U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number 1-5673
RANGER INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Connecticut 06-0768904
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1 Regency Drive, Bloomfield, Connecticut 06002
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (860) 726-1208
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0l par value
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in
this form, and no disclosure will be contained., to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form
10-KSB. [X]
State issuer's revenues for its most recent fiscal year: NONE.
State the aggregate market value of voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified date (March 17, 1998) within the past 60 days: $2,588,255
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date (March 23, 1998): 4,788,644
shares.
DOCUMENTS INCORPORATED BY REFERENCE: None.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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PART I
Item 1. Business.
Background. Ranger Industries, Inc., a Connecticut corporation (the
"Registrant") was organized in 1961, as the successor to the Connecticut Leather
Company, which was founded in 1932. From 1961 through 1990, the Registrant was
known as "Coleco Industries, Inc." The Registrant's principal executive offices
are located at One Regency Drive, Bloomfield, Connecticut 06002, and its
telephone number is (860) 726-1208.
In 1988, the Registrant, then known as Coleco Industries, Inc., filed a
voluntary petition in bankruptcy, and in 1990, a plan of reorganization (the
"Plan") was approved by the bankruptcy court and became effective as of February
28, 1990 (the "Effective Date"), and the Registrant emerged from Chapter 11
pursuant thereto. In accordance with the Plan:
(i) the Registrant emerged from the Chapter 11 proceeding with
$950,000 in cash and no liabilities,
(ii) $5.5 million was transferred to a product liability trust (the
"Product Liability Trust"), to process and liquidate product
liability claims pending or arising after May 15, 1990, and
(iii)all other assets were transferred to a reorganization trust (the
"Reorganization Trust"), which was responsible for collecting
and liquidating the Registrant's other assets and distributing
them to the Registrant's former creditors in accordance with the
Plan.
The Reorganization Trust completed its collection, liquidation and distribution
of assets in May, 1996 and was terminated by order of the bankruptcy court on
August 27, 1996.
The Product Liability Trust contains assets of approximately $12 million
as of December 31, 1997. Under the terms of the Product Liability Trust, the
residual funds, if any, remaining after the application of Trust assets to pay
product liability claims and expenses would be distributed to the Registrant on
February 28, 2020. The bankruptcy court, in its discretion, is authorized to
permit an earlier distribution to the Registrant. The Registrant may apply to
the bankruptcy court for termination of the Product Liability Trust earlier than
originally scheduled (i.e., prior to February 28, 2020), but there can be no
assurance that such application will be successful, or that the Registrant will
otherwise receive any distribution of assets from the Product Liability Trust
prior to 2020, if ever.
As of December 31, 1997, the Registrant had adjusted net operating loss
carryforwards ("NOL's) of approximately $192 million. The NOL's resulted
principally from operating losses
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sustained by the Registrant prior to 1990. See Note 6 of the Notes to the
Consolidated Financial Statements for an explanation of the possible utility of
these NOL's.
Under management that was installed under the Plan, which management
remained in control of the Registrant through July 29, 1997, the Registrant
pursued the business of acquiring investments, but that effort proved to be
unsuccessful.
Recent Developments. During 1997, Pure Group, Inc., a Delaware corporation
("PGI") wholly owned by one of the Registrant's current directors, engaged in
and won a proxy contest for control of the Registrant. The current Board of
Directors, who were the nominees of PGI in the proxy contest, took office on
July 29, 1997, pursuant to a settlement agreement dated that date (the
"Settlement Agreement") among PGI, the former members of the Registrant's Board
of Directors, and the Registrant. Thereafter, they were elected as the directors
of the Registrant at the Annual Meeting of Shareholders of the Registrant that
was held on August 11, 1997. The Registrant had not held an annual meeting of
shareholders at any time since 1990.
