SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from January 1, 2000 to September 30, 2000
Commission File No. 0-18344
SOONER HOLDINGS, INC.
(Name of small business issuer in its charter)
Oklahoma 73-1275261
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
2534 W. I-40 Oklahoma City, Oklahoma 73108
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (405) 236-8332
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common stock, $0.001 par
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes__X__ No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form l0-KSB. [ ]
Revenues for the nine months ended September 30, 2000 were $1,542,590.
The aggregate market value of the voting stock held by non-affiliates
of the Company on December 15, 2000 was approximately $476,500. As of December
15, 2000 we had 16,888,016 shares of common stock issued and outstanding.
Transitional Small Business Issuer Disclosure Format Yes No X
<PAGE>
PART I
ITEM 1. 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, Inc., through which we will
market Cadeum to telecommunications carriers.
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, Inc. ("CO 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 we own 100% of the subsidiary.
Discontinued Businesses
Sooner Holdings also owned 100% of Charlie O Beverages, Inc. ("CO
Beverages"). During fiscal 1997 and early 1998 we discontinued the substantially
inactive business operated by this subsidiary. Charlie O Beverages was spun off
to our existing shareholders as of January 15, 1999.
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 190 inmates in Oklahoma City, Oklahoma, as
of September 30, 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 September 30, 2000, ND Acquisition operates one correctional facility with
an aggregate design capacity of 220 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 98
percent of our correctional revenue for the nine months ended September 30,
2000.
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 regional
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.
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
telecommunications providers, but we await the results of the Beta test now in
progress, which results we estimate will be available by February 2001.
We expect the unified messaging segment of the telecommunications
industry to grow from approximately $272 million in 2000 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. Telecommunication
providers need to distinguish themselves 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 September 30, 2000 leases to 24 non-related lessees. CO Park's
property includes five separate buildings, covering approximately 126,500 square
feet, located at the intersection of I-40 and Agnew Street in Oklahoma City,
Oklahoma. We and our Communications subsidiary currently operate out of
approximately 2,100 square feet in this business park. CO 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 2000 and 1999.
The Discontinued Business
CO Beverages operated the original in-home soda fountain business. We
were trying to sell CO Beverages as a going concern or liquidate the assets of
this business. Therefore, the remaining assets of CO Beverages consisting of
inventory and equipment were written down to their estimated realizable value.
We had hoped to sell CO Beverages as a going concern and therefore, realize
additional value for the extensive tooling and other assets related to CO
Beverages business. These latter assets were written off in their entirety
during 1996. CO Beverages was spun off to our existing shareholders as of
January 15, 1999.
General
Seasonality. Our company and its subsidiaries are not subject to
seasonal fluctuations.
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.
Should ND Acquisition fail to comply with any applicable laws,
rules or regulations, or lose any required license, it 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 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 next year's second fiscal quarter.
Employees. R.C. Cunningham II, our president and chairman of the
board, works on a full-time basis for us and all of our subsidiaries. Brian
Bothroyd, president of our Sooner Communications subsidiary, works full time.
R.C. Cunningham III and Ron Alexander both work for us on a full-time basis.
ND Acquisition has 29 full-time and six part-time employees at
September 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 four persons full-time and one person
part-time. Sooner Holdings, the holding company, employs two 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.
Our business park competes with numerous commercial real
estate providers in the Oklahoma City metropolitan area. As of September 30,
2000, the business park is 97% leased.
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.
Cost 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 based upon a
successful refinancing of our correctional facility, discussed elsewhere in this
document.
Product Research and Development
We have spent approximately $168,000 this fiscal year on research and
development activities regarding our Cadeum product. None of this was borne by
customers. We will continue to perform research and development activities on
software development for products that Cadeum is capable of hosting.
Additional Employees
Upon successful implementation and marketing, 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.
ITEM 2. 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 220-bed capacity, and as of September 30, 2000, the facility
is 89 percent occupied. This property is subject to
- a first mortgage that secures a promissory note in the amount
of $530,242 due April 20, 2001, with interest at New York
prime plus two percent, and
- a second mortgage that secures a promissory note in the amount
of $1,239,246 due June 1, 2001, with stated interest of 10
percent a year but effective interest at 15 percent a year.
The federal tax cost basis of the correctional facility is
$777,647 as of September 30, 2000. For purposes of depreciation, the $365,746 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 36 years
remain.
We pay annual realty taxes of $2,100, which is at an approximate .30
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 foot 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 $210.
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 near 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
CO Park's industrial business park property consists of five buildings
totaling approximately 126,500 square feet on five acres of real estate. This
property is located at our corporate address at the intersection of I-40 and
Agnew Street in Oklahoma City, Oklahoma. We and our subsidiaries occupy
approximately 2,100 square feet and the remainder of the industrial park is
leased to 24 unrelated lessees. The lessees generally use the property for
retail, manufacturing and light industrial operations.
CO Park's leases are generally for three to five years. As of December
31, 1999, excluding the square footage leased to us and our affiliates, the
facility was 100% occupied. As of September 30, 2000, the facility is 97%
occupied. This property is subject to a first mortgage that secures an
installment promissory note in the amount of $2,484,212 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:
Principal Nature Principal Provisions
Name of Lessee of its Business of the Tenant's Lease
-------------------- ---------------- -------------------------
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.
The other principal businesses, occupations and professions carried on
in or from the business park:
- restaurant,
- pick-up parts,
- neon signs and banners,
- shoes and clothing,
- home and window cleaning,
- construction company,
- lawn care,
- water company,
- casters and supplies,
- print shop,
- overhead door company,
- linex spray, and
- steering column repair.
The average effective annual rental a square foot in the business park
was $3.90 on September 30, 2000.
The following is a schedule of the lease expirations for fiscal year
ending September 30, 2001 and the following five years. No existing lease
extends beyond 2006.
<TABLE>
No. of Percentage of
Tenants Gross Annual
Fiscal 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>
2001 6 20,763 $ 70,020 16.5
2002 5 14,346 $ 47,928 11.3
2003 9 42,305 $ 156,408 36.9
2004 2 20,320 $ 126,000 29.7
2005 0 0 0 0.0
2006 1 5,880 $ 24,000 5.7
</TABLE>
Depreciation on the Business Park
The federal tax cost basis of the Business Park is $3,084,781 as of
September 30, 2000. For purposes of depreciation, the $679,504 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.
We pay annual realty taxes of $14,168, which is at a 0.46 percent tax
rate.
Other Properties
CO Beverages had no real property.
