SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
-----------------
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 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
--------------------
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, 1999 were $1,932,433.
The aggregate market value of the voting stock held by non-affiliates of
the Company on March 31, 2000 was approximately $320,000. As of March 31, 2000
the Company had 8,471,350 shares of common stock issued and outstanding.
Transitional Small Business Issuer Disclosure Format Yes [ ] No [X]
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. From 1993 when the Company was restructured until
June 1998 the Company was seeking acquisitions. In June 1998 the Company
acquired, through its subsidiary New Directions Acquisition Corp., the assets
and certain liabilities of New Direction Centers of America, L.L.C. and entered
the minimum security correctional business.
The Company currently operates primarily through two of its
subsidiaries, New Directions Acquisition Corp. ("NDAC") and Charlie O Business
Park Incorporated ("CO Park"). These subsidiaries and a brief summary of their
businesses follows:
NDAC
- ----
NDAC owns and operates a minimum security correctional facility (the
"Correctional Business") for women located in Oklahoma City, Oklahoma. NDAC was
formed in 1997 as a wholly owned subsidiary of the Company and began operations
upon its acquisition in June 1998 of the assets and certain liabilities of New
Direction Centers of America, L.L.C. ("NDLLC"), an Oklahoma-based private
correctional business.
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.
The Company also owned 100% of SD Properties, Inc. ("SDPI") and 100% of
Charlie O Beverages, Inc. ("CO Beverages"). During fiscal 1997 and early 1998
the Company discontinued the two substantially inactive businesses operated by
these two subsidiaries. SDPI was merged with the Company on December 31, 1999.
CO Beverages was spun off to existing shareholders of the Company as of January
15, 1999.
Business Description
The Correctional Business
- -------------------------
NDAC entered the minimum-security correctional business in June 1998 by
acquiring the assets and certain liabilities of NDLLC. NDAC owns and operates a
minimum-security correctional facility, which currently houses 140 inmates in
Oklahoma City, Oklahoma. A non-secure residential facility, known as a halfway
house, provides residential correctional services for offenders in need of less
supervision and monitoring than are provided in a secure environment. Offenders
in minimum-security correctional facilities are typically allowed to leave the
facility to work in the immediate community and/or participate in community
based educational and vocational training programs during daytime hours.
Generally, persons in community correctional facilities are serving the last six
months of their sentence.
In addition to providing the fundamental residential services relating
to the security of facilities and the detention and care of inmates, NDAC has
developed a broad range of in-facility rehabilitative and educational programs.
These programs include substance abuse treatment and counseling, vocational
training, life skills training, and behavioral modification counseling. NDAC
believes that its strategy of offering a wide variety of programs and services
will increase its marketing opportunities.
As of March 31, 2000, NDAC operates one correctional facility with an
aggregate design capacity of 180 beds.
The Real Estate Business
- ------------------------
CO Park operates as a real estate lessor and property manager and as of
March 31, 2000 leases to 23 non-related lessees. CO Park's property includes
five separate buildings, covering approximately 126,500 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 1999 and 1998.
The Discontinued Businesses
- ---------------------------
SDPI, until April 1997, 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. During 1995 to 1997
SDPI commenced a business that markets and services construction contracts. This
business did not develop after the initial contracts, was terminated in early
1998, and merged into the Company in December 1999.
CO Beverages operated the original in-home soda fountain business. The
Company was trying to sell CO Beverages as a going concern or liquidate the
assets of this business. Therefore, the remaining assets of CO Beverages
consisting of inventory and equipment were written down to their estimated
realizable value. The Company had hoped to sell CO Beverages as a going concern
and therefore, realize additional value for the extensive tooling and other
assets related to CO Beverages business. These latter assets were written off in
their entirety during 1996. CO Beverages was spun off to existing shareholders
of the Company as of January 15, 1999.
General
Seasonality. Due to its sale or planned sale of assets or entities, the
Company will not be subject to significant seasonality.
Government Regulation. The Company's Correctional Business is subject to
federal, state and local regulations which are administered by a variety of
regulatory authorities. Generally, providers of correctional services must
comply with a variety of applicable federal, state and local regulations,
including education, healthcare and safety regulations. Management contracts
frequently include extensive reporting requirements. In addition, many federal,
state and local governments are required to follow competitive bidding
procedures before awarding a contract. Certain jurisdictions may also require
the successful bidder to award subcontracts on a competitive bid basis and to
subcontract to varying degrees with businesses owed by women or minorities.
Correctional contracts are generally renewed on a year to year basis.
NDAC's failure to comply with any applicable laws, rules or regulations
or the loss of any required license could have a material adverse effect on the
Company's financial condition, results of operations and liquidity. Further, the
current and future operations of the Company may be subject to additional
regulations as a result of new statutes and regulations and changes in the
manner in which existing statutes and regulations are or may be interpreted or
applied. Any such additional regulations could have a material adverse effect on
the Company's financial condition, results of operations and liquidity.
Marketing. NDAC views governmental agencies responsible for state
correctional facilities in the United States as its primary potential customers.
Employees. Mr. R.C. Cunningham II, the Company's President and Chairman
of the Board ("Cunningham"), works on a part-time basis for the Company and all
subsidiaries. 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.
NDAC has 29 full-time and 6 part-time employees at March 31, 2000. NDAC
employs management, administrative, clerical, security, educational services,
and general maintenance personnel. NDAC through subcontractors also provides
health care and food service. All jurisdictions require correction officers to
complete a specified amount of training prior to employment.
When the need exists, the Company and/or its subsidiaries use temporary
employees or subcontractors to perform administrative services.
Competition. The Correctional Business is highly competitive, with few
barriers to entry. To the Company's knowledge, there are at least 17 companies
engaged in the management and operation of privatized correctional and detention
facilities. NDAC's competitors include local companies with significant local
relationships and knowledge of local conditions, as well as companies that
manage and operate facilities in many states and abroad with financial resources
substantially greater than NDAC's.
NDAC will have to compete on the basis of the cost, quality and range of
services offered, its experience in managing facilities, the reputation of its
personnel, and its ability to design, finance and construct new facilities. NDAC
also attempts to achieve a competitive advantage by seeking additional contracts
from governmental agencies with which it has existing contractual relationships
and by identifying and marketing its services to correctional agencies that have
no previous experience with privatization services.
ITEM 2. DESCRIPTION OF PROPERTY
NDAC's correctional facility consists of three buildings totaling
approximately 44,000 square feet on 2.745 acres of real estate. This property is
located at 3115 N. Lincoln Boulevard in Oklahoma City, Oklahoma. The facility
has a 180-bed capacity, and as of March 31, 2000, the facility is 70% occupied.
This property is subject to a first mortgage.
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 19 unrelated lessees. The lessees generally use the property for
retail, manufacturing and light industrial operations. CO Park's leases are
generally for three to five years. As of December 31, 1999, excluding the square
footage leased to the Company and its affiliates, the facility is 100% occupied.
As of March 31, 2000, the facility is 89% occupied. This property is subject to
a first mortgage.
SDPI had no remaining real property, directly or indirectly, after the
sale of the trust interest in April 1997. CO Beverages had 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:
On February 7, 1998 a lawsuit was filed by David Talbot, one of the
owners of NDLLC, against NDAC related to the purchase of the assets and certain
liabilities of NDLLC. On January 18, 2000, a settlement was reached. The terms
of the settlement include a payment of $76,000 by NDAC to Talbot.