In May 1997, the trustee of the Reorganization Trust notified management
then in office that he had received a distribution of approximately $800,000
from a bankruptcy proceeding in which the Registrant had filed a claim in 1983,
which claim the Registrant apparently wrote off as worthless prior to the
conclusion of the Registrant's bankruptcy proceeding in 1990. The Registrant
received the payment of the $800,000 in October 1997. At the time that such
payment was received, the Company had no other material liquid assets. As of
December 31, 1997, the Company had liquid assets of approximately $785,000,
substantially all of it attributable to the aforesaid distribution.
As of March 31, 1997, the Registrant had cash on hand of less than $5,000
and no other financial resources. In connection with the proxy contest, PGI
agreed to lend the Registrant certain funds necessary for the call of an annual
meeting of shareholders. Under the Settlement Agreement, PGI lent the Registrant
approximately $197,000, and thereafter, PGI lent the Registrant an additional
$267,000. The loans were demand loans bearing interest at 2 percentage points
above the prime rate. In March 1998, PGI and the Registrant exchanged the full
balance of such debt, plus interest, for 788,644 shares of authorized but
theretofore unissued common stock. As a result thereof, PGI now holds
approximately 24% of all outstanding common stock of the Registrant. The
exchange enabled the Registrant to conserve its cash for other corporate
purposes. See Item 12, Certain Relationships and Related Transactions.
Item 2. Properties.
As of the Effective Date of the Plan, the Registrant had no material
properties, and it has acquired none since then. The Registrant currently has
the use of office space in Bloomfield,
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Connecticut. The Registrant's business records, to the extent not discarded, are
stored in a public warehouse
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
Inapplicable.
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PART II
Item 5. Market for Common Equity and Related Shareholder Matters.
The Common Stock is traded over the counter and quotes have been reported
by the OTC Bulletin Board since February 2, 1997. The table set forth below
reports the high and low closing bid quotations as compiled by National
Quotation Bureau, LLC, of New York, New York, for each calendar quarter in the
last two complete fiscal years, and for the first quarter of the current fiscal
year, through the date indicated. The quotations reflect interdealer prices,
without retail markups, markdowns or commissions and may not necessarily
represent actual transactions.
High Bid Low Bid
1996 - 1st Quarter $0.0938 $0.0625
1996 - 2nd Quarter 0.0938 0.0938
1996 - 3rd Quarter 0.0938 0.0938
1996 - 4th Quarter 0.2800 0.0938
1997 - 1st Quarter 1.1875 0.2500
1997 - 2nd Quarter 1.7500 0.3125
1997 - 3rd Quarter 1.0625 0.4375
1997 - 4th Quarter 1.5000 0.6250
1998 - 1st Quarter 0.8125 0.4063
(through March 17)
The number of registered holders of the Common Stock as of March 23, 1998,
was approximately 1,000.
The Registrant has not paid any cash dividends on its stock since 1974 and
has no expectation of doing so in the foreseeable future.
Item 6. Management's Discussion and Analysis of Financial Condition or Plan of
Operation.
The following discussion should be read in conjunction with Item 1,
Business, and the Consolidated Financial Statements, including the Notes
thereto.
Overview. The Registrant emerged from a Chapter 11 bankruptcy proceeding
in 1990 with $950,000 in cash and no liabilities. In the years from 1990 through
1996, the Registrant's only
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material source of revenue was interest on the its cash, and expenses always
exceeded earnings. As of December 31, 1996, the Registrant had a retained
deficit of approximately $1,046,000. In the view of current management, the
business plans of former management were not successful, in that the Registrant
now has no business, and no material financial resources other than on account
of the receipt of approximately $800,000 in the fourth quarter of 1997, arising
from a bankruptcy claim filed by the Registrant in 1983.
