-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HnwodLX3tlbaL11Q55ZRMwlxS8Cm1U7GnXzGiA2b1PkhozpH+7+z76GCauF+GqcN Ng3kVPK901ZyaFhzbq6HGQ== 0000950147-97-000788.txt : 19971113 0000950147-97-000788.hdr.sgml : 19971113 ACCESSION NUMBER: 0000950147-97-000788 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOONER HOLDINGS INC /OK/ CENTRAL INDEX KEY: 0000861370 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 731275261 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-18344 FILM NUMBER: 97716151 BUSINESS ADDRESS: STREET 1: 2680 W I-40 CITY: OKLAHOMA CITY STATE: OK ZIP: 73108 BUSINESS PHONE: 4052368332 MAIL ADDRESS: STREET 1: 2680 E I-40 CITY: OKLAHOMA CITY STATE: OK ZIP: 73108 FORMER COMPANY: FORMER CONFORMED NAME: CHARLIE O COMPANY INC DATE OF NAME CHANGE: 19930328 10QSB 1 QUARTERLY REPORT 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 September 30, 1997 -------------------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission File Number: 0-18344 --------------- 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.) 2680 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: 7,471,350 shares of common stock as of November 13, 1997. 1 PART I. FINANCIAL INFORMATION Item 1. Financial Statements SOONER HOLDINGS, INC. Consolidated Balance Sheet (unaudited)
Sept. 30, 1997 ----------- ASSETS Current assets: Cash $ 5,251 Accounts receivable 3,724 Inventories, net 5,093 Prepaid expenses and deposits 1,780 ----------- Total current assets 15,848 Property and equipment, net 2,295,917 Other assets, net 29,815 =========== $ 2,341,580 =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 26,669 Real estate taxes payable 17,099 Accrued liabilities to related parties 71,710 Accrued liabilities 32,266 Current portion of notes payable 374,053 ----------- Total current liabilities 521,797 ----------- Notes payable, less current portion 1,899,452 Commitments and contingencies -- ----------- Stockholders' deficit: Preferred stock; undesignated, authorized 10,000,000 shares, no shares issued and outstanding -- Common stock; $.001 par value, authorized 100,000,000 shares, 7,471,350 shares issued and outstanding 7,471 Additional paid-in-capital 5,497,907 Accumulated deficit (5,585,047) ----------- Total stockholders' deficit (79,669) ----------- $ 2,341,580 ===========
The accompanying notes are an integral part of this consolidated balance sheet. 2 SOONER HOLDINGS, INC. Consolidated Statements of Operations (unaudited)
For the quarter ended For the nine months ended September 30, September 30, 1997 1996 1997 1996 ---------------- --------------- --------------- --------------- Revenues $ 91,539 $170,821 $363,789 $436,310 ---------------- --------------- ---------------- --------------- Operating expenses: Cost of products sold 279 1,391 899 3,039 General and administrative 41,069 81,272 127,485 171,952 Depreciation and amortization 15,001 24,296 44,853 62,805 Interest expense 51,249 57,476 176,352 171,644 ---------------- --------------- ---------------- --------------- Total operating expenses 107,598 164,435 349,589 409,440 ---------------- --------------- ---------------- --------------- Income (loss) from operations (16,059) 6,386 14,200 26,870 Other income (loss) 39,000 (17,370) 43,801 (17,370) ---------------- --------------- ---------------- --------------- Income (loss) from continuing operations 22,941 (10,984) 58,001 9,500 Loss from discontinued operations - (561) - (47,757) ---------------- --------------- ---------------- --------------- Net income (loss) $ 22,941 $ (11,545) $ 58,001 $ (38,257) ================ =============== ================ =============== Net income (loss) per common share: Income (loss) from continuing operations * (*) * * Loss from discontinued operations - (*) - (*) ================ =============== ================ =============== Net income (loss) per common share $ * $ (*) $ * $ (*) ================ =============== ================ =============== Weighted average common shares outstanding 7,471,350 6,412,528 7,471,350 6,412,528 ================ =============== ================ ===============
* less than $.01 The accompanying notes are an integral part of these consolidated financial statements. 3 SOONER HOLDINGS, INC. Consolidated Statements of Cash Flows (unaudited)
