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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
[ X ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from April 1, 1996 to December 31, 1996
Commission file number 0-23782
RENAISSANCE ENTERTAINMENT CORPORATION
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(Name of Small Business Issuer as Specified in its Charter)
Colorado 84-1094630
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(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
4410 Arapahoe Avenue, Suite 200, Boulder, Colorado 80303
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 444-8273
Securities registered under Section 12(b) of the Act:
Common Stock, $.03 par value Philadelphia Stock Exchange
Class A Common Stock Purchase Warrants Philadelphia Stock Exchange
Class B Common Stock Purchase Warrants Philadelphia Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.03 par value
Class A Common Stock Purchase Warrants
Class B Common Stock Purchase Warrants
Units, each Unit consisting of one (1) Share of Common Stock, one (1) Class A
Common Stock Purchase Warrant and one (1) Class B Common Stock Purchase Warrant
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required
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to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
As of March 31, 1997, the aggregate market value of the Common Stock of the
Registrant based upon the average of the closing bid and asked prices of the
Common Stock as quoted on the NASDAQ National Market held by non-affiliates of
the Registrant was approximately $55,285,358. As of March 31, 1997, 10,787,387
shares of the Common Stock of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
ITEM 1: BUSINESS
OVERVIEW
Renaissance Entertainment Corporation ("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 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 entertainment
industry consists of over 100 separate events of varying size with a Renaissance
theme and has an estimated attendance in excess of 4,000,000 visitors annually.
The Renaissance Faire is a recreation of a Renaissance village, a fantasy
experience transporting the visitor back into sixteenth century England. This
fantasy experience is created through authentic craft shops, food vendors and
continuous live entertainment throughout the day, both on the street and the
stage, including actors, jugglers, jousters, magicians, dancers and musicians.
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STRATEGIC PLAN
The Company's long-term strategic plan is to grow internally as well as through
the acquisition of additional Renaissance Faires located throughout the United
States. At this time, the Company has no agreements or commitments to acquire
additional Renaissance Faires or faire sites.
The Company estimates that there are currently 20 major Renaissance Faires
produced in various locations throughout the country each year which are owned
by approximately 13 different owner/entities. These Faires are predominantly in
major metropolitan areas and in many cases have a history of decades of
profitable operation. Because of the fragmented nature of the industry, the
Company believes that it has an opportunity to acquire existing major Faire
productions as well as develop productions in areas which are not currently
serviced.
EXISTING RENAISSANCE FAIRES AND SITES
The Company presently owns and produces five Renaissance Faires: the Bristol
Renaissance Faire in Kenosha, Wisconsin, serving the Chicago/Milwaukee
metropolitan region; the Northern California Renaissance Pleasure Faire in
Novato, California, serving the San Francisco Bay area; the Southern California
Renaissance Pleasure Faire in Devore, California serving the greater Los Angeles
metropolitan area; the New York Renaissance Faire serving the New York City
metropolitan area; and the Virginia Renaissance Faire in Fredericksburg,
Virginia, serving the Washington, D.C. and Richmond metropolitan areas.
BRISTOL RENAISSANCE FAIRE. The Bristol Renaissance Faire is conducted at the
Kenosha, Wisconsin site owned by the Company. It has been in existence for 10
years. The Bristol Renaissance Faire is presented annually for nine weekends
beginning the last weekend in June and ending the third weekend in August. The
Bristol Renaissance Faire attracts approximately 190,000 patrons each year.
The Bristol Renaissance Faire was originally located on 80 acres. In May 1995,
the Company purchased an adjacent 80 acres of real estate which in the past it
had used under lease, for a purchase price of $850,000. During the first
quarter of fiscal 1996, the Company refinanced both 80 acre parcels with one
loan. The new loan, in the original principal amount of $l million, bears
interest at the rate of 9 1/2% per annum, and calls for annual principal
reduction payments of $100,000 each September through 1997, and, assuming the
Company is current in its obligations to the bank, principal reduction payments
of $50,000 per quarter beginning in March 1998, with the remaining principal
balance of $550,000, together with interest due in December 1998. The loan
balance at December 31, 1996 was $800,000.
As the site of the Bristol Renaissance Faire is owned, the structures and
improvements which have been constructed on the site, including the vendor
booths, are permanent. Craft shops and vendor booths are built by the
individual craft vendors at their cost. In many cases, vendors invest
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substantial sums of money in the construction of these shops, which represent
permanent improvements and value added to the Company's real estate.
While the Company believes that the property is amenable to some
income-producing off-season activity, historically, the Company has only
utilized the site for the Renaissance Faire, and the property has been vacant
during the off-season. The Company is considering year-round uses which could
include campgrounds, a micro-brewery, an Octoberfest and music festivals. To
date, however, there exist no agreements, arrangements or other understandings
with respect to alternate year-round uses, and there can he no assurance that
the Company will be successful in developing any income-producing, off-season
activities.
NORTHERN CALIFORNIA RENAISSANCE PLEASURE FAIRE. The Northern Renaissance
Pleasure Faire has been held in the San Francisco Bay area for the past 30
years. This Faire is conducted annually for six to seven weekends, typically
beginning Labor Day weekend and running through the first or second weekend of
October. The Faire typically attracts 200,000 patrons.
The Northern California Faire is located on leased property in Novato,
California. The lease is currently on a year-by-year basis, and the Company is
in the final stages of negotiations of the lease to cover the 1997 Faire. The
rent was $350,000 in 1996 and is expected to be approximately $300,000 for the
1997 Faire. While the Company believes that its lease for the site will be
renewed for another year, there is no assurance that the lease will be renewed.
If the lease is not renewed, and since it is extremely unlikely that an
alternative site could be prepared in time, it is doubtful that the Company
would conduct a Faire in Northern California in 1997. This would have a
material adverse effect on the Company's results of operations in 1997. The
Company is investigating a new site for the Faire which, if acceptable and
available, will not be available until at least 1998. The Company estimates
that it will be required to spend approximately $300,000 for an environmental
impact study and other site consideration expenses before necessary governmental
approvals can be obtained. There is no assurance that, if the Company incurs
these and other site consideration expenses, it will be successful in obtaining
all necessary approvals for the site to be available for the Faire in 1998 or
any subsequent period. In addition, the Company estimates that it will be
required to spend from $500,000 to $1,000,000 for development of the site prior
to the opening of the Faire at the new site.
In contrast to the permanent structures constructed at the Bristol Renaissance
Faire, all structures, including the gates, stages, booths, shops and arenas
utilized in the California Renaissance Pleasure Faires are mobile. These props
are loaded into the Company's semi-tractor/trailers and transported between the
Northern and Southern California Renaissance Faires and, during the off-season,
are stored at the Northern Renaissance Faire site. The booths and craft shops
utilized by vendors are owned by the individual vendors and moved onto the site
for the Faire and then removed by them. The Faire is constructed and removed
much in the same way as a circus or traveling carnival.
SOUTHERN CALIFORNIA RENAISSANCE PLEASURE FAIRE. The Southern California
Renaissance Pleasure Faire has been conducted for the past 34 years in the Los
Angeles metropolitan area. This Faire typically attracts 200,000 patrons and is
held annually for eight weekends beginning the last week of April and ending
Mid-June.
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The Southern Renaissance Pleasure Faire is held in Glenn Helen Regional Park
located near Devore, California. The site is leased from the San Bernardino
County Parks and Recreation Department, under a one year lease for the 1997
Faire. Rental under the lease is equal to 3.5% of gross revenues. The Company
has the option of leasing the San Bernardino site in the future, but is
currently investigating new sites for the Southern Renaissance Pleasure Faire.
The Southern Renaissance Pleasure Faire site is only occupied during the Faire
season and must be vacated following completion of the Faire. Accordingly, all
structures are mobile and transported to the Northern Renaissance Faire site for
storage during the off-season.
Although the Company has operated that Faire during the past two years at a
small profit, management believes that it will have to relocate the Faire in
order to improve its profitability in the future. The Company has recently
entered into a non-binding letter of intent with the owner of a site in Pomona,
California which contemplates that the Company will commence operation of the
Southern California Faire at that site starting in 1998. The letter of intent
calls for the Company to construct a new village for the Faire. The Company
estimates that the cost of such construction would be approximately $2,000,000.
The Company will need additional funds from one or more third parties to finance
such construction. If such funds are not available, the Company would, in all
likelihood, continue to operate the Faire at its current location in 1998 and
possibly beyond.
NEW YORK RENAISSANCE FAIRE. The Company acquired Creative Faires, Ltd., the
owner and operator of the New York Renaissance Faire in February of 1996. The
New York Renaissance Faire opened in July 1978 and recreates a 16th century
English country Faire on 65 leased acres in Sterling Forest, Tuxedo, New York.
Creative Faires, Ltd. also produces Sterling Forest's Forest of Fear as well as
other arts and crafts shows in the New York tri-state area. The Company issued
540,000 shares of the Company's Common Stock in consideration for all of the
outstanding shares of Creative Faires, Ltd.
VIRGINIA RENAISSANCE FAIRE. The Company's newest Faire is located in
Fredericksburg, Virginia on 250 acres of land purchased by the Company in July
of 1995 for $925,000. Like the Bristol Faire, this is a permanent facility,
which opened for business on May 4, 1996 and operated for seven weekends. All
buildings on the property, including performance stages, restaurants, ale stands
and craft shops, were designed in a unified style appropriate to the Renaissance
period and were constructed by the Company during the year prior to opening.
This is the first time the Company has developed a Faire on its own, since all
other Faires owned by the Company represented acquisitions of existing
businesses. The Virginia Fair, as is typical of new faires, operated at a loss
in 1996, its first year of operation, and is expected to incur a small operating
loss in the 1997 faire season.
The construction of the Faire was financed with a $1.5 million mortgage,
repayable over 15 years at an initial interest rate of 8.65% annually, plus the
use of corporate funds. The Company also borrowed $250,000 to finance the
construction of buildings for crafts vendors, with repayment over five years at
an interest rate of 9.5% annually. Some vendors have paid for their buildings
outright, others have utilized the financing provided by the Company, while
others rent space with an option
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to purchase. The Company arranged for vendor financing in order to attract
desirable vendors to the new Faire, and to develop a permanent contingent of
Faire participants.
Some of the management of the Virginia Faire is handled by employees of the
Bristol Faire, including such areas as entertainment and public relations.
Although there are currently no other activities scheduled on the property
for 1997 other than the Virginia Renaissance Faire, the Company expects to
develop other income-producing activities, which may include a Halloween
forest of fright, music festivals, Christmas activities and other special
events. To date, however, there exist no agreements, arrangements or other
understandings with respect to alternate year-round uses.
VENDORS
Approximately 13% of the revenues realized from presenting the Company's
Renaissance Faires are generated from the Company's relationships with vendors
and craftsmen who sell food and crafts, and offer games and rides.
At the Bristol Renaissance Faire site, the vendors and craftsmen are required to
construct their shops and booths at their own cost and then occupy the
structures on a year-to-year basis for an annual fee of $900. Since the
structures are permanent, once built they become the property of the Company and
substantially increase the value of the Company's asset at that location.
At the Virginia Renaissance Faire site, shops and booths are constructed by the
vendors. All buildings so constructed become a permanent part of the Faire and
are the property of the Company. All vendors at the Virginia Renaissance Faire
pay the Company a fee of 6% to 15%.
At the Northern and Southern California Renaissance Pleasure Faires, craft shops
and booths are owned by the vendors and transported onto the site for the
duration of the Faire and then removed. In lieu of a flat fee to participate,
vendors at the California Faires pay the Company a fee equal to 15% of their
gross revenues.
Vendors occupy their booths and shops pursuant to written lease agreements with
the Company which have a term of one year, and require renewal by both the
vendor and the Company each year. Under these agreements, each vendor agrees to
indemnify and hold harmless the Company from any liability which may arise by
virtue of the vendors' activities at the Faire. Nevertheless, the Company
maintains general public liability insurance which also provides coverage for
such risks.
REVENUE SOURCES
A Renaissance Faire generates revenues from numerous sources, including gate
admissions, beverage sales, parking fees, food sales, craft fees, game fees,
camping fees, souvenir sales and sponsorship fees.
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GATE ADMISSIONS. Gate admissions are set from $14.00 to $17.50 for adults,
$5.95 to $6.95 for children, with children under the age of five admitted free.
Discounts for senior's and military personnel are $1.00 to $2.00. Off premises
discount ticket sales are available at Cub Foods, K-Mart, Sentry Foods, Shoprite
and Kits Camera. Discount coupons are available at retail outlets operated by
the Company's sponsors, including McDonalds, Subway, White Castle, Vons super
markets and Amoco Stations. The Company has a large group sale and advance sale
program that provides discounted tickets. Admission provides the guest with
all-day continuous entertainment on multiple stages. Major entertainment acts
include full contact jousting, falconry, variety acts, sword duels,
Shakespearean vignettes and authentic belly-dancing. Gate admissions represent
approximately 49% of the Faires' total revenues.
BEVERAGE INCOME. The Company sells beer, wine and soft drinks at each Faire.
Beverage sales represent approximately 20% of Faire revenues.
PARKING INCOME. The California Faires charge $6.00 per car for regular parking
and $10 for preferred close-in parking. The Bristol and New York Faires have
preferred parking for $2.00 and $5.00. The Virginia Faire charges $2 for
regular parking. Parking revenue represents approximately 7% of Faire revenues.
FOOD REVENUE. At the California and New York Faires, all food concessions are
run by independent vendors. These vendors pay the Company a commission equal to
approximately 15% of their gross revenues. At the Bristol Faire, the Company
owns certain high volume food items such as turkey legs, pizza, roast beef and
brats (sausages). These items comprise approximately 40% of the total food
sales. Additional food items are sold by independent food vendors who pay the
Company approximately 15% of their gross revenues. At the Virginia Faire, the
Company currently owns all of the food concessions. In the aggregate, food
revenues represent approximately 9% of total Faire income.
CRAFT FEES. Each Faire has over 150 independent craft vendors who sell their
goods to Faire patrons. Most of the craft items are handmade by the artists who
often demonstrate the making of their wares at the Faire. The glassblowers and
lace-makers are generally very popular. The craft vendors in California pay the
Company a fee of approximately 15% of their gross revenue. At the Bristol, New
York and Virginia Faires, craft vendors are required to build their own booth or
shop, and either pay a flat annual fee or a percentage of their gross income.
Craft fees represent approximately 9% of total Faire revenues.
GAME FEES. Many games and rides are operated by independent contractors. The
Company receives 15% of the gross revenues from these games and rides, which
represents, in the aggregate, approximately 1% of total Faire revenues.
SOUVENIR REVENUE. The sale of souvenir tee-shirts, sweatshirts, beer mugs,
books and other high quality merchandise appropriate to the Renaissance era is
believed by the Company to represent an area of excellent future opportunity.
It is intended that the Company's products will also be sold through other
outlets, such as catalogues, department stores, and on-line via the Company's
Internet Web site. There can, however, be no assurance that the Company will be
successful in marketing
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its products and memorabilia through alternative means in the future. Souvenir
sales to date represent approximately 4% of Faire income.
SPONSORSHIP FEES. The Company solicits sponsorship arrangements with major
sponsors including Coca-Cola Company, Anheuser-Busch, Inc., Miller Brewing
Company, Amoco Oil Company, Eastman Kodak Company, Pepsi Cola Company and
Guinness Import Co. The sponsors also participate in joint advertising
campaigns. In the past, sponsorship fees have represented approximately 1% of
Faire revenues.
CAMPING FEES. The Company allows employees and independent vendors limited
camping at the Faire sites during the Faire season. The Company provides
portable rest room facilities, showers and security for campers. The campers
are charged and pay a fee for these services.
MARKETING
The Company markets its Faires as entertainment events for the whole family,
which also include shopping and food. Marketing is accomplished through local
television and radio stations which, from time-to-time, and, often in
conjunction with other advertisers, conduct live broadcasts from the Faires.
Supplementing this television and radio advertising, newspapers and billboards
provide essential information to the general public regarding the cost of
admission, location and times of operation. Artistic brochures and fliers are
directed toward groups for advanced sales campaigns.
The Company has also undertaken a "Sponsorship" campaign. Major sponsors have
included Eastman Kodak Company, Hyatt Hotels & Resorts, Inc., Coca-Cola
Company, Miller Brewing Company, Amoco Production Company and Sentry Foods, Inc.
Agreements with such sponsors have included joint advertising, sponsorship fees,
and product giveaways.
SEASONALITY AND WEATHER
The Company generates its revenue primarily from the production of Renaissance
Faires. Since, at this point, they are exclusively outdoor events, each Faire
is scheduled for the time of year most likely to minimize the risks and hazards
of inclement weather. With a total of five Faires in various U.S. locations,
the Company has been able to extend the period of revenue generation from late
April (the start of the Southern California and Virginia Faires) through early
October (the end of the Northern California Faire), with the Bristol Renaissance
Faire being held during July and August, and the New York Faire during August
and September. The spread of Faires over a six-month period, and the geographic
spread across the West coast, the East coast and the mid-West, helps to assure
that inclement weather in one particular geographic area at any particular time
does not adversely threaten the Company's entire source of revenue. It is
normal, however, for adverse weather to harm the financial results during
certain weekends of any particular Faire.
During the period from the middle of October through the third week of April,
the Company currently has no material income-generating activity and must meet
its working capital requirements from cash flow earned during the Faire season
augmented by short-term debt. Creative Faires, Ltd. operates craft shows and
the Forest of Fear on the New York site during the
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fall and spring. The Company plans to continue those events and also to develop
fall events at certain of the Company's other Faire sites.
Each Faire is scheduled for a finite period which is determined substantially in
advance in order to facilitate advertising and other promotional efforts. Since
attendance at each Faire is dependent upon the weather, poor weather conditions
can result in substantial declines in attendance and loss of revenues. The
Company is also vulnerable to severe climatic events which are similarly beyond
its control but nevertheless could have a direct and material impact upon the
Company's relative success or failure.
COMPETITION
As a promoter and operator of family entertainment events, the Company faces
competition from other more traditional entertainment alternatives, including
amusement parks, theme parks, local and county fairs, and specialty festivals.
While there are more than 100 annual entertainment events produced in the
country with a Renaissance theme, there are only 20 major Renaissance Faire
productions operated in major metropolitan areas throughout the country. As
families typically do not travel to distant metropolitan areas in order to
attend a Renaissance Faire, the Company does not experience direct competition
with those other major productions. More significant competition comes from
other entertainment alternatives and smaller fair events.
Further, by the very nature of Renaissance Faires and the lack of protection
afforded by trademark, service mark and unfair competition laws, there exist few
barriers to entry into the industry, and there can be no assurance that other
companies with substantially greater resources will not develop competing Faires
in the metropolitan areas where the Company has established productions.
INTELLECTUAL PROPERTY
Because of the number of existing Faire productions with Renaissance themes,
it is unlikely that the Company will be able to rely upon trademark or
service mark protection for the name "Renaissance Faire" in connection with
its business. However, the Company did obtain in connection with its
acquisition of Living History Center assets an assignment of a California
registration of the mark "Renaissance Pleasure Faire" which applies only to
the state of California. The Company also has a Virginia service mark for
the "Virginia Renaissance Faire." Further, it is possible that the Company
could apply for and obtain trademark or service mark registrations on a state
level for its other individual Faires, such as "Bristol Renaissance Faire"
and other name-specific marks associated with the "Renaissance Faire"
description as those names are acquired or developed. While the Company may
be able to protect a site-specific name for its productions, the Company does
not consider this protection a significant deterrent to the entry of
competitors into existing markets, given the limited barriers to such entry.
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PUBLIC LIABILITY AND INSURANCE
As a producer of public entertainment events, the Company naturally has exposure
for claims of personal injury and property damages suffered by visitors to the
Company's Renaissance Faires. To date, however, the Company has only
experienced minimum claims which have been resolved quickly without litigation.
The Company maintains comprehensive public liability insurance which it
considers to be adequate against this exposure.
Independent vendors operating food concessions, games and rides are required to
obtain liability insurance protection, and to provide the Company with proof of
such coverage. Alternatively, an independent vendor can be added as an
additional insured under the Company's liability insurance policy for an
additional fee.
