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 March 31, 2001
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 May 8, 2001, 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
Ranger Industries, Inc.
December 31,
2000
As previously
presented and
March 31, 2001 December 31, For Informational
(Unaudited) 2000 Purposes Only
----------- ------------ -------------
Current assets:
Cash and cash equivalents $ 306,382 $ 85 $ 10,233,478
Restricted cash and cash equivalents 177,440 -- --
Prepaid expenses and other current assets 11,250 2,000 2,275
Refundable income taxes 32,755 -- 32,755
Accrued interest receivable 15,736 -- --
Due from related parties 53,717 -- --
------------ ------------ ------------
Total current assets 597,280 2,085 10,268,508
Restricted cash and cash equivalents 8,500,000 --
Investment in oil and gas properties 337,362 161,316 --
------------ ------------ ------------
$ 9,434,642 $ 163,401 $ 10,268,508
============ ============ ============
LIABILITES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,000 $ -- $ 199,344
Accrued expenses, related party 50,000 50,000 --
Accrued expenses, other 11,112 3,718 --
Syndication fees payable 149,316 149,316 --
------------ ------------ ------------
Total current liabilities 230,428 203,034 199,344
------------ ------------ ------------
Note payable, bank 8,500,000 -- --
------------ ------------ ------------
Minority interest 12,000 12,000 --
------------ ------------ ------------
Stockholders' equity:
Common stock 199,986 * 14,720 * 52,786
Capital in excess of par 9,441,859 -- 12,664,062
Deficit accumulated during development stage (173,269) (66,353) (2,647,684)
Less treasury stock (4,388,181 shares at cost) (8,776,362) -- --
------------ ------------ ------------
692,214 (51,633) 10,069,164
------------ ------------ ------------
$ 9,434,642 $ 163,401 $ 10,268,508
============ ============ ============
(*) $.01 par value 20,000,000 shares authorized; 2001, 19,998,644 shares issued,
15,610,463 shares outstanding; 2000, 14,720,000 shares issued and outstanding
See notes to condensed consolidated financial statements.
RANGER INDUSTRIES, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months From Inception
Ended March 31, (March 18, 1998)
---------------------------------- through
2001 2000 March 31, 2001
------------ ------------ --------------
Net sales $ -- $ -- $ --
Operating costs and expenses
Other administrative expenses 7,899 -- 9,533
Salaries and wages 30,000 -- 80,000
Stock-based compensation -- -- 14,719
Legal expenses and other tender offer expenses 107,414 -- 107,414
------------ ------------ ------------
145,313 -- 211,666
------------ ------------ ------------
Other income and (expenses):
Interest income 104,886 -- 104,886
Interest expense (66,489) -- (66,489)
------------ ------------ ------------
38,397 -- 38,397
------------ ------------ ------------
Loss before income taxes (106,916) -- (173,269)
------------ ------------ ------------
Income taxes
Current -- -- --
Deferred -- -- --
------------ ------------ ------------
-- -- --
------------ ------------ ------------
Net loss (106,916) -- (173,269)
------------ ------------ ------------
Basic loss per share ($ .01) $ -- ($ .09)
============ ============ ============
Weighted average shares outstanding 11,248,140 1,000 2,047,112
============ ============ ============
See notes to condensed consolidated financial statements.