As a result of the receipt of $800,000 in the last quarter of 1997, the
Registrant now has sufficient liquidity to meet its current operating expenses
for the foreseeable future. The Registrant's cash on hand was approximately
$770,000 as of March 12, 1998, and the Registrant's projected operating costs
and expenses for the fiscal year ending December 31, 1998, are approximately
$75,000. Average annual operating expenses in the years 1994 - 1996 were
approximately $174,000. Operating expenses in 1997 were substantially higher
than in the prior years because of the expenses incurred in connection with the
proxy contest.
Business Plans, Liquidity and Financial Resources. The Registrant's
financial resources at the present time, other than its cash on hand, are (i) a
remainder interest in the Product Liability Trust which would become payable to
the Registrant, if ever, in 2020, and (ii) the possible utility of net operating
loss carryforwards of approximately $192 million.
Product Liability Trust. The Product Liability Trust processes and
liquidates product liability claims asserted and makes distributions to holders
of settled or adjudicated claims. The trust contained assets of approximately
$12 million as of December 31, 1997. Under the terms of the Product Liability
Trust, the residual funds, if any, remaining after distribution of all Trust
assets to pay product liability claims and expenses would be distributed to the
Registrant on February 28, 2020. The bankruptcy court is authorized to permit an
earlier payout in its discretion, and the Registrant may apply to the bankruptcy
court seeking early termination of the Trust. See Item 1, Business.
NOL'S. In the past, the NOL's sheltered the Registrant's modest interest
income, and the income of the Product Liability Trust and, before it was
terminated, the Reorganization Trust. The income of the Product Liability Trust,
if any, continues to be taxable to the Registrant. As more fully discussed in
the Notes to the Financial Statements, the continuing availability of the NOL's
is uncertain.
Changes in Financial Condition. The Registrant's financial condition is
set forth in the Consolidated Balance Sheets as of December 31, 1997 and 1996.
The changes in financial condition between the two dates resulted mainly from
the receipt of approximately $800,000 from an old claim against a former account
debtor. See "Overview" and "Business Plans, Liquidity and Financial Resources"
above.
Substantially all cash used by the Registrant in 1997 was provided by PGI,
and the Registrant was indebted to PGI, as of December 31, 1997, in the amount
of $478,117. As described in Item
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1, in March 1998 PGI and the Registrant exchanged the debt owed to PGI as of
February 20, 1998, for 788,644 shares of the Registrant's common stock.
Item 7. Financial Statements.
See the "Index to Consolidated Financial Statements and Schedules," which
appears on page F - 1 hereof.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Inapplicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
The following table sets forth the names, ages and business backgrounds of
the Registrant's executive officers and directors, together with all positions
and offices held with the Registrant by such executive officers and directors.
All executive officers and directors first took office on July 29, 1997:
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Name, Age and Office Business Background
Morton E. Handel, 62, President of S&H Consulting, Ltd., a privately held investment and
Chief Executive Officer, consulting firm. Director and chairman of the Audit Committee of
President and Director CompUSA, a publicly held retailer of computer hardware,
software, and accessories; director and
chairman of the Audit Committee of Ithaca
Industries, Inc., a publicly held
manufacturer of underwear and hosiery;
director of Toy Biz, Inc., a publicly held
manufacturer, importer and distributor of
toys; director of Concurrent Computer
Corporation, a manufacturer of real-time
computers and computer systems.
Isaac Perlmutter, 54, Independent investor; sole shareholder of Pure Group,
Inc.; Director director and major shareholder of Toy Biz, Inc., a publicly held
manufacturer, importer and distributor of toys.
Raymond Minella, 48, Principal of Berenson, Minella & Company, an investment
banking Director firm.
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Item 10. Executive Compensation.
Executive Officers. In the three fiscal years ended December 31, 1997,
1996 and 1995, the only executive officer of the Registrant who received any
salary or other compensation from the Registrant was Mr. James B. Rubin, as
follows:
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Fiscal year ended Total annual
Name and Positions December 31, compensation
James T. Rubin, President and Director 1997 $17,888*
1996 50,000
1995 50,000
* For the period from January 1 through July 29, 1997, only.
