SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event) February 6, 2001
Ranger Industries, Inc.
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Connecticut 000-18669 060768904
----------- ----------- ---------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
Incorporation) No.)
3400 82nd Way North, St. Petersburg, FL 33710
--------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
(727) 381-4904
--------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
One Regency Drive, Bloomfield, CT 06002
------------------------------------------------------------
(Former Name or Former Address, If Changed Since Last Report.)
Item 1. Changes in Control of Registrant
-----------------------------------------
On February 6, 2001, pursuant to the terms and conditions of the Agreement
and Plan of Merger and Reorganization, dated as of December 29, 2000, by and
among Bumgarner Enterprises, Inc., a Florida corporation ("Bumgarner"), Ranger
Industries, Inc. ("Ranger") and BEI Acquisition Corporation, a Florida
corporation and wholly-owned subsidiary of Ranger ("BEI"), as amended by the
amendment to the Agreement and Plan of Merger and Reorganization, dated as of
January 23, 2001, by and among Bumgarner, Ranger and BEI (the "Merger
Agreement," (i) Bumgarner merged with and into BEI, with Bumgarner continuing as
the surviving entity (the "Merger"), (ii) each share of Bumgarner common stock,
par value $.001, was converted into one share of common stock, par value $.01
per share ("Common Stock") of the Registrant. A copy of the Merger Agreement is
filed herewith as Exhibit 3. As a result of, and following the completion of the
Merger:
o Charles G. Masters, the principal shareholder of Bumgarner, acquired
11,401,000 shares of Ranger common stock (including 400,000 shares
held through a trust of which he is the trustee); and
o The former directors of Ranger resigned and appointed Mr. Masters,
Robert Sherman Jent, and Henry C. Shults, Jr., to the Ranger board of
directors.
The former directors (and principal shareholders) of Ranger from whom control
had been assumed were Morton E. Handel, formerly president and chief executive
officer of Ranger (and owner of 500,000 shares of Ranger common stock) and Isaac
Perlmutter (owner of 1,136,137 shares of Ranger common stock). Raymond Minella,
also a director of Ranger immediately prior to the Merger, did not own any
shares of Ranger common stock. Ranger had previously advised all of its
shareholders of this pending change of control and appointment of directors with
a notification sent pursuant to SEC Rule 14f-1.
Mr. Masters had acquired his interest in Bumgarner (which he exchanged for
his interest in Ranger) with his personal funds and as compensation for services
rendered prior to August 2000.
Bumgarner borrowed all of the funds necessary to complete the tender offer
and its obligations under the Handel and Perlmutter Purchase Agreements from
Guaranty Bank & Trust Company, Denver, Colorado ("Guaranty"). Bumgarner and
Guaranty entered into a loan agreement by which Guaranty agreed to provide up to
$8.5 million to Bumgarner. Bumgarner paid a fee of $4,000, and will pay interest
of 6.4% per annum on a monthly basis throughout the term of the loan. The term
of the loan is 12 months and it matures on January 29, 2002. Bumgarner agreed to
collateralize the loan using $9,000,000 that the affiliates of Bumgarner,
including Mr. Masters, caused Ranger to place on deposit with Guaranty upon the
consummation of the Merger. The loan agreement provides that Bumgarner may pay
the entire amount due at any time before the maturity date, with no prepayment
penalty. Bumgarner may elect to prepay a portion of the loan with the funds on
deposit, but expects to be able to repay the loan with cash flow from its
anticipated operations, if successful.
Following the completion of the Merger, Bumgarner completed its tender
offer to acquire up to 4,225,000 shares of Ranger common stock. The offer was
over-subscribed, with 4,601,720 shares having been tendered. Consequently,
Bumgarner has purchased approximately 91% from each person who tendered shares
except with respect to Mr. Handel and Mr. Perlmutter. As discussed in the Offer
to Purchase for Cash up to 4,225,000 Shares of Common Stock of Ranger at $2.00
per Share by Bumgarner, as amended by the supplement and Second Supplement
thereto, dated as of January 24, 2001 and January 29, 2001, respectively (the
"Offer to Purchase"), and the Tender Offer Statement on Schedule TO filed by
Bumgarner, as amended (the "Schedule TO") pursuant to which the Tender Offer was
completed, Bumgarner had an obligation to purchase all shares tendered by Mr.
Handel and Mr. Perlmutter regardless of any proration required by the Tender
Offer.
As a result of the Merger and the Tender Offer, the following table sets
forth the names and addresses of the principal shareholders of Ranger
Industries, Inc., the share ownership by the directors of Ranger Industries and
the share ownership of all directors and executive officers as a group. This is
based on the total number of shares outstanding before the consummation and
closing of the Merger and the Tender Offer (5,278,644), less the number of
shares purchased (4,225,000) in the Tender Offer, less the additional shares
purchased from Mr. Handel and Mr. Perlmutter (151,803), and plus the number of
shares issued in the merger with Bumgarner (14,720,000), resulting in a total of
15,621,841 shares of Ranger common stock outstanding.
Ranger Industries, Inc. Page 2
Form 8-K; February 6, 2001
Name Position Number of Shares Percentage
(1)
------------------ ------------------- ---------------- ----------
Charles G. Masters Director, President, 11,401,000 (2) 72.98%
3400 82nd Way North Treasurer, Chief
St. Petersburg, FL 33710 Executive Officer
Robert Sherman Jent Director, Secretary 0 0.00%
Henry C. Shults, Jr. Director 0 0.00%
George Ruppell Shareholder 1,000,000 6.40%
Modern Tool & Die Corp.