RANGER INDUSTRIES, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months From Inception
Ended March 31, (March 18, 1998)
------------------------------ through
2001 2000 March 31, 2001
------------ ------- --------------
Cash flows from operating activities:
Net loss ($ 106,916) $ -- ($ 173,269)
------------ ------- ------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock-based compensation -- -- 14,719
Change in assets and liabilities:
Prepaid expenses and other assets (6,975) -- (11,250)
Accrued interest receivable (15,736) -- (15,736)
Accounts payable and other liabilities (621,383) -- (617,007)
Accrued expenses 9,494 -- 61,112
------------ ------- ------------
Total adjustments (634,600) -- (568,162)
------------ ------- ------------
Net cash used in operating activities (741,516) -- (741,431)
------------ ------- ------------
Cash flows from investing activities:
Advances to related parties (53,717) -- (53,717)
Acquisition of oil and gas properties (176,046) -- (176,046)
Cash acquired in business combination 10,233,478 -- 10,233,478
Deposits to restricted cash (8,677,440) -- (8,677,440)
------------ ------- ------------
Net cash provided by investing activities 1,326,275 -- 1,326,275
------------ ------- ------------
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 (2,100) -- (2,100)
------------ ------- ------------
Net cash used in financing activities (278,462) -- (278,462)
------------ ------- ------------
Net increase in cash and cash
equivalents 306,297 -- 306,382
Cash and cash equivalents at beginning of period 85 -- --
------------ ------- ------------
Cash and cash equivalents at end of period
(exclusive of restricted cash of $8,677,440) $ 306,382 $ -- $ 306,382
============ ======= ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 66,489 $ -- $ 66,489
============ ======= ============
See notes to condensed consolidated financial statements.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(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 has been no
significant business activity since inception except for making an
acquisition of assets in the oil and gas industry through a joint venture
investment. Bumgarner intends to place its emphasis in the oil and gas
business segment through the acquisition of additional interests in
non-producing or producing properties and participating in drilling
operations.
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.
As a result, and following the completion, of the merger:
o Charles G. Masters, the principal shareholder of Bumgarner, acquired
11,401,000 shares of Ranger common stock (including 400,000 shares
held through a trust of which he is the trustee); and
o The directors of the Registrant resigned and appointed Mr. Masters,
Robert Sherman Jent, and Henry C. Shults, Jr., to the Registrant's
board of directors.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Nature of business and basis of presentation (continued):
Since Bumgarner is considered the acquiror for accounting and financial
reporting purposes, the accompanying December 31, 2000 balance sheet has
been restated to reflect the financial position of Bumgarner as of that
date. The accompanying statements of operations for the three months ended
March 31, 2001 and 2000 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 March 31,
2001. The December 31, 2000 balance sheet of Ranger as previously presented
in its December 31, 2000 annual report on Form 10KSB has been presented in
the accompanying financial statement for informational purposes only.
Background on Ranger:
In July 1988, Ranger (then known as Coleco Industries, Inc.) filed a
voluntary petition in United States Bankruptcy Court under Chapter 11 of
the Federal Bankruptcy Code. Effective February 28, 1990, the bankruptcy
court approved a plan of reorganization (the "Plan"), pursuant to which all
then outstanding debt and equity securities of Ranger were canceled, and
4,000,000 shares of Ranger's new $0.01 par value common stock (the "Common
Stock") were distributed to the unsecured creditors. On the Effective Date
of the Plan, Ranger retained $950,000 in cash for working capital purposes
and was expected to engage in the business of acquiring income producing
properties or businesses.
The Plan provided for the creation of a Reorganization Trust in order to
liquidate the Registrant's remaining assets (other than the $950,000 in
cash retained by Ranger) and effectuate distributions thereof to Ranger's
creditors. The Reorganization Trust completed the distribution of its
assets in May 1996 and was terminated by order of the bankruptcy court on
August 27, 1996.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Background on Ranger (continued):
The Plan also provided for the creation of a Product Liability Trust in
order to settle certain personal injury claims (including claims arising
thereafter) against Ranger. Pursuant to the terms of the Product Liability
Trust Agreement, residual funds, if any, would revert to Ranger, as grantor
of the trust, upon the earlier of (a) February 28, 2020, or (b) approval by
the bankruptcy court of earlier termination of the Product Liability Trust.
As of March 31, 2001, the Product Liability Trust continues to process and
liquidate certain product liability claims after the Bankruptcy Court's
approval of a distribution of the majority of its assets to Ranger as
described below.
On May 8, 2000, an order of the United States Bankruptcy Court for the
Southern District of New York was docketed pursuant to which the trustee of
the Product Liability Trust was authorized (i) to obtain insurance covering
all claims made against the Product Liability Trust where the injury giving
rise to the claim occurred between May 15, 1990 and May 15, 2020, and (ii)
after paying $1,156,000 for the insurance premiums, to make a cash
distribution to Ranger of all of the remaining funds in the Product
Liability Trust other than $600,000 which shall remain in the Product
Liability Trust to pay for the administrative expenses of the Product
Liability Trust. The amount of the net distribution to Ranger, which was
made in May 2000, was $11,002,632.