The Registrant's current executive officer, Mr. Morton E. Handel, has
served from July 29, 1997, to date without any compensation.
Compensation of Directors. Each director of the Registrant is paid an
attendance fee of $500 for each regular or special meeting of the Board of
Directors which he attends, in person or by telephone.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table lists all persons who have reported to the Securities
and Exchange Commission their beneficial ownership of more than 5% of the
Registrant's Common Stock, and all directors and officers of the Registrant, as
of March 23, 1998:
Name and Address of Beneficial Owner Number of Shares Percentage1
Morton E. Handel, President and Director 198,167 4.1%
Massachusetts Financial Services Company 398,930 8.3%
Isaac Perlmutter, Director2 1,146,137 23.9%
All directors and officers as a group3 1,344,304 28.1%
===================================================================== ========================== =====================
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1. All percentages have been determined using the number of shares of the
Registrant's common stock outstanding as of March 23, 1998, i.e.,
4,788,644 shares.
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2. Consists of 1,112,100 shares owned by PGI, which is wholly owned by Mr.
Perlmutter, and 34,037 shares owned by another corporation wholly owned by
Mr. Perlmutter.
3. Consists of shares beneficially owned by Mr. Handel and by Mr. Perlmutter.
Mr. Minella does not own any shares of the Registrant.
Item 12. Certain Relationships and Related Transactions.
From time to time in 1997, PGI (which is wholly owned by Mr. Perlmutter,
who became a director of the Registrant on July 29, 1997) advanced funds to or
for the benefit of the Registrant, and as of July 29, 1997, the balance of such
advances stood at approximately $197,000. Prior management agreed on behalf of
the Registrant to repay such advances on demand, and to pay interest on the
outstanding balance at the rate of 2 percentage points over the prime rate,
compounded monthly. Advances made after July 29, 1998, were made on the same
terms and conditions as provided for the advances made prior to Mr. Perlmutter's
election as a director. No cash payments of principal or interest were made on
such indebtedness in 1997, and as of February 20, 1998, the outstanding balance
of principal and interest was $483,616. On March 9, 1998, the Registrant agreed
to exchange 788,644 shares of its authorized but theretofore unissued Common
Stock for the $483,616 of debt due PGI. The value per share used for the
purposes of the exchange was $0.6211, which was the weighted average of the
closing price of shares traded for the 30-day period prior to February 20, 1998.
Throughout 1996, and the period from January 1 through July 28, 1997, the
Registrant had a management services agreement with M.D. Sass Associates, Inc.
("Sass"), of which the Registrant's president throughout in such periods, Mr.
James B. Rubin, was a Senior Managing Director. The Registrant incurred costs of
$19,200 payable to Sass in 1996, and $9,600 in 1997.
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits. The exhibits that are part of this report are listed in
the Exhibit Index at the end of this report.
(b) Reports on Form 8-K. In the last quarter of the year covered by
this Report, the Registrant filed one Current Report on Form 8-K, dated October
9, 1997, reporting information under Item 5, Other Events.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Ranger Industries, Inc.
March 23, 1997 s/ Morton E. Handel
----------------------------
Morton Handel, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
March 23, 1998 /s/ Morton Handel
Morton Handel, President, Acting Chief
Financial Officer, Acting Principal
Accounting Officer, and Director
March 23, 1998 /s/ Raymond Minella
Raymond Minella, Director
March 23, 1998 /s/ Isaac Perlmutter
Isaac Perlmutter, Director
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RANGER INDUSTRIES, INC. AND SUBSIDIARIES
Index to Financial Statements and Schedules
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Page
Report of Independent Accountants...............................................................................F-2
Consolidated Balance Sheets as at December 31, 1997 and 1996....................................................F-3
Consolidated Statements of Operations and Retained Deficit for the years ended
December 31, 1997 and 1996....................................................................F-4
Consolidated Statements of Cash Flows for the years ended December 31,1997 and
1996..........................................................................................F-5
Notes to Consolidated Financial Statements......................................................................F-6
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Schedules not included herein have been omitted because they are not applicable
or the required information is shown in the Consolidated Financial Statements or
Notes thereto.