5201 102nd Avenue North
Pinellas Park, FL 33780
Total of all directors and 11,411,000
executive officers (four 73.05%
persons)
(1) This table is based upon information contained in the books and records of
the Company. Unless otherwise indicated in the footnotes to this table and
subject to community property laws where applicable, the Company believes
that each of the shareholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially
owned. Applicable percentages are based on 15,621,841 shares of Common
Stock outstanding on completion of the merger and the tender offer as
described above.
(2) Includes 400,000 shares of common stock held in the name of the Charles G.
Masters Trust Fund for which Charles G. Masters served as Trustee.
Charles G. Masters is chief executive officer, president, treasurer, and a
director of Ranger. Mr. Masters served as Bumgarner's founder, President and
sole director since March 1998. Since 1973, Mr. Masters has also served as the
president of DataCash Systems, Inc., a privately owned consulting company
specializing in business and corporate development and since 1974, Mr. Masters
has served as president of MicroBeam Corporation, a privately owned computer
software and consulting company. The principal place of business for each of
these companies is located at 3400 82nd Way North, St. Petersburg, FL 33710. Mr.
Masters received a B.S.E.E. ('61) from Duke University, a M.S.E.E. ('64) from
the University of Pittsburgh and a M.S.M.S.('66) from the Johns Hopkins
University.
Robert Sherman Jent is a director and secretary of Ranger, and has been
self-employed as an investment banking consultant since March 2000. He was
employed by Westport Resources Investment Services, Inc. as an investment
banking and securities brokerage manager from July 1999 through March 2000. He
was employed as an investment banking and securities brokerage manager by Nutmeg
Securities, Ltd. from October 1995 through July 1999.
Ranger Industries, Inc. Page 3
Form 8-K; February 6, 2001
Henry C. Shultz, Jr. is a director of Ranger, and has served as the
president of Inter-Oil & Gas Group, Inc., an oil and gas exploration and
development company, since 1985.
Neither Mr. Masters, Mr. Jent, nor Mr. Shults has been convicted in a
criminal proceeding during the past five years. Neither Mr. Masters, Mr. Jent,
nor Mr. Shults was a party to any judicial or administrative proceeding during
the past five years that resulted in a judgment, decree or final order regarding
federal and state securities laws violations.
Item 2. Acquisition or Disposition of Assets
---------------------------------------------
As a result of Ranger acquiring Bumgarner in the Merger described in Item
1, above, Ranger made a significant acquisition of assets in the oil and gas
industry.
Because Ranger wants to provide you with more meaningful and useful
information, this report contains certain "forward-looking statements" (as such
term is defined in Section 21E of the Securities Exchange Act of 1934, as
amended). These statements reflect Ranger's current expectations regarding its
possible future results of operations, performance, and achievements. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995.
Wherever possible, Ranger has tried to identify these forward-looking
statements by using words such as "anticipate," "believe," "estimate," "expect,"
"plan," "intend," and similar expressions. These statements reflect Ranger's
current beliefs and are based on information currently available to Ranger.
Accordingly, these statements are subject to certain risks, uncertainties, and
contingencies, which could cause Ranger's actual results, performance, or
achievements to differ materially from those expressed in, or implied by, such
statements. These risks, uncertainties and contingencies include, without
limitation, the factors set forth herein under "Factors That May Affect Future
Operating Results." Ranger has no obligation to update or revise any such
forward-looking statements that may be made to reflect events or circumstances
after the date of this report.
General. Bumgarner Enterprises, Inc. was incorporated under the laws of the
State of Florida in March 1998. Bumgarner's principal executive offices are
located at 3400 82nd Way North, St. Petersburg, FL 33710. Its telephone number
is (727) 381-4904, and its facsimile number is (727) 381-3904. Bumgarner
Enterprises engaged in no business operations until, in October 2000, Bumgarner
purchased a 74.415% interest in the Henryetta Joint Venture, a joint venture
expecting to engage in exploration drilling for oil and gas in Okfuskee and Coal
counties, Oklahoma.
Prior to the merger, neither Bumgarner nor Mr. Masters owned any Ranger
common stock or transacted any business with Ranger or any of its affiliates.
Ranger Industries, Inc. Page 4
Form 8-K; February 6, 2001
Oil and Gas Exploration and Development - Purchase of Joint Venture
Interest. Bumgarner has not been engaged in any significant business activities
since its incorporation. Bumgarner intends to place its emphasis in the oil and
gas segment -- acquiring interests in non- producing or producing oil or gas
properties and participating in drilling operations.
As its first effort in that direction, in October 2000, Bumgarner purchased
a 74.415% working interest in the Henryetta Joint Venture, a joint venture
formed by Inter-Oil & Gas Group, Inc., in September 1998 (the "Henryetta Joint
Venture" or the "Joint Venture"). (Bumgarner will be responsible for
approximately 93% of all costs of the Joint Venture, including the drilling of
wells, and will receive 93% of all net revenues until it receives a return of
its investment (payout); after payout, Bumgarner's interest will reduce to
74.415%). The Henryetta Joint Venture was formed under Oklahoma law and owns
four leasehold interests (consisting of 1,520 gross, 664 net, acres) in Okfuskee
and Coal counties, Oklahoma. The property at present has no producing oil or gas
wells on it, although (as described below) the Joint Venture plans initially to
drill (and, if warranted, complete) four wells (one on each lease) at a total
cost of approximately $2,200,000 (of which Bumgarner's share will be
approximately 93%). Bumgarner's investment in the Joint Venture will provide
funding for the project. Bumgarner has included more information about these
exploratory oil and gas leases, below.
