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, 2003
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
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RANGER INDUSTRIES, INC.
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Exact name of Registrant as specified in its charter
Connecticut 06-0768904
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State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
3400 82nd Way North, St. Petersburg, FL 33710
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (727) 381-4904
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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
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The number of shares outstanding of each of the issuer's classes of common
stock, as of May 15, 2003, 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
March 31, 2003 December 31,
(Unaudited) 2002
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Current assets:
Cash and cash equivalents $ 787 $ 48,581
Restricted cash and cash equivalents -- 8,500,000
Marketable equity securities 1,052 1,310
Account receivable 50,000 --
Accrued interest receivable -- 17,419
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Total current assets 51,839 8,567,310
Property and equipment, net of accumulated depreciation of $4,300
in 2003 and $3,752 in 2002 6,678 7,227
Investment in oil and gas properties 616,550 616,550
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$ 675,067 $ 9,191,087
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LIABILITES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable, bank $ -- $ 8,500,000
Accounts payable 30,902 23,035
Due to related parties 86,275 68,993
Accrued expenses 18,494 66,459
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Total current liabilities 135,671 8,658,487
Other liabilities 100,000 100,000
Due to related parties 654,430 614,239
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890,101 9,372,726
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Minority interest -- --
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Stockholders' equity:
Common stock, $.01 par value, 20,000,000 shares authorized;
19,998,644 shares issued; 15,610,463 shares outstanding 199,986 199,986
Additional paid-in-capital 9,487,981 9,487,981
Deficit accumulated during development stage (1,126,427) (1,093,032)
Less treasury stock (4,388,181 shares at cost) (8,776,362) (8,776,362)
Other comprehensive income (212) (212)
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(215,034) (181,639)
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$ 675,067 $ 9,191,087
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See notes to condensed consolidated financial statements
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months From Inception
Ended March 31, (March 18, 1998)
---------------------------------- through
2003 2002 March 31, 2003
------------ ------------ ------------
Consulting income $ 50,000 $ -- $ 200,000
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Operating costs and expenses
Loss on investment in oil and gas activities -- -- 156,130
Administrative 7,412 8,985 124,983
Salaries and wages 30,000 30,000 320,000
Stock-based compensation -- -- 19,919
Legal and professional fees 20,582 21,479 330,760
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57,994 60,464 951,792
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Other income and (expenses):
Interest income 35,979 92,698 763,548
Interest expense (68,770) (141,443) (1,137,767)
Gain on extinguishment of debt -- -- 101,719
Other income 7,546 -- 10,257
Other expense (156) -- (124,392)
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(25,401) (48,745) (386,635)
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Loss before income taxes (33,395) (109,209) (1,138,427)
Income taxes -- -- --
Minority interest in loss of joint venture -- -- 12,000
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Net loss (33,395) (109,209) (1,126,427)
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Basic loss per share ($ .002) ($ .01) ($ .15)
============ ============ ============
Weighted average shares outstanding 15,610,463 15,610,463 7,689,740
============ ============ ============
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
2003 2002 March 31, 2003
------------ ------------ --------------
Cash flows from operating activities:
Net loss ($ 33,395) ($ 109,209) ($ 1,126,427)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash
flows from operating activities:
Gain on extinguishment of debt -- -- (101,719)
Loss on sale of marketable equity securities 156 -- 36,497
Stock-based compensation -- -- 19,919
Depreciation 549 458 4,300
Minority interest in loss of joint venture -- -- (12,000)
Change in assets and liabilities:
Account receivable (50,000) -- (50,000)
Prepaid expenses and other assets -- (25,000) 35,020
Accrued interest receivable 17,419 -- 40,922
Accounts payable and accrued expenses (40,099) (30,788) (431,859)
------------ ------------ ------------
Total adjustments (71,975) (55,330) (458,920)
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Net cash flows from operating activities (105,370) (164,539) (1,585,347)
------------ ------------ ------------
Cash flows from investing activities:
Purchase of marketable equity securities (7,638) (25,000) (347,819)
Proceeds from sale of marketable equity securities 7,741 -- 310,059
Acquisition of property and equipment -- (2,742) (10,978)
Acquisition of oil and gas properties -- (34,367) (504,550)
Cash acquired in business combination -- -- 10,233,478
Purchase of restricted certificate of deposit -- -- (8,500,000)
Proceeds from restricted certificate of deposit 8,500,000 -- 8,500,000
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Net cash flows from investing activities 8,500,103 (62,109) 9,680,190
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Cash flows from financing activities:
Proceeds from issuance of stock -- -- 1
Proceeds from note payable, bank -- -- 8,500,000
Payment of note payable, bank (8,500,000) -- (8,500,000)
Acquisition of treasury shares -- -- (8,776,362)
Advances from related party 57,473 137,031 682,305
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Net cash flows from financing activities (8,442,527) 137,031 (8,094,056)
------------ ------------ ------------
Net increase in cash and cash equivalents (47,794) (89,617) 787
Cash and cash equivalents at beginning of period 48,581 101,234 --
------------ ------------ ------------
Cash and cash equivalents at end of period $ 787 $ 11,617 $ 787
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 117,867 $ 136,000 $ 1,110,244
============ ============ ============
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, 2003 AND 2002
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2003
(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 accounting principles generally accepted in the United
States of America 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 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.
