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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended March 31, 1997
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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
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RENAISSANCE ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado 84-1094630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
4410 Arapahoe Avenue, Suite 200, Boulder, Colorado 80303
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(Address of principal executive offices) (Zip Code)
(303) 444-8273
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(Registrant's telephone number, including area code)
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 CORPORATE ISSUERS:
As of May 13, 1997, Registrant had 9,636,262 shares of common stock, $.03 Par
Value, outstanding.
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INDEX
Page
Number
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Part I. Financial Information
Item I. Financial Statements
Balance Sheets as of March 31, 1997 (Unaudited)
and December 31, 1996 3
Statements of Operations for the Three Months
Ended March 31, 1997 and 1996
(Unaudited) 4
Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996
(Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information 11
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RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1997 1996
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Current Assets:
Cash and equivalents $ 310,297 $ 374,289
Stock subscription receivable 133,749 -
Accounts receivable (net) 63,094 99,551
Note receivable, current portion
Inventory 184,494 184,695
Prepaid expenses and other 718,042 139,167
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Total Current Assets 1,275,927 931,451
Property and equipment, net of
accumulated depreciation 6,950,514 7,176,755
Note receivable, net of current portion
Covenant not to compete 40,000 45,000
Goodwill 608,157 620,826
Restricted cash 902,387 890,116
Other assets 167,600 208,201
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TOTAL ASSETS $ 9,944,585 $ 9,872,349
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,119,252 $ 1,068,028
Notes payable, current portion 1,855,669 1,209,119
Unearned income 443,803 160,588
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Total Current Liabilities 3,418,724 2,437,735
Notes payable, net of current portion 2,315,918 2,341,987
Other 37,025 37,175
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Total Liabilities 5,771,667 4,816,897
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Stockholders' Equity:
Common stock, $.03 par value,
50,000,000 shares authorized, 9,621,787
and 9,233,772 shares issued and
outstanding at March 31, 1997 and
December 31, 1996, respectively 288,654 277,013
Additional paid-in capital 9,005,819 8,071,634
Accumulated earnings (deficit) (5,121,555) (3,293,195)
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Total Stockholders' Equity 4,172,918 5,055,452
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Total Liabilities and Stockholders' Equity $ 9,944,585 $ 9,872,349
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The accompanying notes are an integral part of the financial statements.
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RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
-------------------------------
1997 1996
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REVENUE:
Sales $ 14,873 $ (10,003)
Faire operating costs 23,319 15,884
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Gross Profit (8,446) (25,887)
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OPERATING EXPENSES:
Salaries 761,177 709,526
Depreciation and amortization 269,641 105,556
Advertising 12,495 17,033
Other operating expenses 701,787 609,276
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Total Operating Expenses 1,745,100 1,441,391
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Net Operating (Loss) Income (1,753,546) (1,467,278)
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Other Income (Expenses):
Interest income 14,711 13,731
Interest (expense) (91,432) (36,861)
Other income (expense) 1,908 (248,743)
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Total Other Income (Expenses) (74,813) (271,873)
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Net Income (Loss) before (Provision)
Credit for Income Taxes (1,828,359) (1,739,151)
(Provision) Credit for Income Taxes 239,273
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Net Income (Loss) to Common Stockholders $(1,828,359) $ (1,499,878)
------------ -------------
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Net Income (Loss) per Common Share $ (.19) $ (.18)
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Weighted Average Number of Common
Shares Outstanding 9,429,622 8,380,702
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The accompanying notes are an integral part of the financial statements.
