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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/ X / Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 1999
-------------------------------------------
or
/ / Transition Report Pursuance to Section 13 or 15(d) of the Securities
Exchange act of 1934.
For the transition period from __________________ to __________________
Commission File Number 0-23782
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RENAISSANCE ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
Colorado 84-1094630
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
275 Century Circle, Suite 102, Louisville, Colorado 80027
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(Address of principal executive offices) (Zip Code)
(303) 664-0300
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(Registrant's telephone number, including area code)
- -------------------------------------------------------------------------------
(Former Address)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
/ X / Yes / / No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of May 6, 1999, Registrant had 2,144,889 shares of common stock, $.03 Par
Value, outstanding.
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INDEX
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
Balance Sheets as of March 31, 1999 (Unaudited)
and December 31, 1998 3
Statements of Operations for the Three Months
Ended March 31, 1999 and 1998
(Unaudited) 4
Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998
(Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 12
</TABLE>
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This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of
the Securities Act of 1933, as amended, and is subject to the safe harbors
created by those sections. These forward-looking statements are subject to
significant risks and uncertainties, including those identified in the
section of this Form 10-QSB entitled "Factors That May Affect Future
Operating Results," which may cause actual results to differ materially from
those discussed in such forward-looking statements. The forward-looking
statements within this Form 10-QSB are identified by words such as
"believes," "anticipates," "expects," "intends," "may," "will" and other
similar expressions. However, these words are not the exclusive means of
identifying such statements. In addition, any statements which refer to
expectations, projections or other characterizations of future events or
circumstances are forward-looking statements. The Company undertakes no
obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or
circumstances occurring subsequent to the filing of this Form 10-QSB with the
Securities and Exchange Commission ("SEC"). Readers are urged to carefully
review and consider the various disclosures made by the Company in this
report and in the Company's other reports filed with the SEC that attempt to
advise interested parties of the risks and factors that may affect the
Company's business.
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2
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RENAISSANCE ENTERTAINMENT CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
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(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 322,468 $ 379,336
Accounts receivable (net) 24,603 18,509
Inventory 136,179 136,179
Prepaid expenses and other 599,634 237,021
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Total Current Assets 1,082,884 771,045
Property and equipment,
net of accumulated depreciation 6,593,153 6,610,466
Covenant not to compete 0 4,996
Goodwill 506,805 519,474
Other assets 961,962 900,828
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TOTAL ASSETS $ 9,144,804 $ 8,806,809
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,059,337 $ 604,434
Notes payable,
current portion 936,052 153,327
Unearned income 422,124 161,010
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Total Current Liabilities 2,417,513 918,771
Lease obligation payable 3,949,634 3,942,359
Notes payable, net of current portion 608,111 477,853
Other 39,525 38,525
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Total Liabilities 7,014,783 5,377,508
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Stockholders' Equity:
Common stock, $.03 par value, 50,000,000
shares authorized, 2,144,889 and 2,139,891 shares
issued and outstanding at March 31, 1999 and
December 31, 1998, respectively 64,346 64,196
Additional paid-in capital 9,430,827 9,428,477
Accumulated earnings (deficit) (7,365,152) (6,063,372)
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Total Stockholders' Equity 2,130,021 3,429,301
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,144,804 $ 8,806,809
----------- -----------
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------------------
1999 1998
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<S> <C> <C>
REVENUE:
Sales $ 4,321 $ 41,881
Faire operating costs 1,260 (6,038)
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Gross Profit 3,061 47,919
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OPERATING EXPENSES:
Salaries 568,220 712,843
Depreciation and amortization 129,718 141,142
Advertising 0 13,804
Other operating expenses 479,110 626,851
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Total Operating Expenses 1,177,048 1,494,640
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Net Operating (Loss) Income (1,173,987) (1,446,721)
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Other Income (Expenses):
Interest income 8,820 18,548
Interest (expense) (145,068) (144,991)
Other income (expense) 8,455 78,881
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Total Other Income (Expenses) (127,793) (47,562)
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Net Income (Loss) before (Provision)
Credit for Income Taxes (1,301,780) (1,494,283)
(Provision) Credit for Income Taxes -- --
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Net Income (Loss) to Common Stockholders $(1,301,780) $(1,494,283)
