SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934
For the transition period from to
------------- ----------------
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
One Regency Drive
.......................Bloomfield, Connecticut 06002...........................
(Address of principal executive offices)
...............................(860) 726-1208...................................
(Issuer's telephone number, including area code)
Check whether the issuer: (1) filed all 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 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
----------- ----------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date (August 9, 1999): 5,278,644 shares
Transitional Small Business Disclosure Format (check one): Yes No X
----------
864471.3
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Condensed Balance sheets
June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
June 30,
1999 December 31,
(Unaudited) 1998
<S> <C> <C>
Assets
Current Assets
Cash and equivalents $ 766,224 $ 759,216
Prepaid expenses 8,035 2,625
Income tax receivable -- 3,436
------------------- -------------------
774,259 765,277
------------------- -------------------
Other assets 5,501 6,802
------------------- -------------------
Total Assets $ 779,760 $ 772,079
=================== ===================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and other liabilities $ 7,059 $ 18,075
Income tax payable 11,114 --
Deferred income taxes 3,576 3,576
------------------- -------------------
Total current liabilities 21,749 21,651
Non-current liabilities
Deferred income taxes 7,091 8,391
------------------- -------------------
Total liabilities 28,840 30,042
------------------- -------------------
Stockholders' equity
Common stock 52,786 52,786
Capital in excess of par value 1,661,430 1,661,430
Unearned compensation (99,069) (114,937)
Retained deficit (864,227) (857,242)
------------------- -------------------
Total stockholders' equity 750,920 742,037
------------------- -------------------
Total liabilities and stockholders' equity $ 779,760 $ 772,079
=================== ===================
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements
1
864471.3
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Condensed Statements of Operations
For the Three Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
Net sales $ -- $ --
------------------- -------------------
Operating costs and expenses
Administrative expenses 24,978 12,163
Legal expenses -- 10,554
Other income and expenses
Interest income 7,561 9,126
------------------- -------------------
Loss before income taxes (17,417) (13,591)
------------------- -------------------
Provision for income taxes
Current 8,000 2,100
Deferred (500) --
------------------- -------------------
7,500 2,100
------------------- -------------------
Net loss (24,917) (15,691)
------------------- -------------------
Basic loss per share $ (.01) $ (.01)
=================== ===================
Weighted average common shares outstanding 5,278,644 4,788,644
=================== ===================
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements
864471.3
2
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Condensed Statements of Cash Flows
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
Net sales $ -- $ --
------------------- -------------------
Operating costs and expenses
Administrative expenses 49,231 22,425
Legal and settlement expenses 4,000 22,384
Other income and expenses
Bankruptcy claim recovery 47,517 --
Interest expense -- (5,498)
Interest income 15,229 18,388
------------------- -------------------
Income (loss) before income taxes 9,515 (31,919)
------------------- -------------------
Provision for income taxes
Current 17,800 4,600
Deferred (1,300) --
------------------- -------------------
16,500 4,600
------------------- -------------------
Net loss (6,985) (36,519)
------------------- -------------------
Basic loss per share $ (.01) $ (.01)
=================== ===================
Weighted average common shares outstanding 5,278,644 4,492,358
=================== ===================
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements
864471.3
3
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Condensed Statements of Operations
For the Six Months Ended June 30, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
Cash flows from operating activities
Net loss $ (6,985) $ (36,519)
------------------- -------------------
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities
Compensation expense settled in shares of Ranger stock 15,868 --
Interest expense settled in shares of Ranger stock -- 5,498
Deferred income taxes (1,300) --
Changes in assets and liabilities
Receivables -- 608
Prepaid expenses and other assets (4,109) (7,744)
Income tax receivable 3,436 --
Accounts payable, accrued liabilities and interest payable (11,016) 6,330
Income tax payable 11,114 --
------------------- -------------------
Total adjustments 13,993 4,692
------------------- -------------------
Net cash provided by (used in) operating activities 7,008 (31,827)
------------------- -------------------
Cash and cash equivalents at beginning of period 759,216 784,800
------------------- -------------------
Cash and cash equivalents at end of period $ 766,224 $ 752,973
=================== ===================
Noncash transactions
Common stock issued in exchange for the cancellation of amount owed to $ -- $ 483,616
PGI
=================== ===================
</TABLE>
The accompanying notes are an integral part
of the condensed financial statements
864471.3
4
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
June 30, 1999 and December 31, 1998
- --------------------------------------------------------------------------------
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. Also, see Note 8.
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. Management's Representation
The accompanying condensed financial statements should be read in
conjunction with the Notes to Financial Statements and Management's
Discussion and Analysis of Financial Condition and results of
operations included in the Company's 1998 Annual Report filed on Form
10-KSB and in this form 10-QSB report.
In the opinion of management, all adjustments necessary for a fair
presentation of the results for the interim periods have been made.
3. Bankruptcy Claim Recovery
In April 1999, the Company received $47,517 as a distribution on a
bankruptcy claim filed by the Company's predecessor in 1983.
864471.3
5
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
June 30, 1999 and December 31, 1998
- -------------------------------------------------------------------------------
4. 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 financial statements (also see
Note 5).
Tax expense or benefit is attributable to state taxes and Federal
alternative minimum tax.