For the nine months ended September 30, 1997 1996 --------- --------- Cash flows from operating activities: Net income (loss) $ 58,001 $ (38,257) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 44,853 62,805 Loss on repossession of land -- 17,370 Stock received for payment of fees (39,000) -- Changes in assets and liabilities: Accounts receivable (988) (151) Inventories 362 1,429 Prepaid expenses and deposits (1,200) 1,127 Bank overdraft -- (5,500) Accounts payable 5,062 37,975 Real estate taxes payable 10,200 11,251 Real estate taxes payable recourse to land -- 13,157 Accrued liabilities to related parties 67,895 65,101 Accrued liabilities 7,019 716 Deferred revenue (99,830) 195,027 Net liabilities of discontinued operations -- 43,799 --------- --------- Net cash provided by operating activities 52,374 405,849 --------- --------- Cash flows from investing activities: Sale of land 1 -- Advances to Dynamicorp -- (30,000) Purchases of property and equipment (8,875) (60,502) --------- --------- Net cash used in investing activities (8,874) (90,502) --------- --------- Cash flows from financing activities: Repayments of notes payable (54,198) (334,157) Borrowings on notes payable to related parties 13,300 20,499 --------- --------- Net cash used in financing activities (40,898) (313,658) --------- --------- Net increase in cash 2,602 1,689 Cash at beginning of year 2,649 3,490 --------- --------- Cash at end of period $ 5,251 $ 5,179 ========= ========= Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 141,043 $ 140,967 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 4 SOONER HOLDINGS, INC. Notes to Consolidated Financial Statements (Unaudited) September 30, 1997 NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization and operations Sooner Holdings, Inc., an Oklahoma corporation (Company), through its subsidiaries, conducts business in several industries. Charlie O Business Park Incorporated (Business Park) is engaged in the ownership and rental of a business park in Oklahoma City, Oklahoma. Charlie O Beverages, Inc. (Beverages) is engaged in the distribution of an in-home soda fountain appliance and supplies for the preparation of carbonated beverages. SD Properties, Inc. (SDPI) solicits and manages construction activities. New Directions Acquisitions Corp. (NDAC), a newly formed subsidiary of the company, acquired an option to purchase certain assets (see Note 2). Basis of presentation The unaudited consolidated financial statements presented herein have been prepared by the Company, without audit, pursuant to the rules and regulations for interim financial information and the instructions to Form 10-QSB and Regulation S-B. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1996 (1996 Form 10-KSB). In the opinion of management, the unaudited consolidated financial statements reflect all adjustments (consisting of normal recurring accruals only) which are necessary to present fairly the consolidated financial position, results of operations, and changes in cash flow of the Company. Operating results for interim periods are not necessarily indicative of the results which may be expected for the entire year. Reclassifications Certain reclassifications have been made in the 1996 financial statements to conform with the 1997 presentation. These reclassifications do not have a material effect on the consolidated financial statements. Management Plans For the past four fiscal years, the independent auditor's report included an explanatory paragraph calling attention to a going concern issue. The accompanying consolidated financial statements have been prepared contemplating continuation of the Company as a going concern. The Company has sustained recurring operating losses in recent years and is expected to need additional amounts of working capital for its operations. At September 30, 1997, the Company has a shareholders' deficit of $79,669 and has a working capital deficiency of $505,949. In view of these matters, realization of a major portion of the assets is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financing requirements and the success of its future operations. 5 Management of the Company is pursuing merger and/or acquisition opportunities. Management believes it can successfully complete an acquisition or merger that will enable the Company to continue as a going concern; however, there can be no assurance that it will be successful in this endeavor. NOTE 2 - OPTION TO ACQUIRE ASSETS In September 1997, NDAC entered into an Option Agreement (the "Option") to purchase all the assets of New Direction Centers of America, L.L.C. (NDA) and Horizon Lodges of America, Inc. (HLA) (together the "Sellers"). The Sellers' assets relate to a community corrections facility, or "halfway" house, operated in Oklahoma City, Oklahoma. As consideration for the grant of the Option, NDAC agreed to lend the Sellers $325,000 for costs directly related to