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 September 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 November 8, 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
September 30,
2002 December 31,
(Unaudited) 2001
----------- -----------
Current assets:
Cash and cash equivalents $ 18,220 $ 101,234
Restricted certificate of deposit 8,500,000 --
Marketable equity securities -- 22,200
Prepaid expenses and other current assets 68,060 25,000
Accrued interest receivable 17,419 17,419
----------- -----------
Total current assets 8,603,699 165,853
Property and equipment, net 7,776 6,589
Restricted certificate of deposit -- 8,500,000
Investment in oil and gas properties 614,578 555,115
----------- -----------
$ 9,226,053 $ 9,227,557
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable, bank $ 8,500,000 $ --
Accounts payable 123,172 154,417
Due to related parties -- 9,886
Accrued expenses, other 11,602 3,022
----------- -----------
Total current liabilities 8,634,774 167,325
Note payable, bank -- 8,500,000
Other liabilities 100,000 100,000
Due to related parties 580,255 198,449
----------- -----------
Total liabilities 9,315,029 8,965,774
----------- -----------
Minority interest -- --
Stockholders' equity:
Common stock 199,986 * 199,986 *
Capital in excess of par 9,487,981 9,487,981
Deficit accumulated during development stage (1,001,283) (659,522)
Less treasury stock (4,388,181 shares at cost) (8,776,362) (8,776,362)
Other comprehensive income 702 9,700
----------- -----------
(88,976) 261,783
----------- -----------
----------- -----------
$ 9,226,053 $ 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.
2
RANGER INDUSTRIES, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Nine Three Nine
Months Months Months Months From Inception
Ended Ended Ended Ended (Mar. 18, 1998)
------------- ------------ ------------- ------------ through
September 30, 2002 September 30, 2001 September 30, 2002
---------------------------- ----------------------------- ------------------
Revenues $ -- $ -- $ -- $ -- $ 150,000
------------ ------------ ------------ ------------ ------------
Operating expenses:
Loss on investment in oil
and gas activities -- -- -- -- 156,130
Administrative 4,087 28,511 4,756 15,280 105,296
Salaries and wages 28,000 90,000 31,700 91,945 260,000
Stock-based compensation -- -- -- -- 19,919
Consulting and professional fees 1,121 46,104 12,525 162,728 226,567
------------ ------------ ------------ ------------ ------------
Total operating expenses 33,208 164,615 48,981 269,953 767,912
------------ ------------ ------------ ------------ ------------
Net operating loss (33,208) (164,615) (48,981) (269,953) (617,912)
Interest expense, net of interest
income (54,057) (152,453) (71,896) (76,292) (285,494)
Other expense -- -- -- -- (85,184)
Loss on sales of marketable
equity securities (24,693) (24,693) -- -- (24,693)
------------ ------------ ------------ ------------ ------------
Loss before income taxes (111,958) (341,761) (120,877) (346,245) (1,013,283)
Income taxes:
Current -- -- -- -- --
Deferred -- -- -- -- --
Minority interest in loss of joint
venture -- -- -- -- 12,000
------------ ------------ ------------ ------------ ------------
Net loss ($ 111,958) ($ 341,761) ($ 120,877) ($ 346,245) ($ 1,001,283)
============ ============ ============ ============ ============
Net loss per share ($ .01) ($ .02) ($ .01) ($ .02) ($ .15)
============ ============ ============ ============ ============
Weighted average shares
outstanding, basic and
diluted 15,610,463 15,610,463 15,610,463 15,464,751 6,625,706
============ ============ ============ ============ ============
See notes to condensed consolidated financial statements.
3
RANGER INDUSTRIES, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months From Inception
Ended September 30, (March 18, 1998)
---------------------------- through
2002 2001 Sept. 30, 2002
------------ ------------ --------------
Cash flows from operating activities:
Net loss ($ 341,761) ($ 346,245) ($ 1,001,283)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash
flows from operating activities:
Stock-based compensation -- -- 19,919
Depreciation 1,555 -- 3,202
Loss on sale of marketable equity securities 24,693 -- 24,693
Minority interest in loss of joint venture -- -- (12,000)
Change in assets and liabilities:
Prepaid expenses and other assets (43,060) 11,395 (33,040)
Accrued interest receivable -- (14,345) 23,503
Accounts payable and accrued expenses (22,666) (539,220) (448,200)
------------ ------------ ------------
Total adjustments (39,478) (542,170) (421,923)
------------ ------------ ------------
Net cash flows from operating activities (381,239) (888,415) (1,423,206)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of marketable equity securities (225,033) -- (249,383)
Acquisition of property and equipment (2,742) (8,236) (10,978)
Proceeds from sale of marketable equity securities 213,542 -- 213,542
Acquisition of oil and gas properties (59,462) (513,781) (502,577)
Cash acquired in business combination -- 10,233,478 10,233,478
Purchases of restricted certificate of deposit -- (8,556,000) (8,500,000)
------------ ------------ ------------
Net cash flows from investing activities (73,695) 1,155,461 1,184,082
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from issuance of stock -- -- 1
Proceeds from notes payable -- 8,500,000 8,500,000
Acquisition of treasury shares (8,776,362) (8,776,362)
Advances from related parties 371,920 31,646 521,855
Repayment of related party debt -- (2,000) --
------------ ------------ ------------
Net cash flows from financing activities 371,920 (246,716) 245,494
------------ ------------ ------------
Net change in cash (83,014) 20,330 6,370
Cash at beginning of period 101,234 85 --
------------ ------------ ------------
Cash at end of period
(exclusive of restricted cash of $8,500,000) $ 18,220 $ 20,415 $ 6,370
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 414,080 $ 344,673 $ 900,235
============ ============ ============
See notes to condensed consolidated financial statements.