Bumgarner purchased its interest in the Joint Venture in exchange for
$2,073,728, represented by a promissory note bearing interest at 6% per annum,
due in full on October 10, 2001 (with certain incremental payments to be made
before maturity). Bumgarner intends to use funds to be provided by Ranger
following the completion of the merger and the tender offer to meet its
obligations under this note. There are three members of the Joint Venture in
addition to Bumgarner and Inter-Oil & Gas Group (the manager of the Joint
Venture which owns a 20% after-payout interest in the Joint Venture).
Inter-Oil & Gas Group, Inc. is the manager of the Joint Venture. There is
no affiliation or other relationship between Bumgarner or its affiliates and
Inter-Oil & Gas Group. As manager, Inter-Oil & Gas Group may (in its discretion)
make calls to the members of the Joint Venture for additional assessments for
drilling and other operating activities. Bumgarner will be responsible to pay
approximately 93% of any assessment. Under the Joint Venture agreement, revenues
and expenses will be shared by each member of the Joint Venture in accordance
with its interest. This means that:
o Bumgarner will share in 93% of all revenues and expenses before
payout, and 74.415% after payout;
o Inter-Oil & Gas Group (which has no investment in the Joint Venture)
will be entitled to share in 20% of all revenues and expenses after
payout; and
o the other members will collectively share the remaining 7% (before
payout) and 5.585% after payout (which they purchased in 1998 and
1999, and for which they paid $16,732 per 1%).
Ranger Industries, Inc. Page 5
Form 8-K; February 6, 2001
As manager of the Joint Venture, Inter-Oil & Gas Group has a significant
amount of authority to direct the Joint Venture's activities, although it is
obligated to perform its duties "in an efficient and businesslike manner with
due caution and in accordance with the established practices of the oil and gas
industry." Under the agreement, the Joint Venture has agreed to indemnify and
hold its manager harmless from any liability except to the extent it results
from the manager's gross negligence or willful misconduct. The Joint Venture's
obligation to indemnify the manager is limited to the Joint Venture's assets,
and no member will have personal liability to the manager resulting from any
indemnification obligation.
The Joint Venture is, however, treated as a general partnership under
Oklahoma law. Consequently, Bumgarner and the other members of the Joint Venture
are potentially directly liable, jointly and severally, for any obligations the
Joint Venture may owe to third parties who have not limited their right to
proceed against the members. If a well casualty occurs, or any form of personal
or other injury to a person working on the Joint Venture's property occurs, the
person suffering the injury may seek to hold the Joint Venture and its members
jointly and severally liable, even when resulting from the manager's negligence,
gross negligence, or willful misconduct. To the extent that any damages exceed
the assets of the Joint Venture and any insurance proceeds, Bumgarner and the
other members may be directly responsible. It is customary in the oil and gas
industry for the manager of a joint venture such as the Henryetta Joint Venture
to maintain insurance to meet anticipated contingencies. Although the Joint
Venture does not have any insurance at the present time, it intends to obtain
appropriate insurance before it commences any drilling activities on the
properties.
The agreement provides that the Joint Venture will pay Inter-Oil & Gas
Group a management fee equal to 7.2% of the total subscriptions, or
approximately $145,000 based on the subscription being made by Bumgarner. The
agreement provides that the Joint Venture will pay, or reimburse the manager
for, operating expenses, but does not provide for the payment of any additional
fee to the manager for performing his duties as manager. The Joint Venture will
pay the manager an operating fee of $25,000 each in connection with the two
initial wells to be drilled in Coal County, and approximately $12,000 for each
of the two wells to be drilled in Okfuskee County.
The agreement restricts the ability of Bumgarner or any other member to
transfer its Joint Venture interest. Finally, the Joint Venture will
automatically terminate, unless renewed, in 2010.
General Oil and Gas Exploration and Development - Company Strategy.
Bumgarner expects to engage in a broad range of activities associated with the
oil and gas business in an effort to develop oil and gas reserves through the
Henryetta Joint Venture and individually, outside of the Joint Venture. With the
assistance of its management, independent contractors Bumgarner expects to
retain from time to time, and, to a lesser extent, unsolicited submissions,
Bumgarner hopes to identify and acquire additional prospects that Bumgarner
believes are suitable for drilling and acquisition, either through the Joint
Venture or independently from the Joint Venture. As a result of the Joint
Ranger Industries, Inc. Page 6
Form 8-K; February 6, 2001
Venture, its primary area of interest is in the state of Oklahoma, but Bumgarner
expects to participate in the oil and gas industry throughout the Midwest and
western states to the extent its financing will permit.
Even though the Merger was completed, Bumgarner may not be able to finance
oil and gas acquisitions solely through its own resources, and there can be no
assurance that Bumgarner will be able to obtain additional financing when
necessary. Consequently, Bumgarner anticipates identifying undeveloped or
developed prospects or production to acquire and then seek other industry
investors or other interested parties who may be willing to participate in these
activities with Bumgarner. Bumgarner anticipates retaining a promotional
interest in any prospects, but generally it may have to finance a portion (and
sometimes a significant portion) of any acquisition and drilling costs.