GOVERNMENT REGULATION
Since food and alcoholic beverages are sold at the various Faire
sites, the Company, its vendors and/or subsidiaries must comply with all
applicable rules, regulations and/or ordinances pertaining to the handling and
sale of such items. Any material violation of these regulations would subject
the Company, its vendors and/or its subsidiaries to the possibility of having
necessary food service permits and liquor licenses revoked. Material violations
may also result in penalties and fines being assessed against the Company. The
Company must also comply with all state and federal labor laws and regulations,
including all minimum wage and overtime provisions.
The Company believes that it is in compliance with all such laws, and does not
anticipate that any existing law will have a material adverse impact upon the
proposed business and operations of the Company. Although future compliance
cannot be assured in the event of future changes in such laws or the addition of
regulations governing the proposed business and operations of the Company, the
Company will, at all times, endeavor to take all feasible and required actions
necessary to maintain compliance with such laws.
EMPLOYEES
The Company presently has 16 full-time employees working for its Colorado
headquarters. Each Faire has its own full-time staff as well as seasonal and
part-time employees who are engaged during the Faire presentation. The Bristol
Faire has 6 full-time employees, the California Faires have 12 full-time
employees, the New York Faire has 6 full-time employees and the Virginia Faire
has 6 full-time employees.
During Faire presentations, there are over 100 street actors interacting with
Faire patrons at any given time, with over 1,000 seasonal employees and
volunteers. The Company trains its professional street actors, who perform
under contract with the Company for a fixed fee. In addition, the Company
invites numerous apprentice actors and actresses to its training programs to
perform during the Faire on a volunteer basis. Only after an actor or actress
has gained a particular proficiency are they invited to become a fully-paid
contract actor for the Company.
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The Company has plans for acquisition and growth using the current staff and
management systems of the Faire as a management infrastructure. The creation of
a year-round staff has increased expenses, but will, in management's opinion,
achieve economies of scale as the Company acquires and produces additional Faire
operations. The Company believes that it currently has full-time management
sufficient to operate nine annual Faires.
ITEM 2: PROPERTY
The Company's corporate headquarters are located at 4410 Arapahoe Avenue, Suite
200, in Boulder, Colorado. This property measures 3,868 square feet and is
currently leased at $7,854 per month, with increases of 5% per annum each
November 1, expiring October 31, 2001. The Company considers these offices to
be suitable for its needs for the duration of the lease term. The Company has
an option to renew the lease for an additional five year period.
The Company owns approximately 160 acres in Kenosha County, Wisconsin, which is
home to the Bristol Renaissance Faire. The land is subject to mortgages in the
original aggregate principal amount of $1.95 million. On April 11, 1997, the
outstanding balance was $1.7 million.
The Company has leased the property where the Northern California Renaissance
Pleasure Faire is held, located at 1410 Highway 37, Novato, California 94945.
Office quarters for all California personnel is included in the overall lease
covering the Faire site, which expires April 30, 1997. See Item 1 --
"Business--Existing Renaissance Faires and Sites--Northern California
Renaissance Faire."
The New York Faire is operated on 65 acres of leased land in Tuxedo, New
York. This lease expires December 31, 2000. The Company also leases offices
in New York City.
On July 27, 1995, the Company acquired approximately 250 acres of land in
Stafford County, Virginia, for a purchase price of $925,000. This property
houses the Virginia Renaissance Faire. The construction of the Faire was
financed with a $1.5 million mortgage, repayable over 15 years at an initial
interest rate of 8.65% annually, plus the use of corporate funds. The Company
also borrowed $250,000 to finance the construction of buildings for crafts
vendors, with repayment over five years at an interest rate of 9.5% annually.
ITEM 3: LEGAL PROCEEDINGS
From time to time, the Company is a party to legal proceedings arising in the
ordinary course of business. The Company is not currently a party to any
material litigation; however, two former employees are alleging wrongful
termination. The Company is not aware of any litigation threatened against it
that could have a material adverse effect on its business.
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ITEM 4: SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The 1996 Annual Meeting of the Stockholders of the Company was held on November
26, 1996. At that meeting, the following five directors, constituting all
members of the Board of Directors, were elected.
Votes Cast Votes Cast Broker
Name For Against Abstentions Non-Votes
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Charles S. Leavell 3,492,895 -0- 44,990 -0-
Sanford L. Schwartz 3,492,895 -0- 44,990 -0-
Robert Geller 3,492,895 -0- 44,990 -0-
Gregg Adam Thaler 3,326,228 -0- 211,657 -0-
Dean Petkanas 3,326,228 -0- 211,657 -0-
At the 1996 Annual Meeting, the shareholders were also asked to ratify the
selection of Schumacher & Associates, Inc. as independent auditors for the
Company. The vote for such ratification was: 3,514,385 FOR; 6,300 AGAINST,
and 17,200 ABSTENTIONS.
PART II
ITEM 5: MARKET FOR THE COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
On September 1, 1995, the Company's Common Stock began trading on the NASDAQ
National Market. From January 27, 1995 to August 31, 1995, it traded on the
NASDAQ Small-Cap Market and on the Boston Stock Exchange, and prior to that
time, the stock was traded over-the-counter on the OTC Electronic Bulletin
Board. Since December 9, 1996, the Company's Common Stock has also been traded
on the Philadelphia Stock Exchange. The following table reflects the high and
low prices of the Registrant's Common Stock for each quarterly period of the two
most recent calendar years and the subsequent interim quarter retroactively
adjusted for a 2-for-1 stock split in October 1996. From the fourth quarter of
1995 forward, the prices reflect the high and low sales prices. For the first,
second and third quarters of 1995, the prices reflect the high and low bid
prices as quoted by the National Quotation Bureau, Inc. The quotations
represent prices between broker-dealers and do not include retail mark-ups and
mark-downs or any commission to the broker-dealer and may not reflect prices in
actual transactions.
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CALENDAR YEARS ENDED DECEMBER 31 HIGH LOW
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1995
First Quarter ended March 31 $4.50 $3.38
Second Quarter ended June 30 4.88 3.63
Third Quarter ended September 30 4.69 3.88
Fourth Quarter ended December 31 6.44 4.00
1996
First Quarter ended March 31 7.19 5.19
Second Quarter ended June 30 6.81 5.63
Third Quarter ended September 30 7.00 5.25
Fourth Quarter ended December 31 7.50 5.00
1997
First Quarter ended March 31 6.88 5.06
As of March 31, 1997, there were approximately 1,529 shareholders of
record.
DIVIDENDS
The Company has never paid cash dividends on its Common Stock, and does not
anticipate the payment of such dividends in the foreseeable future.
ITEM 6: SELECTED FINANCIAL DATA
The information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes included elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
NINE-MONTHS
YEARS ENDED MARCH 31, ENDED DECEMBER 31,
------------------------------------ -----------------------
INCOME STATEMENT DATA 1994 1995 1996 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue $ 1,973 $12,540 $12,811 $10,470 $14,554
Gross Profit 1,694 9,327 8,984 7,265 9,741
Net Operating Income (Loss) (39) 757 (1,475) 111 (1,753)
Net Income (Loss) before taxes (98) 576 (1,274) 309 (1,852)
Net Income (Loss) to Common
Shareholders (98) 533 (1,274) 264 (1,852)
Net Income (Loss) Per Common
Share (.05) .11 (.16) .03 (.21)
Weighted Average Common
Shares Outstanding 1,901 4,801 7,824 7,644 8,907
</TABLE>
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<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------------------------------------------------------
BALANCE SHEET DATA 1994 1995 1996 1995 1996
(IN THOUSANDS) ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital (deficiency) $ (524) $ 3,123 $ 15 $ 768 $(1,506)
Total current assets 167 4,012 2,120 1,308 931
Total assets 1,257 6,853 10,433 8,226 9,872
Total current liabilities 691 889 2,105 539 2,438
Long-term debt (less current maturities) 434 451 2,531 846 2,379
Stockholders' equity 132 5,513 5,797 6,841 5,055
</TABLE>
ITEM 7: 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.
PROSPECTIVE INFORMATION
This Annual report on Form 10-K 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 - NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO NINE
MONTHS ENDED DECEMBER 31, 1995
On June 21, 1996, the Board of Directors of the Company approved a change in the
Company's fiscal year from April 1 to March 31 to January 1 to December 31. As
a result, the fiscal period ended December 31, 1996 is for a nine-month period,
rather than for a full twelve months. In order to make the comparison of the
fiscal period ended December 31, 1996 with the prior fiscal year more
meaningful, the following discussion compares the results of operations for the
fiscal period ended December 31, 1996 to the results of operations for the nine
months ended December 31, 1995, rather than to the full fiscal year ended March
31, 1996. See Item 6 - Selected Financial Data, for information regarding the
results of operations for the nine months ended December 31, 1995, as well as
information for the audited fiscal periods ended March 31, 1995 and 1996 and
December 31, 1996.
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The results of operations of the Company for the nine-month period ended
December 31, 1996 reflect the nineteen-day run of the Southern California Faire,
the eighteen-day run of the Wisconsin Faire, the fifteen-day run of the Northern
California Faire, the seventeen-day run of the New York Faire and the
fifteen-day run of the Virginia Faire. The comparable period of 1995 included
the same number of days for the Southern California, Wisconsin, and Northern
California Faires, but did not include the New York or Virginia Faires. The New
York Faire was acquired on February 5, 1996, and although accounted for as a
pooling of interest and therefore included in the fiscal year ended March 31,
1996, the entire twelve month results of operations for the calendar year ended
December 31, 1995 were reflected in the operating results for the January 1,
1996 through March 31, 1996 quarter and not in the nine month period ended
December 31, 1995. The Virginia Renaissance Faire, which was under construction
as of December 31, 1995, did not generate any revenues during the nine-month
period ended December 31, 1995. Thus, these financial statements include the
results of five operating faires for the period in 1996, but only three faires
for the same period in 1995.
Revenue increased from $10,469,824 for the nine-month period ended December 31,
1995 to $14,553,577 for the nine-month period ended December 31, 1996, an
increase of $4,083,753 or 39%. The increase in revenues resulted from the
additional operations of the Virginia and New York Faires for the period ended
December 31, 1996, as compared to the same period of 1995. 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 of 1995. Unusually
inclement weather in Virginia, New York and Southern California reduced the
expected revenues from faire operations. The Virginia Faire, as is typical of
new faires, operated at a loss in 1996, its first year of operation, and is
expected to incur a small operating loss in the 1997 faire season. During the
1996 season the Bristol Renaissance Faire revenues increased 20%. This was the
eighth consecutive year that attendance increased at this faire.
Faire operating expenses (expenses directly related to faire operations, such as
rent, grounds maintenance, contract services, contract entertainment, food,
beverage and merchandise costs) increased $1,607,464 or 50%, from $3,205,152 in
the 1995 period to $4,812,616 in the 1996 period. This increase in expenses
resulted from the additional operation of the Virginia and New York Faires for
the period ended December 31, 1996, as compared to the same period in 1995, plus
higher overall costs related to faire operations. The gross profit,
representing operating income from faire operations before overhead expenses,
increased 34% from $7,264,672 in 1995 to $9,740,961 in 1996. This increase is
attributable to the increased revenues from the Virginia and New York Faires,
partially offset by the higher overall costs related to all faire operations.
Operating expenses (year-round operating costs and corporate overhead) increased
$4,340,783 or 61%, from $7,153,674 in 1995 to $11,494,457 in 1996. Of these
amounts, salaries increased 34% from $3,030,208 in 1995 to $4,048,603 in 1996,
representing the expansion of staffing levels resulting from the two additional
faires. Depreciation and amortization expense increased 88% from $337,208 in
1995 to $633,819 in 1996. This increase is primarily the result of depreciation
on the substantial investment in buildings and improvements to the Virginia
property, as well as the New York Faire, both of which were not included in the
same period of 1995. Advertising expenditures increased 142% from $1,036,508 in
1995 to $2,511,973 in 1996, again reflecting the
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<PAGE>
necessary advertising for the two additional faires as well as moderate
increases in advertising and rates for the other three faires. Additionally, a
change in accounting procedures resulted in certain expenses being charged to
advertising this period which were not charged to advertising expense in the
same period of 1995.
The Company wrote down goodwill applicable to the Southern California Faire by
$380,000 in 1996, based on this faire's disappointing performance over the past
two operating seasons. The Company recognized as expense in the nine-month
period ended December 31, 1996, $450,000 of costs to be incurred in 1997, which
costs are the result of changing conditions at the Company's Northern California
Faire, which became apparent to the Company in 1996.
Other operating expenses (all other general and administrative expenses of the
Company) increased $720,808 or 26%, from $2,749,254 in 1995 to $3,470,062 in
1996. This increase is primarily the result of operating expenses resulting
from the two additional faires, and also greater overhead costs at each faire
site plus other corporate activities which support faire operations and pursue
new ventures. As a result of the foregoing, net operating income (before
interest charges and other income) decreased $1,864,495, from $110,999 in 1995
to a loss of $1,753,496 in 1996.
A 27% decrease in interest income from $94,090 in 1995 to $68,571 in 1996
resulted from the substantially decreased cash position of the Company
throughout the 1996 period as compared to the same period of 1995. A 153%
increase in interest expense from $100,266 in 1995 to $253,740 in 1996 resulted
from a large increase in the Company's borrowing levels throughout the 1996
period as compared to 1995. Combined net interest expense (interest expense
less interest income) reflected an increase of $178,993 for the period, from
$6,176 in 1995 to $185,169 in 1996. Miscellaneous expenses decreased from
$224,612 in 1995 to $86,940 in 1996. Combining net operating income with other
income resulted in a $2,161,159 decrease in net income before taxes, from income
of $309,434 in the 1995 period to a loss of $1,851,725 in the 1996 period.
Although the Company incurred a net loss for the entire fiscal year ended March
31, 1996, for the nine-month period ended December 31, 1995, a provision for
income tax in the amount of $45,470 was recorded. As a result of the Company's
loss for the nine-month period ended December 31, 1996, no income tax expense
was recorded.
Net income to common stockholders decreased $2,115,689, from $263,964 net income
for the 1995 period to a loss of $1,851,725 for the 1996 period. Finally, net
income per common share decreased from $0.03 during the 1995 period to a loss of
$.21 for the 1996 period, based on 7,643,702 weighted average shares outstanding
during the 1995 period and 8,907,049 weighted average shares outstanding during
the 1996 period.
RESULTS OF OPERATIONS - FISCAL 1996 COMPARED TO FISCAL 1995
Comparisons of the fiscal year ended March 31, 1996 with the fiscal year ended
March 31, 1995 include Creative Faires, Ltd. (owner of the New York Renaissance
Faire) acquired February 5, 1996. The acquisition has been accounted for as a
pooling of interests, which means that the financial results of Creative Faires,
Ltd. have been retroactively merged into those of the Company. Accordingly, the
Company's results of operations for fiscal 1995 and fiscal 1996 include the
results
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<PAGE>
of Creative Faires. Because the Company's fiscal year previously ended on March
31 and Creative Faires' fiscal year ended on December 31, the income statements
of Creative Faires for the fiscal years ended December 31, 1994 and December 31,
1995 have been consolidated into the Company's income statements for the fiscal
years ended March 31, 1995 and March 31, 1996, respectively. Results of
operations for Creative Faires, Ltd. includes three crafts shows and a Halloween
Forest of Fear in addition to the New York Renaissance Faire, although the Faire
represents most of its revenue.
The results of operations of the Company for the fiscal year ended March 31,
1996 reflect the nineteen-day run of the Los Angeles Faire, the eighteen-day run
of the Wisconsin Faire, the fifteen-day run of the San Francisco Faire, and the
seventeen-day run of the New York Faire. The comparable period of fiscal 1995
included the same number of days for Los Angeles, Wisconsin and New York Faires,
but included an additional three days for the San Francisco Faire. The Virginia
Renaissance Faire, under construction as of March 31, 1996, did not generate any
revenues during fiscal 1996. Thus, these financial statements include the
results of four operating faires and one faire under construction during fiscal
1996, as against four operating faires during fiscal 1995. As a further note,
as a result of the acquisition of the Los Angeles Faire on April 1, 1994, the
comparable figures for the 1995 fiscal year do not reflect advance ticket sales
and certain prepaid expenses of the Los Angeles Faire which were recognized by
the prior owner.
Revenue increased modestly from $12,539,653 for the fiscal year ended March 31,
1995 to $12,810,617 for the fiscal year ended March 31, 1996, an increase of
$270,964 or 2%. During fiscal 1995 beverage operations for the Los Angeles and
San Francisco Faires were handled by an outside contractor, and accordingly only
the fee earned from that contractor was reported as revenue, whereas in fiscal
1996 the Company ran the beverage operation itself and recorded all revenue.
Faire operating expenses (expenses directly related to faire operations, such as
rent, grounds maintenance, contract services, contract entertainment, food,
beverage and merchandise costs) increased $614,377 or 19%, from $3,212,491 in
fiscal 1995 to $3,826,868 in fiscal 1996. This increase is partially due to the
inclusion of beverage costs for the Los Angeles and San Francisco Faires, which
were not reported during the previous period when handled by an outside
contractor, plus higher overall costs related to faire operations. The gross
profit, representing operating income from faire operations before overhead
expenses, decreased 4% from $9,327,162 in fiscal 1995 to $8,983,749 in fiscal
1996. This decrease is attributable to the shorter run of the San Francisco
Faire in fiscal 1996 and growing operating costs which were not offset by
increased attendance.
Operating expenses (year-round operating costs and corporate overhead) increased
$1,888,568 or 22%, from $8,570,320 for fiscal 1995 to $10,458,888 for fiscal
1996. Of these amounts, salaries increased 17% from $3,474,799 in fiscal 1995
to $4,082,271 in fiscal 1996, representing a modest expansion of staffing levels
Company wide. Depreciation and amortization expense increased 42% from $351,215
in fiscal 1995 to $500,203 in fiscal 1996. This increase is largely the result
of the Company's increased investment in property and equipment for the expanded
Wisconsin Faire, as well as investment in furniture and equipment for the
corporate office, which moved to new quarters in April 1995. Substantial
investment in buildings and improvements to the Virginia property were not
subject to depreciation in fiscal 1996, because at March 31, 1996 the Virginia
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Faire had not yet opened. Under accounting rules those assets (categorized on
the balance sheet as construction-in-progress) were not yet depreciable.
Advertising expenditures increased 28% from $1,211,798 in fiscal 1995 to
$1,546,701 in fiscal 1996.
Other operating expenses (all other general and administrative expenses of the
Company) increased $797,205 or 23%, from $3,532,508 for fiscal 1995 to
$4,329,713 for fiscal 1996. This increase is the result of greater overhead
costs at each faire site plus other corporate activities which support faire
operations and pursue new ventures. For example, during the 1996 fiscal year,
approximately $225,000 was spent developing new products and distribution
opportunities. Second, approximately $90,000 in product design costs, which had
been capitalized during the 1995 fiscal year, had to be expensed when changing
circumstances required a different accounting treatment of that transaction.
Third, approximately $160,000 in expenses were incurred searching for and
negotiating for the rights to new sites for the Los Angeles and San Francisco
Faires. Management believes that those Faires have the potential to be more
profitable once they are located on long-term sites with permanent structures,
since the substantial costs of re-establishing the faires each season will be
eliminated and also, the opportunity for revenue enhancement will improve in
conjunction with additional improvements to the property. Fourth, the Company
expensed approximately $300,000 in overhead costs during construction of the new
site in Virginia, including such costs as salaries, office rent and overhead
costs related to overseeing construction. As a result of the foregoing, net
operating income (before interest charges and other income) decreased
$2,231,981, from $756,842 for fiscal 1995 to a loss of $1,475,139 for fiscal
1996.
A 128% increase in interest income from $48,132 in fiscal 1995 to $109,652 in
fiscal 1996 resulted from the investment of cash proceeds from the January 1995
stock offering. Offsetting this was a 159% increase in interest expense from
$53,223 in fiscal 1995 to $138,036 in fiscal 1996. The increase was due to a
new $1,500,000 mortgage and $250,000 note on the Virginia property, plus a
larger mortgage on the Wisconsin property. Combining interest income with
interest expense resulted in an increase in net interest expense from $5,091 in
fiscal 1995 to $28,384 in fiscal 1996. Miscellaneous expenses (primarily loss
on sale of assets) of $28,327 in fiscal 1995 changed to $36,049 in miscellaneous
income (rental income and vendor refunds) in fiscal 1996. Combining net
operating income with other income resulted in a $2,190,898 decrease in net
income before taxes, from income of $723,424 for fiscal 1995 to a loss of
$1,467,474 in fiscal 1996.