Oil and gas properties:
The Company uses the successful efforts method of accounting for oil and
gas producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells that find proved reserves
and to drill and equip development wells are capitalized. Costs to drill
exploratory wells that do not find proved reserves, geological and
geophysical costs, and costs of carrying and retaining unproved properties
will be expensed.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Oil and gas properties (continued):
Unproved oil and gas properties that are individually significant are
periodically assessed for impairment of value, and a loss, if any, will be
recognized at the time of impairment by providing an impairment allowance.
Other unproved properties will be amortized based on the Company's
experience of successful drilling and average holding period. Capitalized
costs of producing oil and gas properties, after considering estimated
dismantlement and abandonment costs and estimated salvage values, will be
depreciated and depleted by the unit-of-production method. Support
equipment and other property and equipment will be depreciated over their
estimated useful lives.
The carrying values of the oil and gas properties as reflected in the
accompanying balance sheet do not reflect the underlying fair values of
such properties.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Income taxes:
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. This method also requires the recognition of future
tax benefits such as net operating loss carryforwards, to the extent that
realization of such benefits is more likely than not. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The deferred tax assets are reviewed
periodically for recoverability and valuation allowances are provided, as
necessary.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Principles of consolidation:
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and the Company's 74.415%
interest in Joint Venture Henryetta. All significant intercompany accounts
and transactions have been eliminated in consolidation.
2. Business combinations:
As discussed on Note 1, on February 6, 2001, Ranger merged with Bumgarner,
acquiring 100% of the outstanding shares in exchange for the issuance of
14,200,000 shares of Ranger's stock. As the transaction has been accounted
for as a reverse acquisition (recapitalization of Bumgarner), results of
operations for Ranger are included in the accompanying financial statements
from February 6 through March 31, 2001.
Assets acquired and liabilities assumed from Ranger are as follows:
Cash $ 10,233,478
Other current assets 2,275
Refundable income taxes 32,755
Accounts payable and accrued expenses ( 641,373)
------------------
Net assets acquired $ 9,627,125
==================
As also indicated in Note 1, Bumgarner acquired a 74.415% interest in Joint
Venture - Henryetta in October 2000. Consideration for this equity interest
was in the form of a $2,073,728 promissory note payable to Henryetta, which
bears interest at 6% and is payable in full by October 10, 2002. The
Company will forfeit its interest in Henryetta (pro-rata with any unpaid
balance) if the note is not paid by the due date. Since the note is payable
to an entity included in the consolidated financial statements, the note
payable, net of a $200,000 principal repayment and related interest, have
been eliminated in consolidation.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
2. Business combinations (continued):
Pro-forma results of operations for the three months ended March 31, 2001
and 2000 as if these combinations had occurred on January 1, 2000 are as
follows:
Three Months Ended March 31,
------------------------------------
2001 2000
--------------- --------------
Net sales $ - $ -
Net loss ($ 548,955) ($ 33,424)
Net loss per share ($ .05) ($ .01)
=============== ==============
3. Oil and gas properties:
In October 2000, the Company acquired a 74.415% working interest in Joint
Venture - Henryetta, ("Henryetta" or "Joint Venture") which was formed as a
general partnership under Oklahoma law and owns four leasehold interests in
Okfuskee and Coal counties, Oklahoma (See Note 2). The properties at
present have no producing oil or gas wells, although initial plans are to
drill and develop four wells at a total cost of approximately $2,200,000.
The Joint Venture automatically terminates, unless renewed, in 2010.
All of the interests held by the Joint Venture are in undeveloped acreage
in Coal and Okfuskee counties, in south central and central Oklahoma,
respectively. This prospect consists of four leases from private
landowners.
The leases (A, B, C and D) are each "fully-paid" leases that require no
additional annual rental payments or other payments before expiration of
their primary lease terms. Each of the leases will continue beyond their
primary terms as long as oil or gas is being produced from the lease in
paying quantities. In each case, the wells contemplated are expected to
meet this requirement, provided that they can be successfully completed;
however, there can be no assurance that any of the wells will produce oil
or gas in paying quantities, even if completed.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
3. Oil and gas properties (continued):
The Joint Venture is in the process of acquiring the entire working
interest within the area of the four leases and believes it has acquired
the majority of the working interest in Lease B. The Joint Venture
commenced drilling of the Joshua #1 well on Lease B in April 2001. The
Joint Venture is actively negotiating with landowners to acquire the
remaining property interests in all lease areas and believes it will be
able to acquire those interests. After it acquires the outstanding property
interests, it will be able to drill the planned wells, subject to adequate
financing. The Joint Venture expects to drill Joshua #2 on Lease A after
the completion of Joshua #1, and the Company believes it has sufficient
capital to participate in Joshua #2. Thereafter, and subject to adequate
financing, the Joint Venture expects to drill a well on each of Leases C
and D.