ITEM 3. LEGAL PROCEEDINGS
In February 1998, a lawsuit was filed by one of the owners of New
Direction Centers of America, L.L.C. against us relating to the purchase of the
community correctional business. On January 18, 2000, a settlement was reached
which includes a payment of $76,000.
We are 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 our results of operations or financial condition.
ITEM 4. Submission of Matters to a Vote of Security Holders
In fiscal 2000, there were no matters submitted to a vote of security
holders through the solicitation of proxies or otherwise. Our last meeting of
shareholders was in 1996.
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters
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 the year
ended December 31, 1999 and the nine months ended September 30, 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>
Calendar Quarter High Low
---------------- ------ ------
<S> <C> <C> <C>
1999: 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
3rd Qtr 0.500 0.188
</TABLE>
Shareholders
As of September 30, 2000, we had 566 shareholders of record. This does
not include the holders whose shares are held in a depository trust in "street"
name. As of September 30, 2000, 1,451,038 shares (or approximately 8.6 percent)
of the issued and outstanding stock were held by Depository Trust Company in
"street" name.
Dividend Information
We have not paid or declared any dividends upon our common stock since
our inception and, by reason of our present financial status and our
contemplated financial requirements, do not anticipate paying any dividends in
the foreseeable future. There are no restrictions that limit our ability 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.
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.
ITEM 6. Management's Discussion and Analysis or Plan of Operation
MANAGEMENT'S DISCUSSION AND ANALYSIS
Background and Introduction
Charlie O Beverages, Inc. was formed in 1986 to enter the in-home soda
fountain business. Subsequently, we evolved into a multi-subsidiary holding
company in diverse businesses and changed our name to Sooner Holdings, Inc..
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. In April 2000, we formed a subsidiary, Sooner
Communications, Inc., to enter the telecommunications support business.
Effective with this filing, we are changing our reporting year to
September 30.
Liquidity and Capital Resources - September 30, 2000 compared to December 31,
1999:
Cash flow provided by operations increased $59,961, and from negative
to positive, (percentage NA) during the nine months ended September 30, 2000 as
compared to the year ended December 31, 1999, due primarily to significant
non-cash expenses. Cash flows used in investing activities decreased $127,244
(44%) due primarily to a significant reduction in tenant build out at our
business park (-$175,081), offset by increased leasehold improvement activity at
our correctional subsidiary (+$26,288), and increased cash purchases of
equipment related to our communications business (+$76,846). The decrease in
cash used in investing activities also reflects a reduction in amounts owed as
trust liabilities for inmate wages. Cash flows from financing activities
decreased $330,384 (69%) due primarily to decreased net borrowings on notes
payable, and purchase of stock totaling $60,000.
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:
September 30, December 31,
2000 1999
Deficiency in working capital $ (1,863,838) $ (96,224)
============= ============
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 our
related parties. Our 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, our chairman of the board and president, or by Aztore Holdings,
Inc., a Phoenix, Arizona-based investment company. Aztore holds various notes
and liabilities against us 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 April 20, 2001. This note is an annually
renewable, fixed payment note. We have received assurances that, absent default
or a serious decline in the financial position of our ND Acquisitions, Inc.
subsidiary, this note will be renewed. As of the balance sheet date of September
30, 2000, this note has a balance due of $530,242 and is classified as short
term due to the above mentioned extended due date. No other terms changed. This
note is not in default.
As a part of the acquisition of our correctional business, we issued a
single-pay note with a face amount of $1,000,000, due June 1, 2001. As of the
balance sheet date, this note has a balance of $1,239,247, including accrued
interest. We expect to be able to refinance this note with an outside lender
prior to the due date. This note is not in default.
These two notes represent $1,769,489 of our $1,863,838 working capital
deficiency.
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
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 our 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 exchange approximately $450,000 in notes payable and
accrued interest. In exchange for the notes payable and accrued interest, we
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 us of approximately $107,000, net of tax.
Results of Operations - The nine months ended September 30, 2000 compared to the
year ended December 31, 1999:
The following table illustrates our revenue mix. Unaudited data from
the Form 10-QSB filed for the third quarter of 1999 are presented for comparison
purposes to our nine months ended September 30, 2000.
<TABLE>
Nine Months
Nine Months Ended
Ended September Year Ended
September 30, 1999 December
30, 2000 % (Unaudited) % 31, 1999 %
----------- -- ----------- -- ---------- --
<S> <C> <C> <C> <C> <C> <C>
Real estate leasing $ 301,924 20 $ 253,582 17 $ 362,404 19
revenues
Correctional revenues 1,240,666 80 1,203,931 83 1,570,029 81
----------- ----------- -----------
Total revenues $1,542,590 $1,457,513 $1,932,433
=========== =========== ===========
</TABLE>
Total revenues decreased by $389,843, or 20%, in the nine months ended
September 30, 2000 as compared to the twelve months ended December 31, 1999.
However, this represents an increase in average revenues of $7,016 per month at
our correctional subsidiary, or a 5% average fee/occupancy increase a month in
2000 over 1999.
Our business park revenues decreased $60,480, or 17%, in the nine
months ended September 30, 2000 as compared to the twelve months ended December
31, 1999. However, this represents an increase of $3,347 per month in average
revenue. This also includes the loss of a major tenant (15,000 sq. ft.) in May,
2000. All but 4,000 sq. ft. of this area has been released as of September 30,
2000. At September 30, 2000, the business park was 97% occupied, net of space
used by us. Losses of tenants in the future could affect future operations and
financial position because of the cost of new leasehold improvements and lower
revenues due to any prolonged vacancy. There is no assurance we will maintain
our high occupancy rate.
<TABLE>
Nine Months
Nine Months Ended
Ended September Year Ended
Operating Expenses September 30, 1999 December
(Before Interest Expense) 30, 2000 % (Unaudited) % 31, 1999 %
------------------------- ----------- -- ----------- -- ----------- --
<S> <C> <C> <C> <C> <C> <C>
Real estate leasing $ 120,084 7 $ 131,807 11 $ 180,289 11
expenses
Correctional expenses 1,155,962 71 1,113,853 87 1,355,107 85
Corporate expenses 130,888 8 27,845 2 64,976 4
Communications expenses 231,779 14 0 0 0 0
----------- -- ----------- -- ----------- --
Total Operating Expenses $1,638,713 $1,273,505 $1,600,372
=========== =========== ===========
</TABLE>
Total operating expenses for the nine months ended September 30, 2000
were $1,638,713, as compared to total expenses for the year ended December 31,
1999 period of $1,600,372. This represents an increase of $38,341 in total
operating expenses for the nine months ended September 30, 2000 versus twelve
months in 1999. Expenses incurred in starting up our communications business
during the period amounted to $231,779, including a $45,000 accrual for deferred
salary to the subsidiary president. Total depreciation and amortization
decreased by $20,423. Expenses at our correctional facility decreased by
$169,998, exclusive of a reduction in depreciation and amortization of $54,621.
