,612 $ -- $(5,555,931) $ (92,906)
Net loss -- -- -- -- (87,118) (87,118)
Exchange of notes payable for
common stock -- -- -- 42,353 -- 42,353
----------- ----------- ----------- ----------- ----------- -------------
BALANCE, December 31, 1996 6,412,528 6,413 5,456,612 42,353 (5,643,049) (137,671)
Net income -- -- -- -- 8,082 8,082
Issuance of common stock 1,058,822 1,058 41,295 (42,353) -- --
----------- ----------- ----------- ----------- ----------- -------------
BALANCE, December 31, 1997 7,471,350 $ 7,471 $ 5,497,907 $ -- $(5,634,967) $ (129,589)
=========== =========== =========== =========== =========== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
12
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 8,082 $ (87,118)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation 58,528 83,082
Amortization of intangible assets 1,500 1,500
Allowance for doubtful accounts 2,362 --
Loss on repossession of land -- 15,340
Provision for writedown of assets -- 115,374
Changes in assets and liabilities-
Increase in accounts receivable (1,293) (287)
Decrease in inventories 389 39,182
Decrease (increase) in prepaid expenses and deposits (600) 2,071
Decrease in bank overdraft -- (5,500)
Decrease in accounts payable (4,035) (409)
Increase (decrease) in real estate taxes payable, net 14,750 (21,452)
Increase in accrued liabilities to related parties 59,961 74,318
Increase in accrued liabilities 9,856 5,009
Increase (decrease) in deferred revenue (96,997) 99,830
--------- ---------
Net cash provided by operating activities 52,503 320,940
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (8,875) (62,860)
Advances to Dynamicorp (Note 7) -- (30,000)
--------- ---------
Net cash used in investing activities (8,875) (92,860)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable (55,295) (322,211)
Borrowings on notes payable 13,500 93,290
--------- ---------
Net cash used in financing activities (41,795) (228,921)
--------- ---------
NET INCREASE (DECREASE) IN CASH 1,833 (841)
CASH, beginning of year 2,649 3,490
--------- ---------
CASH, end of year $ 4,482 $ 2,649
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 182,885 $ 195,006
========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING TRANSACTIONS:
Sale of land for assumption of real estate liabilities and
road trust improvements $ 4,800 $ --
========= =========
Conversion of accrued liabilities to notes payable $ 54,179 $ 340,096
========= =========
Exchange of investments for reduction in notes payable $ 39,000 $ 58,000
========= =========
Conversion of accounts payable to notes payable $ -- $ 14,000
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
13
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(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) 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. 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. New Directions
Acquisition Corp. (NDAC) is a newly formed subsidiary of the Company (see Note
11).
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 $129,589, and
has a working capital deficiency of $863,925 as of December 31, 1997. 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
Realization of a major portion of the Company's assets is dependent upon the
Company's ability to meet its financing requirements and the success of its
future operations.
During the year ended December 31, 1997, Business Park initiated a program of
bringing its lease rates up to the prevailing market rates. As part of this
activity, it generally extended its lease terms from one year to three to five
years. The Business Park closed eleven of these new leases (32% of the total
square footage) at an average increase of $.39 per square foot.
Business Park is actively seeking to rent its vacant space at these higher
rates. With its increased cash flow, the Company expects to pay approximately
$15,000 in real estate taxes which will cure the technical default on the OIFA
loan (see Note 4). The Company is also seeking to refinance its entire debt on
the Business Park which would lower the Company's debt service payments, thereby
further increasing cash flow. The Company is also continuing
14
<PAGE>
to pursue merger and/or acquisition opportunities. Management believes that
these plans will be effective in improving the Company's profitability and
working capital position and 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 its subsidiaries. All significant intercompany
transactions have been eliminated.
Revenue Recognition
The Company records rental revenue on a straight-line basis over the term of the
underlying leases.
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.
Inventories
The Company records its inventories at the lower of cost (first-in, first-out)
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, which are amortized
using the straight-line method over the life of the loan, which does not differ
materially from the effective interest method.
15
<PAGE>
Earnings Per Share
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share,
which supersedes Accounting Principles Board Opinion (APB) No. 15, the existing
authoritative guidance. SFAS No. 128 modifies the calculation of primary and
fully diluted earnings per share (EPS) and replaces them with basic and diluted
EPS. SFAS No. 128 is effective for financial statements for both interim and
annual periods presented after December 15, 1997, and as a result, all prior
period EPS data presented has been restated.
