<PAGE>
FORM 10-QSB - Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the period ended September 30, 1996
or
[ ] Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from _________________ to _________________
Commission File Number 0-23782
RENAISSANCE ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1094630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
4440 Arapahoe Avenue, Suite 200, Boulder, Colorado 80303
(Address of principal executive offices) (Zip Code)
(303) 444-8273
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has 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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
<PAGE>
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of September 30, 1996, Registrant had 4,469,697 shares of common stock, $.03
Par Value, outstanding.
2
<PAGE>
INDEX
PAGE
NUMBER
------
Part I. Financial Information
Item I. Financial Statements
Balance Sheets as of March 31, 1996
and September 30, 1996 (Unaudited) 4
Statements of Operations, Three Months
Ended September 30, 1996 and 1995
(Unaudited) 5
Statements of Operations, Six Months
Ended September 30, 1996 and 1995
(Unaudited) 6
Statements of Cash Flows, Six Months
Ended September 30, 1996 and 1995
(Unaudited) 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II. Other Information 12
3
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
September 30, March 31,
1996 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash and equivalents $ 1,606,910 $ 631,063
Accounts receivable 324,567 392,814
Note receivable, current portion 42,052
Inventory 187,817 116,221
Prepaid expenses and other 133,346 979,769
------------ ------------
Total Current Assets 2,294,692 2,119,867
Property and equipment, net of accumulated depreciation 7,192,847 5,156,217
Note receivable, net of current portion 146,873
Construction in progress 1,080,895
Covenant not to compete 50,000 60,000
Goodwill 633,495 1,046,285
Restricted cash 872,601 848,296
Other assets 199,952 121,909
------------ ------------
TOTAL ASSETS $ 11,390,460 $ 10,433,469
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,518,884 $ 1,181,090
Notes payable, current portion 951,753 437,956
Customer Deposits 39,925
Unearned income 197,107 485,798
------------ ------------
Total Current Liabilities 2,707,667 2,104,844
Note payable, net of current portion 2,375,279 2,531,187
------------ ------------
Total Liabilities 5,082,946 4,636,031
------------ ------------
Stockholders' Equity:
Common stock, $.03 par value, 50,000,000
shares authorized, 4,469,697 shares and 4,360,853 shares
issued and outstanding at September 30, 1996 and
March 31, 1996 respectively 134,091 130,826
Additional paid-in capital 7,637,184 7,108,082
Accumulated (deficit) (1,463,761) (1,441,470)
------------ ------------
Total Stockholders' Equity 6,307,514 5,797,438
------------ ------------
Total Liabilities and Stockholders' Equity $ 11,390,460 $ 10,433,469
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30
---------------------------
1996 1995
REVENUE: ---------- -----------
Sales $7,935,799 $5,758,992
Cost of sales 2,271,185 1,743,258
---------- ----------
Gross Profit 5,664,614 4,015,734
---------- ----------
OPERATING EXPENSES:
Salaries 1,533,507 1,101,035
Depreciation and amortization 213,629 107,356
Advertising 1,558,351 558,467
Other operating expenses 1,033,326 808,259
---------- ----------
Total Operating Expenses 4,338,813 2,575,117
---------- ----------
Net Operating Income 1,325,801 1,440,617
---------- ----------
Other Income (Expenses):
Interest income 28,416 33,538
Interest expense (69,177) (27,943)
Miscellaneous income (2,567) (13,564)
---------- ----------
Total Other Income (Expense) (43,328) ( 7,969)
Net Income before Taxes 1,282,473 1,432,648
Income Taxes - (582,488)
---------- ----------
Net Income to Common Stockholders $1,282,473 $ 850,160
---------- ----------
---------- ----------
Net Income per Common Share $ .29 $ .22
---------- ---------
---------- ---------
Weighted Average Number of Common
Shares Outstanding 4,444,792 3,826,903
---------- ---------
---------- ---------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
September 30
---------------------------
1996 1995
REVENUE: ----------- -----------
Sales $13,251,882 $10,245,718
Cost of sales 4,421,369 3,607,945
----------- -----------
Gross Profit 8,830,513 6,637,773
----------- -----------
OPERATING EXPENSES:
Salaries 3,002,941 2,285,219
Depreciation and amortization 374,307 211,013
Goodwill writedown 380,000
Advertising 2,433,952 961,047