The increase in operating expenses at the correctional facility represents the
amounts necessary to accommodate our increased inmate population. Expenses at
our commercial leasing facility decreased by $60,205, primarily due to decreased
fees for leasing and refinancing. In addition, general and administrative
expenses at our corporate activity, consisting primarily of professional and
management fees, increased due to non-cash compensation paid in stock.
Capital Expenditures and Commitments
During the nine months ended September 30, 2000, we spent approximately
$207,519, exclusive of the software discussed below, on capital expenditures.
Approximately $95,000 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, $23,000 on finishing out additional rooms
to accommodate the increasing inmate population, and $11,000 on furniture,
fixtures, and computers. The business park spent approximately $47,000 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 $396,000.
Going Concern and Management Plans
As shown in the financial statements, we incurred a net loss of $521,380 during
the nine month period ended September 30, 2000 and, as of that date, our current
liabilities exceeded its current assets by $1,863,838 and our total liabilities
exceeded our total assets by $519,162.
Realization of a major portion of our assets is dependent upon our ability to
meet its financing requirements and the success of our future operations.
ND Acquisitions, Inc - During the nine months ended September 30, 2000,
ND Acquisitions, Inc. generated a positive cash flow from operations of
approximately $103,500. Inmate population has increased from an average of less
than 130 per day to in excess of 170 per day. This operation is subject to two
notes which, by their terms, are classified as short term in these financials.
One of the notes is an annually renewable first mortgage. The first mortgage
note holder has indicated that, absent default or a serious decline in the
financial position of ND Acquisitions, Inc., the note will be renewed. The other
note is a single pay note due June 1, 2001. We intend to obtain long term
financing to retire this note. Upon refinancing, this operation will be
self-supporting.
Charlie O Business Park, Inc. - During the nine months ended September
30, Charlie O Business Park, Inc. generated a positive cash flow from operations
of approximately $53,700. As of the balance sheet date, the park was 97%
occupied. This operation is self-supporting.
Sooner Communications, Inc. - Sooner Communications has generated no
revenue to date. We are working with our regional customer to complete the
interface for voice mail into the system of a major telecommunications provider.
We expect to complete testing of, and begin marketing, the unified messaging
system by February 1, 2001.
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 our president, R. C. 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. Our company and all its subsidiaries have had unsuccessful
operating histories and have been consistently unprofitable. Recently, two of
our subsidiaries have shown positive cash flows from operations. Our competition
would almost uniformly have more resources and capital in general than we do. If
we expand, we will have to attract satisfactory operating personnel. If we or
any of our subsidiaries experience any substantial reversal, including but not
limited to the areas discussed above, such entity may have to seek formal court
protection from creditors.
<PAGE>
ITEM 7. Financial Statements
The following financial statements listed in the table below have been
prepared in accordance with the requirements of Item 310(a) of Regulation SB.
Report of Independent Certified Public Accountants
Board of Directors
Sooner Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Sooner Holdings,
Inc. and Subsidiaries, as of September 30, 2000 and December 31, 1999, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for the nine month period ended September 30, 2000 and year ended December
31, 1999. 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 auditing standards generally accepted
in the United States of America. 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 September 30, 2000 and December 31, 1999, and the
consolidated results of their operations and their consolidated cash flows for
the nine month period ended September 30, 2000 and the year ended December 31,
1999 in conformity with accounting principles generally accepted in the United
States of America.
As shown in the financial statements, the Company incurred a net loss of
$521,380 during the nine month period ended September 30, 2000 and, as of that
date, the Company's current liabilities exceeded its current assets by
$1,863,838 and its total liabilities exceeded its total assets by $537,162.
These factors, among others, as discussed in Note A to the consolidated
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note A. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
November 15, 2000
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------- --------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 175,827 $ 177,899
Restricted cash 11,498 36,409
Accounts receivable, net of allowance
of $7,013 in 1999 157,037 134,663
Other current assets 21,295 40,189
--------------- --------------
Total current assets 365,657 389,160
PROPERTY AND EQUIPMENT, net 3,080,594 2,966,550
INTANGIBLE ASSETS, net of accumulated
amortization of $487,432 in 2000 and
$308,364 in 1999 1,663,049 1,444,429
OTHER ASSETS 478,484 467,509
--------------- --------------
$ 5,587,784 $ 5,267,648
=============== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 103,082 $ 149,163
Accrued liabilities 287,204 243,973
Deferred revenue 24,335 36,106
Current portion of notes and royalty
payable, net of discount of $91,753
in 2000 1,814,874 56,142
-------------- --------------
Total current liabilities 2,229,495 485,384
NOTES PAYABLE, less current portion and
net of discount of $215,334 in 1999 3,473,046 5,039,884
ROYALTY PAYABLE, less current portion and net
of discount of $705,595 in 2000 and $821,085
in 1999 422,405 427,162
COMMITMENTS AND CONTINGENCIES - -
REDEEMABLE COMMON STOCK, $.001 par value;
500,000 shares issued and outstanding in 2000 468,500 -
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, 16,888,016
shares in 2000 and 8,471,350 shares in
1999, less 500,000 shares subject to
repurchase in 2000 16,388 8,471
Additional paid-in capital 5,977,490 5,532,907
Accumulated deficit (6,747,540) (6,226,160)
Related party receivable from stock purchase (252,000) -
-------------- --------------
(1,005,662) (684,782)
-------------- --------------
$ 5,587,784 $ 5,267,648
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine month
period ended Year ended
September 30, December 31,
2000 1999
-------------- --------------
Revenues
<S> <C> <C>
Rental $ 301,924 $ 362,404
Service 1,240,666 1,570,029
-------------- --------------
Total revenues 1,542,590 1,932,433
Expenses
Cost of services 513,289 752,723
General and administrative 849,860 551,662
Depreciation and amortization of
intangible assets 275,564 295,987
-------------- --------------
Total operating expenses 1,638,713 1,600,372
-------------- --------------
Income (loss) from operations (96,123) 332,061
Other (income) expense (9,961) 32,274
Interest expense 435,218 611,712
-------------- --------------
425,257 643,986
-------------- --------------
Loss before income taxes and
extraordinary item (521,380) (311,925)
Income tax benefit - deferred - 70,000
-------------- --------------
Loss before extraordinary item (521,380) (241,925)
Extraordinary gain on extinguishment of
debt, net of income taxes of $70,000 - 116,010
-------------- --------------
NET LOSS $ (521,380) $ (125,915)
============== ==============
Basic and diluted loss per common share
Loss before extraordinary item $ (.04) $ (.03)
Extraordinary gain - .02
-------------- --------------
Basic and diluted loss per common share $ (.04) $ (.01)
============== ==============
Weighted average common shares outstanding 13,201,885 8,471,350