NDAC's management of minimum security correctional facilities will
expose it to potential third-party claims or litigation by inmates or other
persons for personal injury or other damages, including damages arising from a
disturbance or riot at a Company-managed facility. In addition, NDAC's
management contracts generally require it to indemnify the governmental agency
against any damages to which the governmental agency may be subject in
connection with such claims or litigation.
The Company's Business Park operation occasionally has disputes with
tenants regarding its lease agreements. In the opinion of management, such
matters will be resolved without material effect on the Company's results of
operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In fiscal 1999, there were no matters submitted to a vote of security
holders through the solicitation of proxies or otherwise. The Company's last
meeting of shareholders was in 1996.
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 "SOONE". 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 1998:
First quarter .250 .875
Second quarter .375 .375
Third quarter .06
Fourth quarter .06
Fiscal 1999:
First quarter .06
Second quarter .06
Third quarter .06
Fourth quarter .06
Fiscal 2000:
First quarter (to March 31, 2000) .08
Shareholders
As of March 15, 2000, the Company had 531 shareholders of record. This
does not include the holders whose shares are held in a depository trust in
"street" name. As of March 15, 2000, 1,108,827 shares (or approximately 13%) of
the issued and outstanding stock was held by 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
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 while seeking new business opportunities. In June 1998 the
Company acquired, through its subsidiary New Directions Acquisition Corp.
("NDAC"), the assets and certain liabilities of New Direction Centers of
America, L.L.C. and entered the minimum security correctional business.
Liquidity and Capital Resources - December 31, 1999
compared to December 31, 1998
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:
1999 1998
---- ----
Deficiency in working capital $(96,224) $(344,852)
======== =========
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 Chairman of
the Board and President ("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 the acquisition by NDAC.
As of April 11, 2000, the Company entered into an agreement with the
bank holding the first mortgage on the Correctional Facility real property to
extend the due date of the note until June 20, 2001. No other terms changed.
Exclusive of funds required for debt repayment, the Company believes
that it can borrow any additional funds from its related parties to maintain its
operations, although there can be no assurance that such funds will be available
when needed. In the event that the Company cannot refinance, or obtain
forbearance on its current liabilities or on its long-term liabilities as they
come due, the Company will undoubtedly face further severe liquidity problems
which may lead to litigation, the inability to transact business, and/or
foreclosure actions being initiated against a majority of the Company's assets.
In June 1999, the Company refinanced the debt on CO Park. The debt was
replaced by a single note in the amount of $2,500,000 payable to a bank with
interest at 8.8% that matures in June 2009.
Effective November 1, 1999, the Company reached an agreement with Aztore
and associated companies to restructure approximately $450,000 in notes payable
and accrued interest. In exchange for the notes, the Company issued two notes
for $120,000 and $180,000 bearing interest at 10%, with preferential liquidation
terms. This transaction resulted in a extraordinary non-cash gain to the Company
of approximately $107,000, net of tax.
Results of Operations - The year ended December 31, 1999 compared to the year
ended December 31, 1998
The following table illustrates the Company's revenue mix. Other
revenues represent revenues from the discontinued businesses (see discussion
under Item 1. "Description of Business"):
1999 1998
Amount % Amount %
------ -- ------ --
CO Park revenues $ 362,404 19 $ 291,329 28
NDAC revenues 1,570,029 81 743,957 72
Other revenues -0- 4,158 *
----------- -----------
Total revenues $ 1,932,433 $ 1,039,444
=========== ===========
*less than 1%
Total revenues increased by $892,989 or 86% in fiscal 1999. 93% of the
Company's revenue increase was related to the Company's NDAC subsidiary. In June
1998 the Company, acquired through NDAC a minimum security correctional
facility. For the seven months from June 1998 to December 1998 the Correctional
Business generated $743,957 of total revenues. For the year ended December 31,
1999, the Correctional Business generated $1,570,029. This increase reflects
twelve months operations of the Correctional Business in 1999 versus seven
months operations in 1998. It also reflects a 23% average fee/occupancy increase
per month in 1999 over 1998.
Business Park revenues increased $71,075 or 24% due to the releasing of the
space vacated by one tenant in November 1997 that accounted for 21% of total
revenues for Business Park. In addition, the revenues increased from the
renegotiated leases during 1998, which were primarily one year to three to five
year leases at an average increase of $.39 per square foot. At December 31,
1999, the Business Park was 100% occupied, net of space used by the Company.
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 maintain
its high occupancy rate.
Total operating expenses for the year ended December 31, 1999 were
$1,600,372 as compared to total expenses for the comparable 1998 period of
$1,035,374. This represents an increase of $564,998 in total operating expenses
for fiscal 1999, which primarily reflects the operation of the Correctional
Business for twelve months in 1999 versus seven months in 1998. The amortization
of the NDAC intangible asset resulted in an increase in depreciation and
amortization expense in 1999 of $81,157 over the 1998 period. In addition,
general and administrative (G&A) expenses, consisting primarily of professional
and management fees, also increased due to the acquisition of the Correctional
Business in June 1998 and operation of the Correction Business for a full twelve
months in 1999.
Going Concern and Management Plans
The Company has suffered recurring losses from operations, has a
shareholders' deficit of $684,782, and has a working capital deficiency of
$96,224. Although the working capital deficit has improved by $248,628, these
factors still 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.
The Company acquired a minimum security correctional facility in June
1998 and has implemented plans to improve its liquidity and performance. These
measures, among other items, include refinancing of long-term debt and reduction
of operating and administrative expenses. Management seeks to expand its
correctional service operations and believes that this segment will ultimately
result in future growth and profitability of the Company.
In 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. Business Park has
closed several of these new leases in 1999 and 1998 at an average increase of
$0.24 and $0.39 per square foot, respectively. New leases have increased to
approximately $3.50 per square foot in 1999 to reflect demand in the market as
well as improvements included in the leases. Business Park is actively seeking
to rent any space which becomes vacant at these higher rates.
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, 1999, the Company spent approximately
$38,000 on capital expenditures primarily related to leasehold improvements
primarily at its correctional facility operations. The Company spent
approximately $215,000 for capital expenditures, primarily for leasehold
improvements, on its Business Park operations during 1999. 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, 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 Aztore'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 Aztor 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.
Report of Independent Certified Public Accountants
--------------------------------------------------
Board of Directors
Sooner Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Sooner Holdings,
Inc. and Subsidiaries, as of December 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Sooner Holdings,
Inc. and Subsidiaries, as of December 31, 1999 and 1998, and the consolidated
results of their operations and their consolidated cash flows for the years then
ended in conformity with generally accepted accounting principles.
