U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Sooner Holdings, Inc.
(Name of small business issuer in its charter)
Oklahoma 7380 73-1275261
-------------- ---------------------------- -------------
(state of (Primary Standard Industrial (IRS Employer
incorporation) Classification Code Number) I.D. Number)
2534 West I-40
Oklahoma City, OK 73108
405-236-8332
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(Address and telephone number of registrant's principal
executive offices and principal place of business)
R.C. Cunningham II
2534 West I-40
Oklahoma City, OK 73108
405-236-8332
---------------------------------------------------------
(Name, address and telephone number of agent for service)
Copies to:
Thomas J. Kenan, Esq., Fuller, Tubb, Pomeroy & Stokes
201 Robert S. Kerr Avenue, Suite 1000
Oklahoma City, OK 73102
Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(c) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
Calculation of Registration Fee
<TABLE>
<CAPTION>
Title of Proposed Proposed
each class maximum maximum
of securities Amount offering aggregate Amount of
to be to be price offering registration
registered registered per unit price fee
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<S> <C> <C> <C> <C>
Common Stock 1,000,000 $__________(1) $__________(1) $78 (1)
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</TABLE>
(1) These 1,000,000 shares are to be offered by one selling shareholder from
time to time at fluctuating market prices. The registration fee for
these shares is based on the average of a bid price of $0.25 and an
ask price of $0.34 on September 25, 2000 on the OTC Bulletin Board. Reg.
230.457(c).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission acting pursuant to said section 8(a)
may determine.
<PAGE>
PROSPECTUS
SOONER HOLDINGS, INC.
1,000,000 Shares of Common Stock
1,000,000 shares of common stock are being offered by one selling
security holder, Brian Bothroyd of Edmond, Oklahoma. None of the proceeds of
sale will go to the company. All proceeds will go to the selling security holder
and for the payment of his brokerage commissions. Mr. Bothroyd is a director of
Sooner Holdings and a director and chief executive officer of Sooner
Communications, Inc., a wholly-owned subsidiary of Sooner Holdings.
The selling security holder will offer the 1,000,000 shares from time to
time in the over-the-counter market through brokers at fluctuating market
prices. He may also offer the shares in negotiated transactions, through the
writing of options on the securities, a combination of such methods of sale, or
otherwise. Sales may be made at fixed prices which may be changed, at market
prices prevailing at the time of sale, or at negotiated prices.
-------------------------
Our common stock trades on the OTC Bulletin Board.
Its trading symbol is "SOON".
-------------------------
The purchase of these shares involves a Neither the Securities and Exchange
high degree of risk. See "Risk Factors," Commission nor any state securities
beginning on page 1. commission has approved or disapproved
these securities or determined if this
offering memorandum is truthful or
complete. Any representation to the
contrary is a criminal offense.
Sooner Holdings, Inc.
2534 West I-40
Oklahoma City, OK 73108
Telephone 405-236-8332
September ___, 2000
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TABLE OF CONTENTS
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Page
----
Summary ................................................................... 1
Our Company ....................................................... 1
Risk Factors .............................................................. 1
1. We have no history of earnings ............................. 1
2. We have been dependent upon our president,
R.C. Cunningham II, to provide the capital
for us to remain in business. The loss of him
could have a materially adverse effect upon
the company ................................................ 1
3. Our new product, the CadeumTM, a computer
hardware and software product that provides
unified messaging services for telecommunications
service providers, is still in the Beta testing
stage and is unproven ..................................... 1
4. The loss of one or more of our executive
and operating officers could have a
materially adverse effect on our company .................. 1
5. The market for our common stock is
poorly developed. Purchasers of our
securities should anticipate a thin
and volatile market ....................................... 2
Use of Proceeds .......................................................... 2
Determination of Offering Prices ......................................... 2
The Selling Security Holder .............................................. 2
Plan of Distribution ..................................................... 3
Legal Proceedings ........................................................ 4
Directors, Executive Officers, Promoters and
Control Persons .................................................. 4
Securities Ownership of Certain Beneficial
Owners and Management ............................................ 7
Description of Securities ................................................ 9
Common Stock ..................................................... 9
Voting Rights ............................................. 9
Dividend Rights ........................................... 9
Liquidation Rights ........................................ 9
Preemptive Rights ......................................... 9
Registrar and Transfer Agent .............................. 9
Dissenters' Rights ........................................ 9
Preferred Stock .................................................. 10
ii
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Interest of Named Experts and Counsel .................................... 10
Indemnification .......................................................... 10
Description of Business .................................................. 11
Summary and Development of the Company ........................... 11
Business Description ............................................. 13
General .......................................................... 15
Seasonality ............................................... 15
Government Regulation ..................................... 15
Marketing ................................................. 15
Employees ................................................. 16
Competition ............................................... 16
Patents .......................................................... 17
Government Approval of Principal Products;
Government Regulations .................................... 17
Costs and Effects of Complying with
Environmental Laws ........................................ 17
Working Capital Requirements ..................................... 17
Product Research and Development ................................. 18
Additional Employees ............................................. 18
Description of Property .................................................. 18
Management's Discussion and Analysis ..................................... 21
Background and Introduction ...................................... 21
Liquidity and Capital Resources .................................. 22
Interim Results ............................................... 22
Results of Operations ............................................ 23
Interim Results ............................................... 24
Capital Expenditures and Commitments.............................. 25
Going Concern and Management Plans ............................... 25
Capital Expenditures and Commitments ............................. 26
Factors That May Affect Future Results ........................... 26
Forward-Looking Statements ....................................... 26
Certain Relationships and Related Transactions ........................... 27
Market for Common Equity and Related
Stockholder Matters .............................................. 28
Shareholders ..................................................... 29
Dividend Information ............................................. 29
Penny Stock Regulations .................................................. 29
The Penny Stock Suitability Rule ................................. 30
The Penny Stock Disclosure Rule .................................. 30
Effects of the Rule .............................................. 31
Potential De-Listing of Common Stock ............................. 33
Reports to Security Holders ...................................... 33
Executive Compensation ................................................... 33
Stock Options .................................................... 33
Directors ........................................................ 33
Employment Contracts ............................................. 33
iii
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Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure .............................. 34
Additional Information ................................................... 34
Financial Statements ..................................................... 34
iv
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SUMMARY
Our Company. Our company, Sooner Holdings, Inc., operates three
businesses through three wholly-owned subsidiaries -
o a minimum-security correctional facility for women offenders in
Oklahoma City, Oklahoma,
o a multi-unit "business park" rental property in Oklahoma City,
Oklahoma for business and industrial tenants, and
o the provision to telecommunications carriers of a new, Class 5,
hardware and software computer-based platform, called "Cadeum."
RISK FACTORS
------------
The following principal factors make the offering described herein
speculative and one of high risk. An investment in the shares should not be made
by persons who cannot afford the loss of their entire investment.
1. We have no history of earnings.
At December 31, 1999 we had a stockholders' deficit of $684,782
and a working capital deficiency of $96,224. Our auditors state that these
factors among others raise substantial doubt about our ability to continue as a
going concern.
2. We have been dependent upon our president, R.C. Cunningham II, to
provide the capital for us to remain in business. The loss of him could have a
materially adverse effect upon the company.
We have stayed in business only because Mr. Cunningham has
provided equity and debt capital to the company. He is today a guarantor of the
repayment of significant debt of the company. We have no substitute for him
should we lose him.
3. Our new product, the CadeumTM, a computer hardware and software
product that provides unified messaging services for telecommunications service
providers, is still in the Beta testing stage and is unproven.
During May, 2000, we launched an initiative in the
telecommunications industry and have committed our resources to its development
and exploitation. The initial test results are positive, but we are not yet able
to assess its commercial value.
4. The loss of one or more of our executive and operating officers
could have a materially adverse effect on our company.
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Our minimum-security correctional facility for women offenders
operates at a profit due to the executive abilities of Ron Alexander, a director
of Sooner Holdings and chief executive officer of ND Acquisition Corp., our
wholly-owned subsidiary. It is unlikely that we could replace him without
disrupting the corrections segment of our company.
Our Sooner Communications, Inc. subsidiary depends entirely on
the services of Brian Bothroyd, its chief executive officer, a director of
Sooner Holdings and the selling security holder of the shares offered through
this Prospectus. Our company has no other experience other than Mr. Bothroyd's
expertise in this new business segment of our company.
5. The market for our common stock is poorly developed. Purchasers
of our securities should anticipate a thin and volatile market.
There are many days when our common stock does not trade at all
in the over-the-counter market. The spread between the quoted bid and ask prices
is usually great. The stock has never traded above $5, the price required to
remove certain trading requirements imposed on Bulletin Board "penny stocks."
Until these trading requirements are removed, many brokerage firms will not
allow their brokers to recommend our stock for purchase by their customers.
USE OF PROCEEDS
All proceeds from the sale of the 1,000,000 shares of common stock will
go to the selling security holder for his own personal use after the payment of
any brokerage commissions.
DETERMINATION OF OFFERING PRICES
The selling security holder proposes to sell his shares primarily
through broker-dealers at prevailing market prices. He may also offer the
securities in private transactions at negotiated prices.
THE SELLING SECURITY HOLDER
The selling security holder is Brian Bothroyd of Edmond, Oklahoma.
Mr. Bothroyd has been a director of Sooner Holdings and the chief
executive officer of its wholly-owned subsidiary, Sooner Communications, since
April, 2000.
The selling security holder's ownership of our common stock, both before
and after the offering, is as follows:
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Percent
Selling Security Holder Amount of Total
----------------------- ------ --------
Brian Bothroyd:
--------------
Owns now 3,000,000 17.8
Owned after sale of
1,000,000 shares 2,000,000 11.8
PLAN OF DISTRIBUTION
The selling security holder may effect sales from time to time in
transactions in the over-the-counter market at market prices prevailing at the
time of sale or in negotiated transactions at negotiated prices. Sales could be
made at fixed prices, which he could change.
The selling security holder may effect such transactions by selling the
securities directly to a purchaser, through broker-dealers acting as agents or
to broker-dealers who may purchase the securities as principals and thereafter
sell the securities from time to time in the over-the-counter market, in
negotiated transactions or otherwise. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
selling security holder or the purchaser for whom such broker-dealers may act as
agents or to whom they may sell as principals. The compensation as to a
particular broker-dealer may be in excess of customary commissions.