Oklahoma has a procedure called "forced pooling" by which an oil and gas
operator can apply to the Oklahoma Corporation Commission to force other
landowners to pool their mineral interests with the interests of that
operator. If the Joint Venture is not able to lease the remaining working
interests on reasonable terms, it intends to apply to force pool the
remaining working interests on terms similar to the leases which it has
obtained from the other property owners, including royalty interest no
greater than 20%.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
3. Oil and gas properties (continued):
The following table summarizes the Joint Venture's interest in its four
leases.
------------------------------------------------------------------------------------------------------------------------------------
Gross Net Acres (2) Net Acres Primary
Nature of Acres (to the (3) lease Lessor
Land Description Reserves (1) Joint Venture) (to Ranger) term Royalty
------------------------------------------------------------------------------------------------------------------------------------
Lease A Private Proved 80 40 29.766 October 2003 20%
SW 1/4SW1/4Section 14, T10N, R12E landowner undeveloped
-----------------------------------------------------------------------------------------------------------------------------------
Lease B Private Unproved 480 337.89 251.44 June 2002 20%
SW 1/4 SW1/4Section 28, SE 1/4 landowner
Section 29, NW1/4 NE1/4
Section 32, E1/2 NE1/4
Section 32, NW1/4 Section 33,
all in T11N, R11E Okfuskee County
------------------------------------------------------------------------------------------------------------------------------------
Lease C Private Unproved 520 282.5 210.22 August 2002 20%
SE 1/4 NE 1/4 Section 11, N 1/2 landowner
and N 1/2 S 1/2 Section 12,
all in T3N, R8E Coal County
------------------------------------------------------------------------------------------------------------------------------------
Lease D Private Unproved 440 320 238.1 August 2002 20%
NE 1/4SW1/4and W1/2W1/2Section 5, NE landowner
1/4SE1/4and S 1/2 SE 1/4 Section 6,
NE 1/4 Section 7, and NW 1/4 Section 8,
all in T3N, R9E Coal County NE 1/4
Section 19, T10N, R13E Section 19,
T10N, R13E
------------------------------------------------------------------------------------------------------------------------------------
(1) A "gross acre" is an acre in which a working interest is owned. The number
of gross acres is the total number of acres in which a working interest is
owned. The disclosure of net acres subject to lease reflects lease status
as of March 31, 2001.
(2) A "net acre" is deemed to exist when the sum of fractional ownership
working interests in gross acres equals one. The number of net acres is the
sum of the fractional working interests owned in gross acres expressed as
whole numbers and fractions thereof.
(3) Reflects Bumgarner's interest in the Joint Venture (74.415%) multiplied by
the net acres owned by the Joint Venture. Ranger's interest in this
property is through its subsidiary investment in the Joint Venture; Ranger
has no direct interest in the leased properties.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
3. Oil and gas properties (continued):
Supplemental information with respect to oil and gas properties is as
follows:
Capitalized costs relating to oil and gas exploration and development
activities at March 31, 2001:
Unproved oil and gas properties $ 327,649
Proved oil and gas properties 9,713
------------
$ 337,362
============
Costs incurred in oil and gas exploration and development activities for
the three months ended March 31, 2001:
Property acquisition costs:
Proved $ -
Unproved 48,772
Exploration costs -
Development costs 127,274
------------
$ 176,046
============
Note: Substantially all oil and gas costs incurred are attributable to the
majority interest in the joint venture.
Reserve Information:
The following estimates of proved and proved developed reserve quantities
and related standardized measure of discounted net cash flow are estimates
only, and do not purport to reflect realizable values or fair market values
of the Company's reserves. The Company emphasizes that reserve estimates
are inherently imprecise and that estimates of new discoveries are more
imprecise than those of producing oil and gas properties. Accordingly,
these estimates are expected to change as future information becomes
available. All of the Company's reserves are located in Oklahoma.