----------- -----------
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Net Income (Loss) per Common Share $ (.62) $ (.72)
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Weighted Average Number of Common Shares
Outstanding 2,140,644 2,067,525
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</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Three Months ended
March 31,
------------------------------------
1999 1998
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income (Loss) $(1,301,780) $(1,494,283)
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Adjustments to reconcile net income (Loss)
to net cash provided by operating
activities:
Depreciation and amortization 129,718 141,142
Gain (loss) on disposal of assets 659 (1,230)
(Increase) decrease in:
Accounts Receivable (6,094) 2,352
Inventory 0 (783)
Prepaid expenses and other (423,831) (198,112)
Increase (decrease) in:
Accounts payable and accrued expenses 454,906 422,211
Unearned revenue and other 262,114 316,018
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Total adjustments 417,472 681,598
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Net Cash Provided by Operating
Activities (884,308) (812,685)
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Cash Flows from Investing Activities:
Investment in restricted cash 0 (4,726)
Acquisition of property and equipment (95,315) (11,644)
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Net Cash (Used in) Investing Activities (95,315) (16,370)
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Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 2,500 46,825
Proceeds from notes payable 951,746 451,699
Principal payments on notes payable (31,491) (22,390)
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Net Cash Provided by Financing Activities 922,755 476,134
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Net Increase (Decrease) in Cash (56,868) (352,921)
Cash, beginning of period 379,336 590,024
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Cash, end of period $ 322,468 $ 237,103
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Interest paid $ 145,068 $ 144,991
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</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1999 (Unaudited)
1. UNAUDITED STATEMENTS
The balance sheet as of March 31, 1999, the statements of operations and
the statements of cash flows for the three month periods ended March 31,
1999 and 1998, have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in financial position at March 31, 1999
and for all periods presented, have been made.
These statements should be read in conjunction with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998, 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. SHORT-TERM NOTES; SUBSEQUENT EVENT
During the first four months of fiscal 1999 the Company raised $500,000 of
short-term capital. These funds were provided by Charles S. Leavell
($100,000), Chairman of the Board of Directors, two directors and two
officers of the Company (an aggregate of $225,000) and three other
investors. The loans allow interest at 4.5% per quarter and are secured
by existing monies and future revenues from the Company's Faires. The
investors also were granted a five-year warrant to purchase one share of
common stock for each $5.00 loaned to the Company at an exercise price
equal to the average closing bid price for the Company's common stock for
the five business days immediately preceding the Closing of each loan.
These loans mature August 31, 1999.
During March of 1999, the Company secured a second mortgage on its Virginia
real estate. The total amount of the loan is $750,000, of which $500,000
was funded at closing and $250,000 will be funded at such time as the
Company has completed the lease for the Northern California Faire site.
This loan is secured by a Second Deed of Trust on the Virginia property.
Further, until a lease for the Northern California Faire site is obtained
or repayment of $250,000 of the amount originally disbursed under the note,
the loan is also secured by the Company's existing cash and future income.
This loan allows interest at 13% per annum. Payments are interest only
4/1/99 through 6/1/99; principal and interest on a 5-year amortization
of the amount of debt remaining unpaid on 6/1/99 from 7/1/99 through
1/1/2000; interest only 2/1/2000 through 6/1/2000; principal and interest
on a 5-year amortization of the amount of debt remaining unpaid on 6/1/2000
from 7/1/2000 through 11/1/2000; and remaining principal and interest is
due in full on 12/31/2000. Additionally, if the lease of the Northern
California Faire site is not completed on or before 8/1/99, $250,000
becomes due and payable. The investor also was granted an option to
purchase one share of the Company's common stock for each $10.00 loaned to
the
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Company at an exercise price of $0.81 per share. These options expire on
the earlier of 12/31/2005 or the third anniversary of the payment in full
of the loan.
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
Financial Statements, including the footnotes for the fiscal period ended
December 31, 1998. 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. 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. 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, a net loss of ($1,851,725) for the nine months ended December 31, 1996,
a net loss of ($2,567,097) for the fiscal year ended December 31, 1997, a net
loss of ($203,080) for the fiscal year ended December 31, 1998 and a net loss
of ($1,301,780) for the three months ended March 31, 1999. The Virginia
Faire has operated at a decreasing loss since opening in 1996. 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. Although the New York Faire operated at a loss in
1996 and 1997 it was profitable in 1998. In 1997 the Company hired a new
manager for this Faire, introduced several new entertainment acts and
implemented additional promotional efforts. These changes were key in
returning this faire to a profitable status.
