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As filed with the Securities & Exchange Commission on January 20, 1998
Registration No. 33-85538
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 4 ON
FORM S-1 TO
REGISTRATION STATEMENT ON FORM SB-2
UNDER
THE SECURITIES ACT OF 1933
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RENAISSANCE ENTERTAINMENT CORPORATION
(Exact name of issuer as specified in its charter)
COLORADO 7900 81-1094630
(State or other jurisdiction Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code No. Identification
organization) No.)
4410 ARAPAHOE AVENUE, SUITE 200
BOULDER, CO 80303
(303) 444-8273
(Address and telephone number of principal executive offices)
CHARLES S. LEAVELL
RENAISSANCE ENTERTAINMENT CORPORATION.
4410 ARAPAHOE AVENUE, SUITE 200
BOULDER, COLORADO 80303
(303) 444-8273
(Name, address and telephone number of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of earlier effective registration
statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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RENAISSANCE ENTERTAINMENT
CORPORATION
3,655,530 SHARES
COMMON STOCK, ISSUABLE UPON THE EXERCISE OF
REDEEMABLE CLASS A WARRANTS AND REDEEMABLE CLASS B WARRANTS
This Prospectus relates to the sale of up to 3,655,530 shares of common
stock, $.03 par value, of Renaissance Entertainment Corporation, a Colorado
corporation ("Renaissance" or the "Company"), which are reserved for issuance
upon the exercise of Class A Redeemable Common Stock Purchase Warrants (the
"Class A Warrants" or "A Warrants") and Class B Redeemable Common Stock
Purchase Warrants (the "Class B Warrants" or "B Warrants"; hereafter the
Class A Warrants and Class B Warrants will collectively be referred to as the
"Warrants" or the "Public Warrants"). The Warrants were part of 1,035,000
Units sold in early 1995.
Each Class A Warrant entitles the registered holder thereof to purchase one
share of Common Stock at a price of $2.00 per share, subject to adjustment in
certain circumstances, from April 27, 1995 (the "Separation Date") through and
including January 27, 2000. Each Class B Warrant entitles the registered holder
thereof to purchase one share of Common Stock at a price of $2.625 per share,
subject to adjustment in certain circumstances, from the Separation Date through
and including January 27, 2000. The Warrants are redeemable by the Company
after January 27, 1997, or sooner with the consent of Duke & Co., Inc., the
underwriter of the Unit offering ("Underwriter"), at a price of $0.01 per
Warrant upon 30 days' notice mailed within three (3) days after the closing bid
price of the Common Stock has equaled or exceeded 150% of the then current
respective Warrant exercise price (currently $3.00 per share with respect to the
Class A Warrants and $3.9375 per share with respect to the Class B Warrants) 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. See "DESCRIPTION OF SECURITIES."
The Company's Common Stock, the Class A Warrants and the Class B
Warrants is traded on the Nasdaq Small Cap Market under the symbols "FAIR,"
"FAIRW," and "FAIRZ" respectively. On December 22, 1997, the last reported
sale price of Common Stock as reported on the Nasdaq Small Cap Market was
$0.4375. See "CERTAIN MARKET INFORMATION."
THE SECURITIES OFFERED HEREBY INVOLVED A HIGH DEGREE OF RISK AND SHOULD BE
CONSIDERED ONLY BY PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS NOT APPLICABLE TO AND MAY NOT BE USED FOR THE RESALE OF THE
COMMON STOCK ACQUIRED UPON EXERCISE OF THE WARRANTS.
The Date of This Prospectus is January __, 1998
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. POTENTIAL
INVESTORS SHOULD CAREFULLY REVIEW THE INFORMATION UNDER THE HEADING "RISK
FACTORS."
THE COMPANY
Renaissance Entertainment Corporation operates five Renaissance Faires
in the United States. With these 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 sizes 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.
The Company owns and operates 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 in Tuxedo, New York, serving the New York City
metropolitan area; and the Virginia Renaissance Faire in Fredericksburg,
Virginia, serving the Washington D.C. and Richmond metropolitan areas. The
Company is currently negotiating for a permanent location for the Southern
California Renaissance Pleasure Faire and is seeking an alternative site for the
Northern California faire. See "Risk Factors."
In July 1995, the Company acquired approximately 250 acres of land in
Fredericksburg, Virginia in order to construct a Renaissance Faire on that
site. The Virginia Renaissance Faire opened in May 1996.
In February 1996, the Company acquired all of the issued and outstanding
stock of Creative Faires, Ltd., which owns and operates the New York Renaissance
Faire. In connection with this acquisition, the Company issued 540,000 shares
of Common Stock.
The Company's strategic plan is to grow through internal growth and by
developing and acquiring additional Renaissance Faires located throughout the
United States. The Company believes that with a long-term strategy of internal
growth and acquisitions, the Company will strengthen its market position.
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The Company maintains its principal executive offices at 4410 Arapahoe
Avenue, Suite 200, Boulder, Colorado 80303, where its telephone number is (303)
444-8273.
RISK FACTORS
An investment in the securities offered hereby involves a high degree of
risk. See "Risk Factors."
THE OFFERING
Securities Offered: Up to 3,655,530 shares of Common Stock reserved
for issuance upon the exercise of Class A
Warrants and Class B Warrants. See
"DESCRIPTION OF SECURITIES."
Common Stock Outstanding
Before the Offering:(1) 10,263,247 shares
After the Offering: (1) 13,918,777 shares. Assumes exercise of all
outstanding Class A and Class B Warrants.
The Warrants:
Exercise Terms: Each Class A Warrant entitles the holder to
purchase one share of Common Stock at a price
of $2.00, subject to adjustment in certain
circumstances, and each Class B Warrant
entitles the holder to purchase one share of
Common Stock at a price of $2.625, subject to
adjustment in certain circumstances. See
"DESCRIPTION OF SECURITIES."
Expiration Date: January 27, 2000, unless earlier redeemed by
the Company.
Redemption: Each Warrant is redeemable by the Company at
any time after January 27, 1997 or earlier with
the consent of the Underwriter, at a price of
$0.01 per Warrant (the "Redemption Price"),
upon not less than 30 days' notice and mailed
within three (3)
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(1) As of December 23, 1997, does not include shares of Common Stock reserved
for issuance upon exercise of options granted under the Company's 1993 Stock
Incentive Plan, or the conversion of certain convertible notes or other
convertible securities.
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days after the closing bid price of the Common
Stock has equaled or exceeded 150% of the then
current respective exercise price (currently
$3.00 per share with respect to the Class A
Warrants, and $3.9375 per share with respect to
the Class B Warrants) for a period of twenty
(20) consecutive trading days. The holders of
the Class A Warrants or Class B Warrants shall
have exercise rights until the close of
business on the date preceding the date fixed
for redemption. See "DESCRIPTION OF
SECURITIES."
Use of Proceeds: The proceeds received by the Company upon
exercise of the Warrants will be utilized for
working capital purposes.
NASDAQ SYMBOLS:
Common Stock. . . . . . . .FAIR
Class A Warrants. . . . . .FAIR W
Class B Warrants. . . . . .FAIR Z
SUMMARY FINANCIAL DATA
The following summary financial data was derived from the Company's
financial statements included elsewhere herein and should be read in conjunction
with such financial statements and the notes thereto. On June 21, 1996, the
Company changed its fiscal year end from March 31, to December 31. The data
presented as of and for the nine months ended December 31, 1996, represents the
transition period for the new fiscal year end. All information is in thousands,
except per share amounts.
STATEMENTS OF OPERATIONS DATA:
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------- ------------------
1994 1995 1996 1995 1996 1996 1997
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue ............... $ 1,973 $12,540 $12,811 $10,470 $14,554 $13,242 $13,094
Gross Profit .......... 1,694 9,327 8,984 7,265 9,741 8,851 8,826
Net Income (Loss) ..... (98) 576 (1,274) 264 (1,852) (1,522) (420)
Net Income (Loss) to
Common Stockholders (98) 533 (1,274) 264 (1,852) (1,522) (420)
Net Income (Loss) per
Common Share ....... (.05) .11 (.16) .03 (.21) (.17) (.04)
Weighted average
number of shares
outstanding ......... 1,901 4,801 7,824 7,644 8,907 8,813 9,574
</TABLE>
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BALANCE SHEET DATA:
September 30, 1997
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Working capital (deficit) ($560)
Total assets 9,636
Total liabilities 4,022
Stockholders' equity 5,614
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following risk factors in
evaluating the Company and its business before purchasing the Shares offered
hereby.
RECENT LOSSES. Although the Company was profitable in its fiscal year
ended March 31, 1995, it incurred a net loss of $1,273,671 in the fiscal year
ended March 31, 1996 and a net loss of $1,851,725 for the nine months ended
December 31, 1996. In addition, the Company expects to incur a net loss for the
fiscal year ending December 31, 1997. There is no assurance that the Company
will return to profitability in any subsequent period. The New York and
Virginia Faires each operated at a loss during 1996 and the Virginia Faire
operated at a loss during 1997. If the performance of these Faires does not
improve in subsequent periods, the Company's ability to achieve and sustain
profitability in subsequent periods will be adversely affected. See "POSSIBLE
SUSPENSION OF NORTHERN CALIFORNIA FAIRE FOR 1998."
NEED FOR ADDITIONAL CAPITAL. The Company had a working capital deficit of
($560,398) as of September 30, 1997 and ($1,506,284) as of December 31, 1996.
During the first five months of fiscal 1997, the Company obtained $1,350,000 of
additional working capital through the placement of convertible loans and on
March 31, 1997, obtained an extension for the payment of short-term bank lines
of credit in the amount of $1,000,000, all of which lines of credit have been
paid as of the date of this Prospectus. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." While the Company
believes that it has adequate working capital to fund anticipated operations for
fiscal 1997, it will need additional funds to sustain operations after that
time. In addition, the Company would require additional funding to move either
its Southern or Northern California Faires to a new location (see "POSSIBLE
SUSPENSION OF NORTHERN CALIFORNIA FAIRE FOR 1998" and "POSSIBLE RELOCATION OF
SOUTHERN CALIFORNIA FAIRE"), and to expand its business, and may require
additional funding in order to develop a new site for the Northern California
Faire (see "POSSIBLE SUSPENSION OF NORTHERN CALIFORNIA FAIRE FOR 1998"). The
Company recently sold its Wisconsin faire site to a group of investors who
leased the site to the Company. This transaction resulted in an increase of
approximately $1,600,000 in the Company's working capital. The Company believes
that it needs to raise from $500,000 to $1,000,000 of short-term working capital
to fund its working capital requirements during fiscal 1998. This additional
capital would not, however, be sufficient to fund the relocation of either the
Southern or Northern California Faires. Therefore, additional
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capital may be sought through borrowings or from additional equity financing.
Such additional equity financing may result in additional dilution to
investors. In any case, there can be no assurance that any additional capital
can be satisfactorily obtained if and when required.
POSSIBLE SUSPENSION OF NORTHERN CALIFORNIA FAIRE FOR 1998. The Company
operates its Northern California Faire during the Fall of each year at a site in
Novato, California. The Company's current lease for that site, which is on a
year-to-year basis, expires in 1997. The Company understands that the owner of
the site is seeking to develop the site for commercial construction purposes,
although the owner's efforts to do so are currently being blocked by pending
litigation in which the use of the site for such purpose is being challenged.
The Company is investigating new sites for the Faire. There is no assurance
that the Company will be successful in locating a new site for the Northern
California Faire for the 1998 or subsequent faire seasons or, if located,
successful in obtaining all necessary approvals for a site to be available for
the Faire in 1998 or any subsequent period. In addition, the Company estimates
that it could be required to spend from $500,000 to $1,000,000 for development
of a site prior to the opening of the Faire at a new site. See "BUSINESS -
EXISTING RENAISSANCE FAIRES AND SITES - NORTHERN CALIFORNIA RENAISSANCE PLEASURE
FAIRE."
POSSIBLE RELOCATION OF SOUTHERN CALIFORNIA FAIRE. Since April 1994, the
Company has operated its Southern California Faire in Devore, California.
The Company has 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 would need additional funds from
one or more third parties to finance such construction. Subsequent to the
execution of the letter of intent for the new site, the owner of the existing
faire site indicated that it was willing to enter into a long-term lease for
the site. This would allow the Company to construct permanent structures on
the site and significantly reduce setup cost for this faire. As of the date
of this Prospectus, the Company had not decided whether it should enter into
a long-term lease for the current faire site or relocate the faire to the
proposed site in Pomona, California, although the Company intends to remain
at the current site through at least the 1998 faire season. See "BUSINESS -
EXISTING RENAISSANCE FAIRES AND SITES-SOUTHERN CALIFORNIA RENAISSANCE
PLEASURE FAIRE."
