UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
OR
( ) 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: 1-5673
RANGER INDUSTRIES, INC.
-----------------------
Exact name of Registrant as specified in its charter
Connecticut 06-0768904
----------- ----------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
3400 82nd Way North, St. Petersburg, FL 33710
--------------------------------------- -----
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (727) 381-4904
Former name, former address and former fiscal year, if changed since last
report:
Indicate by check mark whether Ranger (1) has filed all annual, quarterly and
other reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that Ranger was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of August 7, 2002, were 15,610,463 shares, $0.01 par value.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
PART I. FINANCIAL INFORMATION
ASSETS
June 30, 2002 December 31,
(Unaudited) 2001
----------- -----------
Current assets:
Cash and cash equivalents $ 18,434 $ 101,234
Marketable equity securities 16,450 22,200
Prepaid expenses and other current assets 51,690 25,000
Accrued interest receivable 17,419 17,419
----------- -----------
Total current assets 103,993 165,853
Property and equipment, net of accumulated depreciation
(2002, $915; 2001, $1,647) 8,416 6,589
Restricted cash and cash equivalents 8,500,000 8,500,000
Investment in oil and gas properties 608,603 555,115
----------- -----------
$ 9,221,012 $ 9,227,557
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 123,392 $ 154,417
Accrued expenses, related party -- 9,886
Accrued expenses, other 4,192 3,022
----------- -----------
Total current liabilities 127,584 167,325
Other liabilities 100,000 100,000
Due to related parties 487,045 198,449
Note payable, bank 8,500,000 8,500,000
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Total liabilities 9,214,629 8,965,774
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Minority interest -- --
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Stockholders' equity:
Common stock * 199,986 199,986
Capital in excess of par 9,487,981 9,487,981
Deficit accumulated during development stage (889,325) (659,522)
Treasury stock (4,388,181 shares at cost) (8,776,362) (8,776,362)
Other comprehensive income (15,897) 9,700
----------- -----------
Total stockholders' equity 6,383 261,783
----------- -----------
$ 9,221,012 $ 9,227,557
=========== ===========
(*) $.01 par value 20,000,000 shares authorized; 19,998,644 shares issued,
15,610,463 shares outstanding
See notes to condensed consolidated financial statements.
1
RANGER INDUSTRIES, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Six Three Six
Months Months Months Months From Inception
Ended Ended Ended Ended (March 18, 1998)
------------ ------------ ------------ ------------ through
June 30, 2002 June 30, 2001 June 30, 2002
---------------------------- ---------------------------- -------------
Revenues $ -- $ -- $ -- $ -- $ 150,000
------------ ------------ ------------ ------------ ------------
Operating costs and expenses:
Loss on investment in oil and
gas activities -- -- -- -- 156,130
Administrative 15,439 24,424 2,642 10,524 99,575
Salaries and wages 32,000 62,000 30,245 60,245 182,000
Stock-based compensation -- -- -- -- 5,200
Consulting and professional fees 23,504 44,983 42,789 150,203 225,446
------------ ------------ ------------ ------------ ------------
Total operating expenses 70,943 131,407 75,676 220,972 668,351
------------ ------------ ------------ ------------ ------------
Other:
Interest expense, net of interest
income (49,651) (98,396) (42,794) (4,397) (231,437)
Other income (expense) -- -- -- -- (85,184)
------------ ------------ ------------ ------------ ------------
Loss before income taxes (120,594) (229,803) (118,470) 225,369 (834,972)
Income tax expense -- -- -- -- --
Minority interest in loss on joint
venture -- -- -- -- 12,000
------------ ------------ ------------ ------------ ------------
Net loss ($ 120,594) ($ 229,803) ($ 118,470) ($ 225,369) $ 822,972
============ ============ ============ ============ ============
Basic loss per share ($ .01) ($ .01) ($ .01) ($ .01) ($ .13)
============ ============ ============ ============ ============
Weighted average shares
outstanding 15,610,463 15,610,463 15,610,463 15,412,582 6,244,776
============ ============ ============ ============ ============
See notes to condensed consolidated financial statements.