Bumgarner may be able to acquire interests in producing properties by issuing
shares of Ranger common stock, but it will probably have to do so at a discount
from the market because of the restricted nature of the shares that can be
issued. This will make the issuance of Bumgarner stock as consideration for
prospects more difficult and expensive than were Bumgarner able to issue
registered stock.
Where Bumgarner acquires an interest in acreage on which exploration or
development drilling is planned, it does not expect to assume the entire risk of
acquisition or drilling. Rather, Bumgarner will assess the relative potential
and risks of each prospect and determine the degree to which it will participate
in the exploration or development drilling. Generally, it is more beneficial to
invite industry participants to share the risk and the reward of the prospect by
financing some or all of the costs of drilling contemplated wells. In such
cases, Bumgarner may retain a carried working interest, a reversionary interest,
or may be required to finance all or a portion of its proportional interest in
the prospect. Although this approach reduces its potential return should the
drilling operations prove successful, it also reduces its risk and financial
commitment to a particular prospect.
Conversely, Bumgarner may from time to time participate in drilling
prospects offered by other persons if Bumgarner believes that the potential
benefit from the drilling operations outweighs the risk and the cost of the
proposed operations. This approach allows Bumgarner to diversify into a larger
number of prospects at a lower cost per prospect, but these operations (commonly
known as "farm-ins") are generally more expensive to Bumgarner than operations
where it offers the participation to others (known as "farm-outs").
Principal Products Produced and Services Rendered. Bumgarner has produced
no oil, gas, or other products to date. If Bumgarner's activities with the
Henryetta Joint Venture are successful (as to which Bumgarner can offer no
assurance), Bumgarner anticipates that the Joint Venture will produce crude oil
and natural gas for its account during calendar year 2001. Crude oil and natural
gas are generally sold to various entities, including pipeline companies, which
usually service the area in which its producing wells are located.
Ranger Industries, Inc. Page 7
Form 8-K; February 6, 2001
Distribution Methods of the Products or Services. Bumgarner is not involved
in, and does not expect to become involved in, the distribution aspect of the
oil and gas industry.
Status of any Publicly Announced New Products or Services. Bumgarner does
not have, and it does not expect to have, a new product or service that would
require the investment of a material amount of its assets or which Bumgarner
believes is material to its business.
Competitive Business Conditions. The exploration for and development,
production and acquisition of oil and gas are subject to intense competition.
The principal methods of competition for the acquisition of oil and gas are the
payment of:
o cash bonuses at the time of the acquisition of leases;
o delay rentals and the amount of annual rental payments;
o advance royalties and the use of differential royalty rates; and
o the stipulations requiring exploration and production commitments by
the lessee.
Many of Bumgarner's potential competitors in the oil and gas industry have
vast experience, are larger and have significantly greater financial resources,
existing staff and labor forces, equipment, and other resources than Bumgarner.
Consequently, these competitors will likely be in a better position to compete
for projects in the oil and gas industry, the only industry in which Bumgarner
plans to compete.
In addition, the availability of a ready market for oil and gas will depend
upon numerous factors beyond Bumgarner's control, including the extent of
domestic production and imports of oil and gas, proximity and capacity of
pipelines, and the effect of federal and state regulation of oil and gas sales,
as well as environmental restrictions on exploration and usage of oil and gas.
Further, Bumgarner expects that competition for leasing of oil and gas prospects
will become even more intense in the future. Bumgarner expects to have only a
minimal competitive position in the oil and gas industry.
Sources and Availability of Raw Materials. To conduct business in the oil
and gas industry, Bumgarner will depend on the availability of such items as
drilling rigs and other equipment, casing pipe, drilling mud and other supplies,
core drilling equipment, and other equipment necessary for its operations.
Although Bumgarner foresees no short supply or difficulty in acquiring any
equipment relevant to the conduct of its business, Bumgarner cannot offer any
assurances that these items will be available or that Bumgarner will be able to
acquire the items on economically feasible terms.
Dependence Upon One or a Few Major Customers. Since Bumgarner has had no
production to date, it has had no major customers. Generally, however, Bumgarner
anticipates that a limited number of purchasers will purchase any oil and gas
Bumgarner or the Joint Venture may produce. Even in such a case, however,
Bumgarner does not believe the loss of any customer would adversely impact
revenues because it believes that oil and gas sales are primarily market driven
Ranger Industries, Inc. Page 8
Form 8-K; February 6, 2001
and are not dependent on particular purchasers. Consequently, it believes that
substitute purchasers would be available based on the widespread uses of and the
need for oil and gas.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements
or Labor Contracts. Bumgarner does not own any patents, licenses, franchises, or
concessions. The Joint Venture owns certain oil and gas interests which were
granted by private landowners.
Need for Governmental Approval of Principal Products or Services. Bumgarner
does not need to seek government approval of its principal products.