DEPENDENCE UPON MANAGEMENT. The Company's future success depends in a
large part on the continued service of its key marketing, sales, promotional and
management personnel and on its ability to continue to attract, motivate and
retain highly qualified employees. The loss of the services of key personnel
could have a material adverse effect upon the Company's operations and
development efforts. There can be no assurance of the continued service to the
Company of its key executive officers. The Company does not have key person
life insurance covering its management personnel or other key employees.
COMPETITION. The Company faces significant competition from numerous
organizations throughout the country which offer Renaissance Faires and other
entertainment events, including amusement parks, theme parks, local and county
fairs and festivals, some of which possess
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significantly greater resources than the Company and in many cases greater
expertise and industry contacts. The Company estimates that there are currently
20 major Renaissance Faires produced each year. In addition, the Company
estimates that there are 100 minor Renaissance Faire events held throughout the
United States each year, ranging in duration from one day to two weekends. See
"BUSINESS - COMPETITION."
LACK OF TRADEMARK PROTECTION. Because of the large number of existing
Renaissance Faires, it is unlikely that the Company will be able to rely upon
trademark or service mark protection for the name "Renaissance Faire." As a
result, there is no protection against others using the name "Renaissance Faire"
for the production of entertainment events similar to those produced by the
Company. The Company's own Faires could be negatively impacted by association
with substandard productions. See "BUSINESS - INTELLECTUAL PROPERTY."
PUBLIC LIABILITY AND INSURANCE. As a producer of a public entertainment
event, the Company has exposure for claims of personal injury and property
damage suffered by visitors to the Faires. To date, the Company has experienced
only minimal claims which it has been able to resolve without litigation. The
Company maintains comprehensive liability insurance which it considers to be
adequate against this risk; however, there can be no assurance that a
catastrophic event or claim which could result in damage or liability in excess
of this coverage will not occur. See "BUSINESS - PUBLIC LIABILITY AND
INSURANCE."
DEPENDENCE UPON VENDORS. A substantial portion of the Company's revenues
generated at each Faire are derived from arrangements that the Company has with
vendors who construct elaborate booths at the Faires and sell a variety of food,
crafts and souvenirs. This arrangement consists of either a fixed rental paid
by the vendors to the Company or a percent of revenues. In either case, the
success of a Faire is dependent upon the Company's ability to attract
responsible vendors who sell high quality goods. See "BUSINESS - VENDORS."
SEASONALITY. The Company's Renaissance Faires are located in traditionally
seasonal areas which attract the greatest number of visitors during the warm
weather months in the spring, summer and early fall. Unless the Company
acquires or develops additional Faire sites in areas which are counter-seasonal
to the present sites located in temperate climates, the Company's revenues and
income will be highly concentrated in the six months ended September 30th of
each year. See "BUSINESS - SEASONALITY AND WEATHER."
DEPENDENCE UPON WEATHER. Each Renaissance Faire operated by the Company is
scheduled for a finite period, typically consecutive weekends during a seven to
nine-week period, which are determined substantially in advance in order to
facilitate advertising and other promotional efforts. The success of each Faire
is directly dependent upon public attendance, which is directly affected by
weather conditions. While each of the Company's faires, other than the Northern
and Southern California faires, are open, rain or shine, poor weather, or even
the forecast of poor weather, can result in substantial declines in attendance
and, as a result, loss of revenues. The Northern and Southern California faires
are closed if it is raining. Further, as the Renaissance Faires are outdoor
events, they are vulnerable to severe weather conditions that can cause damage
to the Faire's infrastructure and buildings, as well as injuries to patrons and
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employees. Risks associated with the weather are beyond anyone's control but
have a direct and material impact upon the relative success or failure of a
given Faire. See "BUSINESS - SEASONALITY AND WEATHER."
LICENSING AND OTHER GOVERNMENTAL REGULATION. For each Faire operated by
the Company, it is necessary for the Company to apply for and obtain permits and
other licenses from local governmental authorities controlling the conduct of
the Faire, service of alcoholic beverages, service of food, health and
sanitation and other matters at the Faire sites. Each governmental jurisdiction
has its own regulatory requirements which can impose unforeseeable delays or
impediments in preparing for a Faire production. While the Company has been
able to obtain all necessary permits and licenses in the past, there can be no
assurance that future changes in governmental regulation or the adoption of more
stringent requirements may not have a material adverse impact upon the Company's
future operations. See "BUSINESS - GOVERNMENT REGULATION."
FAIRE SITES. The Company's Northern and Southern California Faire sites
have been held pursuant to short-term leases. The Bristol Renaissance Faire and
the New York Faire are also operated on leased sites. It is expected that
future Faires that may be developed by the Company, if any, will also be
presented on leased sites. The terms and conditions of each lease will vary
from location and to a large extent are beyond the control of the Company.
Further, there can be no assurance that the Company will be able to continue to
lease existing Faire sites on terms acceptable to the Company, or be successful
in obtaining other sites on favorable locations. The Company's dependence upon
leasing Faire sites creates a substantial risk of fluctuation in the Company's
operations from year to year. See "POSSIBLE SUSPENSION OF NORTHERN CALIFORNIA
FAIRE FOR 1998" and "POSSIBLE RELOCATION OF SOUTHERN CALIFORNIA FAIRE."
SHARES ELIGIBLE FOR FUTURE SALE UNDER RULE 144. The Company estimates that
in excess of 3,000,000 shares of the Company's Common Stock currently
outstanding are "restricted securities" which have been outstanding for more
than two years and can be sold publicly in compliance with Rule 144 adopted
under the Securities Act of 1933 (the "Securities Act"). Holders of restricted
securities must comply with the requirements of Rule 144 in order to make a
public sale of their shares without violating the Securities Act. In general,
under Rule 144 as currently in effect, a person who has beneficially owned
restricted securities for at least one year, including persons who may be deemed
affiliates of the Company, would be entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock or the average weekly trading volume in the
Common Stock during the four calendar weeks preceding such sale, provided that
the Company has filed certain periodic reports with the Securities and Exchange
Commission and the sale is made in a "broker's transaction" or in a transaction
directly with a "market maker" as those terms are used in Rule 144. A person
who is not deemed to have been an affiliate of the Company at any time during
the 90 days preceding a sale by such person, and who has beneficially owned
restricted shares for at least two years, would be entitled to sell such shares
under Rule 144 without regard to the volume limitations and public information
and manner of sale requirements described above. The possibility that
substantial amounts of Common Stock may be sold in the public market under Rule
144 may adversely effect the prevailing market price for the Common Stock.
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MARKET OVERHANG FROM WARRANTS AND OUTSTANDING OPTIONS AND CONVERTIBLE
SECURITIES. As of December 23, 1997, the Company had outstanding options,
warrants and convertible notes and debentures to purchase a total of 6,178,392
shares, including Class A and Class B warrants to purchase an aggregate of
3,655,530 shares issued in a public offering in 1995 ("Public Warrants"). To
the extent that such stock options or warrants are exercised or the convertible
securities converted, dilution to the interests of the Company's shareholders
may occur. Exercise of these options or warrants or the conversion of the
convertible securities or even the potential of their exercise or conversion may
have an adverse effect on the trading price and market for the Company's Common
Stock. The holders of the options, warrants or convertible securities are
likely to exercise or convert them at times when the market price of the shares
of Common Stock exceeds the exercise price of the options or warrants or the
conversion price of the convertible securities. Accordingly, the issuance of
shares of Common Stock upon exercise of the options or warrants or conversion of
the convertible securities may result in dilution of the equity represented by
the then outstanding shares of Common Stock. Furthermore, holders of such
securities can be expected to exercise or convert them at a time when the
Company would, in all likelihood, be able to obtain any needed capital on terms
which are more favorable to the Company than the exercise or conversion terms
provided by such securities.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF PUBLIC WARRANTS. The Public
Warrants may be redeemed by the Company after January 27, 1997, at a price of
$0.01 per Warrant, upon 30 days' notice, mailed within three days after the
closing bid price of the Common Stock has equaled or exceeded 150% of the then
current respective warrant exercise prices (currently $3.00 per share with
respect to the Class A Warrants, and $3.9375 per share with respect to the Class
B Warrants), for a period of 20 or more consecutive trading days.
Warrantholders shall have exercise rights until the close of the business day
preceding the date fixed for redemption. Redemption of the Public Warrants
could have an adverse effect on the prevailing market price of the Common Stock.
PROPOSED NEW LISTING STANDARDS FOR NASDAQ SECURITIES. The Nasdaq Stock
Market recently adopted certain changes to the standards for issuers with
securities listed on Nasdaq. One of the changes included increasing the
maintenance requirements for continued listing in the Nasdaq Small Cap Market,
on which the Company's Common Stock is currently listed. While the Company
currently is in compliance with all of the new maintenance requirements other
than the $1.00 minimum stock price requirement, it could cease to be in
compliance with certain of these requirements in the future if it continues to
incur substantial losses from operations. In addition, the Company may be
required to complete a reverse stock split before February 22, 1998 to comply
with the minimum stock price requirement of the new rules. If the Company does
not comply with the new maintenance requirements, its Common Stock would be
delisted from the Nasdaq Small Cap Market.
Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities
and Exchange Commission. Penny stocks generally are equity securities with a
price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the Nasdaq system, provided that
current price
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and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules generally require that prior to a transaction in a penny
stock the broker-dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have
the effect of reducing the level of trading activity in the secondary market for
a stock that becomes subject to the penny stock rules. If the Company's
securities become subject to the penny stock rules, investors in this offering
may find it more difficult to sell their securities.
SEC INVESTIGATION OF DUKE & CO., INC. The underwriter of the Company's
1995 public offering, Duke & Co., Inc. ("Duke"), is aware that the Securities
and Exchange Commission is investigating certain of Duke's trading practices and
mark-ups in connection with trading in securities of the Company following the
public offering. Historically, Duke has been the principal market maker for the
Company's Common Stock and Public Warrants. There can be no assurance that the
investigation will not adversely and materially affect subsequent trading in the
Company's securities.
AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of
Incorporation, as amended, authorize the issuance of up to 1,000,000 shares
of preferred stock. The Board of Directors has been granted the authority to
fix and determine the relative rights and preferences of preferred shares, as
well as the authority to issue such shares, without further stockholder
approval. As a result, the Board of Directors could authorize the issuance
of a series of preferred stock which would grant to holders preferred rights
to the assets of the Company upon liquidation, the right to receive dividend
coupons before dividends would be declared to common stockholders, and the
right to the redemption of such shares, together with a premium, prior to the
redemption of Common Stock. Common stockholders have no redemption rights.
In addition, the Board could issue large blocks of voting stock to fend
against unwanted tender offers or hostile takeovers without further
shareholder approval.
AUTHORIZATION OF ADDITIONAL SHARES. The Company's Articles of
Incorporation, as amended, authorize the issuance of up to 50,000,000 shares of
Common Stock, of which 10,263,247 shares were outstanding on December 23, 1997.
The Company's Board of Directors has the authority to issue additional shares of
Common Stock and to issue options and warrants to purchase shares of the
Company's Common Stock without shareholder approval. In addition, the Board
could issue large blocks of voting stock to fend off unwanted tender offers or
hostile takeovers without further shareholder approval. In addition, the
Company had outstanding at December 23, 1997 options, warrants and convertible
securities to purchase 6,178,392 shares of Common Stock. Exercise or conversion
of these securities may have a further dilutive effect on
-10-
<PAGE>
existing shareholders and warrant holders. See "MARKET OVERHANG FROM WARRANTS
AND OUTSTANDING OPTIONS AND CONVERTIBLE SECURITIES."
MARKET FOR THE COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Since August 21, 1997, the Company's Common Stock has been traded in the
Nasdaq Small Cap Market and from September 1, 1995 to August 21, 1997, it traded
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 Company's Common Stock for each quarterly period of
the two most recent calendar years and the subsequent interim quarters
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.
Calendar Years Ended December 31 High Low
- -------------------------------- ---- ---
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
Second Quarter ended June 30 5.00 1.00
Third Quarter 1.25 0.50
Fourth Quarter - through December 22 1.69 .28
As of November 30, 1997, there were approximately 104 shareholders of
record. The Company estimates that there are approximately 1,530 beneficial
owners of its Common Stock.