2
RANGER INDUSTRIES, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months From Inception
Ended June 30, (March 18, 1998)
---------------------------- through
2002 2001 June 30, 2002
------------ ------------ -------------
Cash flows from operating activities:
Net loss ($ 229,803) ($ 225,369) ($ 822,972)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash flows
from operating activities:
Stock-based compensation -- -- 5,200
Depreciation 915 -- 2,562
Minority interest in loss of joint venture -- -- (12,000)
Change in assets and liabilities:
Prepaid expenses and other assets (26,690) (44,454) (14,670)
Accrued interest receivable -- (15,736) 23,503
Accounts payable and accrued expenses (29,855) (590,814) (507,007)
------------ ------------ ------------
Total adjustments (55,630) (651,004) (502,412)
------------ ------------ ------------
Net cash flows from operating activities (285,433) (876,373) (1,325,384)
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of marketable equity securities (19,847) -- (32,347)
Acquisition of property and equipment (2,742) (8,236) (10,978)
Advances to related parties -- (45,471) --
Acquisition of oil and gas properties (53,488) (380,183) (496,603)
Cash acquired in business combination -- 10,233,478 10,233,478
Deposits to restricted cash -- (8,626,188) (8,500,000)
------------ ------------ ------------
Net cash flows from investing activities (76,077) 1,173,400 1,193,550
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable -- 8,500,000 8,500,000
Acquisition of treasury shares -- (8,776,362) (8,776,362)
Repayment of related party debt -- (2,000) --
Advances from related party 278,710 -- 426,545
------------ ------------ ------------
Net cash flows from financing activities 278,710 (278,362) 150,183
------------ ------------ ------------
Net change in cash and cash equivalents (82,800) 18,665 18,349
Cash and cash equivalents at beginning of period 101,234 85 85
------------ ------------ ------------
Cash and cash equivalents at end of period
(exclusive of restricted cash of $8,500,000 $ 18,434 $ 18,750 $ 18,434
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 314,075 $ 205,511 $ 800,230
============ ============ ============
See notes to condensed consolidated financial statements.
3
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH JUNE 30, 2002
(UNAUDITED)
1. Nature of business, basis of presentation and summary of significant
accounting policies:
Interim financial statements:
The interim financial statements of Ranger Industries, Inc. and
Subsidiaries which are included herein are unaudited and have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. In the
opinion of management, these interim financial statements include all the
necessary adjustments to fairly present the results of the interim periods,
and all such adjustments are of a normal recurring nature. The interim
results reflected in the accompanying financial statements are not
necessarily indicative of the results of operations for a full fiscal year.
Nature of business and basis of presentation:
Bumgarner Enterprises, Inc. ("Bumgarner" or the "Company") was incorporated
under the laws of the State of Florida in March 1998. There was no
significant business activity from inception through October 2000. Since
October 2000, the Company acquired assets in the oil and gas industry
through joint venture investments and has subsequently pursued exploration
and development of those and other similar properties.
In February 2001, Bumgarner merged with Ranger Industries, Inc.'s ("Ranger"
or the "Registrant") subsidiary (BEI Acquisition Corporation) in
consideration of Ranger's issuance of 14,720,000 shares for 100% of
Bumgarner's issued and outstanding stock. This transaction was accounted
for in accordance with reverse acquisition accounting principles as though
it were a re-capitalization of Bumgarner and a sale of shares by Bumgarner
in exchange for the net assets of Ranger. In February 2001, Bumgarner
completed a tender offer for 4,225,000 shares of Ranger common stock at
$2.00 per share. Simultaneously, Bumgarner acquired an additional 163,181
shares pursuant to the terms of a related merger and acquisition agreement.
The acquisition was financed through a bank loan in the amount of
$8,500,000, which is collateralized by an equivalent amount in cash and
cash equivalents.