Proved reserves are estimated reserves of crude oil (including condensate
and natural gas liquids) and natural gas that geological and engineering
data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating
conditions. Proved developed reserves are those expected to be recovered
through existing wells, equipment, and operating methods.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
3. Oil and gas properties (continued):
The standardized measure of discounted future net cash flows is computed by
applying prices of oil and gas ($25/bbl and $3.50/mcf, respectively, with
no escalation) to the estimated future production of proved oil and gas
reserves, less estimated future expenditures (based on year-end costs) to
be incurred in developing and producing the proved reserves, less estimated
future income tax expenses (based on year-end statutory tax rates, with
consideration of future tax rates already legislated) to be incurred on
pretax net cash flows less tax basis of the properties and available
credits, and assuming continuation of existing economic conditions. The
estimated future net cash flows are then discounted using a rate of 10% a
year to reflect the estimated timing of the future cash flows.
Oil Gas
(Bbls) (Mcf)
---------- -----------
Proved undeveloped reserves
Beginning of year and end of period 89 596
========== ===========
Standardized Measure of Discounted Future
Net cash flows at March 31, 2001
Future cash inflows $ 3,197,775
Future production costs ( 93,000)
Future development costs ( 284,810)
Future income tax expenses ( 958,788)
------------------
Future net cash flows 1,861,177
10% annual discount for estimated timing
of cash flows ( 415,611)
------------------
Standardized measures of discounted future net
cash flows relating to proved oil and gas
reserves at beginning and end of period $ 1,445,566
==================
Ranger share at 74.415% $ 1,075,718
==================
As noted in Footnote 1 the carrying values of the oil and gas properties as
reflected in the accompanying balance sheet do not reflect the underlying
fair values of such properties.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
4. Related party transactions:
Syndication and other fees:
The Company has agreed to pay one of the partners in the Joint Venture-
Henryetta (Inter-Oil & Gas, Inc. - "Interoil") a fee aggregating $149,316
in connection with the Company's investment in Henryetta, which is payable
by Interoil to an unrelated third party pro-rata upon satisfaction of the
note discussed in Note 2. This amount is recorded as a liability in the
accompanying consolidated balance sheet. That partner also manages the
joint venture and is reimbursed for any costs it incurs in that regard.
Finally, 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. Partnership agreement:
Under the terms of the Joint Venture - Henryetta agreement, and subject to
satisfaction of the promissory note, the Company is responsible for
approximately 93% of expenses and is entitled to 93% of all distributions
until such time as its investment has been recovered. The other partners
will collectively share in the remaining 7%. Thereafter, profits, losses
and distributions shall be allocated 74.415% to the Company, 20% to
Inter-Oil and 5.585% to others.
6. Note payable, bank
Note payable, bank consists of an $8,500,000 note collateralized by a
restricted certificate of deposit and certain cash equivalents. The loan
bears interest at 6.4% and matures January 2003.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2001
(UNAUDITED)
7. Income taxes:
Income taxes consist of the following:
Deferred tax benefit of operating loss carryforward $ 60,000
Increase in valuation allowance ( 60,000)
---------
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 $60,000, reduced by a $60,000 valuation allowance
since management cannot presently determine that it is more likely than not
that such deferred tax assets will be realized.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
General Discussion.
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, 2000.
Ranger is a Connecticut corporation organized in 1961. Ranger is the
successor to the Connecticut Leather Company, which was founded in 1932. From
1961 through 1990, Ranger was known as "Coleco Industries, Inc." In 1988,
Ranger, then known as Coleco Industries, Inc., filed a voluntary petition in
bankruptcy. In 1990, Ranger's plan of reorganization (the "Plan") was approved
by the bankruptcy court and became effective as of February 28, 1990, and Ranger
emerged from Chapter 11. From 1990 to 2000, Ranger did not engage in significant
business activities. These events are more fully described in Note 1 to the
Financial Statements included herein and in the Form 10-KSB referenced above.