As shown in the financial statements, the Company incurred a net loss of
$125,915 during the year ended December 31, 1999 and, as of that date, the
Company's current liabilities exceeded its current assets by $96,224 and its
total liabilities exceeded its total assets by $684,782. These factors, among
others, as discussed in Note A to the consolidated financial statements, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note A. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
April 5, 2000
Sooner Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS 1999 1998
----------- -----------
CURRENT ASSETS
Cash and cash equivalents ...................... $ 177,899 $ 36,792
Restricted cash ................................ 36,409 --
Accounts receivable, net of allowance
of $7,013 in 1999 and $2,362 in 1998 ......... 134,663 137,139
Other current assets ........................... 40,189 41,244
----------- -----------
Total current assets ............. 389,160 215,175
PROPERTY AND EQUIPMENT, net ...................... 2,966,550 2,828,342
INTANGIBLE ASSETS, net of accumulated
amortization of $308,364 in 1999
and $113,607 in 1998 ........................... 1,444,429 1,639,186
OTHER ASSETS ..................................... 467,509 294,941
----------- -----------
$ 5,267,648 $ 4,977,644
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable ............................... $ 149,163 $ 142,821
Accrued liabilities ............................ 243,973 364,340
Deferred revenue ............................... 36,106 33,882
Current portion of notes and royalty payable ... 56,142 58,984
----------- -----------
Total current liabilities ........ 485,384 600,027
NOTES PAYABLE, less current portion and net
of discount of $215,334 in 1999 and
$425,667 in 1998 ............................... 5,039,884 4,470,379
ROYALTY PAYABLE, less current portion and net
of discount of $821,085 in 1999 and
$888,130 in 1998 ............................... 427,162 432,915
OTHER LIABILITIES ................................ -- 33,190
COMMITMENTS AND CONTINGENCIES .................... -- --
STOCKHOLDERS' DEFICIT
Preferred stock - undesignated; authorized,
10,000,000 shares; issued and
outstanding, none ........................... -- --
Common stock - $.001 par value; authorized,
100,000,000 shares; issued and outstanding,
8,471,350 shares ............................ 8,471 8,471
Additional paid-in capital ..................... 5,532,907 5,532,907
Accumulated deficit ............................ (6,226,160) (6,100,245)
----------- -----------
(684,782) (558,867)
----------- -----------
$ 5,267,648 $ 4,977,644
=========== ===========
The accompanying notes are an integral part of these statements
Sooner Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1999 1998
----------- -----------
Revenues
Rental revenues ................................ $ 362,404 $ 291,329
Service revenues ............................... 1,570,029 748,115
----------- -----------
Total revenues ................... 1,932,433 1,039,444
Expenses
Cost of services ............................... 752,723 517,292
General and administrative ..................... 551,662 318,757
Depreciation and amortization
of intangible assets ......................... 295,987 199,325
----------- -----------
Total operating expenses ......... 1,600,372 1,035,374
Income from operations ........... 332,061 4,070
Other expense .................................... 32,274 57,972
Interest expense ................................. 611,712 411,376
----------- -----------
643,986 469,348
----------- -----------
Loss before income taxes
and extraordinary item ......... (311,925) (465,278)
Income tax benefit - deferred .................... 70,000 --
----------- -----------
Loss before extraordinary item ... (241,925) (465,278)
Extraordinary gain on extinguishment of debt,
net of income taxes of $70,000 ................. 116,010 --
----------- -----------
NET LOSS ......................... $ (125,915) $ (465,278)
=========== ===========
Basic and diluted loss per common share
Loss before extraordinary item ................. $ (.03) $ (.06)
Extraordinary gain ............................. .02 --
----------- -----------
Basic and diluted loss per common share ........ $ (.01) $ (.06)
=========== ===========
Weighted average common shares outstanding ..... 8,471,350 8,054,333
=========== ===========
The accompanying notes are an integral part of these statements
Sooner Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Common stock Additional Total
------------------------- paid-in Accumulated stockholders'
Shares Amount capital deficit deficit
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 ...... 7,471,350 $ 7,471 $ 5,497,907 $(5,634,967) $ (129,589)
Net loss ........................ -- -- -- (465,278) (465,278)
Issuance of common stock (note K) 1,000,000 1,000 35,000 -- 36,000
----------- ----------- ----------- ----------- -----------
Balance at December 31, 1998 .... 8,471,350 8,471 5,532,907 (6,100,245) (558,867)
Net loss ........................ -- -- -- (125,915) (125,915)
Balance at December 31, 1999 .... 8,471,350 $ 8,471 $ 5,532,907 $(6,226,160) $ (684,782)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
Sooner Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
1999 1998
----------- -----------
Increase (Decrease) in Cash
Cash flows from operating activities
Net loss ....................................... $ (125,915) $ (465,278)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation and amortization .............. 295,987 199,325
Accretion of interest ...................... 152,000 88,666
Write-off of other assets .................. 27,315 --
Loss on disposition of property
and equipment ............................ 16,817 --
Extraordinary gain on extinguishment of debt (186,010) --
Changes in assets and liabilities
Accounts receivable ...................... 2,476 (50,526)
Other current assets and other assets .... (88,751) (74,998)
Accounts payable ......................... 6,342 (78,618)
Accrued liabilities and other liabilities (153,556) 252,846
Deferred revenue ......................... 2,224 31,049
----------- -----------
Net cash used in operating activities .. (51,071) (97,534)
Cash flows used in investing activities
Purchase of property and equipment ............. (253,443) (179,172)
Increase in restricted cash .................... (36,409) --
----------- -----------
Net cash used in investing activities .. (289,852) (179,172)
Cash flows from financing activities
Borrowings on notes payable .................... 3,265,111 817,783
Repayments of notes payable .................... (2,665,237) (466,767)
Royalty payments ............................... (4,955) (42,000)
Loan financing fees ............................ (112,889) --
----------- -----------
Net cash provided by
financing activities ................. 482,030 309,016
----------- -----------
NET INCREASE IN CASH ................... 141,107 32,310
Cash at beginning of year ........................ 36,792 4,482
----------- -----------
Cash at end of year .............................. $ 177,899 $ 36,792
=========== ===========
Cash paid for interest ........................... $ 532,254 $ 272,814
=========== ===========
Supplemental Disclosure of Noncash Investing and Financing Activities
Conversion of accrued liabilities to notes payable $ -- $ 71,344
=========== ===========
During the year ended December 31, 1999, the Company had debt principal of
approximately $329,000 and accrued interest of approximately $137,000
extinguished in exchange for the issuance of notes payable of $300,000 (note I).
During the year ended December 31, 1998, the Company purchased a business with
the following liabilities assumed:
Assets acquired $2,517,082
Stock issued 36,000
----------
Liabilities assumed $2,481,082
==========
The accompanying notes are an integral part of these statements
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND OPERATIONS
Sooner Holdings, Inc. ("Sooner" or the "Company"), an Oklahoma corporation,
through its subsidiaries, conducts business in two primary industries. Charlie
O Business Park Incorporated ("Business Park") is engaged in the ownership and
rental of a business park in Oklahoma City, Oklahoma. New Directions
Acquisition Corp. ("NDAC") is a subsidiary of the Company (see Note K) which
operates a minimum security correctional facility. During 1998, management
discontinued the operations of SD Properties, Inc. ("SDPI") and Charlie O
Beverages, Inc. ("Beverage"), the effect of which was not material to
consolidated operations. SDPI acted as a marketing representative for
construction contractors to develop business opportunities for those
contractors for a fee, which sometimes included a warranty coverage for
mechanical contracting services. Beverage was engaged in the distribution of
an in-home soda fountain appliance which prepared carbonated beverages.