The selling security holder and broker-dealers, if any, acting in
connection with any such sale might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act. Any commission received by them
and any profit on the resale of the securities might be deemed to be
underwriting discounts and commissions under the Securities Act.
With respect to the plan of distribution for the sale by the selling
security holder as stated above,
o to the extent that the securities are sold at a fixed price or by
option at a price other than the prevailing market price, such
price would need to be set forth in this prospectus;
o if the securities are sold in block transactions and the
purchaser wishes to resell the securities purchased, such
arrangements would need to be described in this prospectus; and
o if the compensation paid to broker-dealers is other than usual
and customary discounts, concessions or commissions, disclosure
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of the terms of the transaction in this prospectus would be
required.
We have been advised that the selling security holder understands the
prospectus delivery requirements for sales made pursuant to this prospectus and
that, if there are changes to the stated plan of distribution or if additional
information as noted above is needed, a post-effective amendment with current
information would need to be filed before offers are made and no sales could
occur until such amendment is declared effective.
LEGAL PROCEEDINGS
Neither Sooner Holdings nor any of its property is a party to or the
subject of a pending legal proceeding.
We are unaware of any proceeding that a governmental authority is
contemplating that would involve us or any of our property.
We are unaware of any material proceeding to which any director, officer
or affiliate of the company, any owner of record of or beneficially of more than
five percent of any class of voting securities of the company, or security
holder is a party adverse to the company or has a material interest adverse to
the company.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
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 ownership amount and percent represents shares of
the Company's common stock beneficially owned by each of them as of July 31,
2000:
Ownership(1)
------------
Director
Name Age Since Principal Occupation Amount Percent
---- --- -------- -------------------- ------ -------
R.C. Cunningham II 73 06/01/89 Chairman and President, 6,394,081 37.8
Sooner Holdings, Inc.
Ron Alexander, Sr.(2) 58 12/31/99 Vice President, ND 1,442,000 8.5
(apptd Acquisition Corp.
12/31/99)
Brian Bothroyd 37 04/25/00 President, Sooner 3,000,000 17.8
Communications, Inc.
R.C. Cunningham III 35 07/03/97 Vice President, 72,129 *
Sooner Holdings, Inc.
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* Less than 1%
(1) The amount and percent of ownership is based on the total shares of
common stock outstanding of 16,888,016 shares as of June 30, 2000.
(2) Includes 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.
-----------------------------
Director
Name Age Principal Occupation Subsidiary Since
---- --- -------------------- ---------- --------
R.C. Cunningham II 73 Chairman and President, CO Park 06/01/89
Sooner Holdings, Inc. NDAC 09/04/97
R.C. Cunningham III 35 Vice President, Secretary CO Park 07/03/97
Sooner Holdings, Inc. NDAC 09/04/97
Brian Bothroyd 37 President, Sooner Sooner 04/25/00
Communications, Inc. Communications
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 is subsidiaries:
Charlie O Beverages, Inc. and Charlie O Business Park Incorporated since their
respective inceptions. 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 as
a mortgage banker with various lending institutions. In June of 2000 he joined
Sooner Holdings full time as vice president. Mr. Cunningham has a BA Decree in
real estate finance from the University of Oklahoma.
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Ronnie M. Alexander, Sr. Mr. Alexander 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.
Brian Bothroyd. Mr. Bothroyd has over ten years' experience in the
telecommunications industry. In 1990 he became a sales representative with
Westel, Inc. of Austin, Texas. Westel is a long distance communications carrier.
He was promoted to sales manager and then to branch manager. In 1995 he left
Westel and co-founded and served as president of ComSource, Inc., a company that
markets domestic and wholesale international termination to long distance
service providers. He still serves as ComSource's president. He joined Sooner
Holdings in April 2000 and organized its Sooner Communications subsidiary, of
which he is president. Mr. Bothroyd is a full-time employee of Sooner
Communications but performs his duties as president of ComSource in his
otherwise spare time.
Executive Officers, Promoters and Control Persons
The current executive officers of the Company as of July 1, 2000, or its
subsidiaries and their positions held in the Company 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. 06/01/88*
CEO and President, Charlie O Business
Park Incorporated 03/15/91*
CEO and President, ND Acquisiton
Corp. 09/04/97*
Secretary, Sooner Communications, Inc. 04/26/00
Ron Alexander, Sr. 58 Vice President, ND Acquisition Corp. 06/01/98
Brian Bothroyd 37 President, Sooner Communications, Inc. 04/25/00*
R.C. Cunningham III 35 Secretary, Sooner Holdings, Inc. 07/03/97
Treasurer, Sooner Holdings, Inc. 03/31/98
Secretary and Treasurer, Charlie O
Business Park Incorporated 07/03/97
Secretary and Treasurer, ND Acquisition
Corp. 09/04/97*
Vice President, Sooner Holdings, Inc. 07/01/00*
-------------------------
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* Date of inception of the respective companies.
No executive officer, director, person nominated to become a director,
promoter or control person of our company has been involved in legal proceedings
during the last five years such as
o bankruptcy,
o criminal proceedings (excluding traffic violations and other
minor offenses), or
o proceedings permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities.
o Nor has any such person been found by a court of competent
jurisdiction in a civil action, or the Securities and Exchange
Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below sets forth as of August 8, 2000 the beneficial ownership
of securities of the company by the officers and directors, individually, and as
a group, and each person who is known to the company to be the beneficial owner
of more than five percent of the company's voting securities:
Name and Address of Number of Common Percent of
Beneficial Owners Shares(1) Class
------------------- ---------------- ----------
R.C. Cunningham II(5)(6)(8) 6,394,081 37.8
2534 West Interstate 40
Oklahoma City, OK 73103
Brian Bothroyd(2)(8) 3,000,000 17.8
216 Johndoll Drive
Gurthrie, OK 73044
Sheldon L. Miller(3) 502,718 2.9
3000 Town Center, Suite 1700
Southfield, MI 48075
Michael S. Williams(4) 1,006,256 6
3710 East Kent Drive
Phoenix, AZ 85044
Lanny R. Lang(5) 729,183 4
3536 East Saltsage Drive
Phoenix, AZ 85044
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R.C. Cunningham III(6)(8) 72,129 *
2340 Belle View Road
Oklahoma City, OK73112
Ron Alexander, Sr.(7)(8)(9) 1,442,000 8.5
2901 McGee Street
Norman, OK 73072
Marilyn C. Kenan, Trustee 1,047,778 6.2
Marilyn C. Kenan Trust
212 Northwest 18th Street
Oklahoma City, OK 73103
All officers and directors as 10,908,210 65.0
a group (4 persons)
-------------------------
* Less than 1%
Unless otherwise indicated, to the company's knowledge, each person or
group possesses sold 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 16,888,016 shares.
(2) Mr. Bothroyd is the selling security holder named in this Prospectus.
(3) 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.
(4) Includes 384,809 shares owned by Aztore of which Mr. Williams is
president and CEO (see further discussion under "Relationship with
Aztore Holdings, Inc." under Item 12 Certain Relationships and Related
Transactions).
(5) 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).
(6) An officer and director of the company.
(7) A director of the company.
(8) An officer of a subsidiary.
(9) Includes 242,000 shares of common stock owned by C&R Investments of
which Mr. Alexander is the president and sole owner.
There are no arrangements which may result in a change in control of the
company.
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DESCRIPTION OF SECURITIES
-------------------------
The company is authorized to issue 100 million shares of common stock,
$0.001 par value, and 10 million shares of preferred stock, $0.001 par value.
The presently outstanding 16,888,016 shares of common stock are fully paid and
nonassessable.
Common Stock
------------
Voting Rights. Holders of shares of common stock are entitled to one
vote a share on all matters submitted to a vote of the shareholders. Shares of
common stock do not have cumulative voting rights, which means that the holders
of a majority of the shareholder votes eligible to vote and voting for the
election of the board of directors can elect all members of the board of
directors.
Dividend Rights. Holders of record of shares of common stock are
entitled to receive dividends when and if declared by the board of directors out
of funds of the company legally available therefor.
Liquidation Rights. Upon any liquidation, dissolution or winding up of
the company, holders of shares of common stock are entitled to receive pro rata
all of the assets of the company available for distribution to shareholders
after distributions are made to the holders of the company's preferred stock.
Preemptive Rights. Holders of common stock do not have any preemptive
rights to subscribe for or to purchase any stock, obligations or other
securities of the company.
Registrar and Transfer Agent. The company's registrar and transfer agent
is Computershare Trust Company, Inc., 12039 West Alameda Parkway, Lakewood,
Colorado 80228, telephone 303-984-4072.
Dissenters' Rights. Under current Oklahoma law, a shareholder is
afforded dissenters' rights which, if properly exercised, may require the
company to purchase his shares. Dissenters' rights commonly arise in
extraordinary transactions such as
o mergers,
o consolidations,
o reorganizations,
o substantial asset sales,
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o liquidating distributions, and
o certain amendments to the company's certificate of incorporation.
Preferred Stock
---------------
The company is also authorized to issue 10 million shares of preferred
stock, $0.001 par value.
The preferred stock or any series of preferred stock has no qualities or
preferences over the common stock until the board of directors acts. The board
can designate discreet series of the preferred stock. By board resolution it can
carve out a series of preferred stock with specific qualities or preferences.
There are no provisions in the company's charter or bylaws that would
delay, defer or prevent a change in control of the company.
INTEREST OF NAMED EXPERTS AND COUNSEL
Thomas J. Kenan is named in the registration statement of which this
prospectus is a part as having given an opinion on the validity of the offered
securities. His spouse, Marilyn C. Kenan, is the trustee and sole beneficiary of
the Marilyn C. Kenan Trust, which is the record owner of 1,047,778 shares of
common stock of the company. Mr. Kenan disavows any beneficial interest in the
shares owned of record by such trust.
INDEMNIFICATION
Under Oklahoma corporation law, a corporation is authorized to indemnify
officers, directors, employees and agents who are parties or threatened to be
made parties to any civil, criminal, administrative or investigative suit or
proceeding by reason of the fact that they are or were a director, officer,
employee or agent of the corporation or are or were acting in the same capacity
for another entity at the request of the corporation. Such indemnification
includes reasonable expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement if they acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
corporation.