Since the Company incurred a net loss for the 1996 fiscal year, it applied that
loss against taxable income during the previous fiscal year, resulting in a
credit of $193,803 in taxes previously booked. The excess in operating losses
above what has been applied against the previous year (approximately $1,400,000)
was carried forward to reduce taxable income in future periods. During the 1995
fiscal year, a year of net income, income tax expense of $147,000 was incurred.
Net income to common stockholders decreased $1,806,980, from $533,309 in fiscal
1995 to a loss of $1,273,671 for fiscal 1996. Net income to common stockholders
for fiscal 1995 is net of $43,115 paid in dividends on preferred stock. The
Company's preferred stock was fully redeemed on January 27, 1995 in conjunction
with the public offering, and there has been no preferred stock outstanding
since that date. Finally, net income per common share decreased from $0.11
during fiscal 1995 to a loss of $0.16 during fiscal 1996, based on 4,801,044
weighted average shares
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<PAGE>
outstanding during fiscal 1995 and 7,824,182 weighted average shares outstanding
during fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The most significant events of the past year were the purchase of Creative
Faires, Ltd. (owner of the New York Renaissance Faire), the completion of
construction of the Virginia Renaissance Faire and the first year of operations
of those two faires under the Company's ownership and management. As a result
of significant cost overruns in the construction of the Virginia Faire due to
extremely inclement weather during the construction period, overall
disappointing results from faire operations in 1996 and certain corporate
overhead expenses, the Company's working capital decreased from $768,213 at
December 31, 1995 to a working capital deficit of ($1,506,284) at December 31,
1996. In order to reduce the Company's working capital requirements, management
has implemented a number of cost reductions which it estimates will reduce
operating expenses by approximately $1,300,000 during the fiscal year ending
December 31, 1997.
The Company's working capital requirements are greatest during the period
from January 1 to 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 line
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 has entered into a loan workout
agreement with respect to the lines of credit which will permit the Company
to pay these lines from 1997 operations. Since December 31, 1996, the Company
has also raised $750,000 of working capital through issuance of convertible
debt to an officer of the Company and a related party and obtained a
commitment for $350,000 of working capital from the sale of convertible notes
to a number of private investors. The notes are to be secured by a mortgage on
the Company's Kenosha, Wisconsin faire site and will be convertible into
shares of common stock of the Company at a maximum of $1.75 per share.
Management believes that the Company needs to raise an additional $250,000 to
fund the opening of the 1997 faire season. In addition, management believes
that the Company should raise additional working capital in order to more
adequately fund its operations. The Company is pursuing various funding
alternatives. However, there can be no assurance that such funds will be
available to the Company or, if available, available on terms acceptable to
the Company.
Although inflation can potentially have an effect on financial results, during
1996 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.
Reviewing the change in financial position over the previous year, current
assets, largely comprised of cash and prepaid expenses, decreased from
$1,307,541 at December 31, 1995 to $931,451 at December 31, 1996, a decrease of
$376,090 or 40%. Of those amounts, cash and cash equivalents decreased from
$745,021 at December 31, 1995 to $374,289 at December 31, 1996, due to cash
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outflow from operations during the year, plus the use of cash for construction
of the Virginia Faire. Accounts receivable decreased from $228,967 at December
31, 1995 to $133,749 at December 31, 1996. Inventory, comprised of merchandise
sold at the faires and various food and beverage supplies, increased from
$96,034 at December 31, 1995 to $184,695 at December 31, 1996, largely
reflecting merchandise remaining from the previous season and the purchase of
new products for upcoming faires. Prepaid expenses decreased from $237,519 at
December 31, 1995 to $139,167 at December 31, 1996. These costs represent
expenses incurred on behalf of the Southern California and Virginia Faires,
which are expensed once those faires are operating.
Current liabilities increased from $539,328 at December 31, 1995 to $2,437,735
at December 31, 1996, an increase of $1,898,407 or 352%. This increase is
largely due to construction spending on the Virginia Faire and operation of the
two additional faires. Accounts payable and accrued expenses increased from
$279,244 at December 31, 1995 to $1,068,028 at December 31, 1996, an increase of
$788,784 or 282%. The current portion of notes payable increased from $140,064
at December 31, 1995 to $1,209,119 at December 31, 1996. Of the $1,069,055
increase, $1,000,000 was due to short-term borrowings on two lines of credit in
1996. Unearned income, which consists of the sale of admission tickets to
upcoming faires and deposits received from craft vendors for future faires,
increased from $120,020 at December 31, 1995 to $160,588 at December 31, 1996.
Total assets increased from $8,226,264 at December 31, 1995 to $9,872,349 at
December 31, 1996, an increase of $1,646,085 or 20%. Of those amounts, property
and equipment (net of depreciation) increased 49% from $4,819,198 at December
31, 1995 to $7,176,755 at December 31, 1996. Most of this increase was the
result of the purchase of the New York Faire and the completion of the
construction of the Virginia Faire. Goodwill, which arose from the purchase of
the two California Faires and is being amortized over 15 years, decreased from
$1,066,405 at December 31, 1995 to $620,826 at December 31, 1996. This was
primarily due to the Company writing down this account by an additional $380,000
as the result of two consecutive years of disappointing performance for the
Southern California Faire. Other miscellaneous assets (organizational costs and
vendor deposits) increased from $186,702 at December 31, 1995 to $253,201 at
December 31, 1996.
Total liabilities increased from $1,385,208 at December 31, 1995 to $4,816,897
at December 31, 1996, an increase of $3,431,689 or 248%. This increase is
primarily due to costs incurred in connection with the purchase and construction
of the Virginia Faire site and increased borrowings required to fund the
Company's losses. Total liabilities at December 31, 1996 include $2,437,735 in
current liabilities (discussed above), plus $2,341,987 from the long-term
portion of the following bank loans: an $800,000 mortgage on the Bristol Faire
property, a $1,500,000 mortgage on the Virginia Faire property, and a $250,000
loan for construction of vendor booths in Virginia.
Stockholders' Equity decreased from $6,841,056 at December 31, 1995 to
$5,055,452 at December 31, 1996, a decrease of $1,785,604 or 26%. This decrease
resulted from the net loss of $1,851,725, partially offset by additional
contributed capital received as the result of the exercise of 125,328
Class A Warrants at $2.00 per share; the exercise of 34,000 Class B Warrants at
$2.625 per share; the exercise of 324,998 employee stock options at prices
ranging from $1.125 to $3.50 per share; the repurchase of 20,626 shares by the
Company at $4.00 per share. As of December 31, 1996, the Company had
outstanding 9,233,772 shares of common stock, 1,813,856 Class A
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Warrants representing the right to purchase common stock at $2.00 per share, and
2,049,966 Class B Warrants representing the right to purchase common stock at
$2.625 per share. The book value of a share of common stock (stockholders'
equity divided by number of shares outstanding) as of that date was $0.55.
The Company has no significant commitment for capital expenses during the fiscal
year ending December 31, 1997. See Item 1 - Business for a discussion of the
Company's efforts to find new sites for its Southern and Northern California
faires.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as part of this report:
1. Report of Independent Certified Public Accountants;
2. Consolidated Balance Sheets as of December 31, 1996 and March 31,
1996, (audited);
3. Consolidated Statements of Operations for the Fiscal Years Ended March
31, 1995 and March 31, 1996, and the nine-month period ended December
31, 1996 (audited);
4. Consolidated Statements of Changes in Stockholders' Equity for the
Fiscal Years Ended March 31, 1995 and March 31, 1996, and the
nine-month period ended December 31, 1996 (audited);
5. Consolidated Statements of Cash Flows for the Fiscal Years Ended
March 31, 1995 and March 31, 1996 and the nine-month period ended
December 31, 1996 (audited); and
6. Notes to the Consolidated Financial Statements.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Name, position with the Company, age of each Director or officer, and
the period during which each Director has served are as follows:
Director
Name(1) Age Position Since
- ------- --- -------- -----
Charles S. Leavell 55 Chairman of the Board of Directors
& Chief Executive Officer 1993
Sanford L. Schwartz 47 Director 1993
Robert M. Geller 44 Director 1994
Gregg Adam Thaler 31 Director 1996
Dean Petkanas 33 Director 1996
J. Stanley Gilbert 59 President and Chief Operating
Officer --
James R. McDonald 51 Chief Financial Officer --
Howard Hamburg 60 Vice President --
Kevin Patterson 36 Vice President --
Gloria Constantin 46 Secretary --
Sue Brophy 41 Controller --
CHARLES S. LEAVELL was elected Chief Executive Officer effective June 20,
1996. From April 1993 to March 31, 1995, he was Chief Executive Officer, and
from April 1, 1995 to present he has served as Chairman of the Board of the
Company. From 1988 to present, Mr. Leavell has served as President and Chairman
of the Board of Leavell Management Group, Inc. and Ellora Corporation. In that
capacity, he has acquired, developed, and managed numerous ventures, including
the Bristol Renaissance Faire; the 4UR Guest Ranch in Creede, Colorado, a 3,000
acre luxury ranch; and South Meadow, an exclusive 96 unit single family
development in Boulder, Colorado. Prior to his affiliation with Leavell
Management Group and Ellora Corporation, Mr. Leavell worked with Columbia
Pictures in Los Angeles, California, where he was producer of
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the feature film, "The Quick and the Dead," about Grand Prix automobile racing,
and was the executive producer of another film, "Evil Ways," about street gangs
in East Los Angeles. Mr. Leavell also produced a rock musical for the stage
entitled "Goosebumps." Mr. Leavell currently sits on the Board of Directors of
The Leavell Company and CK Properties, L.C., of El Paso, Texas, both of which
are real estate development and management corporations with extensive holdings
in apartments and office buildings. Mr. Leavell's former affiliations include
Board of Directors of the Denver International Film Festival, Denver, Colorado,
and Vice-Chair of Colorado Venture Capital Corporation, a regional investment
firm. Mr. Leavell graduated from Stanford University in 1965 with a Bachelor of
Arts degree in history.
SANFORD L. SCHWARTZ has been a Director of the Company since April, 1993.
Mr. Schwartz has been a founder, senior executive or director of nine
publicly-traded companies over the last nineteen years. From 1992 to present,
Mr. Schwartz has been the Chairman of Creative Business Strategies, Inc.
("CBSI"). Prior to starting CBSI Mr. Schwartz was, from 1989 to 1991, Chief
Executive Officer of HealthWatch, Inc., a publicly-traded medical equipment
manufacturer. Mr. Schwartz serves on the Board of Directors of HealthWatch,
Inc.
ROBERT M. GELLER has been a Director of the Company since April 1, 1994.
He served as Chief Financial Officer of Online System Services, Inc., a provider
of internet services, from March 1995 to October 1996. Mr. Geller has also
served as the President of The Growth Strategies Group, a consulting firm
specializing in executive/board services for emerging growth companies since
August 1991. From April, 1990 to July, 1991, he was Executive Vice-President
for HealthWatch, Inc., a publicly-traded medical equipment manufacturer. Mr.
Geller is currently a director of Armanino Foods of Distinction, Inc. and Online
System Services, Inc., publicly-held corporations, and Integral Peripherals,
Inc., Requisite, Inc., and Chernow Communications, Inc., all privately-held
corporations. Mr. Geller graduated from the University of Colorado Business
School, summa cum laude, with a Bachelor of Science degree in finance and
organizational behavior in 1976.
GREGG ADAM THALER was elected a director of the Company in 1996. He has
been president of Duke & Company, Inc., a New York investment banking firm since
1993. In 1993 he was a sales manager for Corporate Securities of Los Angeles,
California, and from 1992 - 1993, he was a sales manager for HJ Meyers &
Company, also of Los Angeles. From 1989 to 1992, Mr. Thaler was a broker and
analyst with Stratton Oakmont of Lake Success, New York, a broker/dealer. Mr.
Thaler graduated with honors from the University of Michigan in 1987, with a
Bachelor of Arts degree in Political Science.
DEAN PETKANAS was elected a director of the Company in 1996. He has been
President of Briarwood Investment Counsel, a broker/dealer registered with the
National Association of Securities Dealers since 1981. From 1992 to 1994, Mr.
Petkanas was Director of Corporate Finance for Kensington Wells, Inc. of New
York. From 1989 to 1992, he served as a Vice President of Corporate Finance and
Assistant Director of Research for Stratton Oakmont of Lake Success, New York, a
broker/dealer.
J. STANLEY GILBERT became President and Chief Operating Officer in January,
1997. In 1996 Mr. Gilbert was a Vice President of the Company and he managed
the
-23-
<PAGE>
Bristol Renaissance Faire from 1988 until 1996. Prior to that he worked in the
commercial banking field in senior management. Prior to that, he was senior
vice president of Cinema America, a film and video production company. Mr.
Gilbert is the president of Just in Jest, Inc., an art studio featuring
Renaissance and fantasy handmade sculptures, whose works have been displayed in
galleries and museums, including the Delaware Museum of Fine Art. Mr. Gilbert
has served as a board member of the Kenosha Area Convention and Business Bureau.
He holds a degree in Business Administration.
JAMES R.. MCDONALD became Chief Financial Officer of the Company in
November of 1996. From August of 1996 until October of 1996, he served as Chief
Financial Officer of Mountain Solutions, a personal communications services
company. From January of 1994 until August of 1996, Mr. McDonald was Controller
of Omnipoint Corporation, another personal communications services company. Mr.
McDonald was also a principal of James R. McDonald, CPA, from August of 1991
until December 1993. Mr. McDonald received a Bachelor of Science degree in
Accounting from California State University at Fullerton in 1978, and a Masters
of Business Administration in Finance from Loyola University of Chicago in 1980.
HOWARD HAMBURG was Chief Operating Officer of the Company from April 1,
1994 to June 20, 1996, at which time he was elected a Vice President of the
Company. From 1989 to March 31, 1994, Mr. Hamburg served as Treasurer and
Planning Director of the Living History Centre, Inc., a California non-profit,
public benefit corporation and producer of the California Renaissance Pleasure
Faires. In addition to his work with LHC, Mr. Hamburg served, from 1990 to
1993, as Vice-President of the Patent Protection Institute, Inc., an
intellectual property licensing and royalty recovery corporation. Mr. Hamburg
graduated from New York City Community College in 1957 with an AA degree in
Engineering. In 1969 Mr. Hamburg received a Bachelor of Arts degree in social
science from California State University at Sonoma.
KEVIN PATTERSON, General Manager of RPFI since April 1, 1994, has 18 years
experience in the administration and production of Renaissance Faires. From
1993 to 1994 he served as Vice President & Assistant General Manager of the
Living History Center, a non-profit public benefit corporation which previously
produced the California Renaissance Pleasure Faires. Mr. Patterson served as
Production Manager of The Living History Centre in 1992, as Community Outreach
Director during 1989 to 1992, and in other positions with the organization
continuously since 1977. Mr. Patterson holds a B.A. degree in Economics from
Moorpark College and attended the B.S.M. program at Pepperdine University. He
is a founding Board Member of the Historic Oaks Foundation and the St. Andrew's
Society of San Francisco.
GLORIA CONSTANTIN has been Secretary of the Company since 1993. She has
also been in-house Investor Relations since 1993. From 1991 to 1993, she was
employed by Leavell Management Group, Inc. Ms. Constantin holds degrees in
English and Theatre, and is an honors graduate of the Denver Paralegal
Institute.
SUE BROPHY has been Controller of the Company since August, 1995. From
1994 until 1995, Ms. Brophy was employed by Clifton, Gunderson & Co., a public
accounting firm in accounting services. From 1990 to 1993, she was
self-employed. From 1991 to 1992, she was an accountant with Rigden, Inc., a
software development company.
-24-
<PAGE>
Each Director is elected to serve for a term of one year until the next
Annual Meeting of Shareholders or until a successor is duly elected and
qualified.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal period ended December 31, 1996, all
required reports were timely filed, except that due to administrative oversight,
J. Stanley Gilbert filed one late Form 4 reporting one transaction.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's fiscal
periods ended December 31, 1996 (D1996), March 31, 1996 (M1996) and 1995 (M1995)
regarding compensation earned by or awarded to the Company's chief executive
officer and the other executive officers whose total annual salary and bonus
exceeded $100,000 (the "Named Executive Officers").
TABLE I
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------
Annual Compensation Awards Payouts
-------------------------------------------------------------------------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(1) ($) SARs ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles S. Leavell
Chairman, D1996 -0- -0- -0- -0- -0- -0- -0-
CEO and M1996 -0- -0- $ 48,000(1) -0- -0- -0- -0-
President M1995 $ 92,000 $ 23,894 -0- -0- -0- -0- -0-
Miles Silverman,
CEO D1996 $ 95,147 -0- -0- -0- -0- -0- -0-
President M1996 $131,442 -0- -0- -0- -0- -0- -0-
M1995 $ 80,000 $ 28,894 -0- -0- 80,000 -0- -0-
Howard Hamburg,
COO,VP D1996 $ 78,182 -0- -0- -0- -0- -0- -0-
M1996 $114,391 -0- -0- -0- -0- -0- -0-
M1995 $ 84,359 -0- -0- -0- 30,000 -0- -0-
</TABLE>
-25-
<PAGE>
(1) Includes $48,000 received under Consulting Agreement that terminated March
31, 1996.
(2) All executive officers of the Company participate in the Company's group
health insurance plan. However, no Named Executive Officer received
perquisites and other personal benefits which, in the aggregate, exceeded
the lesser of either $50,000 or 10% of the total of annual salary and bonus
paid during the respective years.
OPTIONS GRANTED DURING FISCAL 1996
During the Company's fiscal period ended December 31, 1996, no options were
granted to Named Executive Officers
AGGREGATED OPTION EXERCISES DURING FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to the number and value of
options held by the Named Executive Officers as of December 31, 1996. The
Company does not have any outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Value of Number of Unexercised
Unexercised In-the-Money
Options/SARs at Option/SARs
Value FY-End (#) at FY-End ($)(1)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles S. Leavell -0- $-0- 0/0 $0/$0
Miles Silverman -0- $-0- 0/0 $0/$0
Howard Hamburg -0- $-0- 84,266/30,000 $296,502/$67,500
</TABLE>
(1) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal period end and the exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has Employment Agreements with several of its executive officers and
key employees, the material provisions of which are summarized as follows:
HOWARD HAMBURG. Effective April 1, 1994, the Company entered into an
Employment Agreement with Mr. Hamburg as Treasurer of Renaissance Pleasure
Faires, Inc. Effective April 28, 1995, Mr. Hamburg was also appointed the
Company's COO. Effective June 20, 1996, Mr. Hamburg resigned as COO and was
appointed a Vice President. The current Employment Agreement, which supersedes
the agreement dated April 1, 1994, has a term of one year from the date of
termination notice from the Company. His current annual salary is $110,250.
-26-
<PAGE>
KEVIN PATTERSON. Effective April 1, 1994, the Company entered into an
Employment Agreement with Mr. Patterson as Chief Executive Officer of
Renaissance Pleasure Faires, Inc. Effective August 29, 1994, Mr. Patterson was
also appointed a Vice President of the Company. The current Agreement, which
supersedes the agreement dated April 1, 1994, has a term of one year from the
date of termination notice from the Company. His current base salary is
$78,750.
BARBARA HOPE. On February 5, 1996, the Company entered into an Employment
Agreement with Ms. Hope in connection with the acquisition of Creative Faires,
Ltd. The Agreement has a term of two years and provides for a base salary of
$100,000.
DONALD C. GAITI. On February 5, 1996, the Company entered into an
Employment Agreement with Mr. Gaiti in connection with the acquisition of
Creative Faires, Ltd. The Agreement has a term of two years and provides for a
base salary of $100,000.
DIRECTOR COMPENSATION
During the fiscal period ended December 31, 1996, outside Directors, other than
Mr. Geller and Mr. Leavell, received no cash compensation for their services as
such, however they were reimbursed for their expenses associated with attendance
at meetings or otherwise incurred in connection with the discharge of their
duties as Directors of the Company. Directors who are also executive officers
of the Company receive no additional compensation for their services as
Directors.