Net income (loss) per common share is based upon the weighted average number of
shares of common stock outstanding during the respective periods.
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.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. In the opinion of management, no such events or changes in
circumstances have occurred.
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, 1997.
(3) PROPERTY AND EQUIPMENT:
Property and equipment as of December 31, 1997, is comprised of the following:
Useful Life
-----------
Land - $ 1,191,400
Buildings and improvements 12-40 1,474,197
Machinery 5-12 50,000
-------------
2,715,597
Less: accumulated depreciation (434,480)
-------------
$ 2,281,117
=============
16
<PAGE>
(4) NOTES PAYABLE:
Notes payable as of December 31, 1997, consist of the following:
Installment note payable to bank, interest at bank's prime
(10.5% at December 31, 1997) plus 3% per annum, due June 20,
1999, guaranteed by a shareholder, officer and director.
Secured by real estate. $932,006
Unsecured notes payable to related parties, interest ranging
from 10% to 15% per annum, due January 1, 1999 (see Note 7).
468,371
Oklahoma Industrial Finance Authority loan, variable
interest and payments due monthly, maturing August 1, 2004,
with interest at 3% per annum 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,
1997), guaranteed by a shareholder, officer and director.
Secured by real estate and equipment. 432,839
Installment note payable to bank, interest at bank's prime
(10.5% at December 31, 1997) plus 3% per annum, due June 20,
1999, guaranteed by a shareholder, officer and director.
Secured by real estate. 186,900
Note payable to individual, no stated interest rate, due on
demand. Secured by real estate. 135,000
Note payable to bank, payments of interest only due monthly,
interest at bank's prime (9% at December 31, 1997) plus .5%,
guaranteed by a shareholder, officer and director, due June
1, 1998. Unsecured. 98,800
Note payable to bank, payments of interest only due
quarterly, interest at bank's prime (9% at December 31,
1997), guaranteed by a shareholder, officer and director,
due June 1, 1998. Unsecured. 40,233
Note payable to bank, payable in monthly installments of
$500, interest at bank's prime (9.5% at December 31, 1997)
plus 1% per annum, due June 24, 1998. Secured by inventory. 12,306
----------
2,306,455
Less: Current portion (730,234)
----------
$1,576,221
==========
17
<PAGE>
The Company is in violation of certain of its covenants under its loan from the
Oklahoma Industrial Finance Authority (OIFA). This violation is an event of
default as defined in the loan agreement with the OIFA, which makes the debt
callable at the option of the OIFA and is classified as current in the
accompanying consolidated balance sheet.
The Company intends to refinance its notes payable; however, there can be no
assurance that such financing will be available or will be available on similar
terms.
(5) SHAREHOLDERS' DEFICIT:
Preferred Stock
The Company's authorized capital includes 10,000,000 shares of preferred stock,
undesignated as to par value. The Board of Directors of the Company, in its sole
discretion, may establish par value, divide the shares of preferred stock into
series, and fix and determine the dividend rate, designations, preferences,
privileges, and ratify the powers, if any, and determine the restrictions and
qualifications of each series of preferred stock as established.
No shares of preferred stock have been issued by the Company as of December 31,
1997.
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. 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, 1997.
(6) 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 income tax expense
would be offset by net operating loss carryforwards.
18
<PAGE>
(7) RELATED PARTY TRANSACTIONS:
Aztore Holdings, Inc.
The Company has an Advisory Agreement with Aztore Holdings, Inc. (Aztore)
wherein Aztore acts as the Company's financial advisor. Aztore receives an
annual fee equal to 5% of the Company's gross revenues, as defined in the
Advisory Agreement. Total fees of $21,763 and $30,704 have been recorded
pursuant to this agreement for the years ended December 31, 1997 and 1996,
respectively. Aztore owns approximately 4% of the Company's common stock. In
August 1997, Aztore accepted certain securities held by the Company in payment
of $39,000 in fees. The Company's basis in these shares was nominal and the gain
for such transaction was recognized as other income.