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RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS (Unaudited)
Three Months ended
March 31,
------------------------------
1997 1996
Cash Flows from Operating Activities:
Net income (Loss) $(1,828,359) $ (1,499,878)
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Adjustments to reconcile net income (Loss)
to net cash provided by operating
activities:
Depreciation and amortization 269,642 105,556
Gain (loss) on disposal of assets 1,563 21,919
(Increase) decrease in:
Income tax refund receivable (193,803)
Inventory 201 (20,187)
Receivables 50,600 33,721
Prepaid expenses and other (418,754) (675,493)
Increase (decrease) in:
Accounts payable and accrued expenses 51,223 805,688
Unearned revenue and other 283,065 302,119
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Total adjustments 237,540 379,520
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Net Cash Provided by Operating
Activities (1,590,819) (1,120,359)
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Cash Flows from Investing Activities:
Investment in restricted cash (12,271) (1,877)
Construction in progress costs (1,046,285)
Acquisition of property and equipment (27,210) (341,460)
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Net Cash (Used in) Investing Activities (39,481) (1,389,622)
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Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 945,826 425,293
Proceeds from notes payable 750,000 1,983,198
Principal payments on notes payable (129,518)
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Net Cash Provided by Financing Activities 1,566,308 2,408,491
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Net Increase (Decrease) in Cash (63,992) (101,489)
Cash, beginning of period 374,289 732,552
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Cash, end of period $ 310,297 $ 631,063
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Interest paid $ 91,432 $ 11,981
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Income tax paid $ - $ 108,175
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The accompanying notes are an integral part of the financial statements.
5
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RENAISSANCE ENTERTAINMENT CORPORATION AND
CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
March 31, 1997 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of March 31, 1997, the statements of operations and
the statements of cash flows for the three month periods ended March 31,
1997 and 1996, have been prepared by the Company 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 March 31, 1997 and for all
periods presented, have been made.
These statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
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.
3. SUBSEQUENT EVENTS
During the quarter ended March 31, 1997, an officer/director and related
party loaned the Company $750,000 on a short-term basis. Subsequent to
March 31, 1997, the Company issued $1,000,000 principal amount of its 9%
Convertible Secured Debentures due 2002 (the "Debentures"), including
$750,000 in payment of the short-term loans. The Debentures are secured by
mortgages on the Company's Wisconsin and Virginia Faire sites and are
convertible into shares of the Company's Common Stock after April 30, 1998,
at the lesser of $4.50 per share or 70% of the market value of the
Company's Common Stock at the time of conversion. The Debenture holders
also were granted warrants representing the right to acquire up to 200,000
shares of the Company's Common Stock at an exercise price equal to the
lesser of $3.00 per share or the market value for the Company's Common
Stock at the time the warrants are exercised.
Subsequent to March 31, 1997, the Company also issued $350,000 principal
amount of its 10% Convertible Secured Notes due October 31, 1997 (the
"Notes"). The Notes are secured by a mortgage on the Company's Wisconsin
Faire site and are convertible into shares of the Company's Common Stock at
the lesser of $1.75 per share or 50% of the market value for the Company's
Common Stock at the time the Notes are converted.
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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.
GENERAL
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes for the fiscal period
ended December 31, 1996. On June 21, 1996, the Company changed its fiscal year
end from March 31 to December 31.
The Company operates five Renaissance Faires in the United States and is engaged
in a strategy to develop and acquire additional Renaissance Faires nationwide.
The Company's newest Faire opened on May 4, 1996 in Fredericksburg, Virginia, a
project which was designed and constructed by the Company. On February 5, 1996,
the Company acquired Creative Faires, Ltd., the owner and operator of the New
York Renaissance Faire. With its five faires currently drawing close to 750,000
visitors annually, the Company believes that it is the largest operator of
Renaissance Faires and Renaissance entertainment events in the United States.
The Renaissance Faire is a re-creation of a Renaissance village, a fantasy
experience transporting the visitor back into sixteenth century England.
Although the Company was profitable in its fiscal year ended March 31, 1995, it
incurred a net loss of ($1,273,671) in the fiscal year ended March 31, 1996, and
a net loss of ($1,851,725) for the nine months ended December 31, 1996. In
addition, the Company expects to incur a net loss for the fiscal year ending
December 31, 1997. The New York and Virginia Faires operated at a loss during
1996. The Company believes both of these Faire's results were adversely
affected by unusually inclement weather in their respective areas. It is
typical for a new faire such as the Virginia Faire to operate at a loss for two
or more years until it is able to build a significant customer base and
awareness of the faire. Due to the fact that the New York Faire was acquired in
1996, the Company had limited ability to affect the operations of this Faire
during the 1996 faire season. The Company has hired a new manager for this
Faire and will introduce several new entertainment acts and implement additional
promotional efforts for this faire's 1997 season.