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
Nine month period ended September 30, 2000 and year ended December 31, 1999
Common stock Additional Related Total
------------------------- paid-in Accumulated party stockholders'
Shares Amount capital deficit receivable deficit
------------ ----------- ------------ ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 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)
Issuance of stock April 29, 2000 6,250,000 6,250 368,750 - (252,000) 123,000
Issuance of stock in satisfaction of a
note payable to a related party 1,666,666 1,667 98,333 - - 100,000
Issuance of redeemable common stock 500,000 - - - - -
Accretion of redeemable common stock - - (22,500) - - (22,500)
Net loss - - - (521,380) - (521,380)
------------ ----------- ------------ ------------- ----------- ---------------
Balance at September 30, 2000 16,888,016 $ 16,388 $5,977,490 $(6,747,540) $(252,000) $ (1,005,662)
============ =========== ============ ============= =========== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine month
period ended Year ended
September 30, December 31,
2000 1999
-------------- --------------
Increase (Decrease) in Cash
Cash flows from operating activities
<S> <C> <C>
Net loss $ (521,380) $ (125,915)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 275,564 295,987
Accretion of discount on notes and
royalty payables 123,580 152,000
Write-off of other assets - 27,315
Loss on disposition of property and
equipment - 16,817
Extraordinary gain on extinguishment of
debt - (186,010)
Common stock issued for compensation 93,000 -
Changes in assets and liabilities
Accounts receivable (22,374) 2,476
Other current assets and other assets 3,211 (88,751)
Accounts payable (46,081) 6,342
Accrued liabilities and other
liabilities 115,141 (153,556)
Deferred revenue (11,771) 2,224
-------------- --------------
Net cash provided by (used in)
operating activities 8,890 (51,071)
Cash flows used in investing activities
Purchase of property and equipment (187,519) (253,443)
Decrease (increase) in restricted cash 24,911 (36,409)
-------------- --------------
Net cash used in investing activities (162,608) (289,852)
Cash flows from financing activities
Borrowings on notes payable 321,178 3,265,111
Repayments of notes payable (225,456) (2,665,237)
Royalty payments (4,076) (4,955)
Loan financing fees - (112,889)
Issuance of common stock 60,000 -
-------------- --------------
Net cash provided by financing activities 151,646 482,030
-------------- --------------
NET INCREASE (DECREASE) IN CASH (2,072) 141,107
Cash at beginning of year 177,899 36,792
-------------- --------------
Cash at end of year $ 175,827 $ 177,899
============== ==============
Cash paid for interest $ 219,469 $ 532,254
============== ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Supplemental Disclosure of Noncash Investing and Financing Activities
During the nine month period ended September 30, 2000, the following occurred:
In connection with settlement of the lawsuit discussed in Note L, $71,910 was
transferred from accrued liabilities to notes payable.
In connection with noncash issuances of stock, the Company recorded:
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.
In exchange for 5,200,000 shares of stock: notes receivable of $312,000.
In exchange for 1,666,666 shares of stock: a reduction in stockholder debt
of $100,000.
In exchange for 1,050,000 shares of stock: compensation expense of $63,000.
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).
The accompanying notes are an integral part of these statements.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000 and December 31, 1999
NOTE A - ORGANIZATION AND OPERATIONS
Sooner Holdings, Inc. ("Sooner" or the "Company"), an Oklahoma corporation,
through its subsidiaries, conducts business in three 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 which
operates a minimum security correctional facility. Sooner Communications,
Inc.("Telecommunications") formed on April 24, 2000, is engaged in providing
enhanced services to the telecommunications industry.
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
$987,662, and has a working capital deficiency of $1,863,838 as of September
30, 2000. 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. Plans regarding the Company's primary operations are as
follows, however, there is no assurance that these objectives can be
achieved:
NDAC -- During the nine months ended September 30, 2000, NDAC generated a
positive cash flow from operations of approximately $103,500. Inmate
population has increased from an average of less than 130 per day to in
excess of 170 per day. This operation is subject to two notes which, by
their terms, are classified as short-term at September 30, 2000. One of
the notes is an annually renewable first mortgage. The first mortgage
note holder has indicated that, absent default or a serious decline in
the financial position of NDAC, the note will be renewed. The other note
is a single pay note due June 1, 2001. The Company intends to obtain
long-term financing to retire this note. Upon refinancing, this operation
will be self-supporting.
Business Park -- During the nine months ended September 30, 2000,
Business Park generated a positive cash flow from operations of
approximately $53,700. As of the balance sheet date, the park was
approximately 90% occupied. This operation is self-supporting.
Telecommunications -- This segment has generated no revenue to date. The
Company is working with its regional customer to complete the interface
for voice mail into the system of a major telecommunications provider.
The Company expects to complete testing of, and begin marketing, the
unified messaging system by February 1, 2001.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE B - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows.
1. Principles of Consolidation
The consolidated financial statements include the accounts of Sooner
Holdings, Inc. and its wholly owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.
2. Revenue Recognition
The Company records rental revenue on a straight-line basis over the term of
the underlying leases.
Correctional service revenues are recognized as services are provided.
Revenues are earned based upon the number of housed offenders per day times
the contract rate.
3. Cash and Cash Equivalents
The Company considers money market accounts and all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. Restricted cash consists primarily of inmate wages held in
trust.
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 a business
acquisition and the acquisition of software licenses. These contract rights
and software licenses are being amortized by the straight-line method over
nine and five years, respectively.
The Company assesses the recoverability of intangible assets whenever events
or changes in circumstances indicate that the carrying amount may not be
recoverable through future cash flows. The Company believes that no
impairment has occurred.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE B - SUMMARY OF ACCOUNTING POLICIES - CONTINUED
6. Other Assets
Other assets include unamortized loan commitment fees and investments in
CDs, carried at cost, which approximates market value. The loan commitment
fees are amortized using the straight-line method over the life of the loan,
which does not differ materially from the effective interest method. The
investment in CDs is pledged as collateral on a long-term note payable and
is unavailable for current operations.
7. Discount on Notes and Royalty Payables
Discounts on notes and royalty payables are amortized by the effective
interest method over the term of the underlying obligation. Accretion of
discount for the balloon note was $124,000 and $152,000 for the nine month
period ended September 30, 2000 and the year ended December 31, 1999,
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 financial instruments 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 financial instruments approximates fair value as of September 30, 2000.
