Filed On 5/14/01 6:28pm ET · SEC File 0-18344 · Accession Number 1060830-1-500035
As Of Filer Filing As/For/On Docs:Pgs Issuer Agent
5/15/01 Sooner Holdings Inc/OK 10-Q 3/31/01 1:12 Gray & Northcutt Inc/FA
Document/Exhibit Description Pages Size
1: 10-Q Form 10-Q for Sooner Holdings, Inc. 12 74K
FORM 10-QSB
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-18344
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SOONER HOLDINGS, INC.
--------------------------
(Exact name of small business issuer as specified in its charter)
Oklahoma 73-1275261
------------------------------ -----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2534 W. I-40, Oklahoma City, OK 73108
---------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area code: (405) 236-8332
-------------
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
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by court.
YES NO
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 16,888,016 shares
of common stock as of May 1, 2001.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SOONER HOLDINGS, INC.
Consolidated Balance Sheet
(unaudited)
[Download Table]
March 31,
2001
-----------
ASSETS
Current assets:
Cash and cash equivalents $ 75,651
Restricted Cash 390
Accounts receivable - net 218,520
Other current assets 58,811
----------
Total current assets 353,372
Property and equipment, net 3,048,495
Intangible assets, net of accumulated amortization of $624,410 1,526,071
Other assets, net 476,329
----------
$5,404,267
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current notes payable $ 35,000
Accounts payable 95,281
Accrued liabilities 393,877
Current portion of notes payable and royalty payable 1,344,551
Deferred revenue 24,385
----------
Total current liabilities 1,893,094
Notes payable, less current portion and net
of discount of $27,462 3,955,951
Royalty payable, less current portion and net
of discount of $740,730 423,270
Redeemable Common Stock, 500,000 shares 494,500
Shareholders' deficit:
Preferred stock; undesignated, 10,000,000
shares authorized, no shares issued and
outstanding -
Common stock; $.001 par value, 100,000,000
shares authorized, 16,888,016 shares issued
and outstanding, less 500,000 shares of
redeemable stock above 16,388
Additional paid-in-capital 5,951,490
Accumulated deficit (7,078,426)
Related party receivables from stock purchases (252,000)
----------
$5,404,267
==========
The accompanying notes are an integral part of these consolidated
financial statements.
SOONER HOLDINGS, INC.
Consolidated Statements of Operations
(unaudited)
[Enlarge/Download Table]
For the three months ended For the six months ended
March 31, March 31,
2001 2000 2001 2000
----------- --------- ---------- ----------
Revenues:
Rental revenues $ 114,393 103,838 $ 219,141 $ 212,660
Service revenues 566,095 341,383 1,075,950 707,481
----------- --------- ---------- ----------
Total revenues 680,488 445,221 1,295,091 920,141
----------- --------- ---------- ----------
Operating Expenses:
Cost of Services 217,468 201,327 416,416 345,770
General and administrative 329,439 148,333 691,270 349,781
Depreciation and amortization 111,407 76,817 220,983 153,381
----------- --------- ---------- ----------
Total operating expenses 658,314 426,477 1,328,669 848,932
----------- --------- ---------- ----------
Income (loss) from operations 22,174 18,744 (33,578) 71,209
Interest expense (149,303) (149,724) (304,320) (331,855)
Other income (expense)
Interest income 3,604 1,881 6,502 4,470
Other income 454 - 510 -
Loss on disposal of subsidiary - - - (16,817)
Write off of deferred loan costs on
refinancing - - - (18,046)
----------- --------- ---------- ----------
Loss before income taxes and
extradorinary item (123,071) (129,099) (330,886) (291,039)
Income tax benefit - deferred - - - 70,000
----------- --------- ---------- ----------
Income (loss) before extraordinary item (123,071) (129,099) (330,886) (221,039)
Extraordinary gain on extinguishments of debt,
net of income taxes of $70,000 - - - 101,010
----------- --------- ---------- ----------
Net (Loss) Income $ (123,071) $ (129,099) $ (330,886) $ (120,029)
============ ============ =========== =========
Basic and diluted loss per common share $ (0.01) $ (0.02) $ (0.02) $ (0.01)
============ ============ =========== =========
Weighted average common shares outstanding 16,888,016 8,471,350 16,888,016 8,471,350
============ ============ ============ =========
The accompanying notes are an integral part of these consolidated
financial statements.