the rehabilitation of the facility. Pursuant to the Option Agreement, the exercise price of the Option will be $1,725,000, plus (i) the assumption of a "royalty" fee for the next 20 years of at least $6,000 per month due to the original permitting owner, (ii) the assumption of the rehabilitation loan, and (iii) 1,000,000 shares of common stock of the Company. The president and chairman of the Company, is a major lender to HLA and a major investor and lender in NDA. The Option expires on January 31, 1998. If the Company exercises the Option, it will provide the Company diversification into a new business; however, there can be no assurance that the Company will be successful in this endeavor or whether the Company can raise the capital necessary to acquire the assets in accordance with the terms of the Option. NOTE 3 - RELATED PARTY OBLIGATIONS Related parties are more fully described in the 1996 Form 10-KSB. The table below reflects the related party obligations as of September 30, 1997. In addition, the president and chairman of the Company has personally guaranteed $1,686,662 of the Company's notes payable. L.T. Notes Accrued Payable Liabilities ------- ----------- President and chairman $144,004 $ 32,827 Aztore and affiliates 287,430 38,883 -------- -------- Total related party liabilities $431,434 $ 71,710 ======== ======== 6 NOTE 4 - COMMITMENTS AND CONTINGENCIES In connection with the Option Agreement (see Note 2), NDAC has committed to lend $325,000 to the Sellers. In addition, NDAC has entered into a contingent contract with Mr. Ron Alexander, the current General Manager of NDA, who has agreed to become the president of NDAC. The contract with Mr. Alexander, only if NDAC exercises its Option, includes the grant of stock options for the purchase of up to 1,200,000 shares of common stock of the Company at an exercise price of $.05 per share. These options would vest over three years. Item 2. Management's Discussion and Analysis or Plan of Operation The following discussion should be read in conjunction with the Company's financial statements and notes thereto included elsewhere in this Form 10-QSB report. In addition, the discussion of the Company's expected Plan of Operation, included in the 1996 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. Liquidity and Capital Resources - September 30, 1997 (unaudited) compared to September 30, 1996 (unaudited). The Company has had severe liquidity problems for the last several years. The Company's liquidity is reflected in the table below, which shows comparative deficiencies in working capital. Current working capital has been primarily supplied by the Company's chairman and president, by Aztore Holdings, Inc. (Aztore), a Phoenix, Arizona investment company or by Aztore's other affiliated companies. September 30, Dec. 31, 1996 1997 1996 (audited) ---- ---- --------- Deficiency in working capital $ (505,949) $ (500,249) $(686,011) =========== =========== ========= Since December 31, 1996, the Company has been attempting to sell Beverages as a going concern in order to yield a return on the Company's investment in tooling and intellectual property. In anticipation of this sale, the Company wrote down Beverage's inventory and assets to their estimated net realizable value as of December 31, 1996. Exclusive of funds required for debt repayment, the Company believes that it can borrow any additional funds from its related parties to maintain its operations, although there can be no assurance that such funds will be available when needed. In the event that the Company cannot refinance, or obtain forbearance on its current liabilities or on its long-term liabilities as they come due, the Company will undoubtedly face further severe liquidity problems which may lead to litigation, the inability to transact business, and/or foreclosure actions being initiated against a majority of the Company's assets. For the past few years, management has been pursuing merger and/or acquisition opportunities. In September 1997, New Directions Acquisition Corp. (NDAC), a newly formed subsidiary of the Company, entered into an Option Agreement (the "Option") to purchase all the assets of New Direction Centers of America, L.L.C. (NDA) and Horizon Lodges of America, Inc. (HLA) (together the "Sellers"). The Sellers' assets relate to a community corrections facility, or "halfway" house, operated in Oklahoma City, Oklahoma. As consideration for the grant of the Option, NDAC agreed to lend the Sellers $325,000 for costs directly related to the rehabilitation of the facility. 