With respect to any criminal action or proceeding, these same
indemnification authorizations apply if these persons had no reasonable cause to
believe their conduct was unlawful.
In the case of any action by the corporation against such persons, the
corporation is authorized to provide similar indemnification. But, if any such
persons should be adjudged to be liable for negligence or misconduct in the
performance of duties to the corporation, the court conducting the proceeding
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must determine that such persons are nevertheless fairly and reasonably entitled
to indemnification.
To the extent any such persons are successful on the merits in defense
of any such action, suit or proceeding, Oklahoma law provides that they shall be
indemnified against reasonable expenses, including attorney fees. A corporation
is authorized to advance anticipated expenses for such suits or proceedings upon
an undertaking by the person to whom such advance is made to repay such advances
if it is ultimately determined that such person is not entitled to be
indemnified by the corporation.
Indemnification and payment of expenses provided by Oklahoma law are not
deemed exclusive of any other rights by which an officer, director, employee or
agent may seek indemnification or payment of expenses or may be entitled to
under any bylaw, agreement, or vote of stockholders or disinterested directors.
In such regard, a Oklahoma corporation behalf of any person who is or was a
director, officer, employee or agent of the corporation.
As a result of such corporation law, Sooner Holdings may, at some future
time, be legally obligated to pay judgments (including amounts paid in
settlement) and expenses in regard to civil or criminal suits or proceedings
brought against one or more of its officers, directors, employees or agents, as
such.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the company pursuant to the foregoing provisions or otherwise, the company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable.
DESCRIPTION OF BUSINESS
Summary and Development of the Company
Our company, Sooner Holdings, Inc., an Oklahoma corporation, was formed
in 1986 to enter the in-home soda fountain business. We never developed this
business into a national market. Subsequently, we evolved into a
multi-subsidiary holding company in diverse businesses. From 1993, when we were
restructured, until June 1998 we sought acquisitions. In November 1987 we
acquired a business park from R.C. Cunningham II, our president and a director.
In June 1998 we acquired, through our subsidiary ND Acquisition Corp., the
assets and certain liabilities of New Direction Centers of America, L.L.C. and
entered the minimum security correctional business. In May 2000 we purchased the
rights to a new, Class 5, hardware and software computer-based platform that
resembles the computer-based soft switch. We named it "Cadeum" and organized a
wholly-owned subsidiary, Sooner Communications, through which we will market
Cadeum to telecommunications carriers.
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We currently operate primarily through three subsidiaries, ND
Acquisition Corp., Sooner Communications, Inc., and Charlie O Business Park
Incorporated. These subsidiaries and a brief summary of their businesses
follows:
ND Acquisition
--------------
ND Acquisition Corp. owns and operates a minimum security correctional
facility for women offenders. The facility is located in Oklahoma City,
Oklahoma. ND Acquisition was formed in 1997 as a wholly owned subsidiary and
began operations upon our acquisition in June 1998 of the assets and certain
liabilities of New Direction Centers of America, L.L.C., an Oklahoma-based
private correctional business.
Sooner Communications
---------------------
Sooner Communications was formed in April, 2000 and immediately acquired
all the rights to a new hardware and software computer-based platform that
resembles the computer-based soft switch. Two Oklahoma City engineers had
developed the platform.
The platform is called "Cadeum." In its present form - it is still under
development, it offers a unified messaging product.
Charlie O Business Park
-----------------------
Charlie O Business Park operates a multi-unit rental property for
business and industrial tenants located in Oklahoma City, Oklahoma. Charlie O
Business Park became an operating subsidiary upon its formation in November 1987
and is 100% owned by the Company.
Discontinued Businesses
-----------------------
Sooner Holdings also owned 100% of SD Properties, Inc. and 100% of
Charlie O Beverages, Inc. During fiscal 1997 and early 1998 the Company
discontinued the two substantially inactive businesses operated by these two
subsidiaries. SD Properties was merged with the company on December 31, 1999.
Charlie O Beverages was spun off to existing shareholders of the company as of
January 15, 1999.
12
<PAGE>
Business Description
The Correctional Business
-------------------------
ND Acquisition entered the minimum-security correctional business in
June 1998 by acquiring the assets and certain liabilities of New Direction
Centers of America, L.L.C. ND Acquisition owns and operates a minimum-security
correctional facility, which houses 160 inmates in Oklahoma City, Oklahoma, as
of August 15, 2000. 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 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, ND
Acquisition 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. ND Acquisition believes that its strategy of offering a
wide variety of programs and services will increase its marketing opportunities.
As of August 15, 2000, ND Acquisition operates one correctional facility
with an aggregate design capacity of 300 beds. It has one significant contract
with the Oklahoma Department of Corrections. Compensation is paid to us based on
a per-person, per-day basis. Revenues from this one contract accounted for 81
percent of our revenue in 1999.
The Telecommunications Business
-------------------------------
Our Sooner Communications subsidiary has purchased all the rights to,
and is continuing the development of a product we call "Cadeum." Cadeum combines
computer-based hardware and software, developed specifically for
telecommunications carriers. For instance, a customer of a telecommunications
provider that offers Cadeum to its customers can access his e-mail by telephone
and have it read to him by a synthetic voice. Cadeum will host other unified
messaging products.
The Cadeum product is being Beta tested now within the regional network
of a 20-year-old, regional, integrated telecommunications service provider. The
strategy of Sooner Communications is to market Cadeum to telecommunications
providers who will then market it to their existing customer base as well as new
customers.
13
<PAGE>
The first phase of installation is to integrate Cadeum - which hosts
Class 5 enhanced features - into a legacy, Class 4 switching environment.
We believe our Cadeum product will be eagerly accepted by the regional
telecommunications providers, but we await the results of the Beta test now in
progress, which results we estimate will be available by October 2000.
We expect the unified messaging segment of the telecommunications
industry to grow from approximately $272 million in 1999 to over $12.5 billion
by 2004. The deregulation of the telecommunications industry has spawned a host
of competitors vying for the public's telephone service. A regional
telecommunications provider needs to distinguish itself from the competition by
offering enhanced services. We believe that our Cadeum product, with its
integration of telephony products, will provide this distinction.
The Real Estate Business
------------------------
Charlie O Business Park operates as a real estate lessor and property
manager and as of June 30, 2000 leases to 23 non-related lessees. Charlie O
Business 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. Sooner Holdings and our Sooner Communications
subsidiary currently operate out of approximately 9,000 square feet in the
business park. Charlie O Business Park competes with other commercial lessors in
the Oklahoma City market. Its occupancy, excluding that leased to Sooner
Holdings and Sooner Communications, has averaged over 90% during both 1999 and
1998.
The Discontinued Businesses
---------------------------
SD Properties, until April 1997, held an interest in a beneficial trust
that owned real estate lots in an Arizona subdivision. SD Properties' net book
value in the beneficial trust was negative due to offsetting liabilities related
to the trust and the underlying lots. In April 1997, SD Properties 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
Sooner Holdings. During 1995 to 1997 SD Properties 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 Sooner
Holdings in December 1999.
Charlie O Beverages operated the original in-home soda fountain
business. We were trying to sell Charlie O Beverages as a going concern or
liquidate the assets of this business. Therefore, the remaining assets of
Charlie O Beverages consisting of inventory and equipment were written down to
their estimated realizable value. We had hoped to sell Charlie O Beverages as a
going concern and therefore, realize additional value for the extensive tooling
14
<PAGE>
and other assets related to Charlie O Beverages business. These latter assets
were written off in their entirety during 1996. Charlie O Beverages was spun off
to existing shareholders of the Company as of January 15, 1999.
General
Seasonality. None of our businesses is subject to significant
seasonality.
Government Regulation. Our correctional services 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 owned by women or minorities.
Correctional contracts are generally renewed on a year-to-year basis.
ND Acquisition'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 our financial condition, results of operations and liquidity.
Further, our current and future operations may be subject to additional
regulations as a result of new statutes and regulations and changes in the
manner in which existing statutes are regulations are or may be interpreted or
applied. Any such additional regulations could have a material adverse effect on
our financial condition, results of operations and liquidity.
Our business park business is subject to municipal zoning
restrictions as to the type of industry that can be conducted on our property.
Our property is zoned as I-2, which excludes us from leasing space to businesses
in heavier industries.
Our telecommunications carrier services business is not subject
to government regulation, and we know of no probable government regulations.
Marketing. ND Acquisition views government agencies that are responsible
for state and federal correctional facilities in the United States as its
primary potential customers. We maintain satisfactory relations with the
Oklahoma Department of Corrections, who awards all state contracts to private
corrections facilities companies in Oklahoma. We are attempting to obtain a
contract with the federal Bureau of Prisons through a joint venture with a
private corrections facilities company headed by former Bureau of Prisons
personnel.
15
<PAGE>
We market our business park space locally through our own efforts
and local real estate brokers.
We will market our Cadeum product to telecommunications carriers
of all types. We anticipate that they will market Cadeum's unified messaging
capabilities to their customers. Initially, our marketing efforts will be
conducted by Brian Bothroyd, the president of Sooner Communications. We
anticipate our Beta test will be sufficiently concluded that we can commence
marketing Cadeum during this year's third fiscal quarter.
Employees. R.C. Cunningham II, our president and chairman of the board,
works on a full-time basis for the company and all subsidiaries. Brian Bothroyd,
president of our Sooner Communications subsidiary, works full time. R.C.
Cunningham III and Ron Alexander both work on a full-time basis for the company.
ND Acquisition has 29 full-time and six part-time employees at
June 30, 2000. ND Acquisition employs management, administrative, clerical,
security, educational services, and general maintenance personnel. ND
Acquisition through subcontractors also provides health care and food service.
All jurisdictions require correction officers to complete a specified amount of
training prior to employment.
Our business park employs two persons full time and one person
part time. Sooner Communications employs two persons full time and one person
part time. Sooner Holdings, the holding company, employs three persons full time
and one person part time.
When the need exists, we or our subsidiaries use temporary
employees or subcontractors to perform administrative services.
Competition. The private correctional services business is highly
competitive, with few barriers to entry. To our knowledge, there are at least 17
companies engaged in the management and operation of privatized correctional
detention facilities. ND Acquisition'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 ND Acquisition's.