The owner of the site for the Company's Northern California Faire is seeking to
develop this site for commercial construction purposes, although the owner's
efforts to do so are currently being blocked by pending litigation in which the
use of the site for such purposes is being challenged. An extension of the
lease for this site for the 1997 faire season has been obtained. While the
Company is investigating new sites for the Northern California Faire, there can
be no assurance that the Company will be able to secure a new site for this
faire for the 1998 or following faire seasons.
The Company is also considering relocation of its Southern California Faire. On
November 4, 1996, the Company entered into a non-binding letter of intent with
the owner of a site in Pomona, California, which contemplated that the Company
would commence operation of the Southern California Faire at that site starting
in 1998. Subsequent to the signing of the letter of intent, the owner of the
current site for the Southern California Faire indicated that it was willing to
enter into a long-term lease for the current site. The ability to enter into a
long-term lease for
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this site increases its value to the Company, as the Company could construct
structures on the site and significantly reduce setup costs for the faire. As
of the date of this report, the Company has not decided if it should enter into
a long-term lease for the current site or relocate the Faire to the proposed
site in Pomona. The Company estimates that the cost of the construction and
relocation to the new site would be approximately $2,000,000.
The Company had a working capital deficit ($2,142,797) as of March 31, 1997.
During the first five months of fiscal 1997, the Company obtained $1,350,000 of
additional working capital. While the Company believes that it has adequate
working capital to fund anticipated operations for fiscal 1997, it believes it
must obtain additional working capital for future fiscal periods. See
"LIQUIDITY AND CAPITAL RESOURCES."
PROSPECTIVE INFORMATION
This report contains certain forward-looking statements and information relating
to the Company that are based on the beliefs and assumptions made by the
Company's management as well as information currently available to management.
When used in this document, the words "anticipate," "believe," "estimate,"
"expect," and similar expressions, are intended to identify forward-looking
statements. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those described herein as anticipated, believed, estimated or
expected. The Company does not intend to update these forward-looking
statements.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE
MONTHS ENDED MARCH 31, 1996
The results of operations of the Company for the quarter ended March 31 always
reflect a significant loss, due to the fact that there are no substantial
revenues during this period, while some expenses at each of the company's five
faire locations continue throughout the year, as do corporate expenses.
Revenues for the quarter ended March 31, 1996 were slightly negative, due to
year-end adjustments during this quarter which, prior to the change in the
Company's fiscal year end to December 31, on June 21, 1996, was the fourth
quarter of the fiscal year.
Operating expenses increased $303,709 or 21%, from $1,441,391 in 1996 to
$1,745,100 in 1997. The primary cause of this increase was the inclusion of
New York in 1997 results. The 1996 results did not include any expenses for the
New York Faire, as a result of the acquisition being accounted for using the
pooling of interests method. Additionally, the Virginia Faire, which opened in
April 1996, had only minimal expenses in the first quarter of 1996, but had the
normal off-season complement of expenses during the first quarter 1997.
Salaries, included in operating expenses, increased 7%, from $709,526 in 1996 to
$761,177 in 1997, reflecting the additional personnel at both the New York and
Virginia Faires.
Depreciation and amortization increased 155%, from $105,556 in 1996 to $269,641
in 1997. This increase is primarily the result of depreciation on the
substantial investment in buildings and improvements to the Virginia Faire site.
Other operating expenses increased $92,511 or 15%, from
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$609,276 in 1996 to $701,787 in 1997. This increase is primarily the result of
operating expenses relating to the New York and Virginia Faires.
As a result of the foregoing, net operating income (before interest charges and
other income) decreased $286,268 from a loss of $1,467,278 for the 1996 period
to a loss of $1,753,546 for the 1997 period.
A 148% increase in interest expense from $36,861 in 1996 to $91,432 in 1997
resulted from a large increase in the Company's borrowing levels throughout the
1997 period as compared to the 1996 period. The primary source of the other
expense in 1996 was the reversal of $200,000 of other income which had been
recorded in the quarter ended December 31, 1995. In late 1995, the State of
Virginia paid the Company $200,000 which upon initial evaluation was considered
income. Upon further review, it was determined that the more appropriate
treatment of this amount was as a reduction of fixed assets. The appropriate
adjustment in the last quarter of the fiscal year ended March 31, 1996 (which is
the first quarter of the calendar year) resulted in the $200,000 charge to other
expense.