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 stockholders' deficit of $684,782, and
has a working capital deficiency of $96,224 as of December 31, 1999. 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. The Company acquired a minimum security correctional
facility effective June 1, 1998 and has implemented plans to improve its
liquidity and performance. These measures, among other items, include
refinancing of long-term debt and reduction of operating and administrative
expenses. Management seeks to expand its correctional service operations and
believes that this segment will ultimately result in future growth and
profitability of the Company; however, there is no assurance that these
objectives can be achieved.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements
follows.
1. Principles of Consolidation
The consolidated financial statements include the accounts of Sooner Holdings,
Inc. and its wholly owned subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
2. Revenue Recognition
The Company records rental revenue on a straight-line basis over the term of
the underlying leases.
Correctional service revenues are recognized as services are provided.
Revenues are earned based upon the number of housed offenders per day times
the contract rate.
3. Cash and Cash Equivalents
The Company considers money market accounts and all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. Restricted cash consists primarily of a certificate of deposit
("CD") pledged as collateral for a note payable.
4. Property and Equipment
Property and equipment is stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of five to forty 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.
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amounts of an asset may
not be recoverable. In the opinion of management, no such events or changes in
circumstances have occurred.
5. Intangible Assets
Intangible assets consist of contract rights which resulted from the business
acquisition (see Note K). These rights are being amortized by the
straight-line method over nine years. Amortization expense for the years ended
December 31, 1999 and 1998 was $194,757 and $113,607, respectively.
6. Other Assets
Other assets include unamortized loan commitment fees and investments in CDs,
carried at cost, which approximates market value. The loan commitment fees are
amortized using the straight-line method over the life of the loan, which does
not differ materially from the effective interest method. The investment in
CDs is pledged as collateral on a long-term note payable and is unavailable
for current operations.
7. Discount on Notes and Royalty Payables
Discounts on notes and royalty payables resulting from the business
acquisition (see Note K) are amortized by the effective interest method over
the term of the underlying obligation. Accretion of interest for the balloon
note was $152,000 and $88,666 for the years ended December 31, 1999 and 1998,
respectively.
8. Income Taxes
The Company provides for deferred income taxes on carryforwards and temporary
differences between the bases of assets and liabilities for financial
statement and tax reporting purposes. Additionally, the Company provides a
valuation allowance on deferred tax assets 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.
9. 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. All of the Company's financial instruments are held for
purposes other than trading. The Company believes that the carrying value of
all of its monetary assets and liabilities approximates fair value as of
December 31, 1999.
10. Loss Per Common Share
Basic loss per share has been computed on the basis of weighted average common
shares outstanding during each period. Diluted loss per share is the same as
basic loss per share as the Company has no outstanding dilutive potential
common shares.
11. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures; accordingly, actual
results could differ from those estimates.
12. Reclassifications
Certain reclassifications have been made to the 1998 financial statements to
conform to the 1999 presentation.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following as of December 31:
Useful life 1999 1998
----------- ----------- ----------
Land - $1,311,400 $1,311,400
Buildings and improvements 2-40 2,132,251 1,897,988
Machinery and equipment 5-12 55,471 95,192
Vehicles 5 51,281 42,531
---------- ----------
3,550,403 3,347,111
Less accumulated depreciation 583,853 518,769
---------- ----------
$2,966,550 $2,828,342
========== ==========
Depreciation expense totaled $98,418 and $84,289 for the years ended December
31, 1999 and 1998, respectively.
NOTE D - OTHER ASSETS
Other assets are comprised of the following as of December 31:
1999 1998
---------- ----------
Loan commitment fee $ 112,889 $ 27,941
Certificates of deposit 267,000 267,000
Related party receivable 87,620 --
---------- ----------
$ 467,509 $ 294,941
========== ==========
Amortization expense totaled $2,812 and $1,500 for the years ended December
31, 1999 and 1998, respectively.
NOTE E - NOTES PAYABLE
Notes payable consist of the following at December 31:
1999 1998
---------- ----------
Installment note payable to bank, interest at
bank's prime plus 3% per annum, guaranteed by
a stockholder, officer, and director;
collateralized by real estate; paid off
during 1999 as part of debt refinancing $ -- $ 922,556
Notes payable to related parties, interest
ranging from 10% to 15% per annum, payable on
demand after January 1, 2001;
uncollateralized 914,946 1,074,042
Oklahoma Industrial Finance Authority
("OIFA") loan, variable interest and
principal payments due monthly, guaranteed by
a stockholder, officer, and director;
collateralized by real estate and equipment;
paid off during 1999 as part of debt
refinancing -- 399,176
Installment note payable to bank, interest at
bank's prime plus 3% per annum, guaranteed by
a stockholder, officer, and director;
collateralized by real estate; paid off
during 1999 as part of debt refinancing -- 264,343
Note payable to individual, no stated
interest rate, due on demand; collateralized
by real estate; paid off during 1999 as part
of debt refinancing -- 135,000
Note payable to bank, payments of interest
only due monthly, interest at bank's prime
plus .5%, guaranteed by a stockholder,
officer, and director, uncollateralized; paid
off during 1999 as part of debt refinancing -- 98,800
Note payable to bank, payments of interest
only due quarterly, interest at bank's prime,
guaranteed by a stockholder, officer, and
director; uncollateralized; paid off during
1999 as part of debt refinancing -- 40,233
Note payable to bank, payable in monthly
installments of $500, interest at bank's
prime (7.75%) plus 1% per annum;
collateralized by inventory; paid off during
1999 as part of debt refinancing -- 7,294
Balloon promissory note payable to related
party, 10% stated interest per annum, 15%
effective interest rate, principal and
interest due June 1, 2001; collateralized by
a second mortgage on land and building, net
of discount of $215,334 and $425,667 at
December 31, 1999 and 1998, respectively 1,115,666 905,333
Note payable to bank, interest at New York
prime plus 2%; collateralized by a first
mortgage on land, building, and certificates
of deposit; due April 20, 2000 (1) 551,777 584,170
Other notes payable to banks, interest rates
ranging from 9.5% to 9.75%, principal and
interest due in January 1999; collateralized
by vehicle -- 54,029
Revolving line of credit with Bank One,
maximum credit limit of $35,000, interest
payable monthly at 3.25% over bank's prime
rate, principal payable May 2005;
uncollateralized 10,000 35,342
Installment note payable, interest at 8.8%,
due August 1, 2009; collateralized by first
mortgage on real estate 2,493,795 -
Note payable to related party, interest at
10%, due on demand 4,090 4,090
---------- ----------
5,090,274 4,524,408
Less current portion 50,390 54,029
---------- ----------
$5,039,884 $4,470,379
========== ==========
(1) The Company has entered into an agreement with the bank to extend the
due date. Current maturities are reflected herein.
The Company extinguished a note payable to an individual of approximately
$135,000 for less than the carrying amount. The transaction resulted in an
extraordinary gain of approximately $10,000, net of an income tax expense of
approximately $5,000.
Aggregate future maturities of debt at December 31, 1999 are as follows:
Year ending December 31
2000 $ 50,390
2001 2,781,516
2002 18,002
2003 19,676
2004 20,872
Thereafter 2,415,152
----------
5,305,608
Less amount representing discount on debt 215,334
----------
$5,090,274
==========
NOTE F - ROYALTY PAYABLE
As a part of the business acquisition (see Note K), the Company assumed a
royalty payable to an individual. The agreement calls for monthly payments of
the greater of $6,000 or 6% of the total gross monthly income of NDAC. This
agreement expires on April 30, 2017. Future minimum payments under this
agreement total $1,254,000. A discount of $934,260 was imputed at the date of
purchase by management using a 15% interest rate. Interest expense for the
years ended December 31, 1999 and 1998 was approximately $67,000 and $28,000,
respectively.