691751.10
F-1
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.):
We have audited the accompanying consolidated balance sheets of Ranger
Industries, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations and retained deficit and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ranger Industries,
Inc. and Subsidiaries as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
/s/
Hartford, Connecticut
March 19, 1998
F-2
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RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
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ASSETS
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1997 1996
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Current assets:
Cash and equivalents $ 784,800 $ 43,009
Bad debt recoveries receivable - 2,931
Prepaid expenses - 1,044
Income tax receivable 3,446 -
---------------- ----------
Total assets $ 788,246 $ 46,984
========= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and other liabilities $ 19,918 $ 68,336
Accrued interest payable 16,337 -
Note payable to Pure Group, Inc. 196,477 -
Other amounts owed to Pure Group, Inc. 265,303 -
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Total liabilities 498,035 68,336
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Stockholders' equity (deficit):
Common stock - $.01 par value, 20,000,000
shares authorized, 4,000,000 shares
issued and outstanding 40,000 40,000
Capital in excess of par value 985,000 985,000
Retained deficit (734,789) (1,046,352)
---------- -----------
Total stockholders' equity (deficit) 290,211 (21,352)
---------- -----------
Total liabilities and stockholders' equity $ 788,246 $ 46,984
========= ===========
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The accompanying notes are an integral part
of the consolidated financial statements.
F-3
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RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED DEFICIT
for the years ended December 31, 1997 and 1996
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1997 1996
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Net sales $ - $ -
Operating costs and expenses:
Administrative expenses 111,697 135,367
Legal expenses 111,243 42,072
Proxy contest and annual meeting expenses 251,781 -
Other income and expenses:
Bad debt recoveries income 802,160 6,245
Interest expense (16,337) -
Interest income 8,861 497
--------------- ----------------
Income (loss) before income taxes 319,963 (170,697)
------------- -------------
Provision (benefit) for income taxes 8,400 (30,000)
--------------- --------------
Net income (loss) 311,563 (140,697)
Retained deficit, beginning of year (1,046,352) (905,655)
------------ -------------
Retained deficit, end of year $ (734,789) $(1,046,352)
============ ===========
Basic earnings (loss) per share $ .08 $ (.04)
================ ==============
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The accompanying notes are an integral part
of the consolidated financial statements.
F-4
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RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1997 and 1996
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1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) $311,563 $(140,697)
-------- ---------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Receivable from the Reorganization Trust - 1,939
Bad debt recoveries receivable 2,931 (2,931)
Prepaid expenses 1,044 16,456
Income tax receivable (3,446) 508
Interest receivable - 48
Accounts payable, accrued liabilities and interest payable (32,081) 25,406
---------- -----------
Total adjustments (31,552) 41,426
---------- -----------
Net cash provided by (used in) operating activities 280,011 (99,271)
--------- -----------
Cash flows from financing activities:
Distribution from reorganization trust - 75,000
Proceeds from note payable to Pure Group, Inc. 196,477 -
Other proceeds from Pure Group, Inc. 265,303 -
--------- -----------
Net cash provided by financing activities 461,780 75,000
--------- -----------
Net increase (decrease) in cash and cash equivalents 741,791 (24,271)
Cash and cash equivalents at beginning of year 43,009 67,280
---------- -----------
Cash and cash equivalents at end of year $784,800 $ 43,009
======== ==========
Supplemental disclosures of cash flow information: Cash paid during the year
for:
Income taxes $ 13,324 $ 1,965
========= ===========
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The accompanying notes are an integral part
of the consolidated financial statements.