The accompanying statements of operations for the three and six months
ended June 30, 2002 and 2001 include the results of operations and cash
flows of Bumgarner for those periods and the results of operations and cash
flows of Ranger from the date of acquisition (February 6, 2001) through
June 30, 2001.
4
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH JUNE 30, 2002
(UNAUDITED)
2. Oil and gas properties:
Supplemental information with respect to oil and gas properties is as
follows:
Capitalized costs relating to oil and gas exploration and development
activities at June 30, 2002:
Property acquisition exploration costs $115,724
Development costs 492,879
--------
$608,603
========
Costs incurred in oil and gas exploration and development activities for
the six months ended June 30, 2002:
Property acquisition costs:
Proved $ 8,186
Unproved 850
Exploration costs 44,452
Development costs --
-------
$53,488
=======
Note: Substantially all oil and gas costs incurred are attributable to
the majority interest in the joint venture.
3. Related party transactions:
Other fees:
One of the partners in the Joint Ventures (Inter-Oil & Gas Group, Inc. -
"Interoil") manages the joint ventures and is reimbursed for any costs it
incurs in that regard. Total amounts due to Interoil and an officer of that
Company aggregated $68,126 at June 30, 2002, all of which were capitalized
as investment in oil and gas properties and included in accounts payable in
the accompanying June 2002 balance sheet. There were no payments in 2001.
In addition to the aforementioned fees, that same partner will earn $25,000
as an operating fee in connection with the two initial wells to be drilled
in Coal County and $12,000 for the wells to be drilled in Okfuskee County.
5
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH JUNE 30, 2002
(UNAUDITED)
3. Related party transactions (continued):
Due to related parties:
Due to related parties represent unsecured advances from the President of
the Company and entities affiliated through partial common ownership. These
advances generally bear interest at 8% and mature December 31, 2003. Of
these amounts $90,469 which represents accrued payroll to the President of
the Company, payment of which has been deferred to December 31, 2003.
Interest expense on related party advances aggregated $10,798 for the six
months ended June 30, 2002.
4. Income taxes:
Income taxes consist of the following:
Deferred tax benefit of operating loss carryforward $ 85,000
Increase in valuation allowance (85,000)
--------
Income tax expense $ --
========
Income tax expense differs from that which would result from applying
statutory tax rates to pre-tax loss due to the increase in the valuation
allowance.
Deferred tax assets consist of the deferred tax benefit from the operating
loss carryforward of $321,000 reduced by a $321,000 valuation allowance
since management cannot presently determine that it is more likely than not
that such deferred tax assets will be realized.
6
ITEM 2. Management's Discussion and Analysis or Plan of Operation
-----------------------------------------------------------------
The following discussion should be read in conjunction with Item 1 above,
and the Financial Statements, including the Notes thereto. The following
discussion should also be read in conjunction with the financial statements and
the Plan of Operations contained in the report on Form 10-KSB Ranger Industries,
Inc. ("Ranger") filed with the Securities and Exchange Commission for the year
ended December 31, 2001 (our "Annual Report"). Ranger has had no revenues from
its primary business activities in either of its two most recent fiscal years or
the subsequent fiscal quarter. Consequently Ranger is providing a Plan of
Operations as required by Item 303(a) of Regulation S-B in lieu of a
Management's Discussion and Analysis.
Plan of Operations
------------------
Background. Prior to its acquisition of Bumgarner through a merger that occurred
in February 2001, Ranger did not have any business activity. At the time of that
merger, Ranger's financial resources were solely its cash on hand.
As described more completely in our Annual Report, Ranger's business
activities changed in February 2001 when it acquired Bumgarner. Bumgarner had
acquired a 74.415% interest in the Henryetta Joint Venture and in December 2001
commenced participation in the OK'ee Mac Joint Venture, in each case with the
same affiliated company. In addition to its primary business activities, Ranger
has engaged in consulting activities that resulted in revenues of $150,000 in
2001 and no revenues during the first six months of 2002.