While the Company has a contingent lease for a new site for the Northern
California Faire, it is doubtful that it will be able to complete all
arrangements for this site for the 1999 season. Should the Company be unable
to operate a Northern Renaissance Faire at the proposed new site or at a
temporary site in 1999, it could have a material adverse effect on the
Company's business, results of operations and financial condition. The
Company is also negotiating with the owner of the Southern California Faire
site for a long-term lease for this site. The ability to enter into a
long-term lease for this site would increase its value to the Company, as the
Company could construct structures on the site and significantly reduce setup
costs for the Faire.
The Company had a working capital deficit of ($1,334,629) as of March 31,
1999. During the first four months of fiscal 1999, the Company obtained
$500,000 of additional capital through short-term loans and $500,000 (which
could be increased to $750,000 upon the completion of the lease for the
Northern California Faire) by obtaining a second mortgage on the Virginia
property. While the Company believes that it has adequate capital to fund
anticipated operations for the balance of 1999, it believes it must obtain
additional capital for future fiscal periods. See "LIQUIDITY AND CAPITAL
RESOURCES."
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999, COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
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The results of operations of the Company for the quarter ended March 31
always reflect a significant loss, due to the fact that there are no
substantial revenues during this period, while some expenses at each of the
Company's five faire locations continue throughout the year, as do corporate
expenses.
Operating expenses decreased $317,592 or 21%, from $1,494,640 in 1998 to
$1,177,048 in 1999. The primary cause of this decrease was a decrease of
$144,623 (20%) in salary and wage expense due to reductions in personnel, and
a decrease of $147,741 (24%) in other operating expenses which is primarily
the result of management's efforts to reduce overall operating expenses.
As a result of the foregoing, net operating loss (before interest charges and
other income) decreased $272,734 (19%) from a loss of ($1,446,721) for the
1998 period to a loss of ($1,173,987) for the 1999 period.
Interest income decreased $9,728 (52%) from $18,548 in 1998 to $8,820 in
1999. This decrease is a result of the maturation of three certificates of
deposits in 1998 that were used to curtail the mortgage on the Virginia
property.
Other income decreased $70,426 (89%) from $78,881 in 1998 to $8,455 in 1999.
The primary source of the other income in 1998 was $45,000 received for an
easement on a faire site and a $19,000 lease termination fee paid by the
landlord to obtain an early termination of the lease for the Company's
Boulder, Colorado offices. This line item is a collection of income and
expense items that do not specifically relate to the general operations of
the business in the current period. These items are variable and often
non-recurring events.
Net (loss) to common stockholders decreased $192,503 (13%), from a loss of
($1,494,283) for the 1998 period, to a loss of ($1,301,780) for the 1999
period. Finally, net (loss) per common share decreased from a loss of ($.72)
for the 1998 period to a loss of ($.62) for the 1999 period, based on
2,067,525 weighted average shares outstanding during the 1998 period, and
2,140,644 weighted average shares outstanding during the 1999 period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficit widened during the quarter ended March
31, 1999, from ($147,726) at December 31, 1998 to ($1,334,629) at March 31,
1999. The Company's working capital requirements are greatest during the
period from January 1 through May 1, when it is incurring start-up expenses
for its first Faires of the Faire season, the Southern California and
Virginia Faires. During the first four months of fiscal 1999 the Company
raised $500,000 of short-term capital. These funds were provided by Charles
S. Leavell ($100,000), Chairman of the Board of Directors, two directors and
two officers of the Company (an aggregate of $225,000) and three other
investors. The loans provide for interest at 4.5% per quarter and are
secured by existing monies and future revenues from the Company's Faires. The
investors also were granted a five-year warrant to purchase one share of
common stock for each $5.00 loaned to the Company at an exercise price equal
to the average closing bid price for the Company's common stock for the five
business days immediately preceding the Closing of each loan. These loans
mature August 31, 1999.