Aggregate future principal maturities of royalty payable at December 31, 1999
are as follows:
Year ending December 31
2000 $ 5,752
2001 6,677
2002 7,750
2003 8,996
2004 10,442
Thereafter 393,297
----------
432,914
Less current portion 5,752
----------
$ 427,162
==========
NOTE G - STOCKHOLDERS' 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, 1999.
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, 1999.
NOTE H - INCOME TAXES
The Company's effective income tax rate differed from the federal statutory
rate of 34% as follows at December 31:
1999 1998
---------- ----------
Income taxes at federal statutory rate $ (106,055) $ (158,194)
Change in valuation allowance, net of change
in estimate of deferred tax liability 47,128 200,011
Nondeductible expenses 373 970
State income taxes at statutory rate (17,600) (26,055)
Other 6,154 (16,732)
---------- ----------
Total tax benefit $ (70,000) $ --
========== ==========
Components of deferred taxes are as follows at December 31:
1999 1998
----------- -----------
Assets
Accounts receivable $ 1,755 $ --
Property and equipment 26,751 59,482
Inventories -- 37,626
Intangible assets 189,505 160,126
Tax loss carryforward 1,710,286 1,661,588
Valuation allowance (1,520,720) (1,813,775)
----------- -----------
407,577 105,047
Liabilities
Royalty payable and accrued liabilities (407,577) (105,047)
----------- -----------
Total $ -- $ --
=========== ===========
The valuation allowance decreased $293,055 and increased $200,011 for the
years ended December 31, 1999 and 1998, respectively.
A valuation allowance for deferred tax assets is required when it is more
likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of this deferred tax asset depends on
the Company's ability to generate sufficient taxable income in the future.
Manage-ment believes it is more likely than not that the deferred tax asset
will not be realized by future operating results.
At December 31, 1999, the Company has net operating loss carryforwards for tax
purposes of approximately $4,532,000 which will expire between 2003 and 2019.
NOTE I - RELATED PARTY TRANSACTIONS
Aztore Holdings, Inc. and Affiliates
------------------------------------
The Company had an advisory agreement with Aztore Holdings, Inc. and
affiliates ("Aztore") wherein Aztore acts as the Company's financial advisor.
Aztore received an annual fee equal to 5% of the Company's gross revenues, as
defined in the advisory agreement. This agreement was terminated on January 1,
1999. Total fees of $52,267 were recorded pursuant to this agreement for the
year ended December 31, 1998. Aztor owns approximately 12% of the Company's
common stock.
Employment Contract
-------------------
During 1998, the Company had an incentive compensation agreement with its
president and chairman. Under the agreement, he earned a cash fee of 5% of the
Company's gross revenues, payable on a quarterly basis. Total compensation of
$52,267 was recorded pursuant to this agreement for the year ended December
31, 1998. This agreement was terminated on January 1, 1999.
New Directions Centers of America LLC
-------------------------------------
As a part of the business acquisition (see Note K), the Company issued a note
payable to New Directions Centers of America LLC ("NDLLC") which is owned
partially (24%) by the Company's president and chairman.
Management Agreement
--------------------
The management of the operation of its acquired facility is subcontracted to
C&R Investments LLC ("CRI"). The owner of CRI owns approximately 3% of the
Company's common stock. Fees paid to CRI under this management agreement
totaled $60,000 and $35,000 for each of the years ended December 31, 1999 and
1998, respectively.
Other Agreement
---------------
During 1999, the Company contracted with a corporation owned by the son of a
director to provide certain management services. Fees paid under this
agreement totaled $36,000 for the year ended December 31, 1999.
Related Party Obligations
-------------------------
The following table reflects amounts owed to related parties as of December
31:
1999 1998
----------------------- -----------------------
Accounts Accounts
Notes payable and Notes payable and
payable, accrued payable, accrued
net liabilities net liabilities
---------- ---------- ---------- ----------
President and Chairman .. $ 614,946 $ 89,106 $ 730,042 $ 46,862
Aztore ................. 300,000 10,811 314,217 110,719
CRI .................... -- 5,456 29,783 --
NDLLC .................. 1,115,666 -- 905,333 58,333
Talbot ................. 4,090 818 -- 83,452
---------- ---------- ---------- ----------
Total related party
liabilities $2,034,702 $ 106,191 $1,979,375 $ 299,366
========== ========== ========== ==========
During 1999, the Company reached an agreement to restructure notes payable and
accrued interest of approximately $450,000 to Aztore. In exchange for the
notes payable and accrued interest, two new notes were issued for $120,000 and
$180,000 bearing interest at 10%. The transaction resulted in an extraordinary
gain of approximately $107,000, net of an income tax expense of approximately
$64,000.
The Company has an account receivable from NDLLC related to legal fees paid by
the Company on behalf of NDLLC in defense of a lawsuit. The receivable balance
at December 31, 1999 was $87,620.
In addition, the president and chairman has personally guaranteed $551,777 of
the Company's notes payable (see Note E).
NOTE J - LEASES
The Company's subsidiary, Business Park, leases commercial business sites to
several different entities. Minimum future rentals on noncancelable leases are
as follows at December 31, 1999:
2000 $ 432,958
2001 397,365
2002 298,713
2003 136,436
2004 43,002
-----------
$ 1,308,474
===========
NOTE K - BUSINESS COMBINATIONS
The Company acquired all of the assets and assumed certain specific
liabilities of NDLLC and Horizon Lodges of America, Inc. ("Horizon") effective
June 1, 1998. NDLLC and Horizon owned and operated a minimum security
correctional facility for women. The acquisition included the issuance of
1,000,000 shares of Company common stock, the issuance of a note payable, and
assumption of certain liabilities.
This business combination has been accounted for using the purchase method of
accounting and the accompanying consolidated financial statements include the
operations of this business subsequent to the date of acquisition.
A summary of the purchase price at June 1, 1998 is as follows:
Issuance of 1,000,000 shares of common stock valued
at $.036 per share $ 36,000
Issuance of balloon note payable (see Note E), net
of discount of $456,000 875,000
Assumption of notes payable and other liabilities 1,154,342
Assumption of royalty payable, net of
discount of $934,260 451,740
-----------
Total purchase price $ 2,517,082
===========
This purchase price was allocated to the tangible and intangible net assets
based on their fair values. Approximately $1,750,000 was allocated to contract
rights acquired; approximately $450,000 was allocated to facility land,
building, and equipment; approximately $227,000 was allocated to certificates
of deposit; and the remaining amount of approximately $90,000 was allocated to
accounts receivable and other assets. The contract rights relate to an
annually renewable contract with the Oklahoma Department of Corrections. This
intangible asset is being amortized over a nine-year period which is
management's estimate of the expected life of the contract.
The following summarized pro forma unaudited information assumes the
acquisition had occurred on January 1, 1997:
Year ended December 31,
----------------------------
1998 1997
----------- -----------
Revenues $ 1,286,572 $ 1,363,445
=========== ===========
Net loss $ (649,102) $ (475,255)
=========== ===========
Loss per common share $ (.08) $ (.06)
=========== ===========
The above amounts are based upon certain assumptions which the Company
believes are reasonable. The pro forma results do not necessarily represent
results which would have occurred if the business combination had taken place
at the date and on the basis assumed above.