In December 2000, Ranger entered into an Agreement and Plan of Merger and
Reorganization with Bumgarner Enterprises, Inc., a Florida corporation
("Bumgarner"), and BEI Acquisition Corporation, a Florida corporation and
wholly-owned subsidiary of Ranger (the "Merger"). Pursuant to the Merger
Agreement, Bumgarner commenced a cash Tender Offer on December 29, 2000 and
Merger was completed in February 2001. The acquisition was financed through a
bank loan in the amount of $8,500,000, which is collateralized by a restricted
certificate of deposit and cash equivalents. The loan bears interest at 6.4% and
matures January 2003. The Merger and the Tender Offer and the terms thereof are
more fully described in Notes 1 and 2 to the Financial Statements included
herein and in the Form 10-KSB referenced above.
Currently Ranger's activities are being conducted through the Henryetta
Joint Venture, 74.415% of which is owned by Bumgarner, now a wholly-owned
subsidiary of Ranger. The Joint Venture is currently drilling one well (the
Joshua #1) on the Joint Venture's property in Oklahoma. If this well finds oil
or gas in commercial quantities and can be successfully completed for
production, the revenues from this well (together with available working
capital) will be adequate to continue the required drilling activities. However,
if the Joint Venture's drilling activities are not successful or are abandoned,
the funds currently available to Ranger and Bumgarner will be sufficient to fund
only a limited amount of additional drilling activities.
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.
Business Activities.
--------------------
The following discussion should be read in conjunction with Item 1 above,
and the Financial Statements, including the Notes thereto.
The business activities of Ranger have changed since February 2001 as a
result of completion of the Merger described above and in the Form 10-KSB
referenced above. As a result of the Merger, Ranger acquired a 74.415% interest
in the Henryetta Joint Venture, a joint venture that owns assets in the oil and
gas industry and is committed to drill for oil and natural gas and assumed a
liability to the Henryetta Joint Venture of $2,073,728. For the foreseeable
future, Ranger intends to participate in the oil and gas industry in the
continental United States directly and through the Henryetta Joint Venture.
Unrestricted Cash and Working Capital. As a result of the Merger and the
related Tender Offer, Ranger had approximately $650,000 remaining in
unrestricted cash. Ranger has used cash for expenses incurred in completing the
Merger and the Tender Offer, and in contributions to the Henryetta Joint Venture
for drilling expenses. At March 31, 2001, Ranger had approximately $306,000 in
cash and cash equivalents.
At March 31, 2001, Ranger's working capital (current assets less current
liabilities) was approximately $366,000. This amount includes approximately
$177,000 of "restricted cash" which has been set aside to pay the interest due
on an $8,500,000 loan Bumgarner incurred in connection with the completion of
the Tender Offer. This working capital also includes a reduction of $149,000 for
a current liability for syndication fees that is only payable to the extent the
note payable to the Henryetta Joint Venture is paid.
Working capital does not include $8,500,000 in restricted cash which is not
available to Ranger for general use, but which collateralizes Ranger's
obligation to repay an $8,500,000 loan obtained in connection with completing
the Tender Offer.
Drilling and Completion Expenses. Ranger has contributed $200,000 to the
Henryetta Joint Venture in satisfaction of its initial obligations to finance
the drilling of the Joshua #1 well. The Henryetta Joint Venture has commenced
the drilling of this well for a total turnkey cost to casing point of
approximately $300,000. The Henryetta Joint Venture will make a decision whether
to complete the well for production after the drilling has been completed to the
estimated 5,000 foot level. If warranted, completion of the well may result in
approximately an additional $75,000 cost to Ranger. Ranger's existing working
capital is sufficient to meet these obligations.
Currently the drilling of Joshua #1 is in progress. The well has passed
through four zones potentially viable for oil and natural gas production. Ranger
(through Bumgarner) is responsible for approximately 93% of all costs of the
Joint Venture, including the drilling and completion of the Joshua #1 well.
Ranger will receive 93% of all net revenues until it receives a return of its
contribution; after the return of its contribution, Ranger's working interest in
that well will reduce to 74.415%.
If Joshua #1 is successfully completed, revenues from oil and gas
production will begin to accrue to Ranger's account shortly thereafter. Based on
the information available to Ranger, it appears that the Joint Venture will not
have any difficulty selling any production, or transporting the production to
the point of sale. Ranger expects that the Joint Venture will complete the
drilling and anticipated completion of the Joshua #1 well during the second
quarter of 2001.