During March of 1999, the Company secured a second mortgage on its Virginia
real estate. The total amount of the loan is $750,000, of which $500,000 was
funded at closing and $250,000 will be funded at such time as the Company has
completed the lease for the Northern California Faire
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site. This loan is secured by a Second Deed of Trust on the Virginia
property. Further, until a lease for the Northern California Faire site is
obtained or repayment of $250,000 of the amount originally disbursed under
the note, the loan is also secured by the Company's existing cash and future
income. This loan provides for interest at 13% per annum. Payments are
interest only 4/1/99 through 6/1/99; principal and interest on a 5-year
amortization of the amount of debt remaining unpaid on 6/1/99 from 7/1/99
through 1/1/2000; interest only 2/1/2000 through 6/1/2000; principal and
interest on a 5-year amortization of the amount of debt remaining unpaid on
6/1/2000 from 7/1/2000 through 11/1/2000; and remaining principal and
interest is due in full on 12/31/2000. Additionally, if the lease of the
Northern California Faire site is not completed on or before 8/1/99, $250,000
becomes due and payable. The investor also was granted an option to purchase
one share of the Company's common stock for each $10.00 loaned to the Company
at an exercise price of $0.81 per share. These options expire on the earlier
of 12/31/2005 or the third anniversary of the payment in full of the loan.
While the Company believes it has adequate capital to fund anticipated
operations for fiscal 1999, it believes it must obtain additional working
capital for future periods.
Reviewing the change in financial position over the quarter, current assets,
largely comprised of cash and prepaid expenses, increased from $771,045 at
December 31, 1998 to $1,082,884 at March 31, 1999, an increase of $311,839 or
40%. Of these amounts, cash and cash equivalents decreased from $379,336 at
December 31, 1998 to $322,468 at March 31, 1999. Accounts receivable
increased from $18,509 at December 31, 1998 to $24,603 at March 31, 1999.
Prepaid expenses (expenses incurred on behalf of the faires) increased from
$237,021 at December 31, 1998 to $599,634 at March 31, 1999. These costs are
expensed once the Faires are operating.
Current liabilities increased from $918,771 at December 31, 1998, to
$2,417,513 at March 31, 1999, an increase of $1,498,742 or 163%. This
increase is due to an increase during the quarter in accounts payable and
accrued expenses of $454,903 as a result of the Company's decision to defer
payments of trade payables. Unearned income, which consists of the sale of
admission tickets to upcoming faires, and deposits received from craft
vendors for future faires, increased from $161,010 at December 31, 1998 to
$422,124 at March 31, 1999. The Company increased indebtedness during the
quarter in the amount of $1,000,000 of which approximately $825,000 is
short-term financing. This debt was incurred to cover the Company's
operating expenses prior to the opening of the 1999 faire season.
Stockholders' Equity decreased from $3,429,301 at December 31, 1998 to
$2,130,021 at March 31, 1999, a decrease of $1,299,280 or 38%. This decrease
is due primarily to the net loss incurred during the first quarter.
Although inflation can potentially have an effect on financial results,
during 1998 and the first three months of fiscal 1999 it caused no material
affect on the Company's operations, since the change in prices charged by the
Company and by Company's vendors has not been significant.
The Company has no significant commitment for capital expenses during the
fiscal year ending December 31, 1999.
INFORMATION SYSTEMS AND THE YEAR 2000 ISSUE
The Company has completed an analysis of the effect of Year 2000 issues on
its operations. As a result of this analysis it is believed that these
effects should not have a material effect on the Company. The Company has
determined that critical computer hardware, including personal
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computers and network server equipment are compliant. Software used by the
Company in its accounting and payroll function has been warranted by the
manufacturers to be compliant.
The Company does not rely heavily on any specific vendor or group of vendors
and therefore believes that exposure in this area is minimal. Even so, there
can be no assurance that the systems of other companies that interact with
the Company will be sufficiently Year 2000 compliant so as to avoid an
adverse impact on the Company's operations, financial condition and results
of operation. In addition the Company may be adversely affected by potential
interruptions of utility, communications or transportation systems as a
result of Year 2000 issues.
The Company does not open its first Renaissance Faire until approximately May
of each year. Although there is an approximate two month pre-faire gear-up
period, it is believed that any difficulties encountered as a result of Year
2000 could be resolved before impacting the Company's operations.