7 Pursuant to the Option Agreement, the exercise price of the Option will be $1,725,000, plus (i) the assumption of a "royalty" fee for the next 20 years of at least $6,000 per month due to the original permitting owner, (ii) the assumption of the rehabilitation loan, and (iii) 1,000,000 shares of common stock of the Company. The president and chairman of the Company, is a major lender to HLA and a major investor and lender in NDA. The Option expires on January 31, 1998. If the Company exercises the Option, it will provide the Company diversification into a new business; however, there can be no assurance that the Company will be successful in funding this acquisition or whether the Company can provide sufficient funding to maintain its Option. NDA currently houses between 60 and 100 women under the control of the Oklahoma Department of Corrections (ODOC). NDA recently expanded its available beds to 155. The $325,000 loan will be used for costs directly related to the rehabilitation of the facility to qualify it for American Correctional Association (ACA) accreditation and for expansion to accommodate 300 clients, the maximum number for which the HLA facility is permitted by the ODOC. The Company is still evaluating the structure of the acquisition since not all of the NDA members agreed to the Option Agreement. Although NDAC believes that a sufficient percent of the members (more than 50%) agreed to the grant of the Option to sell the assets, there have been ongoing discussions with the NDA members who did not sign. The fact that less than 100% of NDA members signed the Option Agreement may make raising the amount of financing required to execute the Option Agreement more difficult. Results of Operations - The quarter and nine months ended September 30, 1997 (unaudited) compared to the quarter and nine months ended September 30, 1996 (unaudited) The following table illustrates the Company's revenue mix. Quarter ended Nine months ended September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Business Park revenue $ 84,053 $ 83,021 $257,634 $239,733 SDPI revenue 7,000 86,202 104,830 192,834 Beverages revenue 486 1,598 1,325 3,743 -------- -------- -------- -------- Total revenue $ 91,539 $170,821 $363,789 $436,310 ======== ======== ======== ======== 8 As a result of increases in occupancy related to rehabilitation of its facilities, Business Park revenues rose $1,032 (1%) and $17,901 (7%) for the quarter and nine months ended September 30, 1997, compared to the same quarter and nine-month periods in 1996. At the end of the quarter the Business Park was 100% occupied. However, 35% of the Business Park leases expire during the next twelve months. During the quarter, the Company successfully renegotiated eight leases (or 25%) to three-year leases. Subsequent to September 30, 1997, the Company lost one tenant that accounted for 24% of total revenues for Business Park. This change in the Company's current tenants may have a negative impact on the Company's profitability in the fourth quarter. 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. There is no assurance the Company's historically high occupancy rate will continue. SDPI revenues decreased by $79,202 (92%) and $88,004 (46%) for the quarter and nine months ended September 30, 1997, compared to the same quarter and nine-month periods in 1996. SDPI, a marketing representative for construction contractors, had revenue growth during fiscal 1996 and early 1997 attributable to entry into this new business. Although SDPI continues to evaluate opportunities related to this business, additional revenues related to this business are unlikely. Total operating expenses for the quarter and nine months ended September 30, 1997 were $107,598 and $349,589, respectively, as compared to total expenses for the comparable 1996 periods of $164,435 and $409,440, respectively. The decrease in the 1997 expenses for the quarter and nine months was due primarily to a decrease in general and administrative (G&A) expenses, consisting primarily of professional and management fees. Also, in the 1996 periods there were costs associated with the rehabilitation of the Business Park facilities that did not occur in the comparable 1997 periods. In addition, in 1996 the Company wrote down the Beverages assets to their estimated net realizable value, which resulted in a decrease in depreciation expense in 1997. This decrease in depreciation expense was offset by an increase in interest expense due to increased borrowings. Other income (loss) consists of gains totaling $43,801 for the 1997 periods. These gains arose from the sale of the Company's interest