-11-
<PAGE>
USE OF PROCEEDS
The proceeds received by the Company upon exercise of the Warrants will be
utilized for working capital purposes, construction of permanent faire sites in
Northern and Southern California, and improvement of existing facilities.
CAPITALIZATION
The following table sets forth (i) the current liabilities and
capitalization of the Company as of September 30, 1997.
September 30, 1997
------------------
Current liabilities $1,972,313
Long-term liabilities, net of current portion $2,049,687
--------------
Total liabilities $4,022,000
Stockholders' equity:
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, 9,636,262 issued and outstanding;(1) $289,088
Accumulated (deficit) ($3,712,921)
--------------
Total stockholders' equity $5,614,265
Total liabilities and stockholders' equity $9,636,265
--------------
--------------
_______________
(1) Does not include shares issuable upon exercise or conversion of outstanding
options, warrants or convertible securities.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
anticipate that it will pay cash dividends in the foreseeable future. Instead,
the Company intends to apply any earnings to the development and expansion of
its business.
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
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<PAGE>
related notes included elsewhere in this Prospectus. Information is not
provided for or at the end of fiscal 1993 as the financial statements for this
period, which would be for a predecessor company, are not available to the
Company. The information for fiscal 1993 would, as is the information for and
at the end of fiscal 1994, be for only one of the Company's faires (the Bristol
Renaissance Faire) and would not be, in the Company's opinion, material to an
understanding of the Company's current financial information. The acquisition
in 1996 of Creative Fairs Ltd. was accounted for as a pooling of interest. The
income statement data for the nine months ended December 31, 1996 and 1995
include the accounts of Creative Fairs Ltd. for the year ended December 31, 1996
and 1995 and accounts for the Company for the nine-month periods ended December
31, 1996 and 1995. The income statement data for the years ended March 31, 1996
and 1995 include the accounts of Creative Fairs Ltd. for the two years ended
December 31, 1995 and 1994 and the consolidated accounts of the Company for the
years ended March 31, 1996 and 1995, respectively. The balance sheet data as of
December 31, 1996 and 1995 include the accounts of Creative Fairs Ltd. as of
December 31, 1996 and December 31, 1995, respectively. The balance sheet data
as of March 31, 1996 and 1995, also include the accounts of Creative Fairs Ltd.
as of December 31, 1995 and 1994, respectively. The income statement data for
the year ended March 31, 1994 and as of March 31, 1994 do not include
information regarding Creative Fairs Ltd. as audited financial statements for
periods prior to January 1, 1994 were not available to the Company.
<TABLE>
<CAPTION>
NINE MONTHS
NINE MONTHS ENDED
YEARS ENDED MARCH 31, ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- --------------------- --------------------
INCOME STATEMENT DATA 1994 1995 1996 1995 1996 1996 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue $1,973 $12,540 $12,811 $10,470 $14,554 $13,242 $13,094
Gross Profit 1,694 9,327 8,984 7,265 9,741 8,851 8,826
Net Operating Income (Loss) (39) 757 (1,475) 111 (1,753) (1,432) (428)
Net Income (Loss) After Taxes (98) 576 (1,274) 309 (1,852) (1,522) (420)
Net Income (Loss) to Common
Shareholders (98) 533 (1,274) 264 (1,852) (1,522) (420)
Net Income (Loss) Per Common
Share (.05) .11 (.16) .03 (.21) (.17) (.04)
Weighted Average Common
Shares Outstanding 1,901 4,801 7,824 7,644 8,907 8,813 9,574
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30,
---------------------------------- --------------------- ---------------
BALANCE SHEET DATA 1994 1995 1996 1995 1996 1997
(IN THOUSANDS) ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Working capital (deficiency) $ (524) $3,123 $ 15 $ 768 $(1,506) $ (560)
Total current assets 167 4,012 2,120 1,308 931 1,412
Total assets 1,257 6,853 10,433 8,226 9,872 9,636
Total current liabilities 691 889 2,105 539 2,438 1,972
Long-term debt (less current maturities) 434 451 2,531 846 2,379 2,050
Stockholders' equity 132 5,513 5,797 6,841 5,055 5,614
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes for the fiscal period
ended December 31, 1996. On June 21, 1996, the Company changed its fiscal year
end from March 31 to December 31.
The Company operates five Renaissance Faires in the United States and is engaged
in a strategy to develop and acquire additional Renaissance Faires nationwide.
The Company's newest Faire opened on May 4, 1996 in Fredericksburg, Virginia, a
project which was designed and constructed by the Company. On February 5, 1996,
the Company acquired Creative Faires, Ltd., the owner and operator of the New
York Renaissance Faire. With its five faires currently drawing close to 750,000
visitors annually, the Company believes that it is the largest operator of
Renaissance Faires and Renaissance entertainment events in the United States.
The Renaissance Faire is a re-creation of a Renaissance village, a fantasy
experience transporting the visitor back into sixteenth century England.
Although the Company was profitable in its fiscal year ended March 31, 1995, it
incurred a net loss of ($1,273,671) in the fiscal year ended March 31, 1996, and
a net loss of ($1,851,725) for the nine months ended December 31, 1996. In
addition, the Company will incur a net loss for the fiscal year ending December
31, 1997. The New York and Virginia Faires operated at a loss during 1996. In
addition, the Virginia Faire, which ran from April 26, 1997 through June 8,
1997, operated at a loss in 1997. The Company believes both of these Faire's
results were adversely affected in 1996 and the Virginia Faire in 1997 by
unusually inclement weather in their respective areas. It is typical for a new
faire such as the Virginia Faire to operate at a loss for two or more years
until it is able to build a significant customer base and awareness of the
faire. Due to the fact that the New York Faire was acquired in 1996, the
Company had limited ability to affect the operations of this Faire during the
1996 faire season. The Company has hired a new manager for this Faire and has
introduced several new entertainment acts and implemented additional promotional
efforts for this faire's 1997 season, which began on July 26, 1997 and ended on
September 14, 1997. Revenue for the New York Faire increased approximately
$200,000 for the 1997 season compared to the 1996 season and the faire is
expected to have operated at close to a break even in 1997.
The owner of the site for the Company's Northern California Faire is seeking to
develop this site for commercial construction purposes, although the owner's
efforts to do so are currently being blocked by pending litigation in which the
use of the site for such purposes is being challenged. While the Company is
investigating new sites for the Northern California Faire, there can be no
assurance that the Company will be able to secure a new site for this faire for
the 1998 or following faire seasons.
The Company is also considering relocation of its Southern California Faire. On
November 4, 1996, the Company entered into a non-binding letter of intent with
the owner of a site in Pomona, California, which contemplated that the Company
would commence operation of the Southern
-14-
<PAGE>
California Faire at that site starting in 1998. Subsequent to the signing of
the letter of intent, the owner of the current site for the Southern California
Faire indicated that it was willing to enter into a long-term lease for the
current site. The ability to enter into a long-term lease for this site
increases its value to the Company, as the Company could construct temporary
structures on the site and significantly reduce setup costs for the faire. As
of the date of this Prospectus, the Company has not decided if it should enter
into a long-term lease for the current site or relocate the Faire to the
proposed site in Pomona, although the Company intends to remain at the current
site through at least the 1998 faire season. The Company estimates that the
cost of the construction and relocation to the new site would be approximately
$2,000,000.
The Company had a working capital deficit ($1,506,284) and ($560,398) as of
December 31, 1996 and September 30, 1997, respectively. During the first five
months of fiscal 1997, the Company obtained $1,350,000 of additional working
capital. While the Company believes that it has adequate working capital to
fund operations for fiscal 1997, it believes it must obtain additional working
capital for future fiscal periods. See "LIQUIDITY AND CAPITAL RESOURCES."
PROSPECTIVE INFORMATION
This Prospectus 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 SEPTEMBER 30, 1997 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 1996
Revenues decreased $147,909 or 1% from $13,241,878 in 1996 to $13,093,969 in
1997. This decrease was primarily the result of a decrease in revenues for the
Virginia Faire of approximately $100,000 and a decrease in revenues for the
Southern California Faire of approximately $225,000. The decreased revenues for
the Virginia Faire were due to unusually inclement weather - six of the seven
faire weekends had substantial rain which severely impacted attendance. The
decreased revenues for the Southern California Faire were due to being open one
less weekend in 1997 than in 1996. Although revenues were down in Virginia, the
operating loss was reduced by approximately $250,000, from a loss of
approximately $680,000 for the 1996 period to a loss of approximately $430,000
for the 1997 period, through expense control.
Operating expenses (year-round operating costs and corporate overhead) decreased
$1,029,928 or 10%, from $10,283,166 in 1996 to $9,253,238 in 1997. The primary
causes of this decrease were the $380,000 of goodwill writedown and unusual
expenses of a one time nature of approximately $400,000 applicable to the
initial start-up of the Virginia Faire included in 1996 results.
-15-
<PAGE>
Of the operating expenses, salaries increased 5%, from $3,722,829 in 1996 to
$3,907,931 in 1997, reflecting normal salary increases.
Advertising expense decreased $460,661, or 19%, from $2,450,985 in 1996 to
$1,990,324 in 1997. This decrease was due to spending more in 1996 for
advertising the first year of the Virginia Faire as well as the utilization of
more cost efficient methods of advertising in 1997.
Depreciation and amortization increased 10%, from $479,862 in 1996 to $529,732
in 1997. This increase is primarily the result of depreciation on the
approximately $4,000,000 invested in buildings and improvements to the Virginia
property. This increase would have been greater had the Company not
standardized the depreciable lives used for buildings from a range of between 7
to 30 years in 1996 to 15 years for temporary buildings and 30 years for
permanent buildings in 1997.
Other operating expenses (all other general and administrative expenses of the
Company) decreased $424,239 or 13%, from $3,249,490 in 1996 to $2,825,251 in
1997. Included in this decrease is the $400,000 of one-time expenses discussed
above, incurred in 1996 in connection with the initial start-up of the Virginia
Faire. The balance of the decrease is due to management's implementation of a
variety of cost saving measures.
As a result of the foregoing, net operating income (before interest charges and
other income) increased $1,004,743 from a loss of ($1,432,391) for the 1996
period to a loss of ($427,648) for the 1997 period.
A 57% increase in interest expense from $187,972 in 1996 to $295,275 in 1997
resulted from an increase in the Company's borrowing levels throughout the 1997
period as compared to the 1996 period.
Other income/expense increased $458,886, from other expense of ($199,951) in
1996 to other income of $258,935 in 1997. The primary source of the other
income in 1997 was the reversal of $309,694 of expense which had been accrued in
1996 for expenses expected to have been incurred in 1997 to evaluate a new site
for the Northern California Faire. During the second quarter it became apparent
that this site would not be available and that these costs would not be
incurred. In addition, it is not possible at this time to determine what
expenses may be incurred if the Company is required to find a new site for this
Faire. The primary source of the other expense in 1996 was the reversal of
$200,000 of other income which had been recorded in the quarter ended December
31, 1995. In late 1995, the State of Virginia paid the Company $200,000 which
upon initial evaluation was considered income. Upon further review, it was
determined that the more appropriate treatment of this amount was as a reduction
of fixed assets. The appropriate adjustment in the last quarter of the fiscal
year ended March 31, 1996 (which is the first quarter of the calendar year)
resulted in the $200,000 charge to expense.
Combining net operating income with other income/expense resulted in a
$1,341,718 increase in net income before taxes, from a loss of ($1,761,443) for
the 1996 period to a loss of ($419,725) for the 1997 period.
-16-
<PAGE>
As a result of operating losses for the entire fiscal year ended March 31, 1996
(the Company's fiscal year previously ended March 31), a refund of taxes paid in
prior years was available in the 1996 period. This resulted in a credit to
Income Taxes of $239,273 for the nine month period ended September 30, 1996.
Net income to common stockholders increased $1,102,445, from a loss of
($1,522,170) for the 1996 period to a loss of ($419,725) for the 1997 period.
Finally, the net loss per common share improved from a loss of ($.17) for the
1996 period to a loss of ($.04) for the 1997 period, based on 8,813,137 weighted
average shares outstanding during the 1996 period and 9,574,197 weighted average
shares outstanding during the 1997 period.
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 "Selected Financial Data," for information regarding the
unaudited 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.