Combining net operating income (loss) with other income (expenses) resulted in
an $89,208 decrease in net income before taxes, from a loss of $1,739,151 for
the 1996 period to a loss of $1,828,359 for the 1997 period.
As a result of operating losses for the entire fiscal year ended March 31, 1996
(the Company's fiscal year, which previously ended March 31), a refund of taxes
paid in prior years was available in the 1996 period. This resulted in a credit
to Income Taxes of $239,273 for the quarter ended March 31, 1996.
Net income (loss) to common stockholders decreased $328,481, from a loss of
$1,499,878 for the 1996 period, to a loss of $1,828,359 for the 1997 period.
Finally, net income (loss) per common share decreased from a loss of $.18 for
the 1996 period to a loss of $.19 for the 1997 period, based on 8,380,702
weighted average shares outstanding during the 1996 period, and 9,429,622
weighted average shares outstanding during the 1997 period.
LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1997 COMPARED TO DECEMBER 31, 1996
The Company's working capital deficit widened during the quarter ended March 31,
1997, from $1,506,284 at December 31, 1996 to $2,142,797 at March 31, 1997. In
order to reduce the Company's working capital requirements, management has
implemented a number of cost reductions which will reduce operating expenses
during the fiscal year ending December 31, 1997. Operating expenses for the
fiscal 1997 periods, when compared to the similar 1996 periods, will reflect
these savings offset by increased costs associated with a full year's operating
costs for the Virginia Faire which opened in late April 1996.
The Company's working capital requirements are greatest during the period from
January 1 through April 30, when it is incurring start-up expenses for its first
faires of the faire season, the Southern California and Virginia Faires. The
Company has historically relied upon various revolving credit facilities to meet
its working capital requirements during this period. At December 31, 1996, the
Company had outstanding $1,000,000 in short-term bank lines of credit borrowings
which was the maximum amount available under the lines and did not therefore
have any unused credit available for the 1997 faire season. Subsequent to year
end, the Company
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entered into an agreement with the banks which requires the Company to pay these
lines from 1997 operations. Since December 31, 1996, the Company has also
raised $1,000,000 of working capital through the issuance of convertible
debentures, of which $250,000 was issued to Charles S. Leavell, Chairman of the
Board of Directors of the Company and the balance to Mr. Leavell's father and an
unrelated party, and also raised $350,000 of working capital from the sale in
April 1997 of the Notes to a number of private investors. The debentures are
secured by mortgages on the Company's Wisconsin and Virginia Faire sites, and
the Notes are secured by a mortgage on the Company's Wisconsin Faire site. The
debentures are convertible into Common Stock at the lesser of $4.50 per share or
70% of the fair market value of the Company's Common Stock, and the Notes are
convertible into Common Stock at the lesser of $1.75 per share or 50% of the
fair market value for the Company's Common Stock. The debenture holders were
also granted warrants to purchase an aggregate of 200,000 shares of the
Company's Common Stock at the lesser of $3.00 per share or 70% of the fair
market value of the Company's Common Stock.
Reviewing the change in financial position over the quarter, current assets,
largely comprised of cash and prepaid expenses, increased from $931,451 at
December 31, 1996 to $1,275,927 at March 31, 1997, an increase of $344,476 or
37%. Of these amounts, cash and cash equivalents decreased from $374,289 at
December 31, 1996 to $310,297 at March 31, 1997. Accounts receivable decreased
from $99,551 at December 31, 1996 to $63,094 at March 31, 1997. Prepaid
expenses (expenses incurred on behalf of the Southern California and Virginia
Faires) increased from $139,167 at December 31, 1996 to $718,042 at March 31,
1997. These costs are expensed once the Faires are operating.
Total assets increased from $9,872,349 at December 31, 1996 to $9,944,585 at
March 31, 1997, a nominal increase of $72,236 or 1%. Of this amount, the
increase in current assets of $344,476 was partially offset by moderate
decreases in the other non-current asset categories. Property, plant and
equipment (net of depreciation) decreased by $226,241 or 3% from $7,176,755 at
December 31, 1996 to $6,950,514 at March 31, 1997 as a result of depreciation of
assets for the quarter. Goodwill, which arose from the purchase of the two
California Faires and is being amortized over 15 years, decreased from $620,826
at December 31, 1996 to $608,157 at March 31, 1997, as the result of normal
amortization. Other miscellaneous assets (organizational costs and vendor
deposits) decreased from $253,201 at December 31, 1996 to $207,600 at March 31,
1997.