In April 1997, SDPI consummated a lot sale agreement and sold its interest in a
land trust to Aztore for $1 and the assumption of all liabilities related to the
land (road improvement and real estate tax liabilities). The Company receives
10% of net cash flows, as defined in the lot sale agreement, from any future lot
sales.
Talbot Investment Co.
Talbot Investment Co. (Talbot), is an Oklahoma City, Oklahoma-based commercial
real estate brokerage firm. Mr. David B. Talbot, Jr. is the principal agent for
Talbot. Mr. Talbot was the secretary and a director of the Company and Business
Park until July 1997. Talbot handled all the property management services for
Business Park and received normal and customary commissions and fees for
providing these services. Expenses of $27,103 and $36,362 related to services
provided by Talbot have been recorded in the accompanying consolidated financial
statements for the years ended December 31, 1997 and 1996, 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 5% of the Company's gross revenues, payable on a quarterly
basis. Total fees of $21,763 and $30,704 have been recorded pursuant to this
agreement for the years ended December 31, 1997 and 1996, respectively in the
accompanying consolidated financial statements.
19
<PAGE>
Related Party Obligations
The following table reflects amounts owed to related parties as of December 31,
1997:
Accounts
Payable
and
Notes Accrued
Payable Liabilities
----------- -----------
President and Chairman $ 164,913 $ 19,041
Aztore 303,458 35,794
Talbot -- 13,452
----------- -----------
Total related party liabilities $ 468,371 $ 68,287
=========== ===========
In addition, the president and chairman has personally guaranteed $1,690,778 of
the Company's notes payable (see Note 4).
(8) 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. As a result, no accrual has been made in the accompanying
consolidated balance sheet.
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.
(9) SEGMENT DATA:
The Company's business operations are conducted in three major segments which
are described in Note 1. Financial information by reportable business segment is
as follows:
1997 1996
----------- -----------
Business Park:
Revenues $ 325,328 $ 322,376
=========== ===========
Net income (loss) $ 7,865 $ (17,011)
=========== ===========
Identifiable assets $ 2,282,726 $ 2,280,770
=========== ===========
Beverage:
Revenues $ 2,124 $ 4,514
=========== ===========
Net loss $ (23,775) $ (208,605)
=========== ===========
Identifiable assets $ 39,629 $ 50,000
=========== ===========
20
<PAGE>
1997 1996
----------- -----------
SDPI:
Revenues $ 104,997 $ 288,031
=========== ===========
Net income $ 98,746 $ 247,233
=========== ===========
Identifiable assets $ 2,909 $ 495,790
=========== ===========
(10) SIGNIFICANT CUSTOMERS:
Business Park generates revenue from tenants, all of which occupy space in the
same industrial complex in Oklahoma City, Oklahoma. As of December 31, 1997
there were 21 tenants. Rental revenue recorded from one customer in Business
Park represented 16% and 12% of the Company's total revenues for the years ended
December 31, 1997 and 1996, respectively. This major tenant vacated during
December 1997, and the Company is actively seeking a new tenant. The Company
believes the vacating tenant's lease rate was significantly below the rate it
will obtain from a new tenant. However, there is no assurance the Company will
find a new tenant at a higher lease rate and under other acceptable terms.
SDPI generates revenue from the provision of extended warranties. Service
revenue recorded from one customer represented 23% and 44% of the Company's
total revenues for the years ended December 31, 1997 and 1996, respectively.
(11) SUBSEQUENT EVENT:
In February 1998, NDAC offered to purchase the assets of a community corrections
business in Oklahoma City from New Direction Centers of America, LLC (LLC) for
$1,000,000 in debt, 1,000,000 shares of the Company's common stock and the
assumption of certain liabilities. This offer was accepted by a majority of the
members of the LLC but the closing has been delayed due to issues regarding the
ownership of certain of the business assets. These issues have delayed the
finalization of a definitive purchase agreement and there is no assurance that
NDAC will ever acquire any assets from the LLC.