ND Acquisition competes 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.
16
<PAGE>
Our business park competes with numerous commercial real estate
providers in the Oklahoma City metropolitan area. Our space was fully leased
from June 1998 until October 1999, when two of our tenants, who leased 17
percent of our space, closed their businesses.
The unified messaging service offered by our Cadeum product will
compete with similar unified messaging products now being introduced and
developed in the U.S. by several providers of enhanced telecommunications
services. To the extent of our knowledge, our competitors are marketing or will
market their products directly to the retail sector. We, however, will market
Cadeum to telecommunications carriers who will enhance their services for their
customers with Cadeum's unified messaging product and, in time, other products
we expect to develop from this Class 5 platform.
Patents
Sooner Holdings has no patents. We will soon file for trademark and
trade name protection for our Cadeum telecommunications product.
Government Approval of Principal Products; Government Regulations
In order to obtain and maintain contracts to operate private
correctional facilities, ND Acquisition has to demonstrate to the governmental
agencies that supply offenders that we comply with their standards and
regulations. Recently, the Oklahoma Department of Corrections retained a
national authority on "halfway house" operations to assess all halfway houses in
Oklahoma with regard to their compliance with an "effective interventions"
agenda developed by the National Institute of Corrections. The authority
reported to Oklahoma's Governor that ND Acquisition is "well on their way to
having a program for female offenders that can serve as a national model."
There is no need to obtain government approval to lease space in our
business park or to sell our Cadeum product.
Costs and Effects of Complying with Environmental Laws
There are no significant costs involved in complying with environmental
laws in operating our correctional facility and our business park.
Working Capital Requirements
We have no requirement for additional working capital.
17
<PAGE>
Product Research and Development
We have spent approximately $100,000 this fiscal year on research and
development activities regarding our Cadeum product. None of this was borne by
customers, as we have no Cadeum customers yet. We will continue to perform
research and development activities on software development for products that
Cadeum is capable of hosting.
Additional Employees
We plan to hire six additional full-time employees to perform research
and development work on our Cadeum product and to assemble Cadeum units for sale
to telephone service providers.
DESCRIPTION OF PROPERTY
The Correctional Facility
-------------------------
ND Acquisition'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 North Lincoln Boulevard in Oklahoma City, Oklahoma.
The facility has a 180-bed capacity, and as of June 30, 2000, the facility is 80
percent occupied. This property is subject to
o a first mortgage that secures a promissory note in the amount of
$537,023 due June 20, 2001, with interest at New York prime plus
two percent, and
o a second mortgage that secures a promissory note in the amount of
$1,198,140 due June 1, 2001, with stated interest of 10 percent a
year but effective interest at 15 percent a year.
Depreciation on the Halfway House Property
------------------------------------------
The federal tax basis of the Halfway House Property is $713,378 as of
December 31, 1999. For purposes of depreciation, the $351,066 in improvements
portion of such tax basis is being depreciated at approximately 15 percent a
year, MACRS method over a claimed life of 39 years of which 37 years remain.
We pay annual realty taxes of $8,800 which is at an approximate 1.25
percent tax rate.
We have plans to improve the property by adding sufficient space to
house an additional 42 beds for an expected increase in female inmates. The
estimated cost of adding the planned 3,150 square feet expansion is $70,000. We
believe we will be able to finance this expansion through a bank loan guaranteed
by our president, R.C. Cunningham II. The realty tax rate, annual realty taxes
and estimated taxes on the proposed improvements are $700.
18
<PAGE>
This property, and our ability to liquidate its mortgaged indebtedness,
are subject to our ability to survive in the private correctional services
business. There is considerable competition in this industry. Our operation for
female offenders, however, operates at capacity. Further, a recent enactment by
the Oklahoma State Legislature makes it mandatory that all prison inmates
convicted of non-violent offenses with non-violent juvenile and institutional
records must spend at least 90 days in an accredited halfway house before
release from the Oklahoma prison system.
In the opinion of management, the property is adequately covered by
insurance.
The Business Park
-----------------
Charlie O Business Park's industrial business park property consists of
five buildings totaling approximately 126,900 square feet on five acres of real
estate. The 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.
Charlie O Business 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 was 100% occupied. As of March 31, 2000, the
facility is 89% occupied. This property is subject to a first mortgage that
secures an installment promissory note in the amount of $2,487,570 due in full
on August 1, 2009, with interest at 8.8 percent.
There is considerable competition in the business park industry in
Oklahoma City. However, we have operated at 81 percent or better rates for
several years, and leased commercial property occupancy rates have been rising
in the Oklahoma City metropolitan area.
We believe the business park and its properties are adequately covered
by insurance.
The following tenant leases ten percent or more of the rentable square
footage:
19
<PAGE>
<TABLE>
<CAPTION>
Principal Provisions
Principal Nature of the
Name of Lessee of its Business Tenant's Lease
-------------- ---------------- --------------------
<S> <C> <C>
Harbor Freight Tools Retails tools Monthly rental of $8,000.
Lease expires 11-30-03.
Four successive options
to renew, each for a 5-
year term
</TABLE>
The other principal businesses, occupations and professions carried on
in or from the business park:
o restaurant,
o pick-up parts,
o neon signs and banners,
o shoes and clothing,
o home and window cleaning,
o construction company,
o lawn care,
o water company,
o casters and supplies,
o print shop,
o overhead door company,
o linex spray, and
o steering column repair.
The average effective annual rental a square foot in the business park
was $3.50 on July 31, 2000.
The following is a schedule of the lease expirations for 2000 and the
next nine years:
<TABLE>
<CAPTION>
Percentage of
No. of Tenants Gross Annual
Whose Lease Square Footage of Annual Rental of Rental Represented
Year Will Expire Existing Lease Expiring Lease By Expiring Leases
---- -------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
2000 2 10,500 $ 31,500 8.4
2001 9 26,190 $ 87,700 23.2
2002 4 10,702 $ 41,700 11.1
2003 7 50,344 $216,108 57.3
</TABLE>
Depreciation on the Business Park
---------------------------------
The federal tax basis of the Business Park is $3,037,440 as of December
31, 1999. For purposes of depreciation, the $685,033 in improvements portion of
such tax basis is being depreciated at 2.5 percent a year, straight line method
over a claimed life of 40 years of which 28 to 40 years remain.
20
<PAGE>
We pay annual realty taxes of $13,800, which is at a 0.5 percent tax
rate.
Other Properties
----------------
SD Properties had no remaining real property, directly or indirectly,
after the sale of the trust interest in April 1997. Charlie O Beverages had no
real property.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Background and Introduction
Sooner Holdings was formed in 1996 to enter the in-home soda fountain
business. Subsequently, we evolved into a multi-subsidiary holding company in
diverse businesses. During 1996 and early 1997 we narrowed our focus to Oklahoma
real estate while seeking new business opportunities. In June 1998 we acquired,
through our subsidiary ND Acquisition Corp., 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:
Cash flow used in operations decreased $46,463 (47%) during the year
ended December 31, 1999 due primarily to a smaller net loss and significant
non-cash expenses. Cash flows used in investing activities increased $110,680
(61%) due primarily to increased purchases of property and equipment related to
additions to our business park. Cash flows from financing activities increased
$173,014 (55%) due primarily to increased net borrowings on notes payable.
We have had severe liquidity problems for the last several years. Our
liquidity is reflected in the table below, which shows comparative deficiencies
in working capital at December 31:
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Deficiency in working capital $(96,224) $(384,852)
======= ========
</TABLE>
Although our working capital is negative, we have been able to meet our
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 R.C. Cunningham II, the company's chairman of the board and president,
or by Aztore Holdings, Inc., a Phoenix, Arizona-based investment company. 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 New Directions.
As of April 11, 2000, we 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, we believe that we can
borrow any additional funds from our related parties to maintain our operations,
although there can be no assurance that such funds will be available when
21
<PAGE>
needed. In the event that we cannot refinance, or obtain forbearance on our
current liabilities or on our long-term liabilities as they come due, we will
undoubtedly face further severe liquidity problems which may lead to litigation,
the inability to transact business, or foreclosure actions being initiated
against a majority of the company's assets.
In June 1999, we refinanced the debt on Charlie O Business 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, we reached an agreement with Aztore and
associated companies to forgive approximately $450,000 in notes payable and
accrued interest. In exchange for the forgiveness, 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.
Interim Results. June 30, 2000 compared to June 30, 1999.
For the six-month period ended June 30, 2000 compared to the six-month
period ended June 30, 1999, cash flows used in operations increased $47,461
(590%) due primarily to increased net loss, offset partially by increased
non-cash expenses related to stock-based compensation. Cash flows used in
investing decreased $98,222 (45%) due primarily to reduced purchases of property
and equipment. Cash flows provided by financing activities decreased $95,175
(25%) due primarily to decreased net borrowings.
<TABLE>
<CAPTION>
June 30,
------------------------------
2000 1999
---- ----
<S> <C> <C>
Deficiency in working capital $(1,772,779) $(32,350)
</TABLE>
The significant decrease in working capital resulted from the
contractual terms of certain notes payable. The company would show a positive
working capital if not for the following items:
1. The note due to New Direction Centers of America, L.L.C.
is due on June 1, 2001. In prior reporting, this note had
been a long-term debt. However, by its terms, it is due
within one year of the date of the June 30, 2000 interim
balance sheet that appears in this Prospectus. The amount
due in these statements is $1,198,140. This note is not in
default.
2. The mortgage payable on the correctional facility is
intended by all parties to be a long-term obligation.
However, by its terms, it is a one-year renewable note
payable monthly. The most current due date is April 20,
2001. The amount due in the June 30, 2000 interim balance
sheet is $537,023. This note is paid current and is not in
default.
In June 2000, the company refinanced the debt on Charlie O
Business 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.
22
<PAGE>
The operations of the corrections business are now cash-flow
positive and profitable and sufficient to service the debt payments under the
note and the mortgage payment on the facility. The company intends to continue
the rehabilitation of the facility in order to bring the inmate occupancy up to
300 beds. In the event that cash flow is insufficient to satisfy the company's
needs, management believes that it can borrow any additional funds from its
related parties to maintain its operations.