3
SOONER HOLDINGS, INC.
Consolidated Statements of Cash Flows
(unaudited)
[Enlarge/Download Table]
For the six months ended
March 31,
2001 2000
--------- ---------
Cash flows from operating activities:
Net loss $(330,886) $(120,029)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Accretion of interest 64,294 37,841
Depreciation and amortization 220,983 153,381
Extraordinary gain on extinguishments of debt - (171,010)
Changes in assets and liabilities:
Accounts receivable (69,528) 31,720
Other current assets and other assets (28,422) (118,065)
Accounts payable (7,801) 22,415
Accrued liabilities 106,676 (154,199)
Deferred revenue 50 (15,997)
--------- ---------
Net cash used in operating activities (44,634) (333,943)
--------- ---------
Cash flows from investing activities:
Increase (Decrease) in restricted cash 11,108 (44,823)
Purchases of property and equipment (50,805) (18,220)
--------- ---------
Net cash used in investing activities (39,697) (63,043)
--------- ---------
Cash flows from financing activities:
Repayments of long term debt and royalty (45,845) (547,741)
Borrowings on notes payable - 755,111
Net borrowings on line of credit 30,000 25,000
--------- ---------
Net cash provided by (used in) financing activities (15,845) 232,370
--------- ---------
Net decrease in cash (100,176) (164,616)
Cash at beginning of period 175,827 243,248
--------- ---------
Cash at end of period $ 75,651 $ 78,632
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 187,787 $ 391,338
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
4
SOONER HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
For the three and six months ended March 31, 2001
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and operations
---------------------------
Sooner Holdings, Inc., an Oklahoma corporation, operates primarily
through three of its subsidiaries. New Directions Acquisition Corp. (NDAC) owns
and operates a minimum security correctional facility in Oklahoma City, Oklahoma
and Charlie O Business Park Incorporated (Business Park) is engaged in the
ownership and rental of a business park in Oklahoma City, Oklahoma. Sooner
Communications, Inc. (Communications) supplies hardware and software solutions
to independent telecommunications providers.
Basis of presentation
---------------------
The unaudited consolidated financial statements presented herein have
been prepared by us, without audit, pursuant to the rules and regulations for
interim financial information and the instructions to Form 10-QSB and Regulation
S-B. Accordingly, certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principals have been omitted. These unaudited consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in our Annual Report on Form 10-KSB for the fiscal year ended
September 30, 2000 (the "2000 Form 10-KSB"). In the opinion of management, the
unaudited consolidated financial statements reflect all adjustments (consisting
of normal recurring accruals only) which are necessary to present fairly our
consolidated financial position, results of operations, and changes in cash
flow. Operating results for interim periods are not necessarily indicative of
the results which may be expected for the entire year.
Management plans
----------------
For the fiscal year ending September 30, 2000, the independent auditor's
report included an explanatory paragraph calling attention to a going concern
issue. The accompanying consolidated financial statements have been prepared
contemplating our continuation as a going concern. We have suffered recurring
losses from operations, have a shareholders' deficit of $1,362,548 and have a
working capital deficiency of $1,539.722 at March 31, 2001. In view of these
matters, realization of a major portion of our assets is dependent upon our
ability to meet our financing requirements and the success of our future
operations. We believe that our plans to revise our operating and financial
requirements, as described more fully in the 2000 Form 10-KSB, provide us the
opportunity to continue as a going concern. However, there can be no assurance
that these plans will be successful.
Principles of consolidation
---------------------------
The accompanying consolidated financial statements have been prepared on
the basis of generally accepted accounting principles and include the accounts
of Sooner Holdings, Inc. and all majority owned subsidiaries. All significant
intercompany transactions have been eliminated.
Reclassifications
-----------------
Certain reclassifications have been made to the fiscal year 2000
financial statements to conform to the 2001 presentation.