NOTE L - COMMITMENTS AND CONTINGENCIES
During 1998, a lawsuit was filed by Talbot (see Note I) against the Company
related to the purchase of NDLLC and Horizon. On January 18, 2000, a tentative
settlement was reached. The terms of the settlement include a payment of
approximately $76,000 by the Company to Talbot during 2000 and a deferred
payment of approximately $11,000 as consideration for dropping all claims
against the Company.
The Company is involved in certain other administrative proceedings arising in
the normal course of business. In the opinion of management, such matters,
including the lawsuit described above, will be resolved without material
effect on the Company's results of operations or financial condition.
NOTE M - SEGMENT INFORMATION
The Company operates in the following two segments: commercial leasing and
correctional facility operation. Information concerning the Company's business
segments is as follows as of and for the years ended December 31:
1999 1998
----------- -----------
Revenues
Commercial leasing ............. $ 362,404 $ 291,329
Correctional facility .......... 1,570,029 748,115
----------- -----------
Total ............. $ 1,932,433 $ 1,039,444
=========== ===========
Segment profit (loss)
Commercial leasing ............ $ (186,591) $ (26,398)
Correctional facility ......... (124,905) (240,810)
Corporate ..................... (429) (198,070)
----------- -----------
Total ............. $ (311,925) $ (465,278)
=========== ===========
Identifiable assets
Commercial leasing ............ $ 2,605,171 $ 2,309,596
Correctional facility ......... 2,553,501 2,662,992
Corporate ..................... 369,252 448,845
Eliminations .................. (260,276) (443,789)
----------- -----------
Total ............. $ 5,267,648 $ 4,977,644
=========== ===========
Depreciation and amortization
Commercial leasing ............ $ 62,574 $ 48,454
Correctional facility ......... 233,413 134,204
Corporate ..................... -- 16,667
----------- -----------
Total ............. $ 295,987 $ 199,325
=========== ===========
Capital expenditures
Commercial leasing ............ $ 215,462 $ 112,427
Correctional facility ......... 37,981 66,745
----------- -----------
Total ............. $ 253,443 $ 179,172
=========== ===========
Interest expense
Commercial leasing ............ $ 212,980 $ 187,103
Correctional facility ......... 345,098 176,683
Corporate ..................... 53,634 47,590
----------- -----------
Total ............. $ 611,712 $ 411,376
=========== ===========
Identifiable assets are those assets used in the Company's operations in each
area. Corporate income includes general and administrative costs and corporate
assets consist primarily of cash and other current assets.
NOTE N - SIGNIFICANT CUSTOMERS
The Company contracts with various governmental agencies to provide
correctional services. The contracts generally specify for the Company to
provide correctional services, including complete residential services. As of
December 31, 1999 and 1998, the Company had one significant contract with the
Oklahoma Department of Corrections. Compensation paid to the Company is based
on a per-person, per-day basis. Revenues generated from this contract during
1999 and 1998 comprised 81% and 72% of total Company revenues, respectively.
This contract is renewable annually.
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 of Sooner Holdings, Inc.
The current directors of the Company and their principal occupation are
listed below. R.C. Cunningham III is the son of R.C. Cunningham II, the
president and chairman. The following has been furnished to the Company by the
respective nominees for director. The ownership amount and percent represents
shares of the Company's common stock beneficially owned by each of them as of
March 15, 2000:
Director Ownership (1)
Name Age Since Principal occupation Amount Percent
---- --- ----- -------------------- ------ -------
R. C. Cunningham II 73 6/1/89 Chairman and President,
Sooner Holdings, Inc. 4,717,413 55.69%
Michael S. Williams(2) 53 12/15/93 President, Aztore
Holdings, Inc.
(resigned 12/31/99) 1,006,256 11.88%
Ron Alexander, Sr.(3) 58 12/31/99 Vice President, New
Direction Acquisition
Corp.(apptd 12/31/99) 242,000 2.86%
R.C. Cunningham III 35 7/3/97 Mortgage broker 72,129 *
- ------------------
* less than 1%
(1) The amount and percent of ownership is based on the total shares of co mmon
stock outstanding of 8,471,350 shares as of March 15, 2000.
(2) 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).
(3) Include 242,000 shares owned by C&R Investments, LLC ("CRI") of which Mr.
Alexander is President and sole owner (see further discussion under
"Relationship with C&R Investments" under Item 12. Certain Relationships
and Related Transactions).
Directors of the Subsidiaries
Name Age Principal occupation Subsidiary Director since
---- --- -------------------- ---------- --------------
R. C. Cunningham II 73 Chairman and President,
Sooner Holdings, Inc. CO Park 6/1/89
NDAC 9/4/97
R. C. Cunningham III 35 Mortgage broker,
American Mortgage
Bankers, Inc. CO Park 7/3/97
NDAC 9/4/97
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.
R. C. Cunningham III. 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 and of NDAC since September
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.
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.
Ronnie M. Alexander, 58, became a director of the Company in 1999 and has been
Director of Operations of NDAC since 1996. He was appointed Vice President of
NDAC as of December 31, 1999. His employment background includes various sales
positions, commercial real estate broker, and retail management positions. Mr.
Alexander holds a degree from the University of Oklahoma.
Executive Officers, Promoters and Control Persons
The current executive officers of the Company as of March 15, 2000,
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.
R. C. Cunningham III is the son of R. C. Cunningham II, the president and
chairman of the Company.
Name Age Title Officer since
---- --- ----- -------------
R. C. Cunningham II 73 CEO and President, Sooner Holdings, Inc. 6/1/88 *
CEO and President, Charlie O Business
Park Incorporated 3/15/91 *
CEO and President, New Directions
Acquisition Corp. 9/4/97 *
Ron Alexander, Sr. 58 Vice President, New Directions
Acquisition Corp. 6/1/98
R. C. Cunningham III 35 Secretary, Sooner Holdings, Inc. 7/3/97
Treasurer, Sooner Holdings, Inc 3/31/98
Secretary and Treasurer, Charlie O
Business Park Incorporated 7/3/97
Secretary and Treasurer, New
Directions Acquisition Corp. 9/4/97 *
- --------------------
* 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 1999 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, 1999:
Name Primary capacity in which served* Compensation (1)
---- --------------------------------- ---------------
R. C. Cunningham II(2) Chairman of the Board and President;
Sooner Holdings, Inc. $ -0-
R. C. Cunningham III Secretary; Sooner Holdings, Inc $ -0-
Ron Alexander, Sr. Vice President, New Directions
Acquisition Corp. $ -0-
All Executive Officers as a Group (3 persons) $ -0-
- -------------------------
* 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 received cash compensation in
excess of $60,000. 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). This agreement was terminated December 31, 1998.
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 March 15, 2000, 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, 1999. 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, 1999.
Compensation Pursuant to Plans Including Pension, Stock Option, and Stock
Appreciation Rights Plans
As of March 15, 2000, 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, 1999, 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 March 15, 2000 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.