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 Company's fiscal year ended
March 31, 1996, due to the different fiscal periods for the Company and the New
York Faire, the entire twelve-month results of operations for the New York Faire
for the year ended December 31, 1995 (the New York Faire's fiscal period) were
reflected in the Company's operating results for the January 1, 1996 through
March 31, 1996 quarter (the Company's fiscal year end prior to its change on
June 21, 1996) 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 revenues of $949,304 and $2,360,941
-17-
<PAGE>
for the Virginia and New York Faires, respectively, 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 of
approximately $500,000 in revenues for the Southern California Faire as compared
to the same period of 1995. Management believes that unusually inclement
weather in Virginia, New York and Southern California reduced the expected
revenues from these faire operations. In addition, 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 an operating loss in the 1997 faire season. During the
1996 season the Bristol Renaissance Faire revenues increased approximately
$500,000 over the 1995 season due, in part, to good weather during each of the
nine weekends of this faire. This was the eighth consecutive year that
attendance increased at the Bristol 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 approximately $3,200,000 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 necessary
advertising for the two additional faires as well as moderate increases in
advertising and rates for the other three faires. Additionally, due to
contracting out certain advertising activities previously done by faire
personnel, additional advertising expenses of approximately $136,000 were
charged to advertising expenses during the 1996 period.
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 originally expected to be
incurred in 1997, which costs are the result of the decision made in 1996 to
examine an alternative site for the Company's Northern California Faire. See
"GENERAL" above regarding the possible relocation of the Northern California
Faire.
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 increased operating expenses
(approximately $570,000) resulting from the two additional faires, and also
greater overhead costs (approximately $100,000 in the aggregate) at each faire
site
-18-
<PAGE>
plus an increase in other corporate activities (approximately $50,000) 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 a more than 40% decrease in the Company's cash balances during the
1996 period. A 153% increase in interest expense from $100,266 in 1995 to
$253,740 in 1996 resulted from increases 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 number of shares
outstanding during the 1995 period and 8,907,049 weighted average number of
shares outstanding during the 1996 period.
MARCH 31 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 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
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<PAGE>
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. The approximately
$3,200,000 investment in buildings and improvements to the Virginia property
were not subject to depreciation in fiscal 1996, because at March 31, 1996 the
Virginia 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
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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 number of shares outstanding during fiscal 1995 and 7,824,182
weighted average number of shares outstanding during fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficit was narrowed during the nine months ended
September 30, 1997, from $1,506,284 at December 31, 1996 to $560,398 at
September 30, 1997. This improvement resulted from a number of cost reductions
implemented by management in order to reduce the Company's working capital
requirements and the issuance of $1,000,000 of convertible debentures during the
first five months of the year.
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The Company's working capital requirements are greatest during the period from
January 1 through April 30, when it is incurring start-up expenses for its first
faires of the faire season, the Southern California and Virginia Faires. The
Company has historically relied upon various revolving credit facilities to meet
its working capital requirements during this period. At December 31, 1996, the
Company had outstanding $1,000,000 in short-term bank lines of credit borrowings
which was the maximum amount available under the lines and did not therefore
have any unused credit available for the 1997 faire season. Subsequent to year
end, the Company entered into an agreement with the banks which required the
Company to pay these lines from 1997 operations. As of September 30, 1997, the
entire balance of these lines was repaid. Since December 31, 1996, the Company
has also raised $1,000,000 of working capital through the issuance of
convertible debentures, of which $250,000 was issued to Charles S. Leavell,
Chairman of the Board of Directors of the Company and the balance to Mr.
Leavell's father and an unrelated party, and also raised $350,000 of working
capital from the sale of convertible notes to a number of private investors.
The debentures which were secured by mortgages on the Company's Wisconsin and
Virginia faire sites, were repaid upon completion of the sale/lease back of the
Wisconsin faire site described below. The notes were secured by a mortgage on
the Company's Wisconsin Faire site. Upon the sale/lease back of the Wisconsin
faire site, the noteholders consented to a termination of the mortgage on this
property in consideration for which they were granted a mortgage on the Virginia
Faire site. The debentures were convertible into common stock at the lesser of
$4.50 per share or 70% of the fair market value of the Company's common stock,
and the notes are convertible into common stock at the lesser of $1.75 per share
or 50% of the fair market value for the Company's common stock. The debenture
holders were also granted warrants to purchase an aggregate of 200,000 shares of
the Company's common stock at the lesser of $3.00 per share or 70% of the fair
market value of the Company's common stock. The warrants were canceled upon
payment of the debentures.
Management believes that the Company should raise additional working capital in
order to more adequately fund its operations. During November 1997, the Company
completed the sale of its Wisconsin Faire site for $4,000,000. The purchaser
leased this property back to the Company for a period of 20 years with lease
payments of $400,000 per year during each of the first two years, and increasing
to $543,333 per year in years 13 through 20. The Company has the right to
reacquire the property during the term of the lease at an aggregate price of
$4,433,333 during the first three years, increasing to $4,900,000 during years
13 through 20. The sale/leaseback transaction required a security deposit of
$666,667, $333,333 of which is to be released in four years and the balance
released in eight years. The purchasers of the property were granted a six-year
warrant representing the right to acquire an aggregate of 766,667 shares of the
Company's Common Stock at an exercise price of $1 per share. The Company's
working capital was increased by approximately $1,600,000 as the result of this
transaction. The Company believes that it will need to raise an additional
$500,000 to $1,000,000 of short-term working capital to fund working capital
requirements for the fiscal year ending December 31, 1998. Such additional
funds will not, however, be adequate to fund the relocation of the Company's
Northern or Southern California Faires. Additional capital will be sought
through borrowings or from additional equity financing.
Reviewing the change in financial position over the nine months, current assets,
largely comprised of cash and prepaid expenses, increased from $931,451 at
December 31, 1996 to $1,411,915 at September 30, 1997, an increase of $480,464
or 52%. Of these amounts, cash and cash equivalents
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increased from $374,289 at December 31, 1996 to $375,222 at September 30, 1997.
Accounts receivable increased from $99,551 at December 31, 1996 to $765,154 at
September 30, 1997. This is a normal condition, reflecting outstanding balances
due from vendors for recently completed faires. Prepaid expenses decreased from
$139,167 at December 31, 1996 to $100,010 at September 30, 1997.
Current liabilities decreased from $2,437,735 at December 31, 1996 to $1,972,313
at September 30, 1997, a decrease of $465,422 or 19%. This decrease is due to
the pay off in the first nine months of the $1,000,000 in bank lines of credit
borrowing discussed above. The current portion of notes payable decreased from
$1,209,119 at December 31, 1996 to $1,112,684 at September 30, 1997. Of this
amount, $1,000,000 was repaid during November 1997 from the proceeds of the
sale/leaseback transaction discussed above. Unearned income, which consists of
the sale of admission tickets to upcoming faires and deposits received from
craft vendors for future faires, decreased from $160,588 at December 31, 1996 to
$85,350 at September 30, 1997.
Total assets decreased from $9,872,349 at December 31, 1996 to $9,636,265 at
September 30, 1997, a decrease of $236,084 or 2%. Of this amount, the increase
in current assets of $480,464 was more than offset by moderate decreases in the
other non-current asset categories. Property, plant and equipment (net of
depreciation) decreased by $131,045 or 2% from $7,176,755 at December 31, 1996
to $7,045,710 at September 30, 1997 as a result of depreciation of assets for
the period. Goodwill, which arose from the purchase of the two California
Faires and is being amortized over 15 years, decreased from $620,826 at December
31, 1996 to $582,819 at September 30, 1997 as the result of normal amortization.
Other miscellaneous assets (organizational costs and vendor deposits) increased
from $253,201 at December 31, 1996 to $285,714 at September 30, 1997.
Total liabilities decreased from $4,816,897 at December 31, 1996 to $4,022,000
at September 30, 1997, a decrease of $794,897 or 17%. Total liabilities at
September 30, 1997 include $1,972,313 in current liabilities (discussed above),
plus $2,049,687 from the long-term portion of the following bank loans: a
$700,000 mortgage on the Bristol Faire property and a $1,000,000 mortgage on the
Virginia Faire property. The $700,000 mortgage on the Bristol Faire property
was repaid during November 1997 from the proceeds of the sale/leaseback
transaction discussed above. In August 1997, the Company had approximately
$615,000 of certificates of deposit mature which were previously held as
additional collateral by the lending bank of the two Virginia loans. The
Company elected to apply this amount to the two loans, thereby paying off the
$250,000 loan for construction of vendor booths in Virginia, and applying the
balance to reduce the mortgage on the Virginia property.
Stockholders' Equity increased from $5,055,452 at December 31, 1996 to
$5,614,265 at September 30, 1997, an increase of $558,813 or 11%. This increase
resulted from the net loss of ($419,725), more than offset by additional
contributed capital received as the result of the exercise of 140,292 Class A
Warrants at $2.00 per share, the exercise of 68,000 Class B Warrants at $2.625
per share, and the exercise of 111,716 employee stock options at prices ranging
from $1.125 to $3.50 per share. As of September 30, 1997, the Company had
outstanding 9,636,262 shares of common stock, 1,673,564 Class A Warrants
representing the right to purchase common stock at $2.00 per
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share, and 1,981,966 Class B warrants representing the right to purchase common
stock at $2.625 per share.
The Company has no significant commitment for capital expenses during the fiscal
year ending December 31, 1997.
BUSINESS
OVERVIEW
Renaissance Entertainment Corporation 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.
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
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metropolitan area; and the Virginia Renaissance Faire in Fredericksburg,
Virginia, serving the Washington, D.C. and Richmond metropolitan areas.
The following table shows the attendance, number of vendors and net operating
income for the Company's faires during the 1996 and 1995 faire seasons.
<TABLE>
<CAPTION>
Approximate
Attendance Number of Vendors Net Operating Income
------------------------ ------------------------ ------------------------
1995 1996 1995 1996 1995 1996
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bristol 165,174 190,604 150 150 $422,544 $987,660
Northern CA 184,444 184,548 150 150 * 352,964
Southern CA 193,761 166,283 150 150 * 745,634
New York 114,403 150,773 100 100 9,179 (301,291)
Virginia 0 60,943 0 50 -- (644,813)
--------- --------- --------- --------- --------- ---------
Total 657,782 753,151 $1,163,634 $1,140,154
_______________
</TABLE>
* Combined net operating income for the Northern and Southern California
faires for the 1995 faire season was $731,911.
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 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 November 1997,
the Company sold this site and leased it back for a period of 20 years. See
"Property." 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
substantial sums of money in the construction of these shops.
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.
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The Northern California Faire is located on leased property in Novato,
California. The lease is currently on a year-by-year basis which, unless
extended, will expire before the 1998 faire season. The rent was $350,000 in
1996 and $300,000 in 1997. The Company is investigating new sites 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 from $800,000 to
$1,300,000 for the investigation and development of a new site prior to the
opening of the Faire at the site. Due to the time required to locate a site,
obtain approval to hold a faire on the site and to prepare the site for a faire,
the Company believes it will be difficult to hold this faire on a new site for
the 1998 faire season.
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 is held annually for eight weekends
beginning the last week of April and ending Mid-June.
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 three years at a
profit, management believes that it will either have to relocate the Faire or
obtain a long-term lease for the current faire site in order to improve its
profitability in the future. On November 4, 1996, the Company entered into a
non-binding letter of intent with the owner of a site in Pomona, California
which contemplated that the Company would commence operation of the Southern
California Faire at that site starting in 1998. 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 would need additional funds from one or more third parties to finance
such construction. Following execution of the letter of intent, the owner of
the current site for this faire indicated that it would be willing to enter into
a long-term lease for the faire site. With a long-term lease, the Company would
be able to make permanent improvements to the site and reduce its annual set-up
cost for the faire. The Company has not, as
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of the date of this Prospectus, determined whether it should relocate this faire
to the new proposed site in Pomona or enter into a long-term lease for the
existing faire site, although the Company intends to hold this faire at the
current site in 1998.
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. The Company valued this faire based
on the Company's estimate of net operating income which could be achieved under
the Company's management, the cost of developing a new faire in the New York
metropolitan area and the benefits of having a renaissance faire in the greater
New York metropolitan area. Since the faire was acquired during the 1996 faire
season, the Company did not have a significant opportunity to affect the results
of this faire during the 1996 faire season. A new manager has been hired for
this faire and a number of new promotional activities and entertainment acts
were introduced during the 1997 faire season.
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 Faire, as is typical of new faires, operated at a loss
in 1996, its first year of operation, and incurred an operating loss in the 1997
faire season. These losses may continue for one or more future faire seasons
until the Company is able to establish a regular customer base and increase the
awareness of the 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. Some vendors have paid for their buildings
outright, others have utilized the financing provided by the Company, while
others rent space with an option 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,
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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. During the
1996 faire season, there were approximately 150 vendors at each of the Bristol,
Northern California and Southern California faires, 100 vendors at the New York
faire and 50 vendors at the Virginia faire. Typically, there is little turnover
in vendors from one faire season to the next. The loss of any one or more
vendors would not have a material adverse effect upon a particular faire.