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:
<TABLE>
<CAPTION>
1999 1998
Amount % Amount %
------ -- ------ --
<S> <C> <C> <C> <C>
Charlie O Business Park revenues $ 362,404 19 $ 291,329 28
New Directions revenues 1,570,029 81 743,957 72
Other revenues 0 4,158 *
---------- ----------
Total revenues $1,932,433 $1,039,444
========== ==========
</TABLE>
-------------------------
* Less than 1%
Total revenues increased by $892,289, or 86%, in fiscal 1999. Some 93%
of our revenue increase was related to our New Directions subsidiary. In June
1998 we acquired through New Directions 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 a month in 1999 over 1998.
Our 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 the total revenues for our business park. In addition, the revenues
increased from 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
23
<PAGE>
revenues due to any prolonged vacancy. There is no assurance we will maintain
our 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 versus seven months in 1998. The amortization of the New
Directions 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 expenses, consisting primarily of professional and
management fees, also increased due to the acquisition of the corrections
business in June 1998 and operation of the corrections business for a full
twelve months in 1999.
Interim Results. June 30, 2000 compared to June 30, 1999.
The following table illustrates the company's revenue mix:
<TABLE>
<CAPTION>
Six Months ended
June 30
----------------------------
2000 1999
----------------------------
<S> <C> <C>
Business Park revenue $205,541 $160,203
NDAC revenue 769,474 806,927
-------- --------
Total revenue $975,015 $967,130
======== ========
</TABLE>
Total revenues increased by $7,885 (1%) over the comparable
period in 1999.
The business park's revenues increased $45,338 (28%) for the six
months ended June 30, 2000, compared to the same six-month period in 1999. The
increase is attributable to aggressive marketing of the park and significantly
more favorable leases. At June 30, 2000 the business park was 90% occupied.
Total operating expenses increased $129,219 (15%) for the six
months ended June 30, 2000, compared to the same six-month period in 1999. This
increase is primarily $93,000 non-cash expense related to the issuance of stock
as compensation. Depreciation increased slightly during the period, primarily
due to asset acquisitions.
Interest expense increased by $32,535 (11%) for the six months
ended June 30, 2000 as compared to the comparable period in 1999, primarily due
to the NDAC subsidiary and interest rates on debt.
Loss from discontinued operations relates to the spinoff of the
company's subsidiary, Beverages.
24
<PAGE>
The company recorded net loss of $303,599 for the six months
ended June 30, 2000, as compared to a net loss of $157,461 for the comparable
1999 period. This increase in net loss in 2000 is due primarily to the $93,000
non-cash compensation realized on the issuance of stock.
Capital Expenditures and Commitments
During the six months ended June 30, 2000, the company spent
approximately $166,000 on capital expenditures. Approximately $91,000 of these
expenditures relate to the purchase of hardware for the communications
subsidiary. NDAC spent $30,000 on the purchase of vans necessary for inmate
transportation, and $11,000 on finishing out additional rooms to accommodate the
increasing inmate population. The business park spent approximately $25,000 on
the tenant build-out and other park improvements.
The communications subsidiary acquired rights to certain software during
the quarter. This software is capitalized at $450,000.
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 $288,628, these
factors still raise substantial doubt about our ability to continue as a going
concern. The realization of a major portion of our assets is dependent upon our
ability to meet our financing requirements and the success of our future
operations.
We acquired a minimum security correctional facility in June 1998 and
have 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. We seek to expand our corrections service
operations and believe that this segment will ultimately result in future growth
and profitability of the company.
In 1997, our business park initiated a program of bringing its lease
rates up to the prevailing market rates. As part of this activity, it generally
extended its lease terms from one year to three to five years. The business park
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. The business park is actively
seeking to rent any space which becomes vacant at these higher rates.
We believe that these plans will be effective in improving our
profitability and working capital position and will provide the company the
opportunity to continue as a going concern. However, there can be no assurance
25
<PAGE>
that these plans will be successful.
Capital Expenditures and Commitments
During the year ended December 31, 1999, we spent approximately $38,000
on capital expenditures primarily related to leasehold improvements at our
correctional facility operations. We spent approximately $215,000 for capital
expenditures, primarily for leasehold improvements on our business park
operations during 1999. In addition, we believe we need 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 our current operations. There can be no assurance
that we will be able to obtain any such additional capital on satisfactory
terms, if at all. In such case, our 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 our future operating
results. These include the uncertain general economic conditions, the ongoing
support of Aztore and Cunningham, our ability to refinance our short- and
long-term liabilities on satisfactory terms, and our ability to acquire
sufficient funding to sustain our operations and develop new businesses.
A majority of these issues directly or indirectly relate to our 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 we do. 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
26
<PAGE>
company's control. Accordingly, actual results may differ, perhaps materially,
from those expressed in or implied by such forwarding-looking statements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have 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 this Prospectus.
Relationship with Aztore Holdings, Inc. (formerly ShareData Inc.)
In December 1993, we acquired SD Properties in exchange for shares of
common stock. ShareData was the majority shareholder of SD Properties and
received 887,753 shares or approximately 17 percent of our 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. We had an Advisory
Agreement with Aztore to act as our financial advisor. Aztore receives an annual
fee equal to five percent of our 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 a share.
During 1997, Aztore agreed to accept 260,000 shares of common stock of
Auction Television Network, Inc. ("ATVN") owned by the company as consideration
for payment of a $39,000 note payable, or $.15 per ATVN share.
27
<PAGE>
Effective November 1, 1999, we reached an agreement with Aztore and
associated companies to forgive approximately $450,000 in notes payable and
accrued interest. In exchange for the forgiveness, Sooner Holdings issued two
notes for $120,000 and $180,000 bearing interest at ten percent, with
preferential liquidation terms. This transaction resulted in a non-cash gain to
us of approximately $107,000, net of tax.
Relationship with R.C. Cunningham II
In December 1993, Sooner Holdings 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 five percent 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. is an Oklahoma City, Oklahoma investment firm.
Ron Alexander, Sr. has been the vice president of ND Acquisition Corp., our
corrections business, a subsidiary, since December 1999 and is the managing
director for C&R. The management of the operation of NDAC is subcontracted to
C&R. Fees paid to C&R under this management agreement totaled $60,000 for the
year ended December 31, 1999. C&R owns approximately three percent of Sooner
Holdings' common stock.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock trades on the OTC Bulletin Board under the stock symbol
"SOON". The high and low bid information for the stock during 1998, 1999 and the
first two quarters of 2000 is set forth below. The information was obtained from
the OTC Bulletin Board and reflects inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions:
<TABLE>
<CAPTION>
Calendar
Quarter High Low
-------- ---- ---
1998:
<S> <C> <C>
1st Qtr 0.875 0.250
2nd Qtr 0.375 0.375
3rd Qtr 0.428 0.06
4th Qtr 0.428 0.06
</TABLE>
28
<PAGE>
<TABLE>
1999:
<S> <C> <C> <C>
1st Qtr 0.313 0.06
2nd Qtr 0.313 0.06
3rd Qtr 0.313 0.06
4th Qtr 0.188 0.06
2000:
1st Qtr 0.488 0.08
2nd Qtr 0.500 0.188
</TABLE>
Shareholders
As of July 31, 2000, the company had 566 shareholders of record. This
does not include the holders whose shares are held in a depository trust in
"street" name. As of June 30, 2000, 1,451,038 shares (or approximately 8.6
percent) 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. There are no restrictions that limit the ability of the
company to pay dividends on the common stock or that are likely to do so in the
future other than the requirement that dividends be paid out of earnings.
PENNY STOCK REGULATIONS
Our common stock has always traded at a price less than $5 a share and
is subject to the rules governing "penny stocks."
A "penny stock" is any stock that:
o sells for less than $5 a share,
o is not listed on an exchange or authorized for quotation on The
Nasdaq Stock Market, and
o is not a stock of a "substantial issuer." Sooner Holdings is not
now a "substantial issuer" and cannot become one until it has net
tangible assets of at least $5 million, which it does not now
have.
There are statutes and regulations of the Securities and Exchange
Commission that impose a strict regimen on brokers that recommend penny stocks.
29
<PAGE>
The Penny Stock Suitability Rule
Before a broker-dealer can recommend and sell a penny stock to a new
customer who is not an institutional accredited investor, the broker-dealer must
obtain from the customer information concerning the person's financial
situation, investment experience and investment objectives. Then, the
broker-dealer must "reasonably determine" (1) that transactions in penny stocks
are suitable for the person and (2) that the person, or his advisor, is capable
of evaluating the risks in penny stocks.
After making this determination, the broker-dealer must furnish the
customer with a written statement setting forth the basis for this suitability
determination. The customer must sign and date a copy of the written statement
and return it to the broker-dealer.
Finally the broker-dealer must also obtain from the customer a written
agreement to purchase the penny stock, identifying the stock and the number of
shares to be purchased.
The above exercise delays a proposed transaction. It causes many
broker-dealer firms to adopt a policy of not allowing their representatives to
recommend penny stocks to their customers.
The Penny stock Suitability Rule, described above, and the Penny Stock
Disclosure Rule, described below, do not apply to the following:
o transactions not recommended by the broker-dealer,
o sales to institutional accredited investors,
o transactions in which the customer is a director, officer,
general partner, or direct or indirect beneficial owner of more
than 5 percent of any class of equity security of the issuer of
the penny stock that is the subject of the transaction, and
o transactions in penny stocks by broker-dealers whose income from
penny stock activities does not exceed five percent of their
total income during certain defined periods.
The Penny Stock Disclosure Rule
-------------------------------
Another Commission rule - the Penny stock Disclosure Rule - requires a
broker-dealer, who recommends the sale of a penny stock to a customer in a
transaction not exempt from the suitability rule described above, to furnish the
customer with a "risk disclosure document." This document is set forth in a
federal regulation and contains the following information:
30
<PAGE>
o A statement that penny stocks can be very risky, that investors
often cannot sell a penny stock back to the dealer that sold them
the stock,
o A warning that salespersons of penny stocks are not impartial
advisers but are paid to sell the stock,
o The statement that federal law requires the salesperson to tell
the potential investor in a penny stock -
o the "offer" and the "bid" on the stock, and
o the compensation the salesperson and his firm will receive
for the trade,
o An explanation that the offer price and the bid price are the
wholesale prices at which dealers are willing to sell and buy the
stock from other dealers, and that in its trade with a customer
the dealer may add a retail charge to these wholesale prices,
o A warning that a large spread between the bid and the offer price
can make the resale of the stock very costly,
o Telephone numbers a person can call if he or she is a victim of
fraud,
o Admonitions -
o to use caution when investing in penny stocks,
o to understand the risky nature of penny stocks,
o to know the brokerage firm and the salespeople with whom
one is dealing, and
o to be cautious if ones salesperson leaves the firm.