Number of
Name and Address of common Percent
Beneficial Owners shares (1) of Class
R. C. Cunningham II (5)
2680 W. Interstate 40
Oklahoma City, OK 73108 4,717,413 55.69%
Sheldon L. Miller (2)
3000 Town Center, Ste. 1700
Southfield, MI 48075 502,718 5.93%
Michael S. Williams (3) (6)
3710 E. Kent Drive
Phoenix, AZ 85044 1,006,256 11.88%
Lanny R. Lang (4)
3536 E. Saltsage Drive
Phoenix, AZ 85044 729,183 8.61%
R. C. Cunningham III (5)
6408 Boulevard View
Alexandria, VA 22307 72,129 *
Ron Alexander, Sr. (7)(8)
2901 McGee Street
Norman, OK 73072 242,000 2.86%
All officers and directors as
a group (4 persons) 5,553,798 70.43%
- ----------------------
* less than 1%
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 8,471,350 shares.
(2) Mr. Miller owns approximately 30% of Aztore, which he received under that
company's bankruptcy plan, but has waived dispositive control of shares
owned by Aztore and, therefore, such shares are not included.
(3) Includes 384,809 shares owned by Aztor 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.
(7) An officer of a subsidiary.
(8) Includes 242,000 shares of common stock owned by C&R Investments of which
Mr. Alexander is the President and sole owner.
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 "1999 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 which could not
be delivered to ShareData's creditors 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. This agreement was terminated December 31, 1998.
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
AuctionTelevision Network, Inc. ("ATVN") owned by the Company as consideration
for payment of a $39,000 note payable, or $.15 per ATVN share.
Effective November 1, 1999, the Company reached an agreement with Aztore
and associated companies to restructure approximately $450,000 in notes payable
and accrued interest. In exchange for the notes, the Company issued two notes
for $120,000 and $180,000 bearing interest at 10%, with preferential liquidation
terms. This transaction resulted in a non-cash gain to the Company of
approximately $107,000, net of tax.
Relationship with R.C. Cunningham II
In December 1993, the Company entered into an Incentive Compensation
Agreement with Cunningham. This agreement provided remuneration to Cunningham
based only on the Company's revenue performance. Cunningham received no base
compensation, but would receive a cash incentive fee of 5% of the Company's
gross revenues payable on a quarterly basis. Also, Cunningham has personally
guaranteed $551,777 of the Company's notes payable. This agreement was
terminated December 31, 1998.
Relationship with C&R Investments
C&R Investments L.L.C. ("CRI"), is an Oklahoma City, Oklahoma-investment
firm. Mr. Ron Alexander, Sr. has been the Vice President of New Directions
Acquisition Corp. (the "Correction Business"), a subsidiary, since December 1999
and is the managing director for CRI. The management of the operation of NDAC is
subcontracted to CRI. Fees paid to CRI under this management agreement totaled
$60,000 for the year ended December 31, 1999. CRI owns approximately 3% of the
Company's common stock.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Item No. Description footnote
-------- ----------- --------
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 Directions Acquisition Corp., New
Direction Centers of America, L.L.C., and
Horizon Lodges of America, Inc. dated
September 9, 1997 (2)
10.13 Purchase and Sale Agreement dated May 7, 1998 (2)
10.15 Promissory Note between Sooner Holdings, Inc.
and Bulldog Investment Company, an Arizona
limited liability company Ex-1
10.16 Promissory Note between Sooner Holdings, Inc.
and Aztore Holdings, Inc., an Arizona corporation Ex-2
10.17 Agreement Re: Debt Cancellation and Release of
Liability dated November 1, 1999 between Sooner
Holdings, Inc., Bulldog Investment Company, LLC,
and Aztore Holdings, Inc. Ex-3
16.1 Letter re: change in certifying accountant (1)
16.2 Letter re: change in certifying accountant (3)
16.3 Letter re: change in certifying accountant (4)
19.1 thru 19.6 Other agreements (1)
22.1 Subsidiaries of the registrant Ex-4
Footnotes:
(1) Incorporated by reference to the Company's Form 10-KSB for the year ended
December 31, 1995 (file no. 0-18344).
(2) Filed as an Exhibit to the Company's Form 8-K, filed June 23, 1999 (file
no. 0-18344).
(3) Filed as an Exhibit to the Company's Form 8-K/A, filed May 11, 1999 (file
no. 0-18344).
(4) Filed as an Exhibit to the Company's Form 8-K, filed June 16, 1999 (file
no. 0-18344).
Reports on Form 8-K
The Company has filed no reports on Form 8-K during the fourth quarter
of 1999.
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 13, 2000
SOONER HOLDINGS, INC.
---------------------
(Registrant)
By: 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.
Signature Title Date
--------- ----- ----
Chairman of the Board, Chief
R. C. Cunningham II Executive Officer and President 4/13/00
- ------------------------
R. C. Cunningham II
R. C. Cunningham III Secretary, Treasurer and Director 4/13/00
- ------------------------
R. C. Cunningham III
Ronnie M. alexander Director 4/13/00
- ------------------------
Ronnie M. Alexander
PROMISSORY NOTE
$120,000.00 Oklahoma City, Oklahoma
November 1, 1999
For value received, the undersigned ("Maker") promises to pay to the
order of Bulldog Investment Company, an Arizona limited liability company, or
its assigns (the "Holder"), at 3710 East Kent Drive, Phoenix, AZ 85044, or at
such other place as Holder may designate in writing, in immediately available
U.S. funds, the sum of One Hundred and Twenty Thousand and no/100 Dollars
($120,000.00), together with interest on the outstanding principal balance
computed on the basis of a 365 day year from the above date until paid at the
rate of ten percent (10%) per annum. The principal amount and interest will be
due and payable full on demand. Holder agrees not to demand payment as long as
Holder receives payments in ratio to the greater of payments made, with regard
to maker's note dated May 31, 1998 to New Direction Center of America, L.L.C.,
to Ron Alexander or his affiliates ("Alexander") or R. C. Cunningham II or his
affiliates ("Cunnigham") or the average of Alexander and Cunnigham's ratios,
whichever is greater. For example, if Alexander is owed $250,000 plus accrued
interest and receives a $50,000 payment and Cunnigham receives no payment then
Holder will recive a $24,000 payment ($50,000/$250,000) times $120,000.
Maker also agrees that: (a) it will pay all costs and expenses of
collection of this note, including reasonable attorney's fees; and (b) at the
option of the Holder, the unpaid balance of this note shall become due and
payable immediately without notice, with interest thereon after the date of
exercise of such option until paid in the event Maker becomes insolvent as that
term is defined in the U.S. Bankruptcy Code or in the event garnishment,
attachment, execution, levy or assessment of tax deficiency is issued against
any of the property or assets of Maker.
Maker hereof severally (a) waives presentment, demand, grace periods,
diligence, notice of dishonor and protest and all exemption laws and rights
thereunder affecting the full collection of this note; (b) consents, without
notice, to any indulgence granted to any party by the Holder; (c) agrees that
time is of the essence of Maker's obligations hereunder; and (d) agrees that any
delay in Holder's exercise of its rights hereunder or otherwise shall not
constitute a waiver of any such rights.