Anticipated Operations in 2002. Ranger's principal goal during 2002 is to
provide the Joint Ventures with sufficient capital so that that can achieve
their lease acquisition and drilling objectives. At June 30, 2002, however,
Ranger has insufficient available working capital to accomplish these
objectives, as described in the following table:
Liquid Assets $ 34,884
Restricted Cash $ 8,500,000
Current Liabilities $ 127,584
Working Capital Deficit ($ 23,591)
Current liabilities include Ranger's obligation to Guaranty Bank & Trust
Company of $8,500,000 which becomes due on January 29, 2003. Ranger does have
sufficient restricted cash pledged to repay the amount due to Guaranty Bank, but
would prefer to find other sources to repay Guaranty Bank so that Ranger can use
the restricted cash for its operations.
Ranger has generated losses since inception and has not yet generated
revenues from its primary business activities. Currently management can control
expenses and has drastically curtailed expenditures and drilling activities
until such time as funding can be obtained. If Ranger does not achieve any
funding, Ranger will only finance its administrative activities; Ranger believes
it has adequate resources to fund administrative costs at these reduced levels
at least through 2002, principally through related party borrowings. Ranger is
actively seeking to acquire funding in excess of $2,000,000 to permit the
Company to actively resume development of oil and gas properties in Henryetta
Joint Venture and to resume acquisition of leases and exploratory development
operations with OK'ee Mac Joint Venture. Without that funding and successful
drilling of one or more wells capable of producing oil and gas in commercial
quantities, it is not likely that Ranger will be able to achieve a positive cash
flow.
7
Management is pursuing several opportunities for funding including several
merger opportunities and lending arrangements, any one of which, if successful,
can be expected to produce the cash required to undertake the drilling necessary
to produce oil and gas from the proved reserves reflected in the geological
surveys. In addition, management is actively involved in several business
consulting opportunities which may yield revenues sufficient to support an
increased level of operating costs in 2002. Although management believes it will
be successful, there can be no assurances that the Company will achieve its
objectives in these financing and consulting endeavors.
A promissory note exists within the consolidated group and funds transferred
in payment of that obligation are used to fund the oil and gas investment.
Management has obtained an extension of the maturity of the promissory note to
the Henryetta Joint Venture to October 2003.
Ranger (including its wholly-owned subsidiary, Bumgarner) has no current
plans to hire additional employees, and its only capital commitments are to
complete its obligations under the promissory note to the Henryetta Joint
Venture which will provide the funds to the Joint Venture necessary for its
anticipated drilling operations.
Note of Caution Regarding Forward-looking Statements: This report on Form
10-QSB, including the information incorporated by reference herein, contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Certain statements contained in this report using
the term "may", "expects to", and other terms denoting future possibilities, are
forward looking statements. These statements include, but are not limited to,
those statements relating to development of new products, the financial
condition of Ranger (including its lack of working capital and negative cash
flow). The accuracy of these statements cannot be guaranteed as they are subject
to a variety of risks that are beyond Ranger's ability to predict or control and
which may cause actual results to differ materially from the projections or
estimates contained herein. The business and economic risks faced by Ranger and
Ranger's actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors as described herein.
8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
--------------------------
There are no material pending legal or regulatory proceedings against
Ranger, and it is not aware of any that are known to be contemplated.
Item 2. Changes in Securities and Use of Proceeds.
--------------------------------------------------
None.
Item 3. Defaults Upon Senior Securities.
----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
No matter was submitted during the first quarter of the fiscal year covered
by this report to a vote of security holders, through the solicitation of
proxies or otherwise.
Item 5. Other Information.
--------------------------
None.
ITEM 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits:
15. Letter from Aidman Piser & Company, P.A. dated August, 2002 on
Interim Unaudited Financial Information
99. Officer Certification pursuant to Section 906 of the Sarbanes -
Oxley Act of 2002
(b) Reports on Form 8-K:
8-K filed for extension of maturity of Henryetta Promissory note.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Ranger
Industries, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 8, 2002 /s/ Charles G. Masters
--------------------------------
Charles G. Masters, President,
Principal Executive Officer and
Principal Financial and
Accounting Officer
10