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.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE B - SUMMARY OF ACCOUNTING POLICIES - CONTINUED
12. Reclassifications
Certain reclassifications have been made to the 1999 financial statements to
conform to the 2000 presentation.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following as of:
<TABLE>
September 30, December 31,
Useful life 2000 1999
----------- ------------- -------------
<S> <C> <C>
Land - $ 1,311,400 $ 1,311,400
Buildings and improvements 12-40 2,187,001 2,132,251
Machinery and equipment 3-12 178,553 55,471
Vehicles 5 80,968 51,281
------------- -------------
3,757,922 3,550,403
Less accumulated depreciation 677,328 583,853
------------- -------------
$ 3,080,594 $ 2,966,550
============= =============
</TABLE>
Depreciation expense totaled $93,475 and $98,418 for nine month period ended
September 30, 2000 and the year ended December 31, 1999, respectively.
NOTE D - OTHER ASSETS
Other assets are comprised of the following as of:
<TABLE>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Loan commitment fee $ 109,868 $ 112,889
Certificates of deposit 267,000 267,000
Related party receivable 101,616 87,620
------------- -------------
$ 478,484 $ 467,509
============= =============
</TABLE>
Amortization expense totaled $8,468 and $2,812 for the nine month period
ended September 30, 2000 and the year ended December 31, 1999,
respectively.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE E - INTANGIBLE ASSETS
Intangible assets are comprised of the following as of:
<TABLE>
September 30, December 31,
2000 1999
------------- -------------
<S> <C> <C>
Contract rights $ 1,754,481 $ 1,752,793
Software licenses 396,000 -
------------- -------------
2,150,481 1,752,793
Less accumulated amortization 487,432 308,364
------------- -------------
$ 1,663,049 $ 1,444,429
============= =============
</TABLE>
Amortization expense totaled $179,068 and $194,757 for the nine month period
ended September 30, 2000 and the year ended December 31, 1999, respectively.
NOTE F - NOTES PAYABLE
Notes payable consist of the following at:
<TABLE>
September 30, December 31,
2000 1999
------------- -------------
Notes payable to related parties, interest
at 10% per annum, payable on demand after
<S> <C> <C> <C> <C>
September 30, 2001; uncollateralized $ 1,004,944 $ 914,946
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 $91,753 and $215,334 at September
30, 2000 and December 31, 1999, respectively 1,239,247 1,115,666
Note payable to bank, interest at New York
prime plus 2% (effective rate 11.5% at
September 30, 2000); collateralized by a first
mortgage on land, building, and certificates
of deposit; due April 20, 2001 530,242 551,777
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 5,000 10,000
</TABLE>
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE F - NOTES PAYABLE - CONTINUED
<TABLE>
September 30, December 31,
2000 1999
------------- -------------
Installment note payable, interest at 8.8%,
due August 1, 2009; collateralized by first
<S> <C> <C>
mortgage on real estate 2,484,212 2,493,795
Note payable to related party, interest at
10%, due on demand 17,842 4,090
------------- -------------
5,281,487 5,090,274
Less current portion 1,808,441 50,390
------------- -------------
$ 3,473,046 $ 5,039,884
============= =============
</TABLE>
The Company extinguished a note payable to an individual of approximately
$135,000 for less than the carrying amount in 1999. The transaction resulted
in an extraordinary gain of approximately $10,000, net of an income tax
expense of approximately $5,000.
Aggregate future maturities of debt at September 30, 2000 are as
follows:
<TABLE>
Year ending September 30
<S> <C> <C>
2001 $ 1,808,441
2002 1,022,552
2003 19,245
2004 20,414
2005 22,931
Thereafter 2,387,904
-------------
$ 5,281,487
=============
</TABLE>
NOTE G - ROYALTY PAYABLE
As a 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. This agreement
expires on April 30, 2017. Future minimum payments under this agreement
total $1,200,000. A discount of $934,260 was imputed at the date of purchase
by management using a 15% interest rate. Interest expense for the nine month
period ended September 30, 2000 and the year ended December 31, 1999 was
approximately $49,924 and $67,000, respectively.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE G - ROYALTY PAYABLE - CONTINUED
Aggregate future principal maturities of royalty payable at September 30,
2000 are as follows:
<TABLE>
Year ending September 30
<S> <C> <C>
2001 $ 6,433
2002 7,467
2003 8,667
2004 10,060
2005 11,678
Thereafter 384,533
-------------
428,838
Less current portion 6,433
-------------
$ 422,405
</TABLE>
=============
NOTE H - STOCKHOLDERS' DEFICIT
Common Stock
Effective April 29, 2000, the Company entered into an agreement to acquire
certain software licenses, 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 $.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 per share during the twelfth month after
the date of the contract, the stockholders have the option to require the
Company to repurchase the stock at $1 per share.
The stock has been recorded as redeemable common stock and excluded from
stockholders' equity. The difference between the carrying value of the stock
and its redemption value is being accreted by periodic charges to additional
paid-in capital. If, in fact, the stock does trade within the contract range
during the measurement period, the redeemable common stock will be
reclassified as capital.
On April 27, 2000, a $100,000 note payable to a related party was converted
to equity, using the quoted market price on the date of the transaction
($.06 per share). This resulted in the issuance of 1,666,666 shares of
common stock.
On April 29, 2000, the Company issued 6,250,000 shares of common stock to
employees and nonemployees in exchange for services of approximately $63,000
and notes receivable of $312,000.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE H - STOCKHOLDERS' DEFICIT - CONTINUED
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 September 30, 2000.
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.
The Company uses the intrinsic value method to account for its stock option
plan in which compensation is recognized only when the fair value of each
option exceeds its exercise price at the date of grant. Accordingly, no
compensation cost has been recognized for the options issued. Had
compensation cost been determined based on the fair value of the options at
the grant dates, the Company's net loss and loss per share would have been
increased to the pro forma amounts for the nine month period ended September
30, 2000 as indicated below.
Net loss
As reported $ (521,380)
Pro forma $ (522,676)
Loss per share
As reported $ (.04)
Pro forma $ (.04)
The fair value of each grant is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 2000: No expected dividends; expected
volatility of 38%, risk-free interest rate of 6.56%, and expected lives of
three years. The exercise price of all options equaled or exceeded market
price of the stock at the date of grant.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE H - STOCKHOLDERS' DEFICIT - CONTINUED
Employee Stock Option Plan - Continued
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.
A summary of the status of the Company's stock option plan as of September
30, 2000 and changes during the nine month period ended on that date is
presented below.