Other operating expenses 2,604,317 1,555,204
----------- -----------
Operating Expenses 8,795,517 5,012,453
----------- -----------
Net Operating Income 34,996 1,625,320
----------- -----------
Other Income (Expenses):
Interest income 98,098 69,101
Interest expense (151,110) (76,883)
Miscellaneous income (4,275) (12,051)
----------- -----------
Total Other Income (Expenses) (57,287) (19,833)
----------- -----------
Net Income (Loss) before Taxes (22,291) 1,605,487
Income Taxes - (698,903)
----------- -----------
Net Income (Loss) to Common Stockholders $ (22,291) $ 906,584
----------- -----------
----------- -----------
Net Income (Loss) per Common Share $ (. 01) $ .24
----------- -----------
----------- -----------
Weighted Average Number of Common
Shares Outstanding 4,077,529 3,783,261
----------- -----------
----------- -----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS
Six Months ended
September 30
--------------------------
1996 1995
----------- -----------
Cash Flows from Operating Activities:
Net income (Loss) $ (22,291) $ 906,584
----------- -----------
Adjustments to reconcile net income (Loss)
to net cash provided by operating
activities:
Depreciation and amortization 754,307 211,013
Deferred Income Taxes - (25,738)
(Increase) decrease in:
Inventory (71,596) (30,059)
Receivables (120,678) (549,327)
Prepaid expenses and other 768,213 413,663
Increase (decrease) in:
Accounts payable and accrued
expenses 377,719 1,141,150
Unearned revenue and other (288,691) (400,792)
----------- -----------
Total adjustments 1,419,274 759,910
----------- -----------
Net Cash Provided by Operating
Activities 1,396,983 1,666,494
----------- -----------
Cash Flows from Investing Activities:
(Increase) in construction in process 1,080,895 (35,644)
(Acquisition) of investments (24,305) (1,477,633)
(Acquisition) of property and equipment (2,367,979) (2,713,610)
----------- -----------
Net Cash (Used in) Investing Activities (1,311,389) (4,226,887)
----------- -----------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 532,367 499,447
Proceeds from notes payable 750,000 1,000,000
Principal payments on notes payable (392,114) (569,773)
Other - 13,516
----------- -----------
Net Cash Provided by Financing Activities 890,253 943,190
----------- -----------
Net Increase (Decrease) in Cash 975,847 (1,617,203)
Cash, beginning of period 631,063 3,296,652
----------- -----------
Cash, end of period $ 1,606,910 $ 1,679,449
----------- -----------
----------- -----------
Interest paid $ 151,110 $ 80,888
----------- -----------
----------- -----------
Income tax paid $ - $ 1,223,577
----------- -----------
----------- -----------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND
CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
September 30, 1996 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of September 30, 1996, the statements of operations
for the three month and six month periods ended September 30, 1996 and 1995
and the statement of cash flows for the six month period ended September
30, 1996 and 1995, have been prepared by the Registrant without audit. In
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in financial position at September 30,
1996 and for all periods presented, have been made.
2. CALCULATION OF EARNINGS (LOSS) PER SHARE
The earnings (Loss) per share is calculated by dividing the net income
(Loss) to common stockholders by the weighted average number of common
shares outstanding.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes, included in the
company's annual report FORM 10-KSB for the fiscal year ended March 31, 1996.
The Company has changed its fiscal year end from March 31 to December 31.
This fiscal year will now end on December 31, 1996. For the current fiscal year
the Company will report results of operations for nine months rather than twelve
months.
LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1996 COMPARED TO MARCH 31, 1996
ASSETS
The Company substantially increased its investment in net property and
equipment during the six months ended September 30, 1996. Property and equip-
ment increased 39% from $5,156,217 at March 31, 1996 to $7,192,847 at September
30, 1996. This increase reflects the Company's substantial investment at the
Virginia Renaissance Faire and the pooling of the New York Faire assets. Notes
receivable increased by $188,925 as a result of promissory notes issued to the
Company by craft vendors for the Virginia Faire to reimburse the Company for
capital improvements it made for the benefit of certain craft vendors.