Current liabilities increased from $ 2,437,735 at December 31, 1996, to
$3,418,724 at March 31, 1997, an increase of $980,989 or 40%. This increase is
due to increased indebtedness incurred to cover the Company's operating expenses
during the quarter prior to the opening of the 1997 faire season. Notes
payable, current portion increased from $1,209,119 at December 31, 1996 to
$1,855,669 at March 31, 1997, reflecting the $750,000 of short-term borrowing
described above. Unearned income, which consists of the sale of admission
tickets to upcoming faires, and deposits received from craft vendors for future
faires, increased from $160,588 at December 31, 1996 to $443,803 at March 31,
1997. The increase in total liabilities from $4,816,897 at December 31, 1996 to
$5,771,667 at March 31, 1997 is due to the increase in current liabilities.
Stockholders' Equity decreased from $5,055,452 at December 31, 1996 to
$4,172,918 at March 31, 1997, a decrease of $882,534 or 17%. This decrease
resulted from the net loss of $1,828,359, partially offset by additional
contributed capital received as the result of the exercise of 140,292 Class A
Warrants at $2.00 per share, the exercise of 58,000 Class B Warrants at $2.625
per share, and the exercise of 111,716 employee stock options at prices ranging
from $1.125 to $3.50 per share. As of March 31, 1997, the Company had
outstanding 10,787,387 shares of common stock, 1,681,064 Class
10
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A Warrants representing the right to purchase common stock at $2.00 per share,
and 1,992,742 Class B warrants representing the right to purchase common stock
at $2.625 per share.
Although inflation can potentially have an effect on financial results, during
1996 and the first three months of fiscal 1997 it caused no material affect on
the Company's operations, since the change in prices charged by the Company and
by Company's vendors has not been significant.
The Company has no significant commitment for capital expenses during the fiscal
year ending December 31, 1997.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
See Note 3 of the Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations for information regarding issuance of securities
convertible into shares of the Company's Common Stock and warrants to
purchase Common Stock issued subsequent to March 31, 1997. These
securities were issued without registration under the Securities Act
of 1933 in reliance upon Section 4(2) of the Act. No underwriters
were involved in the issuance of these securities.
Item 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended March 31, 1997, the Company entered into a
Loan Workout Agreement with respect to the Company's bank lines of
credit and bank mortgages on the Company's Wisconsin Faire site.
Pursuant to the Agreement, the banks agreed to restructure the payment
schedule for the lines of credit to permit the Company to pay these
lines of credit from 1997 operations. Pursuant to the Agreement,
$100,000 of the lines of credit were paid during the quarter, leaving
a balance of $900,000 to be paid prior to September 30, 1997. The
bank also agreed that if the Company remains current on its
obligations through December 31, 1997, that the due date for the
mortgage on the Wisconsin site will be extended from January 31, 1998
to December 31, 1998.
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
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The Company was not required to file a report on Form 8-K during the
quarter ended March 31, 1997.
Exhibit 10.1 Form of Subscription and Purchase Agreement, including
the appendix thereto, for the Company's 10% Convertible Secured Notes,
incorporated herein by reference to Registration Statement on From S-
1, No. 333-26677.
Exhibit 10.2 Form of Subscription and Purchase Agreement, including
appendix thereto, for the Company's 9% Secured Debentures due 2002--
filed with Form 10-Q for the quarter ended March 31, 1997, previously
filed.
Exhibit 27. Financial Data Schedule--filed with Form 10-Q for the
quarter ended March 31, 1997, previously filed.
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: October 28, 1997 /s/ James R. McDonald
------------------------ --------------------------------------------
James R. McDonald, Chief Financial Officer
12