Finally, the customer must be furnished with a monthly statement including
prescribed information relating to market and price information concerning the
penny stocks held in the customer's account.
Effects of the Rule
-------------------
The above penny stock regulatory scheme is a response by the Congress
and the Commission to known abuses in the telemarketing of low-priced securities
by "boiler shop" operators. The scheme imposes market impediments on the sale
31
<PAGE>
and trading of penny stocks. It has a limiting effect on a stockholder's ability
to resell a penny stock.
Our common stock likely will trade below $5 a share on the OTC Bulletin
Board and be, for some time at least, shares of a "penny stock" subject to the
trading market impediments described above.
Potential De-Listing of Common Stock
NASD Eligibility Rule 6530 issued on January 4, 1999, states that
issuers that do not make current filings pursuant to Sections 13 and 15(d) of
the Securities Exchange Act of 1934 are ineligible for listing on the OTC
Bulletin Board. Issuers who are not current with such filings are subject,
first, to having an "E" appended to their trading symbol and, then, to
de-listing if they fail to become current within a short period of time. We will
remain subject to delisting at any time that we are not current in filing
reports in the future.
Reports to Security Holders
We file reports with the Securities and Exchange Commission. These
reports are annual 10-KSB, quarterly 10-QSB and periodic 8-K reports. We will
furnish stockholders with annual reports containing financial statements audited
by independent certified public accountants and such other periodic reports as
we may deem appropriate or as required by law. The public may read and copy any
materials we file with the SEC at the Public Reference Room of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Sooner Holdings is an electronic filer, and the SEC maintains an Internet Web
site that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC. The address
of such site is http://www.sec.gov.
EXECUTIVE COMPENSATION
No executive officer of the company has received total compensation in
any of the last three years that exceeds $60,000. The table below sets forth all
compensation awarded to, earned by, or paid to R.C. Cunningham II, the president
of the company during the last three years:
32
<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Awards
-----------------------
Annual Compensation Securities
--------------------------------- -----------
Underlying Payouts
------------ --------------------
Other Annual Restricted Options/LTIP All Other
------------ ---------- ------------ ---------
Year Salary Bonus Compensation Stock Awards SARS Payouts Compensation
---- ------ ----- ------------ ------------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 $0 0 0 0 0 0 0
1998 $0 0 0 0 0 0 0(1)
1997 $0 0 0 0 0 0 0(1)
</TABLE>
(1) In December 1993, Mr. Cunningham entered into an Incentive Compensation
Agreement, which provided remuneration to Mr. Cunningham based only on
the company's revenue performance. Mr. Cunningham received no base
compensation and would receive a cash incentive fee of five percent of
the company's gross revenues, payable on a quarterly basis. This
agreement was terminated December 31, 1998.
Stock Options. We have adopted a Year 2000 Stock Option Plan, the major
provisions of which Plans are as follows:
Options granted under the plans may be "employee incentive stock
options" as defined under Section 422 of the Internal Revenue Code or
non-qualified stock options, as determined by the option committee of the board
of directors at the time of grant of an option. The plans enable the option
committee of the board of directors to grant up to two million stock options to
employees and consultants from time to time. The option committee has granted
options as follows:
<TABLE>
<CAPTION>
No. of
Shares
Expiration Subject Exercise
Date to Option Price
---------- ---------- --------
<S> <C> <C> <C>
Melissa S. Fletcher 06-21-03 300,000 $0.333
R.C. Cunningham III 06-21-03 300,000 $0.333
</TABLE>
Directors. There are no arrangements pursuant to which directors of the company
are compensated for their services as a director.
Employment Contracts. The company has no employment contracts with any person or
any compensatory plan or arrangement with any person that would result from the
resignation, retirement or any other termination of a person's employment with
the company or its subsidiaries or from a change in control of the company or a
change in a person's responsibilities following a change in control of the
company.
33
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The principal independent accountant of the company or any significant
subsidiary has not resigned, declined to stand for re-election, or been
dismissed by the company during the periods for which financial statements are
included herein.
ADDITIONAL INFORMATION
The company will furnish its shareholders with annual reports containing
audited financial information, reported upon by independent public accountants.
The company shall also furnish quarterly reports for the first three quarters of
each year containing unaudited financial information.
FINANCIAL STATEMENTS
The following financial statements are included as part of this
prospectus:
Page
----
Report of Independent Certified Public Accountants ....................... F-1
Consolidated Balance Sheets, December 31,
1999 and 1998 .................................................... F-2
Consolidated Statements of Operations
Year ended December 31, 1999 and 1998 ............................ F-3
Consolidated Statement of Changes in Stockholders'
Deficit Year Ended December 31, 1999 and 1998 .................... F-4
Consolidated Statements of Cash Flows
Year ended December 31, 1999 and 1998 ............................ F-5
Notes to Consolidated Financial Statements ............................... F-7
Consolidated Balance Sheet June 30, 2000 (Unaudited)...................... F-21
Consolidated Statements of Operations (Unaudited)
Six Months ended June 30, 2000
and 1999.......................................................... F-22
Consolidated Statements of Stockholders' Equity
(Unaudited) June 30, 2000 ........................................ F-23
Consolidated Statements of Cash Flows (Unaudited)
Six Months ended June 30, 2000 and 1999.......................... F-24
Notes to Financial Statements (Unaudited) ............................... F-26
34
<PAGE>
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.
/s/ Grant Thornton LLP
----------------------
GRANT THORNTON LLP
Oklahoma City, Oklahoma
April 5, 2000
F-1
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
<TABLE>
<CAPTION>
1999 1998
---------- ----------
CURRENT ASSETS
<S> <C> <C>
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 STOCKHOLDER' 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
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
Sooner Holdings, Inc. and Subisidaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
<TABLE>
<CAPTION>
1999 1998
---------- ----------
Revenues
<S> <C> <C>
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
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
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 this statement.
F-4
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
Increase (Decrease) in Cash
Cash flows from operating activities
<S> <C> <C>
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
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year ended December 31,
<TABLE>
<CAPTION>
1999 1998
----------- -----------
Supplemental Disclosure of Noncash Investing and
Financing Activities
<S> <C> <C>
Conversion of accrued liabilities to notes payable $ - $ 71,344
======== =========
</TABLE>
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:
<TABLE>
<S> <C>
Assets acquired $2,517,082
Stock issued 36,000
---------
Liabilities assumed $2,481,082
=========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
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.
F-7
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE B - SUMMARY OF ACCOUNTING POLICIES - CONTINUED
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.
F-8
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE B - SUMMARY OF ACCOUNTING POLICIES - CONTINUED
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.
F-9
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following as of December 31:
<TABLE>
<CAPTION>
Useful life 1999 1998
----------- ---------- ----------
<S> <C> <C> <C>
Land - $1,311,400 $1,311,400
Buildings and improvements 12-40 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
========= =========
</TABLE>
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:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Loan commitment fee $112,889 $ 27,941
Certificates of deposit 267,000 267,000
Related party receivable 87,620 -
------- -------
$467,509 $294,941
======= =======
</TABLE>
Amortization expense totaled $2,812 and $1,500 for the years ended December
31, 1999 and 1998, respectively.
F-10
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE E - NOTES PAYABLE
Notes payable consist of the following at December 31:
<TABLE>
<CAPTION>
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
<S> <C> <C>
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
</TABLE>
F-11
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE E - NOTES PAYABLE - CONTINUED
<TABLE>
<CAPTION>
1999 1998
---------- ----------
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,
<S> <C> <C>
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
========= =========
</TABLE>
(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.
F-12
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE E - NOTES PAYABLE - CONTINUED
Aggregate future maturities of debt at December 31, 1999 are as follows:
<TABLE>
Year ending December 31
<S> <C>
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
=========
</TABLE>
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:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
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
=======
</TABLE>
F-13
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
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:
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
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) $ -
======== ========
</TABLE>
F-14
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE H - INCOME TAXES - CONTINUED
Components of deferred taxes are as follows at December 31:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
Assets
<S> <C> <C>
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 $ - $ -
========= =========
</TABLE>
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.
Management 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. Aztore owns approximately
12% of the Company's common stock.
F-15
<PAGE>
Sooner Holdings, Inc. and Subsidiaires
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE I - RELATED PARTY TRANSACTIONS - CONTINUED
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 Agreements
----------------
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:
<TABLE>
<CAPTION>
1999 1998
------------------------------- -------------------------------
Accounts payable Accounts payable
Notes and accrued Notes and accrued
payable, net liabilities payable, net liabilities
------------ ---------------- ------------ ----------------
<S> <C> <C> <C> <C>
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
========= ======== ========== ========
</TABLE>
F-16
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE I - RELATED PARTY TRANSACTIONS - CONTINUED
During 1999, the Company reached an agreement to restructure notes payable
and accrued interes 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:
<TABLE>
<S> <C>
2000 $ 432,958
2001 397,365
2002 298,713
2003 136,436
2004 43,002
---------
$1,308,474
=========
</TABLE>
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.
F-17
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE K - BUSINESS COMBINATIONS - CONTINUED
A summary of the purchase price at June 1, 1998 is as follows:
<TABLE>
Issuance of 1,000,000 shares of common stock
<S> <C>
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
=========
</TABLE>
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, 1998:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenues $ 1,286,572 $ 1,363,445
========== ==========
Net loss $ (649,102) $ (475,255)
========== ==========
Loss per common share $ (.08) $ (.06)
========== ==========
</TABLE>
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.
F-18
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE L - COMMITMENTS AND CONTINGENCIES - CONTINUED
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:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
Revenues
<S> <C> <C>
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
========= =========
</TABLE>
F-19
<PAGE>
Sooner Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1999 and 1998
NOTE M - SEGMENT INFORMATION - CONTINUED
<TABLE>
<CAPTION>
1999 1998
----------- -----------
Capital expenditures
<S> <C> <C>
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
========== ==========
</TABLE>
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.