21
<PAGE>
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
Directors
The current directors of the Company and their principal occupation are
listed below. Raymond C. Cunningham is the son of R.C. Cunningham II, the
president and chairman. The following information has been furnished to the
Company by the respective directors. The ownership amount and percent represents
shares of the Company's common stock beneficially owned by each of them as of
April 30, 1998:
<TABLE>
<CAPTION>
Director Ownership (1)
Name Age since Principal occupation Amount Percent
---- --- ----- -------------------- ------ -------
<S> <C> <C> <C> <C>
R. C. Cunningham II 71 6/1/89 Chairman and President, Sooner
Holdings, Inc. 4,475,413 59.90%
Michael S. Williams (2) 51 12/15/93 President, Aztore Holdings, Inc. 1,006,256 13.47%
Raymond C. Cunningham 33 7/3/97 Mortgage broker 72,129 *
</TABLE>
- ---------------------------
* less than 1%
(1) The amount and percent of ownership is based on a total of 7,471,350 shares
of common stock outstanding as of April 30, 1998.
(2) Includes 292,690 shares of common stock owned by Matrix Resources, Inc. of
which Mr. Williams is the President and sole owner. Includes 384,809 shares
owned by Aztore Holdings, Inc. ("Aztore") of which Mr. Williams is
President and CEO (see further discussion under "Relationship with Aztore
Holdings, Inc." under Item 12. Certain Relationships and Related
Transactions).
Directors of the Subsidiaries
<TABLE>
<CAPTION>
Director
Name Age Principal occupation Subsidiary since
---- --- -------------------- ---------- -----
<S> <C> <C> <C> <C>
R. C. Cunningham II 71 Chairman and President, Sooner
Holdings, Inc. Business Park 6/1/89
SDPI 12/31/97
Beverages 6/1/89
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Director
Name Age Principal occupation Subsidiary since
---- --- -------------------- ---------- -----
<S> <C> <C> <C> <C>
Raymond C. Cunningham 33 Mortgage broker, American
Mortgage Bankers, Inc. Business Park 7/3/97
SDPI 12/31/97
Beverages 12/31/97
</TABLE>
Resumes of Directors
R. C. Cunningham II. Mr. Cunningham has been the Chairman of the Board
and President of the Company since June 1988 and of two of its subsidiaries:
Charlie O Beverages, Inc. and Charlie O Business Park Incorporated since their
respective inceptions. Mr. Cunningham has also been the Vice President of the
Company's subsidiary, SD Properties, Inc. ("SDPI"), since February 1996 and the
President since December 1997. From 1965 to 1986, Mr. Cunningham was in the
construction business as CEO and owner of Rayco Construction Company. Mr.
Cunningham continues to serve as President of Midwest Property Management and
Service Co., Inc., a company involved in real estate property management.
Raymond C. Cunningham. Mr. Cunningham has been the Secretary and a
director of the Company since July 1997 and the Treasurer since March 1998. Mr.
Cunningham has also been the Secretary of two of its subsidiaries: Charlie O
Beverages, Inc. and Charlie O Business Park Incorporated since July 1997 and the
Secretary and Treasurer of SDPI since December 1997. From May 1988 to present,
Mr. Cunningham has been continuously employed in the mortgage business as a loan
officer with various mortgage companies. Mr. Cunningham has a BA Degree from the
University of Oklahoma. Mr. Cunningham is the son of R.C. Cunningham II, the
president and chairman.
Michael S. Williams. Mr. Williams has been a director of the Company
since December 1993. Mr. Williams was an officer and director of one of the
Company's subsidiaries, SDPI until December 1997. Since December 1995, Mr.
Williams has been the Chief Executive Officer and Chief Portfolio Officer of
Aztore Holdings, Inc. ("Aztore"). Aztore is a Phoenix, Arizona-based investment
company. From 1993 through 1995 Mr. Williams was active as the Managing Director
of Bulldog Investment Company, LLC ("Bulldog"), a private merchant and investing
banking firm, the predecessor to Aztore. Bulldog and Aztore both specialize in
early stage public companies and turnaround situations. From November 1990 to
1993, Mr. Williams was the sole principal of Matrix Resources, Inc., a Phoenix,
Arizona-based merchant and investment banking firm. From October 1987 to
November 1990, Mr. Williams was the Chief Executive Officer, President, and
director of ShareData Inc., a publicly held software company based in Chandler,
Arizona. On December 30, 1993, ShareData voluntarily filed for Chapter 11
bankruptcy. Aztore became the successor to ShareData after ShareData's Plan of
Reorganization was confirmed by the Bankruptcy Court in December 1995, at which
time Mr. Williams became it's Chief Executive Officer.