RANGER INDUSTRIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
AND FROM INCEPTION (MARCH 18, 1998) THROUGH MARCH 31, 2002
(UNAUDITED)
2. Related party transactions:
Due to related parties:
Due to related parties represent 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, 2004. Of these amounts $136,275 represent accrued payroll to the
President as of March 31, 2003. Payment of $50,000 of the accrued payroll
has been deferred to December 31, 2004 with the remainder of $86,275 due on
demand. Interest expense on these related party advances aggregated
approximately $12,000 and $4,000 for the three months ended March 31, 2003
and 2002, respectively.
3. Income taxes:
Income tax expense consists of the following:
2003 2002
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Deferred tax benefit of
operating loss carryforward $ 13,000 $ 38,000
Increase in valuation allowance ( 13,000) ( 38,000)
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Income tax expense $ - $ -
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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 $426,000, reduced by a $426,000 valuation allowance
since management cannot presently determine that it is more likely than not
that such deferred tax assets will be realized. Net operating loss
carryforwards of approximately $1,100,000 expire 2020 through 2023.
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, 2002 (our "Annual Report"). Ranger has had no revenues from
its primary business activities in its two most recent fiscal years or the
subsequent 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
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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, no revenues during 2002 and $50,000 in the three months ended March 31,
2003.
Anticipated Operations in 2003. Ranger's principal goal during 2003 is to
provide the Joint Ventures with sufficient capital so that they can achieve
their lease acquisition and drilling objectives. At March 31, 2003, however,
Ranger has insufficient available working capital to accomplish these
objectives, as described in the following table:
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Liquid Assets $ 787
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Current Assets $ 51,839
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Current Liabilities $ 135,682
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Working Capital Deficit ($ 83,843)
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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 June 2004, principally through related party borrowings. The
Company paid the $8,500,000 note payable in February 2003 and consequently will
reduce future net interest expense by approximately $180,000 in 2003. 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. Ranger is also exploring the
acquisition of producing oil and gas properties to provide positive cash flow.
Without funding and successful drilling of one or more wells capable of
producing oil and gas in commercial quantities or the acquisition of producing
wells, it is not likely that Ranger will be able to achieve a positive cash
flow.
Ranger did perform a consulting engagement for an unaffiliated party in the
first quarter of 2003 and earned a fee of $50,000. As an interim measure,
pending adequate financing to pursue our contemplated oil and gas activities, we
may seek and perform additional consulting activities.
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. Ranger notes that its director who was operating the Henryetta and
OK'ee Mac Joint Ventures passed away following the end of the first quarter.
Although we do not expect that this will have a negative impact on our ability
to realize value from these properties should we obtain adequate financing to do
so, we are still attempting to analyze the impact of Mr. Shults' death on our
prospective operations.
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 2003. 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.
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.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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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.
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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.
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Henry Shults, a director of Ranger and is the principal owner of Inter-Oil
& Gas Group, Inc., the manager and second largest equity owner of both the
Henryetta Joint Venture and the OK'ee Mac Joint Venture, died in April 2003. The
board of directors of Ranger has not yet replaced Mr. Shults' vacancy. The board
of directors does not believe that Mr. Shults death will have a significant
impact on Ranger's relationship with Inter-Oil & Gas Group, Inc. or Ranger's
ability to develop the properties held by either joint venture when Ranger is
able to provide the necessary funding.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
15. Letter from Aidman Piser & Company, P.A. dated May 15, 2003
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
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 15, 2003 /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;
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: May 15, 2003
/s/ Charles G. Masters
--------------------------------------------
Charles G. Masters
Chief Executive Officer, Principal Financial
and Accounting Officer and President