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 March 31, 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 (November 12, 1998): 5,278,644 shares
Transitional Small Business Disclosure Format (check one): Yes No X
------ -------
831783.1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Condensed Balance Sheets
March 31, 1999 and December 31, 1998
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(unaudited) 1998
Assets
Current assets
<S> <C> <C>
Cash and equivalents $ 747,814 $ 759,216
Bad debt recovery receivable 47,517 -
Prepaid expenses 10,506 2,625
Income tax receivable - 3,436
----------------- -----------------
805,837 765,277
----------------- -----------------
Other assets 6,155 6,802
----------------- -----------------
Total assets $ 811,992 $ 772,079
================= =================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and other liabilities $ 29,852 $ 18,075
Income tax payable 3,114 -
Deferred income tax 3,576 3,576
----------------- -----------------
Total current liabilities 36,542 21,651
Non-current liabilities
Deferred income taxes 7,591 8,391
---------------- ------------------
Total liabilities 44,133 30,042
---------------- ------------------
Stockholders' equity
Common stock 52,786 52,786
Capital in excess of par value 1,661,430 1,661,430
Unearned compensation (107,047) (114,937)
Retained deficit (839,310) (857,242)
----------------- ------------------
Total stockholders' equity 767,859 742,037
----------------- ------------------
Total liabilities and stockholders' equity $ 811,992 $ 772,079
================ ==================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
1
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Condensed Statements of Operations
For the Quarters Ended March 31, 1999 and 1998
(Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
Net Sales $ - $ -
----------------- -----------------
Operating costs and expenses
<S> <C> <C>
Administrative expenses 24,253 10,262
Legal expenses 4,000 11,830
Other income and expenses
Bad debt recoveries income 47,517 -
Interest expense - (5,498)
Interest income 7,668 9,262
---------------- -----------------
Income (loss) before income taxes 26,932 (18,328)
---------------- -----------------
Provision for income
Current 9,800 2,500
Deferred (800) -
---------------- -----------------
9,000 2,500
---------------- -----------------
Net income (loss) 17,932 (20,828)
---------------- -----------------
Basic income (loss) per share $ .01 $ (.01)
================ =================
Weighted average common shares outstanding 5,278,644 4,192,780
================ =================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
2
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Condensed Statements of Cash Flows
For the Quarters Ended March 31, 1999 and 1998
(Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
Cash flows from operating activities
<S> <C> <C>
Net income (loss) $ 17,932 $ (20,828)
----------------- -----------------
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Compensation expense settled in shares of Ranger stock 7,890 -
Deferred income tax (800) -
Changes in assets and liabilities
Bad debt recoveries receivable (47,517) -
Prepaid expenses and other assets (7,234) (11,493)
Income tax receivable 3,436 -
Accounts payable, accrued liabilities and interest payable 11,777 10,762
Income tax payable 3,114 -
----------------- -----------------
Total adjustments (29,334) (731)
----------------- -----------------
Net cash used in operating activities (11,402) (21,559)
----------------- -----------------
Cash and cash equivalents at beginning of period 759,216 784,800
----------------- -----------------
Cash and cash equivalents at end of period $ 747,814 $ 763,241
================= ================
Noncash transactions
Common stock issued in exchange for the cancellation
of amount owed to PGI $ - $ 483,616
================ ================
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
March 31, 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 Plan of Operation
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.
4
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
March 31, 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 March 31, 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 March 31, 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 March 31, 1999 and December 31, 1998, respectively.
At the current tax rates, the taxable income equivalent of the credit
carryforwards is approximately $9.4 million.
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 March 31, 1999 and December 31, 1998, the Company had deferred tax
liabilities of $11,167 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 SFAS 109, due to the
uncertainty of the Company's ability to generate taxable income to utilize
the carryforwards.
5
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
March 31, 1999 and December 31, 1998
- - --------------------------------------------------------------------------------
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.
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.
6
<PAGE>
Ranger Industries, Inc.
(formerly Coleco Industries, Inc.)
Notes to Condensed Financial Statements
March 31, 1999 and December 31, 1998
- - --------------------------------------------------------------------------------
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 quarter ended March 31, 1999, the
Company recognized compensation expense of $7,890, 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 Reorganziation 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.
7
<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 bad debt
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 bad debt 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 $748,000
as of March 31, 1999, and the Registrant's projected cash operating costs and
expenses, net of interest income and bad debt 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 March 31, 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. 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.
831783.1
8
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27. Financial Data Schedule for First Quarter of 1999.
(b) Reports on Form 8-K: None.
831783.1
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Ranger Industries, Inc., the Registrant
Date: May 6, 1999 By: /s/ Morton E. Handel
-------------------------------------
Morton E. Handel
President, Chief Executive Officer and
Acting Chief Financial Officer
831783.1
<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>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> $747,814
<SECURITIES> 0
<RECEIVABLES> 47,517
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 805,837
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 811,992
<CURRENT-LIABILITIES> 36,542
<BONDS> 0
<COMMON> 52,786
0
0
<OTHER-SE> 715,073
<TOTAL-LIABILITY-AND-EQUITY> 811,992
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 28,253
<OTHER-EXPENSES> (47,517)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,668)
<INCOME-PRETAX> 26,932
<INCOME-TAX> 9,000
<INCOME-CONTINUING> 17,932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,932
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
