Newspaper article THE JOURNAL RECORD

Notice of Intent Filed to Revoke Registration by Magnolia Foods / by Securities Commission

Newspaper article THE JOURNAL RECORD

Notice of Intent Filed to Revoke Registration by Magnolia Foods / by Securities Commission

Article excerpt

A summary order with a notice of intent to revoke the registration of the securities of Magnolia Foods Inc. of Oklahoma City has been issued by the Oklahoma Department of Securities, it was reported Tuesday.

The order also delayed renewal of registration of the securities, which became effective with an initial offering on July 23, 1986, and expired on July 31, 1987. It was signed on Aug. 28 by Susan E. Bryant, administrator of the securities department.

Reached by telephone at a conference in Snowmass, Colo., Bryant said Magnolia Foods could request a hearing in writing within 15 days, "or the matter could be settled before a hearing." A hearing would have to be set within 30 days.

Ken L. Kenworthy, president of Magnolia Foods, refused to comment.

Involved in the decision was an alleged assignment on May 19, 1987, to the company of 42,353 shares of stock by Magnolia Foods Chairman Joseph Johnston, and assigment to the company of 4,706 shares of stock by David Newton in exchange for release of their combined debt of about $250,000 to Magnolia, the order said.

The stock had a market value of about $100,000 but was purchased by Johnston and Newton for less than $1,000 and for a promissory note for $114,000 from Johnston, the order said. The advances were used "to fund a restaurant of the same kind" operated by Magnolia Foods and controlled by principals of Magnolia but not the company, the order said.

The company loaned the combined amount of $250,000 to Johnston and Newton in October 1986 and December 1986, said the order. However, the loans, the exchange of stock on May 19, 1987, and the funding of another restaurant were not disclosed in the original prospectus as amended on July 16, 1986, the department said.

Magnolia Foods operates the Magnolia Cafe in Oklahoma City and has interests in 10 other Magnolia Cafes, including joint ventures and licensed restaurants.

The assignment of stock to Magnolia Foods "constituted a violation of the terms" of an escrow agreement included in the original order of registration issued by the securities deparment, the order alleged. …

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