F-5
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RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization:
In July 1988, Ranger Industries, Inc. (the "Registrant" or the "Company",
and 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 the Registrant were canceled, and 4,000,000
shares of the Registrant's new $0.01 par value common stock (the "Common
Stock") were distributed to the unsecured creditors. On the Effective
Date of the Plan, the Registrant 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 the Registrant) and effectuate distributions thereof to
the Registrant'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.
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 the Registrant. The Product Liability Trust continues
to process and liquidate certain product liability claims. Pursuant to
the terms of the Product Liability Trust Agreement, residual funds, if
any, will revert to the Registrant, 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.
2. Change In Control:
Following the conclusion of a hostile proxy contest (the "Proxy
Contest"), initiated by Pure Group, Inc. ("PGI") during the second
quarter of 1997, the Company's former directors resigned from the Board
of Directors effective July 29, 1997, and new directors were elected. The
terms under which this change in control took place are outlined in a
settlement agreement dated July 29, 1997 between PGI, the Company and the
Company's former directors (the "Settlement Agreement"). Under the terms
of the Settlement Agreement, and as set forth in a demand promissory note
dated July 29, 1997, PGI loaned the Company $196,477 to pay its then
outstanding obligations. The note requires the Company to pay interest to
PGI at two percentage points above the prime rate (8.5% at December 31,
1997). Additionally, PGI loaned the Company $251,780 to cover costs
incurred in connection with the Proxy Contest, including the costs of
holding the 1997 annual meeting and $13,523 for working capital purposes.
These additional loans of $265,303 are subject to the same terms outlined
in the demand promissory note. Also, see Note 10.
F-6
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RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. Summary of Significant Accounting Policies:
The consolidated financial statements have been prepared using the
accrual basis of accounting. 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 revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Certain amounts from 1996 have been reclassified to conform with the 1997
presentation.
Income
The only source of income is interest income and the recovery of certain
bad debts.
Expenses
Expenses of the Company consist of professional fees and other costs
incurred in connection with the Company's filing requirements and
interest.
Earnings Per Share
In 1997, the Company adopted Statement of Financial Standards No. 128,
"Earnings Per Share". This pronouncement had no impact on the Company's
consolidated financial position, results of operating, or cash flows.
Basic earnings (loss) per share were computed based on the weighted
average number of shares of common shares outstanding. There are no
dilutive securities outstanding and, as such, basic and diluted earnings
per share are the same. Weighted average common shraes outstanding were
4,000,000 shares during 1997 and 1996 As discussed in Note 1, all
previously existing debt and equity securities were canceled on February
28, 1990.
Cash and Cash Equivalents
Cash equivalents consist of short-term highly liquid investments with an
original maturity, when purchased, of three months or less.
4. Bankruptcy Claim Recovery:
On October 9, 1997, the Company received $802,160 as a distribution on a
bankruptcy claim filed by the Company's predecessor in 1983.
F-7
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. Income Taxes:
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or income tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. In addition, deferred tax assets
are subject to a valuation allowance to reduce them to net realizable
value.
As discussed in Note 1, the assets and liabilities of the Company,
except for $950,000 retained for working capital purposes, were
transferred to the Reorganization and Product Liability Trusts,
respectively, effective February 28, 1990, in accordance with the Plan.
Although the matter is not free from doubt, these Trusts have been
treated as grantor trusts. Accordingly, taxable income or loss
associated with the disposition of assets and the settlement of
liabilities by the Trusts are reflected on the federal income tax return
of Ranger Industries, Inc., although such assets and liabilities are not
presented in these consolidated financial statements (also see Note 6).
Tax expense or benefit is attributable to Federal and state taxes due,
partially offset, in 1996, by amounts due under a tax sharing agreement
between Ranger Industries, Inc. and the Reorganization Trust whereby the
Trust reimbursed Ranger for taxes paid in certain states.