Prior to 1987, Mr. Williams had been continuously employed in the
securities business as an investment banker with various registered
broker-dealers in Detroit, Michigan. Mr. Williams has a BA Degree from
Pennsylvania State University and an MBA from The Wharton Graduate School of the
University of Pennsylvania.
23
<PAGE>
Executive Officers, Promoters and Control Persons
The current executive officers of the Company as of April 30, 1998,
and/or its subsidiaries and their positions held in the Company and/or its
subsidiaries are listed in the table below. Officers are appointed by the Board.
Raymond C. Cunningham is the son of R. C. Cunningham II, the president and
chairman.
<TABLE>
<CAPTION>
Name Age Title Officer since
---- --- ----- -------------
<S> <C> <C> <C>
R. C. Cunningham II 71 CEO and President, Sooner Holdings, Inc. 6/1/88 *
CEO and President, Charlie O Beverages, Inc. 6/16/89 *
CEO and President, Charlie O Business Park
Incorporated 3/15/91 *
President, SD Properties, Inc. 2/1/96
Raymond C. Cunningham 33 Secretary, Sooner Holdings, Inc. 7/3/97
Treasurer, Sooner Holdings, Inc. 3/31/98
Secretary and Treasurer, Charlie O
Beverages, Inc. 7/3/97
Secretary and Treasurer, Charlie O Business
Park Incorporated 7/3/97
Secretary and Treasurer, SD Properties, Inc. 12/31/97
</TABLE>
- -----------------------
* Date of inception of the respective companies.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file certain reports regarding ownership of, and
transactions in, the Company's securities with the Securities and Exchange
Commission (the "SEC"). Such officers, directors and 10% stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on a review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that during fiscal 1997 all the reporting persons complied with Section 16(a)
filing requirements.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth all cash compensation paid by the
Company to each of the executive officers of the Company whose aggregate cash
compensation exceeds $60,000 and to all executive officers as a group for
services rendered during the fiscal year ended December 31, 1997:
24
<PAGE>
<TABLE>
<CAPTION>
Name Primary capacity in which served* Compensation (1)
---- --------------------------------- ----------------
<S> <C> <C>
R. C. Cunningham II (2) Chairman of the Board and President; Sooner
Holdings, Inc. $ -0-
Raymond C. Cunningham Secretary; Sooner Holdings, Inc. $ -0-
Lanny R. Lang (3) Treasurer; Sooner Holdings, Inc. $ -0-
All Executive Officers as a Group (2
persons) $ -0-
</TABLE>
- ------------------------
* The executive officers may serve in other capacities with the Company
and/or its subsidiaries (see Item 9. Executive Officers, Promoters and
Control Persons)
(1) None of the executive officers of the Company receive cash compensation.
All cash is currently being used to permit the Company to operate as a
going concern. The Board is authorized to reimburse officers and directors
for actual expenses incurred and set compensation for officers as funds for
such purpose become available.
(2) In December 1993, Mr. Cunningham entered into a new Incentive Compensation
Agreement, which provides remuneration to Mr. Cunningham based only on the
Company's revenue performance. Mr. Cunningham receives no base compensation
and will receive a cash incentive fee of 5% of the Company's gross
revenues, payable on a quarterly basis (see further discussion under
"Relationship with R. C. Cunningham" under Item 12. Certain Relationships
and Related Transactions).
(3) Mr. Lang acted as Treasurer of the Company during 1997. Mr. Lang is an
officer and director of Aztore. The other director of Aztore is Mr.
Williams, a director of the Company. Aztore receives an incentive fee of 5%
of the Company's gross revenues, payable on a quarterly basis (see further
discussion under "Relationships with Aztore" under Item 12. Certain
Relationships and Related Transactions).
Stock Option Plan
Executive officers, employees and non-employee directors of the Company
and its subsidiaries may be awarded additional compensation pursuant to the 1995
Stock Option Plan (the "Plan"). Pursuant to the Plan, 2,000,000 shares of the
Company's common stock are reserved for issuance. Options granted under the Plan
are to be at amounts that are equal to or greater than the fair market value of
the Company's common stock at date of grant. Each outstanding option has a
maximum term of ten years and, unless otherwise provided, is exercisable
immediately upon issuance. As of April 30, 1998, no options were granted or
outstanding.