NOTE 2 - Property and Equipment
Property and equipment as of March 31, 2001 is comprised of the
following:
Land $ 1,311,400
Buildings and improvements 2,217,746
Machinery and equipment 198,613
Vehicles 80,968
----------
3,808,727
Less accumulated depreciation 760,232
----------
Property and equipment, net $ 3,048,495
==========
5
NOTE 3 - OTHER ASSETS
Other assets at March 31, 2001 is comprised of the following:
Receivable from New Direction Centers of America, LLC $ 101,615
Loan commitment fee, less amortization of $7,363 107,714
Certificates of deposit 267,000
--------
Other assets, net $ 476,329
========
NOTE 4 - NOTES PAYABLE
Notes payable as of March 31, 2001 consists of the following:
Installment note payable, interest at 8.8%,
due August 1, 2009; collateralized by first
mortgage on real estate. $2,477,341
Notes payable to president and CEO, interest
at 10%, due after March 31, 2002. Subordinate
to first mortgage on correctional facility. 704,944
Notes payable to stockholders, interest at 10%,
due concurrently with balloon promissory note
discussed below. Not collateralized. 300,000
Revolving line of credit from Bank, interest at
prime plus 3.25%, currently 11.5%, matures May 5,
2005, collateralized by accounts receivable. 35,000
Balloon promissory note payable to related party
(see Note 6), 10% stated interest per annum, 15%
effective interest rate, principal and interest
due June 1, 2001; collateralized by a second
mortgage on land and facility owned by us,
net of discount of $27,462. 1,303,538
Note payable to bank, interest at New York prime
plus 2%, currently 11.5%, collateralized by a
first mortgage on land and facility owned by us.
Due April 20, 2002. 514,679
---------
5,335,502
Less classified as current notes payable 35,000
Less current portion 1,344,551
---------
Notes payable $3,955,951
=========
NOTE 5 - ROYALTY PAYABLE
As part of a business acquisition, we assumed a royalty payable to an
individual. The agreement calls for monthly payments of the greater of $6,000 or
6% of the total gross monthly income of NDAC. The agreement expires on April 30,
2017. Future minimum payments under this agreement total $1,164,000. A discount
of $740,730 was imputed by management at March 31, 2001 using a 15% interest
rate. These financial statements contain an accrual as of September 30, 2000 for
excess royalty due of $38,761.
NOTE 6 - RELATED PARTIES
6
Our related parties are more fully described in the 2000 Form 10-KSB.
The following table reflects amounts owed to related parties at March 31, 2001:
Notes Accrued
Payable Liabilities
--------- -----------
President and Chairman $ 704,944 $ 153,881
Other Significant Stockholders 300,000 42,513
New Direction Centers of America, LLC 1,303,538 -
---------- ----------
Total related party liabilities $2,308,482 $ 196,394
========== ==========
In addition, the president and chairman has personally guaranteed
$545,621 of our notes payable.
note 7 - COMMITMENTS AND CONTINGENCIES
In February 1998, a lawsuit was filed by a former affiliate against us
related to the purchase of New Direction Centers of America, LLC (NDCA, LLC). On
January 18, 2000, a settlement was reached. The terms of the settlement include
a payment of $76,000 by NDAC. Part of the terms of the settlement included a
lump sum payment of $20,000 and an installment note for $56,000 payable at
$5,000 per month at 10%, which was included in notes payable at December 31,
2000. As of March 31, 2001, this note has been liquidated.
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.
NOTE 8 - SEGMENT INFORMATION
We operate in the following three segments: commercial leasing,
correctional facility operation, and communications. Information concerning our
business segments is as follows as of and for the three and six months ended
March 31, 2001:
[Enlarge/Download Table]
Quarter Quarter Six months Six months
ended ended ended Ended
March 31, March 31, March 31, March 31,
2001 2000 2001 2000
-----------------------------------------------------
Revenues
Commercial leasing $ 114,393 $ 103,838 $ 219,141 $ 212,660
Correctional 566,095 341,383 1,075,950 707,481
-----------------------------------------------------
Total $ 680,488 $ 445,221 $ 1,295,091 $ 920,141
=====================================================
Segment operations profit
Commercial leasing $ 17,750 $ 21,617 $ 21,656 $ 28,186
Correctional (4,003) (74,655) (16,242) (153,550)
Communications (106,514) - (221,784) -
Corporate (30,304) (76,061) $ (114,516) 5,335
-----------------------------------------------------
Total $ (123,071) $ (129,099) $ (330,886) $ (120,029)
=====================================================
Identifiable assets
Commercial leasing $2,589,092 $2,587,934 $2,589,092 $2,587,934
Correctional 2,369,032 2,504,997 2,369,032 2,504,997
Communications 426,347 - 426,347 -
Corporate 19,796 38,844 19,796 38,844
-----------------------------------------------------
Total $5,404,267 $5,131,775 $5,404,267 $5,131,775
=====================================================