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.
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% of gross revenues.
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.
The decision to charge a flat fee or a percentage of revenues is based on
several factors, including the custom of a particular faire and the extent to
which vendors must invest in the construction of their booths. The advantage to
the Company of the flat fee method is that it is easier to monitor and is more
predictable. The advantage to the Company of the percentage method is that the
Company may participate to a greater extent as attendance at the faire
increases. 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. The following table shows
the Company's revenues during the 1995 and 1996 faire seasons from each of these
activities.
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1995 1996
------------ ------------
Gate Admissions $ 6,143,974 $ 6,443,461
Beverage Revenue 2,495,423 2,797,683
Parking Revenue 833,342 808,008
Food Revenue 1,125,489 1,328,339
Craft Fees 1,072,043 1,319,805
Game Fees 133,327 224,542
Souvenir Revenue 536,972 724,518
Sponsorship Fees 121,540 230,020
Camping Fees 173,688 241,084
Miscellaneous Fees 171,819 436,117
------------ ------------
Total $12,810,617 $14,553,577
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.
BEVERAGE INCOME. The Company sells beer, wine and soft drinks at each Faire.
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.
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.
CRAFT FEES. Each Faire has from 50 to 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.
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<PAGE>
GAME FEES. Many games and rides are operated by independent contractors. The
Company receives 15% of the gross revenues from these games and rides.
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 its products and memorabilia through alternative means
in the future.
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.
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
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<PAGE>
adversely threaten the Company's entire source of revenue. It is normal,
however, for adverse weather, or even the forecast of 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 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
Bristol, New York and Virginia faires are open "rain or shine." The Northern
and Southern California sites, which have temporary buildings, are closed on
rain days. 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
significant competition from other more traditional entertainment alternatives,
including amusement parks, theme parks, local and county fairs, and specialty
festivals. At each of the markets in which the Company competes, there are many
entertainment events which compete for the consumers' entertainment dollars.
Many of these entertainment events have attendance and revenues substantially
greater than the Company's fairs in such markets. The Company competes on the
basis of entertainment value and uniqueness of the Renaissance event. The
Company emphasizes its fairs as an activity which appeals to the whole family.
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.
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<PAGE>
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.
PUBLIC LIABILITY AND INSURANCE
As a producer of public entertainment events, the Company 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 experienced
only minimum claims which have been resolved quickly without litigation. The
Company maintains comprehensive public liability insurance in the amount of
$1,000,000 per occurrence and $2,000,000 in the aggregate, 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.
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.
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<PAGE>
EMPLOYEES
At September 30, 1997, the Company had 16 full-time employees working in 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.
At September 30, 1997, the Bristol Faire had 6 full-time employees, the
California Faires had 12 full-time employees, the New York Faire had 6 full-time
employees and the Virginia Faire had 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.
LEGAL PROCEEDINGS
From time to time, the Company is a party to legal proceedings arising in the
ordinary course of business. On June 5, 1997, Carl Jablonski, a former employee
of the Company, commenced an action against the Company, Charles S. Leavell,
Chairman of the Board of Directors of the Company, Howard C. Hamburg, a Vice
President of the Company, and Duke & Co., Inc. in Superior Court of the State of
California in and for the County of Marin alleging breach of implied contract of
employment, breach of the covenant of good faith and fair dealing, promissory
estoppel, negligent misrepresentation, unlawful discrimination based on age and
intentional and negligent infliction of emotional distress. The complaint seeks
damages, including punitive damages, in an unspecified amount.
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 leases approximately 160 acres in Kenosha County, Wisconsin, which
is home to the Bristol Renaissance Faire. The lease is for a period of 20 years
with lease payments of $400,000 per year during each of the first two years
beginning in November 1997 and increasing to $543,333 per year in years 13
through 20. The Company has the right to acquire the property during the term
of the lease at an aggregate price of $4,433,333 during the first three years,
increasing to $4,900,000 during years 13 through 20. The Company has made a
security deposit of $666,667, $333,333 of which is to be released in four years
and the balance released in eight years.
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<PAGE>
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 at the end of the 1997 faire season. See
"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. The funds for this
purchase were provided from the proceeds of a sale of the Company's Common Stock
early in 1995. 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.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
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 Age Position Since
---- --- -------- --------
Charles S. Leavell 55 Chairman of the Board of 1993
Directors & Chief Executive
Officer
Sanford L. Schwartz 47 Director 1993
Robert M. Geller 44 Director 1994
Dean Petkanas 33 Director 1996
Charles J. Weber 51 Director 1997
J. Stanley Gilbert 59 President and Chief Operating --
Officer
James R. McDonald 51 Chief Financial Officer --
Howard Hamburg 60 Vice President --
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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 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"), a business consulting firm. 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.
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<PAGE>
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.
CHARLES J. WEBER has been a successful key executive in the
Entertainment/Communications Industry since the early 1970's. During this
time, he has also been Chairman and Chief Executive Officer of Weber
Communications, Inc., an international consulting firm providing professional
management, consulting, business development, and financial services. He
specializes in strategic alliances in the multimedia, broadcasting,
entertainment, and communications fields. In this capacity, Mr. Weber has been
instrumental in the production and financing of motion pictures, public and
private corporate financing, domestic and international distribution, and
mergers and acquisitions. He has also served in an executive role for Fortune
500, real estate and entertainment companies and has executive produced a number
of feature films. In addition, from 1994-1995, he was President and Chief
Executive Officer of Canwest International Corp; from 1995-1996 he was President
and Chief Executive Officer of the Producer's Entertainment Group; from
1996-1997 he was President and Chief Executive Officer of Greenlight
Entertainment, Inc. Mr. Weber graduated from Manhattan College in New York in
1965, with a B.B.A. degree in Accounting. He received an M.B.A. degree in
Finance and Management from Hofstra University in New York in 1967.
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 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, 1996. From August, 1996 until October, 1996, he served as Chief
Financial Officer of Mountain Solutions, a personal communications services
company. From January, 1994 until August, 1996, Mr. McDonald was Controller of
Omnipoint Corporation, another personal communications services company. Mr.
McDonald also was a principal of James R. McDonald, CPA, from August, 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
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<PAGE>
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.
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.
Each Director is elected to serve for a term of one year and until the next
Annual Meeting of Shareholders or until a successor is duly elected and
qualified.
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 $23,894 -0- -0- -0- -0- -0-
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(1) ($) SARs ($) ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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>
(1) Includes $48,000 received under a 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 $50,000 or 10% of the total of annual salary and bonus
paid during the respective years.
OPTIONS GRANTED DURING FISCAL 1996
During the Company's fiscal period ended December 31, 1996, no options were
granted to Named Executive Officers
AGGREGATED OPTION EXERCISES DURING FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to the number and value of
options held by the Named Executive Officers as of December 31, 1996. The
Company does not have any outstanding stock appreciation rights.
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<PAGE>
<TABLE>
<CAPTION>
Value of Number of Unexercised
Unexercised In-the-Money
Options/SARs at Option/SARs
FY-End(#) at FY-End ($)(1)
Shares Acquired Value 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.
STOCK INCENTIVE PLAN
There are currently 1,420,000 shares of the Company's Common Stock, $.03
par value, reserved for issuance upon the exercise of options granted under
the Company's 1993 Incentive Stock Plan (the "Plan"). On the Proxy Card for
the November 24, 1997, meeting of the Company's shareholders, a vote on a
proposal to increase the number of shares reserved for issuance under that
Plan was requested. This item was added late in the preparation of the proxy
materials and no disclosure regarding the Plan and this proposal was included
in the accompanying Proxy Statement due to a communications failure. The
Company learned, just prior to the meeting, that some shareholders were
soliciting against this proposal and subsequently discovered that a
description of the proposal had not been included in the Proxy Statement.
Because of this omission, no action was taken at the meeting with respect to
the proposal to increase the number of shares reserved for issuance under the
Plan.
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.
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. Mr. Patterson also served as a Vice President
of the Company from August 1994 to November 1997. The current Agreement, which
supersedes the agreement dated April 1, 1994, expires in November 1998. His
base salary is $78,750.
BARBARA HOPE. On February 5, 1996, the Company entered into an Employment
Agreement with Ms. Hope as an officer of Creative Faires, Ltd. in connection
with the acquisition of Creative Faires, Ltd. The Agreement has a term of two
years, subject to termination only for cause, and provides for a base salary of
$100,000, with bonuses and salary increases payable at the discretion of the
Company. Ms. Hope and Mr. Gaiti are in charge of the Company's faire
merchandise program.
DONALD C. GAITI. On February 5, 1996, the Company entered into an
Employment Agreement with Mr. Gaiti as an officer of Creative Faires, Ltd. in
connection with the acquisition of Creative Faires, Ltd. The Agreement has a
term of two years, subject to termination only for cause, and provides for a
base salary of $100,000, with bonuses and salary increases payable at the
discretion of the Company. Ms. Hope and Mr. Gaiti are in charge of the
Company's faire merchandise program.
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<PAGE>
DIRECTOR COMPENSATION
During the fiscal period ended December 31, 1996, 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. During July 1997, the Board of Directors
authorized the granting of options to outside directors representing the right
to acquire up to 40,000 shares for each year that a director serves on the
Board. These options are to be granted in lieu of cash compensation. 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 Company, except discussions and
decisions relating to his own salary, benefits and incentive compensation.
CERTAIN TRANSACTIONS
CONVERTIBLE DEBENTURES
During May 1997, the Company raised $1,000,000 through the issuance of
convertible debentures, of which $250,000 principal amount was issued to Charles
S. Leavell, Chairman of the Board of Directors of the Company, and the balance
to Mr. Leavell's father and an unrelated party. The investments by Mr. Leavell
and his father were made through the conversion of short-term loans they had
made to the Company earlier in fiscal 1997. The debentures were secured by
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<PAGE>
mortgages on the Company's Wisconsin and Virginia faire sites and were
convertible into Common Stock at the lesser of $4.50 per share or 70% of the
fair market value of the Company's Common Stock at the time of conversion. The
debenture holders were also granted warrants to purchase an aggregate of 200,000
shares of the Company's Common Stock at the lesser of $3.00 per share or 70% of
the fair market value of the Company's Common Stock at the date of exercise of
the warrants. During November 1997, the debentures were paid and the warrants
were canceled.
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"), a business
consulting firm. The Company had a Consultation Agreement with CBSI which
expired December 31, 1996, pursuant to which CBSI performed financial and public
relations services for the Company and assisted the Company in the evaluation of
acquisition candidates, including Creative Faires, Ltd. In consideration of
those services, the Company paid 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 who are married to each other, received an aggregate of 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
as officers of Creative Faires, Ltd. for two-year periods. The market value for
the 540,000 shares of Common Stock at the time of the transaction was
$3,071,250. The shares were "restricted" shares as defined in Rule 144
promulgated by the Securities and Exchange Commission.
The Company believes that the foregoing transactions were on terms as favorable
to the Company as could have been obtained from non-affiliated parties.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, as of December 23, 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.
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<PAGE>
Name and Address Percent of
of Beneficial Owner Number of Shares Class (1)
------------------- ----------------- ---------
Charles S. Leavell 1,257,374 (2) 12.2%
1881 Ninth Street, Suite 319
Boulder, Colorado 80302
Legacy Fund, LLC 900,000 (3) 8.8%
4900 Woodway
Suite 650
Houston, Texas 77056
Robert M. Geller 226,666 (4) 2.2%
Sanford L. Schwartz 4,350 (5) *
Gregg Adam Thaler (6) 0 *
Dean Petkanas 0 *
Charles J. Weber(6) 0 *
All Directors & Officers as a Group
(Eight [8] Persons) 1,947,159 (7) 18.2%
* Less than one percent
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of December 23, 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.
(2) Includes 778,000 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. Includes options to purchase $100,000 shares at $0.57 per share.
(3) Represents shares issuable upon conversion of Notes at an assumed
conversion price of $.25 per share. See "Description of Securities --
Convertible Secured Notes."
-42-
<PAGE>
(4) 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.
(5) Includes 4,350 shares owned by Creative Business Strategies, Inc., a
corporation of which Mr. Schwartz is an officer, director and shareholder.
(6) Mr. Thaler's term as a director expired and Mr. Weber was elected to the
Board during November 1997.
(7) Includes 426,666 shares issuable upon exercise of stock options exercisable
within 60 days of December 23, 1997.