Effects of Existing or Probable Governmental Regulation. Oil and gas
exploration and production are open to significant governmental regulation
including worker health and safety laws, employment regulations and
environmental regulations. Operations that occur on public lands may be subject
to further regulation by the Bureau of Land Management, the U.S. Army Corps of
Engineers, or the U.S. Forest Service as well as other federal and state
agencies. Bumgarner does not anticipate that these regulations will have an
adverse impact on its ability (directly, through the Joint Venture, or through
other entities in which it may become involved) to participate in the oil and
gas industry.
Estimate of Amounts Spent on Research and Development Activities. Bumgarner
has not engaged in any material research and development activities since its
inception and it does not expect to do so.
Costs and Effects of Compliance with Environmental Laws (federal, state and
local). Because Bumgarner expects to be engaged in extracting natural resources,
its business will be subject to various federal, state and local provisions
regarding environmental and ecological matters. Therefore, compliance with
environmental laws may necessitate significant capital outlays, affect its
earnings potential, and cause material changes in its current and proposed
business activities. Based on these laws as they currently exist, however, it
does not expect that they will materially hinder or adversely affect its
business.
Employees. At the present time, Bumgarner has one employee, Charles G.
Masters, president of Bumgarner, who has accrued a salary of $10,000 per month
since August 1, 2000. This salary will be paid to Mr. Masters to the extent
Bumgarner has adequate funds available.
Properties - General Information. Bumgarner owns no direct interest in any
oil or gas properties at the present time. Its only interest is through the
Henryetta Joint Venture. All of the following information relates to Bumgarner's
indirect 74.415% after payout interest in the Henryetta Joint Venture. As noted
above, Bumgarner will forfeit that entire interest unless it pays the amounts
due on its promissory note to the Joint Venture by October 10, 2001 with certain
incremental payments to be made before maturity.
Ranger Industries, Inc. Page 9
Form 8-K; February 6, 2001
Properties - Undeveloped Acreage - Lease Descriptions. All of the interests
held by the Henryetta Joint Venture are in undeveloped acreage in Coal and
Okfuskee counties, in south central and central Oklahoma, respectively. This
prospect consists of four leases from private landowners. The following table
summarizes the Joint Venture's interest in its four leases.
Net Acres (2)
Gross (to the Joint Net Acres (3)
Land description Acres (1) Venture) (to Bumgarner)
Lease A private 0 40 29.766
SW 1/4 SW1/4 ss.14, T10N, R12E landowner
Lease B private 480 33.8 25.2
SW 1/4 SW 1/4 ss.28, SE 1/4 ss.29, landowner
NW 1/4 NE 1/4 ss.32, E 1/2 NE 1/4 ss.32,
NW 1/4 ss.33, all in T11N, R11E
Okfuskee county
Lease C private 520 270.5 201.3
SE 1/4 NE 1/4 ss.11, landowner
N 1/2 and N 1/2 S 1/2 ss.12,
all in T3N, R8E
Coal county
Lease D private 440 320 238.1
NE 1/4 SW 1/4 and W1/2 W 1/2 ss.5, landowner
NE 1/4 SE 1/4 and S 1/2 SE 1/4 ss.6,
NE 1/4 ss.7, and NW 1/4 NW 1/4 ss.8,
all in T3N, R9E
Coal county
NE 1/4 ss.19, T10N, R13E ss.19, T10N, R13E
(1) A "gross acre" is an acre in which a working interest is owned. The number
of gross acres is the total number of acres in which a working interest is
owned.
(2) A "net acre" is deemed to exist when the sum of fractional ownership
working interests in gross acres equals one. The number of net acres is the
sum of the fractional working interests owned in gross acres expressed as
whole numbers and fractions thereof.
(3) This reflects Bumgarner's interest in the Joint Venture (74.415%) times the
net acres owned by the Joint Venture. Bumgarner's interest in this property
is through the Joint Venture; Bumgarner has no direct interest in this
property.
The general geology for this region shows many structural features. There is a
long north-south horst-block about one mile to the west of the south Henryetta
prospect. There are faults on either side of this horst-block (an uplifted
geological block). In addition, data obtained from seismic studies in the area
show a 150 foot vertical fault just to the west of the prospect. This
information lends support to the existence of fracturing, and the possible or
probable existence of oil and gas within the south Henryetta prospect. The
principal formations in the area are the Gilcrease, Wapanucka, Cromwell, and
Booch formations (generally at depths of from 2,000 feet to 3,500 feet), the
Hunton and Wilcox formations (at about 4,000 feet), and the Oil Creek and
Ranger Industries, Inc. Page 10
Form 8-K; February 6, 2001
Arbuckle formations (at from 4,800 to 5,000 feet). Because there has been no
drilling on the south Henryetta prospect, Bumgarner has not definitively
established that these formations exist on the prospect or that (if they exist)
they are capable of producing oil or gas in commercial quantities.
Although there are no producing wells on the south Henryetta prospect,
there are numerous wells in the surrounding area. Many of these wells have been
drilled to depths from 2,000 feet to 7,000 feet, with some being deeper than
that. These wells have reported production of significant amounts of oil and
gas.
Properties - Undeveloped Acreage - Lease Obligations. As noted, the Joint
Venture has interests in four oil and gas leases. The following table provides
certain information regarding these leases.
Landowner's Royalty/Other
Lease Primary Term Royalty Interest
A Oct. 2003 20%
B June 2002 20%
C Aug. 2002 20%
D Aug. 2002 20%
The leases are each "fully-paid" leases that require no additional annual
rental payment or other payment before the expiration of their respective terms.