7
Depreciation and amortization
Commercial leasing $ 19,994 $ 17,638 $ 38,607 $ 35,849
Correctional 62,871 59,179 125,292 117,532
Communications 28,327 - 56,654 -
Corporate 215 - 430 -
-----------------------------------------------------
Total $ 111,407 $ 76,817 $ 220,983 $ 153,381
=====================================================
Capital expenditures
Commercial leasing $ 18,784 $ 9,184 $ 31,505 $ 13,952
Correctional 11,081 1,013 12,790 4,268
Communications - - 6,510 -
Corporate - - - -
-----------------------------------------------------
Total $ 29,865 $ 10,197 $ 50,805 $ 18,220
=====================================================
Interest expense
Commercial leasing $ 54,606 $ 57,240 $ 111,860 $ 114,588
Correctional 79,194 79,859 162,022 174,914
Corporate 15,503 12,625 30,438 42,353
-----------------------------------------------------
Total $ 149,303 $ 149,724 $ 304,320 $ 331,855
=====================================================
Identifiable assets are those assets used in our operations in each
area. Corporate income includes general and administrative costs and corporate
assets consist primarily of cash and other current assets.
Item 2. Management's Discussion and Analysis or Plan of Operation
Introduction
The following discussion should be read in conjunction with our
financial statements and notes thereto included elsewhere in this Form 10-QSB
report. In addition, the discussion of our expected Plan of Operation, included
in the 2000 Form 10-KSB, is incorporated herein in its entirety as the
discussion of the Plan of Operation as required by Item 303(a) of Regulation
S-B.
Plan of Operation
Effective June 1, 1998, NDAC completed the acquisition of the assets and
certain liabilities of NDCA, LLC related to the operation of a community
correction business. NDAC runs a community correction center, commonly known as
a halfway house, that currently has approximately 207 beds available but is
licensed to provide up to 300 beds. NDAC operates under a contract with the
Oklahoma Department of Corrections, which provides clients to NDAC.
Effective April 24, 2000, we formed Sooner Communications, Inc.
(Communications), a wholly owned subsidiary. Subsequent to the formation, we
acquired the rights to CADEUM, which will provide a unified messaging solution
to integrated communication providers.
The Community Correction Business
The facility operated by NDAC is a non-secure residential facility for
adult male and female offenders transitioning from institutional to independent
living. Offenders are eligible for these programs based upon the type of offense
committed and behavior while incarcerated in prison. Offenders generally spend
the last six months of their sentence in a community corrections program. The
goal and mission of NDAC's community corrections business is to reduce the
likelihood of an inmate committing an offense after release by assisting in the
reunification process with family and the community. Offenders must be employed,
participate in substance abuse programs, submit to frequent random drug testing,
and pay a predetermined percentage of their earnings to the government to offset
the cost of the program. We supervise these activities and also provide life
skills training, case management, home confinement supervision and family
reunification programs at our facilities.
8
NDAC's facility has received accreditation from the American
Correctional Association (the ACA), the governing body for accreditation. The
ACA has 25 mandatory standards and 263 non-mandatory standards regarding staff
working conditions and correctional facility living conditions. A community
correction facility that is ACA accredited can take private clients as well as
Federal clients.
The Real Estate Business
Charlie O Business Park operates a multi-unit rental property for
business and industrial tenants located in Oklahoma City, Oklahoma. Charlie O
Business Park became an operating subsidiary upon its formation in November 1987
and is 100% owned by us.
The Communications Business
On May 2, 2000 the Sooner Communications subsidiary purchased all the
rights to, a computer based platform called Cadeum. Cadeum will host
computer-based telephony products that are being developed specifically for
telecommunication providers. Upon completion Sooner plans to market these
products on a wholesale level to telecommunication carriers. Sooner has been
beta testing Cadeum with a large Texas based regional telecommunication
provider. The initial product being tested is a full feature call answering
system that will be used to assist in attracting small and medium business to
their local product offering. We will continue to run beta testing on this
product over the next several months. The product should be ready for mass
marketing to this telecommunication provider's customer base by mid summer.
Negotiations are under way for the Sooner Communications division sales staff to
start offering traditional dedicated long distance services on a retail basis.