Weighted
average
exercise
Shares price
---------- ------------
<TABLE>
<S> <C> <C>
Outstanding at beginning of period - $ -
Granted 600,000 $ 0.33
Exercised - $ -
Forfeited - $ -
---------- ------------
Outstanding at end of period 600,000 $ 0.33
========== ============
Options exercisable at period end 600,000 $ 0.33
</TABLE>
Weighted average fair value of options
granted during the period Nominal
The following table summarizes information about fixed-price stock options
outstanding at September 30, 2000:
<TABLE>
Options outstanding Options exercisable
----------------------------------------- ---------------------
Weighted-
average Weighted- Weighted-
Number remaining average Number average
outstanding contractual exercise exercisable exercise
at 9/30/00 life price at 9/30/00 price
------------- ------------- ----------- ------------- ---------
Exercise price
<S> <C> <C> <C> <C> <C> <C>
$0.33 600,000 3 years $ 0.33 600,000 $ 0.33
</TABLE>
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE I - INCOME TAXES
The Company's effective income tax rate differed from the federal statutory
rate of 34% as follows at:
<TABLE>
September 30, December 31,
2000 1999
-------------- --------------
<S> <C> <C>
Income taxes at federal statutory rate $ (177,269) $ (106,055)
Change in valuation allowance, net of change
in estimate of deferred tax liability 170,005 47,128
Nondeductible expenses - 373
State income taxes at statutory rate (28,491) (17,600)
Revisions of prior year estimates 24,094 -
Other 11,661 6,154
-------------- --------------
Total tax benefit $ - $ (70,000)
============== ==============
Components of deferred taxes are as follows at:
September 30, December 31,
2000 1999
-------------- --------------
Assets
Accounts receivable $ - $ 1,755
Property and equipment 32,500 26,751
Intangible assets 217,977 189,505
Tax loss carryforward 1,885,376 1,710,286
Valuation allowance (1,690,725) (1,520,720)
-------------- --------------
445,128 407,577
-------------- --------------
Liabilities
Royalty payable and accrued liabilities (445,128) (407,577)
-------------- --------------
Total $ - $ -
</TABLE>
The valuation allowance increased $170,005 and decreased $293,055 for the
nine month period ended September 30, 2000 and the year ended December 31,
1999, respectively.
A valuation allowance for deferred tax assets is required when
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of this deferred tax asset
depends on the Company's ability to generate sufficient taxable income in the
future. Manage-ment believes it is more likely than not that the deferred tax
asset will not be realized by future operating results.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE I - INCOME TAXES - CONTINUED
At September 30, 2000, the Company has net operating loss carryforwards for
tax purposes of approximately $4,996,280 which will expire between 2003 and
2020.
NOTE J - RELATED PARTY TRANSACTIONS
New Directions Centers of America LLC
As part of a business acquisition effective June 1, 1998, 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 correctional facility was
subcontracted to C&R Investments LLC ("CRI") through December 31, 1999. The
owner of CRI owns approximately 3% of the Company's common stock. Fees paid
to CRI under this management agreement totaled $60,000 for the year ended
December 31, 1999.
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:
<TABLE>
September 30, 2000 December 31, 1999
---------------------------- ----------------------------
Notes Accounts payable Notes Accounts payable
Payable, and accrued Payable, and accrued
net liabilities net liabilities
----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
President and Chairman $ 704,944 $ 118,334 $ 614,946 $ 89,106
Aztore Holdings, Inc. 300,000 27,513 300,000 10,811
CRI - - - 5,456
NDLLC 1,239,247 - 1,115,666 -
David Talbot 7,842 - 4,090 818
----------- ---------------- ----------- ----------------
Total related party
liabilities $2,262,033 $ 145,847 $2,034,702 $ 106,191
=========== ================ =========== ================
</TABLE>
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE J - RELATED PARTY TRANSACTIONS - CONTINUED
During 1999, the Company reached an agreement to restructure notes payable
and accrued interest of approximately $450,000 to Aztore Holdings, Inc.
("Aztore"), a shareholder and former advisor. 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 September 30, 2000 and December 31, 1999 was $101,616 and
$87,620, respectively.
In addition, the president and chairman has personally guaranteed $530,242
of the Company's notes payable (see Note F).
NOTE K - 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 September 30, 2000:
<TABLE>
<S> <C>
2001 $ 313,160
2002 282,775
2003 164,468
2004 62,600
2005 6,600
----------
$ 829,603
==========
</TABLE>
NOTE L - COMMITMENTS AND CONTINGENCIES
During 1998, a lawsuit was filed by Talbot against the Company related to
the purchase of NDLLC and Horizon. On January 18, 2000, a settlement was
reached. The terms of the settlement include a payment of approximately
$76,000 by the Company to Talbot during 2000 and a deferred payment of
approximately $11,000 as consideration for dropping all claims against the
Company.
The Company is involved in certain other administrative proceedings arising
in the normal course of business. In the opinion of management, such matters
will be resolved without material effect on the Company's results of
operations or financial condition.
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE M - SEGMENT INFORMATION
The Company operates in the following three segments: commercial leasing,
correctional facility, and telecommunications operation. Information
concerning the Company's business segments is as follows as of and for the:
<TABLE>
<CAPTION>
Nine month
period ended Year ended
September 30, December 31,
2000 1999
-------------- --------------
Revenues
<S> <C> <C>
Commercial leasing $ 301,924 $ 362,404
Correctional facility 1,240,666 1,570,029
-------------- --------------
Total $ 1,542,590 $ 1,932,433
============== ==============
Segment earnings (loss)
Commercial leasing $ 15,873 $ (186,591)
Correctional facility (175,028) (124,905)
Corporate (130,446) (429)
Telecommunications (231,779) -
-------------- --------------
Total $ (521,380) $ (311,925)
============== ==============
Identifiable assets
Commercial leasing $ 2,586,649 $ 2,605,171
Correctional facility 2,415,657 2,553,501
Corporate 1,001,482 369,252
Telecommunications 456,272 -
Eliminations (872,276) (260,276)
-------------- --------------
Total $ 5,587,784 $ 5,267,648
============== ==============
Depreciation and amortization
Commercial leasing $ 56,101 $ 62,574
Correctional facility 178,792 233,413
Corporate 303 -
Telecommunications 40,368 -
-------------- --------------
Total $ 275,564 $ 295,987
</TABLE>
============== ==============
<PAGE>
SOONER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
September 30, 2000 and December 31, 1999
NOTE M - SEGMENT INFORMATION - CONTINUED
<TABLE>
Nine month
period ended Year ended
September 30, December 31,
2000 1999
-------------- --------------
Additions to long-lived assets
<S> <C> <C>
Commercial leasing $ 40,381 $ 215,462
Correctional facility 64,269 37,981
Corporate 6,023 -
Telecommunications 492,846 -
-------------- --------------
Total $ 603,519 $ 253,443
============== ==============
Interest expense
Commercial leasing $ 166,297 $ 212,980
Correctional facility 229,343 345,098
Corporate 39,578 53,634
-------------- --------------
Total $ 435,218 $ 611,712
============== ==============
</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 September 30, 2000 and December 31, 1999, 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 2000 and 1999 comprised 80% and 81% of total Company
revenues, respectively. This contract is renewable annually.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Directors of Sooner Holdings, Inc.