Obligation to the Henryetta Joint Venture. Ranger's interest in the
Henryetta Joint Venture derives from Bumgarner. Bumgarner had purchased its
interest in the Joint Venture for $2,073,728, represented entirely by a
promissory note bearing interest at 6% per annum. Ranger has paid $200,000
against the principal amount of this note, and the balance is now due in full on
October 10, 2002. The promissory note requires certain incremental payments to
be made before maturity, including the payments that Ranger has already made.
The Joint Venture consists of three members in addition to Bumgarner and
Inter-Oil & Gas Group. Inter-Oil & Gas Group is the manager of the Joint Venture
and owns a 20% after-payout interest in the Joint Venture. Henry Shulz, the
owner of Inter-Oil & Gas Group is also a director of Ranger. At the time
Bumgarner negotiated to acquire the interest in the Henryetta Joint Venture,
there was no affiliation between Mr. Shulz and Bumgarner and the transaction was
an arms'-length transaction.
Ranger intends to use its working capital to make any future payments
required to the Henryetta Joint Venture. If the Joshua #1 well is successfully
completed, Ranger anticipates that revenues from that well will augment its
working capital.
Future Drilling Obligations. The Joshua #1 well is the first of four wells
the Joint Venture expects to drill on its four leasehold interests. Based on
current expectations, the Joint Venture expects to commence drilling the second
5,000 foot well, Joshua #2, after the completion or abandonment of Joshua #1.
Whether or not the Joshua #1 well is successfully completed for production,
Ranger believes that it has sufficient funds to commence drilling on the Joshua
#2.
After Ranger pays the amounts estimated to be necessary for the completion
of the two Joshua wells, it expects to have a balance remaining on the
promissory note to the Joint Venture of approximately $1,500,000. The balance
remaining on the promissory note is approximately equivalent to the amount
necessary for the drilling and completion of the two remaining deeper (7,500
foot) wells. The funds currently available to Ranger will not provide it with
sufficient liquidity to meet the obligation for either of the two deeper wells.
In order to meet these obligations, Ranger will have to rely in part on
anticipated revenues from Joshua #1 or Joshua #2 (if either or both are
successfully completed). In addition, Ranger is considering additional debt and
equity financing alternatives, but has not completed any negotiations for any
additional capital. Ranger cannot offer any assurance that it will be able to
obtain any additional capital.
General and Administrative Obligations. Ranger will also have to fund its
general and administrative expenses during the final three quarters of the
current fiscal year, which Ranger estimates to be approximately $150,000 in
addition to the amounts already spent.
Other Business Objectives. Even though it does not currently have the
necessary capital available to it, Ranger is also investigating other oil and
gas drilling activities that, if acquired, will require the expenditure of funds
(which expenditure may be significant). Ranger does not expect to acquire any
additional oil and gas properties unless prior arrangements have been made to
allow Ranger to meet its financial commitments with respect to those properties.
Ranger's ability to fund its future operations will be dependent upon achieving
profitability, generating positive cash flow from operations or by raising
additional debt or equity. As noted above, Ranger is currently considering
alternatives to the raising of debt and equity capital to provide additional
financing for drilling activities during the current fiscal year and beyond. At
the present time, although it has had positive discussions, no person has
committed to provide any portion such capital. Although Ranger believes that its
existing capital resources are sufficient for the 2001 fiscal year, Ranger may
face working capital shortages thereafter, if its is unable to accomplish
profitability from the Joint Venture's activities, generate positive cash flow
from operations, or raise additional debt or equity.
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 May 8, 2001 on
Interim Unaudited Financial Information
(b) Reports on Form 8-K:
Ranger's Current Report on Form 8-K reporting events of:
February 14, 2001, as amended on April 16, 2001 reporting events under
Item 1 - Change in Control and Item 2 - Acquisition and Disposition
of Assets
April 17, 2001 reporting an event under Item 4 - Change In Accountants
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: May 14, 2001 /s/ Charles G. Masters
---------------------------------------------
Charles G. Masters, President,
Principal Executive Officer and
Principal Financial and Accounting Officer