We fully expect that an agreement will be consumated with at least one or more
Oklahoma telecommunication companies that will allow Sooner Communications to
offer their product lines on a cost reduced retail basis.
Business Strategy
Our business strategy is multi-faceted. Each facet is discussed below.
Community Corrections Business
Our business strategy is to become a leading developer and a manager of
quality privatized community correction facilities, initially in Oklahoma and
then expanding interstate. Management intends on seeking a larger community
corrections business by expanding into other zoned facilities, either internally
or through acquisitions. We intend on obtaining and maintaining ACA
accreditation for all of our facilities.
We will operate each facility under our management. We will also either
directly or through subcontractors, provide health care and food service. In the
future, the facilities may offer special rehabilitation and educational
programs, such as academic or vocational education, job and life skills
training, counseling and work and recreational programs.
Communications Business
The strategy of Sooner Communications is to market Cadeum to
telecommunication 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. The Cadeum product is being Beta tested now within the
network of a 20-year-old, regional, integrated telecommunications service
provider.
We expect the unified messaging segment of the telecommunications
industry as a whole to grow from approximately $272 million in 1999 to over
$12.5 billion by 2004. The deregulation of the telecommunications industry has
spawned a host of competitors vying for the public's telephone service. A
regional telecommunications provider needs to distinguish itself from the
competition by offering enhanced services. We believe that our Cadeum product,
with its integration of telephony products, will provide this distinction.
Real Estate Business
9
Charlie O Business Park will continue to operate as a real estate lessor
and property manager. As of March 31, 2001, the Park leased to 26 non-related
lessees. Charlie O Business Park's property includes five separate buildings,
covering approximately 126,500 square feet, located at the intersection of I-40
and Agnew Street in Oklahoma City, Oklahoma. Sooner Holdings and its
Communications subsidiary currently operate out of approximately 2,200 square
feet in the business park. Charlie O Business Park competes with other
commercial lessors in the Oklahoma City market. Its occupancy, excluding that
leased to Sooner Holdings and Sooner Communications, has averaged over 90%
during both 2000 and 1999.
Liquidity and Capital Resources - March 31, 2001 compared to March 31, 2000.
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.
March 31,
2001 2000
----------- ----------
Deficiency in working capital $ (1,539,722) $ (157,901)
=========== ==========
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 notes payable, has been primarily supplied by either our chairman and
president, or by Aztore Holdings, Inc. ("Aztore"). As of December 31, 1999,
Aztore agreed to restructure a majority of its liabilities as part of the NDAC,
LLC acquisition.
The extreme decrease in working capital resulted from the contractual
terms of notes payable. We would show working capital similar to the prior year
if not for the note due to New Direction Centers of America, LLC, which is due
on June 1, 2001. As of March 31, 2000, this note was reported as long-term debt.
However, by its terms, it is due within one year of the date of this balance
sheet, and therefore is classified as current. The amount in these statements is
$1,303,538. As of the date of this filing, we are in the final stages of
refinancing a majority of the debt owed by NDCA. This note is not in default.
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, and/or foreclosure actions being initiated
against a majority of our assets.
In June 1999, we refinanced the debt on CO Park. The debt was replaced
by a single note in the amount of $2,500,000 payable to a bank with interest at
8.8% that matures in June 2009.
The operations of both the real estate business and the community
corrections business generated positive cash flows from operations during the
three and six months ended March 31, 2001. The amounts were, respectively,
$20,589 and $41,408 for the real estate business, and $64,332 and $113,547 for
the community corrections business. We expect the communications business to
begin generating revenue in the third fiscal quarter of this year. We also
intend to continue the rehabilitation of the correctional facility in order to
bring the inmate occupancy up to 300 beds. In the event that cash flow is
insufficient to satisfy our needs, we believe that we can borrow any additional
funds from our related parties to maintain our operations.