GELLER AGREEMENT
Effective April 1, 1994, the Company appointed Robert M. Geller to serve as a
director of the Company and entered into an Agreement with him pursuant to which
the Company agreed to include his name on the slate of nominees to be elected to
serve as directors of the Company, and Mr. Geller consented to the inclusion of
his name as a nominee through the 1996 annual meeting of shareholders. Pursuant
to the terms of the agreement, Mr. Geller was granted non-qualified options
exercisable to acquire up to 83,333 shares of the Company's Common Stock at an
exercise price of $2.25 per share. Further, the Company has agreed to pay him
$300 for each Board of Directors meeting he attends and to reimburse him for
out-of-pocket expenses incurred in connection with attending those meetings.
The Company has also agreed to reimburse Mr. Geller for his out-of-pocket
expenses incurred in connection with his services rendered as a consultant to
the Company for which he also receives $75 an hour. Under this agreement, Mr.
Geller received $30,137 in the 1996 fiscal year and $9,421 in the nine-month
period ended December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Geller, Schwartz and Leavell.
Mr. Leavell, who is Chief Executive Officer and a director of the Company,
participates in all discussions and decisions regarding salaries, benefits and
incentive compensation for all employees of the
-27-
<PAGE>
Company, except discussions and decisions relating to his own salary, benefits
and incentive compensation.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, as of March 26, 1997, by:
(i) each of the directors of the Company, (ii) all officers and directors of the
Company as a group, and (iii) holders of 5% or more of the Company's Common
Stock. Each person has sole voting and investment power with respect to the
shares shown, except as noted.
Name and Address Percent of
Of Beneficial Owner Number of Shares Class (1)
- ------------------- ---------------- ---------
Charles S. Leavell 1,399,374 (2) 12.9%
1881 Ninth Street, Suite 319
Boulder, Colorado 80302
Robert M. Geller 226,666 (3) 2.1%
1402 Kalmia
Boulder, Colorado 80304
Sanford L. Schwartz 17,350 (4) *
5353 Manhattan Circle, #201
Boulder, Colorado 80303
Gregg Adam Thaler 0 *
909 Third Avenue; 7th Floor
New York, NY 10022
Dean Petkanas 0 *
100 Store Hill Road
Old Westbury, NY 11568
All Directors & 2,920,130 (5) 27%
Officers as a Group
(Nine [9] Persons)
* Less than one percent
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of March 24, 1997, or within 60 days
of such date, are treated as outstanding when determining the percent of
the class owned by such individual and when determining the percent owned
by the group.
-28-
<PAGE>
(2) Includes 1,020,000 shares of Common Stock held of record by Leavell
Management Group, Inc., a controlled corporation of Mr. Leavell who would
be deemed to exercise the voting and investment power with respect to the
securities held by LMG. 133,334 shares of Common Stock held of record by
LMG are subject to an option granted in favor of Mr. Leavell, exercisable
at a price of $.937 per share. Mr. Leavell disclaims beneficial ownership
of the securities held by LMG for purposes of Section 16 under the Exchange
Act.
(3) Includes non-qualified options to purchase 166,666 shares of Common Stock
at an exercise price of $1.125 per share and non-qualified options to
purchase 60,000 shares of Common Stock at an exercise price of $3.50 per
share.
(4) Includes 17,350 shares owned by Creative Business Strategies, Inc., a
corporation of which Mr. Schwartz is an officer, director and shareholder.
(5) Includes 226,666 shares issuable upon exercise of stock options exercisable
within 60 days of March 24, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CBSI CONSULTATION AGREEMENT
Sanford L. Schwartz was elected to serve as a member of the Company's Board of
Directors in April, 1993. Mr. Schwartz is President, Director and a principal
stockholder of Creative Business Strategies, Inc., ("CBSI"). The Company had a
Consultation Agreement with CBSI which expired December 31, 1996 pursuant to
which it performed financial and public relations services. In consideration of
those services, the Company agreed to pay CBSI a fee of $4,500 per month and
$200 per hour for services rendered in excess of 20 days per month. A total of
$36,000 was paid to CBSI during the nine months ended December 31, 1996,
pursuant this agreement.
CREATIVE FAIRES, LTD. AGREEMENT
On February 5, 1996, the Company, its newly-created and wholly-owned subsidiary
Cfaires Acquisition Corp., Creative Faires, Ltd., and Barbara Hope and Donald C.
Gaiti, the sole shareholders of Creative Faires, Ltd., entered into an Agreement
and Plan of Merger pursuant to which Cfaires Acquisition Corp. was merged with
and into Creative Faires, Ltd. In connection with the merger, Ms. Hope and Mr.
Gaiti received 540,000 shares of the Company's Common Stock, and the Company
became the sole shareholder of Creative Faires, Ltd. The Company also agreed to
employ Mr. Gaiti and Ms. Hope for two-year periods.
-29-
<PAGE>
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit No Title
---------- -----
3.0(i) Amended and Restated Articles of Incorporation, incorporated
by reference from the Amendment No. 1 to Registrant's
Registration Statement on Form 8-A filed with the Commission
on April 12, 1994.
3.0(ii) By-Laws, incorporated by reference from the Amendment No. 1
to Registrant's Registration Statement on Form 8-A filed
with the Commission on April 12, 1994.
* 3.1 Articles of Amendment to the Articles of Incorporation.
4.1 Specimen Certificate of Common Stock, incorporated by
reference from the Amendment No. 1 to Registrant's
Registration Statement on Form 8-A filed with the Commission
on April 12, 1994.
* 4.2 Specimen Class A Warrant Certificate.
* 4.3 Specimen Class B Warrant Certificate.
* 4.4 Warrant Agreement.
* 4.5 Certificate of Designations, Preferences, and Rights of
Series A Convertible Preferred Voting Stock of Renaissance
Entertainment Corporation.
* 4.6 Renaissance Entertainment Corporation 1993 Stock Incentive
Plan. (1)
10.1 Employment Agreement with Howard Hamburg, incorporated by
reference from the Registrant's Current Report on Form 8-K
dated December 31, 1995. (1)
10.2 Employment Agreement with Kevin Patterson, incorporated by
reference from the Registrant's Current Report on Form 8-K
dated December 31, 1995. (1)
** 10.3 Office Lease with Diana Wilkins dated August 15, 1996.
* 10.4 Consultation Agreement with Creative Business Strategies,
Inc. (1)
* 10.4 Letter Agreement with Rob Geller dated July 19, 1994. (1)
* 10.5 Agreement with The Living History Centre dated August 25,
1994.
-30-
<PAGE>
* 10.6 Specimen Vendor and Exhibitor Agreement for the Bristol
Renaissance Faire.
* 10.7 Specimen Vendor and Exhibitor Agreement for the Northern and
Southern Renaissance Pleasure Faires.
* 10.8 Specimen Bristol Renaissance Faire Concession Agreement.
* 10.9 Specimen Bristol Renaissance Faire Games Concession
Agreement.
* 10.10 License Agreement and Lease with San Bernardino County for
the Southern Renaissance Pleasure Faire site.
* 10.11 Investment Banking Agreement with Duke & Co., Inc.
10.12 Lease Agreement between Creative Faires, Ltd. and Sterling
Forest Corporation dated June 12, 1996 incorporated by
reference from the Registrant's Annual Report on Form 10-KSB
for the year ended March 31, 1996.
10.13 Mortgage dated April 7, 1995 with Bank One, Kenosha N.A.
with respect to Bristol Property, incorporated by reference
from the Registrant's Annual Report on Form 10-KSB for the
year ended March 31, 1996.
* 10.14 Employment Agreement dated February 5, 1996 with Barbara
Hope.
* 10.15 Employment Agreement dated February 5, 1996 with Donald C.
Gaiti.
10.16 Line of credit with Bank One, Wisconsin in the amount of
$250,000 dated February 6, 1996, incorporated by reference
from the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended December 31, 1995, filed with the
Commission on February 20, 1996.
10.17 Line of credit with Union Bank & Trust in the amount of
$250,000 dated December 29, 1995, incorporated by reference
from the Registrant's Quarterly Report on Form 10-QSB for
the quarter ended December 31, 1995, filed with the
Commission on February 20, 1996.
10.18 Commitment Letter for a line of credit with Bank One
Colorado in the amount of $750,000 dated January 26, 1996,
incorporated by reference from the Registrant's Quarterly
Report on Form 10-QSB for the quarter ended December 31,
1995, filed with the Commission on February 20, 1996.
10.19 Mortgage with Union Bank & Trust in the amount of $1,500,000
with respect to the Virginia property, incorporated by
reference from the Registrant's Annual Report on Form 10-KSB
for the year ended March 31, 1996.
-31-
<PAGE>
** 10.20 Loan Workout Agreement by and among Renaissance
Entertainment Corporation, Bank One, Colorado, N.A. and Bank
One, Kenosha, N.A.
21.0 Subsidiaries, incorporated by reference from the
Registrant's Annual Report on Form 10-KSB for the year ended
March 31, 1996.
** 23.1 Independent Auditor's Consent
** 27.0 Financial data schedule.
* Incorporated by reference from the Company's Registration Statement on
Form SB-2, declared effective by the Commission on January 27, 1995,
and the Post-Effective amendments thereto.
** Filed herewith.
(1) Indicates management contracts, compensation plans or arrangements
required to be filed as exhibits.
REPORTS ON FORM 8-K
The Registrant filed no Current Reports on Form 8-K during the final
quarter of the fiscal period ended December 31, 1996.
-32-
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
MARCH 31, 1995, MARCH 31, 1996 AND DECEMBER 31, 1996
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Page
Report of Independent Certified Public Accountants F-3
Audited Financial Statements:
Consolidated Balance Sheets F-4
Consolidated Statements of Operations F-5
Consolidated Statement of Changes in
Stockholders' Equity F-6
Consolidated Statements of Cash Flows F-8
Notes to Consolidated Financial Statements F-9
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Renaissance Entertainment Corporation
and Consolidated Subsidiary
We have audited the combined balance sheet of Renaissance Entertainment
Corporation and Consolidated Subsidiary as of March 31, 1996 and December 31,
1996 and the related consolidated statements of operations and changes in
stockholders' equity, and cash flows for the nine month period ended December
31, 1996 and for the years ended March 31, 1995 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Renaissance Entertainment
Corporation and Consolidated Subsidiary as of March 31, 1996 and December 31,
1996 and the combined results of operations, changes in stockholders' equity and
cash flows for the nine period ended December 31, 1996 and the years ended March
31, 1995 and 1996 in conformity with generally accepted accounting principles.
Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
March 31, 1997
F-3
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, December 31,
1996 1996
------------ ------------
Current Assets:
Cash and equivalents $ 631,063 $ 374,289
Income tax refunds receivable (Note 6) 323,380 -
Stock subscription receivable (Note 13) - 133,749
Accounts receivable, net of allowance
for doubtful accounts of $8,341 69,434 99,551
Inventory, at lower of cost or market 116,221 184,695
Prepaid expenses and other current assets 979,769 139,167
------------ ------------
Total Current Assets 2,119,867 931,451
Property and equipment, net of accumulated
depreciation of $1,372,060 and $1,982,765
at March 31, 1996 and December 31, 1996
respectively (Note 7) 5,156,217 7,176,755
Construction in progress 1,080,895 -
Goodwill, net of accumulated amortization
of $160,960 and $206,410 at March 31,
1996 and December 31, 1996
respectively (Note 5) 1,046,285 620,826
Covenant not to compete, net of
accumulated amortization of $40,000
and $55,000 at March 31, 1996 and
December 31, 1996 respectively (Note 5) 60,000 45,000
Restricted cash (Note 11) 848,296 890,116
Other assets 121,909 208,201
------------ ------------
Total Assets $ 10,433,469 $ 9,872,349
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,181,090 $ 1,068,028
Notes payable, current portion (Note 3) 437,956 1,209,119
Unearned income 485,798 160,588
------------- ------------
Total Current Liabilities 2,104,844 2,437,735
Notes payable, net of current
portion (Note 3) 2,531,187 2,341,987
Other - 37,175
------------- ------------
Total Liabilities 4,636,031 4,816,897
------------- ------------
Commitments (Notes 3, 4, 8 and 12) - -
Stockholders' Equity (Notes 2, 8, 10, 12 and 13):
Preferred stock, $1.00 par value, 1,000,000
shares authorized, none issued and
outstanding - -
Common stock, $.03 par value, 50,000,000
shares authorized, 8,721,706 and
9,233,772 issued and outstanding
at March 31, 1996 and December 31, 1996
respectively 130,826 277,013
Additional paid-in capital 7,108,082 8,071,634
Accumulated (deficit) (1,441,470) (3,293,195)
------------- ------------
Total Stockholders' Equity 5,797,438 5,055,452
------------- ------------
Total Liabilities and Stockholders' Equity $ 10,433,469 $ 9,872,349
------------- ------------
------------- ------------
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Month
Year Ended Year Ended Period Ended
March 31, March 31, December 31,
1995 1996 31, 1996
------------- ------------ --------------
<S> <C> <C> <C>
REVENUE:
Sales $12,539,653 $ 12,810,617 $14,553,577
Faire operating costs 3,212,491 3,826,868 4,812,616
------------- ------------ ------------
Gross Profit 9,327,162 8,983,749 9,740,961
------------- ------------ ------------
OPERATING EXPENSES:
Salaries and wages 3,474,799 4,082,271 4,048,603
Depreciation and amortization 351,215 500,203 633,819
Advertising 1,211,798 1,546,701 2,511,973
Other operating expenses 3,532,508 4,329,713 4,300,062
------------- ------------ ------------
Total Operating Expenses 8,570,320 10,458,888 11,494,457
------------- ------------ ------------
Net Operating Income (Loss) 756,842 (1,475,139) (1,753,496)
------------- ------------ ------------
Other Income (Expenses):
Interest income 48,132 109,652 68,571
Interest (expense) (53,223) (138,036) (253,740)
Other income (expense) (28,327) 36,049 86,940
------------- ------------ ------------
Total Other Income (Expenses) (33,418) 7,665 (98,229)
------------- ------------ ------------
Net Income (Loss) before (Provision)
Credit for Income Taxes 723,424 (1,467,474) (1,851,725)
(Provision) Credit for Income Taxes (147,000) 193,803 -
------------- ------------ ------------
Net Income (Loss) 576,424 (1,273,671) (1,851,725)
------------- ------------ ------------
Dividends on preferred stock (43,115) - -
------------- ------------ ------------
Net Income (Loss) to Common
Stockholders $ 533,309 $ (1,273,671) $(1,851,725)
------------- ------------ ------------
------------- ------------ ------------
Net Income (Loss) per Common Share $ .11 $ (.16) $ (.21)
------------- ------------ ------------
------------- ------------ ------------
Weighted Average Number of
Shares Outstanding 4,801,044 7,824,182 8,907,049
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
From March 31, 1994 through December 31, 1996
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
--------------------
Shares Amount Capital (Deficit) Total
----------- ------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1994 2,664,356 $ 79,930 $ 795,994 $ (631,226) $ 244,698
Common stock issued, private
placements and acquisition of assets
2,070,050 62,102 835,709 - 897,811
Common stock issued, public offering,
net of offering costs of $646,056
2,070,000 62,100 2,914,344 - 2,976,444
Common stock issued in exchange for
preferred stock issued
583,334 17,500 794,695 - 812,195
Preferred dividends - - - (43,115) (43,115)
Net income for the year ended March
31, 1995, excluding loss of $48,185
of CFL included in accumulated
deficit below - - - 624,609 624,609
------------ ------------ ------------- ------------ -----------
Balance March 31, 1995 7,387,740 221,632 5,340,742 (49,732) 5,512,642
Treasury stock acquired and retired (20,626) (618) (81,886) - (82,504)
Common stock issued for cash 814,592 24,438 1,547,809 - 1,572,247
Common stock issued for CFL 540,000 16,200 170,591 (118,067) 68,724
Net Loss for the year ended March 31,
1996 - - - (1,273,671) (1,273,671)
------------ ------------ ------------- ------------ -----------
Balance March 31, 1996 8,721,706 261,652 6,977,256 (1,441,470) 5,797,438
Exercise of Class A warrants at $2.00 125,328 3,760 246,896 - 250,656
per share
Exercise of Class B warrants at $2.63
per share 34,000 1,020 88,230 - 89,250
Exercise of stock options 324,998 9,749 610,224 - 619,973
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
--------------------
Shares Amount Capital (Deficit) Total
----------- ------------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of stock for services 27,740 832 151,118 - 151,950
Fees incurred in connection with
exercising warrants - - (2,090) - (2,090)
Net loss for the nine month period
ended December 31, 1996 - - - (1,851,725) (1,851,725
------------ ------------ ------------- ------------ -----------)
Balance December 31, 1996 9,233,772 $ 277,013 $ 8,071,634 $(3,293,195) $ 5,055,452
------------ ------------ ------------- ------------ -----------
------------ ------------ ------------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months
Year Ended Year Ended Ended
March 31, March 31, December 31,
------------ ----------- ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $ 576,424 $(1,273,671) $(1,851,725)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 351,214 500,200 633,819
Impairment of goodwill - - 380,000
(Increase) decrease in:
Income tax refund receivable - (323,380) 323,380
Accounts receivable (50,124) (19,310) (163,866)
Prepaid expenses (570,332) (396,276) 840,602
Inventory (82,900) (33,321) (68,474)
Other assets (47,657) (38,811) (86,292)
Increase (decrease) in:
Income taxes payable 48,175 (48,175) -
Accounts payable and accrued
expenses 274,940 742,368 (113,062)
Unearned revenue and other 322,083 42,681 (294,030)
------------ ----------- ------------
Net Cash Provided by Operating
Activities 821,823 (847,695) (399,648)
------------ ----------- ------------
Cash Flows from Investing Activities:
Investment in restricted cash - (848,296) (41,820)
Repayment of advances 351,150 - -
Construction in progress costs - (1,046,285) 1,080,895
Acquisition of property and
equipment, goodwill and covenant
not to compete (896,551) (3,873,738) (2,587,903)
------------ ----------- ------------
Net Cash (Used in) Investing
Activities (545,401) (5,768,319) (1,548,828)
------------ ----------- ------------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 3,403,450 1,489,743 1,109,739
Preferred dividends paid (43,115) - -
Advances from officers 60,500 - -
Proceeds from notes payable - 2,518,018 1,000,000
Principal payments on notes
payable (438,793) (59,429) (418,037)
------------ ----------- ------------
Net Cash Provided by (Used in)
Financing Activities 2,982,042 3,948,332 1,691,702
------------ ----------- ------------
Net Increase (Decrease) in Cash 3,258,464 (2,667,682) (256,774)
Cash, beginning of period 40,281 3,298,745 631,063
------------ ----------- ------------
Cash, end of period $ 3,298,745 $ 631,063 $ 374,289
------------ ----------- ------------
------------ ----------- ------------
Interest paid $ 54,506 $ 112,248 $ 268,605
------------ ----------- ------------
------------ ----------- ------------
Income tax paid $ 98,825 $ 237,752 $ -
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
Note: The Company issued common and preferred stock for assets totalling
$1,408,000 during the year ended March 31, 1995. During the year ended March
31, 1996 the Company issued 270,000 shares of its common stock to consummate the
business combination with CFL.
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Renaissance
Entertainment Corporation (Company) (REC) is presented to assist in
understanding the Company's financial statements. The financial statements
and notes are representations of the Company's management who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
(a) GENERAL
REC was incorporated under the laws of the State of Colorado on June 24,
1988. On April 6, 1993, REC acquired one hundred percent of the common
stock of Ellora Corporation, a Wisconsin corporation which owns and
operates the Bristol Renaissance Faire located in Kenosha, Wisconsin. In
the acquisition, REC issued a total of 1,784,800 shares of common stock to
the shareholders of Ellora Corporation, representing ninety-one percent of
the total issued and outstanding shares of REC following the exchange. The
acquisition was accounted for as a reverse acquisition since the
controlling shareholders of Ellora became the controlling shareholders of
REC. During the year ended March 31, 1994 REC formed a wholly-owned
subsidiary called Heroes and Villains, Ltd. This entity was formed to
provide entertainment services and had limited activity during the year.