The Company does not presently anticipate that the costs to address the Year
2000 issue will have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
In addition to the other information contained in this report, prospective
investors should carefully consider the following factors in evaluating the
Company and its business.
RECENT LOSSES. The Company has incurred substantial operating losses
since fiscal 1995. In addition, although significantly lower than previous
years, the Company incurred a loss in fiscal 1998. 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 1997. In
fiscal 1998, the Virginia Faire operated at a significantly lower loss, 23%
less as compared to the prior year. The New York Faire operated at a profit
in 1998. If the performance of the Virginia Faire does not continue to
improve, the Company's ability to achieve and sustain profitability in
subsequent periods will be adversely affected.
NEED FOR ADDITIONAL CAPITAL. The Company had a working capital deficit
of ($1,334,629) as of March 31, 1999. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." While the
Company believes that it has adequate capital to fund anticipated operations
for the balance of fiscal year 1999, it will need additional capital to
sustain operations after that time. Additional 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. Historically, the
Company has operated its Northern California Faire during the fall of each
year at a site in Novato, California. While the Company had a lease for this
site in 1998, it was known that the owners of the property were seeking to
develop the land. Subsequent to the conclusion of the 1998 season, the
Company moved its Northern California operations from this location. The
Company has obtained a lease, subject to certain contingencies, for a new
site for this Faire. The lease is contingent upon the Company obtaining the
necessary permits to operate the Faire and the lessor closing on the purchase
of the property. It is doubtful that the contingencies will be satisfied and
that the Company will be successful in completing this lease in time for the
1999 faire season. Should the Company be
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unable to operate a Northern Renaissance Faire at the proposed new site or at
a temporary site in 1999, it could have a material adverse effect on the
Company's business, results of operations and financial condition. The
Company estimates that it could be required to spend from $500,000 to
$750,000 for construction of structures prior to the opening of the Faire at
a new site. Should the chosen site require development of an infrastructure,
water, electricity, etc., the cost to the Company could increase
substantially.
POSSIBLE RELOCATION OF SOUTHERN CALIFORNIA FAIRE. Since April 1994, the
Company has operated its Southern California Faire in Devore, California.
The Company has secured a lease for this site in 1999. The Company is
currently negotiating with the owners of the Devore property regarding both
short and long-term use of this property. The Company believes that it either
needs to obtain a long-term lease for the current site or relocate the Faire
to another site for which a long-term lease would be available. This would
allow the Company to construct permanent structures on the site and
significantly reduce setup costs for this Faire. As of the date of this
report, the Company has not entered into a long-term lease for the current
site and there can be no assurance that it will be able to do so.
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 significantly greater
resources than the Company, and in many cases, greater expertise and industry
contacts. The Company estimates that there are approximately 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.
LACK OF TRADEMARK PROTECTION. Because of the large number of existing
Renaissance Faires, the Company is not 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.
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.
DEPENDENCE UPON VENDORS. A substantial portion of the Company's
revenues generated at each Faire is 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.
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
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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.
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 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.
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, 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.
FAIRE SITES. The Company currently has a lease, subject to certain
conditions, for the Northern California Faire site. The Southern California
Faire, Bristol Renaissance Faire, and the New York Faire are all 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 by 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.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
See Note 3 of the Notes to the Financial Statements and
Management's Discussion and Analysis of Financial Condition
and Results of Operations for information regarding
12
<PAGE>
issuance of short-term notes and a second mortgage on the Virginia
property which include the granting of warrants representing the
right to acquire 150,000 shares of the Company's common stock. These
securities were issued without registration under the Securities Act
of 1933 in reliance upon Section 4(2) of the Act. No underwriters
were involved in the issuance of these securities.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company was not required to file a report on Form 8-K during the
quarter ended March 31, 1999.
Exhibit 27. Financial Data Schedule
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Dated: May 10, 1999
------------------------------------------------
Charles S. Leavell, Chief Executive and
Chief Financial Officer
------------------------------------------------
Sue E. Brophy, Chief Accounting Officer
14
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 322,468
<SECURITIES> 0
<RECEIVABLES> 35,201
<ALLOWANCES> 10,598
<INVENTORY> 136,179
<CURRENT-ASSETS> 1,082,884
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<DEPRECIATION> 2,696,257
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