Each of the leases will continue beyond their primary term as long as oil or gas
is being produced from the lease in paying quantities. In each case, the wells
contemplated by the Joint Venture are expected to meet this requirement,
providing that they can be successfully completed (although Bumgarner can offer
no assurance that any of the wells will produce oil or gas in paying quantities
even if completed).
Properties - Proposed Drilling Activity. The Henryetta Joint Venture has
not participated in the drilling of any wells seeking oil or gas.
When adequately financed, the Henryetta Joint Venture expects to drill four
wells. One well will be drilled on each of its leases. Three of those wells are
classified as exploratory or "wildcat" wells; one well (classified as "proved,
undeveloped") offsets a producing well owned by other people.
As noted above, the Joint Venture does not own the entire working interest
within the areas of the four leases. Unless the Joint Venture owns or controls
the entire working interest, it is not able to drill any wells. Oklahoma has a
procedure called "forced pooling" by which an oil and gas operator, such as
Inter-Oil & Gas Group, can apply to the Oklahoma Corporation Commission to force
other landowners to pool their mineral interests with the interests of that
operator. If the Joint Venture is not able to lease the remaining working
interests on terms it believes to be reasonable, Inter-Oil & Gas Group intends
to apply to force pool the remaining working interests on terms similar to the
Ranger Industries, Inc. Page 11
Form 8-K; February 6, 2001
leases which it has obtained from the other property owners, including a royalty
interest no greater than 20%. Typically this process takes about 30 days from
the application to the Corporation Commission to the final determination.
The remaining 50% working interest in Lease A described in the table,
above, is held by a unit of the Cherokee Nation. Because the Cherokee Nation is
still under the protectorate of the United States, Inter-Oil & Gas Group will
have to negotiate with not only representatives of the Cherokee Nation, but also
the Bureau of Indian Affairs of the United States Department of the Interior to
obtain a lease on the remaining 50% working interest. Working interests owned by
the Cherokee Nation or other Indian groups are not subject to forced pooling.
Although Inter-Oil & Gas Group has advised Bumgarner that it has had success in
obtaining leases from the Cherokee and other Indian nations in Oklahoma in the
past, this is more difficult than in the case of private landowners, and there
can be no assurance of success.
As a result of its ability to "force pool" private landowners and its past
success in obtaining Indian leases, however, Inter-Oil & Gas Group has advised
Bumgarner that it reasonably expects to have or control 100% of the working
interest and no less than 80% net revenue interest in each of the four lease
prospects before commencing drilling operations within that prospect.
After the remaining working interests have been obtained, Inter-Oil & Gas
Group has advised Bumgarner that the wells are expected to cost the Joint
Venture a total of approximately $2,200,000 (93% of which will be allocated to
Bumgarner). This includes the initial drilling of the well to the point (the
"casing point") where the well is tested for the presence of oil or gas in
commercial quantities and the manager will make a decision whether to install
casing and production equipment ("completion"), or to plug and abandon the well.
Generally the well will be completed where testing indicates that oil and gas is
present in commercial quantities, and production in "paying quantities" is
likely (although not assured). The manager will bear no cost of drilling to the
casing point or completion of the wells, and if the wells are completed but are
not able to produce oil or gas in paying quantities, the manager will have no
risk. Bumgarner and the other three members of the Joint Venture will bear all
of the expense and (therefore) all of the risk of the drilling.
After the first well on each lease, Inter-Oil & Gas Group will bear its
proportional share (20%) of further expenses. This will reduce the cost and the
risk to Bumgarner and the other joint venture members. The following table sets
forth certain cost information for the first wells to be drilled on each of the
leases, and also the number of additional wells that may be drilled on the
leases. The decision whether to drill any additional wells on any of the leases
will be made only after the first well has been drilled and completed or
abandoned, based on the geologic data known and which is developed.
Ranger Industries, Inc. Page 12
Form 8-K; February 6, 2001
Estimated Cost from Additional
Well Cost Cost to Casing Point to Cost to Plug Possible Well
Lease (Total) Casing Point Completion and Abandon Locations
----- ------- ------------ ---------- ----------- ---------
A $282,500 40% 60% $10,000 -0-
B $282,500 40% 60% $10,000 4
C $747,000 40% 60% $10,000 4
D $747,000 40% 60% $10,000 3
The Henryetta Joint Venture has achieved no production, and therefore has
no information regarding net production, average sales price or average
production costs.
Since there are no productive wells on the south Henryetta prospect,
Bumgarner has no information regarding gross or net productive oil and gas
wells, developed acres, or overriding royalty interests.
Bumgarner is not obligated to provide a fixed and determinable quantity of
oil and gas in the future under existing contracts and agreements.
Properties - Reserve Information - Oil and Gas Reserves. Even though the
four leases are undeveloped, Sycamore Resources LLC, Tulsa, Oklahoma, has
determined that Lease A contains "proved undeveloped reserves" because the well
to be drilled on Lease A will offset an existing producing well located on a
neighboring property. None of the other three leases contain proved reserves.
Sycamore Resources has evaluated Bumgarner's oil and gas reserves
attributable to the Joint Venture's interest in Lease A at November 1, 2000.