Cash and equivalents increased by $975,847 from $631,063 at March 31, 1996
to $1,606,910 at September 30, 1996. The increase in cash and equivalents is
due to the operating seasons of the faires which occurred during the period
ended September 30, 1996. Accounts receivable was reduced by $68,247, reflect-
ing payment from outside vendors. Inventory increased by $71,596 from $116,221
to $187,817. Prepaid expenses decreased 86% from $979,769 to $133,345. This
change reflects the recognition of expenses as the faires completed their
seasons. Goodwill decreased by $412,790 from $1,046,285 to $633,495. This is
due to yearly amortization and a writedown of goodwill of $380,000 for the
Southern California Faire. The lack of operating profits in Southern California
for the past two years caused management to reduce goodwill. In summary, TOTAL
CURRENT ASSETS increased by 8%, from $2,119,867 as of March 31, 1996 to
$2,294,692 as of September 30, 1996. TOTAL ASSETS increased by 9% from
$10,433,469 to $11,390,460. This is due to the capital construction of
the Virginia Renaissance Faire.
LIABILITIES
The Company's TOTAL LIABILITIES increased by $446,915 or 10%, for the six
months ended September 30, 1996. Accounts payable increased by $337,794 to
$1,518,884, in part due to the cyclical increase in accounts payable owing to
the completed run of the faire season. The current portion of the notes payable
increased by $513,797 to $951,753 from $437,956 at March 31, 1996. The Company
drew cash from its operating lines of credit to finance both capital improve-
ments at the Virginia Renaissance Faire and its operations. Unearned revenue
decreased by $288,691 to $197,107 because the Company recognizes income from
vendors as it is earned during the faire season. Based on these events, the
Company's TOTAL CURRENT LIABILITIES increased by 29% to $2,707,668 at September
30, 1996 from $2,104,844 at March 31, 1996. Total liabilities increased 10%
from $4,636,061 at March 31 to $5,082,946 at September 30.
9
<PAGE>
LIQUIDITY
The changes in current assets and liabilities resulted in a decrease in
working capital of $427,998 from $15,023 at March 31, 1996 to $(412,975) at
September 30, 1996. The decrease in working capital is primarily due to the use
of cash to fund the Virginia construction project and also due to disappointing
operating results for the New York Faire, as well as capital improvements to
that faire. The Company's short-term liquidity is highly dependent on the
ability to raise additional financing in the near future.
Except for approximately $20,000 of capital improvements to complete the
construction of the Virginia Renaissance Faire, the Company has no current
commitments for any material capital expenditures for the balance of the year.
The Company currently owes $250,000 to Bank One Kenosha and $750,000 to Bank One
Boulder for its operating lines of credit that are due on December 15 and
December 1, 1996 respectively. Management is in discussions with its current
lenders and other outside sources to increase its lines of credit and/or
refinance its existing lines of credit to accommodate the cyclical nature of the
Company's operations. It will be necessary to raise additional working capital
either through debt or equity to fund the company's cash flow needs. Efforts
are currently underway to accomplish that goal. However, there can be no
assurance that additional capital will be available to the Company, or if
available, available on terms acceptable to the Company. There is a possibili-
ty that the Company may need to raise equity capital at a price significantly
lower than the current market price for the Company's common stock.
STOCKHOLDERS' EQUITY
Stockholders' equity increased $510,076 or 9% from $5,797,438 at March 31,
1996 to $6,307,514 at September 30, 1996. Equity increased by $532,367 due to
the exercise of warrants and incentive stock options, which was partially offset
by a decrease of $22,291 due to the net operating loss for the six months.
10
<PAGE>
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX
MONTHS ENDED SEPTEMBER 30, 1995
A comparison of the results for the six month periods ended September 30,
1996 and 1995 includes the explanations of variances for the three month periods
then ended, and therefore, a separate discussion of the three month periods has
been omitted.