During February, 1994 REC formed Renaissance Pleasure Faires, Inc. (RPFI)
for the purpose of acquiring the assets and the business of two Renaissance
Faires in California. In connection with this acquisition and the
formation of RPFI, the Company issued 1,136,666 shares of its common stock
and 875,000 shares of Series A Convertible Preferred Voting Stock and
assumed certain liabilities and guaranteed certain lease obligations of the
seller. The preferred shares were later exchanged for common stock. Of
the common shares issued, 524,000 common shares were issued to the seller
and 612,666 common shares were issued to shareholders of Western
Renaissance Fair Presentation, Inc. (Western) a newly formed California
corporation, formed for the purpose of providing management services to
operators of renaissance festivals.
Western was owned by certain employees of the seller. Subsequent to its
acquisition, Western was merged into a
F-9
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(a) GENERAL
subsidiary of REC. For accounting purposes, the acquisition of the
California Faires net assets and business and the acquisition of Western
was treated as one combined acquisition with the excess of cost over fair
value of net assets acquired accounted for as goodwill. The preferred
shares had an annual 6% dividend provision payable monthly in arrears. The
preferred shares had equal voting rights per share as the common shares
outstanding (583,334 votes after giving effect to the reverse common stock
splits described in note 10). The preferred shares had a conversion
provision that they could be converted by the holders at any time during
the first two years into common stock on a one-for-three basis. REC had
the right at any time to redeem these shares at $1.00 per share. During
January, 1995 these preferred shares were converted to 583,334 shares of
common stock. The Company also forgave loans to the seller totalling
$62,805 which reduced additional paid-in capital related to this conversion
transaction. Prior to conversion, the Company paid dividends totalling
$43,115 related to these preferred shares. All documents related to this
closing and all shares issued were signed and dated in March, 1994. The
bill of sale related to the transfer of the assets was effective April 1,
1994. In connection with this transaction, certain controlling
shareholders have entered into a stock pooling and voting agreement
requiring the voting for certain individuals to serve as directors of the
Company. In connection with this acquisition, the Company incurred
approximately $50,000 of legal and professional fees and issued 233,066
shares of common stock valued at $72,833 for consulting services related to
assistance with negotiations regarding the acquisition. The business
combination as of April 1, 1994 was accounted for as a purchase by REC.
See Note 10 for additional information related to this business
combination.
Effective December 31, 1995 REC acquired 100% ownership of Creative Faires,
Ltd. (CFL) in exchange for the issuance of 540,000 restricted common shares
of REC stock. REC entered into employment agreements with the two former
owners of CFL and one of the two former owners became a director of REC.
The business combination with CFL was accounted for as a pooling of
interests. The Company changed its year end to December 31. The March 31,
1996 consolidated balance sheet
F-10
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(a) GENERAL
includes the accounts of CFL as of December 31, 1995 and the consolidated
accounts of REC and subsidiaries as of March 31, 1996. The consolidated
statements of operations and cash flows include the accounts of CFL for the
two years ended December 31, 1995 and the consolidated accounts of REC and
subsidiaries for the two years ended March 31, 1996. The consolidated
statements of operations and cash flows include the accounts of CFL for the
year ended December 31, 1996 and accounts of REC for the nine month period
ended December 31, 1996. During the three month period ended March 31,
1996, REC loaned $141,179 to CFL which was not eliminated in the
consolidated financial statements because of the different year ends. The
majority of the advances to CFL were used for start-up costs for the
upcoming New York Faire described in note 9. The $141,179 has been
included with prepaid expenses in the March 31, 1996 consolidated balance
sheet.
All subsidiaries of the Company were merged into REC as of March 31, 1996
with the exception of Creative Faires, Ltd.
All references to the "Company" refer to REC and its subsidiaries. All
intercompany transactions and account balances have been eliminated in the
financial statements other than as noted above.
(b) PER SHARE INFORMATION
Per share information is determined using the weighted average number of
shares outstanding during the periods after giving effect to the common
stock splits described in note 10.
(c) PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed using principally accelerated
methods over the useful lives of the assets ranging from three to
thirty years.
(d) REVENUE AND EXPENSE RECOGNITION AND COST OF SALES
The Company recognizes revenues from the renaissance fairs as earned during
the period when the fairs are in operation.
F-11
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(d) REVENUE AND EXPENSE RECOGNITION AND COST OF SALES
These revenues consist principally of gate entrance fees, food and beverage
concessions sales, lease revenue and fees charged to craft vendors. At
various dates subsequent to the end of the operation of the prior years
fairs, and prior to the opening of the next years fairs, the Company
receives deposits from the craft vendors and others. These deposits are
carried as unearned revenue until applied to fees charged and then earned
on a pro-rata basis during the operation of the fair.
Cost of sales as shown in the statement of operations includes all direct
costs associated with the production of the Renaissance Faire, including
cost of food, beverage and merchandise sold, labor costs for seasonal help
and other direct costs of the production. All other expenses related to
operation of the fair are shown as operating expenses in the statement of
operations.
Advertising costs are expensed as incurred. Direct costs related to the
setting up of the fairs are capitalized as prepaid expenses and expensed
during the period of the operation of the applicable fairs. Also, included
in prepaid expenses at March 31, 1996 is $141,179 of advances from REC to
CFL. CFL has a December 31 year end and REC has a March 31 year end.
These advances relate principally to cost related to setting up the New
York Faire but also include operating expenses which apply to the short
period after the CFL year end. See a description above of the business
combination with CFL accounts for a pooling of interest.
(e) STOCK SPLIT
During the fiscal year ended March 31, 1995, the Company effected a one-
for-three reverse stock split and changed the par value of the common stock
from $.01 to $.03 per share. During the period ended December 31, 1996,
the Company effected a two-for-one stock split. The financial statements
were retroactively adjusted for this split.
(f) CONCENTRATIONS OF CREDIT RISKS
Financial instruments that potentially subject the company to
concentrations of credit risk consist principally of temporary
F-12
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(f) CONCENTRATIONS OF CREDIT RISKS
cash investments and cash equivalents and trade accounts receivables. At
March 31, 1996 and December 31, 1996 respectively, the Company had
approximately $1,370,000 and $1,065,000 of its cash and cash equivalents in
financial institutions in excess of amounts insured by agencies of the U.S.
Government. Most of the trade receivables are from customers in one
geographic location, principally California. The Company does not require
collateral for its trade accounts receivables.
(g) CASH EQUIVALENTS
The Company considers all short term investments in securities that mature
in 90 days or less to be cash equivalents.
(h) INVENTORY
The Company's inventory consists principally of merchandise held for sale.
The Company carries its inventory at the lower of cost or market. Cost is
determined on an average cost basis.
(i) ALLOWANCE FOR BAD DEBTS
The Company provides an allowance for bad debts based on prior collection
experience.
(j) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
F-13
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(k) GEOGRAPHIC AREA OF OPERATIONS AND INTEREST RATES
The Company owns and operates Renaissance Faires principally in five major
metropolitan areas of the U.S.A. The potential for severe financial impact
can result from negative effects of economic conditions within the markets
or geographic areas. Since the Company's business is principally in five
areas, this concentration of operations results in an associated risk and
uncertainty.
(l) CONSTRUCTION IN PROGRESS
As of March 31, 1996 the Company had incurred $1,080,895 of construction
costs related to the Company building a fair site in Virginia. These
construction costs incurred consisted of buildings and land improvements.
The construction was completed subsequent to March 31, 1996.
(m) IMPAIRMENT OF LONG-LIVED ASSETS
The Company determined that the goodwill associated with its acquisition of
the California Faires net assets and its acquisition of Western was
impaired after estimating the expected gross profit from future revenues as
compared to the net book value. The Company wrote down the intangible
assets by $380,000 through a charge to other operating expenses during the
period December 31, 1996.
(2) COMMON AND PREFERRED STOCK
The Articles of Incorporation of the Company authorize issuance of a
maximum of 50,000,000 shares of $.03 par value common stock and 1,000,000
shares of $1.00 par value preferred stock. See note 1 for a description of
the preferred stock issued and then subsequently converted to common stock.
During January, 1995 the Company sold in a public offering 1,035,000 units
of its securities at $3.50 per unit. Each unit consisted of one share of
common stock and one Class A warrant and one Class B warrant. Each Class A
warrant entitles the warrant holder thereof to purchase one share of common
stock at a price of $4.00 per share through January 27, 2000. Each Class B
warrant entitles the holder thereof to
F-14
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(2) COMMON AND PREFERRED STOCK, CONTINUED
purchase one share of common stock at a price of $5.25 per share through
January 27, 2000. These warrants were immediately exercisable. The
warrants are redeemable by the Company after 24 months from January 27,
1995, the date of the prospectus, or sooner with the consent of the
Underwriter, at a price of $.01 per warrant upon 30 days' notice mailed
within ten days after the closing bid price of the Company's common stock
has equaled or exceeded 150% of the then current respective warrant
exercise price for a period of 20 consecutive trading days. The holders of
the warrants called for redemption are granted exercise rights until the
close of business on the date preceding the date fixed for redemption.
The Company incurred $646,056 of costs related to this offering. These
offering costs have been offset against the proceeds of the offering.
(3) NOTES PAYABLE
Notes payable at December 31, 1996 and March 31, 1996 are summarized as
follows:
March 31, December 31,
1996 1996
-------------- -------------
Note payable to bank at 8.65%,
interest quarterly until June, 1996
then monthly principal and interest
payment of $5,082 through May, 2011
collateralized by land, improvements
and jumbo CD's. See note 11. $ 1,500,000 $1,475,950
Note payable to bank at 9.5%, 60
equal monthly payments of $5,251
through March, 2001 collateralized
by land, improvements and jumbo
CD's. See note 11. 250,000 219,605
Mortgage payable to Bank One Kenosha
at 9.5 % at March 31, 1996 and 9.25%
at 9.25% at December 31, 1996;
interest quarterly, two annual
payments of $100,000 each with a
balloon payment of $700,000 due
January, 1998; collateralized by land
and improvements. 900,000 800,000
F-15
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(3) NOTES PAYABLE, CONTINUED
Note payable to Bank One Colorado at
the bank reference rate plus 1%, 9.25%
at December 31, 1996, due September 1,
1996; collateralized by inventory,
accounts and equipment. - 746,132
Note payable to Bank One Kenosha at
the bank reference rate plus 2% with a
minimum rate of 10.25%; interest paid
monthly with the balance due September
1996, extended to December 15, 1997;
collateralized by equipment, fixtures
and inventory. 250,000 250,000
Various notes payable to financial
institutions collateralized by certain
vehicles. Payable in monthly
installments of principal and interest;
final payments due in 2000, interest
ranging from 10% to 12%. 69,144 59,419
-------------- --------------
Total 2,969,144 3,551,106
Less current portion 437,957 1,209,119
-------------- --------------
Long-term portion $2,531,187 $2,341,987
-------------- --------------
-------------- --------------
In March 1997, the Company entered into a loan workout agreement with Bank
One Colorado and Bank One Kenosha (Bank One Wisconsin). The agreement
provides that the Company make principal payments of $50,000 each to Bank
One Colorado and Bank One Wisconsin. Upon execution of this agreement, the
Company executed a real estate mortgage in favor of Bank One Colorado
subordinated to the Bank One Wisconsin's mortgage. Bank One Colorado
agreed to subordinate its mortgage to a potential new loan from a third
party lender to the Company in the amount of from $750,000 to $1.5 million,
so long as the new loan is funded prior to June 1, 1997 and the Company is
not otherwise in default under the loans. As part of this agreement, Bank
One Colorado changed the terms of its loan agreement to provide the Company
interest monthly on its loan starting April 30, 1997 with principal
payments of $150,000 on June 30, 1997, $200,000 on July 31, 1997, $250,000
on August 31, 1997 and final principal payment of $90,189 on September 30,
1997. Additionally Bank One Wisconsin modified the terms of its loan
agreement to provide for monthly interest payments starting April 30, 1997
with four monthly principal payments
F-16
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(3) NOTES PAYABLE, CONTINUED
of $50,000 starting June 30, 1997. If the Company complies with all terms
of this agreement, Bank One Wisconsin agrees to renew its real estate
mortgage to provide for quarterly principal payments of $50,000 beginning
in March of 1998 with the remaining balance due and payable in December
1998. The Company agreed, if it obtains alternative financing in excess of
$2.5 million during calendar year 1997, then the Company will immediately
pay off all amounts then due and owing Bank One Colorado and Bank One
Wisconsin, excluding the Bank One Wisconsin mortgage.
Maturities of notes payable for each of the next five fiscal years ending
December 31 and in the aggregate thereafter, are as follows:
1997 $ 1,210,214
1998 2,188,583
1999 66,108
2000 68,807
2001 17,394
-------------
$ 3,551,106
-------------
-------------
(4) LEASES
The Company leases a vehicle under a four year lease which commenced June
8, 1992 with monthly lease payments of $336. Effective April 1, 1995 the
Company entered into an operating lease at 4440 Arapahoe in Boulder,
Colorado for office facilities. Initial monthly rental payments are $3,066
with annual increases of 5% per annum. Commencing November 1, 1996, the
Company leased additional office space at 4410 Arapahoe in Boulder,
Colorado and subleased its original office space at 4440 Arapahoe. This
lease provides initial monthly lease payments of $5,969 increasing to
$7,255 for the five year term of the lease. In addition the Company will
be allocated certain operating expenses. The Company also leases various
other properties in New York with terms expiring through the year 2001.
Annual lease payments on the New York Faire site range from approximately
$270,000 to $312,000 over the next five years.
Future minimum rentals under all operating leases with terms exceeding
twelve months are as follows:
F-17
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(4) LEASES, CONTINUED
Year Ending
December 31,
1997 436,177
1998 456,623
1999 476,237
2000 468,370
2001 79,807
-----------
Total $1,917,214
-----------
-----------
Effective January 1, 1997, the Company entered into a three year sublease
agreement to sublease its old office space at 4440 Arapahoe. The sublessee
assumes every obligation of the Company under its lease. The Company
remains liable under its lease.
Future minimum sublease rentals are as follows:
Year ending
December 31,
1997 $ 28,979
1998 30,428
1999 31,949
2000 24,849
2001 -
-----------
Total $ 116,205
-----------
-----------
Rent expense for the nine month period ended December 31, 1996 and for the
years ended March 31, 1995 and 1996 totalled approximately $431,292,
$404,495 and $788,375, respectively.
(5) GOODWILL AND COVENANT NOT TO COMPETE
The cost of the acquisition of the California Faire assets and business as
described in Notes 1 and 10 in excess of the fair value of assets acquired
has been recorded as goodwill in the accompanying financial statements.
Goodwill is being amortized on a straight-line basis over fifteen years.
Management reviews the carrying value of goodwill on a periodic basis, at
least annually, to determine if there is any impairment in value. If
management determines that the carrying value is not recoverable over the
remaining amortization term, the excess balance, if any, will be expensed.
During the period ended December 31, 1996, the Company determined that the
goodwill was impaired and wrote off $380,000 as a charge to other operating
expenses. As of
F-18
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(5) GOODWILL AND COVENANT NOT TO COMPETE, CONTINUED
March 31, 1996 and December 31, 1996 the Company's net carrying value for
goodwill was $1,046,285 and $620,826 after amortization and write down of
$160,960 and $586,419 respectively.
In addition, the Company allocated $100,000 for certain covenants not to
compete for certain officers and employees of The Living History Centre
related to the asset and business acquisition. These covenants not to
compete are being amortized on a straight-line basis over five years.
(6) INCOME TAXES
The Company files income tax returns with its subsidiaries.
During the year ended March 31, 1995 the Company utilized loss carryovers
to offset taxable income totalling approximately $386,000 resulting in
realization of tax benefits of approximately $154,000. During the year
ended March 31, 1996 the Company incurred an operating loss resulting in a
carryback to prior years. As of March 31, 1996 the Company had income tax
refunds receivable resulting from the carryback and refunds receivable from
excess estimated payments which together totalled $323,380.
As of December 31, 1996, there are no current or deferred income taxes
payable. As of December 31, 1996, the Company has total deferred tax
assets of approximately $450,000 due to operating loss carryforwards and
the depreciation timing differences described above. However, because of
the uncertainty of potential realization of these tax assets, the Company
has provided a valuation allowance for the entire $450,000. Thus, no tax
assets have been recorded in the financial statements as of December 31,
1996.
The Company has available at December 31, 1996, unused operating loss
carryforwards of approximately $3,251,725 which may be applied against
future taxable income, expiring in various years through 2012.
F-19
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(7) PROPERTY AND EQUIPMENT
Land $3,415,798
Buildings and Improvements 3,018,450
Office Furniture and Equipment 490,975
Costumes, Props and Other Assets 2,180,297
------------
Sub-total 9,105,520
Less Accumulated Depreciation (1 928,765)
------------
Total $7,176,755
------------
------------
(8) WARRANTS ISSUED FOR SERVICES AND STOCK OPTIONS
In January, 1994 the Company issued warrants to purchase an aggregate of
266,666 shares of the Company's common stock at an exercise price of $1.87
per share. These warrants were issued pursuant to a Form S-8 registration
statement for various consulting services. These warrants were exercised
during the year ended March 31, 1995. These 266,666 warrants
were valued at $.15 per warrant and expensed in the total amount of $40,000
in the financial statements.
Pursuant to the Company's stock option plans, the Company has granted
options to acquire 1,081,318 shares of the Company's common stock. Of this
amount 133,724 options have been exercised and 11,998 have expired during
the year ended March 31, 1996. The options are exercisable at prices
ranging from $1.13 per share to $3.50 per share. During the period ended
December 31, 1996, 105,000 options were granted with a weighted average
price of $5.74, 452,558 options were exercised at a weighted average price
of $1.87 and 161,998 options terminated with a weighted average price of
$4.09. The remaining number of options outstanding at December 31, 1996
totalled 571,762 with a weighted average price of $2.60 which are
exercisable at various dates through 2001.
(9) BUSINESS COMBINATION, NEW YORK FAIRE
Effective December 31, 1995 the Company issued 540,000 shares of its
restricted common stock for 100% ownership of Creative Faires, Ltd. (CFL)
The transaction was accounted for as a pooling of interests as described in
note 1. CFL principally conducted a New York Faire.
REC and consolidated subsidiaries previously reported revenue of
$10,459,476 and net income of $624,609 during the year ended March 31,
1996. The revenues and net loss of CFL
F-20
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(9) BUSINESS COMBINATION, NEW YORK FAIRE, CONTINUED
included in the combined statement of operations for the year ended March
31, 1995 amounted to $2,081,177 and $(48,185), respectively. Revenues of
$2,308,378 and a net loss of $(37,756) of CFL, incurred prior to the
business combination have been included in the combined statement of
operations for the year ended March 31, 1996.
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES
Effective April 1, 1994 the Company acquired the assets and certain
liabilities of The Living History Centre, (LHC) a California, not-for-
profit corporation. The Company issued 1,136,666 shares of its common
stock and 875,000 shares of its preferred stock as consideration for the
net assets acquired. The preferred stock was converted into common stock
during January, 1995. In addition to acquiring certain assets and
liabilities of LHC, the Company has acquired the rights to operate two
California Renaissance Faires.
See Note 1 financial statements for additional information related to the
business combination. The transaction was accounted for as a purchase by
REC. The results of operations of the LHC Faire operations are
included in the income statement of REC commencing April 1, 1994. The
cost of this acquisition was approximately $2,534,000, including
assumption of liabilities and issuance of the common and convertible
preferred stock.
The following table shows the allocation of the purchase price assets:
Cash $ 63,000
Prepaid faire costs 318,000
Inventory 56,000
Accounts receivable 87,000
Property and equipment 664,000
Covenant not to compete 100,000
Goodwill 1,207,000
Other assets 39,000
-------------
$ 2,534,000
-------------
-------------
Liabilities assumed 640,000
Preferred stock issued 875,000
Common stock issued 533,000
Cash advanced and acquisition
expenses incurred 486,000
-------------
$ 2,534,000
-------------
-------------
F-21
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES, CONTINUED
Assets and liabilities acquired or assumed were recorded at estimated fair
value at April 1, 1994 the date of acquisition.