4
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH SEPTEMBER 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. In
October 2000, the Company acquired assets in the oil and gas industry
through a joint venture investment 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 nine months
ended September 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 acquisitions (February 6, 2001)
through September 30, 2002.
5
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH SEPTEMBER 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 September 30, 2002:
Property acquisition exploration costs $120,824
Development costs 493,754
--------
$614,578
========
Costs incurred in oil and gas exploration and development activities for
the nine months ended September 30, 2002:
Property acquisition costs:
Proved $13,286
Unproved 850
Exploration costs --
Development costs 45,326
-------
$59,462
=======
Note: Substantially all oil and gas costs incurred are attributable to the
majority interest in the joint venture.
3. Related party transactions:
Due to related parties:
Due to related parties represents unsecured advances from the President of
the Company and entities affiliated through partial common ownership or
control. These advances generally bear interest at 8% and mature December
31, 2003. Of these amounts, $95,534 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 $19,337 for
the nine months ended September 30, 2002.
6
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH SEPTEMBER 30, 2002
(UNAUDITED)
3. Related party transactions (continued):
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 September 30, 2002, all of which were
capitalized as investment in oil and gas properties and included in
accounts payable in the accompanying September 30, 2002 balance sheet.
There were no payments in 2001.
4. Income taxes:
Income taxes consist of the following:
Deferred tax benefit of operating loss carryforward $ 128,000
Increase in valuation allowance (128,000)
---------
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 approximately $580,000, reduced by a $580,000
valuation allowance since management cannot presently determine that it is
more likely than not that such deferred tax assets will be realized. The
operating loss carryfoward will expire from 2019 through 2022.
5. Recent accounting pronouncements:
In April 2002, the FASB issued SFAS No. 145 covering, among other things,
the recession of SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt." Under SFAS No. 4, all gains and losses from the
extinguishment of debt were required to be aggregated and, if material,
classified as an extraordinary item in the statement of operations. By
rescinding SFAS 4, SFAS No. 145 eliminates the requirement for treatment of
extinguishments as extraordinary items. The new standard is effective for
companies with fiscal years beginning after May 15, 2002, however, early
application of the provision is encouraged. At this time, the Company does
not believe that this new standard will have a material effect on its
financial statements.
7
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH SEPTEMBER 30, 2002
(UNAUDITED)
5. Recent accounting pronouncements (continued):
In July 2002, the FASB issued SFAS No. 146, "Accounting Costs Associated
with Exit of Disposal Activates". SFAS No. 146 covers a wide range of exit
and disposal activities, including restructurings planned and controlled by
management that materially change the scope of the business undertaken by
an enterprise and disposal activities such as costs of terminating certain
contracts, costs of consolidating facilities and some types of termination
benefits provided to employees. SFAS 146 will be effective for exit and
disposal activities initiated after December 31, 2002. At this time, the
Company does not believe that this new standard will have a material effect
on its financial statements.
8
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 its two most recent fiscal years or the
subsequent three fiscal quarters. 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 nine months of 2002.
Anticipated Operations in 2002. Ranger's principal goal during 2002 is to
provide the Joint Ventures with sufficient capital so that they can achieve
their lease acquisition and drilling objectives. At September 30, 2002, however,
Ranger has insufficient available working capital to accomplish these
objectives, as described in the following table:
Liquid Assets $ 6,370
Restricted Cash $ 8,500,000
Current Liabilities $ 8,634,774
Working Capital Deficit ($ 31,075)
Current liabilities include Ranger's obligation to Guaranty Bank & Trust
Company of $8,500,000 which matures 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.
9
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.
Based on its engineering analysis of geological data, Ranger believes that,
through the Henryetta and OK'ee Mac Joint Ventures, it has oil and gas resources
that merit the expenditures planned by the Company for development of these
properties.
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.
10
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.
11
Item 3. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of 1934,
within the 90 days prior to the filing date of this report, the company
carried out an evaluation of the effectiveness of the design and operation
of the company's disclosure controls and procedures. This evaluation was
carried out under the supervision and with the participation of the
Company's management, the person serving as the Company's Chairman/Chief
Executive Officer/Principal Financial and Accounting Officer, who concluded
that the Company's disclosure controls and procedures are effective. There
have been no significant changes in the Company's internal controls or in
other factors, which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in the
Company reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in
the Securities and Exchange Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
Company reports filed under the Exchange Act is accumulated and
communicated to management, including the Company's Chief Executive
Officer/Principal Financial Officer as appropriate, to allow timely
decisions regarding required disclosure.
12
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 November 8, 2002
on Interim Unaudited Financial Information
99.1 Certification by Chief Executive and Principal Financial Officer
pursuant to 18 U.S.C. Section 1350.
(b) Reports on Form 8-K:
none
13
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: November 8, 2002 /s/ Charles G. Masters
----------------------
Charles G. Masters, President, Principal
Executive Officer and Principal
Financial and Accounting Officer
CERTIFICATIONS
I, Charles G. Masters, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of RANGER INDUSTRIES,
INC.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us by
others, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
14
5. I have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions);
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 8, 2002
/s/ Charles G. Masters
----------------------
Charles G. Masters
Chief Executive Officer, Principal Financial
and Accounting Officer and President
15