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized to issue 51,000,000 shares of capital stock,
including 50,000,000 shares of Common Stock, $.03 par value, and 1,000,000
shares of Preferred Stock, $1.00 par value. As of December 23, 1997, there
were 10,263,247 shares of Common Stock outstanding and no shares of Preferred
Stock outstanding.
COMMON STOCK
No share of Common Stock is entitled to preference over any other share of
Common Stock, and each share of Common Stock is equal to every other share of
Common Stock in all respects. Holders are entitled to one vote for each share
of Common Stock held of record at each meeting of the shareholders, and to
receive dividends when and as declared by the Board of Directors. To date, the
Company has not paid cash dividends. There is no cumulative voting for the
election of directors. Accordingly, the owners of a majority of the shares of
Common Stock outstanding may elect all of the directors to be elected by the
holders of the Common Stock, if they choose to do so, and the owners of the
balance of such shares would not be able to elect any directors. The holders of
Common Stock do not have preemptive rights. The shares of Common Stock offered
hereby will be, upon issuance, fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors is authorized to issue up to 1,000,000 shares of
Preferred Stock, in any one or more classes or series, to fix the dividend,
redemption, liquidation, retirement, conversion, voting and other preference
rights for such shares, and to issue options and warrants for the purchase of
such shares, on such terms and for such consideration as the Board may deem
appropriate without further shareholder action. Such additional shares may have
disproportionately higher voting rights or class voting rights, may be
convertible into shares of Common Stock, and may rank prior to the Common Stock
as to payment of dividends or the distribution of assets upon liquidation or
dissolution. The Board of Directors, without
-43-
<PAGE>
shareholder approval can issue shares of Preferred Stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock. Currently, no shares of Preferred Stock are outstanding and
the Company does not have plans to issue any Preferred Stock.
CONVERTIBLE SECURED NOTES
During April 1997, the Company issued $350,000 principal amount of its 10%
Convertible Secured Notes due October 31, 1997 (the "Notes"). The Notes are
secured by a mortgage on the Company's faire site in Virginia and are
convertible into shares of the Company's Common Stock at the lesser of $1.75 per
share or 50% of the market value of the Company's Common Stock at the time of
conversion.
WARRANTS
REDEEMABLE CLASS A WARRANTS
Each Class A Warrant entitles the holder thereof to purchase one share of
Common Stock at a price, subject to adjustment, of $2.00, through and including,
January 27, 2000.
The Class A Warrants are redeemable by the Company, after January 27, 1997,
or sooner with the consent of the Underwriter, at a price of $0.01 per Class A
Warrant, upon 30 days' notice mailed within 10 days after the closing bid price
of the Common Stock has equaled or exceeded 150% of the then current exercise
price, (currently $3.00 per share) for a period of 20 consecutive trading days.
The holders of Class A Warrants called for redemption have exercise rights until
the close of business on the date next preceding the date fixed for redemption.
The Class A Warrants are in registered form under a Warrant Agreement
between the Company and Corporate Stock Transfer, as Warrant Agent. Reference
is made to said Warrant Agreement (filed as an exhibit to the Registration
Statement) for a complete description of the terms and conditions therein (the
description herein contained being qualified in its entirety by reference
thereto).
The exercise price and number of shares of Common Stock or other securities
issuable on exercise of the Class A Warrants are subject to adjustment in
certain circumstances, including in the event of a merger, consolidation,
recapitalization, reclassification, reorganization, stock dividend, stock split
or similar transaction. However, no Class A Warrant is subject to adjustment
for issuances of Common Stock at a price below the exercise price of that Class
A Warrant, including the issuance of shares of Common Stock pursuant to the
Company's stock option plans.
The Class A Warrants may be exercised upon surrender of the Class A Warrant
certificate on or prior to the expiration date at the offices of the Warrant
Agent, with the exercise form on the reverse side of the certificate completed
and executed as indicated, accompanied by full payment of the exercise price (by
certified check payable to the Company) to the Warrant Agent
-44-
<PAGE>
for the number of Class A Warrants being exercised. The Warrantholders do not
have the rights or privilege of holders of Common Stock.
REDEEMABLE CLASS B WARRANTS
Each Class B Warrant entitles the holder thereof to purchase one share of
Common Stock at a price, subject to adjustment, of $2.625, through and
including, January 27, 2000.
The Class B Warrants are redeemable by the Company, after January 27, 1997,
sooner with the consent of the Underwriter, at a price of $0.01 per Class B
Warrant upon 30 days' notice mailed within 10 days after the closing bid price
of the Common Stock has equaled or exceeded 150% of the then current exercise
price (currently $3.9375 per share) for a period of 20 consecutive trading days.
The holders of Class B Warrants called for redemption have exercise rights until
the close of business on the date fixed for redemption.
The Class B Warrants are in registered form under a Warrant Agreement
between the Company and Corporate Stock Transfer, as Warrant Agent. Reference
is made to said Warrant Agreement (filed as an exhibit to the Registration
Statement) for a complete description of the terms and conditions therein (the
description herein contained being qualified in its entirety by reference
thereto).
The exercise price and number of shares of Common Stock or other securities
issuable on exercise of the Class B Warrants are subject to adjustment in
certain circumstances, including in the event of a merger, consolidation,
recapitalization, reclassification, reorganization, stock dividend, stock split
or similar transaction. However, no Class B Warrant is subject to adjustment
for issuances of Common Stock at a price below the exercise price of that Class
B Warrant, including the issuance of shares of Common Stock pursuant to the
Company's stock option plans.
The Class B Warrants may be exercised upon surrender of the Class B Warrant
certificate on or prior to the expiration date at the offices of the Warrant
Agent, with the exercise form on the reverse side of the certificate completed
and executed as indicated, accompanied by full payment of the exercise price (by
certified check payable to the Company) to the Warrant Agent for the number of
Class B Warrants being exercised. The Warrantholders do not have the rights or
privilege of holders of Common Stock.
GENERAL
The Company has undertaken to maintain a current prospectus with the SEC
covering shares of Common Stock issuable upon exercise of such Warrants and to
register or qualify such shares under the securities law of the state of
residence of the holder of such warrant. The Company will use its best efforts
to have all such shares so registered or qualified on or before the exercise
date and to maintain a current prospectus relating thereto until the expiration
of the Class A and Class B Warrants, subject to the terms of the Warrant
Agreement. While it is the Company's intention to do so, there is no assurance
that it will be able to do so. If the Company
-45-
<PAGE>
has not qualified its Common Stock underlying the Class A or Class B Warrants
for sale in particular states, holders of the Company's Warrants in those states
will have no choice but to either sell such Warrants or let them expire.
No fractional shares will be issued upon exercise of the Class A and Class
B Warrants. However, if a holder exercises all Class A or Class B Warrants
owned of record by such holder, the Company will pay to such holder, in lieu of
the issuance of any fractional share which is otherwise issuable, an amount in
cash based on the closing bid price of the Common Stock on the last trading day
prior to the exercise date.
In the event the Company adopts a resolution for the liquidation,
dissolution or winding up of the Company's business, the Company will give
written notice of the adoption of such resolution to the registered holders of
the Warrants. Thereupon, all liquidation and dissolution rights under the
Warrants will terminate at the end of 30 days from the date of the notice to the
extent not exercised within those 30 days. Holders of the Class A Warrants and
Class B Warrants have no voting, preemptive, liquidation or other rights of a
shareholder, and no dividends will be declared on the Warrants. The Company has
authorized and reserved for issuance the Common Stock issuable upon exercise of
the Class A Warrants and Class B Warrants.
The foregoing descriptions of the Company's securities are qualified in all
respects by reference to the Articles of Incorporation and By-Laws of the
Company, and the Warrant Agreement by and between the Company and Corporate
Stock Transfer, Inc., copies of which are filed as exhibits to the registration
statement of which this Prospectus forms a part.
WARRANT SOLICITATION FEES
The Company has agreed to pay to the Underwriter a Warrant Solicitation Fee
under certain circumstances and subject to certain conditions and restrictions.
See "UNDERWRITING -- Warrant Solicitation Fees."
TRANSFER AGENT AND REGISTRAR
Corporate Stock Transfer, Denver, Colorado, has been appointed as the
Transfer Agent and Registrar for the Common Stock and the A and B Warrants.
UNDERWRITING
WARRANT SOLICITATION FEES
The Company has agreed to pay to the Underwriter a Warrant Solicitation Fee
on the exercise of Class A Warrants or Class B Warrants exercised more than one
year from the date of issuance. The fee will be equal to 3% of the exercise
price for Warrants exercised in the second year from the date of issuance, and
1% of the Warrant exercise price if exercised after 24 months from the date of
issuance. In order to qualify to receive the Solicitation Fee, the Underwriter
-46-
<PAGE>
must be designated by the Warrantholder as having solicited the exercise of the
Warrant, and the compensation payable to the Underwriter in connection with the
exercise of the Warrant must have been disclosed to the Warrantholder. No
Solicitation Fee will be paid with respect to the exercise of Warrants directly
by Warrantholders without the assistance or participation of the Underwriter.
The Underwriter will not be entitled to receive the Solicitation Fee if (i) the
exercise of the Warrants is made at a time when the market price of the
Company's Common Stock is lower than the exercise price of the Warrants or (ii)
the Warrant to be exercised is held in a discretionary account.
In connection with receiving the Solicitation Fee, the Underwriter will be
required to provide the following undertaking: In connection with the exercise
of any Warrant and in order to qualify to receive the Warrant exercise
Solicitation Fee, the undersigned broker/dealer which is a member of the
National Association of Securities Dealers, Inc. represents to the Company that
(i) it did not within ten (10) business days immediately preceding the exercise
of the Warrants, bid for or purchase the Company's Common Stock or any security
of the Company which is immediately convertible into or exchangeable for the
Company's Common Stock (including the Warrants) and (ii) it did not, within the
ten (10) business days immediately preceding the date of exercise of the
Warrants, otherwise engage in any activity that would be prohibited by Rule
10b-6 under the Securities Exchange Act to one engaged in the distribution of
the Company's securities.
LEGAL MATTERS
The legality of the Common Stock has been passed upon for the Company by
the firm of Newmann & Cobb.
EXPERTS
The audited financial statements of the Company for the fiscal periods
ended December 31, 1996 and March 31, 1996, which are included herein have been
examined and reported on by Schumacher and Associates, Inc., as indicated in
their reports with respect thereto, and are incorporated by reference, in
reliance upon the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W., Washington,
D.C. 20549, and inspected at the Commission's regional offices at Suite 1400,
500 West Madison Street, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street N.W., Washington, D.C. 20549, at prescribed rates.
-47-
<PAGE>
In addition, the Commission maintains a web site that contains reports, proxy
and information statements and other information regarding the Company at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement under
the Securities Act of 1933, as amended (the "Act"), with respect to the
securities offered hereby. This Prospectus omits certain information
included in such Registration Statement. For further information about the
Company and its securities, reference is made to such Registration Statement
and to the exhibits filed as part thereof or otherwise incorporated therein.
Each summary in this Prospectus of information included in the Registration
Statement or any exhibit thereto is qualified in its entirety by this
reference to such information or exhibit.