Reserve calculations by independent petroleum engineers involve the estimation
of future net recoverable reserves of oil and gas and the timing and amount of
future net revenues to be received therefrom. Those estimates are based on
numerous factors, many of which are variable and uncertain. Reserve estimators
are required to make numerous judgments based upon professional training,
experience and educational background. The extent and significance of the
judgments in themselves are sufficient to render reserve estimates of future
events, actual production determinations involve estimates inherently imprecise.
Since reserve revenues and operating expenses may not occur as estimated.
Accordingly, it is common for the actual production and revenues later received
to vary from earlier estimates, and such variances may be significant. Estimates
made for undeveloped properties or during the first few years of production from
a property are generally not as reliable as later estimates based on a longer
production history. Reserve estimates based upon volumetric analysis are
inherently less reliable than those based on lengthy production history. Also,
potentially productive gas wells may not generate revenue immediately due to
lack of pipeline connections and potential development wells may have to be
abandoned due to unsuccessful completion techniques. Hence, reserve estimates
can be expected to vary from year to year.
Ranger Industries, Inc. Page 13
Form 8-K; February 6, 2001
Estimated Proved Reserves/Developed and Undeveloped Reserves. For the
purposes of the following discussion, you should note that:
o Proved Undeveloped Reserves are defined by the Society of Petroleum
Engineers to be reserves from established producing zones that will
require expenditures in excess of recompletion attempts. Normally this
would include drilling wells that offset existing production, and
increased reserves due to secondary and tertiary efforts. This will
take considerable investment. Proved Undeveloped Reserves are
considered to be of higher risk that the Proved Developed Producing
Reserves or Proved Developed Nonproducing Reserves.
o Probable reserves are defined as reserves not directly offsetting
existing production, but production of comparable size is in the area.
The reserves assigned must be normalized to the surrounding area's
production - in other words, the mean or average for a similar
structure. Probable Reserves carry a higher risk than Proved
Undeveloped Reserves.
Since the Henryetta Joint Venture has no producing wells, it has no Proved
Developed Producing Reserves, or Proved Developed Nonproducing Reserves. To the
extent that the Joint Venture can claim any reserves attributable to its
interest, the independent engineer has identified Proved Undeveloped Reserves on
Lease A, and Probable Reserves on the remaining three leases. The requirements
of governmental authorities will not permit disclosure of reserves carrying a
lower classification than "Proved Undeveloped."
Oil and Gas Reserves Reported to Other Agencies. Neither the Joint Venture
nor Bumgarner has filed any estimates of oil or gas reserves with, or have
included such information in reports to, any federal authority or agency.
Title Examinations: Oil and Gas. As is customary in the oil and gas
industry, Bumgarner performs only a perfunctory title examination at the time of
acquisition of undeveloped properties. In acquiring the leases, Bumgarner relied
on a title report prepared by a landman who is experienced in reviewing title
records in Oklahoma. Prior to the commencement of drilling, Inter-Oil & Gas
Group has advised Bumgarner that the Joint Venture will obtain a drilling title
opinion. If this title opinion (which will be written by an attorney experienced
in Oklahoma oil and gas law) shows any significant defects to the title to the
properties, the Joint Venture will remedy those defects before proceeding with
operations.
Based on information the Joint Venture has supplied to Bumgarner, it
believes that the title to its properties is generally acceptable to a
reasonably prudent operator in the oil and gas industry when acquiring the
property. The four leases the Joint Venture owns are subject to 20% landowner
royalty interests. Based on the information Bumgarner has seen, it does not
believe that any of the leases is subject to any other overriding royalty or
other interests, or any liens. These properties may be subject to minor
encumbrances, taxes, easements and restrictions.
Ranger Industries, Inc. Page 14
Form 8-K; February 6, 2001
Based on the information supplied by Inter-Oil & Gas Group, Bumgarner does not
believe that any of these burdens materially detract from the value of the
properties or will materially interfere with the Joint Venture's ability to
force pool the remaining interests in the property or then to drill the
contemplated wells on the property.
Factors that may Affect Future Operating Result. In evaluating Ranger's
business, readers of this report should carefully consider the following factors
in addition to the other information presented in this report that attempt to
advise interested parties of the risks and factors that may affect its
participation in the oil and gas industry. As noted elsewhere herein, the future
conduct of its oil and gas exploration activities and discussions of possible
future activities is dependent upon a number of factors, and there can be no
assurance that Ranger, directly or through its subsidiary Bumgarner, will be
able to conduct its operations as contemplated herein. These risks include, but
are not limited to:
o the possibility that the described operations, reserves, or
exploration or production activities will not be completed or
continued on economic terms, if at all.
o The exploration and development of oil and gas, and mineral properties
are enterprises attendant with high risk, including the risk of
fluctuating prices for oil, natural gas and other minerals being
sought.
o Imports of petroleum products from other countries may depress prices
for oil and gas and are subject to factors beyond its control.
o Ranger may not encounter adequate oil and gas resources despite
expending large sums of money and following the advise of the
professional engineers and consultants who will assist it in its
operations.
o Test results and reserve estimates may not be accurate,
notwithstanding appropriate precautions, and these inaccuracies could
result in spending significant amounts of money on dry holes.
o The possibility that the estimates on which Ranger is relying are
inaccurate and that unknown or unexpected future events may occur that
will tend to reduce or increase its ability to operate successfully,
if at all.
o Ranger's ability to participate in these projects may be dependent on
the availability of adequate financing from third parties which may
not be available on commercially-reasonable terms, if at all.
o Oil and gas exploration and production have inherent risks including
the environment, low prices for oil or gas produced, competition from
better financed companies, risk of personal injury or well explosion,
and the risk of other failures in either exploration or production.
o As a result of the completion of the tender offer, Ranger has only a
limited amount of working capital available to it and significant
liabilities in connection with the purchase of its interest in the
interest in the Henryetta Joint Venture. Ranger will need to obtain
additional financing to complete its obligations, and there can be no
assurance that Ranger will be able to do so.