Results of Operations - The three and six months ended March 31, 2001 compared
to the same periods ended March 31, 2000
The following table illustrates our revenue mix:
[Download Table]
Three months ended Six months ended
March 31, December 31,
2001 2000 2001 2000
-------- -------- ---------- ---------
NDAC revenue $ 566,095 $ 341,383 $ 1,075,950 $ 707,481
Business Park revenue 114,393 103,838 219,141 212,660
Other revenue - - - -
-------- -------- ---------- ---------
Total revenue $ 680,488 $ 445,221 $ 1,295,091 $ 920,141
======== ======== ========== =========
10
Correctional Facility revenues for the three and six months ended March
31, 2001 increased by $224,712 (65.8%) and $368,469 (52.1%), respectively. as
compared to the same periods in fiscal year 2000. During the Spring 2000
legislative session, the Governor signed S.B. 1241, which requires all
non-violent offenders due for release to serve at least 90 days in a halfway
house facility such as is operated by us. Our increase in revenue is directly
related to increased occupancy created by the legislation.
Business Park revenues increased $10,555 (10.2%) and $6,481 (3.0%)
during the three and six months ended March 31, 2001, as compared to the same
periods in fiscal year 1999. These increases are attributable to the leasing of
space vacated by one major tenant in July of 2000 and the ongoing program of
longer leases and an increase average rental rates for space. The majority of
the vacant space was again leased as of September 30, 2000. At March 31, 2001
the Business Park was over 98% occupied. We believe its long-term prospects will
improve with longer leases and higher rates. Losses of tenants in the future
could affect future operations and financial position because of the cost of new
leasehold improvements and lower revenue due to any prolonged vacancy.
Total operating expenses for the three and six months ended March 31,
2001 were $658,314 and $1,328,669, respectively, compared to total operating
expenses for the comparable fiscal 2000 periods of $426,477 and $848,932. The
increase in the 2001 expenses was due primarily to the operations of our
Communications subsidiary, which spent $107,162 and $221,787 (16.3% and 16.7% of
total operating costs) and had no revenue. For the three and six months ended
March 31, 2001, the NDAC subsidiary accounted for $488,790 (74.3%) and $930,877
(70.0%) of the total operating costs, respectively. Increased security,
counseling, and other operating costs resulted from the almost 40% increase in
average inmate population. The amortization of the NDAC intangible assets
represents $48,689 and $97,378 of the total depreciation and amortization
expense for the three and six months ended March 31, 2001.
Interest expense decreased by $421 (0.0%) and 27,535 (8.3%) for the
three and six months ended March 31, 2001, respectively, as compared to the
comparable periods in fiscal 2000, primarily due to the refinancing of the
related party notes in the fourth calendar quarter of 1999.
We recorded net loss for the three and six months ended March 31, 2001
of approximately $123,071 and 330,886 or approximately $0.01 and $0.02 per
share, respectively, compared to net losses in the comparable periods of the
prior year of $129,099 and $120,029, or approximately $0.02 and $0.01 per share,
respectively. The increases in losses are represented by two items. First, the
startup of our communications subsidiary and administrative expenses related to
the development of the business during fiscal 2001 which was not present in the
comparable periods of fiscal 2000. Second, the prior year six month period
showed an extraordinary gain from restructuring of related party debts of $
171,010 in the first fiscal quarter.
Capital Expenditures and Commitments
During the three and six months ending March 31, 2001, we spent
approximately $29,900 and $50,800. respectively; on capital expenditures,
primarily for improvements at the Business Park.
We expect to spend an additional $60,000 for capital expenditures at our
Correctional Facility operation during the remainder of fiscal 2001 to meet the
increased demand for bed space resulting from the legislation discussed above.
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, our ability to
refinance our notes payable 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.
Forward-Looking Statements
Certain statements and information contained in this Report concerning
our future, proposed, and anticipated activities, certain trends with respect to
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 forward-looking statements.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not aware of any litigation either pending, asserted, unasserted
or threatened to which we or any of our subsidiaries is a party or of which any
of their property is the subject, except as follows:
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. Part of the terms of the settlement
included a lump sum payment of $20,000 and an installment note for $56,000
payable at $5,000 per month at 10%. This debt was liquidated during the second
quarter 2001.
Our Business Park operation occasionally has disputes with tenants
regarding its lease agreements. In our opinion, such matters will be resolved
without material effect on our results of operations or financial condition.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibits
None
Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 8, 2001 SOONER HOLDINGS, INC.
(Registrant)
By: /s/R. C. Cunningham II, President
---------------------------------
R. C. Cunningham II, President
(Chairman of the Board)
By: /s/M. T. Buxton, III
---------------------------------
M. T. Buxton, III
(Chief Financial Officer)
12
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