Without limiting the right of the Holder to bring any action or
proceeding against the Maker or against any property of Maker (an "Action")
arising out of or relating to this note or any indebtedness evidenced thereby in
the courts of other jurisdictions, Maker hereby irrevocably submits to the
jurisdiction, process and venue of any Oklahoma State or Federal Court sitting
in Oklahoma City, Oklahoma and hereby irrevocably agrees that any Action may be
heard and determined in such State or Federal Court. Maker hereby irrevocably
waives, to the fullest extent it may effectively do so, the defenses of (1) lack
of jurisdiction over any person, (2) inconvenient forum or (3) improper venue,
to the maintenance of any Action in any jurisdiction.
This note shall be construed according to the laws of the State of
Oklahoma.
"MAKER"
Sooner Holdings, Inc.
2680 W. I-40
Oklahoma City, Oklahoma 73108
By: date
------------------------- --------------
Its: President
EX-1
PROMISSORY NOTE
$180,000.00 Oklahoma City, Oklahoma
November 1, 1999
For value received, the undersigned ("Maker") promises to pay to the
order of Aztore Holdings, Inc., an Arizona corporation, or its assigns (the
"Holder"), at 3710 East Kent Drive, Phoenix, AZ 85044, or at such other place as
Holder may designate in writing, in immediately available U.S. funds, the sum of
One Hundred and Eighty Thousand and no/100 Dollars ($180,000.00), together with
interest on the outstanding principal balance computed on the basis of a 365 day
year from the above date until paid at the rate of ten percent (10%) per annum.
The principal amount and interest will be due and payable full on demand. Holder
agrees not to demand payment as long as Holder receives payments in ratio to the
greater of payments made, with regard to maker's note dated May 31, 1998 to New
Direction Center of America, L.L.C., to Ron Alexander or his affiliates
("Alexander") or R. C. Cunningham II or his affiliates ("Cunnigham") or the
average of Alexander and Cunnigham's ratios, whichever is greater. For example,
if Alexander is owed $250,000 plus accrued interest and receives a $50,000
payment and Cunnigham receives no payment then Holder will recive a $36,000
payment ($50,000/$250,000) times $180,000.
Maker also agrees that: (a) it will pay all costs and expenses of
collection of this note, including reasonable attorney's fees; and (b) at the
option of the Holder, the unpaid balance of this note shall become due and
payable immediately without notice, with interest thereon after the date of
exercise of such option until paid in the event Maker becomes insolvent as that
term is defined in the U.S. Bankruptcy Code or in the event garnishment,
attachment, execution, levy or assessment of tax deficiency is issued against
any of the property or assets of Maker.
Maker hereof severally (a) waives presentment, demand, grace periods,
diligence, notice of dishonor and protest and all exemption laws and rights
thereunder affecting the full collection of this note; (b) consents, without
notice, to any indulgence granted to any party by the Holder; (c) agrees that
time is of the essence of Maker's obligations hereunder; and (d) agrees that any
delay in Holder's exercise of its rights hereunder or otherwise shall not
constitute a waiver of any such rights.
Without limiting the right of the Holder to bring any action or
proceeding against the Maker or against any property of Maker (an "Action")
arising out of or relating to this note or any indebtedness evidenced thereby in
the courts of other jurisdictions, Maker hereby irrevocably submits to the
jurisdiction, process and venue of any Oklahoma State or Federal Court sitting
in Oklahoma City, Oklahoma and hereby irrevocably agrees that any Action may be
heard and determined in such State or Federal Court. Maker hereby irrevocably
waives, to the fullest extent it may effectively do so, the defenses of (1) lack
of jurisdiction over any person, (2) inconvenient forum or (3) improper venue,
to the maintenance of any Action in any jurisdiction.
This note shall be construed according to the laws of the State of
Oklahoma.
"MAKER"
Sooner Holdings, Inc.
2680 W. I-40
Oklahoma City, Oklahoma 73108
By: date
------------------------- --------------
Its: President
EX-2
Letter agreement regarding financial outsourcing between
Sooner Holdings, Inc. and Bulldog Advisors
page 43 of 45; dated January 1, 1999
- ----------------------------------------------------------------------
November 1, 1999
Mr. R.C. Cunningham II
President
Sooner Holdings, Inc.
2680 West I-40
Oklahoma City, OK 73108
RE: Debt Cancellation
Dear R.C.:
The purpose of this letter is to document the agreement of Bulldog Investment
Company, LLC ("Bulldog") and Aztor Holdings, Inc. to restructure their
outstanding liabilities due from Sooner. The undersigned agree to accept for any
outstanding liabilities a $120,000 note payable to Bulldog and a $180,000 note
payable to Aztor. These notes are attached to this letter. This release requires
the execution of these notes and our "Advisory and Management Agreement" dated
January 1, 1999, also attached hereto. The liabilities for cash and stock
accrued or accruing under the Advisory and Management Agreement are not effected
by this settlement.
This Agreement is intended as a mutual release between Bulldog, Aztor
and Sooner (jointly the "Parties"). The Parties for themselves and on behalf of
their respective successors and assigns, fully release, quit and discharge the
other, and all their officers and directors, employees, shareholders,
consultants, attorneys, accountants, other professionals, insurers, agents and
all other entities related to each party, including but not limited to assigns,
parent corporations, subsidiaries, sister corporations, and affiliates (jointly
the "Related Parties") from all rights, claims, demands, actions, causes of
action (jointly, the "Claims"), which each party now has or may have against the
other or any of them from any source what-so-ever whether or not (a) arising
from or related to the above recited facts, (b) know or unknown, (c) disclosed
or undisclosed, except for those rights or obligations arising out of this
Agreement, the Advisory and Management Agreement and any agreements between the
Parties subsequent to the date hereof (the "Remaining Agreements") or of the
acts of each party in caring out the obligations of the Remaining Agreements.
Except for the Remaining Agreements, the Parties agree to hold each
other harmless and indemnify and shall defend each Party and its Related
Parties, directors, officers, employees or agents from all Claims, losses,
actions, damages, liabilities and expenses, including attorney's fees and costs
arising from, related to or in connection with the actions and omissions of a
Party and/or their successors and assigns that occur, or with respect to
omissions, fail to occur, after the date hereof or from any Claims by Related
Parties for prior actions of a Party.
Very truly yours, Accepted and Agreed
- --------------------------------------------------------------------------------
3710 East Kent Drive, Phoenix, AZ 85044
(480) 759-9400, facsimile (480) 759-9401, email [email protected]
Letter agreement regarding financial outsourcing between
Sooner Holdings, Inc. and Bulldog Advisors
page 44 of 45; dated January 1, 1999
- ----------------------------------------------------------------------
- ---------------------------------------- ------------------------------
Michael S. Williams R.C Cunningham, President
President, Aztore Holidngs, Inc.
and Managing Director Bulldog Investment
Company, LLC date:
------------------------
EX-3
- --------------------------------------------------------------------------------
3710 East Kent Drive, Phoenix, AZ 85044
(480) 759-9400, facsimile (480) 759-9401, email [email protected]
Letter agreement regarding financial outsourcing between
Sooner Holdings, Inc. and Bulldog Advisors
page 45 of 45; dated January 1, 1999
- ----------------------------------------------------------------------
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY State of incorporation
- --------------------------------------- --------------------------
Charlie O Business Park Incorporated Oklahoma
New Directions Acquisition Corp. Oklahoma
EX-4
- --------------------------------------------------------------------------------
3710 East Kent Drive, Phoenix, AZ 85044
(480) 759-9400, facsimile (480) 759-9401, email [email protected]
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