F-20
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
June 30, 2000
-------------
ASSETS
Current assets:
<S> <C>
Cash and cash equivalents $ 284,363
Restricted cash 10,045
Accounts receivable 174,611
Other current assets 19,433
-----------
Total current assets 488,452
Property and equipment, net 3,076,218
Intangible assets, net of amortization of $405,743 1,743,101
Other assets, net 481,403
-----------
$ 5,789,174
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current notes payable $ 152,356
Accounts payable 98,227
Accrued liabilities to related parties 160,618
Accrued liabilities 69,145
Current portion of notes and royalty payable 1,760,550
Deferred revenue 20,335
-----------
Total current liabilities 2,261,231
-----------
Notes payable, less current portion and net of
discount of $132,860 3,483,324
Royalty payable, less current portion and net of
discount of $787,803 424,000
Redeemable common stock, $0.001 par value,
500,000 shares issued and outstanding 446,000
Stockholders' deficit:
Preferred stock; undesignated, authorized 10,000,000
shares, no shares issued and outsanding -
Common stock; $.001 par value, authorized 100,000,000
shares, 16,388
16,888,016 shares issued and outstanding, less
500,000 shares subject to repurchase
Additional paid-in-capital 5,999,990
Accumulated deficit (6,529,759)
Related party receivables from stock purchase (312,000)
-----------
$ 5,789,174
===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-21
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the six months ended
June 30,
2000 1999
----------- -----------
Revenues:
<S> <C> <C>
Service revenues $ 769,474 $ 806,927
Rental revenues 205,541 160,203
--------- ---------
Total revenues 975,015 967,130
--------- ---------
Operating expenses:
Cost of Service 418,592 392,762
General and administrative 390,867 300,373
Depreciation and amortization 156,369 143,474
--------- ---------
Total operating expenses 965,828 836,609
--------- ---------
Income (loss) from operations 9,187 130,521
Interest expense (318,216) (285,681)
Other income (expense) 5,430 15,000
--------- ---------
Net loss from continuing operations (303,599) (140,160)
Loss from discontinued operations - (17,301)
--------- ---------
Net loss $ (303,599) $ (157,461)
========= =========
Net loss per common share $ (.03) $ (.02)
========= =========
Weighted average common shares 11,386,620 8,471,350
========== =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-22
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Stockholders' Equity
(unaudited)
<TABLE>
<CAPTION>
Common Stock Common Stock Related Party Total Accumulated
Shares Amount Paid-In Capital Receivables Deficit
------------ ------------ --------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 2000 8,471,350 $ 8,471 $ 5,532,907 $ (6,226,160)
Issuance of stock April 29, 2000 6,250,000 6,250 368,750 $ (312,000) -
Issuance of stock in partial satisfaction
of stockholder debt, April 29, 2000 1,666,666 1,667 98,333 -
Issuance of redeemable common stock 500,000 - - -
Net loss for Period - - - (303,599)
---------- ------- ----------- ---------- ------------
Balance, June 30, 2000 16,888,016 $16,388 $ 5,999,990 $ (312,000) $ (6,529,759)
========== ======= =========== ========== ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-23
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the six months ended
June 30,
2000 1999
----------- ------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $(303,599) $ (157,461)
--------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss from discontinued operations - 17,301
Accretion of interest 82,388 100,880
Common stock issued for compensation 93,000 -
Depreciation and amortization 156,369 143,474
Changes in assets and liabilities:
Accounts receivable (39,948) (55,700)
Other current assets and other assets 4,871 19,453
Accounts payable (50,936) (58,111)
Accrued liabilities to related parties 45,564 27,422
Accrued liabilities (27,419) (45,403)
Deferred revenue (15,771) 125
--------- -----------
Net cash used in operating activities (55,481) (8,020)
--------- -----------
Cash flows from investing activities:
Change in restricted cash 26,364 -
Purchases of property and equipment (146,717) (218,574)
--------- -----------
Net cash used in investing activities (120,353) (218,574)
--------- -----------
Cash flows from financing activities:
Repayments of notes payable (24,985) (1,982,539)
Royalty payments (2,717) (36,000)
Borrowings from related parties 200,000 -
Borrowings on notes payable 110,000 2,510,000
Repayments of notes payable to related parties - (113,988)
--------- -----------
Net cash provided by financing activities 282,298 377,473
--------- -----------
Net increase in cash 106,464 150,879
Cash at beginning of year 177,899 76,792
--------- -----------
Cash at end of period $ 284,363 $ 227,671
========= ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 174,115 $ 128,456
========= ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-24
<PAGE>
SOONER HOLDINGS, INC.
Consolidated Statements of Cash Flows
(unaudited)
Non-cash transactions:
In connection with settlement of the lawsuit discussed in Note 7,
$71,910 was transferred from accrued liabilities to notes payable for
the six month period ended June 30, 2000.
In connection with non-cash issuance of stock during the six month period ended
June 30, 2000, the Company recorded:
1. In exchange for 500,000 shares of stock: Intangible assets of
$396,000, property of $20,000, compensation of $30,000, and
Redeemable common stock of $446,000
2. In exchange for 4,200,000 shares of stock: Notes receivable of
$252,000.
3. In exchange for 1,666,666 shares of stock: A reduction in
stockholder debt of $100,000.
4. In exchange for 1,050,000 shares of stock: Compensation
expense of $63,000.
The accompanying notes are an integral part
of these consolidated financial statements.
F-25
<PAGE>
SOONER HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 2000
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and operations
---------------------------
Sooner Holdings, Inc., an Oklahoma corporation (the "Company"), operates
primarily through three of its subsidiaries. New Directions Acquisition Corp.
(NDAC) owns and operates a minimum-security correctional facility in Oklahoma
City, Oklahoma. Charlie O Business Park Incorporated (Business Park) is engaged
in the ownership and rental of a business park in Oklahoma City, Oklahoma.
Sooner Communications, Inc., formed on April 24, 2000, is in engaged in
providing enhanced services to the telecommunications industry.
Basis of presentation
---------------------
The unaudited consolidated financial statements presented herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations for interim financial information and the instructions to Form
10-QSB and Regulation S-B. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principals have been omitted. These unaudited
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1999 (the "1999 Form
10-KSB"). In the opinion of management, the unaudited consolidated financial
statements reflect all adjustments (consisting of normal recurring accruals
only) which are necessary to present fairly the consolidated financial position,
results of operations, and changes in cash flow of the Company. Operating
results for interim periods are not necessarily indicative of the results which
may be expected for the entire year.
Management plans
----------------
For the fiscal year ending December 31, 1999, the independent auditor's
report included an explanatory paragraph calling attention to a going concern
issue. The accompanying consolidated financial statements have been prepared
contemplating continuation of the Company as a going concern. The Company has
suffered recurring losses from operations, has a shareholders' deficit and a
working capital deficiency of $ 1,772,779 at June 30, 2000. In view of these
matters, 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. Management believes that its plans to revise the
Company's operating and financial requirements, as described more fully in the
1999 Form 10-KSB, provide the Company the opportunity to continue as a going
concern. However, there can be no assurance that these plans will be successful.
Principles of consolidation
---------------------------
The accompanying consolidated financial statements have been prepared on
the basis of generally accepted accounting principles and include the accounts
of Sooner Holdings, Inc. and all majority owned subsidiaries. All significant
intercompany transactions have been eliminated.
Reclassifications
-----------------
Certain reclassifications have been made to the interim 1999 financial
statements to conform to the interim 2000 presentation.
F-26
<PAGE>
NOTE 2 - Property and Equipment
Property and equipment as of June 30, 2000 is comprised of the
following:
<TABLE>
<S> <C>
Land $1,311,400
Buildings and improvements 2,165,974
Machinery and equipment 158,729
Vehicles 80,968
---------
$3,717,071
Less accumulated depreciation 640,853
---------
Property and equipment, net $3,076,218
=========
</TABLE>
NOTE 3 - OTHER ASSETS
Other assets at June 30, 2000 is comprised of the following:
<TABLE>
<S> <C>
Rent Deposit $ 1,190
Receivable from New Direction Centers of America, LLC 102,315
Loan commitment fee, less amortization of $4,208 110,898
Certificates of deposit 267,000
---------
Other assets, net $ 481,403
=========
</TABLE>
NOTE 4 - NOTES PAYABLE
<TABLE>
Notes payable as of June 30, 2000 consists of the following:
Installment note payable, interest at 8.8%, due August 1,
<S> <C>
2009; collateralized by first mortgage on real estate $2,487,570
Notes payable to president and CEO, interest at 10%, due
after June 30, 2001. Subordinate to first mortgage on
correctional facility. 714,944
Note payable to stockholder, interest at 10%. Payable
at $5,000 per month, including principal and interest.
Not collateralized. Final payment due January 28, 2001. 32,357
Notes payable to stockholders, interest at 10%, due
concurrently with balloon promissory note discussed
below. Not collateralized. 300,000
Revolving line of credit from Bank, interest at prime
plus 3.25%, currently 11.5%, matures May 5, 2005,
collateralized by accounts receivable. 35,000
Balloon promissory note payable to related party
(see note 6), 10% stated interest per annum, 15%
effective interest rate, principal and interest due
June 1, 2001; collateralized by a second mortgage
on land and facility owned by the Company, net
of discount of $132,860. 1,198,140
Note payable to bank, interest at 10%, due July 13,
2000. Secured by personal guarantee of major
shareholder. 85,000
Note payable to bank, interest at New York prime plus
2%, due April 20, 2000, collateralized by a first
mortgage on land and facility owned by the Company.
Renewed April 20, 2000 until April 20, 2001 537,023
---------
5,390,034
Less current portion and current notes 1,906,710
---------
Notes payable - Long Term $3,483,324
=========
</TABLE>
In June 1999, the Company refinanced several notes payable that were due
to mature. A single note payable to a bank bearing an 8.8% interest rate and
maturing in June 2009 replaced these notes.
F-27
<PAGE>
NOTE 5 - ROYALTY PAYABLE
As part of a business acquisition, 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. The agreement expires on
April 30, 2017. Future minimum payments under this agreement total $1,218,000.