Bonuses and Deferred Compensation
No cash bonuses were paid by the Company to any executive officer
during the year ended December 31, 1997. The Company did not have any deferred
compensation plan or arrangement pursuant to which benefits, remuneration,
value, or compensation was or is to be granted, awarded, entered, set aside, or
accrued for the benefit of any executive officer of the Company as of December
31, 1997.
25
<PAGE>
Compensation Pursuant to Plans Including Pension, Stock Option, and Stock
Appreciation Rights Plans
As of April 30, 1998, other than the Company's 1995 Stock Option Plan,
the Company does not have any stock appreciation rights plans, phantom stock
plans, or any other incentive or compensation plan or arrangement pursuant to
which benefits, remuneration, value, or compensation was or is to be granted,
awarded, entered, set aside, or accrued for the benefit of any executive officer
of the Company.
Termination of Employment and Change of Control Arrangement
During the year ended December 31, 1997, no officer, director, or
principal shareholder of the Company either received or is to receive any
remuneration as a result of either the termination of such person's employment
whether by resignation, retirement, or otherwise; or a change of control of the
Company or a change in such individual's responsibilities following a change in
control of the Company.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth certain information regarding the beneficial
ownership of the common stock of the Company as of April 30, 1998 by each
shareholder who is known by the Company to be the beneficial owner of more than
5% of the Company's voting securities, by each director and by each executive
officer and by all directors and officers as a group.
Name and Address of No. common
Beneficial Owners shares (1) Percent of Class
----------------- ---------- ----------------
R. C. Cunningham II (5)
2680 W. Interstate 40
Oklahoma City, OK 73108 4,475,413 59.90%
Sheldon L. Miller (2)
3000 Town Center, Ste. 1700
Southfield, MI 48075 502,718 6.73%
Michael S. Williams (3) (6)
3710 E. Kent Drive
Phoenix, AZ 85044 1,006,256 13.47%
Lanny R. Lang (4)
3536 E. Saltsage Drive
Phoenix, AZ 85044 729,183 9.76%
Raymond C. Cunningham (5)
6408 Boulevard View
Alexandria, VA 22307 72,129 *
All officers and directors as
a group (3 persons) 5,553,798 74.33%
- ---------------------------------
* less than 1%
26
<PAGE>
Unless otherwise indicated, to the Company's knowledge, each person or
group possesses sole voting and sole investment power with respect to the shares
shown opposite the name of such person or group. Shares not outstanding, but
deemed beneficially owned by virtue of the right of a person or member of a
group to acquire them within 60 days, are treated as outstanding only when
determining the amount and percent owned by such person or group.
(1) The number of shares and percent are based on the current number of shares
of common stock outstanding of 7,471,350 shares.
(2) Mr. Miller owns approximately 30% of Aztore's outstanding shares of common
stock, which he received under Aztore's bankruptcy plan. Mr. Miller has
waived dispositive control of the Company's common stock owned by Aztore.
Therefore, such shares are not included in Mr. Miller's interest.
(3) Includes 292,690 shares of common stock owned by Matrix Resources, Inc. of
which Mr. Williams is the President and sole owner. Includes 384,809 shares
owned by Aztore of which Mr. Williams is President and CEO (see further
discussion under "Relationship with Aztore Holdings, Inc." under Item 12.
Certain Relationships and Related Transactions).
(4) Includes 15,661 shares of common stock owned by Lang Financial Services,
Inc. of which Mr. Lang is the President and sole owner. Includes 384,809
shares owned by Aztore of which Mr. Lang is Secretary and Treasurer (see
further discussion under "Relationship with Aztore Holdings, Inc." under
Item 12. Certain Relationships and Related Transactions).
(5) An officer and director of the Company.
(6) A director of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has adopted a policy that any transactions with directors,
officers or entities of which they are also officers or directors or in which
they have a financial interest, will only be on terms consistent with industry
standards and approved by a majority of the disinterested directors of the Board
and based upon a determination that these transactions are on terms no less
favorable to the Company than those which could be obtained by unaffiliated
third parties. This policy could be terminated in the future. In addition,
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board or a committee thereof which approves such a transaction.
The following are transactions considered by the Company to be
significant of disclosure pursuant to Regulation 228.404 of Regulation S-B. Any
references to Notes refer to the Notes to the Consolidated Financial Statements
included in Item 7 of this Form 10-KSB (the "1997 10-KSB").