At December 31, 1997 and 1996, it was estimated that the Company had
adjusted tax net operating loss carryforwards and future deductions of
approximately $192 million after giving effect to the Plan and the
transactions contemplated thereby, which may be used to offset future
taxable income, subject to several limitations, and which begin to
expire in the year 2002. These amounts include the tax consequences of
the activity of the Reorganization and Product Liability Trusts, as well
as the activity of Ranger Industries, Inc. At December 31, 1997 and
1996, the Company had Alternative Minimum Tax (AMT) loss carryforwards
of approximately $168 million which will begin to expire in the year
2002. The Company also had approximately $7.7 and $13.1 million in tax
credit carryforwards at December 31, 1997 and 1996, respectively. At the
current tax rates, the taxable income equivalent of the credit
carryforwards is approximately $22.6 and $38.5 million, respectively.
Under current tax laws, the Internal Revenue Code provides for certain
limitations following an "ownership change". Accordingly, under the
confirmed Plan of Reorganization, the continued availability of the
Company's net operating loss carryforwards and other tax attributes may
be subject to substantial limitations (also see Note 6).
F-8
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. Income Taxes, Continued:
At December 31, 1997 and 1996, the only remaining book and tax base
differentials related to the claim settlement activities of the Product
Liability Trust. Additionally, any deferred tax asset recorded to
recognize the tax net operating loss carryforwards would be subject to a
full valuation allowance under the provisions of SFAS 109, due to
uncertainty of the Company's ability to generate taxable income to
utilize the carryforwards. The Company's tax liabilities are
attributable to state minimum taxes and federal alternative minimum tax.
6. Treasury Regulation:
On January 6, 1992, the Department of the Treasury promulgated new
Treasury Regulations. These regulations interpret Section 269 of the
Internal Revenue Code which permits the Internal Revenue Service to deny
corporations the ability to use tax benefits, such as net operating
losses ("NOLs") where control of the corporation was acquired for the
principal purpose of avoiding tax. The regulations provide that if a
corporation in a bankruptcy reorganization that qualifies for an
exemption from the general rule limiting the use of net operating loss
carryforwards does not carry on a significant amount of an active trade
or business during and subsequent to such bankruptcy reorganization, the
Internal Revenue Service will presume, absent a showing of strong
evidence to the contrary, that the principal purpose of the
reorganization was to evade or avoid Federal income tax and that Section
269 should apply. The regulations are only effective, by their terms,
with respect to acquisitions of control of corporations occurring after
August 14, 1990 and, accordingly, they do not apply to Ranger
Industries, Inc.
Despite the inapplicability of these regulations to Ranger, the issue of
essentially inactive reorganized companies with NOLs that survive
bankruptcy intact has now been firmly raised in the eyes of the Internal
Revenue Service. Accordingly, due to the Company's disposition of its
historic toy businesses to Hasbro and the Company's switch to a new
business of acquiring investments, it is possible that the Internal
Revenue Service may assert that the Company has not carried on a
significant trade or business during and subsequent to its
reorganization. If such an assertion is made and ultimately sustained,
then the Company would be unable to utilize its estimated $192 million
of net operating loss carryforwards. This could have a materially
adverse effect on the Company's ability to attract outside investors
willing to invest in the Company. Notwithstanding these regulations,
there can be no assurance that the Company will be able to attract
sufficient outside investment to allow it to continue to operate, once
its current working capital is depleted. The consolidated financial
statements do not include any adjustments that might result from the
resolution of these uncertainties.
F-9
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
7. Related Party Transactions:
The Company had an Agreement with M.D. Sass Associates, Inc. ("SASS") of
which James B. Rubin is Senior Managing Director, under which SASS
provided accounting, administrative, financial, legal, secretarial and
other support services at the Company's request. The Company incurred
costs of $9,600 and $19,200 for these services for the each of the years
ended December 31, 1997 and 1996, respectively. In connection with the
change in control described in Note 2, this agreement was terminated.