in the land trust held by SDPI ($4,801) and the sale of stock in On TV Incorporated (ONTV) acquired in 1994 ($39,000). The loss for the 1996 periods relates to the loss of certain of SDPI's lots due to tax foreclosure sales. Loss from discontinued operations for the 1996 periods relate to the divestiture of two of the Company's subsidiaries in 1996 including the majority ownership of ONTV. The Company recorded net income from continuing operations for the nine-month period of 1997 of $58,001 as compared to net income of $9,500 for the comparable 1996 period. The increase in net income from continuing operations in 1997 was due primarily to the sale of the land trust held by SDPI in 1997 thus eliminating losses resulting from lots lost due to tax foreclosure sales. 9 Capital Expenditures and Commitments During the quarter and nine months ending September 30, 1997, the Company had modest capital expenditures primarily for leasehold improvements at the Business Park. In order to consummate the NDAC Option Agreement as currently structured, the Company will have to raise approximately $2,100,000 by January 31, 1998. Such funds are expected to be raised by a combination of debt and equity. As consideration for the Option, the Company has an interim-funding requirement of $325,000, which is included in the above amount. This funding will only be available for pre-approved rehabilitation expenses related to the facility. There can be no assurance that the Company will be successful in this endeavor or whether the Company can provide sufficient funding to maintain its Option. Forward-looking statements This Form 10-QSB, including all documents incorporated by reference, includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts included in this Form 10-QSB (and in documents incorporated by reference), including without limitation, statements under "Management's Discussion and Analysis or Plan of Operation" regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this section. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is not aware of any litigation either pending, asserted, unasserted or threatened to which the Company or any of is subsidiaries is a party or of which any of their property is the subject, except as follows: During 1996, the Company was named as a defendant in a lawsuit. The Company answered the suit in August 1996 and there has been no further activity. The plaintiff alleges damages of approximately $100,000. The Company believes it has no liability under this claim due to various defenses which it intends to vigorously assert. However, such defense will likely cost the Company legal fees and expenses which it may be unable to recover from the plaintiff. The Company's Business Park operation occasionally has disputes with tenants regarding its lease agreements. In the opinion of management, such matters will be resolved without material effect on the Company's results of operations or financial condition. 10 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 On July 3, 1997, Mr. David B. Talbot, Jr. resigned as a member of the board of directors and as secretary of the Company. Mr. Talbot's resignation was not the result of any disagreement on accounting principles or corporate policies. Mr. R. C. Cunningham, III, 33, a mortgage broker in Washington, D.C. and the son of the president and chairman, was appointed to succeed Mr. Talbot on the board and was elected by the board to serve as secretary of the Company. Item 6. Exhibits and Reports on Form 8-K Page ---- 10.1 Option Agreement by and between Sooner Holdings, Inc., New Directions Acquisition Corp., New Direction Centers of America, L.L.C., and Horizon Lodges of America, Inc. dated September 9, 1997 E-1 11 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. SOONER HOLDINGS, INC. ---------------------------------------- (Registrant) Dated: November 13, 1997 ------------------------ By: /s/ R.C. Cunningham ---------------------------------------- R. C. Cunningham II, Chairman and President By: /s/ Lanny R. Lang ---------------------------------------- Lanny R. Lang, Treasurer (Chief Accounting Officer) 12 EX-10.1 2 OPTION AGREEMENT DATED SEPTEMBER 9, 1997 OPTION AGREEMENT ---------------- (New Direction - Horizon Lodges - Sooner - Sooner Sub) THIS OPTION AGREEMENT (the "Agreement") is entered into effective September 9, 1997, by and among SOONER HOLDINGS, INC. ("Sooner"), an Oklahoma corporation; N D ACQUISITION CORP. ("Sooner Sub"), an Oklahoma corporation; NEW DIRECTION CENTERS OF AMERICA, A LIMITED LIABILITY COMPANY ("New Direction"), an Oklahoma limited liability company; and HORIZON LODGES OF AMERICA, INC. ("Horizon Lodges"), an Oklahoma corporation. IN CONSIDERATION of the representations, promises, undertakings, and covenants set forth herein, the parties agree as follows: This Agreement is not assignable and transferable by ND Acquisitions. 