Our current directors 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 our common stock
beneficially owned by each of them as of December 15, 2000:
<TABLE>
Ownership (1)
Director -----------------
Name Age Since Principal Occupation Amount Percent
--------------------- ---- -------- ----------------------- --------- -------
<S> <C> <C> <C> <C> <C>
R.C. Cunningham II 73 06/01/89 Chairman and President,
Sooner Holdings, Inc. 6,394,081 37.8
Ron Alexander, Sr.(2) 58 12/31/99 Vice President, New
(apptd Direction Acquisition
12/31/99) Corp. 1,442,000 8.5
Brian Bothroyd 37 04/25/00 President, Sooner
Communications, Inc. 3,000,000 17.8
R.C. Cunningham III 35 07/03/97 Vice President, Sooner
Holdings, Inc. 72,129 *
-------------------------
</TABLE>
* 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 December 15, 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 our chairman of the board
and president 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 Sooner Holdings, Inc. 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 of NDAC since September 1997. From May 1988 to June 2000, Mr.
Cunningham was 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 Degree in real estate finance from the
University of Oklahoma.
Ronnie M. Alexander, Sr. Mr. Alexander became a director of Sooner
Holdings, Inc. in 1999 and has been vice president of ND Acquisitions since June
1, 1998, and director of operations of NDAC since 1996. 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
Our current executive officers as of September 30, 2000, or our
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.
SOONER HOLDINGS, INC. AND SUBSIDIARIES
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 03/15/91*
Park, Incorporated
CEO and President, ND Acquisition 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 07/03/97
Business Park Incorporated
Secretary and Treasurer, ND Acquisition 09/04/97*
Corp.
Vice President, Sooner Holdings, Inc. 07/01/00*
-------------------------
* Date of inception of the respective companies.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our officers and directors,
and persons who own more than 10% of a registered class of our equity
securities, to file certain reports regarding ownership of, and transactions in,
our securities with the Securities and Exchange Commission (the "SEC"). Such
officers, directors and 10% stockholders are also required by SEC rules to
furnish us with copies of all Section 16(a) forms that they file.
Based solely on a review of the copies of such forms received by it, or
written representations from certain reporting persons, we believes that during
fiscal 1999 all the reporting persons complied with Section 16(a) filing
requirements.
ITEM 10. Executive Compensation
The table below sets forth all compensation awarded to, earned by, or paid to
our executive officers during the last three years:
<TABLE>
Long Term Compensation
----------------------
Awards Payouts
---------- -------
Annual Compensation Securities
---------------------------------------------------------- Restricted Underlying
Name and Other Annual Stock Options/ LTIP All Other
Principal Position Year Salary Bonus Compensation Awards SARS Payouts Compensation
-------------------- ------ ------- ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. C Cunningham, II, 2000 $ 0 0 0 0 0 0 0
CEO 1999 $ 0 0 0 0 0 0 0
1998 $ 0 0 0 0 0 0 0(1)
Ronnie M. Alexander, 2000 $55,000 0 0 0 0 0 $ 11,628
Director and VP, 1999 $ 0 0 0 0 0 0 0
ND Acquisitions, 1998 $ 0 0 0 0 0 0 0
Inc.
R. C. Cunningham, 2000 $ 5,540 0 0 0 0 0 0
III, Director, 1999 $ 0 0 0 0 0 0 0
Secretary, and 1998 $ 0 0 0 0 0 0 0
Treasurer
Brian K. Bothroyd, 2000 $55,000 0 0 0 0 0 0
President, Sooner 1999 $ 0 0 0 0 0 0 0
Communications, Inc 1998 $ 0 0 0 0 0 0 0
--------------------- ------ -------- ----- ------------- ---------- ---------- ------- ------------
(1) In December 1993, Mr. Cunningham entered into an Incentive Compensation
Agreement, which provided remuneration to Mr. Cunningham based only on
our revenue performance. Mr. Cunningham received no base compensation
and would receive a cash incentive fee of five percent of our gross
revenues, payable on a quarterly basis. This agreement was terminated
December 31, 1998.
</TABLE>
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:
No. of
Shares
Expiration Subject Exercise
Date to Option Price
---------- --------- --------
Melissa S. Fletcher 06-21-03 300,000 $0.333
R.C. Cunningham III 06-21-03 300,000 $0.333
Directors. There are no arrangements pursuant to which our directors are
compensated for their services as a director.
Employment Contracts. We have 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
us or our 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.
Bonuses and Deferred Compensation
We paid no cash bonuses to any executive officer during the year ended
September 30, 2000. We did not have any deferred compensation plan or
arrangement pursuant to which benefits, remuneration, value, or compensation was
or is to be granted, awarded, entered, set aside, or accrued for the benefit of
any of our executive officers as of September 30, 2000.
Compensation Pursuant to Plans Including Pension, Stock Option, and Stock
Appreciation Rights Plans
As of December 15, 2000, other than our 2000 Stock Option Plan, we do
not have any stock appreciation rights plans, phantom stock plans, or any other
incentive or compensation plan or arrangement pursuant to which benefits,
remuneration, value, or compensation was or is to be granted, awarded, entered,
set aside, or accrued for the benefit of any of our executive officers.
Termination of Employment and Change of Control Arrangement
During the nine months ended September 30, 2000, no officer, director,
or principal shareholder either received or is to receive any remuneration as a
result of either the termination of such person's employment whether by
resignation, retirement, or otherwise; or a change of control of the Company or
a change in such individual's responsibilities following a change in control of
the Company.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
The table below sets forth certain information regarding the beneficial
ownership of our common stock as of December 15, 2000 by each shareholder who is
known by us to be the beneficial owner of more than 5% of our voting securities,
by each director and by each executive officer and by all directors and officers
as a group.