Unamortized discount related to this agreement is $ 787,803 at June 30, 2000.
Current portion of the royalty payable is $6,196.
NOTE 6 - related parties
The Company's related parties are more fully described in the 1999 Form
10-KSB. The following table reflects amounts owed to related parties at June 30,
2000:
<TABLE>
<CAPTION>
Notes Accrued
Payable Liabilities
------- -----------
<S> <C> <C>
President and Chairman $ 714,944 $ 140,686
Other Significant Stockholders 332,357 19,932
New Direction Centers of America, LLC 1,198,140 -
--------- ---------
Total related party liabilities $2,245,441 $ 160,618
========= =========
</TABLE>
In addition, the president and chairman has personally guaranteed
$629,108 of the Company's notes payable.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Legal Matters
-------------
In February 1998, a lawsuit was filed by a business associate against
the Company related to the purchase of NDLLC. On January 18, 2000, a settlement
was reached. The terms of the settlement include a payment of $76,000 by NDAC.
Part of the terms of the settlement included a lump sum payment of $20,000 and
an installment note for $56,000 payable at $5,000 per month at 10%, which is
included in notes payable at June 30, 2000. The balance due as of the balance
sheet date is $32,357.
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 8 - INCOME TAXES
Due to ongoing losses, the Company's current tax liability is zero. The
tax benefit resulting from losses in these financial statements is reduced due
to increases in the valuation allowance.
NOTE 9 - STOCKHOLDERS' DEFICIT
Redeemable Common Stock and Stock Repurchase Agreement
-------------------------------------------------------
Effective April 29, 2000, the Company entered into an agreement to
acquire certain software, hardware, and services in exchange for 500,000 shares
of the Company's restricted common stock. As of that date, the Company believed
the value of the stock to be $0.06 per share, or $30,000, and the value of the
put feature to be $416,000.
Part of the agreement constitutes a put feature whereby, if the
Company's stock does not trade at or above $1.00 per share during the twelfth
month after the date of the contract, the stockholders have the option of
requiring the Company to repurchase the stock at $1.00 per share.
F-28
<PAGE>
The stock has been recorded as redeemable common stock and excluded from
stockholders' equity. If, in fact, the stock does trade within the contract
range during the measurement period, the redeemable common stock will be
reclassified as capital.
Employee Stock Option Plan
--------------------------
The Company has a stock option plan ("2000 Plan") for directors,
officers, key employees, and consultants covering 2,000,000 shares of Company
common stock. Options granted under the 2000 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% 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.
At a special meeting of the Board of Directors on June 21, 2000, each of
R.C. Cunningham III and Melissa S. Fletcher was granted an option to purchase
300,000 shares of Common Stock exercisable within three years at $0.333 per
share, the market price on June 21, 2000.
NOTE 10 - SEGMENT INFORMATION
The Company operates in the following three segments: commercial
leasing, correctional facility operation, and the communications industry.
Information concerning the Company's business segments is as follows for the six
and three months ended June 30, respectively:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
---------- ----------
<S> <C> <C>
Revenues Commercial leasing $ 205,541 $ 160,203
Communications 0 0
Correctional facility 769,474 806,927
--------- ---------
Total $ 975,015 $ 967,130
========= =========
Segment operations
profit (loss) Commerical leasing $ 25,669 $ (118,997)
Communications (83,635) -
Correctional facility (100,323) 6,419
Corporate (145,310) (27,582)
--------- ---------
Total $ (303,599) $ (140,160)
========= =========
Identifiable assets Commercial leasing $2,596,665 $2,502,440
Communications 497,394 0
Correctional facility 2,495,365 2,585,444
Corporate 199,750 139,638
--------- ---------
Total $5,789,174 $5,227,522
========= =========
</TABLE>
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, receivables, and other current
assets.
F-29
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The general corporation law of Oklahoma and the bylaws of the Registrant
provide certain indemnification rights for directors, officers and agents of the
Registrant. These indemnification provisions are set forth in the Prospectus
under "Indemnification."
Item 25. Other Expenses of Issuance and Distribution
The estimated expenses of this offering, other than brokers'
commissions, are as follows:
<TABLE>
<CAPTION>
Estimated
Item Amount
---- ---------
<S> <C>
Registration fees $ 250
Transfer agent's fees 1,500
Printing 2,000
Legal 20,000
Accounting 35,000
EDGAR provider fees 3,000
-------
$61,750
</TABLE>
The Registrant, by prior agreement with the selling security holder,
will pay all the above expenses. The selling security holder will pay none of
them.
Item 26. Recent Sales of Unregistered Securities
The following information is provided for all securities sold by the
Registrant within the past three years without registering the securities under
the Securities Act of 1933. All securities were shares of common stock. There
were no underwriters involved in the sales.
<TABLE>
<CAPTION>
Dollar Value of
No. of Cash Other Type of
Date Shares Sold Purchasers Consideration Consideration
---- ----------- ---------- ------------- ---------------
<S> <C> <C> <C> <C>
01-01-98 1,000,000(1) __ persons $ - $ 36,000
04-26-00 250,000 Craig Brooks - 15,000(2)
04-26-00 250,000 Dennis Smith - 15,000(2)
04-26-00 3,000,000 Brian Bothroyd 180,000 -
04-26-00 1,200,000 Ron Alexander, Sr. 72,000 -
04-26-00 1,000,000 Thomas J. Kenan 60,000 -
04-26-00 500,000 Tom Garner - 30,000(3)
</TABLE>
35
<PAGE>
<TABLE>
<S> <C> <C> <C>
04-26-00 100,000 Tom Buxton 6,000(3)
04-26-00 200,000 Henson Cash Cargill 12,000(3)
04-26-00 100,000 Ron Alexander, Jr. 6,000(3)
04-26-00 25,000 Kathy Upton 1,500(3)
04-26-00 25,000 Kelly Simmons 1,500(3)
04-26-00 100,000 Brian D. Gustas 6,000(3)
04-27-00 1,666,666 R.C. Cunningham II 100,000(4)
</TABLE>
------------------------
(1) These shares were issued as part of the purchase price of the New
Directions' correctional facility. See "Certain Relationships and
Related Transactions" in the Prospectus. The shares were issued pursuant
to the exemption from registration provided by Regulation D, Rule 506.
No public solicitation or public advertising was employed.
(2) These shares were issued in exchange for this person's one-half interest
in the property rights to the CadeumTM hardware and software system that
is the basis for the business of the company's communications
subsidiary, Sooner Communications, Inc.
(3) These shares were issued to this person in exchange for personal
services already rendered to Sooner Holdings, Inc.
(4) These shares were issued to this person in exchange for the reduction of
$100,000 in debt owed to him.
Exhibits
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description of Exhibit
------- ----------------------
3(i) - Articles of Incorporation of Sooner Holdings, Inc. and amendments
thereto.(1)
3(ii) - Bylaws of Sooner Holdings, Inc.(1)
5 - Opinion of Thomas J. Kenan on the legality of the
securities being registered.
9 - 2000 Stock Option Plan.
10.1 - 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)
36
<PAGE>
10.2 - Purchase and Sale Agreement dated May 7, 1998.(2)
10.3 - Promissory Note between Sooner Holdings, Inc. and Bulldog
Investment Company, an Arizona limited liability
company.(5)
10.4 - Promissory Note between Sooner Holdings, Inc. and Aztore
Holdings, Inc., an Arizona corporation.(5)
10.5 - Agreement Re: Debt Cancellation and Release of Liability dated
November 1, 1999 between Sooner Holdings, Inc., Bulldog
Investment Company, LLC, and Aztore Holdings, Inc.(5)
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)
22.1 - Subsidiaries of the registrant.(5)
23 - Consent of Thomas J. Kenan, to the reference to him as an
attorney who has passed upon certain information contained
in the Registration Statement.
23.1 - Consent of Grant Thornton LLP, Certified Public
Accountants, independent auditors of the Registrant.
27 - Financial Data Schedule.
------------------------
(1) Incorporated by reference to the company's Form 10-KSB for the year
ended December 31, 1995 (file number 0-18344).
(2) Filed as an exhibit to the company's Form 8-K, filed June 23, 1999 (file
number 0-18344).
(3) Filed as an exhibit to the company's Form 8-K/A, filed May 11, 1999
(file number 0-18344).
(4) Filed as an exhibit to the company's Form 8-K, filed June 16, 1999 (file
number 0-18344).
(5) Filed as an exhibit to the company's Form 10-KSB, filed March __, 2000
(file number 0-18344).
Item 28. Undertakings
The Registrant will -
37
<PAGE>
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement; and notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the volume and price represent no
more than a twenty percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) Include any additional or changed material information on
the plan of distribution.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the company pursuant to the foregoing provisions, or otherwise, the
company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the company of expenses incurred or paid by a
director, officer or controlling person of the company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
38
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Oklahoma City, Oklahoma.
Date: September 25, 2000 SOONER HOLDINGS, INC.
By/s/ R.C. Cunningham II
--------------------------------------
R.C. Cunningham II, President,
and individually as a Director
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated.
Date: September 25, 2000 /s/ R.C. Cunningham III
--------------------------------------
R.C. Cunningham III, Vice President
and individually as a Director
Date: September 26, 2000 /s/ Ronnie M. Alexander
--------------------------------------
Ronnie M. Alexander, Director
Date: September 25, 2000 /s/ Brian Bothroyd
--------------------------------------
Brian Bothroyd, President of Sooner
Communications and Director
39
<PAGE>
PROSPECTUS DELIVERY OBLIGATION. All dealers or brokers that effect transactions
in these securities for the selling security holders are required to deliver a
Prospectus.
40
<PAGE>
Sooner Holdings, Inc.
Exhibits to Form SB-2 Registration Statement
Exhibit
Number Description of Exhibit
------- ----------------------
5 - Opinion of Thomas J. Kenan on the legality of the
securities being registered.
9 - 2000 Stock Option Plan.
23 - Consent of Thomas J. Kenan, to the reference to him as an
attorney who has passed upon certain information contained
in the Registration Statement.
23.1 - Consent of Grant Thornton LLP, Certified Public
Accountants, independent auditors of the Registrant.
27 - Financial Data Schedule.