1. Representation by New Direction. New Direction represents as follows: 1.1 New Direction is the permittee of a permit (the "Permit") granted by the Oklahoma Department of Corrections ("ODOC") to operate a pre-release program (the "Program") for up to 300 criminal offenders subject to the authority of the ODOC and referred by ODOC to New Direction (the "Clients"). The Permit restricts the Program to activities conducted at and from a certain facility (the "Facility") located on approximately 2.8 acres of land with frontage of approximately 280 feet on North Lincoln Boulevard in Oklahoma City, Oklahoma. The Facility is presently able to accommodate only 155 Clients, is not accredited by the American Correctional Association (the "ACA"), and must be rehabilitated at a cost of approximately $478,000 (i) to expand to accommodate 300 Clients and (ii) to obtain ACA accreditation. 1.2 New Direction leases the Facility from Horizon Lodges at a monthly rental of $8,500. 1.3 New Direction's sole manager is Ron Alexander of Norman, Oklahoma. 1.4 Attached as Schedule 1.4 is a true and complete list (i) of New Direction's and Horizon Lodges' liabilities as of the date set forth therein and (ii) of the ownership interests of all of New Direction's members except certain employees who hold minor interests. Liabilities are variable due to operations, subsequently a true and correct accounting will be 1 issued on the day of closing. Ordinary expenditures creating liability will be incurred only nominal offsetting. 1.5 Among the liabilities listed in Schedule 1.4 is an obligation owed to Hal Rupert, a previous owner of the Permit, which obligation is a one-month's portion of a 20-year obligation which is, itself, a continuing participation in the revenues obtained through the exercise of the rights granted by the Permit (the "Royalty Obligation"). 2. Representations of Horizon Lodges. Horizon Lodges represents as follows: 2.1 Horizon Lodges is the owner in fee simple of the Facility. 2.2 Attached as Schedule 2.2 is a true and complete list of all mortgages, liens and other encumbrances attached to or operating as charges on the Facility as of the date set forth therein. 2.3 Horizon Lodges leases the Facility to New Direction for a monthly rental of $8,500. 3. Representations of Sooner. Sooner represents as follows: 3.1 Sooner has issued and there are outstanding approximately 7,400,000 shares of its Common Stock. Its Common Stock trades on the NASD OTC Bulletin Board under the symbol "SOON". 3.2 Sooner Sub is a wholly owned subsidiary of Sooner. 4. Option. New Direction and Horizon Lodges (collectively, the "Sellers") grant to Sooner Sub an option (the "Option") to acquire the Permit, the Facility, and all other assets of the Sellers, real and personal, tangible and intangible, related in any way to the enjoyment of the Permit and the Facility. 5. Expiration of Option. The Option expires at 5:00 P.M., Oklahoma City time, on January 31, 1998, unless earlier exercised. Exercised shall be interpreted as closing of the purchase. The transaction must be closed on or before January 31, 1998. 6. Purchase Price for the Option. As consideration for the grant of the Option, Sooner Sub agrees to lend $325,000, less $25,000 in prepaid interest, to the Sellers (the "Rehabilitation Loan") subject to the following provisions: 6.1 The Rehabilitation Loan shall: 6.1.1 have a three year term commencing on January 31, 1998; 6.1.2 bear interest at 10% per annum; 2 6.1.3 be amortized starting on January 31, 1998 using a ten year amortization schedule; requiring quarterly payments; 6.2 The principal amount of the Rehabilitation Loan shall be advanced only for costs directly related to the rehabilitation of the Facility to qualify it for ACA accreditation and for expansion to accommodate 300 Clients. The Sellers shall incur costs, in the respect, only after obtaining the prior written approval of Sooner Sub to incur such costs, which approval shall not be unreasonably withheld. 6.3 Said loan shall be secured by a second mortgage on the property. Said loan shall be executed by the LLC, non-recourse to LLC Members and no liability other than the property to the manager of the LLC. 7. Exercise Price of the Option. The exercise price of the Option is as follows: 7.1 Assumption of the Rehabilitation loan. 7.2 Assumption of the Royalty Obligation. 