-48-
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Audited Financial Statements:
Consolidated Balance Sheets F-3
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
Consolidated Balance Sheet as of September 30, 1997 (unaudited) F-28
Consolidated Statements of Operations for the nine months ended
September 30, 1997 and 1996 (unaudited) F-29
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 (unaudited) F-30
Notes to Financial Statements (unaudited) F-31
F-1
<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-2
<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
------------ ------------
------------ ------------
F-3
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
Current Liabilities: 1996 1996
---- ----
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 261,652 277,013
Additional paid-in capital 6,977,256 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>
Year Ended Nine Month Period Ended
---------------------------------- -------------------------------------
REVENUE: March 31, 1995 March 31, 1996 December 31, 1995 December 31, 1996
-------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
(Unaudited)
Sales $12,539,653 $12,810,617 $10,469,824 $14,553,577
Faire operating costs 3,212,491 3,826,868 3,205,152 4,812,616
----------- ----------- ----------- -----------
Gross Profit 9,327,162 8,983,749 7,264,672 9,740,961
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Salaries and wages 3,474,799 4,082,271 3,030,205 4,048,603
Depreciation and amortization 351,215 500,203 337,708 633,819
Advertising 1,211,798 1,546,701 1,036,508 2,511,973
Other operating expenses 3,532,508 4,329,713 2,749,254 4,300,062
----------- ----------- ----------- -----------
Total Operating Expenses 8,570,320 10,458,888 7,153,674 11,494,457
----------- ----------- ----------- -----------
Net Operating Income (Loss) 756,842 (1,475,139) 110,999 (1,753,496)
----------- ----------- ----------- -----------
Other Income (Expenses):
Interest income 48,312 109,652 94,090 68,571
Interest (expense) (53,223) (138,036) (100,266) (253,740)
Other income (expense) (28,327) (36,049) 204,612 (98,229)
----------- ----------- ----------- -----------
Total Other Income (expenses) (33,418) 7,665 198,436 (98,229)
----------- ----------- ----------- -----------
Net Income (Loss) before (Provision)
Credit for Income Taxes 723,424 (1,467,474) 309,434 (1,851,725)
(Provision) Credit for Income Taxes (147,000) 193,803 45,470
----------- ----------- ----------- -----------
Net Income (Loss) 576,424 (1,273,671) 263,964 (1,851,725)
----------- ----------- ----------- -----------
Dividends on Preferred Stock (43,115)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income (Loss) to Common
Stockholders $ 533,309 $(1,273,671) $ 263,964 $(1,851,725)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income (Loss) per Common Share $ .11 $ (.16) $ .03 $ (.21)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted Average Number of Shares
Outstanding 4,801,044 7,824,182 7,643,702 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>
Common Stock
------------------------ Additional Paid-in Accumulated
Shares Amount Capital (Deficit) Total
--------- --------- ------------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1994 3,204,356 $ 96,130 $ 966,585 $ (701,108) $ 361,607
Common stock issued, acquisition of assets 1,136,666 34,100 498,711 -- 532,811
Common stock issued, private placements 800,000 24,000 216,000 -- 240,000
Common stock issued, services 133,384 4,002 120,998 -- 125,000
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 -- -- -- 576,424 576,424
--------- --------- --------- ---------- ----------
Balance March 31, 1995 7,927,740 237,832 5,511,333 (167,799) 5,581,366
Treasury stock acquired in cashless transaction
and retired (20,626) (618) (81,886) -- (82,504)
Cashless exercise of stock options 66,666 2,000 80,504 -- 82,504
Common stock issued for cash 678,200 20,346 1,334,402 -- 1,354,748
Exercise of stock options 69,726 2,092 132,903 -- 134,995
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 per share 125,328 3,760 246,896 -- 250,656
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
Common Stock
------------------------- Additional Paid-in Accumulated
Shares Amount Capital (Deficit) Total
---------- ---------- ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
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
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>
Year Ended Nine Months Ended
-------------------------------- -------------------------------------
March 31, 1995 March 31, 1996 December 31, 1995 December 31, 1996
-------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
(Unaudited)
Cash Flows from Operating Activities: $ 576,424 $(1,273,671) $ 263,964 $(1,851,725)
Net Income (loss) -- -- -- --
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 351,214 500,200 337,708 633,819
Impairment of goodwill -- -- -- 380,000
Stock issued for services 125,000 -- -- 151,950
(Increase) decrease in:
Income tax refund receivable -- (323,380) -- 323,380
Accounts receivable (50,124) (19,310) (178,844) (163,866)
Prepaid expenses (570,332) (396,276) 291,995 840,602
Inventory (82,900) (33,321) (13,134) (68,474)
Other assets (49,657) (38,811) -- (86,292)
Increase (decrease) in:
Income taxes payable 48,175 (48,175) (25,738) --
Accounts payable and accrued
expenses 274,940 742,368 (117,449) (113,062)
Unearned revenue and other 322,083 42,681 (313,197) (294,030)
----------- ----------- ----------- -----------
Net Cash Provided by Operating
Activities 946,823 (847,695) 245,305 (247,698)
----------- ----------- ----------- -----------
Cash Flows from Investing Activities:
Investment in restricted cash -- (848,296) (846,449) (41,820)
Repayment of advances 351,150 -- -- --
Acquisition and construction of
property and equipment, goodwill
and covenant note to compete (896,551) (4,920,023) (3,490,356) (1,507,008)
----------- ----------- ----------- -----------
Net Cash (Used in) Investing Activities (545,401) (5,768,319) (4,336,775) (1,548,828)
----------- ----------- ----------- -----------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 3,278,450 1,489,743 1,100,908 957,789
Preferred dividends paid (43,115) -- -- --
Advances from officers 60,500 -- -- --
Proceeds from notes payable -- 3,053,989 1,068,729 1,000,000
Principal payments on notes payable (438,793) (595,400) (593,340) (418,037)
Other -- -- (36,458) --
----------- ----------- ----------- -----------
Net Cash Provided by (Used in)
Financing Activities 2,857,042 3,948,332 1,539,839 1,539,752
----------- ----------- ----------- -----------
Net Increase (Decrease) in Cash 3,258,464 (2,667,682) (2,551,631) (256,774)
Cash beginning of period 40,281 3,298,745 3,296,652 631,063
----------- ----------- ----------- -----------
Cash, end of period $ 3,298,745 $ 631,063 $ 745,021 $ 374,289
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Interest paid $ 54,506 $ 112,248 $ 100,267 $ 268,605
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income tax paid $ 98,825 $ 237,752 $ 129,577 $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Cashless exercise of stock option $ -- $ 82,504 $ 82,504 $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Note: The Company issued common and preferred stock for assets totaling
$1,408,000 during the year ended March 31, 1995. During the year ended March
31, 1996 the Company issued 540,000 shares of its common stock to consummate the
business combination with CFL, which was accounted for as a pooling of
interests, effective for the fiscal year ended March 31, 1995. 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 owned and
operated 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,
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
Western was merged into a 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 totaling $62,805 which reduced additional paid-in capital related to
this conversion transaction. Prior to conversion, the Company paid
dividends totaling $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, effective
December 31, 1996. The March 31, 1996 consolidated balance sheet includes
the accounts of
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
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, as follows:
Useful lives (years)
--------------------
Computers 5
Vehicles 5
Trailers 7
Office Furniture 7
Costumes 7
Faire Equipment 7
Buildings - Temporary 15
Buildings - Permanent 30
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
The Company recognizes revenues from the renaissance fairs as earned during
the period when the fairs are in operation.
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 had a March 31 year end, which
was changed to December 31, effective December 31, 1996. 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-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
Financial instruments that potentially subject the company to
concentrations of credit risk consist principally of temporary 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 regularly evaluates the recoverability of assets for its faires
and reviews its assets to assure that the amount therefor carried on the
Company's financial statements is commensurate with the future economic
benefit to be recovered over time from use of such 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, based on
declining attendance for these faires in 1996 and prior periods, 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. At December 31, 1996, the remaining goodwill
associated with this acquisition was $620,826.
(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
F-15
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(3) NOTES PAYABLE, CONTINUED
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
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
F-16
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(3) NOTES PAYABLE, CONTINUED
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 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 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,
F-17
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(4) LEASES, CONTINUED
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:
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
---------
---------
F-18
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
Rent expense for the nine-month period ended December 31, 1996 and for the
years ended March 31, 1995 and 1996 totaled 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 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 totaling 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 totaled $323,380.
F-19
<PAGE>
RECONCILIATION OF STATUTORY TAX
TO ACTUAL INCOME TAX EXPENSE (BENEFIT)
The following is a reconciliation of the statutory tax rates to actual income
tax expense:
For the year ended March 31, 1995:
Expected tax at statutory rates $311,072
Benefit of Net Operating Loss (93,124)
Benefit of graduated tax rates (28,937)
Benefit of Federal deduction for state income taxes (13,745)
All other differences (28,266)
--------
Provision for Income Taxes $147,000
--------
--------
For the year ended March 31, 1996:
Expected tax at statutory rates $ -0-
Benefit of carryback of Net Operating Loss (193,803)
--------
Provision (Credit) for Income Taxes ($193,803)
--------
--------
F-20
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(7) PROPERTY AND EQUIPMENT
December 31, 1996 March 31, 1996
----------------- -----------------
Land $3,415,798 $2,888,350
Buildings and Improvements 3,018,450 1,171,794
Office Furniture and Equipment 490,975 366,171
Costumes, Props and Other Assets 2,180,297 2,101,962
---------- ----------
Sub-total 9,105,520 6,528,277
Less Accumulated Depreciation (1,928,765) (1,372,060)
---------- ----------
Total $7,176,755 $5,156,217
---------- ----------
---------- ----------
(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 1,186,318 shares of the Company's common stock. Of
this amount 136,392 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, 324,998 options were exercised at a weighted
average price of $1.87 and 150,000 options terminated with a weighted
average price of $4.09. The remaining number of options outstanding at
December 31, 1996 totaled 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.
F-21
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(9) BUSINESS COMBINATION, NEW YORK FAIRE, CONTINUED
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 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
-----------
-----------
F-22
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES, CONTINUED
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
-----------
-----------
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.
F-23
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(10) BUSINESS COMBINATION, CALIFORNIA FAIRES, CONTINUED
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.
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 in 2011 and 2001,
respectively, and Certificates of
F-24
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(11) RESTRICTED CASH, CONTINUED
Deposit totaling $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 equity infusion to the Company initiated or
introduced to the Company
F-25
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(12) COMMITMENTS AND SUBSEQUENT EVENTS, CONTINUED
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.
F-26
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(14) SUBSEQUENT EVENTS, CONTINUED
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 operation.
F-27
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS
(Unaudited)
ASSETS
September 30,
1997
------------
Current Assets:
Cash and equivalents $ 375,222
Stock subscription receivable 133,749
Accounts receivable (net) 765,154
Inventory 171,529
Prepaid expenses and other 100,010
---------
Total Current Assets 1,411,915
Property and equipment, net of accumulated depreciation 7,045,710
Covenant not to compete 29,999
Goodwill 582,819
Restricted cash 310,107
Other assets 255,715
---------
TOTAL ASSETS $9,636,265
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 774,279
Notes payable, current portion 1,112,684
Unearned income 85,350
---------
Total Current Liabilities 1,972,313
Notes payable, net of current portion, unrelated parties 1,748,365
Notes Payable, related parties 250,000
Other 51,322
---------
Total Liabilities 4,022,000
---------
Stockholders' Equity:
Common stock, $.03 par value, 50,000,000
shares authorized, 9,636,262 shares
issued and outstanding at September 30, 1997 289,088
Additional paid-in capital 9,038,098
Accumulated earnings (deficit) (3,712,921)
---------
Total Stockholders' Equity 5,614,265
---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $9,636,265
---------
---------
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
------------------------------
1997 1996
------------- --------------
REVENUE:
Sales $ 13,093,969 $ 13,241,878
Faire operating costs 4,268,379 4,391,103
------------- -------------
Gross Profit 8,825,590 8,850,775
------------- -------------
OPERATING EXPENSES:
Salaries 3,907,931 3,722,829
Depreciation and amortization 529,732 479,862
Goodwill Writedown -- 380,000
Advertising 1,990,324 2,450,985
Other operating expenses 2,825,251 3,249,490
------------- -------------
Total Operating Expenses 9,253,238 10,283,166
------------- -------------
Net Operating (Loss) Income (427,648) (1,432,391)
------------- -------------
Other Income (Expenses):
Interest income 44,263 58,871
Interest (expense) (295,275) (187,972)
Other income (expense) 258,935 (199,951)
------------- -------------
Total Other Income (Expenses) 7,923 (329,052)
------------- -------------
Net Income (Loss) before (Provision)
Credit for Income Taxes (419,725) (1,761,443)
(Provision) Credit for Income Taxes -- 239,273
------------- -------------
Net Income (Loss) to Common Stockholders $ (419,725) $ (1,522,170)
------------- -------------
------------- -------------
Net Income (Loss) per Common Share $ (.04) $ (.17)
------------- -------------
------------- -------------
Weighted Average Number of Common
Shares Outstanding 9,574,197 8,813,137
------------- -------------
------------- -------------
The accompanying notes are an integral part of the financial statements.