All amounts owed to SASS in connection with this agreement were paid
during the quarter ended September 30, 1997. At December 31, 1996,
$11,200 was owed to SASS in connection with this agreement. Effective
August 1, 1990, Mr. Rubin, as Chief Executive Officer, was entitled to
an annual salary of $50,000, through the date of the change in control
(see Note 2). All fees for his services are included in administrative
expenses in the consolidated financial statements. All amounts owed to
Mr. Rubin in connection with this agreement were paid during the quarter
ended September 30, 1997. At December 31, 1996, $32,112, was owed to Mr.
Rubin in connection with this agreement. Also, see Notes 2 and 10.
8. Final Distribution from Ranger Industries, Inc. Reorganization Trust:
As described in Note 1, the Reorganization Trust made its final
distribution to creditors on May 29, 1996. On October 31, 1996, the
Company received a distribution of $75,000 from the Reorganization Trust
representing substantially all of the funds then expected to be
disbursed to the Company from the Reorganization Trust. This amount was
reflected as an adjustment to the original capitalization of the Company
and accordingly, is included in capital in excess of par value at
December 31, 1997 and 1996.
9. Recently Issued Accounting Pronouncements:
In 1998, the Company will adopt Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income", and No. 131,
"Disclosures About Segments of and Enterprise and Related Information,
which are effective for financial statements issued for periods
beginning after December 15, 1997. When adopted, these pronouncements
will not have any effect on the Company's consolidated financial
position, results of operations, or cash flows.
F-10
<PAGE>
RANGER INDUSTRIES, INC.
(formerly Coleco Industries, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
10. Subsequent Event:
On March 9, 1998, the Company issued 788,644 shares of its $.01 par
value common stock in exchange for the cancellation of the amount owed
to PGI as of February 10, 1998. The exchange value of $.6211/share was
determined using the weighted average of the closing prices of the
Company's common stock for the 30-day period prior to February 20, 1998.
F-11
<PAGE>
EXHIBIT INDEX
The following exhibits are a part of this report. All such exhibits are
incorporated herein by reference to other documents on file with the Securities
and Exchange Commission, except those marked with an asterisk.
<TABLE>
<CAPTION>
<S> <C>
Exhibit No. Description
3.1 Amended and restated certificate of incorporation of the Registrant,
incorporated herein by reference to the Registrant's Annual Report on Form 10-
K for the year ended December 31, 1989, SEC File No. 1-5673.
3.2 Amended and restated by-laws of the Registrant, incorporated herein by
reference to the Registrant's Annual Report on Form 10-KSB for year ended
December 31, 1994, SEC File No. 1-5673.
10.1 Settlement agreement dated July 29, 1997, among the
Registrant, Pure Group, Inc., and Messrs. James B. Rubin,
James Berman and Duncan N. Darrow, incorporated herein by
reference to Exhibit IV of Amendment No. 4 dated July 29,
1997, of Schedule 13D filed by Pure Group, Inc., and
certain other persons with respect to ownership of the
Registrant's Common Stock.
21 List of subsidiaries, incorporated herein by reference to
the Registrant's Annual Report on Form 10-KSB for the year
ended December 31, 1996.
27* Financial Data Schedule
</TABLE>
691751.10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from the Consolidated
Balance Sheet and Consolidated Statement of
Operations and Retained Deficit and is qualified
in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> YEAR
<CASH> 784,800
<SECURITIES> 0
<RECEIVABLES> 3,446
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 788,246
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 788,246
<CURRENT-LIABILITIES> 498,035
<BONDS> 0
0
0
<COMMON> 40,000
<OTHER-SE> 250,211
<TOTAL-LIABILITY-AND-EQUITY> 788,246
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 474,721
<OTHER-EXPENSES> (811,021)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,337
<INCOME-PRETAX> 319,963
<INCOME-TAX> 8,400
<INCOME-CONTINUING> 311,563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 311,563
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