7.3 $1,725,000. 7.4 1,000,000 shares of Common Stock of Sooner. 8. Closing. Should Sooner Sub exercise the Option, the closing of this transaction (the "Closing") shall occur as follows: 8.1 The Closing shall occur in the office of Fuller, Tubb & Pomeroy, 800 Bank of Oklahoma Plaza, Oklahoma City, Oklahoma 73102, and in the Oklahoma County Courthouse at a time or times designated by Sooner Sub. Closing shall be concluded on or before January 31, 1998. The closing shall be concluded in the offices of a designated title company. 8.2 The parties shall first examine and approve the form of the following documents: 8.2.1 Horizon Lodges' deed of the Facility to Sooner Sub (the "Deed"). 8.2.2 New Direction's assignment to Sooner Sub of the Permit, approved by the Oklahoma Department of Corrections (the "Permit Assignment"). 8.2.3 The Sellers' assignments to Sooner Sub of all other assets of the Sellers (the "Other Assignments"). 3 8.2.4 Sooner Sub's cashier's checks (the "Cashier's Checks") aggregating $1,725,000, for the extinguishment of all debt of the Sellers and payments to members in accordance with Schedule 1.4(ii). 8.2.5 Sooner Sub's written evidence of its assumption of the Royalty Obligation. 8.2.6 Evidence that Sooner's debt, denominated as "L.T. Notes Payable" and in the amount of $462,693 as of June 30, 1997, either (i) has been paid partially or in full, (ii) has been assumed by Sooner's real estate subsidiary corporation, Charlie O Business Park, Inc., or (iii) has been converted to Common Stock of Sooner at a conversion rate equal to the lower of $0.20 a share or the market bid price of Sooner's Common Stock on the day before the Closing. 8.3 A representative of each of the parties shall be stationed in the Oklahoma County Courthouse in each of (i) the office of the Recorder of Deeds and (ii) the office of the County Clerk, which representatives shall be in cellular telephone contact with representatives of the parties in the offices of Fuller, Tubb & Pomeroy. 8.4 At such time as the representatives of the parties can ascertain that no mortgages, liens, or security interests have been filed as charges on the Permit, the Facility, or the Sellers not acceptable to Sooner Sub or to Sooner, the parties shall exchange the documents and instruments described in paragraph 8.2 herein and the Deed and the Security Interest shall be filed for recording in the offices of the Oklahoma County Recorder of Deeds and County Clerk. 8.5 The parties agree that R.C. Cunningham II shall receive back his $227,000 certificate of deposit pledged to support the loan from First Enterprise Bank as soon as that bank is paid from the proceeds of the sale. The parties will execute any documentation to effect this agreement. 9. Pre-Closing. Sellers agree to make available to Sooner, during business hours, its books and records and access to the Facility and its employees in order that Sooner can satisfy itself concerning the assets, liabilities and business of New Directions. 10. Post-Closing. Subsequent to the Closing: 10.1 The parties shall each cooperate with the others to do all acts and execute any required documents to carry out the intention of this Agreement and to achieve the enjoyment by the parties of the fruits of their bargains, which includes a requirement that the 4 Sellers obtain an audit of their financial statements as required by Regulation S-B of the Securities and Exchange Commission. 10.2 Sooner shall indemnify Ron Alexander and David Talbot, Jr. for their legal fees up to $10,000 related to defending any claims asserted regarding a note executed between Alexander and Tabot (as borrowers) and P.J.K. Inc. as lender. Such claims are for reimbursement of reasonable legal fees. N D ACQUISITION CORP SOONER HOLDINGS, INC. By: /s/ R. C. Cunningham, II By: R. C. Cunningham, II - ------------------------------------ ------------------------------------- R.C. Cunningham, II President R.C. Cunningham, II President HORIZON LODGES OF AMERICA, INC. NEW DIRECTION CENTERS OF AMERICA, A LIMITED LIABILITY COMPANY By: /s/ Tim Moore By: /s/ Ron Alexander - ------------------------------------ ------------------------------------- Tim Moore, President Ron Alexander, Manager 5 EX-27 3 SELECTED FINANCIAL DATA
5 1 U.S. Dollar 9-MOS Dec-31-1997 Jan-01-1997 Sep-30-1997 1 5,251 0 3,724 0 5,093 15,848 2,715,597 419,680 2,341,580 521,797 0 0 0 5,505,378 (5,585,047) 2,341,580 363,789 363,789 899 173,237 (43,801) 0 176,352 58,001 0 58,001 0 0 0 58,001 0 0
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