<TABLE>
Number of
Names and Addresses of Common Percent of
Beneficial Owners Shares (1) Class
----------------------------- ----------- ----------------
<S> <C> <C> <C>
R. C. Cunningham II (5) 6,394,081 37.86%
2680 W. Interestate 40
Oklahoma City, OK 73108
Sheldon L. Miller (2) 502,718 2.98%
3000 Town Center, Ste. 1700
Southfield, MI 48075
Michael S. Williams (3) 1,006,256 5.96%
3710 E. Kent Drive
Phoenix, AZ 85044
Lanny R. Lang (4) 729,183 4.32%
3536 E. Saltsage Drive
Phoenix, Az 85044
R. C. Cunningham III (5) 72,129 *
6408 Boulevard View
Alexandria, Va 22307
Ron Alexander, Sr. (6)(7)(8) 1,442,000 8.54%
2901 McGee Street
Norman, OK 73072
Brian Bothroyd (7) 3,000,000 17.76%
All officers and directors as
a group (4 persons) 10,908,210 64.59%
</TABLE>
------------------------
* less than 1%
Unless otherwise indicated, to our knowledge, each person or group
possesses sole voting and sole investment power with respect to the shares shown
opposite the name of such person or group. Shares not outstanding, but deemed
beneficially owned by virtue of the right of a person or member of a group to
acquire them within 60 days, are treated as outstanding only when determining
the amount and percent owned by such person or group.
(1) The number of shares and percent are based on the current number of shares
of common stock outstanding of 16,888,016 shares.
(2) Mr. Miller owns approximately 30% of Aztore, which he received under that
company's bankruptcy plan, but has waived dispositive control of shares
owned by Aztore and, therefore, such shares are not included.
(3) Includes 384,809 shares owned by Aztore of which Mr. Williams is President
and CEO (see further discussion under "Relationship with Aztore Holdings,
Inc." under Item 12. Certain Relationships and Related Transactions).
(4) Includes 15,661 shares of common stock owned by Lang Financial Services,
Inc. of which Mr. Lang is the President and sole owner. Includes 384,809
shares owned by Aztore of which Mr. Lang is Secretary and Treasurer (see
further discussion under "Relationship with Aztore Holdings, Inc." under
Item 12. Certain Relationships and Related Transactions).
(5) An officer and director of Sooner Holdings, Inc..
(6) A director of Sooner Holdings, Inc.
(7) An officer of a subsidiary.
(8) Includes 242,000 shares of common stock owned by C & R Investments of which
Mr. Alexander is the President and sole owner.
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 our anticipated activities,
certain trends with respect our revenue, operating results, capital resources,
and liquidity or with respect to the markets in which we compete 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 our control. Accordingly, actual results
may differ, perhaps materially, from those expressed in or implied by such
forwarding-looking statements.
ITEM 12. 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
us 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.
We consider the following transactions to be significant of disclosure
pursuant to Regulation 228.404 of Regulation S-B. Any references to Notes refer
to the Notes to the Consolidated Financial Statements included in Item 7 of this
Form 10-KSB (the "2000 10-KSB").
Relationship with Aztore Holdings, Inc. (formerly ShareData Inc.)
Effective November 1, 1999, we reached an agreement with Aztore and
associated companies to exchange approximately $450,000 in notes payable and
accrued interest. In exchange for the notes payable and accrued interest, we
issued two notes for $120,000 and $180,000 bearing interest at 10%, with
preferential liquidation terms. This transaction resulted in a non-cash gain to
us of approximately $107,000, net of tax.
Relationship with R.C. Cunningham II
In December 1993, we entered into an Incentive Compensation Agreement
with Cunningham. This agreement provided remuneration to Cunningham based only
on our revenue performance. Cunningham received no base compensation, but would
receive a cash incentive fee of 5% of our gross revenues payable on a quarterly
basis. This agreement was terminated December 31, 1998. Also, Cunningham has
personally guaranteed $530,242 of our notes payable.
Relationship with C&R Investments
C&R Investments L.L.C.("CRI"), is an Oklahoma City, Oklahoma-investment
firm. Mr. Ron Alexander, Sr. has been the Vice President of New Directions
Acquisition Corp. (the "Correction Business"), a subsidiary, since December 1999
and is the managing director for CRI. The management of the operation of NDAC
was contracted to C&R Investments until December 1999, at which time Mr.
Alexander became the vice-president of New Direction Acquisition Corp. Fees
paid to CRI under this management agreement totaled $60,000 for the year ended
December 31, 1999. CRI owns approximately 3% of our common stock.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
Page no.
Item No. Description (footnote)
---------------- -------------------------------------------------- ----------
3.1 thru 3.3 Articles of Incorporation, By-Laws and Amendments
thereto (1)
10.1 thru 10.11 Material contracts (1)
10.12 Option Agreement by and between Sooner Holdings,
Inc., New Directions Acquisition Corp., New
Directions Centers of America, L.L.C., and
Horizon Lodges of America, Inc. dated
September 9, 1997 (2)
10.13 Purchase and Sale Agreement dated May 7, 1998 (2)
10.15 Promissory Note between Sooner Holdings, Inc.
and Bulldog Investment Company, an Arizona
limited liability company (3)
10.16 Promissory Note between Sooner Holdings, Inc.
and Aztore Holdings, Inc. an Arizona
corporation (3)
10.17 Agreement Re: Debt Cancellation and Release
of Liability dated November 1, 1999 between
Sooner Holdings, Inc., Bulldog Investment
Company, L.L.C. and Aztore Holdings Inc. (3)
19.1 thru 19.6 Other agreements (1)
22.1 Subsidiaries of the registrant (4)
Footnotes:
(1) Incorporated by reference to our Form 10-KSB for the year ended
December 31, 1995 (file no. 0-18344).
(2) Filed as an Exhibit to our Form 8-K, filed June 23, 1999 (file no.
0-18344).
(3) Filed as an Exhibit to our Form 10-KSB, filed April 20, 2000 (file no.
0-18344).
(4) Filed as an Exhibit to our Form SB-2, filed September 29, 2000 (file
no. 0-18344).
Reports on Form 8-K
On September 19, 2000, we filed a report on Form 8-K changing our
reporting year to September 30, effective with the September 30, 2000 filing.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 13, 2000
SOONER HOLDINGS, INC.
(Registrant)
---------------------
By: /s/
--------------------------------
R.C. Cunningham II
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
Signature Title Date
---------------------- ------------------------------------------- -----------
/s/ Chairman of the Board, Chief Executive
---------------------- Officer and President 04/13/00
R. C. Cunningham II
/s/ Secretary, Treasurer and Director
---------------------- 04/13/00
R. C. Cunningham III
/s/ Director 04/13/00
----------------------
Ronnie M. Alexander