The amount assigned to the common stock was $532,812 ($.9375 per share)
approximately one half of the market trading price of the Company's common
stock as of April 1, 1994. This value was used due to the large number of
shares and their restrictive nature. LHC, a non-profit corporation,
obtained an appraisal of its business for the purpose of determining an
approximate valuation necessary to obtain regulatory approval for sale of
its assets. Although this appraisal indicated a valuation in an amount
such that the common stock of REC exchanged for the certain net assets and
the business of LHC would have been recorded at $1.56 per share, management
of REC did not believe that such a valuation was appropriate under the
circumstances. The appraiser based the valuation on projected net income
from the California Faires of $500,000 per year. The California Faires
have not been historically profitable and to assume that the Faires will
earn $500,000 per year is, as explained in the appraisal, inherently
highly speculative. Therefore, management believes that the appraisal
is unsuitable for determining a value of the business acquired.
Management gave consideration to the following transactions and events
when it determined the appropriate valuation of the shares issued in the
acquisition:
a. In the fall of 1993, the Company sold 253,334 shares at a cash price
of $.75 per share. Following this private offering of a small number
of shares, the Company incurred substantial operating losses and
accumulated deficits.
b. For the two years prior to their acquisition, the two California
Renaissance Faires had generated substantial net operating loss of
$(869,953) and $(928,569) in the years 1992 and 1993, respectively.
c. In August 1994, the Company sold in a private offering 800,000 shares
at a price of $.30 per share, principally to raise working capital to
cover the anticipated cost of the public offering.
d. The public market of the Company's common stock was highly illiquid,
with only 300,000 shares in the public float eligible for trading.
Management believes that the price of $1.875 per share of the
publicly-traded shares was not indicative of the fair market value of
substantially larger blocks of restricted shares.
F-22
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES, CONTINUED
e. The Company issued 77,688 shares and warrants to purchase an
additional 133,334 shares at an exercise price of $.9375, to an entity
affiliated with a director of the Company. The shares and the
exercise price of the warrants were valued at 100% of the public
trading price due to (I) the transaction having been between the
Company and a related party, and (ii) the fact that the shares were
registered on a Form S-8 which rendered them free-trading.
f. The Company has granted to executive officers and key employees
incentive stock options at an exercise price of $1.875 per share. In
order to qualify as incentive stock options under Section 422 of the
Internal Revenue Code, the options must be priced at 100% of the
public trading market of the Company's common stock.
Management believes that recording the shares issued for the LHC
acquisition at 50% of the publicly traded value is reasonable, appropriate
and normal for this large of a block of restricted securities. Goodwill is
being amortized on a straight-line basis over a fifteen year period and the
covenant not to compete is being amortized on a straight-line basis over a
five year period. The Company believes that a 15 year estimated life over
which goodwill is being amortized is reasonable due to the fact the
California Faires have been in existence approximately 30 years and the
fact that the average life of other currently successful Renaissance Faires
in the United States is over 15 years and there is no reason to believe
that those Faires will not be in existence for another 15 years.
It is the Company's policy that management on a periodic basis, at least
quarterly, will evaluate the Carrying value of goodwill and other
intangibles to determine if there is an impairment of value or the
remaining estimated life is less than the remaining unamortized period. If
the evaluation indicates write-downs or adjustments to the amortization are
necessary, such write-downs or adjustments will be made immediately.
(11) RESTRICTED CASH
Certificates of Deposit in the amount of $890,116 at December 31, 1996 are
collateral to an 8.65% and a 9.5% loan maturing
F-23
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(11) RESTRICTED CASH, CONTINUED
in 2011 and 2001, respectively, and Certificates of Deposit totalling
$275,000 may be released annually beginning March 1, 1997 and each year
thereafter provided that projected net operating income goals are realized
in each of the three operating seasons commencing in 1996. If the
Certificates of Deposit have not been released for any of the previous
years but the projected income goal for the current year is reached,
the Certificates of Deposit for the previous year and the current year
shall be released. If projected goals are not reached by year three, then
the certificates shall be released in any subsequent year that the third
year goal amount is reached.
(12) COMMITMENTS AND SUBSEQUENT EVENTS
Effective December 16, 1994 the Company entered into an agreement with a
consulting firm to provide to the Company certain promotional services for
the Company's fairs. The Company has agreed to pay commissions to the
consulting firm of 17.65% of the actual net billings by advertisers for
media placed pursuant to plans approved by the Company. The Company has
also agreed to pay $7,500 per month for the five year term of the
agreement. The Company has also granted an option to the consulting firm
to allow the firm to acquire a minimum of 66,000 and a maximum of 132,000
shares of the Company's common stock at $1.625 per share with the increase
depending on the results of the services performed by the consulting firm.
Effective October 1, 1994 the Company entered into a consulting agreement
with a company owned by a director of Renaissance Entertainment
Corporation. The Company has agreed to pay the consulting company $4,500
per month for twenty hours per month for services. Additional hours will
be compensated at $200 per hour. The term of the agreement continues until
December 31, 1996. Effective April 1, 1995 the Company agreed to pay
$4,000 per month for consulting services to a director of the Company which
expired effective December 31, 1995. The Company also has a consulting
agreement with another company that is owned by a director of the Company.
This agreement is for $75 per hour plus $300 per Board meeting and can be
terminated at any time.
On August 1, 1996, the Company entered into a one year agreement with a
consultant. The agreement provides that the Company pay the consultant a
fee equal to 5% of any debt or
F-24
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(12) COMMITMENTS AND SUBSEQUENT EVENTS, CONTINUED
equity infusion to the Company initiated or introduced to the Company by
the consultant. Additionally, the Company will pay the consultant a fee
equal to 5% of the total value of the merger or acquisition, including the
value of stock, cash and other assets of the merged entities.
Subsequent to December 31, 1996 the Company issued 54,738 shares of its
common stock as payment of the Company's liabilities.
During the year ended March 31, 1995 the Company adopted a non-qualified
deferred compensation plan for ten employees of the Company. Monthly
contributions to the plan total approximately $3,500. Beginning April 1,
1996 monthly contributions are approximately $1,152.
(13) STOCK SUBSCRIPTIONS RECEIVABLE
At December 31, 1996 the Company had stock subscriptions receivable in the
amount of $133,749 which was collected in full in January, 1997.
(14) SUBSEQUENT EVENTS
The Company incurred substantial losses from operations during 1995 and
1996 and incurred significant cost overruns in the construction of its
Virginia faire. As described in note 3, the Company has entered into
loan workout agreements with two banks which will require total bank
principal loan payments of $1,100,000 during 1997.
Subsequent to December 31, 1996, the Company raised $750,000 from an
officer of the Company and a related party through the issuance of
convertible debt and has commitments from investors for $600,000 of
convertible debt and additional equity capital. In order to reduce the
Company's working capital requirements, management has implemented a
number of cost reductions which it estimates will reduce the Company's
operating expenses by approximately $1,300,000 during the fiscal year
ending December 31, 1997.
Management believes that the additional capital raised, plus the
additional capital to be received from investors, in conjunction with
the reductions in operating expenses are sufficient for the Company to
be able to meet its financial commitments in 1997.
The Company's lease for the site of its Northern California faire expires
April 30, 1997. While the Company believes that its lease for this site
will be renewed for the 1997 faire, there can be no assurance of such
renewal. If the lease is not renewed, it is doubtful that the Company
would conduct a faire in Northern California in 1997.
(15) FOURTH QUARTER ADJUSTMENTS
The Company recognized as expense in the nine-month period ended December
31, 1996, $450,000 of costs to be incurred in 1997, which costs are the
result of changing conditions at the Company's Northern California Faire
which became apparent to the Company in 1996. This adjustment, which was
made in the fourth quarter, was material to fourth quarter operations.
F-25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to
be signed on its behalf by the undersigned, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Date: April 14, 1997 /S/ James R. Mcdonald
-----------------------------------
James R. McDonald, Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Charles S. Leavell Chairman of the Board, April 14, 1997
- ------------------------- Chief Executive Officer
Charles S. Leavell
/s/ James R. Mcdonald Chief Financial Officer April 14, 1997
- -------------------------
James R. McDonald
/s/ Sue Brophy Chief Accounting Officer April 14, 1997
- -------------------------
Sue Brophy
/s/ Sanford L. Schwartz Director April 14, 1997
- -------------------------
Sanford L. Schwartz
/s/ Robert M. Geller Director April 14, 1997
- -------------------------
Robert M. Geller
/s/ Gregg Adam Thaler Director April 14, 1997
- -------------------------
Gregg Adam Thaler
/s/ Dean Petkanas Director April 14, 1997
- -------------------------
Dean Petkanas
<PAGE>
INDEX TO EXHIBITS
Exhibit No Title Page
---------- ----- ----
3.0(i) Amended and Restated Articles of Incorporation,
incorporated by reference from the Amendment No. 1 to
Registrant's Registration Statement on Form 8-A filed
with the Commission on April 12, 1994.
3.0(ii) By-Laws, incorporated by reference from the
Amendment No. 1 to Registrant's Registration
Statement on Form 8-A filed with the Commission on
April 12, 1994.
* 3.1 Articles of Amendment to the Articles of
Incorporation.
4.1 Specimen Certificate of Common Stock, incorporated
by reference from the Amendment No. 1 to
Registrant's Registration Statement on Form 8-A
filed with the Commission on April 12, 1994.
* 4.2 Specimen Class A Warrant Certificate.
* 4.3 Specimen Class B Warrant Certificate.
* 4.4 Warrant Agreement.
* 4.5 Certificate of Designations, Preferences, and Rights
of Series A Convertible Preferred Voting Stock of
Renaissance Entertainment Corporation.
* 4.6 Renaissance Entertainment Corporation 1993 Stock
Incentive Plan.(1)
10.1 Employment Agreement with Howard Hamburg,
incorporated by reference from the Registrant's
Current Report on Form 8-K dated
December 31, 1995.(1)
10.2 Employment Agreement with Kevin Patterson,
incorporated by reference from the Registrant's
Current Report on Form 8-K dated
December 31, 1995.(1)
** 10.3 Office Lease with Diana Wilkins dated
August 15, 1996.
* 10.4 Consultation Agreement with Creative Business
Strategies, Inc.(1)
* 10.4 Letter Agreement with Rob Geller dated
July 19, 1994.(1)
<PAGE>
* 10.5 Agreement with The Living History Centre dated
August 25, 1994.
* 10.6 Specimen Vendor and Exhibitor Agreement for the
Bristol Renaissance Faire.
* 10.7 Specimen Vendor and Exhibitor Agreement for the
Northern and Southern Renaissance Pleasure Faires.
* 10.8 Specimen Bristol Renaissance Faire Concession
Agreement.
* 10.9 Specimen Bristol Renaissance Faire Games Concession
Agreement.
* 10.10 License Agreement and Lease with San Bernardino
County for the Southern Renaissance Pleasure
Faire site.
* 10.11 Investment Banking Agreement with Duke & Co., Inc.
10.12 Lease Agreement between Creative Faires, Ltd. and
Sterling Forest Corporation dated June 12, 1996
incorporated by reference from the Registrant's
Annual Report on Form 10-KSB for the year ended
March 31, 1996.
10.13 Mortgage dated April 7, 1995 with Bank One,
Kenosha N.A. with respect to Bristol Property,
incorporated by reference from the Registrant's
Annual Report on Form 10-KSB for the year ended
March 31, 1996.
* 10.14 Employment Agreement dated February 5, 1996 with
Barbara Hope.
* 10.15 Employment Agreement dated February 5, 1996 with
Donald C. Gaiti.
10.16 Line of credit with Bank One, Wisconsin in the
amount of $250,000 dated February 6, 1996,
incorporated by reference from the Registrant's
Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995, filed with the Commission
on February 20, 1996.
10.17 Line of credit with Union Bank & Trust in the
amount of $250,000 dated December 29, 1995,
incorporated by reference from the Registrant's
Quarterly Report on Form 10-QSB for the quarter
ended December 31, 1995, filed with the Commission
on February 20, 1996.
<PAGE>
10.18 Commitment Letter for a line of credit with Bank
One Colorado in the amount of $750,000 dated
January 26, 1996, incorporated by reference from
the Registrant's Quarterly Report on Form 10-QSB
for the quarter ended December 31, 1995, filed with
the Commission on February 20, 1996.
10.19 Mortgage with Union Bank & Trust in the amount of
$1,500,000 with respect to the Virginia property,
incorporated by reference from the Registrant's
Annual Report on Form 10-KSB for the year ended
March 31, 1996.
** 10.20 Loan Workout Agreement by and among Renaissance
Entertainment Corporation, Bank One,
Colorado, N.A. and Bank One, Kenosha, N.A.
21.0 Subsidiaries, incorporated by reference from the
Registrant's Annual Report on Form 10-KSB for the
year ended March 31, 1996.
** 23.1 Independent Auditor's Consent
** 27.0 Financial data schedule.
* Incorporated by reference from the Company's Registration
Statement on Form SB-2, declared effective by the Commission
on January 27, 1995 and the Post-Effective Amendments thereto.
** Filed herewith.
(1) Indicates management contracts, compensation plans or
arrangements required to be filed as exhibits.
<PAGE>
VIEWPOINT ON THE PARKWAY
LEASE AGREEMENT
THIS LEASE is made and entered into this 15TH day of AUGUST 1996 by and between
Diana Wilkins, (hereinafter referred to as "Lessor"or"Landlord") and RENAISSANCE
ENTERTAINMENT CORPORATION (hereinafter referred to as "Lessee" or "Tenant").
SECTION 1. LEASED PREMISES.
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the premises
known and described as 4410 ARAPAHOE SUITE 200 AND 205 (hereinafter referred to
as the "Premises" and shown on Exhibit A), consisting of approximately 3868
rentable square feet in the office building known as 4410 ARAPAHOE BOULDER,
COLORADO 80303 (hereinafter referred to as the "Building"), in the office park
commonly known as VIEWPOINT ON THE PARKWAY.
SECTION 2. TERM OF LEASE.
The term of the Lease shall commence on the 1ST day of NOVEMBER, 1996 and
continue for FIVE years, terminating on the 31ST day of OCTOBER, 2001. The
commencement date and termination date shall be further defined in the addendum
to this Lease.
SECTION 3. RENT.
3.0 Initial base rental rate: $18.52 per square foot per year.
3.1 Lessee shall pay Lessor as Base Rent for the Premises the full term sum of
THREE HUNDRED NINETY FIVE THOUSAND SEVEN HUNDRED SEVENTY EIGHT AND 86/100
Dollars ($395,778.86). Rent shall be payable in advance, commencing in monthly
installments of FOUR THOUSAND SIX HUNDRED FOURTY SEVEN AND 33/100 ($5,968.83) on
the first day of each calendar month during the term of this Lease at the
offices of Lessor located in the Building or at such other place as Lessor from
time to time may designate in writing.
3.2 Lessor acknowledges receipt of and will keep on deposit at all times during
the term hereof, the sum of $5,950.00 as security for the payment by Tenant of
the rent and all other sums herein agreed to be paid and for the faithful
performance of all the terms, conditions and covenants of this Lease. If at any
time during the term hereof, Tenant shall be in default in the performance of
any provisions of this Lease, Landlord shall have the right, but shall not be
obligated, to use said deposit or so much thereof as necessary, in payment of
any rent in default, reimbursement of any expense incurred by Landlord and in
payment of any damages incurred by the Landlord by reason of Tenant's default.
In such event, Tenant shall, on written demand of Landlord, forthwith remit to
Landlord a sufficient amount in cash to restore said deposit to its original
amount. In the event said
1
<PAGE>
deposit has not been utilized as aforesaid, said deposit, or as much thereof as
has not been utilized for such purposes, shall be refunded to Tenant, without
interest, within sixty (60) days after the termination of this Lease upon full
performance of this Lease by Tenant and vacation of the Premises by Tenant.
Landlord shall have the right to commingle said deposit with other funds of
Landlord. Landlord may deliver the funds deposited herein by Tenant to any
purchaser of Landlord's interest in the Premises in the event such interest is
sold and thereupon Landlord shall be discharged from further liability with
respect to such deposit. If the claims of Landlord exceed the amount of said
deposit, Tenant shall remain liable for the balance of such claims.
3.3 Lessee shall pay Lessor as additional rent, Lessee's proportionate share of
the Operating Costs of the Building for each calendar year, which annual amount
shall be adjusted for the first and last calendar years of the term of the Lease
based on the number of months of occupancy during each such calendar year.
a. Lessee's "proportionate share" is defined for purposes of this Lease as
the ratio of the total square feet of the Premises leased to Lessee to the
total net leasable area in the Building.
b. "Operating Costs" are defined for purposes of this Lease as the sum of
the following for each calendar year:
i. All general and special real estate taxes, special assessments and
other ad valorem taxes, rates, levies and assessments by any government or
quasi-governmental authority and all taxes specifically imposed in lieu of any
such taxes (but excluding any income, profit or business tax or impost of a
personal nature charged or levied against Lessor) payable in respect of such
year by Lessor upon or in respect of the Building and the property of which it
is a part:
ii. All costs, charges and expenses payable by Lessor and not
directly reimbursed to Lessor, as hereinafter provided, which are directly
attributable to the operation, repair and maintenance of the Building or Grounds
at ViewPoint, including, but not limited to, janitorial, property management,
security, legal/accounting, provided that if any services are not provided by
Lessor in a portion of the Building the amount included in respect to such
service shall be divided by the difference between the net rentable and the
number of square feet in the Building in which Lessor does not provide such
service;
iii. All charges for heat, water, gas, electricity, sewer service and
any other utility service used or consumed in the Building or Grounds at
ViewPoint and not directly reimbursed to Lessor as hereinafter provided;
iv. All premiums for fire, extended coverage, vandalism and malicious
mischief and other insurance carried by Lessor in such amounts as shall be
determined appropriate by Lessor; and
2
<PAGE>
v. That year's amortization of capital costs incurred by Lessor for
improvements, structural repairs to the Building or Grounds at ViewPoint
required to comply with any change in the laws, or in rules and regulations of
any government or quasi-governmental authority having jurisdiction over the
Building, or to save labor or otherwise reduce applicable operating
expenditures, which costs shall be amortized over the useful life of the
improvement or repair.
vi. If normal operation, maintenance and repair shall, in the
judgment of Lessor, require the repair or replacement of an item (such as
carpet, extensive repainting, or the like which item exceeds a cost of $2,000.00
and has a reasonable life expectancy of more than one year the duration of which
life expectancy exceeds the remaining term of this Lease, (including extension
and renewals thereof), then Lessee shall be obligated to pay only its pro-rata
share of that portion of the cost of the item times a fraction, the numerator of
which is the number of months remaining in the Lease term and any renewal
options and the denominator of which shall be the useful life expectancy of the
item.
c. In determining Operating Costs, the costs of the following shall be
excluded except as specifically provided above:
i. Structural maintenance and repair: Walls and roof.
ii. Repair or replacement resulting from inferior or deficient
workmanship, materials or equipment in the initial construction of
the Building;
iii. Interest on or retirement of capital debt;
iv. Costs for which Lessor is reimbursed by insurers.
v. Any costs representing an amount paid to any person, firm,
corporation or other entity related to Landlord or any partner thereof
which is in excess of the amount which would have been paid in the
absence of such relationship, except for a normal and customary
property management fee;
3.4 Lessee shall make monthly payments of Operating Costs in an amount equal to
one twelfth (1/12) of the previous year's proportionate share of Operating Costs
at the same time and in the same manner as the monthly payment of the Base
Rent.
SECTION 4. RENT ADJUSTMENT
4.1 At the end of each lease year, the Base Rent due under the terms of this
Lease shall be adjusted. Said adjustment is detailed in Addendum One of this
Lease.
4.2 Within Seventy-Five (75) days of the end of each calendar year, Lessor
shall compute the difference between the Operating Costs which Lessee has paid
during the calendar year and Lessee's actual proportionate share of Operating
Costs due and owing for that year and the additional rent based on operating
costs shall be adjusted accordingly. The adjusted operating costs for the
previous calendar year shall be divided
3
<PAGE>
by twelve (12) to establish the additional monthly rental based on operating
costs during the following calendar year. Upon written request from Lessee,
Lessor agrees to provide written reconciliation of Operating Costs to Lessee.