At June 30, 1999 and December 31, 1998, it was estimated that the
Company had adjusted tax net operating loss carryforwards and future
deductions of approximately $177.6 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 June 30, 1999 and December 31, 1998, the Company had Alternative
Minimum Tax (AMT) loss carryforwards of approximately $153.9 million,
which will begin to expire in the year 2002. The Company also had
approximately $3.2 million and $7.7 million in tax credit
carryforwards at June 30, 1999 and December 31, 1998, respectively.
At the current tax rates, the taxable income equivalent of the credit
carryforwards was approximately $9.4 million and $22.7 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 5).
At June 30, 1999 and December 31, 1998, the Company had deferred tax
liabilities of $10,667 and $11,967, respectively, as a result of a
compensation expense temporary difference, associated with the stock
issued to Mr. Handel (see Note 7). 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
864471.3
6
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
June 30, 1999 and December 31, 1998
- --------------------------------------------------------------------------------
SFAS 109, due to the uncertainty of the Company's ability to generate
taxable income to utilize the carryforwards.
5. 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 $177.6 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 financial statements do not include any adjustments
that might result from the resolution of these uncertainties.
6. PGI Indebtedness
On March 9, 1998, the Company issued 778,644 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, the date of the agreement.
864471.3
7
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
June 30, 1999 and December 31, 1998
- --------------------------------------------------------------------------------
7. Stock Compensation
On August 4, 1998, the Company entered into a five-year Employment
Agreement (the "Agreement") with Mr. Morton E. Handel, whereby Mr.
Handel will serve as the Company's Chief Executive Officer and
President. As base compensation, in lieu of cash, Mr. Handel received
500,000 shares of the Company's stock, one-fifth of which was
immediately vested and non-forfeitable as of the date of the
Agreement. Mr. Handel will vest in an additional 20 percent of the
shares each year over the succeeding four anniversaries of the
Agreement.
The estimated market value of the stock award was $160,000 or $.32
per share. The Company will incur compensation expense based on the
vesting terms included in the Agreement. For the six months ended
June 30, 1999, the Company recognized compensation expense of
$15,868, plus related taxes, in connection with this stock award,
which is included in administrative expenses in the condensed
financial statements.
8. Distribution from Ranger Industries, Inc.'s Reorganization Trust
As described in Note 1, the Reorganization Trust made what was
expected to be its final distribution to creditors on May 29, 1996.
In August 1998, however, the Company received an additional
distribution of $45,601 from the former trustee of the Reorganization
Trust. This amount has been 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, 1998.
864471.3
8
<PAGE>
PART I - FINANCIAL INFORMATION (cont'd)
Item 2. Plan of Operation.
The following discussion should be read in conjunction with the
Financial Statements, including the Notes thereto.
As a result of the receipt of approximately $802,000 of
bankruptcy claim recovery in the last quarter of 1997, approximately $45,600
from the Reorganization Trust (see Note 1, Organization, in the Condensed
Financial Statements included in this Report) in the third quarter of 1998 and
approximately $47,500 of bankruptcy claim recovery in the second quarter of
1999, the Registrant has sufficient liquidity to meet its current operating
expenses for the foreseeable future. The Registrant's cash on hand was
approximately $766,000 as of June 30, 1999, and the Registrant's projected cash
operating costs and expenses, net of interest income and bankruptcy claim
recovery, for the fiscal year ending December 31, 1999 are approximately
$40,000. The Registrant does not expect to have to raise additional funds in the
next twelve months.
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 and (ii) the possible utility of net operating loss carryforwards ("NOLs")
of approximately $178 million as of June 30, 1999. See Note 4, Income Taxes, in
the Condensed Financial Statements included in this Report. The NOLs have
sheltered the Registrant's modest interest income and the income of the Product
Liability Trust from Federal income taxation and, until 1999, from state income
taxation. 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 NOLs is uncertain.
Year 2000 Issues. The Registrant does not use a computer to
maintain its financial records at this time. The Registrant therefore (i)
considers itself ready to deal with the transition to the year 2000; (ii)
expects to bear no significant costs associated with addressing the Year 2000
problem; and (iii) believes that its Year 2000 issues present it with no
material risks. The Registrant cannot be certain that BankBoston, the bank where
most of the Registrant's cash is kept in the form of accounts, will be free from
Year 2000 difficulties. The Registrant believes, however, that those accounts
are safe from any material risk associated with the Year 2000 problem. Because
the Registrant has no operations and does not use a computer to maintain its
financial records, the Registrant has not considered it necessary to make
contingency plans for dealing with the Year 2000 problem and it has not done so.
864471.3
9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K: None.
864471.3
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Ranger Industries, Inc., the Registrant
Date: August 12, 1999 By: /s/ MORTON E. HANDEL
-------------------------------------
Morton E. Handel
President, Chief Executive Officer
and Acting Chief Financial Officer
864471.3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Balance Sheet and Statement of Operations and is
qualified in its entirety by reference to such condensed
financial statements.
</LEGEND>
<CIK> 0000021610
<NAME> Ranger Industries, Inc.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> $766,224
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 744,259
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 779,760
<CURRENT-LIABILITIES> 21,749
<BONDS> 0
0
0
<COMMON> 52,786
<OTHER-SE> 698,134
<TOTAL-LIABILITY-AND-EQUITY> 779,760
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 53,231
<OTHER-EXPENSES> 47,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (15,229)
<INCOME-PRETAX> 9,515
<INCOME-TAX> 16,500
<INCOME-CONTINUING> (6,985)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,985)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