The results of operations of the Company for the six months ended September
30, 1996, reflect operations for the full run of four faires and all but one
weekend of the San Francisco Faire. Operating results for the same period of
1995 did not include the Virginia or New York Faires.
Revenue increased from $10,245,718 for the six months ended September 30,
1995 to $13,251,882 for the six months ended September 30, 1996. This is an
increase of 29%. The increase in revenues resulted from the additional opera-
tions of the Virginia and New York Faires for the period ended September 30,
1996, as compared to the same period last year. The increased revenues from the
new faires were partially offset by a decrease in revenues for the Southern
California Faire as compared to the same period last year. Unusually inclement
weather in both Virginia and Southern California reduced the expected revenues
from Faire operations.
Operating expenses increased by $3,783,064 for the period ended
September 30, 1996 compared to the same period of 1995. This is primarily
due to the increased costs of starting a new faire in Virginia and nine
months of operating expenses for the New York Renaissance Faire, which was
purchased by the Company in February 1996. Because there was a pooling of
interests between Creative Faires, Ltd. (owner and operator of The New York
Renaissance Faire) and the Company, due to the different fiscal year ends of
Creative Faires, Ltd. and the Company, the Company is accounting for nine
months of operations for the New York Faire for the period ended September
30, 1996. The Company wrote down $380,000 in Goodwill for the Southern
California Faire, based on its poor performance for the past two years.
Advertising expenses increased from $961,047 for the six months period
ended September 30, 1995 to $2,433,952 for the six months period ended
September 30, 1996. This increase is due to advertising for five faires in the
six month period ended September 30, 1996 vs. only three faires for the six
month period ended September 30, 1995. Additionally, a change in accounting
procedures resulted in certain expenses being charged to advertising expense
this period which were not charged to advertising expense in the prior period.
The Company incurred a net loss of $22,291 for the six months ended
September 30, 1996 compared to a net income of $906,584 for the six months
ended September 30, 1995. The decrease in net income is due to: a) losses
incurred with the opening of the Virginia Faire, reflecting the industry
experience that it can take two or more years for a new faire to become
profitable; b) losses incurred in operating the New York Faire which
experienced inclement weather. The Company is currently negotiating for a new
permanent location for the Southern California Faire which management believes
will improve the faire operating results. There can be no assurance that a
permanent location will be negotiated on terms acceptable to the Company.
The net loss per share was ($.01) for the first six months of the current
fiscal period compared to net income per share of $.24 for the same period last
year. This reflects the operating losses for the Virginia Faire, start-up costs
for the Virginia Faire, the reduction of revenue from the Southern California
Faire, operating losses for the New York Faire, and the write-down of $380,000
of goodwill for the Southern California Faire. The company will incur a net
loss for the full fiscal period ending December 31, 1996, as the company's
revenues are almost all recognized in the six-month period ended September 30.
11
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The company was not required to file report on Form 8-K during the
quarter ended June 30, 1996.
EXHIBIT 27. FINANCIAL DATA SCHEDULE.
12
<PAGE>
SIGNATURE
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, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Dated: 11/19/96 /s/ Charles S. Leavell
--------------------------------------
Charles S. Leavell, duly authorized
officer of registrant and Chief
Executive Officer
/s/ James R. McDonald
--------------------------------------
James R. McDonald, duly authorized
officer of registrant and Chief
Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,606,910
<SECURITIES> 0
<RECEIVABLES> 324,567
<ALLOWANCES> 0
<INVENTORY> 187,817
<CURRENT-ASSETS> 2,294,692
<PP&E> 8,888,322
<DEPRECIATION> 1,695,475
<TOTAL-ASSETS> 11,390,460
<CURRENT-LIABILITIES> 2,707,667
<BONDS> 3,327,032
0
0
<COMMON> 7,771,275
<OTHER-SE> (1,463,761)
<TOTAL-LIABILITY-AND-EQUITY> 11,390,460
<SALES> 13,251,882
<TOTAL-REVENUES> 13,251,882
<CGS> 1,324,339
<TOTAL-COSTS> 3,097,030
<OTHER-EXPENSES> 8,795,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,110
<INCOME-PRETAX> (22,291)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,291)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,291)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