4.3 If Lessee disputes the determination of Operating Costs as determined above
or the calculation of any amount payable, Lessee shall give Lessor written
notice of such dispute within thirty (30) days after receipt of notice from
Lessor of the matter giving rise to the dispute. If Lessee does not give Lessor
such notice within such time, Lessee shall have waived its right to dispute the
determination or calculation. Promptly after the giving of notice, Lessee shall
cause to be made a complete audit of Lessor's records relating to the matter in
dispute by independent certified public accountants. The cost of the audit
shall be borne by Lessee unless the audit discloses an error which favors Lessor
by more than 5% of the amount previously determined, in which event Lessor shall
bear the cost of the audit. If the audit reveals that the amount previously
determined by Lessor was incorrect, a correction shall be made accordingly.
During the pendency of any such dispute, Lessee shall make payments based upon
Lessor's determination or calculation until the dispute has been resolved.
SECTION 5. TAXES.
5.1 Lessee shall pay before delinquency, any and all taxes, assessments,
license taxes and other charges levied, assessed or imposed and which become
payable during the term of this Lease upon Lessee's operations, occupancy or
conduct of business on the Premises or upon equipment, furniture, appliances,
trade fixtures and other personal property of any kind installed or located on
the Premises.
5.2 Lessor shall pay before delinquency, all general and special real estate
taxes, all special assessments and any other ad valorem taxes, rates, charges,
levies or assessments levied upon or assessed against the Building or the
property on which the Building is located by government or quasi-governmental
authority, or any tax specifically imposed in lieu of any such taxes.
SECTION 6. UTILITIES AND SERVICES.
6.1 Lessor shall, in accordance with standards from time to time prevailing for
first-class office buildings in Boulder, Colorado, furnish such heated or cooled
air to the Premises and Building as may be reasonably required for the
comfortable use and occupancy of the Premises; provide the use of elevators,
provide access to and from the Premises, provide routine janitorial services for
the Premises and Building, including such window washing as may be in the
judgment of Lessor to be reasonably required; and cause electric current to be
supplied for lighting the Premises and Building. Lessee shall use such electric
current as shall be supplied by Lessor only for lighting, typewriters, adding
machines, calculators, small reproduction machines, computers and fax machines
and other equipment used in the ordinary course of business and using an
ordinary amount of electricity during a normal work day. Lessee shall pay upon
demand to Lessor the cost
4
<PAGE>
of any additional electric current used for other than ordinary business
purposes or in any extraordinary amount and if it should appear that such
additional electric current is being utilized on a regular basis by Lessee,
shall upon demand by Lessor install at Lessor's expense a check meter and shall
pay monthly for the use of the additional current as shown on such check meter.
6.2 Lessor shall not be liable for failure to supply any heating, air
conditioning, elevator, janitorial or electrical service if by reason of
accident, unavailability of employees, repairs, alterations or improvements,
strikes, walkouts, riots, acts of God or any other happening beyond the control
of Lessor which renders Lessor unable to furnish such services.
6.3 Should Lessee determine that additional janitorial or other services are
necessary in the Premises because of the nature of Lessee's business, Lessee
shall notify Lessor to arrange such needs. Lessor, at its option, may either
provide for such specific services and charge Lessee as additional rent the cost
of providing the services, or may permit Lessee to arrange for the provision of
such services.
SECTION 7. INSURANCE
7.1 Lessor shall have and maintain in effect at all times, fire, extended
coverage and insurance in such amounts as shall be deemed appropriate by Lessor.
7.2 Lessee shall procure, pay for and maintain comprehensive public liability
insurance providing coverage from any loss or damage occasioned by an accident
or casualty on the leased Premises in the amount of $1,000,000.00. Certificates
of such insurance shall be delivered to Lessor and shall provide that the
coverage shall not be changed or canceled without thirty (30) days prior written
notice being given to Lessor. Lessee acknowledges that Lessor does not carry
insurance with respect to the contents and interior of the leased
Premises and that Lessee assumes all risk with respect to same.
SECTION 8. IMPROVEMENTS, MAINTENANCE AND REPAIR.
8.1 Lessee shall make all necessary repairs to the Premises and keep all
improvements in good condition and repair. All glass and doors on the Premises
shall be the responsibility of Lessee. Any replacement or repairs shall be
promptly completed at the expense of Lessee. At the end of the term of this
Lease, Lessee shall return the Premises to Lessor in as good a condition as when
received, except for usual and ordinary wear and tear. Lessee shall be
responsible for any repairs or maintenance required for any part of the
improvements of which the Premises are a part where such repair or maintenance
is necessitated by Lessee or activities conducted by Lessee, Lessee's employees,
guests, invitees or any person on the Premises.
8.2 Lessee shall have the right, at its own expense, to make reasonable
changes, alterations or improvements in the Premises of a value less than
$500.00 provided they in
5
<PAGE>
no way damage the structure or mechanical systems of the Building. Lessee shall
make no changes or alterations having a value in excess of $500.00 without first
having secured the written consent of Lessor, at Lessor's sole discretion.
8.3 All trade fixtures, furniture and equipment installed and electrical
fixtures attached to or built upon the Premises by Lessee shall be considered
personal property of Lessee and may be removed by Lessee during the term of this
Lease, so long as Lessee shall not be in default under any provision of the
Lease. Lessee shall repair any damage caused by such removal. All other
property attached to or built upon the Premises by Lessee shall become the
property of Lessor and shall remain the property of Lessor at the expiration or
termination of the Lease.
8.4 Lessee shall permit Lessor at any reasonable time, to enter the Premises
to examine and inspect the same or to perform cleaning, maintenance, janitorial
services, repairs, additions or alterations as provided in this Lease. Lessor
shall have access to the Premises at any time in the event of an emergency.
Lessor reserves the right to show the Premises to prospective Lessees at any
time during the last 120 day period of this Lease.
8.5 Lessor shall have the right at its election to make any alterations to the
Building as it may from time to time deem necessary and desirable so long as
such alterations do not unreasonably interfere with Lessee's use and occupancy
of the Premises.
SECTION 9. CONTROL OF COMMON AREAS.
All entrances and exits, parking and common areas and other facilities furnished
by Lessor shall at all times be subject to the exclusive control and management
of Lessor, and Lessor shall have the right from time to time to establish,
modify and enforce the reasonable rules and regulations, with respect to such
facilities and areas.
SECTION 10. USE OF THE PREMISES.
10.1 Lessee shall use the Premises only as professional business offices or
incidental uses thereto. Lessee may use the Premises for other legally
permissible business or commercial ventures upon the written approval of Lessor,
at Lessor's sole discretion.
10.2 Lessee shall not conduct any auction, fire, bankruptcy or similar sale
without the express written approval of Lessor, at Lessor's sole discretion.
10.3 Lessee shall not use the Premises in any manner which would constitute
waste, nuisance or unreasonable annoyance to other occupants of the project.
10.4 Lessee shall not do, bring or keep anything on the Premises that would
cause the cancellation of any insurance covering the Building. If the rate of
any insurance carried by Lessor is increased by the result of Lessor's use,
Lessee shall pay to Lessor within ten (10) days of receipt of a certified
statement from Lessor's insurance carrier stating that
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the rate of increase was caused by the activity of Lessee on the Premises a sum
equal to the difference between the original premium and the increased premium.
10.5 Lessee shall comply at Lessee's expense with all requirements of any
governmental unit having jurisdiction which pertains to the Premises or its use.
10.6 RULES AND REGULATIONS: Lessee agrees to the following rules and
regulations of the Lessor: Lessee,
Will take good care of the premises at all times, keeping them clean
and free from danger or damage by fire, open window, open faucets or
improper handling of apparatus or equipment of all kinds;
Will not use any apparatus for any purpose other than that for which
the same was constructed;
Will supervise as may be necessary the use of all supplies furnished
by the Lessor to avoid waste;
Will not attach or detach any shade, blind, screen or awning without
Lessor's written consent;
Will not maintain or permit to be maintained any nuisance upon the
leased premises;
Will not permit sleeping, lodging, immoral or unlawful acts in the
leased premises;
Will comply with all laws, ordinances, orders and regulations of the
federal, state and city governments or their respective departments and
bureaus and of the Board of Fire Underwriters;
Will conduct Lessee's business on the leased premises so as not to
interfere with any other tenant in the building;
Will not introduce or operate in the leased premises any equipment
which will or may annoy other tenants or increase insurance rates of the
building;
Will permit Lessor to inspect the premises and exhibit the premises to
prospective tenants and purchasers;
Will not permit cooking other than microwave, without the written
consent of the Lessor;
Will not overload the building floors or place thereon, any weight
exceeding fifty pounds per square foot;
Will not place any additional lock on the premises or change any lock
placed thereon by Lessor, and upon termination of this tenancy will
surrender to the Lessor all keys of the premises and of the building
received by Lessee, and will obtain only from Lessor any duplicate key or
keys to any part of the premises;
Will not install any electrical lighting or power equipment in the
demised premises without first obtaining the written approval of Lessor and
if Lessee installs any electrical equipment that overloads the electric
lines in the herein demised premises, Lessee shall either disconnect such
equipment or upon Lessor's prior written approval, at Lessee's sole
expense, make whatever changes are necessary to comply with the existing
laws, regulations and building code
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requirements and controlling the installation of such electrical equipment
and additional electric lines;
Will abide by all such reasonable rules and regulations as Lessor may
now or hereafter make which are according to Lessor's judgment for general
good of the building and its tenants;
Will not attach or display any sign or notice in, to or on the leased
premises or other part of the building without Lessor's written consent and
any such sign or notice, if approved, shall be painted or affixed by
someone also approved by the Lessor and Lessor will furnish and install a
reasonable number of names in the directory of the building;
Will use chair mats under all chairs with caster to protect the
carpeting;
Will not have any animal of any type in the building at any time
except for seeing eye dogs;
Will not smoke in the building at any time.
SECTION 11. DAMAGE TO PREMISES
11.1 In the event the Premises shall be totally destroyed by fire or other
casualty or so badly damaged that it is not feasible to restore, either party
shall have the right to terminate this Lease upon written notice to the other.
11.2 Unless caused by Lessee's negligence, if the Premises or Building shall be
partially damaged by fire or other casualty but not rendered untenatable, as
determined by Lessor, Lessor shall, if it determines to do so, restore the
Premises or Building to substantially the same condition as immediately before
the destruction and the rent shall be reduced in proportion (proportion being
determined by the ratio which the number of square feet damaged or destroyed in
the subject Premises bears to the total square feet in the Premises) to the loss
of use of the Premises until restoration shall be substantially completed, as
reasonably determined by Lessor.
11.3 Unless caused by Lessee's negligence, if the Premises are rendered
untenatable by fire or other casualty, Lessee may, at its election, terminate
this Lease on the day of the damage. If Lessee elects not to terminate the
Lease, the rent shall be reduced in proportion to the loss of use of the
Premises by Lessee during such untenatability.
11.4 Lessor shall not be liable for any damage to the property of Lessee or of
other property located on the Premises nor for the loss of or damage to any
property of Lessee or others by theft or otherwise.
11.5 Lessee shall indemnify Lessor and save Lessor harmless from and against
any claims, actions, damages and liability in connection with loss of life,
personal injury or damage to property arising from or out of any occurrence on
the Premises, or from the occupancy or use of the Premises by Lessee, its
agents, contractors, employees, servants or of any other person entering upon
the Premises under express or implied invitation of Lessee. In the event of any
proceeding at law or in equity wherein Lessor shall be named
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a party to any litigation by reason of Lessee's interest in the Premises or in
the event Lessor shall be required to commence any legal proceedings pertaining
to the Premises or Lessee's occupancy or relation to the Premises, Lessor shall
be allowed and Lessee shall be liable for and shall pay all costs and expenses
incurred by Lessor, including a reasonable attorney's fee, as additional rent.
11.6 For purposes of the within agreement "tenantable" and untenantable" shall
be determined by Lessor and Lessee in the exercise of their reasonable judgment.
SECTION 12. BANKRUPTCY, ASSIGNMENT TO CREDITORS, LOSS OF POSSESSION.
12.1 Lessor may terminate Lessee's rights under this Lease without prejudice to
any other rights or remedies of Lessor, if:
a. Lessee is adjudicated a bankrupt, or makes a general assignment for the
benefit of creditors, or voluntarily initiates any bankruptcy or similar
proceedings; or
b. A sheriff, Marshall, receiver or keeper takes possession of the
Premises by virtue of the appointment of any such officer or receiver by a court
of competent jurisdiction, or by virtue of any attachment, execution or lien
arising out of a debt of or judgment against Lessee, and the Premises are not
released from the possession of such officer or receiver and Lessee restored to
possession within one week after demand by Lessor.
12.2 In the event of such termination, neither Lessee nor any person claiming
through or under Lessee by virtue of any statute of if any order of any court
shall be entitled to possession or to remain in possession of the Premises but
shall immediately quit and surrender the Premises to Lessor.
12.3 Any other language herein to the contrary notwithstanding, the parties
acknowledge and agree that in the event Lessor terminates the within Lease, such
termination shall not operate and is not intended by the parties, to waive,
release, terminate or otherwise relieve Lessee of Lessee's obligation to pay all
sums which are or would otherwise become due through the full term of the within
Lease, including any extensions or renewals thereof which may be in effect at
the time of termination.
SECTION 13. ASSIGNMENT-SUBLETTING
Lessee may not assign the Lease or sublet the Premises without the written
consent of Lessor first being obtained, such consent not to be unreasonably
withheld. In the event Lessee wishes to sublease one office in their suite, no
consent shall be required from Lessor.
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SECTION 14. CONDEMNATION
14.1 If at any time during the term of this Lease, the Premises are totally
taken by condemnation, this Lease shall terminate on the date of taking. If any
portion of the Premises or Building are taken by condemnation, this Lease shall
remain in effect except that Lessee may elect to terminate the Lease if the
Premises are rendered unsuitable for Lessee's continued use of the Premises. If
the Lease continues the rent shall be reduced in proportion to the loss of the
use of the Premises.
14.2 If Lessee elects to terminate this Lease because the Premises or Building
have been partially taken by condemnation rendering the Premises unsuitable for
Lessee's continued use of the Premises, Lessee must exercise its right to
terminate by giving notice to Lessor within thirty (30) days after the nature
and extent of the taking have been finally determined. The termination shall be
effective not earlier than thirty (30) days nor later than sixty (60) days after
Lessee has notified Lessor of its election to terminate, except that Lessee
shall terminate on the date of taking if that date occurs prior to the date of
termination as designate by Lessee.
SECTION 15. SUBORDINATION
Lessee agrees that its Lease rights shall be subordinate to those of any lending
institution making any loan upon the property on which the Premises are located.
Subordination shall be effective without any further act of Lessee. Lessee
shall from time to time on request of Lessor execute and deliver any documents
or instruments that may be required by a lender to effectuate any
subordination. If Lessee fails to execute and deliver any such documents or
instruments, Lessee irrevocably constitutes and appoints Lessor as Lessee's
special attorney in fact to execute and deliver any such documents or
instruments.
SECTION 16. DEFAULT-TERMINATION
16.1 In the event of any failure of Lessee to pay any rental or other payment
due hereunder within ten (10) days after the same shall be due, or any failure
to perform any other of the terms, conditions or covenants of this Lease to be
observed or performed by Lessee for more than thirty (30) days after written
notice of such default, the Lessor may solely at Lessor's option, either bring
an action to enforce the Lease and recover any damages incurred or declare this
Lease terminated. If terminated, all of the right, title and interest of the
Lessee hereunder shall wholly cease and expire and Lessee shall then immediately
quit and surrender the Premises and pay Lessor the amount of any damages
incurred. In the event of such termination, Lessee shall nevertheless remain
obligated to Lessor pursuant to the terms of Lease as more specifically set
forth in Section 12.3 hereof.
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16.2 If any default is of such a nature that it cannot with due diligence be
cured within thirty (30) days after notice to correct the default, Lessor shall
not be entitled to terminate the Lease if the Lessee shall have commenced to
cure such default within thirty (30) days and shall thereafter proceed with all
due diligence to complete the cure of such default.
16.3 If this Lease is terminated as herein provided and Lessee shall not have
immediately quit and surrendered the Premises to Lessor, the Lessee shall be
deemed guilty of forcible and unlawful detainer, thereby waiving all notice and
Lessor or its agents or servants may immediately or at any time thereafter
re-enter the Premises and use any necessary force to remove Lessee, its agents,
employees, servants and licensees, without being liable to indictment,
prosecution or damages herefore and may repossess and enjoy the Premises,
together with all additions, alterations and improvements. Lessor shall also be
entitled to the benefits of all provisions of law respecting a speedy recovery
of land and tenements held over by Lessee, including proceedings in forcible
entry and unlawful detainer.
16.4 If the Premises are left vacant at any time during the term of this Lease
and any rent remains unpaid, then Lessor may, without terminating the Lease,
relet the whole or any part of said Premises for any unexpired period of time
during the term of this Lease, or longer, or from, time to time for shorter
periods, for any rental then obtainable, giving such concessions of rent and
making such repairs and changes as may be reasonably required. Lessee shall be
liable for the balance of the rent until the expiration of the Lease after being
given credit for any rent received. Lessee shall be liable for all reasonable
expenses which Lessor may incur as a result of any default by Lessee, including
but not limited to the cost of enforcing the Lease, including attorneys' fees;
making good any default suffered by Lessee; doing any reasonably required
painting, altering or dividing of the Premises; combining the Premises with any
adjacent space for any new tenant; putting the same in proper repair; protecting
and preserving the Premises; and reletting the Premises, less any net rental
received from reletting.
16.5 If lessee should fail to remove all effects from the Premises upon
abandonment or upon termination of this Lease for any cause whatsoever, Lessor,
at its option, may remove such effects in any manner that it shall choose and
store them without liability to Lessee for loss or damage and Lessee agrees to
pay Lessor on demand any and all expenses incurred in such removal, including
all court costs and attorneys' fees and storage charges on such effects for any
length of time they shall be in Lessor's possession. Lessor may, at its option,
in the alternative and without notice, sell said effects, at private sale and
without legal process and for such prices as Lessor may obtain and apply the
proceeds of such sale against any amounts due under this Lease from Lessee to
Lessor and against the expenses incident to the removal and sale of said
effects, rendering the surplus, if any, to Lessee.
16.6 Lessee acknowledges that late payments by Lessee to Lessor of rent will
cause Lessor to incur costs not contemplated by this Lease, the exact amount of
such cost being extremely difficult and impracticable for fix. Such costs
include, without limitation, processing and accounting charges and late charges
that may be imposed upon Lessor by
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the terms of any encumbrance and note secured by any encumbrance covering the
Premises. Therefore, if any installment of rent due from Lessee is not received
by Lessor within ten (10) days of date due, Lessee shall pay Lessor either
$25.00 or 3% of the overdue payment, whichever shall be greater as a late fee.
In addition, Lessor may collect one tenth(1/10) of one(1) percent per day of any
amount more than thirty(30) days past due, from and after the thirtieth(30) day
payment is due. Such additional payment shall be due immediately upon demand by
Lessor. The parties agree that this late Fee represents a fair and reasonable
estimate of the cost that Lessor will incur by reason of late payment by Lessee.
Acceptance of any late charge shall not constitute a waiver of Lessee's default
with respect to the overdue amount, or prevent Lessor from exercising any of the
other rights and remedies available to Lessor.
16.7 Any suit brought by Lessor to enforce the collection of any amount due
under this article for any one month shall not prejudice Lessor's right to
enforce the collection of any further amount due for any subsequent month.
SECTION 17. HOLDING OVER
If, after the expiration of the term of this Lease, Lessee shall remain in
possession of the leased Premises and continue to pay rent without a written
agreement as to such possession then Lessee shall be deemed to continue in
possession on a month-to-month tenancy. The rental rate during such holdover
period shall be equivalent to the monthly rental rate paid during the previous
month; plus twenty-five percent (25%). No holding over by Lessee shall operate
to renew or extend this Lease without the written consent of Lessor.