F-29
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months ended
September 30,
-------------------------------
1997 1996
----------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (Loss) $ (419,725) $ (1,522,170)
--------- ----------
Adjustments to reconcile net income (Loss) to net cash
provided by operating activities:
Depreciation and amortization 529,732 859,862
Gain (loss) on disposal of assets 1,363 25,981
(Increase) decrease in:
Stock subscription receivable 133,749
Inventory 13,166 (91,783)
Receivables (665,603) (277,136)
Prepaid expenses and other (15,036) 89,095
Increase (decrease) in:
Accounts payable and accrued expenses (293,749) 1,143,478
Unearned revenue and other (61,091) 53,352
--------- ----------
Total adjustments (357,469) 1,802,849
--------- ----------
Net Cash Provided by Operating
Activities (777,193) 280,679
--------- ----------
Cash Flows from Investing Activities:
Investment in restricted cash 580,009 (26,182)
Acquisition of property and equipment (340,363) (2,678,888)
--------- ----------
Net Cash (Used in) Investing Activities 239,646 (2,705,070)
--------- ----------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 978,539 957,661
Proceeds from notes payable 1,350,000 3,092,628
Principal payments on notes payable (1,790,059) (751,541)
--------- ----------
Net Cash Provided by Financing Activities 538,480 3,298,748
--------- ----------
Net Increase (Decrease) in Cash 933 874,357
Cash, beginning of period 374,289 732,553
--------- ----------
Cash, end of period $ 375,222 $ 1,606,910
--------- ----------
--------- ----------
Interest paid $ 295,275 $ 187,972
--------- ----------
--------- ----------
Income tax paid $ 374 $ (239,273)
--------- ----------
--------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-30
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION AND
CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
September 30, 1997 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of September 30, 1997, the statements of operations
and the statements of cash flows for the nine month periods ended September 30,
1997 and 1996, have been prepared by the Company without audit. In the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in financial position at September 30, 1997 and for all periods
presented, have been made.
These statements should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission.
2. CALCULATION OF EARNINGS (LOSS) PER SHARE
The earnings (loss) per share is calculated by dividing the net income
(loss) to common stockholders by the weighted average number of common shares
outstanding.
3. CHANGE IN ACCOUNTING ESTIMATE
The Company standardized the depreciable lives used for buildings from a
range of between 7 to 30 years in 1996 to 15 years for temporary buildings and
30 years for permanent buildings in 1997. The effect of this change on net
income of the current period (nine months ended September 30, 1997) was an
increase of approximately $292,950 over the amount that would have been
reported. The effect of this change on earnings per share of the current period
(nine months ended September 30, 1997) was a reduction in the loss per share of
approximately $.03 per share from the amount that would have been reported.
4. SUBSEQUENT EVENTS
During November 1997, the Company completed a sale and leaseback of its real
property in Wisconsin. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
F-31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesman, Selling Shareholder or any other person has been
authorized to give any information or to make any representations other than
those contained in this Prospectus in connection with the offer made by this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or the solicitation of any offer to buy any
security other than the shares of the Common Stock offered by this Prospectus,
nor does it constitute an offer to sell or a solicitation of any offer to buy
the shares of Common Stock by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that information contained herein is correct as of any time subsequent to the
date hereof.
---------------
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Market for the Common Equity and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . 11
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . 12
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . 14
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . 42
Description of Securities. . . . . . . . . . . . . . . . . . . . . . . . 43
Underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . 48
Index to Financial Statements. . . . . . . . . . . . . . . . . . . . . .F-1
-------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,655,530 Shares
RENAISSANCE
ENTERTAINMENT
CORPORATION
--------------
PROSPECTUS
--------------
January ___, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article VIII of the Company's Amended and Restated Articles of
Incorporation provides that the Company shall indemnify any director, officer,
employee or agent of the corporation made or threatened to be made a party to a
proceeding, by reason of the former or present official act of the person,
against judgments, penalties, fines, settlements and reasonable expenses
incurred by the person in connection with the proceeding if certain standards
are met.
Article XI of the Company's Amended and Restated Articles of Incorporation
eliminates certain personal liability of the directors of the Company for
monetary damages for certain breaches of director's fiduciary duties.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
1. For unregistered sales of the Company's securities prior to February
27, 1996, reference is made to Item 26 of the Company's Registration
Statement on Form SB-2 (No. 33-85538), declared effective by the Commission
on January 27, 1995, and the post-effective amendments thereto.
2. During April 1997, the Company issued $350,000 principal amount of its
10% Convertible Secured Notes to three investors. The Notes were acquired
for investment purposes and were issued without registration under the
Securities Act of 1933, in reliance upon Section 4(2) thereof for offerings
not involving a public offering of securities. No underwriters were
involved in such offering and no commissions were paid for the solicitation
of the investors. The Notes are convertible into shares of the Company's
Common Stock at the lesser of $1.75 per share or 50% of the market price
for such stock at the time of conversion.
3. During May 1997, the Company issued $1,000,000 principal amount of its
9% Convertible Debentures to three investors. The holders of the
Debentures were also granted warrants representing the right to acquire
200,000 shares of the Company's common stock at a warrant exercise price of
the lesser of $3.00 per share or 70% of the market price for such stock at
the time of exercise of the warrants. The securities were acquired for
investment purposes and were issued without registration under the
Securities Act of 1933, in reliance upon Section 4(2) thereof for offerings
not involving a public offering of securities. No underwriters
II-1
<PAGE>
were involved in such offering and no commissions were paid for the
solicitation of the investors. The Debentures were convertible into shares
of the Company's common stock at the lesser of $4.50 per share or 70% of
the market price for such stock at the time of conversion. During November
1997 the debenture were paid and the warrants were canceled.
4. During November 1997, the Company entered into a sale/lease back
transaction with respect to its Wisconsin faire site. In connection with
this transaction, the purchasers of the property were granted a six-year
warrant representing the right to acquire an aggregate of 766,667 shares of
the Company's common stock at an exercise price of $1.00 per share. The
warrants were acquired for investment purposes and were issued without
registration under the Securities Act of 1933, in reliance upon Section
4(2) thereof for offerings not involving a public offering of securities.
No underwriters were involved in such offering and no commissions were paid
for the solicitation of the investor.
5. During November 1997, the Company entered into a Consulting and
Warrant Compensation Agreement with Wall Street Financial. Pursuant to
this agreement, the Company issued warrants to purchase up to 200,000
shares of the Company's common stock and agreed to issue an additional
100,000 shares of common stock to Consultant in payment of expenses. These
securities were issued without registration under the Securities Act of
1933, in reliance on Section 4(2).
ITEM 16. 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.
II-2
<PAGE>
Exhibit No Title
---------- -----
4.3 Specimen Class B Warrant Certificate.
4.4 Warrant Agreement.
4.15 Renaissance Entertainment Corporation 1993 Stock Incentive Plan.
5.1 Opinion of Newmann & Cobb.
10.1 Employment Agreement with Howard Hamburg, incorporated by
reference from the Registrant's Current Report on Form 8-K dated
December 31, 1995.
10.2 Office Lease with Diana Wilkins dated August 15, 1996,
incorporated by reference from the Registrant's Annual Report on
Form 10-K for the nine months ended December 31, 1996.
10.3 Letter Agreement with Rob Geller dated July 19, 1994.
10.4 Specimen Vendor and Exhibitor Agreement for the Bristol
Renaissance Faire.
10.5 Specimen Vendor and Exhibitor Agreement for the Northern and
Southern Renaissance Pleasure Faires.
10.6 Specimen Bristol Renaissance Faire Concession Agreement.
10.7 Specimen Bristol Renaissance Faire Games Concession Agreement.
10.8 License Agreement and Lease with San Bernardino County for the
Southern Renaissance Pleasure Faire site.
10.9 Investment Banking Agreement with Duke & Co., Inc.
10.10 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.
10.11 Employment Agreement dated February 5, 1996 with Barbara Hope.
10.12 Employment Agreement dated February 5, 1996 with Donald C. Gaiti.
II-3
<PAGE>
Exhibit No Title
---------- -----
10.13 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.
10.14 Subscription and Purchase Agreement for 9% Convertible
Debentures, incorporated herein by reference from the
Registrant's Registration Statement on Form S-1 (No. 333-26677)
declared effective by the Commission in October 30, 1997.
10.15 Consulting and Warrant Compensation Agreement dated November 4,
1997 between the Company and Wall Street Financial.
10.16 Supplemental Agreement and Subscription and Purchase Agreement
for 10% Convertible Secured Notes.
10.17 Purchase Agreement dated November 12, 1997 between Faire
Partners, LLC and Renaissance Entertainment Corporation,
including Lease Agreement and Warrant to Purchase Common Stock as
exhibits thereto.
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--filed herewith.
23.2 Consent of Newmann & Cobb.
24.1 Power of Attorney (included on signature page of initial
Registration Statement).
ITEM 17. UNDERTAKINGS
A. The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement : (i) to include any
prospectus required by Section 19(a)(3) of the Securities Act of 1933; (ii) to
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and (iii) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
II-4
<PAGE>
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
B. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the registrant as discussed above, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boulder,
State of Colorado, on January 19, 1998.
RENAISSANCE ENTERTAINMENT
CORPORATION
By /s/ Charles S. Leavell
-------------------------------------
Charles S. Leavell
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on the 19th day of January, 1998,
by the following persons in the capacities indicated:
Signature Position
- --------- --------
/s/ Charles S. Leavell Director and Chairman of the Board
- -------------------------------------------- and Chief Executive Officer
Charles S. Leavell
/s/ James R. McDonald Chief Financial Officer
- --------------------------------------------
James R. McDonald
II-6
<PAGE>
Signature Position
- --------- --------
/s/ Sue Brophy Chief Accounting Officer
- ---------------------------------------------
Sue Brophy
/s/ Sanford L. Schwartz* Director
- ---------------------------------------------
Sanford L. Schwartz
/s/ Robert M. Geller* Director
- ---------------------------------------------
Robert M. Geller
/s/ Dean Petkanas* Director
- ---------------------------------------------
Dean Petkanas
/s/ Charles J. Weber* Director
- ---------------------------------------------
Charles J. Weber
*By Charles S. Leavell attorney in fact
II-7
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
POST-EFFECTIVE AMENDMENT NO. 3 ON FORM S-1
TO REGISTRATION STATEMENT ON FORM SB-2
INDEX TO 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.
4.15 Renaissance Entertainment Corporation 1993 Stock Incentive Plan.
5.1 Opinion of Newmann & Cobb.
10.1 Employment Agreement with Howard Hamburg, incorporated by
reference from the Registrant's Current Report on Form 8-K dated
December 31, 1995.
10.2 Office Lease with Diana Wilkins dated August 15, 1996,
incorporated by reference from the Registrant's Annual Report on
Form 10-K for the nine months ended December 31, 1996.
10.3 Letter Agreement with Rob Geller dated July 19, 1994.
10.4 Specimen Vendor and Exhibitor Agreement for the Bristol
Renaissance Faire.
II-8
<PAGE>
Exhibit No Title
---------- -----
10.5 Specimen Vendor and Exhibitor Agreement for the Northern and
Southern Renaissance Pleasure Faires.
10.6 Specimen Bristol Renaissance Faire Concession Agreement.
10.7 Specimen Bristol Renaissance Faire Games Concession Agreement.
10.8 License Agreement and Lease with San Bernardino County for the
Southern Renaissance Pleasure Faire site.
10.9 Investment Banking Agreement with Duke & Co., Inc.
10.10 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.
10.11 Employment Agreement dated February 5, 1996 with Barbara Hope.
10.12 Employment Agreement dated February 5, 1996 with Donald C. Gaiti.
10.13 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.
10.14 Subscription and Purchase Agreement for 9% Convertible
Debentures, incorporated herein by reference from the
Registrant's Registration Statement on Form S-1 (No. 333-26677)
declared effective by the Commission in October 30, 1997.
10.15 Consulting and Warrant Compensation Agreement dated November 4,
1997 between the Company and Wall Street Financial.
10.16 Supplemental Agreement and Subscription and Purchase Agreement
for 10% Convertible Secured Notes.
10.17 Purchase Agreement dated November 12, 1997 between Faire
Partners, LLC and Renaissance Entertainment Corporation,
including Lease Agreement and Warrant to Purchase Common Stock as
exhibits thereto.
21.0 Subsidiaries, incorporated by reference from the Registrant's
Annual Report on Form 10-KSB for the year ended March 31, 1996.
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<PAGE>
Exhibit No Title
---------- -----
23.1 Independent Auditor's Consent--filed herewith.
23.2 Consent of Newmann & Cobb
24.1 Power of Attorney (included on signature page of initial
Registration Statement).
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<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We hereby consent to the use of our report dated March 31, 1997,
accompanying the consolidated financial statements of Renaissance Entertainment
Corporation as of March 31, 1996 and December 31, 1996 and for the periods ended
March 31, 1995, March 31, 1996, and December 31, 1996 included in the Company's
Post-Effective Amendment No. 4 on Form S-1 to Registration Statement No.
33-85538 on Form SB-2 and to the reference made to our firm under the caption
"Experts" in the Post-Effective Amendment No. 4 to the that Registration
Statement.
Schumacher & Associates, Inc.
January 19, 1998
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