Ranger Industries, Inc. Page 15
Form 8-K; February 6, 2001
o Also as a result of the completion of the tender offer, there are only
approximately 900,000 shares of Ranger common stock in the "public
float." Consequently shareholders can anticipate that there will be
limited trading volume for Ranger common stock and significant
volatility.
Office Facilities. Bumgarner's principal office is (and, as a result of the
completion of the merger described above, Ranger's principal office is) located
in St. Petersburg, Florida in the home of Charles G. Masters, its president.
Ranger and Bumgarner occupy space provided by Mr. Masters at no cost. Ranger and
Bumgarner expect to obtain a lease of office space in the St. Petersburg,
Florida region on terms that are customary in the area. It has not yet
identified any leased space to obtain, but Ranger and Bumgarner believes that
there is a significant amount of availability and it expects to be able to find
the necessary space on commercially reasonable terms.
Legal Proceedings. Neither Bumgarner nor the Joint Venture is subject to
any pending or, to Bumgarner's knowledge, threatened, legal proceedings. The
Joint Venture anticipates initiating some legal proceedings before the Oklahoma
Corporation Commission and possibly Judicial action in connection with the Joint
Venture's anticipated application for forced pooling.
Security Ownership of Certain Beneficial Owners and Management. See
disclosure in Item 1, above.
Item 6. Resignation of Registrant's Directors
----------------------------------------------
Not applicable. Although the Registrant's directors resigned, as disclosed
in Item 1, above, in no case did a resigning director express any disagreement
with the registrant on any matter relating to the registrant's operations,
policies, or practices.
Ranger Industries, Inc. Page 16
Form 8-K; February 6, 2001
Item 7. Financial Statements and Exhibits
Financial Statements of Businesses Acquired.
See Exhibit 1.
Pro Forma Financial Information
See Exhibit 2.
Exhibits
Exhibit 1. Financial Statements of Bumgarner Enterprises, Inc. (audited
financial statements will be filed within 60 days of the
date that the initial report on Form 8-K must be filed
pursuant to Item 7(a)(4) of Form 8-K)
Exhibit 2. Pro forma financial statements (included herewith)
Exhibit 3. Agreement and Plan of Merger and Reorganization, dated as of
December 29, 2000, by and among Bumgarner Enterprises, Inc.,
Ranger Industries, Inc. and BEI Acquisition Corporation, as
amended by the Amendment to the Agreement and Plan of Merger
and Reorganization, dated as of January 23, 2001, by and
among Bumgarner Enterprises, Inc., Ranger Industries, Inc.
and BEI Acquisition Corporation.
Exhibit 4. Firm commitment letter dated January 19, 2001, from Guaranty
Bank and Trust Company, incorporated by reference from
Exhibit 99(b)(1) to the Schedule TO/A and amendments thereto
filed by Bumgarner Enterprises, Inc. (005-18370)
Exhibit 5. Letter dated January 26, 2001, from Guaranty Bank and Trust
Company, incorporated by reference from Exhibit 99(b)(2) to
the Schedule TO/A and amendments thereto filed by Bumgarner
Enterprises, Inc. (005-18370)
Exhibit 6. Letter Agreement dated January 26, 2001, from Guaranty Bank
and Trust Company, incorporated by reference from Exhibit
99(b)(3) to the Schedule TO/A and amendments thereto filed
by Bumgarner Enterprises, Inc. (005-18370)
Exhibit 7. Commercial/Agricultural Revolving or Draw Note-Fixe Rate,
dated January 29, 2001, executed by Bumgarner as borrower
with Guaranty Bank and Trust Company as lender, incorporated
by reference from Exhibit 99(b)(4) to the Schedule TO/A and
amendments thereto filed by Bumgarner Enterprises, Inc.
(005-18370)
Exhibit 8. Commercial Security Agreement dated January 29, 2001,
between Bumgarner Enterprises, Inc. as debtor and from
Guaranty Bank and Trust Company as secured party,
incorporated by reference from Exhibit 99(b)(5) to the
Schedule TO/A and amendments thereto filed by Bumgarner
Enterprises, Inc. (005-18370)
Exhibit 9. Commercial Assignment of MMDA Account, dated January 29,
2001, incorporated by reference from Exhibit 99(b)(6) to the
Schedule TO/A and amendments thereto filed by Bumgarner
Enterprises, Inc. (005-18370)
Exhibit 10. Guaranty dated January 29, 2001, by Charles G. Masters as
guarantor, incorporated by reference from Exhibit 99(b)(8)
to the Schedule TO/A and amendments thereto filed by
Bumgarner Enterprises, Inc. (005-18370)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RANGER INDUSTRIES, INC. (Registrant)
Date: February 13, 2001 By: /s/ Charles G. Masters
----------------------------------
Charles G. Masters,
President and Chief
Executive Officer
Ranger Industries, Inc. Page 17
Form 8-K; February 6, 2001