SECTION 18. QUIET ENJOYMENT
Subject to the terms of this Lease, Lessee, upon paying the Base Rent and
additional rent and performing the other terms, covenants and conditions of this
Lease, shall and may peaceably and quietly occupy and enjoy the Premises during
the term of this Lease. Lessor shall warrant and defend Lessee in the quiet
enjoyment and possession of the Premises during the term of this Lease.
SECTION 19. ESTOPPEL CERTIFICATE
Tenant further agrees at any time and from time to time on or before ten(10)
days after written request by Landlord, to execute, acknowledge and deliver to
Landlord an estoppel certificate certifying (to the extent it believes the same
to be true) that this Lease is unmodified and in full force and effect (or if
there have been modifications, that the same is in full force and effect as
modified, and stating the modifications), that there have been no defaults
thereunder by Landlord or tenant (or if there have been defaults, setting forth
the nature thereof), the date to which the rent and other charges have been
paid, if any,
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that Tenant claims no present charge, lien, claim or offset against rent, the
rent is not prepaid for more than one month in advance and such other matters as
may be reasonably required by Landlord, Landlord's mortgagee, or any potential
purchaser of the building, it being intended that any such statement delivered
pursuant to this Paragraph may be relied upon by any prospective purchaser of
all or any portion of Landlord's interest herein, or a holder of any mortgage or
deed of trust encumbering any portion of the Building Complex. Tenant's failure
to deliver such statement within such time shall be a default under this Lease.
Notwithstanding the foregoing, in the event that tenant does not execute the
statement required by this Paragraph, Tenant hereby grants to Landlord a power
of attorney coupled with an interest to act as Landlord's attorney-in-fact for
the purpose of executing such statement or statements required by this
Paragraph.
SECTION 20. NOTICE PROCEDURE
All notices, demands and requests which may be or are required to be given by
either party to the other shall be in writing. Any such notice, demand or
request to be given to Lessee shall be deemed to have been properly given if
served on Lessee or an employee of Lessee or sent to Lessee by United States
Registered Mail, Return Receipt Requested, at Lessee's address set forth below
or such other place as Lessee may designate in a written notice to Lessor. Any
such notice, demand or request to be given to Lessor shall be deemed to have
been properly given if served on Lessor or an employee of Lessor, or sent to
Lessor by United States Registered Mail, Return Receipt Requested, at such
other place as Lessor may designate in a written notice to Lessee. Any notice
given by mailing shall be effective as of the date of mailing as shown by the
receipt given.
AS TO LESSEE: AS TO LESSOR:
RENAISSANCE ENTERTAINMENT CORP. JOHN WILKINS
4410 ARAPAHOE AVE. SUITE 200 WILKINS ASSOCIATES
BOULDER, CO 80303 4430 ARAPAHOE SUITE 205
BOULDER, CO 80303
SECTION 21. INTENTIONALLY DELETED
SECTION 22. WAIVER
No delay or admission in the exercise of any right or remedy of Lessor on any
default by Lessee shall impair such a right or remedy or be construed as a
waiver. Any waiver by Lessor of a default by Lessee must be in writing and
shall not be a waiver of any other present or future default concerning the same
or any other violation of the Lease.
SECTION 23. PREVAILING PARTY LANGUAGE
In the event of any action or proceeding brought by either party against the
other under this Lease, the prevailing party shall be entitled to recover for
the fees of its attorneys in
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such action or proceeding, including costs of appeal, if any, such amount as the
court may adjudge reasonable as attorneys' fees. In addition, should it be
necessary for Owner to employ legal counsel to enforce any of the provisions
herein contained, Tenant agrees to pay all attorneys' fees and court costs
reasonably incurred.
SECTION 24.HAZARDOUS MATERIALS
24.1 Tenant shall not cause or permit any Hazardous Material t be brought upon,
kept, or used in or about the Premises by Tenant, its agents, employees,
contractors, licensees or invitees, without prior written consent of Landlord
(which Landlord shall not unreasonably withhold or delay as long as tenant
demonstrates to Landlord's reasonable satisfaction that such Hazardous Material
is necessary or useful to Tenant's business and will be used, kept and stored in
a manner that complies with all laws regulating any such Hazardous Materials so
brought upon or used or kept in or about the Premises). If Tenant breaches the
obligations stated in the preceding sentence, or if the presence of Hazardous
Material on the Premises caused or permitted by Tenant results in contamination
of the Premises or Building Complex by Hazardous Material otherwise occurs for
which Tenant is legally liable to Landlord for damage resulting therefrom, then
Tenant shall indemnify, defend and hold Landlord, its agents, employees, legal
representatives, successors and assigns, harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, or losses(including,
without limitation, diminution in value of the Premises and Building Complex,
damages for the loss or restriction on use of any rentable or usable space or of
any amenity of the Premises or Building Complex, damages arising from any
adverse impact on marketing of space in the Building, and sums paid in
settlement of claims, reasonable attorneys' fees, consultant fees and expert
fees) which arise during or after the Lease term as a result of such
contamination. This indemnification of Landlord by Tenant includes, without
limitation, such costs incurred in connection with any investigation of site
conditions or any cleanup, remedial, removal or restoration work required by any
federal, state, or local governmental agency or political subdivision because of
Hazardous Material present in or about the Building Complex or the soil or
ground water on or under the Building complex. Without limiting the foregoing,
if the presence of any Hazardous Material on or about the Building Complex
caused or permitted by Tenant results in any contamination of any portion
thereof, Tenant shall promptly take all actions at its sole expense as are
necessary to return the Building Complex to the condition existing prior to the
introduction of any such Hazardous Material, subject to obtaining Landlord's
prior written consent to the actions to be taken by Tenant. Landlord may
properly require its consent to the selection of the contractors and other
experts involved in the inspection, testing and removal or abatement activities,
the scope of activities to be performed, the manner and method for performance
of such activities and such other matters as may be required or requested by
Landlord for the safety of and continued use of the Building Complex and all
occupants thereof. The obligations and liabilities of Tenant herein shall
survive expiration or termination of this Lease.
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24.2 "Hazardous Material", as used in this Lease, shall be construed in its
broadest sense and shall include asbestos, other asbestotic material (which is
currently or may be designated in the future as a Hazardous Material), any
petroleum base products, pesticides, paints and solvents, polychlorinated
biphenyl, lead, cyanide, DDT, acids, ammonium compounds and other chemical
products (excluding commercially used cleaning materials in ordinary quantities)
and any substance or material if defined or designated as hazardous or toxic
substance, or other similar term, by any federal, state or local law, statute,
regulation, or ordinance affecting the Building Complex or Premises presently in
effect or that may be promulgated in the future, as such statutes, regulations
and ordinances may be amended from time to time.
24.3 In the event Tenant caused or permits Hazardous Material to be brought
upon, kept or used in or about the Premises, with or without Landlord's consent,
Landlord shall be entitled to have an environmental audit performed at
reasonable intervals during the term, in Landlord's reasonable judgment, the
reasonable costs and expense of which shall be paid by Tenant.
SECTION 25. CONTROLLING LAW.
The Lease and all its terms shall be construed consistent with the laws of the
State of Colorado. Any dispute resulting in litigation shall be resolved in
Court proceedings instituted in Colorado and in no other jurisdiction.
SECTION 26. LEASE BINDING UPON SUCCESSORS.
The covenants and agreements in this Lease shall bind and inure to the benefit
of Lessor and Lessee and their respective successors.
SECTION 27. EXECUTION IN DUPLICATE.
This Lease shall be signed by the parties in duplicate, each of which shall be a
complete and effective original Lease.
SECTION 28. PARTIAL INVALIDITY.
If any term, covenant or condition of this Lease or the application thereof
shall to any extent be invalid or unenforceable, the remainder of the Lease or
the application of such term, covenant or condition to persons or circumstances
other than those to which it has been held invalid or unenforceable shall not be
affected and each term, covenant and condition of this Lease shall be valid and
shall be enforced to the fullest extent permitted by law.
SECTION 29. SECTION HEADINGS.
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All section headings are for the purpose of reference and shall not affect the
true meaning and intent of the terms contained in the sections.
SECTION 30. GUARANTEE OF LEASE -N/A
IN WITNESS OF THIS AGREEMENT, the parties have executed this Lease on the day
and year first above written.
LESSOR: Diana Wilkins LESSEE: Renaissance Entertainment
Corporation
By: /s/ John Wilkins By: /s/ Miles Silverman
----------------------------- -------------------------
JOHN WILKINS MILES SILVERMAN
AUTHORIZED SIGNATURE FOR
DIANA WILKINS THE OWNER
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ADDENDUM ONE
The terms and conditions of this addendum shall supersede and control those
terms of the attached lease dated AUGUST 15, 1996 between RENAISSANCE
ENTERTAINMENT CORPORATION as Lessee and Diana Wilkins as Lessor, for the lease
of 4410 ARAPAHOE AVE. SUITE 200 AND 205, Boulder CO 80303. Both Lessor and
Lessee agree to the following:
1.) LESSEE FINISH ALLOWANCE
Lessor agrees to construct Lessee's space in accordance with the
attached Building Standards and Mutual Consent.
2.) BASE RENTAL PAYMENT SCHEDULE
Months 1-12 $5,968.83 per month
Months 13-24 $6,267.28 per month
Months 25-36 $6,580.64 per month
Months 37-48 $6,909.67 per month
Months 49-60 $7,255.15 per month
3.) COMMENCEMENT DATE DEFINED
clearly defined as the earlier of the day that the premises are
substantially completed or the day a "certificate of occupancy" is
issued by the City of Boulder Building Department.
4.) OPTION TO RENEW
Lessor grants lessee the option to renew this lease for one (1)
additional term of five (5) years, Provided the Lessee has been in
good standing and has not been in default under the terms of this
Lease. Lessee must notify Lessor 120 days prior to the expiration
date of this lease of their intent to renew. Lessee's rental
payment shall be adjusted during the option at the then current
fair market value.
5.) CURRENT LEASE
Both Lessor and Lessee agree to terminate the Lease dated July 25,
1995 between Diana Wilkins and Renaissance Entertainment
Corporation for 4440 Arapahoe Suite 102 by mutual consent. The
termination date will be the same day as the commencement date of
this Lease.
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6.) RIGHT OF FIRST OPPORTUNITY
Provided that Lessee has been in good standing and has not been in
default under the terms and conditions of this Lease, Lessor hereby
grants Lessee the right of first refusal to Lease any contiguous and
adjacent space for the purposes of expansion as it becomes available
on the second floor of the Building upon the terms and conditions set
forth by the Lessor. Lessee shall have 72 hours from receipt of
written notice to accept the space. Lessee's failure to provide
written acceptance within the time allowed shall be deemed rejection
of the space and/or waiver of this right.
LESSOR: Diana Wilkins LESSEE: Renaissance Entertainment
Corporation
/s/ [ILLEGIBLE] 8/21/96
- ----------------------------------- ----------------------------------------
BY: John Wilkins DATE BY: DATE
Authorized signature for
Diana Wilkins
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LOAN WORKOUT AGREEMENT
This Loan Workout Agreement (the "Agreement") is entered into on this ___
day of March 1997, by and among Renaissance Entertainment Corporation, a
Colorado corporation ("Renaissance"), Bank One, Colorado, NA ("Bank One,
Colorado"), and Bank One, Kenosha, NA, n/k/a Bank One, Wisconsin ("Bank One
Wisconsin") (Bank One, Colorado and Bank One, Wisconsin are herein collectively
referred to as "Bank One").
RECITALS
A. Ellora Corporation, a Wisconsin corporation ("Ellora"), was a
wholly-owned subsidiary of Renaissance until about March 31, 1996 at which time
it was merged into Renaissance.
B. On or about April 7, 1995, Ellora executed a promissory note in the
amount of $1,000,000, payable to Bank One, Wisconsin (the "Bank One, Wisconsin
REL").
C. The current principal balance owing on the Bank One, Wisconsin REL is
$800,000.
D. The Bank One, Wisconsin REL is secured by, among other things, a real
estate mortgage on certain real property (the "Bank One, Wisconsin Mortgage").
A description of the real property is attached and incorporated herein by
reference as Exhibit A, (the "Subject Property").
E. On or about September 1, 1996, Renaissance executed a promissory note
in the amount of $250,000, payable to Bank One, Wisconsin (the "Bank One,
Wisconsin LOC").
F. The current principal balance owing on the Bank One, Wisconsin LOC is
$250,000.
G. The Bank One, Wisconsin LOC is secured by, among other things, a
security interest in all of Renaissance's equipment, fixtures, inventory,
documents, general intangibles, accounts, contract rights, chattel paper,
instruments and other property of Renaissance.
H. On or about March 7, 1996, Renaissance executed a promissory note in
the amount of $750,000, payable to Bank One, Colorado (the "Bank One, Colorado
LOC").
I. The current principal balance owing on the Bank One, Colorado LOC is
$740,188.55.
J. The Bank One, Colorado LOC is secured by, among other things, a
security interest in all of Renaissance's inventory, chattel paper, accounts,
equipment, general intangibles, and other property of Renaissance.
<PAGE>
K. The Bank One, Wisconsin REL, the Bank One, Wisconsin LOC, and the Bank
One, Colorado LOC, together with any and all mortgages, deeds of trust, security
agreements, loan agreements, modification agreements, change in term agreements,
and all other loan documents executed in connection therewith, are collectively
herein referred to as the "Loans."
L. The Loans are currently in default.
M. In order to cure the defaults on the Loans and in order to resolve any
and all disputes among the parties hereto, the parties stipulate and agree as
follows:
AGREEMENT
1. In its Articles of Merger and its Plan of Merger filed with the
Secretary of State of Wisconsin on or about March 26, 1996, Renaissance has and
hereby assumes all of the obligations of Ellora under the Loans.
2. Renaissance hereby ratifies and affirms the existence of, the validity
of, and all of their obligations under the Loans.
3. Upon the execution of this Agreement, Renaissance shall pay Bank One,
Wisconsin, the sum of $50,000 as a principal reduction on the Bank One,
Wisconsin LOC, plus all accrued interest then due and owing on the Bank One,
Wisconsin LOC.
4. Renaissance shall execute a Change in Terms Agreement relating to the
Bank One, Wisconsin LOC in the form which is attached and incorporated herein by
reference as Exhibit B.
5. Upon the execution of this Agreement, Renaissance shall pay Bank One,
Colorado, the sum of $50,000 as a principal reduction on the Bank One, Colorado
LOC, plus all accrued interest then due and owing under the Bank One, Colorado
LOC which interest shall be at the Bank One, Colorado LOC note rate except that
effective January 15, 1997 it shall be calculated at Bank One prime plus 2
percent.
6. Renaissance shall execute a Change in Terms Agreement relating to the
Bank One, Colorado LOC in the form which is attached and incorporated herein by
reference as Exhibit C.
7. Upon execution of this Agreement, Renaissance will execute a Real
Estate Mortgage in favor of Bank One, Colorado on the Subject Property. The
Mortgage shall be in a form which is attached and incorporated herein as Exhibit
D (the "Bank One, Colorado Mortgage").
8. The Bank One, Colorado Mortgage shall be immediately subordinate to
the Bank One, Wisconsin Mortgage. Bank One, Colorado agrees to subordinate the
Bank One, Colorado
2
<PAGE>
Mortgage to a potential new loan from a third party lender to Renaissance in the
amount of from $750,000 to $1.5 million, so long as the new loan is funded prior
to June 1, 1997 and Renaissance is not otherwise in default under the Loans, as
the Loans may be modified by this Agreement.
9. Upon execution of this Agreement, Renaissance shall pay Bank One,
Wisconsin all accrued interest then due and owing under the Bank One, Wisconsin
REL.
10. Renaissance shall pay Bank One the amount of Bank One's reasonable
attorney fees and costs incurred in connection with the preparation of any
documents relating to the Agreement. Such fees and costs shall be paid by
Renaissance within 15 days after Bank One presents Renaissance with its
statement for such fees and costs incurred.
11. Renaissance shall execute such other and further documents as may be
deemed necessary by Bank One in order to complete the transactions referenced
herein.
12. Renaissance hereby forever releases, discharges and acquits Bank One
and any of its present, former or future representatives, successors, heirs,
assigns, executors, administrators, and any of their present, former or future
agents, principals, trustees, insurers and reinsurers, representatives or any of
them and their lawyers, and all persons acting by, through or under or in
concert with them, or any of them, from any and all manner of action or actions,
cause or causes of action, whether class, derivative or individual in nature, in
law or in equity, suits, debts, liens, contracts, agreements, promises,
liabilities, claims, demands, damages, lawsuits, costs or expenses of any kind
or nature whatsoever, known or unknown, suspected or unsuspected, fixed or
contingent, that it has or may have as of the date of the execution of this
Agreement.
13. If Renaissance fully complies with all of the terms and provisions of
the Loans, as the Loans may be modified by this Agreement, then Bank One,
Wisconsin shall renew the Bank One. Wisconsin REL, in the amount of $700,000 on
the following terms:
(A) one point origination fee;
(B) interest at 2% over Bank One's prime rate, to move with prime;
(C) quarterly principal reductions of $50,000 beginning in March of 1998;
(D) monthly interest payments of all accrued interest;
(E) the entire balance of the note is due and payable in December 1998.
(F) The renewed note shall continue to be secured by the Bank One
Wisconsin Mortgage on the Subject Property and all of the collateral
currently secured by the Bank One, Wisconsin REL and the Bank One,
Wisconsin LOC.
3
<PAGE>
14. Renaissance hereby affirms that it is currently seeking alternative
financing in the form of debt or equity in an amount sufficient to pay off the
Bank One, Colorado LOC and the Bank One, Wisconsin LOC. Renaissance shall use
its best efforts to obtain such alternative financing. If Renaissance obtains
such alternative financing in an amount in excess of $2.5 million during the
calendar year 1997, then it shall immediately pay off all amounts then due and
owing under the Bank One, Colorado LOC and the Bank One, Wisconsin LOC.
15. The Recitals contained in this Agreement are part of this Agreement.
16. If there is any uncertainty in the interpretation of any provision of
this Agreement, all terms and provisions of this Agreement shall be construed on
the basis that all parties assisted in the drafting and finalization hereof.
17. In the event that any party brings a lawsuit (or other proceedings)
for the purpose of seeking enforcement of this Agreement, the party who
primarily prevails in such proceedings shall be entitled to the recovery of its
reasonable attorneys fees and costs incurred therein.
RENAISSANCE ENTERTAINMENT CORPORATION
By: /s/ Charles S. Leavell
-------------------------------
Name: Charles S. Leavell
Title: Chief Executive Officer
BANK ONE, WISCONSIN
By: /s/ Michael Vellor
-------------------------------
Name: Michael Vellor
Title: Vice President
BANK ONE, COLORADO, NA
By: /s/ Dennis Warren
-------------------------------
Name: Dennis Warren
Title: Vice President
4
<PAGE>
EXH 23.1
INDEPENDENT AUDITOR'S CONSENT
We hereby consent to the use of our reports dated March 31, 1997,
accompanying the consolidated financial statements of Renaissance
Entertainment Corporation as of December 31, 1996, March 31, 1996 and 1995,
included in the Company's Annual Report on Form 10-K and to the incorporation
by reference of the aforementioned financial statements in Registration No.
33-90044 for the 1993 Stock Incentive Plan, Registration No. 33-97388 also
for the 1993 Stock Incentive Plan, and Registration No. 333-21479 for sales
by certain Selling Shareholders, and Registration No. 333-17167 for the 1996
Consultant Compensation Agreements.
Schumacher & Associates, Inc.
April 14, 1997
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 374,289
<SECURITIES> 0
<RECEIVABLES> 99,551
<ALLOWANCES> 0
<INVENTORY> 184,695
<CURRENT-ASSETS> 931,451
<PP&E> 9,150,520
<DEPRECIATION> 1,928,765
<TOTAL-ASSETS> 9,872,349
<CURRENT-LIABILITIES> 2,437,735
<BONDS> 3,551,106
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<COMMON> 8,348,647
<OTHER-SE> (3,293,195)
<TOTAL-LIABILITY-AND-EQUITY> 9,872,349
<SALES> 14,553,577
<TOTAL-REVENUES> 14,553,577
<CGS> 1,350,949
<TOTAL-COSTS> 3,461,667
<OTHER-EXPENSES> 11,494,457
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 253,740
<INCOME-PRETAX> (1,851,725)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,851,725)
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