Relationship with Aztore Holdings, Inc. (formerly ShareData Inc.)
In December 1993, the Company acquired SDPI in exchange for shares of
common stock. ShareData was the majority shareholder of SDPI and received
887,753 shares or approximately 17% of the Company after the transaction.
ShareData emerged from Chapter 11 Bankruptcy on December 5, 1995 and was
required to distribute the common stock it owns of the Company to its creditors.
All shares were distributed accordingly except for 85,987 shares that could not
be delivered to ShareData's creditors
27
<PAGE>
and became the property of ShareData. Aztore became the successor to ShareData.
The Company has an Advisory Agreement with Aztore to act as the Company's
financial advisor. Aztore receives an annual fee equal to 5% of the Company's
gross revenues, as defined in the Advisory Agreement.
In December 1996, Aztore accepted 358,822 shares of common stock in
settlement of a $14,000 note payable plus accrued interest, or $.04 per share.
During 1997, Aztore agreed to accept 260,000 shares of common stock of
Auction Television Network, Inc. ("ATVN") owned by the Company as consideration
for payment of a $39,000 note payable, or $.15 per ATVN share.
Relationship with R.C. Cunningham II
In December 1993, the Company entered into an Incentive Compensation
Agreement with Cunningham. This agreement provides remuneration to Cunningham
based only on the Company's revenue performance. Cunningham receives no base
compensation, but will receive a cash incentive fee of 5% of the Company's gross
revenues payable on a quarterly basis. Also, Cunningham has personally
guaranteed $1,690,778 of the Company's notes payable.
Relationship with Talbot Investment Co.
Talbot Investment Co. ("Talbot"), is an Oklahoma City, Oklahoma-based
commercial real estate brokerage firm. Mr. David Talbot was the Secretary and a
director of the Company and Business Park until July 1997 and is the principal
agent for Talbot. Talbot handled all the property management services for the
Business Park until October 1997, and received normal and customary commissions
and fees for providing these services.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
Exhibits
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)
10.12 Option Agreement by and between Sooner Holdings, Inc., New (2)
Directions Acquisition Corp., New Direction Centers of
America, L.L.C., and Horizon Lodges of America, Inc. dated
September 9, 1997
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>
Footnotes:
- ----------
(1) Incorporated by reference to the Company's Form 10-KSB for the year
ended December 31, 1995 (file no. 0-18344).
(2) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended September 30, 1997 (file no. 0-18344).
28
<PAGE>
Reports on Form 8-K
The Company has filed no current Reports on Form 8-K during the year
ended December 31, 1997 and subsequently through the date of this report.
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: April 30, 1998
-------------------
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.
Date: April 30, 1998
-------------------
Signature Title
--------- -----
/s/ R. C. Cunningham II Chairman of the Board, CEO and President
- --------------------------------------
R. C. Cunningham II
/s/ Raymond C. Cunningham Secretary, Treasurer and Director
- --------------------------------------
Raymond C. Cunningham
/s/ Michael S. Williams Director
- --------------------------------------
Michael S. Williams
29
SOONER HOLDINGS, INC.
FORM 10-KSB
For the fiscal year ended December 31, 1997
Exhibit 22.1
Subsidiaries of the Registrant
------------------------------
Charlie O Beverages, Inc.
Charlie O Business Park Incorporated
SD Properties, Inc.
Ex-1
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<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,482
<SECURITIES> 0
<RECEIVABLES> 1,667
<ALLOWANCES> 0
<INVENTORY> 5,066
<CURRENT-ASSETS> 12,395
<PP&E> 2,715,597
<DEPRECIATION> 434,480
<TOTAL-ASSETS> 2,322,952
<CURRENT-LIABILITIES> 876,320
<BONDS> 0
0
0
<COMMON> 5,505,378
<OTHER-SE> (5,634,967)
<TOTAL-LIABILITY-AND-EQUITY> 2,322,952
<SALES> 432,449
<TOTAL-REVENUES> 432,449
<CGS> 1,460
<TOTAL-COSTS> 243,433
<OTHER-EXPENSES> (43,800)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 224,734
<INCOME-PRETAX> 8,082
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,082
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
